Gulf Keystone Pet Ord New

Good morning and welcome to Gulf Keystone Petroleum's 2026 Half Year Results presentation. At the end of today's presentation, there will be an opportunity for Q&A. For participants joining via the conference call, you may ask a question by pressing star 1 on your telephone keypad. For those listening through the webcast, you can submit a written question at any time by clicking on the control panel at the bottom of your screen and selecting the questions icon to type it in. We will take analyst questions from the conference call first, followed by investor questions from the webcast. I'll now hand over to Chief Executive Officer, Jon Harris. Jon, please go ahead.

Thank you. Welcome to Gulf Keystone's 2026 half-year results presentation. I'm Jon Harris, the CEO, and I'm joined by Gabriel Papineau-Legris, our CFO. Over the next few slides, we will discuss our operational financial performance in the first half of 2026 and the current advent for the business. We will then open the line for questions. Next slide, please. This is our regular legal disclaimer, and I'll leave you to review at your leisure. Presentation slides are available to view on our website. Next slide, please. DOS Keystone delivered a resilient operational financial performance in the first half of 2026 during a period of significant regional disruption caused by the conflict between the USA and Iran. Our priority throughout has been the safety of our people. Despite the challenging circumstances, we are pleased to have extended our track record of zero lost time incidents to over three and a half years. Decisive act to reduce expenditures following the production shutdown enabled us to minimise cash outflow, maintain a robust balance sheet and pay a $12.5 million dividend to shareholders. We are pleased to have recently restarted production and exports, with volumes continuing to ramp to prior levels. Looking ahead, we are focused on unlocking full production sharing contract entitlement for export sales at international prices, which could bolster cash flow generation in the second half of the year and support a return to production growth in 2027. Turning now to the operational review. Next slide, please. Production in 2026 year-to-date has been impacted by two precautionary shut-ins related to the regional security environment, totalling almost five months. Gross average production in the first half of 2026 was 14,600 barrels of oil per day, compared with 44,100 barrels per day in the first half of 2025, reflecting the shut-in from 28 February to 23 June. Shaikan Field and the team on the ground responded exceptionally well to these disruptions. Prior to the first shut-in, production had exceeded 44,000 barrels of oil per day on several days in late February thanks to the completion of several well workovers. Following the restart on the 24th of June, the field ramped up quickly to exceed 45,000 barrels of oil per day before the second shut-in on the 19th of July. On August 16th, we were able to restart production again following the extension of the Tripartite Interim Export Agreements and our view of the regional security environment. Growth volumes are currently approaching 40,000 barrels of oil per day and well activities are underway to increase production to prior levels soon. Our focus for the remainder of 2026 is completing the ongoing ramp-up and maintaining stable export sales. Subject to the stable security environment continuing. Next slide, please. Investment and activity in the first half of 2026 has focused on the enhanced production and on healthy production and improving safety and reliability of our facilities. Almost half of the $18 million net capex in the period was spent prior to the shutdown on the 28th of February. Subsequently, we moved quickly to moderate expenditures and preserve cash. Nonetheless, we have actively continued to progress safety critical and strategic projects during that period. In particular, the installation of water handling facilities up here too. We're making good progress and remain on track for full startup in Q1 2027. Once operational, the project is expected to unlock 4,000 to 8,000 barrels of oil per day of incremental gross production above the baseline, expand total capacity to around 77,000 barrels of oil per day, and Reduce Reservoir Risk. Looking ahead to the remainder of the year, we will continue to further progress the work program provided production remains online. We are also positioning for a return to field development and drilling in 2027 once we have unlocked full production sharing contract entitlement for export sales at international prices. Next slide, please. Despite the disruptions to production this year, the Tripartite Interim Export Agreement signed in September 2025 between the IOCs, Kurdistan Regional Government and Federal Government of Iraq have worked effectively. IOC remuneration has improved relative to local sales and payments have been consistent without delay following crude liftings. Realized prices in entitlement invoices have been very robust. with a Shaitan discount of Brent in the first half of the year at around $9 a barrel. The decrease in discount relative to Q4 2025 has been driven by strong demand for the Kukuk blend of crude marketed at Cheyhan from the Iraq-Turkey pipeline. Due to the market disruptions caused by the US-Iran conflict, some cargos of Kurdistan crude were sold at a net bag price which included a premium to the Kukuk blend official selling price. We will keep a close eye on how the discount evolves going forward, but it is too early at this stage to provide long-term guidance. In June, the Independent Consultants Review of IOC invoices and contractual costs were submitted to the Government of Iraq. Gulf Keystone and other IOCs are now focused on reconciling export sales since September 25 for international prices. As you can see from the chart, we have a top-up receivable on our balance sheet of around $80 million net to Gulf Keystone. This is estimated values the differential between cash received to date of $30 a barrel and international prices in the entitlement invoices. It remains subject to the implementation of the Independent Consultants Review. We are seeking to recover the receivable through the commencement of the districtings in September 2026. The interim export agreements have also been extended for six months to the end of January 2027. This is the final step enabling the recent restart of exports and follow the one-year extension of the Iraq-Turkey pipeline agreement earlier this month. Our focus is now on replacing the interim arrangements with longer-term agreements at international prices. Next slide, please. Chaikan remains a large, long-life asset with significant growth potential. As at the end of 2025, The Jurassic Reservoir had 416 million barrels of internally estimated gross Tupi reserves, implying a reserve life of 27 years of 2025 production levels. The field also contained 311 million barrels of estimated gross contingent resources, including 157 million barrels in the Triassic Reservoir, based on the latest CPR from 2022. Returning to stable exports and payments at international prices would provide the foundation for renewed investment in production growth. In preparation, we are discussing a revised field development plan with the M&R and positioning for a potential return to field development and drilling in 2027. The draft field development plan targets a more than doubling of current production from the Jurassic, a test of the Triassic reservoir up to 10,000 barrels a day, and the elimination of routine gas flowing through a gas management plan. We will provide further updates as we firm up our plans. With that, I'll now hand over to Gabriel for the financial review.

