Earnings Transcript for GUKYF - Q4 Fiscal Year 2015

Executives: Jon Ferrier – Chief Executive Officer John Stafford – Vice President Operations Sami Zouari – Chief Financial Officer Tony Peart – Legal and Commercial Director

Analysts: Marc Levinson – JPMorgan Will Forbes – Edison Charlie Sharp – Canaccord

Jon Ferrier: Good afternoon, everyone, and thank you for joining the call. With me today are Sami, John and Tony from the management team, and we have one hour available for this call including questions. What we’d like to do is to walk you through a few of the slides we’re prepared to focus on some of the key issues we think are important and indeed address the questions by the rest in RNS this morning. If you don’t have the slides already, they are available on the website. We put out a very full RNS this morning that covers a lot of grounds, so I appreciate there’s a lot of information to absorb here. But before I address the work slides and if you’d like to go to Slide 3, I think in your pack, I’ll just give you a little background. I appreciate that as well as analysts we have very many shareholders on the call and I’m sure that everyone will agree that 2015 was a very challenging year. I must frustrated by you with share price performance over the last year and the only and I repeat only comfort I take is that our price performance roughly at 66% reduction over the last 12 months. It was broadly in line with that of the E&P sector and specifically our peers in Kurdistan in fact we didn’t do as badly as some. A massive reduction in share price is driven in pop by the drop in oil price, nervousness around equity markets particularly commodities, but certainly compounded by the geopolitics within the region within which we operate. So, there is a lot of troubling news out there, but I want to stress that we’re not just sitting around waiting for the well to improve, we’re actively getting to grips with a situation and taking control of all the factors over which we can exert any influence. So I’m pleased to say that it’s against this background that we’re actually made some good progress in the business. I’ll now on the Slide 3. Our operations remain safe and secure throughout the year. And I get question just when I say this, but this is an inherently hazardous business and you cannot take this for granted. If we don’t just achieve safe operations, we really don’t need to worry about much of the other things that are causing you concern at the moment. Shaikan remains a superb field and we have a motivated workforce dedicated to realizing its potential. And the management’s view of Shaikan reserves, which is a hot topic at the moment in Kurdistan, remains aligned with our recent CPR from October 2015. Big news recently earlier this year in February was news from the MNR that PSC conditions will be applied to all the licenses in the country and that news was very much welcomed by the market. And recently as close as yesterday, we have agreed with the MNR to address a number of legacy PSC issues, which were catalyzed in fact by the news from the MNR on 1st of February. So it’s been very welcome to us to be able to address a number of things that have been uncertain over the last couple of years for Gulf Keystone. So a good progress in the business and a very different company to what we were a year ago. Before I hand over to the team, I'll just give you a quick few minutes on what I see looking forward, on Slide 4. The situation we face as a company is clear. Payment arrears, the past cost and revenue arrears coupled with reduced oil prices, and therefore low income and have resulted in a weak balance sheet. And this is the balance sheet that’s required to servicing the existing debt obligations of the guaranteed notes and convertible bonds and we have coupon payments due in April and October of this year as well as bond maturities in 2017. That’s almost $600 million to settle in about a year from now. So what's our reaction to this? Well, capital discipline is critical. There is only so much we can do. The decision was made to relinquish Sheikh Adi, which carries significant near-term cash demands approximately $600 million for the development is the kind of magnitude that you're looking out and of course there is execution risk as well. Our partners made similar portfolio management decisions, Mol relinquishing Akri Bijeel with our agreement at the end of last year, and Genel currently progressing relinquishment of Ber Bahr. Our focus is very much on Shaikan, where we can yield immediate returns and minimal project execution risks. There's only so much we can do and this is a very important asset. We mustn't forget the scale of this opportunity and the level of upside that we have to exploit. Sami will talk about this later, but we have to work with our balance sheet and secure additional funding capacity, so that we can take the company forwards. Well, what do we recognize? We see in terms of taking the company forwards as a near-term action is an investment program that bridges to and is complementary to the FDP. The FDP you will remember is a plan that takes the field to its full potential of at least a 100,000, 110,000 barrels a day. And what we have identified is a program complementary to that that maintains a plateau production of nameplate of 40,000 barrels a day and with the option to upgrade to 55,000 barrels a day, a near 40% growth in production. So some difficult choices made by the company, but certainly opportunities out there to grow the business and create value. So as I've just been talking about this investment program, I’ll hand over to John, who can take you through our bridge to the FDP.

