REG-Gulf Keystone Petroleum Ltd 2024 Half Year Results Announcement
29/08/2024 07:15
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Gulf Keystone Petroleum Ltd (GKP)
2024 Half Year Results Announcement
29-Aug-2024 / 07:00 GMT/BST
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29 August 2024
Gulf Keystone Petroleum Ltd. (LSE: GKP)
(“Gulf Keystone”, “GKP”, “the Group” or “the Company”)
2024 Half Year Results Announcement
Gulf Keystone, a leading independent operator and producer in the Kurdistan Region
of Iraq, today announces its results for the half year ended 30 June 2024.
Jon Harris, Gulf Keystone’s Chief Executive Officer, said:
“We have safely delivered a solid operational and financial performance in the first
half of 2024, with robust local sales combined with sustained capital and cost
discipline supporting our return to profitability and free cash flow generation in
the period. Cash flow has enabled us to strengthen our balance sheet and restart
shareholder distributions, with $25 million returned to shareholders in 2024 to
date.
Looking ahead, we continue to engage with government stakeholders to push for an
exports restart solution, with significant potential value to be unlocked for
Kurdistan, Iraq and the Company. In the interim, we remain focused on maximising
shareholder value from local sales. To capitalise on continued strong demand, we are
pursuing incremental opportunities to optimise production and improve process safety
and reliability. We also continue to review the Company’s capacity for additional
dividends or buybacks to build on our track record of shareholder returns.”
Highlights to 30 June 2024 and post reporting period
Operational
• Continued strong safety track record, with no Lost Time Incidents for over 590
days
• Gross average production increased 69% to 39,252 bopd in H1 2024 (H1 2023:
23,256 bopd), reflecting robust local market demand for Shaikan Field crude
• Gross average production of c.41,400 bopd in 2024 year to date
◦ Local market demand rebounded in February and has remained high
◦ Strong gross average production in July of c.47,900 bopd and in August to
date of c.48,200 bopd
◦ Realised prices have fluctuated between $25/bbl - $28/bbl and are currently
at c.$27/bbl
• Shaikan Field reservoir and operations have continued to perform well following
the smooth ramp up of production at the beginning of 2024 and the subsequent
transition to 24/7 truck loading
• No operational impact from regional tensions; we continue to closely monitor the
security environment and take precautions to protect the organisation
Financial
• Successful return to profitability and free cash flow generation in H1 2024
following a challenging 2023, driven by pre-paid local sales and capital and
cost discipline
• Adjusted EBITDA increased 6% to $36.4 million (H1 2023: $34.2 million) as higher
production and cost reductions offset the decline in realised prices related to
the transition from exports to discounted local sales
◦ Revenue decreased 11% to $71.2 million (H1 2023: $79.6m) as the increase in
H1 2024 production was more than offset by the 49% decline in average
realised price to $26.3/bbl (H1 2023: $51.3/bbl)
◦ Gross operating costs per barrel decreased 25% to $4.2/bbl (H1 2023:
$5.6/bbl), reflecting higher production and cost control
• Net capital expenditure of $7.8 million (H1 2023: $47.0 million) reflecting the
Company’s focused 2024 work programme of safety critical upgrades and production
optimisation expenditures
• Monthly average net capex, operating costs and other G&A in H1 2024 of $6.2
million, in line with guidance
• Free cash flow generation of $26.6 million (H1 2023 free cash outflow: $9.9
million) enabled the Company to strengthen its balance sheet and restart
shareholder distributions
◦ $25 million returned to shareholders in 2024 year to date, comprising a $10
million share buyback (initiated in May and completed in July) and $15
million interim dividend (paid in July)
• Cash balance of $102.3 million as at 30 June 2024 (31 December 2023: $81.7
million); latest balance as at 28 August 2024 of $98.2 million
Outlook
• GKP remains focused on maximising shareholder value from local sales and
unlocking significant potential additional value from the restart of Kurdistan
exports
Local sales and production
• The Company sees continued robust local sales demand in the near term while
longer term market dynamics remain uncertain
• The Shaikan Field is producing close to its maximum capacity reflecting prudent
reservoir management in the current investment constrained environment
• Planned safety-critical upgrades and maintenance are scheduled for November
2024, requiring the shutdown of PF-1 for c.3 weeks with an expected gross
production impact of c.26,000 bopd, as previously announced
• The Company continues to exercise capital and cost discipline to maximise free
cash flow while maintaining production capacity to respond to local market
demand and the restart of exports
◦ Average monthly aggregate net capex, operating costs and other G&A run rate in
2024 now expected to be c.$7 million
◦ Reflects incremental expenditures on production optimisation, process safety &
reliability and associated resources to capitalise on continued local sales
demand following the strong performance year to date
◦ Net capex and operating costs expected to be weighted to H2 2024, as safety
critical upgrades are completed as part of the planned PF-1 shutdown; estimated
2024 net capex remains c.$20 million
Shareholder distributions
• GKP remains committed to returning excess cash to shareholders via dividends or
share buybacks, subject to conserving sufficient liquidity to manage the current
operating environment and ensuring the Company is able to transition
successfully from local sales to the restart of Kurdistan exports and
normalisation of Kurdistan Regional Government (“KRG”) payments
Kurdistan exports
• GKP continues to engage with government stakeholders regarding a pipeline
exports restart solution with the objective of unlocking significant potential
value for shareholders
• GKP remains ready to restart exports, contingent upon reaching agreements on
payment surety for future oil exports, the repayment of outstanding exports
sales receivables (of which GKP is owed over $150 million net) and the
preservation of current contract economics
Investor & analyst presentations
GKP’s management team will be hosting a presentation for analysts and investors at
10:00am (BST) today via live audio webcast:
1 https://brrmedia.news/GKP_HY_24
Management will also be hosting an additional webcast presentation focused on retail
investors via the Investor Meet Company ("IMC") platform at 12:00pm (BST) today. The
presentation is open to all existing and potential shareholders and participants
will be able to submit questions at any time during the event.
2 https://www.investormeetcompany.com/gulf-keystone-petroleum-ltd/register-investor
Recordings of both presentations will be made available on GKP’s website.
This announcement contains inside information for the purposes of the UK Market
Abuse Regime.
Enquiries:
Gulf Keystone: +44 (0) 20 7514 1400
Aaron Clark, Head of Investor Relations
& Corporate Communications 3 aclark@gulfkeystone.com
FTI Consulting +44 (0) 20 3727 1000
Ben Brewerton
4 GKP@fticonsulting.com
Nick Hennis
or visit: 5 www.gulfkeystone.com
Notes to Editors:
Gulf Keystone Petroleum Ltd. (LSE: GKP) is a leading independent operator and
producer in the Kurdistan Region of Iraq. Further information on Gulf Keystone is
available on its website: 6 www.gulfkeystone.com
Disclaimer
This announcement contains certain forward-looking statements that are subject to
the risks and uncertainties associated with the oil & gas exploration and production
business. These statements are made by the Company and its Directors in good faith
based on the information available to them up to the time of their approval of this
announcement but such statements should be treated with caution due to inherent
risks and uncertainties, including both economic and business factors and/or factors
beyond the Company's control or within the Company's control where, for example, the
Company decides on a change of plan or strategy. This announcement has been prepared
solely to provide additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. This announcement
should not be relied on by any other party or for any other purpose.
CEO review
Gulf Keystone delivered a solid operational and financial performance in the first
half of 2024, with robust local sales and sustained capital and cost discipline
generating free cash flow, enabling us to strengthen our balance sheet and reward
our shareholders with the restart of distributions. During the period we have been
able to maintain our strong safety track record, with over 590 days without a Lost
Time Incident.
