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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 outlines Payments to Govts for 2021

By John Lee.

Gulf Keystone Petroleum (GKP) has just published details of its payments to governments for the year 2021:

Introduction

This report sets out details of the payments made to governments by Gulf Keystone Petroleum Ltd and its subsidiary undertakings (“Gulf Keystone”) for the year ended 31 December 2021 as required under Disclosure and Transparency Rule 4.3A issued by the UK’s Financial Conduct Authority (“DTR 4.3A”) and in accordance with The Reports on Payments to Governments Regulations 2014 (as amended in 2015) (“the UK Regulations”) and our interpretation of the Industry Guidance on the UK Regulations issued by the International Association of Oil & Gas Producers. DTR 4.3A requires companies listed on a stock exchange in the UK and operating in the extractive industry to publicly disclose payments to governments in the countries where they undertake exploration, prospection, discovery, development and extraction of minerals, oil, natural gas deposits or other materials.

Basis for preparation

Total payments below £86,000 made to a government are excluded from this report, as permitted under the UK Regulations.

All of the payments made in relation to the Shaikan Production Sharing Contract (“Shaikan PSC”) in the Kurdistan Region of Iraq have been made to the Ministry of Natural Resources (“MNR”) of the Kurdistan Regional Government (“KRG”).

Production entitlements

Production entitlements are the host government’s share of production during the reporting period from the Shaikan Field operated by Gulf Keystone. The figures reported have been produced on an entitlement basis, rather than on a liftings basis. Production entitlements are paid in-kind and the monetary value disclosed is derived from management’s calculation based on the monthly oil sales invoices.

Royalties

Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the royalties are described within the Shaikan PSC. Royalties have been calculated on the same basis as production entitlements.

Licence fees and capacity building payments

These include licence fees, rental fees, entry fees, capacity building payments, security fees and other considerations for licences or concessions.

Infrastructure improvement payments

These include payments for infrastructure improvements, whether contractual or otherwise, such as roads, other than in circumstances where the infrastructure is expected to be primarily dedicated to operational activities throughout its useful life.

KRG

Production entitlements in-kind (1) (mboe (2))

5,151

Production entitlements in-kind (1)  ($ ‘000)

255,763

Royalties in-kind (1) (mboe (2))

1,255

Royalties in-kind (1) (2) ($ ‘000)

62,320

Licence fees and capacity building payments in-kind (3) ($ ‘000)

17,385

Infrastructure improvement payments (4)

342

Total (mboe (2))

6,406

Total ($ ‘000)

355,811

Notes

(1)  All of the crude oil produced by Gulf Keystone was sold by the KRG. All proceeds of sale were received by or on behalf of the KRG, out of which the KRG then made payment for cost oil and profit oil in accordance with the Shaikan PSC to Gulf Keystone, in exchange for the crude oil delivered to the KRG. Under these arrangements, payments were made by or on behalf of the KRG to Gulf Keystone, rather than by Gulf Keystone to the KRG. However, for the purposes of the reporting requirements under the UK Regulations, we are required to characterise the value of the KRG’s production entitlements under the Shaikan PSC (for which the KRG receives payment directly from the market) as a payment to the KRG.

(2)  Thousand barrels of oil.

(3)  Capacity building payments are deducted from the monthly crude oil sales invoice, no direct payment is made to the KRG. The value of licence, rental and security fees has been accrued and is not expected to be paid, but rather offset against revenue due from the KRG related to pre-October 2017 oil sales, which have not yet been recognised in the financial statements.

(4)  Drilling of water well, construction of water supply network and purchase of generators.

(Source: Gulf Keystone Petroleum)

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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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GKP “on Track” to Meet Production Guidance

Gulf Keystone has provided an operational and corporate update:

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

“We are pleased to announce that we have submitted a draft Field Development Plan to the Ministry of Natural Resources. While the timing of FDP approval is uncertain given the scale of the project, this is an important step forward to develop the significant potential of the Shaikan Field while more than halving CO2 per barrel by eliminating routine flaring.

