TIDMGKP
RNS Number : 7359L
Gulf Keystone Petroleum Ltd.
10 September 2019
10 September 2019
Gulf Keystone Petroleum Ltd. (LSE: GKP)
("Gulf Keystone", "GKP" or "the Company")
2019 Half Year Results Announcement
Gulf Keystone Petroleum, a leading independent operator and
producer in the Kurdistan Region of Iraq ("Kurdistan" or "Kurdistan
Region"), announces its results for the half year ended 30 June
2019.
Highlights to 30 June 2019 and post reporting period
Operational
-- Average production during August was 39,269 bopd, reflecting
the positive results from the workover campaign and facilities
debottlenecking at PF-1; gross production this month up to 8
September averaged 39,921 bopd.
-- Gross production for the first half of 2019 averaged 29,362
bopd. Average production rates during H1 of 2019 were necessarily
affected by wells being off-line for workovers and well
maintenance, in addition to the planned shutdown of PF-1 to install
facilities as part of the 55,000 bopd expansion project.
-- The first well of the drilling campaign, SH-12, successfully
reached total depth ("TD") of 2,112 metres on 23 August. Well
results were encouraging with the structure coming in 53 metres
higher than prognosis. The well is currently being completed and is
expected to be on production later in October.
-- Following completion of SH-12, the rig will move to the
second well of the campaign, SH-9. This well is designed to assess
the gas reinjection potential of the Jurassic formation; part of
the longer-term gas management plan for the Shaikan
development.
-- The workover campaign to install electrical submersible pumps
("ESPs") in existing wells has been moved into 2020 to coincide
with the availability of new permanent facilities being installed
as part of the 55,000 bopd expansion programme. These facilities
will allow the wells to be cleaned-up more effectively when the
ESPs are installed.
-- The PF-1 pipeline and export station are nearing completion
and will be in full operation following commissioning at which
point all Shaikan oil will be exported via pipe.
-- A revised Field Development Plan ("FDP"), which addressed
additional feedback on gas management, was submitted to the
Ministry of Natural Resources ("MNR") in May 2019. We await formal
feedback from the MNR and look forward to a constructive dialogue
to finalise the FDP as soon as possible. As we have stated in the
past, this delay is not slowing operations and progress on the
55,000 bopd work programme.
-- Operations at Shaikan remain safe and secure, with no Lost
Time Incidents ("LTI") in over 400 days.
Financial
-- Revenue of $95.6 million (H1 2018: $116.2 million).
-- EBITDA of $59.0 million (H1 2018: $61.6 million).
-- Profit after tax of $24.2 million (H1 2018: $26.7 million).
-- Growth in activity required to bring production to 55,000
bopd led to an increase in cash operating costs and cash operating
costs per barrel in line with previous guidance to $18.4 million
(H1 2018: $14.1million) and $3.9/bbl (H1 2018: $3.0/bbl)
respectively.
-- Net capital investment in Shaikan of $32.4 million (H1 2018:
$6.9 million). Full year capital investment guidance stands at
$88-104 million net ($110-130 million gross).
-- Cash balance of $302.7 million at 30 June 2019 and $263.6 million at 9 September 2019.
Corporate
-- A $50 million dividend was approved at the June AGM. The
first tranche of c.$17 million was paid in July 2019, with the
second tranche of c.$33 million to be paid on 4 October 2019.
-- A $25 million share buyback programme was announced in July.
The Company is pleased to confirm that the first tranche of $15
million was completed on 30 August.
-- Today, the Company is resuming its buyback programme for the remaining $10 million.
-- Following completion of the above, the Company will have
returned $75 million to its shareholders in 2019.
Outlook
-- Active work programme to continue with the ongoing Jurassic
drilling campaign, ESP workovers and completion of the
debottlenecking plan with the Company remaining on track to deliver
55,000 bopd in Q2 2020.
-- Total capital expenditure of $200-230 million gross for the
55,000 bopd expansion programme remains in line with earlier
guidance.
-- Gross production guidance for 2019 is now expected to be
between 30,000-33,000 bopd, compared to previous guidance of
32,000-38,000 bopd. This new guidance considers the delayed start
to the drilling campaign, the postponement of the ESP workover
campaign and the planned shutdown of PF-2 in October.
Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:
"The first half of 2019 saw high levels of operational activity
as we continue to develop Shaikan targeting a significant, phased,
production uplift. Despite some operational delays, we have made
considerable headway towards our 55,000 bopd production target.
Activity has further increased during H2 2019 as we remain on track
to achieve this milestone in the first half of 2020. As a
consequence of the work to increase production in the longer term,
the near-term production guidance for the full year has been
reduced. However, the Shaikan reservoir, the cornerstone of our
equity story, continues to behave strongly.
The Company has a robust balance sheet which supports
operational funding requirements and expansion plans in addition to
returning funds to shareholders. The Company is therefore well
positioned to deliver on its growth objectives for the benefit of
all stakeholders."
Enquiries:
Celicourt Communications: + 44(0) 20 8434 2754
Mark Antelme
Jimmy Lea
or visit: www.gulfkeystone.com
Notes to Editors:
Gulf Keystone Petroleum Ltd. (LSE: GKP) is a leading independent
operator and producer in the Kurdistan Region of Iraq. Further
information on Gulf Keystone is available on its website
www.gulfkeystone.com
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. 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.
Chairman and CEO Statement
The first half of 2019 has seen high levels of operational
activity as the phased expansion of the Shaikan Field towards
55,000 bopd continues. We are pleased to confirm that Gulf Keystone
remains on track to achieve the first expansion target of 55,000
bopd in Q2 2020 following the completion of plant debottlenecking
and drilling of a series of Jurassic wells. Safe operations remain
the focus and against a backdrop of a high operational tempo, no
LTIs have occurred during the reporting period.
During H1, gross production at Shaikan was 29,362 bopd (H1 2018:
31,861). This production level reflects the strong performance of
the reservoir against the necessary interruptions associated with
operations such as well workovers and plant upgrades. Benefits from
these earlier works will result in higher production in the second
half of the year. Gross production this month up to 8 September
averaged 39,921 bopd, reflecting the positive results from the
workover campaign and facilities debottlenecking at PF-1. Average
production during August was 39,269 bopd. The new well, SH-12, is
scheduled to be on stream in October.
Whilst the Company remains on track to benefit from the current
work programme with 55,000 bopd to be achieved in Q2 2020, the
Company now envisages full year 2019 gross production to be in the
30,000-33,000 bopd range compared with the previous guidance of
32,000-38,000 bopd. This is due to the delayed start of the
drilling campaign, the postponement of the ESP workover campaign
and the planned shutdown of PF-2 in October; however, the Shaikan
reservoir continues to perform strongly.