Gross average production has been c.41,400 bopd in 2024 year to date as at 27 August
2024. Following weaker demand in January due to local refinery constraints and
challenges from winter weather, local market demand rebounded in February and has
remained robust since. While we experienced minor fluctuations of volumes in April
and June from the impact of Eid celebrations on truck availability, we have seen
strong gross average production in July and August to date of c.47,900 bopd and
c.48,200 bopd respectively. The Shaikan Field reservoir and operations have
continued to perform well following the smooth ramp up of production at the
beginning of 2024 and subsequent transition to 24/7 truck loading. Realised prices
have fluctuated in a range between $25/bbl - $28/bbl and are currently at c.$27/bbl.
We have continued to exercise capital and cost discipline to maximise value creation
from local sales. Our performance has enabled us to generate free cash flow of $26.6
million in the first half of 2024 relative to a $9.9 million outflow in the first
half of 2023. Consequently, we have been able to strengthen our balance sheet and
restart shareholder distributions, with $25 million paid to shareholders in 2024
year to date, comprising a $10 million share buyback and $15 million interim
dividend.
We have continued to engage with government stakeholders, both as a single company
and in collaboration with other International Oil Companies (“IOCs”) in Kurdistan,
to enable an exports restart solution. We have seen some traction, with tripartite
negotiations between the Federal Government of Iraq, Kurdistan Regional Government
(“KRG”) and IOCs taking place earlier this year.
We continue to believe there are major economic benefits to be unlocked for
Kurdistan and Federal Iraq from achieving a solution. Kurdistan production,
historically around 400,000 bopd, sold at international prices would provide a
significant source of funding for Kurdistan’s share of the Federal Iraqi budget,
which otherwise has been funded since the closure of the Iraq-Turkey Pipeline
through loans or fiscal revenue generated in Federal Iraq. For GKP, the restart of
exports could unlock significant value, potentially more than doubling current
realised prices. The repayment of over $150 million net to GKP of outstanding
receivables for October 2022 to March 2023 exports sales would bring further upside.
We remain ready to restart exports, contingent upon reaching agreements on payment
surety for future oil exports, the repayment of outstanding exports sales
receivables and the preservation of current contract economics.
Looking ahead to the remainder of the year, we will continue to push for an exports
restart solution. In the meantime, we remain focused on maximising free cash flow
from local sales while retaining production capacity to capitalise on local market
demand and the restart of exports.
We see robust local sales demand in the near term. Longer term, visibility remains
low as the market is dictated by the forces of local supply and demand.
Consequently, production guidance remains suspended. Nonetheless, at current sales
levels we are producing at close to maximum capacity as we prudently manage the
reservoir in the current investment constrained environment, optimising well
production rates to avoid traces of water and manage field declines estimated at
6-10% per year. We also expect production to be reduced by c.26,000 bopd for around
three weeks in November as we execute a shutdown of PF-1 to complete safety critical
upgrades.
GKP’s performance continues to be enabled by the dedication and skill of our teams
across the Company and I would like to thank all of our staff for their continued
hard work. I would also like to thank GKP’s shareholders for their continued
support. We are in a fundamentally more positive place relative to a year ago and I
believe offer an attractive investment case combining our ability to create
shareholder value from local sales and the option of significant potential upside
from the restart of exports and normalisation of our operating environment.
Jon Harris
Chief Executive Officer
28 August 2024
Financial review
Key financial highlights
Six months Six months
Year ended
ended ended
31 December 2023
30 June 2024 30 June 2023
Gross average production(1) bopd 39,252 23,256 21,891
Dated Brent(2) $/bbl 84.1 81.2 82.6
Realised price(1) $/bbl 26.3 51.3 40.9
Discount to Dated Brent $/bbl 57.8 29.9 41.7
Revenue $m 71.2 79.6 123.5
Operating costs $m 23.9 18.9 36.1
Gross operating costs per barrel(1) $/bbl 4.2 5.6 5.6
Other general and administrative $m 5.4 9.1 10.5
expenses
Share option expense $m 2.1 8.4 10.8
Adjusted EBITDA(1) $m 36.4 34.2 52.7
Profit/(loss) after tax $m 0.4 (2.9) (11.5)
Basic earnings/(loss) per share cents 0.2 (1.3) (5.3)
Revenue receipts(1) $m 65.5 65.7 109.2
Net capital expenditure(1) $m 7.8 47.0 58.2
Free cash flow(1) $m 26.6 (9.9) (13.1)
Shareholder distributions(3) $m 20.9 25.0 24.8
Cash and cash equivalents $m 102.3 84.9 81.7
1. Gross average production, realised price, gross operating costs per barrel,
Adjusted EBITDA, revenue receipts, net capital expenditure and free cash flow
are either non-financial or non-IFRS measures and, where necessary, are
explained in the summary of non-IFRS measures.
2. For the periods six months ended 30 June 2024 and year ended 31 December 2023, a
simple average Dated Brent price is provided as a comparator for realised price.
Realised prices for local sales are currently driven by supply and demand
dynamics in the local market, with no direct link to Dated Brent. For the period
six months ended 30 June 2023, Dated Brent reflects the weighted average price
used for export sales between 1 January to 24 March 2023 prior to the
Iraq-Turkey Pipeline closure.
3. Includes both paid and declared dividends. In the period six months ended 30
June 2024, shareholder distributions comprise the $15 million interim dividend,
paid on 19 July 2024, and $5.9 million of the Company’s $10 million share
buyback programme launched on 13 May 2024 and completed on 23 July 2024;
shareholder distributions in prior periods consist solely of dividends.
Following a challenging year in 2023 impacted by the suspension of Kurdistan exports
in March and delays to KRG export sales payments, GKP returned to free cash flow
generation in the first half of 2024, driven by robust pre-paid sales of Shaikan
Field crude to the local Kurdistan market and capital and cost discipline, with
monthly average capex and costs in line with guidance. Free cash flow enabled the
Company to strengthen its balance sheet, settling all overdue invoices in the first
quarter of 2024, and restart shareholder distributions, with $25 million paid to
shareholders in 2024 year to date, including a $10 million share buyback and $15
million interim dividend.
Adjusted EBITDA
Adjusted EBITDA increased 6% to $36.4 million in H1 2024 (H1 2023: $34.2 million) as
robust volumes from local sales and cost reductions more than offset the decline in
realised prices related to the transition from exports to discounted local sales.
Gross average production increased 69% to 39,252 bopd (H1 2023: 23,256 bopd) driven
by strong local sales, significantly higher than the first half of 2023 which
included the curtailment and shut-in of Shaikan Field production following the
suspension of Kurdistan exports on 25 March 2023.
Revenue decreased 11% to $71.2 million (H1 2023: $79.6m) as the increase in H1 2024
volumes was more than offset by the 49% decline in average realised price to
$26.3/bbl (H1 2023: $51.3/bbl). Realised prices for local sales remain driven by
supply and demand dynamics in the local market, with no direct link to Dated Brent.
The Company continued to exercise cost control in the first half of 2024 while
maintaining full production capacity to respond to local market demand and the
potential restart of exports.
Gross operating costs per barrel decreased 25% to $4.2/bbl (H1 2023: $5.6/bbl),
reflecting higher production. Operating costs of $23.9 million were 27% higher
year-on-year (H1 2023: $18.9 million), primarily reflecting the shut in of
production for the majority of Q2 2023.
Other G&A expenses were $5.4 million in H1 2024 (H1 2023: $9.1 million), reflecting
the absence of non-recurring corporate costs of $2.1 million incurred in H1 2023 and
cost reductions.
Share option expense of $2.1 million was 75% lower year-on-year, principally
reflecting the sharply reduced vesting of the 2021 LTIP award in H1 2024 relative to
the vesting of the 2020 LTIP award in H1 2023.
Cash flows
Revenue receipts of $65.5 million were flat relative to the prior period (H1 2023:
$65.7 million), reflecting local sales pre-payments at lower realised prices in H1
2024 compared to the delayed receipt of KRG payments for August and September 2022
export sales in H1 2023. $151 million of overdue receivables from the KRG for
October 2022 to March 2023 export sales remain outstanding, which the Company
continues to expect to recover in full.
