http://www.gulfkeystone.com/ The firms exploration programme in Algeria is going well and "the shares look good value", say the Investors Chronicle. Your comments please. goal.

Good post by Bill Fish on III

Hi Guys,
Taken a wee while to absorb all the info that was presented yesterday - looks like the market has done the same.

IMHO the most important information was imparted at the Genel capital markets day as it has implications for all the KRI players.

The most important piece of information IMHO is that a KRG PSC is no longer to be regarded as sacrosanct.

Genel have taken 2 of them and tossed them in the bucket.

In their place they are in the process of creating a new type of PSC that amongst other things does away with Profit Oil and Cost oil as we know it and also kicks the R factor into touch.

Instead of a single contract covering the disposition of all the hydrocarbons their contact splits the hydrocarbons into streams and each stream has a separate disposition.

I must admit at first glance setting the KRI price for raw gas at 78 cents per mcf did not exactly have me turning somersaults given the amount of gas we have to deal with. A closer look at the Genel proposition has made me change my mind.

Under the new contract Genel now get 100% of the oil until they recover 100% of their total costs for everything. The oil is then split 50-50.

Note no R factor and intriguingly no mention of CBBT either.

Genel get 100% of the condensate for the lifetime of the contract.

Genel sell the gas to the KRG at 78 cents per mcft.

The KRG have signed a contact with Turkey to sell them gas at $6.75 per mcfu i.e more than 8 times what they are paying for it.

Meanwhile Turkey who are currently paying $12-13 for their gas will get gas from KRI at approx half of what they are currently paying.

On the Capex front Genel have committed to $1b to pay for everything up to delivery of the gas to the processing plant while the KRG need $4b to build and operate the gas plant and any customer facing infrastructure.( apparently their are loads of Turkish contractors ready to step in here).

The deal works better for those with more oil which suites Genel at Miran - less so for Bina Bawi so OMV have taken the opportunity to cash their chips and bow out. A decision I suspect not completely unrelated to the kicking they are getting as a 10% partner in Pearl.

Genel propose to start with a horizontal well at Miran to tap the oil there first of all before drilling the gas wells.

Win win all round.

Turkey gets a 50% reduction in its energy bill for their Power Stations
KRI gets really cheap gas with an export contact worth 8.5 times cost price while being able to provide domestic gas cheaply at a profit.
Genel and their shareholders get a 15% return on the deal and TH is happy with that.

What does that mean for GKP and the other contractors.

From the Q&A it was made clear that this deal was made between Genel and the KRG without recourse or thought for the other contractors.What comes out of it for the other contractors is purely happenstance.

The contact only works if Genel get paid for their oil. If Genel don't get paid for their oil then the KRI don't get the cheap gas and Turkey don't get a 50% cut in their electricity generation bill.

This puts tremendous pressure on both the KRG and Turkey to get a solid payments mechanism in place as their benefits come at the back end of this deal so the quicker it is in place the better.

This will benefit all the KRI contractors, us probably most of all.

The breaking of the sanctity of the KRG PSC shows what is now possible. Your assets now have 2 or more valuations. They can be valued using the standard PSC which we all understand but there is now also a value for ingenuity as well for those that come up with more creative methods for monitising the assets.

Not all the hydrocarbon streams have to be valued the same way under the PSC- Genel have shown this.

Depending on the composition of your hydrocarbons there must now be an incentive for some operators to come up with a proposition that at the very least removes the "R" factor and, can we even whisper it, removes the CBBT as well.

On the down side if you stick with the standard PSC and have a lot of gas then it becomes a liability, a cost if you like that we have to dispose of.

The type of deal that was outlined yesterday by Genel was of a breadth,scope and imagination the we as GKP shareholders once thought would be generated by GKP when PW were hired for their expertise in this area.

That did not happen, but now the ice has been broken, surely it is time to have another look at our assets and see if value can be enhanced by a more creative regime for their monitisation.

At the very least the imperative that lies with the KRG and Turkey to get the payments sorted should see all the operators share price ourselves included head north.