Thank you, Jon. We delivered a resilient financial performance in the first half of 2026. By reducing expenditures, we were able to minimize the free cash outflow, protect our balance sheets, and return cash to shareholders while continuing to program safety-critical and strategic projects. Next slide, please. The adjusted EBITDA increased 26% to $52 million in H1 2026, compared with $41 million in the first half of 2025. The increase was driven primarily by considerably higher real-life prices reflected in entanglement invoices for export sales and as well as lower operating costs. This more than offset the impact of lower production from the temporary shut-in of the shut-in field. Next slide, please. By taking decisive actions to reduce costs, we have been able to protect our balance sheet through the shut-in while maintaining our ability to quickly restart production at full capacity. Operating costs reduced by 25% to $20 million in the first half of the year relative to H1 2025 while other G&A expenses were 6% lower at $4.3 million. OPEX per barrel, while elevated over the entire period due to the lower production denominator, was around $4.4 per barrel prior to the February shut-in, in line with prior years. G&A expenses were also down in H1, despite incurring the one-off costs related to the Oslo Dual listing. Looking ahead, We remain focused on exercising strict custom control following the recent restart of production and exports. Next slide, please. The reduction in capex and cost during the period enabled us to limit the free cash outflow to $2 million. The working capital outflow primarily reflects the difference between cash received at around $30 per barrel and the international prices reflected in the entitlement invoices. As John mentioned, the difference is accrued at the top of receivables, which increased to around $80 million net GDP at the end of the period. To begin recovering the receivables, we are seeking the allocation by SOMO of additional listings of crude in September 2026, with payments expected no later than 30 days after scheduled cargoes. GKB's net entitlement of Shikenfield Stealth was approximately 36% in the first half of the year, in line with prior periods. Future net entitlement will depend on realized prices, production levels, and the outcome of the ongoing commercial negotiations with the Ministry of Natural Resources. A return to international prices would quickly defeat the current report's cost goals, incentivizing future investments. Next slide, please. GKT's robust balance sheets and ability to moderate expenditures enable us to weather the disruption in the first half of the year while paying a $12.5 million semi-annual dividend in April. We remain committed to returning excess cash to shareholders. We are therefore pleased today to announce an interim semi-annual dividend of $10 million for payment in September 2026. The dividend decision follows a careful consideration by the boards of JKP's operating environment, outlook, and cash balance. Achieving full PSE entitlement for export sales could strengthen cash flow generation in the second half of the year while the company maintains significant flexibility to reduce capex and costs if required. As Jon mentioned, export sales at international prices would also support a return to field development and drilling in 2027 as we firm up our plan with the Ministry of Natural Resources. Looking ahead, we will remain true to our strategy, balancing disciplined investment in production growth while shareholder distribution and a robot balance sheet. With that, I will lend out to Jon for closing remarks.

Thanks, Gavron.