Net capital expenditure in H1 2024 was $7.8 million (H1 2023: $47.0 million),
comprising safety critical upgrades and production optimisation expenditures. The
83% decrease relative to H1 2023 reflects the termination of all expansion, drilling
and well workover activity following the suspension of Kurdistan exports.
Free cash flow generation in H1 2024 was $26.6 million, relative to a $9.9 million
outflow in H1 2023. With improving liquidity, good visibility on near term local
sales demand and the cheap valuation of GKP’s share price, the Company announced on
13 May 2024 the launch of a $10 million share buyback programme, which was completed
on 23 July 2024. Given continued robust local sales, the buyback was supplemented
with the payment of a $15 million interim dividend on 19 July 2024, increasing
aggregate shareholder distributions in the year to date to $25 million.
GKP’s cash balance was $102.3 million as at 30 June 2024 (31 December 2023: $81.7
million). Continued free cash flow generation from local sales in July and August
2024 have more than offset shareholder distributions, with the Company’s cash
balance as at 28 August 2024 of $98.2 million.
The Group performed a cash flow and liquidity analysis, including consideration of
the current uncertainty over the timing of the pipeline reopening and settlement of
outstanding amounts due from the KRG, and the fact that the outlook for local sales
volumes and pricing cannot be predicted. Based on this analysis, the Directors have
a reasonable expectation that the Group has adequate resources to continue to
operate for twelve months. Therefore, the going concern basis of accounting is used
to prepare the financial statements.
Net entitlement
The Company shares Shaikan Field revenues with its partner, MOL, and the KRG, based
on the terms of the Shaikan Production Sharing Contract. GKP's net entitlement
includes the recovery of the Company’s investment in the Shaikan Field through cost
oil and a share of the profits through profit oil, less a Capacity Building Payment
owed to the KRG. The Company's net entitlement of gross Shaikan Field sales remained
36% in H1 2024 and is expected to remain at a similar level in H2 2024.
The unrecovered cost oil and R-factor are used to calculate monthly cost oil and
profit oil entitlements, respectively, owed to the Company from crude oil sales. As
at 30 June 2024, there was $189 million of gross unrecovered cost oil, subject to
potential cost audit by the KRG. The R-factor, calculated as cumulative gross
revenue receipts of $2,313 million divided by cumulative gross costs of $1,913
million, was 1.21.
Outlook
Looking ahead to the remainder of 2024, the Company remains focused on maximising
shareholder value from the local sales market while preserving sufficient liquidity
to manage the current operating environment and unlock significant potential value
from the restart of Kurdistan exports.
Monthly average aggregate net capex, operating costs and other G&A in 2024 are now
expected to be c.$7 million (vs. c.$6 million previously), reflecting incremental
expenditures on production optimisation, process safety & reliability and associated
resources to capitalise on continued local sales demand following our strong
performance in the year to date. Net capex and operating costs are expected to be
weighted to the second half of the year as safety critical upgrades are completed
during the c.3 week PF-1 shutdown scheduled for November 2024. 2024 net capex
continues to be estimated at c.$20 million as per original guidance. While local
sales demand is expected to remain strong in the near term, the Company retains
flexibility to rapidly and significantly reduce capital expenditures and costs in a
downside scenario.
As demonstrated by the recent restart of distributions, GKP remains committed to
returning excess cash to shareholders via dividends or share buybacks, taking into
account sufficient liquidity to manage the current operating environment and
ensuring the successful transition from local sales to the restart
of Kurdistan exports and normalisation of KRG payments. With improvements in the
operating environment, the Company’s ambition is to reinstate an appropriate
distributions policy to provide shareholders with greater clarity on returns. In the
interim, the Board will continue to review the Company’s capacity for additional
shareholder returns.
Gabriel Papineau-Legris
Chief Financial Officer
28 August 2024
Non-IFRS measures
The Group uses certain measures to assess the financial performance of its business.
Some of these measures are termed “non-IFRS measures” because they exclude amounts
that are included in, or include amounts that are excluded from, the most directly
comparable measure calculated and presented in accordance with International
Financial Reporting Standards (“IFRS”), or are calculated using financial measures
that are not calculated in accordance with IFRS. These non‑IFRS measures include
financial measures such as operating costs and non-financial measures such as gross
average production.
The Group uses such measures to measure and monitor operating performance and
liquidity, in presentations to the Board and as a basis for strategic planning and
forecasting. The Directors believe that these and similar measures are used widely
by certain investors, securities analysts and other interested parties as
supplemental measures of performance and liquidity.
The non-IFRS measures may not be comparable to other similarly titled measures used
by other companies and have limitations as analytical tools and should not be
considered in isolation or as a substitute for analysis of the Group’s operating
results as reported under IFRS. An explanation of the relevance of each of the
non-IFRS measures and a description of how they are calculated is set out below.
Additionally, a reconciliation of the non-IFRS measures to the most directly
comparable measures calculated and presented in accordance with IFRS and a
discussion of their limitations is set out below, where applicable. The Group does
not regard these non-IFRS measures as a substitute for, or superior to, the
equivalent measures calculated and presented in accordance with IFRS or those
calculated using financial measures that are calculated in accordance with IFRS.
Gross operating costs per barrel
Gross operating costs are divided by gross production to arrive at operating costs
per barrel.
Six months ended Six months
ended Year ended 31
30 June 2024 December 2023
30 June 2023
Gross production (MMstb) 7.2 4.2 8.0
Gross operating costs ($ million)(1) 29.9 23.6 45.1
Gross operating costs per barrel ($ per 4.2 5.6 5.6
bbl)
1. Gross operating costs equate to operating costs (see note 5) adjusted for the
Group’s 80% working interest in the Shaikan Field.
Adjusted EBITDA
Adjusted EBITDA is a useful indicator of the Group’s profitability, which excludes
the impact of costs attributable to tax expense)/(credit), finance costs, finance
revenue, depreciation, amortisation, impairment of receivables and provision against
inventory held for resale.
Six months Six months
ended ended Year ended 31
December 2023
30 June 2024 30 June 2023
$ million
$ million $ million
Profit/(loss) after tax 0.4 (2.9) (11.5)
Finance costs 0.8 0.9 1.8
Finance income (2.0) (2.1) (3.8)
Tax charge 0.6 0.4 0.1
Depreciation of oil and gas assets 36.5 20.6 39.5
Depreciation of other PPE assets and 1.7 1.3 2.6
amortisation of intangibles
(Decrease)/increase of expected credit loss (1.7) 13.9 21.4
provision on trade receivables
Provision against inventory held for resale - 2.1 -
Adjusted EBITDA 36.4 34.2 50.1
Net cash
Net cash is a useful indicator of the Group’s indebtedness and financial flexibility
because it indicates the level of cash and cash equivalents less cash borrowings
within the Group’s business. Net cash is defined as cash and cash equivalents, less
current and non-current borrowings and non-cash adjustments. Non-cash adjustments
include unamortised arrangement fees and other adjustments.
30 June 2024 30 June 2023 31 December 2023
$ million $ million $ million
Cash and cash equivalents 102.3 84.9 81.7
Borrowings - - -
Net cash 102.3 84.9 81.7
Net Capital expenditure
Net capital expenditure is the value of the Group’s additions to oil and gas assets
excluding the change in value of the decommissioning asset or any asset impairment.
Six months ended Six months ended Year ended 31 December
2023
30 June 2024 30 June 2023
$ million
$ million $ million
Net capital expenditure 7.8 47.0 58.2
Free cash flow
Free cash flow represents the Group’s cash flows, before any dividends and share
buybacks including related fees.
