GKP Resumes Kurdistan Investment Programme

Gulf Keystone Petroleum (GKP) has announce the resumption of the Company's growth plans to ramp-up gross production towards 55,000 barrels of oil per day ("bopd").

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

"After a year of successfully managing the impact of COVID-19 on our people and production operations at Shaikan, we are pleased to announce that we are resuming the 55,000 bopd expansion programme.

"Workstreams have already begun, and we are targeting to restart the drilling of SH-13 in Q3 2021, subject to managing the continuing impact of COVID-19 on the movement of people, services and equipment."

With support from its partner Kalegran B.V. (a subsidiary of MOL Hungarian Oil & Gas plc), Gulf Keystone has restarted 55,000 bopd expansion activity.

Considering the requirement to manage the ongoing impact of COVID-19 and to remobilise people, services and equipment, the Company currently expects drilling operations to begin in Q3 2021.

Remaining expansion activity includes completion of SH-13, which was suspended last year, drilling SH-I, the final well in the programme from the same pad, and installing electric submersible pumps in two existing wells.

Guidance for 2021 average gross production remains unchanged at 40,000 to 44,000 bopd, with the increase in gross production towards 55,000 bopd expected to occur in Q1 2022.  Remaining Capex required to deliver the 55,000 bopd programme is estimated to be $40-45 million net, resulting in total 2021 Capex of $55-65 million net.

(Source: GKP)

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GKP issues Update on Shaikan Field

Gulf Keystone Petroleum (GKP) has provided a Competent Person's Report ("CPR") update on the Shaikan Field in which it has an 80% working interest.  

The CPR, an independent third-party evaluation of the Company's reserves and resources as at 31 December 2020, was prepared by ERC Equipoise ("ERCE").

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

"The updated CPR demonstrates the continuing long-term strong performance of the Shaikan Field with gross 2P+2C reserves and resources volumes in line with the 2016 CPR, after adjusting for production over the period.   

"Prior Company estimates are reaffirmed with gross 2P+2C reserves and resources of c.800 MMstb at 31 December 2020, including over 500 MMstb of gross 2P reserves.  

"We have a deep understanding of the Shaikan Field that has produced over 80 MMstb to date and are pleased that the latest CPR matches our interpretation and understanding of the geological model, underlining the considerable untapped potential of the field."

"We had a strong start to the year in January, which saw GKP's highest monthly average daily gross production of 44,405 bopd.  As conditions continue to improve, we look forward to resuming the 55,000 bopd expansion project and shareholder distributions."  

Highlights

  • The CPR incorporates significant incremental information, including an updated development plan, new wells, production data and further technical analysis, since the last CPR was prepared by ERCE in 2016.
  • Gross 2P reserves + 2C contingent resources1 of 798 MMstb2 at 31 December 2020 are consistent with volumes as at 31 December 2019, adjusted principally for 2020 production.
  • Gross 1P reserves increased to 240 MMstb, up 33% after adjusting for 2020 production.
  • Gross 2P Jurassic reserves were revised down marginally (2%) to 505 MMstb, after adjusting for 2020 production. 
  • Gross 2P Triassic and Cretaceous reserves of 47 MMstb were reclassified to gross 2C contingent resources1, while the Field Development Plan is progressed with the Ministry of Natural Resources.
  • Shaikan continues to deliver stable production with average gross production in January of 44,405 bopd, the highest monthly average to date from the field.
  • The Shaikan Field has significant future production potential with a gross 1P reserves life index3 of c.15 years and a gross 2P reserves life index3 of over 31 years, assuming January 2021 production levels.

Gross reserves and resources based on the Company's estimates at 31 December 2019 and the CPR at 31 December 2020 were:

31 December 2020

1P

2P

2C 1

2P+2C 2

Formation (MMstb)

  Reserves

Resources

Jurassic

240

505

80

585

Triassic

-

-

157

157

Cretaceous

-

-

56

56

Total - Gross

240

505

293

798

31 December 2019

1P

2P

2C 1

2P+2C 2

Formation (MMstb)

  Reserves

Resources

Jurassic

  175

  531

  80

  611

Triassic

  18

  44

  106

  150

Cretaceous

  1

  3

  53

  56

Total - Gross

  194

  578

  239

  817

The reconciliation of changes in reserves and resources between the Company's estimates at 31 December 2019 and the CPR at 31 Decemer 2020 is as follows:

