Gulf Keystone launches $10m share buyback amid strong operations

(Sharecast News) - Kurdistan-focussed energy company Gulf Keystone updated the market on its operations on Monday, initiating a $10m share buyback programme aimed at enhancing shareholder value. The London-listed firm said sales of crude from the Shaikan Field remained robust, with gross average sales reaching around 37,000 barrels of oil per day for the year-to-date as of 11 May.

While April saw a slight dip in sales to around 38,900 daily barrels due to temporary factors like Eid celebrations impacting truck availability, volumes had since rebounded, with May sales averaging approximately 48,300 barrels per day.

Moreover, realised prices increased from around $25 per barrel to roughly $27 per barrel, reflecting sustained local market demand.

Financially, Gulf Keystone's liquidity position had strengthened, with a cash balance of $98m as of 10 May.

With minimal work planned for 2024 and manageable operating costs, the company anticipated continued free cash flow generation.

Notably, at current realised prices and net entitlement, Gulf Keystone said its free cash flow breakeven point stood at around 20,500 barrels of oil per day.

Looking ahead, the company said it anticipated variable local market demand throughout 2024, but remained optimistic about near-term sales prospects, supporting ongoing free cash flow generation.

Recent optimisations to well performance raised gross production potential to a range of 45,000 to 48,000 barrels of oil per day.

Gulf Keystone also launched a share buyback programme on Monday, with a maximum aggregate consideration of $10m.

The board said the programme aimed to leverage the company's belief that its current share price undervalued the intrinsic worth of the Shaikan Field and its potential for near-term free cash flow generation.

It said execution of the programme would be under its authority for on-market purchases of shares, as granted by shareholders at the annual general meeting on 16 June 2023.

Gulf Keystone said it had engaged Canaccord Genuity and Peel Hunt as brokers for the programme, with purchases to be made on an irrevocable and non-discretionary basis within agreed parameters.

The program was starting immediately, and would run until completion or the company's 2024 annual general meeting on 21 June.

All shares purchased under the programme would be cancelled.

"Local sales have continued to be robust in recent weeks, with gross average sales in 2024 year to date of around 37,000 barrels of oil per day, and realised prices recently increasing to about $27 per barrel," said chief executive officer Jon Harris.

"As a result, our liquidity position has continued to improve.

"While we remain focused on retaining sufficient liquidity in the current operating environment and ensuring we are able to unlock significant potential value from the restart of Kurdistan exports, we recognise the importance of distributing excess cash to shareholders.

"Given GKP's weak share price, which the board believes trades at a significant discount to the intrinsic value of the Shaikan Field and does not adequately reflect the near-term cash flow generation potential from local sales, the board has decided to initiate a share buyback programme of up to $10m."

At 0807 BST, shares in Gulf Keystone Petroleum were up 13.94% at 136.5p.

Reporting by Josh White for Sharecast.com.