G
u
l
f
K
e
y
s
t
o
n
e
P
e
t
r
o
l
e
u
m
L
i
m
i
t
e
d
A
n
n
u
a
l
r
e
p
o
r
t
a
n
d
a
c
c
o
u
n
t
s
2
0
2
2
Annual report and
accounts 2022
About us
Gulf Keystone is the
operator of the Shaikan
Field, one of the largest
oil fi elds in the Kurdistan
Region of Iraq.
2022 timeline
February:
Payment of $50 million interim dividend
April:
SH-15 brought online after drilling in record time
Payment of $65 million interim dividend
May:
Outstanding KRG arrears balance fully repaid
July:
Payment of ordinary and special dividends
totalling $75 million
August:
SH-16 spud
$100 million bond redeemed,
leaving GKP debt free
October:
Payment of $25 million interim dividend
November:
SH-17 spud
December:
SH-16 brought online on schedule
and on budget
International Border
Oil Pipelines
Shaikan Licence
Block Licences
DOHUK
DOHUK
DOHUK
DOHUK
DOHUK
DOHUK
ERBIL
ERBIL
ERBIL
ERBIL
ERBIL
ERBIL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
CHEMCHEMAL
SULEIMANIAH
SULEIMANIAH
SULEIMANIAH
SULEIMANIAH
SULEIMANIAH
SULEIMANIAH
SULEIMANIAH
SULEIMANIAH
KIRKUK
KIRKUK
KIRKUK
KIRKUK
2022 full-year highlights
44,202 bopd
record gross annual average production, up
from 43,440 bopd in 2021
817 MMstb
gross 2P reserves and 2C resources confi rmed
by 2022 CPR
$359 million
Adjusted EBITDA, a 61% increase vs 2021
$266 million
profi t after tax
$215 million
dividends distributed to shareholders
$100 million
outstanding bond repaid
$515 million
revenues (net) generated for the Kurdistan
Regional Government
$119 million
cash at year end(1)
74%
of GKP’s Kurdistan workforce are local nationals(1)
(1) As at 31 December 2022 .
Gulf Keystone Petroleum Limited Annual report and accounts 2022
1
Our purpose
GKP is a responsible energy
company developing natural
resources for the benefi t of all our
stakeholders, delivering social
and economic benefi ts by working
safely and sustainably with integrity
and respect.
Financial statements
Independent auditor’s report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement
of changes in equity
122
131
131
132
133
Consolidated cash fl ow statement 134
Summary of signifi cant
accounting policies
Notes to the consolidated
fi nancial statements
Non-IFRS measures
Report on Payments
to Governments
Glossary
Directors and advisers
Key shareholder engagements
135
144
159
161
162
163
164
Contents
Strategic report
Our investment case
Chairman’s statement
Chief Executive Offi cer’s review
Operational review
Financial review
Our asset
Business model
Strategy and objectives
Key performance indicators
Stakeholder engagement
Sustainability report
TCFD report
Management of principal risks
and uncertainties
Viability statement
Governance
Board of Directors
Corporate governance report
Nomination Committee report
Audit and Risk Committee report
2
4
6
8
12
16
22
24
26
28
32
52
66
76
78
80
90
94
Safety and Sustainability
Committee report
Technical Committee report
98
100
Remuneration Committee report
102
Directors’ report
Directors’ responsibilities
statement
119
121
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
READ MORE
on pages 6 to 7
CEO
review
Our
asset
READ MORE
on pages 16 to 21
READ MORE
on pages 32 to 51
Sustainability
report
2
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Our investment case
Long life asset with proven
production track record
Robust financial position
• Operator of the Shaikan Field, one of the largest oil
fields in Kurdistan;
• Low-cost operator, with top quartile operating and
G&A costs(4) underpinning cash flow generation;
• >117 million stock tank barrels (“MMstb”) produced
to date(1);
• 2022 Competent Person’s Report (“CPR”)
confirmed 2P reserves and 2C resources of 817
MMstb(2), 52 MMstb higher than previous 2020
CPR after adjusting for production; and
• Significant growth potential, with 2P
reserves-to-production ratio of 31 years(3).
• Capital discipline and flexibility, with profitable
investment in Shaikan Field predicated on
timeliness of oil sales payments and continued
robust oil prices; and
• Debt-free balance sheet.
>117 MMstb
oil produced from the Shaikan Field since first
commercial production in 2013
$3.2/bbl
gross Opex in 2022
31 years
2P gross reserves-to-production ratio
$119 million
cash balance as at 22 March 2023
Shaikan gross 2P reserves reconciliation
(2022 CPR vs 2020 CPR)
Net cash balance (2019-2023)(5)
505
34
506
Net cash
119
$100m bond
119
(33)
100% reserves
replacement
91
70
48
YE 2020 gross
2P reserves
2021 & 2022
production
Higher Jurassic
plateau rate
YE 2022 gross
2P reserves
(100)
2019
(100)
2020
(100)
2021
2022
22 Mar
2023
(1) As at 21 March 2023.
(2) ERCE Competent Person’s Report as at 31 December 2022.
(3) Gross 2P reserves of 506 MMstb as at 31 December 2022 / 2022 gross average production of 44,202 bopd.
(4) Benchmarked against international and Kurdistan peer group for 2019-2021 period.
(5) As at 31 December of each year, unless otherwise stated.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
3
Balancing investment in profitable
growth with sustainable
shareholder returns
Safety and sustainability
underpin our business
• Delivered 34% production growth from 2019 to
• Focused on enhancing the safety and sustainability
2022, while distributing $415 million to shareholders;
of our business;
• Targeting 2023 double-digit annual production
• Priorities for our sustainability strategy include
growth at mid-point of 46,000-52,000 bopd gross
guidance;
• Declared ordinary and interim dividend in 2023 year
to date, totalling $50 million and representing a 11%
dividend yield(6); and
• Subject to timely KRG payments and oil prices,
targeting step up in production levels through
execution of the Jurassic scope of the FDP while
continuing to advance towards key FDP sanction
milestones.
$50 million
2023 dividends declared
workforce health and safety, addressing
climate-related risks and opportunities, minimising
environmental impact, enhancing diversity and
inclusion, generating local economic value, and
strong governance and compliance;
• The Gas Management Plan will enable us to
eliminate almost all routine flaring and significantly
reduce our carbon intensity per barrel by 2025,
subject to timely sanction and implementation; and
• Disclosures fully consistent with TCFD(8)
recommendations for fiscal year 2022.
>50%
reduction in scope 1 emissions per barrel by 2025(9)
11%
2023 gross average production growth targeted at
mid-point of 46,000-52,000 bopd guidance
“A”
MSCI ESG Research rating(10)
Shareholder distributions (2019-2022)
MSCI ESG rating history (2019-2022)
Dividends
Share buybacks
AAA
$465 million
50
215
AA
A
BBB
A
A
BBB
100
BB
BB
BB
20
30
50
2019
2020
2021
2022
2023(7)
YTD
B
CCC
2018
2019
2020
2021
2022
(6) Based on GKP’s closing share price on 22 March 2023.
(7) Includes declaration of the final 2022 ordinary annual dividend of $25 million.
(8) Task Force on Climate-related Financial Disclosures.
(9) Against an original baseline scope 1 emissions intensity of 38 kgCO2e/bbl in 2020.
(10) MSCI ESG Research as at 25 October 2022. MSCI ESG Research aims to measure a company’s resilience to long-term, financially relevant ESG risks.
Companies are rated on a AAA-CCC scale relative to the standards and performance of their industry peers. “A” is at the upper end of the “average” rankings
of BB, BBB and A.
Strategic report
4
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Chairman’s statement
GKP’s disciplined
investment has enabled
the recent increase in
production to over
55,000 bopd.
Jaap Huijskes
Non-Executive Chairman
Gulf Keystone benefi tted from strong oil prices in 2022, with Dated
Brent averaging $101/bbl in the year, up $30/bbl from 2021.
However, volatility was high, with peaks of around $130/bbl in the
fi rst half of the year declining in the second half to around $80/bbl in
December, as concerns around energy security and supply defi cits,
driven primarily by the tragic confl ict in Ukraine and recovery in
global economic demand, transitioned to market fears of infl ationary
pressures, fi scal tightening and recession.
From an operational perspective, working patterns in the Shaikan Field
and our offi ces returned to normal following the disruption caused by
the COVID-19 pandemic. Safety was a major focus for the team as
activity ramped up, and the Board and I are pleased with the Company’s
performance in 2022. The Company is continuing to manage tightness
in regional and global supply chains, with ongoing pressure on
equipment lead times and cost pressures.
Looking at the geopolitical environment, while security in Kurdistan
was relatively stable in the year, the Iraqi Federal Supreme Court ruling
in February 2022 led to heightened tensions in the long-standing
dispute between Federal Iraq and the KRG regarding oil and gas
assets in Kurdistan. The situation has improved since the formation
of a new Federal Iraqi government in October 2022, with an active
dialogue taking place between both sides. Nonetheless, it remains
diffi cult to predict outcomes and the Board continues to monitor the
situation closely. We also continue to closely monitor and engage with
the KRG regarding the delays to recent oil sales payments and the
negotiation of a new lifting agreement. While historically payments
have been made, the recent delays have been disappointing. We are
experienced operating in Kurdistan and look to maintain a prudent level
of liquidity and fl exible capital programme to manage through periods
of uncertainty.
GKP 2022 total shareholder return vs peers and Brent Crude
133%
169%
83%
76%
59%
57%
48%
45%
43%
39%
18%
18%
14%
7%
4%
(5)%
(10)%
(10)%
(11)%
(20)%
-30
0
30
60
90
120
150
180
TAQA
IPC
Kosmos
Apache
Energean
GKP
ShaMaran
VAALCO
Africa Oil
Capricorn
DNO
Forza Petroleum
EnQuest
Brent Crude
Genel
Dana Gas
Pharos
Harbour Energy
SDX
Tullow Oil
Gulf Keystone Petroleum Limited Annual report and accounts 2022
5
The Board continued to engage with the Company’s shareholders
in 2022 and welcomes ongoing interaction and feedback with all
investors. We encourage GKP shareholders to participate in our
Annual General Meetings, which are accessible virtually to all investors.
While we saw voting turnout improve at the 2022 AGM, it remained
low relative to prior years and we continue to look at ways to improve
shareholder participation and voting at future general meetings.
We were delighted in July 2022 to welcome Wanda Mwaura to the
Board as a new Non-Executive Director and member of the Audit
and Risk Committee. Wanda brings over 25 years of expertise and
experience in accounting, external and internal audit, consulting,
regulatory and corporate governance to GKP. She is highly respected
and complements the Board with her extensive skill set.
GKP’s 2022 Full Year Results and Annual Report will be my last as
Non-Executive Chairman, as I prepare to hand over the role following
the 2023 AGM. It has been a distinct privilege to serve as Chairman
of GKP and I am proud of the significant achievements and progress
the Company has made during my tenure to create value for its
shareholders, Kurdistan and broader stakeholder base.
Since my appointment in 2018, GKP has increased gross average
production from an average of 31,563 bopd in 2018 to over
55,000 bopd recently. In the same period, GKP has distributed
$440 million in dividends and share buybacks to shareholders,
generated more than $1.8 billion in gross revenues for the KRG from
the Shaikan Field and maintained a strong balance sheet throughout,
against a backdrop of commodity price volatility and the COVID-19
pandemic. This performance has been underpinned by a rigorous
focus on safety and sustainability and strong leadership from the
Board, with regular Director visits to the Company’s operations
in Kurdistan.
I am delighted to be succeeded by Martin Angle, my esteemed fellow
Director and current Deputy Chairman and Senior Independent
Director (“SID”), and that Martin’s Deputy Chair and SID roles will be
taken on by Kimberley Wood, currently independent Non-Executive
Director. I have worked with both Martin and Kimberley since 2018 and
they have both made an enormous contribution to the Company and to
the Board. Their experience and expertise will be invaluable to GKP’s
future success.
On behalf of the Board, I would like to thank GKP’s leadership team
and all of the Company’s employees for their continued commitment
to safety, delivery of the Company’s strategy and relentless focus on
creating value for GKP’s shareholders and stakeholder base. We are
excited about the future and the year of significant activity ahead.
Jaap Huijskes
Non-Executive Chairman
22 March 2023
Against this backdrop, GKP delivered strong operational and financial
results in 2022 and continued execution of its strategy of balancing
investment in growth with sustainable shareholder returns, while
maintaining a robust balance sheet and prudent liquidity levels.
From an operational perspective, the Company achieved its 2022
production guidance and completed a significant work programme,
paving the way for expected future increases in production.
The Company also advanced towards approval of the Shaikan Field
Development Plan (“FDP”). From a financial perspective, strong oil
prices and continued cost control and capital discipline supported
significant cash flow generation, enabling the Company to fund
its investment programme, pay record dividends to shareholders
of $215 million and strengthen its balance sheet through the early
redemption of the outstanding $100 million bond. The Company
delivered top quartile total shareholder returns of 57% in the year,
assuming dividends reinvested.
The Company has seen a material increase in production in 2023,
with production recently exceeding 55,000 bopd. The achievement of
this important milestone has been supported by the Company’s 2022
investments and decision to proceed with the execution of the FDP’s
Jurassic scope.
Looking ahead to 2023, the Company is currently reviewing its forward
capital programme in light of continued delays to KRG payments.
Subject to timely payments and oil prices, the Company will continue
to transition to increased investment in profitable production growth
while advancing towards key project sanction milestones of the
full FDP, which the Board expects to maximise long-term value
for shareholders and Kurdistan. The Board and I are pleased the
2022 Competent Person’s Report reaffirms the significant growth
potential of the Shaikan Field, with 817 MMstb 2P reserves and 2C
resources, 100% reserves replacement since the 2020 CPR and a 2P
reserves-to-production ratio of 31 years.
As the Company progresses, the Board will manage the balance
between investment in growth, shareholder returns and balance sheet
strength according to a disciplined financial framework.
The Board is committed to paying an ordinary dividend of at least
$25 million per annum and distributing excess cash to shareholders
by way of dividends and/or share buybacks. In determining the level
of distributions, the Board regularly reviews the Company’s expected
liquidity, cash flow generation and investment needs. We are pleased to
have declared total dividends in 2023 to date of $50 million, including
the declaration of a $25 million 2022 ordinary annual dividend for
shareholder approval at the Company’s AGM on 16 June 2023.
Sustainability continues to be a strategic priority for GKP and the
Board has direct oversight and responsibility for the Company’s
strategy. The strategy has a number of objectives, of which
addressing climate-related risks and opportunities is key. For fiscal
year 2022, the Company’s disclosures are fully consistent with all of
the Task Force on Climate-related Financial Disclosures (“TCFD”)
recommendations, reflecting how a focus on climate-related risks
and opportunities is embedded into the Company’s strategy and
governance, including risk management. The Company also continued
to make significant progress in the year in supporting the development
of its workforce, increasing gender diversity, generating material
economic and social value for Kurdistan and the Company’s local
communities, as well as continuing to maintain strong corporate
governance, ethical business conduct and compliance.
Strategic report 6
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Chief Executive Offi cer’s review
As we increase investment
in profi table growth,
we remain focused on
delivering our strategy.
Jon Harris
Chief Executive Offi cer
In 2022, we delivered strong operational and fi nancial performance as
we continued to execute our clear strategy of balancing investment in
profi table growth with shareholder returns while maintaining a robust
balance sheet.
We commenced the execution of the Phase 1 Shaikan Field
Development Plan (“FDP”) Jurassic scope with the agreement of the
MNR, comprising additional wells (with SH-15 and SH-16 completed in
2022 and SH-17 and SH-18 completed or currently underway in 2023)
and early works related to the expansion of our production facilities.
We also delivered another year of record production and made good
progress towards key FDP sanction milestones.
We generated record Adjusted EBITDA in 2022, driven by higher
production, strong oil prices and a continued focus on cost
management and effi ciency, resulting in a more than doubling of free
cash fl ow to $266 million. Strong cash fl ow generation enabled us to
fund our capital programme and pay sector-leading dividends to our
shareholders of $215 million, bringing total shareholder distributions
to $415 million since 2019, while at the same time strengthening our
balance sheet through the redemption of our $100 million bond.
We are now debt free.
Our performance, as always, was underpinned by a rigorous focus
on safety, with zero Lost Time Incidents (“LTIs”) in the year and only
one recordable incident.
Gross average production in 2022 was 44,202 bopd, within our
annual guidance range. Despite the small increase versus 2021,
our 2022 work programme has laid the foundations for a material
increase in future production. Our drilling performance is improving
and we are delivering wells on or below budget. The latest well,
SH-18, is progressing well and we expect start up in Q2 2023, in line
with our previous guidance. Continuous drilling has been facilitated
by our investment in well pad preparation, fl owlines and long lead
items. In addition, completion of early work for the production facility
expansion in 2022 has positioned us to increase total fi eld processing
capacity to 85,000 bopd and install water handling capacity in
H2 2024.
As we enter 2023, it is clear that our investments in 2022 and
decision to progress the Jurassic scope of the FDP are beginning
to pay off . Gross average production in 2023 year to date has been
c.48,900 bopd, while gross average production in March to date has
been c.53,500 bopd, including the achievement of a new production
record of over 55,000 bopd in the last few days, an important milestone
for the Company.
We continue to see signifi cant growth potential from the Shaikan Field,
with the 2022 Competent Person’s Report (“CPR”) confi rming gross
2P reserves and 2C resources of 817 MMstb, 52 MMstb higher than
the previous CPR from 2020 after adjusting for production. The 2022
CPR shows 100% reserves replacement, driven by a higher plateau
rate of 85,000 bopd from the Jurassic reservoir and accelerating post
licence production.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
7
We have an exciting year ahead of us at Gulf Keystone and a number
of opportunities to create significant value for our shareholders and
broader stakeholder base. I want to provide my heartfelt thanks to
GKP’s teams in Kurdistan and the UK, whose continued hard work and
innovation are enabling the Company to deliver against its strategy.
I would also like to thank Jaap Huijskes, who will be stepping down
following the 2023 AGM, for all his help and stewardship in my first
two years as CEO. I wish him well for the future.
Jon Harris
Chief Executive Officer
22 March 2023
In addition, we see an excellent opportunity to create value for our
shareholders. Returns on capital from incremental investment in the
Shaikan Field are attractive, as the payback of investment under the
Shaikan Production Sharing Contract accelerates as we recover our
historic costs. By increasing profitable production, we also expect to
enhance the sustainability and longevity of the Company’s capacity for
shareholder distributions.
Looking ahead, our intention is to continue our transition towards
increased investment in profitable production growth, expanding
the Jurassic reservoir while advancing towards key project sanction
milestones of the FDP. However, given continued delays to KRG
payments, we are currently reviewing our forward capital programme
and 2023 net capital expenditure guidance of $160-$175 million.
With further clarity around KRG payments, we would consider
continued drilling following SH-18. However, we will also review
potential reductions to our capital programme should payment
delays continue.
As we increase investment in profitable production growth through a
flexible capital programme, we remain focused on delivering against
our strategy of balancing growth with sustainable shareholder
returns, while maintaining a robust balance sheet and prudent
liquidity levels. We are pleased to declare a final 2022 ordinary
annual dividend of $25 million subject to shareholder approval at the
AGM on 16 June 2023, increasing total dividends declared in 2023
to $50 million and equating to an 11% yield for 2023, based on the
closing share price on 22 March 2023. The Board remains committed
to distributing excess cash to shareholders by way of dividends and/or
share buybacks and will continue to review distribution decisions based
on a disciplined financial framework.
Strategic report 8
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Operational review
We delivered strong
operational performance
in 2022, laying the
foundation for
future growth.
John Hulme
Chief Operating Offi cer
We delivered strong operational performance in 2022, safely achieving
higher production while investing in future growth and further
advancing towards approval of the Shaikan Field Development Plan
(“FDP”). We also continued to execute our sustainability strategy with
progress in several areas.
Throughout the year, the health and safety of our workforce and local
communities remained our priority. We were pleased to record zero
Lost Time Incidents (“LTIs”) in 2022, despite a more than 50% increase
in working hours to 2.2 million hours. Unfortunately, we experienced an
LTI in January 2023 during drilling operations and we are implementing
remedial actions. As at 22 March 2023, we have been operating for
over 60 days without an LTI.
We achieved gross average production of 44,202 bopd in 2022, a
2% increase versus 2021 and in line with our revised annual guidance
range of 44,000-47,000 bopd. Production was supported by
incremental volumes from SH-13 and SH-14, brought on stream in
December 2021, and from SH-15 and SH-16, which started up in April
and December 2022 respectively. Increases were mostly off set by the
continued prudent management of well production rates to avoid trace
amounts of water production ahead of installation of water handling
capacity, including the shut-in of SH-12 for most of H1 2022, as well as
the temporary shut-in of one well during Q4 2022 due to an isolated
electrical submersible pump (“ESP”) electrical failure.
We delivered a signifi cant work programme in 2022 as we commenced
execution of the FDP Jurassic scope that positions us to drive
profi table future production growth. Drilling activities in 2022 included
the start-up of SH-15 and SH-16 and spud of SH-17 which was
completed in early 2023 and started producing in February 2023.
We have seen the benefi t of a continuous drilling programme with a
general decline in drilling costs and times, while investments in the year
in well pad preparation, fl owline installation and long lead items have
enabled us to maintain momentum.
In addition, we advanced the expansion of the production facilities in
the year, carrying out early engineering and construction work and
progressing the procurement of long lead items, despite ongoing
equipment lead time and cost pressures, positioning us to increase
total fi eld processing capacity to 85,000 bopd and install water
handling capacity in H2 2024. Water handling capacity will potentially
enable us to increase production rates from constrained wells which
we are currently prudently managing to avoid traces of water.
Shaikan Field Development Plan
We are continuing to progress towards approval of the FDP.
Since the initial draft was submitted in November 2021, we have
engaged extensively with the MNR and have substantially fi nalised
the technical scope and future work programme. We continue to
progress key project milestones, including optimising the work
programme to phase activity and facilitate accelerated cost recovery,
negotiating commercial terms including a potential update to the
Shaikan Production Sharing Contract (“PSC”) with the target of
ensuring changes are at least value neutral, and concluding the
Gas Management Plan tendering process and, as appropriate,
fi nancing arrangements.
As we progress, we have agreed with the MNR to execute the
Jurassic scope of the FDP before approval, to date drilling or in the
process of drilling a total of four FDP wells – SH-15, SH-16, SH-17 and
SH-18 – and advancing the expansion of the production facilities.
We remain focused on testing the Triassic reservoir, targeting
initial pilot production of up to 10,000 bopd, and implementing the
Gas Management Plan, which, depending on timely sanction and
implementation, will enable us to eliminate almost all routine fl aring,
a requirement of the PSC, and more than halve our scope 1 emissions
intensity by 2025 versus the original 2020 baseline.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
9
Gross 2P reserves have increased 7% to 506 MMstb relative to
2020 CPR volumes adjusted for production, with 100% reserves
replacement during the period. The increase is driven by the higher
plateau rate of 85,000 bopd from the Jurassic reservoir, bringing
more reserves volumes into the licence period. Gross 1P reserves of
199 MMstb are 4% lower relative to 2020 CPR volumes adjusted for
production due to prudent management of production rates to avoid
traces of water ahead of water handling installation.
Gross 2C resources of 311 MMstb have increased 6% relative to 2020
CPR volumes due to higher planned production processing capacity.
2022 Competent Person’s Report
We are pleased to announce the 2022 Competent Person’s Report,
an updated independent third-party evaluation of the Company’s
reserves and resources prepared by ERC Equipoise (“ERCE”).
The 2022 CPR incorporates significant incremental information,
including an updated field development plan, new wells, production
data and further technical analysis, since the previous CPR dated
31 December 2020 also prepared by ERCE.
The 2022 CPR confirms the Shaikan Field’s significant gross 2P
reserves and 2C resources of 817 MMstb, 52 MMstb higher than the
previous 2020 CPR after adjusting for production during the period.
It underlines the significant growth potential of the asset, with a gross
2P reserves-to-production ratio of 31 years, based on 2022 gross
production. It also reaffirms our deep understanding of the reservoir,
which has produced over 117 MMstb to date.
2022 CPR: Shaikan gross reserves and resources
Jurassic
Triassic
Cretaceous
Total 2C:
311 MMstb
Total 2P + 2C:
817 MMstb
53
157
101
53
157
607
900
800
700
600
500
400
300
200
100
0
b
t
s
M
M
Total 2P
506
2P(1)
reserves
2C(2)
resources
2P + 2C(3)
Including estimated 1P reserves of 199 MMstb.
(1)
(2) Contingent resources volumes are classified as such because there is technical and commercial risk involved with their extraction. In particular, there may be a
chance that accumulations containing contingent resources will not achieve commercial maturity. The 2C (best estimate) contingent resources presented are not
risked for chance of development. All Contingent resource volumes quoted in this document are volumes which could be extracted prior to licence expiry.
(3) Aggregated 2P+2C estimates should be used with caution as 2C contingent resources are commercially less mature than the 2P reserves.
Strategic report 10
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Operational review continued
Current operational activity and 2023 outlook
We have seen a step up in production in 2023, with gross average
year-to-date production of c.48,900 bopd and gross average
production in March to date of c.53,500 bopd. In the last few days,
we are delighted that production has exceeded 55,000 bopd.
Production growth has been supported by the continued ramp up of
SH-16, production from SH-17, which we are gradually ramping up,
and our well workover programme. Production increases have more
than offset the minor impact of the temporary suspension of pipeline
exports in February following the tragic earthquakes in
Turkey and Syria.
Looking ahead to the rest of the year, we are currently reviewing our
forward capital programme and 2023 net capital expenditure guidance
of $160-$175 million, given continued delays to KRG payments.
Our current guidance includes the completion of SH-17 and the drilling
and completion of SH-18, further investment in well pad preparation
and long lead items for continuous drilling and the continued
progression of the production facility expansion. With further clarity
around KRG payments, we would consider continued drilling following
SH-18. However, we will also moderate investment levels should
payment delays continue.
We remain focused on delivering our production guidance of
46,000-52,000 bopd, representing 11% growth at the mid-point
versus 2022, as we continue to target start-up of SH-18 in Q2 2023.
While we have seen strong recent production, we continue to manage
well production rates ahead of water handling installation and are
optimising production from a single well near the gas cap due to higher
gas production, in line with our reservoir modelling. Estimated base
natural declines of 6-10% per annum across the Shaikan Field remain
low relative to the industry and are in line with our expectations and
development plan, even following production of over 117 million barrels
to date.
Sustainability strategy
We continued to deliver against our sustainability strategy in
2022, which is critical to the creation of long-term value for all our
stakeholders and our licence to operate. Our strategic priorities include
working safely, minimising our impact on the environment, addressing
climate change, enhancing diversity and inclusion, generating local
economic value and strong governance and compliance.
There were a number of highlights to note, which we will publish as
part of our 2022 Annual Report and Sustainability Report, but I am
particularly pleased that this year our disclosures are fully consistent
with all of the TCFD recommendations as the Company continues to
address climate-related risks and opportunities, in particular through
progression of the Gas Management Plan tendering process and
development of a number of other decarbonisation opportunities.
As we progress, we expect to see increases in our emissions
principally due to higher oil production and higher gas production
from a single well near the gas cap. Subject to timely sanction and
implementation, the Gas Management Plan will enable us to eliminate
almost all our routine flaring and more than halve our scope 1 emissions
intensity by 2025. We are also targeting further emissions reductions
through other decarbonisation projects and are proceeding in the near
term to eliminate methane venting from our production facility storage
tanks, which we expect to complete in 2024.
We also continued to make a significant contribution to Kurdistan
and our local communities, generating $515 million net from the
Shaikan Field for the KRG, employing almost 350 Kurdistan nationals,
representing three-quarters of our workforce in country, increasing our
purchasing and contracting with local suppliers by 31% to $64 million
and spending over $1 million gross on impactful projects for our local
communities focused on agriculture, education and infrastructure.
In addition, we remain focused on investing in the development of our
people and improving the diversity of our teams. The proportion of
women in our workforce increased to 14% in 2022 from 9% in 2021,
a figure which we hope to build momentum on into 2023 and beyond.
John Hulme
Chief Operating Officer
22 March 2023
Gulf Keystone Petroleum Limited Annual report and accounts 2022
11
Q&A
with John Hulme, COO
Q.
What attracted you to GKP?
A.
The Shaikan Field is a world-class asset, with a long track record
of low-cost, cash generative production and huge future growth
potential. It was clear to me from speaking to the Board and
management team that there is an ambitious vision to capitalise
on this opportunity, as well as a strong focus on health and safety,
sustainability and collaboration. GKP is a company that I knew
I would be proud to work for.
Q.
What role does GKP and the oil and gas industry
play in Kurdistan?
A.
The oil and gas industry is one of the key drivers of financial health
and social and economic development in Kurdistan. As the operator
of the Shaikan Field, one of the largest oil fields in Kurdistan and
accounting for around 10% of the region’s production in 2022,
we play a critical role in the future of the region. We have plans to
double our level of production, which will significantly increase
our footprint. That means more investment, more revenue for
the government, more jobs and more development for local
communities in the Shaikan area.
Q.
Q.
What have been the key highlights and learnings
after almost one year in the role?
How important is sustainability to GKP’s strategy
and business model?
A.
The main highlight for me has been witnessing the dedication and
commitment from our teams in Kurdistan and the UK. It is clear that
they have immense pride in their work and that feeds into the quality
of our operations. I’ve quickly learnt that the potential I saw when
I first joined the Company only scratched the surface compared
to the opportunity I see now. The Field Development Plan will
eventually result in a material step up in production for GKP and it
has the potential to completely transform the Company, creating
significant value for all stakeholders.
A.
Sustainability is central to our strategic focus. It is not only critical for
our mandate to operate as a listed company, but it is fundamentally
linked to long-term value creation for our stakeholders. We have
made excellent progress on our sustainability strategy in 2022,
including upgrading our disclosures to be fully consistent
with the Task Force on Climate-related Financial Disclosures
recommendations, and we continue to look at ways to further
embed sustainable practices across our entire organisation.
Strategic report
12
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Financial review
Strategically, we are
committed to balancing
investment in profi table
production growth with
returns to shareholders.
Ian Weatherdon
Chief Financial Offi cer
Key fi nancial highlights
Gross average production(1)
Dated Brent(2)
Realised price(1)
Discount to Dated Brent
Revenue
Operating costs
Gross operating costs per barrel(1)
Other general and administrative expenses
Incurred in relation to Shaikan Field
Corporate G&A
Share option expense
Adjusted EBITDA(1)
Profi t after tax
Basic earnings/(loss) per share
Revenue and arrears receipts(1)
Net capital expenditure(1,3)
Free cash fl ow(1)
Dividends
Cash and cash equivalents
Face amount of the Notes
Net cash(1)
Year ended
Year ended
31 December 31 December
2021
2022
bopd
$/bbl
$/bbl
$/bbl
$m
$m
$/bbl
$m
$m
$m
$m
$m
$m
cents
$m
$m
$m
$m
$m
$m
$m
44,202
43,440
101.4
74.1
27.2
460.1
41.9
3.2
12.2
5.2
7.0
13.8
358.5
266.1
123.5
450.4
114.9
266.5
215
119.5
0.0
119.5
70.8
49.7
21.1
301.4
34.4
2.7
13.6
4.1
9.5
8.5
222.7
164.6
77.1
221.7
46.2
122.2
100
169.9
100.0
69.9
(1) Gross average production, realised price, gross operating costs per barrel, Adjusted EBITDA, revenue and arrears receipts, net capital expenditure,
free cash fl ow and net cash are either non-fi nancial or non-IFRS measures and, where necessary, are explained in the summary of non-IFRS measures.
(2) Weighted average GKP sales volume price.
(3) 2021 restated as the defi nition of net capital expenditure was amended to no longer exclude the increase/decrease of drilling and other equipment.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
13
Record profitability and cash flow generation in 2022 were driven by
an increase in the oil price, higher production and a continued focus
on cost control. The Company increased net capital expenditure while
maintaining capital discipline to drive future production growth and
paid oil and gas sector leading dividends, while maintaining a robust
balance sheet and prudent liquidity levels to manage potential risks,
including KRG payment delays.
152
3
(11)
(8)
3
(5)
2
359
Adjusted EBITDA
400
350
300
250
223
200
m
$
150
100
50
0
2021
Adjusted EBITDA
Oil
price
Production
CBP(1)
Operating
costs
Other
G&A
Share option
expense
Other
2022
Adjusted EBITDA
Adjusted EBITDA increased by 61% in 2022 to $358.5 million
(2021: $222.7 million), driven by a strong increase in the oil price and
higher production, partly offset by higher operating costs, share option
expense and capacity building payments.
Gross average production was 44,202 bopd in 2022, up 2% from
43,440 bopd in 2021 and within the Company’s 2022 guidance range.
Revenue increased by 53% to $460.1 million (2021: $301.4 million),
driven by our leverage to the 43% increase in Dated Brent price from
an average of $70.8/bbl in 2021 to $101.4/bbl in 2022. The increase
was partially offset by a corresponding $11.4 million increase in
capacity building payments to $34.9 million (2021: $23.5 million),
which is a component of the KRG’s entitlement from the Shaikan Field.
