--UPDATE, ADDS BROKER COMMENT--
Gulf Keystone Petroleum (LON:GKP) told investors it now has a better understanding of the Shaikan oil field as it unveiled new reserve upgrades for the project.
The company said that using gas to aid oil recovery rather than water means the field's performance is more predictable.
Each well can yield more reserves and operating costs (per barrel) are lower, it added.
Shaikan’s proved (1P) reserves have now increased 55% to 306mln barrels, from 198mln last March, while proved and probable (2P) reserves more than doubled, rising 114% to 639mln barrels form 299mln.
The new reserve assessment, provided by ERC Equipoise, comes after the field recently passed a key milestone of producing 15mln barrels of oil.
Jón Ferrier, Gulf Keystone chief executive, described it as “a further independent endorsement of the calibre of Shaikan as a world-class field.”
Ferrier added: "Our technical confidence has markedly improved.”
He explains that the company was now preparing a revised field development plan based on fewer wells.
Gulf Keystone is also currently working a field development plan for the Sheikh Adi field, and it said that approval of a development would likely see 112mln barrels of resources reclassified as 2P reserves.
At the same time, the company also told investors of a new prospect in the north west portion of the Sheikh Adi block where some 169mln barrels of prospective resources has been identified.
“Shaikan is performing well with current production at stable rates and an average daily offtake of over 40,000bopd,” said Sam Wahab, analyst at city broker Cantor Fitzgerald.
“In terms of the company’s medium-term corporate outlook, GKP is currently engaged in discussions with a number of parties in relation to possible asset transactions or a full company sale, and we believe that today’s CPR will assist in this process.”
Wahab has a ‘buy’ recommendation for Gulf Keystone, and with a 101p price target he suggests some 215% upside to the current share price of 32p.