China's Sinopec Corp (600028.SS) (0386.HK) is weighing a takeover of Gulf Keystone Petroleum (GKP.L), an oil company operating in the Kurdistan region of Iraq, Bloomberg reported on Tuesday.
Gulf Keystone shares were up 13.5 percent at 144.43 pence at 1041 GMT.
Sinopec, Asia's largest refiner, is working with advisers and has made an approach to Gulf Keystone, Bloomberg reported, citing sources familiar with the matter.
The company may also attract other bidders, according to Bloomberg.
A spokesman for Gulf Keystone declined to comment, while Sinopec could not be immediately reached for comment.
Gulf Keystone has been fighting to avoid insolvency after low oil prices and overdue oil export payments from the Kurdistan regional government crippled its balance sheet.
The Kurdish oil producer's market value has tumbled to about 290 million pounds ($368 million) as of Monday's close from its peak valuation of 3.5 billion pounds in February 2012, according to Reuters calculations.
Earlier this year, Gulf Keystone agreed to swap $500 million of debt for equity, wiping out some of the world's top funds as shareholders.
In July, Norwegian energy firm DNO ASA (DNO.OL) offered to buy Gulf Keystone for $300 million, following the latter's junk bond deal.
However, DNO's proposal lapsed as Gulf Keystone failed to meet certain conditions related to its financial restructuring.
(Reporting by Noor Zainab Hussain and Rahul B in Bengaluru; Editing by Anil D'Silva)