TIDMGKP
RNS Number : 2298X
Gulf Keystone Petroleum Ltd.
27 August 2015
Not for release, publication or distribution, directly or
indirectly, in whole or in part in or into the United States or any
jurisdiction other than the United Kingdom and Bermuda where to do
so would constitute a contravention of the relevant laws or
regulations of such jurisdiction. This announcement (and the
information contained herein) does not contain or constitute an
offer to sell or the solicitation of an offer to purchase, nor
shall there be any sale of securities in any jurisdiction where
such offer, solicitation or sale would constitute a contravention
of the relevant laws or regulations of such jurisdiction.
27 August 2015
Gulf Keystone Petroleum Ltd. (LSE: GKP)
("Gulf Keystone" or "the Company")
Half Year Report for the six months ended 30 June 2015
Gulf Keystone, an independent oil and gas exploration and
production company and operator of the world class Shaikan field in
the Kurdistan Region of Iraq, today announces its results for the
six months ended 30 June 2015.
Operational highlights
Security situation and HSE performance
-- All operations in the Kurdistan Region of Iraq remain safe
and secure with no significant HSE incidents during the period
Shaikan (75% working interest; Operator)
Production
-- Strong production performance resulted in gross production of
4.7 million barrels in the period to 30 June 2015, an increase of
102% on H1 2014
-- A new daily production record of 45,000 barrels of oil per
day (bopd) was established on 16 August 2015 with the current
average daily production in excess of 40,000 bopd
-- Plant availability at the Shaikan production facilities (PF-1
and PF-2) for 2015 to mid-August has averaged 98.2%, which should
allow the Company to achieve its previously announced daily
production average target of 30,000-34,000 bopd for Full-Year
("FY") 2015 and 36,000-40,000 bopd for H2 2015, subject to offtake,
which continues to be variable
Sales and payments
-- In line with the announced diversified marketing strategy
aimed at achieving more flexibility, Shaikan production is
currently being delivered to export markets through two principal
routes. Approximately 20,000 bopd is delivered to the Turkish coast
by truck and 20,000 bopd is delivered into the export pipeline
-- Under a direct six month contract with a domestic off-taker
established in mid-May 2015, the Shaikan crude oil delivered by
truck to the Turkish coast has to date resulted in total cash
receipts of US$19.3 million gross (US$15.4 million net to Gulf
Keystone)
-- In July 2015, at the request of the Kurdistan Regional
Government's ("KRG") Ministry of Natural Resources ("MNR"), the
Company commenced trucking Shaikan crude oil a distance of 120 km
to Fyshkhabour on the Turkish border for injection into the export
pipeline to Ceyhan in Turkey
-- Further to the KRG statement on 3 August 2015 regarding
expected regular payments from September 2015 for oil exports to
the exporting international oil companies, Gulf Keystone
anticipates regular payments for pipeline export sales to
complement revenues from domestic offtake
-- Export deliveries against the pre-payment of US$26 million
gross (US$20.8 million net to Gulf Keystone) received for Shaikan
crude oil sales in February, were completed in May 2015
Sheikh Adi (80% working interest; Operator)
-- Appraisal report for the Sheikh Adi commercial discovery has
been completed and work has commenced on a Field Development
Plan
Financial highlights
-- Cash and cash equivalents at 25 August 2015 of US$63.9
million, including US$32.5 million restricted to meet debt service
obligations
-- Revenues of US$30.1 million achieved for H1 2015 (1H14:
US$18.7 million; FY14: US$38.6 million), an increase of 61% on H1
2014
-- Loss after tax for H1 2015 of US$77.7 million (1H14: US$29.8
million; FY14: US$248.2 million)
-- Unbooked revenues in the region of US$117 million from
commencement of commercial production to 30 June 2015
-- Total arrears net to Gulf Keystone of US$283 million as of 30
June 2015, including unbooked revenues and past costs due from the
Shaikan Third Party and Government Options, subject to audit
-- Cash spend on capital items in H1 2015 US$28.8 million, a
reduction of 74% compared with H1 2014
-- Placing of 85.9 million shares, raising gross proceeds of US$40.7 million in March 2015
-- Book Equity Ratio Put Option, a restrictive condition,
successfully removed in April 2015 from the US $250 million 13.0
per cent Guaranteed Notes due 2017
Corporate developments
-- An active search process to appoint a number of Non-Executive
Directors to the Board continues, led by Andrew Simon,
Non-Executive Chairman
-- Management team strengthened with the appointment of Nadhim
Zahawi as Chief Strategy Officer
-- Further to the Strategic Update of 25 February 2015,
discussions are ongoing with a number of parties in relation to
possible asset transactions or corporate sale
Outlook
-- Continue safe and secure operations with the focus on
achieving commercial sustainability of the business
-- Continue to manage expenditure in a responsible and prudent
manner and, in line with the KRG statement on 3 August 2015,
anticipate the establishment of a regular payment cycle for all
crude oil export sales from September 2015, with arrears being
addressed from early 2016 -- Following the establishment of a
regular payment cycle for all oil sales and the arrears, progress
from the current production levels of in excess of 40,000 bopd to
the Shaikan Phase 1 development target of 100,000 bopd -- Complete
the Strategic Review process
Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:
"From an operational perspective Shaikan is continuing to
perform strongly. However, there remain a number of challenges for
producing operators in the region. Nevertheless, we are making good
progress on all fronts at Gulf Keystone and are cautiously
optimistic about the future. Chiefly, we are confident that our
host government will be able to deliver on their recent pledge to
establish a regular payment cycle for our crude from next month,
and will start addressing the amount owed in arrears from 2016.
Combined with revenue from our domestic off-taker agreement, this
will provide us with the necessary means to recommence investment
into the field and progress toward further increasing production,
and subsequently value, for all stakeholders."
A live webcast of the presentation to analysts and investors
will be available at 10:30am (BST) today on the Company's website
www.gulfkeystone.com.
Enquiries:
Gulf Keystone Petroleum: +44 (0) 20 7514 1400
Jón Ferrier, CEO
Sami Zouari, CFO
Anastasia Vvedenskaya, Head of Investor
Relations +44 (0) 20 7514 1411
Celicourt Communications: +44(0) 20 7520 9266
Mark Antelme
Jimmy Lea
or visit: www.gulfkeystone.com
Notes to Editors:
-- Gulf Keystone Petroleum Ltd. (LSE: GKP) is an independent oil
and gas exploration and production company with operations in the
Kurdistan Region of Iraq.
-- Gulf Keystone Petroleum International (GKPI) holds Production
Sharing Contracts for four exploration blocks in Kurdistan, the
Shaikan, Sheikh Adi, Ber Bahr and Akri-Bijeel blocks.
-- GKPI is the operator of the Shaikan block, which is a major
commercial discovery, with a working interest of 75% and is
partnered with MOL Kalegran Limited (a 100% subsidiary of MOL
Hungarian Oil and Gas plc.) and Texas Keystone Inc., which have
working interests of 20% and 5% respectively.
-- Following the establishment of a regular payment cycle for
all oil sales and arrears, Gulf Keystone plans to move into the
large-scale phased development of the Shaikan field targeting
100,000 bopd of production capacity during Phase 1 of the Shaikan
Field Development Plan.
Disclaimer
This announcement contains certain forward-looking statements.
These statements are made by the Company's 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 uncertainties, including both economic
and business factors, underlying such forward-looking information.
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.
