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GKP Shares lower following update

Ahead of Friday’s 2022 Annual General Meeting (“AGM”), Gulf Keystone Petroleum (GKP), provided an operational and corporate update.

Shares in the company closed down 4.4 percent.

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

“Following a year of strong operational and financial performance in 2021, our leverage to the oil price, low-cost production base and focus on capital discipline have continued to drive significant cash flow generation from the Shaikan Field in 2022. We have declared sector-leading dividends of $190 million year to date, $75 million of which is subject to shareholder vote at today’s AGM, while continuing to invest in the high growth potential of the Shaikan Field. We also remain focused on maintaining a robust balance sheet and today we are pleased to announce our intention to call the $100 million outstanding bond, leaving the Company debt free.

“Year to date production has averaged c.44,900 bopd. We are prudently managing our wells to avoid traces of water and, as a result, we are tightening 2022 gross production guidance to 44,000 – 47,000 bopd. The installation of water handling facilities will unlock upside production potential and we continue to explore acceleration options in a supply constrained market. In the near-term, we continue to progress our well workover and intervention programme to optimise production. While timing of approval remains uncertain, we also continue to make positive progress on the FDP as we prepare to resume drilling and ramp up production.

 “Ahead of our AGM later today, I would like to thank our shareholders, employees and other stakeholders in Kurdistan for their continued commitment and support. Together, we are focused on safely delivering the significant value of the Shaikan Field.“

Operational

  • Continued strong focus on safety, with no Lost Time Incident (“LTI”) recorded for over 240 days
  • Gross average production in 2022 year to date of c.44,900 bopd; gross average production in June of c.45,900 bopd, as at 22 June 2022
  • Year to date gross average production impacted by:
    • SH-12 reperforated and brought back online in June at a reduced rate after being shut-in at the beginning of the year
    • SH-14 production remains constrained following acid stimulation earlier in the year
    • SH-15 brought online in April after being drilled in record time and is currently producing towards the lower end of the anticipated range
  • While the industry is currently experiencing equipment lead time pressures in a supply constrained market, we are continuing to review options to accelerate installation of water handling facilities that would enable further production ramp up from existing wells
  • Progressing well workover and intervention programme to optimise near-term production

Financial 

  • Significant cash flow generation in 2022 year to date, with $348.8 million ($273.1 million net to GKP) received from the Kurdistan Regional Government (“KRG”) for crude oil sales and revenue arrears. The outstanding arrears balance has been fully recovered
  • $190 million of dividends declared in 2022, a sector-leading dividend yield of 26% based on GKP’s closing price on 22 June 2022
    • $115 million paid to shareholders to date; additional $75 million, including the previously declared ordinary and special dividends, to be paid in July following approval at AGM
  • Robust balance sheet, with a cash balance of $247.0 million at 23 June 2022

Outlook 

  • Tightened 2022 gross average production guidance to 44,000 – 47,000 bopd
  • Gross Opex guidance of $2.9-$3.3/bbl remains unchanged
  • Net capital expenditure guidance of $85-$95 million remains unchanged
  • While timing of FDP approval remains uncertain, we continue to progress towards sanction with the MNR. The Company is preparing to resume drilling to ramp-up production from the Jurassic reservoir and will update capital expenditure guidance in due course
  • We continue to monitor the long running dispute between the Federal Iraqi Government and the KRG on the management of oil and gas assets in Kurdistan. Our operations currently remain unaffected and we continue to work closely with the KRG, our advisers and other stakeholders to protect the Company’s interests
  • Remain focused on balancing investment in growth with shareholder returns, while preserving adequate liquidity:
    • Intention to call $100 million bond after the step down in July 2022 of the call premium from 4% to 2% of principal
    • Assuming timely payment of invoices and strong oil prices, we expect continuing robust cash flow generation in 2022 providing flexibility to consider further shareholder distributions and an increase in capital expenditure to resume drilling

:

Update on ordinary and special dividend per share rate

Gulf Keystone will be seeking shareholder approval at today’s AGM to pay total dividends of $75 million, comprising the $25 million annual ordinary dividend declared on 30 March 2022 and the $50 million special dividend declared on 25 May 2022.

