Gulf Keystone raises £16m for 2010 Kurdistan campaign

Gulf Keystone Petroleum (AIM: GKP) has completed a fully subscribed placing of 20.9m new shares at a price of 76.5p per share, raising gross proceeds of approximately £16 million. The company said it intends to use the proceeds to fund its ongoing activities in Kurdistan, with a 2010 work campaign planned for the Shaikan and Sheikh Adi blocks.

“GKP's operational team has worked exceptionally hard through the winter to have our well sites drill-ready for 2010 and to secure the required extended lead-time items such as casing, tubing and wellhead equipment”, Gulf Keystone chief executive Todd Kozel said. "We are very pleased to be commencing the first stage of our drilling campaign which has the prospect of substantially furthering the company's resource base.  The capital raised today, together with our other financial facilities, allows us to begin our programme". 
 
The new shares were placed by Gulf Keystone and its broker Fox-Davies Capital with existing and new institutional shareholders. The placing shares are expected to be admitted to AIM on 19 March 2010.

Gulf Keystone noted that further funding will be required during the course of 2010, and it is considering its best funding strategy with its advisers. The company clarified that today’s placing does not trigger any payments due under the arrangements announced on 10 March 2010, relating to the re-organisation of the holding in Kurdistan operating subsidiary GKPI.

Gulf Keystone’s previous exploration campaign enjoyed notable success in Kurdistan, with the Shaikhan-1 well discovering significant resources of oil and gas, and last week at the Akri Bijeel block its partner concluded a successful oil test on the Bijeel-1 exploration well.

With this latest funding in place, the company is on track to begin its 2010 work programme in Kurdistan. Gulf Keystone plans to commence the acquisition of 3D seismic over the Shaikan structure during the first quarter of 2010.  Additionally further 3D seismic work is planned for later in the year, on the Sheikh Adi structure, subject to a successful exploration well.

The 2010 campaign has a considerable focus on the company’s most advanced project, the Shaikan block, with further evaluation and testing of Shaikan-1 and three further appraisal wells planned. A work-over rig will conduct short term tests on several previously tested Jurassic targets on the Shaikan-1 well.
 
Additionally Gulf Keystone plans a long term, extended well test lasting between 18 and 24 months in order to deliver production from the initial, upper Jurassic discovery zone in Shaikan-1. “The short term Jurassic tests and the extended well test on the discovery zone in Shaikan-1 are expected to provide comprehensive data on potential recovery factors and to provide Gulf Keystone with our first oil production revenue in Kurdistan”, Kozel added.

The company said that, based on current evaluated data, this extended well test will provide for the production and sale of approximately 8,000 to 10,000 barrels of oil per day (bopd) into the domestic Kurdistan oil market. The Shaikan-1 work over bidding process and the construction of oil production and truck loading facilities near the well site have been finalised, the company expects these contracts to be awarded shortly.

The appraisal well, Shaikan-2, is planned to evaluate the Cretaceous, Jurassic and all zones in the Triassic in which total oil in place volumes of 1.9 to 7.4 billion barrels with a mean value of 4.2 billion barrels were discovered.  Gulf Keystone said that the casing and wellhead design for Shaikan-2 has been modified to allow the evaluation of all these zones including the upper Permian, which lies immediately below the Triassic and contains the high pressure zone that forced a halt to Shaikan-1 drilling. 

Shaikan-2 is expected to be drilled by the Weatherford 842 rig, which drilled Shaikan-1 and is currently drilling the Bijeel-1.

Construction of the well location has been completed and currently the company plans to spud Shaikan-2 in the second quarter of 2010.  Also scheduled for spudding near the Shaikan-1 location in Q2, Shaikan-3 will be a shallow appraisal well targeting the Cretaceous zone. The company said the well will be drilled by the work-over rig following the planned testing operations on Shaikan-1.

Later in the fourth quarter following the scheduled Shaikan-2 drilling, the Weatherford 842 rig will subsequently drill the Shaikan-4 appraisal well, which will appraise all zones down to and including the upper Permian. 

Through the 2010 campaign, Gulf Keystone also intends to drill the first exploration well on the Sheikh Adi block, to explore all zones down to and including the upper Permian. The exploration well is planned to spud in the third quarter of 2010, as such the well location has already been selected and construction of the well site is underway.

In today’s statement, the company also noted that Bijeel-1 on the Akri Bijeel block, operated by MOL's subsidiary Kalegran, is currently being drilled by Weatherford Rig 842 and is forecast to take a total of approximately four to five months to complete. Last week, Gulf Keystone reported that Bijeel-1 tested the upper Jurassic and flowed at rates of up to 3,200bopd with associated gas rates of 933,000 standard cubic feet of gas per day.  Oil gravity was 18 degrees API and flowing wellhead pressure was 420 psi on a 48/64" choke.