GLA

BF

Gulf Keystone Petroleum Limited Is Back With A Bang!
By Harvey Jones | Fool.co.uk

You might have spotted today's 14% rise in the share price of Gulf Keystone Petroleum (LSE: GKP) and found yourself thinking: why didn't I buy it when I had the chance?
The truth is there was a very good reason why you didn't buy. In good times or bad, this is a hugely volatile holding.
Although to many investors, that's its charm.

Shaikan All Over

GKP is back with a bang after announcing that it its Shaikan operation in Kurdistan is on track to produce 40,000 barrels of oil per day (bopd) by the end of 2014.
That's a leap from today's 23,000 bopd, and comes fast on the heels of last week's announcement that the Kurdistan regional government's ministry of natural resources will begin repayments to producers for exports.

Well Of Hope

Long-term investors will be breathing more easily, because they have gushed losses over the last year. Last time I took a close at Gulf Keystone Petroleum, almost one year ago, its shares were trading at 171p.
Even after today's dash for glory, its stock costs just 77p.
The sharp fall in its share price over the last year was partly down to the Islamic State (IS) militancy, which threaten Kurdish borders, and a report in March that the Shaikan field only held 299m barrels, of which just 163m belonged to GKP.
Investors ignored management protests that it had only drilled 25% of its target 109 wells, which could dramatically increase the reserves.
Patience Is A Virtue
The world turns, and if you had bought GKP's shares last month, you would be sitting on a 56% profit.
The good news started rolling in October, when the Kurdish regional government approved the field development plan for the Akri-Bijeel block, part owned by GKP.
That's the company's reward for years of exploration and patience.
But the volatility of GKP's share price performance only underlines why smaller oil companies are only for those with strong nerves and vast reserves of patience.
Recent good news is a respite, but no guarantee of a full-blooded turnaround in the company's fortunes.
Anything could happen in Iraq, although it does seem the West is committed to arming Kurdistan against the ravages of IS.
If you think IS will burn itself out, and Kurdistan will edge closer to statehood, Gulf Keystone Petroleum is still a lot cheaper than it was despite today's share price surge.
But brace yourself for more volatility, because in this corner of the world, it won't be far away.

Excellent summing up of the ICG/KRG situation.

http://www.nytimes.com/2014/11/10/opinion/the-kurds-cant-afford-to-leave-iraq.html?_r=1

http://www.proactiveinvestors.co.uk/companies/stocktube/3254/mol-group-hoping-kurdistan-will-offset-production-declines-3254.html

long winded but worthwhile,goes on and on,so it's GKP and only $499 .

http://www.angelnexus.com/o/web/66892

http://www.gulfkeystone.com/investor-centre/gkp-tv-video-player

http://www.brrmedia.co.uk/event/132946?popup=true

http://rudaw.net/english/middleeast/iraq/25112014

From bloomberg this am.

Consolidation will cut the number of oil producers in Kurdistan by three-quarters within five years, Genel Energy Plc (GENL) Chief Executive Officer Tony Hayward said.

“It’s likely that we’ll end up with, perhaps, five or six of the largest companies operating with Genel, Exxon, Chevron ending up as major operators,” Hayward said in a Nov. 21 interview during the Atlantic Council conference in Istanbul. “It’s what happens in most hydrocarbon provinces.”

ExxonMobil Corp. (XOM), Chevron Corp. (CVX) and DNO ASA (DNO) of Norway are among more than two dozen international oil companies holding 35 licenses in the Kurdish Regional Government area. They export about 350,000 barrels a day of crude, pumping it through a Turkish pipeline to the Mediterranean.

Genel has spent more than $1 billion since 2012 on acquisitions in Kurdish-controlled northern Iraq, giving the London-based company joint ventures in seven of the region’s oil and gas fields. This month it agreed to pay $150 million for OMV AG’s 36 percent stake in Bina Bawi, making it the sole owner of the gas field.

“Having made four or five investments in the region, we are continuously looking for opportunities,” said Hayward.

Genel expects approval by the end of this year of an agreement signed with KRG last week to develop the Miran and Bina Bawi gas fields, which will start sending Turkey 4 billion cubic meters of gas a year from 2018. That export volume could more than double by 2020 and increase fivefold to 20 billion cubic meters by 2025, Hayward said.

Gas Reserves

Officials in Turkey said the country plans to build a pipeline to import the fuel.

