REG-Gulf Keystone Petroleum Ltd Operational, Corporate & AGM Update

Gulf Keystone PetroleumAnnouncement

19/12/2022 07:15

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   Gulf Keystone Petroleum Ltd (GKP)
   Operational, Corporate & AGM Update

   19-Dec-2022 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   19 December 2022

                                        

                                        

                    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 (“KRI”), today provides an operational, corporate
   and AGM update.

    

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

   “Our leverage to strong oil prices, low-cost production base and focus  on
   capital discipline has led  to significant cash  flow generation in  2022,
   enabling us to deliver sector leading dividends of $215 million, repay our
   $100 million bond leaving us debt-free  and continue to invest in  Shaikan
   Field production growth.

    

   2022 production is expected to be at the lower end of our 44,000 –  47,000
   bopd guidance range,  recently impacted  by the temporary  shut-in of  one
   well due to  an isolated  Electrical Submersible  Pump (“ESP”)  electrical
   failure, which has just been worked  over and restarted. We are  currently
   producing c.44,400 bopd as we gradually  ramp up production from both  the
   restarted well and SH-16, which was brought online earlier this month.

    

   To drive  production and  cash flow  growth, we  are maintaining  drilling
   momentum, recently spudding SH-17 and subsequently planning to drill SH-P.
   We are reviewing our 2023 work programme with our partner and look forward
   to providing production, capex and opex guidance in the new year.

    

   Jaap Huijskes, GKP’s Non-Executive  Chairman, has expressed his  intention
   to retire from the Board following the 2023 AGM. I would like to thank him
   for his outstanding contributions to the company over the past five  years
   and in particular his guidance during my tenure.”

    

   Operational

    

     • Continued strong focus on safety,  with no Lost Time Incident  (“LTI”)
       recorded for over 420 days
     • Gross average  production  in 2022  year  to date  of  c.44,100  bopd;
       current production of c.44,400 bopd as at 17 December 2022

          ◦ Production recently impacted by temporary shut-in of one well
            caused by an isolated ESP electrical failure
          ◦ Following a prompt workover, the well has just been restarted and
            is gradually ramping up. All other well ESPs continue to function
            without any issues
          ◦ Ahead of installation of water handling facilities, we continue
            to prudently manage our wells to avoid traces of water and
            optimise production

     • Maintaining drilling momentum:

          ◦ SH-16 drilled, completed and brought online this month on
            schedule and on budget
          ◦ While the SH-16 well has good productivity, production is
            currently constrained due to the temporary use of a SH-12
            flowline. We are planning to further ramp up production following
            installation of a dedicated flowline into PF-2 in Q1 2023
          ◦ SH-17, situated on the same well pad as SH-16, was recently
            spudded with first production targeted into PF-2 in Q1 2023
          ◦ Plan to drill SH-P, the next well in the sequence, following
            completion of SH-17; SH-P will be drilled from the existing SH-9
            well pad and will produce into PF-1 with targeted start up in Q2
            2023

     • Carefully managing ongoing equipment lead time and cost pressures in a
       supply  constrained  market  to  progress  preparatory  work  for  the
       expansion of  the  production  facilities,  including  water  handling
       capacity procurement activities

    

   Financial

    

     • Significant cash flow  generation in  2022 year to  date, with  $450.4
       million net to  GKP received  from the  Kurdistan Regional  Government
       (“KRG”) for crude oil sales and revenue arrears
     • Record  dividends  paid  in  2022  of  $215  million,  representing  a
       sector-leading dividend yield of 41%  based on GKP’s closing price  on
       16 December 2022
     • Robust, debt-free balance sheet, with a cash balance of $116.9 million
       at 16 December 2022

    

   Outlook

    

     • 2022 gross average production expected to be at lower end of 44,000  –
       47,000 bopd guidance range, recently impacted by the temporary shut-in
       of one well caused by an isolated ESP electrical failure. The well was
       recently brought  back online  after  a work  over and  production  is
       gradually being ramped up
     • 2022 net capital expenditure guidance of $110-$120 million  unchanged,
       with additional  costs related  to  the drilling  of SH-17  offset  by
       phasing of production facility expansion procurement activities
     • 2022 gross Opex guidance of $2.9-$3.3/bbl unchanged
     • While timing of 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 project that will materially reduce emissions
     • We are currently in  the process of agreeing  the 2023 work  programme
       with our partner and look  forward to providing production, capex  and
       opex guidance in the new year
     • The Company is currently negotiating with the MNR to amend the Shaikan
       Lifting Agreement, including a change  in reference price for  Shaikan
       crude  oil  sales  from  Dated  Brent  to  the  local  benchmark   KBT
       (“Kurdistan Blend”), effective 1 September 2022. The final outcome and
       impact on realised prices remain uncertain and further updates will be
       provided as appropriate
     • Assuming timely payment of invoices  and strong oil prices, we  expect
       continued robust cash flow generation, which would provide flexibility
       to continue  to  invest in  the  Shaikan Field  and  consider  further
       distributions to shareholders, while preserving adequate liquidity