GULF KEYSTONE PETROLEUM LIMITED
Half Year Report for the six months ended 30 June 2015
Chairman's Statement
Gulf Keystone has made significant progress on a number of its
key objectives since the beginning of 2015, despite the continuing
challenging conditions in the region where we operate, and a
depressed oil price. The average price for oil has fallen
approximately 57% compared with this time in 2014. Geopolitics and
the oil price are issues over which we have little direct
influence; however, in the areas under our control we have made
progress notwithstanding the weak market environment. Despite the
above-ground challenges, over the reporting period and since, we
have consistently delivered an operational performance of which any
company in the sector would be proud. Production has continued
throughout the period; it is important to not lose sight of the
fact that the Shaikan field continues to live up to its reputation
as a world class asset.
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
There have been a number of changes in the leadership team. John
Gerstenlauer, the previous CEO, left the business at the Annual
General Meeting in July. John was instrumental in bringing our
major asset, Shaikan, to a production rate of 40,000 bopd. We thank
him for his considerable contribution over the last seven years. In
June he was replaced by Jón Ferrier, an accomplished international
oil company executive with considerable experience in the region,
and specifically in the Kurdistan Region with Maersk Oil. He is
already making a considerable impact on the business and I am
delighted that he had the confidence in our future to join us. Jón
will update you on recent developments in his management team.
The last few months has also seen changes on your Board. The
previous Chairman stepped down in March and a further four
Non-Executive Directors have left the Board. An active search
process to appoint a number of Non-Executive Directors to the Board
continues. It is our intention to operate with a smaller, lower
cost, but high quality Board with relevant oil industry, regional
and corporate experience. I will continue to oversee the rebuilding
of the Board and to provide stability and continuity for our
stakeholders.
In keeping with our objective of achieving lower operating costs
for the business and in line with our Remuneration Policy, we will
be reducing the Non-Executive Directors' fees by 25% and reviewing
the Executive Directors' salaries on a regular basis, under the
leadership of our new CEO.
Finally, we are totally committed to rebuilding the trust of our
shareholders and all other stakeholders in the business, especially
in the current climate of the depressed share price. The wellbeing
of all our stakeholders, our host Government, our hard working
colleagues and our shareholders are all inextricably linked. I
would like to thank the MNR for their support at what is a most
demanding time for the region, our shareholders for their
forbearance, as well as our highly dedicated employees both in the
Kurdistan Region and the UK.
You have my and my Board's commitment to meeting all of our
stakeholders' expectations.
Andrew Simon
Chairman
CEO's Review
Having joined Gulf Keystone in June this year, I am pleased to
be able to present my first CEO review. With the benefit of three
months in the job, I am very encouraged by what I have seen. The
calibre of people both in London and in the Kurdistan office and
field operations has greatly impressed me. At every level, across
every department, there is the highest degree of professionalism
and a "can do" approach which is ensuring the Company's steady
progress despite the challenges we face. In addition, and as you
will read, having now spent time on the ground, the operations are
in good order and performing consistently.
My management team, consisting of Sami Zouari, CFO, who was
appointed in early 2015, Tony Peart, Legal and Commercial Director,
and John Stafford, Vice President Operations, has most recently
been strengthened by the appointment of Nadhim Zahawi as Chief
Strategy Officer. He brings a depth and breadth of regional
knowledge that will be of great value to the Company as we move
forward. Reporting to me, he will be responsible for evaluating and
advising me and the Board on strategic options for the Company.
HSE and Operations
My chief priority is the welfare of our employees, contractors,
partners and communities neighbouring our operations. This is not
an area where there is any margin for complacency and we will
continue to drive the highest industry standards in order to
maintain safe and reliable operations. I am pleased to state that
our HSE performance over the period has been strong with no
significant HSE incidents occurring. Despite the regional
instability, all of our operations remain safe and secure and, as
expected, this dimension of our business will continue to be given
the appropriate amount of care and attention from myself and my
management team and Board colleagues.
Over the period we have seen strong production growth. This is
despite the continuing and well reported adverse market conditions,
which the whole industry currently faces. Our gross production in
H1 2015 was 4.7 million barrels, representing an increase of 102%
over the same period in 2014.
Plant availability at the Shaikan production facilities (PF-1
and PF-2) for 2015 to mid-August has averaged 98.2%, which should
allow the Company to achieve its previously announced daily
production average target of 30,000-34,000 bopd for FY 2015 and
36,000-40,000 bopd for H2 2015, subject to offtake, which continues
to be variable.
Currently, daily production levels are in excess of 40,000 bopd
and a new daily production record of 45,000 bopd was established on
16 August 2015.
The first third-party evaluation of the Company's Reserves,
Contingent Resources and Prospective Resources for the Shaikan
field and its other petroleum interests in the Kurdistan Region of
Iraq was issued in March 2014. In light of the new reservoir data
accumulated since March 2014, Gulf Keystone has commissioned ERC
Equipoise Limited to update its Competent Person's Report. This
report is currently planned to be finalised by the end of Q3
2015.
Sales and Payments
Whilst we continue to make important inroads towards the
establishment of a regular payment cycle, the marketing of our
crude has never been more important for the sustainability of our
business. Through the continuing dialogues with the MNR, we have
been able to adopt a diversified approach to our marketing strategy
aimed at achieving as much flexibility as possible in selling and
getting paid for every barrel we produce.
Export deliveries by truck, against a pre-payment of US$26
million gross (US$20.8 million net to Gulf Keystone), received for
Shaikan crude oil sales in February, were completed in early May
2015. Current production, which is in excess of 40,000 bopd, is
being delivered for export through two principal routes.
Approximately 24,000 bopd is being delivered to the Turkish coast
by truck and the remainder delivered for injection into the export
pipeline.
Under a direct six month contract with a domestic off-taker
established in mid-May 2015, the Shaikan crude oil delivered by
truck to the Turkish coast has generated total cash proceeds of
US$19.3 million gross (US$15.4 million net to Gulf Keystone) to
date.
In parallel and at the request of the MNR, in July 2015 the
Company commenced trucking Shaikan crude oil a distance of 120 km
to Fyshkhabour on the Turkish border for injection into the export
pipeline to Ceyhan in Turkey. This marketing route is expected to
prevail in the future on the assumption of better netbacks to the
Company and subject to regular payments.
Further to the KRG statement on 3 August 2015 regarding expected
regular payments from September 2015 for oil exports to the
exporting international oil companies, we now anticipate a regular
payment cycle for pipeline export sales to complement revenues from
domestic offtake. During this extraordinary period, cash payments
received for exports to date have not followed the strict terms of
the Production Sharing Contract ("PSC"). We anticipate a future
reconciliation against the terms of the PSC as revenue arrears are
addressed.
The Company has estimated, subject to audit, arrears amounts
outstanding of US$283 million at 30 June 2015. These amounts are
comprised of US$117 million unbooked revenues, $76 million of past
costs associated with the Shaikan Government Option and US$90
million past costs associated with the Shaikan Third party option.
The KRG has indicated that it plans to address these arrears from
2016, payment of which will be the key to unlocking further
investment and realising the potential of our assets.
Development Plans
Looking ahead, work has now commenced on an update to the Field
Development Plan (FDP) for the Shaikan field, which was originally
approved by the MNR in June 2013. This is driven by the recent
production data and will mainly focus on the Jurassic reservoir and
the Company's evolving understanding of its recovery mechanism. It
is currently our expectation that this will lead to a revision in
the location and a reduction of the number of required development
wells.
