TIDMGKP
RNS Number : 4691K
Gulf Keystone Petroleum Ltd.
02 September 2021
2 September 2021
Gulf Keystone Petroleum Ltd. (LSE: GKP)
("Gulf Keystone", "GKP", "the Group" or "the Company")
2021 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 2021.
Jon Harris, Gulf Keystone's Chief Executive Officer, said:
"I am pleased to report strong operational and financial
performance in the first half of 2021, despite the continuing
challenges of the COVID-19 pandemic. Our leverage to the recovery
in oil prices, combined with safe and reliable production towards
the top end of our guidance range and a continued sharp focus on
costs, has resulted in significant cash flow generation. With
continued strong production performance from the Shaikan Field, we
are tightening the 2021 production guidance range to 42,000 -
44,000 bopd.
We continue to deliver against our commitment to balance
investment in growth and returns to shareholders. Today, we are
pleased to declare an interim dividend for 2021 of $50 million,
bringing total dividends this year to $100 million.
The early restart of the drilling campaign in June enables us to
maintain production growth momentum and to drill an additional
well, SH-G, in 2021 after completion of SH-14, the final well in
the 55,000 bopd investment programme. SH-14 is expected to come
onstream in Q4 2021, while we expect SH-G to come onstream in Q1
2022.
We continue to work closely with the MNR and our partner on the
preparation of the Shaikan FDP and expect to submit the FDP to the
MNR in Q4 2021 for approval."
Highlights to 30 June 2021 and post reporting period
Operational
-- Remain focused on safe and reliable operations with No Lost
Time Incident ("LTI") recorded for over 600 days and no recordable
incidents for around 550 days
-- Continuing to manage the challenges presented by COVID-19 to
protect the health of staff and contractors
-- Strong average gross 2021 production to 31 August 2021 of
c.42,900 bopd, up 18% from the corresponding period in 2020 and
towards the top end of 2021 guidance; gross production on 31 August
2021 was 42,842 bopd
-- Drilling activities progressing well following early restart
in June; SH-13 expected to come onstream imminently ; drilling of
SH-14 underway with completion and hook-up expected in Q4 2021
-- Capitalising on early restart of drilling and opportunity to
maintain a continuous drilling programme, planning to spud SH-G in
Q4 2021, after completion of SH-14. SH-G is expected to commence
production in Q1 2022
-- SH-G, the first well after the 55,000 bopd expansion
programme, is an opportunity to maintain growth and momentum while
we prepare the Shaikan Field Development Plan ("FDP")
-- Completed debottlenecking of PF-2, increasing total field
processing capacity to c.57,500 bopd
Financial
-- H1 2021 revenue up 162% to $130.7 million (H1 2020: $49.9m)
contributing to a return to profit after tax of $64.8 million (H1
2020: $33.1 million loss)
-- Adjusted H1 2021 EBITDA of $93.8 million, more than triple
$27.5 million in H1 2020, driven by the Company's strong leverage
to the recovery in oil prices, increase in production and low-cost
base:
o Realised price up 129% to $43.7/bbl (H1 2020: $19.1/bbl)
o H1 2021 gross average production up 17% to 43,516 bopd (H1
2020: 37,159 bopd)
o H1 2021 gross Opex per barrel of $2.4/bbl, below 2021 guidance
range of $2.5-$2.9/bbl
-- Net Capex of $14.1 million (H1 2020: $38.5 million), with the
restart of the 55,000 bopd expansion programme
-- Total dividends of $50 million paid to date, including an
annual dividend of $25 million and a special dividend of $25
million
-- Robust cash balance of $177.4 million at 1 September 2021
Outlook
-- Tightening 2021 average gross production guidance range from
40,000 - 44,000 bopd to 42,000 - 44,000 bopd
-- Maintaining 2021 gross Opex per barrel guidance of $2.5 to $2.9/bbl
-- The addition of SH-G increases 2021 net Capex guidance from
$55-$65 million to $75-$85 million
-- With continued constructive engagement with the Ministry of
Natural Resources ("MNR") and the Company's partner Kalegran B.V.
(a subsidiary of MOL Hungarian Oil & Gas plc) ("MOL"), Gulf
Keystone is expecting to submit an FDP in Q4 2021 to the MNR for
approval
o The FDP includes the continued ramp-up of Jurassic oil
production, appraisal of the Triassic reservoir and a Gas
Management Plan
o We continue to optimise the scope, schedule and cost of the
FDP
-- Developing Gulf Keystone's sustainability strategy, with the
primary environmental focus on more than halving CO(2) per barrel
by 2025 by eliminating flaring
-- In line with the Company's strategy of balancing investment
in growth and returns to shareholders, Gulf Keystone is pleased to
declare an interim dividend for 2021. The 2021 interim dividend is
$50 million to be paid on 8 October 2021 based on a record date of
24 September 2021
-- Following payment of the interim dividend, the Company will
have distributed $100 million of dividends in 2021
-- With continuing strong oil prices and cash flow generation,
there may be opportunities to consider further distributions to
shareholders and to optimise the capital structure
Investor & analyst presentation
Gulf Keystone's management team will be presenting the Company's
2021 Half Year Results at 10:00am (BST) today via live audio
webcast:
https://webcasting.brrmedia.co.uk/broadcast/60e86de51ba1724bfa9a0d87
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 aclark@gulfkeystone.com
Celicourt Communications: + 44 (0) 20 8434 2754
Mark Antelme GKP@Celicourt.uk
Jimmy Lea
or visit: 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
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 Statement
The first half of 2021 has been characterised by a significant
recovery in spot and forward oil prices as economies around the
world have begun the early stage of their recoveries, even while
the course and eventual conclusion of the COVID-19 pandemic remains
uncertain. Against this more favourable economic backdrop, Gulf
Keystone has delivered strong operational and financial
performance, and demonstrated our commitment of balancing
shareholder returns with investment in growth.
The foundation of our performance remains our strong health,
safety, security and environment ("HSSE") culture. Our focus on
HSSE has been more critical than ever with the restart of expansion
activities. I'm pleased to report today that we have now had over
600 LTI free days. That said, we are not being complacent, and all
of Gulf Keystone's people are continuing to live and breathe the
target of zero personal and process safety incidents.
We continue to implement measures to protect our workforce and
operations from COVID-19. While we still face challenges on the
ground because of the pandemic, we continue to manage them well,
and we have limited the impact of COVID-19 on our operations to
date.
Year-to-date to 31 August 2021, we have delivered safe and
reliable production towards the upper end of our 2021 guidance,
with gross average production of c.42,900 bopd, up 18% from the
corresponding period in 2020. Gross production on 31 August 2021
was 42,842 bopd. To date, we have produced around 92 million stock
tank barrels ("MMstb") from the Shaikan Field and have c.500
million barrels of gross 2P reserves yet to produce.