  • The annual ordinary dividend of $25 million is equivalent to 11.56 US cents per Common Share of the Company and is expected to be paid on 15 July 2022, based on a record date of 1 July 2022
  • The special dividend of $50 million is equivalent to 23.12 US cents per Common Share of the Company and is expected to be paid on 29 July 2022, based on a record date of 15 July 2022

The Company will disclose the pounds sterling rate per share for both dividends prior to their payment dates.

Update on Iraqi Federal Supreme Court (“FSC”) Ruling

Further to Gulf Keystone’s disclosure in its Annual Report and Accounts for the year ended 31 December 2021 regarding the FSC ruling, the Iraqi Ministry of Oil recently commenced legal proceedings with respect to the validity of Production Sharing Contracts (“PSCs”) issued under the Kurdistan Region of Iraq Oil and Gas Law, an escalation in the long running dispute between the Federal Iraqi Government and the KRG on the management of oil and gas assets in Kurdistan. The Company has been advised that the Iraqi Ministry of Oil has raised a case in the Baghdad Commercial Court against several IOCs, including Gulf Keystone. Gulf Keystone also understands that the Iraqi Ministry of Oil has also written to contractors and service providers requesting them to cease working in Kurdistan.

Gulf Keystone notes the KRG’s public assertion that the actions taken by the Iraqi Ministry of Oil are unlawful and that “it will take all constitutional, legal, and judicial measures to protect and preserve all contracts made in the oil and gas sector”. Further, on 4 June 2022, the Judicial Council of the Kurdistan Region of Iraq stated that the Kurdistan Region of Iraq Oil and Gas Law “remains in full force” and that the Iraq Federal Supreme Court “lacks the constitutional authority” to invalidate the Law. Also, on 13 June 2022, the Ministry of Natural Resources stated that “the contracts entered into between the IOCs and the Kurdistan Regional Government are entirely in accordance with the 2007 Oil and Gas Law”. The Company notes that the KRG has itself launched criminal and civil lawsuits which seek to protect the validity of the PSCs.

The Company continues to work closely with the KRG, its advisers and other stakeholders to protect its interests and will provide further updates on the matter as and when it is able and necessary to do so, recognising that this is a live legal matter and Gulf Keystone is not party to the resolution discussions between the Federal Iraqi Government and the KRG.

Gulf Keystone’s operations currently remain unaffected.

(Source: GKP)

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BGC Exports first Semi-Refrigerated LPG Shipment

By John Lee.

Basrah Gas Company (BGC) has exported its first semi-refrigerated liquefied petroleum gas (LPG) shipment from Umm Qasr jetty.

The General Manager of BGC, Malcolm Mays, said the export of the first shipment of semi-refrigerated liquid gas is a great and historical achievement for Basra Gas Company, noting that this came as a result of working hard and continuously to achieve the strategic goal by rehabilitating Umm Qasr jetty and equipping it with chiller units to be used in export operations.

He added that BGC is able to load and export both types of liquid gas: pressurized and semi-refrigerated, through vessels, saying that this step gives the flexibility and the opportunity to triple exports globally via tankers, as it will double the exported quantity per shipment.

(Source: Ministry of Oil)

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KRG files Civil suit against Baghdad Minister of Oil

By John Lee.

The Minister of Natural Resources of the Kurdistan Regional Government (KRG) has filed a civil suit against the Baghdad Minister of Oil, accusing him of sending emails and letters with the intention of intimidating international oil companies (IOCs) and interfering with the contractual rights of the IOCs and the KRG.

The KRG has also filed a criminal complaint against a Director General in the Baghdad Ministry of Oil for allegedly abusing his power and position by intimidating and harassing the IOCs working in the Kurdistan Region of Iraq.

This follows a series of summonses issued to the IOCs by a court in Baghdad, relating to their operations in Kurdistan Region.

