News Column

Oil investors take fright at Iraqi turmoil

June 12, 2014

By Rob Davies, Daily Mail, London

June 12--Shares in Kurdistan-focused oil firms Genel Energy, Gulf Keystone Petroleum and Afren slumped yesterday as traders took fright at a surge in terrorist activity in northern Iraq.

Both firms have major oil and gas assets in the semi-autonomous Kurdistan region of Iraq, not far from the city of Mosul, which has been overrun by terrorist group ISIS.

While Kurdistan has been relatively peaceful throughout Iraq's domestic problems in the past decade, the capture of Mosul has set nerves jangling in the City.

Genel, run by former BP boss Tony Hayward, saw shares fall 58.5p to 968.5p, Gulf Keystone Petroleum lost 9p to close at 81.5p, while Afren fell 6.8p to 144.2p.

The reaction sparked an intervention from Genel backer and banking dynasty scion Nat Rothschild, who weighed in to dispute any suggestion that the company's oilfields were under threat.

He hit out at stock market pundits who he said were 'totally wrong to state that Mosul lies between [Genel assets] Ber Bahr and Bina Bawi'.

Analysts at Liberum Capital said the deteriorating security situation could even play to Genel's advantage. The Kurdish government and Baghdad have been trying to thrash out an agreement over the division of oil income for years. And Liberum suggested Kurdistan's hand may have been strengthened by the security situation, potentially removing obstacles to ramping up oil exports to the benefit of Genel.

'It can be argued that Iraq has a pressing need for Kurdish (military) support,' said Liberum.

But it added Baghdad might also use the uprising to demand that Kurdistan get behind the government for the sake of 'national unity'.

The broker added that Genel was 'one issue short of being able to export and crystallise a prompt of the shares,' which Liberum thinks could rise to 1400p.


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Source: Daily Mail (London, England)

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