Development starts next year at Miran, which has gas reserves of 4 trillion cubic feet, and Bina Bawi, with double that volume, according to Hayward. Genel will sell unprocessed gas from the two fields to KRG at a price of 78 U.S. cents per million British thermal units after investing in drilling wells and flow lines, he said.

“We will earn our return through the condensate we’ll strip from the gas and the oil associated with the gas field and KRG will get this gas at a very cheap price,” Hayward said. The KRG will build a gas-processing plant in which Turkish builders and lenders will participate, he said.

Genel, which doesn’t need partners for the gas fields, would need to spend about $1 billion over three years to develop them, Hayward said. KRG’s processing plant would cost as much as $6 billion, potentially with about half coming from Turkish bank loans and the remainder as equity from Turkish contractors, he said.

Lowest Cost

KRG will sell the gas to Turkey at $7 per million Btu, according to a 2013 agreement between the regional government and Turkey, he said. The wholesale market price for gas-fired power plants in Turkey is $10 to $11 per million Btu, Hayward said. Turkey imports almost all of its gas needs, with Russia supplying 60 percent.

“This is one of the lowest cost prices in the world today actually and right on the Turkish doorstep, only 100 kilometers away,” Hayward said. “Kurdish gas has certainly the potential to match Russian gas for Turkish market.”

Turkey plans to build a pipeline extension to the Iraqi border to import gas from Kurdistan, two Turkish officials with knowledge of the matter said last week. It would carry as much as 20 billion cubic meters of gas a year, one of them said.

http://news.sky.com/story/1383271/ex-bp-boss-hayward-boosted-by-kurdish-payout

hxxp://basnews.com/en/economy/2014/12/01/krg-to-pay-three-oil-companies/.

KRG to Pay Three Oil Companies
DNO, Genel and Gulf Keystone will share $75m payout

Basnews | Luke Coleman views
01.12.2014 15:00

Kurds to pay three international oil companies


LONDON


Share prices in two London-listed companies and one listed in Oslo are expected to rise after news that Genel will report on Monday part-payment of contractor fees owed by the Kurdistan Regional Government.


Genel, founded by Tony Hayward the ex-boss of British Petroleum, has shown patience in the face of reduced payments by the KRG in recent months.


A combination of the costs involved in tackling the threat of Islamic State and poor relations between Baghdad and Erbil, resulting in the withholding of the KRG budget, are to blame.


In a statement earlier this month, Hayward said, “Exports will continue to rise and the KRG’s firm commitment to ensure contractors receive full entitlements will see a normalised payment process for this production early in 2015.”


Genel holds seven PSC licences, including in the highest producing KRI fields of Taq Taq and Tawke. It will announce a payment of $25 million.


Gulf Keystone, the other company listed on the London stock exchange, is in desperate need of the cash, as investors continue to express concern over its balance sheet. The company claims to be owed $250 million, and will disclose the amount it will receive later on Monday.


The third operator, DNO, also operates in the Tawke oil field, and will take the remaining share of the $75 million payout.

Gulf Keystone Petroleum Ltd. (LSE: GKP)

Payment made for Shaikan crude oil exports

Gulf Keystone Petroleum Limited ("Gulf Keystone" or the "Company") is pleased to announce that, further to the recent statement by the Ministry of Natural Resources (MNR) of the Kurdistan Regional Government (KRG) regarding payment to producers for crude oil exports, an initial payment of USD 15 million gross has been made to the Company.

Gulf Keystone now looks forward to the establishment of a pattern of regular payments for export crude sales. In the meantime, the Company continues to adopt a prudent approach to capital expenditure.

The statement made by the KRG's MNR on 7 November 2014 regarding the plan to make an initial payment to producers for exports, with further payments to follow on a regular basis, can be viewed at http://mnr.krg.org/index.php/en/press-releases/422-update-on-oil-export-from-the-kurdistan-region-of-iraq.

Commenting on today's news, John Gerstenlauer, Gulf Keystone's CEO, said.

"We welcome this initial payment of USD 15 million gross from the MNR for Shaikan export oil sales. It represents a major step forward for us and we are grateful to our partners in the KRG, who we resolutely stand beside. We continue to have constructive discussions with the KRG in relation to receiving payment in full for our oil sales.