We currently expect the Shaikan FDP update will be completed by
the end of 2015 when it will be submitted to the MNR for review and
their approval. Meanwhile, Front End Engineering and Design (FEED)
work for the next stage of the Shaikan development is progressing
to bring production from 40,000 bopd towards our Phase 1
development target of 100,000 bopd. The FEED will be followed by
the award of an EPC tender once a regular payment cycle for oil
sales has been established and arrears have been addressed.
Beyond Shaikan, work continues on the remainder of the Company's
portfolio of operated assets. At Sheikh Adi, the appraisal report
for this commercial discovery has been completed and submitted to
the MNR. Work has now commenced on a Field Development Plan for the
field, which is expected to be completed by the end of the year.
This is a very exciting satellite development adjacent to Shaikan
and its upside potential remains the focus of the current
study.
Non-operated Assets
At Ber Bahr (40% working interest), Genel Energy plc, the
operator, have plans to drill the first appraisal well on the
block. This is expected to help refine resource estimates for the
field and potential development concepts. These plans are subject
to the establishment of a stable payment for export crude oil sales
in 2016.
At Akri-Bijeel (20% working interest), MOL Hungarian Oil and Gas
plc., the operator, have recently commissioned a CPR, which will
inform the operator's future work programme on the block. As
previously announced, we are progressing to an orderly exit of the
Company's 20% working interest in the block.
Outlook and Strategic Priorities
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
With plant availability at the Shaikan production facilities
(both PF-1 and PF-2) currently averaging 98.2%, we remain on track
to achieve the previously announced daily production average target
of 30,000-34,000 bopd for FY 2015, and 36,000-40,000 bopd for 2H
2015.
We welcome the KRG's statement on 3 August 2015, following which
the Company looks forward to the establishment of a regular payment
cycle for all crude oil export sales from September 2015, and with
arrears being addressed from early 2016. Meanwhile, we contain
expenditure to that required for safe and reliable production
operations and to develop concepts for future expansion.
The anticipated establishment of a regular payment cycle will
help to strengthen the Company's financial position and, together
with arrears payments, will unlock further investment.
Upon the establishment of a regular payment cycle and arrears
being addressed, we look forward to moving towards recommencing our
investment programme in order to achieve our goal of 100,000 bopd
at the end of Phase 1 of the Shaikan development. In the absence of
a regular payment cycle Shaikan will not be able to move forward
with further development and in the future, production will
decline.
The strategic review process, launched in February 2015,
continues. Discussions are on-going with a number of interested
parties in relation to possible asset transactions or a corporate
sale. We will issue further updates in due course.
In conclusion, since joining the Company, I have been clear on
what my strategic priorities are: Safe and Reliable Operations; and
the Commercial Sustainability of the business. My third priority is
Effective Stakeholder Engagement, where increased efforts are
principally focused on the Kurdistan Region - including the MNR,
our industry partners and, of course, our shareholders.
I am pleased to be able to lead a strong and highly experienced
team, fully aligned with shareholders and soon to be supported by
an effective Board.
Jón Ferrier
Chief Executive Officer
Financial Review
The first half of 2015 has been a period of operational
consolidation for Gulf Keystone as well as one of remaining patient
on payment whilst our host government continues to address the
difficult challenges it faces. The Group has focused its efforts on
managing expenditure in a responsible and prudent manner alongside
continuing a constant dialogue with the MNR. We welcome the
announcement of the MNR on 3 August 2015 regarding the
establishment of a regular payment cycle for crude oil export
sales, and expect that once established, this regular payment cycle
will make a significant difference to the Group's financial
position and outlook.
Operating Results
Gross production for the first six months of 2015, all from the
Shaikan field, totalled just over 4.7 million barrels with average
daily production being 26,000 bopd. Gross liftings for the period
were just under 4.7 million barrels, of which 3.8 million barrels
were lifted for the export market and 0.9 million barrels lifted by
a domestic off-taker.
In the absence of full pricing information and a lack of regular
payments for export sales, the Group continues to recognise revenue
on a cash receipts basis for sales to the export market. Consistent
with year-end, revenue received from domestic offtake is recognised
on an accruals basis. However, only 50% of gross sales proceeds
have been recognised for sales from domestic offtake, consistent
with the cash received by the Shaikan contractors and marginally
(2.2%) below the PSC entitlement, net of royalty. Revenue realised
for the period was $30.1 million (1H14: $18.7 million), of which,
$20.8 million arose from export sales (1H14: $16.2 million) and
$9.3 million from domestic offtake (1H14: $2.5 million). All
revenues arise from the Shaikan field.
The realised price for domestic offtake was $25/bbl (2014:
$42/bbl), whilst the price realised for export sales recognised has
been estimated as $29/bbl. All prices are the price achieved at the
Shaikan facility and stated after deductions for trucking and port
storage costs as well as the discount to Brent associated with the
quality of the Shaikan crude. Sales for the period have been
recognised net of royalty with the KRG deemed to have taken the
royalty "in-kind". Export revenues are recognised on a cash
receipts basis and entitlement sales to a domestic offtaker are
recognised at 50% of the gross sales proceeds. This policy has
resulted in cumulative sales to 30 June 2015 in the region of $117
million being owed but not recognised, based on GKP's current 80%
working interest in the field. The Directors regularly review the
criteria for revenue recognition and, in the absence of a regular
payment cycle, consider the current methodology appropriate.
Further details on revenue, and the related judgements and
assumptions, can be found in note 4 to the half year report.
Cost of Sales for the period was $62.6 million (1H14: $16.5
million). This includes production costs, any royalty costs and
depreciation, depletion and amortisation (DD&A) charge on the
Shaikan asset for the period. On a gross field basis, including
unpaid production, cash operating costs per gross barrel excluding
royalty, production and capacity payments due to the KRG were
$6.5/bbl (FY2014: $7.0/bbl).
The DD&A charge relating to these assets for the period to
30 June 2015 was $31.4 million (FY2014: $38.4 million). Further
details on cost of sales are to be found in note 5 to the half year
report.
The Group's gross margin for the period was a $32.5 million loss
(1H2014: $2.2 million profit) and will continue to be variable
whilst export sales are recognised on a cash receipts basis.
General and administrative expenses during the period were $17.9
million (1H14: $23.5 million). The decrease in administrative
expenses of $5.6 million results from a decrease in travel and
other costs. This decrease is partially offset by an increase in
advisors costs associated with the guaranteed bond consent
solicitation process and an increase in Erbil office administrative
and overhead costs in the income statement for the period,
consistent with lower capital expenditure. There was an impairment
charge of $3.6 million in relation to Akri-Bijeel as described
further in note 11 to the half year report.
Non-operating results
Other gains of $2.5 million (1H14: $0.8 million loss) comprise
foreign exchange gains associated with the GBP:USD exchange rate
movements. Interest revenue remains low in accordance with
prevailing rates. Finance costs of $25.6 million (1H14: $6.0
million) relate to the accretion charge on the decommissioning
provision (1H15: $0.3 million, 1H14: $0.2 million), interest
payable in respect of the convertible bonds of $13.6 million (1H14:
$13.3 million) and interest payable in respect of the guaranteed
bonds of $21.0 million (1H14: $8.3 million), offset by
capitalisation of borrowing costs associated with qualifying assets
under development of $9.3 million (1H14: $15.8 million).
Capitalised borrowing costs have decreased significantly during 1H
2015 due to reduced capital activity during 1H 2015 following the
successful attainment of 40,000 bopd production capacity. The cash
coupon paid on the convertible bonds in 1H15 amounted to $10.2
million (1H14: $10.2 million) and on the guaranteed bonds $16.3
million (1H2014: $nil).
