Gulf Keystone Petroleum sees strong performance from Shaikan Jurassic

Kurdistan-focussed operator and producer Gulf Keystone Petroleum updated the market on Wednesday, reporting that its production operations - underpinned by strong performance of the Shaikan Jurassic reservoir - had continued in line with expectations.

The AIM-traded firm said average gross production of 31,563 barrels of oil per day was achieved in 2018, at the upper end of the 27,000 to 32,000 bopd guidance.

It said the plant debottlenecking programme required to expand gross production capacity to 55,000 bopd from PF-1 and PF-2 remained on schedule for completion towards the end of 2019.

GKP signed an agreement with Independent Oil Tools to use 'Rig 1' during its workover programme, to replace tubing on the SH-1 and SH-3 wells, and install downhole pumps (ESPs) on three other existing wells.

The rig had been mobilised, and was currently performing a workover on the SH-1 well to install larger bore tubing to increase productivity.

GKP also signed an agreement with the rig operator, DQE, to use 'Rig 40' for its upcoming drilling campaign, due to start in March, with the first four wells needed for the 55,000 bopd target expected to be completed in the first quarter of 2020.

Since July, GKP said all production from PF-2 had been exported via the Atrush export pipeline, which connected to the main Kurdish export pipeline.

Additional pumps, along with a temporary unloading facility, had now been installed at PF-2 which allowed the majority of production from PF-1 to be trucked to PF-2 and exported via pipeline.

At present, around 3,000 bopd were exported by truck via Fishkhabour, which lowered HSSE exposure.

The company said further progress had been made, including delivery of all 16-inch pipeline to the field, on the installation by KAR Group of the pipeline also connecting PF-1 to the Atrush export pipeline.

That remained on schedule to be brought into service mid-2019, at which point the residual trucking of crude oil would be eliminated.

GKP and its partner MOL had agreed on a staged investment programme to increase gross production up to 110,000 bopd by 2024.

The revised field development plan was submitted for approval to the Ministry of Natural Resources in October, with the current expansion to 55,000 bopd already underway.

On the corporate front, GKP said it continued to receive regular oil payments from the Kurdistan Regional Government, with cash receipts of $225m net to GKP during 2018.

Cash balances stood at $294m as at 15 January, with the firm saying it remained fully funded to complete the expansion to 55,000 bopd.

Gross capital expenditure guidance for the total 55,000 bopd project phase remained unchanged, at $200m to $230m.

Of the 2018 approved gross budget of $91m, around $40m had been transferred to early 2019, which the board said was primarily driven by delays in delivery of drilling and well completion equipment.

Looking ahead, GKP said that given the active 2019 investment programme - particularly in new wells and workovers - the company had anticipated improved production levels and expected gross average production guidance to be in the range of 32,000 to 38,000 bopd.

It said that guidance took account the latest drilling and project schedules, but also the temporary plant shutdowns required in 2019 for the tie-in of new facilities and wells being offline while workovers were taking place.

The company’s 55,000 bopd production target had been moved to early 2020, due to delays in the delivery of equipment, affecting the start date of the drilling campaign, which was originally January and was now March 2019.

GKP said it intended to host a capital markets day in the first quarter of 2019.

“Having successfully laid the foundations for our expansion plans in 2018, we are very pleased to have now initiated our new investment programme at Shaikan,” said Gulf Keystone Petroleum chief executive officer Jón Ferrier.

“We continue to make considerable operational headway as we look to safely increase production to 55,000 bopd, in line with our strategy.

“2019 is set to be another important year for Gulf Keystone and we look forward to keeping our stakeholders updated on our ongoing progress.”