Gulf Keystone says debt restructuring plans still on track


Shares in Gulf Keystone Petroleum (GKP) edged up by 3% on the London exchange this morning after the company revealed a large jump in revenues in the first half of 2016.

GKP, operator of the Shaikan field in the Kurdistan region of Iraq, also provided details of its restructuring plan, which is slated for completion by mid-October.

The Bermuda-headquartered company said the move would lower its debt pile from more than $600million to about $100million, through the conversion of debt to equity.

GKP also said improved liquidity would help maintain gross production at 40,000 barrels of oil per day (bopd), with the potential to increase the figure to 55,000 bopd.

The firm’s first half production totalled 6million barrels, up 28% year-on-year, boosting revenues to $102million from $30.1 million.

Capital expenditure dropped to $15.7million from $52.2million, and pre-tax losses narrowed to $60million from $77million.

GKP chief executive Jon Ferrier said: “Upon completion of the restructuring we will be able to effectively relaunch Gulf Keystone.  We will benefit from an enhanced balance sheet, a well understood field which continues to perform above expectations and a clear path to significantly increasing production and growing value over time.

“With a regular payment schedule, Gulf Keystone will be in the strongest position it has been in for a number of years and faces the future with renewed confidence.”

David Cheetham, market analyst at XTB, said: “Gulf Keystone’s latest trading update is fairly mixed on the whole, but any positives in the report should be tempered with the company’s continued struggle to stay afloat.

“$46.7million in positive cash flow generated through the 6 months ended 30th June should keep the hunting pack at bay for the time being as the firm focuses on the recent restructuring agreement aimed at significantly lowering debt through raising more equity.

“This decision will go some way to securing the future business as a going concern, but has left investors feeling the pain. The Oil & Gas exploration and production company offered a 30% discount on this rights issue, but reports suggest the largest shareholder (a Los Angeles based capital group) had to underpin the offering as demand was weak.

“This likely meant many shareholders have seen their holdings diluted from the move and with the share price closing a fraction over 2p last night, the 52 week high of 37p seems a distant memory. It is going to take a lot more than just a mildly positive trading update before investors can hope to see their stakes return to anywhere the previous peak.”