Gulf Keystone Petroleum Limited (LON:GKP) has guided for production in 2017 of between 32,000 and 38,000 barrels of oil per day, but it says without further investment in the Shaikan field it would expect it to be at the low end of that range.
How much GKP invests into the Shaikan field – beyond what it terms ‘maintenance capital’ - depends upon the outcome of ongoing talks with the Kurdistan Regional Government.
Uncertainty over the quantum and regularity of oil payments from the KRG has been a continual headache for both GKP and its shareholders.
Long running talks aim to establish a regular and timely payment cycle, and crude marketing arrangements. And as analysts at stockbroker WH Ireland this morning point out, the present payments schedule reflects only slight returns for the oil company.
“The cash received amounts to $11.22/b, which is low and suggests the KRG is not shy about creaming the lion’s share of the gains at the expense of the providers of capital and technical expertise,” WH Ireland said in a note.
Over the course of 2016, Gulf Keystone received US$142.5mln of gross oil payments from the KRG, while production averaged 34,794 barrels of oil per day (at the top end of last year’s guidance).
GKP ended 2016 with some US$104mln of cash, and following its debt-for-equity refinancing the group’s debt was reduced to US$100mln.
Chief executive Jón Ferrier emphasised the group’s operational performance, which he described as strong.
“We have an increasingly well understood field which continues to perform in line with expectations, a healthy balance sheet, and stand ready to further invest in the Shaikan Field,” he said.
“However, commercial and contractual clarity around payments and marketing remain key to achieving production growth and realising full value potential."