The rumours triggered shares in the company to gain 13 per cent in value by the close of trading on 29 July on the London Stock Exchange.

But by late afternoon the following day, in the wake of Gulf Petroleum's dismissal of the market speculation, the value of its shares had fallen by 8.3 per cent.

The company said it was instead considering a rights issue to raise cash for its exploration programmes in the Kurdistan region of northern Iraq.

On 14 July, Gulf Keystone said it planned to sell its share of a major oil and gas exploration and production permit in Algeria, so that it could concentrate on its operations in Kurdistan (MEED 14:7:09).

Its Kurdistan operations will make a profit sooner than those in Algeria, says Todd Koze, chairman of the firm.

The company holds interests in two permits in Kurdistan, which it won along with Hungary's Mol Oil in 2007.

It has successfully tested for oil at both permits.