Six months ended Six months ended Year ended 31
December 2023
30 June 2024 30 June 2023
$ million
$ million $ million
Net cash generated from operating 42.8 31.7 51.3
activities
Net cash used in investing (16.0) (41.3) (63.9)
activities
Payment of leases (0.2) (0.3) (0.5)
Free cash flow 26.6 (9.9) (13.1)
Principal risks & uncertainties
The Board determines and reviews the key risks for the Group on a regular basis. The
principal risks, and how the Group seeks to mitigate them, for the second half of
the year are largely consistent with those detailed in the management of principal
risks and uncertainties section of the 2023 Annual Report and Accounts. The
principal risks are listed below:
Strategic Operational Financial
Political, social and economic Health, safety and Liquidity and funding
instability environment (“HSE”) risks capability
Export route availability Gas flaring Oil revenue payment
mechanism
Stakeholder misalignment Security Commodity prices
Disputes regarding title or
Reserves
exploration and production rights
Business conduct and
Field delivery risk
anti‑corruption
Risk of economic sanctions
impacting the Group
Climate change
Organisation and talent
Cyber security
Responsibility statement
The Directors confirm that to the best of their knowledge:
a. the condensed set of financial statements has been prepared in accordance with
UK-adopted IAS 34 'Interim Financial Reporting';
b. the interim management report includes a fair review of the information required
by DTR 4.2.7R (indication of important events and their impact during the first
six months and description of principal risks and uncertainties for the
remaining six months of the year); and
c. the interim management report includes a fair review of the information required
by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board
Jon Harris
Chief Executive Officer
28 August 2024
INDEPENDENT REVIEW REPORT TO GULF KEYSTONE PETROLEUM LIMITED
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial report
for the six months ended 30 June 2024 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and the Disclosure
Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
We have been engaged by Gulf Keystone Petroleum Limited (the “company”) and its
subsidiaries (the “Group”) to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 June 2024 which
comprises the condensed consolidated income statement, the condensed consolidated
statement of comprehensive income, the condensed consolidated balance sheet, the
condensed consolidated statement of changes in equity, the condensed consolidated
cash flow statement and the related explanatory notes that have been reviewed.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on Review
Engagements (UK) 2410, “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” (“ISRE (UK) 2410 (Revised)”). A review of interim
financial information consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the Group are prepared in
accordance with UK adopted international accounting standards. The condensed set of
financial statements included in this half-yearly financial report has been prepared
in accordance with UK adopted International Accounting Standard 34, “Interim
Financial Reporting”.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an
audit as described in the Basis for conclusion section of this report, nothing has
come to our attention to suggest that the directors have inappropriately adopted the
going concern basis of accounting or that the directors have identified material
uncertainties relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with ISRE
(UK) 2410 (Revised), however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report in
accordance with the UK adopted International Accounting Standard 34 “Interim
Financial Reporting”, the Bermuda Companies Act 1981 and Disclosure Guidance and
Transparency Rules of the United Kingdom’s Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible for
assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the half-yearly
financial report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit procedures, as
described in the Basis for Conclusion paragraph of this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom’s Financial Conduct Authority and for no
other purpose. No person is entitled to rely on this report unless such a person is
a person entitled to rely upon this report by virtue of and for the purpose of our
terms of engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to any other
person or for any other purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
28 August 2024
BDO LLP is a limited liability partnership registered in England and Wales (with
registered number OC305127).
Condensed consolidated income statement
For the six months ended 30 June 2024
Six months Six months Year ended 31
ended ended December 2023
Notes 30 June 2024 30 June 2023 Audited
Unaudited Unaudited
$’000
$’000 $’000
Revenue 4 71,186 79,555 123,514
Cost of sales 5 (65,675) (51,156) (93,953)
Decrease/(increase) of expected
credit loss provision on trade 12 1,676 (13,939) (21,378)
receivables
Gross profit 7,187 14,460 8,183
Other general and administrative 6 (5,392) (9,080) (10,466)
expenses
Share option related expense 7 (2,055) (8,372) (10,760)
Loss from operations (260) (2,992) (13,043)
Finance income 2,008 2,057 3,803
Finance costs (814) (873) (1,765)
Foreign exchange gains/(losses) 124 (668) (384)
Profit/(loss) before tax 1,058 (2,476) (11,389)
Tax charge (616) (390) (111)
Profit/(loss) after tax 442 (2,866) (11,500)
Profit/(loss) per share (cents)
Basic 8 0.20 (1.32) (5.28)
Diluted 8 0.19 (1.32) (5.28)
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2024
Six months Six months
Year ended
ended ended
31 December 2023
30 June 2024 30 June 2023
Audited
Unaudited Unaudited
$’000 $’000 $’000
Profit/(loss) after tax for the period 442 (2,866) (11,500)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation of (139) 903 952
foreign operations
Total comprehensive income/(expense) 303 (1,963) (10,548)
for the period
Condensed consolidated balance sheet
As at 30 June 2024
30 June
31 December 2023
2024
Notes Audited
Unaudited
$’000
$’000
Non-current assets
Property, plant and equipment 10 415,785 445,842
Trade receivables 12 148,244 140,218
Intangible assets 1,618 2,813
Deferred tax asset 918 1,545
566,565 590,418
Current assets
Inventories 11 9,919 9,901
Trade and other receivables 12 7,726 15,118
Cash and cash equivalents 102,332 81,709
119,977 106,728
Total assets 686,542 697,146
Current liabilities
Trade and other payables 13 (108,283) (109,394)
Dividends payable (15,000) -
Deferred income 13 (2) (5,164)
(123,285) (114,558)
Non-current liabilities
Trade and other payables 13 - (39)
Provisions (35,264) (35,312)
(35,264) (35,351)
Total liabilities (158,549) (149,909)
Net assets 527,993 547,237
Equity
Share capital 14 219,339 222,443
Share premium account 14 485,787 503,312
Exchange translation reserve (3,905) (3,766)
Accumulated losses (173,228) (174,752)
Total equity 527,993 547,237
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2024
Exchange
Share Share premium Accumulated Total
translation
capital account losses equity
reserve
$’000 $’000 $’000 $’000 $’000
Balance at 1 January 2023 216,247 528,125 (4,718) (166,729) 572,925
(audited)
Loss after tax for the period - - - (2,866) (2,866)
Exchange difference of
translation of foreign - - 903 - 903
operations
Total comprehensive - - 903 (2,866) (1,963)
income/(loss) for the period
Dividends - (24,960) - - (24,960)
Share issues 6,196 - - (6,196) -
Employee share schemes - - - 7,328 7,328
Balance at 30 June 2023 222,443 503,165 (3,815) (168,463) 553,330
(unaudited)
Loss after tax for the period - - - (8,634) (8,634)
Exchange difference of
translation of foreign - - 49 - 49
operations
Total comprehensive - - 49 (8,634) (8,585)
income/(loss) for the period
Dividends - 147 - - 147
Employee share schemes - - - 2,345 2,345
Balance at 31 December 2023 222,443 503,312 (3,766) (174,752) 547,237
(audited)
Profit after tax for the - - - 442 442
period
Exchange difference of
translation of foreign - - (139) - (139)
operations
Total comprehensive - - (139) 442 303
(loss)/income for the period
Dividends - (15,000) - - (15,000)
Share issues 255 - - (255) -
Repurchase of ordinary shares (3,359) (2,525) - - (5,884)
Employee share schemes - - - 1,337 1,337
Balance at 30 June 2024 219,339 485,787 (3,905) (173,228) 527,993
(unaudited)
Condensed consolidated cash flow statement
for the six months ended 30 June 2024
Six months Six months Year ended
ended ended 31 December
Notes 2023
30 June 2024 30 June 2023
Audited
Unaudited Unaudited
$’000 $’000 $’000
Operating activities
Cash generated in operations 9 40,788 29,617 47,520
Interest received 2,008 2,057 3,803
Net cash generated in operating 42,796 31,674 51,323
activities
Investing activities
Purchase of intangible assets (32) - -
Purchase of property, plant and 10 (15,973) (41,301) (65,386)
equipment
Sale of drilling stock - - 1,449
Net cash used in investing activities (16,005) (41,301) (63,937)
Financing activities
Payment of dividends 14 - (24,960) (24,813)
Share buyback (5,884) - -
Payment of leases (238) (262) (503)
Net cash used in financing activities (6,122) (25,222) (25,316)
Net increase/(decrease) in cash and cash 20,669 (34,849) (37,930)
equivalents
Cash and cash equivalents at beginning 81,709 119,456 119,456
of period
Effect of foreign exchange rate changes (46) 328 183
Cash and cash equivalents at end of the
period being bank balances and cash on 102,332 84,935 81,709
hand
1. General information
Gulf Keystone Petroleum Limited (the “Company”) is domiciled and incorporated in
Bermuda (registered address: Cedar House, 3rd Floor, 41 Cedar Avenue, Hamilton,
HM12, Bermuda); together with its subsidiaries it forms the “Group”. On 25 March
2014, the Company’s common shares were admitted, with a standard listing, to the
Official List of the United Kingdom Listing Authority (“UKLA”) and to trading on the
London Stock Exchange’s Main Market for listed securities. On 29th July 2024, new
Listing Rules came into effect for the London Stock Exchange. Previously, the
Company was quoted on Alternative Investment Market, a market operated by the London
Stock Exchange. The former categories for Main Market listed companies of Premium
and Standard Listed were ceased (GKP being a Standard Listed company up until this
point). From that date, GKP moved to the Equity Shares – Transition category. The
Company serves as the parent company for the Group, which is engaged in oil and gas
exploration, development and production, operating in the Kurdistan Region of Iraq.