The revised FDP, which addressed feedback from the MNR relating
to the management of produced gas, was submitted in May. With our
partner Kalegran B.V. (a subsidiary of MOL Hungarian Oil & Gas
plc ("MOL")), GKP looks forward to working closely with the new
administration in the Kurdistan Regional Government ("KRG") on the
subsequent approval process. The revised FDP covers Phase 1 of the
Shaikan FDP as well as subsequent phases beyond the 55,000 bopd,
including the expansion to 75,000 bopd Jurassic, gas re-injection
phase and the 10,000 bopd Triassic pilot. Sanction of the
subsequent expansion towards 110,000 bopd will be dependent on the
results from
Phase 1. We confirm once again that despite the absence of an
approved FDP, GKP and its partner MOL have been preparing the
ground for the next phases of the development, notably in relation
to certain long lead items and equipment orders. We remain
confident that the FDP will be approved by the new MNR
administration, although with some uncertainty on the timing of
such approval.
The Company remains focused on its approach to Environmental,
Social and Governance ("ESG") related matters. From an
environmental perspective, the strategic priority remains the gas
reinjection project, designed to minimise routine flaring and
emissions at Shaikan. The SH-9 well, mentioned in the Operational
Review, is an important milestone in this regard. Further, the
Company strives to minimise its environmental footprint on the
Shaikan area and is actively involved in the remediation of the old
drilling sites. From a social standpoint, we continue to be a
significant employer in the area surrounding Shaikan and to invest
in the training and development of our staff. The Company
voluntarily adheres to the UK Corporate Governance Code and
published a detailed report on Corporate Governance in the 2018
Annual Report during the period.
As is set out in the Financial Review, the Company continues to
be in a robust financial position. With sustained operational
activity, along with the introduction of its first dividend and
share buyback programme, GKP has been successful in balancing its
financial requirements while returning cash to its shareholders. To
this date, the Company has purchased 5,225,933 shares for a total
amount of $15 million and from today it will resume its buyback
programme with $10 million for a total $25 million.
The Company announced in June that Sami Zouari, CFO, would be
leaving the Company. We reiterate our thanks to Sami for his
immense contribution to GKP. A search for his successor is underway
and we will be announcing the new CFO in due course. Garrett Soden
is stepping down from the Board of Directors effective today
following a review of external Board commitments of individual
Directors in accordance with corporate governance guidelines. We
would like to thank Garrett for his contribution over the last
three years since joining shortly after the Company's financial
restructuring and wish him all the best for his future endeavours.
The Nomination Committee will seek to appoint an appropriate
replacement and will review the composition of the Board Committees
as soon as practical.
We would like to thank our hosts, the Kurdistan Regional
Government, our staff and contractors for their continued
commitment to developing Shaikan for the benefit of all our
stakeholders.
Operational Review
Gulf Keystone has made considerable headway with its work
programme to increase production at Shaikan with a number of
important milestones achieved.
Operations at Shaikan remained safe and secure during the
period, with no LTI in over 400 days. Best practice health and
safety standards are an integral part of the business and we always
aim to be at the forefront of HSSE performance in Kurdistan.
Successful workovers earlier this year on SH-1 and SH-3 resulted
in material production uplift; SH-1 increased by more than 100%, to
7,800 bopd, and SH-3 by 40%, to 6,200 bopd. Well SH-12, the first
drilled in over four years, was spud in June, reaching its target
in the Lower Jurassic Butmah in August. Well results are
encouraging with the structure coming in 53 metres higher than
previously prognosed. The rig is currently running an ESP
completion into the well, before moving location and work begins on
the installation and hook-up of surface flowlines and controls. The
well is expected to be on production in October.
Following completion of SH-12, the rig will move to the second
well in the campaign, SH-9. As stated at the AGM in June, this well
aims to assess the feasibility of gas reinjection into the Jurassic
formation and is an important part of the longer-term gas
management plan for the full development of the Shaikan Field aimed
at minimising flaring and emissions. The installation of ESPs in
existing wells has been moved into 2020 to coincide with the
availability of new permanent facilities being installed as part of
the expansion programme. These facilities will allow the wells to
be cleaned up more effectively when the ESPs are installed.
Average production rates during H1 were affected by wells being
off-line for workovers, necessary well maintenance works and a
planned shutdown at PF-1 to install facilities as part of the
expansion project. As stated at the AGM, ahead of the drilling of
SH-12, a number of necessary upgrades had to be made to the
drilling rig in order to ensure it met appropriate standards,
safety requirements and had the proper certification; these
upgrades delayed spud by three months. Consequently, production
averaged 29,362 bopd during the period, with average production
during July and August standing at 34,641 bopd and 39,269 bopd
respectively, largely reflecting the positive results from the
workover campaign and the successful debottlenecking works at
PF-1.
Although we expect production in the second half of the year to
be higher than in the first half, following the interruptions
associated with operational activities, we now envisage 2019
average gross daily production in the 30,000-33,000 bopd range,
compared to the previous guidance of 32,000-38,000 bopd. The
Shaikan reservoir continues to perform strongly and we maintain our
55,000 bopd production target in Q2 2020.
A 25-day shutdown of PF-2 is planned in October and during this
time a number of necessary upgrades will be made to the facility.
We have factored in this shutdown to the revised production
guidance for 2019, in addition to the 7-day export pipeline system
shutdown for maintenance later this month.
The PF-1 pipeline and export station, which links PF-1 to the
main export pipeline is nearing completion. Commissioning of the
facilities is underway, and the pipeline is expected to be in
service over the coming weeks. Subsequently, all Shaikan oil will
be exported by pipe, a significant milestone for the field. Not
only will this increase operating efficiency but also minimise HSSE
risks, eliminate trucking costs and improve netbacks.
