Gulf Keystone Petroleum (LON:GKP) reported what management described as a strong operational and financial performance in 2025, highlighted by production in line with guidance, positive free cash flow, and the resumption of Kurdistan crude exports in September after a two-and-a-half-year hiatus. The company also said it began 2026 positively before shutting in production on February 28 amid a deterioration in the regional security environment.
2025 operations and export restart
Chief Executive Officer Jon Harris said 2025 production averaged “just over” 41,500 barrels of oil per day, up 2% year-over-year and toward the top end of the company’s tightened 40,000 to 42,000 barrel-per-day guidance range. Harris noted that, absent losses from trucking and security-related disruptions over the summer that averaged about 3,500 barrels per day on an annualized basis, 2025 would have been the company’s best year of production on record, which he said demonstrated the resilience of the Shaikan field.
2026 shut-in and guidance changes
Harris said the company started 2026 with gross production increasing to above 44,000 barrels of oil per day by the end of February following workovers and interventions. However, on February 28 the company shut in production as a safety precaution after strikes by the U.S. and Israel on Iran and a subsequent deterioration in the regional security environment.
Management said its assets had not been impacted to date and that measures were taken to protect staff. Harris said estimated annualized losses had been around 840 barrels of oil per week, reducing year-to-date production to just above 32,000 barrels of oil per day as of March 17. The company said it is ready to restart production and exports quickly if security conditions improve.
Given the interruption, Gulf Keystone placed prior 2026 guidance under review and suspended previously issued guidance for production, operating costs and G&A, and net capital spending. The company had previously guided to 2026 net capital expenditure of $40 million to $50 million.
Capital program and PF-2 water handling project
The company reported disciplined 2025 net capital spending of $39 million, which management said was in line with guidance and reflected investments in production-enhancing projects and safety upgrades at PF-2.
Harris said the company sanctioned the installation of produced water handling facilities at PF-2, a project intended to unlock production growth while reducing reservoir risk. Once operational, the new facilities are expected to unlock an estimated 4,000 to 8,000 barrels of oil per day of incremental gross production above the anticipated field baseline. The project is also expected to increase total dry and wet processing capacity to around 77,000 barrels of oil per day. Management said the facilities will be leased over a number of years following commissioning to minimize upfront capital expenditure and provide flexibility, and noted that good progress has been made so far.
Pricing, interim agreements, and receivables
Management said the interim export agreements provided immediate benefits compared with local sales. Harris cited increased cash receipts versus local sales of around $30 per barrel, consistent liftings and payments, and the recognition of contracts by Iraq “for the first time.” He added that the agreements also created a path toward international prices via top-ups for export sales since September 2025 and for future sales.
Based on 2025 export invoice revenue, the company cited an implied discount to Brent of around $13 per barrel, which it said was a significant improvement on local sales and better than historic export discounts. Management said it is too early to project a precise discount going forward, but said the “direction of travel is encouraging.”
The move toward international prices depends on the completion of a review by an international independent consultant of IOC invoices and contractual costs. Management said the review had been progressing well and that it expected the interim agreements—set to expire at the end of March—to be extended to allow completion of the consultant’s report. On the call, management said the review had been planned for completion in the first quarter, but it now expects “a bit of a delay.”
Chief Financial Officer Gabriel Papineau-Legris said adjusted EBITDA rose 46% year-over-year to $111 million, primarily due to higher realized prices visible in 2025 export sales invoiced. He also cited a 2% increase in production and continued cost control, noting operating costs and other G&A were in line with guidance and that OpEx of $4.3 per barrel remained “one of the lowest in the industry.”
Free cash flow in 2025 was $29 million. Papineau-Legris said free cash flow reflected increased EBITDA, offset by incremental capital spending and a working capital outflow related to export receivables. He said 2025 export payments equated to $30 per barrel, while realized prices of around $51 per barrel were reflected in invoices, resulting in a receivable of $33 million net to Gulf Keystone at year-end for recent export sales. He said the company expects to collect these amounts after the consultant’s review, likely through additional cargoes and associated payments.
The company also accrued a $32 million receivable under the interim agreements tied to an approximate two-month timing difference between production and payment, which management said related to fourth-quarter production and has now been collected, with consistent payments continuing into the first quarter of 2026.
Balance sheet, dividends, and reserves
Papineau-Legris said the company ended 2025 with $78 million of cash, and cash increased to $89 million “as at yesterday,” reflecting continued export payments. He said the company has no debt and emphasized flexibility in the cost base and capital program if the shut-in persists. In response to analyst questions, management said that while it was too early to give firm run-rate guidance, operating activity is currently minimal and it believes it can reduce outgoing cash costs below $7 million per month, potentially in the “$5-$6” million range, while balancing the need to restart quickly when conditions allow.
The company declared an interim dividend of $12.5 million, payable April 27, 2026. Management said the board approved the dividend after considering liquidity needs, the operating and security environment, and the company’s ability to adjust expenditures. Papineau-Legris said the board intends to review the feasibility of a supplementary dividend following a restart of production, exports, and payments, and indicated a decision could potentially come before the next scheduled distribution review.
On reserves, Harris said the company reported internally estimated gross 2P reserves of 416 million barrels at the end of 2025, down from 443 million barrels at the end of 2024. He attributed the reduction to 2025 production of 15.1 million barrels and minor revisions from updated modeling assumptions. Management also referenced gross 2C resources of 311 million barrels estimated in the 2022 competent person’s report, and said the Shaikan field has a reserve life of 27 years.
During webcast questions, Harris also discussed plans for Triassic development, saying the company’s approach has been to drill two or three appraisal wells and produce them into an early production scheme, with a six- to nine-month appraisal period before evaluating a full development. He described the KCA reservoir as containing 38 API oil and said the deeper reservoir appears to be a supercritical-phase gas condensate with high gas-oil ratio and sour characteristics, which could require a later-phase development.
Management said it remains focused on preserving liquidity and maintaining restart readiness, while continuing discussions with relevant ministries on export arrangements and negotiations with the Ministry of Natural Resources regarding historical commercial matters, including settlement of past oil sales arrears related to 2022 and 2023 invoices and other KRG-related assets and liabilities.
About Gulf Keystone Petroleum (LON:GKP)
Gulf Keystone Petroleum Limited engages in oil and gas exploration, development, and production in the Kurdistan Region of Iraq. The company operates Shaikan field that covers an area of approximately 280 square kilometers, which is located north-west of Erbil. It also provides management, support, geological, geophysical, and engineering services. The company was incorporated in 2001 and is based in Hamilton, Bermuda.
