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GKP claims “Strong Start to 2021”

Gulf Keystone Petroleum (GKP) has announced its audited results for the full year ended 31 December 2020.

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

“Against the backdrop of extraordinary global challenges in 2020, GKP acted decisively to successfully manage the impact of COVID-19 on our staff, contractors and production operations. We achieved all of our cost reduction targets and annual average production of 36,625 bopd, 11% higher than 2019.

“We have had a strong start to 2021. The updated independent Competent Person ‘s Report reaffirmed the significant upside production potential of the field with gross 2P reserves + 2C contingent resources of c.800 MMstb. Average gross production from Shaikan in 2021 to 29 March is 43,190 bopd, up c. 13% from the corresponding period in 2020. 

“Recently, we resumed the 55,000 bopd investment programme and today we are pleased to be announcing the reinstatement of at least a $25 million annual dividend, in keeping with our commitment to balance investment in growth and returns to shareholders.“

Highlights to 31 December 2020 and post reporting period

Operational

  • Effectively managing the impact of COVID-19 on production operations and continue to prioritise the welfare of workforce and contractors whilst maintaining production momentum.
  • Continued strong safety performance, with no Lost Time Incident (“LTI”) recorded for over 450 days.
  • 2020 a verage gross production of 36,625 bopd, exceeding revised guidance and the highest annual average production rate to date from the field.
  • Gross average production from the field in 2021 to date of 43,190 bopd, in line with guidance of 40,000 – 44,000 bopd for the year.
  • Updated Competent Person’s Report (“CPR”) published with c.800 MMstb gross 2P+2C reserves and resources volumes, which was in line with the 2016 CPR, after adjusting for production over the period, supporting GKP’s view of the geological model.

Financial

  • GKP achieved its 2020 cost reduction targets, reducing Opex and G&A by more than 20% compared to 2019 and delivering gross unit Opex of $2.6/bbl, below the low end of the guidance range and down over 30% versus 2019.
  • Net Capex was $45.9 million net (FY 2019: $90 .0 million) within the $40-48 million revised guidance range despite the addition of low-cost, high impact investments during the fourth quarter that contributed to record 2020 annual average production.
  • Loss after tax of $47.3 million (FY 2019: $43.5 million profit) and reduced revenue of $108.4 million (FY 2019: $206.7 million) were driven by a decline in Brent oil prices that averaged $42/bbl in 2020 compared to $64/bbl in 2019.
  • Consistent payments from the Kurdistan Regional Government (“KRG”) for the last eleven months.  Repayment mechanism in place to recover outstanding arrears of $73.3 million net for the period November 2019 – February 2020 with the first payment of $2.6 million net recently received.
  • Cash balance of $147.8 million at year end (FY 2019: $190.8 million). Cash balance of $161.0 million at 30 March 2021.
  • The Company has hedged c.60% of Q2 and Q3 2021 forecast net production at a floor price of $35/bbl and $40/bbl respectively, while retaining full upside exposure.

Outlook

  • Resumption of expansion activity with drilling operations expected to begin in Q3 resulting in an increase in gross production towards 55,000 bopd in Q1 2022.
  • Reinstatement of at least a $25 million annual dividend . A $25 million dividend is subject to shareholder approval at the Annual General Meeting (“AGM”) scheduled for 18 June 2021 and is expected to be paid in full on 2 July 2021 based on a record date of 25 June 2021 .
  • With continuing strong oil prices, there may be opportunities to consider further distributions to shareholders this year.
  • Guidance for 2021 of average gross production of 40,000 to 44,000 bopd, net Capex of $55-$65 million and gross unit Opex of $2.5 to $2.9/bbl.

Full announcement here.

(Source: GKP)

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Cabinet Extends Contracts of KBR and Antonoil at Majnoon

By John Lee.

The Iraqi Cabinet has approved the renewal of two contracts at the Majnoon oil field.

Chinese company Anton Oilfield Services Group (Antonoil) is to continue to provide Integrated Field Management, while the American company KBR will provide Engineering, Procurement and Construction Management (EPCM).

The decision allows for the extension of the contracts for two more years, with an option to increase that to three years.

Both companies were awarded the contract by Basra Oil Company (BOC) in 2018, when BOC took over operations at Majnoon from Shell.

(Source: Office of the Prime Minister)

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Iraq to Buy More Pfizer Vaccine

By John Lee.

The Iraqi Cabinet held its weekly meeting on Tuesday under the chairmanship of Prime Minister Mustafa Al-Kadhimi.

Following discussions, the Cabinet approved the purchase of an “additional quantity” of the Pfizer vaccine for COVID-19 (coronavirus), but did not specify the amount.

