GKP Reports Loss for 1H 2020

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) were trading largely unchanged at lunchtime on Thursday, after the company announced a loss for the half year ended 30 June 2020.

Company statement:

Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:

"We moved decisively to protect the business and preserve liquidity in response to COVID-19 and the decline in oil prices. We are actively managing the impact of COVID-19 and working to protect our staff. The Shaikan Field continues to perform well with production up more than 25% compared to H1 2019. 

"While waiting to resume the 55,000 bopd project, the Company has identified a number of simple, low-cost, high-impact investments that have the potential to increase the current base level of gross production by approximately 5,000 bopd and, subject to a satisfactory operating environment, could be implemented in the near-term.

"We continue to maintain a tight focus on cost control and further savings will be reflected in the full year results.

"With our current measures in place, we are pleased to provide 2020 gross production guidance of 35,000 to 36,000 bopd. With continued improvement in macro and operating conditions, we are well positioned to deliver the long-term potential of the Shaikan Field and look forward to resuming shareholder distributions over time."

Highlights to 30 June 2020 and post reporting period

Operational

  • Operations at Shaikan continue safely and reliably, with no Lost Time Incidents ("LTIs") reported during 2020.
  • The Shaikan reservoir continues to perform in line with expectations, with current gross production of c.36,000 bopd and average 2020 gross production to 1 September 2020 of 36,272 bopd.
  • At the time of suspension of investment plans in March 2020, key drilling and facilities activities were on track to achieve the 55,000 bopd target in Q3 2020.
  • GKP is preparing to return to production growth, and has identified a number of quick payback projects, which are expected to increase gross production by c.5,000 bopd for an aggregate gross cost of c.$3 million. Planning is ongoing and, subject to a satisfactory operating environment, could be implemented in the near-term.
  • The Company remains committed to operating sustainably. Throughout the pandemic, the Company has continued to actively support the communities around Shaikan and has donated essential equipment to nearby hospitals.

Financial

  • H1 2020 revenue of $49.9 million (H1 2019 - $95.6 million) and Adjusted EBITDA of $27.5 million (H1 2019 - $59.0 million) resulted from the decline in oil prices, partially offset by increased production. Such factors combined with increased depreciation, depletion and amortisation ("DD&A") due to production growth drove a loss after tax of $33.1 million (H1 2019 - $24.2 million profit).
  • Opex per barrel in H1 2020 was $2.6/bbl, below guidance of $2.7 - $3.1/bbl. Operating costs and general and administrative ("G&A") expenses savings of 12% contributed to expense reductions compared to H1 2019, and further savings are expected in H2 2020 with the significant reduction in activity and continuing focus on cost control.
  • Net capex in H1 2020 was $38.5 million. H2 2020 net capex is expected to be minimal, comprised principally of long-lead time deliveries that will expedite the eventual restart of growth activities. Full year net capex is expected to be within the original $40-48 million guidance range.
  • To protect cash flows, Gulf Keystone hedged c.70% of its H2 2020 net production at a floor price of $35/bbl while retaining full upside exposure.
  • In Q1 2020, the Company completed the second tranche of its share buyback programme bringing total 2019 and 2020 capital distributions to $99 million.
  • Since March 2020, the Kurdistan Regional Government ("KRG") has paid for the last five months of oil sales in the following month as per its commitment to international oil companies ("IOCs").
  • The Company has a strong balance sheet with $140 million of cash at 2 September 2020 and no debt repayment until mid-2023.

  Corporate

  • As previously announced, Jón Ferrier, CEO, has informed the Board of his intention to retire from the Company upon appointment of a successor and after a period of handover. The search process for a new CEO is underway.
  • The Company announced the re-appointment of Garrett Soden to the Board of GKP as a Non-Independent Non-Executive Director representing funds managed by Lansdowne Partners Austria GmbH.

