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GKP Profits more than Double

Gulf Keystone Petroleum (GKP) has today announced its results for the half year ended 30 June 2022.

Jon Harris (pictured), Gulf Keystone’s Chief Executive Officer, said:

“With the strengthening oil price and increased production, we have delivered strong profitability and cash flow generation in the first half of the year. As we progress towards approval of the Field Development Plan, we have continued to develop the Shaikan Field and recently resumed drilling with the spud of SH-16. We have paid a record $190 million of dividends in 2022 and are pleased today to announce an incremental interim dividend of $25 million, increasing total dividends declared this year to $215 million. While delivering a sector leading dividend yield, we have also maintained a strong balance sheet, redeeming our $100 million bond leaving the Company debt free.

“Looking ahead to the rest of the year, we are focused on progressing towards FDP approval and achieving our production and opex guidance as we continue to optimise production from the field while maintaining a rigorous focus on costs. We have raised our 2022 capex guidance to $110-$120 million as we have added the drilling of SH-16 and are progressing initial procurement activities for the installation of water handling facilities, which will enable us to unlock additional production from our wells in the future.

“We remain focused on balancing investment in growth with shareholder returns. Continued robust cash generation provides flexibility to consider funding future capital expenditures and further distributions to shareholders, while preserving adequate liquidity.“

Highlights to 30 June 2022 and post reporting period

Operational

  • Strong safety performance, with no Lost Time Incident (“LTI”) recorded for 315 days
  • 2022 year to date gross average production increased by 3.6% to c.45,000 bopd as compared to the FY 2021 average of 43,440 bopd
  • Continued to progress delivery of our 2022 work programme:
    • SH-15 drilled and brought online in April 2022 in record time
    • SH-16 (formerly SH-M) and SH-N well pad completed in preparation for resumption of drilling
    • Well workovers and interventions completed on two wells to optimise production rates
    • Progressing preparatory work for the expansion of the production facilities, including procurement activities for the installation of water handling capacity
  • Resumed drilling activities late August with the spud of SH-16:
    • Targeting production start-up into PF-2 towards the end of the year

Financial

  • Free cash flow more than doubled to $177.3 million (H1 2021: $66.7 million), driven by the strengthening oil price and continued production growth, enabling the Company to deliver against its strategic commitment of balancing investment in growth with shareholder returns
  • Dividends declared of $215 million in 2022, providing shareholders with a sector-leading dividend yield of 36% based on GKP’s closing price on 30 August 2022
  • Significant increase in Adjusted EBITDA and profitability in H1 2022:
    • Adjusted EBITDA up 122% to $208.6 million (H1 2021: $93.8 million)
    • Profit after tax up 151% to $162.8 million (H1 2021: $64.8 million)
    • Realised price up 93% to $84.3/bbl (H1 2021: $43.7/bbl)
    • Gross average production increased 3% to 44,941 bopd (H1 2021: 43,516 bopd)
    • Revenue up 102% to $263.6 million (H1 2021: $130.7 million)
    • Gross Opex per barrel of $2.9/bbl (H1 2021: $2.4/bbl), at low end of 2022 guidance of $2.9-$3.3/bbl
  • Net capex of $41.8 million (H1 2021: $14.1 million), primarily related to the drilling of SH-15, well interventions and workovers, well pad construction, procurement of flowlines and plant expansion activities
  • $354.4 million net to GKP received year to date from the Kurdistan Regional Government (“KRG”) for crude oil sales and revenue arrears, with the arrears balance related to the November 2019 to February 2020 invoices fully recovered
  • $100 million outstanding bond redeemed in August, leaving the Company debt-free and eliminating annual interest costs of $10 million
  • Robust balance sheet maintained with cash balance of $112.0 million at 31 August 2022

Outlook 

  • 2022 gross average production guidance reiterated at 44,000-47,000 bopd
    • Continuing to optimise production through prudent management of existing well stock, delivery of well workover and intervention programme and addition of SH-16 
  • Gross Opex guidance of $2.9-$3.3/bbl remains unchanged
  • Increasing 2022 net capex guidance from $85-$95 million to $110-$120 million
    • Primarily driven by the drilling of SH-16 and initial procurement activities related to the installation of water handling capacity
  • While timing of Field Development Plan (“FDP”) approval remains uncertain, we continue to engage with the Ministry of Natural Resources (“MNR”) towards project sanction and are progressing the tendering process for the Gas Management contract. We are also monitoring the potential impact of global supply chain pressures and logistical challenges on the costs and schedule of the FDP
  • We continue to monitor the long running dispute between the Federal Iraqi Government and the KRG on the management of oil and gas assets in Kurdistan. Our operations currently remain unaffected