The average realised price per barrel increased by 49% in the year to
$74.1/bbl (2021: $49.7/bbl), including the impact of an increase in the
discount to Dated Brent to $27.2/bbl (2021: $21.1/bbl). The increase in
the discount reflected a new pricing mechanism proposed by the KRG
for Shaikan oil sales changing the reference price from Dated Brent to
KBT, effective 1 September 2022, and increased pipeline tariffs.
While the Company has not accepted the proposed pricing
mechanism, revenue from September 2022 to December 2022 has
been recognised on this basis, resulting in an average reduction in the
realised sales price versus the previous pricing mechanism over the
four-month period of approximately $12/bbl or $23.4 million.
If the new pricing mechanism had been in place throughout 2022,
the reduction in monthly Shaikan realised prices would have ranged
from $4/bbl to $13/bbl versus the previous pricing mechanism,
assuming KBT crude specs during Q3 2022 were representative of
those during H1 2022. While it is difficult to predict how pricing will
evolve going forward given the historic fluctuation of KBT prices,
the KBT discount to Dated Brent has tightened since November 2022,
with the impact on Shaikan realised prices versus the previous pricing
mechanism decreasing to $6/bbl in February 2023.
Gulf Keystone continues to maintain a rigorous focus on cost
control. Gross operating costs per barrel increased to $3.2/bbl in
2022 (2021: $2.7/bbl), in line with the Company’s 2022 guidance
range of $2.9-$3.3/bbl. The increase in operating costs in 2022 to
$41.9 million (2021: $34.4 million) was primarily driven by an increase
in staff costs reflecting increased activity, as well as incremental
maintenance activity.
Other general and administrative expenses (“G&A”), comprising
Shaikan Field and corporate G&A, were 10% lower in 2022 at
$12.2 million (2021: $13.6 million), reflecting increased capitalisation
due to accelerating capital activity resulting in a more than doubling of
net capital expenditure. Share option expense in the period increased
by $5.3 million to $13.8 million (2021: $8.5 million), principally due to
the final contractual exercise of share option entitlements by former
Directors under the 2016 Value Creation Plan (“VCP”).
(1) Capacity building payments.
Strategic report 14
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Financial review continued
Profit after tax
Profit after tax increased to $266.1 million (2021: $164.6 million) driven by the increase in Adjusted EBITDA, partly offset by higher depreciation,
depletion and amortisation (“DD&A”) expense of $80.2 million (2021: $54.1 million) due to increased production, accelerated cost recovery as
result of recent high oil prices, and updated future capital cost estimates.
Cash flows
600
500
400
300
)
m
$
(
200
170
100
0
Opening
cash
(31 December
2021)
Free cash flow: $266 million
32
359
(115)
(10)
(215)
119
119
(102)
Adjusted
EBITDA
Working
capital
Net
Capex
Interest
Dividends
Bond
redemption
Closing
cash
(31 December
2022)
Cash balance
(22 March
2023)
The Company more than doubled cash from operating activities to
$374.3 million (2021: $178.5 million) primarily due to the increase in
Adjusted EBITDA.
In 2022, Gulf Keystone received revenue receipts from the KRG
of $450.4 million net to GKP for crude oil sales related to the
September 2021 to July 2022 invoices and repayment of arrears
outstanding from November 2019 to February 2020 invoices, which
were fully recovered with payment of the March 2022 invoice.
Since the beginning of 2023, the Company has received a further
$65.7 million net to GKP for crude oil sales related to the August and
September 2022 invoices. Discussions are ongoing with the KRG
regarding payments for October to December 2022 crude oil sales,
which are overdue and amount to $76.0 million net on the basis of the
KBT pricing mechanism.
During the year, the Company invested net capital expenditure of
$114.9 million (2021 restated: $46.2 million), in line with final 2022
guidance of $110-$120 million, to drive future profitable production
growth. $63.4 million was spent on the drilling of SH-15, SH-16 and
SH-17 that was completed in early 2023. $35.8 million was invested
in early work for the expansion of the production facilities with water
handling capacity, as well as future well pad preparation costs.
$15.7 million was invested in well workover and interventions to
optimise production.
Free cash flow generation was $266.5 million in 2022, more than
double the prior year (2021: $122.2 million), enabling the Company
to continue to deliver against its strategic commitment of balancing
investment in growth with returns to shareholders, while maintaining
a robust balance sheet.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
15
In 2022, GKP paid record dividends of $215 million, representing a
sector-leading dividend yield of 41% based on the closing share price
on 31 December 2022.
In early August 2022, the Company redeemed the $100 million of notes
outstanding, leaving the Company debt free with significant financial
capacity. Net cash increased from $69.9 million at 31 December 2021
to $119.5 million at 31 December 2022. The Company continues to
maintain a robust balance sheet with cash and cash equivalents of
$118.8 million at 22 March 2023.
As at 31 December 2022, there were $213 million gross of unrecovered
costs, subject to potential cost audit by the KRG. The R-factor,
calculated as cumulative gross revenue receipts of $2,078 million
divided by cumulative gross costs of $1,760 million, was 1.18.
The unrecovered cost pool and R-factor are used to calculate monthly
cost oil and profit oil entitlements, respectively, owed to the Company
from crude oil sales.
The Group performed a cash flow and liquidity analysis, including
the impact on the Group’s working capital position due to delays in
revenue receipts from the KRG and the proposed revision to the
lifting agreement, based on which the Directors have a reasonable
expectation that the Group has adequate resources to continue to
operate for the foreseeable future. Therefore, the going concern basis
of accounting is used to prepare the financial statements.
Outlook
Given continued delays to KRG payments, we are currently reviewing
our forward capital programme and 2023 net capital expenditure
guidance of $160-$175 million. Our guidance includes $30-$35 million
related to drilling costs and well workovers, $45-$50 million related
to long lead items and well pad preparation and $85-$90 million
related to the expansion of the production facilities and installation of
water handling. With further clarity around KRG payments, we would
consider continued drilling following SH-18. However, with continued
payment delays we would review reductions to our capital programme.
We remain focused on delivering 2023 gross average production of
46,000-52,000 bopd, representing an 11% increase from 2022 at the
mid-point. We also continue to target gross Opex of $3.0-$3.4/bbl
in 2023, implying no change from 2022 gross Opex per barrel at the
mid-point of guidance.
Financial framework and shareholder distributions
As we continue to transition towards increased investment in profitable
production growth from the Jurassic reservoir through a flexible capital
programme, we remain focused on balancing investment in growth
with sustainable shareholder returns, while looking to maintain a robust
balance sheet and prudent liquidity levels.
Given our oil price outlook and flexible capital programme, we currently
have no hedging programme in place. We consider hedging on an
ongoing basis, taking into account macro-economic and corporate
considerations.
In line with the Company’s dividend policy and financial framework,
we paid an interim dividend of $25 million to shareholders on
3 March 2023 and we are pleased to declare a $25 million final 2022
ordinary dividend for shareholder approval at the Company’s AGM on
16 June 2023. Total dividends declared in 2023 of $50 million equate to
an 11% yield based on the closing share price on 22 March 2023.
The Board remains committed to distributing excess cash to
shareholders by way of dividends and/or share buybacks and will
continue to review further distributions based on a rigorous framework
that includes an assessment of the outlook for oil prices, timeliness of
payments from the KRG, expected liquidity, cash flow generation and
future PSC and capital commitments.
Ian Weatherdon
Chief Financial Officer
22 March 2023
Strategic report 16
16
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Our asset
The Shaikan Field is a long-life asset, with a proven track record
of low-cost production and significant growth potential.
Overview
The Shaikan Field is one of the largest oil fields in the Kurdistan
Region of Iraq by reserves and production, with 817 MMstb of
gross reserves and resources and accounting for around 10% of
total crude production from the region in 2022. Located around
60 kilometres north-west of Erbil, the largest city in Kurdistan, and
at the north-west end of the Zagros Fold-belt, the Field spans an
area of approximately 280 square kilometres.
The Shaikan Field Production Sharing Contract (“PSC”) was
awarded in 2007 by the KRG, with oil discovered in 2009 through
the SH-1 well and first commercial production achieved in July 2013.
Since then, over 117 MMstb of oil has been produced, with gross
average production increasing by 40% between 2018 and 2022.
Gulf Keystone is operator of the Shaikan Field with an 80% working
interest. The remaining 20% is held by our partner MOL. We share
the revenues generated by the Field with the KRG, based on the
terms of the Shaikan PSC. GKP’s entitlement includes the recovery
of our investment in the Field through cost oil and a share in the
profits through profit oil. In 2022, our entitlement(1) was around 37%
of total Shaikan Field revenues, based on the current mechanics of
the PSC.
Shaikan Field production as % of KRG production (‘000 bopd)(2)
% of total KRG production
8%
31.6
7%
32.9
8%
36.6
10%
43.4
10%
44.2
2018
2019
2020
2021
2022
(1) Net revenue to GKP after capacity building payments.
(2) Source: Deloitte reviews of Kurdistan Regional Government of Iraq’s oil production, export, consumption and revenue; KRG production defined as
“total exported and consumed”.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
17
17
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
r
r
e
e
p
p
o
o
r
r
t
t
Infrastructure
The Shaikan Field consists of 16 production wells connected to two production facilities, PF-1 and PF-2. Since the beginning of 2022,
three new wells have been drilled and brought online – SH-15 and SH-16 in 2022 and SH-17 in February 2023. A fourth production
well, SH-18, was spudded in Q1 2023 and is expected to start up in Q2 2023. Total facilities processing capacity is currently around
60,000 bopd and the production facilities are being expanded with the objective of increasing capacity to 85,000 bopd in H2 2024
(see Shaikan Field Development Plan on page 19).
SH-4
SH-18
SH-9
SH-16 & SH-17
SH-11
SH-10
SH-14
SH-5
SH-1
SH-7
PF-1
SH-3
SH-8
SH-15
SH-12
SH-13
SH-2
SH-6
0
2.5
5
KILOMETRES
PF-2
PIPE YARD
Key
Current wells
Facilities
Flowlines
Oil pipelines
River network
Well drilling
Block boundaries
The Shaikan Field consists of three fractured carbonate
reservoirs, the Cretaceous, the Jurassic and the Triassic, with the
Cretaceous being the shallowest and the Triassic the deepest.
Crude oil contained in the Cretaceous and Jurassic reservoirs
is relatively heavy, with the Cretaceous containing bituminous
oil between 12-15° API and the Jurassic holding heavy oil with a
slightly higher API of 15-17°.
The Triassic reservoir contains light oil with gas condensate of
between 38-43° API.
Shaikan Field production to date has been entirely from the
Jurassic reservoir. Looking forward, our focus in the near term is
driving production growth from the Jurassic with a fl exible capital
programme and, over time, introducing lighter oil from the Triassic
reservoir as part of the Shaikan Field Development Plan.
Shaikan Field reservoir geology
0
-500
) -1,000
s
e
r
t
e
m
(
h
t
p
e
D
-1,500
-2,000
-2,500
Cretaceous
Jurassic
Triassic
Sarmord
Garagu
Chia Gara
Barsarin
Upper Jurassic
Lower Jurassic
Baluti
Triassic Reservoirs
Water in fractures
Isotherm
Fracture OWC
Matrix OWC
Oil
Gas
Anhydrite
Anhydrite
ShaleShaleShale
18
18
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Our asset continued
Reserves and resources
2022 Competent Person’s Report
In March 2023, the Company announced the 2022 Competent Person’s Report (“2022 CPR”), an updated independent third-party
evaluation of the Company’s reserves and resources prepared by ERC Equipoise (“ERCE”). The 2022 CPR incorporates significant
incremental information, including an updated field development plan, new wells, production data and further technical analysis, since
the previous CPR dated 31 December 2020 also prepared by ERCE.
The 2022 CPR confirms the Shaikan Field’s significant gross 2P reserves and 2C resources of 817 MMstb, 52 MMstb higher than the
previous 2020 CPR after adjusting for production during the period:
• gross 2P reserves have increased 7% to 506 MMstb relative to 2020 CPR volumes adjusted for production, with 100% reserves
replacement during the period. The increase is driven by the higher plateau rate of 85,000 bopd from the Jurassic reservoir, bringing
more reserves volumes into the licence period;
• gross 1P reserves of 199 MMstb are 4% lower relative to 2020 CPR volumes adjusted for production due to prudent management of
production rates to avoid traces of water ahead of water handling installation; and
• gross 2C resources of 311 MMstb have increased 6% due to higher planned production processing capacity.
Gross reserves and resources(1) based on the 2022 CPR compared to the 2020 CPR are as follows:
Reserves
Resources
Formation (MMstb)
31 December 2022
Jurassic
Triassic
Cretaceous
Total – gross
31 December 2020
Jurassic
Triassic
Cretaceous
Total – gross
1P
199
—
—
199
240
—
—
240
2P
506
—
—
506
505
—
—
505
2C(2)
2P+2C(2, 3)
101
157
53
311
80
157
56
293
607
157
53
817
585
157
56
798
The reconciliation of changes in reserves and resources between the 2020 CPR and the 2022 CPR is as follows:
Reserves
Resources
Gross (MMstb)
31 December 2020
2021 and 2022 production
31 December 2020 (adjusted for production)
Revisions
31 December 2022
1P
240
(33)
207
(8)
199
2P
505
(33)
472
34
506
2C(2)
2P+2C(2, 3)
293
—
293
18
311
798
(33)
765
52
817
GKP’s 80% net working interest (“WI”)(4) share of reserves and resources at 31 December 2022 are:
Formation (80% WI) (MMstb)
Jurassic
Triassic
Cretaceous
Total – net WI
Reserves
Resources
1P
159
—
—
159
2P
405
—
—
405
2C(2)
2P+2C(2, 3)
81
126
42
249
486
126
42
654
(1) Reserves and resources have been calculated in accordance with the June 2018 SPE/WPC/AAPG/SPEE/SEG/SPWLA/EAGE Petroleum Resources
Management System.
(2) Contingent resources volumes are classified as such because there is technical and commercial risk involved with their extraction. In particular, there
may be a chance that accumulations containing contingent resources will not achieve commercial maturity. The 2C (best estimate) contingent resources
presented are not risked for chance of development. All contingent resource volumes quoted in this document are volumes which could be extracted
prior to licence expiry.
(3) Aggregated 2P+2C estimates should be used with caution as 2C contingent resources are commercially less mature than the 2P reserves.
(4) Net working interest reserves and resources do not represent the net entitlement resources under the terms of the Production Sharing Contract (“PSC”).
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
19
19
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
r
r
e
e
p
p
o
o
r
r
t
t
Shaikan Field Development Plan
Overview
The Shaikan Field Development Plan (“FDP”) is our vision to capitalise on the Shaikan Field’s signifi cant growth potential, increasing
gross production up to 85,000-95,000 bopd, while enhancing the sustainability and longevity of the Company’s capacity for
shareholder distributions, generating material economic value for Kurdistan and eliminating almost all routine fl aring, a requirement of
the Shaikan Production Sharing Contract (“PSC”), enabling a >50% reduction in scope 1 emissions intensity versus an original 2020
baseline by 2025, subject to timely sanction and implementation. While the timing of FDP approval remains uncertain, we are making
good progress towards key project sanction milestones.
Phase 1 gross production ramp up (bopd)
To 85,000-95,000
Gas Management Plan carbon intensity reduction
(kgCO2e/bbl)
38
44,202
Targeting >50%
reduction
2022
gross production
Jurassic expansion
and Triassic test
Original 2020 baseline
carbon intensity
2025 target(1)
The FDP has three key components: expansion of the Jurassic reservoir, test of the Triassic reservoir and the Gas Management Plan.
Jurassic expansion
Comprises a plan to drill new wells and expand the existing production facilities, PF-1 and PF-2, to increase Jurassic gross production
plateau up to 85,000 bopd. As part of the production facility expansion, we will install water handling capacity, potentially enabling the
increase in production rates from constrained wells which we are currently prudently managing to avoid traces of water.
To increase profi table production and cash fl ow generation and to capitalise on the attractive returns resulting from the accelerated
payback of investment under the PSC as historic costs are recovered, we have agreed with the Ministry of Natural Resources
(“MNR”) to proceed with execution of the Jurassic reservoir expansion as we move towards FDP approval. However, given continued
delays to KRG payments, we are currently reviewing our forward capital programme and 2023 net capital expenditure guidance of
$160-$175 million. Further information on our progress and current approach can be found in the Operational review on pages 8 to 11.
Triassic appraisal
In addition to the Jurassic expansion, we plan to drill pilot wells to test the Triassic reservoir, where gross 2C resources are estimated
at 157 million barrels as at 31 December 2022. We are targeting initial pilot production of up to 10,000 bopd.
Gas Management Plan
The Gas Management Plan (“GMP”) will eliminate almost all routine fl aring at our production facilities by processing and reinjecting
associated gas produced with our oil. Some of the processed gas will also be used for power generation at the production facilities,
displacing the use of diesel. The project is expected to enable a transformation of GKP’s carbon footprint, underpinning our target
of more than halving scope 1 emissions intensity by 2025 (relative to an original 2020 baseline of 38 kgCO2e/bbl), assuming timely
sanction and implementation. Further information on the Gas Management Plan and our focus on addressing climate-related risks
and opportunities can be found in our TCFD report on pages 52 to 65.
(1) Dependent on timely sanction and implementation of Gas Management Plan.
20
20
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Our asset continued
Crude export and marketing
The KRG is responsible for marketing and exporting all crude from the Shaikan Field, which is exported via pipeline to the Ceyhan oil
terminal in Turkey where it is sold as part of the Kurdistan Blend (“KBT”), a mix of crude exports from the various oil fi elds in Kurdistan.
In 2022, pipeline uptime was in excess of 99%.
In 2022, GKP received 11 payments from the KRG totalling $450.4 million net to GKP for September 2021 to July 2022 crude oil sales.
In addition, arrears related to the November 2019 to February 2020 invoices were fully recovered.
Pipeline export map
CEYHAN PIPELINE
TERMINAL
MEDITERRANEAN
SEA
0
100
KILOMETRES
TURKEY
IRAQ – TURKEY
PIPELINE
IRAN
FISHKHABOUR
DOHUK
SHAIKAN
SYRIA
IRAQ
KURDISTAN
EXPORT PIPELINE
ERBIL
CHEMCHEMAL
SULEIMANIAH
KIRKUK
Key
Oil Pipelines
International Border
Kurdistan
KRG-Iraqi Forces Demarcation
Shaikan Licence
Since the beginning of 2023, GKP has received payments for August 2022 and September 2022 crude oil sales, totalling $65.7 million
net to GKP. Discussions are ongoing with the KRG regarding payments for October to December 2022 crude oil sales, which are
overdue as at 22 March 2023.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
21
21
As highlighted in the Financial review on pages 12 to 15, in 2022 the MNR proposed a new pricing mechanism for Shaikan oil sales,
including a change in reference price from Dated Brent to KBT, effective 1 September 2022. While the Company has not accepted
the proposed pricing mechanism, revenue from September 2022 to December 2022 has been recognised on this basis, resulting in
an average reduction in the realised sales price versus the previous pricing mechanism over the four-month period of approximately
$12/bbl or $23.4 million.
If the new pricing mechanism had been in place throughout 2022, the reduction in monthly Shaikan realised prices would have ranged
from $4/bbl to $13/bbl versus the previous pricing mechanism, assuming KBT crude specs during Q3 2022 were representative of
those during H1 2022. While it is difficult to predict how pricing will evolve going forward given the historic fluctuation of KBT prices,
the KBT discount to Dated Brent has tightened in February 2023, with the impact on Shaikan realised prices versus the previous pricing
mechanism decreasing to $6/bbl.
Net crude oil sales and payments (January 2022 to February 2023)
60
50
40
30
20
10
)
t
e
n
(
m
$
0
Month of
production
Gross prod.
(kbopd)
Invoice paid
Arrears paid
Invoice unpaid
8
8
33
35
49
44
38
51
45
39
MNR proposed change
in reference price from
Dated Brent to KBT
Overdue invoices
($76m net)
27
29
24
23
27
25
Jan
2022(1)
Feb
2022
Mar
2022
Apr
2022
May
2022(1)
Jun
2022
Jul
2022
Aug
2022
Sep
2022
Oct
2022
Nov
2022
Dec
2022
Jan
2023
Feb
2023
46.1
45.4
44.8
42.6
44.7
46
45.2
44.9
44.2
43.7
39.1
43.7
48.0
46.6
Dated Brent
$87
$98
$119
$104
$113
$124
$113
$100
$90
$93
$92
$81
$83
$82
Shaikan discount
to Brent
Impact on
Shaikan discount
to Brent
$23
$23
$24
$23
$24
$24
$24
$23
$34
$35
$36
$34
$32
$29
$4-$11 increase if proposed pricing mechanism had been in effect(2)
$11
$12
$13
$12
$10
$6
(1) January 2022 and May 2022 invoices include a net adjustment to GKP of $0.8 million and $1.6 million respectively related to a backdated pipeline tariff
increase in 2021.
(2) Assuming KBT crude specs during Q3 2022 were representative of those during H1 2022.
Strategic reportStrategic report
22
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Business model
Our purpose: GKP is a responsible energy company developing natural
resources for the benefi t of all our stakeholders, delivering social and economic
benefi ts by working safely and sustainably with integrity and respect.
Inputs
What we do and how we create value
Focus on safe and sustainable operations
Zero LTIs
recorded in 2022
2.2 million
total working hours in 2022
>50%
targeted reduction in scope 1
emissions per barrel by 2025(1)
Long life asset
817 MMstb
gross 2P reserves + 2C
contingent resources(2)
>31 years
gross 2P
reserves-to-production ratio(3)
Local and empowered workforce
74%
of GKP’s Kurdish workforce
are local nationals
>600
local workers employed
through GKP contractors
Financial strength
$3.2/bbl
gross Opex in 2022
$119m
cash as at 31 December 2022
Debt free
following bond redemption
in August 2022
Our experience and expertise
We bring together a unique combination of above and below ground
expertise developed over more than 15 years of operations in
Kurdistan:
• Kurdistan and emerging market expertise: We have been
present in Kurdistan since 2007. Over that time, we have built up a
deep understanding of the geopolitical, commercial and security
environment and a passion for furthering the region’s social and
economic development. The majority of our workforce are local
nationals while our Board and management team bring together
decades of experience of working in emerging markets around
the world; and
• Technical expertise: We have a strong understanding of the
Shaikan Field and its fractured carbonate reservoirs. Over time,
we have refi ned our understanding of how to get the most out
of our wells and optimise all aspects of drilling and development
to profi tably exploit the Field’s signifi cant reserves and
resources base.
Our core activities
Develop
The Shaikan Field is one of the largest oil fi elds in Kurdistan by
reserves and production, with signifi cant growth potential. As
part of the Shaikan Field Development Plan, GKP has a vision to
generate value for all stakeholders by increasing gross production
plateau up to 85,000-95,000 bopd while eliminating almost all
routine fl aring and transforming the Company’s carbon footprint.
As we move towards project sanction, we are progressing
the expansion of the Jurassic reservoir with a fl exible capital
programme, subject to timely KRG payments and oil prices.
(1) >50% reduction measured against an original baseline carbon intensity of
38 kgCO2e/bbl in 2020; dependent on timely sanction and implementation
of Gas Management Plan.
(2) ERC Equipoise 2022 Competent Person’s Report as at 31 December 2022.
(3) Gross 2P reserves of 506 MMstb as at 31 December 2022 / 2022 gross
average production of 44,202 bopd.
Read more on pages 18 to 21.
Underpinned by our values and culture
1. Safety
2. Social responsibility
3. Trust through open
communication
Gulf Keystone Petroleum Limited Annual report and accounts 2022
23
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
r
r
e
e
p
p
o
o
r
r
t
t
Our strategic objectives
Safety and sustainability
Value creation
Capital discipline and cost focus
Robust fi nancial position
Outputs
Investors
Gulf Keystone is committed to balancing investment in profi table growth with
sustainable shareholder returns, while maintaining a robust balance sheet and
prudent liquidity levels. The Board is committed to paying an ordinary dividend
of at least $25 million per annum and distributing excess cash to shareholders
by way of dividends and/or share buybacks. Since 2019, the Company
has successfully delivered against its strategy by growing gross average
annual production by 34%, distributing $415 million to shareholders through
dividends and share buybacks and maintaining a strong balance sheet.
ESG focus
Safety and sustainability underpin our business model
Kurdistan
• Sustainability report: pages 32 to 51
• TCFD report: pages 52 to 65
Strong governance framework
• Governance report: pages 80 to 89
Produce
Gulf Keystone has a proven track record of delivering
production growth from the Shaikan Field. Since fi rst
commercial production in 2013, GKP has produced over
117 MMstb, with production growth of 40% between
2018 and 2022. In 2022, Gulf Keystone delivered record
gross average production of 44,202 bopd, in line with
annual guidance.
Read more on pages 8 to 10.
Kurdistan is part of Gulf Keystone’s DNA. Through our ongoing operations and
by creating local jobs, investing in the local supply chain and supporting local
communities, Gulf Keystone makes a signifi cant contribution to Kurdistan’s oil
and gas industry, society and economy. The Company is planning to make further
contributions through the Shaikan Field Development Plan.
Communities
Gulf Keystone takes pride in its engagement with local communities and through
regular engagement and investment, has a strong relationship with the areas local
to Shaikan. The Company is a signifi cant employer in Kurdistan and has a high
staff localisation ratio, with many employees hired from neighbouring villages.
It is committed to local workforce development through jobs, training and career
opportunities. In 2022, GKP spent over $1 million gross on impactful projects for
our local communities focused on agriculture, education and infrastructure.
Workforce
Gulf Keystone’s workforce is integral to the Company’s ability to deliver its
strategy. To support our staff , we foster a safe, diverse and inclusive working
environment that enables our people to thrive and develop.
Host government and partner
The Company continues to work with its host government, the KRG, and partner,
MOL, to generate value from the Shaikan Field. In 2022, $515 million net was
generated for the government, primarily from production entitlements, royalties
and capacity building payments.
4. Innovation and
excellence
5. Integrity and respect
6. Teamwork
24
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Strategy and objectives
Our strategy is to create value for all stakeholders by balancing investment
in profitable production growth with sustainable shareholder returns,
while maintaining a robust balance sheet and prudent liquidity levels.
Our strategic objectives are as follows:
Safety and sustainability
Value creation
Strategic objective
• The Group is committed to high ESG standards with a focus on
safety, our environmental impact, our people and generating
economic and social value for Kurdistan and our local communities,
underpinned by strong corporate governance.
Strategic objective
• Balance investment in profitable production growth with sustainable
distributions to shareholders.
2022 progress
• Zero Lost Time Incidents (“LTIs”) and one recordable incident in
2022 progress
• Annual gross average production of 44,202 bopd, in line with annual
2022, resulting in a Total Recordable Incident Rate (“TRIR”) of 0.45,
well below the Kurdistan benchmark of 1.3;
• 2022 Annual Report disclosures fully consistent with TCFD(1)
recommendations;
• Continued to advance the tendering process for the Gas
Management Plan;
• Further developed climate-related opportunity register of additional
decarbonisation initiatives, including progression of plans to
eliminate methane emissions from oil storage tank venting;
guidance of 44,000-47,000 bopd;
• Drilled SH-15 and SH-16, spudded SH-17;
• Laid groundwork for material increase in future production levels
through drilling programme, well pad preparation and facilities
expansion activities;
• Continued to make good progress towards key FDP project sanction
milestones, including substantial finalisation of technical scope and
future work programme;
• $358.5 million Adjusted EBITDA, primarily driven by a strong
• Substantial completion of 2022 Health, Safety and Environment
increase in the oil price and higher production; and
(“HSE”) improvement programme;
• Paid record annual dividends to shareholders of $215 million,
• December 2022 Kurdistan staff localisation rate of 74%. 2022
representing a sector-leading dividend yield of 41%(2).
voluntary turnover rate of 3%; and
• Developed Code of Business Conduct and accompanying
workforce training, launched in early 2023.
2023 focus
• Continue to target zero harm across our operations, increasing
vigilance to prevent any further incidents following the LTI during
drilling operations in January 2023;
• Advance tendering process for Gas Management Plan and progress
discussions with MNR to secure approval of the FDP;
2023 focus
• Deliver annual gross average production guidance range of
46,000-52,000 bopd through continued progression of the
Jurassic expansion programme with a flexible capital programme;
• Progress discussions with MNR to secure approval of the FDP,
including the Gas Management Plan;
• Continue to engage with the KRG and MNR to seek clarity on oil sales
payment timing and the negotiation of a new lifting agreement; and
• Maintain dividend policy of paying at least $25 million per year while
• Progress plans to eliminate methane emissions from oil storage
tank venting, with commissioning currently expected in 2024,
and quantify fugitive emissions and accompanying reduction plan;
distributing excess cash to shareholders by way of dividends
and/or share buybacks, according to the Company’s disciplined
financial framework.
• Deliver 2023 Health, Safety, Environment and Quality (“HSEQ”)
improvement programme;
• Deliver local community engagement programme and projects;
• Maintain high level of staff localisation and retention; and
• Further build capability of workforce, drive engagement and
wellbeing and advance diversity and inclusion.
Link to key performance measures
• Safety performance (TRIR).
Link to key performance measures
• Gross production (bopd); and
• Adjusted EBITDA ($m).
(1) Task Force on Climate-related Financial Disclosures.
(2) Based on GKP’s closing price on 30 December 2022.
Successful delivery of our strategic objectives is underpinned by a robust and rigorous risk management process.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
25
Our focus on safety and sustainability and strong corporate
governance underpin our strategy.
Capital discipline and cost focus
Robust financial position
Strategic objective
• Prudent, disciplined and proactive management of capital
expenditures and underlying cost base.
Strategic objective
• Maintain a robust balance sheet and prudent liquidity levels to fund
and execute strategy and to manage commodity cycle and operating
in Kurdistan.
2022 progress
• Net capital expenditure of $114.9 million, in line with final 2022
2022 progress
• $358.5 million of Adjusted EBITDA and $266.5 million of free cash
guidance of $110-$120 million;
flow generated in 2022;
• Gross Opex per barrel of $3.2/bbl, in line with 2022 guidance of
• Redeemed $100 million bond in August 2022, leaving the
$2.9-$3.3/bbl; and
Company debt free; and
• Other G&A expenses of $12.2 million, 10% lower versus 2021
• Cash balance of $119.5 million as at 31 December 2022.
2023 focus
• Maintain robust balance sheet and prudent liquidity levels to fund
2023 and forward work programme.
Link to key performance measures
• Adjusted EBITDA ($m); and
• Net cash ($m).
reflecting increased capitalisation due to accelerating capital activity
resulting in a more than doubling of net capital expenditure.
2023 focus
• Deliver 2023 work programme and current net capital expenditure
guidance of $160-$175 million, predicating investment levels on
the timeliness of KRG payments and oil prices. The Company will
consider potential adjustments to the capital programme based on
how the business environment evolves; and
• Deliver annual gross Opex per barrel guidance range of
$3.0-$3.4/bbl, maintaining position as top quartile low-cost
operator among Kurdistan Region of Iraq and international
E&P peers.
Link to key performance measures
• Operating costs ($m);
• Other G&A expenses ($m); and
• Net capital expenditure ($m).
Successful delivery of our strategic objectives is underpinned by a robust and rigorous risk management process.
Strategic report 26
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Key performance indicators
Gulf Keystone sets performance measures and assesses
progress against these targets on a regular basis.
Strategic priorities key:
Safety and sustainability
Value creation
Capital discipline
and cost focus
Robust financial position
Safety performance
(TRIR)(1)
2.61
1.37
Why we measure this
• The Company is committed to safe and reliable
operations;
• Safety performance and improvements in safety
management are measured using several metrics,
including TRIR; and
• We require employees and contractors to work in a
safe and responsible manner and provide them with the
training and equipment to do so.
Performance
• TRIR decreased in 2022 due to zero Lost
Time Incidents in the year and only one
recordable incident; and
• Our performance was supported by a
rigorous focus on safety as operational
activity increased.
0.71
Strategic
priorities
Link to remuneration
Yes(2)
0.45
2019
2020
2021
2022
Adjusted EBITDA
($m)
Why we measure this
•
Indicator of the Group’s cash generation to fund
expenditures and return capital to shareholders.
359
223
123
57
2019
2020
2021
2022
Strategic
priorities
Link to remuneration
No
Net capital expenditure
($m)
115
90
Why we measure this
• Net capital expenditure includes the Company’s net
expenditure on oil asset investments; and
• Net capital expenditure is incurred with a focus on capital
discipline and flexibility to drive profitable production
growth and to meet the requirements of the Shaikan
Production Sharing Contract.
52
46
2019
2020
2021(3)
2022
Strategic
priorities
Link to remuneration
Yes(2)
Performance
•
Increased by 61% versus 2021 driven
by an increase in the oil price and higher
production;
• Partly offset by higher operating costs,
share option expense and capacity
building payments; and
•
Increase in share option expense
principally due to the final contractual
exercise of share option entitlements by
former Directors under the 2016 Value
Creation Plan (“VCP”).
Performance
•
Increase versus 2021, in line with final
guidance, to drive future profitable
production growth;
• Majority of expenditure ($63 million)
spent on drilling of SH-15, SH-16 and the
initial stages of SH-17;
• $36 million invested in completing
early work for the expansion of the
production facilities and installation of
water handling, as well as future well pad
preparation costs; and
• $16 million invested in well workover and
interventions to help optimise production.
