By John Lee.
Shares in Gulf Keystone Petroleum (GKP) were up around 10 percent on Thursday morning, following the company’s announcement of its results for the year ended 31 December 2019.
Jón Ferrier (pictured), Gulf Keystone’s Chief Executive Officer, said:
“2019 saw a step change in activity at Shaikan; we delivered production and controlled expenditures in line with guidance, returned just under $100 million to our shareholders, and maintained a strong balance sheet with cash of $164 million at 22 April 2020.
“The current oil price and macro-economic uncertainty continues to have profound, far-reaching effects. We have taken concrete steps to protect value and assure the viability and financial strength of our business, both for today and the longer-term. As previously announced, we have suspended guidance and, while we were on-track to achieve 55,000 bopd in Q3 2020, we have stopped further expansion activity and are currently demobilising the team until circumstances improve. While we have secured ongoing production operations, we continue to closely monitor market dynamics and will take appropriate further actions to preserve value.
“We continue to focus on strict financial discipline and maintaining our strong balance sheet. GKP remains underpinned by Shaikan, which continues to perform in line with expectations, and we look forward to resuming expansion activity and delivering the underlying value of the field for all stakeholders upon resolution of the outstanding payments from the Kurdistan Regional Government (“KRG”) and an improvement in economic conditions.”
Highlights to 31 December 2019 and post reporting period
Operational
- Robust safety performance during a period of increased operational activity.
- GKP remains committed to the welfare of all personnel and the safety of our operations. To limit the risk and transmission of COVID-19, only location essential personnel are working at GKP sites and offices.
- Average gross production in 2019 of 32,883 bopd, in line with original guidance.
- Gross production from the field in 2020 to date of c.38,000 bopd.
- As a result of COVID-19, the focus on cost control and overdue payments from the KRG, operations have been reduced to focus on minimum safety critical activities required for production.
- Once macro conditions improve, including resolution of outstanding payments from the KRG, the Company will restart expansion activity to increase production to 55,000 bopd.
Financial
- In 2019, the Company achieved its production, capital expenditures, operating costs and G&A costs guidance.
- Profit after tax of $43.5 million (FY 2018: $79.9 million) and revenue of $206.7 million (FY 2018: $250.6 million) were down, as Brent oil prices averaged $64 per barrel in 2019 compared to $71 per barrel in 2018.
- Net capital investment in Shaikan of $90.0 million (FY 2018: $35.4 million).
- Maiden dividend and share buyback programmes returned $79 million in 2019. Subsequent completion of the share buyback programme brought total returns to $99 million.
- Cash balance of $190.8 million at year end (2018: $295.6 million).
Outlook
- The Company is actively focused on maintaining a robust financial position and is targeting a major reduction of costs across the business, while maintaining a strong focus on safety and long-term asset reliability. These actions are being taken in response to the current oil price environment and in anticipation of a protracted recovery:
- net Capex for 2020 include expenditures incurred to date and remaining firm commitments andare expected to be $40-$48 million ($50-$60 million gross), a c.50% reduction compared to 2019;
- targeted Opex and G&A savings of at least 20%; and
- in process of reducing expatriate workforce by c.60%.
- The KRG has committed to paying for monthly production by the 15th day of each following month starting with March 2020, for which payment was recently received. Dialogue with the KRG is continuing relating to payment of outstanding invoices for November 2019 to February 2020 aggregating $93.7 million gross ($73.3 million net to GKP).
- Guidance for 2020 suspended until the outlook becomes clearer.
- Resumption of distributions is dependent on an improvement in macro-economic conditions, resolution of outstanding payments from the KRG and a clear operational outlook.
- With a strong balance sheet, limited capital commitments and an existing low-cost production base, GKP is well placed to navigate through these challenging conditions and, if necessary, to withstand a lower oil price throughout 2020 and 2021.
The Company’s 2019 Full Year Results presentation is available on the investor relations section of the website: https://www.gulfkeystone.com/
(Source: GKP)