Last time I looked atGulf Keystone Petroleum (LSE: GKP)it wasburning through its dwindling cash reserves while wondering whether it would ever get paid by the semi-autonomous Kurdish Regional Government (KRG). The money is coming now at least some of it is. A handy$15m gross should be wired to the companys account over the next few days, with further payments in the pipeline. All being well, it should soon move towards regular monthly payouts.
Shipping Out
This is great news for a company whoseprime revenue lifeline has comefrom the tiresome task of trucking oil shipments via Turkey. The last KRG payment was in December last year, also for $15m. Butthere is still a long way to go. Management reckons it is owed $283m, and still cannot be sure itwill ever be paid. Meanwhile, GKP will continue to burn through cash while it waits to see if the KRGmakes good on its pledge to pumpout additional revenuesas shipments rise in the first half of next year.
We know the oil is there. GKPsShaikan field can produceup to 70,000 barrels per day, butcontinuing payment worriesmay explain why the share price rallied just5% afterthe recent announcement. TheKRG has been in dispute with the Iraqi government over oil revenues and has a rather pressing need for the cash itself, which itneeds to finance the war against Islamic State. Throw in the crashin the oil price, and you have troubleupon trouble. No wonder the share price is still down more than 60% this year, despite recent good news.
Soco To Go
The problems afflicting Soco International (LSE: SIA)lookrelatively manageable by comparison. Yes, its had a rough year, the share price down an equally painful 65%, but few oil stocks have come through 2015 unscathed. While GKN has been scratching around for $15m from its paymasters, Soco was strong enough to dishup $51m of first-half dividends, which suggests a strong financial position.
Nevertheless,Soco has beendrilling through its cash pile. Cash flow was negative in the first half, on lower prices and production, with revenues falling to $117m, down from $246m in the first half of 2014. Operatingprofits fell to $28.7m, down from $174m. Investors werealarmed by the plunge in free cash from 64.8m to a negative $19.9m, butthat was largely due to development project expenditure on its H5 wellhead platform in Vietnam.
And The Winner Is
Socos management remains confident, however, stating that future cash flow projections should secure itsoperational existence for the foreseeable future. Production has now started at its H5, nicelyahead of schedule, and management remainscommitted to rewarding shareholders and pursuingfurther growth. No debt on the balance sheet, low operating costs and attractive Vietnam production economics continue to makesSoco a more solid proposition thanGKP. Risk-takers may disagree.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.