Outlook

  • After successfully managing the impacts of COVID-19 over the last several months, the Company is pleased to provide 2020 gross production guidance of 35,000 bopd to 36,000 bopd.
  • GKP is well positioned to restart its drilling programme to achieve 55,000 bopd when circumstances permit.
  • In line with its stated growth strategy, GKP continues to progress growth opportunities at Shaikan and will also consider potential value accretive inorganic options on an opportunistic basis.
  • The Company remains in a constructive dialogue with the KRG and will continue to seek the timely settlement of the overdue November 2019 to February 2020 invoices totaling $73.3 million (net). The KRG has committed that with the continuing improvement in the price of dated Brent above $50/bbl outstanding arrears will be reviewed.
  • GKP remains committed to maintaining its strong financial position and, as conditions continue to improve, returning to a balance of production growth and shareholder distributions.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

More here and here.

(Sources: GKP, Yahoo!)

The post GKP Reports Loss for 1H 2020 first appeared on Iraq Business News.

GKP CFO to Chair Oryx

Oryx Petroleum has announces the appointment of Sami Zouari (pictured) as Board Chair and Independent Director with immediate effect.

Mr. Zouari  succeeds Jean Claude Gandur who recently resigned from the Corporation as part of transactions consummated between The Addax and Oryx Group PLC and Zeg Oil and Gas Limited.

Sami Zouari was most recently the Chief Financial Officer and an Executive Director of Gulf Keystone Petroleum Limited, an independent oil and gas company that operates the Shaikan Field in the Kurdistan Region of Iraq. During his tenure, Mr. Zouari played a lead role in the operational and commercial transformation and the financial restructuring of Gulf Keystone into one of the premier independent exploration and production companies operating in the Kurdistan Region of Iraq and the wider Middle East. Prior to appointment at Gulf Keystone, Mr. Zouari held various positions at Total E&P and BNP Paribas.

Commenting today, Independent Director of Oryx Petroleum, Peter Newman, stated:

"We are delighted to welcome Sami to the Board. His extensive experience in the oil and gas sector in the Kurdistan Region of Iraq and the Middle East, his knowledge of financial markets, and his experience with corporate transformation processes will be enormously helpful to us as we confront financial challenges and seek to maximise value from the Hawler license."

Also commenting today, Chair of Oryx Petroleum, Sami Zouari, stated:

"The Hawler license is an asset I believe has significant potential. I look forward to working with the Board and Management of Oryx Petroleum to transform Oryx Petroleum into one of the leading independent exploration and production operators in the Kurdistan Region."

(Source: Oryx Petroleum)

Soden Re-joins GKP Board

Further to the recent announcement that Garrett Soden was to be re-appointed to the Board of Gulf Keystone Petroleum (GKP) as a Non-Independent Non-Executive Director representing funds managed by Lansdowne Partners Austria GmbH, the Company is pleased to confirm that the formal appointment process has now been completed and as such welcomes Mr Soden back to the Board of Gulf Keystone.

Garrett Soden has extensive experience as a senior executive and board member of various public companies in the natural resources sector. He is currently President and CEO of Africa Energy Corp., a Canadian oil and gas exploration company focused on South Africa, and is also a Non-Executive Director of Etrion Corporation, Noble Group Holdings Limited and Panoro Energy ASA. Mr Soden has undertaken to conform to UK corporate governance standards in respect of external appointments.

Directorships held within the past five years:

Phoenix Global Resources plc

Gulf Keystone Petroleum Ltd

Petropavlovsk plc

PA Resources AB

RusForest AB

(Source: GKP)

Ferrier Steps Down as CEO of GKP

Gulf Keystone Petroleum (GKP) has announced that Jón Ferrier (pictured), Chief Executive Officer, has informed the Board of his intention to retire from the Company upon appointment of a successor and after a period of handover.

The Company is now commencing a formal, externally facilitated, search process and will provide an update as and when appropriate.

Jaap Huijskes, Chairman of the Company, said:

"Jón Ferrier took the helm five years ago, immediately leading the Company through its financial restructuring and breathing new life into GKP as an attractive investment proposition.  He has brought us the experience he gained over a long and distinguished career, resulting in GKP meeting the highest standards across all aspects of its business. 

