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:
or visit: 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
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.