John Stafford: Thanks, Jon. I’m John Stafford. Me and my team look after operations here at Gulf Keystone. And I'll just walk you through some of our ideas about the near-term growth that we see in Shaikan and how that’s structured in the context of the challenging environment we’re in where we've got the company's balance sheet. As many of you will be aware already, we submitted a draft Field Development Plan to the MNR in December 2015. This draft is currently under reviewed and has been updated in the context of the discussions that we're having at the moment and we’re resubmitted as final following final partner discussion sometime later this year. And what we're doing now is we're building a series of projects that subject to available financing seek to stabilize current production and potentially grow it. Clearly, we are in a difficult position financially. So we have the decision made amongst the team is to decide what we can do and what we want to do and we think these projects provide a very useful value-added opportunity for the company. So the first plan is to maintain 40,000 barrel a day production. We have installed capacity to that level. So the plan is to keep the plant full and maintain production at that level. There is also the option to increase production up to 55,000 barrels of oil a day. And the interesting thing about this is that the incremental costs associated with that increase from 40,000 to 55,000 is only $17 million. It's a very attractive opportunity. And it's worth confirming that as of today Shaikan is producing dry oil. There's no formation water. And the observed pressure decline in the wells is in line with our predicted field performance and entirely consistent with the reserves in the CPR. The field is performing pretty much exactly to expectations. And as Jon said that we see no reason to change our update our view on reserves and resources, it’s behaved in a very stable predictable manner and we’re highly encouraged by that. However, if we spend no further money, production will decline. And we will begin to lose wells in next two years either by wells getting out at the crest as gassing out from the oil or just by ceasing to flow naturally, by ceasing to lift. This oil needs to flow uphill and awfully long way, and eventually that would stop. So, we need to invest in order to arrest that and maintain production or hopefully increase it. And the chart at the bottom of Page 5 gives you a quick summary of our plans to maintain 40,000 a day plan or we increase to 55,000 plan. Both share lots of common characteristics in the installation of three new electric submersible pumps, the drilling of one new well. This will be a simple vertical well with low execution risk. And that's inherent through both projects is that this is simple execution stuff low risk, minimal CapEx. So, we have the option in the – for the 55,000 today to add an additional production facility. We've identified that facility and that will take us in a two year spend of $88 million and we can exit 2017 doing 55,000 barrels of oil a day. I’ll now hand over to Sami, who will explain some of the context behind our investment choices.

Sami Zouari: Hello, everyone. Slide 6 demonstrates the investment rationale for upgrading our current production at 40,000 barrels per day to 55,000 barrels per day, which means an increase of almost 40%. One of the key parameters to look at are the breakeven prices. These breakeven prices are naturally past application of the PSC terms and also applying the Shaikan discount to the Brent. As you can see here, we are standing around $37 per barrel. And under the no investment case, we are – this breakeven price can only go up. And our estimate is that by the end of 2016, the breakeven price will stand between 40 and 45, which considering the current oil prices. It is not a good scenario to farther ourselves in. So by contrast, if you compare the no investment case to the 55,000 barrels per day by investing what will deem to be a reasonable amount of CapEx, you can then, over the next four years, significantly reduce the breakeven prices around $36 per barrel. What does it mean? It means that I am pointing to the obvious it means that the company will increase its profitability by lowering and its breakeven price. And it also increases its resilience should the oil prices remain at the current low levels say between $40 and $50 per barrel at Brent. So beyond the strong economic rationale of reinvesting for the benefit to afford our stakeholders, the company would also believe around the MNR expectations. And as I stated before the MNR despite growing through tremendous financial difficulties, has chosen to support us notably by addressing our past costs in the short to mid term. And the MNR in return is expecting to see also some goodwill from the company, which translates naturally into some investments in 2016. And as you know, Genel and DNO are resuming their investments and Gulf Keystone wouldn’t want to send out by not doing so. The next slide would be done by my colleague, Tony.

