News Column

Gulf Keystone Expects To Increase Production Despite Iraq Fighting

August 28, 2014

Joshua Warner

LONDON (Alliance News) - Gulf Keystone Petroleum Ltd Thursday said daily production from its Shaikan oil field in Kurdistan region of northern Iraq has almost doubled since the beginning of 2014 and is expected to double again by year end, despite the fragile security situation in the region.

The independent oil and gas exploration, development and production company reported a pretax loss of USD29.8 million in the six months to June 30, widened slightly from a loss of USD26.4 million in the year-earlier half.

Revenue rose to USD18.7 million in the half, compared to USD6.7 million for all of 2013. Gulf Keystone recorded no revenue in the first half of 2013. The rise in revenue resulted from the jump in production.

Export sales contributed USD16.2 million of the total, with USD2.5 million from domestic sales.

In addition, the company, which has a policy of recognising export revenue on a cash receipts basis, said some USD35 million in export sales, based on its current 80% working interest in the field, are owed but have not yet been recognised in its revenue figures.

Gulf Keystone said the revenue recognition policy for export sales will be re-evaluated once the payment process is better established.

The realised price for domestic sales was USD42 per oilfield barrel, up USD1 from 2013, with the realised price for export sales recognised estimated as USD51-56 per oilfield barrel.

Shaikan production has doubled since 2013 to in excess of 20,000 gross barrels of oil per day through the tie-in of an additional producing well to Shaikan PF-1 and the commencement of production from Shaikan PF-2.

"The company still targets 40,000 barrels of oil per day of Shaikan production by year end through the tie-in of three additional producing wells, Shaikan-7, -8 and -10," it said in a statement. However, it added that "certain consequences of the recent security situation, including the current short term limited availability of some international contractors, may cause this to move to the first-quarter of 2015."

The six months period to June 30 was a key milestone in the group's operations as it is the first time a gross profit has been recognised from the Shaikan field, Gulf Keystone said.

The company said its primary focus is to continue to work with the Kurdistan government to secure a regular and predictable payment cycle as well as to achieve its production target. Receipt of cash revenues from export sales is critical to the on-going business, Gulf Keystone said.

Meanwhile, the company said it continues to affect an orderly exit from its Algerian operations, continuing discussions with its partner Sonatrach regarding the withdrawal from Block 126a.

Gulf Keystone shares were down 7.0% at 77.00 pence Thursday midday.

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Source: Alliance News

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