Key financial highlights
Six months Six months
ended ended
------------------------------------------
30 June 30 June
2019 2018
------------------------------------------ ----------- -----------
Gross average production (bopd) 29,362 31,861
------------------------------------------ ----------- -----------
Realised price ($/bbl) 44.8 47.9
------------------------------------------ ----------- -----------
Revenue ($m) 95.6 116.2
------------------------------------------ ----------- -----------
Operating costs ($m)(1) (18.4) (14.1)
------------------------------------------ ----------- -----------
Operating costs per bbl ($/bbl)(1) (3.9) (3.0)
------------------------------------------ ----------- -----------
General and administrative expenses ($m) (8.2) (7.6)
------------------------------------------ ----------- -----------
Profit from operations ($m) 26.2 26.6
------------------------------------------ ----------- -----------
Profit after tax ($m) 24.2 26.7
------------------------------------------ ----------- -----------
Basic earnings per share (cents) 10.55 11.65
------------------------------------------ ----------- -----------
EBITDA ($m)(1) 59.0 61.6
------------------------------------------ ----------- -----------
Capital investment ($m) (1) 32.4 6.9
------------------------------------------ ----------- -----------
Net cash ($m) (1) 198.3 117.0
------------------------------------------ ----------- -----------
Net increase in cash ($m) 7.2 58.5
------------------------------------------ ----------- -----------
(1) Operating costs, operating costs per barrel, EBITDA, capital
investment and net cash are either non-financial or non-IFRS
measures and are explained in the summary of significant accounting
policies.
Revenues
H1 2019 revenue stands at $95.6 million (H1 2018: $116.2
million). This decrease is the result of a lower Brent price and
production. All sales were made under the terms of the Crude Oil
Sales agreement signed in early 2019 and effective until 31
December 2020.
Operating costs, depreciation, other cost of sales and
administrative expenses
The Group's operating costs increased to $18.4 million (H1 2018:
$14.1 million) as the Group undertook certain one-off maintenance
projects and incurred additional transportation costs for trucking
oil from PF-1 to PF-2 for injection into the spur pipeline (the
pipeline was not operational in H1 2018). The Group also started
incurring costs associated with the preparation for the future
production ramp up, mostly in relation to hiring additional
personnel. Operating costs per bbl stand at $3.9 bbl, which is at
the lower end of the previously disclosed guidance of
$3.8-4.6/bbl.
Other cost of sales components include depletion and
amortisation of oil and gas assets, capacity building charge,
production bonuses, and certain other cost of sales such as the
cost of trucking oil to Fishkhabour and oil inventory movements.
Cost of sales decreased to $61.3 million (H1 2018: $81.9 million),
which was mostly driven by the production bonus of $16.0 million in
June 2018 (H1 2019: $nil) and a lower depletion and amortisation
charge.
General and administrative expenses ("G&A") have increased
by 7% from $7.6 million in H1 2018 to $8.2 million in H1 2019,
below the previously disclosed guidance of c.10% increase in 2019.
The increase is attributable to the Kurdistan office, which
contributed $4.2 million (H1 2018: $3.6 million) of this amount.
The increase in the G&A reflects the rise in Shaikan
development activity. Corporate G&A remained unchanged in spite
of the increased activity. The G&A amount includes $0.8 million
of share-based payments (H1 2018: $0.5 million) and $0.4 million
(H1 2018: $0.2 million) of depreciation costs.
The movements in these components have resulted in a modest
decrease of 4% in the EBITDA, which stands at $59.0 million (H1
2018: $61.6 million).
Net finance costs and other gains
The Group incurred net finance costs of $1.9 million (H1 2018:
$4.2 million). The improvement is driven by active cash management
resulting in higher interest earned of $3.6 million (H1 2018: $1.5
million).
A solid financial foundation underpinning the Group's
strategy
Cash flows
In 2019, the Group received payments for sales of Shaikan oil of
$89.8 million (H1 2018: $107.4 million), incurred operational cash
outflows of $34.8 million (H1 2019: $46.2 million) and spent $47.8
million on investment activities (H1 2018: $2.6 million) of which
$36.7 million related to Shaikan development activities and $11.1
million to the exit costs of Algerian operations, resulting in a
net cash increase of $7.2 million (H1 2018: $58.5 million).
The cash balance at 30 June 2019 stood at $302.7 million (31
December 2018: $295.6 million), providing a strong base for the
Shaikan investment programme.
At the June AGM, shareholders approved the distribution of a
total cash dividend of $50.0 million for the year ended 31 December
2018. The first tranche of c.$17 million was paid on 5 July, with
the second tranche of c.$33 million to be paid on 4 October 2019.
The ex-dividend date is 19 September 2019 and the record date is 20
September 2019. The first tranche paid was 5.68p per common share,
which is equivalent to 7.26 US cents per common share. The full
$50.0 million dividend payable was recognised in current
liabilities as at 30 June 2019. As stated earlier, the buyback was
successfully implemented from 8 July 2019 to 30 August 2019 for a
total amount of $15.0 million. The Company is today resuming the
buyback for an additional $10.0 million for a total of $25 million
as announced on 8 July 2019.
Capital investment
In H1 2019, additions to Shaikan oil and gas asset amounted to
$32.4 million net to GKP. This investment covered the work on two
tubing workovers, well civils, drilling of SH-12 from early June,
PF-1 spur pipeline, various studies and production facilities
debottlenecking projects.
Capital investment into Shaikan will continue this year with the
Group's work programme aimed at achieving the target of 55,000
bopd. In addition, the Company has initiated certain workstreams in
relation to the subsequent phases of the development which include
expansion to 75,000 bopd and the gas re-injection project, although
the investment decision has not been finalised. In 2019, the gross
capital expenditure is expected to stand at $88-104 million net
($110- 130 million gross). A higher level of capital expenditure is
expected in H2 2019 with continuous drilling, wells civils,
flowlines, the completion of PF-1 spur pipeline and debottlenecking
work.
GULF KEYSTONE PETROLEUM LIMITED
Half Year Report for the six months ended 30 June 2019
Non-IFRS measures
The Group uses certain measures to assess the financial
performance of its business. Some of these measures are termed
"non-IFRS measures" because they exclude amounts that are included
in, or include amounts that are excluded from, the most directly
comparable measure calculated and presented in accordance with
IFRS, or are calculated using financial measures that are not
calculated in accordance with IFRS. These non-IFRS measures include
financial measures such as operating costs and non-financial
measures such as gross average production.
The Group uses such measures to measure operating performance
and liquidity, in presentations to the Board and as a basis for
strategic planning and forecasting, as well as monitoring certain
aspects of its operating cash flow and liquidity. The Directors
believe that these and similar measures are used widely by certain
investors, securities analysts and other interested parties as
supplemental measures of performance and liquidity.
The non-IFRS measures may not be comparable to other similarly
titled measures used by other companies and have limitations as
analytical tools and should not be considered in isolation or as a
substitute for analysis of the Group's operating results as
reported under IFRS. An explanation of the relevance of each of the
non-IFRS measures and a description of how they are calculated is
set out below. Additionally, a reconciliation of the non-IFRS
measures to the most directly comparable measures calculated and
presented in accordance with IFRS. The Group does not regard these
non-IFRS measures as a substitute for, or superior to, the
equivalent measures calculated and presented in accordance with
IFRS or those calculated using financial measures that are
calculated in accordance with IFRS.
