Gulf Keystone is seeking a buyer for its interest in the Hassi Ba Hamou Permit in central Algeria. A sale of Gulf Keystone’s interest in the Permit is subject to approvals from the Algerian Government and the Company’s partners, Sonatrach and BG North Sea Holdings Limited (“BG”).
Following appraisal and exploration successes on the HBH Gas Project the partners in June 2008 elected to go into Phase 2 of the exploration contract with an additional three well and 2D seismic commitment. Planning for the development and commercialization of the Project has also begun but revenues are not expected to commence until 2014. Given the significant near-term upside potential of Gulf Keystone’s interests in Kurdistan, it is the Company’s considered view that shareholders’ interests would be best served by the Company focusing its resources entirely on its Kurdistan operations. Gulf Keystone has therefore suspended further investment in the Permit and, as a consequence, has opted not to pay certain due cash calls in respect of the Permit. BG, which acts as Operator of the Permit, has certain rights under the terms of the Joint Operating Agreement (“JOA”) which could, subject to certain Permit conditions, lead to Gulf Keystone’s withdrawal from the JOA and the Permit.
Todd Kozel, Executive Chairman of Gulf Keystone, commented, “Kurdistan offers our shareholders significant near-term upside potential and it is therefore strategically compelling that Gulf Keystone should focus all its cash resources and efforts on maintaining the fast pace of exploration drilling in the country. With the commencement of oil exports from Kurdistan any success from our current and planned well operations could lead to oil production revenues in a relatively short timeframe. This also means that we must take advantage of opportunities to realise value from assets where the returns are less compelling.”