Shareholder distributions

  • The Company has announced an ordinary dividend policy of at least $25 million per year and, with free cash flow, is committed to maximising distributions taking into account various factors, including investment levels required to achieve production targets, deliver profitable growth and satisfy PSC obligations, and preserve adequate liquidity to manage geopolitical, KRG payment and market uncertainties
  • Today we are declaring an interim dividend of $25 million, increasing total dividends declared in 2022 to $215 million:
    • $25 million interim dividend is equivalent to 11.561 US cents per Common Share of the Company and is expected to be paid on 7 October 2022, based on a record date of 23 September 2022 and ex-dividend date of 22 September 2022
  • Assuming timely payment of invoices and continuing strong oil prices, we expect continued robust cash flow generation, which would provide flexibility to consider funding future capital expenditures and further distributions to shareholders, while preserving adequate liquidity
  • With continued progress towards implementing the FDP, the Company expects to firm up the future estimated timing and levels of investment and review the dividend policy

More here.

(Source: GKP)

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GKP Shares lower following update

Ahead of Friday’s 2022 Annual General Meeting (“AGM”), Gulf Keystone Petroleum (GKP), provided an operational and corporate update.

Shares in the company closed down 4.4 percent.

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“Following a year of strong operational and financial performance in 2021, our leverage to the oil price, low-cost production base and focus on capital discipline have continued to drive significant cash flow generation from the Shaikan Field in 2022. We have declared sector-leading dividends of $190 million year to date, $75 million of which is subject to shareholder vote at today’s AGM, while continuing to invest in the high growth potential of the Shaikan Field. We also remain focused on maintaining a robust balance sheet and today we are pleased to announce our intention to call the $100 million outstanding bond, leaving the Company debt free.

“Year to date production has averaged c.44,900 bopd. We are prudently managing our wells to avoid traces of water and, as a result, we are tightening 2022 gross production guidance to 44,000 – 47,000 bopd. The installation of water handling facilities will unlock upside production potential and we continue to explore acceleration options in a supply constrained market. In the near-term, we continue to progress our well workover and intervention programme to optimise production. While timing of approval remains uncertain, we also continue to make positive progress on the FDP as we prepare to resume drilling and ramp up production.

 “Ahead of our AGM later today, I would like to thank our shareholders, employees and other stakeholders in Kurdistan for their continued commitment and support. Together, we are focused on safely delivering the significant value of the Shaikan Field.“

Operational

  • Continued strong focus on safety, with no Lost Time Incident (“LTI”) recorded for over 240 days
  • Gross average production in 2022 year to date of c.44,900 bopd; gross average production in June of c.45,900 bopd, as at 22 June 2022
  • Year to date gross average production impacted by:
    • SH-12 reperforated and brought back online in June at a reduced rate after being shut-in at the beginning of the year
    • SH-14 production remains constrained following acid stimulation earlier in the year
    • SH-15 brought online in April after being drilled in record time and is currently producing towards the lower end of the anticipated range
  • While the industry is currently experiencing equipment lead time pressures in a supply constrained market, we are continuing to review options to accelerate installation of water handling facilities that would enable further production ramp up from existing wells
  • Progressing well workover and intervention programme to optimise near-term production

Financial 

  • Significant cash flow generation in 2022 year to date, with $348.8 million ($273.1 million net to GKP) received from the Kurdistan Regional Government (“KRG”) for crude oil sales and revenue arrears. The outstanding arrears balance has been fully recovered
  • $190 million of dividends declared in 2022, a sector-leading dividend yield of 26% based on GKP’s closing price on 22 June 2022
    • $115 million paid to shareholders to date; additional $75 million, including the previously declared ordinary and special dividends, to be paid in July following approval at AGM
  • Robust balance sheet, with a cash balance of $247.0 million at 23 June 2022

