Corporate Developments - First Half
|·||173.2 million new common shares issued to existing and new institutional investors raising gross proceeds of $189.0 million|
|·||8.2 million new common shares issued as part of the Standby Equity Distribution Agreement ("SEDA") with YA Global Master SPV Ltd, an investment fund managed by Yorkville Advisors, LLC raising proceeds of $10.8 million|
|·||Reorganisation of the Company's interests held through its subsidiary, Gulf Keystone Petroleum International Limited ("GKPI"), following the exit of Etamic|
|·||Establishment of the Employee Benefit Trust and grant there under of i) Long Term Incentive Performance Share Options ii) Executive Bonus, announced on 7 June 2010 and 25 June 2010|
|·||Following the departure of Mr Jeremy Asher the Company is actively seeking an additional Non-Executive Director|
Operational Summary - Post Period End
|·||Additional testing of the Shaikan-1 Jurassic commenced on 12 July 2010:|
|-||the Butmah section resulted in flow rates of 4,650 bopd|
|-||the Mus section resulted in flow rates of 1,250 bopd - a ten fold increase over the 128 bopd measured during the initial test in 2009|
|-||Sargelu completed for long term production test|
|·||Sheikh Adi-1 exploration well spudded on 4 August 2010|
|·||Shaikan-3 appraisal well spudded on 2 September 2010|
|·||Production facilities undergoing commissioning|
|·||Sidetrack of Bijeel-1 completed and testing underway|
|·||3D seismic acquisition on the Shaikan structure 74% complete|
Todd Kozel, Executive Chairman & Chief Executive Officer of Gulf Keystone said:
"2010 has seen an unprecedented level of activity for Gulf Keystone. Our extensive drilling programme is aimed at proving up last year's immense discovery, and we look forward to the first test production from Shaikan-1 in the coming weeks.
Gulf Keystone's outstanding progress could not have been achieved without the commitment of our staff, industry partners, the Kurdistan Regional Government and our shareholders, and I thank them all for their efforts and look forward to further success in the remainder of 2010."
Executive Chairman and Chief Executive Officer's Statement
Gulf Keystone strives to be ahead of the pack, and the first six months of 2010 have seen us undertaking an unprecedented level of activity to successfully maintain that position in Kurdistan. Operationally and financially we have made significant progress positioning ourselves to exploit the upside of the potentially vast resource we have discovered in Northern Iraq.
This time last year we had an exploration team in place in the region. Now we employ close to 100 people, and our exploration team is supplemented by appraisal and production teams, working as three cohesive units to implement our strategy and prove up our resources. While we actively recruit from the local talent pool, Gulf Keystone continues to attract top international experts, a sign that we are not alone in recognising the potential of our assets.
Following the success of last year's exploration and discovery testing on Shaikan, the majority of our recent efforts have been focussed on an extensive drilling campaign aimed at increasing and providing greater certainty and understanding of the extent of the resource. Full 3D seismic data collection over the Shaikan structure is largely complete with the subsequent processing and evaluation taking place well into 2011. There are currently two operated drill rigs in place (Shaikan-3 and Sheikh Adi-1) with a third due to commence operation on Shaikan-2 in the fourth quarter of 2010. We eagerly await commencement of the extended production test on the Sargelu formation due in September, with production to be sold to the local market. This is the culmination of an intensive work programme involving tendering, procurement, civil works, engineering and construction of production facilities.
The first six months of the year also saw preparatory work for Gulf Keystone's first exploration well on the Sheikh Adi Block. The initial drilling campaign, which is expected to take six months, commenced in August 2010. Full 3D seismic data collection will be undertaken upon the arrival of the equipment from Shaikan should the initial indications from Sheikh Adi prove encouraging.
Our partners have been progressing their campaigns. Initial exploration activities conducted by MOL on the Bijeel structure in the Akri-Bijeel Block have produced very encouraging results. We eagerly await the results of further testing currently underway. Genel is evaluating data from Ber Bahr and we look forward to reviewing their drilling plans.
Whilst we have focussed our efforts on exploring the massive potential of the Kurdistan Region we also continue with our orderly exit from Algeria. Gulf Keystone signed an agreement with BG North Sea Holdings Limited in early 2010 for our withdrawal from the Hassi Ba Hamou Permit. The Company also continues to work on options with regard to Ferkane Permit Block 126a containing the GKN/GKS oil fields.
For a small independent, sustaining this level of activity and delivering results is an immense achievement and on behalf of the Company, I thank all our staff for their extraordinary efforts and commitment.
None of this could be achieved without assistance from the Kurdistan Regional Government ("KRG"), which in addition to being our host is now our strategic partner, following the exit of Etamic as announced in March and finalised in August. We continue to work closely with the KRG to ensure that the interests of the Kurdistan Region of Iraq and its people are well served.
The support shown by our shareholders, both retail and institutional, has also been instrumental to achieving our impressive progress. The successful fundraising of $165 million in May provided the capital to substantially fund our extensive drilling campaign through to the end of 2010 and early 2011. We believe the significant amount raised was a vote of confidence from new and existing investors in the high potential of our assets and is evidence of management's ability to take the assets forward from their initial discovery.
& Chief Executive Officer