"Today, Gulf Keystone is a highly respected and successful E&P Company, for which Jón deserves considerable credit.  On behalf of the Board and everyone within the Company I would like to thank Jón for his leadership and resolute commitment over the past five years.  We will be sad to see him step down when a successor is found and wish him all the best for his retirement."   

(Source: GKP)

GKP to Cut Workforce by 40%

By John Lee.

Gulf Keystone Petroleum (GKP) has provided an operational and corporate update in advance of Friday's Annual General Meeting:

Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:

"In response to the unprecedented COVID-19 pandemic and macroeconomic conditions, we took decisive actions to preserve liquidity and safeguard the long-term health of the business. We are now well placed to weather the current environment and are able to move quickly back to growth at the right time. 

"Our cost reduction initiatives have been thorough, and I am grateful to our staff and contractors for their commitment and support.  Whilst uncertainty around the timing of the end of the crisis persists, the partial oil price recovery gives us some grounds for optimism about the future and our return to delivering the significant untapped value in Shaikan."

Operational

  • Maintaining strong focus on safety with zero LTIs recorded in 2020.
  • In order to protect all personnel, the Company continues to actively manage its working practices in light of the COVID-19 pandemic observing all of the appropriate protection measures.
  • Despite the challenges presented by COVID-19, production operations continue at c.36,000 bopd (gross). Average gross production for the year to date is 37,232 bopd.
  • DQE's Rig 40 has been stacked on site at zero cost, which will aid the timely resumption of drilling activities, when appropriate.
  • During this period of reduced activity, the Company continues to optimise its plans for a quick and effective restart of the 55,000 bopd expansion project.

Financial

  • As a result of a continued rationalisation of the organisation, expenditures, and contract renegotiations, the Company remains on track to achieve its previously announced target of Opex and G&A savings in excess of 20% in 2020 compared to 2019. On a run-rate basis, we are targeting to achieve savings of c.30%.
    • The Company is introducing 2020 guidance for Opex of $2.7 to $3.1 per barrel (vs $3.9 per barrel in 2019).
    • The workforce is in the process of being reduced by c.40%, including over 60% of expatriates, due to the reduction in the work programme.
  • Capex for 2020 remains in the range $40 - $48 million (net), a 50% reduction compared to 2019, of which $30 million (net) had been spent by the end of April 2020.
  • Cash balance of $144 million as at 17 June 2020.
  • Payments by the Kurdistan Regional Government to GKP are in line with the peer group, with invoices from March 2020 onwards being settled the following month. There is an ongoing dialogue relating to the payment of invoices for November 2019 to February 2020, aggregating $73 million (net).

Corporate

  • Garrett Soden is to be welcomed back to the Board of GKP as a Non-Independent Non-Executive Director representing funds managed by Lansdowne Partners Austria.
  • Mr Soden will be formally appointed following completion of the appointment process and will bring valuable financial and industry experience.  Mr Soden was a Non-Executive Director between 2016 and 2019 and he has undertaken to conform to UK corporate governance standards in respect of external appointments.

Outlook

  • With the Company's ongoing prudent approach to managing its financial position and the decisive measures taken to reduce its cost structure to preserve liquidity, GKP remains financially resilient to manage through the current macro environment.
  • Despite a partial recovery in oil price, the Company closely monitors market dynamics and will continue to take the appropriate actions to preserve value in Shaikan.
  • GKP looks forward to resuming investment and shareholder distributions when conditions allow.

(Source: GKP)

GKP Directors Buy Shares

By John Lee.

Gulf Keystone Petroleum (GKP) has announced that it was informed on 30th April 2020 of the following transactions by persons discharging managerial responsibilities and persons closely associated with them.

Mr Ian Weatherdon (pictured), Chief Financial Officer, purchased 50,112 common shares in Gulf Keystone Petroleum Limited on 30 April 2020 at a price of 79.8p per share. In total Mr Weatherdon owns 50,112 common shares in the Company representing 0.024% of the issued share capital.

