Gulf Keystone Petroleum Limited · LSE:GKP
Gulf Keystone Petroleum — FY2018 Earnings Presentation
62 slides from Gulf Keystone Petroleum's earnings presentation, Mar 28, 2019
Slide 1: 2018 Full Year Results & Capital Markets Event
Gulf Keystone Petroleum 2018 Full Year Results & Capital Markets Event 28 March 2019
Slide 2: Disclaimer
Disclaimer This proprietary presentation (the “Presentation”) has been prepared by Gulf Keystone Petroleum Limited (the “Company”). Under no circumstances may this presentation be deemed to be an offer to sell, a solicitation to buy or a solicitation of an offer to buy securities of any kind in any
Slide 3: Agenda
1 Introduction 2 2018 Full Year Results 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 4: Today’s presenters
Today’s presenters Jón Ferrier Sami Zouari Stuart Catterall CEO CFO COO 4
Slide 5: Senior management team
Senior management team Jane Barker Andrew Britten Bertrand Demont Ross Deutscher HR Director HSE Manager Development Manager Country Manager Kurdistan Kurdistan Joined in July 2016 Joined in July 2018 Joined in Sept 2017 Joined in Jan 2019 Nadzeya Kernoha Gabriel Mark Parsley Alasdair Robinson Papin
Slide 6: Board developments
Board developments • New Non-Executive Chairman –Jaap Huijskes appointed in April 2018 • Appointment of new Non-Executive Directors –Martin Angle – joined Board as Senior Independent Director in July 2018 –Kimberley Wood – joined Board in October 2018 Martin Angle Kimberley Wood 6
Slide 7: GKP at a glance and in numbers
GKP at a glance… ..and in numbers bopd 2018 • Pure-play Kurdistan E&P with operatorship 31,563 Gross Production – 80% WI in Shaikan Field MMstb Gross 591 2P Reserves(1) • Vision to grow production 3.5x to 110,000 bopd – FDP submitted in October 2018; not accepted by MNR $/bbl 2018 3.2 Opex per Barre
Slide 8: Shaikan – a world-class asset
Platform for growth and returns to shareholders Value The right Operational Sustained creation people & and safety financial via low-cost organisation excellence health development Shaikan – a world-class asset HSSE, governance, values, good neighbour 8
Slide 9: Setting the scene for today
Setting the scene for today 2018 1 A year of accomplishments Optimised vision 2 to develop Shaikan Fully funded 3 for entire development 4 First dividend 9
Slide 10: Agenda: Operational Highlights
1 Introduction 2 2018 Full Year Results Operational Highlights Financial Highlights 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 11: 2018 operational highlights
2018 operational highlights • Consistent performance from the reservoir and facilities – Average daily gross production of 31,563 bopd – upper end of guidance range – Cumulative production to date over 58 MMstb – Reliable operations – plant uptime at 99% • Expansion to 55,000 bopd underway – On trac
Slide 12: Steady 2018 production
Steady 2018 production • Predictable performance from Jurassic reservoir – Black oil, no signs of water or gas breakthrough • 2019 gross production guidance – unchanged at 32,000-38,000 bopd Pressure gauge End of Export Start SH-1 SH-1 workover retrieval domestic pipeline workover & other completed
Slide 13: Agenda: Financial Highlights
1 Introduction 2 2018 Full Year Results Operational Highlights Financial Highlights 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 14: Continuous payments strengthening balance sheet
Continuous payments strengthening balance sheet • $225m net to GKP received in 2018; $51m received so far in 2019 – Positive impact of crude oil sales agreement (renewed in February 2019 for 24 months) $35 Reduction driven by $30m oil price and start of $30 SH-1 workover US$m (net) $25 $23m $21m $21
Slide 15: Record 2018 figures
Record 2018 figures • Driven by predictable production, robust oil price, regular payments and focus on costs Revenue EBITDA Profit/(Loss) After Tax • Cash receipts on entitlement basis • Prudent resource management and • $10m gains arising from the since the signature of crude oil sales cost discip
Slide 16: Sustained cost optimisation