Tony Peart: Good afternoon to you. I’ll now talk to the slide that’s titled Shaikan exports where there is a map, which shows the truck route from Shaikan to Fyshkhabour, where the oil is injected into the international pipeline that runs to Shaikan on the Turkish Mediterranean coast. As I've mentioned to you before the company's marketing strategy is determined by the MNR, who currently control oil marketing and crude exports from Kurdistan. After two years of exporting Shaikan direct by truck as a high sulfur heavy crude oil about 17 API with high quality and transport discounts. Shaikan is now sold as part of a Kurdish blend that is lighter about 30 API that attracts lower quality and transport discounts. So from July 2015, oil export deliveries are transported 120 kilometers by truck to Fyshkhabour and injected into the international Kirkuk to Ceyhan export pipeline for sale at Ceyhan. I’ll now address the Shaikan realized prices and provide some detail on our historic and current pricing. As said out in our Russell’s announcement, the realized price for truck sales under a direct contract with a domestic off taker was $18 a barrel in 2015. The realized weighted average price for export sales, which comprised both trucked and pipeline sales was an estimated $22 a barrel in 2015. For our current sales, we’re very pleased with the new payment arrangement announced by the MNR, which we believe achieves greater pricing certainty and predictability. Our pricing terms are subject to ordered and for January's production the KRG set the Shaikan quality discount for pipeline exports of Shaikan at $14.7 a barrel plus transport deductions of approximately $5.7 a barrel. We also understand that the MNR are committed to the establishment of a retroactive quality bank for Kurdistan exports via the pipeline. It is also worth noting that the local market in Kurdistan offers an attractive alternative to exports at the current low Brent prices, as there is limited demand for high sulfur heavy fuel oil in the domestic markets in Kurdistan. I would not turn to the MNR agreement which we announced was signed on the 16 of March and refer to Jón’s introductory remarks, which he said was a result of the catalytic announcement by the MNR on the February 1, which provides clarity on the application of PSC terms and addresses some of the Shaikan PSC legacy issues. So subject to a formal Shaikan PSC amendment, GKP and the MNR have agreed to firstly, changing GKP’s capacity building charge from 40% to 30%. And between GKP and MNR we recognize the MNR’s Shaikan Government Participation Option of 20%, where they will be a paying party rather than a carried party and again subject to the conclusion of the PSC amendment. Also contemplating agreement is the implementation of the provisions of the First Amendment to the Shaikan PSC, which has entered into in August 2010. But not previously implemented as the MNR had indicated in writing that they wish to take up this third-party interest. What this amendment provides is that the 15% third-party interest will be split equally between the government and the contractor comprising GKP and MOL and split on a pro rata basis with the government's 7.5% interest being fully carried by the contractor. We have also addressed in this agreement that the 5% Texas Keystone interest, which was not been assigned to GKP as yet and has been held in trust by Texas Keystone for the benefit of GKP will now be formally assigned to GKP. An important provision of the agreement is that we have schedule a near-term repayment of the 20% interest, government interest back-costs which are due to GKP, via continued monthly payments of up to $15 million comprising of PSC entitlements and top-ups until the back-costs are repaid in full. We’ve also started recovery of back costs with the top-up payments received in March 2016. I’ll now turn to provide clarity on the Shaikan PSC interests and describe the impact of the MNR agreement and the First Amendment dealing with the third-party interest on the Shaikan PSC interests going forward. So as a result of the 16 of March agreement, GKP’s fully diluted Shaikan working interest and share of reserves will increase from 54.4% to 58%. And as mentioned previously the capacity building charge will change from 40% to 30%. Also as mentioned the MNR will start paying their 20% of monthly cash costs; as a paying party. And GKP and MOL will carry their 7.5%, which cannot be diluted any further. And the breakdown of those interests is shown in that slide where we have showed the diluted working interest, which was the previous position going from 54.4% to post the agreement the new diluted working interest of 58%. Our cost exposure actually increasing to 64%, which is the effect of the 7.5% carry. I’ve also showed in that slide the change in the capacity building charge from 40% to 30%. I’ll now turn to Sami.

