By John Lee.
Gulf Keystone (pictured: CEO John Gerstenlauer) an independent oil and gas exploration, development and production company with operations in the Kurdistan Region of Iraq ("Kurdistan Region"), today announces its results for the six months ended 30 June 2014.
Operational highlights
· Gulf Keystone's operations in the Kurdistan Region remain secure and production and crude oil sales from the Shaikan field have not been interrupted in any material way
· Ramp-up of Shaikan production in H1 2014 from 10,000 gross barrels of oil per day ("bopd") to rates of in excess of 20,000 gross bopd through the tie-in of an additional producing well to Shaikan PF-1 and the commencement of production operations from Shaikan PF-2
· Crude oil export deliveries by truck to Turkey in H1 2014 totalled 2.2 million barrels gross with total gross production from Shaikan to date fast approaching 5.5 million barrels
· Initial payments for the export crude oil sales received with the realised price at the Shaikan facility estimated as US$51-56/bbl. Through an ongoing dialogue with the Ministry of Natural Resources of the Kurdistan Regional Government ("MNR" and "KRG"), the Company is seeking to establish a regular payment cycle for past and future Shaikan crude oil export sales
· Gross domestic sales for H1 2014 of 0.1 million barrels with a realised price of US$42/bbl
· Agreement of the Field Development Plan ("FDP") for the Akri-Bijeel Block by the MNR in August with production from the Bijell and Bakrman discovery areas expected by MOL Kalegran Limited, the operator, to reach 35,000 gross bopd in 2015
Financial highlights
· Revenues of US$18.7 million achieved for H1 2014 (1H13: $nil; FY13: $6.7 million); additional revenue in the region of US$35 million owed but not yet recognised for H1 2014 crude oil export sales
· Loss after tax for H1 2014 of $29.8 million (1H13: $26.4 million; FY13: $32.0 million)
· Net proceeds of US$240 million raised from the issue of debt securities and associated warrants in April 2014
· Cash and cash equivalents at 26 August 2014 of US$177 million
Outlook
· Company continues to target 40,000 bopd of Shaikan production by year end through the tie-in of three additional producing wells (Shaikan-7, -8 and -10), although certain consequences of the recent security situation, including the current short term limited availability of some international contractors, may cause this to move to Q1 2015
· Conclude discussions with the MNR on the establishment of a regular and predictable payment cycle for past and future Shaikan crude oil export sales in order to generate steady revenues, which is of critical importance to Gulf Keystone's funding position
· Manage expenditure in a responsible and prudent manner, continuing to review and control capital commitments. Once a steady flow of revenues has been established, make decisions on investment in additional production facilities, development wells and infrastructure in order to increase Shaikan production in line with the approved Shaikan Field Development Plan
· Continue to review options regarding the Company's 20% working interest in the Akri-Bijeel Block and explore other funding options available
· Complete the appraisal of the Sheikh Adi discovery, submit the appraisal report and make a decision regarding early production and development
Simon Murray, Non-Executive Chairman of Gulf Keystone, said:
"Despite the recent security crisis in Iraq, which clearly affected the lives of many people in the Kurdistan Region and refugees from elsewhere in Iraq, I strongly believe that Gulf Keystone's footprint as one of the key oil producers in this strategically important area is assured. With the continued support of the Ministry of Natural Resources, we are positive about increasing our production to the stated goal of 40,000 bopd, receiving payment for all entitlement barrels produced to date and entering a new phase of value generation."
John Gerstenlauer, Chief Executive Officer of Gulf Keystone, commented:
"Our operations in the Kurdistan Region, where we have been present since 2007, are progressing well with the two existing Shaikan production facilities producing in the range of 20,000 to 25,000 bopd and crude oil export deliveries continuing essentially uninterrupted since late November 2013 to date. We are currently discussing with our hosts and stakeholders in the Kurdistan Region the plan for monetizing all past and future Shaikan production through achieving a stable payment cycle to progress in line with the approved Shaikan Field Development Plan."
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