In June, we were able to successfully restart drilling
activities, two months ahead of schedule, and have made good
progress since then executing the programme. Following the
completion of SH-13, the drilling rig was moved on the same well
pad to drill SH-I (now SH-14). We expect SH-13 to come onstream
imminently and expect completion and hook-up of SH-14 to take place
in Q4 this year. We continue to expect gross production to increase
towards 55,000 bopd in Q4 2021.
The early restart of drilling enables us to drill an additional
well in 2021 after completion of SH-14, the final well in the
55,000 bopd investment programme. We expect the new well, SH-G, to
spud later this year and come online in Q1 2022. SH-G is an
excellent opportunity to maintain growth and momentum in developing
our world-class resource base while we finalise the FDP.
Since the appointment of the new Minister of Natural Resources
at the beginning of 2021, GKP and MOL have been meeting frequently
with the MNR to progress the preparation of the FDP. Engagement has
been constructive, and we are expecting to submit the FDP in Q4
2021 to the MNR for approval.
Gulf Keystone's leverage to the recovery in oil price, combined
with safe and reliable production towards the upper end of the 2021
guidance range and our low-cost structure, has enabled us to more
than triple Adjusted EBITDA year-on-year to $93.8 million. We
continue to balance investment in growth and returns to
shareholders, with total dividends of $100 million to be
distributed this year following the declaration of a $50 million
interim dividend for 2021, announced today. With continuing strong
oil prices and cash flow generation, there may be opportunities to
consider further distributions to shareholders and to optimise the
capital structure.
Looking ahead to the remainder of the year, we are tightening
our 2021 average gross production guidance range to between 42,000
- 44,000 bopd. We are maintaining our gross Opex per barrel
guidance of $2.5 to $2.9/bbl, while we are increasing our net Capex
guidance from $55-$65 million to $75-$85 million to reflect the
addition of SH-G.
After almost eight months in the CEO role, I'm delighted with
the performance of the Company and the energy and commitment of our
people. It is thanks to their passion and resilience that Gulf
Keystone has hit the ground running in 2021 following the
challenges of 2020 created by the COVID-19 pandemic and the oil
price crash. I am excited about finalising the FDP to provide
visibility around the significant potential of the Shaikan Field
and I am confident that by executing our strategy and striving for
the highest operational and financial delivery in a sustainable way
we will create significant value for all our stakeholders.
Jon Harris
Chief Executive Officer
Operational Review
Gulf Keystone's strong operational performance has continued
into the first half of 2021. We have maintained safe and reliable
production towards the upper end of 2021 guidance, successfully
restarted the 55,000 bopd investment programme ahead of schedule,
maintained momentum by approving the drilling of SH-G, and advanced
the preparation of the FDP, with expected submission to the MNR
later this year.
All of our operational activity is underpinned by our rigorous
focus on safety. We have had over 600 LTI free days and around 550
recordable incident free days. We have taken extra precautions as
drilling activities have restarted by ensuring all drilling and
operational staff on site received appropriate training and safety
refresher courses at the beginning of the campaign. The emphasis
remains on steady, careful progress.
Similarly, we have continued to manage the impact of COVID-19 on
our operations. As in other countries, the COVID-19 pandemic
remains a challenge in the Kurdistan Region of Iraq and we continue
to take measures, such as testing and quarantine, to protect our
staff and contractors across our field operations and offices.
In the period to 31 August 2021, gross average production was
c.42,900 bopd, up 18% from the corresponding period in 2020. Gross
production on 31 August 2021 was 42,842 bopd. Average year-to-date
production is towards the top end of guidance, with record monthly
production in January of more than 44,400 bopd. As a result, we are
tightening our 2021 average gross production guidance from 40,000
to 44,000 bopd to between 42,000 to 44,000 bopd.
Following a hiatus due to the sharp decline in oil prices and
COVID-19 pandemic, we successfully restarted drilling activities in
June 2021, two months ahead of schedule. Following the restart,
SH-13 was completed as planned, and the well is expected to come
onstream imminently. SH-14, which is adjacent to SH-13 on the same
well pad, is expected to be completed and hooked up in Q4 2021. The
installation of two electric submersible pumps in two existing
wells is currently expected to follow.
The early restart of drilling activities has given us the
opportunity to complete the 55,000 bopd programme and then
immediately drill the next well in the sequence, SH-G. SH-G will be
located around 2 km to the east of SH-7 and will be tied into PF-1.
SH-G is currently expected to come on-stream in Q1 2022.
In addition to the drilling campaign, we have just completed the
debottlenecking of PF-2, increasing the total processing capacity
of PF-1 and PF-2 to c.57,500 bopd. SH-13 and SH-14 will be tied
into PF-2.
Our strong operational performance has been accompanied by
progress in preparing the FDP, as we seek to develop and produce
Shaikan Field's significant reserves and resources. With continuing
constructive engagement with the MNR and our partner MOL, we expect
to submit the FDP in Q4 2021 to the MNR for approval. The FDP
currently includes the continued ramp-up of Jurassic oil
production, appraisal of the Triassic reservoir and a Gas
Management Plan. Gulf Keystone is targeting to more than halve
Scope 1 and 2 CO(2) emissions per barrel by eliminating flaring. We
are continuing to work with the MNR to optimise scope, schedule and
cost.
Finally, we continue to progress the development of Gulf
Keystone's sustainability strategy. This work will build on our
high environmental, social and governance ("ESG") standards by
defining a corporate strategy, aligned to internationally
recognised frameworks, to drive further improvements in
performance, underpinned by targets and transparent disclosure.
Stuart Catterall
Chief Operating Officer
Financial Review
Key financial highlights
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2021 2020 2020
Gross average production(1) bopd 43,516 37,159 36,625
---------------------------------- -------- ----------- ----------- -------------
Realised price(1) $/bbl 43.7 19.1 20.9
---------------------------------- -------- ----------- ----------- -------------
Revenue $m 130.7 49.9 108.4
---------------------------------- -------- ----------- ----------- -------------
* Oil sales $m 133.4 49.9 108.4
---------------------------------- -------- ----------- ----------- -------------
* Hedging costs $m (2.7) - -
---------------------------------- -------- ----------- ----------- -------------
Operating costs $m (15.0) (14.2) (27.4)
---------------------------------- -------- ----------- ----------- -------------
Gross operating costs per
barrel(1) $/bbl (2.4) (2.6) (2.6)
---------------------------------- -------- ----------- ----------- -------------
Share option (expense)/credit $m (6.5) 0.1 (1.2)
---------------------------------- -------- ----------- ----------- -------------
Other general and administrative
expenses $m (5.4) (5.5) (12.3)
---------------------------------- -------- ----------- ----------- -------------
- Incurred in relation
to Shaikan Field $m (2.1) (2.8) (5.0)
---------------------------------- -------- ----------- ----------- -------------
- Corporate G&A $m (3.3) (2.7) (7.3)
---------------------------------- -------- ----------- ----------- -------------
Adjusted EBITDA(1) $m 93.8 27.5 56.7
---------------------------------- -------- ----------- ----------- -------------
Profit/(loss) after tax $m 64.8 (33.1) (47.3)
---------------------------------- -------- ----------- ----------- -------------
Basic earnings/(loss) per
share cents 30.52 (15.64) (22.45)
---------------------------------- -------- ----------- ----------- -------------
Revenue receipts(1,2) $m 106.4 52.1 101.1
---------------------------------- -------- ----------- ----------- -------------
Net capital expenditure(1) $m 14.1 38.5 45.9
---------------------------------- -------- ----------- ----------- -------------
Net cash(1) $m 85.1 39.2 43.4
---------------------------------- -------- ----------- ----------- -------------
Net increase/(decrease)
in cash and cash equivalents $m 41.7 (47.2) (43.0)
---------------------------------- -------- ----------- ----------- -------------
(1.) Gross average production, realised price, gross operating
costs per barrel, Adjusted EBITDA, net capital expenditure, revenue
receipts and net cash are either non-financial or non-IFRS measures
and, where necessary, are explained in the Non-IFRS measures
section.
