Northland Capital Partners View on the City Galasys and Gulf Keystone Petroleum

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Gulf Keystone (LON:GKP): Production update

Market Cap: £606m; Current Price: 68p

  • The Shaikan facilities are now producing from seven wells, with an eighth expected to go online in January.
  • Total daily gross production reached the company’s 40k bopd target on the 27th of December.
  • On the 29th of December, the company loaded 354 trucks from its two Shaikan production facilities (PF1 and PF2) with 58k bbl of crude sent to the Turkish coast for export.
  • The company spud its Shaikan-11 well on the 24th September that is expected to be tied into PF2 with an 11km flowline already in place.

NORTHLAND CAPITAL PARTNERS VIEW: Another positive update for Gulf which ended 2014 strongly on an operational front. There are of course significant issues faced by the company, not least the turbulent geopolitical backdrop. In addition, the company is also working to ensure regular payment cycles and the market will keenly monitor progress on that front. Gulf has strong underlying fundamentals (with production costs estimated at c. $9/bbl) and is trading on an undemanding multiple. In another territory it would seem a ripe takeover target (and may be in future depending upon geopolitical developments). However, this is offset by the significant risk profile that continues to mean it is not one for the faint hearted.

 

Galasys (LON:GLS): Acquisition

Market Cap: £14.1m; Current Price: 21.2p

  • Acquisition strengthens position in Malaysian market
  • Acquisition of I Logic Solutions Sdn Bhd, a provider of leisure and entertainment software and services in Malaysia, for up to £1.3m. 
  • iLogic customers include the Sepang International Circuit that has hosted several Formula 1 race events in Malaysia and the National Zoo of Malaysia. As well as leisure and entertainment systems, Point of Sales and Passenger Management Systems, it has developed an online travel agency platform that links theme parks and travel agents.
  • Consideration is structured as two times audited profit after tax for FY14, FY15 and FY16. The FY14 earn out payment is fully in cash and an upfront payment of £74k has been paid with the selling shareholders have provided a £37k profit guarantee. The FY15 and FY16 payments will be split between cash and shares.

NORTHLAND CAPITAL PARTNERS VIEW: The first acquisition since its IPO in May, iLogic increases Galasys’s market share in the Malaysian theme park sector and the addition of iLogic’s Online Travel Agent portal strengthens Galasys’s own recently launched CLOTA platform. Consideration of 2x profits looks pretty compelling and the acquisition should be immediately earnings’ enhancing. 

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