Gamble of the week: A punt on an oil company

If you fancy a punt on an oil company share that promises untold riches, then you have plenty of choice on the London stock exchange. That said, this stock has a more colourful history than most of its quoted peers.

The company is a play on getting oil out of Iraqi Kurdistan. This has proved to be easier said than done. Problems here and in the boardroom have seen the company's shares hammered. Just over two years ago they were changing hands for over 400p; they are now 89p and have halved in value during the last year.

Oil explorer Gulf Keystone (LSE: GKP) seems to have been embroiled in one controversy after another. These range from its former advisers staking a claim to a third of the company, to excessive payments to its founder and a series of departures from key boardroom roles.

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However, the main issue comes down to how much money this company can ultimately make. No one seems too sure about this.

Gulf Keystone's key asset is an oilfield in Kurdistan called Shaikan. The problem for investors is that there's a lack of confidence about how much oil the company can actually get out of this field.

Until March this year, investors were led to believe that there was 13.7 billion barrels of oil in there. Then they were told it was 9.4 billion. That's still a lot of oil, but then there's the question of how much of it can actually be recovered, and whether Gulf Keystone can sell it and get paid for it.

On the other hand,the company said that there were somedelays in getting paid for its oil, which isnever a good sign.

So where do the shares go from here?Well, you have to believe that things canonly get better, and possibly they can.Production should ramp up from 20,000barrels of oil per day now to 40,000 bythe end of the year and 66,000 by 2016.

By then, most of the money earmarkedto develop the oilfield should havebeen spent so Gulf Keystone could begenerating lots of surplus cash flow.

It's not hard to see why the company'sshares have been battered, but there isa chance that they can rebound stronglyfrom here.

Verdict: a very risky punt at 89p