Mr Gabriel Papineau-Legris, Chief Commercial Officer, purchased 20,000 common shares in Gulf Keystone Petroleum Limited on 30 April 2020 at an average price of 84.225p per share. In total Mr Papineau-Legris owns 30,000 common shares in the Company representing 0.014% of the issued share capital.

(Source: GKP)

GKP Shares up 10% on Results

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) were up around 10 percent on Thursday morning, following the company's announcement of its results for the year ended 31 December 2019.

Jón Ferrier (pictured), Gulf Keystone's Chief Executive Officer, said:

"2019 saw a step change in activity at Shaikan; we delivered production and controlled expenditures in line with guidance, returned just under $100 million to our shareholders, and maintained a strong balance sheet with cash of $164 million at 22 April 2020. 

"The current oil price and macro-economic uncertainty continues to have profound, far-reaching effects. We have taken concrete steps to protect value and assure the viability and financial strength of our business, both for today and the longer-term. As previously announced, we have suspended guidance and, while we were on-track to achieve 55,000 bopd in Q3 2020, we have stopped further expansion activity and are currently demobilising the team until circumstances improve. While we have secured ongoing production operations, we continue to closely monitor market dynamics and will take appropriate further actions to preserve value.

"We continue to focus on strict financial discipline and maintaining our strong balance sheet.  GKP remains underpinned by Shaikan, which continues to perform in line with expectations, and we look forward to resuming expansion activity and delivering the underlying value of the field for all stakeholders upon resolution of the outstanding payments from the Kurdistan Regional Government ("KRG") and an improvement in economic conditions."

 Highlights to 31 December 2019 and post reporting period

Operational

  • Robust safety performance during a period of increased operational activity.
  • GKP remains committed to the welfare of all personnel and the safety of our operations. To limit the risk and transmission of COVID-19, only location essential personnel are working at GKP sites and offices.  
  • Average gross production in 2019 of 32,883 bopd, in line with original guidance.
  • Gross production from the field in 2020 to date of c.38,000 bopd.
  • As a result of COVID-19, the focus on cost control and overdue payments from the KRG, operations have been reduced to focus on minimum safety critical activities required for production.
  • Once macro conditions improve, including resolution of outstanding payments from the KRG, the Company will restart expansion activity to increase production to 55,000 bopd.

Financial

  • In 2019, the Company achieved its production, capital expenditures, operating costs and G&A costs guidance.
  • Profit after tax of $43.5 million (FY 2018: $79.9 million) and revenue of $206.7 million (FY 2018: $250.6 million) were down, as Brent oil prices averaged $64 per barrel in 2019 compared to $71 per barrel in 2018.
  • Net capital investment in Shaikan of $90.0 million (FY 2018: $35.4 million).
  • Maiden dividend and share buyback programmes returned $79 million in 2019. Subsequent completion of the share buyback programme brought total returns to $99 million.
  • Cash balance of $190.8 million at year end (2018: $295.6 million).

Outlook

  • The Company is actively focused on maintaining a robust financial position and is targeting a major reduction of costs across the business, while maintaining a strong focus on safety and long-term asset reliability. These actions are being taken in response to the current oil price environment and in anticipation of a protracted recovery:
    • net Capex for 2020 include expenditures incurred to date and remaining firm commitments andare expected to be $40-$48 million ($50-$60 million gross), a c.50% reduction compared to 2019;
    • targeted Opex and G&A savings of at least 20%; and
    • in process of reducing expatriate workforce by c.60%.
  • The KRG has committed to paying for monthly production by the 15th day of each following month starting with March 2020, for which payment was recently received.  Dialogue with the KRG is continuing relating to payment of outstanding invoices for November 2019 to February 2020 aggregating $93.7 million gross ($73.3 million net to GKP).
  • Guidance for 2020 suspended until the outlook becomes clearer.
  • Resumption of distributions is dependent on an improvement in macro-economic conditions, resolution of outstanding payments from the KRG and a clear operational outlook.
  • With a strong balance sheet, limited capital commitments and an existing low-cost production base, GKP is well placed to navigate through these challenging conditions and, if necessary, to withstand a lower oil price throughout 2020 and 2021.