(1) Total Recordable Incident Rate.
(2) See 2022 corporate KPIs table on page 115 of the Remuneration Committee report.
(3) 2021 restated after the definition of net capital expenditure was amended to no longer exclude the increase/decrease of drilling and other equipment.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
27
Net cash
($m)
91
119
Why we measure this
• Maintaining a robust balance sheet and prudent liquidity
management provides the flexibility to fund our strategy
of balancing investment in profitable growth and
shareholder returns, while providing a cushion to manage
through declines in oil price and risks associated with
operating in Kurdistan.
Performance
•
Increase in 2022 driven by higher Adjusted
EBITDA, more than offsetting the
increase in net capital expenditure and
payment of $215 million of dividends; and
•
In early August 2022, the Company
redeemed the $100 million of notes
outstanding, leaving the Company debt
free with significant financial capacity.
70
48
2019
2020
2021
2022
Operating costs
($m)
Gross Opex per
barrel ($/bbl)
3.2
42
3.9
37
2.7
34
2.6
27
2019
2020
2021
2022
Strategic
priorities
Link to remuneration
No
Why we measure this
• The Company monitors operating costs to ensure they
remain in line with the budget; and
• Costs are carefully controlled with a focus on remaining a
low-cost operator.
Performance
•
Increase primarily driven by an increase in
staff costs reflecting increased activity, as
well as incremental maintenance activity;
and
• Gross operating costs of $3.2 per barrel
within 2022 guidance range of
$2.9-$3.2 per barrel.
Strategic
priorities
Link to remuneration
Yes(2)
Other G&A
expenses
($m)
Shaikan
Corporate
Why we measure this
• A key metric for the Company is to control G&A
expenses, including business, corporate and
support costs; and
9
7
4
10
5
7
5
7
2019
2020
2021
2022
Gross production
(bopd)
43,440
44,202
36,625
32,883
• Performance is measured relative to budget and the
ability to identify and implement cost reductions.
Strategic
priorities
Link to remuneration
Yes(2)
Why we measure this
•
Indicator of our revenue generation potential; and
• Measure of progress towards achieving our
annual production guidance and driving profitable
production growth.
Strategic
priorities
Link to remuneration
Yes(2)
2019
2020
2021
2022
Performance
• 2022 costs decreased 10% versus 2021;
and
• Reflects increased capitalisation of G&A
costs due to accelerating capital activity
resulting in a more than doubling of net
capital expenditure.
Performance
• 2022 gross average production of
44,202 bopd, 2% increase versus 2021
and in line with annual guidance of
44,000-47,000 bopd;
• Supported by incremental volumes from
new wells; and
• Mostly offset by continued prudent
management of well production rates to
avoid trace amounts of water production
ahead of installation of water handling
capacity and the temporary shut-in of one
well during Q4 2022 due to an isolated
ESP electrical failure.
Strategic report
28
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Stakeholder engagement
Engagement with our stakeholders
remains a priority and is critical to
Gulf Keystone’s success.
Statement by the Directors in performance of their
statutory duties in accordance with section 172(1)
of the Companies Act 2006
The Board of Directors of Gulf Keystone Petroleum Limited consider,
both individually and together, that they have acted in a way they
consider, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole (having regard
to its stakeholders and matters set out in s172 of the Companies Act
2006 (“section 172”)) in the decisions taken during the year ended
31 December 2022.
In doing so, the Directors have taken account of the likely long-term
consequences of decisions made in the year, the interests of Gulf
Keystone’s employees, the Company’s business relationships with
suppliers and its single customer, the host government, and the
impact of the Company’s operations on its local communities and the
environment.
The Directors have also acted with regard to the desirability of Gulf
Keystone maintaining a reputation for high standards of business
conduct and ethics, and the need to act fairly as between members
of the Company.
When formulating the Company’s strategy, the Directors consider
the longer-term and broader consequences and implications of its
business on key stakeholders and factors relating to climate change.
The need to be a responsible energy company is embedded in Gulf
Keystone’s corporate purpose and is the focus of the Company’s
sustainability strategy.
As part of GKP’s commitment to effective stakeholder engagement,
and in accordance with section 172, the Company sets out on pages
28 to 31 its key stakeholder groups and corresponding approach to
engagement with them. GKP’s stakeholder engagement strategies
are tailored for each of these key audiences to continue a mutually
beneficial dialogue with those who are invested in, or impacted by,
the Company’s operations.
Investors
Key engagement topics
• Operational and financial performance;
• Valuation considerations;
• Capital allocation;
• Financing strategy;
• Risk management;
• Shareholder distributions; and
• Sustainability strategy and addressing climate-related
risks and opportunities.
How we engaged in 2022
• Active and ongoing investor relations programme
engaging with equity and debt investors;
• Clear and timely investor communications, including the
London Stock Exchange’s Regulatory News Service;
• Regular meetings with sell-side analysts;
• Virtual AGM held with open invitation to all shareholders
with the ability to submit questions electronically via the
Company’s website;
• Engagement with shareholders prior to AGM to
encourage voting turnout; and
• Consultation with major shareholders in response to
voting on certain resolutions at the AGM.
Why we engage
• We are dependent on access to equity and debt funding;
and
• Our investors have valid views on strategic, financial
and operational decision making which we must take
into account.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
29
Host government
Local communities
Key engagement topics
• Health, safety and security;
• Local employment;
• Development of local staff and contractors;
• Major incident prevention;
• Local community projects; and
• Protection of the environment.
How we engaged in 2022
• Active and ongoing engagement with local communities;
• Support and funding for local community initiatives;
• Proactive staff localisation policy; and
• Proactive use of local suppliers and service companies.
Why we engage
• The support of local communities is essential for the
mutually beneficial development and operation of the
Shaikan Field; and
• GKP is an important employer in the local communities.
Key engagement topics
• Shaikan Field performance;
• Shaikan Field Development Plan;
• Commercial arrangements;
• Crude oil sales payments and pricing;
•
• Health and safety;
• Community investment strategy and plans; and
• Environmental matters.
Iraqi Federal Supreme Court ruling and related implications;
How we engaged in 2022
• Regular meetings and correspondence with senior KRG
and MNR officials;
• Meetings with MNR advisers on specific topics such as
the Iraqi Federal Supreme Court ruling;
• Engagement regarding delays to payments and overdue
invoices;
• Engagement regarding proposed amendments by the MNR
to pipeline fees and the Shaikan Lifting Agreement; and
• Generated revenues from the Shaikan Field for the
government, comprising production entitlements,
royalties and capacity building payments.
Why we engage
• We work closely with our host government, the KRG,
to ensure alignment on: developing and producing
resources for the benefit of all stakeholders; business and
operational strategy; commercial terms regarding the sale
of Shaikan crude oil; and our licence to operate under the
Shaikan PSC; and
• The KRG is responsible for managing Kurdistan’s oil and
gas industry, including marketing and exporting all crude
from the Shaikan Field.
Strategic report 30
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Stakeholder engagement continued
Workforce
Joint venture partner
Key engagement topics
• Health, safety and security;
• Local community engagement;
• Shaikan Field performance;
• Shaikan Field Development Plan;
• Work programme and budget;
• Commercial arrangements;
• Crude oil sales payments; and
• Sustainability strategy and addressing climate-related
risks and opportunities.
How we engaged in 2022
• Regular multi-disciplinary meetings and dialogue; and
• Approval of work programmes and budgets.
Why we engage
• Partner alignment is critical for the development and
operation of the Shaikan Field to achieve its full potential.
Key engagement topics
• Health, safety and security;
• Gulf Keystone’s purpose, values and culture;
• Gulf Keystone’s Code of Business Conduct;
• Learning and development;
• Diversity and inclusion;
• Remuneration and benefits;
• Company strategy and operational progress; and
• Sustainability and climate-related risks and opportunities.
How we engaged in 2022
• Regular health and safety briefings across the Company;
• Ongoing initiatives to support mental and physical
wellbeing;
• Regular digital and in-person communications through
emails, intranet, social media, team meetings, town halls
and teach-ins;
• Clear communication of targets and attainment of
incentive schemes;
• Clear communication of policies and procedures,
including “working from home” and vaccination protocols;
• Formulation and preparation for the rollout in Q1 2023
of Code of Business Conduct, training and mandatory
compliance certificate;
• Engagement and initiatives to improve diversity
and inclusion;
• Learning and development programmes; and
•
Initiatives to deepen workforce understanding of and
involvement in sustainability strategy and addressing
climate-related risks and opportunities.
Why we engage
• The health and safety, development, diversity and
retention of GKP’s workforce is essential to the
Company’s success and execution of its strategy.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
31
Suppliers and contractors
Environment
Key engagement topics
• Health, safety and security;
• Fair and transparent contracting processes;
• Long-term partnerships;
• Collaborative approach;
• Fair payment terms;
• Consistency of application of business ethics practices; and
• Development of a Human Rights and Modern Slavery
Policy as part of the Code of Business Conduct.
How we engaged in 2022
• Regular engagement on health, safety and security to
ensure compliance with GKP policies and procedures;
• Rigorous contracting processes strictly in accordance
with the MNR set tendering processes for all suppliers,
resulting in broad participation;
• Active contract management;
• Focus on working with businesses that are involved with
local communities; and
• Regular communication with all suppliers and the MNR
Tender Committee.
Why we engage
• The support and performance of suppliers and
contractors enables the Company to deliver against
its strategy.
Key engagement topics
• Protection of air quality to conform to Kurdish and,
with implementation of the Gas Management Plan,
international standards;
• Addressing climate-related risks and opportunities, with
the Company’s disclosure fully consistent with all of the
Task Force on Climate-related Financial Disclosures
(“TCFD”) recommendations; and
• Gas Management Plan and other decarbonisation
projects underpinning GKP’s focus on significantly
reducing routine flaring and scope 1 emissions intensity.
How we engaged in 2022
• GKP’s disclosures for fiscal year 2022 are fully consistent
•
with all 11 recommendations of the TCFD framework
as well as the additional disclosure recommendations
specific to oil and gas companies;
Improved accuracy and scope of GHG emissions
reporting, recalculating our scope 1 and scope 2
emissions, measuring and reporting our scope 3
emissions for the first time and obtaining independent
verification of our 2022 emissions;
• Continued to advance the tendering process for the
Gas Management Plan, which will enable us to eliminate
almost all routine flaring and achieve our target of a
>50% reduction in scope 1 emissions intensity by 2025,
assuming timely sanction and implementation;
• Further developed climate-related opportunity register
of additional decarbonisation initiatives, including
advancement of plans to eliminate methane emissions
from oil storage tank venting; and
• Continued to minimise our impact on the local
environment, in particular by protecting air quality,
managing water and waste and assessing and managing
the impact of our facilities.
Why we engage
•
In order to maintain our licence to operate, we are focused
on emissions reduction, addressing climate-related
risks and opportunities, and minimising our impact on
the environment, while ensuring our disclosures are fully
consistent with the TCFD recommendations.
The Company’s impact on the environment
continues to be a key consideration.
Strategic report 32
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report
Sustainability underpins
our ability to create value
for all stakeholders and
our licence to operate.
Jon Harris
Chief Executive Offi cer
CEO’s introduction
At Gulf Keystone, we are committed to embedding sustainable
business practices in all that we do and improving our sustainability
performance. As a responsible energy company and an employer of
over 500 people in Kurdistan and the UK, we view sustainability as
critical to our licence to operate and ability to create value for all GKP
stakeholders.
We continued to make progress against our sustainability strategy in
2022, with a number of highlights to note.
First, we are pleased to report that for the fi rst time, our annual
disclosures are fully consistent with all the recommendations set out
by the Task Force on Climate-related Financial Disclosures (“TCFD”).
Our full TCFD report can be found on pages 52 to 65. This is the result
of a signifi cant eff ort since our initial TCFD disclosure in 2020 and
demonstrates our commitment to addressing climate-related risks and
opportunities at all levels of the organisation.
As part of this eff ort, in 2022 we undertook to improve the accuracy
and scope of our greenhouse gas emissions disclosures. This included
extending our emissions reporting to include scope 3 emissions
(categories 1-12) for the fi rst time, providing more detailed and accurate
reporting of our scope 1 emissions, including the addition of methane
emissions, obtaining independent external verifi cation of our GHG
emissions data and developing a new digital system to increase the
integrity of our environmental data management.
These changes have led us to revise and increase our scope 1
emissions for 2020 and 2021. We have also seen an increase in
scope 1 emissions in 2022, driven by higher oil production and higher
gas production principally from a single well near the gas cap, in
line with our reservoir modelling. Looking ahead, we are focused on
transforming our emissions footprint. We are continuing to progress
the tendering process for the Gas Management Plan, which will enable
us to eliminate almost all of our routine gas fl aring and, depending on
timely sanction and implementation, more than halve our emissions
intensity versus the original 2020 baseline of 38 kgCO2e/bbl by 2025.
We are also working on progressing a number of other decarbonisation
initiatives to further reduce our emissions, including in the near term a
project to eliminate methane venting from our oil storage tanks, which we
are targeting to complete in 2024. Ahead of implementation of the Gas
Management Plan and other decarbonisation projects, we expect our
scope 1 emissions to continue to rise as production increases. Further
information on our emissions and decarbonisation projects are on page
33 of the Sustainability report and on pages 52 to 65 of our TCFD report.
Looking to our people, we continued to progress initiatives focused on
strengthening the skills and wellbeing of our workforce. We are proud
of our diversity, which includes our large contingent of almost 350
local Kurdish employees, making up 74% of our total workforce at the
end of 2022. The year also marked the launch of our Global Women’s
Network (“GWN”) which is committed to the professional development
and advocacy of women across the organisation. The GWN aims
to create growth opportunities for women and serve as a trusted
partner to help drive inclusivity through greater female participation
and representation at GKP. While we were pleased to see female
representation in our workforce increase signifi cantly to 14% in 2022,
there is still further to go.
I am particularly proud of our ongoing eff orts to support local
community projects that improve the lives of those in areas surrounding
our operations. Thanks to the ingenuity of our people, our community
support extends beyond fi nancial aid to deliver practical solutions that
support agriculture, education and vital community infrastructure.
Whether that’s providing innovative agricultural technologies and
training to improve farmer yields, off ering vocational training or
connecting local villages to power and clean water supplies, our
community outreach spending exceeded $1 million gross in 2022,
a 20% increase from 2021.
In addition to our community support, we continued to maintain a
strong working relationship with our host government, the KRG.
The Shaikan Field accounts for around 10% of Kurdistan’s oil
production and in 2022, we generated $515 million net in production
entitlements, royalties and capacity building payments for the KRG
from the Field, a 53% increase versus 2021.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
33
Our sustainability strategy:
Environment
Social
Governance
• Workforce health and safety;
• Recruit, nurture, develop and
retain talent;
• Enhance diversity and
inclusion;
• Support our local
communities; and
• Generate economic value for
Kurdistan.
• Health, safety and wellbeing;
• Learning and development;
• Diversity and inclusion;
• Local employment;
• Local supply chain
purchasing and contracting;
• Community engagement and
investment; and
• Shaikan Field revenues
generated for the KRG.
• Zero harm to staff,
contractors and local
communities.
•
Robust corporate governance
and compliance; and
• Highest standards of
business ethics.
• Board oversight;
•
Internal controls and
policies;
• Risk management;
• Anti-bribery and corruption;
and
• Code of Business Conduct
compliance.
• Outstanding governance and
compliance; and
• Annual workforce
compliance with Code of
Business Conduct .
• Address climate-related
risks and opportunities;
• Reduce our scope 1
emissions intensity;
• Protect air quality; and
• Minimise our environmental
impact.
• GHG and other emissions;
• Air quality;
• Facility impact management;
• Water management and
withdrawal;
• Waste management; and
• Soil and land remediation.
• Reduce scope 1 emissions
intensity per barrel by >50%
and eliminate almost all
routine flaring by 2025(1);
• Eliminate methane venting
from storage tanks by 2024;
and
• Zero harm to the
environment.
Strategic
priorities
Material
factors
Key current
targets
SDG
alignment
(1) >50% reduction measured against the original baseline carbon intensity of 38 kgCO2e/bbl in 2020; dependent on timely sanction and implementation of
Gas Management Plan; reference to scope 2 eliminated following recalculation of emissions.
We also generated significant economic value for the Kurdistan region
via local employment and our support of regional suppliers. In 2022,
our total purchasing and contracting with local suppliers increased
31% to $64 million versus 2021.
We have also taken meaningful steps to further embed sustainability
in our corporate governance structure. In 2022, we launched the
GKP Sustainability Panel to facilitate the delivery of our sustainability
strategy and to ensure ESG oversight across the organisation.
The Panel’s permanent members include myself and the Executive
Committee, as well as the Safety and Sustainability team and other
senior leaders. The Panel’s work will be bolstered by our now
44 strong “Sustainability Champions” brought together from across
the organisation, who will help us to identify sustainability-related
opportunities they see in their roles.
Finally, a personal highlight was the launch of our Code of Business
Conduct (“COBC”) – our guidelines for how we conduct business,
safeguard our assets and work together to create a positive work
environment. Available in both English and Kurdish, the Code outlines
the shared behaviours we expect of our people. It also includes our
newly developed Human Rights and Modern Slavery policy, which
reinforces our zero tolerance stance to any forms of child labour,
forced labour, modern slavery or human trafficking within our business
and wider supply chain. In early 2023, training on the COBC was rolled
out to all members of our staff to ensure Company-wide understanding
and compliance.
Looking ahead, we are excited about making further progress against
our strategy, with a number of priorities identified in 2023. I look forward
to updating you on our progress.
Jon Harris
Chief Executive Officer
22 March 2023
Strategic report 34
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Material ESG factors
We conducted our first materiality assessment in 2020 to identify the ESG factors that are most relevant to Gulf Keystone and its stakeholders.
The process involved direct engagement with internal and external stakeholders to identify the ESG factors they consider to be most important,
as well as a review of the sustainability landscape, which included a review of relevant external standards (including SASB, GRI, UNGC, UN SDGs,
etc), a detailed peer benchmark and review of internal activities.
The outcomes of this process and the key material ESG factors identified can be found in the materiality matrix below. We have recently reviewed
the material factors and their importance to the Company and have updated the matrix accordingly.
The material factors and metrics in our 2022 Sustainability report draw on current standards and frameworks for sustainability information
disclosure, including the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations, Streamlined Energy and Carbon
Reporting (“SECR”), Sustainability Accounting Standards Board (“SASB”), International Petroleum Industry Environmental Conservation
Association (“IPIECA”) and GHG Protocol.
Material ESG factors
’
l
s
r
e
d
o
h
e
k
a
t
s
s
P
K
G
o
t
e
c
n
a
t
r
o
p
m
I
h
g
H
i
i
m
u
d
e
M
w
o
L
C
K
A
L
D
I
J
B
F
M
G
H
E
Environment
A. Climate change/gas flaring
B. Environmental
management
C. Biodiversity
Social
D. Process safety
H. Human rights
I. Community engagement
J. Community investment
K. Economic value generated
Governance
L. Business ethics and
anti-corruption
E. Occupational health
M. Effective governance
F. Employee training
and development
G. Diversity
Low
Medium
High
Importance to GKP
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
35
35
Environment
Our focus
Energy security and affordability are fundamental for our future.
At the same time, we recognise the urgent need to deliver the world’s
energy requirements in a way that addresses climate-related risks
and opportunities and minimises our impact on the environment.
For GKP, this means taking ambitious steps to reduce the carbon
intensity of our operational activities, align our disclosures with TCFD
recommendations, monitor our emissions footprint across scopes
1, 2 and 3, protect air quality around our operations and manage the
impact of our facilities on the local environment.
SDG alignment
Targets:
Reduce scope 1 carbon emissions
intensity per barrel by >50% by 2025(1)
Eliminate methane venting from
storage tanks by 2024
SDG 11: Sustainable cities and
communities
By targeting emissions reduction,
protecting air quality and managing our
water and waste, we are focused on
minimising the impact of our activities
on the communities that surround our
operations.
SDG 13: Climate action
Our commitments to more than halving
our carbon intensity per barrel by 2025,
eliminating methane venting from our
storage tanks and progress other
decarbonisation opportunities means we
are taking effective climate action for a
sustainable future.
SDG 15: Life on land
Through our robust facilities impact
management programme, we ensure
that any land we operate on is carefully
assessed via detailed environmental and
social impact assessments to protect and
preserve life on land.
Unit
2020(2)
2021(2)
2022(3)
Key performance highlights
Material factor
Indicator
GHG emissions(4)
Total scope 1 emissions
Scope 1 emissions – Flaring
Scope 1 emissions – Venting
Scope 1 – Fugitive
Scope 1 – Combustion of petrol and diesel
Scope 1 – Combustion of fuel gas
Total CH4 emissions(5)
Total scope 1 emissions intensity
Total scope 2 emissions
Total scope 3 emissions
Other emissions(4)
Total SO2 emissions
Water management(4) Total water withdrawn(6)
Waste management
Recycled solid non-hazardous waste
Recycled solid hazardous waste
ktCO2e
ktCO2e
ktCO2e
ktCO2e
ktCO2e
ktCO2e
ktCO2e
kgCO2e per barrel
ktCO2e
ktCO2e
ktSO2
m3
% of total waste
% of total waste
Recycled liquid non-hazardous waste
% of total waste
Recycled liquid hazardous waste
% of total waste
504
429
17
5
6
47
42
640
557
20
5
9
49
51
47.0
50.5
0
—
71
0
—
82
739
654
21
5
9
50
57
57.2
0
6,654
87
11,467
88,432
80,628
92
6
100
100
86
28
100
100
92
86
100
100
References
(1) 50% reduction measured against an original baseline scope 1 emissions
intensity of 38 kgCO2e/bbl in 2020; dependent on timely sanction and
implementation of Gas Management Plan.
(2) 2020 and 2021 scope 1 and scope 2 emissions revised following
recalculation; 2020 and 2021 scope 3 emissions will be reported in the
2023 Sustainability report; see “Emissions reporting” section on page 36.
(3) Scope 1, 2 and 3 emissions for 2022 have been independently verified by
and guidance for the verification and validation of greenhouse
gas statements.
(4) All GHG emissions, other emissions and water management metrics
based on GKP’s 80% working interest in the Shaikan Production
Sharing Contract.
(5) Methane emissions also included in scope 1 – Flaring, Venting
and Fugitive.
(6) 2020 data are estimates; installation of water metering devices from 2021
EcoAct, aligned with the ISO 14064-3:2019 standard with specification
improved accuracy of data.
Strategic reportStrategic report
36
36
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Environment continued
Addressing climate-related risks and opportunities
Consistency with Task Force on Climate-related Financial
Disclosures recommendations
We started applying the Task Force on Climate-related Financial
Disclosures (“TCFD”) recommendations in 2020 and, as of 2022,
GKP’s disclosures are now fully consistent with all 11 recommendations
of the TCFD framework, as well as the additional disclosure
recommendations specific to oil and gas companies. Our full
disclosure can be found in our TCFD report on pages 52 to 65.
Environmental and emissions data collection
In 2022, we conducted a review of our environmental data collection
process to implement improvements that will strengthen the
accuracy of our emissions data. To achieve this, a digital solution for
more effective and efficient data capture, recording and monitoring
of our emissions footprint is being developed for implementation in
2023. Over time, this new system will improve our data integrity and
help us to identify additional opportunities to reduce our emissions.
Updates to GHG emissions reporting
To align with the TCFD recommendations and to provide a more
comprehensive and accurate picture of our GHG emissions footprint,
we have amended and updated our emissions reporting. As part
of this exercise, we have commissioned a third-party organisation
EcoAct to independently verify our scope 1, 2 and 3 emissions
disclosures for 2022 according to the ISO 14064-3:2019 standard.
We use the equity share approach to report our emissions.
First, we have broadened our emissions reporting to measure for the
first time our scope 3 emissions in 2022. This disclosure is aligned
to all 12 relevant sources of scope 3 emissions set out by TCFD,
a breakdown of which can be found in our TCFD report on page 52.
As an energy company, categories 10 and 11 are the most material for
us, as most oil and gas emissions are generated from the processing
or use of sold products. We are planning to report our scope 3
emissions (categories 1-12) for 2020 and 2021 as part of the 2023
Sustainability report.
2021 scope 1 emissions recalculation (total and intensity)
Second, we have reviewed our reporting of scope 1 and 2 emissions
to improve the accuracy of our disclosures and to align with the TCFD
recommendations, as well as a number of other industry guidelines,
such as the “GHG Protocol: a corporate reporting and accounting
standard” (Revised edition, 30 March 2004, updated 2015) and the
“IPIECA Petroleum industry guidelines for reporting greenhouse gas
emissions” (2nd edition, 2011). This review resulted in the following
material changes to our calculation of emissions in 2022, which we
have used to recalculate and revise our scope 1 and 2 emissions for
2020 and 2021:
• emissions from our own power generators has been reclassified to
scope 1, resulting in zero emissions being reported under scope 2;
• the composition of our associated gas, which is currently flared or
used as fuel gas, has been recalculated for greater accuracy and to
align with IPIECA Petroleum industry guidelines following a recent
systematic review of all gas sampling results;
• our scope 1 emissions have been broken down for the first time by
source, including flaring, venting, fugitive, and fuel, petrol and diesel
combustion; and
• as part of this change, methane and nitrous oxide emissions from
our flaring activities, as well as carbon and methane emissions
resulting from venting and fugitive emissions, have been added as
scope 1 emissions.
For our 2021 emissions, these changes resulted in total scope 1
emissions increasing by 27% from 505 ktCO2e under the previous
methodology to 640 ktCO2e (with scope 1 emissions intensity
increasing from 40.8 kgCO2e/bbl under the previous methodology
to 50.5 kgCO2e/bbl). Almost all of the increase between the two
methodologies was driven by the recalculation of our associated
gas composition, resulting in a higher estimated proportion of
more carbon intensive gases in the composition, and the addition
of methane and nitrous oxide emissions from flaring, venting and
fugitive leaks.
Intensity
(kgCO2e/bbl)
40.8
505
13
5.7
72
4.3
54
-0.3
-4
50.5
640
2021 (previous)
Scope 2 additional
Gas composition
Methane and NOx
Other
2021 (new)
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
37
37
Emissions performance and focus on decarbonisation
Total scope 1 emissions in 2022 were 739 ktCO2e, a 15% increase versus the previous year (2021 revised: 640 ktCO2e). A small proportion
of the increase was driven by higher gross production, with the majority due to a higher gas-oil ratio principally from a single well near
the gas cap, in line with our reservoir modelling. Scope 2 emissions in 2022 were 0 ktCO2e, following recalculation as described above
(2021 revised: 0 ktCO2e).
Our scope 1 emissions intensity in 2022 was 57.2 kgCO2e/bbl, with the increase versus the previous year (2021 revised: 50.5 kgCO2e/bbl)
driven entirely by the change in gas-oil ratio.
Intensity
(kgCO2e/bbl)
50.5
640
0
11
6.7
87
57.2
739
2021 scope 1
Production
Gas-oil ratio
2022 scope 1
2022 vs 2021 scope 1 emissions (total and intensity)
As part of our focus on addressing climate-related risks and opportunities, we are committed to reducing the carbon footprint of
our operations.
Our primary objective is to reduce our scope 1 emissions intensity by >50% by 2025, compared to our original 2020 baseline of
38 kgCO2e/bbl (with the reference to scope 2 emissions eliminated following recalculation). This is dependent on the timely sanction and
implementation of the Gas Management Plan and subsequent elimination of almost all of our routine flaring. The Gas Management Plan will
also significantly reduce our sulphur dioxide emissions.
In addition to the GMP, we are also exploring the viability of a number of other decarbonisation projects. In 2022, we carried out a detailed
assessment of these opportunities, including scenario analysis. Following this exercise, we have decided to progress as a priority the
elimination of methane emissions from the venting of our storage tanks. We are targeting to complete the engineering and procurement for
the project in 2023, which is a key component of the 2023 bonus plan safety and sustainability KPIs. The project is currently expected to be
commissioned in 2024.
Further information regarding our focus on emissions reduction, the Gas Management Plan and our other decarbonisation opportunities can
be found in the TCFD report, in particular in the Strategy section on pages 56 to 61 and the Metrics and targets section on pages 64 and 65.
Protecting air quality
The Shaikan Field is located approximately 60km to the north-west
of Erbil, sitting within close proximity to surrounding villages.
As a result, it is imperative we adopt a robust air quality monitoring
programme to avoid any negative impacts on our local communities.
In 2022, our air quality performance continued to be within Kurdish
regulatory limits.
We monitor air quality in a variety of ways, including stationary
field monitoring, handheld Photo-ionisation Detectors (“PIDs”),
gas surveys and, for the first time in 2022, satellite monitoring.
See the boxes on page 38 for more information.
In 2023, we are planning to extend our air quality monitoring
programme to detect and monitor methane and other fugitive
emissions across our production facilities and wells, with the goal
to reduce or eliminate emissions at source. Fugitive emissions are
a very small proportion of existing scope 1 emissions, as disclosed
on page 64, and we would expect this to remain similar following
implementation of the programme. We will also be contracting
a qualified external party to audit our air quality monitoring
programme to ensure it aligns with local and international
stipulations, standards and best practice.
Strategic reportStrategic report 38
38
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Environment continued
Protecting air quality continued
1. Stationary field monitoring
As of 2022, GKP operates four Scentinal SL-50 air quality
monitoring stations which measure a broad range of air quality
parameters, including H2S, methane, VOC, NOx, PM2.5 and
PM10 levels. Data is captured and reported to the Ministry of
Natural Resources each month to ensure ongoing compliance.
Additional stationary monitors will be installed in 2023 to
enhance our data capture.
In addition, we deploy passive diffusion tubes at ten locations
near the Shaikan Field and neighbouring villages to ensure the
levels of H2S, O3, VOC, SO2 and NO2 remain below Kurdistan
stipulations. These tubes are deployed and recovered each
month for detailed analysis.
As our operations continued to expand during 2022, we
installed additional stationary air quality monitors across the
block. In 2023, we will be installing further additional diffusion
tubes around our well pads and other key locations where
emissions occur. Furthermore, based on findings from the
detailed studies conducted in 2019 and 2021, we will implement
continuous monitoring at all of our natural seepages via our Gas
Management Plan to ensure no leakages take place.
The combination of fixed monitoring stations, diffusion tubes and
manual monitoring provides adequate and reliable monitoring
across the block.
2. Handheld Photo-ionisation Detector (“PID”)
GKP uses handheld PIDs to monitor photo-ionisation which can
detect more than 400 gaseous pollutants in the air. This enables
us to put in place actions to identify, prioritise and target specific
pollutants where they occur.
3. Gas surveys
We conduct gas surveys of the Shaikan block, the last of which
was conducted in 2021. The purpose of gas surveys is to identify
any natural gas seeps at surface level and to provide insights
into the underlying geology. The studies were conducted using
sensitive hydrogen sulphide (H2S), methane (CH4) and sulphur
dioxide (SO2) detectors deployed from a vehicle, together with
sensors deployed from a drone to cover inaccessible areas.
The results from our 2019 survey confirmed the presence of
three known seepages, together with the discovery of a fourth
seepage in the area. The findings identified low parts per billion
(“ppb”) levels of H2S and SO2 and low ppm background levels of
CH4, indicating overall low levels of seepage. The results from
the study in 2019 were verified in the second survey in 2021.
4. Satellite monitoring
In 2022, Gulf Keystone used satellite imagery for the first
time to determine if any fugitive emissions from our facilities
and emissions from natural seepage could be monitored and
quantified via this innovative technology. Currently, we are
analysing data from the first three datasets collected in March,
September and December of 2022.
In addition to emissions monitoring, the technology also
provides valuable data on biodiversity, land use, hydrology and
topography which can be used for a wide range of analyses in
the field of sustainability and will be made accessible to other
departments, such as to conduct sustainable pipeline surveys.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
39
39
Minimising our impact on the environment
Facility impact management
We undertake detailed facility impact management studies prior
to commencing any site work. Before facilities or access roads are
built, flowlines installed or wells drilled, GKP conducts a thorough
environmental and social impact assessment (“ESIA”) as part of our
project design phase.
In 2022, two ESIAs for the expansion of our two production facilities
and one ESIA for the Gas Management Plan were initiated. All three
ESIAs have been submitted for approval by the Ministry of Natural
Resources.
Specific measures to minimise the impact of Gulf Keystone facilities
on the environment include:
1. effective site selection: including safe location of well pads,
clear access roads and flowlines as far as possible away from
environmentally sensitive targets, such as human habitations
and places of ecological and cultural significance. GKP
maximises the use of existing field infrastructure and conducts
detailed studies for site selection;
2. adequate waste management: with a strong focus on waste
3.
reduction, reuse and recycling;
implementing civil engineering designs that prevent or minimise
any impacts on natural hydrology, drainage systems and erosion
patterns; maximising the use and reuse of local fill material from
the area of land disturbance; ensuring potentially hazardous
materials are contained on site (including drainage systems that
capture contaminated run-off from accidental spills and leaks)
and enhancing future site restoration plans;
4. efficient equipment specification, maintenance and operational
control: to prioritise equipment that is fuel efficient, well maintained,
and controlling operations to mitigate environmental impacts;
5. clear operational management control: to ensure the right
documentation is in place to deliver operational activity in line
with a given project’s environment, social and safety objectives;
ensuring the requirements of GKP’s health and safety and
environmental management systems are met; and ensuring
the recommendations of the development environmental
management plan are adhered to; and
6. preparedness for unplanned events: to embed effective
emergency response and contingency plans, that are resourced
and rehearsed to mitigate any unforeseen events that could
have a significant environmental or social impact.