Operating costs
Operating costs is a useful indicator of the Group's costs
incurred to produce Shaikan oil. Operating costs, in comparison
with cost of sales, exclude certain non-cash accounting
adjustments, contractual PSC payments and transportation costs.
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$ million $ million $ million
------------------------------------- ------------- ------------- ------------
Cost of sales 61.3 81.9 154.5
Depreciation of oil & gas properties (32.4) (34.8) (70.7)
Transportation costs (3.2) (8.8) (14.3)
Production bonus - (16.0) (16.0)
Capacity building payments (7.1) (8.3) (17.0)
Working capital movement (0.2) 0.1 (5.8)
Operating costs 18.4 14.1 30.7
============= ============= ============
Gross operating costs per barrel
Gross operating costs are divided by gross production to arrive
at operating costs per bbl.
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
Gross production (MMbbls) 5.3 5.8 11.5
Gross operating costs ($ million) 20.5 17.4 36.8
Gross operating costs per barrel
($ per bbl) 3.9 3.0 3.2
GULF KEYSTONE PETROLEUM LIMITED
Half Year Report for the six months ended 30 June 2019
EBITDA
EBITDA is a useful indicator of the Group's profitability, which
excludes the impact of costs attributable to income tax
(expenses)/credit, finance costs, interest revenue, depreciation
and amortisation and other gains and losses.
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$ million $ million $ million
------------------------------------- ------------- ------------- ------------
Profit from operations 26.2 26.6 78.2
Depreciation of oil & gas properties 32.4 34.8 70.7
Other Depreciation and amortisation 0.4 0.2 0.4
------------- ------------- ------------
EBITDA 59.0 61.6 149.3
============= ============= ============
Capital investment
Capital investment is the value of the Group's additions to oil
and gas assets excluding any movements in decommissioning
assets
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$ million $ million $ million
-------------------------------- ------------- ------------- ------------
Additions to oil and gas assets 32.4 6.9 35.7
Capital investment 32.4 6.9 35.7
============= ============= ============
Net Cash
Net cash is a useful indicator of the Group's indebtedness,
financial flexibility and capital structure because it indicates
the level of cash and cash equivalents less cash borrowing with the
Group's business. Net cash is defined as current and non-current
borrowings plus non-cash adjustments, less cash and cash
equivalents
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$ million $ million $ million
-------------------------- ------------- ------------- ------------
Outstanding New Notes (100.0) (100.0) (100.0)
Interest accrual (4.4) (2.0) (4.4)
Cash and cash equivalents 302.7 219.0 295.6
------------- ------------- ------------
Net cash 198.3 117.0 191.2
============= ============= ============
GULF KEYSTONE PETROLEUM LIMITED
Half Year Report for the six months ended 30 June 2019
Principal risks and uncertainties
The Board determines and reviews the key risks for the Group on
a regular basis. The principal risks, and how the Group seeks to
mitigate them, at half year are consistent with those detailed in
the management of principal risks and uncertainties section of the
2018 Annual Report and Accounts. The principal risks are listed
below:
Strategic HSSE and CSR Operational Financial
Political, social HSSE risks Field delivery Liquidity and
and economic instability risk funding capability
----------------- --------------- --------------------
Disputes regarding Gas flaring Reserves Export payment
title or exploration mechanism
and production
rights
----------------- --------------- --------------------
Business conduct Security Commodity prices
and anti-corruption
----------------- --------------- --------------------
Export route availability Corporate social
responsibility
risks
----------------- --------------- --------------------
Stakeholder expectations
----------------- --------------- --------------------
Responsibility statement
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements, which has been
prepared in accordance with IAS 34 "Interim Financial Reporting",
gives a true and fair view of the assets, liabilities, financial
position and loss of the Group as a whole as required by DTR
4.2.4R;
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months of the year and a description of
principal risks and uncertainties for the remaining six months of
the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Jón Ferrier
Chief Executive Officer
10 September 2019
GULF KEYSTONE PETROLEUM LIMITED
Independent Review Report to Gulf Keystone Petroleum Limited
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2019 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and related notes 1 to
17. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
10 September 2019
GULF KEYSTONE PETROLEUM LIMITED
Condensed Consolidated Income Statement
for the six months ended 30 June 2019
Six months
ended Six months Year ended
30 June ended 31 December
2019 30 June 2018 2018
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------- ----- ---------- ------------------- -------------------
Continuing operations
Revenue 5 95,606 116,171 250,554
Cost of sales 6 (61,250) (81,905) (154,534)
--------------------------- ----- ---------- ------------------- -------------------
Gross profit 34,356 34,266 96,020
General and administrative
expenses (8,169) (7,644) (17,813)
Profit from operations 26,187 26,622 78,207
Finance revenue 7 3,628 1,450 4,441
Finance costs 7 (5,549) (5,645) (13,873)
Other gains 8 (112) 4,081 10,925
--------------------------- ----- ---------- ------------------- -------------------
Profit before tax 24,154 26,508 79,700
Tax credit 50 208 189
--------------------------- ----- ---------- ------------------- -------------------
Profit after tax 24,204 26,716 79,889
--------------------------- ----- ---------- ------------------- -------------------
Profit per share (cents)
Basic 9 10.55 11.65 34.84
Diluted 9 10.06 11.58 33.87
--------------------------- ----- ---------- ------------------- -------------------
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------- ------------- ------------- ------------
Profit for the period 24,204 26,716 79,889
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations (12) (298) (800)
-------------------------------------- ------------- ------------- ------------
Total comprehensive income
for the period 24,192 26,418 79,089
-------------------------------------- ------------- ------------- ------------
GULF KEYSTONE PETROLEUM LIMITED
Condensed Consolidated Balance Sheet
as at 30 June 2019
30 June 30 June 31 December
2019 2018 2018
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------ ------ ------------------ ---------- -----------
Non-current assets
Intangible assets 445 41 84
Property, plant and equipment 11 381,546 389,782 380,537
Deferred tax asset 607 599 559
------------------------------ ------ ------------------ ---------- -----------
382,598 390,422 381,180
------------------------------ ------ ------------------ ---------- -----------
Current assets
Inventories 19,854 17,515 14,190
Trade and other receivables 12 67,497 80,991 67,909
Cash and cash equivalents 302,701 219,025 295,566
390,052 317,531 377,665
------------------------------ ------ ------------------ ---------- -----------
Total assets 772,650 707,953 758,845
