KRG Delays Payments to Oil Firms

By John Lee.

The Kurdistan Regional Government (KRG) has delayed payments to oil producers by several weeks.

In statements to the markets on on Thursday, Genel Energy, Gulf Keystone Petroleum (GKP) and Shamaran Petroleum said that payments relating to invoices for oil production in August and September, which were due to be paid in November and December, will be received in January 2020.

(Sources: Genel Energy, Gulf Keystone Petroleum (GKP), Shamaran Petroleum)

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 appoints new Chief Financial Officer

By John Lee.

Gulf Keystone Petroleum (GKP) has announced the appointment of Ian Weatherdon as Chief Financial Officer (“CFO”).

Mr Weatherdon has over 25 years’ experience in the international oil and gas industry and joins GKP from Sino Gas & Energy Holdings Limited where he was CFO.  Sino Gas is an energy company focused on developing natural gas assets in China and was an Australian listed Company (ASX:SEH) until acquired by a private equity firm.

Prior to this, he held various executive roles, including; Vice President of Finance & Planning for the Asia-Pacific region, and Vice President of Investor Relations for Talisman Energy Inc., the Canadian exploration and production company which was acquired by Repsol in 2015.  He also held the CFO role at Equión Energía Limited, a Colombian joint venture between Talisman Energy Inc. and Ecopetrol SA.

Mr Weatherdon was educated at the University of Calgary before qualifying as a Chartered Accountant from the Chartered Professional Accountants of Canada.

Mr Weatherdon will join the Board of GKP and assume the CFO role on 13th January 2020.  As previously announced, Sami Zouari will step down as CFO and a Director of the Company on 2nd December 2019, but will assist Mr Weatherdon for a short handover period.

Jaap Huijskes, Chairman of the Company, said:

Following a thorough search process, I am very pleased to announce the appointment of Ian Weatherdon as CFO.  Ian brings a wealth of highly relevant finance experience within the sector to the management team, and to the Board.  We look forward to him joining the team and to his contribution.  

“On behalf of the Company, I would like to again thank Sami Zouari for his outstanding contribution to Gulf Keystone, since joining the Company in 2015. We wish him all the best for the future.

Save as disclosed below there is no further information to be disclosed pursuant to sections LR 9.6.11, LR 9.6.12 or LR 9.6.13 of the Listing Rules, FCA Handbook.

Previous Directorships/Partnerships:

  • Talisman SAE Pte Ltd
  • Sino Gas and Energy Holdings
  • Daily Glory Investment Limited
  • Lucky Asia Industrial Limited

(Source: GKP)

GKP appoints new Chief Financial Officer

By John Lee.

Gulf Keystone Petroleum (GKP) has announced the appointment of Ian Weatherdon as Chief Financial Officer (“CFO”).

Mr Weatherdon has over 25 years’ experience in the international oil and gas industry and joins GKP from Sino Gas & Energy Holdings Limited where he was CFO.  Sino Gas is an energy company focused on developing natural gas assets in China and was an Australian listed Company (ASX:SEH) until acquired by a private equity firm.

Prior to this, he held various executive roles, including; Vice President of Finance & Planning for the Asia-Pacific region, and Vice President of Investor Relations for Talisman Energy Inc., the Canadian exploration and production company which was acquired by Repsol in 2015.  He also held the CFO role at Equión Energía Limited, a Colombian joint venture between Talisman Energy Inc. and Ecopetrol SA.

Mr Weatherdon was educated at the University of Calgary before qualifying as a Chartered Accountant from the Chartered Professional Accountants of Canada.

Mr Weatherdon will join the Board of GKP and assume the CFO role on 13th January 2020.  As previously announced, Sami Zouari will step down as CFO and a Director of the Company on 2nd December 2019, but will assist Mr Weatherdon for a short handover period.

Jaap Huijskes, Chairman of the Company, said:

Following a thorough search process, I am very pleased to announce the appointment of Ian Weatherdon as CFO.  Ian brings a wealth of highly relevant finance experience within the sector to the management team, and to the Board.  We look forward to him joining the team and to his contribution.  

“On behalf of the Company, I would like to again thank Sami Zouari for his outstanding contribution to Gulf Keystone, since joining the Company in 2015. We wish him all the best for the future.

Save as disclosed below there is no further information to be disclosed pursuant to sections LR 9.6.11, LR 9.6.12 or LR 9.6.13 of the Listing Rules, FCA Handbook.

Previous Directorships/Partnerships:

  • Talisman SAE Pte Ltd
  • Sino Gas and Energy Holdings
  • Daily Glory Investment Limited
  • Lucky Asia Industrial Limited

(Source: GKP)

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)

GKP Declares Dividend; Shares Rise

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) were trading up more than three percent on Thursday morning after the company proposed issuing $50-million in dividends this year.

