Questor share tip: Gulf Keystone a sell on production issues There are currently two major oil fields in Kurdistan vying for refining capacity. Genel owns the Tak Tak field and Gulf Keystone owns Shaikan. The problem for Gulf Keystone is down to the type of oil in the fields; Tak Tak produces a higher quality oil, known as light sweet crude, that sells for higher prices, whereas Shaikan produces a heavier oil that sells for lower prices. There is an additional issue at play here. The Kurdistan Regional Government (KRG) subsidises infrastructure development by handing back some revenue made on oil sales. The more developed an oilfield the less money the KRG has to hand back. The Tak Tak field is more developed than Shaikan. The KRG not only achieves higher prices by selling Tak Tak oil, it also gets to keep more of the profits. Gulf Keystone expects Shaikan to reach 20,000 barrels of oil per day (bopd) by the end of the year, with a second facility capable of another 20,000 bopd to be completed within six weeks. The lack of access to refining capacity is not disastrous as the company can truck its oil to other facilities further away, but this is costly and reduces profits. Brokers expected pre-tax losses to improve to $53m (£33.4m) from an $80m loss last year as production increased. Questor thinks that, with only two-and-a-half months left and production still on hold, those targets will now be missed. There is a longer-term issue of when Gulf Keystone's heavy oil goes back on sale. In the absence of clear information from the company the only sensible option is to cut the 28p loss investors have made since the recommendation at 200p, and sell.