There's really no other way of putting it -- Gulf Keystone Petroleum(LSE: GKP) is on its last legs. When the company warned shareholders last week that there is "significant doubt" that it can stay in business, it sounded as if management had given up on the enterprise. And it seems as if most of Gulf Keystone's shareholders have also given up. Shares in the company have lost 80% of their value over the past 12 months and more than 50% of their value since the beginning of January.
Nonetheless, Gulf Keystone isn't insolvent just yet, and the company has some breathing space with $57.2m of cash on the balance sheet.
Premier has net debt of $2.2bn, four times forward earnings based on the current oil price. However, the company still has $400m cash on hand, $850m of unused borrowing, the support of its banks, and is completing a deal to buy all of Eon's cash-generative North Sea fields. Premier's flagship Solan project is set to begin production later this month. The company is also set to benefit from the recent North Sea oil production tax cuts announced by the Chancellor in the last Budget.
UK Oil & Gas is rapidly becoming one of the UK oil industry's greatest success stories. Unlike most early stage exploration and production companies, UK Oil & Gas isn't a one-trick pony. The company has a number of assets across the south of England, several of which are already producing oil and revenue for the group.
Moreover, the company is participating in the Horse Hill licence. Recent testing has shown that the three intervals within the Horse Hill-1 well have produced a final aggregate flow rate of 1,688 barrels of oil per day, a flow rate that could generate hefty profits for UK Oil & Gas. UK Oil and Gas holds a 30% stake in Horse Hill Developments.
Time to sell Gulf Keystone?
Is it worth selling Gulf Keystone for Premier or UK Oil & Gas? Well, it depends on your outlook for the price of oil.
If you believe oil prices are set to increase over the next 12 months, Premier and UK Oil & Gas might be better bets than Gulf Keystone, as they both operate in stable regions and have stronger balance sheets than GKP. However, if you don't have a view on the price of oil, or believe oil prices will languish over the next year, it might be wise to avoid the sector altogether. What's more, it should be said that all three of these companies aren't really suitable for widows and orphans and should only be owned by investors with a high risk tolerance.
And if you do decide to avoid the industry, our top analysts here at the Motley Fool have recently discovered a hidden gem that could supercharge your investment portfolio's returns. The company in question has already delivered a powerful return for investors over the years, and our analysts believe the company's growth is only just getting started.
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Rupert Hargreaves 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.