Full statement from the KRG:

On 19 May 2022, a commercial court sitting in Al Karkh, Baghdad, acted at the request of the Minister of Oil in Baghdad and purported to issue summonses to international oil companies (IOCs) operating within the Kurdistan Region of Iraq. Those IOCs – which include Addax, DNO, Genel, Gulf Keystone, HKN, Shamaran, and WesternZagros – operate in the Kurdistan Region in accordance with the Kurdistan Region’s Oil and Gas Law (No. 22 of 2007), which was issued by the Kurdistan Regional Government in accordance with its powers under the Constitution of Iraq.

These court summonses are the latest in a series of illegal actions taken by the Minister of Oil and his staff under the current caretaker government in Baghdad. These illegal actions are apparently based upon a ruling by a court in Baghdad that calls itself the “Federal Supreme Court”. This so-called “Federal Supreme Court” issued a politically motivated decision on 15 February 2022, which purported to declare the 2007 Oil and Gas Law void.

No court in Baghdad has the authority to make such a declaration. On 28 February 2022, the President of the Kurdistan Region, together with the presidents of the legislative, executive, and judicial branches of the Kurdistan Regional Government, issued a statement rejecting the 15 February decision. On 4 June 2022, the Judicial Council, the highest judicial institution in the Kurdistan Region, issued a statement upholding the validity of the 2007 Oil and Gas Law. The Council noted that Article 92(2) of the Constitution of Iraq requires that the Iraqi Council of Representatives pass a law to establish an Iraqi Federal Supreme Court. No such law has ever been enacted. Iraq, therefore, does not have a constitutionally established Federal Supreme Court. The court that issued the 15 February 2022 opinion purporting to invalidate the 2007 Oil and Gas Law has no constitutional authority to do so. On the contrary, the issuance of the 2007 Oil and Gas Law was entirely authorised under the Constitution of Iraq. As such, legally, the Oil and Gas Law remains in full force.

On 2 June 2022, the Kurdistan Regional Government filed a criminal complaint against a Director General in the Baghdad Ministry of Oil for abusing his power and position by intimidating and harassing the IOCs working in the Kurdistan Region of Iraq. In the view of the Kurdistan Regional Government, emails and letters sent to the IOCs undertaking work in the Kurdistan Region by that Director General were sent with the intention of intimidating the IOCs and interfering with the contractual rights of the IOCs and the Kurdistan Regional Government. The contracts entered into between the IOCs and the Kurdistan Regional Government are entirely in accordance with the 2007 Oil and Gas Law.

On 5 June 2022, the Erbil Court of Investigation ruled that the lawsuits filed in the Al Karkh commercial court against the IOCs must be brought to the Erbil Court to be examined as evidence in this criminal complaint. The Erbil Court also ruled that any lawsuits in the Al Karkh court must be delayed for this purpose, and that named criminal defendants, including the Baghdad Minister of Oil, must attend the criminal hearing in Erbil on 22 June 2022. Iraqi law (Article 26 of Criminal Procedural Law No. 23 of the year 1979) requires that civil proceedings cannot take place while a related criminal investigation is underway. In addition, Article 38 of Civil Procedural Law No. 83 of the year 1969 states that any civil proceeding against the IOCs must take place in the Kurdistan Region, where the IOCs are registered and operate.

Furthermore, on 5 June 2022 the Minister of Natural Resources of the Kurdistan Regional Government filed a civil suit against the Baghdad Minister of Oil. In the view of the Kurdistan Regional Government, the Minister is liable under applicable civil law provisions for sending emails and letters with the intention of intimidating the IOCs and interfering with the contractual rights of the IOCs and the Kurdistan Regional Government.

(Source: KRG Ministry of Natural Resources)

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Genel Energy CEO Steps Down

Genel Energy has announced that after discussions with the Board following the recent AGM, at which Bill Higgs did not receive the required 50% majority of votes in favour of re-election as a Director, he has agreed to step down as CEO of the Company with immediate effect.

Dr Higgs will take up a role as Special Advisor to the Chairman until 1 September 2022, to support an orderly transition, after which he will remain as a consultant to the Company.

Paul Weir, COO, has been appointed as Interim CEO with immediate effect. A search for a suitable replacement is now ongoing and an announcement will be made in due course.

