Gulf Keystone Pet Ord New

Hello and thank you for joining Gulf Keystone's 2022 half-year results. I'm joined today by Ian Weatherden, Chief Financial Officer, who will be taking you through our financial performance. I'm also joined by Gabriel Papineau-Legree, Chief Commercial Officer, and Aaron Clark, Head of Investor Relations. We'll run through the slides before opening up the line for questions. Slide two, disclaimer. Before I start, I'd like to remind you that the presentation slides are available to view on our website. I will leave you to review the legal disclaimer in your own time. by three half-year results highlights. We've delivered significant profitability and cash generation in the first half of 2022, driven by strengthening oil price and increased production from the Sheikhan field. As ever, a focus on safety and sustainability has underpinned our performance, and I'm pleased to report we have been operating for 315 days without a lost-time incident, even as our operational activity has increased. We also remain focused on delivering our broad sustainability strategy. Strong cash generation has enabled us to continue delivering against our strategic commitment to balancing investment in growth and shareholder returns. Regarding investment, we've been busy in the year to date, preparing our infrastructure for future growth and resuming drilling in August with the spread of Shai Can 16. We also continue to progress towards approval of the field development plan and award of our gas management contract. Regarding returns, we are delighted to have paid $190 million of dividends to our shareholders in the year to date. We are today increasing this total to $215 million with the announcement of an additional interim dividend of $25 million. I will now touch on our sustainability performance before reviewing our operational activity and preparation for future growth. Slide four, ESG. The safety and sustainability of our business is critical for Gulf Keystone. In the year to date, we've been delivering against our sustainability strategy and addressing the priorities that are material for our business and our stakeholders. Addressing climate risk remains very important and we are pleased to be progressing the gas management plan tender process with execution of the project enabling us to more than halve our emissions intensity by 2025. We're also focused on achieving full compliance with the task force on climate related financial disclosures for our annual results next year. We also continue to deliver against are other priorities, in particular investing in local employment, suppliers and community projects. We have completed a number of impactful community projects this year, including the funding and development of a hydroponic fodder facility, which you can see on the right, which will provide local farmers in the Shaikan area with food for their livestock. The fodder is grown without soil and with very little water. We're also supporting over 500 local farmers with the provision of enhanced grain to make up for lost yield in recent years. In addition, we are developing local skills and providing equipment for local business startups such as sewing machines and vehicle maintenance training. We are proud to be investing in Kurdistan and supporting the communities that enable us to produce from the Shaikan field. Turning now to the operational review and our production performance. Slide six, production performance. Gross average production in the year today has been around 45,000 barrels of oil per day, slightly higher than the full year 2021 average of 43,440 barrels of oil per day. Production has been supported by bringing SCICAM 13 and 14 online in January, and most recently SCICAM 15, which are offsetting the natural decline of the field. We continue to optimize our wells to avoid traces of water ahead of planned installation of water handling. We remain focused on our on achieving our production guidance of 44,000 to 47,000 barrels of oil per day by continuing to optimise production from existing wells, supported by well workover and intervention programme. In the year to date, we have worked over two wells and are planning to complete further interventions in the remainder of the year. Slide seven, please. 2022 workover programme, work programme, sorry. Our operational activity in the year to date has focused on preparing the Shikhan field for future growth. We have been progressing the expansion of our production facilities, as well as preparing well sites, including the pad for Shaikan 16 and Well N. Following the completion of Shaikan 15 in April, this activity has enabled us to resume drilling with the spread of Shaikan 16 in late August, which we are targeting to start up towards the end of the year. With the drilling of Shaikan 16, as well as procurement activities to progress the installation of water handling, We have increased our 2022 net capex guidance to between $110 to $120 million. Due to supply chain disruptions, the timing of water handling installation remains uncertain. Once installed, we will be able to unlock additional production from our wells. Slide 8, fill development plan update. As we continue to prepare the Shikhan fill for growth, we are also progressing towards fill development plan approval. While timing remains uncertain, we retain an active dialogue with the M&R and recently submitted a revised field development plan in response to their technical inquiries. Simultaneously, we are progressing the tendering process for the gas management contract. As we progress, we are monitoring the market environment and potential impact of global supply chain pressures and logistical challenges on the field development plan's costs and schedule. We are very excited about the project and continue to believe that a field development plan is an opportunity to create value for all our stakeholders, and particularly our investors and the people of Kurdistan. The preparatory work we are currently progressing, such as the construction of well pads and facilities expansion activity that you can see in the photos here, will enable us to hit the ground running once we obtain approval. With that, I now hand you over to Ian for the financial review.