The Company's 2019 Full Year Results presentation is available on the investor relations section of the website: https://www.gulfkeystone.com/

(Source: GKP)

GKP Updates on Iraq Operations

Gulf Keystone Petroleum (GKP) has issued providing an operational and corporate update:

Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:

 "In these challenging times, we remain focused on the safety of our people and have adapted our operations to ensure their continued welfare.  With the associated economic backdrop compounded by a delay in payments, we are taking a prudent approach to running our business with a sharp focus on financial discipline and maintaining liquidity.  While we were on track to deliver the expansion to 55,000 bopd in Q3 2020, flexibility is the order of the day and as such, beyond our existing commitments, we have suspended further expansion activity until conditions improve. 

 "Underpinning the Company's strong investment case is the quality and scale of the Shaikan Field, which continues to perform well with current production of c.38,000 bopd.  

"Given our strong balance sheet with cash of $154 million at 23 March 2020, no debt repayment until mid-2023, limited capital expenditure commitments and a low-cost structure, we are highly confident in our future ability to capture the significant value in Shaikan, for the benefit of all stakeholders."   

Operational

  • Production from the field continues in line with expectations at c.38,000 bopd, currently unaffected by the impact of COVID-19.
  • GKP was on track to achieve 55,000 bopd in Q3 2020, prior to the previously announced suspension of expansion activity.  
  • The Company remains committed to the elimination of routine gas flaring. Its gas management plan now envisages the export of sweet gas instead of gas reinjection. This follows the results of the SH-9 well, which did not encounter a gas cap. The well has been completed as an oil producer and is in the process of being tied into PF-1.
  • A revised Field Development Plan ("FDP") is currently expected to be submitted this year, reflecting the new gas management project. Upon FDP approval, planning will commence for FEED ("Front End Engineering and Design").

Outlook

  • GKP will maintain a conservative financial position with a clear focus on cost control and cash preservation. At current production levels, the Company covers all operating, general and administrative costs and interest payments with a Brent price of c.$35 per barrel.
  • In the absence of further expansion activity, 2020 capital expenditures, including expenditures incurred to date and remaining firm commitments, are estimated to be between $50 million and $60 million (gross).
  • The delay of further investment into Shaikan is expected to impact prior gross 2020 production guidance of 43,000-48,000 bopd and achieving 55,000 bopd in Q3 2020.
  • Given the macro uncertainty, the Board is suspending guidance until such time as the outlook becomes clearer.
  • The Board recognises the importance of distributions to shareholders and intends to consider the appropriateness and timing of the ordinary dividend and any share buyback - upon resumption of payments and when it has a clearer view of the scale and duration of the impact of COVID-19 and the macro-economic effects on the business.

(Source: GKP)

GKP Shares Fall as Coronavirus Delays Plans

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) were trading down 9.6 percent on Monday, compared to a broader market fall of 7.4 percent, as the company announced that expansion plans will be delayed due to coronavirus (COVID-19).

In a statement to the markets, the company said:

The Company has been closely monitoring the Coronavirus (COVID-19) situation in the Kurdistan Region of Iraq.  Gulf Keystone's priority is the welfare of its staff, contractors and the communities close to its operations. We remain committed to deliver safe operations, protection of the asset and the underlying business.

In an attempt to limit the spread of Coronavirus (COVID-19), the Kurdistan Regional Government, in line with many other jurisdictions, has put in place a series of tight controls on the movement of personnel into and around the region.  With these controls, along with the increasing global restrictions on movement, it has become difficult to ensure Gulf Keystone has the appropriate drilling personnel and equipment on site in order to continue safe drilling operations.

Therefore, with the SH-13 well - the current well in the campaign - at a safe stage, the decision has been taken to suspend drilling activities until conditions improve to ensure safe operations.