(2.) Revenue receipts include the recovery of overdue November
2019 - February 2020 invoices.
Gulf Keystone continues to maintain a sharp focus on capital
discipline. In H1 2021, with the benefit of all-time high Adjusted
EBITDA resulting from leverage to strengthening oil prices,
increased oil production and cost reductions, GKP reinstated an
annual dividend of at least $25.0 million and declared a special
dividend of $25.0 million. The dividends were paid in July and
August, respectively. The Company is pleased today to announce an
interim dividend of $50.0 million for 2021. The Company continues
to progress its drilling activities and the preparation of the FDP
and remains committed to striking a balance between investments in
growth and distributions to shareholders.
Adjusted EBITDA
In H1 2021, Adjusted EBITDA increased significantly to $93.8
million (H1 2020: $27.5 million).
Average production in H1 2020 was 43,516 bopd, up 17% from H1
2020 and the highest half-yearly rate from the Shaikan Field to
date. With GKP's leverage to the strengthening of Brent oil prices
from an average of $40.1/bbl in H1 2020 to $64.8/bbl in H1 2021,
the realised price per barrel more than doubled in the period to
$43.7/bbl resulting in an increase in revenue from $49.9 million in
H1 2020 to $130.7 million in H1 2021.
The Company continues to maintain strict control over its cost
base. Gross operating costs per barrel decreased by 8% from $2.6 in
the same period last year to $2.4, which is just under the 2021
guidance range of $2.5 to $2.9/bbl. Operating costs were $0.8
million higher in the period primarily due to the execution of
deferred maintenance activity and costs associated with the
increased production.
H1 2021 Other G&A expenses were in line with the same period
last year. Share option expense in the period increased by $6.6
million principally due to tax settlements being made in cash,
instead of selling additional shares, on the exercise of the Value
Creation Plan share options by former Directors.
Cash flow
Cash increased during the first half of 2021 by $41.7 million,
from $147.8 million to $189.5 million. The Company has Notes
outstanding with a principal balance of $100.0 million (FY20:
$100.0 million) that mature in July 2023 resulting in net cash of
$85.1 million at 30 June 2021.
During H1 2021, the Company generated cash from operating
activities of $77.8 million up from $24.2 million in H1 2020 due
principally to the increase in Adjusted EBITDA.
The Company continued to receive regular payments for its oil
sales in the period, although the Kurdistan Regional Government
("KRG") advised IOCs that the monthly payment terms would increase
from 30 to 60 days starting with payments related to March 2021.
During the period, the KRG commenced repayment of the net $73.3
million outstanding for November 2019 - February 2020 oil sales. A
total of $14.5 million was received in respect of overdue invoices
in the reporting period and a further $4.0 million was received up
to the date of this report, resulting in a current outstanding
amount of net $54.8 million. The repayments related to January and
February were calculated based on 50% of the difference between
average monthly dated Brent price and $50/bbl multiplied by the
gross Shaikan crude sold in a month. The KRG advised IOCs that
since the dated Brent price had remained consistently well above
$50/bbl, the 50% difference would be changed to 20% from March 2021
and onwards. The Company continues to engage with the KRG regarding
its proposed amendment to payment terms.
With the improvement in oil prices and continuous payments from
the KRG, GKP restarted its 55,000 bopd expansion programme. During
the period, GKP invested net capital expenditures of $14.1 million
(H1 2020: $38.5 million; FY 2020: $45.9 million) with most of the
work programme investment planned for H2 2021. Capital was invested
in completing the SH-13 well, facilities debottlenecking
activities, flowlines and studies.
During the period, the Company reinstated the annual dividend
policy of at least $25.0 million, declared a $25.0 million ordinary
dividend for 2020 and also declared a $25.0 million special
dividend. Towards the end of period, the Company transferred $25.0
million to the share registrar to pay the ordinary dividend on 2
July 2021. The special dividend was paid on 6 August. Today, we are
pleased to declare an interim dividend of 50.0 million for 2021,
which is to be paid on 8 October 2021, based on a record date of 24
September 2021, in line with our strategy of balancing investment
in growth and returns to shareholders.
The Group performed a cash flow and liquidity analysis based on
which 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 the financial statements.
Profit after tax
Profit after tax increased to $64.8 million (H1 2020: $33.1
million loss). The increase in Adjusted EBITDA was the main
contributor together with lower depreciation, depletion and
amortisation ("DD&A") expense of $28.2 million (H1 2020: $41.8
million) and trade receivables impairment reversal of $5.0 million
(H1 2020: $12.8 million charge).
In 2021, the Company issued a revised Competent Person's Report
from its reserves auditor, ERC Equipoise Limited, with updated
Shaikan 2P reserves estimates at 31 December 2020. The use of the
report's updated 2P reserves, entitlement production and future
development costs resulted in a decrease in the DD&A per barrel
rate, which was applied prospectively from 1 January 2021.
The trade receivables impairment reversal represents a reduction
in the expected credit losses ("ECL") provision related to past due
trade receivables from the KRG for November 2019 to February 2020
invoices (30 June 2021: $3.2 million; 30 June 2020: $14.2 million;
31 December 2020: $8.2 million). The reduction in the provision is
driven by the decrease in the past due receivables balance and the
acceleration of the expected recovery of the remaining balance due
to improvements in forward Brent oil prices.
Outlook
Given strong production performance, we are pleased to tighten
the 2021 average gross production guidance range from 40,000 -
44,000 bopd to 42,000 - 44,000 bopd. We maintain our gross Opex per
barrel target at $2.50 - $2.90 as an increase in operating costs is
expected in H2 2021 due to additional maintenance activities and
costs associated with the ramp up of production.
Given the drilling programme restarted earlier than expected,
after the completion of drilling SH-14, the final well in the
55,000 bopd expansion programme, the Company plans to drill SH-G to
maintain production growth momentum. As a result of the addition of
SH-G, net Capex for the year is expected to increase from $55-65
million to $75-85 million.
The Company has a strong balance sheet with cash and cash
equivalents of $177.4 million at 1 September 2021. We are pleased
to have declared an aggregate of $100.0 million of dividends this
year, a clear testament to the cash generating potential of the
Shaikan Field and in keeping with our commitment to continue to
balance investment in growth and distributions to shareholders.
