Kurdistan payments ~ two payments in two months

Published on 15-10-2015 14:35:5015 October 2015

Today’s announcement that Gulf Keystone has been paid for the second month running is good news for all concerned. Gulf Keystone gets much needed revenues, and a second payment starts to give Kurdistan companies (and investors) a taste that these payments could be the start of regular, reliable cashflows. We note Genel and DNO have yet to announce payments themselves, though we would be surprised to not see these in the near future.

Two swallows do not make a summer, but once confidence in the payments (for current and historic production) is high, the companies will be able to fund further development in their assets, whether that is offsetting potential declines (Taq Taq/Tawke) or increasing production (Shaikan) or investing in new capacity (Sheikh Adi, Ber Bahr, Peskabir, Chia Surkh).

We note Gulf Keystone’s cash balance is now $76.2m, enough to cover the upcoming bond repayments of $26.4m. This will take the cash balance below the $50m level, which under the terms of the bonds will trigger the need for GKP to talk with bondholders. We note that cash dipping below the $50m level does not trigger anything other than a need to talk to bondholders (there are no penalties), and we would expect the company to have been actively engaging with bondholders throughout this period.

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