Gulf Keystone Update

Posted on 13 March 2014. Tags: Akri-Bijeel, Ber Bahr, GKP, Gulf Keystone, Shaikan, Sheikh Adi Pages: 1 2 3 4 Gulf Keystone Petroleum (GKP) has this morning provided an Operational and Corporate update, and released a third party audit of the Company’s reserves, contingent resources and prospective resources for its petroleum interests in the Kurdistan Region of Iraq. Summary The Company continues to maintain current stable production and sales levels of approximately 10,000 barrels of oil per day (“bopd”) from the Company’s first Shaikan production facility (“PF-1″) in the Kurdistan Region of Iraq, which is expected to increase in Q2 2014 as a result of the recently tied-in third production well, Shaikan-4, which is now flowing. The second Shaikan production facility (“PF-2″) is being commissioned, with two wells (Shaikan-2 and Shaikan-5) already tied in and the first production from PF-2 expected in Q2 2014. The Company remains focused on achieving the target of 40,000 bopd of production capacity from PF-1 and PF-2 in 2014. Since crude oil exports from the Shaikan field commenced in December 2013, in excess of 105,000 tonnes (690,000 barrels) of oil have been tendered and sold at international prices. The Company is expecting to receive payment, in line with the terms of the Shaikan Production Sharing Contract. In order to move to the next stage of the Shaikan project execution, the Company is making progress in its discussions on the near term debt financing options. Production and Development Shaikan (75% working interest; Operator) Stable production operations and sales from PF-1 continued in January, February and March 2014 at the level of approximately 10,000 bopd (gross). Total cumulative production from late 2010 to date from Shaikan has reached 2.1 million barrels. Since crude oil exports from the Shaikan field commenced in December 2013, three cargoes totalling in excess of 105,000 tonnes (690,000 barrels) of oil have been delivered from PF-1. The fourth cargo of approximately 33,000 tonnes (215,000 barrels) of Shaikan crude is expected to be delivered later in March 2014. In addition to the presently producing Shaikan-1 and Shaikan-3 wells, Shaikan-4 is now tied into PF-1, has started to flow and is expected to increase the current output in Q2 2014. An amine plant is currently being connected to PF-1, which will allow sweetening of some of the associated gas stream, which will be used as fuel for the PF-1 operations instead of diesel, representing savings of approximately US$400,000 per month to the project. The Shaikan-2 and Shaikan-5 wells have now been tied into PF-2 and the production facility is currently being commissioned with first production, initially of approximately 10,000 bopd, expected in Q2 2014. The connection of Shaikan-10 to PF-2 will also be completed in Q2 2014, increasing PF-2 production capacity. The Company is focused on achieving the target of 40,000 bopd of production capacity from PF-1 and PF-2 in 2014, which it intends to reach through: ◦Potential re-configuration of Shaikan-8, initially drilled as a gas injection well, into a fourth producer tied into PF-1 ◦Tie in of the deep exploration well Shaikan-7, which is currently being drilled, to become the fifth producing well at PF-1 ◦Productivity enhancement of the Shaikan-1 and Shaikan-3 wells through the replacement of the existing 3 ½” tubing by 4 ½” tubing ◦Plans to drill an additional production well in the proximity of Shaikan-10, which will also be connected to PF-2, and install four flowlines between the Shaikan-10 location and PF-2 The Company’s focus is on the ramp-up of commercial production from the existing Shaikan facilities. The move to 40,000 bopd of production capacity will allow further expansion of export crude oil sales. The additional cash generated, in addition to the Company’s near term debt financing options where the Company is making progress in its discussions, will facilitate the move to the next stage of the Shaikan project execution. This next stage envisages a further 60,000 bopd of additional production capacity in order to reach the medium-term target of 100,000 bopd set for Phase 1 of the approved Shaikan Field Development Plan. This next stage will require construction of additional production facilities with gas injection and water handling capabilities, as well as the drilling of a substantial number of development and production wells. Exploration & Appraisal Shaikan (75% working interest; Operator) The Shaikan-7 deep exploration well is currently drilling 17 ½” hole below 2,600 metres in the upper Triassic. Shaikan-7 will drill into the deep Triassic, after setting casing at the bottom of Kurre Chine B formation, and is then expected to penetrate the Permian with the first results expected in Q2 2014. Sheikh Adi (80% working interest; Operator) The first well to appraise the Sheikh Adi discovery, which spudded in December 2013, is drilling below 2,240 metres in the Alan formation in the Jurassic. A well testing programme to evaluate the potential of the Jurassic reservoirs in the Sheikh Adi footwall is currently being designed, before the well enters the