Gulf Keystone Announces Annual Results

Gulf Keystone Petroleum (AIM: GKP), the oil and gas exploration and production company operating in the Kurdistan Region of Iraq, has announced its results for the year ended 31 December 2010.


Financial Summary

·      Loss after tax $26.0 million (2009: $96.3 million)

·      Loss per share 4.17 cents (2009: 22.80 cents)

·      Cash, cash equivalents and liquid investments $211.4 million (2009: $19.2 million)

Operational Summary - To Period End

Kurdistan Region of Iraq:

Shaikan Block

·     Significant increase in gross oil-in-place numbers for the Shaikan discovery with a range of 1.9 (P90) to 7.4 (P10) billion barrels, following independent evaluation by Dynamic Global Advisors

·      599 km² 3D seismic acquisition completed

·      Successful re-testing of Shaikan-1 in the Butmah and Mus formations at improved rates following which the well was completed as the first Jurassic producer in the Sargelu formation

·      Extended Well Test ("EWT") facilities completed in September and first domestic sales from Shaikan-1 commenced in October with a net entitlement to oil sales of 30,193 barrels

·      Shaikan-3 appraisal well spudded in September to evaluate the Cretaceous

·      Shaikan-2 deep appraisal well spudded in December

·      Shaikan-4 deep appraisal well location completed

Akri-Bijeel Block

·      Bijell-1 well resulted in a significant oil discovery with a test rate of up to 3,743 barrels of oil per day ("bopd").  Operator's (MOL Hungarian Oil & Gas plc "MOL") estimate P50 of Petroleum-Initially-in-Place ("PIIP") of 2.4 billion barrels

Sheikh Adi Block

·      Sheikh Adi-1 exploration well spudded in August

·      215 km² 3D seismic acquisition commenced (completed in early 2011)

Ber Bahr Block

·      Subsurface work undertaken by the Operator (Genel Energy International Limited "Genel"), to define an exploration well target, location and design in preparation for drilling in 2011


·     Settlement agreement negotiated with BG North Sea Holdings Limited ("BG") for the immediate stay of arbitration between the parties and the proposed withdrawal of the Company from the Hassi Ba Hamou Permit in consideration for a net cash payment of $10.0 million from BG, subject to the necessary Algerian approvals. On 23 August 2010 the parties to the Hassi Ba Hamou permit executed an amendment to the production sharing contract providing for the extension of the expiry of the exploration period from 23 September 2010 until 23 September 2012

·      During May 2010 Sonatrach exercised a guarantee of $15.6 million in its favour in relation to the Ben Guecha Permit Blocks 108 and 128b as the exploration commitments were not satisfied

·      The Company is currently evaluating a number of options with regard to its interests in Block 126a (GKN and GKS oilfields under the Ferkane Permit)

Corporate Developments

·      251.2 million new common shares issued to existing and new institutional investors raising gross proceeds of  $364.0 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 withdrawal of Etamic Limited

·      Establishment of the Employee Benefit Trust and grant thereunder of Long Term Incentive Performance Share Options and 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

·     Excalibur Ventures LLC ("Excalibur") asserted certain contractual and non-contractual claims in an International Chamber of Commerce ("ICC") Arbitration in New York and in the English Commercial Court against Gulf Keystone and two of its subsidiaries and is claiming entitlement to an interest of up to 30% in the Companies' blocks in the Kurdistan Region of Iraq which the Company is vigorously contesting

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