Paul joined Genel in January 2020, having worked for more than 30 years in upstream E&P with experience in the North Sea, South East Asia and Africa. Before joining Genel, Paul was Group Head of Operations and Safety at Tullow Oil, having previously spent 13 years at Talisman as VP Production and Exploration, and also worked in a variety of roles at Nippon Oil, Elf, Occidental, and Total.

David McManus, Chair, said:

“Bill worked tirelessly at Genel and oversaw a positive change in the strategic direction, operational capability, and culture of the Company. He steps down as CEO with Genel well positioned to utilise our robust balance sheet and material cash generation to fund growth and underpin our material and progressive dividend for the long-term.

“Paul has been a key contributor to the transition of Genel into an operator with interests in more producing assets than any other IOC in Kurdistan, and, given his longstanding operational experience with a range of world class companies, is perfectly placed to lead the team as it seeks to progress its next phase of growth.“

(Source: Genel Energy)

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PM announces new Ministry of Electricity and Alternative Energy

By John Lee.

The Iraqi Prime Minister has announced that the Ministry of Electricity is to be renamed the “Ministry of Electricity and Alternative Energy“.

At a press conference in Baghdad, Mustafa al-Kadhimi (pictured) said it is unreasonable to build gas power stations when there is not enough gas available, so the new ministry will actively seek alternative power sources.

In the past, he said, power stations were built, “in an absurd manner, without planning and without knowledge.”

He also referred to the country’s electrical interconnection projects with the Gulf states, Saudi Arabia, Turkey, Jordan and Egypt, which will provide power until Iraq reaches self-sufficiency.

Addressing the annual shortage of electricity during the very hot summer season, he said that last year’s production of 21,000 MW will not be achieved this year, due to the reduction in gas supply from Iran.

(Source: Govt of Iraq)

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KRG Judicial Council disputes Supreme Court ruling over Oil

By John Lee.

The Judicial Council of Kurdistan Region of Iraq has issued a statement saying that the provisions of its oil law (Law No. 22, 2007) do not violate the Iraqi Constitution and therefore should be recognized as “standing laws“.

The statement follows months of dispute between Baghdad and Erbil regarding control of the energy resources in Iraqi Kurdistan, with Iraq’s Federal Supreme Court ruling in February that sales of oil and gas by the Kurdistan Regional Government (KRG), independently of the central government in Baghdad, were unconstitutional.

Full statement from KRG:

“The Kurdistan Regional Government’s tenure on the issue of oil and gas exploration on its territory is in accordance with the 2005 Iraqi Constitution. The provisions of Law No. 22, 2007, issued by the Kurdistan Regional Parliament, do not violate the Iraqi Constitution and therefore should be recognized as standing laws.

“The oil and gas sector do not fall under the exclusive purview of the Federal Government of Iraq as stated in Article 110 of the Iraqi Constitution, underpinned by Article 112 of the Iraqi Constitution which states the Federal Government is to manage oil and gas exploration of discovered fields, in conjunction with regional governments and oil-producing provinces. Of that, revenues are supposed to be distributed equally among the population of Iraq.

“Article 112 refers to existing oil wells and fields prior to the ratification of the Constitution in 2005. As such, oil fields discovered in the Kurdistan Region since 2005 fall under the jurisdiction of the Kurdistan Region and the Kurdistan Regional Government. Accordingly, the texts of the Kurdistan Regional Government’s Oil and Gas Law No. 22, 2007, remain in line with the provisions of the Iraqi Constitution.

“Article 92(2) of the Constitution of Iraq requires that the Iraqi Council of Representatives pass a law to establish an Iraqi Federal Supreme Court. No such law has to date been enacted. Iraq, therefore, does not have a constitutionally established Federal Supreme Court. As such, the court that issued the 15 February 2022 opinion purporting to invalidate the Oil and Gas Law (No.22 of 2007) lacks the constitutional authority to do so and, consequentially, the Oil and Gas Law remains in full force as per the Iraqi Constitution.”

Click here to view document from Judicial Council.

(Source: KRG)

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Saudi Arabia and Iraqi discuss Connecting Electricity Grids

By John Lee.

Iraq’s Minister of Oil, Ihsan Abdul-Jabbar Ismail, has met with the Saudi Minister of Energy, HRH Abdulaziz bin Salman, to discuss connecting their respective electricity grids.

