UPDATE 2-Gulf Keystone wins Kurdistan oilfield ownership court case

Tue Sep 10, 2013 8:14am EDT

* Shares soar 19 percent

* Company could become takeover target now legal uncertainty removed

* Analysts call company's victory "decisive"

By Sarah Young

LONDON, Sept 10 (Reuters) - Kurdistan-focused oil explorer Gulf Keystone won a court case over its ownership of giant oilfields on Tuesday, removing a legal shadow hanging over the company and making it more attractive to potential suitors.

Announcing his ruling to a packed London courtroom, the judge dismissed claims made by Excalibur Ventures that it was entitled to a 30 percent share in the oilfields, bringing to a close almost three years of legal wranglings.

Shares in the company, which had been temporarily suspended ahead of the ruling, soared as much as 26 percent when trading resumed.

Gulf Keystone has long been touted as a takeover target for a big oil company looking for a foothold in Kurdistan, but the ongoing uncertainty created by the legal battle had been cited as a potential obstacle to any takeover deal.

The company's prize asset in Kurdistan is the Shaikan field, which is estimated to hold at least 12 billion barrels of oil - a volume which would make it one of the biggest discoveries made anywhere in recent years - and from which it aims to produce 250,000 barrels per day by 2018.

Kurdistan, a semi-autonomous region of Iraq locked in a dispute with Baghdad over oil exports and payments, was once the domain of smaller firms such as Gulf Keystone but recently big oil companies such as Exxon Mobil, Total, Chevron and Gazprom, have all moved in.

Excalibur's case was made against Gulf Keystone and Texas Keystone, a company founded by Gulf Keystone Chief Executive Todd Kozel, which holds a small interest in the Shaikan field in trust for Gulf Keystone.

"It (Excalibur) has accordingly no valid claim against either Texas or Gulf to an interest in that (Shaikan) or any other PSC (production sharing contract)," said the judge, Christopher Clarke.

Kozel was in court for the judgement and left to backslapping and applause from about 50 private investors gathered outside the courtroom.

Excalibur, a two-man company which said it helped introduce Gulf Keystone to the opportunity in Kurdistan, began legal action in 2010.

The man behind Excalibur, former U.S. special forces soldier Rex Wempen, said during the trial that he had funding from hedge funds which specialise in litigation finance. Under court orders, the claimant had been ordered to pay 10.7 million pounds ($16.82 million) as security for Gulf Keystone's costs.

Shares in Gulf Keystone traded up 19 percent at 224 pence at 1124 GMT, hitting levels not seen since October 2012, but below an all-time high of 465 pence reached in February of that year.

DECISIVE VICTORY

In a statement anticipating the reopening of trading in its stock, Gulf Keystone said its priority now was to move from the London Stock Exchange's Alternative Investment Market (AIM) and onto the main market by the end of 2013.

"We are very pleased to have achieved the best possible outcome from the point of view of the Company and our shareholders. We look forward to pursuing the company's stated objectives for the future."

With a valuation of around 2 billion pounds after Tuesday's news, Gulf Keystone is one of the biggest companies on AIM.

The judge adjourned the hearing to a later date where arguments over costs and Excalibur's right to appeal will be heard.

Analysts at Mirabaud called Gulf Keystone's victory "decisive" and said it was unlikely an appeal would go ahead given the one-sided nature of the judgement.

"Whilst there will be a fair bit of profit taking from existing holders the underlying upside is substantial, our target price of 480 pence stays and now with just the full listing to come I remain very bullish about the prospects for Gulf Keystone," VSA Capital analyst Malcolm Graham-Wood said.

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