To summarise, our performance in the first half of 2026 demonstrated the resilience of our business during challenging conditions. By acting quickly and decisively, we've been able to protect our people Our assets and our balance sheet while continuing to progress strategic projects and returning cash to shareholders. Following the recent restart of production and exports, we are focused on completing the current ramp-up to prior levels and unlocking full production sharing contract entitlement for past and present export sales. Achieving the latter would bolster cash flow generation, supporting our decision today to announce a semi-annual dividend of $10 million. and provide the foundations for returns for production growth in 2027. As I conclude, I would like to say a big thank you to our staff, shareholders and wider stakeholders for your continued support. With that, I will now open the line for questions. Thank you.

Thank you. As a reminder, if you would like to ask a question over the phone, please press star 1 on your telephone keypad and you can also submit written questions via the webcast. We will take our first question from Verna Riding of Peel Hunt. Your line is open. Please go ahead.

Thank you. Morning, guys. Just a question on reserves. You mentioned that your estimate of 2p reserves shows 27 years of productive life based on last year's production. But when I look at the license diary, including the two five-year extensions, The license expires well before this, so I'm thinking, well, would like to kind of hear your thoughts. Do the revised discussions you're having on the new FTP with the MNR, do they factor in a development period that will allow you to produce all of those reserves? How do those two things marry together?

Werner, thank you. Thanks for your question. The simple answer is yes. Those are our reserves and they are the reserves produced within the license period. Essentially, during the presentation I mentioned that we were looking to ramp up production to some 85,000 per ounce a day, which is nearly double what we're producing now. So clearly that would shorten the 27 years life based on last year's production considerably. I'm not quite sure it halves it, but nearly, basically. So yes, they are the reserves they are produced within the period and it does assume a production ramp up.

Okay and so with the revised FTP it's possible that we'll see an extended license period as well to kind of enable you to do that?

We are not, that's not part of the field development plan and at the moment of course it might become part of future negotiations.

All right, thank you. Maybe one for Gabriel. Just wondering how much of the H1 operating cost reduction reflects the temporary shut-in versus, I guess, more sustainable structural efficiencies? Yeah, I'd probably say... Just because you were producing less.

Exactly. So, I would say the majority is related to the fact that we were shut-in. So, we were... Thank you very much. Thank you.

Our next question comes from Theodore Nelson from SB1 Market. Your line is open, please go ahead.

Good morning, guys, and thanks for taking my questions. A few questions for me first on the ongoing ramp that you discussed. You indicated that you aim to increase production back to the pre-shutdown level of around 40,000 barrels per day. So how do you think, when will we reach that level and what should we expect? Production for the second half, assuming that there won't be any more shutdowns. Second question, guys, on the reserves. How do you think around any potential impact of the reserves because of the Production shut down and then production restart and then shut down again. Will there be any impact at all? And final question, but that's all on the receivables. I understand it's difficult to precisely answer it, but how should we think about like the repayment profile and how much do you think could be recovered this year? Thanks.

Ryan, okay. I think your first question was around how quickly did we get back up to previous levels. I think you said during the sort of production ramp back in June through to July, which is like the 23rd of June to the middle of July, so that was like three weeks we got to 45,000. We've just started on the 16th of August, we've restarted production, so here we are not even 10 days into that. Coral Tubing is in the field lifting wells. As we speak, I'd expect to be over 40,000 by tomorrow in terms of the production run rate. It's really about three weeks since we started. I'd expect us to be back close to 44,000, 45,000 on the production run time, so I hope that answers that question. You said with the production shutdown and start and shutdown again, do you expect the reserves to be affected? I mean, the numbers we're talking about... I wouldn't expect those to really materially affect the overall reserves position because we will be producing at a much higher rate. And the fact that we haven't been producing, that kind of obviously plays into how we produce in the future. But I don't expect the reserves to be affected materially by that.

Yeah, and I think all what you've seen in the activity on the field, it hasn't. As we run above the world, they won't come back. There hasn't been any issues, so that's from a mechanical or subsurface perspective, so that's positive. And on your point on the receivable, basically we're really focused at the moment dealing with the Q4 2025 that is following the submission of the independent consultant's review, and we're working quite hard with the other IOCs and the MNR at the moment to get some cardinals allocated from September. So we'll have to see. We also need to recognize that in the summers, the volumes, the throughput of oil going through has been kind of impaired by the security concerns. The fact that us and other fields have been limited, that impairs, I suspect, a little bit the ability for a quick handover of additional cargoes. But now that we are back online, production is ramping up. We hope that we're going to be able to see some of those cargo coming up soon. And the priority is really get that first cargo, get Q4 over the line. And then basically then you start a program to deal with the first half of this year. And as John mentioned, production, the first part of this year was essentially January, February for the large part. So we would expect it should be also... And one final question if I may, that is on catfish.

