By John Lee.
Shares in Gulf Keystone Petroleum (GKP) were trading down 9.6 percent on Monday, compared to a broader market fall of 7.4 percent, as the company announced that expansion plans will be delayed due to coronavirus (COVID-19).
In a statement to the markets, the company said:
The Company has been closely monitoring the Coronavirus (COVID-19) situation in the Kurdistan Region of Iraq. Gulf Keystone's priority is the welfare of its staff, contractors and the communities close to its operations. We remain committed to deliver safe operations, protection of the asset and the underlying business.
In an attempt to limit the spread of Coronavirus (COVID-19), the Kurdistan Regional Government, in line with many other jurisdictions, has put in place a series of tight controls on the movement of personnel into and around the region. With these controls, along with the increasing global restrictions on movement, it has become difficult to ensure Gulf Keystone has the appropriate drilling personnel and equipment on site in order to continue safe drilling operations.
Therefore, with the SH-13 well - the current well in the campaign - at a safe stage, the decision has been taken to suspend drilling activities until conditions improve to ensure safe operations.
Production rates from the field are at c.38,000 bopd and production currently continues unaffected by the impact of Coronavirus (COVID-19). However, as a precaution, the Company has restricted the access to its production facilities. As a result, certain construction activities related to the expansion to 55,000 bopd have also been suspended until circumstances improve.
The current situation is extraordinary and we believe that our actions protect the long-term value of the asset. The planned production increase to 55,000 bopd, scheduled for Q3 2020, and average production guidance for 43,000 - 48,000 bopd remain priorities.
However, the suspension of drilling and certain expansion operations may impact Gulf Keystone's ability to meet these targets in the timeframes currently in place. Gulf Keystone will continue to closely monitor this fast-moving situation and will provide updates, as appropriate. As previously announced, the Company will release its Full Year results on 26 March 2020.
Notwithstanding the above, the Company remains in a strong financial position to manage through these turbulent times with a cash balance of $159 million, as at 13 March 2020.
Jón Ferrier, CEO, commented:
"As a Company we place the welfare of our people and those we work with and near as our absolute priority. We also have to be confident of having the right people on site to continue safe operations. Whilst we are not aware of any employees or contractors having been infected, we believe it is prudent to suspend drilling and certain production facility expansion operations during this time.
"We are watching the situation closely and will keep all of our stakeholders informed of developments. Meanwhile, the Shaikan Field itself is performing well."