- Stable production operations and sales from PF-1 continued in January, February and March 2014 at the level of approximately 10,000 bopd (gross).
- The Shaikan-7 deep exploration well is currently drilling 17 ½" hole below 2,600 metres in the upper Triassic.
- The first well to appraise the Sheikh Adi discovery, which spudded in December 2013, is drilling below 2,240 metres in the Alan formation in the Jurassic.
- The Ber Bahr-1 exploration well was successfully side-tracked in the first half of 2013 and tested 2,100 bopd of 15 degree API oil from the Jurassic Sargelu formation.
Gulf Keystone is pleased to provide an Operational and Corporate update. Separately, the Company is releasing today a third party audit of the Company's reserves, contingent resources and prospective resources for its petroleum interests in the Kurdistan Region of Iraq.
The Company continues to maintain current stable production and sales levels of approximately 10,000 barrels of oil per day ("bopd") from the Company's first Shaikan production facility ("PF-1") in the Kurdistan Region of Iraq, which is expected to increase in Q2 2014 as a result of the recently tied-in third production well, Shaikan-4, which is now flowing. The second Shaikan production facility ("PF-2") is being commissioned, with two wells (Shaikan-2 and Shaikan-5) already tied in and the first production from PF-2 expected in Q2 2014. The Company remains focused on achieving the target of 40,000 bopd of production capacity from PF-1 and PF-2 in 2014.
Since crude oil exports from the Shaikan field commenced in December 2013, in excess of 105,000 tonnes (690,000 barrels) of oil have been tendered and sold at international prices. The Company is expecting to receive payment, in line with the terms of the Shaikan Production Sharing Contract.
In order to move to the next stage of the Shaikan project execution, the Company is making progress in its discussions on the near term debt financing options.
Production and Development
Shaikan (75% working interest; Operator)
Stable production operations and sales from PF-1 continued in January, February and March 2014 at the level of approximately 10,000 bopd (gross). Total cumulative production from late 2010 to date from Shaikan has reached 2.1 million barrels. Since crude oil exports from the Shaikan field commenced in December 2013, three cargoes totalling in excess of 105,000 tonnes (690,000 barrels) of oil have been delivered from PF-1. The fourth cargo of approximately 33,000 tonnes (215,000 barrels) of Shaikan crude is expected to be delivered later in March 2014.In addition to the presently producing Shaikan-1 and Shaikan-3 wells, Shaikan-4 is now tied into PF-1, has started to flow and is expected to increase the current output in Q2 2014. An amine plant is currently being connected to PF-1, which will allow sweetening of some of the associated gas stream, which will be used as fuel for the PF-1 operations instead of diesel, representing savings of approximately US$400,000 per month to the project.
The Shaikan-2 and Shaikan-5 wells have now been tied into PF-2 and the production facility is currently being commissioned with first production, initially of approximately 10,000 bopd, expected in Q2 2014. The connection of Shaikan-10 to PF-2 will also be completed in Q2 2014, increasing PF-2 production capacity.
The Company is focused on achieving the target of 40,000 bopd of production capacity from PF-1 and PF-2 in 2014, which it intends to reach through:
- Potential re-configuration of Shaikan-8, initially drilled as a gas injection well, into a fourth producer tied into PF-1
- Tie in of the deep exploration well Shaikan-7, which is currently being drilled, to become the fifth producing well at PF-1
- Productivity enhancement of the Shaikan-1 and Shaikan-3 wells through the replacement of the existing 3 ½" tubing by 4 ½" tubing
- Plans to drill an additional production well in the proximity of Shaikan-10, which will also be connected to PF-2, and install four flowlines between the Shaikan-10 location and PF-2
The Company's focus is on the ramp-up of commercial production from the existing Shaikan facilities. The move to 40,000 bopd of production capacity will allow further expansion of export crude oil sales. The additional cash generated, in addition to the Company's near term debt financing options where the Company is making progress in its discussions, will facilitate the move to the next stage of the Shaikan project execution.
This next stage envisages a further 60,000 bopd of additional production capacity in order to reach the medium-term target of 100,000 bopd set for Phase 1 of the approved Shaikan Field Development Plan. This next stage will require construction of additional production facilities with gas injection and water handling capabilities, as well as the drilling of a substantial number of development and production wells.