Following our first anniversary of steady export sales, this initial payment is another important milestone in Gulf Keystone's history and further evidence of the Company's great momentum. With the creation of a regular payment cycle we look forward to being able to deliver further benefits to the people of Kurdistan, and all our stakeholders, as we consolidate our position as a key producer in the region from the world class Shaikan field."

Gulf Keystone Petroleum - Payment made for Shaikan crude oil exports

click here

http://rudaw.net/english/kurdistan/02122014

Great finish to the day,up 15%.
--------------------------------------------

Oil shares rise on Iraqi Kurdistan export deal
http://www.ft.com/fastft/244561/oil-shares-rise-on-iraqi-kurdistan-export-deal

An oil deal between the Baghdad government and the administration in Iraqi Kurdistan has boosted shares of oil companies operating in the north.

After months of disputes and halts to supplies, Iraq's finance minister, Hoshiyar Zebari, told the Reuters news agency that a deal had been done for the north to export 300,000 barrels of oil per day from Kirkuk and 250,000 from the north through Turkey.

Shares in London-listed Afren, which is operating in the Barda Rash field in the north, are up 11 per cent on the news at 50.76p and are top of the mid-cap FTSE 250 index.

Gulf Keystone Petroleum, which is in the Shaikan field, is up 10 per cent at 71.5p, Genel Energy, operating in the Miran and Bina Bawi fields, is 7.7 per cent higher at 690.3p, while Norway's DNO, which has an interest in several wells, is up 10 per cent at NKr17.35.

Here's an explanation from Exotix research on the source of the dispute:

The dispute between Baghdad and the KRG [Kurdistan Regional Government] rests on conflicting interpretations of the Iraq constitution implemented in 2006 with regard to oil-sharing agreements. The constitution is vague, but Baghdad believes that all oil should be marketed through Iraq's federal State Oil Marketing Organisation, with KRG receiving 17% of the revenues (proportionate to the population distribution). However, in practice Baghdad was paying Kurdistan only 12% until it stopped the revenue flows entirely in January this year, in protest at Erbil independently sending oil to Turkey without going through the Iraqi Oil Ministry. This followed increasing concern that Kurdistan breached the constitution by signing into law separate agreements with oil companies. The KRG maintains it has not breached its constitutional obligations and claims autonomy under the constitution to manage oil and gas in Kurdistan.

The FT's Borzou Daragahi says the Baghdad government is reported to have agreed to send the three-province Kurdistan Regional Government 17 per cent of Iraq's national budget in monthly stipends. In exchange, Kurdistan authorities in Erbil are to hand the central government 250,000 barrels of oil per day drawn from the self-ruled Kurdistan region and export 300,000 of oil per day drawn from northern fields near the city of Kirkuk through Turkey via a state-owned company.

"The Cabinet approves the oil agreement between the central government and Kurdistan," Iraqi Prime Minister Haider al-Abadi's official Facebook page declared. "Iraqi oil is the property of all Iraqis."

C&ped,todays usa presentation.
-----------------------------------------------
http://www.wsw.com/webcast/cowen20/gukyf/

Some notes I made form the presentation today. Most of it we've heard before but I say it's worth repeating.

Plateau for Shaikan will be 150-250k bopd
Shaikan has an oil column of 3000 feet and is a stack of seven independent reservoirs with their own GOR and API.
SH-10 will produce 10-12k bopd for PF-2
Due bottling of both PF-1 and 2 will take production over 40k bopd combined for these plants.
No paraffin in the oil.so even though it's is heavy oil it flows very well.
PF-3 CAPEX is $350m
PF-4 CAPEX is $320m
PF-3 will be funded from the money owed to GKP by the Kurds $250m) plus another $100m
Matrix is fractured carbonate. 7m produced so far most from SH-1 and 3. Shut in has happened several times and the wells recover back to their production numbers and pressure prior to shut in.
SH-1 and 3 are phenomenal wells.
$15m a month from KRG is "right on the edge" for being "comfortable". This amount to continue until March.
23k bopd is worth $15m and 40k is worth $24m - (seem familiar to me!)
CAPEX so far for Shaikan alone is $750m
Kurds at 310k bopd at the moment, soon will be 500k bopd. Break even at current oil price,is 450k bopd. I'll repeat that. 450k is Kurds break even given current oil price.