    

   Board changes

    

   Jaap Huijskes,  the  Company’s  Non-Executive  Chair,  has  expressed  his
   intention to retire from  the Board and will  not seek re-election at  the
   2023 AGM. In line with our succession plan, we are reviewing alternatives,
   including commencing a process to  appoint a new Non-Executive Chair  with
   Mr  Huijskes  remaining  as  Chair  until  the  AGM  to  ensure  a  smooth
   transition. The Company would like to thank Mr Huijskes for his leadership
   and guidance over the past five years, a period which has seen significant
   progress by the Company.

    

   Update on Federal Iraqi Government & KRG dispute regarding Kurdistan oil &
   gas assets

    

   In our 2022 Half Year Results Announcement, we reported the Iraqi Ministry
   of Oil had commenced proceedings  in the Baghdad Commercial Court  against
   various  International  Oil  Companies  ("IOCs")  operating  in  the  KRI,
   including  GKP,  seeking  to  nullify  the  Production  Sharing  Contracts
   ("PSCs") issued under the Kurdistan Oil and Gas Law ("KROGL"). Since then,
   the Company has learned from media  reports that, on 23 October 2022,  the
   Court issued decisions  in absentia  against Gulf Keystone  and two  other
   IOCs. Gulf Keystone did not have legal representation in the Court.  Media
   has also reported similar judgements issued against several other IOCs.

    

   The KRG continues to affirm that KROGL is validly constituted and the PSCs
   issued are valid and in full force and effect. Media reports indicate that
   high level  political discussions  are  ongoing between  the KRG  and  the
   recently appointed Federal Iraqi Government  with a view to resolving  the
   matter. The  Company's  operations  in the  Shaikan  Field  are  currently
   unaffected.  However,  the  matter  continues  to  be  closely  monitored,
   including any potential impact on the restrictions placed on the export of
   crude oil, service contractors or any other parties by the Iraqi  Ministry
   of Oil.

    

   The Company is  also aware  of the  ongoing arbitration  case between  the
   Federal Government of Iraq and the Turkish Government on the management of
   the Iraq to Turkey pipeline.

    

   AGM update

    

   At the Company's Annual General Meeting ("AGM") held on 24 June 2022,  all
   resolutions were successfully passed. However, resolutions 2 and 7,  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 continued to be  low relative to  prior years, with  approximately
   52% 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 7 were from a single
   major shareholder, who voted against the re-election of the same Directors
   at the 2021  AGM. The  Company also notes  that the  proxy agencies  Glass
   Lewis and ISS were in favour  of all resolutions, including resolutions  2
   and 7. 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 Board has carefully considered all feedback and has addressed  issues,
   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.

    

    

    

    

    

    

    

    

   Enquiries:

    

   Gulf Keystone:                          +44 (0) 20 7514 1400  
   Aaron Clark, Head of Investor Relations  1 aclark@gulfkeystone.com
                                            
   FTI Consulting                          +44 (0) 20 3727 1000
   Ben Brewerton
                                            2 GKP@fticonsulting.com
   Nick Hennis

    

    

   or visit:  3 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  4 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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   ISIN:          BMG4209G2077
   Category Code: MSCH
   TIDM:          GKP
   LEI Code:      213800QTAQOSSTNTPO15
   Sequence No.:  209432
   EQS News ID:   1515857


    
   End of Announcement EQS News Service

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References

   Visible links
   1. mailto:aclark@gulfkeystone.com
   2. mailto:GKP@fticonsulting.com
   3. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=8d526d3701dabe9a2ff9507b71394df8&application_id=1515857&site_id=refinitiv2&application_name=news
   4. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=6965f2bb1ddcf50ad2dd09b21a93cfc7&application_id=1515857&site_id=refinitiv2&application_name=news


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