The tax expense of $0.5 million (1H14: $1.7 million) is related
to UK activities and comprises $0.4 million of corporate income tax
and $0.1 million change in the deferred tax asset associated with
share-based payments.
The results for the first half of 2015 show an increased loss
after tax of $77.7 million (1H14: $29.8 million) reflecting the
increase in operating costs associated with increased production
and the increase in bond interest discussed above.
Cash flow
Net cash outflow from operating activities after general and
administrative expenses was $6.5 million (1H14: $21.3 million
inflow). The loss from operations of $54.1 million (1H14: $21.3
million) was adjusted for non-cash expenditure of $36.9 million
(1H14: $11.7 million), which included share-based payment,
depreciation and amortisation charges and impairment of the
Akri-Bijeel asset. The working capital adjustments totalled to a
$10.7 million cash inflow (1H14: $30.9 million outflow) increasing
the operational cash inflow.
The working capital adjustments represent an increase in
operating payables following the increase in production during 1H
2015 compared to 1H 2014, and a decrease in receivables primarily
attributable to the receipt of outstanding court costs of $2.1
million related to the Excalibur litigation as well as movements in
partner working capital accounts and inventory. A tax refund was
received in the UK Company for 1H 2015 of $0.6 million relating to
prior periods (1H14: $nil), while interest received was negligible
(1H14: $0.1 million). Net cash outflow from operating activities
after tax and interest, including the $26.5 million semi-annual
coupon payments for the guaranteed and convertible bonds, was $32.3
million (1H14: $11.2 million inflow).
Cash used in investing activities totalled $28.8 million (1H14:
$109.7 million), which comprises $3.4 million spent on intangible
assets (1H14: $52.4 million) and $25.5 million (1H14: $57.3
million) spent on property, plant and equipment. Spend on property
plant and equipment primarily relates to expenditure on the Shaikan
asset, where additions include the drilling of the Shaikan-11 well
as well as completion of flowline tie-in and minor plant works
including facility debottlenecking projects. The Company has not
funded the Akri-Bijeel project during 2015.
Intangible expenditure primarily comprises additions to Sheikh
Adi and Ber Bahr assets and includes continued geological and
geophysical activities as well as the preparation of the Sheikh-Adi
appraisal report and commencement of work on the development plan.
Further information on oil and gas assets can be found in notes 9
to 11 to the half year report.
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
The Company raised $40.7 million before issue costs from a
private placement of 85.9 million shares in March 2015 at a placing
price of 32p per share, which became unconditional on 8 April 2015
following the successful completion of the consent solicitation to
remove the book equity ratio (see Corporate Activities).
The net overall decrease in cash and cash equivalents during the
period was $21.8 million (1H14: $141.7 million increase). Foreign
exchange gains on cash balances were $1.5 million (1H14: $0.1
million loss). Cash and cash equivalents totalled $67.5 million at
30 June 2015 (30 June 2014: $223.5 million; 31 Dec 2014: $87.8
million). As at 25 August 2015, cash and cash equivalents totalled
$63.9 million. Included within these cash and cash equivalent
figures is restricted cash of $32.5 million relating to the Debt
Service Reserve Account (see Corporate Activities).
Corporate Activities
In March 2015, the Company launched a consent solicitation to
remove the book equity ratio term within the guaranteed bonds'
Trust Deed, which was successfully completed on 8 April 2015. In
addition, the Company agreed with the guaranteed note holders the
following terms: (i) to retain the Company's Debt Service Reserve
Account at one year of scheduled interest payments for the
guaranteed notes (instead of stepping down to six months of
interest payments in October 2015); (ii) to grant a security
interest in favour of the holders of the guaranteed notes and the
convertible bonds over the shares of Gulf Keystone Petroleum
International Limited; and (iii) to reduce certain of the Company's
grace periods under the Trust Deed for certain events of default
and including additional notifications to the Trustee; and (iv) to
begin a dialogue with a committee of holders of the guaranteed
bonds if and when the Company's cash balance drops below US$50
million (including amounts in the Debt Service Reserve Account) for
a period of five consecutive business days.
Following the issue of 85.9 million new Common Shares of US$
0.01 each in the Company at a placing price of 32p per share,
adjustments have been made to the conversion price of the
convertible bonds and the outstanding 40 million warrants issued
with the guaranteed notes. The adjusted conversion price of the
convertible bonds is $4.34 (initial conversion price: $4.39) and
for the warrants the adjusted conversion price is $1.68 (initial
conversion price: $1.70).
In 2011, as part of the Group's forward strategy to rationalise
its asset portfolio, the Board resolved to sell the Group's 20%
working interest in the Akri-Bijeel block. The Company has received
limited enquiries from interested parties during 1H 2015 relating
to the sale of Akri-Bijeel and has determined that the criteria to
classify the asset as held for sale are no longer met at 30 June
2015. The Group continues to progress towards an orderly exit of
this project. Further details are given in note 11 to the
consolidated financial statements.
The Company awaits the attention of Sonatrach to resume an
orderly exit from its previous operations in the Ferkane Permit of
Algeria.
Financial Strategy and Outlook
The KRG and Gulf Keystone continue to operate under difficult
circumstances, facing significant macro geo-political challenges,
including the low oil price. We continue to work closely with the
KRG, our host and partner, on ensuring the best course possible
through this period for the benefit of all stakeholders, with the
priority being for the Company to establish a regular payment cycle
for Shaikan production; regular receipt of payments is paramount to
the on-going survival of the business and maintaining our liquidity
with further details of material uncertainties in relation to the
going concern basis of accounting provided in note 2 to the half
year report.
The successful share placement strengthened the Company's
financial position in the first half of 2015, while discussions
with interested parties in relation to possible asset transactions
or a sale of the Company were, and are, on-going. We continue to
work on several mid to long term funding alternatives and ensure we
are doing everything possible to maintain and enhance our liquidity
in the near term. Allied to this, and as can be seen in our cash
expenditure for the period, we are working to manage our cost base
prudently and responsibly.
Sami Zouari
Chief Financial Officer
Mary Hood
Deputy Chief Financial Officer
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on Gulf Keystone's business and that
may result in failure to meet shareholder expectations and to
achieve strategic targets for growth, loss of financial standing
and reputation. Not all of these risks are wholly within the
Company's control and the Company may be affected by risks which
are not yet manifest or reasonably foreseeable. The Board
determines and reviews the key risks for the Group on a regular
basis and consider them remain unchanged from those published in
the 2014 Annual Report and Accounts. For all the known risks facing
the business, Gulf Keystone attempts to minimise the likelihood and
mitigate the impact.
The Group has identified its principal risks for the next six
months as being:
- political and regional risk;
- liquidity and credit risk;
- capital availability;
- meeting shareholder expectations;
- organisational capability;
- risks associated with infrastructure and export market;
- business conduct and bribery act;
- field delivery risk including a successful delivery of the Shaikan Field Development Plan;
- health, safety environment and security; and
- prohibition on flaring and undeveloped options for monetising natural gas discoveries
Further information detailing the possible impact of these risks
and the ways in which these risks are mitigated is provided on
pages 32 to 35 of the 2014 Annual Report and Accounts.
