REG-Gulf Keystone Petroleum Ltd Operational & Corporate Update

Gulf Keystone PetroleumAnnouncement

31/01/2024 07:15

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   Gulf Keystone Petroleum Ltd (GKP)
   Operational & Corporate Update

   31-Jan-2024 / 07:00 GMT/BST

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   31 January 2024

                                        

                                        

                    Gulf Keystone Petroleum Ltd. (LSE: GKP)

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

                                        

                         Operational & Corporate Update

                                        

    

   Gulf  Keystone,  a  leading  independent  operator  and  producer  in  the
   Kurdistan Region of Iraq (“Kurdistan”), today provides an operational  and
   corporate update. The information contained  in this announcement has  not
   been audited and may be subject to further review. 

    

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

   “2023 was a challenging year for  GKP and our industry as Kurdistan  crude
   exports were suspended in March  and payments from the Kurdistan  Regional
   Government for oil  sales were  further delayed.  By adapting  to the  new
   environment and commencing sales to the local market we have been able  to
   protect our business  and balance sheet.  I’m proud of  the GKP team,  who
   have swiftly transitioned from a focus on profitable production growth  to
   preserving liquidity and  restarting trucking  operations, maintaining  an
   excellent safety record throughout.

   While local market  demand remains  variable, we are  actively working  to
   increase volumes and  remain focused  on at least  covering our  estimated
   monthly capex and other costs of  c.$6 million in 2024, while  proactively
   managing our accounts payable.

   We continue to engage with government stakeholders to push for the restart
   of  exports  and  payment  surety  for  past  and  future  sales.  We  see
   considerable upside should the operating environment improve,  underpinned
   by the attractive fundamentals of the Shaikan Field and our historic track
   record of value creation.” 

    

   Operational

    

     • Zero Lost Time Incidents for over a year, demonstrating GKP’s rigorous
       commitment to  safety  despite  significant  operational  and  project
       changes in 2023
     • 2023 gross  average production  of 21,891  bopd (2022:  44,202  bopd),
       reflecting the  suspension of  exports  and subsequent  initiation  of
       local sales

          ◦ Gross production averaged 49,165 bopd between 1 January and 24
            March 2023 prior to the Iraq-Turkey Pipeline closure
          ◦ Gross average sales of 23,331 bopd between the initiation of
            local sales on 19 July and 31 December 2023 

     • Gross average sales in 2024 year to 29 January of c.21,600 bopd

          ◦ Continued fluctuation in volumes reflects seasonal logistics and
            demand challenges, refinery capacity constraints and supply from
            other producers in the region
          ◦ Realised prices are currently c.$27/bbl, in line with local
            market pricing (current breakeven at gross sales of c.20,500
            bopd); reduced from an average of $30/bbl in the second half of
            2023
          ◦ The Company continues to receive advance payments for its net
            entitlement of 36% of gross sales revenue

     • No operational impact from regional tensions; we continue to closely
       monitor the security environment and have taken precautions to protect
       the organisation

    

   Financial

    

     • Total 2023 revenue receipts of $109.2 million (2022: $450.4  million),
       reflecting:

          ◦ $65.7 million related to invoices paid for export sales in August
            and September 2022, received in January and March 2023
            respectively
          ◦ $43.5 million proceeds from local sales in H2 2023

     • Capital expenditures and costs were  significantly reduced in 2023  to
       preserve liquidity in response to the suspension of exports

          ◦ Aggregate net capex, operating costs and other G&A monthly run
            rate reduced to c.$6 million in H2 2023 that was covered by local
            sales revenues
          ◦ 2023 net capex of c.$59 million (2022: $114.9 million), of which
            c.$12 million was in H2 2023, as the Company suspended all
            Shaikan Field expansion activity
          ◦ 2023 operating costs of c.$36 million (2022: $41.9 million),
            reflecting the shut-in of production for the majority of Q2 2023
            and cost saving initiatives

     • Prior to the  suspension of  dividends, $25  million interim  dividend
       paid in March
     • Cash balance of $82 million at 30 January 2024 with no debt

          ◦ Proactively managing and reducing accounts payable with balances
            trending towards levels in line with ongoing monthly expenditures

     • The Kurdistan Regional Government (“KRG”) owes $151 million net to GKP
       for October 2022 to March 2023 export sales

    

   Outlook

    

     • The Company  remains focused  on maximising  local sales  to at  least
       cover monthly costs while proactively managing accounts payable
     • While local market demand remains  variable and difficult to  predict,
       we are actively pursuing opportunities to increase sales volumes
     • Expect to maintain aggregate net capex, operating costs and other  G&A
       monthly run rate at c.$6 million in 2024:

          ◦ Estimated 2024 net capex of c.$20 million, comprising safety
            critical upgrades and production maintenance expenditures
          ◦ Continuing to focus on minimising costs while retaining
            operational capability to increase local sales and resume exports
          ◦ Production and gross Opex per barrel guidance remains suspended

     • The Company continues to actively engage with government  stakeholders
       to push for the restart of pipeline exports:

          ◦ Political and commercial negotiations between the Government of
            Iraq (“GOI”) and the KRG are ongoing
          ◦ First tripartite discussions between the GOI, KRG and
            International Oil Companies recently held in Baghdad, at which
            GKP was present
          ◦ We continue to emphasise the importance of payment surety for
            future oil exports, the repayment of outstanding receivables and
            the preservation of current contract economics

     • With the resumption of exports and normalisation of KRG payments,  GKP
       will  consider  incremental  field  investment  to  realise  Shaikan’s
       substantial reserves base and return to previous production levels

    

    

    

    

    

   Enquiries:

    

   Gulf Keystone:                          +44 (0) 20 7514 1400  
   Aaron Clark, Head of Investor Relations

   & Corporate Communications               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.:  300637
   EQS News ID:   1826453


    
   End of Announcement EQS News Service

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References

   Visible links
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   2. mailto:GKP@fticonsulting.com
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