LONDON--Kurdistan-focused Gulf Keystone Petroleum Ltd. (GKP.LN) said on Friday it has stopped exporting crude because of a payments dispute with Kurdistan's regional government, hitting shares in the oil explorer.

Gulf Keystone received an initial export payment in December, along with Genel Energy (GENL.LN) which is also owed money by the Kurdistan Regional Government, or KRG. Hopes that regular payments would follow soon were boosted when the KRG struck an oil export deal with Iraq's central government.

The company has now suspended the trucked export shipments and returned to selling crude from its Shaikan field in the domestic market to keep cash coming as negotiations continue. In its results for the first half of 2014, the company said crude sold for export fetched $51 to $56 a barrel, versus $42 a barrel for domestic sales.

"Gulf Keystone Petroleum is still struggling to establish a stable payment cycle with the Kurdish government," wrote Marc Anis-Hanna, an analyst at VSA Capital Ltd. "This situation will have a negative read-across for all the companies operating in the Kurdish region."

Shares in Gulf Keystone fell as much as 17% before paring losses to trade six pence or 11% lower at 47 pence at 1340 GMT.

"This is expected to be a short term measure until a regular payment cycle can be established for sales via the export route," Gulf Keystone said. "The company is actively working towards an early pipeline access solution for Shaikan crude, which will provide significantly improved margins than trucking to the export market."

Gulf Keystone said the return to domestic sales is part of a prudent approach to its near-term finances, adding that it's also progressing a number of "longer term financing options."

Write to Ed Ballard at ed.ballard@wsj.com

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