Outlook 

  • Tightened 2022 gross average production guidance to 44,000 – 47,000 bopd
  • Gross Opex guidance of $2.9-$3.3/bbl remains unchanged
  • Net capital expenditure guidance of $85-$95 million remains unchanged
  • While timing of FDP approval remains uncertain, we continue to progress towards sanction with the MNR. The Company is preparing to resume drilling to ramp-up production from the Jurassic reservoir and will update capital expenditure guidance in due course
  • We continue to monitor the long running dispute between the Federal Iraqi Government and the KRG on the management of oil and gas assets in Kurdistan. Our operations currently remain unaffected and we continue to work closely with the KRG, our advisers and other stakeholders to protect the Company’s interests
  • Remain focused on balancing investment in growth with shareholder returns, while preserving adequate liquidity:
    • Intention to call $100 million bond after the step down in July 2022 of the call premium from 4% to 2% of principal
    • Assuming timely payment of invoices and strong oil prices, we expect continuing robust cash flow generation in 2022 providing flexibility to consider further shareholder distributions and an increase in capital expenditure to resume drilling

:

Update on ordinary and special dividend per share rate

Gulf Keystone will be seeking shareholder approval at today’s AGM to pay total dividends of $75 million, comprising the $25 million annual ordinary dividend declared on 30 March 2022 and the $50 million special dividend declared on 25 May 2022.

  • The annual ordinary dividend of $25 million is equivalent to 11.56 US cents per Common Share of the Company and is expected to be paid on 15 July 2022, based on a record date of 1 July 2022
  • The special dividend of $50 million is equivalent to 23.12 US cents per Common Share of the Company and is expected to be paid on 29 July 2022, based on a record date of 15 July 2022

The Company will disclose the pounds sterling rate per share for both dividends prior to their payment dates.

Update on Iraqi Federal Supreme Court (“FSC”) Ruling

Further to Gulf Keystone’s disclosure in its Annual Report and Accounts for the year ended 31 December 2021 regarding the FSC ruling, the Iraqi Ministry of Oil recently commenced legal proceedings with respect to the validity of Production Sharing Contracts (“PSCs”) issued under the Kurdistan Region of Iraq Oil and Gas Law, an escalation in the long running dispute between the Federal Iraqi Government and the KRG on the management of oil and gas assets in Kurdistan. The Company has been advised that the Iraqi Ministry of Oil has raised a case in the Baghdad Commercial Court against several IOCs, including Gulf Keystone. Gulf Keystone also understands that the Iraqi Ministry of Oil has also written to contractors and service providers requesting them to cease working in Kurdistan.

Gulf Keystone notes the KRG’s public assertion that the actions taken by the Iraqi Ministry of Oil are unlawful and that “it will take all constitutional, legal, and judicial measures to protect and preserve all contracts made in the oil and gas sector”. Further, on 4 June 2022, the Judicial Council of the Kurdistan Region of Iraq stated that the Kurdistan Region of Iraq Oil and Gas Law “remains in full force” and that the Iraq Federal Supreme Court “lacks the constitutional authority” to invalidate the Law. Also, on 13 June 2022, the Ministry of Natural Resources stated that “the contracts entered into between the IOCs and the Kurdistan Regional Government are entirely in accordance with the 2007 Oil and Gas Law”. The Company notes that the KRG has itself launched criminal and civil lawsuits which seek to protect the validity of the PSCs.

The Company continues to work closely with the KRG, its advisers and other stakeholders to protect its interests and will provide further updates on the matter as and when it is able and necessary to do so, recognising that this is a live legal matter and Gulf Keystone is not party to the resolution discussions between the Federal Iraqi Government and the KRG.

Gulf Keystone’s operations currently remain unaffected.

(Source: GKP)

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GKP Revenues Triple

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) closed up nearly 13 percent on Wednesday after the company announced that revenue for 2021 had almost tripled.

In its results for the full year ended 31 December 2021, Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“I am pleased to report a year of strong operational and financial delivery in 2021. With a 19% increase in gross average production to 43,440 bopd, our leverage to the recovery in oil prices and continued cost and capital discipline, we generated substantial revenue and free cash flow.

“We continued to deliver on our strategy of balancing investment in sustainable growth and shareholder returns, as we resumed drilling activities and submitted a draft Field Development Plan to the Ministry of Natural Resources while also returning $100 million of dividends to our shareholders in 2021. Following the $50 million dividend that we paid in February 2022, we are pleased to announce today the declaration of an additional $90 million of dividends. This brings aggregate shareholder distributions declared since 2019 to $340 million.

“Looking ahead to the remainder of 2022, we remain focused on delivering gross annual production of 44,000-50,000 bopd by bringing SH-15 online in Q2 2022 and optimising production with well interventions and workovers. While constructive engagement continues with the MNR on the FDP, timing of approval remains uncertain and further progress is required before we fully execute FDP activity.