------------------------------ ------ ------------------ ---------- -----------
Current liabilities
Trade and other payables 13 (73,221) (83,181) (81,478)
Dividends payable (50,000) - -
Provisions - (4,155) (4,155)
(123,221) (87,336) (85,633)
------------------------------ ------ ------------------ ---------- -----------
Non-current liabilities
Other borrowings 14 (97,987) (97,380) (97,795)
Provisions (23,647) (24,448) (22,600)
(121,634) (121,828) (120,395)
------------------------------ ------ ------------------ ---------- -----------
Total liabilities (244,856) (209,164) (206,028)
------------------------------ ------ ------------------ ---------- -----------
Net assets 527,795 498,789 552,817
------------------------------ ------ ------------------ ---------- -----------
Equity
Share capital 15 229,430 229,430 229,430
Share premium account 15 870,728 920,728 920,728
Exchange translation reserve (3,830) (3,316) (3,818)
Accumulated losses (568,533) (648,053) (593,523)
------------------------------ ------ ------------------ ---------- -----------
Total equity 527,795 498,789 552,817
------------------------------ ------ ------------------ ---------- -----------
GULF KEYSTONE PETROLEUM LIMITED
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2019
Share Exchange
Share premium translation Accumulated Total
capital account reserve losses equity
----------------------
Notes $'000 $'000 $'000 $'000 $'000
---------------------- --------- -------- -------- ------------ ----------- ----------
Balance at 1 January
2018 (audited) 229,430 920,728 (3,018) (675,254) 471,886
--------------------------- ---- -------- -------- ------------ ----------- ----------
Net profit for the
period - - - 26,716 26,716
Other comprehensive
income for the period - - (298) - (298)
--------------------------- ---- -------- -------- ------------ ----------- ----------
Total comprehensive
income for the period - - (298) 26,716 26,418
Share-based payment
charge - - - 485 485
Balance at 30 June
2018 (unaudited) 229,430 920,728 (3,316) (648,053) 498,789
--------------------------- ---- -------- -------- ------------ ----------- ----------
Net profit for the
period - - - 53,173 53,173
Other comprehensive
income for the period - - (502) - (502)
--------------------------- ---- -------- -------- ------------ ----------- ----------
Total comprehensive
income for the period - - (502) 53,173 52,671
Share-based payment
charge - - - 1,357 1,357
Balance at 31 December
2018 (audited) 229,430 920,728 (3,818) (593,523) 552,817
--------------------------- ---- -------- -------- ------------ ----------- ----------
Net profit for the
period - - - 24,204 24,204
Other comprehensive
loss for the period - - (12) - (12)
---------------------- ------- -------- ------- --------- --------
Total comprehensive
(loss)/income for
the period - - (12) 24,204 24,192
Dividend - (50,000) - - (50,000)
Share-based payment
charge - - - 786 786
Balance at 30 June
2019 (unaudited) 229,430 870,728 (3,830) (568,533) 527,795
---------------------- ------- -------- ------- --------- --------
GULF KEYSTONE PETROLEUM LIMITED
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Note Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------------ ---- ------------- ------------- ------------
Operating activities
Cash generated in operations 10 56,566 64,708 161,483
Interest received 3,491 1,450 4,441
Interest paid (5,022) (5,000) (7,713)
Net cash generated in operating
activities 55,035 61,158 158,211
------------------------------------------ ---- ------------- ------------- ------------
Investing activities
Exits costs of Algerian operation (11,060) - -
Purchase of intangible assets (392) - (66)
Purchase of property, plant and
equipment (36,337) (2,635) (20,589)
Net cash used in investing activities (47,789) (2,635) (20,655)
------------------------------------------ ---- ------------- ------------- ------------
Financing activities
Issue costs of new notes - - (2,366)
Net cash from financing activities - - (2,366)
------------------------------------------ ---- ------------- ------------- ------------
Net increase in cash and cash equivalents 7,246 58,523 135,190
Cash and cash equivalents at beginning
of period 295,566 160,456 160,456
Effect of foreign exchange rate
changes (111) 46 (80)
------------------------------------------ ---- ------------- ------------- ------------
Cash and cash equivalents at end
of the period being bank balances
and cash on hand 302,701 219,025 295,566
------------------------------------------ ---- ------------- ------------- ------------
In early 2019, the Group paid $11.1 million in final settlement
of liabilities relating to its exit from activities in Algeria.
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019
1. General information
The Company is incorporated in Bermuda (registered address:
Cedar House, 3rd Floor, 41 Cedar Avenue, Hamilton 12, Bermuda). The
Company's common shares are listed on the Official List of the
United Kingdom Listing Authority and are traded on the London Stock
Exchange's Main Market for listed securities. The Company serves as
the holding company for the Group, which is engaged in oil and gas
exploration and production, operating in the Kurdistan Region of
Iraq.
2. Basis of preparation
The Annual Report and Accounts of the Group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. The condensed Group financial
statements for the six months period ended 30 June 2019 have been
prepared in accordance with International Accounting Standard (IAS)
34, "Interim Financial Reporting", as adopted by the European Union
and the Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority (FCA) in the United Kingdom as applicable to
interim financial reporting.
The condensed set of financial statements included in this half
yearly financial report have been prepared on a going concern basis
as the Directors consider that the Group has adequate resources to
continue operating for the foreseeable future.
The accounting policies adopted in the 2019 half-yearly
financial report are the same as those adopted in the 2018 annual
report and accounts, other than the implementation of new IFRS
reporting standards.
The financial information for the year ended 31 December 2018
does not constitute the Group's financial statements for that year,
but is derived from those accounts. The auditor's report on these
accounts was unqualified and did not include a reference to any
matters to which the auditor drew attention by way of emphasis of
matter.
Critical accounting judgements and key sources of estimation
uncertainty remain consistent with those disclosed in the 2018
annual report and accounts.
Adoption of new and revised accounting standards
As of 1 January 2019, a number of accounting standard amendments
and interpretations became effective, as noted in the 2018 Annual
Report and Accounts (pages 90 and 91). The adoption of these
amendments and interpretations has not had a material impact on the
financial statements of the Group for the six months ended 30 June
2019.
The Group has implemented IFRS 16 for the year commencing 1
January 2019. On adoption the Group has recognised lease
liabilities in relation to leases previously classified as
'operating leases' under the principles of IAS 17. These
liabilities have been measured at the present value of the
remaining lease payments, discounted using the interest rate
implicit in the lease (if available) or the Group's incremental
borrowing rate of 10.0 per cent.