As a result of the steady increase in the number of coronavirus infections, the Cabinet also authorised the Minister of Health to contract with retired doctors and specialists to fill the shortage in health institutions. They will be paid a monthly amount of 1 million Iraqi dinars.

It was also agreed to include foreign diplomats, and workers in international organizations and companies, in the vaccination program, “taking into account the principle of reciprocity“.

(Source: Office of the Prime Minister)

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Iraq signs 4 Major Energy Deals with Total

By John Lee.

Iraq’s Ministry of Oil has signs an agreement of principles with the French company Total for four major energy projects in the country:

  1. Plants to collect and refine associated natural gas at the fields of Artawi [Ratawi], West Qurna 2, Majnoon, Tuba [Subba] and Lahais [Luhais]. This will include a Central Gas Complex at Artawi;
  2. Development of the Artawi field;
  3. The integrated seawater project [Common Seawater Supply Project (CSSP)?], which the ministry has been trying to implement for more than ten years; and,
  4. A 1,000MW solar energy plant.

Full statement here (Arabic)

(Source: Ministry of Oil)

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Iraq Finalises Oil Exports for February

By John Lee.

Iraq’s Ministry of Oil has announced finalised oil exports for February of 82,877,757 barrels, giving an average for the month of 2.960 million barrels per day (bpd), up from the 2.868 million bpd exported in January.

These exports from the oilfields in central and southern Iraq amounted to approximately 79,105,329 barrels, while exports from Kirkuk amounted to 3,727,428 barrels.

Revenues for the month were $5.013 billion at an average price of $60.487 per barrel.

January’s export figures can be found here.

(Source: Ministry of Oil)

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Iraq receives First Delivery of Vaccines through COVAX Facility

Iraq receives the first delivery of COVID-19 vaccines through the COVAX Facility

Amid a global shortage of COVID-19 vaccines, Iraq has finally received 336 000 doses of AstraZeneca COVID-19 vaccine through the COVAX Facility, a partnership co-led by Coalition for Epidemic Preparedness Innovations (CEPI), Gavi – The Vaccine Alliance and the World Health Organization (WHO), alongside key delivery partner UNICEF.

The AstraZeneca vaccines, manufactured by SK-Bio Institute of South Korea, arrived on Thursday 25 March 2021, and were received at Baghdad International Airport by the Minister of Health, Iraq, His Excellency Dr Hassan Mohammed Al-Tamimi, accompanied by the teams of the MOH, WHO and UNICEF.

This is a historic step towards the global goal to ensure equitable distribution of COVID-19 vaccines around the world and is part of a first allocation of vaccines to Iraq. Further consignments of 1.1 Million COVAX vaccine doses are planned for Iraq in the coming weeks and will continue to cover 20 per cent of the population before the end of 2021.

The COVID-19 pandemic still has a long a way to run in Iraq and around the world, as intense transmission is ongoing and is putting enormous pressure on hospitals, intensive care units and health workers. While the preventive measures can be effective in reducing transmission of the virus, their effectiveness depends on strict application by all citizens.

The arrival of the vaccines and the launch of a nationwide vaccination campaign will be a game changer in the battle against COVID-19. However only when more than 80% of the eligible population are reached, will a significant reduction in transmission be achieved.

His Excellency Dr Hassam Mohammed Al-Tamimi, Minister of Health, Iraq, said:

“Today, vaccines that were expected in the country since the last week of February have finally arrived. Although Iraq finalized all the requirements for the COVAX facility in time, delays in the global production and shortages of vaccines within the COVAX Facility delayed this shipment. The vaccines received today have recently received the Emergency Use Listing from the World Health Organization and will be a game changer in the response to COVID19 Pandemic in Iraq.”

“The Ministry of health will immediately dispatch these vaccines to all departments of health in Baghdad, in all governorates and Kurdistan to be used for protecting people within the priority groups according to the national vaccine deployment plan and framework.”

Dr Ahmed Zouiten, WHO Representative, Iraq, said:

“This is a historical landmark in the response to COVID-19 in Iraq, receiving and utilizing these vaccines is a step in the right direction in controlling the pandemic in Iraq. Indeed, these vaccines have proven to be very safe and effective in preventing COVID-19 infections, with its associated risk of hospitalization and death.”

“We wish to congratulate the Ministry of Health and the Government of Iraq for all the efforts deployed for the response to COVID19 in general, and for securing the arrival of these life-saving vaccines in the country. As more vaccines are receiving the WHO Emergency Use listing, and more doses of vaccines are manufactured globally, we will be looking forward to receiving more allocations and more vaccines from the COVAX facility in the coming weeks and months.”