Thank you very much. Thank you very much.

It's tied with international pricing and the recovery of cash flows, so that's why we didn't reinstate guidance. But, for example, on strategic projects like the wet drain and the shutdown and some of the things that we had decided to carry on, regardless or not of the production shut-in, those are carrying on, but some more activities and planning for next year's activities like loan leaves and stuff like that. are more discretionary, and we will navigate those as we go through the remainder of this quarter and Q4.

Okay, understood. Thank you. That's all from me. Thank you.

Our next question comes from Charles Sharp from Canaccord. Your line is open. Please go ahead.

Thank you very much for taking my question. A couple of questions, actually, if I may. In terms of the recovery of the Q4 true-up, do you think you need to have agreements on the full export pricing before you get that perhaps September lifting? And has that Q4 receivable for the true-up been agreed with the various authorities?

So basically the Q4 receivables was part of the independent consultant's review. And so now that that number has been validated, it's now moving to allocation of additional cargoes to turn those receivables into money. But there is also a longer-term element to discuss about future production, Thank you very much. in advance of agreeing long-term agreements related to ongoing production.

Okay, that's great. Thank you. And one short follow-up. You talk about maybe a return to growth next year and drilling next year. Do you have in mind a possible timetable for that drilling and would that need, in your mind, to have agreement on the FTP or approval of the FTP.

I mean, Charlie, we're out tendering at the moment for a rig and also some of our lead items which will dictate the exact start date which we haven't got the answer to. Our expectation is H2 next year. and, yes, we would like to have the field development plan agreed, but we might consider drilling without it. But I think our very strong preferences with driving towards a green field development plan. That's great. Thank you. Thank you.

As a reminder, if you would like to ask a question over the phone lines, please press R1 on your telephone keypad. Our next question comes from David Round from Stiefel. Please go ahead.

Great. Morning, guys. Just firstly on the draft FPP, obviously, that's been around a while. I was interested whether it's changed much in recent years, thinking particularly around the gas management system, or whether you've just sort of dusted off the old one. And I think, I mean, correct me if I'm wrong, I mean, the last number I saw was sort of 800 to 925 million for that next phase. So does that still stand? Are you able to break that down for us at all? And how are you thinking about funding it?

So based on the FTP in terms of development planning, in terms of expanding capacity both in the facilities and from the wells perspective is similar. We have a few more wells than we had previously towards the back end of the programme, so we have a continuous drilling programme. The gas management plan, we are considering a number of alternatives. One is, as per the original plan, which was to re-index all of the gas that's not needed for use in the plant. The second one is to just re-index the acid gas into a deeper reservoir and produce the sweet gas and make that available for sales. So that's the difference, and we haven't concluded on that yet, but we are sort of honing in on those two solutions to the gas side of things. I think the next question was around on the cafe. Yeah, thanks.

Yeah, so if you account for those additional wells which come later in the life of the asset, as well as the gas management program, we haven't come yet publicly for what does come in because we still need to go to the tendering of the gas projects. But I think the estimate that you said at the starting points on the growth basis, we probably expect to see this going a little bit higher off because there would be more wealth in the back end. And we have to see how ultimately the costs come from the gas management. The one thing worth noting is that the cost pool has been mostly depleted since, if you move back 2021, We know that the high-year market has been quite supportive of the response layer over the years. and Denny Satial. The gas management program turns it on. There could be some other providers of capital, but we're really into this as we speak to make sure that we're well-funded and our pace of investment ties with the robust balance sheets and ensuring that our shelters are seeing some distribution as we pay the investment over time. So, well, once we get the FTP over the line, we'll be in a much better place to come with the full story to investors.

Okay, great. And can I just sneak in a follow-up, please, just on the discount. The numbers you show on slide seven, are they a discount for the Kurdistan blend? or are they sort of specific SCICAN discounts and can I ask just what you're assuming going forward in your own estimate?

Yeah so to clarify this is really related to SCICAN so it takes into account the quality as well as the transportation, the length of the pipeline we use and as Jon said it's a little bit Thank you very much. Thank you. That appears to be all the questions from the phone line, so I'd like to now hand over for webcast questions. Thanks Danielle. Thanks everyone for submitting your questions.

First question from investors is, what's management doing to unlock the value of the assets as the stock has undervalued and has underperformed over the last few years against industry peers? Jon, maybe I can pass that to you.