In accordance with transition provisions in IFRS 16 the modified
retrospective approach has been adopted, with the cumulative effect
of initially applying the new standard recognised on 1 January
2019. Comparative figures for 2018 have not been restated, as
permitted under the specific transaction provisions in the
standard.
The financial impact of this adoption has been to increase
assets by $0.4 million and liabilities by $0.4m. The effect on the
Group's income statement was immaterial.
Going concern
The Group continues to closely monitor and manage its liquidity
risk. Cash forecasts are regularly produced and sensitivities run
for different scenarios. The Group has $263.6 million of cash at 9
September 2019. The Group's forecasts, taking into account the
risks applicable to the Group, show that the Group will be able to
have sufficient financial headroom for the twelve months from the
date of approval of the half year financial statements.
Based on the analysis performed, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the half year financial statements.
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
3. Dividend
At the Company's annual general meeting on 21 June 2019, the
shareholders approved the distribution of a total cash dividend of
$50 million for the year ended 31 December 2018. The first tranche
of c.$17 million was paid in July 2019, with the second tranche of
c.$33 million to be paid on 4 October 2019.
The initial tranche paid was 5.68p per common share, which is
equivalent to 7.26 US cents per common share.
The distribution is eligible under Bermudan Law based on the
solvency of the Group. As the Group has negative retained earnings
this is considered a return of capital and accordingly is presented
as a deduction from share premium.
4. Segment information
For the purposes of resource allocation and assessment of
segment performance, the Group is organised into three regional
business units - Algeria, Kurdistan and the United Kingdom. These
geographical segments are the basis on which the Group reports its
segmental information. The chief operating decision maker is the
Chief Executive Officer. He is assisted by the Chief Financial
Officer and senior management team.
The accounting policies of the reportable segments are
consistent with the Group's accounting policies.
Each segment is described in more detail below:
- Kurdistan Region of Iraq: the Kurdistan segment consists of
the Shaikan block and the Erbil office, which provides support to
the operations in Kurdistan.
- United Kingdom: the UK segment provides geological,
geophysical and engineering services to other segments of the
Group; and
- Algeria: the Algerian segment consists of the Group's discontinued operations in Algeria.
The Corporate segment manages activities that serve more than
one segment and represents all overhead and administration costs
incurred that cannot be directly linked to one of the above
segments.
Algeria Kurdistan Corporate Total
30 June 2019 (unaudited) $'000 $'000 $'000 $'000
------------------------- ------- ---------- --------- -------
Revenue
Oil sales - 94,063 - 94,063
Transportation revenue - 1,543 - 1,543
-------------------------
Total revenue - 95,606 - 95,606
------------------------- ------- ---------- --------- -------
Profit/ (loss) from
operations - 30,173 (3,986) 26,187
Finance revenue - 3,088 540 3,628
Finance cost - (336) (5,213) (5,549)
Other gains and losses - 14 (126) (112)
Profit/ (loss) before
tax - 32,939 (8,785) 24,154
Tax credit - - 50 50
Profit/ (loss) after
tax - 32,939 (8,735) 24,204
-------------------------
Total assets - 684,665 87,985 772,650
------------------------- ------- ---------- --------- -------
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
4. Segment information continued
Algeria Kurdistan Corporate Total
30 June 2018 (unaudited) $'000 $'000 $'000 $'000
------------------------- ------- ---------- --------- -------
Revenue
Oil sales - 111,960 - 111,960
Transportation revenue - 4,211 - 4,211
------------------------- ------- ---------- --------- -------
Total revenue - 116,171 - 116,171
------------------------- ------- ---------- --------- -------
Profit/ (loss) from
operations - 31,003 (4,293) 26,710
Finance revenue - 1,132 318 1,450
Finance cost - (359) (5,286) (5,645)
Other gains and
losses 3,658 43 292 3,993
-------------------------
Profit/ (loss) before
tax 3,658 31,819 (8,969) 26,508
Tax credit - - 208 208
Profit/ (loss) after
tax 3,658 31,819 (8,761) 26,716
-------------------------
Total assets 26 635,868 72,059 707,953
------------------------- ------- ---------- --------- -------
Algeria Kurdistan Corporate Total
31 December 2018
(audited) $'000 $'000 $'000 $'000
----------------------- ------- -------------------- --------- --------
Revenue
Oil sales - 243,711 - 243,711
Transportation revenue - 6,843 - 6,843
-----------------------
Total revenue - 250,554 - 250,554
----------------------- ------- -------------------- --------- --------
Profit/ (loss) from
operations (153) 88,139 (9,779) 78,207
Finance revenue - 3,713 728 4,441
Finance cost - (723) (13,150) (13,873)
Other gains and losses 10,205 39 681 10,925
Profit/ (loss) before
tax 10,052 91,168 (21,520) 79,700
Tax credit - - 189 189
Profit/ (loss) after
tax 10,052 91,168 (21,331) 79,889
----------------------- ------- -------------------- --------- --------
Total assets - 686,636 72,209 758,845
----------------------- ------- -------------------- --------- --------
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
5. Revenue
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------- ------------- ------------- ------------
Oil sales 94,063 111,960 243,711
Transportation revenue 1,543 4,211 6,843
------------- ------------- ------------
95,606 116,171 250,554
============= ============= ============
The Group accounting policy for revenue recognition is set out
in its 2018 annual report, with revenue recognised on a
cash-assured basis.
During the six months period ended 30 June 2019, the
cash-assured values recognised as oil sales were the Group's share
of the invoiced revenue amounting to $94.1 million (H1 2018: $112.0
million; FY 2018: $227.5 million). There were no MNR liability
offset revenues in the period (H1 2018: nil; FY 2018: $16.2
million) The oil sales price was calculated using the monthly Brent
price less an average discount of $21.69 (H1 2018: $22.8; FY 2018:
$22.3) per barrel for quality, pipeline tariff and transportation
costs.
From 15 November 2017 onwards, the Group has performed
transportation services in respect of the KRG's share of export oil
sales. It recharges all these transportation costs at nil mark-up
to KRG.
Interest revenue has been presented as part of net finance costs
(note 7)
6. Cost of Sales
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------- ------------- ------------- ------------
Oil production costs 25,663 38,335 69,479
Depreciation of oil & gas properties 32,358 34,760 70,744
Transportation costs 3,229 8,810 14,311
------------- ------------- ------------
61,250 81,905 154,534
============= ============= ============
Oil production costs represent the Group's share of gross
production expenditure for the Shaikan field for the period and
include capacity building charges of $7.1 million (H1 2018: $8.3
million; FY 2018: $17.0 million) and Shaikan PSC production bonus
of $nil (H1 2018: $16.0 million; FY 2018: $16.0 million). The
production bonus became payable in H1 2018 when the gross
production milestone of 50 MMbbl was achieved, there are no further
production bonuses envisaged under the PSC.