Fin.

http://www.turkishweekly.net/news/176545/iraqi-and-kurdish-officials-agree-over-oil-and-budget.html

From the Times.


The Kurds and Baghdad have finally ended their bitter feud over how to share Iraq’s oil revenues, sending shares in London-listed Kurdish oil explorers soaring.
After more than five years of squabbling, the two sides have struck an agreement guaranteeing that oil producers in the Kurdish semi-autonomous region of Iraq will be paid in full.
Shares in Genel Energy, the explorer set up by Tony Hayward, the former chief executive of BP, rose by nearly 10 per cent, and Gulf Keystone’s stock closed up by 15 per cent.
Hoshiyar Zebari, the finance minister of Iraq, described the deal as a “win-win” for Baghdad and the Kurdish Regional Government.
Baghdad has agreed to allow the Kurds to export 300,000 barrels a day from Kirkuk, the northern city, and another 250,000 barrels a day from the northern Kurdish region through Turkey. In return, the Kurds will receive a 17 per cent share of Iraq’s national budget every month.

BAGHDAD--The Iraqi government agreed Tuesday to an oil export deal with the northern region of Kurdistan, signaling an end to a yearslong political impasse that has nearly bankrupted both governments and hobbled efforts to fight the Islamic State insurgency.

The broad deal would allow Baghdad and Erbil, the capital of the Kurdish Regional Government or KRG, to mend broken relations that have put the defense of the country against Islamic State on shaky ground. The accord is also likely to further muffle voices in Iraqi Kurdistan that only six months ago had called for a referendum on the region's independence from Baghdad.

"This agreement represents a victory for all Iraqis," said Masoud Haidar, a Kurdish member of the parliament in Baghdad. "There are no losers in this agreement. All are winners."

Obama administration officials hailed the oil agreement Tuesday as a crucial advance in Baghdad's efforts to improve relations with Iraq's Kurdish minority.

U.S. officials have pressed Iraqi Prime Minister Haider al-Abadi, a Shiite politician who took office in September, to build bridges to his country's Kurdish and Sunni population and buttress the war against Islamic State militants. The Kurdish security forces, the Peshmerga, are close ally of the Pentagon in the fight against Islamic State, which is also known as ISIS or ISIL.

U.S. officials have also been working to ensure the KRG doesn't move forward with its threats to hold a referendum on independence.

"This resolution, in line with its constitution, allows all Iraqis to benefit equitably from Iraq's hydrocarbon sector," said Marie Harf, a State Department spokeswoman. "This agreement will further strengthen both Iraq's federal government and the Kurdistan Regional Government as they work together to defeat ISIL."

Under the new agreement, which comes into effect on Jan. 1, Kurdistan will export 250,000 barrels of oil a day and the disputed province of Kirkuk--now under Kurdish control--will export 300,000 barrels a day, said Abdel Qadr Mohammed, a Kurdish member of the Iraqi parliament's finance committee, who participated in the negotiations.

Those exports will flow through Iraq's national oil company, the State Organization for Marketing of Oil, or SOMO, marking a win for Iraq's central government, which has long sought to exercise more control over Kurdish oil exports and revenue.

In return, Tuesday's compromise would see the KRG keep 17% of Iraq's budget expenditure, nearly a year after Baghdad halted payments to the region in retaliation for its moves to sell Kurdish oil on the global market independently of Baghdad.

That percentage, based on estimates of Kurds" share of Iraq's total population, reflects the fiscal arrangement laid out in the 2005 constitution. By hewing closely to those parameters, established under U.S. occupation, the agreement showed that Iraq's worst security crisis in recent memory has helped shift the country toward a renewed unity.

"With the threat of ISIS bearing down on all of us, it was necessary for both sides to come to an agreement in any way," said Razaq al Haidari, a Shiite politician from the ruling State of Law bloc.

Though the deal is largely about oil, observers agreed that concern over the insurgency made it possible.

