Gulf Keystone Placing Raises £16m

Gulf Keystone Petroleum on Monday raised £16m in a stopgap share placing to fund drilling costs in Iraq after the default of its partner in Iraq last week writes Miles Johnson in the Financial Times.

Gulf Keystone said last week it would have to pay $40m to the Kurdistan government within three months after the default by its joint venture partner.

It plans to drill three further appraisal wells on its main Shaikan asset this year.

Analysts at Evolution Securities said GK could need to raise a further $100m-$125m this year based on a $150m total commitment to capital expenditure in 2010.

In July 2009 the company sold half its Iraqi assets to Etamic, a private investment fund based in the Middle East, in return for the partner funding 50 per cent of the development costs of Gulf Keystone’s Sheikh Adi and Ber Bahr projects.

The company has since disclosed little about the identity or beneficiaries of Etamic, leading some analysts to question its transparency standards.

Ewen Ainsworth, Gulf Keystone chief financial officer, said Etamic had requested anonymity when the deal was signed, and none of the management or directors of Gulf Keystone had any interest in Etamic.

Gulf Keystone said last week it would have to pay $12m to Etamic after it defaulted on its first payment to the Aim-quoted explorer.

When asked about the payment to Etamic, Mr. Ainsworth said: “It’s just a commercial reality. While they made no payment to us or the Kurdish regional government, they do have their signature on the documents. We didn’t want to get involved in legal proceedings, but wanted to move forward quickly and make them go away.”

Gulf Keystone, which currently funds itself partly through a so-called equity drawdown agreement, meaning it can issue new shares as collateral for loans, said it would continue to use the facility.

Todd Kozel, Gulf Keystone chief executive, said in a statement: “We are very pleased to be commencing the first stage of our drilling campaign, which has the prospect of substantially furthering the company’s resource base.”

The company placed 20.9m shares with existing and institutional investors at 76½p, a 12 per cent discount to Friday’s closing price of 87¼p.

Fox-Davies Capital co-ordinate the placing shares. Gulf Keystone shares fell 3.5p in early trading to 83.8p.

(Financial Times)

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