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
26 August 2015
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 2015 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
15. 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 Auditing Practices
Board. 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 and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (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 Auditing Practices Board 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 Ireland) 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
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
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 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Emphasis of matter- Going Concern
In forming our conclusion on our review of the condensed
financial statements, we have considered the adequacy of the
disclosure made in note 2 to the condensed financial statements
concerning the Group's ability to continue as a going concern. The
Group's only producing asset is its interest in the Shaikan Block
in Kurdistan and to date it has not been able to establish a stable
and reliable pattern of cash receipts from export deliveries made
from this field. If there are no further cash receipts in respect
of export deliveries, the directors expect the Group to require
additional funding at the time the next coupon payments fall due
under the Group's bonds in October 2015. These conditions, along
with the other matters explained in note 2 to the condensed
financial statements, indicate the existence of a material
uncertainty which may cast significant doubt about the Group's
ability to continue as a going concern. The condensed financial
statements do not include the adjustments that would result if the
Group was unable to continue as a going concern. Our review
conclusion is not qualified in respect of this matter.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
26 August 2015
Condensed Consolidated Income Statement
for the six months ended 30 June 2015
Six months
ended Six months Year ended
30 June ended 31 December
2015 30 June 2014 2014
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------- ----- ---------- ------------- ------------
Continuing operations
Revenue 4 30,092 18,700 38,560
Cost of sales 5 (62,620) (16,506) (81,845)
--------------------------- ----- ---------- ------------- ------------
Gross (loss)/profit (32,528) 2,194 (43,285)
Other operating expenses
Impairment loss 11 (3,610) - (144,119)
General and administrative
expenses (17,920) (23,500) (39,034)
Loss from operations (54,058) (21,306) (226,438)
Interest revenue 4 25 59 73
Other gains and losses 2,473 (795) 103
Finance costs 6 (25,620) (6,015) (19,812)
--------------------------- ----- ---------- ------------- ------------
Loss before tax (77,180) (28,057) (246,074)
Tax expense (513) (1,717) (2,129)
--------------------------- ----- ---------- ------------- ------------
Loss after tax (77,693) (29,774) (248,203)
--------------------------- ----- ---------- ------------- ------------
Loss per share (cents)
Basic 7 (8.50) (3.42) (28.51)
Diluted 7 (8.50) (3.42) (28.51)
--------------------------- ----- ---------- ------------- ------------
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2015
Six months Six months Year ended
ended ended 31 December
30 June 2015 30 June 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------- ------ ------------- ------------- ------------
Loss for the period (77,693) (29,774) (248,203)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations (50) 1,121 (987)
--------------------------------------------- ------------- ------------- ------------
Total comprehensive loss for
the period (77,743) (28,653) (249,190)
--------------------------------------------- ------------- ------------- ------------
Condensed Consolidated Balance Sheet
as at 30 June 2015
30 June 30 June 31 December
2015 2014 2014
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------- ------ ---------- ---------- -------------------
Non-current assets
Intangible assets 9 306,984 256,963 276,290
Property, plant and equipment 10 591,661 571,754 593,604
Deferred tax asset 710 3,109 732
-------------------------------- ------ ---------- ---------- -------------------
899,355 831,826 870,626
-------------------------------- ------ ---------- ---------- -------------------
Current assets
Assets held for sale 11 - 132,374 8,587
Inventories 21,108 22,188 22,854
Trade and other receivables 12 10,558 5,021 16,380
Cash and cash equivalents 67,526 223,509 87,835
99,192 383,092 135,656
-------------------------------- ------ ---------- ---------- -------------------
Total assets 998,547 1,214,918 1,006,282
-------------------------------- ------ ---------- ---------- -------------------
Current liabilities
Trade and other payables 13 (120,760) (109,220) (103,985)
Provisions (10,840) (7,197) (7,197)
Liabilities directly associated
with assets classified as held
for sale 11 - (2,264) (8,587)
Current tax liabilities - (1,037) -
-------------------------------- ------ ---------- ---------- -------------------
(131,600) (119,718) (119,769)
-------------------------------- ------ ---------- ---------- -------------------
Non-current liabilities
Convertible bonds 14 (306,762) (299,910) (303,278)
Guaranteed bonds 14 (228,825) (219,657) (224,071)
Provisions (28,407) (16,880) (19,559)
(563,994) (536,447) (546,908)
-------------------------------- ------ ---------- ---------- -------------------
Total liabilities (695,594) (656,165) (666,677)
-------------------------------- ------ ---------- ---------- -------------------
Net assets 302,953 558,753 339,605
-------------------------------- ------ ---------- ---------- -------------------
Equity
Share capital 15 9,781 7,975 8,922
Share premium account 15 834,619 796,099 796,099
Share option reserve 51,731 57,844 51,017
Convertible bonds reserve 13,030 18,684 15,834
Exchange translation reserve (309) 1,849 (259)
Accumulated losses (605,899) (323,698) (532,008)
-------------------------------- ------ ---------- ---------- -------------------
Total equity 302,953 558,753 339,605
-------------------------------- ------ ---------- ---------- -------------------
Condensed Consolidated Statement of Changes in Equity
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
for the six months ended 30 June 2015
Attributable to equity holders of the Group
---------------------------------------------------------------------
Share Share Exchange Convertible
Share premium option translation Accumulated bond reserve Total
Capital account reserve reserve losses equity
Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000
----- -------- -------- -------- ------------ ----------- ------------- -------
Balance at 1 January
2014 (audited) 7,975 796,099 33,486 728 (297,409) 21,488 562,367
Net loss for the
period - - - - (29,774) - (29,774)
Other comprehensive
income/(loss) for
the period - - - 1,121 - - 1,121
-------------------------- ----- ------- ------- ------- --------------- -------------------- ---------
Total comprehensive
income/(loss) for
the period - - - 1,121 (29,774) - (28,653)
Transfer relating
to share based payments - - (681) - 681 - -
Share-based payment
charge - - 2,894 - - - 2,894
Deferred tax on
share-based payment
transactions - - (17) - - - (17)
Issue of warrants - 22,162 - - - 22,162
Convertible bond
equity amortisation - - - - 2,804 (2,804) -
Balance at 30 June
2014 (unaudited) 7,975 796,099 57,844 1,849 (323,698) 18,684 558,753
Net loss for the
period - - - - (218,429) - (218,429)
Other comprehensive
income/(loss) for
the period - - - (2,108) - - (2,108)
-------------------------- ----- ------- ------- ------- --------------- -------------------- ---------
Total comprehensive
income/(loss) for
the period - - - (2,108) (218,429) - (220,537)
Transfer relating
to share-based payments - - (8,216) - 8,216 - -
Share-based payment
charge - - 1,991 - - - 1,991
Deferred tax on
share-based payment
transactions - - (602) - - - (602)
Share conversion
issue 947 - - - (914) - 33
Own shares held
by EBT(1) - - - - (33) - (33)
Convertible bond
equity amortisation - - - - 2,850 (2,850) -
Balance at 31 December
2014 (audited) 8,922 796,099 51,017 (259) (532,008) 15,834 339,605
-------------------------- ----- ------- ------- ------- --------------- -------------------- ---------
Net loss for the
period - - - - (77,693) - (77,693)
Other comprehensive
income/(loss) for
the period - - - (50) - - (50)
-------------------------- ----- ------------- ------ ----- --------------- ------- --------
Total comprehensive
income/(loss) for
the period - - - (50) (77,693) - (77,743)
Transfer relating
to share-based payments - - (998) - 998 - -
Share-based payment
charge - - 1,645 - - - 1,645
Deferred tax on
share-based payment
transactions - - 67 - - - 67
Share conversion
issue 859 38,520 - - - - 39,379
Convertible bond
equity amortisation - - - - 2,804 (2,804) -
Balance at 30 June
2015 (unaudited) 9,781 834,619 51,731 (309) (605,899) 13,030 302,953
-------------------------- ----- ------------- ------ ----- --------------- ------- --------
(1) Employee Benefit Trust ("EBT").
