Gulfsands Petroleum

Ongoing conflict in Syria coupled with the collapse in the oil price drive shares to an all-time low

Gulfsands Petroleum is an AIM listed oil & gas exploration and development company whose primary asset is a 50% working interest in a Production Sharing Contract (PSC) on Block 26 in Syria. Other assets are located in Morocco, Tunisia and Colombia..

  • Force Majeure served in December 2011

    Having advanced production to 24,000 barrels a day on Block 26, December 2011 saw a Notice of Force Majeure served by Gulfsands under the Block 26 PSC following the imposition of EU sanctions on Syria. Economic activity by Gulfsands has been prohibited, although the firm maintains a presence in the country and is focussed on the hoped for eventual restart of production.

  • Rescue fundraising completed and all other assets seeking to be divested/ farmed out

    In January 2016 a $21.4 million rescue fundraising was completed in order to pay off a convertible loan brought into being by the previous executive management and Arawak Intl and for working capital purposes. All assets outside of Syria are currently being divested or farmed out in order to reduce the firm’s financial liabilities. However, management were clear at the time of the recent fund raising that further funds will be needed within the next 12 months.

  • Valuation

    Attributing a value to the company is difficult given the multitude of risks involved. However, we note that the fair value attributed to the Syrian assets by the company as at 30th June 2015 was $102 million (£71.5 million) – 5.25 times the market cap – this figure itself being discounted some 74% from the company’s base case NPV(15) of $392 million. Subsequently there has recently being an additional reclassification of the reserves from 2P TO 2C status.

    CLEAR DISCLOSURE – An employee of Align Research holds a personal interest in Gulfsands Petroleum & is bound to Align Research’s company dealing policy ensuring open and adequate disclosure. Full details can be found here (“Legals”).

Table: financial overview
Year to end Dec 2011A 2012A 2013A 2014A
Production (bopd) 8,542 239 175 0
Revenue ($m) 125 5.6 4.4 0
Net profit ($m) 55.1 (27) (26.8) (16.1)
Free cash ($m) 124.2 91 33.8 7.9
Source: Company accounts