Gulf Keystone which drills for oil in Iraqi Kurdistan, has warned there is doubt” that it can stay in business as it struggles to cope with low oil prices and political instability caused by the rise of Isis in the region.
The London-listed company said on Thursday that it might not be able to meet interest payments on its bonds due in April and October or make capital repayments of $575m due next year.
It warned in its annual results that the continuing low price of oil, political problems in Iraq and other difficulties “create a material uncertainty that casts significant doubt upon the group’s ability to continue as a going concern”.
But the company added: “The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future.”
Like other oil companies that entered the region after the 2003 invasion, Gulf Keystone has encountered a series of problems, including non-payment by the Kurdistan Regional Government.
The Erbil-based KRG has struggled to meet its commitments to international oil companies as it battles Islamist militants and argues with Baghdad over financing.
Gulf Keystone chief executive Todd Kozel stepped down in 2014 amid complaints over high executive pay, and according to one person close to the company, at the request of the KRG.
Gulf Keystone did start receiving payments from the KRG last year but it is still owed $168m.
The company announced last year that it had entered talks with potential buyers — news that sent the shares up more than 55 per cent to 55p, giving it a market valuation of £489m.
But it said on Thursday that thanks to low oil prices and volatile geopolitics, “a transaction is unlikely in the near term”. The shares dropped 21.7 per cent to close at 9.4p, valuing the company at £92m.
Gulf Keystone is in talks to secure new financing from its bondholders, to whom it must pay $26.4m of interest in April. The company currently holds $50m in cash.
Lionel Therond, head of oil and gas equity research at Standard Advisory, said: “They might make the interest payments in April but the one in October, maybe not. And it seems they won’t make their debt repayments next year.”
He added: “Eventually if there is no oil price recovery, this is a company which is doomed.”
Jón Ferrier, Gulf Keystone’s chief executive, said: “We are not going bust at all, but we are facing up to a difficult position we are in.”
Lombard
Crumbling Keystone
Jonathan Guthrie
Iraqi Kurds and independent oil companies are mutually dependent. If the relationship fails, both have a problem, says Jonathan Guthrie.
Sami Zouari, chief financial officer, said Gulf Keystone’s ability to pay its bondholders would depend on the payments it receives from the KRG.
He added that debt owners held the right to take over the equity in the company if it failed to make its payments. Payments are partially tied, however, to how much oil the KRG can sell each month.
The major oil pipeline linking Iraqi Kurdistan to international markets was shut down between February 17 and the end of last week as Turkish forces battled Kurdish militants in the south-east border region the pipeline runs through.
The disruption was also a blow to the autonomous regional government that is struggling to pay civil service and military salaries amid the worst oil price collapse in 25 years.
The KRG is running a large budget deficit that has only been partially covered through pre-pay deals with large international oil traders.
Unlike rival Genel, which is led by former BP chief executive Tony Hayward, Gulf Keystone has not written down the size of its proved and probable reserves, however.
The company increased production from its Shaikan oilfield last year by 71 per cent to 11.1m barrels — an average of 35,000 barrels a day.
Mr Ferrier said: “We have a fantastic asset and we have secure rights to those assets.”
Referring to the London-listed oil company that called in administrators last year, Mr Ferrier said: “We are not another Afren.”
Wird schon schiefgehen,hm ? ---- Oder ???
Grummel
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