Sami Zouari: Thank you, Tony. The Shaikan, every year, as explained very clearly by Tony, now the company has achieved a much clearer view on the MNR’s position with respect to their back-ins and also third-party interest. And this allows us to explain in a clear way the evolution of certain figures from 30 of June 2015 to this year end. In relation to past revenues, in June, the company disclosed the figure of $117 million adjusted now to $93 million as of December. And the main explanation or contributors to this figure of $93 million is number one, the exercising of the back-in right by the government, which triggers an allocation of profit only for the benefit of the MNR. And second, the MNR provided also some supporting documents information providing the company with further clarity on the Shaikan quality discounts. As to the payables to the MNR, it is really stable going from $41 million to $49 million and this item is mainly composed of the capacity building bonus and other expenses in relation to our operations, in relation to services provided by the MNR, such as the police force. And God knows that we need them in Kurdistan. The item, the 20% back-in we have gone from $85 million that’s been adjusted to $75 million and the adjustment is due to the $10 million bonus payment for the Sheikh Adi bonus liability. And last in June, we disclose $90 million in relation to the third-party interest. And this figures know to be converted into a value that will be recoverable under the PSC cost recovery mechanism. Now the next slide, the 2015 financial highlights. So the revenues are US$86.2 million to be split between export sales and the local sales. Export sales being a figure of $69 million and local sales $17 million. With respect to the revenues as there was uncertainty regarding the payment mechanism for sales to the export markets, revenues could only be measured reliably and therefore recognized when the cash receipt was assured. With respect to the capital expenditures of $82 million, these capital expenditure and as disclosed in the past mainly allocated to the drilling of Shaikan 11, somewhere like in relation to three additional flowlines, as well as the Shaikan FDP updates and the design of the central processing facility. And last but not least, some de-bottlenecking work that allowed us to upgrade the production capacity. Cash balance, as of 16 of March, is about $51 million. The operating cost at $5 per barrel, still improving compared to $7 per barrel in 2014. Loss after tax of $135 million. In 2014, Gulf Keystone recognized $144 million impairment of Akri Bijeel. No asset impairment has been recognized in 2015, based on the managements impairment review, which is itself based on the full cost accounting policy and this hasn’t changed compared to our previous accounting policies. Now we if go to the next slide, Slide 13, I believe that Jon mentioned already all these key elements. So the company is facing in 2016, this year two coupon payments, one in April and one in October of $26 million each. These are covering both bond instruments. The debt repayment of $575 million in 2017 with the first maturity keeping in April 2017, and the other one in October, so we’re facing here significant amount of debt to be repaid. So Gulf Keystone, faces material uncertainty regarding meeting these debt obligations. So, we are now doing everything we can to counter for the future and to strengthen our balance sheet and that includes restructuring plans, access to additional funding and also talking about additional funding MNR payments being part of our funding story. And the new agreement with the MNR definitely addresses that last point. Asset transaction, always considered, but fairly, unlikely, and this is not specific to Gulf Keystone. We haven’t heard very much about M&A transactions across the sector. And that will be due to the low oil price environment and in our case of course we have to add that layer of political risk. Thank you, very much.

