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Q&A

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Q&A with Jón Ferrier, CEO - August 2016

I have received many questions in my time at Gulf Keystone, particularly from private shareholders. Many of these questions follow common themes. I have taken the opportunity here to paraphrase those questions and give you my answers.

What was the result of the Special General Meeting on 5 August in Geneva?

The Special General Meeting (“SGM”) took place for shareholders to consider and, if thought fit, to approve the following resolution:

 “THAT the authorised share capital of the Company be increased by US$219,105,237 from US$73,000,000 by the creation of 21,910,523,665 new Common Shares, ranking pari passu in all respects as one class of shares with the existing Common Shares.”

The resolution proposed was duly passed by shareholders with 94.85% votes in favour.

Click here to view the SGM Result RNS

 

Why don’t you react to gossip and incorrect information on bulletin boards?

It has come to my attention that certain information and representations regarding Gulf Keystone have been made on various external websites, in particular on a number of internet bulletin boards. For the avoidance of doubt, the Company does not selectively brief, engage or sponsor shareholders or other third parties who purport to represent the Company and who disclose information on external websites and internet bulletin boards. We are not responsible for and accept no liability for the content of any information and representations regarding the Company which appear online apart from the Company’s official website www.gulfkeystone.com and Twitter account @Gulf_Keystone.

All information regarding the Company is disclosed by way of formal regulatory and financial communications (RNS), as is required in respect of a publicly listed company: /investor-centre/regulatory-news.

 

What does the standstill agreement mean to shareholders?

The agreement reflects the ongoing work by the Company to secure near-term fundraising and restructure  the Company’s balance sheet.  This is critical in ensuring the longer term sustainability of GKP.

Further updates will be provided in due course.

What options are being considered to deal with the difficult circumstances you are facing and ensure the financial health and commercial sustainability of the business?

When we issued our 2015 results on 17 March, we provided a comprehensive assessment of where the Company is today. The reality is that we have a prize asset which will be producing for generations to come. We have managed to bring Shaikan into production, increased and stabilised its production, found the route to the international market and made plans for the next phase of the field’s development. We have done all this in a safe and reliable manner, working hand-in-hand with our host government and navigating the choppy waters to the best of our abilities. We recognise the reality of our near‑term challenges. First and foremost, we need to continue getting paid for our production and exports on a regular basis, including unpaid past oil sales and other arrears. Secondly, we need to restructure the weak balance sheet in order to continue developing the business and secure its longer‑term future, as well as to meet our existing debt obligations consisting of the significant interest payments in 2016 and the full debt repayment of $575 million in 2017. A considerable amount of work is currently underway to achieve a solution in the interest of all our stakeholders.

Are you concerned about the share price?

Of course. We look at the share price and it is highly frustrating for all of us; and there is little comfort in saying that the decline in our share price has to be viewed in a wider context which has seen market valuations dramatically drop for all E&P players in 2015. Gulf Keystone and our peers in the Kurdistan Region have been particularly affected. My duty as the CEO is to steer this business towards a longer-term sustainable future. We can’t do anything about the oil price, so we focus on areas we can influence – be it above or below the ground.

Are you confident that you will be paid every month by the KRG?

It is important to recognise the unprecedented set of circumstances facing both the business and the Kurdistan Region of Iraq in the last 18 months, from a macroeconomic oil industry perspective, but also the very specific regional issues affecting us and all international operators in the region. The KRG have been fighting the war against the terrorist group Daesh since August 2014, not only within its own borders but also in order to protect people in the neighbouring areas in Iraq. The KRG’s finances are under severe strain. Despite that, since September 2015, we have been receiving regular payments for our production and exports. It is extremely important that the arrears are now being addressed. The support of the KRG is clear. It is not in the KRG’s interest to see any of the Kurdistan producers and exporters fail and for the development of the region’s oil and gas sector further delayed. I strongly believe that our strategy of co-operation with our host government, seeking to reach agreement in the interests of all parties involved, including our shareholders, is working.

When are the Directors going to purchase shares to show confidence in the Company?

It is a fact that the Company has been in a close period for a very long time; in fact we remain in a close period at the time of writing. Consequently, the Directors have been unable to buy or sell shares in the Company. This restriction is in place because of the level of corporate activity and amount of inside information in possession of the Directors. We review the status of the close period with our legal advisers on a regular basis and this is their current advice.

 

What are you doing to control the costs?

We are being extremely prudent and disciplined in the areas we can control and expenditures have been reduced across the organisation. The difficult decision to relinquish our non‑core assets and focus on Shaikan was driven by commercial considerations. My decision to invest in two additional Board appointments was motivated by my belief that this is the exactly the time when the Company needs a strong and fit for purpose Board with the level of experience and knowledge to support me and my management team to take the business through a period of unprecedented challenge and change.

Will the production decline in 2016?

Our October 2015 Competent Person’s Report highlighted that, without additional capital expenditure, Shaikan wells will begin to exhibit natural declines. This is true of any field and is why we have prepared an interim project to maintain production at 40,000 bopd and potentially increase production up to 55,000 bopd. This “bridge solution” to the FDP can be implemented subject to available finances and final partner and MNR approval. Delivering a stronger business in 2016 with stable production and commercial discipline, in order to progress to the full field development of Shaikan remains my key focus as the CEO.