Gulf Keystone Petroleum Shares Rally as Kurdistan Crude Exports to Resume

Gulf Keystone Petroleum (LSE: GKP) shares rallied more than 7% Friday after it announced that crude oil exports from the Kurdistan Region of Iraq are set to restart via the Iraq-Türkiye Pipeline.

The development, formalized through agreements between Gulf Keystone, other International Oil Companies (IOCs), the Kurdistan Regional Government (KRG), and the Federal Government of Iraq (FGI), is expected to unlock substantial value for the company and its stakeholders.

The resumption of pipeline exports from the Shaikan Field is anticipated imminently. The agreements are structured to comply fully with Iraq’s 2023-2025 Budget Law, while simultaneously upholding the integrity of Kurdistan’s Production Sharing Contracts (PSCs).

During an interim period, estimated to last around three months, IOCs will receive compensation for exported production, covering production and transportation expenses.

Gulf Keystone anticipates that this arrangement will elevate Shaikan Field realized prices to over $30/bbl, a notable improvement from the $27-28/bbl currently realized through local sales.

Following this interim phase, a comprehensive review of IOC invoices and contractual costs will be conducted by an independent consultant, paving the way for a reconciliation to full PSC entitlement at international prices, adjusted for crude quality and transportation costs.

The Iraqi State Organization for Marketing of Oil (SOMO) will manage the transportation of crude from Fishkhabour to Ceyhan in Türkiye. The KRG and the IOCs will jointly market Kurdistan crude at the Kirkuk blend official selling price.

Payments to Gulf Keystone and other IOCs will be facilitated through a nominated trader, who will deposit sales proceeds into an escrow account at an international bank before disbursing funds to the IOCs.

Gulf Keystone is actively engaging with the KRG to establish a payment mechanism for the outstanding receivable balance from October 2022 to March 2023. These discussions are part of broader negotiations aimed at resolving other commercial matters related to the Shaikan Field.

Jon Harris, Gulf Keystone’s Chief Executive Officer, stated, “The restart of Kurdistan crude exports via the Iraq-Türkiye Pipeline is a historic milestone for Gulf Keystone, Kurdistan and Iraq that is expected to unlock significant value for all stakeholders.

“A return to international sales prices will be transformative for the Company’s cash flow while we believe the signed agreements with the KRG and FGI, along with the Production Sharing Contracts, will facilitate long term profitable investment in Kurdistan’s oil and gas reserves, of which the Shaikan Field accounts for a significant portion.”