Sustained cost optimisation • Prudent resource management, cost saving initiatives and supply chain optimisation leading to sustainable cost reductions • Operating expenses up in 2018 due to one-off maintenance projects and preparation for production ramp-up • Corporate G&A down 37% / Recoverable Ku
Slide 17: Strong cash flow
Strong cash flow • Cash balance up 85% in 2018 due to stable revenue receipts and managed costs • Capex underspend vs. previous guidance driven by delays in drilling and completion equipment delivery • $135m net increase in cash (2017: $67m) 2018 Cash Flow 350 (21) 300 (3) (2) 250 +161 US$ million 2
Slide 18: Agenda: Shaikan Operations & Field Overview
1 Introduction 2 2018 Full Year Results 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 19: The GKP story in Kurdistan
The GKP story in Kurdistan Dec Jan Jan Crude Start of executive team Crude oil sales exports to and Board reconstruction agreement Jan / Jun Turkey by signed Nov Nov FDP sub- trucks Jun Dec Oct Shaikan PSC First domestic mission / Export pipeline; 2P: 615 Revised FDP awarded sales approval 45,000 bo
Slide 20: Shaikan – A large field in a proven oil region
Shaikan – A large field in a proven oil region Turkey Dohuk Iran Shaikan Syria Mosul Iraq Erbil Sulaymaniyah 100km 20
Slide 21: Kurdistan Region of Iraq, 60 km North of Erbil
Kurdistan Region of Iraq, 60 km North of Erbil 21
Slide 22: Security
Security sursearone Gy 22
Slide 23: Understanding the scale…
Understanding the scale… SH-6 SH-4 23
Slide 24: Shaikan – A giant field with proven production track record
Shaikan – A giant field with proven production track record Shaikan Field in brief Shaikan key information (gross figures) • Located ca.60km north-west of Erbil at the • Gulf Keystone interest: 80% north-west end of the Zagros Fold-belt • Partner: MOL 20% • One of the largest fields in Kurdistan by
Slide 25: Shaikan today – Infrastructure overview
Shaikan today – Infrastructure overview Atrush pipeline SH-4 SH-10 SH-11 SH-5 PF-1 SH-1 SH-3 SH-6 SH-7 SH-2 SH-8 PF-1 PF-1 pipeline under PF-2 SH-1&3 SH-4 SH-7 SH-8 construction PF-2 SH-2 SH-5 SH-10 SH-11 2.5 km • Two production facilities, each with a nameplate capacity of 20,000 bopd • Nine produc
Slide 26: Exports
Exports Turkey Iran Syria Iraq • MNR currently controls marketing and exports • Nearly all Shaikan production exported directly via tie-in at PF-2 into Kurdistan export pipeline as part of the Kurdish blend – Only ca.3,000 bopd trucked ca.120km to Fishkhabour • PF-1 pipeline construction underway by
Slide 27: Subsurface schematic
Subsurface schematic Cretaceous Very heavy or bituminous oil 2P: 3 MMstb / 2C: 53 MMstb Jurassic Heavy oil with 14 - 20° API 2P: 544 MMstb / 2C: 80 MMstb 3 Shards Unusually high hydrocarbon column – ca.950m Triassic Light oil with 38-43° API and gas condensate 2P 44 MMstb 2C 106 MMstb Dark Green = O
Slide 28: Shaikan-1 core
Shaikan-1 core 28
Slide 29: Subsurface challenges of a giant fractured carbonate field
Subsurface challenges of a giant fractured carbonate field Pre-development phase 2009 Subsurface studies 2018 Development phase • Seismic • Seismic / structural history – Poor quality imaging – Acquired 2D/3D and VSPs – Low confidence mapping – Interpretation tied to surface geology – Complex struct
Slide 30: Cracking the fracture porosity code
Cracking the fracture porosity code Full field DFN history match Faults interpreted and and material balance re- geomechanically modelled confirm porosity and producing fracture heat maps permeability Fractures characterised Drill Well Pressure [psia] 2150 2050 Fracture Porosity Liquid rate [STB/D]
Slide 31: Historical gross production
Historical gross production • Over 58 MMstb produced to date; all black oil • No formation water or gas breakthrough SH-1 workover 31
Slide 32: Local development & CSR
Local development & CSR 4 Tier Strategy 1. Employment, development and training • 80% of employees during 2018 were local staff • Management development programme • Highly regarded competency-based training framework 2. Agriculture improvement • Livestock improvement over three villages • Nutrition
Slide 33: Strong safety performance