2. Summary of material accounting policies
These interim financial statements should be read in conjunction with the audited
financial statements contained in the Annual Report and Accounts for the year ended
31 December 2023. The Annual Report and Accounts of the Group were prepared in
accordance with United Kingdom adopted International Accounting Standards (“IAS”).
The condensed set of financial statements included in this half yearly financial
report have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’
and the Disclosure and Transparency Rules (“DTR”) of the Financial Conduct Authority
(“FCA”) in the United Kingdom as applicable to interim financial reporting.
The condensed set of financial statements included in this half yearly financial
report have been prepared on a going concern basis as the Directors consider that
the Group has adequate resources to continue operating for the foreseeable future.
The accounting policies adopted in the 2024 half-yearly financial report are the
same as those adopted in the 2023 Annual Report and Accounts, other than the
implementation of new International Financial Reporting Standards (“IFRS”) reporting
standards.
The financial information included herein for the year ended 31 December 2023 does
not constitute the Group’s financial statements for that year but is derived from
those Accounts. The auditor’s report on these Accounts was unqualified and did not
include a reference to any matters to which the auditor drew attention by way of
emphasis of matter.
Adoption of new and revised accounting standards
As of 1 January 2024, a number of accounting standard amendments and interpretations
became effective. The adoption of these amendments and interpretations has not had a
material impact on the financial statements of the Group for the six months ended 30
June 2024.
Going concern
The Group’s business activities, together with the factors likely to affect its
future development, performance and position, are set out in the Chief Executive
Officer’s review and the Management of principal risks and uncertainties. The
financial position of the Group at the period end and its cash flows and liquidity
position are included in the Financial review.
As at 28 August 2024 the Group had $98.2 million of cash and no debt. The Group
continues to closely monitor and manage its liquidity. Cash forecasts are regularly
produced and sensitivities are run for different scenarios including, but not
limited, to changes in sales volumes, commodity price fluctuations, timing of export
pipeline restart, delays to revenue receipts and cost optimisations. The Group
remains focused on taking appropriate actions to preserve its liquidity position.
As a result of closure of the Iraq-Turkey pipeline (“ITP”) in March 2023, the Group
significantly reduced expenditures to preserve liquidity and continues to closely
monitor costs with minimal capital investment committed while the pipeline remains
closed. Throughout 2024, due to the stabilising of local sales volumes, the Group
has significantly improved its working capital position to the extent it has been
able to distribute $25 million to shareholders via a buyback programme and
re-instatement of dividends. Nonetheless, the Group is aware there could be a
potential decline in local sales, and potential delays in Kurdistan Regional
Government (“KRG”) revenue receipts once the ITP has been reopened. The key
uncertainties of the alternative crude sale methods are summarised below:
• Local sales: the Group continues local sales with payments from buyers required
in advance following extensive due diligence. In the first six months of 2024
the Group received over $65 million related to local sales. However, local sales
volumes and prices have fluctuated and remain difficult to predict; and
• Export sales: While political negotiations and commercial negotiations are
ongoing between the Government of Iraq and the KRG, the timing of reopening the
ITP and payment mechanism remain uncertain.
The Directors believe an agreement will ultimately be reached to reopen the ITP, and
we reasonably expect that overdue balances will be paid and receipts from the KRG
will return to a more regular basis. However, a reduction in local sales or
reopening of the pipeline with a deferral of revenue receipts could result in
liquidity pressures within the 12-month going concern period.
The Directors have considered sensitivities, including local sales volumes and
potential delays in KRG revenue receipts once the ITP reopens, to assess the impact
on the Group’s liquidity position and believe sufficient mitigating actions are
available to withstand such impacts within the 12-month going concern period.
Specifically, the Directors considered stress tests that included no further local
sales or KRG revenue receipts and confirmed that cost reduction opportunities exist
to ensure that the Group can continue to discharge its liabilities for a period of
at least 12 months.
As explained in Note 13, although the Group has recognised current liabilities of
around $78 million payable to the KRG, it does not expect these will be cash
settled.
Overall, the Group’s forecasts, taking into account the applicable risks, stress
test scenarios and potential mitigating actions, show that it has sufficient
financial resources for the 12 months from the date of approval of these interim
financial statements.
Based on the analysis performed, the Directors have a reasonable expectation that
the Group has adequate resources to continue to operate for the foreseeable future.
Thus, the going concern basis of accounting is used to prepare these interim
financial statements.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the accounting policies described above, the Group is required
to make judgements, estimates and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period or in the period of revision and
future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations
(which are presented separately below), that the Directors have made in the process
of applying the Group’s accounting policies and that have the most significant
effect on the amounts recognised in financial statements
Production sharing contract (“PSC”) entitlement: Revenue and capacity building
payments
The recognition of revenue, particularly the recognition of revenue from pipeline
exports, is considered to be a key accounting judgement. The Group began commercial
production from the Shaikan Field in July 2013 and historically made sales to both
the domestic and export markets. The Group considers that revenue can be reliably
measured as it passes the delivery point into the export pipeline or truck, as
appropriate. The critical accounting judgement applied in preparing the 2023
financial statements is that it is appropriate to recognise export revenue for
deliveries from 1 January to 25 March 2023 based on the proposed new pricing
mechanism, notwithstanding that there is no signed lifting agreement for that period
and the pricing mechanism has not yet been agreed. Further details of this judgement
are provided in the sales revenue accounting policy within the Company’s 2023 Annual
Report and Accounts. In making this judgement, consideration was given to the fact
that the Group received payment for September 2022 deliveries at an amount that was
consistent with the proposed new pricing terms; no further receipts for the period
of pipeline exports from 1 October 2022 to 25 March 2023 have been received.
A summary of the currently estimated financial impact of the proposed change in
pricing mechanism is detailed in Note 4.
Any future agreements between the Group and the KRG might change the amounts of
revenue recognised.
During past PSC negotiations with the Ministry of Natural Resources (“MNR”), it was
tentatively agreed that the Shaikan Contractor would provide the KRG a 20% carried
working interest in the PSC. This would result in a reduction of GKP’s working
interest from 80% to 61.5%. To compensate for such decrease, capacity building
payments expense would be reduced to 20% of profit petroleum. While the PSC has not
been formally amended, it was agreed that GKP would invoice the KRG for oil sales
based on the proposed revised terms from October 2017. The financial statements
reflect the proposed revised working interest of 61.5%. Relative to the PSC terms,
the proposed revised invoicing terms result in a decrease in both revenue and cost
of sales and on a net basis are slightly positive for the Group.