“Following my first year as GKP’s CEO, I would like to personally thank the Company’s teams in Kurdistan and the UK for all of their efforts. We are in a strong position and I am excited about safely delivering the significant growth potential of the Shaikan Field to drive sustainable value for all of our stakeholders.“

Highlights to 31 December 2021 and post reporting period

Operational

  • Continued strong focus on safety in 2021 despite one previously reported lost time incident (“LTI”); currently no LTIs recorded for  over 160 days  
  • Third consecutive year of production growth with 2021 gross average production of 43,440 bopd, towards the upper end of our tightened guidance range of 42,000-44,000 bopd and a 19% increase versus 2020
  • 2022 YTD gross average production of c.45,500 bopd, following milestone achievement in February 2022 of 100 MMstb cumulative production since inception
  • Successfully restarted drilling activities in June, resulting in two new wells, SH-13 and SH-14, coming online towards the end of the year
  • After acid stimulations, current SH-13 production in line with expectations while we continue to explore options to further increase SH-14 production
  • Following the early appearance of trace quantities of water, SH-12 is currently shut-in while we investigate near-term production options ahead of installation of planned water handling facilities  
  • Spudded SH-15, which is currently being hooked up ahead of targeted start-up in Q2 2022

Draft Shaikan Field Development Plan (“FDP”)

  • Submitted draft FDP to Ministry of Natural Resources in November 2021 comprising plan to increase Phase 1 gross production plateau to between 85,000-95,000 bopd while eliminating routine flaring and significantly reducing carbon intensity
  • While final timing of approval remains uncertain due to the complexity of the project, we are providing today an interim update on progress to date on Phase 1 of the draft FDP. As we continue to review opportunities to further optimise the project, final details and cost estimates may vary and we expect to provide an update upon FDP approval
  • Expected components of Phase 1 of draft FDP:
    • Expand Jurassic gross production plateau up to 85,000 bopd
    • Test Triassic reservoir, targeting gross production plateau of up to 10,000 bopd
    • Concurrently, execute Gas Management Plan to eliminate routine flaring through gas reinjection, underpinning target of more than halving scope 1 and 2 emissions per barrel by 2025
  • From FDP approval, expected duration of Phase 1 Jurassic and Triassic projects is 36 to 42 months and the Gas Management Plan is 18 to 24 months
  • Total Phase 1 gross Capex currently estimated to be $800-$925 million, up c.$160 million from previous FDP with the objective of increasing production towards 95,000 bopd through project optimisations

Financial

  • Strong free cash flow generation of $122.2 million (2020: $(22.9) million)
  • Total dividends of $100 million paid in 2021, including a 2020 annual dividend of $25 million, a special dividend of $25 million and an interim dividend for 2021 of $50 million. An additional $50 million interim dividend was paid to shareholders in February 2022
  • Revenue almost tripled to $301.4 million (2020: $108.4 million), contributing to a return to profit after tax of $164.6 million (2020: $47.3 million loss)
  • Adjusted EBITDA increased by almost four times to $222.7 million (2020: $56.7 million) driven by higher gross production, leverage to the recovery in oil prices and the Company’s continued strict control of costs:
    • Gross average production increased 19% to 43,440 bopd (2020: 36,625 bopd)
    • Realised price more than doubled to $49.7/bbl (2020: $20.9/bbl)
    • Gross Opex per barrel of $2.7/bbl (2020: $2.6/bbl), in line with 2021 guidance of $2.5-$2.9/bbl
  • Revenue receipts of $221.7 million in 2021 from the KRG for crude oil sales related to the December 2020 to August 2021 invoices and partial repayment of arrears related to the outstanding November 2019 to February 2020 invoices
  • Since the beginning of 2022, the Company has received a further $106.4 million net to GKP for crude oil sales and arrears related to the September 2021 to November 2021 invoices. As at 29 March 2022, the outstanding arrears balance is $21.9 million net to GKP
  • Net Capex of $50.8 million (2020: $45.9 million), primarily related to the completion of the SH-13 and SH-14 wells and debottlenecking of PF-2
  • Robust cash balance of $182.7 million at 29 March 2022