They also discussed enhanced energy cooperation between the two countries, and the work of the Saudi-Iraqi Coordination Council.

Iraq and Saudi Arabia signed a memorandum of understanding (MoU) in January to link their power grids.

(Source: Saudi Ministry of Energy)

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Iraq Oil Revenues Hit New High

By John Lee.

Iraq’s Ministry of Oil has announced preliminary oil exports for May of 102,303,020 barrels, giving an average for the month of 3.300 million barrels per day (bpd), slightly down from the 3.380 million bpd exported in April.

The exports from the oilfields in central and southern Iraq amounted to approximately 98,946,914 barrels, while exports from the Kirkuk fields through the port of Ceyhan amounted to 3,002,133 barrels.

While not explicitly stated by the Ministry, these figures seem to imply that exports by road to Jordan totalled 353,973 barrels for the month.

Revenues for the month were $11.436 billion, at an average price of $111.79 per barrel.

April’s export figures can be found here.

(Source: Ministry of Oil)

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Iran Reduces Gas Supply to Iraq, as Iraq Misses Payment

By John Lee.

Iran has reduced its gas supply to Iraq by 5 million cubic meters per day, causing a reduction in electricity production, according to a statement on Wednesday from Iraq’s Ministry of Electricity.

The Iranian government had demanded payment of debts relating to gas supply, which AFP says totals $1.6 billion and dates from 2020, by the end of May. 

The Ministry blames the non-payment on the delay in approving the general budget, and “the search for an alternative solution to the Food Security Law.“

Iraq exported a record $11.436-billion worth of oil in May.

(Sources: Ministry of Electricity, AFP)

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New Primary Health Care Centre opens in Kawergosk

Opening of new primary health care centre in Kawergosk to support the local and refugee communities

UNHCR, the UN Refugee Agency, and the General Directorate of Health (DoH) of the Kurdistan Regional Government inaugurated the new Primary Health Care Centre (PHCC) in Kawergosk sub-district in Erbil governorate, the Kurdistan Region of Iraq.

The new Kawergosk Public PHCC will provide primary health care services to over 20,000 people from the Syrian refugee and Iraqi displaced communities living in Kawergosk town and surrounding areas. As a result, UNHCR is contributing to give better access to quality health services to all without discrimination. The newly-established health care centre has the capacity to take 150 to 200 consultations per day

The construction of the PHCC was made possible through a generous contribution from PricewaterhouseCoopers (PwC), one of the largest professional services networks in the world. The land for the project was generously provided by the municipality of Kawergosk, and the Directorate of Health will be managing the PHCC and providing the necessary staff, medical equipment, and medicines.

Mr. Hussain Kalari, the Director General of Joint Crisis Coordination Centre, Ms. Nicole Epting, Deputy Representative of UNHCR in Iraq, Ms Kwestan Ahmed, the Mayor of Khabat district, Mr. Suhaib Asad, Tax Partner at PwC, and Jaivir Singh, Leader of the Global Office for Humanitarian Affairs at PwC, cut the ribbon to announce the opening of the new health centre. The PHCC provides comprehensive primary health care services, including consultations, provision of medicines, laboratory services, emergency referrals, immunization and growth monitoring, reproductive health services and dental care.

“We are grateful for the support and hospitality that the local communities in Kawergosk town have extended to the refugee communities in the nearby Kawergosk camp. In return, we are pleased to now support the national health services for the benefit of all, refugees and Kawergosk local communities alike.” said Nicole Epting.

Jaivir Singh “At PwC, we are committed to supporting and empowering those most in need in a sustained manner. The newly inaugurated primary health centre at Kawergosk will significantly improve the quality of care and services provided to the surrounding communities, making a positive contribution to their lives. I extend my thanks to our partner UNHCR Iraq and the General Directorate of Health (DoH) of the Kurdistan Regional Government for their efforts, as well as our teams at PwC for bringing our values to life.”

UNHCR extends its sincere gratitude to the people and Government of the Kurdistan Region of Iraq, PricewaterhouseCoopers and all the stakeholders who participated in making this project a success.

(Source: UN)

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