As part of earlier PSC negotiations, on 16 March 2016, GKP signed a bilateral
agreement with the MNR (the “Bilateral Agreement”). The Bilateral Agreement included
a reduction in the Group’s capacity building payment from 40% to 30% of profit
petroleum. Subsequent to signing the Bilateral Agreement, further negotiations
resulted in the capacity building payment rate being reduced from 30% to 20%, which
has formed the basis for all oil sales invoices to date as noted above. Since PSC
negotiations have not been finalised, GKP has included a non-cash payable for the
difference between the capacity building rate of 20% and 30%, which is recognised in
cost of sales and other payables.
The Group expects to confirm with the MNR whether to proceed with a formal amendment
to the PSC to reflect current invoice terms.
Material sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting period that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are discussed below.
Expected credit loss (“ECL”)
The recoverability of receivables is a key accounting judgement. The difference
between the nominal value of receivables and the expected value of receivables after
allowing for counterparty default risk gives the ECL. In making this judgement,
management has estimated the timing of the receipt of receivables which will be
dependent upon uncertain future events, in particular the expected timing of the
re-opening of the ITP. Management have considered scenarios for recovering
receivables and assigned probabilities to these scenarios. A weighted average has
been applied to receipt profiles, upon which a counterparty default allowance has
been applied to derive the ECL. This ECL is offset against current and non-current
receivable amounts as appropriate within the balance sheet with the change in the
receivable balance during the period recognised in the income statement.
Decommissioning provision
Decommissioning provisions are estimated based upon the obligations and costs to be
incurred in accordance with the PSC at the end of field life in 2043. There is
uncertainty in the decommissioning estimate due to factors including potential
changes to the cost of activities, potential emergence of new techniques or changes
to best practice. The Group performed an estimate of the current value of
obligations and costs to decommission the asset as at 31 December 2023, which was
independently reviewed by ERC Equipoise, an independent third party; this estimate
formed the basis of the 30 June 2024 estimate.
The Group updated the current value of obligations and costs at 30 June 2024, which
followed an ERC Equipoise assessment of the Group’s estimate at 31 December 2023.
Management have increased these costs by estimated compound interest rates, to
future value in 2043, and reduced to present value by an estimated discount rate,
there is also uncertainty regarding the inflation and discount rates used.
Carrying value of producing assets
The Group’s accounting policy on impairment remains consistent with that disclosed
in the 2023 Annual Report. In line with the Group’s accounting policy on impairment,
management performs an impairment review of the Group’s oil and gas assets with
reference to indicators as set out in IAS 36 ‘Impairment of Assets’. The Group
assesses its group of assets, called a cash-generating unit (“CGU”), for impairment,
if events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Where indicators are present, management calculates the
recoverable amount using key estimates such as future oil prices, estimated
production volumes, the cost of development and production, post-tax discount rates
that reflect the current market assessment of the time value of money and risks
specific to the asset, commercial reserves and inflation. The key assumptions are
subject to change based on market trends and economic conditions. Where the CGU’s
recoverable amount is lower than the carrying amount, the CGU is considered impaired
and is written down to its recoverable amount. The Group’s sole CGU at 30 June 2024
was the Shaikan Field with a carrying value, being Oil and Gas assets less
capitalised decommissioning provision, of $378.5 million (FY 2023: $408.0 million).
The Group performed an impairment indicator evaluation as at 30 June 2024 and
concluded that no impairment indicators arose. The key areas of estimation in
assessing the potential impairment indicators are as follows:
• While the date of the re-opening of the ITP remains uncertain, management have
assessed a re-opening date of April 2025 as being reasonable. Although the
estimated re-opening date is six months later than the base case assessment at
31 December 2023, management previously performed sensitivities of up to two
years with no impairment, therefore this delay to the projected re-opening was
not assumed to be an impairment trigger;
• The Group’s netback oil price was based on the Brent forward curve and market
participants’ consensus, including banks, analysts and independent reserves
evaluators, as at 30 June 2024 for the period 2024 to 2029 with inflation of
2.25% per annum thereafter, less transportation costs and quality adjustments.
Brent consensus prices are as follows:
$/bbl – nominal 2024 2025 2026 2027 2028 2029
30 June 2024 – base case 84 80 77 77 77 83
31 December 2023 – base case 83 80 77 77 77 80
• Management have previously applied sensitivities in reviewing stress case
pricing including a 10% reduction from base case pricing to derive a stress case
price with no impairment impact. As the prices are broadly flat or slightly
higher at 30 June 2024, management have not noted any stress case pricing above;
• Discount rates are adjusted to reflect risks specific to the Shaikan Field and
the Kurdistan Region of Iraq. Management assessed changes to the key variables
that could impact discount rate and concluded no change was necessary. The
post-tax nominal discount rate was estimated to be 16%, unchanged from 31
December 2023;
• Operating costs and capital expenditure are based on financial budgets and
internal management forecasts. Costs assumptions incorporate management
experience and expectations, as well as the nature and location of the operation
and the risks associated therewith. There were no indicators that costs will
increase in comparison to 31 December 2023 impairment assessment;
• No adverse changes were noted for commercial reserves and production profiles;
and
• No changes were noted in the operating environment such as local market
conditions, tax or other legal or regulatory changes. Specifically, management
considered if there had been any update with respect to the Iraqi Federal
Supreme Court ruling announced in 2022 and concluded there was no movement in
the period which would impact the impairment analysis.
3. Geographical information
The Chief Operating Decision Maker, as per the definition in IFRS 8 ‘Operating
Segments’, is considered to be the Board of Directors. The Group operates in a
single segment, that of oil and gas exploration, development and production, in a
single geographical location, the Kurdistan Region of Iraq (“KRI”); 100% (FY 2023:
100%) of the group’s non-current assets, excluding deferred tax assets and other
financial assets, are located in the KRI. The financial information of the single
segment is materially the same as set out in the condensed consolidated statement of
comprehensive income, the condensed consolidated balance sheet, the condensed
consolidated statement of changes in equity, the condensed consolidated cash flow
statement and the related notes.
4. Revenue
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Unaudited Unaudited Audited
$’000 $’000 $’000
Oil sales via export pipeline - 79,555 78,955
Local oil sales 71,186 - 44,559
71,186 79,555 123,514
The Group accounting policy for revenue recognition is set out in its 2023 Annual
Report, with revenue recognised upon crude oil passing the delivery points, either
being entry into pipeline or delivered into trucks.
Oil sales via export pipeline (until 25 March 2023)
The International Court of Arbitration in Paris ruled on the long running ITP
arbitration case in Iraq’s favour, which led to the shut-in of the ITP on 25 March
2023. Negotiations are ongoing to reopen the pipeline.
Since 1 September 2022, there has been no lifting agreement in place between the
Shaikan Contractor and the KRG. The KRG proposed a new pricing mechanism based upon
the average monthly Kurdistan blend (“KBT”) sales price realised by the KRG at
Ceyhan; formerly the pricing mechanism was based upon Dated Brent. The Group has not
accepted the proposed contract modification and continued, until suspension of the
export pipeline, to invoice the KRG for oil sales based on the pre-1 September 2022
pricing formula. Considering the uncertainty with respect to the variable
consideration within the pricing mechanism, the Group has concluded that it is an
appropriate judgement to recognise revenue based on the proposed contract
modification for the period to the pipeline shutdown on 25 March 2023.
Export sales covering the period from 1 January to 25 March 2023 were based upon the
monthly Kurdistan blend price. The realised price in this period was $51.3/bbl.
The 2023 revenue impact of using the proposed KBT pricing mechanism instead of Dated
Brent relating to oil sales via the export pipeline was estimated to be a reduction
of $12.0 million; taking into account the associated reduction in capacity building
payments resulted in a total reduction of profit after tax of $11.4 million. Any
difference between the proposed and final pricing mechanism will be reflected in
future periods.
No oil sales via the export pipeline occurred in the six-month period to 30 June
2024 (H1 2023: $79.6 million; FY 2023: $79.0 million).