Soil remediation
We aim to avoid any instances of contaminated soil, surface water
and groundwater resulting from our operations to prevent any risks to
public health and safety or our impact on the environment. As part of our
standard procedure, all waste drilling cuttings and fluids are managed
in line with Kurdistan legislation and international standards. We also
ensure that any pits that are excavated next to well pads to hold drilling
fluid are remediated after any drilling operations are completed. In 2022,
one water pit was remediated at the SH-13 and SH-14 well pad by
using the quality-tested and clean water for irrigation of the adjacent
fields, handing over the liner to the neighbourhood communities for
their own purposes and backfilling the pit with fresh soil.
Waste management
Gulf Keystone maintains high standards of waste management
in the Shaikan Field and our offices. We sort our waste into four
categories:
•
liquid hazardous waste: includes waste crude oil, contaminated
water and drilling fluids;
•
liquid non-hazardous waste: includes uncontaminated water;
• solid hazardous waste: includes drilling cuttings, chemicals and
medical waste; and
• solid non-hazardous waste: includes food waste, packaging,
glass and metals.
In 2022, we recycled 100% of our liquid hazardous waste, 100%
of our liquid non-hazardous waste, 86% of our solid hazardous
waste and 92% of our solid non-hazardous waste. The increase in
the recycling rate of our solid hazardous waste from 28% in 2021 to
86% in 2022 was primarily driven by the increased recycling of our
drilling cuttings.
To ensure that our third-party partners comply with our
requirements and local legislation, we use tools such as GPS
vehicle tracking, waste transfer documentation and quarterly
contractor auditing to track compliance. We also ensure that
all recycled waste has cradle-to-grave traceability for effective
management, end-use and recycling.
All waste generated at GKP operational sites is transported to a
centralised Waste Management Area, where it is separated by our
in-house Waste Management Team. Waste that can be recycled
or reused is then transported to specialist recycling companies
(see “Partnering to repurpose operational waste”). All our waste
management suppliers are approved by the Ministry of Natural
Resources and audited by our HSE & Sustainability team.
Strategic reportStrategic report 40
40
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Environment continued
Case study
Partnering to repurpose
operational waste
Gulf Keystone continually seeks to find innovative ways to divert
waste from landfill by partnering with local suppliers in Kurdistan
to transforming waste into useful products.
In previous years, we sent our oil-based drilling cuttings to a local
asphalt company where the asphalt produced was used for road
construction in the wider Erbil area. However, with this option no
longer available in 2022, we looked for alternatives. After some
research, we identified a company that was able to use the drill-
cutting waste to produce roadside concrete jersey barriers.
Since the start of this project in November 2022, 80 concrete
jersey barriers have been produced from 89.4 tonnes of our
drilling cuttings from the drilling of SH-16 and SH-17 that would
otherwise have gone to landfill. Once produced, the barriers are
used to protect sensitive infrastructure such as flowlines and
well heads.
Wastewater management
Our sewage wastewater is continuously treated in sewage
treatment units, with samples taken from the inlet and outlet streams
to ensure the units are operating efficiently and that the quality of
the effluent meets WHO guidelines. In 2022, an additional sewage
treatment unit was installed at our construction camp, and looking
ahead, we are planning to reuse treated sewage water from our
operations for the irrigation of our facilities.
Any wastewater from drilling activities with oil traces is collected
and transported via vacuum trucks to an MNR-approved refinery
that specialises in recycling oil and lubricants of different grades
from waste containing oil and/or hydrocarbons.
Water management
With our operations situated in a region that is prone to drought,
having a strong water and wastewater management process in
place is a key consideration – not only for our own business but
for our land and local communities.
The majority of our water use, measured as water withdrawn, is
associated with our drilling activities. The remainder is used for
operational requirements and as drinking water in our production
facility camps. Water at the camps is supplied via water wells, which
are analysed monthly and chlorinated weekly to ensure they meet
World Health Organization (“WHO”) guidelines.
In 2022, Gulf Keystone used around 9% less water than in 2021.
This was mainly achieved by closely monitoring the consumption
and storage of fresh water during our drilling activities to ensure
efficient usage. The significant increase in water withdrawn in 2021
relative to 2020 was primarily driven by the resumption of drilling
activities and more accurate data measurement following the
installation of metering devices at our production facilities.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
41
41
Social
Our focus
Our contribution to Kurdistan’s social and economic development is
critical to our licence to operate and our long-term future success.
Our people are what make our business unique and we are proud
to be an employer of over 500 people in Kurdistan and the UK.
We work together as one team and we are focused on continuous
improvement to enhance the safety, wellbeing, skills and diversity
of our workforce. We are also committed to creating significant
local economic value by employing local people, supporting local
suppliers and generating revenues for our host government from
the Shaikan Field. We regularly engage with and invest in our local
communities, as we continue to strengthen the relationships we
have built over 15 years working in Kurdistan.
SDG alignment
Target:
Zero harm to staff, contractors and local communities
SDG 4: Quality education
Projects focused on education and skills
development are a key strategic focus
of our local community engagement
programme (see page 49).
SDG 5: Gender equality
We are focused on increasing the
number of women who work for GKP and
empowering female leaders through our
Global Women’s Network, launched in
2022 (see page 46).
SDG 8: Decent work and
economic growth
We are passionate about generating
economic value for Kurdistan, creating
local jobs, supporting regional suppliers
and generating revenues for the region
through production from the Shaikan
Field (see page 47).
Incidents per
million man-hours
Incidents per
million man-hours
Key performance highlights
Material factor
Indicator
Health, safety
and wellbeing
Total recordable incident rate (“TRIR”)
Gender diversity
Lost time incident Rate (“LTIR”)
Proportion of female staff in
workforce (as at 31 December)
Proportion of female staff
in Kurdistan (as at 31 December)
Proportion of female
staff in UK (as at 31 December)
Generating economic
value in Kurdistan
Proportion of local staff
in workforce (as at 31 December)
Local supplier purchasing
and contracting (80% WI)
Proportion of total purchasing and
contracting with local suppliers
Payments to host government(1) (80% WI)
Local community
projects
Total value of contributions
to local communities (80% WI)
References
(1) See the Report on Payments to Governments for 2022 on page 161 for full disclosure.
%
%
%
%
$m
%
$m
Unit
2020
2021
2022
0.71
1.37
0.45
0.00
0.68
12
9
36
84
21
42
9
7
30
74
49
58
0
14
12
38
74
64
35
120.6
335.8
514.9
$
209,000
640,000
833,500
Strategic reportStrategic report
42
42
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Social continued
Health, safety and wellbeing
The ongoing health, safety and wellbeing of our workforce and local
communities is a critical priority. It is one of GKP’s six core values and
integrated across all organisational levels and operational activities.
We believe that no job is so urgent or important that it cannot be done
safely, which is why we are committed to zero harm across all our
business activities. By regularly engaging with our workforce through
ongoing training, learning and development activities we seek to
prevent incidents before they occur..
Health, safety, environment and quality governance
Health, safety, environment and quality (“HSEQ”) governance is a
core responsibility for our executive team. Led by our Chief Executive
Offi cer (“CEO”), the Board oversees our HSEQ strategy and receives
regular updates on our performance via the Safety and Sustainability
Committee. The Executive Committee addresses health and
safety via ongoing operational meetings which include senior
management meetings.
Our Chief Operating Offi cer (“COO”) holds weekly health, safety and
sustainability meetings with GKP’s Head of Safety and Sustainability
to ensure that our HSEQ Action Plan, HSEQ-related metrics and
daily actions are appropriately addressed. This includes upholding
the principles and expectations outlined in Gulf Keystone’s Health,
Safety, Security, Environment and Community Policy and our Code of
Business Conduct.
HSEQ Management System
Working with the MNR, our local communities and third-party
consultants, Gulf Keystone has developed and implemented a
comprehensive HSEQ Management System and Health, Safety,
Security, Environment and Community Policy.
Our HSEQ Management System, which was updated in 2022 to
integrate Quality, follows the “plan – do – check – act” process,
consistent with ISO 14001 and ISO 9001 standards on environmental
management, occupational health and safety management and
quality. Our system is driven through internal commitment, leadership,
planning assessment and risk mitigation, as well as through the
employment of skilled and competent personnel to carry out the
work. Our performance is monitored on a rolling basis to identify any
shortfalls, and to introduce improvements as and when required.
GKP Life Saving Rules
Core Rules
To support this system, a “maturity index” was developed to monitor
the relative strength of our progress. This is reviewed on an annual
basis and agreed improvements are included in the following year’s
HSEQ plan.
A vital element of GKP’s HSEQ Management System is the formal
Competency Based Framework which seeks to train and develop
local staff on required health, safety and environmental-related
expectations. This programme includes mentoring, online training
programmes, internal/external training, and a formal assessment
process to demonstrate competence. The HSEQ Management
System is fundamental for supporting a strong culture of health and
safety within the business.
Our 2022 HSEQ Plan
Our HSEQ Plan outlines GKP’s roadmap for improving HSEQ
performance and measuring HSEQ metrics throughout the year.
The annual HSEQ Plan is put forward by our COO to the Executive
Committee at the start of the year for approval and is endorsed by the
Safety and Sustainability Committee before being rolled out.
In 2022, the HSEQ Plan included actions to embed further
improvements to the HSEQ Management System, to continue
to enhance process safety, provide ongoing training, and embed
improvements to our air quality monitoring programme. As of
31 December 2022, we achieved a 98% completion rate of the
actions we set out at the beginning of the year.
Life Saving Rules
Gulf Keystone’s Life Saving Rules are based on the International
Association of Oil & Gas Producers’ Life Saving Rules and provide
all our people and contractors with practical lifesaving guidance
required in the fi eld. The Life Saving Rules, comprising nine Core
Rules and 11 Supplementary Rules, are regularly discussed and
reinforced at safety briefi ngs, highlighted in various places around our
facilities and are reviewed on an ongoing basis to ensure they remain
front-of-mind for all our staff .
In 2022, the Life Saving Rules were reviewed and extended to include
coverage of hydrogen sulphide (H2S), which we consider to be the
most dangerous risk in our business. Two separate icons were also
introduced for the prohibition of drugs and alcohol on site.
1
2
5
3
6
8
4
7
9
Personal Safety
Driving
Site Safety
Control of Work
Supplementary
10
11
12
13
14
17
18
15
19
16
20
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
43
43
2022 LTIR and TRIR versus working hours
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jan
2022
12-month rolling working hours
12-month rolling Total Recordable Incident Rate ("TRIR") per million hours worked
12-month rolling Lost Time Incident rate ("LTIR") per million hours worked
Benchmark TRIR for Kurdistan, IOGP Stats 1.3
Benchmark LRIR for Kurdistan, IOGP Stats 0.3
Feb
2022
Mar
2022
Apr
2022
May
2022
Jun
2022
Jul
2022
Aug
2022
Sep
2022
Oct
2022
Nov
2022
(m)
2.5
2.0
1.5
1.0
0.5
0.0
Dec
2022
2022 health and safety performance
We are pleased to report a continuation of our strong health
and safety performance in 2022. We recorded zero Lost Time
Incidents (“LTIs”) in the year, despite increasing levels of activity
and recording over 2.2 million working hours. One recordable
incident was recorded relating to a snakebite, with the member of
staff affected receiving rapid treatment and making a full recovery.
As a result, our Total Recordable Incident Rate (“TRIR”) decreased
from 1.37 incidents per million working hours in 2021 to 0.45 in 2022.
Following our strong performance in 2022 and over 440 days
without an LTI, we were disappointed to record an incident during
drilling operations in January 2023. The incident occurred as our
drilling team was preparing to move the drilling rig from the SH-17
well pad to the SH-18 well pad. We are pleased the member of the
team is making a full recovery and we have put in place a series of
remedial actions to prevent future incidents. As we continue our
drilling campaign in the Shaikan Field, it is more important than ever
we maintain a rigorous focus on health and safety.
Emergency response planning
We have long-standing tiered emergency response plans in place
on our sites, which are regularly tested through a combination of
drills and response exercises covering different operational and
security-related scenarios. In 2022, two emergency response
exercises were held which involved the incident and emergency
management teams within the Shaikan Field, the Erbil office and our
London office.
Land clearance activity
Whenever our operations expand into a new area, we ensure the
land is safe by surveying it for unexploded ordinance and clearing it
prior to any work commencement. This is a vital activity that not only
helps to protect our staff and contractors, but also helps to reclaim
the safety of the land for local communities.
In 2022, we surveyed 2,142,328m2 of land in preparation for our
future development activity and new well locations. Through this
process, we identified two pieces of ordinance that were safely
disposed of by a government agency.
Core Rules
1
2
5
3
6
8
4
7
9
Supplementary
10
11
12
13
14
17
18
15
19
16
20
Personal Safety
Driving
Site Safety
Control of Work
Strategic reportStrategic report 44
44
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Social continued
Case study
Health and
safety training
In 2022, we developed an HSEQ Excellence Training course
for members of our Executive Committee and senior leadership
team. The training was undertaken by 25 leaders from across the
business and included updates on topics such as legal health and
safety stipulations, roles and responsibilities and advice for how
leaders can embed HSEQ across the organisation.
For the wider organisation, a Behavioural Based Safety Campaign
was rolled out in October 2022. The campaign was supported by
an external organisation and consists of a general HSEQ audit,
an HSEQ culture audit, interviews with employees and ongoing
training and workshops relating to health, safety and wellbeing.
Furthermore, an incident response training module was provided
to managers to encourage the regular reporting of near-misses
and incident investigations. The training included modules specific
to each manager’s role as well as an overview of our standard
organisational procedures. We apply the Based Systematic
Cause Analysis Technique (“BSCAT”) approach for incident
investigations and investigation reports. This includes ensuring
that all investigations are conducted by unbiased and impartial
actors who are not directly involved in the incident.
Wellbeing initiatives
In addition to upholding high levels of operational health and safety
on site, we recognise the importance of helping our people live
healthy and active lives in which their physical and mental health
are prioritised.
In 2023 we introduced a wellbeing allowance paid monthly through
payroll to all employees to encourage participation in wellbeing
activities. We rolled out a new Employee Assistance Programme
in the UK and promoted healthy lifestyles by encouraging staff to
join online webinars and take part in fitness challenges. We also
introduced on-site neck and shoulder massages in our London
office, as well as weekly fruit deliveries in all our facilities and offices.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
45
45
Our people
Our team of over 500 staff and contractors in Kurdistan and the
UK are the lifeblood of our organisation. Their dedication and
expertise help us to deliver, improve and grow our business every
day. To support them, we are focused on fostering a safe, diverse
and inclusive working environment that enables our people to
thrive and develop their careers. We are also deeply committed to
enhancing employment opportunities for local people in Kurdistan
and we place a strong emphasis on hiring directly from our local
communities in the Shaikan Field.
Our purpose and values
As a purpose-driven business, GKP exists to develop natural
resources for the benefit of all stakeholders by delivering social and
economic benefits by working safely and sustainably with integrity
and respect.
GKP’s values
Our culture is underpinned by six core values which provide the
building blocks for how we operate and get things done as a team.
It is by embodying these values that we can deliver our purpose and
meet our strategic objectives.
To ensure we live these values every day, we hold regular meetings,
briefing sessions, town hall sessions, as well as “coffee chats” and
surveys, to give our people the opportunity to share their views,
listen to our progress and understand our shared direction.
Our employee retention rate remains excellent, and our voluntary
turnover level in 2022 was 3%. We are also proud that close to
50% of our local workforce has been with the Company for over
five years in 2022. This is a strong endorsement of our positive
culture and workplace values.
Safety
Safety comes first. No job is so urgent or important that it cannot be done safely.
Social
responsibility
We are committed to meeting high standards of corporate citizenship by protecting
the wellbeing of our employees, by safeguarding the environment and by creating a
long-standing, positive impact on the communities where we do business.
Trust through open
communication
We understand the importance of listening and open communication with employees,
our business partners, stakeholders and shareholders – our success depends on
everyone. We encourage an environment of open and continuous communication and
build our relationships on trust.
Innovation and
excellence
We are committed to a high-performance culture and to ensure sustained long-term
value for not only our external stakeholders but also our employees through learning,
mentoring and career development.
Integrity
and respect
Doing the right thing. We are always guided by the highest standards of ethical conduct,
integrity and fairness. Respect is: ensuring diversity and equal opportunities in the
business with our partners, stakeholders and contractors, and seeking to conduct our
business openly and to mutual benefit of all.
Teamwork
Positive and constructive collaboration and relationships between all employees is vital
to deliver outstanding performance in everything we do.
Diversity and inclusion
At Gulf Keystone, we seek to create a strong culture in which the
principles of diversity and inclusion are promoted across the
business. As detailed in our Diversity and Equal Opportunities
Policy, we treat all people fairly, equally and without prejudice
irrespective of their gender, sex, age, race, disability, sexual
orientation or any other attributes.
We work hard to build an inclusive culture that creates a strong
sense of belonging and purpose. We believe our individual
differences and unique cultural perspectives add value to our
expertise and enable us to find innovative solutions to solve
challenges. As at 31 December 2022, we are proud to report that
our workforce is made up of 25 different nationalities.
We also recognise we operate in an industry with low rates of female
participation. As a result, we make a concerted effort to attract and
retain female talent, improve the balance of our workforce and to
create opportunities for the development and promotion of women
into senior leadership roles. In 2022, we increased the proportion
of women in our workforce to 14%, a figure which we hope to build
momentum on into 2023 and beyond.
Strategic reportStrategic report 46
46
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Social continued
Our people continued
Employee testimonial:
Asuda Tahir
My name is Asuda Tahir and I started working at GKP in late
2019. I am extremely grateful to be working in a company
that promotes both equal opportunities and clear career
progression for all genders. Since joining the organisation,
I have held several roles and I am now a Junior Drilling Engineer.
Currently I’m working at the SH-18 rig site, assisting the
Drilling Supervisor and Well Engineers with all aspects of Well
Engineering and daily drilling operations. Safety is a key focus
of a successful operation, that is why our priority each morning
is to conduct pre-job safety meetings. The thing I enjoy most
about my role on the rig is that each day differs to the day before
and there are always new challenges.”
Case study
Global Women’s
Network
Learning and development
We are committed to attracting, retaining and developing talented
individuals. To achieve this, we provide ongoing training and
development opportunities for all our employees to help build
the skills we need for today while also supporting them with their
long-term career ambitions.
Among our training opportunities, we provide a bespoke Gulf
Keystone Management Development Programme together with
a Coaching and Mentoring Programme for our managers and
supervisors. We also offer a mini-MBA programme to our employees
to learn more about our business and the oil and gas industry in
general. In 2022, we introduced Situational Leadership training,
as well as English and Kurdish language training to build further
cohesion among our teams. We also offer local classroom training to
our Kurdish employees in courses such as Excel and report writing.
For more specialised areas of focus, we provide structured technical
training programmes for our employees working in areas such as
subsurface or HSEQ positions. We also have strong commitments
in place to develop our local workforce by providing them with the
technical and non-technical management training programmes
required to support their development.
In a milestone step for gender diversity and inclusion at
GKP, we established our Global Women’s Network (“GWN”)
in 2022. The purpose of the GWN is to create additional growth
opportunities for women within the business and to help us drive
inclusivity and representation. The network is sponsored by our
Chief Executive Officer and will focus on:
• delivering opportunities to enhance and upskill leadership skills;
fostering an inclusive environment where women can support
•
one another through a strong network;
• achieving a positive impact and contributing to GKP’s gender
diversity and inclusion efforts; and
• demonstrating our core values of safety, social responsibility,
trust through open communication, innovation and excellence,
integrity and respect, and teamwork.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
47
47
Case study
Generating economic
value for Kurdistan
Kurdistan is part of Gulf Keystone’s DNA. Since our entry into
the region in 2007, we have continued to generate significant
economic value in partnership with our host government,
the KRG. Our focus on creating local jobs, investing in local
suppliers, generating revenues from the Shaikan Field and
supporting our local communities means the benefits of
our operations continue to be shared with the people of
Kurdistan.
Commitment to local employment
We are committed to creating a skilled and localised
Kurdistan workforce to ensure the safe, effective and
ongoing development of the Shaikan Field. We have several
strategies in place to help deliver, including a localisation
programme aligned to our business objectives and
commitment to developing our Kurdistan workforce both
technically and professionally.
As of 31 December 2022, we employed 349 local employees
in Kurdistan, or 74% of our total workforce in the region.
In addition to direct employment, our operations are also
responsible for significant economic activity and indirect
employment through the engagement of local contractors.
In 2022, major Gulf Keystone contracts supported over
600 jobs among local communities. We also collaborate
with local stakeholders on an ongoing basis to ensure that
direct and indirect employment is shared across the villages
surrounding our Shaikan operations.
Supporting regional businesses
In 2022, $64 million of our purchasing and contracting
was spent with local suppliers, a 20% increase versus
2021. Nine new contracts were signed with local Shaikan
companies during the year. While the proportion of local
purchasing and contracting as a percentage of total
spending decreased from 58% in 2021 to 35% in 2022,
due to increased spending with international suppliers on
development and drilling activity, we see material levels of
expenditure with local suppliers in future years.
Creating economic value for Kurdistan
Since commercial production began in 2013, the Shaikan
Field has generated significant revenues for our host
government, the KRG, and the Kurdistan region, through
ongoing production entitlements, royalties and capacity
building payments. In 2022, we generated a total of
$514.9 million net for the KRG, a 53% increase versus
2021 as both realised prices and production increased.
For additional information, please refer to the Report on
Payments to Governments for 2022 on page 161.
2022 highlights
>600
local workers employed through
GKP contractors
$64m
spent with local suppliers
$514.9m
generated for the KRG
Strategic reportStrategic report 48
48
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Social continued
Local community engagement
Our relationships with the communities located in the Shaikan area
are critical to our licence to operate. By listening and responding to
their needs and by supporting valuable community initiatives, we are
making a lasting impact (see “Sustainable community initiatives”).
As part of the initial phases of development and drilling activity, we
identify and assess any possible impact our operations and projects
may have on the local community, and we communicate these with
regional stakeholders and local authorities to mitigate any issues
or negative impacts. We maintain close relationships with local
authorities, share information on safety, security and other issues,
and set professional standards for local employees and contractors.
We have a formal procedure in place for our local communities
to provide all types of feedback regarding our operations. The
procedure is connected to our corporate values and incorporates
guidance on best practice from the International Finance Corporation
(“IFC”) Standards. Grievances and the resulting conclusions are
documented in a tracking system, which enables us to analyse, track
and mitigate future issues.
Sustainable community initiatives
We work in close collaboration with our local communities to identify
programmes that promote economic growth, social development
and shared prosperity. Our community focus is split into three core
areas: Firstly, we support regional agriculture – the second largest
sector of Kurdistan’s economy after oil and gas. Secondly, we support
local education and enterprise projects. And thirdly, we support Good
Neighbour projects that provide vital community infrastructure, such
as power and water.
In 2022, we supported 18 villages within the Shaikan area via
sustainable community projects across the areas of agriculture,
education, water, electricity and healthcare. In total, over $1 million
gross in community support was provided by Gulf Keystone and our
partner MOL to fund these projects, representing a 20% increase
from 2021 and underlining our continued commitment to providing
meaningful support.
Olive oil extractor
Hydroponic fodder facility
Some of the key project highlights from 2022 are as follows:
1. Agriculture initiatives
Gulf Keystone continued its support of local farmers and livestock
breeders in 2022 by providing valuable tools, resources and training
to support regional agricultural development.
• Olive tree donations: We delivered 5,600 olive trees to local
farmers to provide a productive method of sequestration for
the area outside our production facility and to support farmer
livelihoods. As well as providing year-round greenery, the olives
can be converted into olive oil via an extractor donated by GKP
in 2021. Of the 5,600 trees, 1,500 were planted close to our
production facility and the olive oil extractor produced 70 tonnes of
olive oil. Training sessions and site visits were held to teach farmers
how to maintain the trees and we will hire a cohort of workers to
manage the unit for the harvesting season;
• Beekeeper support: We continued to support 60 local
beekeepers within the Shaikan block by distributing 180 boxes
of live bees, 120 wooden beehives, honey extractors, other
beekeeper materials, as well as hands-on training and site visits
during the year. As a result, honey production increased from
5kg/beehive to 8kg. The project is inspiring a new generation of
beekeepers, with many of the local participants newcomers to bee
husbandry;
• Sustainable fodder for livestock: We opened an innovative
hydroponic fodder facility at Kani Falla, close to the Shaikan Field.
Hydroponic farming enables plants and crops to be grown without
soil, which is very valuable in an area that is often impacted by
drought. With a little water and power that is part generated by
solar panels, the facility can produce up to one tonne of fodder per
day, which is enough to feed around 500 sheep, goats and other
local livestock;
• Milk machine donations: We donated milking machines and
stainless-steel containers to 62 local livestock breeders to enable
quicker and more hygienic milking of their sheep and goats. The
machines will process milk for collection and transportation to
local dairy factories and ice cream shops, with any extra milk used
for home consumption to make yogurt and cheese; and
• Wheat seed and fertiliser donations: We distributed 265 metric
tonnes of certifi ed wheat seeds, DAP, and urea fertilisers to over
500 local farmers in the Shaikan area to support them through the
poor crop yields of recent years. The event, which took place in
September, was attended by the Shaikan Mayor, as well as offi cials
from the Shaikan area and agriculture departments, local village
mukhtars and farmers.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
49
49
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
r
r
e
e
p
p
o
o
r
r
t
t
2. Educational projects
We provide education provisions to children and young people in
the surrounding area, including skills development programmes,
healthcare initiatives and school supplies.
• Plumbing and sewing courses: Working in partnership
with local NGO Armand, we delivered skills-based training to
local people who have had a diffi cult start in life. By providing
skills-based training in areas such as plumbing and sewing, we
have been able to support several young people in starting their
own ventures or fi nding employment. As of 2022, 30 young
people have used the plumbing skills learned to fi nd subsequent
employment opportunities, and 15 girls from local villages have
started their own home-based sewing businesses;
• School donations: We distributed 20 water tanks, 40
whiteboards and other visual educational materials to 14 schools
within the Shaikan block during the year; and
• Eye tests for local pupils: We hired a mobile team of
ophthalmologists and optometrists to perform eye examinations
for more than 1,700 students across 16 schools in the area.
Following the tests, we distributed 230 eyeglasses to students.
3. Good Neighbour projects
We provided extensive infrastructure support to local communities
in 2022 via our Good Neighbour projects programme. Through the
actions implemented, over 3,000 residents in the Shaikan block
have benefi ted from improved access to water and electricity.
• Water pipes: We built over 14,000m of water pipes across nine
villages to improve access to clean water;
• Water tanks and wells: We constructed fi ve water tanks in fi ve
villages with a total volume of 340m³. We also drilled a 200m
water well to enable members from a local village to access a new
fresh water supply; and
• Electricity support: We ran and installed more than 15,000m of
power lines across two villages to get them on the grid.
Local testimonial:
Adnan Mirza
My name is Adnan Mirza. I am a farmer and livestock breeder
living in the village of Kani Fala. Thanks to GKP’s support,
I have been able to improve my livelihood. Before GKP’s
contribution, I was struggling to cultivate my land due to the
scarcity of seeds, drought, and lack of support. Today, all of
that has changed, thanks to the tools and training off ered
by GKP. Throughout the years, what seemed impossible to
achieve is now a reality.
Local testimonial:
Ghariba Salih
Local school eye examinations
Milk machine donations
My name is Ghariba Salih and I am a villager from Musaka.
I have a physical disability in my legs which has made fi nding
employment hard. As a person with special needs, I was
extremely happy to have been selected to participate in the
sewing training programme. After completing the training,
I now have my own sewing machine and can sew diff erent
types of Kurdish clothes for women and girls. The training
has benefi ted me fi nancially, socially and psychologically.
Words can’t express my joy and gratitude for your support.
50
50
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Sustainability report continued
Governance
Our focus
Outstanding governance, ethical conduct and compliance are
the foundation of GKP’s business and underpin our purpose as a
responsible energy company. We have taken significant steps to
establish robust oversight and management of our sustainability
strategy and climate-related risks and opportunities. We also
continue to embed a focus on ethical conduct and compliance at
all levels of the organisation, including the launch in 2023 of GKP’s
Code of Business Conduct and training programme.
SDG alignment
Target:
Outstanding governance and compliance
Annual workforce compliance
with Code of Business Conduct
SDG 8: Decent work and economic growth
We are passionate about generating economic value for Kurdistan, creating local jobs, supporting regional suppliers and generating
revenues for the region through production from the Shaikan Field (see page 47).
Key performance highlights
Indicator
Material factor
Board oversight
Proportion of independent
Directors on Board(1)
Proportion of independent Directors
on Nomination Committee
Proportion of independent Directors
on Audit and Risk Committee
Proportion of independent Directors
on Remuneration Committee
Proportion of female Directors on Board
Director Board meeting attendance
(1)
Includes independent Non-Executive Chairman.
Unit
2020
2021
2022
%
%
%
%
%
%
57%
57%
63%
100%
100%
100%
67%
100%
100%
100%
14%
98%
100%
14%
100%
100%
25%
100%
Board and management oversight of GKP’s
sustainability strategy
GKP’s Board meets regularly to consider and discuss the Company’s
strategy, policies, major capital expenditure and all aspects of the
Company’s activities and business operations. This includes active
involvement and ultimate accountability for matters relating to
safety, sustainability and climate change through oversight of GKP’s
sustainability strategy.
The Safety and Sustainability Committee has primary responsibility
for ensuring appropriate systems are in place to manage health,
safety, security and environmental risks, including climate-related
risks and opportunities, as well as implementing and monitoring
appropriate safety and sustainability-related governance processes
across the Company. This includes the development of relevant KPIs
and making recommendations of improvement where appropriate.
The Safety and Sustainability Committee meets four times per year
and reports all matters discussed into the Board.
All significant decisions affecting sustainability matters and
climate-related risks and opportunities are considered by the Board
upon the recommendations of the Safety and Sustainability Committee.
Gulf Keystone’s Chief Operating Officer (“COO”) is executive
sponsor for sustainability and climate-related risks and
opportunities and has an open and regular dialogue with the Safety
and Sustainability Committee. He is supported by the HSE and
Sustainability team, headed up by Gulf Keystone’s Head of HSE and
Sustainability, who is in turn supported by a dedicated Sustainability
Manager. The COO, Safety and Sustainability team and other
members of the Executive Committee and senior management team
are part of the Sustainability Panel, a new body created in 2022 with a
mandate of facilitating the execution of GKP’s sustainability strategy.
Further information on the Board’s role and responsibilities, as
well as the oversight and management of climate-related risks and
opportunities in the organisation, can be found in the Corporate
governance report on pages 80 to 89 and in our TCFD report on
pages 52 to 65.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
51
51
GKP Sustainability Champions
In 2022, 44 dedicated employees from across GKP, from
operational staff through to IT, and from London to Erbil,
volunteered to be Sustainability Champions. This unique role will
provide departments from across the business with a dedicated
sustainability representative who can identify, present and deliver
new environmental, social and governance-related ideas to the
Safety and Sustainability Committee.
Our Sustainability Champions come from a wide range of
backgrounds with diverse skill sets, and each bring their own
perspectives on GKP’s sustainability needs. The initiative will also
empower our Champions to develop their own careers by giving
them the power to take on actions that have the potential to impact
our future for the better.
Moving forward, our Sustainability Champions will hold regular
meetings together, with the best ideas being voted on and taken
to the Safety and Sustainability Committee for implementation on
the ground.
Ethics and compliance
We are committed to operating as a responsible business that
upholds the highest standards of ethics and compliance wherever
and however we operate. Failure to do so could endanger our
licence to operate and result in significant legal and financial losses.
To reinforce our commitment to ethics, we recently launched
GKP’s Code of Business Conduct (see case study). The document
contains an overview of our policies and procedures relating to
anti-bribery and corruption, conflicts of interest, competition and
anti-trust, data and information security, diversity, harassment,
human rights, modern slavery and HSEQ.
We operate a zero-tolerance approach to bribery and corruption.
It is essential that the Company maintains transparent relationships
free from corruption with our host government, suppliers,
contractors and local communities. This protects our reputation
and our licence to operate, as well as the ability to access funding
and operate effectively. To monitor our activity, we operate an
independent whistleblowing service in the event any employee
wishes to raise a concern, either online or over the phone,
anonymously and without fear of reprimand.
Case study
Code of
Business Conduct
We recently developed and launched the GKP Code of
Business Conduct (“COBC” or “the Code”) to act as a guide
to doing the right thing for all our employees, as well as
contractors, suppliers and other third parties. Our COBC lies
at the heart of everything we do and underlines our absolute
commitment to safety, compliance, ethics, caring for others
and working together as one team. The Code is essential
to maintaining our integrity, and our integrity is essential to
maintaining our future success.
