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GKP Shares Down on Half-Year Results

Shares in Gulf Keystone Petroleum (GKP) were trading down 3 percent this morning following the announcement of its results for the half year ended 30 June 2017.

Reuters quotes analysts at Cenkos Securities as saying that further clarity on payment is required before GKP can commit to proper capital expenditure.

Highlights to 30 June 2017 and post reporting period

Operational

  • Gulf Keystone’s operations in the Kurdistan Region remained safe and secure throughout H1 2017 with plant uptime at PF-1 and PF-2 of over 99% with no lost-time incidents.
  • Shaikan achieved average daily production of 36,664 bopd.
  • Cumulative production from Shaikan has now exceeded 40 million barrels.
  • In March 2017, Shaikan-8 (“SH-8”) was brought back on-stream.
  • In April 2017, ERC Equipoise verified remaining gross Shaikan 2P reserves of 615 MMstb, as at 31 December 2016.
  • With gross production of c.35,350 bopd in Q3 2017 so far, gross production guidance for 2017 remains at 32,000-38,000 bopd.
  • Operational strategy for investment into Shaikan has been matured throughout 2017.

Financial

  • Cash flow positive through H1 2017.
  • The Group has continued to receive regular payments from the Ministry of Natural Resources (“the MNR”) of $15 million gross ($12 million net to GKP) with cash receipts of $84 million net to GKP year to date.
  • Continued cost control with gross operating costs per barrel of $3/bbl (H1 2016:$4/bbl).
  • Profit after tax of $0.7 million (H1 2016 (as restated): loss after tax of $232.6 million).
  • As at 30 June 2017, the Group estimates an unrecognised revenue receivable of $33 million net to GKP with regards to unpaid export sales (December 2016: $25 million) and $76 million net to GKP for the past costs associated with the Shaikan Government Participation Option (December 2016: $71 million).
  • Cash balance at 30 June 2017 of $118.8 million against $100 million debt principal.
  • Cash balance at 18 September of $133.8 million.
  • April 2017, decision taken to pay Reinstated Notes coupon of $5.1 million at 10% interest rate. The decision regarding the October 2017 coupon will be communicated to the market in due course.

Outlook

  • The Company is progressing in its ongoing discussions with the MNR regarding commercial and contractual conditions, in particular those around regular payments conforming to the Shaikan Production Sharing Contract (“PSC”) and crude marketing arrangements.
  • GKP is preparing to make further investments to maintain plateau production at the nameplate capacity of 40,000 bopd with a view to increasing to 55,000 bopd, and beyond, subject to MOL and MNR approvals, a regular payment cycle from the MNR and a commercially acceptable investment environment.

Jón Ferrier (pictured), Gulf Keystone’s Chief Executive Officer, said:

“The first half of the year was a period of solid operational delivery, which has seen the Shaikan field continue to perform in line with expectations.

“The Company continues its dialogue with the MNR with the objective of achieving contractual and commercial clarity. Whilst continuing to maintain a rigorous and disciplined approach to its cost base, Gulf Keystone remains cash flow positive and well placed to continue to invest in increasing production from Shaikan.”

Full results here.

(Sources: Gulf Keystone Petroleum, Reuters, Yahoo!)