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2015
Six months Six months Year ended
ended ended 31 December
30 June 2015 30 June 2014 2014
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------------- ----- ------------- ------------- ------------
Operating activities
Cash (used)/generated in operations 8 (6,469) 21,309 (760)
Tax received/(paid) 599 - (210)
Interest received 25 59 103
Bond coupon payments (26,496) (10,156) (36,563)
--------------------------------------- ----- ------------- ------------- ------------
Net cash (used)/generated in operating
activities (32,341) 11,212 (37,430)
--------------------------------------- ----- ------------- ------------- ------------
Investing activities
Purchase of intangible assets (3,357) (52,341) (86,822)
Purchase of property, plant and
equipment (25,480) (57,322) (110,623)
Net cash used in investing activities (28,837) (109,663) (197,445)
--------------------------------------- ----- ------------- ------------- ------------
Financing activities
Proceeds on issue of share capital 39,379 - -
Proceeds on issue of other borrowings - 240,114 240,114
--------------------------------------- ----- ------------- ------------- ------------
Net cash generated by financing
activities 39,379 240,114 240,114
--------------------------------------- ----- ------------- ------------- ------------
Net (decrease)/increase in cash
and cash equivalents (21,799) 141,663 5,239
Cash and cash equivalents at beginning
of period 87,835 81,972 81,972
Effect of foreign exchange rate
changes 1,490 (126) 624
--------------------------------------- ----- ------------- ------------- ------------
Cash and cash equivalents at end
of the period being bank balances
and cash on hand* 67,526 223,509 87,835
--------------------------------------- ----- ------------- ------------- ------------
*Cash and cash equivalents include an amount of $32.5 million
held in the Debt Service Reserve Account.
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2015
1. General information
The condensed Group financial statements for the six months
period ended 30 June 2015, comprising Gulf Keystone Petroleum Ltd
and its subsidiaries (together, "the Group"), 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.
Accordingly, certain information and note disclosures normally
included in annual financial statements prepared in accordance with
International Financial Reporting Standards ("IFRS"), as adopted by
the European Union, have been omitted or condensed as is normal
practice and are to be read in conjunction with the Group's
financial statements for the year ended 31 December 2014. The
condensed Group interim financial statements for the six months
ended 30 June 2015 have not been audited, but have been reviewed by
the Company's external auditor and their report to the Company is
attached. The condensed interim financial statements were approved
by the Board of Directors on 26 August 2015. An electronic version
of the half year report has been posted on the Group's website
www.gulfkeystone.com. Hard copies are available by writing to Gulf
Keystone Petroleum Limited, c/o Gulf Keystone Petroleum (UK)
Limited, 6th Floor, New Fetter Place, 8-10 New Fetter Lane, London,
EC4A 1AZ, UK.
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
The financial information for the year ended 31 December 2014
does not constitute the Group's financial statements for that year,
but it is derived from those accounts. The auditors have reported
on those accounts and their report was not modified but drew
attention by way of emphasis of matter over the uncertainty of the
Group's ability to continue as a going concern.
2. Accounting policies
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 same accounting policies,
presentation and methods of computation are followed in this
condensed set of financial statements as applied by the Group in
its Annual Report and Accounts for the year ended 31 December
2014.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement and Chief Executive
Officer's Review. The financial position of the Group as at 30 June
2015 and its cash flows and liquidity position are included in the
Financial Review.
At 25 August 2015, the Group's cash balance, including $32.5
million of restricted cash relating to the Debt Service Reserve
Account (see note 14), is $63.9 million. To enhance its capital
resources, the Group issued 85.9 million shares during March 2015
raising net proceeds of $39.3 million. Operationally, the Group
reached its stated production target of 40,000 bopd in December
2014 and production for 1H 2015 has averaged 26,000 bopd.
In 2014 and 2015 to-date, the Group has continued to achieve
revenues from domestic sales and to lift oil for export, receiving
cash of $38.3 million during 2015 to date. While the payments for
domestic revenues have been received regularly, the inflow of cash
from export sales has been inconsistent throughout the period with
the Group not receiving its full entitlement to date in line with
the Production Sharing Contract. The process for receiving
consistent payments in a timely manner is in the process of being
established. The Group sees this matter as its main priority and
continues to engage the Kurdistan Regional Government with this
intent.
Based on the Group's on-going operational and capital
requirements, if the Group was to receive its entitlement revenues,
including arrears, in full, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. However, due to
the lack of regular revenue receipts to date, the Directors believe
that additional financing may be required over and above existing
capital resources and expected operating cash flow from production
in order to fund the Group's current capital and operating
expenditure and commitments in the upcoming 12-month period.
Existing cash resources may be enhanced over the next 12 months
from the date of this report by the exercise of the Shaikan
Government Option and/or the Shaikan Third Party Option under the
terms of the Shaikan PSC. The Group may also enter into joint
venture agreements with third parties, issue new Common Shares,
sell assets, or execute a combination of the aforementioned
financing options, to maintain or adjust its capital structure.
Whilst the Directors believe that one or more of the above
events are likely to occur, including the establishment of a
regular payment cycle, if none of these events occur and there are
no additional receipts for oil sent for export subsequent to the
date of this report, the Directors would expect the Group to
require additional working capital at the time the next coupon
payments fall due under the Group's bonds in October 2015. Owing to
the criticality of cash receipts from export revenues to the
Group's ability to continue as a going concern, the Directors
consider that whilst a stable and reliable payment process for
export sales is not yet fully established, a material uncertainty
exists that casts significant doubt over the Group's ability to
continue as a going concern and to realise its assets and discharge
its liabilities in the normal course of business. These interim
financial statements do not include any adjustments that might be
required if they were to be prepared on a basis other than that of
a going concern.
Changes in accounting policy
As of 1 January 2015, a number of new standards and
interpretations became effective, as noted in the 2014 Annual
Report and Accounts (page 84). The adoption of these standards and
interpretations has not had a material impact on the financial
statements of the Group for the six months ended 30 June 2015.
3. Segment information
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss during the period.
The accounting policies of the reportable segments are consistent
with the Group's accounting policies, which are described in the
Group's latest annual financial statements.
The operations of the Group comprise one class of business, oil
and gas exploration, development and production and the sale of
hydrocarbons and related activities. The reportable segments in
accordance with IFRS 8 are therefore the three geographical regions
that the Group operates within as described below:
- Kurdistan Region of Iraq - the Group's operations in the
Kurdistan Region, comprising the Shaikan, Akri-Bijeel, Sheikh Adi
and Ber Bahr Blocks and the Erbil office.
- United Kingdom - the United Kingdom office, which provides
geological, geophysical, engineering and administrative services to
the Group.
- Algeria - the Algiers office and the Group's operations in Algeria.
Corporate 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.
