Gulf Keystone to Raise US$250 Mln in Debt Offering

Source: www.gulfoilandgas.com 3/19/2014, Location: Middle East

Gulf Keystone, an independent oil and gas exploration, development and production company with operations in the Kurdistan Region of Iraq, is pleased to announce that it has mandated Deutsche Bank and Pareto Securities to arrange a series of fixed income investor meetings in the US, Europe and Asia commencing 20 March 2014. A debt offering of up to US$250 million in accordance with Reg S/144A is expected to follow, subject to market conditions.

On 13 March 2014, Gulf Keystone released an Operational and Corporate Update and published the first third party audit of the Company's reserves, contingent resources and prospective resources for its petroleum interests in the Kurdistan Region of Iraq comprising the Shaikan, Sheikh Adi, Ber Bahr and Akri-Bijeel blocks. The Company continues to maintain current stable production and sales levels at an average of 10,000 barrels of oil per day ("bopd") from the Company's first Shaikan production facility (PF-1).

In addition, Shaikan-4, the third production well, recently tied-in to PF-1, has been flowing at up to 6,000 bopd in the recent week.

The Company's immediate focus remains on achieving its target of 40,000 bopd of production capacity from PF-1 and PF-2 in 2014, which will allow further expansion of export crude oil sales. The Company estimates that achieving this level of production capacity at Shaikan, as well as continuing planned expenditure at Sheikh Adi, Ber Bahr and Akri-Bijeel, will require capital expenditure of approximately US$210 million in 2014. To complete this work programme, the Company expects to seek additional funding via a debt offering of up to US$250 million to enhance its existing cash resources, which totalled US$81.9 million as at 31 January 2014.

Whilst there can be no certainty that a debt transaction will follow the Company's investor meetings, any debt raised will support the completion of the Company's move to 40,000 bopd of production capacity. The Company expects to utilise cash generated from increasing oil sales, in addition to the funds remaining from the contemplated raising of up to US$250 million in debt financing, to initiate the next stage of the Shaikan project execution and increase production capacity from 40,000 bopd to 66,000 bopd by Q1 2016. The increase of Shaikan production capacity to 66,000 bopd, which is the Company's next step towards reaching the medium-term target of 100,000 bopd set for Phase 1 of the approved Shaikan Field Development Plan, is expected to require construction of at least one additional production facility (PF-3) with gas injection and water handling capabilities, as well as the drilling of a substantial number of development and production wells.

The increase of Shaikan production capacity from 40,000 bopd to 66,000 bopd, alongside the continuation of the planned work programmes at Sheikh Adi, Ber Bahr and Akri-Bijeel, is anticipated to require further capital expenditure of approximately US$340 million through 2014 to the end of 2015.

Commenting on today's announcement, Todd Kozel, Chief Executive Officer of Gulf Keystone, said: "We have reached a crucial milestone in Gulf Keystone's transition from an exploration company to an exploration and production company. This is the first time in the Company's history that it has been in a position to access the conventional bond markets, and we are confident that this proposed bond issue will further expand the Company's financial options in the future.

The roadmap for the Shaikan development is the field development plan approved by the KRG and its Phase 1 target of 100,000 bopd production capacity. In order to achieve this significant medium-term target, by Q1 2016 we plan to grow our production capacity from 40,000 bopd to 66,000 bopd, drilling more wells and completing our next production facility. In the near term, our intention is to maintain and increase consistent production and sales, continue to prove up reserves, diversify our funding mix, and we are looking forward to issuing our Listing Prospectus and completing our planned move to the standard segment of the Official List shortly.

The recently published Competent Person's Report confirming some 12.5 billion barrels of gross oil in place across our portfolio in the Kurdistan Region of Iraq, demonstrates the world-class significance of the Company's asset base, especially the Shaikan field, and indicates the scale of the reserves that we can prove up as we implement Phase 1 of the development. The report has also provided us with the necessary initial baseline of minimum tangible value in order to access the credit market, which will enable us to continue to develop the Shaikan field and begin to realize its value for all of our stakeholders.


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Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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