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 USD215 million, repay our USD100 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 at17 December 2022?
Production recently impacted by temporary shut-in of one well
caused by an isolated ESP electricalfailure ? Following a prompt
workover, the well has just been restarted and is gradually ramping
up. All otherwell ESPs continue to function without any issues ?
Ahead of installation of water handling facilities, we continue to
prudently manage our wells toavoid 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 temporaryuse of a SH-12 flowline. We are
planning to further ramp up production following installation of a
dedicatedflowline into PF-2 in Q1 2023 ? SH-17, situated on the
same well pad as SH-16, was recently spudded with first production
targetedinto PF-2 in Q1 2023 ? Plan to drill SH-P, the next well in
the sequence, following completion of SH-17; SH-P will bedrilled
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 toprogress preparatory
work for the expansion of the production facilities, including
water handling capacityprocurement activities
Financial
-- Significant cash flow generation in 2022 year to date, with
USD450.4 million net to GKP received from theKurdistan Regional
Government ("KRG") for crude oil sales and revenue arrears
-- Record dividends paid in 2022 of USD215 million, representing
a sector-leading dividend yield of 41% basedon GKP's closing price
on 16 December 2022
-- Robust, debt-free balance sheet, with a cash balance of
USD116.9 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 wasrecently brought back online after a work over
and production is gradually being ramped up
-- 2022 net capital expenditure guidance of USD110-USD120
million unchanged, with additional costs related tothe drilling of
SH-17 offset by phasing of production facility expansion
procurement activities
-- 2022 gross Opex guidance of USD2.9-USD3.3/bbl unchanged
-- While timing of FDP approval remains uncertain, we continue
to engage with the Ministry of NaturalResources ("MNR") towards
project sanction and are progressing the tendering process for the
Gas Management projectthat will materially reduce emissions
-- We are currently in the process of agreeing the 2023 work
programme with our partner and look forward toproviding production,
capex and opex guidance in the new year
-- The Company is currently negotiating with the MNR to amend
the Shaikan Lifting Agreement, including achange in reference price
for Shaikan crude oil sales from Dated Brent to the local benchmark
KBT ("KurdistanBlend"), effective 1 September 2022. The final
outcome and impact on realised prices remain uncertain and
furtherupdates will be provided as appropriate
-- Assuming timely payment of invoices and strong oil prices, we
expect continued robust cash flowgeneration, which would provide
flexibility to continue to invest in the Shaikan Field and consider
furtherdistributions 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 aclark@gulfkeystone.com
FTI Consulting +44 (0) 20 3727 1000
Ben Brewerton
GKP@fticonsulting.com
Nick Hennis
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
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