Mr. Paul Edwards, UNICEF’s acting Representative to Iraq, said:

“UNICEF and WHO have been working with the Ministry of Health around the clock to make sure that Iraq has enough syringes, vaccination cards, and state-of-the-art cold chain facilities to store the vaccines safely, in anticipation of this day. We have also trained thousands of health workers in vaccination centers across Iraq.

“We have been waiting for this day for months. Vaccines are among the greatest advances of modern medicine. They are a protective shield, keeping families and communities safe.“

While these vaccines are being rolled out, the Ministry of Health, WHO and UNICEF urge all people in Iraq to continue observing public health measures that are in place, such as wearing masks at all times, physical distancing, air ventilation, proper hand hygiene and avoiding congested gatherings and settings.

(Source: UN)

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Cabinet approves $480m Drilling Deal in Southern Iraq

By John Lee.

The Iraqi Cabinet held its weekly meeting on Tuesday under the chairmanship of Prime Minister Mustafa Al-Kadhimi.

Following discussions, the Cabinet approved a bid from Schlumberger to drill 96 wells for the Basra Oil Company (BOC) and ExxonMobil.

The company has previously worked at ExxonMobil’s West Qurna 1 field in southern Iraq.

The deal is valued at more than $480 million.

(Source: Office of the Prime Minister)

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GKP Resumes Kurdistan Investment Programme

Gulf Keystone Petroleum (GKP) has announce the resumption of the Company’s growth plans to ramp-up gross production towards 55,000 barrels of oil per day (“bopd”).

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

“After a year of successfully managing the impact of COVID-19 on our people and production operations at Shaikan, we are pleased to announce that we are resuming the 55,000 bopd expansion programme.

“Workstreams have already begun, and we are targeting to restart the drilling of SH-13 in Q3 2021, subject to managing the continuing impact of COVID-19 on the movement of people, services and equipment.“

With support from its partner Kalegran B.V. (a subsidiary of MOL Hungarian Oil & Gas plc), Gulf Keystone has restarted 55,000 bopd expansion activity.

Considering the requirement to manage the ongoing impact of COVID-19 and to remobilise people, services and equipment, the Company currently expects drilling operations to begin in Q3 2021.

Remaining expansion activity includes completion of SH-13, which was suspended last year, drilling SH-I, the final well in the programme from the same pad, and installing electric submersible pumps in two existing wells.

Guidance for 2021 average gross production remains unchanged at 40,000 to 44,000 bopd, with the increase in gross production towards 55,000 bopd expected to occur in Q1 2022.  Remaining Capex required to deliver the 55,000 bopd programme is estimated to be $40-45 million net, resulting in total 2021 Capex of $55-65 million net.

(Source: GKP)

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Petrofac Wins Contract Extension in Iraq

By John Lee.

Petrofac has announced that its Engineering & Production Services division (‘EPS’) has secured a one-year contract extension worth around US$80 million with a key client in Iraq.

While not mentioning the specific project, the company said:

“The award is recognition of Petrofac’s successful eight-year track record of safe delivery as the incumbent operations and maintenance service provider.

“The facility which Petrofac will continue to manage, is one of the largest in the Gulf and handles around 55% of Iraq’s crude oil exports.”

Basra Oil Company (BOC) awarded Petrofac the operations and maintenance (O&M) contract for its Iraq Crude Oil Export Expansion Project (ICOEEP) at Fao [Faw] Terminal in 2012.

Steve Webber, SVP Operations EPS East, commented:

“This contract extension strengthens our long-term client partnership. Since the start of our involvement in 2012, we have supported this facility to export over 4 billion barrels of oil. Our teams in Iraq have an impeccable safety record and the use of innovative solutions have been at the heart of our delivery model. We look forward to supporting our client to maintain the best-in-class operation of this important national asset.”

Petrofac has been providing services in Iraq since 2010, involved in a range of greenfield and brownfield projects in the country worth more than US$1 billion.

(Source: Petrofac)

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Genel Energy shares gain on 2020 Results

Genel Energy has announced its audited results for the year ended 31 December 2020. The shares closed the day up more than 2 percent.

Bill Higgs, Chief Executive of Genel, said:

“2020 was a uniquely challenging year for everyone. As for Genel, our continued progress and strong performance in 2020 has laid the foundation for a year of growth and operational catalysts in 2021. We continued investment in Sarta, which entered production in November, and the field is generating cash as we now move to rapidly appraise its exciting potential. Three appraisal wells will be drilled at the licence in 2021. The QD-2 well at Qara Dagh is also set to spud shortly, as we look to evaluate the potential to add a fifth producing field.

