What You Were Selling Last Week: Gulf Keystone Petroleum Limited

One of Warren Buffetts famous investing sayings is be fearful when others are greedy and greedy only when others are fearful. Or, in other words, sell when others are buying and buy when theyre selling.

But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with some ideas for investments that may be past their prime

So, in this series of articles, were going to look at what customers of The Motley Fool ShareDealing Service have been selling in the past week or so, and what might have made them decide to do so.

No bed of roses

Its really not been a good year so far for shareholders inGulf Keystone Petroleum(LSE: GKP).

Last yearwasnt exactly a bed of roses Gulf Keystones share fellby as much as 35% at one point in 2013, but it clawed its way back up (and down and up again) to end the year only slightly below its start-of-year level.

But 2014 has been a disaster.

To begin with, the first Competent Persons Report (CPR) on Gulf Keystone, published by ERC Equipoise in March this year, only confirmed proved and probable reserves in the Shaikan andSheihk Adifields of 299m barrels of oil, putting Gulf Keystones share at just 163m barrels. The report also put thegross oil in place at 12.5bn barrels over a third lower than previous estimates, and less than had been estimated for Shaikan alone.

The market reacted badly tothe reports contents andGulf Keystones share price dropped close to30%.

Director departures

The situation wasnt improved when three board members finance director Ewen Ainsworth and three non-executive directorsleft Gulf Keystone in June,followed in July by thedeparture from the board ofhighly controversial CEO and founder, Todd Kozel, together with yet another non-exec.

That said,Kozels stepping down as CEO would have been greeted with pleasure by many shareholders, who had long been dismayed by his more than somewhat generous remuneration package, and his replacement,John Gerstenlauer, is an industry veteran, having started his career with a division of Shell in 1978.

By the middle of July,Gulf Keystones share price was down nearly 50% since the start of the year.

The fog of war

Butif all the company-related bad news werent enough,Gulf Keystone now finds itself on the edge of what amounts to a war zone, as Islamic State the jihadist militia formerly known as ISIS tries to impose its caliphate on Iraq by force.

Although Islamic State has recently seized some key oilfields in Kurdistan, Gulf Keystones operations are probably not under direct threat. Even so, having a war going on next doorcan only complicate matters, and Gulf Keystone could well be indirectly affected by any problems with infrastructure caused by the mountingconflict, and by the inevitable disruption to business in Iraq in general.

As a consequence of the above and despite gaining a main-market listing and starting commercial production this year Gulf Keystones share price is now down 56% so far in 2014, compared with aFTSE All-Share index that has barely moved either way), and there are no immediatereasons why it should go up significantly again any time soon.

So, perhaps some shareholders had simply had enough last week, and decided to put their money into a less troubled venture, thereby securingGulf Keystone the number one spot in our latest Top Ten Sells list*.

There may be an argument to be made that perhaps things cant really get worse, andmaybe now is the time to bagan oil share at a bargain price. If things were tostart going Gulf Keystones way, its share price could rocket.

But, of course, things can always get worse, so youd need to think very carefully before deciding what to do.

Jon Wallis 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.

* based on aggregate data fromThe Motley Fool ShareDealing Service.