 

 

1P

2P

2C 1

2P+2C 2

Gross (MMstb)

  Reserves

Resources

31 December 2019

  194

  578

  239

  817

Production

(13)

(13)

  - 

(13)

Reclassifications

(19)

(47)

  +47

  - 

Revisions

  +78

(13)

  +7

(6)

31 December 2020

  240

  505

  293

  798

GKP's 80% net WI4 share of reserves and resources at 31 December 2020 were: 

1P

2P

2C 1

2P+2C 2

Formation (80% WI) (MMstb)

  Reserves

Resources

Jurassic

  192

  404

  64

  468

Triassic

  - 

  - 

  125

  125

Cretaceous

  - 

  - 

  45

  45

Total - Net WI

192

404

  234

638

1.  Contingent resources volumes are classified as such because there is technical and commercial risk involved with their extraction. In particular, there may be a chance that accumulations containing contingent resources will not achieve commercial maturity. The 2C (best estimate) contingent resources presented are not risked for chance of development.

2.  Aggregated 2P+2C estimates should be used with caution as 2C contingent resources are commercially less mature than the 2P reserves.

3.  Reserves life index is calculated as gross 1P reserves or gross 2P reserves, as appropriate, divided by annualised January 2021 gross production.

4.  Net working interest reserves and resources do not represent the net entitlement resources under the terms of the PSC.

 (Source: GKP)

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GKP Shares Rally following Update

By John Lee.

Shares in Gulf Keystone Petroleum, have rallied more than 20 percent after the company issued an operational and corporate update on Tuesday:

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

"We have made significant operational strides in recent months, ensuring we remain on-track to achieve our revised targets for the year. I am pleased to update stakeholders on further success in executing the previously reported, low-cost, high-impact investments that have so far increased gross production to 42,000 bopd, in excess of the initially targeted increase of 5,000 bopd.

"The Shaikan Field recently achieved an important milestone of cumulative production of 80 million stock tank barrels. This is a clear testament to not only the quality of the asset, from which there remains significant untapped potential, but also the professionalism and dedication of the team. We look forward to updating the market on further progress early in 2021."

Operational

  • Following on from the successful work over of the SH-12 well, the Company has progressed the previously announced low-cost, high-impact investments to further increase field production.
  • The SH-9 well, on which activity was suspended in March 2020 due to COVID-19, has now been successfully tied-in to PF-1 and is on production. PF-1 is now operating at its current maximum processing capacity of c.27,500 bopd. Debottlenecking activities at PF-1 remain on-track to further increase production capacity to over 30,000 bopd during Q1 2021.
  • Gross Shaikan production is currently at c.42,000 bopd, c.20% above the November 2020 average rate.
  • Average gross production for the year is expected to be at, or slightly above, 36,000 bopd, the top end of the guidance range.

Financial

  • The Company remains on track to achieve targeted G&A and Opex savings of at least 20% compared to 2019 and 30% on a run-rate basis.
  • Net capex for 2020 is expected to be at or slightly exceed the top end of the guidance range of $48 million, following the $3 million investment in high-impact projects.
  • The Kurdistan Regional Government ("KRG") has maintained regular payments for eight months, including the recent October receipt.
  • The Company has extended its hedging programme, establishing a H1 2021 floor price of $35/bbl on c.60% of production, based on current production levels.
  • As at 14 December 2020, the Company had a cash balance of $142 million.

Outlook

  • With completion of the debottlenecking of PF-1, GKP is expected to deliver a further increase in production in Q1 2021.
  • In line with the KRG's commitment to review the outstanding November 2019 to February 2020 invoices totalling $73.3m (net) when oil prices reached $50/bbl, we are pleased to confirm receipt of a proposal to repay the arrears. We look forward to further engaging with the KRG on this matter and will provide an update in due course.
  • GKP is well positioned to restart its drilling programme to achieve 55,000 bopd when circumstances permit.
  • The Company remains committed to maintaining its strong financial position and aims to return to a balance of production growth and shareholder distributions, as conditions continue to improve.
  • The search process to identify a successor for CEO, Jón Ferrier, is ongoing.