A unit-of-production method, based on full entitlement
production, commercial reserves and costs for Shaikan full field
development, has been used to calculate the DD&A charge for the
period. Commercial reserves are proven and probable ("2P")
reserves, estimated using standard recognised evaluation
techniques.
The breakdown of the transportation costs comparative for the
period to June 2018 has been restated by $4.6million to accurately
show the full transportation costs, as part of this had previously
been shown in oil production costs.
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
7. Finance costs
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------ ------------- ------------- ------------
Notes interest charged during the
period (Note 14) (5,192) (5,285) (13,150)
Finance lease Interest (21) - -
Unwinding of discount on provisions (336) (360) (723)
------------- ------------- ------------
Total Finance costs (5,549) (5,645) (13,873)
Finance Revenue 3,628 1,450 4,441
------------- ------------- ------------
Net finance costs (1,921) (4,195) (9,432)
============= ============= ============
8. Other (losses)/gains
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------ ------------- ------------- ------------
Exchange (losses)/gains (112) 344 710
Other gains - 3,737 10,215
(112) 4,081 10,925
============= ============= ============
Other gains in prior periods consist of the release of
decommissioning liability and reduction of accruals relating to
exiting the Algerian project.
9. Profit per share
The calculation of the basic and diluted loss per share is based
on the following data:
Six months Six months Year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------- ------------- ------------- ------------
Profit
Profit after tax for the purposes
of basic and diluted loss per share 24,204 26,716 79,889
Weighted average number of shares
used:
Basic ('000) 229,317 229,317 229,317
Diluted ('000) 240,564 230,761 235,845
------------------------------------- ------------- ------------- ------------
The average number of ordinary shares in issue excludes shares
held by Employee Benefit Trustee ("EBT") and the Exit Event Trustee
of 0.1 million (H1 2018: 0.1 million; FY 2018: 0.1 million)
The diluted number of ordinary shares outstanding, including
share options, is calculated on the assumption of conversion of all
potentially dilutive ordinary shares. As at 30 June 2019, there
were 0.3 million share options (H1 2018: 0.3 million; FY 2018: 0.3
million) that were excluded from the calculation of diluted
earnings, because they were anti-dilutive.
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
10. Reconciliation of profit from operations to net cash
generated in operating activities
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------------- ---------- ---------- ------------
Profit from operations 26,187 26,622 78,207
Adjustments for:
Depreciation of property, plant and
equipment 32,769 34,924 71,081
Amortisation of intangible assets 31 22 46
Other gains or losses - 694 -
Share-based payment expense 756 485 1,785
(Increase)/ decrease in inventories (5,664) (325) 3,000
(Increase)/decrease in receivables 549 (19,236) (4,330)
Increase/(decrease) in payables 1,938 21,522 11,694
------------------------------------------- ---------- ---------- ------------
Net cash generated in operating activities 56,566 64,708 161,483
------------------------------------------- ---------- ---------- ------------
11. Property, plant and equipment
Oil and Gas Fixtures Total
Assets and $'000
$'000 Equipment
$'000
----------------------------------------- ----------- ---------- ----------
Year ended 31 December 2018
Opening net book value 416,908 565 417,473
Additions 6,947 278 7,225
Depreciation charge (34,760) (164) (34,924)
Foreign currency translation differences - 8 8
----------- ---------- ----------
Net book value at 30 June 2018 389,095 687 389,782
Additions 28,768 366 29,134
Depreciation charge (35,984) (173) (36,157)
Revisions to decommissioning charge (2,229) - (2,229)
Foreign currency translation differences - 7 7
Net book value at 31December 2018 379,650 887 380,537
=========== ========== ==========
Cost 600,048 6,201 606,249
Accumulated depreciation (220,398) (5,314) (225,712)
----------- ---------- ----------
Net book value at 31 December 2018 379,650 887 380,537
=========== ========== ==========
Period ended 30 June 2019
Opening net book value 379,650 887 380,537
Additions 32,432 605 33,037
Revision to decommissioning asset 710 - 710
Depreciation charge (32,358) (411) (32,769)
Foreign currency translation differences - 31 31
Closing net book value 380,434 1,112 381,546
========= ======= =========
At 30 June 2019
Cost 633,190 6,837 640,027
Accumulated depreciation (252,756) (5,725) (258,481)
--------- ------- ---------
Net book value 380,434 1,112 381,546
========= ======= =========
The additions to the Shaikan asset amounting to $32.4 million
during the period include the costs of tubing changeovers, well
civils and drilling, spur pipeline, various studies and production
facilities debottlenecking projects.
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
12. Trade and other receivables
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------- ----------- ----------- ------------
Trade receivables 59,737 77,109 61,251
Other receivables 6,852 3,190 5,405
Prepayments and accrued income 908 692 1,253
----------- ----------- ------------
67,497 80,991 67,909
=========== =========== ============
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
13. Trade and other payables
31 December
30 June 2019 30 June 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------- ------------ ------------ -----------
Trade payables 3,275 2,859 11,857
Other payables 26,907 38,189 19,552
Finance Leases 211 - -
Accrued expenses 42,828 42,133 50,069
------------ ------------
73,221 83,181 81,478
============ ============ ===========
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs.
There is $4.4 million interest payable included in accrued
expenses as at 30 June 2019 (30 June 2018: $2.0 million. FY 2018:
$4.4 million)
As at 30 June 2019, other payables included $10.0 million (H1
2018: $10.0 million; FY 2018: $10.0 million) in relation to the
Sheikh Adi PSC bonus that was payable on the declaration of
commerciality. It is likely that this liability will be offset
against unrecognised Shaikan revenue arrears, in accordance with
the principles agreed under the Bilateral Agreement between the
Group and the MNR. As at 30 June 2018, the other payables balance
also included $16.2 million of payments received in excess of the
Group's revenue entitlements from the MNR under the bilateral
Agreement. In December 2018, this amount was transferred to revenue
as an offset of past revenue arrears.