Outlook

  • Remain focused on delivering 2022 gross average production of 44,000-50,000 bopd reflecting the anticipated production contribution from SH-15 and the benefits of well intervention and workover activities
  • 2022 net capital expenditure guidance of $85-$95 million:
    • Includes completion of SH-15 drilling, well interventions and workovers, and activity that enables us to expedite the FDP following approval 
    • With progress on the FDP, the Company expects to resume drilling and increase 2022 capital guidance
  • Gross Opex guidance of $2.9-$3.3/bbl, driven by increased operational activity and the continued catch up of previously scheduled work programmes deferred due to COVID-19
  • Today declaring $90 million of dividends, representing further delivery against GKP’s strategic commitment of balancing investment in sustainable growth with shareholder returns:
    • $25 million final 2021 ordinary dividend subject to approval at AGM on 24 June 2022
    • $65 million interim dividend, expected to be paid on 13 May 2022, based on a record date of 29 April 2022 and ex-dividend date of 28 April 2022
    • The Company will disclose the US dollar and pounds sterling rate per share for both dividends prior to their ex-dividend dates
  • Assuming timely payment of invoices and continuing strong oil prices, we are expecting strong cash flow generation in 2022. This would provide flexibility to fund a potential increase in capital expenditure, with progress on the FDP, and the opportunity for further distributions to shareholders, while preserving adequate liquidity and maintaining a robust balance sheet

More here.

(Source: GKP)

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Former CEO of GKP Jailed for Tax Evasion

By John Lee.

A US court has sentenced the former CEO of Gulf Keystone Petroleum (GKP) to five years in prison for tax evasion.

According to a statement from the US Department of Justice, Todd Kozel used offshore structures, trusts, and bank accounts to conceal a portion of his undeclared income from the U.S. government.

In addition to the prison sentence, Kozel, was sentenced to two years of supervised release and ordered to pay restitution to the IRS in the amount of $29,462,965.23.

The full text of the court statement follows:

Co-Founder And Former CEO Of Foreign Oil Company Sentenced To 60 Months In Prison For Failure To File Tax Returns Causing Over $20 Million In Losses To The U.S. Treasury Damian Williams, United States Attorney for the Southern District of New York, and Thomas Fattorusso, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that TODD KOZEL, the former Chief Executive Officer (“CEO”) of a multi-national foreign oil company, was sentenced in Manhattan federal court to 60 months in prison following KOZEL’s guilty plea to five counts of willful failure to file individual income tax returns for the calendar years 2011 through 2015.  U.S. District Judge Kimba M. Wood, who previously accepted Kozel’s guilty plea, imposed today’s sentence.

U.S. Attorney Damian Williams said:  “For years, Todd Kozel failed to file income tax returns, or pay the federal tax liabilities that were owed under those returns, despite earning millions of dollars in compensation as the CEO of an overseas oil company.  Today’s sentence shows that no one is above the law-all citizens must pay their fair share of taxes, including Americans who earn compensation from working in foreign countries.”

IRS Criminal Investigation Special Agent-in-Charge Tom Fattorusso said:  “U.S. citizens are required to pay taxes on worldwide income from all sources, including income earned overseas. Kozel earned tens of millions of dollars, and as a result, was required by law to pay taxes – more than $20 million – on those earnings. By not paying his fair share, he cheated the American people out of millions of dollars.”

According to the Information and other documents filed in the case, as well as statements made during public court proceedings:

Pursuant to the Internal Revenue Code and attendant regulations, all United States citizens and residents who had annual income in excess of a threshold amount are required to report accurately their income, tax obligations, and, where appropriate, any claim for a refund on a United States Individual Income Tax Return, Form 1040 (“Form 1040”), which must be filed annually with the Internal Revenue Service (“IRS”).  This obligation applies to all sources of income, including income earned through overseas employment and from foreign financial accounts.

From at least in or about 2004 through at least in or about 2014, TODD KOZEL was the co-founder and CEO of a London-based petroleum company with operations in the Kurdistan Region of Iraq (the “Oil Company”).  During the period 2011 through 2015, KOZEL, a United States citizen, earned substantial compensation as the CEO of the Oil Company, totaling more than approximately $66 million during the five-year period.  But despite earning this substantial income, KOZEL willfully failed timely to file any personal federal income tax returns for calendar years 2011 through 2015, resulting in well over $20 million in unpaid federal tax liabilities.  As part of his criminal conduct, KOZEL used sophisticated offshore structures, trusts, and bank accounts to conceal a portion of his undeclared income from the U.S. government.