Triassic. Approximately 111 km of new 2D seismic data acquired in the north of the block during 2013, is being processed to evaluate potential new structures. Ber Bahr (40% working interest) The Ber Bahr-1 exploration well was successfully side-tracked in the first half of 2013 and tested 2,100 bopd of 15 degree API oil from the Jurassic Sargelu formation. A 3D seismic survey is underway, planned for completion by mid-year 2014. Ber Bahr-2, an appraisal well, is planned to spud in the fourth quarter of 2014. Akri-Bijeel (20% working interest) Further to the declaration of commerciality of the block by the operator in 2013, appraisal drilling continues and work is ongoing on the Field Development Plan for the Bijell and Bakrman discoveries, which is expected to be submitted to the Ministry of Natural Resources of the Kurdistan Region of Iraq in Q2 2014 and approved later in 2014. The operator plans to complete four appraisal wells on the Bijell discovery and one appraisal well on the Bakrman discovery in 2014. Bijell-1B has been side-tracked, completed as a producer in the Sargelu formation in the Jurassic and tied into the Bijell Extended Well Test facility (“EWT”) where initial flow rates of 3,500 bopd of 23 degrees API oil have been recorded. The operator expects that production from the Bijell EWT facility will reach its full capacity of 10,000 bopd of export quality crude by the end of 2014. Bijell-2, a deep appraisal well targeting the Triassic horizons of the Bijell discovery, is currently drilling 12 ¼” hole below 4,750 metres in the Kurre Chine Anhydrite formation. Bijell-4, an appraisal well targeting the Jurassic horizons of the Bijell discovery, is drilling ahead below 2,800 metres in the Tanjero formation. Move to the Main Market As previously announced, the Company expects that its common shares will be admitted to the Standard Segment of the Official List of the United Kingdom Listing Authority (the “Official List”) and commence trading on the London Stock Exchange plc’s (“LSE”) main market for listed securities effective at 8.00 a.m. on or after 24 March 2014 (the “Admission Date”) (together the “Admission”), subject to the receipt of the necessary approvals from the UK Listing Authority and the LSE. Trading in the Company’s common shares on the AIM market of the LSE (“AIM”) will be cancelled simultaneously with the Admission. The Company will issue a prospectus in connection with the Admission prior to the Admission Date. As part of the Company’s move from AIM to the Official List, it is today publishing the Competent Person’s Report on the petroleum interests of Gulf Keystone Petroleum Ltd and its subsidiaries in the Kurdistan Region of Iraq (“CPR”), which has been completed by ERC Equipoise Ltd. This is the first third party evaluation of the Company’s Reserves, Contingent Resources and Prospective Resources for the Shaikan field and its other petroleum interests in the Kurdistan Region of Iraq (Sheikh Adi, Ber Bahr and Akri-Bijeel blocks). It is available on the Company’s website. Todd Kozel (pictured), Gulf Keystone’s Chief Executive Officer commented: “Progress achieved since July 2013, when we commenced commercial production from Shaikan, demonstrates that Gulf Keystone is evolving from an oil and gas exploration company to a production company targeting production capacity of 40,000 barrels of oil per day in 2014. “Another significant milestone in this journey is our forthcoming move from AIM to the Main Market of the London Stock Exchange and we are another step closer to achieving this goal after publishing the Competent Person’s Report today. “We see significant upside to this important baseline third party estimate of reserves and contingent resources, which will be targeted through the implementation of the approved Shaikan Field Development Plan in the coming months and years.” (Source: GKP) ================ 15% off m cap for 16 mill shares traded or 8 mill sold if you like , This is precisely the kind of atmosphere where people think if I just press that button it will all be over!......Were listing in a few days on the main market dont do something you might regret. If you are going to sell dont read this BB for opinions for help /advice make your own decision away from the PC over a cuppa and then do it if you think its right for you dont get caught up in the herd mentality on here. The derampers are going bananas today absolutelly bananas! Im not saying dont do it if you really have had enough but just be carefull in how you formulate the decision thats all. Luck all ============================= Well I have to say I am pretty astonished by people's reaction to the CPR: somehow spooked into selling. Still, provided the savvy a great opportunity to enter/top-up. The reserves quoted in the initial CPR were always going to be ultra-conservative. But that's not the point. Actually I was pleasantly surprised to see the CPR Shaikan OIP figure of 9.2 billion barrels. Sure it's not 13.7, but it is an independent audited third-party confirmation that, just as the company has been telling us for a while, we have found a super-giant multi-billion barrel oil field. The reserves figure quoted so