GKP hits Seven-Year Low; Bondholder Nego Continues

Outlook

• Forecast to achieve the 2016 average production target of 31,000 to 35,000 bopd, subject to offtake and export infrastructure availability
• Continue to aggressively manage the cost base and, building on savings realised in 2015, deliver a reduced operating cost of $4.5/bbl (from $5/bbl)
• Without additional capital expenditure and in line with the 2015 CPR, Shaikan wells may begin to exhibit natural declines later in 2016. An interim project to maintain Shaikan production at 40,000 bopd and potentially increase up to 55,000 bopd, which bridges to the FDP, has been prepared and can be implemented subject to a period of regular payments, available finances and final partner and MNR approval
• This interim project can be completed within a year under a capex programme of between $71 million and $88 million, including 30% contingency.
• The Company continues to actively review options to secure new funding and restructure the Company's balance sheet, to ensure it is able to continue as a going concern.

Jón Ferrier (pictured), Gulf Keystone's Chief Executive Officer, said:

"The reasons behind my initial attraction to Gulf Keystone remain my motivation today. We have a superb subsurface asset, which continues to perform well, and a motivated workforce dedicated to realising Shaikan's full potential.  We started 2015 with installed capacity to produce 40,000 bopd and achieved our guidance with a 30,500 bopd average rate, as well as record levels of over 45,000 bopd achieved during the year.

 "Against a well-publicised challenging backdrop, both across the industry and in the region, the team is actively managing all aspects of the business over which we can assert control. To that end we are further rationalising the portfolio, in order to focus on Shaikan with its lower risk profile and ability to generate the greatest near term return on investment. 

"We are encouraged that we are now awaiting our sixth consecutive payment for Shaikan crude oil exports, and that we have also been able to bring forward an agreement with the MNR on a number of important factors, including the settlement of the amount owed in arrears and the reduction of the capacity building charge, which results in material improvement of the commercial terms for GKP in Shaikan. We see these developments as positive as we are striving for much greater certainty and transparency at a crucial time for GKP. 

"In the interest of all stakeholders, strenuous efforts are currently underway to strengthen the balance sheet, not only to ensure our ability to remain as a going concern, but also to be able to provide new capital to increase production and as a solid foundation for the longer-term future of the Company.  I look forward to delivering a stronger business in 2016 with stable production, commercial discipline, value realisation and growth."

(Sources: GKP, Yahoo!)