In early 2023, we rolled out mandatory training on the Code
to all 500+ members of staff, ensuring that all our internal
stakeholders are upholding the highest standards on matters
of business ethics while safeguarding our assets. Following
completion of the training, GKP staff are required to sign a
certificate, confirming their compliance with the Code of
Conduct in 2022 and commitment to complying in 2023.
The Code also includes a newly developed Human Rights
and Modern Slavery Policy which outlines our commitment
towards upholding, protecting and advancing human rights
within our business and across the supply chain in line with
the International Bill of Human Rights, UN Guiding Principles
on Business and Human Rights and the International Labour
Organisation Core Conventions, including those related to
child and forced labour, human trafficking, non-discrimination,
freedom of association and collective bargaining.
Strategic reportStrategic report 52
52
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report
Task Force on
Climate-related
Financial Disclosures
(“TCFD”) report
GKP’s business is inextricably linked to
environmental considerations and the
Company recognises climate change as one
of the most important issues the world faces.
GKP has taken signifi cant steps in recent years to
develop a sustainability strategy, with a particular
focus on minimising the Company’s environmental
footprint, while addressing climate-related risks and
opportunities. 2020 represented GKP’s fi rst disclosure
to address the TCFD recommendations and since then
the Company has focused its eff orts on enhancing its
disclosures and working towards full consistency in
fi scal year 2022.
Gulf Keystone’s climate-related fi nancial disclosures
made in the 2022 annual report are fully consistent
with all 11 of the TCFD’s recommended disclosures
described in “Implementing the Recommendations
of the Task Force on Climate-related Financial
Disclosures” published in October 2021, in line with the
Financial Conduct Authority’s LR9.8.6 requirement.
The Company’s disclosures are also consistent with
the TCFD’s additional recommendations for the oil
and gas industry outlined in the same publication
mentioned above, including reporting of scope 1
emissions by source, presented on page 35 of the
Sustainability report. Full consistency with TCFD
demonstrates GKP’s commitment to addressing
climate-related risks and opportunities, with the
four pillars of TCFD embedded into our business
and strategy.
Task Force on
Climate-related
Financial Disclosures
(“TCFD”) report
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
53
53
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
TCFD Pillar 1 – Governance
GKP’s Board is responsible for the Company’s sustainability
strategy and governance, and its focus on addressing
climate-related risks and opportunities. The Board is supported, as
appropriate, by its Board Committees. The sustainability strategy
is integral to GKP’s overall strategy and ability to create long-term
value for its shareholders and other stakeholders.
Board members meet at least four times per year with members of
GKP’s Executive Committee and senior management to consider
a wide range of climate-related risks and opportunities and to
facilitate the sustainability strategy’s success.
Board and Board Committees
The broader workforce and organisation are empowered to
support the sustainability strategy through regular communication
and GKP’s Sustainability Champions initiative, which brings
together representatives from each of the Company’s business
departments to support GKP’s sustainability strategy, including
addressing climate-related risks and opportunities (see page 56-59
of the Sustainability report for further detail).
Technical
Committee
Audit and Risk
Committee
Board of Directors
Safety and
Sustainability
Committee
Nomination
Committee
Remuneration
Committee
Management
Executive Committee
Chief Operating Officer
Sustainability strategy sponsor
Safety and
Sustainability team
Other relevant senior
management
Sustainability
Panel
Workforce
Sustainability Champions
Business departments
Strategic reportStrategic report
54
54
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report continued
TCFD Pillar 1 – Governance continued
a) Describe the Board’s oversight of climate-related
risks and opportunities
The Board
The Board carries out robust assessments of GKP’s principal
and emerging risks, including those related to climate change, as
maintained in the Company’s Sustainability and Climate Risk Register.
The Company’s sustainability strategy, including climate-related risks
and opportunities, is the responsibility of the Board, with specific
issues and responsibilities related to the strategy delegated to the
appropriate Board Committees. The Board has significant oil and
gas industry experience and expertise and continues to develop
its knowledge and expertise on climate-related matters through
ongoing education and advice from specialist advisers.
In 2022, the Board met ten times and discussed climate-related
risks and opportunities on five occasions. Meetings were attended
by Board Directors, as well as other members of the Executive
Committee.
Throughout the year, the Board considered climate-related risks
and opportunities when reviewing GKP’s strategy, capital allocation,
budgeting and risk management. Specific Board discussions related
to climate-related issues focused on:
• progress in scoping and implementing emissions reduction
projects, primarily the Gas Management Plan but also other
decarbonisation initiatives, as part of GKP’s climate-related
opportunities (see pages 54 and 55 for further detail);
• the creation of the Company’s Sustainability and Climate Risk
Register and subsequent updates;
• activity to fully comply with TCFD recommendations, including
improving the accuracy and scope of our greenhouse gas
emissions disclosures; and
• analysis of market trends related to climate change, including
the development of voluntary carbon markets to offset carbon
emissions and upcoming changes to global climate-related
regulation.
As part of the discussions, the Board reviewed reports from relevant
Board Committees on specific topics, in particular from the Safety
and Sustainability Committee.
Further detail on the role and responsibilities of the Board is available
in the Corporate governance report on pages 80 to 89.
Safety and Sustainability Committee
The Safety and Sustainability Committee is responsible for ensuring
that appropriate systems and resources are in place to manage
the Company’s commitment to safety and sustainability, including
the management of climate-related risks and opportunities.
The Committee, supported by the Technical Committee, monitors
and oversees progress of climate-related goals and targets.
The Safety and Sustainability Committee is chaired by David Thomas,
Non-Executive Director, and is comprised of the Chief Executive
Officer, Chief Operating Officer and two other Non-Executive
Directors, Kimberley Wood and Jaap Huijskes, GKP’s Non-Executive
Chairman. The Committee regularly invites the Company’s Safety
and Sustainability team, as well as other Board Directors, Executive
Committee members and relevant senior management, to attend
meetings and report to the Committee.
In 2022, the Safety and Sustainability Committee met four times and
discussed climate-related risks and opportunities at all four meetings.
The below topics were discussed:
• progress against GKP’s target to achieve full consistency with
TCFD recommendations in fiscal year 2022;
• progress in tendering the Gas Management Plan (“GMP”) to
achieve our target to reduce scope 1 emissions intensity by >50%
by 2025 versus the original 2020 baseline, subject to the timely
sanction and implementation of the GMP;
• GKP’s other climate-related opportunities, including the
development of other decarbonisation projects beyond the Gas
Management Plan;
• review of Company GHG emissions data to improve the accuracy
and scope of our reporting, including the publication of scope 3
emissions data and independent verification of the Company’s
2022 GHG emissions;
• review of climate-related data reported by GKP international and
Kurdistan peer companies;
• analysis of market trends related to climate change, including
the development of voluntary carbon markets to offset carbon
emissions and upcoming changes to global climate-related
regulation; and
• development of climate-related corporate policies.
Further detail on the role and responsibilities of the Safety and
Sustainability Committee is available in the Safety and Sustainability
Committee report on pages 98 and 99.
Audit and Risk Committee
The Audit and Risk Committee is responsible for overseeing
GKP’s financial reporting, internal risk management and control
functions, internal audit requirements and the appointment and
oversight of the Company’s internal (as appropriate) and external
auditor. This responsibility includes oversight of the identification
and mitigation of climate-related risks, including physical and
transition risks defined by TCFD, as maintained in the Company’s
Sustainability and Climate Risk Register, which was created in 2022.
The Committee reviews key risks from the Company’s risk registers,
including the Company’s Sustainability and Climate Risk Register,
and it is expected that in the future the Sustainability and Climate Risk
Register will be reviewed at least three times a year, following which a
risk report will be provided to the Board.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
55
55
The Committee also ensures that there is appropriate disclosure
on climate-related risks and opportunities within the Company’s
financial reporting.
The Safety and Sustainability Committee is responsible for
providing regular verbal and written updates on climate-related
matters to the Audit and Risk Committee through the Board
members who are present on both Committees.
Further detail on the role and responsibilities of the Audit and Risk
Committee is available in the Audit and Risk Committee report on
pages 94 to 97.
Remuneration Committee
The Remuneration Committee determines GKP’s remuneration
policy for Executive Directors, Executive Committee members
and employees, which includes sustainability and climate-related
metrics. Further information on how the Board, upon the
recommendation of the Remuneration Committee, embeds
climate-related metrics and targets into its remuneration policy can
be found on page 64 of the TCFD report.
Further detail on the role and responsibilities of the Remuneration
Committee is available in the Remuneration Committee report on
pages 102 to 118.
Nomination Committee
The Nomination Committee is responsible for, among other things,
the identification and nomination of Directors for vacancies on the
Board and other Board Committees, as and when they arise.
The Board and Nomination Committee aim to ensure that for future
appointments to the Board, there is an appropriate balance of skills
and experience that continues to align with GKP’s overall business
objectives, which include a focus on addressing climate-related
risks and opportunities.
Further detail on the role and responsibilities of the Nomination
Committee is available in the Nomination Committee report on
pages 90 to 93.
Technical Committee
The Technical Committee provides support and guidance for
the Shaikan Field development planning and project execution
activities.
Within this, it oversees GKP’s produced gas management strategy,
including the Gas Management Plan as contained in the draft FDP.
Further detail on the role and responsibilities of the Technical
Committee is available in the Technical Committee report on pages
100 and 101.
b) Describe management’s role in assessing and
managing climate-related risks and opportunities
Executive Committee and senior management
GKP’s Executive Committee, comprised of the CEO, CFO, Chief
Operating Officer, Chief Commercial Officer, Chief Legal Officer
and Company Secretary and Chief HR Officer, is responsible for
managing climate-related risks and opportunities on a day-to-day
basis and for executing GKP’s sustainability strategy. The CEO and
CFO are Executive Directors.
The Chief Operating Officer (“COO”), John Hulme, is executive
sponsor for the sustainability strategy and climate-related risks and
opportunities. He reports directly to the Chief Executive Officer and
is responsible for updating the Safety and Sustainability Committee
and the Board on the sustainability strategy and climate-related
risks and opportunities. The COO has weekly meetings with heads
of departments, including the Head of Safety and Sustainability,
to discuss climate-related issues and updates.
The Head of Safety and Sustainability shares updates and
decisions with the wider Safety and Sustainability team and
reports on a weekly basis to the Executive Committee and senior
management team on sustainability and climate-related issues.
He also reports to a monthly meeting, hosted by the Executive
Committee, analysing progress against the Company’s bonus plan
KPIs, which includes Safety and Sustainability KPIs.
The GKP Sustainability Panel
In 2022, the GKP Sustainability Panel was created, with the
mandate to facilitate the execution of GKP’s sustainability strategy,
ensure that the Company has the necessary resources and
systems in place to oversee, manage and monitor sustainability
issues, including climate-related risks and opportunities, and to
unite and coordinate all Company managers and employees whose
responsibilities include sustainability and climate-related issues.
The Sustainability Panel meets on a quarterly basis. Meetings
to date have reviewed, among other things, the creation of and
subsequent updates to the Company’s Sustainability and Climate
Risk Register, progress in developing and advancing the Company’s
Climate Change Opportunities Register and progress towards
full consistency with the TCFD recommendations. The panel also
aims to ensure the Board is up to date on emerging climate change
regulation, as well as the present regulatory landscape.
The permanent members of the Sustainability Panel include the
Executive Committee, the Safety and Sustainability team, the Head
of Investor Relations and Corporate Communications, the Group
Financial Controller, and the Senior Economist. Other senior
management members and employees are invited to attend and
contribute, as appropriate.
Strategic reportStrategic report 56
56
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report continued
TCFD Pillar 2 – Strategy
a) Describe the climate-related risks and
opportunities the organisation has identified over
the short, medium and long term
GKP assesses climate-related risks and opportunities for its
business and strategy.
To do this, the Company has defined three distinct time periods.
These are based on the time periods in which we would expect a
potential financial impact on the Company to materialise. They also
align with the potential development and implementation schedules
of planned decarbonisation projects, defined as the Company’s
climate-related opportunities, and of the draft Shaikan Field
Development Plan (“FDP”), as well as the duration of the Shaikan
Field licence.
1) Short term (2023 to 2025): This period is focused on the
development and delivery of projects to reduce the Company’s
scope 1 emissions intensity. Notably, 2023 to 2025 demarcates
the current potential schedule for developing and commissioning
the Gas Management Plan (“GMP”), based on timely sanction and
implementation of the project. The GMP will enable the Company
to eliminate almost all of its routine flaring and achieve its target of
reducing scope 1 emissions intensity by >50%. During the period,
the Company also plans to continue to develop its Climate Change
Opportunities Register to further reduce emissions intensity.
Further detail on the GMP and other climate-related opportunities
can be found on page 59.
2) Medium term (2026 to 2030): In this period, subject to timely
sanction and implementation, the GMP would be operational.
Other decarbonisation projects could also be progressed and
implemented.
3) Long term (2031 to 2043): During this period, production is
expected to continue from the Shaikan Field up to the current
expiry of the licence in 2043 (including extensions).
Given that 100% of GKP’s revenues are generated from a single oil
asset, the Shaikan Field, in a single geography, the Kurdistan Region
of Iraq, and all of the Company’s oil is sold to the KRG, all of GKP’s
climate-related risks and opportunities are deemed to be related to a
single sector and geography.
Climate-related risks
GKP’s Board and management team have identified a number of
transition and physical climate-related risks, which are maintained in
the Company’s Sustainability and Climate Risk Register and regularly
reviewed and updated by the management team and Board.
For each risk, the Company determines the relevant time horizon(s),
assesses the potential financial impact on the Company and
describes the Company’s strategic response and resilience.
Risks are categorised as either transition or physical: transition
risks relate to policy and legal, market conditions, reputation and
technology; physical risks can be event driven (acute) or longer-term
shifts (chronic) in climate patterns.
Materiality of climate-related risks
To assess the potential financial impact and materiality of climate-related
risks, the Company uses a risk matrix to determine expected
probability and impact, considering the key financial and non-financial
metrics that could be affected. Further detail on the Company’s
identification, assessment and management of climate-related risks
is available on pages 62 and 63, Pillar 3 – Risk Management.
As the operator of a single oil-producing asset, the most material
risk to the Company’s strategy and valuation is the oil price. Carbon
prices, which are not currently in place in Kurdistan, could also have
a material impact, if implemented. As a result, GKP believes that
climate-related risks connected to the transition to a lower carbon
economy could have a material financial impact on the Company.
The qualitative assessment of climate-related transition risks are
summarised in the table on pages 57 and 58 and the Company
has carried out scenario analysis on oil price and carbon price,
described on page 59 to assess the potential impact on its strategy
and valuation.
Regarding physical risks of climate change, the Company has
identified potential chronic and acute risks, including extreme
changes in weather patterns, extreme weather events and rising
mean temperatures. However, these risks are not currently deemed
to be material to our strategy and valuation, given the design of GKP’s
facilities, operational processes and focus on asset integrity to
mitigate these risks. There has been no discernible financial impact
from climate-related physical risks in recent years.
The impact of climate-related risks on our supply chain is currently
not considered to be material.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
57
57
Climate-related transition risks
Type of risk
Potential financial impacts
Our strategic response
Transition
Market
•
Inability to fund development projects and
other capital allocation priorities.
Risk description
Unable to secure financing due
to increasing lender focus on
emissions and climate change
Time horizon
Transition
Market
Risk description
Increased cost of raw materials,
equipment and technology
Time horizon
Transition
Market
Risk description
Decreased oil demand and oil
prices
Time horizon
Short
Medium
Long
•
•
Increased operational expenditure due to
changing input costs (e.g. fuel costs);
Increased capital expenditure due to changing
input costs (e.g. production and drilling
equipment, decarbonisation technology); and
• Decreased profitability and cash generation.
• Decreased revenue from lower crude sales;
• Decreased profitability and cash generation
•
from lower realised prices; and
Impairment and early retirement of
existing assets.
• Proactively communicate GKP’s
sustainability strategy and focus on
addressing climate risk;
• Proactively engage with existing and
potential shareholders and lenders;
• Monitor the Nordic Bond market, where GKP
has previously secured debt financing; and
• Explore alternative sources of financing,
in particular those linked to addressing
climate change and emissions reduction.
• Monitor raw material costs;
• Actively engage with supply chain to secure
the best possible prices and reduce price
volatility through negotiation of multi-year
contracts;
• Develop flexible work programmes that
can be quickly adapted to changing market
conditions; and
• Maintain robust balance sheet and prudent
liquidity levels.
• Maintain low production costs to
enable profitable production at lower
realised prices;
• Develop flexible work programmes that
can be quickly adapted to changing market
conditions;
• Maintain robust balance sheet and prudent
liquidity levels; and
• Consider use of oil price hedging.
Strategic reportStrategic report 58
58
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report continued
TCFD Pillar 2 – Strategy continued
Potential financial impacts
Our strategic response
• Decreased revenue from lower crude sales;
• Decreased profitability and cash generation
•
•
from lower realised prices;
Increased costs from complying with new
regulation and from litigation/fines; and
Impairment and early retirement of existing
assets.
Type of risk
Transition
Policy and Legal
Risk description
Introduction of carbon pricing/
taxation
Introduction of new regulations
Exposure to litigation
Time horizon
Transition
Technology
Risk description
Substitution of crude oil with
lower emission products and
technologies
•
• Decreased revenue and profitability;
•
Impairment and early retirement of existing
assets; and
Increased expenditures.
• Reduced access to talent;
•
•
Increased hiring and employment costs; and
Increased staff turnover rate.
Time horizon
Transition
Reputation
Risk description
Negative public perception of oil
and gas industry
Time horizon
Short
Medium
Long
•
Implement decarbonisation projects,
principally the Gas Management Plan, to
reduce carbon emissions;
• Maintain low production costs to enable
profitable production at lower realised
prices;
• Develop flexible capital programmes that
can be quickly adapted to changing market
conditions;
• Maintain robust balance sheet and prudent
liquidity levels; and
• Monitor and comply with existing and
emerging regulation, where applicable.
•
Implement decarbonisation projects,
principally the Gas Management Plan;
• Maintain low production costs to enable
profitable production at lower realised
prices;
• Develop flexible capital programmes that
can be quickly adapted to changing market
conditions; and
• Maintain robust balance sheet and prudent
liquidity levels.
• Proactively communicate GKP’s
sustainability strategy and focus on
addressing climate risk;
Implement initiatives to attract, retain and
develop talent; and
•
• Monitor relevant data regarding employment
trends in the UK and Kurdistan.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
59
59
Climate-related opportunities
GKP recognises climate-related opportunities to further its
strategy, primarily through the scoping, development and
implementation of a number of potential projects to reduce scope 1
emissions.
This includes assessing the potential impact of climate-related
risks and opportunities on our production of crude oil and broader
operations, our use of global and regional supply chains and our
access to and allocation of capital. We do not currently invest in
research and development.
The Gas Management Plan
GKP’s primary climate-related opportunity is the Gas Management
Plan (“GMP”), a component of the Shaikan Field Development Plan.
Based on timely sanction and implementation, the GMP will
eliminate almost all routine flaring at the Company’s production
facilities by processing and reinjecting associated gas. Some of
the processed gas will also be used for power generation at the
production facilities, displacing the use of diesel.
Once the GMP is online, the project is expected to enable a
transformation of GKP’s carbon footprint, underpinning the
Company’s target of more than halving scope 1 emissions intensity
by 2025, versus the original 2020 baseline of 38 kgCO2e per
barrel. The GMP is expected to save several million tonnes of
scope 1 emissions over the life of the Shaikan Field, depending on
future levels of production and the final technical specifications of
the project. The Company plans to provide a full external update
on the project and its expected emissions reduction capability
following sanction.
Additional decarbonisation projects
In 2022, GKP developed a list of other potential decarbonisation
projects, with the objective of further reducing GKP’s scope 1
emissions during the life of the Shaikan Field beyond the reduction
targeted by the GMP. Current potential options include improving
heat recovery in oil processing, replacing operational power
demand with cleaner fuel sources and eliminating methane
emissions from the venting of our production facility storage tanks.
In the near term, GKP has decided to progress as a priority the
project to eliminate methane emissions from the venting of our
storage tanks. We are targeting to complete the engineering and
procurement for the project in 2023, which is a key component of
the 2023 bonus plan safety and sustainability KPIs. The project is
currently expected to be commissioned in 2024.
We will continue to develop and review the list of opportunities to
assess feasibility, prioritising projects expected to achieve the
highest reduction in scope 1 emissions for the lowest cost.
b) Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning
As an energy company, we recognise the importance of
incorporating climate-related risks and opportunities into our
strategy and financial planning.
We do this by:
• maintaining registers for climate-related risks and opportunities,
with both registers key inputs for our strategy and financial planning
processes, as described in section 2a on pages 56 to 57; and
• using scenario analysis to assess the resilience of our strategy
and business to material climate-related risks, described in
section 2c on pages 60 to 61.
Sustainability and Climate Risk Register
To be able to manage our climate-related risks more effectively,
in 2022 the Company created the Sustainability and Climate
Risk Register. A summary of GKP’s climate-related risks and the
impact on our strategy is available in sections 2a and 2c on pages
56 to 57 and 60 to 61 respectively. A more detailed description of
the Sustainability and Climate Risk Register and the Company’s
approach to climate-related risk management is available in section
3a on page 62.
Climate Change Opportunities Register
GKP maintains a register of climate change opportunities.
The register currently includes the Gas Management Plan and
the additional decarbonisation projects identified in section 2a on
pages 56 to 57.
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower
scenario
To assess the resilience of our strategy to a transition to a lower
carbon economy and the climate-related transition risks identified
in section 2a on pages 56 to 57, GKP has carried out a scenario
analysis exploring the impact on the Company’s net present value
from two scenarios published by the International Energy Agency
(“IEA”), both associated with a rise in global average temperatures
of less than 2°C in 2100. The scenarios include:
1. announced Pledges Scenario (“APS”); and
2. net Zero Emissions by 2050 (“NZE”).
The scenarios reflect different potential government, industry and
consumer responses to rising global demand for energy, resulting
in different trajectories for oil demand, oil prices and carbon prices,
which, as the operator of a single oil-producing asset, are key
determinants for the Company’s future cash generation and value.
We have applied these assumptions in our valuation models to test
the resilience of our strategy.
Both scenarios cover the combined period identified by our short,
medium and long-term time horizons on page 56 (from 2023 to
2043, the end of the Shaikan licence period).
Strategic reportStrategic report 60
60
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report continued
TCFD Pillar 2 – Strategy continued
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario continued
Announced Pledges Scenario (“APS”)
The Announced Pledges Scenario assumes that governments will meet, in full and on time, all of the climate-related commitments that they
have announced, including longer-term net zero emissions targets and pledges in Nationally Determined Contributions (“NDCs”) to reduce
national emissions and adapt to the impacts of climate change. This leads to a global temperature rise of 1.7°C in 2100.
Global oil demand in the scenario is assumed to be around 98 mb/d in the mid-2020s due to strong policy action, before dropping to 93 mb/d
in 2030, followed by an almost 40% decline to 57 mb/d in 2050, with passenger cars, road freight and industry responsible for the largest
reduction. This leads to oil prices (real 2021) declining to $64/bbl in 2030, with further small declines to $60/bbl by 2050.
No carbon prices are assumed to be in place in the scenario until 2031, in line with the IEA’s assumptions for emerging market and developing
economies without net zero emissions pledges (which currently includes Iraq). From 2031, the scenario assumes carbon prices are
implemented, increasing to $26 tCO2 (real 2021) by the end of the Shaikan licence period in 2043.
Net Zero Emissions by 2050 (“NZE”)
This scenario assumes the global energy sector achieves net zero CO2 emissions by 2050, with non-energy emissions reducing in the same
proportion as energy emissions. This leads to a global temperature rise of 1.5°C in 2100.
Global oil demand in the scenario is assumed to radically change, dropping by 2.5% each year on average between 2021 and 2030 to around
75 mb/d, and by just under 6% each year from 2030 to around 23 mb/d in 2050. The oil price (real 2021) is increasingly set by the operating
cost of the marginal project, falling to around $35/bbl real in 2030 and to $24/bbl by 2050.
Carbon prices (real 2021) are assumed to be in place from 2024, even in emerging market and developing economies without net zero
emissions pledges, with real prices rising to $25 tCO2 in 2030 and to $114 tCO2 by the end of the Shaikan licence period in 2043.
Potential impact on GKP strategy and valuation
The findings of the scenario analysis show that GKP’s strategy is resilient to a transition to a lower carbon economy, with no impairment
required to the current carrying value of the Company’s assets, even in the most aggressive carbon reduction scenario reflected and in the
Net Zero Emissions by 2050 scenario.
APS and NZE % change in NPV vs base case
40
30
20
e
g
a
t
n
e
c
r
e
P
10
0
10
20
30
40
% change in NPV vs GKP base case
22%
-37%
IEA – APS
IEA – NZE
Real terms (2021)(1)
Oil price (Brent crude)(2)
Unit
$/bbl
Base
2030
62
2050
62
APS
2030
72
2050
68
NZE
2030
40
2050
27
(1) Real 2023 prices have been calculated by adjusting the IEA real 2021 prices described in the scenarios for inflation (2021 inflation: 4.7%;
2022 inflation: 8.0%).
(2) Oil prices in APS and NZE scenarios consider carbon pricing, consistent with the IEA’s assumption that carbon tax will be borne by the consumer.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
61
61
In the APS scenario, net present value increases by 22% versus
the Company’s base case, primarily due to the more conservative
oil price deck used in our internal financial planning assumptions.
While the IEA oil price assumptions incorporate carbon prices,
the Company has conservatively included IEA carbon pricing
from 2031, resulting in an increase in carbon prices to $53/tCO2
(real 2023) by 2050, in its net present value sensitivity since it is
not clear what carbon intensity per barrel the IEA has used in its oil
price assumptions.
In the NZE scenario, net present value declines by around 37%
versus our base case. Consistent with the above, while the IEA oil
price assumptions incorporate carbon prices, the Company has
conservatively included IEA carbon pricing, resulting in a carbon
price in 2024 increasing to $28/tCO2 (real 2023) in 2030 and
$204/tCO2 (real 2023) by 2050, in its net present value sensitivity
since it is not clear what carbon intensity per barrel the IEA has
used in its oil price assumptions. The Shaikan Field potentially
becomes uneconomic in 2037, after which it is assumed there is
no further production and only decommissioning and restoration
costs. Nevertheless, even in this scenario, the Company would have
headroom above the current carrying value of its assets.
The scenario analysis confirms the importance of our sustainability
strategy and focus on addressing climate-related opportunities to
reduce the emissions intensity of our operations, primarily through
the Gas Management Plan.
In both scenarios, the GMP, which is assumed to be operational
from 2025 based on timely sanction and implementation, acts
as a material mitigant against the impact of carbon prices on net
present value.
The implementation of additional decarbonisation projects would
further reduce the impact of carbon prices.
Regarding our broader strategy, the oil and carbon prices
embedded in the APS scenario would not lead us to change our
focus on balancing investment in profitable production growth with
shareholder returns while maintaining a robust balance sheet, given
the base case oil price assumptions we use for financial planning
and capital investment decisions are more conservative.
However, if the oil and carbon price assumptions in the NZE
scenario were to materialise, which we believe is unlikely given the
continued strong outlook for oil prices and demand and the current
levels of investment in clean energy, we would review our current
strategy and adapt our flexible capital programme, as we have done
in the past during periods of depressed commodity prices and
economic demand.
The short-term period as identified in our scenario analysis is
captured under the assessment period covered by the going
concern and viability statement. The base case oil price used in
these assessments is lower than the NZE, the most conservative
climate-related scenario, and therefore we believe that any further
adverse oil price due to the impact of transition to a lower carbon
economy is not material on going concern and viability.
Strategic reportStrategic report 62
62
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report continued
TCFD Pillar 3 – Risk Management
a) Describe the organisation’s processes for
identifying and assessing climate-related risks
Risk identification
GKP’s identification of climate-related risks combines a bottom-up
approach, carried out by GKP’s Safety and Sustainability team
in collaboration with the Company’s heads of departments, with
top-down oversight from GKP’s Executive Committee and Board,
who hold ultimate responsibility for risk management.
Risks are identified initially by the Safety and Sustainability team
with reference to existing and emerging regulatory requirements
and guidelines, including those provided by TCFD, the International
Energy Agency (“IEA”), the European Bank for Reconstruction
and Development (“EBRD”), International Sustainability Standards
Board (“ISSB”) and International Petroleum Industry Environmental
Conservation Association (“IPIECA”).
The risks are then discussed with relevant heads of department
to agree relevance to GKP. Once agreed, risks are added to the
Sustainability and Climate Risk Register, as described below, and
reviewed by the Executive Committee, before being submitted to
the Audit and Risk Committee and the Board. At the end of 2022, the
Company had identified over 20 climate-related risks.
Risk assessment
A separate Sustainability and Climate Risk Register was created in
2022, acknowledging the increasing importance of climate change to
the Company’s stakeholders and the need to manage climate-related
risks in a more structured and comprehensive way.
Each risk contained in the Sustainability and Climate Risk Register
is assessed based on the Company’s risk matrix, which is used to
assess the materiality of the Company’s risks across all risk registers.
The relevance of climate-related risks is described in the
Management of principal risks and uncertainties section on page 66
of the annual report.
GKP’s risk matrix defines a rating, from “Lowest” to “Critical”, for
each risk according to probability of occurrence and severity of
impact. To define severity, the Company considers the impact of
the risk according to a number of dimensions and both financial
and non-financial metrics, such as safety, environmental damage,
annual production loss, financial loss, market impact, social impact
and reputation and regulatory action, among others. To determine
probability, the Company considers the frequency of past
occurrences and an assessment of future potential occurrences.
The Company’s Chief Financial Officer leads a process whereby
the heads of department and senior managers complete an
assessment of each risk, which are then reviewed in detail by the
Executive Committee.
In addition to determining severity and probability, the Sustainability
and Climate Risk Register categorises risks as either transition
or physical and identifies the most applicable time horizon, in
accordance with TCFD requirements. The register also determines
appropriate prevention and mitigation actions and assigns a risk
owner to manage the risk with oversight from the Company’s
Executive Committee.
As described in Pillar 2 – Strategy, the Company believes that
climate-related risks connected to the transition to a lower carbon
economy could have a material financial impact on the Company.
Physical risks of climate change are not currently expected to be
material to our strategy and valuation.
b) Describe the organisation’s processes for
managing climate-related risks
The Company’s Executive Committee is responsible for the overall
management of the Sustainability and Climate Risk Register. The Risk
Register is reviewed at least three times a year by the Audit and Risk
Committee and the Board.
Each climate-related risk is allocated a risk owner and actions are
identified to either prevent or mitigate the risk, as described in the
climate-related risk tables on pages 66 to 75.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
63
63
c) Describe how processes for identifying, assessing and managing climate-related risks are integrated
into the organisation’s overall risk management
The approach implemented by GKP to identify, assess and manage climate-related risks is consistent with the Company’s overall risk
management framework and processes applied to other business risks:
• the Sustainability and Climate Risk Register is one of several detailed risk registers maintained by heads of department and other
appropriate senior managers, who identify, manage and rank risks. The process is supported by the Safety and Sustainability team and led
by the CFO;
• the Executive Committee has oversight of all risk registers. All risks, including climate-related risks, are assigned an executive risk owner;
• the Audit and Risk Committee reviews all risks that have been determined as material by GKP’s risk matrix; and
• climate change has been identified as a principal risk.
Further information on the Company’s management of principal and emerging risks can be found on pages 66 to 75.
Integration of climate-related risk management into overall risk framework
Board responsible for overall system of internal control and risk management
Board
Audit and Risk Committee reviews all risks, including material risks
Audit and Risk Committee
Risk registers reviewed by Executive Committee and risks assigned an executive owner
Executive Committee
Risks identified, ranked and managed by heads of department
Sustainability and
Climate Risk Register
Operational Risk
Register
Corporate Risk
Register
IT Risk
Register
OT Risk
Register
Fraud Risk
Register
Finance Risk
Register
Project Risk
Register
Strategic reportStrategic report 64
64
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
TCFD report continued
TCFD Pillar 4 – Metrics and Targets
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line
with its strategy and risk management process
GKP assesses climate-related risks and opportunities using a number of metrics. These metrics, which encompass GHG and other emissions,
water withdrawn and quantification of financial impact, are summarised as follows.
Type
Metric
GHG emissions
• Scope 1 GHG emissions, categorised by source
according to the TCFD recommendations for oil and
gas companies:
• flaring;
• venting;
•
• combustion of petrol, diesel and fuel gas.
fugitive; and
• Methane emissions (also reported under scope 1
Flaring, Venting and Fugitive emissions);
• Scope 3 GHG emissions, categories 1-12.
• Scope 1 GHG emissions intensity
Financial impact
• Dated Brent price
• Change in net present value
Unit
ktCO2e
Page
Page 35 Sustainability report
Page 35 Sustainability report
Page 35 TCFD Pillar 4
kgCO2e/
bbl
$/bbl
$m
Page 35 Sustainability report
Page 60 Pillar 2 – Strategy
Page 60 Pillar 2 – Strategy
GKP recognises the importance of accurate and comprehensive
data to ensure the Company can make appropriate strategic and
risk management decisions. In 2022, we conducted a review of our
environmental data collection process to implement improvements
that will strengthen the accuracy of our emissions data. As part of
this process, we commissioned a third-party organisation, EcoAct,
to independently verify our scope 1 and 3 emissions disclosures for
2022 according to the ISO14064-3:2019 standard.