Ian Weatherdon
Chief Financial Officer
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
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
financial non-IFRS measures and a description of how they are
calculated is set out below. Additionally, a reconciliation of the
financial 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 gross operating costs per bbl.
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
$'000 $'000 $'000
------------------------------------- ------------- ------------- ------------
Gross production (MMbbls) 7.9 6.8 13.4
Gross operating costs ($ million)(1) 19.1 17.7 34.2
------------------------------------- ------------- ------------- ------------
Gross operating costs per barrel
($ per bbl) 2.4 2.6 2.6
===================================== ============= ============= ============
(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
income tax (expense)/credit, finance costs, finance revenue,
depreciation and amortisation and impairment of receivables.
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
$'000 $'000 $'000
------------------------------------ ------------- ------------- ------------
Profit/(loss) after tax 64.8 (33.1) (47.3)
Finance costs 5.7 5.7 14.1
Finance revenue (0.4) (1.0) (1.3)
Tax expense (0.0) 0.5 0.3
Depreciation of oil & gas assets 28.2 41.8 82.8
Other depreciation and amortisation 0.5 0.8 1.3
Impairment of receivables (5.0) 12.8 6.8
Adjusted EBITDA 93.8 27.5 56.7
==================================== ============= ============= ============
Net capital expenditure
Net capital expenditure is the value of the Group's additions to
oil and gas assets excluding any movements in decommissioning
assets.
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
$'000 $'000 $'000
------------------------------------ ------------- ------------- ------------
Additions to oil & gas assets (note
11) 14.1 38.5 45.9
Net capital expenditure 14.1 38.5 45.9
==================================== ============= ============= ============
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.
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
$'000 $'000 $'000
---------------------------- ------------- ------------- ------------
Cash and cash equivalents 189.5 143.6 147.8
Outstanding Notes (note 14) (98.9) (98.4) (98.6)
Unamortised issue costs (1.1) (1.6) (1.4)
Accrued interest (note 13) (4.4) (4.4) (4.4)
Net cash 85.1 39.2 43.4
============================ ============= ============= ============
Principal risks and 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 consistent with
those detailed in the management of principal risks and
uncertainties section of the 2020 Annual Report and Accounts. The
principal risks are listed below:
Strategic Operational Financial
Political, social Health, Safety, Security Liquidity and funding
and economic instability and Environment risks capability
------------------------- ----------------------
Disputes regarding Gas flaring Oil revenue payment
title or exploration mechanism
and production rights
------------------------- ----------------------
Business conduct and Security Commodity prices
anti-corruption
------------------------- ----------------------
Export route availability Field delivery risk
------------------------- ----------------------
Stakeholder misalignment Reserves
------------------------- ----------------------
Climate change and
sustainability
------------------------- ----------------------
Global pandemic (e.g.
COVID-19)
------------------------- ----------------------
Cyber security
------------------------- ----------------------
The Board continues to actively monitor the effect of COVID-19
on the macro environment and the Group's operations. The primary
risks associated with COVID-19 are considered separately and are
also embedded within the existing principal risks, including HSSE,
Field delivery risk, Liquidity and funding capability and Commodity
prices.
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
1 September 2021
Independent review report to Gulf Keystone Petroleum Ltd
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed
consolidated income statement, 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 related notes 1 to
17. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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.
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 2021 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
1 September 2021
Condensed consolidated income statement
For the six months ended 30 June 2021
Six months
ended Six months Year ended
30 June ended 31 December
2021 30 June 2020 2020
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------------- ----- ---------- ------------- ------------
Revenue 4 130,713 49,878 108,449
Cost of sales 5 (53,516) (60,245) (121,507)
Impairment reversal/(charge)
on trade receivables 12 5,034 (12,791) (6,776)
Gross profit/(loss) 82,231 (23,158) (19,834)
Share option related (expense)/credit 6 (6,533) 100 (1,235)
Other general and administrative
expenses (5,411) (5,528) (12,312)
Profit/(loss) from operations 70,287 (28,586) (33,381)
Finance revenue 400 997 1,278
Finance costs (5,674) (5,707) (14,087)
Foreign exchange (losses)/gains (235) 697 (841)
-------------------------------------- ----- ---------- ------------- ------------
Profit/(loss) before tax 64,778 (32,599) (47,031)
Tax credit/(expense) 7 (24) (538) (311)
-------------------------------------- ----- ---------- ------------- ------------
Profit/(loss) after tax 64,754 (33,137) (47,342)
-------------------------------------- ----- ---------- ------------- ------------
Profit/(loss) per share (cents)
Basic 8 30.52 (15.64) (22.45)
Diluted 8 28.87 (15.64) (22.45)
-------------------------------------- ----- ---------- ------------- ------------
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2021
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------- ------------- ------------- ------------
Profit/(loss) for the period 64,754 (33,137) (47,342)
Items that may be reclassified
subsequently to profit or loss:
------------------------------------- ------------- ------------- ------------
Fair value losses arising in
the period (2,013) - (1,732)
-------------------------------------- ------------- ------------- ------------
Cumulative losses arising on
hedging instruments reclassified
to revenue 2,710 - -
-------------------------------------- ------------- ------------- ------------
Exchange differences on translation
of foreign operations 279 (1,099) 707
-------------------------------------- ------------- ------------- ------------
Total comprehensive income/(expense)
for the period 65,730 (34,236) (48,367)
-------------------------------------- ------------- ------------- ------------
Condensed consolidated balance sheet
As at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
Notes Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------- ------- ---------- ---------- -----------
Non-current assets
Intangible assets 10 2,234 462 933
Property, plant and equipment 11 362,914 406,747 374,702
Trade receivables 12 12,641 72,213 59,096
Deferred tax asset 500 345 617
--------------------------------- ------- ---------- ---------- -----------
378,289 479,767 435,348
--------------------------------- ------- ---------- ---------- -----------
Current assets
Inventories 35,547 34,768 36,527
Trade and other receivables 12 111,628 13,322 37,832
Derivative financial instruments 8 - 977
Cash and cash equivalents 189,543 143,579 147,826
336,726 191,669 223,162
--------------------------------- ------- ---------- ---------- -----------
Total assets 715,015 671,436 658,510
--------------------------------- ------- ---------- ---------- -----------
Current liabilities
Trade and other payables 13 (81,518) (72,553) (69,123)
Dividends payable (25,000) - -
(106,518) (72,553) (69,123)
--------------------------------- ------- ---------- ---------- -----------
Non-current liabilities
Trade and other payables 13 (1,022) (2,096) (1,058)
Other borrowings 14 (98,872) (98,407) (98,633)
Provisions (38,839) (31,668) (35,671)
(138,733) (132,171) (135,362)
--------------------------------- ------- ---------- ---------- -----------
Total liabilities (245,251) (204,724) (204,485)