Strong safety performance LTIR and TRIR Lost Time and Recordable Incidents Rate 2016-2018 8 7 6 5 4 3 2 1 0 Jan-2016 Jul-2016 Jan-2017 Jul-2017 Jan-2018 Jul-2018 Dec-2018 -1 12 Month Rolling Total Recordable Incident Rate (TRIR) Per 1 Mil Hours Worked Benchmark TRIR for Iraq, IOGP Stats (2017) 12 Mo
Slide 34: Safety and reliable operations go hand in hand
Safety and reliable operations go hand in hand 2018 performance LTIs 1 HiPos 1 Near misses 5 Observation cards 3,605 HSSE plan 100% 34
Slide 35: Agenda: Vision to Develop Shaikan
1 Introduction 2 2018 Full Year Results 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 36: Shaikan 55,000 bopd expansion underway
Shaikan 55,000 bopd expansion underway • On track with facilities upgrade completion in 2019; well capacity in Q1 2020 – Workover rig scheduled to start the ESP programme in April – Jurassic well (SH-H) – first in the drilling sequence Atrush pipeline New Jurassic well (4x) SH-4 SH-10 SH-11 SH-5 SH-
Slide 37: Tubing workovers – Quick wins
Tubing workovers – Quick wins 8,000 7,000 6,000 Well Production (bopd) 5,000 4,000 3,000 2,000 1,000 0 Pre Post Pre Post (Completed) (Forecast) SH-1b Workover SH-3 Workover 37
Slide 38: Shaikan Field Development Plan
Shaikan Field Development Plan • Staged approach further de-risks long-term potential • Revised FDP submitted for approval to the MNR in October 2018 • FDP not accepted by the MNR due to insufficient assurances on the elimination of flaring Subject to FDP approval 120 Phase 2: 110,000 bopd Shaikan P
Slide 39: Phase – 55,000 bopd expansion
Phase 1 – 55,000 bopd expansion • Quick gains from tubing change-outs and ESP workovers Est. Gross Capex • Relatively simple debottlenecking $200 - $230m (incl. 25% contingency) • Begins foundations for 75,000 bopd expansion Forecast Completion • 4 new Jurassic wells 120 Facilities: Q4 2019 Drilling
Slide 40: Phase – 75,000 bopd expansion & gas re-injection
Phase 1 – 75,000 bopd expansion & gas re-injection • Builds on improvements from 55,000 bopd project to provide Est. Gross Capex additional process train $400 - $450 million(1) (incl. 25% contingency) • Eliminates flaring and provides reservoir pressure support • Lays foundations for Triassic pilot
Slide 41: Phase – Triassic Pilot
Phase 1 – Triassic Pilot • 10,000 bopd facility and 2 production wells Est. Gross Capex $135 - $165 million • Allows evaluation of Kurre-Chine B while underwritten by lower (incl. 25% contingency) risk Kurre-Chine A resources Est. Timing Post Sanction • Gas production re-injected into Jurassic 18-24
Slide 42: Phase 2 – Triassic Full Field Development
Phase 2 Triassic Full Field Development Est. Gross Capex • Will be optimised on the basis of results from $450 - $550 million (incl. 25% contingency) the Triassic pilot • Currently based on an additional 25,000 bopd Est. Timing Post Sanction train 24-30 months • Additional gas handling and compressi
Slide 43: 55,000 bopd expansion
55,000 bopd expansion Summary Overview Capex Estimates & Timing • Current state • Total gross Capex $200–230m – Jurassic reservoir produces from 9 wells through – 2018: $45m 2 production facilities (PF-1 and PF-2) – 2019: $130-150m – Combined nameplate capacity of 40,000 bopd – Remainder in 2020 • 5
Slide 44: 55,000 bopd expansion – Additional separation train
55,000 bopd expansion – Additional separation train Existing Facilities Preheaters Fired Separator heater Stabiliser Separator Fired Heater Adds capability to handle clean-up of wells (losses of water-based drilling Heater 3ph fluids during drilling) and forms the Treater Separator basis of the 3rd
Slide 45: 55,000 bopd expansion – Development wells
55,000 bopd expansion – Development wells 45
Slide 46: 75,000 bopd & gas re-injection – Project scope
75,000 bopd & gas re-injection – Project scope 75,000 bopd oil expansion – Provision of crude stabilisation packages at PF1/2 Preheaters Booster Pump Existing Separator Fired Heater Facilities Stabiliser Separator Fired Heater Stabiliser Stabiliser package: Builds on separation installed in 55,000 b
Slide 47: 75,000 bopd & gas re-injection – Project scope
75,000 bopd & gas re-injection – Project scope Three 8'' sour gas in-field pipelines To Gas Injection Well Export Manifold 47