The Group continues to embed metrics and targets related to climate
change in its Executive Director and employee remuneration.
•
•
In 2022, the bonus plan included a KPI of 20% related to safety
and sustainability, of which 8% was related to climate-related risks
and opportunities, including the continued development of GKP’s
decarbonisation initiatives beyond the Gas Management Plan and
full compliance with the TCFD’s recommendations. The Company
achieved a 100% rating for this metric;
In 2023, the bonus plan includes a KPI of 20%, of which 8% is
related to climate-related risks and opportunities;
• This includes objectives to complete the engineering and
procurement for the project focused on the elimination of
methane venting from our oil storage tanks in 2024, to quantify
the Company’s fugitive emissions and develop a reduction
plan and to further define the Company’s other climate-related
opportunities and decarbonisation projects; and
• An additional KPI of 10% is related to, amongst other things,
achieving approval of the FDP, which includes the Gas
Management Plan, the timely sanction and implementation of
which is critical for achieving the Company’s target to reduce
scope 1 emissions intensity by >50% by 2025.
• For the 2023 LTIP award, the Remuneration Committee
considered incorporating an ESG metric to make up no more than
20% of the total award. However, the Committee determined that
prior to the sanction of the Gas Management Plan, and further
progress on the Company’s other decarbonisation opportunities,
it was not possible at this stage to set sufficiently robust targets.
The Committee agreed to consider the matter again for the 2024
LTIP award.
Further information is available in the Remuneration Committee
report on pages 102 to 118.
b) Disclose scope 1, scope 2 and, if appropriate,
scope 3 greenhouse gas (“GHG”) emissions,
and the related risks
GKP discloses scope 1 emissions in its Sustainability report on
page 35. As described in the Sustainability report, in 2022 the
Company reviewed its calculation of GHG emissions and their
composition, resulting in a number of changes to improve the scope
and accuracy of our reporting.
(1) https://www.frc.org.uk/getattachment/65fa8b6f-2bed-4a67-8471-ab91c9cd2e85/FRC-TCFD-disclosures-and-climate-in-the-financial-statements_July-
2022.pdf. Page 11.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Gulf Keystone Petroleum Limited Annual report and accounts 2022
65
65
These changes included the reclassification of emissions
previously reported as scope 2 to scope 1, the recalculation of
the Company’s gas composition and the addition of emissions
not previously calculated, in particular methane and nitrous oxide
emissions from flaring and methane emissions from venting and
fugitive leaks. Furthermore, GKP commissioned independent
verification of its 2022 scope 1 and scope 3 GHG emissions by
EcoAct. Further information on the changes can be found on
page 35 of the Sustainability report.
As part of this process, we are, for the first time, reporting scope 3
emissions for 2022 to ensure our emissions disclosures are fully
aligned with TCFD recommendations. We plan to report our historic
scope 3 emissions in future annual reports.
As an energy company, categories 10 and 11 are the most material
for us, as most oil and gas emissions are generated from the
processing or use of sold products. As TCFD encourages
companies to report scope 3 categories irrespective of the
amount, we are also initiating reporting of the remaining categories.
Categories 13-15, related to downstream leased assets, franchises
and financial investments, are not relevant to the Company and
not reported. Total scope 3 emissions and categories 1-12 are
outlined below.
In calculating scope 3 emissions, we used a number of
internationally accepted methods and assumptions, including GHG
Protocol, IPIECA, API and the UK Government emissions database.
As per FRC recommendations(1), a summary of the methods and
assumptions used for the calculations, as well as their references,
are reported in a separate document available on our website.
Scope 3 emissions, categories 1-12 (2022)
No
Category
Note
2022 (ktCO2e)
1
2
3
4
5
6
7
8
9
10
11
12
Purchased goods and services
Relevant, reported
Capital goods
Fuel and energy
Relevant, reported
Relevant, reported
Upstream transportation and distribution
Relevant, reported
Waste generated in operations
Relevant, reported
Business travel
Employee commuting
Upstream leased assets
Relevant, reported
Relevant, reported
Relevant, reported
Downstream transportation and distribution
Relevant, reported
Processing of sold products
Relevant, reported
Use of sold products
Relevant, reported
End-of-life treatment of sold products
Relevant, reported
Total scope 3
1
30
9
2
1
3
0
1
86
751
5,613
158
6,654
c) Describe the targets used by the organisation
to manage climate-related risks and opportunities
and performance against targets
Our publicly announced target related to managing climate-related
risks and opportunities is to more than halve our scope 1 emissions
intensity per barrel by 2025, versus the original 2020 baseline of
38 kgCO2e per barrel, by eliminating the majority of our routine gas
flaring from our operations. This target is dependent on the timely
sanction and implementation of the Gas Management Plan, which is
a component of the Shaikan Field Development Plan. While we are
making progress towards sanction of the FDP with the Ministry of
Natural Resources, timing of approval remains uncertain.
In addition to the Gas Management Plan, we are targeting to
eliminate methane emissions from the venting of our storage tanks
in 2024. We also continue to develop and review our broader list
of potential decarbonisation opportunities to assess feasibility.
Further information on the Gas Management Plan, the venting
project and our other climate-related opportunities can be found in
Pillar 2 – Strategy on pages 56 to 61.
As we move towards sanction and implementation of the Gas
Management Plan and further define our other climate-related
opportunities in collaboration with the MNR and our partner, MOL,
it is our aspiration to define a net zero strategy.
Strategic reportStrategic report
66
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Management of principal
risks and uncertainties
BOARD
Responsible for the overall system of
internal control and risk management
Audit and Risk
Committee
Responsible for monitoring the
effectiveness of the Company’s
risk management framework and
internal controls
Safety and
Sustainability
Committee
Ensures appropriate systems are in place
to manage health and safety, security,
environment, climate and community risks
Technical
Committee
Ensures that appropriate processes are
in place to manage Shaikan development
planning and project execution risks
SENIOR
MANAGEMENT
Responsible for implementation and
management of internal control and risk
management systems
Risk assessment framework
The Board regularly considers the Group’s principal and emerging risks
and reviews reports from the Audit and Risk, Safety and Sustainability
and Technical Committees.
The Group considers potential emerging risks and maintains risk
registers that incorporate strategic, sustainability and climate,
commercial, financial, operations, projects, information technology and
operational technology risks. The risk registers include clear definitions
of the risk, potential impact, mitigating controls the Group has in place
to reduce the impact or probability of the risk to an acceptable level,
and potential further actions to further mitigate the impact or probability
of the risk. Risks in the registers are included in the Company’s risk
matrix, which is used to assess the materiality of the Company’s risks
across all risk registers based on estimated impact and probability.
The Company invites specialist advisers to attend meetings with the
Board and management to provide an assessment of particular risks
which may affect the Company, such as climate, geopolitical, security
and cyber security risks, thus enabling the Company to understand and
plan for the mitigation of these risks.
The risk register is reviewed by senior management on a regular
basis following consultation with owners of the risks and external
consultants, as appropriate.
The Audit and Risk Committee regularly reviews the status of the
Group’s key risks and performs an ongoing review of effectiveness of
the internal control and risk management systems to ensure risks are
appropriately identified, monitored and reported to the Board and are
aligned with the Group’s strategy.
The Safety and Sustainability Committee is primarily responsible
for ensuring that appropriate systems are in place to manage health,
safety, security and environmental risks, including climate-related
risks, that is one of our principal risks, as well as corporate social
responsibility.
The Technical Committee regularly reviews the Group’s principal
operational risks. It supports ongoing production operations and the
Company’s Shaikan development planning and project execution
activities and ensures that appropriate processes are in place to
manage project execution risks.
The Board monitors the Company’s risk management and internal
control systems by means of reports from the various committees
and direct consideration of risk within the Board meeting agenda.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
67
Principal risks
The Board has carried out a robust assessment of the principal and emerging risks facing the Group, including those that would threaten
its business model, future performance, solvency or liquidity, recognising the Company remains dependent on its interest in a single asset,
the Shaikan Field, located in the Kurdistan Region of Iraq. The following table indicates the principal post-mitigation risks the Group faces.
The list is not exhaustive nor in priority order, and may change.
Key risk factor
Potential impact
Mitigation
Strategic
Political, social and economic
instability
Risk owner:
CEO
Kurdistan and Iraq as a whole and the
neighbouring region have a history of
political, social and economic instability
which continue to represent a risk to the
Group, its operations and its personnel.
Uncertainty may arise from changes in
the KRG leadership or changes in the
continued administration of the Shaikan
licence by the KRG.
Link to strategic priorities
Change in year
Business conduct and
anti-corruption
Risk owner:
Anti-Bribery Officer
Due to the nature of the industry sector
and the region in which the Group
operates, it is exposed to the risk that
the Group, or parties acting on its
behalf, breach relevant laws, including
anti-bribery and corruption laws.
Link to strategic priorities
Change in year
There has been a history of tension
between the political parties in the
Kurdistan Region of Iraq and with the
central government of Iraq.
Any changes in the government could
generate uncertainty and may cause a
material adverse impact to the Group,
including changes in PSC terms.
Other consequences of political, social
and economic instability may include
unrest or armed conflict, limits on
production (including restrictions related
to OPEC actions) or cost recovery, import
and export restrictions, price controls,
uncertainty over payment mechanisms
for export sales, imposition of additional
costs and taxes, tax increases and
other retroactive tax claims, revocation
of licence to operate, expropriation of
property, cancellation of contract rights
and an increase in regulatory burdens and
fiscal pressures on the KRG.
Violation of anti-bribery or corruption
regulations by the Group, or those acting
on its behalf, may result in a criminal
case against Gulf Keystone and/or its
employees which may lead to reputational
damage, monetary losses, fines,
imprisonment of staff and revocation of
licence to operate.
The Group engages in continuous dialogue with
advisers and the KRG.
The Group acts as a responsible operator and
adheres to the terms and requirements of the PSC
and FDP, and holds regular, minuted meetings with the
MNR. While timing of FDP approval remains uncertain,
we continue to engage with the Ministry of Natural
Resources (“MNR”) towards project sanction and
are progressing the tendering process for the Gas
Management Plan. The MNR has agreed to continued
progression of the Jurassic FDP programme.
The Board closely monitors future spending plans,
maintaining flexibility and phasing expenditures to
ensure that an adequate cash balance and other
potential sources of liquidity are identified and
maintained to enable the Company to manage
potential future uncertainties.
The Group has a corporate social responsibility policy
which has led to several local initiatives and promotes
a strong relationship with the local communities.
The Chief Legal Officer and Company Secretary is the
Anti-Bribery Officer for the Group and reports directly
to the Audit and Risk Committee.
The Group has a Code of Business Conduct and
various policies, including anti-bribery and corruption,
whistleblowing and prevention of tax evasion, and
has implemented training programmes to ensure
understanding and promote ethical behaviours and
compliance.
All employees, agents and other associated persons
are made fully aware of the Group’s policies and
procedures regarding ethical behaviour, business
conduct and transparency. All staff and certain
contractors are required to certify compliance with
policies on an annual basis.
The Group has robust controls around contracting,
payment approvals and the non-facilitation of
tax evasion.
Key
Strategic
priorities
Change
in year
Safety and
sustainability
Increased
level of risk
Value
creation
Similar level
of risk
Capital discipline and
cost focus
Robust
financial position
Decreased
level of risk
Strategic report
68
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Management of principal
risks and uncertainties continued
Key risk factor
Potential impact
Mitigation
This is an industry-wide risk faced by all international
oil companies operating in the Kurdistan Region
of Iraq.
The Group will continue to engage with KRG officials
on this matter and will react as any implications
of the ruling become clearer. The Group is also in
discussions with external legal counsel and other
advisers on the matter.
The Group cannot control or completely mitigate
disputes between the KRG and other parties.
To date, the rulings have not impacted the Company’s
operations but may have, since the September 2022
invoice, reduced revenue, which is dependent on the
price that the KRG is able to sell KBT in the market.
The Group closely monitors the situation.
Strategic continued
Disputes regarding title or
exploration and production
rights
Risk owner:
CEO
The Iraqi government disputes the validity
of the PSCs granted by the KRG.
Link to strategic priorities
Change in year
If the validity of the PSCs was successfully
challenged, the Group could be required
by the KRG or another administration to
either accept terms that are materially
less favourable than the current PSC or
relinquish the PSC.
In February 2022, a majority decision of
the Iraqi Supreme Court ruled that the
Kurdistan Region of Iraq Oil and Gas
Law (“KROGL”) was unconstitutional.
The ruling also provides that the Iraqi
Ministry of Oil may pursue annulment of
Production Sharing Contracts issued by
the Kurdish Regional Government (“KRG”).
The KRG responded that “it will take all
constitutional, legal and judicial measures
to protect and preserve all contracts made
in the oil and gas sector”.
The Company learned from media
reports that in proceedings brought by
the Iraqi Ministry of Oil against various
IOCs, on 23 October 2022, the Baghdad
Commercial Court issued decisions to
nullify the Production Sharing Contracts
in absentia against Gulf Keystone and two
other IOCs. Gulf Keystone did not have
legal representation in the Court. Media
has also reported similar judgements
issued against several other IOCs.
The KRG continues to affirm that KROGL
is validly constituted and the PSCs issued
are valid and in full force and effect.
In addition to the potential validity of the
PSC, the rulings may impact the KRG’s
ability to export crude oil or negotiate KBT
selling prices, the Company’s ability to
contract service contractors that also do
business in Federal Iraq and other parties.
Key
Strategic
priorities
Change
in year
Safety and
sustainability
Increased
level of risk
Value
creation
Similar level
of risk
Capital discipline and
cost focus
Robust
financial position
Decreased
level of risk
Gulf Keystone Petroleum Limited Annual report and accounts 2022
69
Key risk factor
Potential impact
Mitigation
Loss of revenue or reduction in profitability.
The Group relies on the international
pipeline between Fishkhabour (in
Kurdistan) and Ceyhan (in Turkey)
and the Kurdistan Export Pipeline for
delivery of oil. These pipelines may be
subject to interruption due to a variety
of reasons, including, but not limited
to, technical, maintenance, repairs,
damage (for example earthquake, military
operations or terrorism), theft, smuggling,
regional politics, arbitration ruling or
sanctions.
There is an ongoing arbitration case
between the Federal Government of Iraq
and the Turkish Government on the legality
of oil exports through Turkey in violation
of an agreement between Iraq and Turkey
dating from 1973. The outcome of this
case could impact the oil export route from
Kurdistan.
The Shaikan Lifting Agreement between
the Group and MNR that provided access
to the Kurdistan Export Pipeline expired
on 31 August 2022 and has not yet been
extended as negotiations are ongoing
related to the MNR’s proposal to change
the reference price for Shaikan crude
oil sales from Dated Brent to the local
benchmark KBT (“Kurdistan Blend”).
In the event foreign economic sanctions
(be it country, sectoral or specific)
are made on Russian or other owned
companies, this could have an impact on
GKP’s ability to operate, or to produce,
transport or market crude oil.
While the Company is currently negotiating to amend
and renew the Shaikan Lifting Agreement, effective
1 September 2022, it continues to produce and sell
crude oil to the KRG. The timing to conclude such
negotiations is currently unknown. The Company has
received sales proceeds for the September 2022
invoice based on the KRG’s new proposed pricing
mechanism.
Each PF is equipped with storage tanks that could
mitigate the impact of short-term pipeline disruptions.
Additional storage at PF-1 is planned as part of
the FDP.
Plans to recommission truck loading facilities have
been prepared, however the cost of trucking is
expected to be higher than pipeline export and the
Group may not be able to maintain or grow production
using this method.
The Group continues to monitor the current economic
sanctions imposed on a country, sectoral and specific
basis and takes professional advice relating to this.
The Group monitors the potential sanctions-related
risks affecting all suppliers and stakeholders.
Strategic continued
Export route availability
Risk owner:
CCO
Risks associated with availability and
accessibility of infrastructure allowing the
Group to sell oil to export markets, and
changes to export route forced on the
Group which affect profitability.
Link to strategic priorities
Change in year
Risk of economic sanctions
impacting the Group
Risk owner:
Chief Legal Officer and Company
Secretary
The imposition of foreign economic
sanctions impacts the ability of the Group
to operate, or to produce, transport or
market crude oil.
Link to strategic priorities
Change in year
Strategic report
70
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Management of principal
risks and uncertainties continued
Key risk factor
Potential impact
Mitigation
Strategic continued
Stakeholder misalignment
Risk owner:
CEO
The Group’s long-term strategy and plans
may not be fully aligned with all stakeholder
groups due to the diverse nature of the
stakeholders (including, but not limited
to, shareholders, bondholders, the KRG,
the MNR, joint venture partners and local
communities).
Link to strategic priorities
Change in year
Ineffective or poorly executed strategy
may lead to loss of investor confidence and
reduction in the Company’s share price or
credit quality, which reduces the Group’s
ability to access finance and increases
vulnerability to a takeover.
Misalignment with our joint venture
partner, the KRG or the MNR may
result in delays or modifications to the
development project, potentially impacting
economic returns.
Delays in FDP approval may impact
Shaikan Management Committee timely
approval of budgets, increasing cost
recovery risk.
The inability to finalise commercial
negotiations with the MNR confirming
either no changes are required to the
existing PSC or that the PSC will be
amended could potentially negatively
impact profitability and stakeholder value.
Amount of recoverable costs may be
challenged and reduced, adversely
impacting profit and cash generation from
operating activities.
Local community opposition may lead to
project delays, inability to gain land lease
extensions, significant security risk to our
employees and contractors or, in extreme
cases, loss of licence to operate.
Global pandemic
Risk owner:
CEO
The effects of a global pandemic such as
COVID-19 may be severe and far-reaching,
affecting the global economy and supply
chain, our business, our workforce and the
local communities in which we operate.
Link to strategic priorities
Change in year
Over the long term, a pandemic and its
effects on the global economy and supply
chain may threaten the viability of the
Group. In the short term, the deterioration
of market conditions and volatile oil
prices could reduce the Group’s revenue
generation potential and adversely impact
the Group’s profitability and liquidity
position.
A pandemic may adversely affect the
health and safety of our staff, the KRG’s
ability to make ongoing revenue or arrears
payments, field operations and expansion
activities and increase cyber security
vulnerabilities due to remote working.
The Group employs an Investor Relations team which
maintains regular dialogue with the Group’s investor
base and releases all key developments to the market
through the London Stock Exchange’s Regulatory
News Service and, prior to the redemption of the
outstanding notes in August 2022, the Nordic ABM of
the Oslo Bors.
While timing of FDP approval remains uncertain, we
continue to engage with the MNR towards project
sanction and are progressing the tendering of the Gas
Management Plan. The MNR has agreed to continued
progression of the Jurassic FDP programme. The
Company strictly adheres to MNR approved tendering
processes and regularly updates the MNR on field
operations and development progress mitigating the
potential impact of budget approval delays.
The Company continues to progress commercial
negotiations with the MNR to finalise PSC terms.
Such negotiations are expected to take into account
revenue and contractual arrangements, and various
proposals. While the overarching objective is to at least
maintain the value of the current contract, there is a
risk that may not be achievable. Shaikan Management
Committee meetings including representatives of the
MNR, MOL and GKP are held periodically to discuss
issues and ensure alignment. Key decisions from
meetings are formally documented.
Strong community relations are vital to our ability to
achieve local support for new projects. Gulf Keystone
strives to be a good corporate citizen and fosters its
reputation through strong and positive relationships
with the governments and communities where we do
business.
The Group continues to collaborate with local and
government stakeholders and has a CSR strategy to
complement its existing community welfare initiatives.
The Company monitors the environment for potential
signs of new or emerging pandemics.
The Company has developed a series of protocols to
manage a potential global pandemic.
The Company ensures that it maintains adequate
liquidity and operational flexibility to protect itself from
the effects of a pandemic.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
71
Key risk factor
Potential impact
Mitigation
Strategic continued
Climate change
Risk owner:
CEO
Climate change is a material global issue
and Group risk. Climate-related transition
risks may have a significant effect on the
long-term viability of the Group.
Link to strategic priorities
Change in year
The transition to a low carbon economy
may lead to a decline in oil demand
resulting in lower oil prices, lower revenue,
decreased profitability, increased capital
and operational costs including costs
relating to decarbonisation projects,
impairment and early retirement of existing
assets, flaring emissions or carbon taxes,
reduced access to or increased cost
of funding and insurance, disruptions
to the supply chain, interruptions to
production, increasing challenges and
cost to attract and retain talent, increased
exposure to litigation and climate
activism, and increased compliance and
monitoring costs related to new regulatory
frameworks.
While currently considered immaterial, the
Group may also be impacted by physical
risks due to climate change, including
increasing frequency and magnitude
of extreme weather events impacting
operations, production efficiency losses,
disruptions to the supply chain and
weakened international cooperation.
Additionally, conflicting stakeholder
expectations and/or a lower oil price may
lead to an inability of the Group to develop
the asset.
Gulf Keystone’s climate-related financial disclosures
are consistent with the TCFD’s recommendations,
including the TCFD’s additional recommendations for
the oil and gas industry.
The Company has formulated its sustainability
strategy and an ESG implementation roadmap has
been approved by the Board.
In 2022, the bonus plan included KPIs related to
climate-related risks and opportunities, including the
continued maturation of decarbonisation initiatives
beyond the Gas Management Plan and full compliance
with the TCFD’s recommendations.
A specific Sustainability and Climate Risk Register
closely tracks and reviews existing and evolving risks
more effectively.
The ability to achieve the Group’s target of reducing
emissions intensity and eliminating most of routine
flaring is dependent on sanction of the FDP and
implementation of the Gas Management Plan with our
partner MOL and the MNR.
The Group continuously monitors air quality and its
management of waste, water and wastewater, soil
remediation and the impact of its facilities as part of its
commitment to minimise impact on the environment
and local communities.
Maintain low production costs and monitor raw
material costs to enable profitable production at
lower realised prices and a robust balance sheet and
prudent liquidity levels to fund required technology
and decarbonisation projects. Actively engage with
supply chain to secure required technology at the best
possible price. Develop flexible capital programmes
that can be quickly adapted to changing market
conditions.
Monitor relevant data regarding employment trends in
the UK and Kurdistan. Implement initiatives to attract,
retain and develop talent.
Monitor weather and regularly review and update
health and safety procedures and working patterns
to adapt to changes in weather patterns. Maintain and
practise crisis management and business continuity
protocols to protect workforce and assets from
extreme weather events.
Key
Strategic
priorities
Change
in year
Safety and
sustainability
Increased
level of risk
Value
creation
Similar level
of risk
Capital discipline and
cost focus
Robust
financial position
Decreased
level of risk
Strategic report
72
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Management of principal
risks and uncertainties continued
Key risk factor
Potential impact
Mitigation
The Group has developed focused information
and operational technology cyber risk registers to
facilitate identification, management and mitigation
of potential risks.
The Group has implemented a cyber security strategy
and roadmap to continuously identify and remediate
system vulnerabilities.
The Group has contracted a recognised Managed
Security Services Provider that employs several
tools to manage cyber security risks on an ongoing
basis, including third-party monitoring, vulnerabilities
management, red team tests, dark web monitoring,
endpoints and perimeter security and ongoing cyber
security awareness training.
The Group continues to invest in staff and software
to monitor, maintain and regularly upgrade its systems,
processes and network.
The Group is enrolled on the Early Warning Service
carried out by the UK National Cyber Security Centre.
The Board has established a Safety and Sustainability
Committee to ensure that the Company has a robust
HSSE strategy with clear lines of accountability and
commitment throughout the organisation.
The Company has established a sustainability
strategy and is implementing the Board-approved
ESG roadmap. In addition, the Company has
developed specific risk registers and action plans to
proactively identify and manage risks.
The Group has comprehensive HSE and operations
management procedures, including emergency and
incident response plans. The Company establishes
an annual HSE Plan to continuously improve its HSE
performance (see “Key performance measures”
section on pages 26 and 27).
Strategic continued
Cyber security
Risk owner:
CFO
The Group is reliant on information
technology systems, software and cloud
computing, exposing it to the potential
impacts of malicious cyber attacks.
Link to strategic priorities
Change in year
A cyber security breach could disrupt our
operational and development activities,
expose the Company to ransomware
demands, put employees at risk, or result in
the disclosure of confidential information,
which could adversely affect the share
price, damage our reputation and create
significant financial and legal exposure for
the Group.
As a result of current global events there
could be an increase in the frequency and
severity of cyber attacks.
Consequences may include accidents
resulting in loss of life or injury, significant
pollution of the local environment,
destruction of facilities, disruption to
business activities, risk of litigation and
reputational damage with an associated
financial loss.
Operational
Health, safety and
environment (“HSE”) risks
Risk owner:
COO
The Group, its staff and contractors and
local communities may be exposed to
specific risks in relation to HSE matters.
Identified risk areas include, but are not
limited to, H2S leaks at the production
facilities, loss of containment, road
traffic accidents and other accidents at
production facilities and well sites.
Link to strategic priorities
Change in year
Reserves
Risk owner:
COO
Recoverable reserves are below
expectations, which will affect the revenue
and economic viability of the field.
Link to strategic priorities
Change in year
Due to natural uncertainty in the volumes
of hydrocarbons in place and the
proportion of those hydrocarbons that
might be recoverable, the actual reserves
may be lower than our most likely forecast.
An updated, independent third-party evaluation of the
Company’s reserves as at 31 December 2022 was
issued by ERCE. The report reaffirmed the reserves
and resources estimates and ranges in the 2020 CPR.
The Group bases its forecasts and investment
planning on a range of possible outcomes that include
a low-side case.
Seismic, fracture and structural models continue
to be updated as wells are drilled in order to better
understand the subsurface and optimise future
well locations.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
73
Key risk factor
Potential impact
Mitigation
Operational continued
Gas flaring
Risk owner:
COO
GKP relies on flaring as a disposal method
for the gas produced as a by-product
of its oil production, which creates an
environmental impact. There is a risk that
the Group does not achieve its target of
reducing scope 1 CO2e emissions per
barrel by more than 50% by 2025, which is
subject to approval of the FDP and timely
sanction and implementation of the Gas
Management Plan.
Link to strategic priorities
Change in year
Security
Risk owner:
COO
The Group is exposed to security risks
by virtue of the location of its operations.
These include the threat of terrorist attack,
military action and local protests and
unrest at Gulf Keystone sites.
Link to strategic priorities
Change in year
The KRG may enforce a ban on gas flaring
and/or introduce a financial penalty or
other sanctions for gas flaring, resulting in
reduction or cessation of production or a
less favourable Shaikan asset valuation.
The Group maintains active dialogue with the MNR
to ensure that it complies with the existing emissions
regulations.
Harmful gas emissions are closely monitored by
the HSE department, with any variances outside
normal levels investigated and reported to executive
management and the MNR.
The Group uses a clean flare stack to improve the
combustion of flared gas.
The ability to achieve a reduction of routine flaring
is dependent on approval of the FDP, finalisation
of tendering of the Gas Management Plan with
our partner MOL and the MNR and its subsequent
implementation, and potentially financing.
Political unrest, armed conflict in Iraq or
other security issues may lead to loss
of life or injury to personnel, personnel
evacuations, disruption to operations,
costs to repair facilities, increased costs of
doing business due to increased security
and reduced staff retention, reputational
damage with the associated financial loss
and loss of investor confidence.
There can be no assurance that the Group
will be able to obtain or maintain effective
security over any of the Group’s assets or
personnel.
The Board has established a Safety and Sustainability
Committee to ensure that the Company has a robust
HSSE strategy with clear lines of accountability and
commitment throughout the organisation.
The Company periodically completes external
security reviews. The most recent review was
completed in Q4 2022.
The wells and facilities are protected by external
security consultants and local government forces who
work closely with the Group’s internal security team.
The Company retains external security advisers
who prepare detailed risk assessments, security
procedures and contingency plans which can be
activated when threats arise.
Local communities are an essential source of
intelligence about the nature, severity and likelihood
of any threat. The Group ensures it maintains good
relations with the local population and considers the
impact of all decisions on them.
Key
Strategic
priorities
Change
in year
Safety and
sustainability
Increased
level of risk
Value
creation
Similar level
of risk
Capital discipline and
cost focus
Robust
financial position
Decreased
level of risk
Strategic report
74
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Management of principal
risks and uncertainties continued
Key risk factor
Potential impact
Mitigation
Operational continued
Field delivery risk
Risk owner:
COO
The Company does not achieve its
stated investment case and economic
and production returns do not match
expectations.
The major identified risks within this area
are the following:
•
loss of a well due to water or gas
breakthrough, pressure decline or
mechanical failure;
• damage to wells during drilling and loss
of drill fluids; and
• well locations are sub-optimal.
Link to strategic priorities
Change in year
Financial
Liquidity and funding
capability
Risk owner:
CFO
The Group has insufficient working
capital to meet short-term operational
requirements or has insufficient funding
in place to pursue the full Shaikan
development programme.
Link to strategic priorities
Change in year
Failure to control development and
production risks may manifest as project
delays, cost overruns, high production
costs, early field decommissioning and,
ultimately, lower than expected reserves.
Water breakthrough in advance of the
installation of appropriate water-handling
facilities may result in damage to the
production facilities, and reduced
well production and temporary well
shut-ins resulting in failure to meet
production targets.
Gas breakthrough in volumes exceeding
the limit of the gas processing capacity
could result in reduced oil production and
shutting-in the well with gas breakthrough.
Drilling operations issues might result
in cost overruns and project delays, and
possibly even the termination of drilling
operations.
Lack of liquidity may result in the Group not
being able to function as a going concern
and being unable to meet its operational
commitments.
Lack of funding may result in the Group’s
inability to fully achieve its strategy, failure
to reach the stated field plateau, failure
to service its debt, as appropriate, and
inability to deliver a return to investors.
Lack of capital discipline and operational
cost focus may result in significant
unplanned cash outflows and
inadequate liquidity.
Technical and financial approvals are required for all
material projects and for all dedicated project teams.
All projects are closely monitored to ensure the
project delivers against plan, which enables actions
to be taken to maintain progress, and minimise
budget overruns.
All wells are monitored to ensure early detection of,
and reaction to, any abnormalities. Zones within wells
which are producing water may be isolated while other
zones in the well are brought on production. Wells are
regularly tested to look for any changes in
gas/oil ratio and to provide an early warning of any
gas breakthrough.
Reservoir modelling, including data acquired from
well production and pressure measurements and
the results from new wells, is carried out to improve
our understanding and forecasting of this event.
Our current analysis does not show inclement water
breakthrough in advance of the scheduled installation
of water handling and desalting facilities.
Design of future development wells takes account of
modelling to optimally locate the producing interval
at a depth to minimise the risk of early gas and water
breakthrough.
The Group targets to maintain a minimum level of cash
to manage potential downside risks.
The Company is currently debt free.
The Group invests capital in phases and has a flexible
capital programme, enabling it to quickly adjust
levels of spending to adapt to changes in market
circumstances and timeliness of KRG payments.
The Group is proactively considering and reviewing
potential financing options to execute the GMP.
The Board and management ensure that the planning
process is robust. The Group’s business plan is
regularly reviewed and revisited by the Board to
ensure that it reflects any changes to internal or
external factors.
Business planning and corporate performance
management processes are used to control spend.
These processes involve the review of multiple
scenarios to assess a possible range of outcomes.
Key
Strategic
priorities
Change
in year
Safety and
sustainability
Increased
level of risk
Value
creation
Similar level
of risk
Capital discipline and
cost focus
Robust
financial position
Decreased
level of risk
Gulf Keystone Petroleum Limited Annual report and accounts 2022
75
Key risk factor
Potential impact
Mitigation
Financial continued
Oil revenue payment
mechanism
Risk owner:
CFO
There is uncertainty relating to the revenue
payment mechanism for oil in Kurdistan.
There can be no assurance that PSC
operators will be paid on a timely basis
or will receive their full contractual
entitlement.
Link to strategic priorities
Change in year
Commodity prices
Risk owner:
CFO
A material decline in oil prices may
adversely affect the Group’s cash flows,
asset valuations, production operations
or result in delays to the Shaikan
development.
Low oil prices may adversely impact
the KRG’s ability to meet its payment
obligations towards the region’s
producers.
Link to strategic priorities
Change in year
Delays in, or lack of, revenue payments
from the KRG could adversely impact the
Group’s ability to develop and invest in the
asset, to operate efficiently and to make
necessary working capital payments.
Irregular receipts of revenue payments
may damage investor confidence in the
Group and the region and make any
fundraising difficult.
Changes in the terms of the Shaikan
Lifting Agreement, such as the recent
proposal from the MNR to change the
reference price for Shaikan crude oil sales
from Dated Brent to the local benchmark
KBT, may have an unfavourable effect
on revenue.
Recently, payment terms have slipped
from the contractual 60 days per the
Shaikan Lifting Agreement that expired at
the end of August 2022. The last payment
was received almost 100 days past the
due date.
The Group’s revenues, profitability
and future rate of growth will depend
substantially on prevailing oil prices,
which can be volatile and subject to
fluctuation.