far is just the tip of the iceberg. In time, as field development proceeds, there is no reason to suppose that an industry-normal recovery rate will not be achieved. Meaning that several billions of barrels will be added to the reserves. But that's not the point of the initial CPR. What the CPR does is put an independent audited third-party valuation on, not the company as a whole, but on the absolute minimum amount of oil that is guaranteed to be present, and recoverable using wells that have already been drilled. Why? To establish the value of an asset that can now be booked on to our balance sheet. Yes we can have a $1billion asset on our balance sheet! And that asset provides collateral for a loan. And with a full 75% WI in current sales, that loan does not need to be all that large to kickstart the development plan, as I have posted before. Good luck all long-term investors. Hold the nerve - we always said this road would be rocky! SilkStillDreaming ======================== Still digesting how the management allowed us to get into this position. One word that TK and JG were at pains to emphasise on Thursday was 'complex'. There is no disputing that this IS a complex project. They are both (and Ewan) keen to promote themselves to the big league and pay themselves the big salaries and bonuses. In my opinion they are out of their league. There is no question about the massive potential and upside of the 4 blocks but these guys do not have the experience to manage this project. I go along with I48's post today and hope that a predator takes a big enough share and removes the current management team. I presume that a technical audit, such as this CPR, would be discussed and the contents agreed with the customer prior to publication. The implication, therefore, seems to be that there was an extended period of argument and discussion with GKP board - a battle that our people finally lost, at least in respect of SH-6. JG, in response to Will Forbes, said the DGA/RS people had "been there every day" whereas the ERC people had "only looked at a couple of wells" - implying that their dataset was limiting their evaluation. This puzzled me - if true, surely the customer could have insisted on many more wells being evaluated in order to get a more accurate picture? Re. the Q&A session, I was amazed at the poor quality of analyst's questions - and at their lack of determination in getting full answers; Nlper, Ren and Bonobo did a much better job at the Paris AGM. ============ I was reading through the Edison report and looking at comparison of RF of Genel vs GKP. What confused me most was that Genel gets credited with a 20% RF whilst we are getting 12% on average. OK Different geology differnet places etc etc BUT When I compare our joint asset - Ber Bahr - Genel report a RF of 22% and GKP EDC are reporting around 6%. Now forgive me but surely its the same oil in the same place, but with 2 wildly different RF..... === Also noticed that the oil above the isotherm is not included in EDC. This accounts for 70% of the stoip difference between 18B from Gkp and the 13 from EDC. Or 3.5 billion oip. They are ignoring this because they say it's too tarry to flow. However for around $50-$100 million they can flow this oil using steam injection and blending. Even at 10% rf this would add 350million barrels of oil - and let's half it for arguments sake say 300 million b Resolve playground squabble on sh6 oil water contact and you add 300m depth and circa 300 million barrels Add to this genel RF of 20 - or let's take it lower and just say 16% and add another 200 million barrels You get to around 800 million barrels additional Now sh7 is hopefully light oil. They have been near this depth before Nd had to stop because pressure was off the scale - sh7 could be another 250m of light. (Ok. So looking a bit more then So all in all I think another one billion barrels will get firmed up within 12 months. If they find light oil in sh7 I bet you will see a change to the fdp. And 2 billion 2p+2c at $6 makes double digit billions on core NAV Now it's late and I may have units wrong - all off the top of head. But I'll work it out , or someone else can What would be interesting is to compare to CPR assumptions that genel use and read across to Gkp. Anyhow over 24 months I can't see a big geological issue preventing significant reserves upside. =========== There are people on this and other bb's who would have you believe that as a result of the CPR being published The Mighty Shaikan has shrunk and vast amounts of oil have disappeared. This is of course complete rubbish and it is just the nature of a CPR that only a very restricted and conservative amount of oil is recognised . In any event even on the CPR figures it is of a size that any major would give their right arm to own. I wonder what all those other companies are doing exploring for oil in Kurdistan. Why drill in hope when you could buy in certainty with GKP. We had all the fuss about appointing the famous four at the instigation of a couple of our institutional shareholders however this doesn't seem to have had the desired effect so far if we look at the sp. However one thing you can be