*                *                *

In addition to the prison sentence, KOZEL, 55, of New York, New York, was sentenced to two years of supervised release and ordered to pay restitution to the IRS in the amount of $29,462,965.23.

Mr. Williams praised the IRS-CI for their outstanding investigative work on this case, and thanked the Large Business and International Division of the IRS for its assistance.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Louis A. Pellegrino and Olga I. Zverovich are in charge of the prosecution.

(Source: US Department of Justice)

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GKP Shares Rise on Corporate Update

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) ended the day up more than 6 percent on Friday, as the Kurdistan-focused oil producer gave an operational and corporate update:

Jon Harris (pictured), Gulf Keystone’s Chief Executive Officer, said:

“We continue to safely navigate a challenging operating environment due to COVID-19, with gross average year-to-date production of c.43,600 bopd, up almost 20% from 2020 annual average gross production. Today, we are pleased to announce that we have restarted work to complete SH-13, marking the resumption of drilling activities ahead of schedule.

“As a result, we now expect to increase gross production towards 55,000 bopd in Q4 2021 and to be at the upper end of 2021 guidance (40,000-44,000 bopd) as we continue to develop and realise the value of the Shaikan Field’s substantial reserves and resources for the benefit of all stakeholders.“

 55,000 bopd investment programme

  •  Successful restart of drilling activities, with commencement of SH-13 completion ahead of the previously announced schedule of Q3 2021.
  • After SH-13, SH-I will be drilled and electric submersible pumps will be installed in two existing wells.
  • Gross production is now expected to increase towards 55,000 bopd in Q4 2021, versus previous guidance of Q1 2022.

Operational

  • Continued strong safety performance, with no Lost Time Incident (“LTI”) recorded for over 530 days.
  • Continuing to effectively manage the impact of COVID-19 on production operations and the resumption of drilling activities despite continued challenges on the ground.  
  • Gross average production from the field in 2021 to date of c.43,600 bopd, in line with 2021 guidance.

Financial

  • $100.8 million ($78.9 million net to GKP) received from the Kurdistan Regional Government in 2021 to date for payments of crude oil sales and recovery of outstanding arrears. 
  • As previously announced, proposing a $25 million annual dividend and $25 million special dividend, both for approval at next week’s Annual General Meeting as we continue to balance investment in growth and returns to shareholders.
  • Retain a robust balance sheet, with a cash balance of $195 million as at 10 June 2021.

Outlook 

  • Expect 2021 average gross production guidance to be towards the upper end of the 40,000 to 44,000 bopd guidance range following early resumption of drilling activities.
  • 2021 guidance of $55-$65 million net capex and $2.5 to $2.9/bbl gross unit Opex remains unchanged.
  • Continuing to progress the preparation of the Field Development Plan, including the Gas Management Plan, through engagement with the Ministry of Natural Resources and other stakeholders; we will provide updates as this work progresses.

(Sources: GKP, Google)

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Gulf Keystone announces Special Dividend

Gulf Keystone Petroleum (GKP) has announced that its Board has approved the declaration of a special dividend of $25 million.

Jon Harris (pictured), Gulf Keystone’s Chief Executive Officer, said:

“Given continuing strong oil prices, improving macroeconomic conditions and our robust financial position, we are pleased to deliver on our commitment to consider further shareholder distributions and declare a $25 million special dividend, bringing total dividends for shareholder approval at the upcoming AGM to $50 million.

“We will continue to balance investment in growth and returns to shareholders as we develop and realise value from the Shaikan Field for the benefit of all stakeholders.”

Following the previously announced resumption of the Company’s annual dividend policy and declaration of a $25 million dividend, Gulf Keystone will be seeking shareholder approval at the Annual General Meeting (“AGM”) on 18 June 2021 to pay total dividends of $50 million, comprising the $25 million annual dividend and today’s announced $25 million special dividend.

The annual dividend of $25 million is expected to be paid on 2 July 2021, based on a record date of 25 June 2021. The special dividend of $25 million is expected to be paid on 6 August 2021, based on a record date of 30 July 2021.

Both dividends will be payable in pounds sterling and converted from dollars at the spot rate prevailing on the relevant record dates.

As at 12 May 2021, the Company had a cash balance of $179 million.

(Source: GKP)

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KRG amends Oil Payment Terms; Share Prices Fall

By John Lee.

Shares in oil companies operating in Iraqi Kurdistan have been hit by a change in payment terms imposed by the Kurdistan Regional Government (KRG).