A sustained low oil price environment
would have an adverse effect on the
Group’s liquidity and ability to develop the
asset. In addition, it may lead to a reduction
in the Group’s commercial reserves and an
impairment of its asset.
The Group continues to monitor the political situation
in the Kurdistan Region of Iraq and maintains dialogue
and relations with the relevant regional authorities.
Export oil sales quantities are currently agreed by
three parties (including an independent pipeline
operator) to reduce uncertainty regarding
delivery volumes.
The Company is currently negotiating with the MNR
to amend the Shaikan Lifting Agreement, effective
1 September 2022. The Company is pursuing with
the MNR a longer-term contractual arrangement.
The timing to conclude such negotiations is currently
unknown.
Discussions are ongoing with the KRG regarding
overdue payments for October to December 2022
crude oil sales. As at 22 March 2023, the value of
overdue invoices was $76.0 million net to GKP.
The Group monitors and, where possible,
reduces costs while maintaining safe operations.
The Group’s cash forecast is constantly monitored
and it maintains surplus cash and a flexible capital
programme to manage short-term uncertainty.
In establishing the annual work programme and
budget, the Group considers a range of forward oil
curves to assess the potential impact on cash flows
and liquidity. Commodity prices are monitored on an
ongoing basis.
While a hedging programme is not currently in place,
the Board considers hedging on an ongoing basis,
taking into account macro-economic and corporate
considerations.
Strategic report
76
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Viability statement
In accordance with the UK Corporate Governance Code, the Directors
have carefully assessed the Group’s viability and prospects over
a longer period than the 12 months required by the going concern
provision. The Board assesses the business over a number of time
horizons for different reasons, including the following:
a) annual Corporate Budget (i.e. 2023);
b) medium-term Corporate Budget; and
c)
life-of-field plan used to produce an internal view of the value
of the Company.
The Board concluded that a three-year period most appropriately
reflects the underlying prospects and viability of the Group for the
following reasons:
a)
b)
it is aligned with the Group’s strategic planning cycle;
it is expected to be the peak investment period under the draft FDP;
and
c) should the risks and uncertainties identified by the Group on pages
66 to 75 have an impact on the Group, it is reasonable to believe that
they will occur within this period.
Notwithstanding, the Group will continue to monitor the business over
all time horizons noted above.
The Directors’ viability assessment has been made with reference to
the Group’s strategy and business model, as detailed on pages 22 and
23, and to the risks, uncertainties and available mitigating action plans,
as detailed on pages 66 to 75.
The Group conducted an annual planning process which consisted
of the review of the Group’s strategy and performance, preparation
of a work plan and budget and review of risks, uncertainties and
opportunities over the three-year assessment period.
The Directors reviewed the Group’s cash flow projections which were
prepared using the following base assumptions:
• average Brent prices (nominal) of $83.4/bbl in 2023, $78.2/bbl in
•
2024, $74.5/bbl in 2025 and $71.7/bbl in 2026;
incremental KBT discount of $10/bbl for H1 2023, $5/bbl for
H2 2023 and nil thereafter;
• debt funding for the GMP;
•
latest cost assumptions for the draft FDP;
• production profiles in line with the draft FDP;
• annual ordinary dividend of $25 million; and
• regular revenue receipts.
The assessment demonstrated that the Group is in a sound financial
position, with an adequate cash balance and ability to meet liabilities
as they fall due.
Further, the Directors have considered the financial and operational impact of severe but plausible scenarios that could threaten GKP’s viability.
This was done through modelling the individual and combined effects of various risks and uncertainties in order to establish the Group’s ability
to meet its working capital requirements. Additionally, the Directors considered possible mitigating actions. The modelled stress scenarios and
potential mitigating actions considered are as follows:
Stress test scenarios
Downside assumptions
Mitigating actions
Reference to principal risks
and uncertainties(1)
1. Low oil price environment
2. Oil revenue payment
interruptions(2)
3. Delays to the development
programme
4. Decreasing reservoir
5.
6.
productivity
Inability to access debt market
Inability to access export
pipeline
7. Continuing increased oil sales
discount
• Brent price reduction to
• Deferrals and reductions in
• Political, social and economic
$55/bbl flat real from Q2 2023
onwards
• Revenue receipts interruptions
• Reduced production
• Cost increases
•
• Oil sales discount above
Increased oil export costs
historical trend
• No debt funding
capital expenditure
instability
• Further optimisation of the
development programme
• Further rationalisation of the
operational cost base
• Oil export via trucking
• Disputes regarding title or
exploration and production rights
• Export route availability
• Risk of economic sanctions
impacting Group
• Oil revenue payment mechanism
• Stakeholder misalignment
• Climate change
• Commodity prices
• Field delivery risk
• Reserves
• Liquidity and funding capability
(1) Principal risks which were not specifically modelled were either considered not likely to have an impact within the viability period or their financial effect was
covered within the overall downside economic risks implicit within the stress testing.
(2) For further details of recent delays in revenue receipts from the KRG and related mitigating actions, see the going concern section on page 120.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
77
The Company previously reported that the Iraqi Federal Supreme Court (“FSC”) in February 2022 had ruled that the Kurdistan Oil and Gas Law
(“KROGL”) was unconstitutional and that the Iraqi Ministry of Oil had then commenced proceedings in the Baghdad Commercial Court against
International Oil Companies (“IOCs”), including Gulf Keystone, operating in the Kurdistan Region of Iraq seeking to nullify the Production Sharing
Contracts (“PSCs”) issued under the KROGL. The Company understands that the Baghdad Commercial Court has issued adverse judgments
against many of the IOCs, including Gulf Keystone, in absentia. The KRG continues to affirm that KROGL is validly constituted and the PSCs
issued are valid and in full force and effect. While the ruling has not to date impacted our business, it is not possible to determine potential future
implications. The Group will continue to engage with KRG officials on this matter and will react as any implications of the ruling become clearer.
Also, there is an ongoing arbitration case between the Federal Government of Iraq and the Turkish Government on the legality of oil exports
through Turkey, the outcome of which could impact the oil export route from Kurdistan.
Based upon the Directors’ robust assessment of the principal risks facing the Group, the stress test scenarios and possible mitigating actions,
as described above, the Directors have a reasonable expectation that the Group will be able to continue to operate and meet its liabilities as they
fall due over the three-year viability assessment period. In the event the stress test scenario assumptions are more severe than the Directors
reasonably considered as severe but plausible, including potential adverse implications of the Iraqi Federal Supreme Court ruling, the Iraq-Turkey
export pipeline arbitration case and further delays in revenue receipts from the KRG, significant changes to the Group’s operational and
development plans, including a further curtailment of activities and reductions in staff, amongst other things, would be required and there could
be an impact on the Group’s viability.
Strategic report 78
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Board of Directors
Appointed: November 2017
Skills and experience: Jaap Huijskes
was appointed Non-Executive Chairman
of Gulf Keystone in April 2018, having
been a Non-Executive Director since
November 2017. He will retire from the
Board at the 2023 AGM.
Jaap has worked in the upstream oil
and gas sector for nearly 30 years.
He started his career with Shell and
worked in a variety of project engineering
and other roles around the world.
Jaap’s last role with Shell was as Project
Director for the Sakhalin II project,
followed by a short period at head offi ce
as Executive Vice President for all of
Shell’s upstream projects. Jaap left Shell
to join OMV, as their board member
responsible for all upstream activities.
OMV’s upstream activities at the time
included signifi cant exploration activities
in the Kurdistan Region of Iraq.
Jaap is currently Non-Executive
Chairman at Energie Beheer Nederland.
Appointed: January 2021
Skills and experience: Jon Harris joined
Gulf Keystone in January 2021 as Chief
Executive Offi cer.
Jon has over 30 years’ experience in the
oil and gas industry and joined GKP from
SASOL Limited, an integrated energy
and chemicals company based in South
Africa where he was Executive Vice
President, Upstream.
Prior to this, he spent 25 years with BG
Group in various international roles,
including Executive Vice President
Technical and General Manager
Production Operations, as well as senior
management assignments in the United
States, Trinidad and Tobago and Egypt.
Jon received a Masters of Engineering
from the University of Leeds, UK. He is a
Non-Executive Director of PetroTal Corp.
Appointed: January 2020
Skills and experience: Ian Weatherdon
joined Gulf Keystone in January 2020 as
Chief Financial Offi cer.
Ian has over 30 years’ experience in
the international oil and gas industry.
Prior to joining GKP, he was CFO of
Sino Gas & Energy Holdings, an energy
company focused on developing natural
gas assets in China. Previously, he held
various executive roles at Talisman
Energy Inc., the Canadian exploration
and production company, which
was acquired by Repsol, including:
Vice President of Finance & Planning
for the Asia-Pacifi c region, CFO of
Equión Energía Limited, a Colombian
joint venture between Talisman and
Ecopetrol SA, and Vice President of
Investor Relations.
Ian has a Bachelor of Commerce
from the University of Calgary and is a
Canadian Chartered Accountant.
Appointed: July 2018
Skills and experience: Martin Angle
was appointed as Deputy Chairman in
June 2019 having been Senior Independent
Non-Executive Director since joining the
Board in July 2018. Following the 2023 AGM,
it is proposed that he be appointed Chairman.
Martin has had a distinguished executive
career holding senior positions in investment
banking, industry and private equity. He
has served as a Non-Executive Director
on a number of boards both in the UK and
overseas including Pennon Group, where
he chaired the Remuneration Committee,
Savills plc (Senior Independent Director),
National Exhibition Group (Chairman)
and Dubai International Capital.
Martin is currently Deputy Chairman and
Senior Independent Director of Spire
Healthcare plc, a Non-Executive Director
of Ocean Biomedical Inc. (USA) and is a
Hon. Professor in the College of Social
Sciences and International Studies,
University of Exeter. He is a Chartered
Accountant and holds a BSc (Hons) in
Physics from the University of Warwick.
Jaap Huijskes
Non-Executive Chairman
Jon Harris
Chief Executive Offi cer
Ian Weatherdon
Chief Financial Offi cer
Martin Angle
Deputy Chairman and
Senior Independent Director
Gulf Keystone Petroleum Limited Annual report and accounts 2022
79
G
o
v
e
r
n
a
n
c
e
Appointed: July 2020
Skills and experience: Garrett Soden
was re-appointed as a Non-Executive
Director of Gulf Keystone in July 2020.
He is a shareholder representative of
Lansdowne Partners Austria GmbH and
thus is deemed non-independent.
Garrett has worked with the Lundin
Group since 2007 and has extensive
experience as a senior executive
and board member of various public
companies in the natural resources
sector. He is currently President and
CEO of Africa Energy Corp., a Canadian
oil and gas exploration company
focused on South Africa. He is also
a Non-Executive Director of Panoro
Energy ASA.
Garrett holds a BSc honours
degree from the London School of
Economics and an MBA from Columbia
Business School.
Appointed: October 2016
Skills and experience: David Thomas
was appointed as an independent
Non-Executive Director of Gulf Keystone
in October 2016.
David is an experienced oil and gas
professional with 40 years in the industry.
He started his career as a Petroleum
Engineer working for Conoco in the
North Sea and Dubai. Subsequently,
he joined Lasmo where he became
Group GM Operations and, following
the company’s acquisition, held three
international regional Vice President
roles with Eni. David’s subsequent Board
directorships have included positions as
President and COO of Centurion Energy
and CEO of Melrose Resources. In 2015
he briefl y served on a caretaker Board
at Afren and is currently the CEO of
Cheiron in Egypt.
David has a BSc in Mining Engineering
from Nottingham University and an
MSc in Petroleum Engineering from
Imperial College.
Appointed: October 2018
Skills and experience: Kimberley
Wood was appointed as an independent
Non-Executive Director of Gulf Keystone
in October 2018. Following the 2023
AGM, it is proposed that Kimberley is
appointed Senior Independent Director
and Deputy Chair.
Kimberley is a legal professional
with over 20 years’ experience and a
specialist in the energy sector. She was
Head of Oil and Gas for Europe and
Middle East at Norton Rose Fulbright
LLP and remains a Senior Consultant for
the fi rm. She is included in Who’s Who
Legal Energy 2021 and as an expert
in Energy and Natural Resources in
Women in Business Law, 2021.
Kimberley is also an independent
Non-Executive Director of Energean plc,
Africa Oil Corp., and Valeura Energy Inc.
Appointed: July 2022
Skills and experience: Wanda Mwaura
was appointed as an independent
Non-Executive Director of Gulf Keystone
in July 2022.
Wanda has over 25 years’ experience
in the fi nancial services sector with
extensive experience in both executive
and non-executive roles, including
audit committee membership. She
is a qualifi ed accountant and was
previously a partner in Ernst & Young
(Bermuda) and the Chief Accounting
Offi cer at PartnerRe. Wanda is now a
Non-Executive Director of International
General Insurance Holdings Limited
and a number of private companies,
including Clarien Bank Limited, as well
as Executive Director for the Bermuda
Public Accountability Board.
Wanda has a Bachelor of Commerce
degree from Dalhousie University, Nova
Scotia, and is a member of the Chartered
Professional Accountants of Bermuda,
where she resides.
Garrett Soden
Non-Executive Director
David Thomas
Non-Executive Director
Kimberley Wood
Non-Executive Director
Wanda Mwaura
Non-Executive Director
80
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Corporate governance report
Our commitment to the
highest standards of
corporate governance,
ethics and integrity are
essential in delivering
sustainable success for
our stakeholders.
Jaap Huijskes
Non-Executive Chairman
Dear Shareholder,
Governance is at the heart of the way we do
our business. Only by ensuring that we have
the appropriate culture, systems, policies,
integrity and ethics in place will the Company
be in a position to deliver sustainable success
for our shareholders. In addition to having
a comprehensive governance and policy
framework in place, the highest priority
is given to fostering a culture of safety,
governance, sustainability, environmental,
social and ethical considerations,
underpinned by the Company’s core values
which are regularly communicated to all staff .
The Company maintains an absolute
zero-tolerance approach to bribery and
corruption. Strong ethics are an integral part
of the way we do business. We have recently
launched an updated Code of Business
Conduct which incorporates a wide range
of policies and standards in respect of
governance, ethics, workplace behaviours
and integrity. All staff and contractors have
to undertake compulsory training in this and
certify that they have, and will, comply.
Jaap Huijskes
Non-Executive Chairman
22 March 2023
In promoting the long-term sustainable
success of the Company, the Board
encourages a transparent and open culture
to ensure eff ective contributions from all
Directors, management and the wider
workforce. Communication is key to this
and we continue to maintain and enhance
this aspect of our culture as we interact
with our staff and other stakeholders. In
2022, the Board undertook an externally
facilitated evaluation of its performance and
governance. This evaluation concluded that
the Board as a whole considered the overall
governance and associated processes of
the Company to be strong, with only a small
number of enhancements proposed to
improve the overall eff ectiveness. Each matter
raised was addressed and then brought back
to the Board. A further Board evaluation was
completed in early 2023, which was largely
conducted as an internal evaluation process.
These are more fully described in the report of
the Nomination Committee.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
81
Introduction
It is the duty of the Board of Directors that
it must act in a manner, in good faith, which
will be most likely to promote the success of
the Company for the benefit of its members
as a whole and taking account of the likely
consequences of any decision in the long
term. The maintenance of high standards
of governance is integral to this, and the
Board sets the tone for the highest ethical
compliance. The Board aims to create a
culture which demands the same commitment
and performance from all employees and
contractors in all business activities. The
governance processes applied across the
Group are set out below and in the individual
Committee reports.
The Board accepts responsibility for
oversight of management who prepares the
annual report and accounts and considers the
annual report and accounts, taken as a whole,
to be fair, balanced and understandable,
and provide the information necessary for
shareholders to assess the Company’s
performance, business model and strategy.
Board leadership and purpose
The Board is accountable to shareholders
and other stakeholders for the creation of a
sustainable, long-term business. The Board
oversees a robust governance framework
with clear procedures, lines of responsibility
and delegated authorities to ensure that
the Company’s strategy and values are
implemented, and key risks assessed and
managed effectively. The Board also engages
with the Company’s stakeholders on an
ongoing basis to ensure their long-term
interests are understood and preserved. This
includes investors, the host government and
local communities, staff and contractors,
business partners and suppliers. It is
recognised that the nature of the Company’s
business requires specific expertise at Board
level and this is regularly reviewed to ensure it
is appropriate.
Key oversight responsibilities of the Board
include:
• health and safety;
• ethical compliance;
• environmental and social governance;
• strategy development and objectives;
• operational and technical review;
• financial performance, structure and capital
management;
• corporate planning and KPIs;
• stakeholder and workforce engagement;
• shareholder value;
• people, culture and values;
• risk management;
• Board development and effectiveness; and
• governance and regulatory compliance.
When considering these responsibilities, the
Chairman encourages an open, respectful
and collaborative working environment
where all Directors voice their opinions and
contribute to constructive debate.
Division of responsibilities
The Board is led by the Chairman, who
promotes a culture of openness and debate
and is responsible for the leadership of the
Board and its overall effectiveness. The
Chairman also facilitates constructive Board
relations and the effective contribution of
all Non-Executive and Executive Directors,
and ensures that Directors receive accurate,
timely and clear information. The Chairman is
supported on the Board by four independent
Non-Executive Directors, one of whom
is the Senior Independent Director, a
further Non-Executive Director who is a
non-independent shareholder representative,
and the CEO and CFO. The CEO is
responsible for operational management,
and the development and implementation
of strategy in conjunction with the senior
leadership team. The Chief Legal Officer
attends Board and Committee meetings as
Secretary to ensure corporate governance
and regulatory compliance.
The Company has a formal register of
“Matters Reserved for the Board” which is
reviewed and approved on a regular basis, and
there is a clear separation of responsibilities
between the Board and management.
Some matters may be delegated to the Board
Committees: the Safety and Sustainability
Committee; the Technical Committee; the
Audit and Risk Committee; the Remuneration
Committee; and the Nomination Committee.
Each Board Committee has terms of
reference in place which are reviewed and
approved on a regular basis.
The Board is satisfied that the Committees
and the individual Directors have sufficient
time and resources to carry out their duties
effectively and anticipate that will continue to
be the case in the coming year when Martin
Angle is expected to become Non-Executive
Chairman and Kimberley Wood is expected
to become Deputy Chairman and Senior
Independent Director following the 2023
AGM. The Company maintains an ongoing
review of the external commitments of its
Directors and there have been no significant
changes to these over the past year, or likely
to be in the coming year.
The Executive Committee comprises of the
CEO, CFO, Chief Operations Officer, Chief
Commercial Officer, Chief Legal Officer and
Chief HR Officer. They meet on a regular
basis, at least weekly, to discuss significant
management matters. The senior leadership
team, comprising functional heads of
departments and the Executive Committee,
also meets on a regular basis to discuss
management matters.
Composition, succession
and evaluation
The Nomination Committee is primarily
responsible for reviewing the composition
and balance of the Board, and for
recommending any new appointments to the
Board and Committees. Appointments and
succession planning are based on merit and
in accordance with the Company’s Diversity
Policy. During the year, one new appointment
to the Board was made: Wanda Mwaura
was appointed as an additional independent
Non-Executive Director.
All Directors are subject to annual re-election
by shareholders in accordance with the
Company’s Bye-Laws and the Code.
A formal, externally facilitated Board and
Committee evaluation takes place at least
every three years, the last one being in 2022
and further details of which are set out on
page 85. A further evaluation, which was
largely conducted as an internal process,
was completed in early 2023.
Audit, risk and internal control
The Audit and Risk Committee is primarily
responsible for ensuring that the financial
performance of the Company is measured
and reported, in conjunction with the
Company’s auditors. This Committee will also
review and report on the risk identification,
mitigation and management, identifying
specific “deep dives” on particular risks,
as appropriate. It is recognised that risk
management is of crucial importance to a
company of the profile of Gulf Keystone.
The risk process is therefore placed as an
integral part of the Company’s strategy
formulation and execution.
The Board acknowledges that it must have
in place a sound system of internal control
to safeguard the assets and value of the
business and to ensure reliability of financial
information. In this respect, a regular review is
undertaken by the Audit and Risk Committee
to consider the adequacy of and whether
enhancements to current internal control
systems are necessary. Further details of this
review in 2022 are set out on page 94.
Governance 82
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Corporate governance report continued
Remuneration
The Remuneration Committee is primarily
responsible for devising and monitoring the
Company’s remuneration policies to ensure
that they are consistent with corporate
governance guidelines and the Company’s
objectives, and it is assisted by external
remuneration consultants, Mercer Kepler.
A detailed report of all remuneration matters
is contained in the Directors’ remuneration
report. The Company’s Remuneration Policy
was formally approved by shareholders at the
Annual General Meeting in 2022.
Adherence with the UK Corporate
Governance Code
Although the Company is not subject to
the UK Corporate Governance Code 2018
(“the Code”) on account of its standard listing
on the London Stock Exchange, the Company
has voluntarily agreed to adhere to the Code
so far as practicable. We firmly believe that this
voluntary adherence establishes a solid basis
from which to conduct Board and managerial
decision-making acting in the best interests
of the Company and its stakeholders. A copy
of the Code is available on the website of
the Financial Reporting Council (“FRC”) on
www.frc.org.uk.
As at the date of this report, the Board
considers that the Company has applied
all of the principles and complied with all
of the provisions of the Code, except for
the following matters, using the provision
references set out in the July 2018 version
of the Code:
Provision 5 – There is no formal
workforce engagement scheme in place.
The Company’s existing remuneration
arrangements have been reviewed by
the Board in conjunction with its external
remuneration advisers, Mercer Kepler. It was
concluded that GKP had a very transparent
culture with regular staff engagement
initiatives and an open reporting line which
encouraged staff participation. Such initiatives
include regular “town hall” meetings, offsite
strategy sessions by department, grade and
location, and regular internal communications
including through the Company’s intranet.
Taking these existing arrangements, and the
size and nature of the business, into account,
it was considered that it was an unnecessary
step to formalise this into a formal workforce
engagement scheme. The Board will keep
these arrangements under review, taking into
account GKP’s size and legal and regulatory
requirements in its locations. With respect
to the remuneration of the wider workforce,
this is benchmarked and reported to the
Remuneration Committee, although the
determination of workforce remuneration is a
matter for management. The Remuneration
Committee, which has responsibility for the
remuneration of the Executive Committee,
will take into account the remuneration of the
wider workforce to ensure alignment with the
Executive Committee.
The information contained in this report, and
elsewhere in this annual report and accounts,
describes the manner in which Gulf Keystone
has applied the principles of governance set
out in the Code and complied with individual
Code provisions.
As at the date of this report, the Directors of the Company are:
The Board
The composition of the Board is a key
constituent of the Company’s corporate
governance. As an international energy
company, Gulf Keystone’s business carries
a diverse range of risks and it is important
that these are covered by the skills and
knowledge of the Board. For each Board
appointment a number of factors will be
considered, including skills, experience,
diversity and ability. This is replicated in
senior management positions and in the
Company’s succession planning.
Following the conclusion of the 2023 AGM,
at which the current Chair, Jaap Huijskes,
will retire, it is proposed that Martin Angle be
appointed Chair of the Board, and Kimberley
Wood be appointed Senior Independent
Director and Deputy Chair. The Board and
the Nomination Committee considered this
matter in significant detail and concluded that
it was in the best interests of the Company
and its stakeholders as a whole that these
appointments be proposed. In addition, a
search process is underway to recruit a
further independent Non-Executive Director
to replace Mr Huijskes.
The following Board changes were made
during 2022: Wanda Mwaura was appointed
as Non-Executive Director on 1 July 2022.
Name
Jaap Huijskes
Jon Harris
Ian Weatherdon
David Thomas
Martin Angle
Kimberley Wood
Garrett Soden
Wanda Mwaura
Role
Date of appointment
Date of last re-election
Non-Executive Chairman
29 November 2017
CEO
CFO
18 January 2021
13 January 2020
Deputy Chairman and Senior Independent Director
16 July 2018
Non-Executive Director
13 October 2016
Non-Executive Director
1 October 2018
Non-Executive Director
Non-Executive Director
14 July 2020
1 July 2022
24 June 2022
24 June 2022
24 June 2022
24 June 2022
24 June 2022
24 June 2022
24 June 2022
—
Gulf Keystone Petroleum Limited Annual report and accounts 2022
83
Board composition,
independence and diversity
As at the date of this report, the Board is
comprised of two Executive Directors and
six Non-Executive Directors (including
the Chairman). In accordance with Code
Provision 9, the Chairman was independent
on appointment. The Company regards
the other Non-Executive Directors as
independent according to Code Provision 10,
save for Garrett Soden who is representing
funds managed by Lansdowne Partners
Austria GmbH.
The independence of each of the other
Non-Executive Directors is considered
upon appointment, at each Board
evaluation and at any other time a Director’s
circumstances change in a way that warrants
reconsideration, and by their ongoing actions.
The Board considers whether the
Non-Executive Director is independent
of management and any business or
other relationship that could materially
interfere with the exercise of objective and
independent judgement by the Director or
the Director’s ability to act in the best interests
of all stakeholders. In particular, the Board
has considered any positions which the
Non-Executive Director holds, or held, in
companies with which Gulf Keystone has
commercial relationships. None of the
Non-Executive Directors participate in
share compensation schemes, including the
Company Share Options Plan and executive
bonus schemes.
The Company’s Executive and Non-Executive
Directors are recruited from a variety of
backgrounds and bring different experience
and perspectives, ensuring that the
Company’s Directors have capacity and
capability to meet the needs of the business.
The Company places high importance on
having diverse Board composition to enable
robust consideration and challenge of
the strategies proposed by the Executive
Directors. The balance of skill diversity of the
Board is specifically considered at the annual
Board evaluation and by the Nomination
Committee.
The experience provided by the Board
covers, amongst other things, financial/
capital markets, legal, commercial,
technical (including petroleum engineering,
geology, operations and HSE) and project
management. The Company actively
considers Board composition on a regular
basis to ensure the Board has the necessary
balance of skills, experience, knowledge,
independence and diversity to discharge
its duties.
Board appointments are undertaken through
a formal, rigorous and transparent procedure
run by external search consultants.
Wanda Mwaura was appointed to the Board
as a Non-Executive Director on 1 July 2022
following an external recruitment search
managed by Henrietta High Consulting,
further details of which can be found on
page 90.
Board tenure
Board experience
The Company has in place a Diversity Policy
which applies across the Company, including
at Board level, and seeks to ensure that there
is no discrimination within the Company
on the basis of gender, sexual orientation,
ethnicity, age, disability or other minority. It is
recognised that diversity is a key element
for the Board, and that diversity extends to
a number of different facets. During 2022,
the Company enhanced the diversity of its
Board through the recruitment of an additional
Non-Executive Director.
The operation of this policy is monitored on
a continual basis and a report is prepared
for each scheduled Board meeting which
sets out the breakdown of staff according to
various diversity metrics. This includes the
gender balance of those considered to be
senior management. The implementation of
the Diversity Policy has resulted in enhanced
awareness throughout the organisation of the
benefits of a diverse workforce. The Diversity
Policy will be strictly adhered to in the
recruitment process for any Board position.
The current gender balance of the Board is six
males and two females. Further information on
diversity at Board and executive management
level can be found on page 84.
1
2
5
Under one year
Over one year
Over two years
Over three years
4
3
1
3
7
Oil and gas
Engineering
Technical/commercial
Finance
Legal
Governance 84
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Corporate governance report continued
Board and executive management diversity data
The Company is also voluntarily reporting its Board and executive management diversity data as at 31 December 2022 in accordance with the
new UK Listing Rules disclosure requirements and our progress in meeting the new UK Listing Rules Board diversity targets.
As at 31 December 2022, the Board comprised 25% women. None of the four senior positions on the Board was held by a woman, and there were no
Directors from an ethnic minority background. The Board recognises that it does not currently meet the UK Listing Rules targets, however the Board
is committed to the continued enhancement of its gender balance and ethnic diversity as described in more detail above and as recognised by the
Board evaluation undertaken in 2023. Following the retirement of Jaap Huijskes at the end of the Company’s 2023 AGM, it is anticipated that 29% of
the Board will be women and one of the four senior positions will be held by a woman once Kimberley Wood takes up the role of Senior Independent
Director, although it should be noted that the Board is currently engaged in a recruitment process to search for a replacement Non-Executive
Director for Mr Huijskes. The Board is committed to meet the UK Listing Rules targets and will continue to keep its progress under review.
Gender representation:
Board and executive management
as at 31 December 2022
Men
Women
Other categories / not specified / prefer not to say
Ethnic background:
Board and executive management
as at 31 December 2022
White British or other White
(including minority-white groups)
Mixed / Multiple ethnic groups / Asian / Asian British / Black /
African / Caribbean / Black British / Other ethnic group,
including Arab / Not specified / prefer not to say
Number
of Board
members
Percentage of
the Board
6
2
—
8
—
75
25
—
100
—
Number of senior
positions (CEO, CFO,
Percentage
of executive
Chairman and SID) management management
Number in
executive
4
0
—
4
—
5
1
—
6
—
83
17
—
100
—
Executive management for these purposes is the Executive Committee (the most senior executive body below the Board) and the Company
Secretary, excluding administrative and support staff, as defined by the UK Listing Rules.
Gender and ethnicity data relating to the Board and senior management team was collected by the Company’s Human Resources department.
Board induction
New Directors receive a full and appropriate
induction on joining the Board. This
includes meetings with functional heads
of department, other Board members
and the Company’s principal advisers as
appropriate. A comprehensive induction pack
is also prepared which includes historical
Board and Committee papers and minutes,
Company compliance policies (for example
the Anti-Bribery Policy), organisational
structure charts, relevant legal, insurance and
regulatory information.
The Company will also provide training on a
periodic basis to the Directors on relevant
matters. All Directors undergo Code of
Business Conduct training on the same cycle
as staff, with the latest such cycle having been
completed in March 2023.
The role of the Board
The Board leads the Company in the delivery
of its strategic goals, generating long-term
sustainable success whilst putting in place
and respecting the necessary controls within
which the Company must operate to ensure
appropriate assessment and management of
risk and respect for the environment. The Board
establishes the Company’s purpose, values
and strategy, and ensures that these are
aligned with its culture. This is brought into the
Company’s training on the Code of Business
Conduct to ensure they are appropriately
embedded within the organisation.
The Board has a formal schedule of matters
specifically reserved to it for decision-making
on certain aspects of the business which is
approved on an annual basis. They cover the
key strategic, financial and operational issues
facing the Group and include:
• the Group’s strategic aims and objectives;
• annual operating and capital expenditure
budgets;
• changes to the Group’s capital,
management or control structures;
• dividend policy and dividend
recommendation;
• half-yearly reports, final results, annual
report and accounts;
• the overall system of internal control and
risk management;
• major capital projects, corporate actions
and investment;
• acquisitions and disposals; and
• changes to the structure, size and
composition of the Board.
A Delegation of Authority is reviewed by the
Board on a regular basis to ensure there are
appropriate controls in place for management
decisions. In addition, terms of reference
are set and approved for each of the Board
sub-committees; these are available on
the Company’s website. The Board and
its Committees have access to the advice
and services of the Chief Legal Officer and
Company Secretary and, if necessary, the
Board and its individual Directors have the
ability to seek external expert advice at the
expense of the Company.
Board and Committee meetings are attended
by members of the senior management
team upon invitation. At each Board meeting
any attendees are required to declare any
conflicts of interest they may have, including
in relation to significant shareholdings.
The Board will ensure that the influence of
third parties will not compromise or override
independent judgement.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
85
Division of responsibilities
between Non-Executive Chairman
and Chief Executive Officer
The Company maintains a clear division of
responsibilities between the independent
Non-Executive Chairman and the Chief
Executive Officer. The Non-Executive
Chairman is responsible for leading the
Board in an ethical manner and for guiding
the Directors in the development of the
Company’s strategy. The Non-Executive
Chairman chairs the Board meetings and
oversees implementation of the Board’s
decisions. On occasions, the Non-Executive
Chairman will meet with key shareholders
and stakeholders to articulate the Company’s
strategy and seek their feedback.
In running the Board, the Non-Executive
Chairman is responsible for creating an
environment that facilitates robust and
constructive challenge whilst promoting a
culture of openness and debate. In creating
this environment, the Non-Executive Chairman
encourages open communications and
aims to ensure that the Non-Executive
Directors’ challenges and suggestions are
considered dispassionately and on their merits.
The Non-Executive Chairman is responsible
for setting the Board’s agenda and ensuring
that adequate time is available for discussion of
all agenda items including strategic issues.
The Chief Executive Officer is responsible
for the overall management of the business,
delivering successful achievement of the
Company’s KPIs and providing leadership
to the management team and staff whilst
communicating and fostering the underlying
culture and principles of the Company to all
staff and stakeholders.
member of the Board, having been appointed
in 2018, and her diverse skills mean that she
is well placed to provide a sounding board
for Mr Angle in his new role as Chairman and
to serve as an intermediary for her fellow
Directors and shareholders.