AGM Update

In accordance with the 2018 UK Corporate Governance Code, the Company can confirm that following the Annual General Meeting held on 19 June 2020, where three of the proposed Resolutions did not attain the support of 80% of the votes, members of the Board and executive management team have consulted with several of the Company's large shareholders. Mr Garrett Soden has been reappointed to the Board of GKP as a Non-Independent Non-Executive Director representing funds managed by Lansdowne Partners Austria, GKP's largest shareholder. The Company continues to actively engage with its shareholders.

(Source: GKP)

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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 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 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)

GKP launches second Share Buyback Programme

Gulf Keystone Petroleum (GKP) has provided an operational and corporate update. 

Operational

  • Average gross production for the year up to 30 November 2019 of 32,127 barrels of oil per day (“bopd”).
  • November gross production averaged 40,582 bopd, with current production rates from the field at c.42,000 bopd.
  • GKP is therefore on track to meet its original gross production guidance for 2019 of 32,000-38,000 bopd.
  • The first well of the drilling campaign, SH-12 came onstream on 13 November. During commissioning, the well produced at rates up to 4,600 bopd, in line with expectations and is currently producing at c.4,000 bopd. 
  • The second well in the drilling campaign, SH-9 is a crucial part of the long-term field gas management plan and is designed to assess the gas reinjection potential of the Jurassic formation. The well, which was spudded on 19 October, encountered a faulted section requiring the well to be side-tracked to the Jurassic reservoir target.
  • The SH-9 side-track necessitates a revision to the drilling schedule. Assuming a duration of one month for the side-track, the Company now expects to reach the 55,000 bopd gross production target at Shaikan in Q3 2020.
  • The planned maintenance and debottlenecking shutdown at PF-2 was completed safely during October.
  • The PF-1 export pipeline is complete. Full oil export operations are expected to commence in the next 24 hours marking the end of export by trucking from the Shaikan Field.
  • Operations at Shaikan remain safe and secure, with no Lost Time Incidents (“LTI”) recorded in over 500 days.

Corporate

  • Cash balance of $206 million as at 9 December 2019.
  • With a robust cash position and the Company’s confidence in its delivery of the Shaikan project, a second share buyback programme for a further $25 million has been approved and an initial tranche of $15 million will be initiated today.

Jón Ferrier, CEO, commented:

The Company has made significant progress on a number of fronts; with the successful addition of SH-12 to the PF-2 production inventory and drilling of the gas appraisal well SH-9 where operations continue.  The imminent start of export through the PF-1 pipeline means all production from Shaikan will now be exported directly via pipeline, benefitting safety, reducing environmental impact and improving netbacks. 

“We are pleased to confirm that we are on track to achieve our initial average production guidance for 2019, and whilst the need to side-track SH-9 has slightly impacted our timing guidance for delivering 55,000 bopd, we remain on course to achieve further significant production growth in 2020.  

We are also pleased to announce the launch of a second $25 million share buyback programme, which is in line with our focus on returning value to shareholders, whilst retaining the capital necessary to grow the business.

(Source: GKP)

GKP launches second Share Buyback Programme

Gulf Keystone Petroleum (GKP) has provided an operational and corporate update. 

Operational

  • Average gross production for the year up to 30 November 2019 of 32,127 barrels of oil per day (“bopd”).
  • November gross production averaged 40,582 bopd, with current production rates from the field at c.42,000 bopd.
  • GKP is therefore on track to meet its original gross production guidance for 2019 of 32,000-38,000 bopd.
  • The first well of the drilling campaign, SH-12 came onstream on 13 November. During commissioning, the well produced at rates up to 4,600 bopd, in line with expectations and is currently producing at c.4,000 bopd. 
  • The second well in the drilling campaign, SH-9 is a crucial part of the long-term field gas management plan and is designed to assess the gas reinjection potential of the Jurassic formation. The well, which was spudded on 19 October, encountered a faulted section requiring the well to be side-tracked to the Jurassic reservoir target.
  • The SH-9 side-track necessitates a revision to the drilling schedule. Assuming a duration of one month for the side-track, the Company now expects to reach the 55,000 bopd gross production target at Shaikan in Q3 2020.
  • The planned maintenance and debottlenecking shutdown at PF-2 was completed safely during October.
  • The PF-1 export pipeline is complete. Full oil export operations are expected to commence in the next 24 hours marking the end of export by trucking from the Shaikan Field.
  • Operations at Shaikan remain safe and secure, with no Lost Time Incidents (“LTI”) recorded in over 500 days.

