You simply don’t ever have to be contrarian. Many risk-averse investors make plenty of money.

But those that take a leap of faith and swim upstream can benefit the most.

That being said, I draw your attention to the country of Iraq and, in particular, the semi-autonomous northern region of Kurdistan. The Kurds control massive oilfields, which, for the bold investor, is a potentially lucrative investment opportunity.

#-ad_banner-#​But before we get to that, let me explain the unique situation in Iraq and why this risky venture is meant only for a conservative portion of a brave investor’s portfolio.

A radical Islamic group — known as ISIS — grew out of the Syrian civil war and began invading Iraq earlier this year with the goal of creating an Islamic state, or caliphate, across Syria and Iraq. The group has successfully captured and controls wide swaths of land in the northern regions of both countries.

The Kurdish oil fields lie just north of ISIS-held territory in Iraq and remain a target for the radical group. Not surprisingly stock prices of independent companies operating exclusively in Kurdistan have been decimated.

These companies control very large conventional oil fields that have terrific economics at current oil prices.  These are the kinds of fields that we stopped finding in North America fifty years ago — inexpensive to develop and very high-quality oil.

The following companies have incredibly valuable assets, yet sit in the direct path of one of the most violent conflicts on Earth.
 

WesternZagros Resources Ltd (TSE:WZR, WZGRF:OTC)

If WesternZagros found the vast oil deposits somewhere onshore in North America that it discovered in Kurdistan, then its share price would be multiples of where it is today.  But with its location comes political and security risks, and results in a very low oil price.

WesternZagros has two main drilling contracts for huge deposits of oil. For instance, their contract to drill in an area known as the Kurdamir block should yield the company 400 million barrels of conventional light oil that flow at prolific rates.

Despite the mass supply of oil, prices are low due to the inherent risk of the region. For oil firms in North American it is common to see enterprise valuations near $20 per barrel of reserves paid. Western Zagros trades at $1.12 per barrel of contingent reserves.

I’m not saying that the company should ever trade for the same kind of price as a North American asset given the volatility of this region. But even a small revaluation upwards could make a big difference to the share price.

With virtually no debt, WesternZagros looks very attractive if you can stomach the turmoil that surrounds it.

Gulf Keystone Petroleum (LON:GKP, GUKYF:OTC)

The stock price of Gulf Keystone is not just in the doghouse because of the current upheaval in Iraq, but also because there has been a recent management change, delays in receiving payments for production and a downgrade of reserves at its main oilfield.

Devoid of good news, a very attractive valuation often exists.

Like WesternZagros, Gulf Keystone is focused 100% on Kurdistan and it has found four huge conventional oil reserves.

Third party reserve auditors estimate that there is 1.2 billion barrels of recoverable hydrocarbons on land controlled by Gulf Keystone.  And that report only covers 30% of Gulf Keystone’s oil bearing land.

The company’s share of that prize is 681 million barrels of proved, probable and contingent oil. Proved, probably and contingent refer to the three stages of progress toward extracting the oil.

Gulf Keystone has proved and probable reserves because, unlike WesternZagros, it is already at the production stage.  The company produces nearly 20,000 barrels of oil equivalent per day.

Gulf Keystone’s current enterprise value is roughly one billion dollars. That means the company is trading for $1.61 per barrel of booked and contingent reserves.  Again, remember that companies that are bought and sold in North America typically go for $20 per barrel or more.

The quality and size of these oil discoveries are a dream.  The turmoil in nearby areas is a nightmare.  That makes valuation efforts very imprecise.

This is a very hostile environment, but with the very low cost of developing these big conventional fields, Gulf Keystone and WesternZagros look very tempting for big oil companies willing to operate in the region.

No one knows how the coming weeks and months will play out for this troubled region, but if the violence lessens in the next five years, then I believe shares in these companies could increase significantly.

Risk to Consider: Take small position in WesternZagros and Gulf Keystone.  This is an open-ended idea where we have no idea when the violence in Iraq may cool down so patience and a strong stomach are required.

Action to take –> This is obviously a volatile region of the world and the downside of owning these companies is much larger than owning companies in safer parts of the world. Keep position sizes conservative.  

Investing in Kurdish oil companies is very risky… but not all international investments are quite as controversial. We’ve found 93 stocks that yield 12% or more, including some of the safest, highest-yielding stocks the world has to offer. To find out where the best international investments are, click here.