REG-Gulf Keystone Petroleum Ltd Operational & Corporate Update

Gulf Keystone PetroleumAnnouncement

27/04/2023 07:15

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   Gulf Keystone Petroleum Ltd (GKP)
   Operational & Corporate Update

   27-Apr-2023 / 07:00 GMT/BST

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   27 April 2023

                                        

                                        

                    Gulf Keystone Petroleum Ltd. (LSE: GKP)

                   (“Gulf Keystone”, “GKP” or “the Company”)

                                        

                         Operational & Corporate Update

    

   Gulf  Keystone,  a  leading  independent  operator  and  producer  in  the
   Kurdistan Region of  Iraq (“KRI”  or “Kurdistan”), is  today providing  an
   update on operational and corporate  activity and 2023 guidance  following
   the shut-in of the Iraq-Turkey pipeline on 25 March 2023.

    

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

   “Gulf Keystone was on track to  deliver another year of strong  profitable
   production growth and  robust cash flow  generation until the  Iraq-Turkey
   pipeline arbitration award resulted in the suspension of pipeline exports.
   March production prior to the  pipeline suspension averaged c.53,700  bopd
   with plans to bring on SH-18  in Q2 2023 and ongoing facilities  expansion
   activities.

   The lack of crude oil exports  for a month has further exacerbated  delays
   in KRG payments to  international oil companies  with uncertainty on  when
   consistent monthly  payments  will resume  and  when the  current  overdue
   amount of $102 million net to GKP will be paid.

   While we continue to  believe that the pipeline  shut-in is temporary  and
   the KRG  will resume  more normalised  payments, we  are prudently  taking
   action to preserve liquidity by targeting a reduction of costs across  the
   business. We are closely  monitoring the situation  and will take  further
   appropriate action as required.”  

    

   Operational

    

     • Up to the Iraq-Turkey pipeline shut-in on 25 March 2023, gross average
       production in 2023  of c.49,200  bopd and  in March  2023 of  c.53,700
       bopd, including five days in excess of 55,000 bopd
     • Following the suspension  of exports,  GKP produced  at reduced  rates
       into storage facilities prior to shutting in production at PF-1 on  31
       March 2023 and at PF-2 on 13 April 2023
     • The suspension has resulted in a gross production deferment to date of
       around 1.6 million barrels, or approximately 4,400 bopd on a full-year
       basis
     • The Company continues to believe  that the suspension of exports  will
       be temporary and is ready  to resume production immediately,  although
       no official timeline to restart pipeline operations has been  publicly
       announced by the Kurdistan Regional Government (“KRG”)

          ◦ The Company understands that discussions between the KRG and the
            Iraqi Ministry of Oil are ongoing to implement the framework
            agreement announced on 4 April 2023

     • Upon the resumption of exports, production will be gradually ramped up
       with the objective of safely returning to full export capacity

          ◦ The drilling of SH-18 was recently completed and the well is now
            being hooked-up. We expect the well to be available for start-up
            in Q2 2023, in line with prior guidance

    

   Financial

    

     • The Company continues to engage with  the KRG regarding the delays  to
       oil sales payments

          ◦ While the Company has received $66 million net from the KRG in
            2023 for August and September 2022 oil sales, overdue receivables
            for the months of October 2022 to January 2023 total $102 million
            net on the basis of the KBT pricing mechanism

     • Net capital expenditures to the end of April 2023 are estimated at $45
       million net, including completion of SH-17 and SH-18, well workovers,
       well pad preparation, long lead items and expansion of production
       facilities
     • Cash balance of $99 million at 26 April 2023

    

   Outlook

    

     • Given the ongoing suspension  of exports and  continued delays to  KRG
       payments, the  Company  is focussed  on  preserving liquidity  and  is
       targeting a reduction of costs across the business, while  maintaining
       a strong focus on safety and long-term asset reliability
     • Consequently,  the  Company  is  significantly  reducing  planned  net
       capital expenditures to focus on only safety critical and  unavoidable
       contractual commitments

          ◦ While our review is ongoing, we currently expect May to December
            2023 net capital expenditures of $35-40 million 
          ◦ Full year 2023 net capital of expenditures are currently
            estimated at $80-85 million (prior guidance: $160-$175 million)

     • The Company  is  implementing  initiatives to  reduce  Opex  and  G&A.
       However, until pipeline operations  resume and the overall  production
       impact from the export  suspension is known,  the Board is  suspending
       production and gross Opex per barrel guidance
     • As part of its ongoing review, the Board is considering the previously
       declared final 2022 ordinary annual dividend of $25 million
     • The  Board  continues  to  review  the  implications  of  the  current
       situation and  is  considering necessary  operational,  financial  and
       legal measures to protect the Company’s interests during this period

    

   The information  contained  within  this announcement  is  deemed  by  the
   Company to constitute  inside information as  stipulated under the  Market
   Abuse Regulation (EU) no.  596/2014 (as it forms  part of domestic law  by
   virtue of the European Union (Withdrawal) Act 2018).

    

    

   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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   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   ISIN:          BMG4209G2077
   Category Code: MSCM
   TIDM:          GKP
   LEI Code:      213800QTAQOSSTNTPO15
   Sequence No.:  239838
   EQS News ID:   1618379


    
   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=1618379&site_id=reuters8&application_name=news
   4. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=6965f2bb1ddcf50ad2dd09b21a93cfc7&application_id=1618379&site_id=reuters8&application_name=news


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