Gulf Keystone Petroleum (LON:GKP) is set to avoid a ‘worst case scenario’ as a result of the latest crude oil payment from the Kurdistan Regional Government.
The Kurdistan based oil producer last month gave investors a stark warning that it was facing a possible debt crisis.
But, it confirmed the receipt of a US$15mln gross payment from the Kurdistan Regional Government for crude oil deliveries in March.
GKP said its cash position will amount to US$69.5mln as a result of the payment.
Richard Savage, energy analyst at Mirabaud Securities, says GKP will now “comfortably” make its biannual interest payment of US$26mln, which is due at the end of April, without breaching debt covenants that require the company to hold at least US$32.5mln as a debt reserve.
As a result GKP won’t trigger a ‘default event’, he added.
“So, the company has avoided a worst case scenario under which it stumbles into a restructuring with its bondholders, and, with sufficient liquidity until at least the next interest payment (due in October), there is a window of opportunity to find the best possible solution ahead of US$575mln of debt maturing in 2017 (April & October),” the analyst said in a note.
SP Angel, meanwhile, said in a note: “While every payment to the company over and above that which is made for the oil revenues is a release of pressure, especially given its debt pile, they are currently not enough to ‘move the needle’ and as such say more for KRG than the company’s fortunes.
“We think today's news says a lot more positive things for the KRG than it does for the company, but that is not to take away the positive impact this has on the company.”
In this morning’s statement, GKP confirmed that the KRG’s payment comprises US$5.5mln (US$4.3mln net to GKP) as the contractual revenue entitlement under the production sharing contract, for the month of March, as well as US$0.6mln towards outstanding entitlements for past deliveries and US$8.9mln towards the recovery of Gulf Keystone’s past costs associated with the Shaikan Government Participation Option.
GKP shares advanced 7.38% on Tuesday to trade at 6.55p.
The former investor favourite oil share, which a number of years ago changed hands near 200p, is down some 58% in 2016 to date.