Investors in Gulf Keystone Petroleum Plc (LON:GKP) will have had an eye on Kurdistan neighbour Genel Energy PLC’s (LON:GENL) turmoil this week.
Genel first gave investors the sinking feeling on Tuesday with a massive 65% reserve downgrade for the group’s Taq Taq field two day before full year results confirmed falling production and revenues.
Taq Taq’s production continues to decline presently produces some 19,000 barrels per day, down from 36,000 at the end of 2016. Genel made a US$181mln impairment for Taq Taq in its 2016 results.
Both Gulf Keystone and Genel both have been faced irregular and somewhat uncertain payment schedules in Kurdistan, and have now both experienced big downgrades to reserve and resource figures in recent years.
Given that GKP severely diluted equity holders with its recent financial restructuring, swapping some US$500mln of debt for new shares in October, the loyal investors still holding shares will be hoping the worst is now over.
Eyes will be on production volumes, realised oil prices as well as commentary regarding crude transportation and payments.
GKP boss Jon Ferrier is seemingly in increasingly positive mood, according to oil companies expert Malcom Graham Wood.
“The winds they are a changing, around at New Fetter Lane but the main asset, Shaikan is certainly not, it is still a high quality asset with significant growth potential,” he said in his blog this week, following a meeting with the company.
“The reserves which are 622 mmbbl of 2P give current stable production of 40/- b/d and with investment that figure could and should grow to a much higher number.”
“Effectively under new management and after last year’s refinancing with a balance sheet that actually has net cash GKP is in a stronger position, albeit having wiped out most of the equity holders which they would be minded to remember.
“KRG payments for their oil have been regular and adequate and means that in due course they will be able to contemplate further investment to increase production, but this time they will do things in the right order one hopes.”