Gulf Keystone Petroleum, a leading independent operator and producer in the Kurdistan Region of Iraq ("Kurdistan" or "Kurdistan Region"), is providing an operational and corporate update.
Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:
"In these challenging times, we remain focused on the safety of our people and have adapted our operations to ensure their continued welfare. With the associated economic backdrop compounded by a delay in payments, we are taking a prudent approach to running our business with a sharp focus on financial discipline and maintaining liquidity. While we were on track to deliver the expansion to 55,000 bopd in Q3 2020, flexibility is the order of the day and as such, beyond our existing commitments, we have suspended further expansion activity until conditions improve.
Underpinning the Company's strong investment case is the quality and scale of the Shaikan Field, which continues to perform well with current production of c.38,000 bopd.
Given our strong balance sheet with cash of $154 million at 23 March 2020, no debt repayment until mid-2023, limited capital expenditure commitments and a low-cost structure, we are highly confident in our future ability to capture the significant value in Shaikan, for the benefit of all stakeholders."
· Production from the field continues in line with expectations at c.38,000 bopd, currently unaffected by the impact of COVID-19.
· GKP was on track to achieve 55,000 bopd in Q3 2020, prior to the previously announced suspension of expansion activity.
· The Company remains committed to the elimination of routine gas flaring. Its gas management plan now envisages the export of sweet gas instead of gas reinjection. This follows the results of the SH-9 well, which did not encounter a gas cap. The well has been completed as an oil producer and is in the process of being tied into PF-1.
· A revised Field Development Plan ("FDP") is currently expected to be submitted this year, reflecting the new gas management project. Upon FDP approval, planning will commence for FEED ("Front End Engineering and Design").
· GKP will maintain a conservative financial position with a clear focus on cost control and cash preservation. At current production levels, the Company covers all operating, general and administrative costs and interest payments with a Brent price of c.$35 per barrel.
· In the absence of further expansion activity, 2020 capital expenditures, including expenditures incurred to date and remaining firm commitments, are estimated to be between $50 million and $60 million (gross).
· The delay of further investment into Shaikan is expected to impact prior gross 2020 production guidance of 43,000-48,000 bopd and achieving 55,000 bopd in Q3 2020.
· Given the macro uncertainty, the Board is suspending guidance until such time as the outlook becomes clearer.
· The Board recognises the importance of distributions to shareholders and intends to consider the appropriateness and timing of the ordinary dividend and any share buyback - upon resumption of payments and when it has a clearer view of the scale and duration of the impact of COVID-19 and the macro-economic effects on the business.