Presentation

Gulf Keystone is an independent E&P company focused on the Kurdish Region of Iraq. The company had about 578 mill bbl of 2P reserves at 31 December 2019 and is listed on the main market at London Stock Exchange with a market capitalization of USD 205m. The company has a solid balance sheet with USD 140m of cash as of 2 September and USD 100m of bond debt maturing in 2023.

Gulf Keystone’s main asset is the Shaikan heavy oil field, which has 578 mill bbl of 2P reserves and 239 mill bbl of 2C resources gross. In June 2018, the company announced an agreement with the KRG to resume investments at Shaikan to grow production by 70% to 55,000 bpd, set to take place in Q3’20 after some delay caused by changes to the drilling program, which has now been suspended due to the current macro-economic environment and Covid-19 pandemic. Total capex to increase production to 55,000 bopd was estimated at USD 200m - 230 million gross of which about USD 190 million has already been spent. With infill drilling the increased production level can be maintained until PSC expiry in 2043. The Shaikan field also holds a large potential for further growth with a long-term production potential of above 100,000 boe/day.

The upside potential to the market cap of USD 205m (EV USD 190m) is in our opinion large as indicated by (1) est. annual FCF of USD 100-150m at Brent USD 50-60/bbl, (2) DNO’s 2016 bid of USD 300m for the company when Brent traded at USD 42/bbl and (3) USD 99m distribution to shareholders in 2019 and 2020.