Shares in Gulf Keystone Petroleum (LSE: GKP) have soared by as much as 10% today after it announced the receipt of a further payment from the Kurdistan Regional Government. The payment amounts to $15m and comprises the company’s monthly contractual revenue entitlement under the Shaikan Production Sharing Contract for crude oil exports in March of $5.5m gross. It also comprises $0.6m towards the recovery of outstanding entitlements for past deliveries and $8.9m towards the recovery of Gulf Keystone’s past costs associated with the Shaikan Government Participation Option.
Clearly, the news has been well received and has helped Gulf Keystone to have a current cash position of $69.5m. However, with the company facing a number of major risks, investing now may not prove to be a sound move. That’s because there’s scope for further uncertainty in the geopolitical outlook for the Northern Iraq/Kurdistan region, while there’s no guarantee that payments will continue in the long run. And with a number of other oil producers being less risky and still offering high potential rewards, it may be prudent to invest elsewhere at the present time.
Improving profitability
Meanwhile, Acacia Mining (LSE: ACA) today announced a 21 April release date for its first quarter results. They may be more eagerly anticipated than usual since investor sentiment in Acacia has improved significantly as the company’s last results release, with the price of gold moving higher and the outlook for the wider sector improving dramatically.
A key reason for this is the slower-than-expected pace of US interest rate rises, with a less hawkish Federal Reserve indirectly boosting sentiment towards gold as it seeks to avoid choking off the US economic recovery. As a result, Acacia’s long-term outlook is brighter and a higher gold price should mean higher profitability moving forward.
With Acacia trading on a price-to-earnings-growth (PEG) ratio of just 0.4, it looks set to continue its excellent share price performance of late. Although it may not repeat its rise of 67% year-to-date in the next few months, it remains a relatively appealing buy for the long term.
Linking up for growth
Also releasing an update today was Amara Mining (LSE: AMA), with the West Africa-focused gold miner announcing details of an investor event regarding the proposed tie-up with Perseus Mining. This is significant for the combined company’s investors since the new entity will have greater financial firepower and a larger asset base through which to deliver improved profitability in the long run.
And with uncertainty set to remain relatively high among the wider investment community, it would be of little surprise for the gold mining sector to remain popular since it has recently been viewed as a store of wealth for nervous investors. Clearly, mergers can take time to come good, but for investors seeking a smaller gold mining play, the combined Amara/Perseus entity could be worth a closer look.