Production rates from the field are at c.38,000 bopd and production currently continues unaffected by the impact of Coronavirus (COVID-19).  However, as a precaution, the Company has restricted the access to its production facilities.  As a result, certain construction activities related to the expansion to 55,000 bopd have also been suspended until circumstances improve.

The current situation is extraordinary and we believe that our actions protect the long-term value of the asset.  The planned production increase to 55,000 bopd, scheduled for Q3 2020, and average production guidance for 43,000 - 48,000 bopd remain priorities.

However, the suspension of drilling and certain expansion operations may impact Gulf Keystone's ability to meet these targets in the timeframes currently in place.  Gulf Keystone will continue to closely monitor this fast-moving situation and will provide updates, as appropriate. As previously announced, the Company will release its Full Year results on 26 March 2020.

Notwithstanding the above, the Company remains in a strong financial position to manage through these turbulent times with a cash balance of $159 million, as at 13 March 2020.

Jón Ferrier, CEO, commented:

"As a Company we place the welfare of our people and those we work with and near as our absolute priority.  We also have to be confident of having the right people on site to continue safe operations.  Whilst we are not aware of any employees or contractors having been infected, we believe it is prudent to suspend drilling and certain production facility expansion operations during this time. 

"We are watching the situation closely and will keep all of our stakeholders informed of developments.  Meanwhile, the Shaikan Field itself is performing well."

(Source: GKP)

GKP Plans 30% Year-on-Year Growth

Gulf Keystone Petroleum (GKP) has issued an operational and corporate update in advance of the Company’s full year 2019 results which are scheduled to be released on 26 March 2020.

Operational

  • Average gross production for 2019 of 32,883 barrels of oil per day (“bopd”), meeting original 2019 gross production guidance.
  • Current production rates from the field at c.40,000 bopd.
  • The side-track to the SH-9 well, designed to assess the gas reinjection potential of the Jurassic formation, reached total depth on 27 December 2019.
  • The SH-9 well is currently being tested. GKP and its partner MOL will then review plans for gas management, in consultation with the Ministry of Natural Resources.
  • In order to optimise the cost and production benefits from the drilling campaign, the sequence of wells will now be SH-L then SH-I, both of which will be drilled from the same pad and will produce into PF-2, which has available processing capacity.
  • The rig is currently being mobilised to drill the SH-L production well.
  • Full oil export from Shaikan via pipeline following commissioning of the PF-1 export line on 10 December 2019.
  • Safety remains a core focus. However, following over 530 Lost Time Incident (“LTI”) free days, an LTI occurred in December as a result of a road traffic accident.

Corporate

  • Cash balance of $192 million as at 20 January 2020.
  • The Company returned value to shareholders by paying dividends of $50 million in 2019 and to date repurchasing c.$35 million of shares out of $50 million in aggregate of share buyback programmes previously announced (with the Company today separately announcing its intention to complete the final $10 million tranche of such programmes).
  • Ian Weatherdon joined the Company on 13 January as Chief Financial Officer and Executive Board member.

Outlook

  • With the continued development of the Shaikan Field, the Company expects to increase average production in 2020 by more than 30% year-on-year to 43,000-48,000 bopd.
  • Debottlenecking and facility upgrades remain on schedule.
  • On track to reach the 55,000 bopd gross production target at Shaikan in Q3 2020.

Jon Ferrier, CEO, commented:

2019 saw GKP continue to realise the benefits of the Company’s recent turn around. In a year in which we returned significant value to shareholders, through both our maiden dividend and share buyback programmes, we also benefited from the increased operational tempo. This resulted in the first steps along the road to a significant production increase from Shaikan, and we are pleased to confirm today that we achieved our original 2019 gross production guidance.

“Looking forward, the pace of the development of Shaikan continues with the drilling and investment in our facilities, in order to deliver our growth trajectory. With a robust balance sheet and confidence in regular payments, we expect to be fully funded for our work programme and continue to return value to shareholders.

(Source: GKP)