Jon Ferrier: So, I hope that helps. It’s clear that we’re not in an easy situation and business has made some tough decisions as we work in areas where we actually can exert control. Managing cost is just one. Portfolio decisions were particularly tough, but it is paramount to focus our resources on Shaikan where immediate value can be realized. More so now with the improvement of terms, we’ve also achieved clarity on a number of a legacy PSC issues, I’m really happy that we’ve got greater transparency in the business in this regard. So some good progress made and we’re confidence in future Gulf Keystone. With that, we’ll hand over to the questions and Pauline or whoever will begin to take questions. Thank you.

Operator: We will take our first question from Marc Levinson of JPMorgan. Please go ahead sir your line is open.

Marc Levinson: Hi, good afternoon. Thanks for taking my questions. I got three, please. The first one is on the third-party back-in option. Is it fair to saying that its [indiscernible], because there is a lack of interest and given the company’s balance sheet, presumably would be been better to have the cash [indiscernible] over the life of the sales. Secondly, you talk about new capital. Given where the debt is trading in the current size of your market cap, what were you thinking on that front? And then finally, after the top up payment what kind of cash flows do you expect to receive every month and will these cover your cash costs?

Tony Peart: Marc I’ll address, Tony, here. I’ll address the first point, as to what the motivation was in the third-party agreement. So we’re talking about the period of, the summer of 2010, very different oil price environment. And I think the expectations of the MNR at that time whether they would be able to find a third-party. And in that case, as you’ve suggested that there would be a cash reimbursement. And that is not proved possible and despite the MNR continuing to seek third-party to take that interest. So the result of that negotiation as we had agreed back at that time was that if that was unsuccessful and they weren’t able to locate a party that we would come to this settlement arrangement whereby the 15% was split between the parties. That’s the historical context to it.

Jon Ferrier: To address the – your question about the top-up, what is it that this company is expecting, we are expecting the top-ups plus the monthly payments in relation to the monthly exports to amount to a total of $15 million and whatever increments there is on top of the monthly export payments will be allocated to repaying our past costs.

Marc Levinson: Okay, perhaps just a follow-up on that because I think the top-up payments could be exhausted within six to eight months. And then after that I think your cash inflow payment could drop meaningfully. Is that correct?

Jon Ferrier: It is fair although we don't quite know how the oil price environment will evolve. But that goes back to some key elements in our presentation. This company needs to be prepared and needs to address its balance sheet regardless. And you mentioned our debt payable in 2017. This company has or the management of this company rather has to responsibly preserve its stakeholders and address our – the strengthening of the balance sheet. And that includes of course all stakeholders when first of all the MNR who has been quite helpful in providing these increment payments to support the company but certainly also the support of all other stakeholders and meaning our investors.

Marc Levinson: Okay. Thanks.

Operator: There are no questions in the queue.

Jon Ferrier: I've got a couple of questions sort of come-in by mail on the theme of payments and regular payments. One question how confident are we in the MNR paying as regularly on a regular day per month linked that is are we going to be able to fund the work that we've talked about this bridge to the FDP and are we clearest to the MNRs commitment to forward payment a month – forward program of monthly payments. I think I can try that to answer that one maybe with my colleagues help but the reason as we have talked about is under tremendous stress, it’s not an easy time for them. And yet throughout this in fact over the last more than a year the MNR has sought to support Gulf Keystone a year ago approximately when things were also particularly difficult they stepped in and provided a $26 million payment in advance of the bond coupon maturity in April last year. And we have enjoyed payments over the last part of last year eventually U.S. not coming in on a given day which can cause some anxiety around the receipt of these things but nevertheless we have had support perhaps disproportionately beneficial support even in against what other companies are producing towards the end of last year and talked last year continued through this year with this program. Of course, the recent pipeline shut down for three weeks has put even more pressure on the system. So before I'm asked the question, I'll tell you that we have not been paid yet for February production. And I don't know that any other exporters are being paid either. So this is clearly adding additional strain into the system. But we maintain a very close dialogue with the MNR who know our needs. The MNR and in fact the nation of Kurdistan recognize is that the oil industry is the most important revenue generator for the region. And they will do what they can, I believe to support the industry and us. That's really I think what I can say on that one. And the – related to that is maybe a question for Tony from another private investor is, can you please explain the PSC payment of $5.8 million roughly how it is calculated is the 40% cost oil incorporated in this. And what is the quality discount. That is relating to the January payment.