Genel Energy, Gulf Keystone Petroleum (GKP) and DNO this morning reported to the markets that they have received letters from the KRG proposing an amendment to payment terms due to the ongoing challenges in Iraq with the COVID-19 pandemic, starting with the March 2021 production invoice.

They said that since the dated Brent price has remained consistently well above $50 per barrel, the monthly repayment of outstanding arrears will now be calculated as 20 percent (compared to 50 percent previously) of the difference between the average monthly dated Brent price and $50 per barrel.

The KRG added that payment terms will be 60 days after the submission of invoices, and that the KRG will re-evaluate this payment model should markets see substantial volatility.

The oil companies have not agreed to these terms, and are seeking discussions with the KRG.

Shares in Genel Energy were down more than 12 percent before recovering slightly, while Gulf Keystone Petroleum (GKP) fell more than 6 percent before recovering slightly. The Oslo Stock Exchange, on which DNO is traded, is closed for the Ascension Day holiday.

(Sources: GKP, Genel Energy, DNO)

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GKP claims “Strong Start to 2021”

Gulf Keystone Petroleum (GKP) has announced its audited results for the full year ended 31 December 2020.

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“Against the backdrop of extraordinary global challenges in 2020, GKP acted decisively to successfully manage the impact of COVID-19 on our staff, contractors and production operations. We achieved all of our cost reduction targets and annual average production of 36,625 bopd, 11% higher than 2019.

“We have had a strong start to 2021. The updated independent Competent Person ‘s Report reaffirmed the significant upside production potential of the field with gross 2P reserves + 2C contingent resources of c.800 MMstb. Average gross production from Shaikan in 2021 to 29 March is 43,190 bopd, up c. 13% from the corresponding period in 2020. 

“Recently, we resumed the 55,000 bopd investment programme and today we are pleased to be announcing the reinstatement of at least a $25 million annual dividend, in keeping with our commitment to balance investment in growth and returns to shareholders.“

Highlights to 31 December 2020 and post reporting period

Operational

  • Effectively managing the impact of COVID-19 on production operations and continue to prioritise the welfare of workforce and contractors whilst maintaining production momentum.
  • Continued strong safety performance, with no Lost Time Incident (“LTI”) recorded for over 450 days.
  • 2020 a verage gross production of 36,625 bopd, exceeding revised guidance and the highest annual average production rate to date from the field.
  • Gross average production from the field in 2021 to date of 43,190 bopd, in line with guidance of 40,000 – 44,000 bopd for the year.
  • Updated Competent Person’s Report (“CPR”) published with c.800 MMstb gross 2P+2C reserves and resources volumes, which was in line with the 2016 CPR, after adjusting for production over the period, supporting GKP’s view of the geological model.

Financial

  • GKP achieved its 2020 cost reduction targets, reducing Opex and G&A by more than 20% compared to 2019 and delivering gross unit Opex of $2.6/bbl, below the low end of the guidance range and down over 30% versus 2019.
  • Net Capex was $45.9 million net (FY 2019: $90 .0 million) within the $40-48 million revised guidance range despite the addition of low-cost, high impact investments during the fourth quarter that contributed to record 2020 annual average production.
  • Loss after tax of $47.3 million (FY 2019: $43.5 million profit) and reduced revenue of $108.4 million (FY 2019: $206.7 million) were driven by a decline in Brent oil prices that averaged $42/bbl in 2020 compared to $64/bbl in 2019.
  • Consistent payments from the Kurdistan Regional Government (“KRG”) for the last eleven months.  Repayment mechanism in place to recover outstanding arrears of $73.3 million net for the period November 2019 – February 2020 with the first payment of $2.6 million net recently received.
  • Cash balance of $147.8 million at year end (FY 2019: $190.8 million). Cash balance of $161.0 million at 30 March 2021.
  • The Company has hedged c.60% of Q2 and Q3 2021 forecast net production at a floor price of $35/bbl and $40/bbl respectively, while retaining full upside exposure.

Outlook

  • Resumption of expansion activity with drilling operations expected to begin in Q3 resulting in an increase in gross production towards 55,000 bopd in Q1 2022.
  • Reinstatement of at least a $25 million annual dividend . A $25 million dividend is subject to shareholder approval at the Annual General Meeting (“AGM”) scheduled for 18 June 2021 and is expected to be paid in full on 2 July 2021 based on a record date of 25 June 2021 .
  • With continuing strong oil prices, there may be opportunities to consider further distributions to shareholders this year.
  • Guidance for 2021 of average gross production of 40,000 to 44,000 bopd, net Capex of $55-$65 million and gross unit Opex of $2.5 to $2.9/bbl.

