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LONDON (Alliance News) - Gulf Keystone Petroleum Ltd Thursday said its pretax loss widened in the first half of the year after the company said it will not receive more than USD250.0 million owed to the company from the Kurdistan government in Iraq until 2016.
The oil company producing in Iraq reported a USD77.7 million pretax loss in the first six months of 2015, widening from the USD28.1 million loss a year earlier, after the company's operations became unprofitable and it booked more impairments and higher finance costs.
Although revenue increased to USD30.1 million from USD18.7 million, its cost of sales sky-rocketed to USD62.6 million from USD16.5 million. That means it made a gross loss of USD32.5 million in the first half, compared to the small USD2.2 million gross profit a year earlier.
Gulf Keystone also has USD177.0 million of unbooked revenue up to June 30.
Gulf Keystone said it was owed a total of USD283.0 million at the end of the half, which includes the unbooked revenue alongside historical costs, which has prompted the company to restrict spending. Gulf Keystone said the Kurdistan government has suggested this will be addressed in 2016.
The gross loss was also partially due to the average price of oil falling approximately 57% year-on-year, the company said. In June 2014, Brent traded at around USD115 per barrel and on Wednesday was trading around USD45 per barrel, after hitting a six-and-a-half-year low on Monday.
Gulf Keystone also booked finance costs totalling USD25.6 million, much higher than the USD6.0 million paid in the first half of 2014, whilst impairments came in at USD3.6 million, related to the Akri-Bijeel asset, from nil.
Revenue rose as a result of production more than doubling to 4.7 million barrels of oil in the first half, averaging 26,000 barrels per day. In August, the company said it achieved a new record of 45,000 barrels in a day and said the current daily average is around 40,000 barrels.
In the second half of 2015, production is expected to average between 36,000 and 40,000 barrels per day, which will bring daily production for the full year to between 30,000 and 34,000 barrels per day. Gulf Keystone said it is on track to deliver the full-year target.
Of current total production, around 20,000 barrels is sent to the Turkish coast by truck whilst the other 20,000 barrels are pumped into an export pipeline. It has a secure payment method in place with an offtake partner in Turkey.
On Thursday, Gulf Keystone said it expects payments from Turkey to continue without disruption, whilst it plans to secure a formal agreement on a secure payment cycle from the Kurdistan government from September following on from previously delayed payments.
"Upon the establishment of a regular payment cycle and arrears being addressed, we look forward to moving towards recommencing our investment programme in order to achieve our goal of 100,000 barrels of oil per day at the end of Phase 1 of the Shaikan development," said Chief executive Jon Ferrier.
"In the absence of a regular payment cycle, Shaikan will not be able to move forward with further development and in the future, production will decline," he added.
"The strategic review process, launched in February 2015, continues. Discussions are on-going with a number of interested parties in relation to possible asset transactions or a corporate sale," said Ferrier.
Gulf Keystone shares were up 12% to 30.25 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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