--------------------------------- ------- ---------- ---------- -----------
Net assets 469,764 466,712 454,025
--------------------------------- ------- ---------- ---------- -----------
Equity
Share capital 15 213,731 229,430 211,371
Share premium account 15 792,914 871,675 842,914
Treasury Shares - (49,812) (2,592)
Cost of hedging reserve (1,035) - (1,732)
Exchange translation reserve (2,235) (4,320) (2,514)
Accumulated losses (533,611) (580,261) (593,422)
--------------------------------- ------- ---------- ---------- -----------
Total equity 469,764 466,712 454,025
--------------------------------- ------- ---------- ---------- -----------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2021
Share Cost of Exchange
Share premium Treasury hedging translation Accumulated Total
capital account shares reserve reserve losses equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Balance at 1 January
2020 (audited) 229,430 871,675 (29,749) - (3,221) (548,216) 519,919
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Net loss for the period - - - - - (33,137) (33,137)
Other comprehensive
loss for the period - - - - (1,099) - (1,099)
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Total comprehensive
loss for the period - - - - (1,099) (33,137) (34,236)
Share buy-back - - (20,165) - - - (20,165)
Employee share schemes - - - - - 1,194 1,194
Share options exercised - - 102 - - (102) -
Balance at 30 June
2020 (unaudited) 229,430 871,675 (49,812) - (4,320) (580,261) 466,712
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Net loss for the period - - - - - (14,205) (14,205)
Cash flow hedge -
fair value movements - - - (1,732) - - (1,732)
Exchange difference
of translation of
foreign operations - - - - 1,806 - 1,806
Total comprehensive
(loss)/income for
the period - - - (1,732) 1,806 (14,205) (14,131)
Share cancellation (18,059) (28,761) 46,820 - - - -
Employee share schemes - - - - - 1,443 1,443
Share options exercised - - 400 - - (399) 1
Balance at 31 December
2020 (audited) 211,371 842,914 (2,592) (1,732) (2,514) (593,422) 454,025
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Net profit for the
period - - - - - 64,754 64,754
Cash flow hedge -
fair value movements - - - 697 - - 697
Exchange difference
of translation of
foreign operations - - - - 279 - 279
Total comprehensive
(loss)/income for
the period - - - 697 279 64,754 65,730
Dividends - (50,000) - - - - (50,000)
Share issues 2,360 - - - - (2,360) -
Employee share schemes - - - - - 9 9
Share options exercised - - 2,592 - - (2,592) -
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Balance at 30 June
2021 (unaudited) 213,731 792,914 - (1,035) (2,235) (533,611) 469,764
------------------------ -------- -------- -------- -------- ------------ ----------- --------
Condensed consolidated cash flow statement
for the six months ended 30 June 2021
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2021 2020 2020
Note Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------------- ---- ---------- ---------- ------------
Operating activities
Cash generated in operations 9 83,487 28,082 50,873
Interest received 400 1,288 1,278
Interest paid (5,000) (5,121) (10,000)
Payment of put option premium (1,043) - (5,371)
Net cash generated in operating
activities 77,844 24,249 36,780
--------------------------------------- ---- ---------- ---------- ------------
Investing activities
Purchase of intangible assets (1,245) (7) (458)
Purchase of property, plant and
equipment (9,454) (50,109) (57,899)
Net cash used in investing activities (10,699) (50,116) (58,357)
--------------------------------------- ---- ---------- ---------- ------------
Financing activities
Payment of dividends (25,000) - -
Share buy-back - (20,165) (20,164)
Payment in lieu of options exercised - (330) -
Payment of leases (431) (718) (1,317)
Net cash used in financing activities (25,431) (21,213) (21,481)
--------------------------------------- ---- ---------- ---------- ------------
Net increase/(decrease) in cash
and cash equivalents 41,714 (47,080) (43,058)
Cash and cash equivalents at beginning
of period 147,826 190,762 190,762
Effect of foreign exchange rate
changes 3 (103) 122
--------------------------------------- ---- ---------- ---------- ------------
Cash and cash equivalents at end
of the period being bank balances
and cash on hand 189,543 143,579 147,826
--------------------------------------- ---- ---------- ---------- ------------
1. General information
The Company is incorporated in Bermuda (registered address:
Cedar House, 3rd Floor, 41 Cedar Avenue, Hamilton 12, Bermuda). The
Company's common shares are listed on the Official List of the
United Kingdom Listing Authority and are traded on the London Stock
Exchange's Main Market for listed securities. The Company serves as
the holding 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 significant accounting policies
The Annual Report and Accounts of the Group are prepared in
accordance with United Kingdom adopted International Financial
Reporting Standards. The condensed set of financial statements
included in this half yearly financial report have been prepared in
accordance with United Kingdom adopted International Accounting
Standard 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 2021 half-yearly
financial report are the same as those adopted in the 2020 Annual
Report and Accounts, other than the implementation of new IFRS
reporting standards.
The financial information for the year ended 31 December 2020
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 2021, a number of accounting standard amendments
and interpretations became effective, as noted in the 2020 Annual
Report and Accounts (pages 114 and 115). 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
2021.
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 CEO Statement, Operational Review and Financial
Review, which includes the financial position of the Group at the
period end and its cash flows and liquidity position.
As at 1 September 2021, the Group had $177.4 million of cash.
The Group continues to closely monitor and manage its liquidity.
Cash forecasts are regularly produced, and sensitivities run for
different scenarios including, but not limited to, the impact of
COVID-19, commodity prices, different production rates from the
Shaikan block, cost contingencies, disruptions to revenue receipts,
etc. The Group's forecasts, taking into account the applicable
risks and the stress test scenarios, show that it has sufficient
financial resources for the 12 months from the date of approval of
the 2021 half year 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 the 2021 half year financial
statements.
Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, the
directors are 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 accounting judgements and key sources of estimation
uncertainty remain consistent with those disclosed in the 2020
Annual Report and Accounts.
Critical accounting judgement
Revenue
The recognition of revenue 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. However, as the payment mechanism for sales to
the export market continues to develop within the Kurdistan Region
of Iraq, the Group considers revenue can only be reliably measured
when the cash receipt is assured. The assessment of whether cash
receipts are assured is based on management's evaluation of the
reliability of the Ministry of Natural Resources' (the "MNR")
payments to the IOCs operating in the Kurdistan Region of Iraq. The
Group also recognised payables to the MNR that were offset against
amounts receivable from the MNR for previously unrecognised revenue
in line with the terms of the Shaikan Production Sharing Contract
(the "PSC").
The judgement is not to recognise revenue in excess of the sum
of the cash receipt that is assured and the amount of payables to
the MNR that can be offset against amounts due for previously
unrecognised revenue in line with the terms of the Shaikan PSC,
even though the Group may be entitled to additional revenue under
the terms of the Shaikan PSC. Any future agreements between the
Company and the Kurdistan Regional Government ("KRG") might change
the amounts of revenue recognised.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities, are discussed below.