"This is an oil deal that is motivated by security conditions and the need for some sort of political unity against ISIS," said Ahmed Ali, a researcher for the Washington-based Institute for the Study of War. "At the end of the day, the realization on both side is that the ISIS threat is so great that a unified front is the major recipe to defeating it."

The deal satisfies many of the Kurds" outstanding demands, giving them profits from what they consider their own oil, a greater say in how Iraq's oil industry is administered, and additional funding and recognition for their semiautonomous defense forces.

The settlement also marks Baghdad's most formal step toward recognizing the disputed province of Kirkuk as a formal part of Kurdistan since Kurdish forces effectively seized the area during Islamic State's initial blitz in June. By positioning Kirkuk's oil as a part of Tuesday's agreement, Baghdad tacitly forfeited its control over Kirkuk's oil to Erbil.

In addition to Baghdad according a portion of Iraq's budget to Kurdistan, the deal calls for the Iraqi defense ministry to give a direct monthly payment to Kurdish fighters, known as the Peshmerga, to train and arm them in their fight against Islamic State, said Kawa Mahmoud Mawloud, a Kurdish member of the oil and gas committee in parliament.

Before Tuesday's deal, the Kurdish fighters had been financed and were mostly managed independently of Baghdad.

The deal isn't a wholesale solution to Iraq's fractured national polity. Governance in Baghdad has long been paralyzed by divisions among Sunni Arabs, Shiite Arabs, Kurds and a many smaller religious and ethnic groups. But the agreement demonstrates the unifying potential of Mr. Abadi. With support from Washington, he assumed the premiership in September followed the eight-year rule of Nouri al-Maliki, whose leadership was marked by sectarian and ethnic discord, corruption and worsening security.

Tuesday's deal had seemed almost impossible until last month.

The long-simmering dispute came to a head early this year after Baghdad cut off budget payments to the KRG, which began exporting large volumes of oil for the first time via a pipeline to Turkey.

Efforts by U.S. diplomats to broker a compromise fell apart amid mutual distrust, with both sides unable to agree on who should control the oil's marketing and revenue.

Kurdistan-focused oil stocks have languished this year as the political tensions with Baghdad left the KRG struggling to meet its payment obligations and the Islamic insurgency buffeting the country threatened operational security.

Oil markets saw the first glimmer of a deal three weeks ago, when Mr. Abadi and Kurdish delegates--supported by American and regional diplomats--agreed to an interim deal that saw Baghdad pay $500 million to the Kurds in exchange for 150,000 barrels a day of oil.

The good-faith payments opened a floodgate of concessions, said Mr. Haidari, the Shiite lawmaker. Kurds dropped their demands for huge payments from Baghdad, while Baghdad stopped its requests to micromanage Kurdish contracts with foreign oil firms, he said.

Shares in Kurdish-focused exploration and production companies such as Genel Energy PLC and Gulf Keystone Petroleum Ltd. surged Tuesday on news of the deal and after the KRG made initial payments to some companies for oil exports.

Though good news for Iraqi unity, the deal is likely to add to the downward tailspin in the oil market, with the additional barrels from Kirkuk set to augment the already ample supply on the market.

Oil prices have tanked since June amid sluggish demand growth and a boom in oil production in North America, but major oil producers in the Organization of the Petroleum Exporting Countries have shown little sign that they intend to pull back their own output to support prices.

When OPEC met in Vienna last week the group decided to keep its oil production unchanged, sparking a rout in the oil market. Iraq, the group's second-largest producer after Saudi Arabia, imade it clear it wouldn't consider reducing its oil output, which remains below levels reached in the 1970s before Saddam Hussein came to power.

Iraq's oil minister Adel Abdul-Mehdi told reporters in Vienna last week that Iraq is targeting production of around 3.8 million barrels a day next year, an increase of around 500,000 barrels a day compared with its production in October, according to the International Energy Agency. Oil exports from the Turkish port of Ceyhan via Iraqi Kurdistan have already reached over 350,000 barrels a day, according to Genel Energy, but the deal with Baghdad should boost that figure by 200,000 barrels a day come January.

Jay Solomon contributed to this article

http://www.reuters.com/article/2014/12/03/us-mideast-crisis-kurdistan-specialrepor-idUSKCN0JH18720141203