Corporate

  • Cash balance of $206 million as at 9 December 2019.
  • With a robust cash position and the Company’s confidence in its delivery of the Shaikan project, a second share buyback programme for a further $25 million has been approved and an initial tranche of $15 million will be initiated today.

Jón Ferrier, CEO, commented:

The Company has made significant progress on a number of fronts; with the successful addition of SH-12 to the PF-2 production inventory and drilling of the gas appraisal well SH-9 where operations continue.  The imminent start of export through the PF-1 pipeline means all production from Shaikan will now be exported directly via pipeline, benefitting safety, reducing environmental impact and improving netbacks. 

“We are pleased to confirm that we are on track to achieve our initial average production guidance for 2019, and whilst the need to side-track SH-9 has slightly impacted our timing guidance for delivering 55,000 bopd, we remain on course to achieve further significant production growth in 2020.  

We are also pleased to announce the launch of a second $25 million share buyback programme, which is in line with our focus on returning value to shareholders, whilst retaining the capital necessary to grow the business.

(Source: GKP)

GKP: “Significant, Phased, Production Uplift”

Gulf Keystone Petroleum (GKP), a leading independent operator and producer in the Kurdistan Region of Iraq (“Kurdistan” or “Kurdistan Region”), has announced its results for the half year ended 30 June 2019.

Highlights to 30 June 2019 and post reporting period

Operational

  • Average production during August was 39,269 bopd, reflecting the positive results from the workover campaign and facilities debottlenecking at PF-1; gross production this month up to 8 September averaged 39,921 bopd.
  • Gross production for the first half of 2019 averaged 29,362 bopd.  Average production rates during H1 of 2019 were necessarily affected by wells being off-line for workovers and well maintenance, in addition to the planned shutdown of PF-1 to install facilities as part of the 55,000 bopd expansion project.
  • The first well of the drilling campaign, SH-12, successfully reached total depth (“TD”) of 2,112 metres on 23 August.  Well results were encouraging with the structure coming in 53 metres higher than prognosis.  The well is currently being completed and is expected to be on production later in October.
  • Following completion of SH-12, the rig will move to the second well of the campaign, SH-9.  This well is designed to assess the gas reinjection potential of the Jurassic formation; part of the longer-term gas management plan for the Shaikan development.
  • The workover campaign to install electrical submersible pumps (“ESPs”) in existing wells has been moved into 2020 to coincide with the availability of new permanent facilities being installed as part of the 55,000 bopd expansion programme.  These facilities will allow the wells to be cleaned-up more effectively when the ESPs are installed.
  • The PF-1 pipeline and export station are nearing completion and will be in full operation following commissioning at which point all Shaikan oil will be exported via pipe.
  • A revised Field Development Plan (“FDP”), which addressed additional feedback on gas management, was submitted to the Ministry of Natural Resources (“MNR”) in May 2019.  We await formal feedback from the MNR and look forward to a constructive dialogue to finalise the FDP as soon as possible. As we have stated in the past, this delay is not slowing operations and progress on the 55,000 bopd work programme.
  • Operations at Shaikan remain safe and secure, with no Lost Time Incidents (“LTI”) in over 400 days.

Financial

  • Revenue of $95.6 million (H1 2018: $116.2 million).
  • EBITDA of $59.0 million (H1 2018: $61.6 million).
  • Profit after tax of $24.2 million (H1 2018: $26.7 million).
  • Growth in activity required to bring production to 55,000 bopd led to an increase in cash operating costs and cash operating costs per barrel in line with previous guidance to $18.4 million (H1 2018: $14.1million) and $3.9/bbl (H1 2018: $3.0/bbl) respectively.
  • Net capital investment in Shaikan of $32.4 million (H1 2018: $6.9 million). Full year capital investment guidance stands at $88-104 million net ($110-130 million gross).
  • Cash balance of $302.7 million at 30 June 2019 and $263.6 million at 9 September 2019.

Corporate

  • A $50 million dividend was approved at the June AGM. The first tranche of c.$17 million was paid in July 2019, with the second tranche of c.$33 million to be paid on 4 October 2019.
  • A $25 million share buyback programme was announced in July. The Company is pleased to confirm that the first tranche of $15 million was completed on 30 August.
  • Today, the Company is resuming its buyback programme for the remaining $10 million.
  • Following completion of the above, the Company will have returned $75 million to its shareholders in 2019.