Carrying value of producing assets
In line with the Group's accounting policy on impairment,
management performs an impairment review of the Group's oil and gas
assets at least annually with reference to indicators as set out in
IAS 36. 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 2021 was the Shaikan Field with a carrying value of $360.5
million.
The Group performed a full impairment indicator evaluation for
the H1 2021 and concluded that no impairment indicators arose.
The key areas of estimation in assessing the potential
impairment indicators are as follows:
- Commodity prices are based on latest internal forecasts,
benchmarked with external sources of information to ensure they are
within the range of available market and analyst forecasts;
$/bbl - real 2021 2022 onwards
30 June 2021 - base
case $69 $55
----- -------------
30 June 2021 - stress
case $45 $50
----- -------------
31 December 2020 - base
case $50 $55
----- -------------
31 December 2020 - stress
case $45 $50
----- -------------
- discount rates that are adjusted to reflect risks specific to
the Shaikan Field and the Kurdistan Region of Iraq. The post-tax
nominal discount rate was estimated to be 15%, unchanged from 31
December 2020;
- operating costs and capital expenditure that 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 2020 impairment
assessment;
- no adverse changes were noted for commercial reserves and production profiles; and
- timing of revenue receipts changed from 30 to 60 days
following the month of sale, however, this is a minor change and is
not considered to be an indicator of impairment.
3. Geographical information
The Group's non-current assets excluding deferred tax assets and
other financial assets by geographical location are detailed
below:
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
--------------- ------------- ------------- ------------
Kurdistan 361,921 407,017 369,761
United Kingdom 3,227 192 1,910
------------- ------------- ------------
365,148 407,209 371,671
============= ============= ============
The Chief Operating Decision Maker, as per the definition in
IFRS 8, is considered to be the Board of Directors. The Group
operates in a single segment, that of oil and gas explorations,
appraisal and production, in a single geographical location, the
Kurdistan Region of Iraq. As a result, the financial information of
the single segment is 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.
Information about major customers
Included in oil sales are $133.4 million, which arose from sales
to the KRG (H1 2020: $49.9 million; FY 2020: $108.4 million).
4. Revenue
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------------- ------------- ------------- ------------
Oil sales 133,423 49,878 108,449
Put option hedging losses reclassified
to revenue (2,710) - -
130,713 49,878 108,449
============= ============= ============
The Group accounting policy for revenue recognition is set out
in its 2020 Annual Report, with revenue recognised on a
cash-assured basis.
During the six months period ended 30 June 2021, the
cash-assured values recognised as oil sales was $133.4 million (H1
2020: $49.9 million; FY 2020: $108.4 million). The oil sales price
was calculated using the monthly dated Brent price less an average
discount of $21.2 (H1 2020: $21.1; FY 2020: $21.1) per barrel for
quality and pipeline tariffs.
In November 2020, the Company purchased put options effectively
establishing a floor price of $35/bbl on approximately 60% of its
H1 2021 production. The cost of the put option was $2.7 million and
it expired on 30 June 2021. The put option was designated as an
accounting hedge for the period prior to expiry, at which point the
associated hedging losses that had previously been deferred within
the hedging reserve were reclassified to revenue.
In February 2021 the Company purchased a put option establishing
a floor price of $40/bbl on approximately 60% of its Q3 2021
production. This put option has also been designated as an
accounting hedge with the hedging losses incurred as of 30 June
2021 of $1.0 million deferred within the hedging reserve. The cost
of the option will be reclassified to revenue in 2H 2021 upon the
expiry of the option.
5. Cost of Sales
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------------------- ------------- ------------- ------------
Operating costs 15,033 14,215 27,401
Capacity building payments 10,288 3,846 8,362
Changes in inventory valuation and
other write-offs (52) 411 2,923
Depreciation of oil and gas assets 28,223 41,773 82,797
Depreciation of operational assets 24 - 24
------------- ------------- ------------
53,516 60,245 121,507
============= ============= ============
A unit-of-production method has been used to calculate the
depreciation, depletion and amortisation ("DD&A") charge for
oil and gas assets. This is based on full entitlement production,
commercial reserves and capital costs for Shaikan. Commercial
reserves are proven and probable ("2P") reserves, estimated using
standard recognised evaluation techniques. In 2021, the Group
received a Competent Person's Report from ERC Equipoise Limited
with 2P reserves estimates at 31 December 2020. The use of the
report's entitlement production, commercial reserves and capital
costs for Shaikan resulted in a significant decrease in the
DD&A per barrel rate, which was applied prospectively from 1
January 2021.
6. Share option related expense/(credit)
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------------- ------------- ------------- ------------
Share-based payment expense 902 1,098 2,440
Payments related to share options
exercised 4,060 - -
Share-based payment related provision
for taxes 1,571 (1,198) (1,205)
6,533 (100) 1,235
============= ============= ============
On the exercise of the Value Creation Plan share options by
former Directors, tax settlements were made in cash instead of
selling additional shares. This and payment of dividends
accumulated during the vesting period are the main components of
the payments related to share options exercised.
7. Taxation
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------- ------------- ------------- ------------
Corporation tax credit/(expense) 103 (90) (90)
Deferred tax credit/(expense) (127) (448) (221)
(24) (538) (311)
============= ============= ============
8. Profit/(loss) per share
The calculation of the basic and diluted profit/(loss) per share
is based on the following data:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
Profit/(loss) after tax for the purposes
of basic and diluted loss per share
($'000) 64,754 (33,137) (47,342)
----------------------------------------- ---------- ---------- ------------
Number of shares ('000s):
Basic weighted average number of
ordinary shares 212,138 211,934 210,893
--------------------------------- ------- ------- -------
Basic EPS (cents) 30.52 (15.64) (22.45)
--------------------------------- ------- ------- -------
The Group followed the steps specified by IAS 33 in determining
whether outstanding share options are dilutive or
anti-dilutive.
8. Profit/(loss) per share (continued)
Reconciliation of dilutive shares:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
Number of shares ('000s):
Basic weighted average number of
ordinary shares 212,138 211,934 210,893
Effect of dilutive potential ordinary
shares 12,119 - -
-------------------------------------- ---------- ---------- ------------
Diluted number of ordinary shares
outstanding 224,257 211,934 210,893
Diluted EPS (cents) 28.87 (15.64) (22.45)
-------------------------------------- ---------- ---------- ------------
Weighted average number of ordinary shares excludes shares held
by Employee Benefit Trustee ("EBT") and the Exit Event Trustee of
0.1 million (H1 2020: 0.1 million; FY 2020: 0.1 million). On 30
June 2020 and 31 December 2020, weighted average number of shares
also excluded shares held in treasury (H1 2021: nil, H1 2020: 19.1
million, FY 2020: 1.0 million).
The dilutive number of ordinary shares relates to outstanding
share options and is calculated on the assumption of conversion of
all potentially dilutive ordinary shares. As the company reported a
loss for the six months ending 30 June 2020 and for the year ended
31 December 2020, the exercise of the outstanding share options
would have reduced the reported loss per share and, therefore,
these share options were anti-dilutive.