“Production performance has been strong, reaching a record monthly average high in October, and we are on track to meet our tightened 2021 gross average production guidance. With our leverage to oil prices and low cost base, strong production has translated into robust cash flow generation. We have experienced operational challenges with SH-13 and SH-14 and, subject to well productivity, we are now targeting to increase gross production towards 55,000 bopd in January.“

Shaikan Field Development Plan (“FDP”)

  • Following extensive constructive engagement with the Ministry of Natural Resources (“MNR”), Gulf Keystone and its partner Kalegran B.V. (a subsidiary of MOL Hungarian Oil & Gas plc) (“MOL”) have submitted a draft FDP to the MNR
  • The FDP includes the continued ramp-up of Jurassic oil production , an appraisal of the Triassic reservoir and a Gas Management Plan to more than halve CO2 per barrel by eliminating routine flaring
  • The FDP is subject to review and final approval by the MNR, the timing of which is uncertain given the scale of the project. Final investment decision (“FID”) is also subject to approval of both Boards of Directors of Gulf Keystone and MOL, and the Company will provide an update at the appropriate time

Operational

  • Following over 660 days without a Lost Time Incident (“LTI”), we were disappointed to have an LTI during drilling operations in October. Following the incident, we have completed a full investigation and have put in place a number of remedial actions
  • Gross average production from the field in 2021 to date of c.43,300 bopd, in line with tightened 2021 guidance, with record gross average production in October of 45,654 bopd
  • SH-14 has been drilled, completed and is currently being hooked-up , following delays caused by equipment failures and wellbore issues in the subsequent side-track
  • Following the rig move from the SH-13/SH-14 well pad, an acid stimulation programme is now underway on SH-13 to access the broader fracture network in the reservoir after an area of low fracture connectivity was encountered. Acid stimulation is commonly used in carbonate reservoirs such as Shaikan
  • Activities are ongoing to start production from SH-13 and SH-14 and the increase in gross production towards 55,000 bopd, subject to well productivity, is now expected in January
  • Preparations are ongoing to spud SH-15 (formerly referred to as SH-G) which is now expected to be brought onstream in Q2 2022
  • Planned installation of two electric submersible pumps deferred to 2022 after successful trial of lower cost jet pump solution at SH-10 and stronger than expected SH-11 reservoir performance

Financial

  • $283.2 million ($221.7 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. $32.4 million of the original total net arrears balance of $73.3 million has now been recovered
  • The delayed payment for September 2021 crude oil sales and arrears (gross: $37.8 million; net to GKP: $29.6 million) is expected to be paid shortly
  • Following the payment of the $50 million interim dividend on 8 October 2021, $100 million of dividends have been distributed to shareholders in 2021, in line with the Company’s strategy of balancing investment in growth with shareholder returns
  • Robust balance sheet, with a cash balance of $176 million as at 16 December 2021

Outlook

  • On track to meet tightened 2021 average gross production guidance of 42,000 to 44,000 bopd
  • 2021 net Capex guidance lowered from $75-$85 million to approximately $55 million, principally due to the revised spud date of SH-15 and deferral of installation of SH-10 and SH-11 electric submersible pumps, partially offset by the higher cost of SH-14
  • 2021 gross Opex guidance of $2.5 to $2.9/bbl remains unchanged
  • With continuing strong oil prices and cash flow generation, there may be opportunities to consider further distributions to shareholders and to optimise the capital structure

AGM update

At the Company’s Annual General Meeting (“AGM”) held on 18 June 2021, all resolutions were successfully passed. However, resolutions 2 and 6, being the re-election of the Company’s Chairman and Chief Financial Officer, failed to attain the support of 80% of the shareholders who voted. Voting turnout in general was low relative to prior years, with approximately 49% of the total shareholder register voting. The Company continues to look at ways to increase voting turnout at future general meetings.

Substantially all the votes against resolutions 2 and 6 were from a single major shareholder. In accordance with Provision 4 of the 2018 UK Corporate Governance Code, the Board has consulted with the single shareholder, and, as part of this exercise, also consulted with the Company’s other major shareholders.

Feedback received from the single shareholder encompassed issues principally related to the Company’s operational progress, organisational structure and capital allocation. The Company also received feedback from other major shareholders, all of which were supportive of resolutions 2 and 6. The Board has carefully considered the issues and has addressed them, to the extent possible or necessary. The independent members of the Board continue to hold every confidence in both the Chairman and Chief Financial Officer, recognising the value and contribution each bring to the Company.

The Company will continue to engage with the major shareholder in question and welcomes ongoing engagement and feedback from all shareholders.

(Source: GKP)

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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!)

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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)

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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)