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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)

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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)

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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)

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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)

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GKP CFO Steps Down

Gulf Keystone Petroleum (GKP) has announced that Sami Zouari (pictured), Chief Financial Officer (CFO), will be stepping down as CFO and a Director of the Company during the second half of the year, and will leave the business by no later than 2 December 2019.

Mr Zouari has been CFO of GKP since January 2015 overseeing both financial and commercial activities in the company.  Since joining, he has played a key role in the strategic turnaround of the business, in particular leading the 2016 implementation of a new capital structure, materially strengthening the Company’s balance sheet and bringing about a significant debt reduction.  In addition, he has overseen the $100 million bond refinancing completed in 2018, and, most recently, was instrumental in the introduction of the Company’s maiden dividend policy.

In addition to remuneration in respect of his six-month notice period which will run from the date of this announcement, Mr Zouari will remain eligible to receive a pro rata bonus under the Executive Bonus Scheme for the 2019 financial year.  With respect to Mr Zouari’s current outstanding options held under the 2016 Value Creation Plan (VCP), these will be retained by Mr Zouari and will vest according to the rules and normal operation of the VCP, subject to performance conditions being attained.

A leading search firm will be appointed to find Mr Zouari’s successor and the process is expected to be concluded over the coming months.  A further announcement will be made in due course.

Jaap Huijskes, Chairman of the Company, said:

“On behalf of the Board, I would like to thank Sami for his substantial positive contribution over the past four and a half years.  He has played a pivotal role in bringing Gulf Keystone back from the brink of collapse and helping to shape it into the profitable company it is today.

“We wish Sami well for the future and look forward to an orderly handover to his successor over the coming months.”

Jón Ferrier, Chief Executive Officer, said: 

“It has been a privilege to work with Sami who has been key in the overall turnaround of the company.  His legacy will be the strong financial position GKP enjoys today, which is in marked contrast to the Company he joined in early 2015. 

“I look forward to continuing to work closely with him over the coming months, at what remains an important time for us as we materially build production from the Shaikan Field.

“I echo the Chairman’s thanks for his important contribution to the Company throughout his tenure as CFO, and have no doubt that he will be employing his intellect, strategic grasp and leadership skills in his future endeavours.“

(Source: GKP)

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GKP Maintains Production Guidance; Shares Up

Shares in Gulf Keystone Petroleum (GKP) were trading up 3 percent on Monday after the company provided an operational and corporate update on its operations in Iraqi Kurdistan.

Analyst Peel Hunt has reportedly re-issued its “Buy” rating during the morning.

Operational

  • Operational activity continues at the Shaikan Field (pictured) to complete the debottlenecking programme in 2019, in order to achieve the near-term production target of 55,000 bopd in Q1 2020
  • Progress is continuing with the export pipeline from PF-1 to the main export pipeline, which remains on schedule to become operational mid-year, at which point trucking of crude oil will be eliminated
  • The SH-1 workover to replace the existing tubing with larger bore tubing, has now been successfully concluded.  The result was positive with an increase in production from the well of approximately 50% to over 6,500 bopd
  • The IOT Rig 1 has been demobilised.  It will now complete a short workover for another operator nearby before returning to Shaikan for the remaining workovers in the 55,000 bopd expansion programme.  This will include the SH-3 tubing change-out, along with installation of Electric Submersible Pumps (“ESPs”) in wells SH-5, SH-10 and SH-11
  • DQE’s Rig 40 is currently being prepared ahead of the imminent Jurassic drilling campaign, which remains on schedule to be mobilised for the SH-H well later this month

Corporate

  • A renewal of the crude oil sales agreement has been signed between Gulf Keystone Petroleum International Ltd and the Kurdistan Regional Government (“KRG”)
    • The KRG will purchase Shaikan crude oil directly injected at PF-2 into the Atrush export pipeline at the monthly average Dated Brent oil price minus a total discount of c.$21 per barrel for crude
    • Until the PF-1 pipeline is completed, the KRG will continue to purchase crude oil delivered by truck at a discount of c.$22 per barrel
    • The above discounts account for quality, domestic and international transportation costs
    • The agreement is effective from 1 January 2019 until 31 December 2020
  • The Company has received final clearance from Sonatrach in relation to the Ferkane Permit (Block 126). This officially marks Gulf Keystone’s exit from its Algerian operations.
    • This positive development will allow the Company to release $10 million of past liabilities

Outlook

Despite Q1 production having been affected by SH-1 being offline for the workover, and the export system being shut-down for maintenance for a week earlier this month, the Company maintains its 2019 gross average production guidance in the range of 32,000 – 38,000 bopd

 (Sources: GKP, Yahoo!, Financial Headlines)

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GKP confirms Shaikan Payment

By John Lee.

Gulf Keystone Petroleum (GKP) has confirmed that a gross payment of $27.0 million ($21.2 million net to GKP) has been received from the Kurdistan Regional Government for Shaikan crude oil sales during May 2018.

(Source: GKP)

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GKP Completes $100m Bond Issue

Gulf Keystone Petroleum Ltd., operator of the Shaikan Field in the Kurdistan Region of Iraq, has announced the successful completion of the private placement of a 5-year senior unsecured $100 million bond issue (the “New Notes”).

The New Notes will be issued at 100 percent of par and carry a 10 percent fixed semi-annual coupon. The bond placement received strong investor demand, both from existing and new investors across international markets and was oversubscribed.

The New Notes issue is expected to settle on or about 25 July 2018, subject to customary conditions precedent. An application will be made for the New Notes to be listed on an appropriate recognised exchange. The proceeds from the New Notes will be used to refinance all of Gulf Keystone’s existing $100 million Guaranteed Notes due 2021 (the “Existing Notes”).

With respect to the Existing Notes that have not tendered for exchange, the Company intends to exercise the option to redeem all of the Existing Notes then outstanding at par value according to the call option, expected to take place on 26 July 2018.

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

“Following our recent announcement of the resumption of investments at the Shaikan Field to increase production to 55,000 bopd, an increase by about 70% compared to current levels, this refinancing resets the Company’s capital structure that was put in place in conjunction with the restructuring in 2016. This is another positive milestone for the company and the Kurdistan Region of Iraq.

“We also look forward to updating the market on our plans to increase production to 75,000 bopd and up to 110,000 bopd in due course.“

Sami Zouari, Gulf Keystone’s Chief Financial Officer, said:

“The refinancing confirms the substantial progress achieved by the Company. The New Notes considerably strengthen the Company’s financial capabilities as we embark on our next investment phases in the Shaikan field.”

(Source: GKP)

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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)

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GKP receives New Payment from KRG

By John Lee.

Gulf Keystone Petroleum (GKP) has confirmed that a gross payment of $18.8 million ($14.7 million net to GKP) has been received from the Kurdistan Regional Government for Shaikan crude oil sales during February 2018.

(Source: GKP)