9. Reconciliation of profit from operations to net cash
generated in operating activities
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------------- ---------- ---------- ------------
Profit/(loss) from operations 70,287 (28,586) (33,381)
Adjustments for:
Depreciation of property, plant and
equipment (including right of use
assets) 28,737 42,570 84,119
Amortisation of intangible assets 1 6 3
Share-based payment expense 9 1,098 2,440
Lease modification 154 - (97)
(Credit)/expense due to change in
impairment of receivables provision (5,034) 12,791 6,776
Put option hedging losses reclassified
to revenue 2,710 - -
Decrease/(increase) in inventories 980 (3,728) (5,487)
Decrease/(increase) in receivables (22,260) 2,574 (523)
(Decrease)/increase in payables 7,903 1,357 (2,977)
------------------------------------------- ---------- ---------- ------------
Net cash generated in operating activities 83,487 28,082 50,873
------------------------------------------- ---------- ---------- ------------
10. Intangible assets
Computer software
$'000
----------------------------------------- -----------------
Period ended 30 June 2020
Opening net book value 454
Additions 15
Amortisation charge (1)
Foreign currency translation differences (6)
-----------------
Net book value at 30 June 2020 462
-----------------
Cost 1,351
Accumulated depreciation (889)
-----------------
Net book value at 30 June 2020 462
-----------------
Period ended 31 December 2020
Additions 451
Amortisation charge (3)
Foreign currency translation differences 23
Net book value at 31 December 2020 933
=================
Cost 1,980
Accumulated depreciation (1,047)
-----------------
Net book value at 31 December 2020 933
-----------------
Period ended 30 June 2021
Opening net book value 933
Additions 1,292
Amortisation charge (1)
Foreign currency translation differences 10
-----------------
Net book value at 30 June 2021 2,234
=================
Cost 3,282
Accumulated depreciation (1,048)
-----------------
Net book value at 30 June 2021 2,234
=================
The amortisation charge for computer software has been included
in general and administrative expenses.
11. Property, plant and equipment
Oil and Gas Fixtures Right of
Assets and use Total
$'000 Equipment Assets $'000
$'000 $'000
------------------------------ ----------- ---------- -------- ---------
Period ended 30 June 2020
Opening net book value 403,696 1,310 2,596 407,602
Additions 38,541 56 1,640 40,237
Disposals at cost - (492) - (492)
Revisions to decommissioning
asset 1,491 - - 1,491
Depreciation charge (41,773) (112) (685) (42,570)
Depreciation on disposals - 492 - 492
Foreign currency translation
differences - (13) - (13)
----------- ---------- -------- ---------
Net book value at 30 June
2020 401,955 1,241 3,551 406,747
Cost 736,640 6,442 5,132 748,214
Accumulated depreciation (334,685) (5,201) (1,581) (341,467)
----------- ---------- -------- ---------
Net book value at 30 June
2020 401,955 1,241 3,551 406,747
=========== ========== ======== =========
Period ended 31 December
2020
Additions 7,313 99 81 7,493
Revisions to decommissioning
asset 3,609 - - 3,609
Lease modifications - - (1,623) (1,623)
Depreciation charge (41,024) (166) (359) (41,549)
Foreign currency translation
differences - 13 12 25
Net book value at 31 December
2020 371,853 1,187 1,662 374,702
=========== ========== ======== =========
Cost 747,562 7,160 3,602 758,324
Accumulated depreciation (375,709) (5,973) (1,940) (383,622)
----------- ---------- -------- ---------
Net book value at 31 December
2020 371,853 1,187 1,662 374,702
=========== ========== ======== =========
Period ended 30 June 2021
Opening net book value 371,853 1,187 1,662 374,702
Additions 14,084 139 - 14,223
Disposals at cost - - (1,064) (1,064)
Revision to decommissioning
asset 2,814 - - 2,814
Lease modification - - (107) (107)
Depreciation charge (28,223) (168) (346) (28,737)
Depreciation on disposals - - 1,064 1,064
Foreign currency translation
differences - - 19 19
Closing net book value 360,528 1,158 1,228 362,914
========= ======= ======= =========
At 30 June 2021
Cost 764,460 7,299 2,450 774,209
Accumulated depreciation (403,932) (6,141) (1,222) (411,295)
--------- ------- ------- ---------
Net book value 360,528 1,158 1,228 362,914
========= ======= ======= =========
The additions to the Shaikan asset amounting to $14.1 million
during the period include the costs of completing SH-13, facilities
debottlenecking activities, flowlines and studies. The increase in
the decommissioning asset represents further decommissioning
obligations that arose on capital projects.
12. Trade and other receivables
Non-current receivables
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
--------------------------------- ----------- ----------- ------------
Trade receivables - non-current 12,641 72,213 59,096
Current receivables
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------- ----------- ----------- ------------
Trade receivables - current 106,788 7,961 34,021
Other receivables 4,036 4,725 2,963
Prepayments and accrued income 804 636 848
----------- ----------- ------------
111,628 13,322 37,832
=========== =========== ============
Reconciliation of trade receivables
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
-------------------------------- ----------- ----------- ------------
Gross carrying amount 122,580 94,375 101,302
Less: impairment allowance (3,151) (14,200) (8,185)
Carrying value at 30 June 2021 119,429 80,175 93,117
=========== =========== ============
Trade receivables comprise invoiced amounts due from the KRG for
crude oil sales totalling $113.5 million (H1 2020: $85.3 million;
FY 2020: $92.2 million) and a share of Shaikan revenue arrears the
Group purchased from MOL in 2018 amounting to $9.1 million (H1
2020: $9.1 million; FY 2020: $9.1 million). The amount due from the
KRG includes past due trade receivables of $62.2 million(1) (H1
2020: $77.3 million; FY 2020: $77.3 million) related to November
2019 to February 2020 invoices. While the Group expects to recover
the full nominal value of the outstanding invoices and MOL
receivable, the ECL on the overdue receivable balance of $3.2
million was provided against the receivables balance in line with
the requirements of IFRS 9 resulting in a credit to income of $5.0
million in the reporting period (H1 2020: $12.8 million expense; FY
2020: $6.8 million expense).
In May 2021, the Company received a letter from the KRG
proposing an amendment to the 30-day payment terms, starting with
the March 2021 production invoice. The KRG stated that payment will
be 60 days after submission of each invoice. The KRG also stated
that from March 2021 the monthly repayment mechanism of past due
trade receivables will change from the previously agreed 50% to 20%
of the difference between average dated Brent price and $50/bbl,
multiplied by the gross Shaikan crude oil volumes sold. The Company
continues to engage with the KRG regarding its proposed amendment
to payment terms.
ECL sensitivities
No material changes to the Group's profit before tax arise when
considering reasonably possible changes to the estimates which are
used to calculate the ECL impairment allowance.
(1) The past due trade receivables amount excludes the
associated capacity building payments due to the KRG which reduce
the net amount due to GKP to $58.9 million.