The company, which produces oil at the Shaikan field (pictured) in Iraqi Kurdistan, issued the following statement as part of its 2018 Full Year Results:

Financial

  • Record revenue of $250.6 million (FY 2017: $172.4 million)
  • EBITDA of $149.3 million (FY 2017: $104.3 million)
  • Profit after tax of $79.9 million (FY 2017: $14.1 million)
  • Net capital investment in Shaikan of $35.7 million (FY 2017: $8.1 million)
  • Cash balance of $295.6 million at year end (2017: $160.5 million)
  • The Company anticipates being fully funded for all phases of the Shaikan expansion
    programme under its current set of assumptions
  • $100 million bond refinancing in July 2018

Dividend

  • The Board confirms a dividend policy to shareholders, which will comprise an annual dividend on the ordinary shares of the Company of no less than $25 million per financial year
  • The Company is therefore pleased to announce its intention to pay an ordinary dividend on the ordinary shares of $25 million in 2019 and, given its current financial strength, the Board is also proposing to complement the ordinary dividend in 2019 with a $25 million supplemental dividend to shareholders on the ordinary shares
  • The total dividend of $50 million will be subject to approval at the next AGM in June 2019.  One third of the total dividend will be paid following approval at the Company’s AGM, with the balance payable following release of the Company’s half-year results

Operational

  • Full year gross average production of 31,563 bopd (2017: 35,298), at the upper end of guidance
  • GKP and its partner MOL reached agreement with the MNR in June 2018 to recommence investment into Shaikan, towards an initial production target of 55,000 bopd by Q1 2020
  • Common vision for a phased development that will grow gross Shaikan production to 110,000 bopd
  • The development vision described by the revised Field Development Plan (“FDP”) was submitted in October 2018. This revision has not been accepted by the MNR, specifically due to a request for additional assurances on the timing and commitment to eliminate gas flaring. As the parties aim to progress this matter and reach an agreement, investment on the ground continues as per the initial phases of this plan
  • On target to achieve plant de-bottlenecking by year-end and tie-in of the pipeline from PF-1 to the export system mid-year
  • GKP internal review indicates an upgrade in Proven (1P) reserves and no material changes to Probable reserves (2P). A revised Competent Person’s Report to be released following FDP approval
  • Robust HSSE performance with one LTI in 2018, the first in three years

Corporate

  • Signature of Crude Oil Sales Agreement in January 2018 normalised payments in line with oil prices and production.  Renewed in February 2019 through to 2020 providing certainty over payments for the foreseeable future
  • Further strengthening of the Board in 2018 with Jaap Huijskes appointed as Non-Executive Chairman, Martin Angle as Senior Independent Non-Executive Director and Kimberley Wood as Non-Executive Director

Outlook

  • On track for material uplift in production to 55,000 bopd in Q1 2020
  • In 2019, gross Capex associated with 55,000 bopd phase of between $130 million and $150 million, in addition to $20 million to $45 million associated with the subsequent development phase
  • Dividend distribution from 2019 onwards
  • Gross production guidance for 2019 unchanged at 32,000 – 38,000 bopd

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

Throughout 2018, our focus was on laying the foundations for the delivery of the Company’s phased growth plans, which envisages a step change in production profile.  The Company is on track to achieve its near-term production target of 55,000 bopd in Q1 2020, and with our partner MOL continues to work towards delivering the staged investment programme. The remarkable Shaikan reservoir presents a straightforward, low-cost onshore development opportunity with unrivalled near-term upside.

The new dividend policy represents another major milestone for the Company. It crystallises returns to shareholders while we preserve the ability to fully fund the Shaikan development and maintain a strong balance sheet; our platform for growth.

More details here.

(Sources: GKP, Yahoo!)

GKP to Increase Production; Shares Rise

Shares in Gulf Keystone Petroleum (GKP) closed 4.3 percent higher on Wednesday after the company provided an operational and corporate update.

Operational

  • Production operations, underpinned by strong performance of the Shaikan Jurassic reservoir, continue in line with expectations. Average gross production of 31,563 barrels of oil per day (“bopd”) was achieved in 2018, at the upper end of the 27,000 – 32,000 bopd guidance.
  • The plant debottlenecking programme required to expand gross production capacity to 55,000 bopd from PF-1 and PF-2 remains on schedule for completion towards the end of 2019.
  • GKP has signed an agreement with Independent Oil Tools to use ‘Rig 1’ during the Company’s workover programme to replace tubing on SH-1 and SH-3 wells and install downhole pumps (“ESPs”) on three other existing wells. The rig has been mobilised and is currently performing a workover on the SH-1 well to install larger bore tubing to increase productivity.
  • GKP has also signed an agreement with the rig operator, DQE, to use ‘Rig 40’ for its upcoming drilling campaign, due to start in March 2019, with the first four wells (needed for the 55,000 bopd target) expected to be completed in Q1 2020.
  • Since July 2018, all production from PF-2 has been exported via the Atrush export pipeline which connects to the main Kurdish export pipeline. Additional pumps along with a temporary unloading facility have now been installed at PF-2 which allows the majority of production from PF-1 to be trucked to PF-2 and exported via pipeline. Today, only ca.3,000 bopd are exported by truck via Fishkhabour which lowers HSSE exposure.
  • Further progress has been made, including delivery of all 16″ pipeline to the field, on the installation by KAR Group of the pipeline also connecting PF-1 to the Atrush export pipeline. This remains on schedule to be brought into service mid-2019, at which point the residual trucking of crude oil will be eliminated.
  • GKP and its partner MOL have agreed on a staged investment programme to increase gross production up to 110,000 bopd by 2024. The revised Field Development Plan was submitted for approval to the Ministry of Natural Resources in October 2018. The current expansion to 55,000 bopd is already underway.

