GKP hits Seven-Year Low; Bondholder Nego Continues

Payments

• The Company generated gross cash receipts of $92.8 million ($74.2 million net to GKP) in 2015. This is made up of $26 million gross prepayment for export deliveries by truck to the Turkish coast received in February 2015, $21.7 million gross received under the direct contract with a domestic offtaker for similar export sales and $45 million gross received from the KRG from September to December 2015 for oil exported through  the Kirkuk-Ceyhan pipeline
• In January and March 2016, the Company received two further payments from the KRG of $15 million gross each
• On 1 February 2016, the KRG issued a press release committing to a regular payment cycle to international oil companies for oil exports based upon monthly contractual entitlements in line with the terms of the relevant Production Sharing Contract (PSC)

Financial - as at 31 December 2015

• Revenues of $86.2 million (FY14: $38.6 million)
• Loss after tax of $135.0 million (FY14: $248.2 million)
• Gross proceeds of $40.7 million raised from the issue of equity securities in April 2015 following the successful guaranteed note consent solicitation to remove the book equity ratio covenant
• Operating costs per barrel on a gross field basis reduced to $5/bbl from $7/bbl in 2014
• Cash balance at 16 March 2016 of $50.6 million (31 Dec 2015: $43.6 million)

Agreement with the MNR and other corporate developments

• Following the KRG's press release of 1 February 2016, discussions commenced with the MNR on a number of issues related to the application of the terms of the Shaikan PSC, including the 15% Third Party Interest, the 20% Government Participation Option, the associated past costs, as well as revenue arrears, and the capacity building charge
• On 16 March 2016, an Agreement between the Company and the MNR was signed addressing the Company's agreement to the MNR's exercise of the 20% Government Participation Option and the settlement of the associated past costs together with the reduction of the capacity building charge from 40% to 30% to be the subject of an amendment agreement to the Shaikan PSC
• The Company and the MNR have also confirmed their intention to implement the First Amendment to the Shaikan PSC dated 1 August 2010, in particular the provision regarding the assignment of the 15% Third Party Interest, and also the assignment of the 5% Texas Keystone Inc interest in the Shaikan PSC to Gulf Keystone to be the subject of an amendment agreement to the Shaikan PSC, which will result in an increase in the Company's fully diluted working interest in the Block to 58%
• The Agreement provides clarity on the past costs and revenue arrears and constitutes the MNR's commitment to a forward programme of monthly payments, including contract entitlement and additional payments towards the amounts in arrears
• As at 31 December 2015, the Company estimates an unrecognised receivable of $93 million net to GKP on a diluted basis with regards to the unpaid export sales and $85 million net to GKP for the past costs associated with the Shaikan Government Participation Option. Further details are provided in the Financial Review
• As a result of a detailed review of the Company's portfolio with emphasis on capital discipline and focusing on Shaikan, the operated producing asset, a decision has been made by the Company to relinquish the Sheikh Adi block given the project's potential capital demands and performance risk of the development; the relinquishment and the termination of the Sheikh Adi PSC has been agreed subject to the execution by the Regional Council for Oil and Gas Affairs of the Kurdistan Region of Iraq
• As previously announced in agreement with its partners MOL Hungarian Oil and Gas plc. and Genel Energy Plc, Gulf Keystone decided to exit the non-core assets of the Akri-Bijeel Block, which was relinquished on 31 December 2015, and the Ber Bahr Block, the relinquishment of which is ongoing
• On 25 February 2015, the Company announced a Strategic Review of its financing options, which included discussions with a number of interested parties in relation to possible asset transactions or a corporate sale. Over the course of 2015 and to date, interest has been expressed by various parties. While there are ongoing discussions with them, we believe given the current sector dynamics (low and volatile oil prices and geo-political issues in the region), a transaction is unlikely in the near term
• As announced on 23 October 2015 and as required under the terms of the guaranteed notes, the Company entered into and is continuing discussions with the representatives for the Company's bondholders
• The Board has been strengthened through the appointments of Cuth McDowell and Keith Lough, Non-Executive Directors in December 2015