John Stafford: Right, perhaps. I can certainly answer that so the quality discount as I mentioned in my presentation it’s been set by the MNR is $14.7 a barrel. With respect to the $5.8 that's our production entitlement based I think we’re talking about January. I think it was based on just over 1 million barrels of export production. Is that correct?

Jon Ferrier: Thank you. While we’re waiting for another call to come in is so obviously the question that I get asked a number of times is from, I'm guessing here to share a private investor and shareholder is when you guys going to buy some shares. And as a company General Counsel I’ll ask get Tony to answer that one from a formal point of view. And then I’ll add in myself.

Tony Peart: Yes, this is dictated by the regulations that applied to close and open periods, both statutory. So that there’s always two months before our results announcement where there’s no purchase of any securities by insiders and the management who are talking to you are definitely insiders, and directors are also regard as insiders. So it’s very much dictate by that, but also the fact that if any of the directors or insiders have price sensitive information they all prohibited from purchasing securities. And regrettably over the last couple of years, this company has been in a virtual close period. So it’s been quite difficult for insiders to find themselves in open period where they can buy the shares.

Jon Ferrier: Yes, and from my point of view, the last thing I want to do is to sit here without having a stake in the company through shares. But it’s also the last thing I want to do which is to buy shares at the wrong time and then a event to happen, and business is behaving in the wrong way. So we’re going to be extremely careful about this intake legal advice as to when this is appropriate. The close period has been running since February last year, when we started the strategic review. And as I mentioned earlier, we are talking to company still, and so this close period remains, I’m sorry, that’s just the way it is. Pauline, do you have any questions for us?

Operator: I do indeed. We have another question from Will Forbes from Edison. Please go ahead. Your line is open.

Will Forbes: Yes, good afternoon I have a couple of questions just about the reservoirs and the flagging that you have – potential declines in 2016. Could you give us an idea you think of the risk of declines in 2016. I’m just saying that you’re seeing currently entirely dry oil, but there is a risk. Could you – if you could give us clarification on that? That would be great. The second thing is that going to Ganal situation, they – their production met exactly with the reservoir modeling, until it did – which close to have significant down going into that reserve. So just – if I could get an idea – if you were doing any further investigation work within your reservoirs to shore up that reservoir modeling. And what kind of information you’ll review on the daily basis to make sure that everything is okay? Thank you.

John Stafford: Thanks, Will. It’s John Stafford here. I’ll do my best to cover your two points. Firstly, the pressure decline isn’t a surprise. It’s what we knew what happened and it’s what we predicted would happened in the CPR. And if you refer to Page 4 of the CPR, it talks about there in the executive summary. So the pressure decline is stable, predicable and field wide. So from that point of view it’s manageable. And it’s really not a problem, because it has no impact at all in our reserve estimate. The 639 million barrels of 2P reserve remains unaffected by this phenomenon. All it means is that your ability to floor the wells naturally declines overtime. So you need to put electric submersible pumps in that to get the oil to surface. And in terms of the read across from other operators in the region and some unpleasant surprises that they’ve had, yes, we were concerned and we’ve done some internal analysis on that ourselves. And we can honestly say, I don’t think there’s any direct read across for the situation from many of our neighbors into our license. Shaikan is a different reservoir, a different oil, with a different fracture system. And what we benefit from is virtually a kilometer of oil. We brought a kilometer column of oil. If we can largely manage our way within that huge column, no one else benefits from such an asset, and really that is the driver for a lot of the certainty that we see. Together with the field performance we’re measuring which is an entirely stable field performance, performing pretty much exactly to model predictions. So now we don’t see any short-term problems with water. We honestly don’t think that we need to upgrade any of our models in the light of recent event elsewhere and we’re content with our performance going forward I think at the moment.