Slide 48: Jurassic reservoir – Well locations & future potential
Jurassic reservoir – Well locations & future potential Atrush Export Pipeline PF1 Export Pipeline In Progress Tie-in Point to Kurdish Export Pipeline Note: With the exception of SH-9, all the numbered wells have been drilled to date. The wells which have been denoted with letters (e.g. SH-H) are pot
Slide 49: Triassic reservoir – Potential and uncertainties
Triassic reservoir – Potential and uncertainties • Light oil with 38-43° API and gas condensate Cross section • Kurre-Chine A (KCA) is a proven oil accumulation • Kurre-Chine B (KCB) hydrocarbon footprint is field- wide and similar to the Jurassic • FDP proposes a pilot programme including 2/3 wells
Slide 50: Jurassic reserves studies – Simulation model grid
Jurassic reserves studies – Simulation model grid • Fracture model updated and tuned to well test history 2017/2018 • Simulation model built and history matched • FDP Low, Mid, High forecasts generated 50
Slide 51: Jurassic reserves studies – High quality history match
Jurassic reserves studies – High quality history match SH-1B SH-3 SH-2 SH-5B SH-4 SH-8 SH-10A SH-11 SH-7 Butmah SH-8 Butmah 51
Slide 52: Reserves and Resources
Reserves and Resources • In support of the FDP submitted in (1) Gross Shaikan Reserves (Dec-2018) 2018, GKP completed: 1000 920 – New petrophysical and geological interpretations and a comprehensive 800 fracture network modelling study 591 (MMstb) 600 – Review of updated well and facilities performa
Slide 53: Agenda: Financial Strategy
1 Introduction 2 2018 Full Year Results 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 54: GKP fully funded for entire development
GKP fully funded for entire development Phase 1 Phase 2 Low cost base(1): 110,000 bopd Accelerated recovery of petroleum costs pool (ca.$500m gross) Opex ($3/bbl) (Triassic expansion & & continuous recovery of future expenditures Focus on G&A Cretaceous pilot) 85,000 bopd (Triassic pilot) 75,000 bop
Slide 55: Commercial status
Commercial status • Enhanced predictability with crude oil sales agreement Crude • Majority of crude directly exported via pipeline at PF-2 Marketing • Trucking to be eliminated this summer & Export • ca.$1/bbl reduction to discount to Brent (ca.$22/bbl trucks to ca.$21/bbl pipeline) • GKP hopeful t
Slide 56: Financial strategy
Financial strategy 1 2 3 Clean Staged Cash Flow Balance Sheet Development Generation • $296m cash • Onshore development • Regular payments • Effective cash • Optimal reservoir • Strong revenue generation management management • Also, ca.$500m petroleum cost pool (gross) available for • $100m bond •
Slide 57: First dividend
First dividend • GKP is pleased to announce its dividend policy – An annual ordinary dividend of no less than $25 million per financial year – In periods of strong cash flow generation, the Board may complement the ordinary dividend with further dividends while preserving its ability to grow the bus
Slide 58: Agenda: Outlook
1 Introduction 2 2018 Full Year Results 3 Shaikan: Operations & Field Overview 4 Vision to Develop Shaikan 5 Financial Strategy 6 Outlook
Slide 59: Strategic objectives for next 3-5 years
Strategic objectives for next 3-5 years 1 Platform for growth 2 Sustained financial health 3 Return capital to shareholders 59
Slide 60: 2019 outlook
2019 outlook Operational Excellence –Safe operations –Delivery of project milestones –Continued cost control discipline Growth –Deliver the 55,000 bopd expansion project –Meet 2019 gross production guidance of 32,000-38,000 bopd –Investing to define next phases: 75,000 bopd and beyond Shareholder Re
Slide 61: Questions? Thank you
Questions? Thank you More resources are available at: www.gulfkeystone.com
Slide 62: Board of directors
Board of directors Jaap Huijskes Jón Ferrier Sami Zouari Martin Angle Garrett Soden David Thomas Kimberley Wood Non-Executive Chief Executive Chief Financial Senior Independent Non-Executive Non-Executive Non-Executive Chairman Officer Officer Director Director Director Director Joined in Nov 2017 J
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