Gulf Keystone Petroleum reserves fall short of expectations

13th Mar 2014 09:08

Oil producer Gulf Keystone Petroleum disappointed the market with its first third-party reserves and resources report, although management insisted the figures were conservative measures. A first Competent Persons Report (CPR) into the AIM company's assets found it has 12.5bn barrels of gross oil in place and 1.2bn barrels of recoverable reserves and resources at its Kurshish Iraq portfolio.Shares in the company initially fell 30% on Thursday, recovering to be down 16.3% at 120.5p at 10:00, as the market had pinned hopes on previous estimates of 19bn barrels of gross oil in place.Chief Executive Todd Kozel said the report represented "a conservative estimate" that was based solely on reserves which were currently being targeted, which represented less than 25% of all wells management currently envisaged for GKP's Shaikan development.He added that the CPR did not take into account undrilled and untested horizons and Kozel envisions increasing the numbers by drilling more wells and thus obtaining a better understanding of the oil water contact levels and the fracture porosity of the rock. Kozel insisted the report was "a significant milestone" in the evolution of the company and was a key component in the company's planned move from AIM to the Official List of the London Stock Exchange. An operational update released by the company on the same day revealed the first production facility at its Shaikan field had maintained stable production and sales levels of approximately 10,000 barrels of oil per day, with an extra well still to be tied in.A second production facility was being commissioned, with two wells already tied in.Since crude oil exports from the Shaikan field began in December, more than 690,000 barrels of oil have been tendered and sold at international prices. The company said it was expecting to receive payment in line with the terms of the Shaikan Production Sharing Contract. In order to move to the next stage of the Shaikan project execution, the company added it was making progress in its discussions on the near-term debt financing options.OH