Will Forbes: And just one follow-up if I can. The well under your plans for the bridging to FDP, I’m assuming that well would be a horizontal well. Is that correct?

John Stafford: No, no, no. That would be a simple plain vanilla vertical well to the Jurassic.

Will Forbes: Okay, okay.

Jon Ferrier: Yes. We’re looking for – as little delivery risk as possible in this bridge program. It’s all pretty conventional technology, conventional well and ESP. So it should be pretty easy to deliver. And I rise that is – as a question that’s coming is to say that is the team in place to do this work and chemical and extra 10,000 barrels a day into the project. John?

John Stafford: Absolutely the team is very much in place. There’s planning going on in anticipation for the project sanction, once the stable funding is in place, and yes, we’ve identified a suitable facility that will add name plate capacity to our current 40,000. So we’re really good to go the teams in place, we’ve identified some of the assets that we need to look at, yes, it’s a good time to go, because the market is hungry at the moment, there are not many people issuing tenders for drilling rigs at the moment. So it’s a good time.

Will Forbes: Got a question on funding, that I’d pass it over to Sami.

Sami Zouari: Yes, I have one question from – I guess – our shareholder. How can we fund this work, how can we fund these CapEx indeed when the company is under such tight liquidity. As we motioned it before, what we need to do is we need to address definitely our balance sheet before proceeding with such an investment plan, even though the investment is fairly modest compared to the value that, would be unlocked. And I’m going to be fairly straight forward, what is the point of going into such an investment, if we, if the company is challenged for – in 2017, with respect to paying the full amount of the debt. So there is a prerequisite and the prerequisite again is to address our balance sheet. The restructuring, but also the funding of this CapEx will be also funded by the payments, these additional payments from the MNR, this is why this agreement that – Jon, and Tony mentioned before, is so important. The MNR has accepted to address our past costs, in a very clear way which is in my opinion, an achievement for us, and was quite helpful, and that will contribute to the our – to funding this project. The results were the fact that this CapEx program will be also funded by the positive cash flow of the company, let us not forget that, also depending on the oil prices. While hopefully I manage to address this question, as, with as much clarity as possible, of course we don’t have a full view as of yet, with respect to addressing our balance sheet. But this is something on which we have been working actively. Thank you.

Will Forbes: I think, Pauline over to you.

Operator: Yes. The next question comes from Charlie Sharp from Canaccord. Please go ahead. Your line is open.

Charlie Sharp: Thank you very much. Good afternoon, gentlemen.

Jon Ferrier: Good afternoon.

Charlie Sharp: Few questions if I may. Firstly, perhaps you could outline in a little bit more detail, as much as you are able at this stage to let us know what sort of discussions you have had with bondholders regarding possible deferment of repayment or that for equity swaps and whether or not those bondholders may indeed be willing to fund additional capital. Secondly, I just want to be very clear in terms of these amendments to Shaikan including the capacity building bonus reduction. Is there any payment expected to be made by yourselves for the completion of those amendments. And then in addition I guess I want to just be very clear, are you expecting you specify that, you are expecting continued monthly payments of up to $15 million. Are you expecting to receive no more than $15 million? I just want to be clear if that is the cap or not? And very finally on Shaikan if you were not to spend any further CapEx either the $71 million or $88 million, what sort of production profile for let say $17 million and $18 million would you expect from the field?

Sami Zouari: All right. There are quite a few questions here. I counted four, five. So I’ll try to address.

Charlie Sharp: Sorry about that.

