Commercial Production Starts In Gulf Keystone Petroleum Limited’s Shaikan Block

The share price of Gulf Keystone Petroleum (LSE: GKP) — an oil &  gas exploration and production company with operations in the troubled Kurdistan Region of Iraq — is currently over 2% down, following the release the company’s half-year report to 30 June 2013 this morning. The report also included post-period news.

The company recorded a loss after tax of $26.4 million, which is an improvement on 2012’s loss of $31.4 million.  That’s a loss per share of $0.03, versus $0.04 in 2012.

The main news was the commencement of commercial production from the Shaikan block, with 12,400 barrels of oil per day (bopd) being achieved by early September. The company already has one production facility — Shaikan PF-1 — which was fully commissioned in July, and construction of a second Shaikan production facility is ongoing, with production operations expected by the end of 2013

The half-year report also recorded the decision in the company’s long-running court battle with former partner Excalibur Ventures, with all the claims against Gulf Keystone being dismissed.  The decision in its favour opens the way to Gulf Keystone moving from AIM to the Main Market of the London Stock Exchange, with a listing expected by the end of 2013.

Commenting on the results, CEO Ted F Kozel said:

As a result of having the Shaikan FDP approved, and in line with the Kurdistan Regional Government’s stated production targets for the Shaikan discovery, we are delighted to have entered the first phase of commercial production, which was eagerly awaited by the Company’s shareholders.  It is an important milestone and another highlight of the four years of hard work since striking oil in August 2009.  

“With the protracted Excalibur litigation behind us and the key uncertainty about the Company’s future removed, we are working hard to deliver on all of our stated objectives and are very pleased to have appointed Deutsche Bank to advise the Company on achieving our goal to move to the Main Market by the end of 2013.

At the time of writing Gulf Keystone’s share price is 212.6p. That’s over 20% up so far in 2013 — beating the FTSE 100’s 12.7% over the same period — but 13.5% down on this time last year — since when the FTSE 100 has risen 13%. That said, longer-term shareholders won’t have any cause for complaint, having enjoyed a return of 900% over the past five years.

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> Jon doesn't own shares in Gulf Keystone Petroleum.