Kurdistan United
Algeria Region Kingdom Corporate Elimination Total
30 June 2015
(unaudited) $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ------- ---------------- ---------- --------------------- ------------- -----------------
Revenue
Oil sales - 30,092 - - - 30,092
Inter-segment sales - - 4,528 - (4,528) -
--------------------- ------- --------------------- ----- --------------------- ------------- -----------------
Total revenue - 30,092 4,528 - (4,528) 30,092
(Loss)/profit before
tax (420) (41,043) 1,086 (45,327) 8,524 (77,180)
Tax expense - - (513) - - (513)
(Loss)/profit after
tax (420) (41,043) 573 (45,327) 8,524 (77,693)
Total assets 58 879,674 18,059 1,273,952 (1,173,196) 998,547
--------------------- ------- ---------------- ---------- --------------------- ------------- -----------------
Kurdistan United
Algeria Region Kingdom Corporate Elimination Total
30 June 2014 (unaudited) $'000 $'000 $'000 $'000 $'000 $'000
------------------------- ------- --------- -------- --------- ----------- --------
Revenue
Oil sales - 18,700 - - - 18,700
Inter-segment sales - - 5,575 - (5,575) -
------------------------- ------- --------- -------- --------- ----------- --------
Total revenue - 18,700 5,575 - (5,575) 18,700
(Loss)/profit before
tax (3,541) (3,991) 3,726 (38,423) 14,172 (28,057)
Tax expense - - (1,717) - - (1,717)
(Loss)/profit after
tax (3,541) (3,991) 2,009 (38,423) 14,172 (29,774)
1,214,
Total assets 74 1,028,639 25,393 1,305,026 (1,144,214) 918
------------------------- ------- --------- -------- --------- ----------- --------
United
Algeria Kurdistan Kingdom Corporate Elimination Total
31 December 2014
(audited) $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ------- ------------------ -------- --------- ----------- ------------------
Revenue
Oil sales - 38,560 - - - 38,560
Inter-segment sales - - 10,661 - (10,661) -
--------------------- ------- ------------------ -------- --------- ----------- ------------------
Total revenue - 38,560 10,661 - (10,661) 38,560
(Loss)/profit before
tax (3,928) (189,250) 844 (77,894) 24,154 (246,074)
Tax expense - - (2,129) - - (2,129)
(Loss)/profit after
tax (3,928) (189,250) (1,285) (77,894) 24,154 (248,203)
--------------------- ------- ------------------ -------- --------- ----------- ------------------
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
Total assets 52 946,312 21,074 1,271,385 (1,232,542) 1,006,282
--------------------- ------- ------------------ -------- --------- ----------- ------------------
4. Revenue
During the period to 30 June 2015, the Company sold Shaikan oil
direct to a domestic offtaker and on the export market. Revenue
from domestic offtake sales for the period to 30 June 2015 amounted
to $9.3 million (30 June 2014: $2.5 million, 31 Dec 2014: $10.4
million) and revenue from export sales amounted to $20.8 million
(30 June 2014: $16.2 million, 31 Dec 2014: $28.2 million). Revenue
for commercial sales is recognised in line with the terms of the
Shaikan PSC, the applicable sales contracts and the Group's
accounting policy. At present, the Group is receiving, and
recognising as revenue, 50% of the cash proceeds from any domestic
offtake sales agreement.
In arriving at the value of sales revenue, management have used
the following assumptions:
-- Point of sale is the Shaikan facility;
-- Export revenue is recognised on a cash receipts basis, whilst
sales to any domestic offtaker are recognised on an accruals
basis;
-- Cash is received and revenue is recognised for all sales for
the period, net of royalty, royalty is taken "in-kind" by the
KRG;
-- Cash receipts by GKPI as the operator represent the
non-governmental contractors' share of revenue; and
-- Company's current working interest in the Shaikan block is 80%.
The price achieved on domestic sales to 30 June 2015 was
$25.2/bbl (2014: $42/bbl). The estimated realised price for export
sales recognised for the first half of the year was $28.6/bbl. In
estimating the price for export sales, management has estimated
deductions for trucking and port storage costs as well as the
discount to Brent received based on available information.
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------- ---------- ---------- ------------
Oil Sales 30,092 18,700 38,560
Interest revenue 25 59 73
30,117 18,759 38,633
========== ========== ============
5. Cost of Sales
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------- ---------- ---------- ------------
Production costs 31,199 10,118 41,784
Royalty costs - 408 1,671
Depreciation of oil & gas properties 31,421 5,980 38,390
62,620 16,506 81,845
========== ========== ============
Production costs represent the Group's share of gross production
costs for the period together with any consolidation adjustments;
all costs are included with no deferral of costs associated with
unpaid production.
A unit of production method, based on full entitlement
production for the period, commercial reserves and costs for the
Shaikan field full development, has been used to calculate the
depreciation, depletion and amortisation (DD&A) charge for the
period. Commercial reserves are proven and probable ("2P") reserves
together with, where considered appropriate, a risked portion of
"2C" contingent resources, estimated using standard recognised
evaluation techniques.
6. Finance costs
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------------- ---------- ---------- ------------
Interest payable in respect of convertible
bonds 13,583 13,285 26,866
Interest payable in respect of guaranteed
bonds 20,969 8,277 29,066
Unwinding of discount on provisions 325 249 534
Capitalised finance costs (9,257) (15,796) (36,654)
25,620 6,015 19,812
========== ========== ============
7. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------------------- ---------- ---------- ------------
Loss
Loss after tax for the purposes of
basic and diluted loss per share (77,693) (29,774) (248,203)
30 June 30 June 31 December
2015 2014 2014
Number (000s) Number (000s) Number (000s)
Unaudited Unaudited Audited
---------------------------------------- -------------- -------------- --------------
Number of shares
Weighted average number of common
shares for the purposes of basic
loss per share 913,539 869,517 870,578
Adjustments for:
-bonus shares n/a n/a n/a
-share options n/a n/a n/a
-warrants n/a n/a n/a
-ordinary shares held by the Employee
Benefit Trust n/a n/a n/a
-ordinary shares held by the Exit
Event Trustee n/a n/a n/a
-convertible bonds n/a n/a n/a
Weighted average number of common
shares for the purposes of diluted
loss per share 913,539 869,517 870,578
---------------------------------------- -------------- -------------- --------------
The Group followed the steps specified by IAS 33 in determining
whether potential common shares are dilutive or anti-dilutive. It
was determined that all of the potential common shares including
bonus shares, share options, warrants, convertible bonds and common
shares held by the Employee Benefit Trust ("EBT") and the Exit
Event Trustee have an anti-dilutive effect on loss per share. As a
result, there is no difference between basic and diluted earnings
per share.
As at 30 June 2015, 37.3 million share options (30 June 2014:
36.8 million, 31 Dec 2014: 35.8 million), 40.0 million warrants (30
June 2014: 40.0 million, 31 Dec 2014: 40.0 million), 10.0 million
common shares held by the Exit Event Trustee (30 June 2014: 10.0
million, Dec 2014: 10.0 million), 8.7 million common shares held by
the Employee Benefit Trust (30 June 2014: 9.4 million, 31 Dec 2014:
10.3 million) and 74.9 million common shares (30 June 2014: 74.0
million, 31 Dec 2014: 74.0 million) to be issued if the bonds are
converted at the adjusted conversion price of $4.34 (initial
conversion price: $4.39) were excluded from the loss per share
calculation as they were anti-dilutive.
8. Reconciliation of loss from operations to net cash
(used)/generated in operating activities
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------------- ------------- ---------- ------------
Loss from operations (54,058) (21,306) (226,438)
Adjustments for:
Depreciation of property, plant and
equipment 31,768 6,278 39,019
Amortisation of intangible assets 17 89 111
Increase in Algerian decommissioning
provision - 3,013 3,012
Impairment of the Akri-Bijeel asset 3,610 - 144,119
Share-based payment expense 1,500 2,301 3,971
Decrease/(increase) in inventories 1,746 (1,534) (2,200)
Decrease in receivables 2,885 28,680 21,291
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
Increase in payables 6,063 3,788 16,355
--------------------------------------- ------------- ---------- ------------
Net cash (used)/generated in operating
activities (6,469) 21,309 (760)
--------------------------------------- ------------- ---------- ------------
9. Intangible assets
The net book value at 30 June 2015 includes intangible assets
relating to Ber Bahr $76.5 million (30 June 2014: $65.0 million, 31
Dec 2014: $74.2 million) and Sheikh Adi $230.4 million (30 June
2014: $191.9 million, 31 Dec 2014: $202.1 million). The remainder
of the balance, with a carrying value of $0.3 million (30 June
2014: $0.1 million, 31 Dec 2014: 0.5 million), is comprised of
computer software.