12. Trade and other receivables (continued)
Other receivables
Included within Other receivables is an amount of $0.5 million
(H1 2020: $0.4 million; FY 2020 $0.4 million) being the deposits
for leased assets which are receivable after more than one year.
There are no receivables from related parties as at 30 June 2021
(H1 2020: nil; FY 2020: nil). No impairments of other receivables
have been recognised during the first half of the year (H1 2020:
nil; FY 2020: nil).
13. Trade and other payables
Current liabilities
30 June 2021 30 June 2020 31 December
Unaudited Unaudited 2020
$'000 $'000 Audited
Restated $'000
-------------------------- ------------ ------------ -----------
Trade payables 1,448 5,218 2,212
Accrued expenditures 19,828 14,857 14,481
Other payables 59,854 50,827 51,612
Finance lease obligations 388 1,561 718
Taxation payable - 90 100
81,518 72,553 69,123
============ ============ ===========
The Group changed the presentation of current liabilities in
2020 and the H1 2020 balances have been restated accordingly.
Accrued expenditures include $4.4 million interest payable as at
30 June 2021 (H1 2020: $4.4 million, FY 2020: $4.4 million) (note
14).
Other payables include $51.0 million (H1 2020: $44.7 million, FY
2020: $46.5 million) of amounts payable to the KRG that are
expected to be offset against revenue due from the KRG related to
pre-October 2017 oil sales, which have not yet been recognised in
the financial statements.
Non-current liabilities
31 December
30 June 2021 30 June 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------------ ------------ ------------ -----------
Non-current finance lease liability 1,022 2,096 1,058
14. Long-term borrowings
In July 2018, the Company completed the private placement of a
5-year senior unsecured $100 million bond (the "Notes"). The
unsecured Notes are guaranteed by Gulf Keystone Petroleum
International Limited and Gulf Keystone Petroleum (UK) Limited, two
of the Company's subsidiaries, and the key terms are summarised as
follows:
- maturity date is 25 July 2023;
- at any time prior to maturity, the New Notes are redeemable in
part, or full, with a prepayment penalty;
- the interest rate is 10% per annum with semi-annual payment dates; and
- the Company is permitted to raise up to $200 million of
additional indebtedness at any time on market terms to fund capital
and operating expenditure, subject to certain requirements.
The liabilities associated with Notes are presented in the
following tables:
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
----------------------------------------- ---------- ---------- -----------
Liability at the beginning of the period 102,993 102,553 102,553
Interest charged during the period 5,238 5,215 10,440
Interest paid during the period (5,000) (5,000) (10,000)
Liability at the end of period 103,231 102,768 102,993
========== ========== ===========
Liability component reporting in:
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------------ ---------- ---------- -----------
Current liabilities (note 13) 4,359 4,361 4,360
Non-current liabilities 98,872 98,407 98,633
103,231 102,768 102,993
========== ========== ===========
The Notes are traded on the Norwegian Stock Exchange and the
fair value at the prevailing market price as at the close of
business on the reporting date was:
Market price 30 June
2021
$'000
Notes 104.38 104,375
As of 30 June 2021, the Group's remaining contractual liability
comprising principal and interest based on undiscounted cash flows
at the maturity date of the Notes is as follows:
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
$'000 $'000 $'000
------------------------- ---------- ---------- -----------
Within one year 10,000 10,000 10,000
Within two to five years 110,639 120,639 115,639
120,639 130,639 125,639
========== ========== ===========
15. Share capital
Common shares
Share Share
No. of shares Amount capital premium
000 $'000 $'000 $'000
--------------------------------- ------------- --------- ------------------- --------
Issued and fully paid
Balance 1 January 2021 (audited) 211,371 1,054,285 211,371 842,914
Share issue 2,360 2,360 2,360
Dividend (50,000)
------------- --------- ------------------- --------
Balance 30 June 2021 (unaudited) 213,731 1,056,645 213,731 792,914
------------- --------- ------------------- --------
The dividend of $50.0 million consists of an ordinary dividend
of $25.0 million and a special dividend of $25.0 million, as
approved at the June 2021 Annual General Meeting. The ordinary
dividend was remitted for distribution as at the balance sheet date
and the special dividend was paid to shareholders on 6 August
2021.
16. Contingent liabilities
The Group has a contingent liability of $27.3 million (H1 2020
and FY 2020: $27.3 million) in relation to the proceeds from the
sale of test production in the period prior to the approval of the
Shaikan Field Development Plan ("FDP") in July 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 (GKP and MOL), 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 currently involved in negotiations to resolve this
matter. The Group has received external legal advice and does not
consider that a probable material payment is payable to the KRG.
This contingent liability forms part of the ongoing Shaikan PSC
amendment negotiations and it is likely that it will be settled as
part of those negotiations.
17. Subsequent events
The Company has declared an interim dividend of $50.0 million to
be paid on 8 October 2021 based on a record date of 24 September
2021.
GLOSSARY (See also the glossary in the 2020 Annual Report and
Accounts)
2P proved plus probable reserves
bbl barrel
------------------------------------------------
bopd barrels of oil per day
------------------------------------------------
CGU cash-generating unit
------------------------------------------------
COVID-19 Coronavirus
------------------------------------------------
Crude Oil Sales Agreement the Shaikan crude oil export sales agreement
valid between 1 January 2019 and 30 June
2021
------------------------------------------------
DD&A depreciation, depletion and amortisation
------------------------------------------------
EBT employee benefit trust
------------------------------------------------
ECL expected credit losses
------------------------------------------------
ESG environmental, social and governance
------------------------------------------------
FDP Field Development Plan
------------------------------------------------
G&A general and administrative
------------------------------------------------
GKP Gulf Keystone Petroleum Limited
------------------------------------------------
Group Gulf Keystone Petroleum Limited and its
subsidiaries
------------------------------------------------
HSSE health, safety, security and environment
------------------------------------------------
IAS International Accounting Standards
------------------------------------------------
IFRS International Financial Reporting Standards
------------------------------------------------
IOC International oil companies
------------------------------------------------
KRG Kurdistan Regional Government
------------------------------------------------
LTI lost time incident
------------------------------------------------
MMstb million stock tank barrels
------------------------------------------------
MNR Ministry of Natural Resources of the Kurdistan
Regional Government
------------------------------------------------
MOL Kalegran B.V. (a subsidiary of MOL Hungarian
Oil & Gas plc)
------------------------------------------------
Notes the $100 million unsecured, guaranteed
notes issued on 25 July 2018 by GKP with
a maturity date of 25 July 2023
------------------------------------------------
PF-1 Production Facility 1
------------------------------------------------
PF-2 Production Facility 2
------------------------------------------------
PSC production sharing contract
------------------------------------------------
Shaikan PSC the Production Sharing Contract for the
Shaikan block between the Kurdistan Regional
Government of Iraq and Gulf Keystone Petroleum
International Limited and Texas Keystone
Inc. and Kalegran Limited (a subsidiary
of MOL) signed on 6 November 2007 as amended
by subsequent agreements
------------------------------------------------
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END
IR SSUESFEFSELU
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