Gulf Keystone takes control of JV

10th Mar 2010 07:54

Kurdistan-focused oil and gas explorer Gulf Keystone has been in talks with the Kurdistan Regional Government (KRG) to reorganise the company’s interest in its joint venture Gulf Keystone Petroleum International (GKPI).Gulf Keystone contacted the KRG after a material default by uits joint venture partner ETAMIC, an independent energy fund founded for the purpose of making investments in the upstream oil and gas exploration and production business in the Middle East and Central Asia.Though the terms of the agreement have yet to be ratified by the KRG the plan is for the 50% stake in GKPI held by ETAMIC to revert to Gulf Keystone, making GKPI a fully owned subsidiary of Gulf Keystone.GKPI will pay $40m to the KRG, representing an infrastructure support payment that should have been paid by ETAMIC. As a result GKPI will be able to maintain its 80% interest in Sheikh Adi and 40% interest in Ber Bahr.Gulf Keystone will make a payment of $12m to ETAMIC in full and final settlement of all of their rights in respect of GKPI.Gulf Keystone has also agreed that the KRG will be entitled to receive additional infrastructure support payments amounting to 40% of GKPI's entitlement to Profit Petroleum derived from GKPI's share of profits in all four of its production sharing contracts.Gulf Keystone’s shares in the four production sharing contracts will effectively double as a result of the deal, to the following:Shaikan – 75% (51% fully diluted)Sheikh Adi – 80% Ber Bahr – 40%Akri Bijeel – 20% (12.8% fully diluted)The Shaikhan stake is subject to a government back-in right of 20% and third party back-in right of 15% if exercised in full, while the Akri Bijeel holding is subject to KRG’ 40% share of GKPI's profit petroleum..On Tuesday Gulf Keystone announced an oil discovery in the Akri Bijeel block.