Full announcement here.

(Source: GKP)

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GKP Shares Rise following Update

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) closed the day up more than 5 percent on Wednesday, after the Kurdistan-focused oil producer provided an operational and corporate update to the markets.

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

“I am pleased to report that throughout 2020, Gulf Keystone successfully managed the challenging operating environment delivering record annual average production of over 36,600 bopd and in December, record monthly average production of over 43,000 bopd.

“Planned debottlenecking works have increased PF-1 production capacity to more than 30,000 bopd and the Company expects to deliver average gross production in 2021 of 40,000 to 44,000 bopd. We look forward to updating guidance once conditions allow resumption of the 55,000 bopd expansion.

“I would like to thank the team at GKP for their dedication and professionalism in what has been a challenging year for the E&P sector. I look forward to working closely with my successor, Jon Harris, to effect a smooth handover of responsibilities and I am confident of the continuing success of the Company.“

Operational

  • GKP’s continued strong focus on safety resulted in no Lost Time Incidents during 2020.
  • The Company has effectively managed to minimise the impact of COVID-19 on our staff and contractors and ongoing production operations.
  • In 2020, average gross production at Shaikan was 36,625 bopd, exceeding the top end of the guidance range and the highest annual average production rate to date from the field.
  • The previously announced PF-1 plant debottlenecking work has delivered production capacity in excess of 30,000 bopd.
  • As a result, Shaikan Field production has increased and is currently c.44,000 bopd.

Financial

  • Total cash received from the Kurdistan Regional Government (“KRG”) during 2020 for payments of crude oil sales was $129 million ($101 million net).
  • As a result of increased production and the recent improvement in the oil price, the December 2020 crude oil sales invoice submitted to the KRG was $18.0 million ($14.1 million net), up 65% from the previous month.
  • As at 12 January 2021, the Company had a cash balance of $147 million.

Corporate

  • Jon Harris to join as Chief Executive Officer and Board member on 18 January 2021.

Outlook

  • Guidance for 2021 is: 40,000 to 44,000 bopd average gross production, $15 to $20 million net Capex and $2.5 to $2.9/bbl Opex.
  • Guidance will be updated once conditions allow well workovers and/or the restart of the drilling programme to achieve 55,000 bopd.
  • Following receipt of the previously announced proposal to repay the arrears from the outstanding November 2019 to February 2020 invoices, totalling $73.3 million (net), the Company continues to engage with the KRG and will provide an update in due course.
  • The Company remains committed to maintaining its strong financial position and, as conditions continue to improve, will look to return to a balance of growth focussed field development investments and shareholder distributions.

(Sources: GKP, Yahoo!)

The post GKP Shares Rise following Update first appeared on Iraq Business News.

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GKP appoints New CEO

By John Lee.

Gulf Keystone Petroleum (GKP) has announced the appointment of Jon Harris as Chief Executive Officer (CEO).

Mr Harris has over 30 years’ experience in the oil and gas industry and joins GKP from SASOL Limited, an integrated energy and chemicals company based in South Africa where he was Executive Vice President, Upstream.

Prior to this, he spent 25 years with BG Group in various international roles, including Executive Vice President Technical and General Manager Production Operations, as well as senior management assignments in the United States, Trinidad and Tobago and Egypt.

Mr Harris received a Master of Engineering in Fuel and Energy (with distinction) from the University of Leeds, UK.

Mr Harris will join the Board of GKP and assume the CEO role on 18 January 2021.  He  will have a period of handover with Jón Ferrier who, as previously announced, will retire on 31 January 2021.

Jaap Huijskes, Chairman of the Company, said:

“Following a thorough global search process, I am very pleased to announce the appointment of Jon Harris as CEO.  Jon is an experienced executive who brings a wealth of highly relevant project delivery, asset management, production operations and technical experience within the sector to the management team and to the Board.  We look forward to him joining GKP and to his contributions. 

“On behalf of the Company, I would like to again thank Jón Ferrier for his outstanding commitment and contributions since joining Gulf Keystone in 2015. Under his leadership, GKP was successfully restructured and transformed, as evidenced by today’s strong operational performance, low-cost structure, robust financial position and pathway to further production growth and value creation.  We wish him the very best of success for the future.“

(Source: GKP)

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