Local oil sales (from 19 July 2023)
In July 2023, GKP began selling oil to local buyers at negotiated prices. The
realised price achieved in the six-month period to 30 June 2024 was $26/bbl (H1
2023: not applicable; FY 2023: $30/bbl). Local buyers pay GKP in advance of receipt
of oil; such amounts are recognised as deferred income.
Information about major customers
In the six months ended 30 June 2024, 100% of sales were made to customers
individually making up more than 10% of revenue (H1 2023: 100%; FY 2023: 99%);
customers with more than 10% of revenue in the period were Customer A and Customer B
with 86% and 14% respectively (H1 2023: Kurdistan Regional Government with 100%; FY
2023: Kurdistan Regional Government, Customer B, Customer C and Customer D with 68%,
11%, 10% and 10% respectively).
5. Cost of Sales
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Unaudited Unaudited Audited
$’000 $’000 $’000
Operating costs 23,917 18,858 36,082
Capacity building payments 5,131 5,713 8,872
Changes in oil inventory value 98 (1,188) (75)
Depreciation of oil and gas assets and 36,529 20,559 39,470
operational assets
Contract termination costs - 5,143 5,525
Provision against inventory held for sale - 2,071 2,627
Loss on disposal of drilling stock - - 1,452
65,675 51,156 93,953
Capacity building payments have been recorded in line with the proposed pricing
mechanism (see note 4); any difference between the proposed and final pricing
mechanism will be reflected in future periods.
The Group accounting policy for depreciation of oil and gas assets is set out in its
2023 Annual Report. The depreciation charge above is based upon the reserves
estimate within the Competent Persons Report (“CPR”) prepared by ERC Equipoise as at
31 December 2022. The increase in charge compared to the corresponding period in
2023 is principally derived from higher production in 2024.
Contract termination, provision against inventory held for sale and loss on disposal
of drilling stocks in 2023 relate to non-recurring activities undertaken following
the ITP export pipeline suspension in March 2023.
6. Other general and administrative expenses
Six months Year ended
ended Six months 31 December
ended
30 June 2024 30 June 2023 2023
Unaudited
Unaudited $’000 Audited
$’000 $’000
Depreciation and amortisation 1,690 1,331 2,652
Other general and administrative costs 3,702 7,750 7,814
5,392 9,081 10,466
The decrease of other general and administrative costs from H1 2023 to H1 2024 is
primarily due to the absence of non-recurring corporate costs of $2.1 million
incurred in H1 2023, and cost reductions.
7. Share option related expense
Six months Year ended
ended Six months 31 December
ended
30 June 2024 30 June 2023 2023
Unaudited
Unaudited $’000 Audited
$’000 $’000
Share-based payment expense 1,337 7,328 9,673
Payments related to share options exercised 741 764 797
Share-based (credit)/payment related provision (23) 280 290
for taxes
2,055 8,372 10,760
On 31 March 2024 the 2014 Long Term Incentive Plan (“LTIP”) concluded. On 21 June
2024, the 2024 LTIP was approved at the Company’s Annual General Meeting, becoming
effective on 1 July 2024. No expense relating to the 2024 LTIP scheme was recognised
by the Group from 1 April 2024 to 30 June 2024.
8. Earnings per share
The calculation of the basic and diluted profit per share is based on the following
data:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Unaudited Unaudited Audited
Profit/(loss) after tax ($’000) 442 (2,866) (11,500)
Number of shares (‘000s):
Basic weighted average number of ordinary shares 222,188 216,927 217,992
Basic earnings/(loss) per share (cents) 0.20 (1.32) (5.28)
The Group followed the steps specified by IAS 33 ‘Earnings per share’ in determining
whether outstanding share options are dilutive or anti-dilutive.
Reconciliation of dilutive shares:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Unaudited Unaudited Audited
Number of shares (‘000s):
Basic weighted average number of ordinary 222,188 216,927 217,992
shares
Effect of dilutive potential ordinary shares 5,906 - -
Diluted number of ordinary shares outstanding 228,094 216,927 217,992
Diluted earnings/(loss) per share (cents) (1) 0.19 (1.32) (5.28)
1. At the reporting date, the Group had 5,837k dilutive (H1 2023: 11,547k
antidilutive; FY 2023: 8,224k antidilutive) ordinary shares relating to
outstanding share options. Earnings per share are calculated on the assumption
of conversion of all potentially dilutive ordinary shares; however, during a
period where a company makes a loss, anti-dilutive shares are not included in
the loss per share calculation as they would reduce the reported loss per share.
The weighted average number of ordinary shares in issue excludes shares held by
Employee Benefit Trustee (“EBT”) of 0.2 million, (H1 2023: 3.4 million; FY 2023: 0.2
million).
9. Reconciliation of loss from operations to net cash generated in operating
activities
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Unaudited Unaudited Audited
$’000 $’000 $’000
Loss from operations (260) (2,992) (13,043)
Adjustments for:
Depreciation, depletion and amortisation of
property, plant and equipment (including the 37,008 21,010 40,409
right of use assets)
Amortisation of intangible assets 1,211 815 1,648
Share-based payment expense 1,337 7,328 9,673
(Decrease)/increase of provision for (1,676) 13,939 21,378
impairment of trade receivables
Provision against inventory held for sale - 2,071 2,627
Operating cash flows before movements in 37,620 42,171 62,692
working capital
Increase in inventories (18) (9,858) (7,605)
Decrease/(increase) in trade and other 1,042 (8,906) (10,741)
receivables
Increase in trade and other payables 2,144 6,143 3,107
Income taxes received - 67 67
Cash generated from operations 40,788 29,617 47,520
10. Property, plant and equipment
Oil and Gas Fixtures and Right of use
Assets Equipment Assets Total
$’000 $’000 $’000 $’000
Year ended 31 December 2023
Opening net book value 433,556 2,257 630 436,443
Additions 58,240 453 86 58,779
Disposals’ costs - - (70) (70)
Revision to decommissioning asset (8,933) - - (8,933)
Depreciation charge (39,470) (649) (356) (40,475)
Disposals’ depreciation - - 66 66
Foreign currency translation - 5 27 32
differences
Closing net book value 443,393 2,066 383 445,842
Cost 992,870 9,404 2,188 1,004,462
Accumulated depreciation (549,477) (7,338) (1,805) (558,620)
Net book value at 31 December 2023 443,393 2,066 383 445,842
Period ended 30 June 2024
Opening net book value 443,393 2,066 383 445,842
Additions 7,751 52 - 7,803
Revision to decommissioning asset (848) - - (848)
Depreciation charge (36,529) (306) (173) (37,008)
Foreign currency translation - (1) (3) (4)
differences
Closing net book value 413,767 1,811 207 415,785
At 30 June 2024
Cost 999,773 9,455 2,185 1,011,413
Accumulated depreciation (586,006) (7,644) (1,978) (595,628)
Net book value 413,767 1,811 207 415,785
The additions to the Shaikan asset, amounting to $7.8 million during the period (FY
2023: 58.2 million) included safety critical upgrades.
The $0.8 million decrease (2023: $8.9 million increase) in decommissioning asset
value relates to a $1.1 million decrease in changes to inflation and discount rates
(2023: $13.1 million), offset by an increase of $0.3 million relating to facilities
work (2023: $4.2 million).