Sami Zouari: No, no, it’s fine. I’ll try to address at least some of them. Your number one question, discussion with the bondholders, there hasn’t been any former discussion with the bondholders. We need to make this very clear. There has been always a very close relationship with all our investors, shareholders and bondholders alike always on a public basis. The difference is that the company has been discussing with a representative of some of the bondholders, which got organized during the March 2015 consensus solicitation. And since October 2015, under the agreed terms of the guaranteed bond instrument, the company was required to sit down with the representative of the bondholders and engage into not discussing a transaction, but maintain a continuous dialogue with respect to the company’s position and this in different levels or the liquidity, strategy, operations, marketing. And this was made public. So hopefully I was clear on that. The company is not formerly engaged with the bondholders. With respect to the $15 million, do we expect $15 million including the top-up? The answer is yes. That is the agreement with the MNR. That was mentioned throughout the presentation by Jon and Tony. So I can’t comment further on that. So the expectation is yes. The number four, the no CapEx scenario and I’ll let John step in on that question and how potentially it could evolve in 2017 and 2018. Jon?

John Stafford: Thanks. Well, the effective no CapEx is difficult to quantify is the answer. And the way that these wells behave is that they flow naturally to surface and when they cease to flow is actually relatively difficult to predict, but clearly there is a predictable and stable pressure decline. The wells will decline overtime. By the end of 2017, we predict production performance of between in a zero investment case of anything between 34,000 barrels a day and 11,000 barrels a day.

Sami Zouari: Yes. Thank you, John. This is Sami again just to rebound on John’s comment. Which makes the 55,000 scenario and a very important – it demonstrate the investment case – the 55,000 barrel per day, not only to upgrade the production from 40,000 to 55,000, but also to capture and to be prepared for the future and to be prepared for the future as for in the case of any E&P company. You have not only to be prepared for the natural decline, but as John said potential loss of a well, which means an immediate loss of production and hence loss of revenues and there is nothing more I think worse than that for a producing company. Thank you.

Jon Ferrier: I think John you…

Charlie Sharp: Thank you very much and – please go ahead.

Jon Ferrier: John, I was going to address you. I think you asked whether there any payments contemplated by the agreement we’ve signed with the MNR. And the answer to that is no. And if anything this is about releasing payments from the MNR with respect to the government interest back-in rent.

Charlie Sharp: Thank you very much. And just to be clear than on the monthly payments. Is that are you expecting to be up to $15 million to be a net payment to your sales.

Jon Ferrier: Well. The – Tony, I let you address this. But just my quick comment on this. The top-up is to address Gulf Keystone past costs, while the monthly revenue is to be distributed amongst the JV partners in Gulf Keystone and MOL. Tony, did I get this right.

Tony Peart: Yes.

Jon Ferrier: Okay, thank you.

Operator: [Operator Instructions]

Jon Ferrier: Thanks, Pauline. Why are we waiting for one to come in? I’ve got a couple of more that have arrived by mail and I’ll ask Tony to address this one. Is there anything recoverable from past costs associated with the TPI interest?

Tony Peart: Thanks, Jon. No, there isn’t. So the settlement as I mentioned before is that the third-party interest is split between the government to receive 7.5% and it’s in the form of a carried interest and the other 7.5% is split between MOL and ourselves on a pro rata basis. So we get the additional focus and MOL gets a small percent. So there is no – does not – there is no provision for any payment of past costs. This is an effect the settlement in lieu of recovery past costs had a 15% interested party come in.

Jon Ferrier: Thank you, Tony. And thanks for related question for clarification is as per the RNS today, GKP’s fully diluted working interest in Shaikan will be 58% after the agreement. Is that correct?

Tony Peart: Correct. After the amendment to the PSC.

Jon Ferrier: Okay. And Pauline, if you’ve got nothing out there, we’ve used up the questions we’ve received here. So I’d like to thank everybody. Well, is there anything Pauline. No, thank you, well, in which case then, I will close this session. Thank everybody for their time and attention and their support of Gulf Keystone. Thank you very much.