Thanks very much, John. As John mentioned, we delivered strong first half financial results. driven by strengthening oil prices, increasing production, and our relentless focus on cost control and capital discipline. Adjusted EBITDA and profit after tax in the first six months of the year were more than double the first half of 2021 and almost equal to the full year 2021. We continue to deliver on our strategic commitment to balance investment in profitable growth with reward in our shareholders. Dividends declared this year are more than double last year, translating into a sector-leading dividend yield. We have increased CAPEX guidance by $25 million to a range of $110 to $120 million, with the addition of drilling Shikan 16 and water handling facilities procurement activity. Moving to slide 11, adjusted EBITDA. Looking at the underlying cash generation from our business, adjusted EBITDA more than doubled to $209 million. We are leveraged to increases in oil prices. Weighted average dated Brent was up about 65%, which drove an almost doubling of our realized price for our crude sales to $84.30 a barrel. Also, gross average production in the first half was up 3% to 44,941 barrels per day versus the prior period. Operating costs and other G&A were up slightly with increased production and activity. We also saw an increase in share option expense due to the final exercise entitlements by former directors under the legacy value creation plan. We expect share option expense to be lower in future periods now that the value creation plan has been terminated. Moving to slide 12, cash flow. The significant increase in adjusted EBITDA underpins strong cash flow generation in the first half. Net capex was $42 million, reflecting the drilling of Shikam 15, an activity to prepare well sites, and production facilities for future growth. Free cash flow in the first half of the year was $177 million, almost triple the prior period. This enabled us to pay $115 million of dividends in the first half of the year, and in July, an additional $75 million of dividends. Also, since the end of June, we redeemed our outstanding bond of $100 million, leaving us debt-free. Moving to slide 13, operating costs and G&A. We remain focused on strict cost control as operational activity continues to increase. Gross OPEX per barrel increased in the first half of the year to 290. At the lower end of our 290 to 330 per barrel guidance range. We remain on track to achieve guidance. Other G&A expenses also increased to manage higher activity as we position for future growth. Moving to slide 14, cash receipts. We received net $272 million in the first half of the year from the KRG, including payments for both crude oil sales and arrears. With the February 2022 invoice, we were pleased to recover the outstanding revenue arrears balance that related to the end of 2019 and early 2020. We have so far received net $82 million in the second half of the year for the April and May invoices. Moving to slide 15, balance sheet. Maintaining a robust balance sheet is a strategic priority for us, providing resilience through the commodity cycle and flexibility to execute our strategy. A robust liquidity position enables us to manage downside risks, including those associated with operating in Kurdistan. While our operations currently remain unaffected, we continue to monitor the potential impact of the February 2022 Iraqi Supreme Court ruling stemming from the long-running dispute between the federal Iraqi government and the KRG on the management of oil and gas assets in Kurdistan. Strong free cash flow generation to date has enabled us to reward shareholders and redeem our outstanding $100 million bond, leaving us debt-free with significant financial capacity. Moving to slide 16, shareholder returns. We have a demonstrated track record of allocating capital to achieve profitable growth and reward our shareholders. In the past, we announced an ordinary dividend of at least $25 million, and with free cash flow generation, we are committed to maximizing distributions. In taking distribution decisions, we consider a number of criteria, including future investment levels, and maintaining an adequate level of liquidity to protect the downside. This year, we have paid $190 million of dividends and are pleased today to declare a $25 million interim dividend. This brings total dividends declared to $215 million, translating into a sector-leading dividend yield of around 36%. Assuming timely payment of invoices, and continuing strong oil prices, we expect strong free cash flow generation. This would provide flexibility to fund future CapEx and consider further shareholder distributions while preserving adequate liquidity. As we progress towards FTP implementation, we will firm up future CapEx investment requirements and review our dividend policy. With that, I'd like to now hand it back to you, John. Thanks, Ian.

Slide 17, Outlook. We're excited about the remainder of this year and remain focused on delivering our production guidance, maintaining our low cost base, and continue to invest in the Shai Khan field to position for sustainable growth. We are pleased to have resumed drilling and are targeting startup of Shai Khan 16 towards the end of the year. We're also continuing to execute our program of well workovers and interventions to optimize production and further advancing activity to prepare our infrastructure for future growth. We also remain focused on moving towards field development plan approval and gas management contract award. At the same time, we remain committed to balancing investment in growth with best-in-class shareholder returns while maintaining a robust balance sheet. We have today announced an incremental $25 million interim dividend, taking total dividends declared in 2022 to $215 million. With continuing strong cash flow generation, we will assess further opportunities for dividends, as well as funding future capex and maintaining adequate liquidity. With that, I now hand you back to the operator for questions. Thank you.