“As we make this investment in growth, the low-cost and high-margin nature of our growing oil production means that we expect to generate significant free cash flow at the prevailing oil price. In turn, this gives us the confidence in our material and sustainable dividend distribution, including a final dividend of 10 cents per share announced today, as we continue to offer investors a compelling mix of growth and returns.“

Results summary ($ million unless stated)

2020 2019
Average Brent oil price ($/bbl) 42 64
Production (bopd, working interest)  31,980 36,250
Revenue  159.7 377.2
EBITDAX1  114.6 321.8
  Depreciation and amortisation  (153.7) (158.5)
  Exploration expense (2.2) (1.2)
  Impairment of oil and gas assets2 (286.3) (29.8)
  Impairment of receivables (36.9) –
Operating (loss) / profit (364.5) 132.3
Cash flow from operating activities 129.4 272.9
Capital expenditure 109.7 158.1
Free cash flow4 (4.4) 99.0
Dividends declared (¢ per share) 15 15
Cash 354.5 390.7
Cash after post-year end payments5 273.5 377.1
Total debt after settlement of called bonds5 280.0 300.0
Net cash6 6.2 92.8
Basic EPS (¢ per share) (152.0) 37.8
Underlying EPS (¢ per share)3 41.8 116.9

 

  1. EBITDAX is operating loss / (profit) adjusted for the add back of depreciation and amortisation ($153.7 million), exploration expense ($2.2 million), impairment of property, plant and equipment ($242.0 million), impairment of intangible assets ($44.3 million) and impairment of receivables ($36.9 million)
  2. Despite production in line with expectations, the low oil price in June 2020 resulted in an impairment of production assets at the half-year results, which under IFRS cannot be reversed despite the improved oil price outlook
  3. Underlying EPS is EBITDAX divided by weighted average number of ordinary shares
  4. Free cash flow is reconciled on page 13
  5. On 8 January 2021, shortly after the balance sheet date, the Company paid $81.0 million to settle $77.1 million of old bonds reducing its gross debt balance to $280.0 million, with $267.7 million reported under IFRS in the balance sheet (2019: Cash reported at 31 December 2019 less interim dividend paid ($13.6 million) on 8 January 2020)
  6. Reported cash less IFRS debt (page 13)

Highlights

  • Zero lost time injuries (‘LTI’) and zero tier one loss of primary containment events in 2020 at Genel and TTOPCO operations
    • No LTIs since 2015, with over 13 million work hours since the last incident as of end-2020
  • Net production averaged 31,980 bopd in 2020 (2019: 36,250 bopd), following the pause in the drilling programme at Tawke, appropriate to the external environment
    • First oil from Sarta achieved in November 2020, with asset now producing over 10,000 bopd
  • $173 million of cash proceeds were received in 2020 (2019: $317 million)
  • The low-production cost per barrel of $2.8/bbl in 2020 helped deliver cash generation of $85 million in the year from producing assets
    • Free cash outflow of $4 million following material capital expenditure on growth assets
  • Dividends of 15¢ per share announced in 2020 (2019: 15¢ per share)
  • Net cash of $6 million at 31 December 2021 following the call of the old 2022 bond, with cash of $274 million and reported IFRS debt of $268 million
  • Carbon intensity of 13 kgCO2e/bbl for scope 1 and 2 emissions in 2020, significantly below the global oil and gas industry average of 20 kgCO2e/boe

Outlook

  • Production guidance for 2021 maintained as slightly above the 2020 average of 31,980 bopd, with the potential for a higher exit rate and further growth in 2022 depending on success of the Sarta appraisal programme
    • Margin of $15 per working interest barrel expected in 2021 at average Brent oil price $60/bbl, with receivable recovery payments increasing that to $20/bbl
  • 2021 capital expenditure guidance maintained at $150 million to $200 million, with the current macro environment and outlook supporting investment at the top end of this range
    • c.$100 million expenditure is forecast to be spent on growth assets, with three appraisal wells at Sarta targeting a material 2C resource and the QD-2 well, set to spud shortly, aiming to open up a new producing field
  • Operating costs still expected to be c.$50 million (2020: $33 million), equating to c.$4/bbl in 2021 ($2.8/bbl in 2020), retaining our advantageous low operating cost position, with the increase from 2020 due to the addition of Sarta early production costs
  • Given the increase in Brent oil price and confidence in ongoing payments from the Kurdistan Regional Government (‘KRG’), including override and receivable recovery payments, Genel expects to generate cash in 2021 post-dividend payments
    • Receivable recovery payments expected to generate c.$50 million in 2021 at an oil price of $60/bbl
    • A $5/bbl change in Brent impacts cash generation by c.$35 million in 2021
  • Due to Genel’s robust financial position and confidence in the Company’s future prospects, the Board is accordingly recommending a final dividend of 10¢ per share (2020: 10¢ per share), a distribution of $27.9 million

More here.

(Source: Genel Energy)

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