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
14. Other borrowings
In July 2018, the Group redeemed $100 million Reinstated Notes,
issued in October 2016, at a price equal to 100 per cent of the
principal, plus accrued and unpaid interest on the Notes up to and
including the Redemption Date. The Group also successfully
completed the private placement of a 5-year senior unsecured $100
million bond issue (the "New Notes"). The unsecured New Notes are
guaranteed by Gulf Keystone Petroleum International Limited and
Gulf Keystone Petroleum (UK) Limited, two of the Company's
subsidiaries, and their key terms are summarised as follows:
- maturity date is 25 July 2023;
- at any time prior to maturity, the New Notes are redeemable in
part or full with a prepayment penalty;
- the interest rate is 10% per annum with semi-annual payment dates; and
- the Company is permitted to raise up to $200 million of
additional indebtedness at any time on market terms to fund capital
and operating expenditure.
The liabilities associated with Reinstated Notes are presented
in the following tables:
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------------------------- ---------- ---------- -----------
Liability at the beginning of the period 102,156 99,084 99,084
Interest charged during the period 5,192 5,285 13,150
Interest paid during the period (5,000) (5,000) (7,713)
Exchange or redemption of Reinstated
notes - - (100,000)
Issue of new notes at fair value - - 97,635
---------- ---------- -----------
Liability at the end of period 102,348 99,369 102,156
========== ========== ===========
Liability reported in:
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------ ---------- ---------- -----------
Current liabilities 4,361 1,989 4,361
Non-current liabilities 97,987 97,380 97,795
102,348 99,369 102,156
========== ========== ===========
The New Notes are traded on the Norwegian Stock Exchange and the
fair value at the prevailing market price as at the close of
business on the reporting date was:
Market price 30 June
2019
$'000
New Notes $1.04663 104,663
As of 30 June 2019, the Group's remaining contractual liability
comprising principal and interest based on undiscounted cash flows
at the maturity date of the Reinstated Notes is as follows:
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------- ---------- ---------- -----------
Within one year 10,000 10,000 10,000
Within two to five years 130,639 125,000 135,639
140,639 135,000 145,639
========== ========== ===========
GULF KEYSTONE PETROLEUM LIMITED
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019 continued
15. Share capital
Common shares Share Share
No. of shares Amount capital premium
000 $'000 $'000 $'000
--------------------------------- ------------- --------- ------------------- --------
Issued and fully paid
Balance 1 January 2019 (audited) 229,430 1,150,158 229,430 920,728
Dividend (see note 3) - - - (50,000)
Balance 30 June 2019 (unaudited) 229,430 1,150,158 229,430 870,728
------------- --------- ------------------- --------
16. Contingent Liabilities
The Group has a contingent liability of $27 million (2018: $27
million) in relation to the proceeds from the sale of test
production in the period prior to the approval of the Shaikan Field
Development Plan in July 2013. The Shaikan PSC does not appear to
address expressly any party's rights to this pre-Development Plan
petroleum. This suggests strongly that there must have been some
other agreement, understanding or arrangement between GKP and the
KRG as to how this pre-Development Plan petroleum would be lifted
and sold. The sales were made based on sales contracts with
domestic offtakers which were approved by the KRG. The Group
believes that the receipts from these sales of pre-Development Plan
petroleum are for the account of the Contractor (GKP and MOL),
rather than the KRG and accordingly recorded them as test revenue
in prior years. However, the KRG has requested a repayment of these
amounts and the Group is currently involved in negotiations to
resolve this matter. The Group has received external legal advice
and does not consider that a probable material payment is payable
to the KRG. This contingent liability forms part of the ongoing
Shaikan PSC amendment negotiations and it is likely that it will be
settled as part of those negotiations.
17. Events after the balance sheet date
In July 2019 the Group announced its intention to commence a
share buyback programme using the Group's existing cash resources
to make market purchases of Gulf Keystone common shares for a
maximum consideration of
$25.0 million.
The first stage of that programme to purchase Gulf Keystone
shares for an initial amount of $15.0 million was initiated on 8
July 2019 and completed on 30 August. The company is now resuming
the buyback for an additional $10.0 million.
GULF KEYSTONE PETROLEUM LIMITED
GLOSSARY (See also the glossary in the 2018 Annual Report and
Accounts)
Bilateral Agreement the bilateral agreement between GKPI and
the MNR dated 16 March 2016
bopd barrels of oil per day
--------------------------------------------------
capex any expenditure or obligation in respect
of expenditure which, in accordance with
accounting principles applied by the Company
in the preparation of its audited accounts,
is treated as capital expenditure (and including
the capital element of any expenditure or
obligation incurred in connection with any
finance lease)
--------------------------------------------------
Crude Oil Sales Agreement the Shaikan crude oil export sales agreement
valid between 1 January 2019 and 31 December
2020
--------------------------------------------------
CSR corporate social responsibility
--------------------------------------------------
DD&A depreciation, depletion and amortisation
--------------------------------------------------
EBITDA earnings before interest, tax, depreciation
and amortisation
--------------------------------------------------
EBT employee benefit trust
--------------------------------------------------
ESG Environmental Social Governance
--------------------------------------------------
ESP electrical submersible pump
--------------------------------------------------
FDP Field Development Plan
--------------------------------------------------
First Shaikan Amendment First amendment to the Shaikan PSC executed
on 1 August 2010.
--------------------------------------------------
G&A general and administrative
--------------------------------------------------
Group Gulf Keystone Petroleum Limited and its
subsidiaries
--------------------------------------------------
HSSE health, safety, security and environment
--------------------------------------------------
KRG Kurdistan Regional Government
--------------------------------------------------
LTI lost time incident
--------------------------------------------------
MNR Ministry of Natural Resources of the Kurdistan
Regional Government
--------------------------------------------------
MOL Kalegran B.V. (a subsidiary of MOL Hungarian
Oil & Gas plc)
--------------------------------------------------
New Notes the $100 million unsecured, guaranteed notes
issued on 25 July 2018 by GKP with a maturity
date of 25 July 2023
--------------------------------------------------
PF-1 Production Facility 1
--------------------------------------------------
PF-2 Production Facility 2
--------------------------------------------------
PSC production sharing contract
--------------------------------------------------
Second Shaikan Amendment the second proposed amendment to the Shaikan
PSC formally implementing the terms of the
Bilateral MNR Agreement (including the First
Shaikan Amendment)
--------------------------------------------------
Shaikan PSC the Production Sharing Contract for the
Shaikan block between the Kurdistan Regional
Government of Iraq and Gulf Keystone Petroleum
International Limited and Texas Keystone
Inc. and Kalegran Limited (a subsidiary
of MOL) signed on 6 November 2017 as amended
by subsequent agreements
--------------------------------------------------
TD total depth
--------------------------------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR CKCDNKBKBCCK
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September 10, 2019 02:01 ET (06:01 GMT)
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