REG - Gulf Keystone Petrol - Operational, Corporate & AGM Update

Gulf Keystone PetroleumAnnouncement

17/12/2021 07:00

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RNS Number : 0151W  Gulf Keystone Petroleum Ltd.  17 December 2021

 

 

17 December 2021

 

 

Gulf Keystone Petroleum Ltd. (LSE: GKP)

("Gulf Keystone", "GKP" or "the Company")

 

Operational, Corporate & AGM Update

 

Gulf Keystone, a leading independent operator and producer in the Kurdistan
Region of Iraq, today provides 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
CO(2) 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 CO(2) 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.

 

 

 

This announcement contains inside information for the purposes of the UK
Market Abuse Regime.

 

Enquiries:

 

 Gulf Keystone:                           +44 (0) 20 7514 1400
 Aaron Clark, Head of Investor Relations  aclark@gulfkeystone.com

 Celicourt Communications:                + 44(0) 20 8434 2754
 Mark Antelme                             GKP@Celicourt.uk

 Jimmy Lea

 

 

or visit: www.gulfkeystone.com (http://www.gulfkeystone.com)

 

Notes to Editors:

 

Gulf Keystone Petroleum Ltd. (LSE: GKP) is a leading independent operator and
producer in the Kurdistan Region of Iraq. Further information on Gulf Keystone
is available on its website www.gulfkeystone.com
(http://www.gulfkeystone.com/)

 

Disclaimer

 

This announcement contains certain forward-looking statements that are subject
to the risks and uncertainties associated with the oil & gas exploration
and production business.  These statements are made by the Company and its
Directors in good faith based on the information available to them up to the
time of their approval of this announcement but such statements should be
treated with caution due to inherent risks and uncertainties, including both
economic and business factors and/or factors beyond the Company's control or
within the Company's control where, for example, the Company decides on a
change of plan or strategy.  This announcement has been prepared solely to
provide additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed.  This
announcement should not be relied on by any other party or for any other
purpose.

 

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