absolutely certain about is that Deutche Bank (whom Simon Murray knows very well) will not have announced the move to the main market without having all their ducks in a row. The financial arrangements will have been sorted. The Mighty Shaikan is at an early stage of its discovery and recovery of its oil and it will be very interesting to see what reserve figure is credited to it in 2,5 and 10 years time because that's what the big boys will be bidding for. If you believe as I do that the Mighty Shaikan will prevail continue to hold or buy more on Monday. If you don't believe (and actually hold any shares ) then sell and move on to something you are comfortable with. ========================= Perhaps the ultimate irony now on this board, in that the 'TK to stay' crew are now an insignificant minority. I think you can count these club members on the fingers of one hand. I wonder if they'll still be so positive about GKP's future when the current top table are replaced, for surely they will be. We are truly sunk without hope if the main market doesn't trust the top table. I wonder how Todd feels this morning, fully in the knowledge that his only supporters now in the entire financial markets amount to not much more than a failed washing-machine salesman and a retired plumber? I wonder how Robert Kuok feels this morning, staring at his c.£15m paper loss - that is if he even still holds his 'slightly less than 3%' number of shares? Its taken a few years, but even i48 has finally seen the light and turned. Change will come, driven by the M&G4, Capital, and The City etc, who will surely gather strength, force an EGM to oust the value-destroyers and replace them with people they can trust. Texan cowboys will simply not be tolerated on the main market. The days of real accountability and building shareholder value on facts, not hype, have started, and we need a builder at the top - not a perma-tanned salesman - and I'm sure our BoD have known this for a very long time. From the moment change started and the M&G4 arrived, the BoD must have been planning their exit from the business. If not, then they've been very very very naïve indeed. Todd - if you really cared about your company, and its shareholders, surely you can see that it would be for the best if you chose to take a very long cruise on your super yacht sometime soon? Todd - do the decent thing. Take the deal and go. You know if you don't, it will simply be forced. ============ Re: I'm with you first thing Monday will be topping up GKP now a screaming buy … need to raise more cash quickly , can see a trip to the bank manager on the horizon this week --------- Opulentia, I do not know you. And I admire your enthusiasm. However, you have been calling this a 'screaming buy' all the way down. Now, many of us (including myself) have made the mistake of thinking it can go no lower. But with long term supports breached, no clarity of finance, hardline 'revision' of numbers (whether you agree or not), it is perhaps unwise to keep banging the 'screaming buy' drum, until the dust settles. I would certainly be wary of approaching your bank manager and possibly over-extending. I hope you can hold on to your shares until they all come back into profit, because your posts in 2014 alone provide a good illustration of the slow car crash that this investment has become (and perhaps how blinded retail investors - including myself - have often got) - 09.01.14 Little top up … with the good progress going forward, it would be rude not to Transaction type: Buy Executed Price: GBP 1.81625 21.01.14 some more golden tickets into my pot Transaction type: Buy Executed Price: GBP 1.807 29.01.14 Transaction type: Buy Executed Price: GBP 1.637 03.02.14 Nice little Top up, unbelieveably cheap , never thought id get some more golden tickets at these prices, really helps bringing average down Executed Price: GBP 1.568675 07.02.14 My top up this morning Price dealt: £1.6285 17.02.14 happy to add even at 156p 26.02.14 managed a top up this morning in the 140,s thanks Mr MM, 12.03.14 Transaction type: Buy Executed Price: GBP 1.4518 13.03.14 picked up a stack of shares at under £1.10. --- Many will try and call the bottom here. Could be 95p, 87p, 64p, 35p … depending on who you listen to. It might be wiser to ignore the prevailing SP and wait until the ship has been steadied (or a new captain placed at the wheel). Sincere good luck. ============================ Baghdad regains control in oil disputes Iraqi Prime Minister Nouri al-Maliki speaks in Baghdad on Jan. 12, 2014. (THAIER AL-SUDANI/Reuters) By Ben Van Heuvelen, Patrick Osgood, Rawaz Tahir, and Staff of Iraq Oil Report Published Thursday, March 20th, 2014Iraqi central government authorities have regained leverage in their long-standing oil disputes with the autonomous Kurdistan Regional Government (KRG).Just a few months ago, the KRG seemed poised to solidify the independence of its oil sector by sending crude through its new pipeline to the Turkish border. But those plans have been complicated both by scandals swirling around Turkish Prime Minister Recep Tayyip Erdogan and by a newly assertive government in Baghdad.As more than 1.3 mill...