Outlook

  • Active work programme to continue with the ongoing Jurassic drilling campaign, ESP workovers and completion of the debottlenecking plan with the Company remaining on track to deliver 55,000 bopd in Q2 2020.
  • Total capital expenditure of $200-230 million gross for the 55,000 bopd expansion programme remains in line with earlier guidance.
  • Gross production guidance for 2019 is now expected to be between 30,000-33,000 bopd, compared to previous guidance of 32,000-38,000 bopd.  This new guidance considers the delayed start to the drilling campaign, the postponement of the ESP workover campaign and the planned shutdown of PF-2 in October.

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

The first half of 2019 saw high levels of operational activity as we continue to develop Shaikan targeting a significant, phased, production uplift.  Despite some operational delays, we have made considerable headway towards our 55,000 bopd production target.

“Activity has further increased during H2 2019 as we remain on track to achieve this milestone in the first half of 2020.  As a consequence of the work to increase production in the longer term, the near-term production guidance for the full year has been reduced.  However, the Shaikan reservoir, the cornerstone of our equity story, continues to behave strongly.

“The Company has a robust balance sheet which supports operational funding requirements and expansion plans in addition to returning funds to shareholders.  The Company is therefore well positioned to deliver on its growth objectives for the benefit of all stakeholders.”

Full statement here.

(Source: Gulf Keystone Petroleum)

GKP Shares Gain following Update

Shares in Gulf Keystone Petroleum (GKP) closed Friday up 3.5 percent after the company issued the following operational and corporate update ahead of its AGM:

Operational

  • Workovers on SH-1 and SH-3 have now been completed, resulting in the anticipated material production uplift at both wells.  Production from SH-1 has increased by 105% to 7,800 bopd and SH-3 by 40% to 6,200 bopd.
  • The SH-12 well (formerly called SH-H) was spudded on 7 June with DQE’s Rig 40, signalling the commencement of the Company’s drilling campaign; a major milestone for Gulf Keystone.
  • The next well, forecasted to spud in Q4 2019, will be SH-9 which aims to assess the feasibility of gas reinjection into the Jurassic formation, rather than the originally planned Jurassic production well.
  • The workovers to install Electric Submersible Pumps (“ESP”) will take place in Q4 2019. 
  • As part of the 2019 work-programme, PF-1 was shut down on 10 June for planned maintenance and the installation of equipment required for the 55,000 bopd de-bottlenecking project. The facility is scheduled to be offline for approximately 15-20 days.
  • The installation of the PF-1 export pipeline infrastructure continues. The pipeline is now installed, and export pumps and the associated controls are currently being fitted.  The pipeline is expected to be operational in Q3 2019.
  • Average gross production of 29,993 barrels of oil per day (“bopd”) achieved to date in 2019 with production levels of 38,100 bopd attained prior to the PF-1 shut down.
  • Full year production guidance remains unchanged, although due to changes in the drilling schedule average gross production in 2019 is currently expected to be at the lower end of the 32,000 – 38,000 bopd guidance. 
  • As a result of the revised timeframe, the 55,000 bopd production target is now expected to be achieved in Q2 2020, as opposed to previous guidance of Q1 2020.

Corporate

  • At the request of the Ministry of Natural Resources (“MNR”), GKP and its partner MOL re-submitted a revised Field Development Plan (“FDP”) on 23 May 2019 to address additional MNR requests on gas management. The FDP is currently under review by the MNR.
  • Cash balance of $290 million as at 20 June 2019. The Company remains fully funded for all phases of the Shaikan expansion programme.
  • As part of the Company’s dividend policy, and subject to approval at today’s AGM, a $50 million dividend will be paid, comprising an ordinary annual dividend of $25 million and a special dividend of $25 million, to be paid in 2019.
  • The Company also intends to initiate a share repurchase programme subject to shareholder approval at today’s AGM.

Commenting, Jón Ferrier, CEO, said:

Operational activity has intensified and good progress is being made across all fronts of our Shaikan expansion programme, including investment into the 75,000 bopd expansion and the gas re-injection project. 

“We are pleased to have started the drilling campaign, in addition to seeing promising results with the workovers drilled at SH-1 and SH-3, both of which have increased in output significantly, and all of which serve to achieve our near term production targets. 

“Furthermore, we look forward to bringing our new export pipeline into service later in the year eliminating the need for trucking and reducing HSSE exposure.

(Source: GKP)