Okay, great. Thank you. Well, I would say we've outperformed many of our international peers over the past three years on a total shareholder return basis accounting for dividends. I recognise that nonetheless, I agree that there's been an impact on our share price this year due to the deterioration of the regional security environment and our prudent response to shutting production, while many other peers have benefited from ongoing sales across the international prices at the inflated international oil price. Now that we're back into production and seeking to get back to international prices, the targeted recovery of the top-up receivable for the actual production we had produced during this period, we expect our performance to very much recover. This would enable us to drive production growth from the Shire Camp Build, which we believe would unlock significant value for shareholders.

Thanks, Jon. The second question on, there's actually been a few questions on the overdue receivables between 2022 to 2023. What's the update on those receivables and is there a resolution forthcoming any time soon? Gabriel?

Yep. Thanks, Aaron. So, The recovery of those historical receivables, including 23 and 22, is part of the ongoing discussion with the MNR as part of the other outstanding shock and commercial matters. The talks are progressing, and regarding the timing and the form of the potential specialness of all the historical receivables. But what I'm happy to point is that, as you can see in our account in Note 12, We are actually effectively continuing to recover the costs or portion of some of those 2022 and 2023 arrears. So that balance has been going down since the back end of last year. So it's positive and de-risks that position.

Great. The next question is just on M&A. Do you envisage opportunities to merge or diversify the asset base and therefore enhance revenue streams in the next 12 months? John, would you like to take that?

Thank you. Our primary focus remains unlocking the full production sharing contract entitlement from export sales and returning to disciplined investment in production growth from the shotgun field. But of course, we also look at opportunities to grow production and diversify our portfolio inorganically. That would be value-accretive and consistent with our current financial profile.

Great. A few here on the top-up. I think Gabrielle We've covered that quite extensively, but there's one here just on regarding the September liftings that we talked about. Are you now supposed to receive international oil prices for those liftings, or is it still the interim deal with local prices that potentially later top up?

Yeah, so there's a dollar amount of receivables owed to the IOCs, and basically they take the international pricing that you kind of divide that amount of that at that point in time, it determines the number of barrels. So then the IOCs are allocated some barrels. We sell those barrels. And as this is converted back to cash, we're able to deplete our receivables. So the short answer is yes, it would be on international pricing.

Great. Next question is just on the CPR. The last CPR was from 2022. When would that be a new CPR?

Jon? Yeah, I mean, With us progressing to a field development plan, agreed with the Ministry of Natural Resources, we would move quite swiftly to also to reinvigorate the last CPR. But I mean, one thing I would say is the field has continued to perform as expected. You know, it's continued to produce as we thought it would. It's been very, very reliable. From that perspective, that's why it's quite easy to say our reserves haven't changed significantly, albeit obviously we're still looking at doing a major development to liberate those reserves, but it is behaving predictably. So it gives us confidence to state the numbers having not done a CPR since 2022.

Great. And just for you, John, again, can you elaborate on how the security situation has changed in such a way that you've decided to restart production?

Yeah, very much so. We continue to look at what's been going on, obviously, between the US and Iran. And we've kind of continued to see that there was a build-up in military hardware by the U.S. kind of up until about 10 days, two weeks ago. And then the U.S. has kind of backed off going full tilt militarily and continued with its rhetoric about going full tilt, but it hasn't done it. us connected with the conversations around having sufficient Patriot missiles and other interceptors of drones and ballistic missiles, having a reduced number of those in the region and therefore wanting to potentially go move to a negotiated solution. And then obviously you'll have heard recently, yesterday, the Secretary of State of the US has come out Well, it's actually a mistake, but Besson's come out and said that they're going to go full tilt on trying to bring Iran to the negotiating table through economic hardship means. So from our perspective, we've seen obviously the militia who are, the Shia militia sponsored by Iran, have been largely responsible for most of the ordnance fired into Kurdistan. certainly some have come from Iran but the vast majority has been fired by the militia and we've seen the militia basically in negotiations with the Iraqi government about political power but also kind of getting to a place where they are have backed off military activity as well whilst people are talking about the US leaving Iraq also connected with the new Prime Minister of Iraq saying that he's expecting the militia to disarm, albeit there are rumblings about the timing of that and how that's going to be affected. So our overall assessment is that we've seen less hostilities towards Kurdistan, less hostilities towards IOCs, Not for a considerable period of time, actually. Therefore, that's led us to go back to being able to produce. But we are going to continue to monitor the situation. And, of course, it may deteriorate again, in which case we might have to shut in. But our hope is that we can continue to produce.

Great. Thank you, Jon. I don't have any further questions from the webcast, so I will hand back to the operator to close the call.

Thank you. That concludes today's presentation and Q&A. You may now disconnect.