11. Inventories
31 December
30 June 2024
2023
Unaudited
Audited
$’000
$’000
Warehouse stocks and materials 6,854 6,900
Inventory held for sale 2,789 2,627
Crude oil 276 374
9,919 9,901
12. Trade and other receivables
Non-current receivables
31 December
30 June 2024
2023
Unaudited
Audited
$’000
$’000
Trade receivables – non-current 148,244 140,218
Current receivables
31 December
30 June 2024
2023
Unaudited
Audited
$’000
$’000
Trade receivables - current 409 6,350
Underlift 1,216 3,806
Other receivables 3,531 3,080
Prepayments and accrued income 2,570 1,882
Total current receivables 7,726 15,118
Total receivables 155,970 155,336
Reconciliation of trade receivables
31 December
30 June 2024
2023
Unaudited
Audited
$’000
$’000
Gross carrying amount relating to export sales 171,026 171,026
Less: impairment allowance relating to export sales (22,782) (24,458)
Carrying value relating to export sales at end of period 148,244 146,568
Trade receivables relating to local oil sales 409 -
Total carrying value of trade receivables 148,653 146,568
Gross trade receivables relating to export sales of $171.0 million (FY 2023: $171.0
million) are comprised of invoiced amounts due, based upon KBT pricing, from the KRG
for crude oil sales totalling $158.8 million (FY 2023: $158.8 million) related to
October 2022 – March 2023 and a share of Shaikan amounts due from the KRG that GKP
purchased from MOL amounting to $12.2 million (FY 2023: $12.2 million). Trade
receivables net of capacity building payments payable of $7.7 million (FY 2023: $7.7
million) are $151.1 million (FY 2023: $151.1 million).
While GKP expects to recover the full value of the outstanding invoices and
purchased revenue arrears, an ECL of $22.8 million (FY 2023: $24.5 million) was
provided against the trade receivables balance in accordance with IFRS 9 ‘Financial
Instruments’. During the six-month period to 30 June 2024, a $1.7 million credit was
recognised due to the decrease in the ECL provision (H1 2023 $13.9 million charge;
FY 2023: $21.4 million charge).
As detailed in the Summary of significant accounting policies and Note 2, the
outstanding sales invoices from October 2022 – March 2023 receivable have been
recognised based on a proposed pricing mechanism, which GKP has not accepted.
ECL sensitivities
As detailed within Material sources of estimation uncertainty, the ECL is calculated
through a weighted average being applied to receivables recovery profile scenarios.
Considering the receipt profile scenarios, the only variable expected to materially
change profit before tax is the timing of receipt. If the pipeline reopening is
delayed beyond April 2025 resulting in the receipt of past-due trade receivables’
repayment profile being delayed by a further 12 months, then the ECL would increase
by $10.1 million. Conversely, if the repayment profile was brought forward by 6
months, then the ECL would decrease by $5.3 million.
The Group’s financial statements are not materially sensitive to a movement of ±10%
in the default spread or recovery rate.
13. Trade and other payables
Current liabilities
30 June 31 December
2024 2023
Unaudited Audited
$’000 $’000
Trade payables 3,115 11,953
Accrued expenditures 15,115 14,009
Amounts due to KRG not expected to be cash settled 78,278 74,703
Capacity building payment due to KRG on trade receivables 7,687 7,687
Other payables 3,917 683
Finance lease obligations 171 359
Total current liabilities 108,283 109,394
Trade payables and accrued expenditures principally comprise amounts outstanding for
trade purchases and ongoing costs and the Directors consider that carrying amounts
approximate fair value. The stabilising of local sale revenues during 2024 enabled
the Group to settle all overdue trade payables in the first quarter of 2024.
Amounts due to KRG not expected to be cash settled of $78.3 million (FY 2023: $74.7
million) include:
• $39.4 million (FY 2023: $37.7 million) expected to be offset against oil sales
to the KRG up to 2018, that have not been recognised in the financial statements
as management consider that the criteria for revenue recognition have not been
satisfied, and
• $38.9 million (FY 2023: $37.0 million) related to an accrual for the difference
between the capacity building rate of 20%, as per the invoicing basis in effect
since October 2017, and 30% as per the 2016 Bilateral Agreement. The working
interest under the 2016 bilateral agreement is 80% whereas the invoicing basis
is 61.5%. If the commercial position were to revert to the full terms of the
executed amended PSC and the 2016 Bilateral Agreement, the Group would not
expect to cash settle this balance as a more than offsetting increase in GKP’s
net entitlement is expected to result in revenue being due to GKP (see critical
accounting judgements), the value of which is expected to exceed the accrued
$38.9 million.
Deferred income
At 30 June 2024, deferred income of $0.0 million (FY 2023: $5.2 million) relates to
cash advances paid by local oil buyers in advance of lifting oil (note 4).
Non-current liabilities
31 December
30 June 2024
2023
Unaudited
Audited
$’000
$’000
Non-current finance lease liability - 39
14. Share capital
Common shares
No. of shares Share Share premium Amount
capital
000 $’000 $’000 $’000
Issued and fully paid
Balance 1 January 2024 222,443 222,443 503,312 725,755
(audited)
Dividends - - (15,000) (15,000)
Share issues 255 255 - 255
Repurchase of ordinary (3,359) (3,359) (2,525) (5,884)
shares
Balance 30 June 2024 219,339 219,339 485,787 705,126
(unaudited)
In May 2024 the Company announced a $10 million share buyback programme. At the
reporting date 3,359,461 shares had been repurchased and subsequently cancelled
totalling $5.9 million with a further 185,000 committed to be cancelled valued at
$0.4 million.
Subsequent to the period end, the Company completed the full $10 million share
buyback programme on 23 July 2024.
Dividends of $15.0 million consist solely of an interim dividend declared in June
2024 and subsequently paid in July 2024.
15. Contingent liabilities
The Group has a contingent liability of $27.3 million (FY 2023: $27.3 million) in
relation to the proceeds from the sale of test production in the period prior to the
approval of the original Shaikan Field Development Plan (“FDP”) in June 2013. The
Shaikan PSC does not appear to address expressly any party’s rights to this pre-FDP
petroleum. The sales were made based on sales contracts with domestic offtakers
which were approved by the KRG. The Group believes that the receipts from these
sales of pre-FDP petroleum are for the account of the Contractor, rather than the
KRG and accordingly recorded them as test revenue in prior years. However, the KRG
has requested a repayment of these amounts and the Group is involved in negotiations
to resolve this matter. The Group has received external legal advice and continues
to maintain that pre-FDP petroleum receipts are for the account of the Contractor.
This contingent liability forms part of the Shaikan PSC amendment negotiations and
it is likely that it will be settled as part of those negotiations.
GLOSSARY (See also the glossary in the 2023 Annual Report and Accounts)
H1 2023 First half of Financial Year 2023
H1 2024 First half of Financial Year 2024
2P Proved plus probable reserves
bbl Barrel
bopd Barrels of oil per day
Capex Capital expenditure
CGU Cash-generating unit
Company Gulf Keystone Petroleum Limited
CPR Competent Person’s Report
DD&A Depreciation, depletion and amortisation
DTR Disclosure and Transparency Rules
EBITDA Earnings before interest, tax, depreciation and amortisation
EBT Employee benefit trust
ECL Expected credit losses
ESG Environmental, social and governance
FCA Financial Conduct Authority
FDP Field Development Plan
G&A General and administrative
FY Financial year
GKP Gulf Keystone Petroleum Limited
Group Gulf Keystone Petroleum Limited and its subsidiaries
HSE Health, safety and environment
IAS International Accounting Standards
IFRS International Financial Reporting Standards
IOC International oil companies
ITP Iraq-Turkey pipeline
KBT Kurdistan blend
KRG Kurdistan Regional Government
KRI Kurdistan Region of Iraq
LTI Lost time incident
LTIP Long term incentive plan
MMstb Million stock tank barrels
MNR Ministry of Natural Resources of the Kurdistan Regional Government
MOL Kalegran B.V. (a subsidiary of MOL Group International Services B.V.)
Opex Operating costs
PF-1 Production Facility 1
PF-2 Production Facility 2
PSC Production sharing contract
PSC for the Shaikan block between the KRG, Gulf Keystone Petroleum
Shaikan PSC International Limited, Texas Keystone, Inc and MOL signed on 6 November
2007 as amended by subsequent agreement
UKLA United Kingdom Listing Authority
$ US dollars
════════════════════════════════════════════════════════════════════════════════════
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
════════════════════════════════════════════════════════════════════════════════════
ISIN: BMG4209G2077
Category Code: MSCM
TIDM: GKP
LEI Code: 213800QTAQOSSTNTPO15
Sequence No.: 343450
EQS News ID: 1977169
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
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