Gulf Keystone reports $248 million loss

Posted a loss last year because of the oil price slump and arrears from export sales.

The London-based energy company Gulf Keystone Petroleum, which is focused on Iraqi Kurdistan, posted a wider loss last year because of the oil price slump and arrears from export sales.

Gulf Keystone posted a loss after tax of US$248.2 million last year compared with a loss of $32m in 2013.

It is owed about $100m in crude oil export sales, it said.

The company produced 6.48 million barrels of oil last year, compared with 496,921 barrels for all of 2013.

It is expecting “significant” growth in oil production this year.

“While we can be proud of our achievements from an operational and production stand point, the ongoing costs of the regional conflict and budget negotiations between the Kurdistan Regional Government (KRG) and the federal government in Baghdad, combined with the fall in the oil price, have had a detrimental effect on our cash receipts,” said Andrew Simon, the interim non-executive chairman who replaced Simon Murray this month.

“While this has also been the case with other regional producers, the impact on Gulf Keystone has been felt more severely because of the relative weakness of our balance sheet.”

The company exported its first crude shipment last year and met its target to produce 40,000 bpd from the Shaikan field, its flagship asset in the region.

It plans to raise production from the field to 70,000 barrels per day and ultimately to 100,000 bpd, but did not provide a timeline.

“We are committed to rebuilding shareholder value. All avenues for doing this are being considered, including expansion plans for Shaikan,” said Mr Simon.

“As already announced, the company is continuing to engage in discussions with interested parties in relation to possible asset transactions or a sale of the company, as well as considering additional routes to secure further funding.”

Gulf Keystone and other oil producers in Kurdistan are suffering from a long-running disagreement between the KRG and Iraq’s federal government over oil exports from the semi-autonomous region.

The governments had reached in December last year an accord under which the federal government would pay the Kurds for oil exports from their own territory and the Kirkuk oilfield under Baghdad’s control.

However, the deal has foundered because Baghdad has only paid a part of the agreed payments to the Kurds, alleging that the oil exported did not match the expected volume.

This month the former chairman, Mr Murray, said he was effectively forced to quit after he disagreed with the company’s decision to raise $41 million through an equity issue at a 21 per cent discount to the market to avoid breaching debt covenants.

Mr Murray said he believed the capital increase this week was a bad short-term solution and had been pushing for a longer-term option, such as an offer from investment group T5, led by former the Tullow Oil chairman Pat Plunkett.

He said there had been other options on the table too.

“We had two offers. Pat Plunkett was offering a slightly complicated but interesting solution.

“Exxon and a Chinese company was looking at us as well. I told the board we should be looking for a long-term solution,” Mr Murray said.

* with Reuters