Corporate

  • GKP has continued to receive regular oil payments from the Kurdistan Regional Government, with cash receipts of $225 million net to GKP during 2018.
  • Cash balance of $294 million as at 15 January 2019. The Company remains fully funded to complete the expansion to 55,000 bopd.
  • Gross capital expenditure guidance for the total 55,000 bopd project phase remains unchanged at $200 million to $230 million.
  • Of the 2018 approved gross budget of $91 million, ca.$40 million has been transferred to early 2019 which was primarily driven by delays in delivery of drilling and well completion equipment.

Outlook

  • Given the active 2019 investment programme, particularly in new wells and workovers, the Company anticipates improved production levels this year and expects gross average production guidance to be in the range of 32,000 – 38,000 bopd.
  • The above guidance takes account the latest drilling and project schedules, but also the temporary plant shut-downs required in 2019 for the tie-in of new facilities and wells being offline while workovers are taking place.
  • 55,000 bopd production target moved to early 2020 due to delays in the delivery of equipment, affecting the start date of the drilling campaign, originally January, now March 2019.
  • The Company intends to host a Capital Markets Day in the first quarter of 2019. Further details will be announced at a later date.

Commenting, Jón Ferrier, CEO, said:

Having successfully laid the foundations for our expansion plans in 2018, we are very pleased to have now initiated our new investment programme at Shaikan.

“We continue to make considerable operational headway as we look to safely increase production to 55,000 bopd, in line with our strategy. 2019 is set to be another important year for Gulf Keystone and we look forward to keeping our stakeholders updated on our ongoing progress.”

(Source: GKP)

GKP Shares Gain following Update

Shares in Gulf Keystone Petroleum (GKP), operator of the Shaikan Field in Iraqi Kurdistan, were trading up 10 percent on Friday after the company issued an operational and corporate update.

Highlights

  • Agreement with the Kurdistan Regional Government’s (“KRG”) Ministry of Natural Resources (“MNR”) and MOL Hungarian Oil & Gas plc (“MOL”) has been reached in relation to the investment plans to increase gross production capacity to 55,000 barrels of oil per day (“bopd”) in the next 12 to 18 months.
  • Gulf Keystone has initiated contracting and procurement activities to implement the 2018 approved capital expenditure of approximately $91 million gross ($73 million net to GKP), which includes workovers in existing wells (electric submersible pumps (“ESPs”) and tubing replacements), drilling of a new well, facilities improvement and plant debottlenecking.
  • The remainder of the required capital expenditure which is currently estimated to be between $175 million to $215 million gross (as previously set out in the 2017 Full Year Results) to achieve 55,000 bopd gross production capacity is expected to be part of the 2019 investment plan (which will also include activities related to the further development of the field).
  • The Company continues to work on the revised Field Development Plan, which is expected to be submitted to the MNR in Q3 2018. The Company will provide an update on the details of the investment plans for the 75,000 bopd and up to 110,000 bopd phases when finalised.
  • Safety performance remains strong with over 3 million man hours without a lost-time incident achieved since 2015.
  • Plant uptime between 1 January 2018 and 31 May 2018 has been outstanding at over 99%, leading to an average gross production of 32,138 bopd for the period, just above the upper end of our 27,000-32,000 bopd guidance for 2018. Full-year guidance for 2018 remains unchanged.
  • A major milestone has been achieved with cumulative production from the Shaikan Field reaching 50 million barrels. As a result, in line with the terms of the Shaikan Production Sharing Contract (“Shaikan PSC”) and our previous disclosure, a production bonus in the amount of $20 million ($16 million net to GKP) is now payable to the KRG.
  • Hook-up of the 400m spur pipeline from Production Facility 2 to the Atrush export line is in its final stage and expected to be operational shortly. This will eliminate trucking requirements for a significant share of Shaikan production which will reduce HSE exposure and is expected to improve netbacks to the Company. Pipeline tie-in of Production Facility 1 will be part of the 2019 investment plan.
  • Payments from the KRG have been received on a regular basis throughout the year. The Company has received gross payments of $136.7 million ($107.3 million net to GKP) year to date.
  • The Company had cash amounting to $222 million as at 21 June 2018.
  • The Company continues its dialogue with the MNR and MOL in order to achieve further contractual and commercial clarity in relation to amendments of the Shaikan PSC which it anticipates being concluded in Q3 2018.

Commenting, Jón Ferrier, CEO, said:

“We are very pleased with the progress we have made in recent months on key commercial and operational matters and are delighted that Gulf Keystone is now back to investment mode, with the objective of achieving 55,000 bopd production capacity in the next 12 to 18 months; an important step towards the development of the full potential of the Shaikan field.”

(Source: GKP)