Gulf Keystone Petroleum Limited (LON:GKP), the operator of the Shaikan Field in the Kurdistan Region of Iraq, is to increase production on the field.
The company said agreement had been reached with the Kurdistan Regional Government (KRG) and MOL Hungarian Oil & Gas PLC in respect of the investment needed to increase Shaikan gross production to 55,000 barrels of oil per day (bopd) over 12-18 months; in 2017, bopd averaged around 35,000, while this year it has been running at 32,138 bopd, slightly above the company’s guidance range.
READ: Gulf Keystone Petroleum reports first profit in Kurdistan but Shaikan investment is still on hold
Gulf Keystone (GKP) said it continues to negotiate with both parties, hoping for Q3 clarity on amendments to production sharing contract.
The oil producer has initiated contracting and procurement activities to implement the 2018 approved capital expenditure of around US$91mln (US$73mln net to GKP), which includes work-overs in existing wells, the drilling of a new well, facilities improvement and the removal of plant bottlenecks.
The remainder of the required capital expenditure, which is currently estimated to be between US$175mln to US$215mln, to achieve 55,000 bopd gross production capacity is expected to be part of the 2019 investment plan, which will also include activities related to the further development of the field.
#GKP Production has averaged out an 32,138bopd in 1st 5 months, Cash pile has increased by $62m in < 6 months! Future production at 55,000bopd with greater netbacks causes an even greater cash surge. This has enormous legs IMO #GulfKeystone https://t.co/E47f9n2STl
— Baron Day Trading (@barondaytrading) June 22, 2018
GKP said a major milestone has been achieved with cumulative production from the Shaikan Field reaching 50mln barrels, as a result of which a production bonus of US$20mln (US$16mln of which will be paid by GKP) is now payable to the KRG.
As for money going in the other direction, GKP said payments from the KRG have been received on a regular basis throughout the year. The company has received gross payments of US$136.7mln (US$107.3mln net to GKP) so far this year.
The company had cash of US$222mln as at 21 June 2018.
"We are very pleased with the progress we have made in recent months on key commercial and operational matters and are delighted that Gulf Keystone is now back to investment mode, with the objective of achieving 55,000 bopd production capacity in the next 12 to 18 months; an important step towards the development of the full potential of the Shaikan field,” said Jón Ferrier, the chief executive officer of GKP.
Shares in Gulf Petroleum were up 12% at 240p in mid-morning trading.