The additions to oil and gas exploration and evaluation costs in
the year include the recognition of the PSC capacity building and
signature bonus obligations on the Sheikh Adi licence following the
Declaration of Commerciality and submission of the appraisal report
for the block, and continuing geological studies together with
capitalised administration costs over the Ber Bahr block.
10. Property, plant and equipment
The net book value at 30 June 2015 includes property, plant and
equipment relating to the Shaikan block, which has a carrying value
of $589.7 million (30 June 2014: $570.1 million, 31 Dec 2014:
$591.9 million). The remainder of the balance, with a carrying
value of $2.0 million (30 June 2014: $1.6 million, 31 Dec 2014:
$1.7 million) is comprised of fixtures and equipment.
Additions to property, plant and equipment were $29.8 million,
of which $29.2 million related to the Shaikan block. Additions
include construction work on the Shaikan production facilities,
enhancing the operational capacity of PF-1 and PF-2 as well as the
completion of work associated with the tie-in of wells to these
production facilities and the drilling and tie-in of the Shaikan-11
well.
Associated with production, a depreciation, depletion and
amortisation charge of $31.4 million was recognised on the Shaikan
oil and gas properties (30 Jun 2014: $6.0 million; 31 Dec
2014:$38.4 million), which has been included within cost of sales.
A depreciation charge of $0.3 million was recognised on fixtures
and equipment (30 Jun 2014: $0.3 million, 31 Dec 2014: $0.6
million), which has been included in general and administrative
expenses.
11. Akri-Bijeel Contingent Liabilities
In 2011, as part of the Group's forward strategy to rationalise
its asset portfolio, the Board resolved to sell the Group's 20%
working interest in the Akri-Bijeel block. The Group appointed
Joint Corporate Advisers responsible for coordinating the sale and
this process has been ongoing since that date with the operator,
MOL, announcing in November 2014 that the field development plan
had been agreed with the MNR. However, the Company has received
limited enquiries from interested parties during 1H 2015 relating
to the sale of Akri-Bijeel. Following from this, and taking into
consideration the $144.1 million impairment of the Akri-Bijeel
asset recorded at 31 December 2014, a prolonged period of lower oil
prices and the on-going challenges faced by Kurdistan Region of
Iraq, management has determined that the criteria to classify the
asset as held for sale are no longer met at 30 June 2015.
Discussions are ongoing with MOL over the 2014 and 2015 work
programme and budget and there is an amount of $27.6 million, which
represents part of 2014 and 2015 billed expenditure, which the
Company considers it is not obliged to pay. Accordingly, this
amount has not been recognised in these financial statements. An
impairment of $3.6 million (2014: $144.1 million) has been
recognised in 1H 2015 associated with the write off of the
remaining intangible asset as at 31 December 2014 and additions to
the decommissioning provision during 1H 2015. The Akri-Bijeel
project at 30 June 2015 is represented by a decommissioning
provision of $3.6 million within current provisions. The Group
continues to progress towards an orderly exit of this project.
12. Trade and other receivables
30 June 30 June 31 December
2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------- ----------- ----------- ------------
Trade receivables 6,732 1,367 4,890
Other receivables 2,703 1,441 8,877
Corporation tax receivable 200 - 339
Prepayments and accrued income 923 2,213 2,274
----------- ----------- ------------
10,558 5,021 16,380
=========== =========== ============
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value and no amounts
are provided against them.
13. Trade and other payables
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs.
31 December
30 June 2015 30 June 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------- ------------ ------------ -----------
Trade payables 11,069 13,009 13,885
Other creditors 1,056 3,401 669
Accrued expenses 108,635 92,810 89,431
------------ ------------
120,760 109,220 103,985
============ ============ ===========
Accrued expenses include interest payable of $4.1 million (30
June 2014: $4.1 million; 31 Dec 2014: $4.3 million) in respect of
convertible bonds and $6.6 million (30 June 2014: $6.6 million; 31
Dec 2014: $6.6 million) in respect of the guaranteed notes (see
note 14).
14. Long term borrowings
The Group has in issue convertible debt securities issued in
2012 and 2013 consisting of $325 million convertible loan notes due
October 2017 carrying a coupon of 6.25% payable on a biannual basis
(the "convertible bonds") and debt securities issued in April 2014
consisting of $250 million three-year senior unsecured loan notes,
carrying a coupon of 13% per annum payable on a biannual basis (the
"guaranteed bonds"). The guaranteed bonds are guaranteed by Gulf
Keystone Petroleum International Ltd and have a maturity date of 18
April 2017. Issued with the guaranteed bonds were freely tradeable
and detachable warrants relating to 40 million common shares in the
Company. Each warrant entitles the holder, subject to certain
conditions, to purchase a common share in the Company on payment of
the exercise price. The warrants expire on 18 April 2017. The bonds
and warrants are listed on the Luxembourg Stock Exchange.
Guaranteed bonds consent solicitation
On 8 April 2015, the Company successfully completed a consent
solicitation to remove the book equity ratio covenant from the
Trust Deed constituting the guaranteed bonds and from the
conditions contained therein. In addition, the Company agreed to
the following terms: (i) retaining the Company's Debt Service
Reserve Account at one year of scheduled interest payments for the
guaranteed notes (instead of stepping down to six months of
interest payments in October 2015); (ii) granting a security
interest in favour of the holders of the guaranteed notes and the
convertible bonds over the shares of Gulf Keystone Petroleum
International Limited; and (iii) reducing certain of the Company's
grace periods under the Trust Deed for certain events of default
and including additional notifications to the Trustee; and (iv)
beginning a dialogue with a committee of holders of the guaranteed
bonds if and when the Company's cash balance drops below US$50
million (including amounts in the Debt Service Reserve Account) for
a period of five consecutive business days.
Adjustment of conversion price
Following the issue of 85.9 million new Common Shares of US$
0.01 each in the Company at a placing price of 32p per share (see
note 15), adjustments have been required to the conversion price of
the convertible bonds and the warrants. The adjusted conversion
price of the convertible bonds is $4.34 (initial conversion price:
$4.39) and for the warrants the adjusted conversion price is $1.68
(initial conversion price: $1.70).
The liabilities associated with both the convertible and
guaranteed bonds are presented in the following tables:
30 June 30 June 31 December
2015 2014 2014
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------------------- ---------- ---------- ---------------------
Liability at the beginning of the
period 538,221 300,900 300,900
Liability of new bonds at issue - 217,952 217,952
Interest charged during the period
* on convertible bonds 13,583 13,285 26,866
* on guaranteed bonds 20,969 8,277 29,066
Interest paid during the period
* on convertible bonds (10,156) (10,156) (20,313)
* on guaranteed bonds (16,340) - (16,250)
---------- ---------- -----------------------
Liability at the end of period 546,277 530,258 538,221
(MORE TO FOLLOW) Dow Jones Newswires
August 27, 2015 02:04 ET (06:04 GMT)
Gulf Keystone Petroleum (LSE:GKP)
Historical Stock Chart
From Feb 2024 to Mar 2024
Gulf Keystone Petroleum (LSE:GKP)
Historical Stock Chart
From Mar 2023 to Mar 2024