Gulf Keystone Actively Reviewing Options to Remain a Going Concern
Gulf Keystone revealed in its 2015 results statement that it is actively reviewing options to secure new funding and restructure its balance sheet in order “to ensure it is able to continue as a going concern”.
The Kurdistan region of Iraq-focused oil and gas exploration and production company stated that it faces “material uncertainties” relating to its ability to meet “significant coupon payments” in April and October 2016, as well as debt repayments of $250 million in April 2017 and $325 million in October 2017. As a result, the energy firm is currently considering a number of options to strengthen its balance sheet, including balance sheet restructuring, a capital raise, and acceleration of MNR arrears payments.
Commenting on the company’s financial concerns, Gulf stated in its 2015 results:
“We recognize that, given the group's debt burden, the current oil price environment, the geopolitical challenges in Iraq and, as a result, the low likelihood of an asset transaction in the near future, obtaining alternative funding and restructuring the group's balance sheet is essential to the group's ability to continue as a going concern.”
Gulf posted a loss after tax of $135 million in 2015 (2014 loss: $248 million), and revenues of $86 million (2014 revenues $38 million). Gross production for the company in 2015 was 11.1 million barrels of oil, marking an increase of 71 percent compared to 2014, which translates to an average of 30,500 barrels of oil per day. The group expects to produce between 31,000 and 35,000 bopd this year.
Jón Ferrier, Gulf Keystone's chief executive officer, said in the company’s 2015 results statement:
"The reasons behind my initial attraction to Gulf Keystone remain my motivation today. We have a superb subsurface asset, which continues to perform well, and a motivated workforce dedicated to realising Shaikan's full potential. We started 2015 with installed capacity to produce 40,000 bopd and achieved our guidance with a 30,500 bopd average rate, as well as record levels of over 45,000 bopd achieved during the year.
"Against a well-publicised challenging backdrop, both across the industry and in the region, the team is actively managing all aspects of the business over which we can assert control. To that end we are further rationalising the portfolio, in order to focus on Shaikan with its lower risk profile and ability to generate the greatest near term return on investment. We are encouraged that we are now awaiting our sixth consecutive payment for Shaikan crude oil exports, and that we have also been able to bring forward an agreement with the MNR on a number of important factors, including the settlement of the amount owed in arrears and the reduction of the capacity building charge, which results in material improvement of the commercial terms for GKP in Shaikan.
“We see these developments as positive as we are striving for much greater certainty and transparency at a crucial time for GKP. In the interest of all stakeholders, strenuous efforts are currently underway to strengthen the balance sheet, not only to ensure our ability to remain as a going concern, but also to be able to provide new capital to increase production and as a solid foundation for the longer-term future of the company. I look forward to delivering a stronger business in 2016 with stable production, commercial discipline, value realisation and growth."
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