Exploration & Appraisal
Shaikan (75% working interest; Operator)
The Shaikan-7 deep exploration well is currently drilling 17 ½" hole below 2,600 metres in the upper Triassic. Shaikan-7 will drill into the deep Triassic, after setting casing at the bottom of Kurre Chine B formation, and is then expected to penetrate the Permian with the first results expected in Q2 2014.
Sheikh Adi (80% working interest; Operator)
The first well to appraise the Sheikh Adi discovery, which spudded in December 2013, is drilling below 2,240 metres in the Alan formation in the Jurassic. A well testing programme to evaluate the potential of the Jurassic reservoirs in the Sheikh Adi footwall is currently being designed, before the well enters the Triassic.
Approximately 111 km of new 2D seismic data acquired in the north of the block during 2013, is being processed to evaluate potential new structures.
Ber Bahr (40% working interest)
The Ber Bahr-1 exploration well was successfully side-tracked in the first half of 2013 and tested 2,100 bopd of 15 degree API oil from the Jurassic Sargelu formation. A 3D seismic survey is underway, planned for completion by mid-year 2014. Ber Bahr-2, an appraisal well, is planned to spud in the fourth quarter of 2014.
Akri-Bijeel (20% working interest)
Further to the declaration of commerciality of the block by the operator in 2013, appraisal drilling continues and work is ongoing on the Field Development Plan for the Bijell and Bakrman discoveries, which is expected to be submitted to the Ministry of Natural Resources of the Kurdistan Region of Iraq in Q2 2014 and approved later in 2014. The operator plans to complete four appraisal wells on the Bijell discovery and one appraisal well on the Bakrman discovery in 2014.
Bijell-1B has been side-tracked, completed as a producer in the Sargelu formation in the Jurassic and tied into the Bijell Extended Well Test facility ("EWT") where initial flow rates of 3,500 bopd of 23 degrees API oil have been recorded. The operator expects that production from the Bijell EWT facility will reach its full capacity of 10,000 bopd of export quality crude by the end of 2014.
Bijell-2, a deep appraisal well targeting the Triassic horizons of the Bijell discovery, is currently drilling 12 ¼" hole below 4,750 metres in the Kurre Chine Anhydrite formation.
Bijell-4, an appraisal well targeting the Jurassic horizons of the Bijell discovery, is drilling ahead below 2,800 metres in the Tanjero formation.
Move to the Main Market
As previously announced, the Company expects that its common shares will be admitted to the Standard Segment of the Official List of the United Kingdom Listing Authority (the "Official List") and commence trading on the London Stock Exchange plc's ("LSE") main market for listed securities effective at 8.00 a.m. on or after 24 March 2014 (the "Admission Date") (together the "Admission"), subject to the receipt of the necessary approvals from the UK Listing Authority and the LSE. Trading in the Company's common shares on the AIM market of the LSE ("AIM") will be cancelled simultaneously with the Admission. The Company will issue a prospectus in connection with the Admission prior to the Admission Date.
As part of the Company's move from AIM to the Official List, it is today publishing the Competent Person's Report on the petroleum interests of Gulf Keystone Petroleum Ltd and its subsidiaries in the Kurdistan Region of Iraq ("CPR"), which has been completed by ERC Equipoise Ltd. This is the first third party evaluation of the Company's Reserves, Contingent Resources and Prospective Resources for the Shaikan field and its other petroleum interests in the Kurdistan Region of Iraq (Sheikh Adi, Ber Bahr and Akri-Bijeel blocks). It is available on the Company's website at http://www.gulfkeystone.com/investor-centre/presentations-and-technical-reports.
Todd Kozel, Gulf Keystone's Chief Executive Officer commented:
"Progress achieved since July 2013, when we commenced commercial production from Shaikan, demonstrates that Gulf Keystone is evolving from an oil and gas exploration company to a production company targeting production capacity of 40,000 barrels of oil per day in 2014. Another significant milestone in this journey is our forthcoming move from AIM to the Main Market of the London Stock Exchange and we are another step closer to achieving this goal after publishing the Competent Person's Report today. We see significant upside to this important baseline third party estimate of reserves and contingent resources, which will be targeted through the implementation of the approved Shaikan Field Development Plan in the coming months and years."
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