Gulf Keystone, a leading independent operator and producer in the Kurdistan Region of Iraq, today announces its results for the half year ended 30 June 2024. 

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“We have safely delivered a solid operational and financial performance in the first half of 2024, with robust local sales combined with sustained capital and cost discipline supporting our return to profitability and free cash flow generation in the period. Cash flow has enabled us to strengthen our balance sheet and restart shareholder distributions, with $25 million returned to shareholders in 2024 to date. 

Looking ahead, we continue to engage with government stakeholders to push for an exports restart solution, with significant potential value to be unlocked for Kurdistan, Iraq and the Company. In the interim, we remain focused on maximising shareholder value from local sales. To capitalise on continued strong demand, we are pursuing incremental opportunities to optimise production and improve process safety and reliability. We also continue to review the Company’s capacity for additional dividends or buybacks to build on our track record of shareholder returns.”

Highlights to 30 June 2024 and post reporting period

Operational

• Continued strong safety track record, with no Lost Time Incidents for over 590 days
• Gross average production increased 69% to 39,252 bopd in H1 2024 (H1 2023: 23,256 bopd), reflecting robust local market demand for Shaikan Field crude
• Gross average production of c.41,400 bopd in 2024 year to date
  • Local market demand rebounded in February and has remained high 
  • Strong gross average production in July of c.47,900 bopd and in August to date of c.48,200 bopd
  • Realised prices have fluctuated between $25/bbl – $28/bbl and are currently at c.$27/bbl
• Shaikan Field reservoir and operations have continued to perform well following the smooth ramp up of production at the beginning of 2024 and the subsequent transition to 24/7 truck loading
• No operational impact from regional tensions; we continue to closely monitor the security environment and take precautions to protect the organisation

Financial

• Successful return to profitability and free cash flow generation in H1 2024 following a challenging 2023, driven by pre-paid local sales and capital and cost discipline
• Adjusted EBITDA increased 6% to $36.4 million (H1 2023: $34.2 million) as higher production and cost reductions offset the decline in realised prices related to the transition from exports to discounted local sales
  • Revenue decreased 11% to $71.2 million (H1 2023: $79.6m) as the increase in H1 2024 production was more than offset by the 49% decline in average realised price to $26.3/bbl (H1 2023: $51.3/bbl)
  • Gross operating costs per barrel decreased 25% to $4.2/bbl (H1 2023: $5.6/bbl), reflecting higher production and cost control
• Net capital expenditure of $7.8 million (H1 2023: $47.0 million) reflecting the Company’s focused 2024 work programme of safety critical upgrades and production optimisation expenditures 
• Monthly average net capex, operating costs and other G&A in H1 2024 of $6.2 million, in line with guidance
• Free cash flow generation of $26.6 million (H1 2023 free cash outflow: $9.9 million) enabled the Company to strengthen its balance sheet and restart shareholder distributions
  • $25 million returned to shareholders in 2024 year to date, comprising a $10 million share buyback (initiated in May and completed in July) and $15 million interim dividend (paid in July)
• Cash balance of $102.3 million as at 30 June 2024 (31 December 2023: $81.7 million); latest balance as at 28 August 2024 of $98.2 million 

Outlook

• GKP remains focused on maximising shareholder value from local sales and unlocking significant potential additional value from the restart of Kurdistan exports

Local sales and production

• The Company sees continued robust local sales demand in the near term while longer term market dynamics remain uncertain 
• The Shaikan Field is producing close to its maximum capacity reflecting prudent reservoir management in the current investment constrained environment
• Planned safety-critical upgrades and maintenance are scheduled for November 2024, requiring the shutdown of PF-1 for c.3 weeks with an expected gross production impact of c.26,000 bopd, as previously announced 
• The Company continues to exercise capital and cost discipline to maximise free cash flow while maintaining production capacity to respond to local market demand and the restart of exports

• Average monthly aggregate net capex, operating costs and other G&A run rate in 2024 now expected to be c.$7 million
• Reflects incremental expenditures on production optimisation, process safety & reliability and associated resources to capitalise on continued local sales demand following the strong performance year to date
• Net capex and operating costs expected to be weighted to H2 2024, as safety critical upgrades are completed as part of the planned PF-1 shutdown; estimated 2024 net capex remains c.$20 million 

Shareholder distributions

• GKP remains committed to returning excess cash to shareholders via dividends or share buybacks, subject to conserving sufficient liquidity to manage the current operating environment and ensuring the Company is able to transition successfully from local sales to the restart of Kurdistan exports and normalisation of Kurdistan Regional Government (“KRG”) payments 

Kurdistan exports

• GKP continues to engage with government stakeholders regarding a pipeline exports restart solution with the objective of unlocking significant potential value for shareholders
• GKP remains ready to restart exports, contingent upon reaching agreements on payment surety for future oil exports, the repayment of outstanding exports sales receivables (of which GKP is owed over $150 million net) and the preservation of current contract economics

Investor & analyst presentations

GKP’s management team will be hosting a presentation for analysts and investors at 10:00am (BST) today via live audio webcast:

https://brrmedia.news/GKP_HY_24

Management will also be hosting an additional webcast presentation focused on retail investors via the Investor Meet Company (“IMC”) platform at 12:00pm (BST) today. The presentation is open to all existing and potential shareholders and participants will be able to submit questions at any time during the event.

https://www.investormeetcompany.com/gulf-keystone-petroleum-ltd/register-investor

Recordings of both presentations will be made available on GKP’s website. 

This announcement contains inside information for the purposes of the UK Market Abuse Regime.

Enquiries

Disclaimer

This announcement contains certain forward-looking statements that are subject to the risks and uncertainties associated with the oil & gas exploration and production business. These statements are made by the Company and its Directors in good faith based on the information available to them up to the time of their approval of this announcement but such statements should be treated with caution due to inherent risks and uncertainties, including both economic and business factors and/or factors beyond the Company’s control or within the Company’s control where, for example, the Company decides on a change of plan or strategy. This announcement has been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. This announcement should not be relied on by any other party or for any other purpose.