The role of the Senior Independent
Director (“SID”)
Martin Angle was appointed as SID on
16 July 2018. The SID is responsible for
assisting the Non-Executive Chairman with
effective communications with shareholders
and is available to shareholders should
there be any concern which could not be
resolved through the normal channels of the
Non-Executive Chairman, Executive Directors
or the Investor Relations team. The SID is
available to meet shareholders if they have
specific concerns. The SID also ensures
that there is a clear division of responsibility
between the Non-Executive Chairman and
Chief Executive Officer and, as necessary,
acts as a conduit between the Board’s
Non-Executive Directors, its Chairman and
the Executive Directors. Martin Angle also
acts as Deputy Non-Executive Chairman
of the Board. The Board is satisfied that the
SID demonstrates complete independence
in the role. Following the 2023 AGM, it is
proposed that Kimberley Wood is appointed
the SID, replacing Martin Angle who will be
appointed Chairman following the retirement
of Jaap Huijskes. Ms Wood is a long-standing
Board meetings and attendance
Board meetings are held on a regular basis
and no decision of any consequence
is made other than by the Directors.
A total of ten scheduled Board meetings
were held during the year ended
31 December 2022. In addition to those
scheduled meetings, the Board held a
further eight informal meetings to discuss
strategic matters. These meetings
were attended by all Directors and,
if appropriate, senior management,
with discussions being minuted.
No formal decisions were made at these
informal meetings.
The Directors’ attendance record at the
scheduled Board meetings and Board
Committee meetings for the year ended
31 December 2022 is shown in the table
below. For Board and Board Committee
meetings, attendance is expressed as the
number of meetings that each Director
attended followed by the number of meetings
held for the period she/he was a Director
during the year. The number of meetings
attended by each Director is shown out of the
total number she/he was eligible to attend.
Jaap Huijskes
Martin Angle
Garrett Soden
David Thomas
Kimberley Wood
Jon Harris
Ian Weatherdon
Wanda Mwaura(1)
John Hulme(2, 3)
Gabriel Papineau-Legris(3)
Audit
Full Board
meetings
and Risk Remuneration
Committee
Committee
Safety and
Nomination Sustainability
Committee
Committee
Technical
Committee
5/5
5/5
5/5
3/3
3/3
3/3
10/10
10/10
10/10
10/10
10/10
10/10
10/10
4/4
8/8
8/8
4/4
4/4
3/3
4/4
4/4
4/4
2/2
3/3
3/3
1/1
3/3
(1) Appointed to the Board on 1 July 2022.
(2) Appointed to the Safety and Sustainability Committee and Technical Committee on 23 June 2022.
(3) John Hulme and Gabriel Papineau-Legris are members of the Executive Committee but not the Board. The Board considers they offer valuable expertise to the
Committees they are members of.
The composition of the Committees will be reconsidered following the 2023 AGM. It is recognised that, in the event Mr Angle is appointed Chair
of the Board, he can no longer act as Chair of the Audit and Risk Committee. The Board will generally hold scheduled meetings over two days.
In advance of the Board meeting, on the first day, meetings of the Audit and Risk, Nomination and Remuneration Committees may be held as
appropriate. Meetings of the Technical Committee and Safety and Sustainability Committee will generally be held in advance of the Board
meeting. The formal agenda for the Board meeting will be determined by the Non-Executive Chairman following consultation with the Chief
Executive Officer and the Chief Legal Officer.
Governance
86
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Corporate governance report continued
Current Board Committees
Audit and Risk
Remuneration
Nomination
Martin Angle (Chair)
Kimberley Wood (Chair)
Jaap Huijskes (Chair)
Kimberley Wood
Wanda Mwaura
David Thomas
Martin Angle
Kimberley Wood
Martin Angle
Safety and Sustainability
Technical
David Thomas (Chair)
David Thomas (Chair)
Jaap Huijskes
Kimberley Wood
Jon Harris
John Hulme
Jaap Huijskes
Jon Harris
Gabriel Papineau-Legris
John Hulme
The Board Committees
The Company has five Board Committees: the
Audit and Risk Committee, the Remuneration
Committee, the Nomination Committee, the
Safety and Sustainability Committee and the
Technical Committee. Each Board Committee
has specific written terms of reference issued
by the Board and adopted by the relevant
Committee, updated on a regular basis and
published in the corporate governance
section of the Company’s website
www.gulfkeystone.com.
All Committee Chairs report orally on
the proceedings of their Committees
at the meetings of the Board. Where
appropriate, the Committee Chairs also
make recommendations to the Board
in accordance with their relevant terms
of reference. In addition, the minutes
and papers of the Committee meetings
are distributed to all Board members in
advance of Committee meetings.
To ensure Directors are kept up to date
on developing issues and to support the
overall effectiveness of the Board and its
Committees, the Non-Executive Chairman
and Committee Chairs communicate
regularly with the Chief Executive Officer and
other executive management.
Alasdair Robinson, the Company’s Chief
Legal Officer, acts as Company Secretary
to each Committee.
The key governance mandates of the Board’s
five main Committees are shown on the
following pages.
Audit and Risk Committee
As at 31 December 2022, the Audit and Risk
Committee comprised three Non-Executive
Directors, all of whom are considered
to be independent. The members were:
Martin Angle (Chair), Kimberley Wood and
Wanda Mwaura.
The Committee members have been selected
to provide the wide range of financial and
commercial expertise necessary to fulfil the
Committee’s duties. The Board considers that
the Committee has experience to be recent
and relevant for the purposes of the Code and
the members of the Committee as a whole
have competence relevant to the sector in
which the Company operates; in particular,
both Martin Angle and Wanda Mwaura are
qualified accountants. This Committee meets
at least three times per year. During the year
ended 31 December 2022, the Committee
met eight times.
The terms of reference of the Audit and Risk
Committee are documented and agreed by
the Board and are available in the corporate
governance section of Gulf Keystone’s
corporate website: www.gulfkeystone.com.
The terms of reference are reviewed regularly
and were last updated in January 2022.
The Audit and Risk Committee report is set
out on pages 94 to 97.
Nomination Committee
As at 31 December 2022, the Nomination
Committee comprised three Non-Executive
Directors, who are considered to be
independent, including the Non-Executive
Chairman of the Board. The members were:
Jaap Huijskes (Chair), Kimberley Wood and
Martin Angle. There were no changes to the
composition of the Committee in 2022.
The Nomination Committee met on three
occasions during the year on a formal basis.
The terms of reference of the Nomination
Committee are documented and agreed by
the Board and are available in the corporate
governance section of Gulf Keystone’s
corporate website: www.gulfkeystone.com.
The terms of reference are reviewed regularly
and were last updated in March 2023.
The Nomination Committee report is set out
on pages 90 to 93.
Remuneration Committee
As at 31 December 2022, the Remuneration
Committee comprised three Non-Executive
Directors: Kimberley Wood (Chair), David
Thomas and Martin Angle. There were no
changes to the composition of the Committee
in 2022.
This Committee, which meets at least
twice per year, is responsible for making
recommendations to the Board concerning
the compensation of the Executive Directors
and the Non-Executive Chairman, as well as
the level and structure of remuneration for
senior management.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
87
Information and support
The Company is committed to supplying
the Board and its Committees with full
and timely information, including detailed
financial, operational and corporate
information, to enable Directors and
Committee members to discharge their
responsibilities. The Committees are provided
with sufficient resources to undertake their
duties. All Directors have access to the
advice of senior management and, where
appropriate, the services of other employees
and the Company Secretary and Chief Legal
Officer for all governance and regulatory
matters. Independent professional advice
is also available to Directors in appropriate
circumstances, at the Company’s expense.
Board members also keep up to date with
developments in relevant law, regulation
and best practice to maintain their skills and
knowledge.
Relevant analysis and reports are prepared
by management prior to all Board and
Committee meetings, allowing the Board
to effectively address all of the items on the
relevant meeting’s agenda. Documents and
reports are provided to the Board in a timely
manner allowing for sufficient time to review
the information prior to the meeting and raise
questions where necessary. Management
discusses the detail and format of Board
reports on an ongoing basis to ensure the
Board is appropriately informed of all relevant
information.
Technical Committee
As at 31 December 2022, the Technical
Committee comprised two Non-Executive
Directors, one Executive Director, the Chief
Operating Officer (“COO”) and the Chief
Commercial Officer (“CCO”), being
David Thomas (Chair), Jaap Huijskes,
Jon Harris (CEO), John Hulme (COO)
and Gabriel Papineau-Legris (CCO).
The Committee’s main remit is to support
the Company’s Shaikan development
planning and project execution activities.
The Committee also has the following specific
objectives:
• provide assurance that development plans
are in line with the Company’s strategy and
have been optimised;
• review and recommend to the Board
approval of Shaikan Field reserves and
resources estimates and revisions;
• ensure that the Company has the
appropriate resources and project
management systems in place to
successfully execute development projects
on time and within budget;
• provide the Board with assurance that
the key project execution risks have
been identified and that the required risk
management processes and mitigation
measures are in place;
• provide oversight, where appropriate, for
any material contract tendering exercises;
and
• review and recommend for executive
approval any information relating to the
Shaikan FDP and reserves and resources
estimates for public release.
The Committee met three times in 2022.
The terms of reference of the Technical
Committee are documented and agreed by
the Board and are available in the corporate
governance section of Gulf Keystone’s
corporate website: www.gulfkeystone.com.
The terms of reference are reviewed regularly
and were last updated in March 2021.
The Technical Committee report is set out on
pages 100 and 101.
The Committee is also responsible for the
determination of the Group’s Remuneration
Policy. The Remuneration Committee met on
four occasions during the year.
The terms of reference for the Remuneration
Committee are available in the corporate
governance section of Gulf Keystone’s
corporate website: www.gulfkeystone.com.
The terms of reference are reviewed regularly
and were last updated in March 2023.
The Remuneration Committee report is set
out on pages 102 to 118.
Safety and Sustainability Committee
As at 31 December 2022, the Safety and
Sustainability Committee comprised three
Non-Executive Directors, one Executive
Director and the Chief Operating Officer,
being David Thomas (Chair), Jaap Huijskes,
Kimberley Wood, Jon Harris (CEO) and
John Hulme (COO).
The Committee was formed in June
2020 in succession to the HSE and CSR
Committee. It aims to meet four times a year
and met four times during 2022. The primary
function of the Committee is to oversee
the development of the Group’s policies
and guidelines for the management of ESG
including evaluating HSE and social risks,
evaluate the effectiveness of these policies
and their ability to ensure compliance with
applicable legal and regulatory requirements,
overseeing the quality and integrity of
reporting to external stakeholders concerning
safety and sustainability, and reviewing the
results of any independent audits of the
Group’s performance in regard to safety and
sustainability making recommendations,
where appropriate, to the Board concerning
the same. The Committee also reviews
ESG and safety performance and examines
specific safety issues as requested by the
Board and will also review all governance
matters which are relevant to the work of the
Committee. The Committee provides visible
leadership on HSE matters through site visits
to the production facilities and drilling sites as
well as aiming to hold a Committee meeting
once a year in Erbil at the field facilities.
The next site visit is scheduled for May 2023.
The terms of reference of the Safety
and Sustainability Committee are
documented and agreed by the Board and
are available in the corporate governance
section of Gulf Keystone’s corporate website:
www.gulfkeystone.com. The terms of
reference are reviewed regularly and were last
updated in March 2022.
The Safety and Sustainability Committee
report is set out on pages 98 and 99.
Governance 88
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Corporate governance report continued
Business ethics
The Company adopts a zero-tolerance
approach to bribery and corruption and
has adopted a number of measures
and procedures to ensure ongoing
compliance with relevant anti-bribery laws.
An Anti-Bribery Policy is in place which
is regularly reviewed and updated by the
Board. This policy also includes provisions on
conflicts of interest and the Criminal Finances
Act. Training is undertaken on a regular
basis through both physical presentations
(in Kurdistan and the UK, where possible),
and online training courses. A number of
procedures underlie the Policy, including
the maintenance of registers covering, for
example, gifts and hospitality. The latest
compliance training cycle was completed in
March 2023 as part of the Code of Business
Conduct training.
An external whistleblowing service, Navex
Global, is maintained in order to provide a
mechanism whereby staff and contractors
may make anonymous reports if necessary,
which is designed to encourage staff to “speak
up”. In the event any reports are received
through this service, the matter is brought to
the attention of the Board and a full review is
undertaken on the allegations. The Board will
then determine whether there is a need for
a further independent investigation of such
matters and for follow-up action.
Workforce engagement and
Company culture
The Company has noted the provisions
contained in the Code with respect to
workforce engagement. In the context of
the size of the Company, the Board does not
intend to appoint either a Director from the
workforce or a designated Non-Executive
Director to ensure engagement with the
workforce. However, the Company does run
a system of regular “town hall” events across
its offices and production facilities which
enable an open forum for discussion with its
workforce. The workforce receive updates on
recent developments relating to the Company
and have the opportunity to ask questions of
management through interactive sessions
and meetings. This matter is reviewed on a
regular basis by management and, where
appropriate, its advisers. The current
conclusion is that the Company is not of
a sufficiently complex nature to warrant
the need for additional levels of workforce
engagement processes and the Board will
keep this assessment under review.
The Company has embedded six fundamental
principles in the organisation which cover its
purpose, values and culture. These are:
Safety
• Safety comes first. No job is so urgent or
important that it cannot be done safely.
Social responsibility
• Gulf Keystone’s relationship with, and
contribution to, society has been critical
to the development of the Company as
it stands today and is fundamental for
its future success. We are committed
to meeting high standards of corporate
citizenship by protecting the wellbeing
of our employees, by safeguarding
the environment and by creating a
long-standing, positive impact on the
communities where we do business.
Trust through open communication
• We understand the importance of listening
and open communication with employees,
our business partners, stakeholders and
shareholders; our success depends on
everyone. We encourage an environment of
open and continuous communication and
build our relationships on trust.
Teamwork
• Positive and constructive collaboration
and relationships between all employees is
vital to deliver outstanding performance in
everything we do.
Innovation and excellence
• We are committed to a high-performance
culture and to ensure sustained long-term
value for not only our external stakeholders
but also our employees through learning,
mentoring and career development.
Integrity and respect
• Doing the right thing. We are always guided
by the highest standards of ethical conduct,
integrity and fairness. Respect is: ensuring
diversity and equal opportunities in the
business; with our partners, stakeholders
and contractors seeking to conduct our
business openly for the mutual benefit of all.
The principles are referred to on an ongoing
basis through internal communications and
meetings, and are displayed prominently
throughout all Company offices, and even on
Company mouse mats and screensavers.
In addition, the principles are incorporated
into the annual training which staff and
contractors take on the Code of Business
Conduct. All staff and contractors are required
to adhere to the principles.
Risk management and internal
control
The Board acknowledges its responsibility
for establishing and monitoring the Group’s
systems of risk management and internal
control. While the systems of internal control
cannot provide absolute assurance against
material misstatement or loss, the Group’s
systems are designed to provide the Directors
with a high level of assurance that material
emerging and principal risks are identified on
a timely basis and dealt with appropriately.
The Board annually reviews the effectiveness
of the systems of risk management and
internal control and considers the significant
business risks and the control environment.
This is carried out by management and
reported to the Audit and Risk Committee
which assesses and tests the conclusions,
including the need for an internal audit
function. The Audit and Risk Committee will
then report on the matter to the Board. Having
conducted its review in 2022, the Board is
satisfied that effective controls are in place
and that risks have been identified and
mitigated as appropriate.
The Group is subject to a variety of risks,
which derive from the nature of the oil and gas
exploration, development and production
business and relate to the countries in which
it conducts its activities. The key procedures
that have been established and which are
designed to provide effective control are as
follows:
• regular meetings between executive
management and the Board to discuss all
issues affecting the Group;
• detailed analysis of risk reviews undertaken
at Audit and Risk Committee meetings
(strategic, financial, ESG, IT and cyber,
fraud risks) and Technical Committee
meetings (operational and project risks);
• a clearly defined framework for investment
appraisal with Board approval required as
appropriate;
• regular analysis and reporting on the
Company’s risk register; and
• reviews of the Company’s risk management
systems, controls and culture by external
advisers.
The Board also believes that the ability to
work in partnership with the host government
is a critical ingredient in managing risk
successfully.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
89
The Company is committed to maintaining this
constructive dialogue with all its investors and
will continue to provide regular updates on
its operations and corporate developments.
The Company has an established practice
of issuing regulatory announcements on
the Group’s operations and/or any new
price-sensitive information. The Group’s
website, www.gulfkeystone.com, which
is regularly updated, contains a wide range
of information on the Group, including a
dedicated investor section where investors
can find the Company’s share price, financial
information, regulatory announcements,
investor presentations and corporate
webcasts with the Group’s management.
A list of the Company’s significant
shareholders as at the date of this report can
be found in the Directors’ report and on the
Group’s website, at www.gulfkeystone.com.
The Company also seeks to engage with
its wider stakeholders on a regular basis.
This includes, for example, the Ministry
of Natural Resources in Kurdistan, the
Company’s joint venture partner, MOL Group,
residents local to the Company’s operations,
suppliers, contractors and employees.
Additional information
The Company has provided the additional
information required by the UK Financial
Conduct Authority’s Disclosure Guidance
and Transparency Rules of the Listing Rules
(and specifically the requirements of DTR
7.2.6 in respect of directors’ interests in
shares; appointment and replacement of
directors; powers of the directors; restrictions
on voting rights; and rights regarding control
of the Company) in the Directors’ report.
The Directors have derived assurance over
the control environment from the following
internal and external controls during 2022:
•
implementation of policies and procedures
for key business activities;
• an appropriate organisational structure;
• specific delegations of authority for all
financial and other transactions;
• segregation of duties where appropriate
and cost effective;
• management and financial reporting,
including KPIs;
• reports from the Group Audit and Risk,
Safety and Sustainability, and Technical
Committees; and
• reports from the Group’s external auditor
on matters identified during their audit.
The above procedures and controls have
been in place in respect of the Group for the
2022 accounting period and up to the date of
approval of the annual report and accounts.
There were no significant weaknesses or
material failings in the risk management and
internal control system identified in any of the
above reviews and reports. Further details on
the Company’s emerging and principal risks
and procedures in place and to how these
are managed and mitigated are contained on
pages 66 to 75.
Relations with investors and
stakeholders
Regular communications with the Company’s
institutional and retail equity investors, as well
as bondholders, are given high priority by the
Board. The Non-Executive Chairman, Senior
Independent Director, Chief Executive Officer,
Chief Financial Officer and members of the
Investor Relations team are the Company’s
principal spokespersons, engaging with
investors, analysts, the press and other
interested parties. Communication is
undertaken through site visits, shareholder
presentations, attendance and presentations
at industry conferences, one-on-one
meetings, conference calls and other
written and oral mediums. Throughout
2022, the Group held a number of investor
presentations which are available to view on
the Group’s website.
Annual General Meeting
At the Company’s Annual General
Meeting (“AGM”) held on 24 June 2022,
all resolutions were successfully passed.
However, resolutions 2 and 7, being the
re-election of the Company’s Chairman and
Chief Financial Officer, failed to attain the
support of 80% of the shareholders who
voted. Substantially all the votes against
resolutions 2 and 7 were from a single major
shareholder. In accordance with Provision
4 of the 2018 UK Corporate Governance
Code, the Board consulted with the single
shareholder and, as part of this exercise,
also consulted with the Company’s other
major shareholders. Feedback received
from the single shareholder encompassed
issues principally related to the Company’s
operational progress, organisational structure
and capital allocation. The Company
also received feedback from other major
shareholders, all of which were supportive of
resolutions 2 and 7. External proxy agencies
were also all in favour of all the resolutions
proposed at the AGM. The Board has
carefully considered the issues raised by the
shareholder who voted against these two
resolutions and has addressed them, to the
extent possible or necessary. The Company
reported on this matter on 19 December 2022
in accordance with the Code and also stated
that the independent members of the Board
continued to hold every confidence in both
the Chairman and Chief Financial Officer,
recognising the value and contribution each
bring to the Company. As previously stated,
the Chairman will be stepping down with
effect from the end of the Company’s AGM
in 2023. The Board is recommending the
reappointment of all other Directors, including
the Chief Financial Officer.
The 2023 AGM will be held on 16 June 2023.
The Notice of AGM accompanies this annual
report and accounts and sets out the business
to be considered at the meeting. The Board
uses the AGM to communicate with private
and institutional investors and welcomes their
participation. The 2023 AGM will be hosted in
Bermuda and shareholders are able to attend
by video conference. Both the annual report
and accounts and Notice of AGM are available
on the Company’s website.
Jaap Huijskes
Non-Executive Chairman
22 March 2023
Governance 90
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Nomination Committee report
Jaap Huijskes
Non-Executive Chairman
Matters
discussed
March 2022
• Board evaluation
• Non-Executive Director recruitment
June 2022
• Non-Executive Director recruitment
• Committee membership
Role
In accordance with its terms of reference, the
Nomination Committee (the “Committee”) is
a committee of the Board of Directors of the
Company which is primarily responsible for:
• reviewing the structure, size and
composition of the Board and
recommending changes;
• considering and recommending
•
succession planning strategy for Executive
and Non-Executive Directors and key
senior management positions;
identifying and nominating for the approval
of the Board candidates to fi ll Board
vacancies or new positions as and when
they arise;
• reviewing the Company’s policy on diversity
and inclusion and the progress made in
achieving the policy’s objectives; and
• the Committee will lead an annual
evaluation of the performance of the Board,
its Committees, the Chairman and the
individual Directors. The Committee will
consider an externally facilitated approach
to this at least every three years.
December 2022
• Board and Executive Committee
composition and succession
• Board evaluation
2022 membership and meeting
attendance
Member Nomination
since Committee
Jaap Huijskes
6 Dec 2017
Martin Angle
16 Jul 2018
Kimberley Wood 3 Oct 2019
3/3
3/3
3/3
Composition
The Nomination Committee currently
comprises three independent Non-Executive
Directors: Jaap Huijskes (Chair), Martin Angle
and Kimberley Wood. This will be reviewed in
June 2023 in the context of the retirement of
Jaap Huijskes as Chairman.
The meetings may be attended by Alasdair
Robinson (Chief Legal Offi cer and Secretary
to the Committee), Clare Kinahan (Chief HR
Offi cer), other Non-Executive and Executive
Directors, and external advisers as
appropriate.
Review of the Committee’s
activities
The Nomination Committee meets at least
twice per year. During 2022, the Committee
met formally on three occasions. In addition,
a number of informal meetings took place to
discuss matters relevant to the Committee,
and on some occasions, matters of a
Nomination Committee nature may be
discussed in full Board meetings.
Some of the key matters considered by
the Committee during the year ended
31 December 2022 were: considering the
balance and composition of the Board and
Committees; the recruitment of further
independent Non-Executive Directors;
succession planning for the Board and
Executive Committee; Board Committee
composition; and Board evaluation.
On 1 July 2022, Wanda Mwaura was
appointed as a Non-Executive Director to
the Board. Wanda was appointed following
an extensive search process, externally led
by Henrietta High Consulting. The search
process was based on merit and objective
criteria and Wanda’s appointment refl ected
the Board’s desire to enhance its fi nancial
expertise and diversity in line with the
Diversity Policy. Henrietta High Consulting
has no other connection with the Company
or any of its Directors.
Further information on Wanda Mwaura
is detailed in the section on the Board of
Directors on pages 78 and 79.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
91
Q&A
with Wanda Mwaura,
with Wanda Mwaura,
Non-Executive Director
Non-Executive Director
G
o
v
e
r
n
a
n
c
e
Q.
What attracted you to joining the GKP Board?
Q.
How have you found the induction process for new Directors?
A.
I was attracted to this opportunity as GKP is a strong company,
publicly listed on the London Stock Exchange, in a fascinating
industry and region of the world. When I spoke to executive
management and other Board Directors I quickly realised how
professional, knowledgeable and dedicated each were and that
it was a good fi t for me.
Q.
What experience and expertise do you bring to the Board?
A.
I am a qualifi ed accountant with extensive accounting, external and
internal audit, consulting, regulatory and corporate governance
knowledge and experience from a number of diff erent industries.
I feel I can bring this knowledge and experience to GKP to add a
diff erent perspective and insight. In doing so I aspire to add value.
A.
So far GKP has done a fantastic job ensuring I am up to date
on the Company’s industry, business, practices, policies and
other aspects of the environment it operates in. I have received
one-on-one introductions and a training programme was arranged
for me and tailored to my experience and expertise.
Q.
What have been some of the highlights from your fi rst few
months in role?
A.
During my fi rst few months as a Director and Audit and Risk
Committee member, I have observed the knowledge and
professionalism demonstrated by executive management and
the Board. It is clear that management and my fellow Directors are
passionate about the business, its employees and are focused on
acting with integrity and high ethical standards. The protection of
shareholder interests and the safety of GKP’s employees has also
been clearly evident.
92
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Nomination Committee report continued
The Diversity Policy applies across all facets
of the business, including administrative,
management and supervisory functions,
including at Board level. Diversity statistics
are provided in each scheduled Board
meeting showing the breakdown of senior
management (and their direct reports)
and staff by a number of metrics. These
are reviewed in detail by the Board and
the Committee. In the event the statistics
demonstrate a trend or weighting which is not
in accordance with the Diversity Policy, this
will be investigated and, if necessary, rectified.
In the event an individual has concerns about
matters of a diversity nature, the Company has
in place a confidential third-party-managed
whistleblowing service, which described in
more detail on page 88.
For the purposes of the UK Corporate
Governance Code, the gender balance of
senior management (being the Executive
Committee and including the Company
Secretary) and their direct reports is
described on page 84.
Diversity
The Committee recognises the benefits
of diversity across all areas of the Group
and believes that a diverse Board is a
positive factor in business success, brings
a broader, more rounded perspective to
decision-making, and makes the Board
more effective. When recruiting, the Board
endeavours to consider a wide and diverse
talent pool whilst also taking into account the
optimum make-up of the Board, including
the benefits of differences in skills, industry
experience, business model experience,
gender, race, disability, age, nationality,
background and other attributes that
individuals may bring.
In 2018, Gulf Keystone implemented a formal
Diversity Policy throughout the organisation.
The policy states that:
“The Company does not discriminate against
workers or consultants on the basis of
their gender, sexual orientation, marital or
civil partner status, gender reassignment,
race, colour, nationality, ethnic or national
origin, religion or belief, disability or age.
The Company will also seek to accommodate
the religious observations and beliefs of
all workers and consultants. The principle
of non-discrimination and equality of
opportunity applies equally to the treatment
of former workers, visitors, clients, customers
and suppliers by members of the Company’s
current workforce.”
Succession
During 2022, the Committee has continued
to review succession planning and the
active engagement and development
of the Company’s staff. This included
the consideration and development of
succession planning for the Executive
Directors and the Executive Committee,
which takes into account the Diversity
Policy and the need to foster a diverse
pipeline of candidates. The Company has a
structured training programme for executives
which is included as part of their annual
performance review.
In January 2023, the Committee and
the Board considered the appointment
of a Company Chairman to succeed
Jaap Huijskes following his retirement at
the 2023 AGM. Following discussion, and
taking into account the best interests of the
Company and its stakeholders as a whole,
it was agreed that Martin Angle would step up
from Senior Independent Director and Deputy
Chairman to become Chairman following
the conclusion of the AGM. Kimberley Wood
would be appointed Senior Independent
Director and Deputy Chair at this time.
It was recognised that both Mr Angle and
Ms Wood have extensive knowledge of the
Company having been Directors since 2018,
were well respected, and their appointments
would ensure a smooth transition to a new
Chair and Senior Independent Director.
As a matter of process, the discussion was
held primarily at Board level and Mr Huijskes,
Mr Angle and Ms Wood were recused from
these discussions as appropriate and did not
participate in the decision-making process.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
93
Process used for Board
appointments
The Committee adopts a formal, rigorous and
transparent procedure for the appointment of
new Directors to the Board.
In appointing Non-Executive Directors, the
Board’s practice is to use external recruitment
consultants appointed following a formal
pitch process. A detailed job profile and
engagement scope will be agreed with the
selected recruitment consultant following a
review of the balance and composition of the
Board. New Directors are subject to a formal
induction process covering all facets of the
business including asset review, technical,
operations, finance, legal, ESG and HR.
In 2022, Henrietta High Consulting was
engaged to run the selection process for
the appointment of a new Non-Executive
Director, Wanda Mwaura.
Board evaluation
The Company aims to undertake an externally
facilitated Board evaluation process
every 3 years. In early 2022, the Company
undertook an externally facilitated evaluation
with Evalu8 Limited (“Evalu8”). Evalua8 has
no other connection with the Company or any
individual Director and was selected following
a review by the Committee of a number of
potential suppliers taking into account the
level of interaction by the external consultant,
cost, and the experience of the Committee
of such evaluations. The evaluation, which
is questionnaire based rather than interview
based, covered the following topics and
covered the Board and all Board Committees,
with all Board members participating through
questionnaires and subsequent analysis and
discussion of the results:
• composition, succession and evaluation;
• Board/Committee strategy and Company
purpose;
leadership;
•
• meetings, contributions and relationship
with the Board;
• effectiveness;
• accountability;
• remuneration; and
• relations with shareholders.
The results of the review were considered
by both the Committee and the Board.
The review concluded that the Board as a
whole considered the overall governance
and associated processes of the Company
were strong with only a small number of
enhancements being proposed to improve
overall effectiveness. These included:
• enhanced diversity at the Board and
Committee level;
• enhanced communication with major
•
shareholders;
improved transparency on certain matters
(e.g. remuneration) between the Board/
Committees and senior management; and
• additional training for Directors.
During the year, the Board welcomed Wanda
Mwaura, which enhanced diversity at both
Board and Committee level, and will look
for further opportunities to increase Board
diversity as appropriate. The Board has
also addressed the other enhancements
suggested by the review as detailed above.
In March 2023, a further Board evaluation was
completed. This was largely internally driven,
although Evalu8 was also used to provide
a limited questionnaire of key governance
questions. These were answered by each
Board member, compiled and then used
as a forum for discussion in a dedicated
Board session. The key themes which
emerged were:
• the need to enhance diversity in the
composition of the Board and Committees;
• shareholder communications and
relationships;
• remuneration process and assessment;
and
• new UK governance requirements.
As at the date of this report, the Board and
management are currently devising a plan to
address each of these matters to ensure they
are fully considered and addressed.
There are no arrangements or
understandings between any Director or
executive officer and any other person
pursuant to which any Director or executive
officer was selected to serve, aside from
the appointment of Garrett Soden as a
shareholder representative of Lansdowne
Partners Austria. There are no family
relationships between the Directors.
Jaap Huijskes
Chair of the Nomination Committee
22 March 2023
Governance 94
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Audit and Risk Committee report
Matters
discussed
January 2022
• External audit
• Risk review
• Controls review
• ERP update
• ESEF update
•
• Terms of reference review
Insurance review
March 2022 (two meetings)
• 2021 annual report and financial statements
• Private session with external auditor
without management present
• Climate change risk assessment
• Management representation letter
June 2022
• Risk review including climate change risks
• CFO organisation update
• ERP update
• Audit tender plan
• Regulatory update
• Auditor fee review
Martin Angle
Chair of the Audit and Risk Committee
2022 membership and meeting
attendance
Member
Audit
and Risk
since Committee
Martin Angle(1)
16 Jul 2018
Kimberley Wood 12 Oct 2018
Wanda Mwaura(2)
1 Jul 2022
8/8
8/8
4/4
(1) Martin Angle will no longer be able
to serve as Chair of the Committee
following his proposed appointment
as Company Chair in June 2023.
The Committee formation will be
considered at this time.
(2) Appointed to the Board on 1 July 2022.
August 2022 (two meetings)
• 2022 half-year results
• Report from the external auditor on
outcome of interim review including key
judgements and management letter
• Management representation letter and
engagement letter review
• ERP update
• Audit tender update
October 2022
• Risk update
• DOA update
• Cyber security update
• Regulatory update
•
Insurance review
• Audit tender update
Insurance update
December 2022
• 2022 Deloitte audit planning report
•
• Risk review
• 2022 year-end ESEF tagging update
•
• Audit tender update
• Deloitte audit fee review
• Non-audit fee review
Internal audit
Gulf Keystone Petroleum Limited Annual report and accounts 2022
95
Role
The Audit and Risk Committee is the
committee of the Board of Directors that
is primarily responsible for overseeing the
financial reporting, internal risk management
and control functions, the external and
internal audit requirements, and for making
recommendations to the Board in relation
to the appointment of the Group’s internal
(if applicable) and external auditor.
In accordance with its terms of reference,
the Committee, which reports its findings to
the Board, is authorised to:
• monitor the integrity of the Group’s financial
statements and announcements, and
significant financial accounting estimates
and judgements;
• review the effectiveness of the Group’s
risk management framework and internal
controls and risk management systems;
• consider and make recommendations with
respect to the Group’s risk appetite and
review, on behalf of the Board, the Group’s
risk profile;
• monitor and review the need for and,
if appropriate, the effectiveness of,
the Group’s internal audit function;
• oversee the Company’s corporate and
operations technology functions, including
cyber security controls and processes;
• advise the Board on the appointment of the
external auditor and on the remuneration
for both audit and non-audit work;
• discuss the nature and scope of the audit
with the external auditor, and review the
audit findings ahead of reporting to the
Board; and
• assess the performance, independence
and objectivity of the external auditor and
any supply of non-audit services.
Composition
As at 31 December 2022 and the date of
this report, the Committee comprised three
Non-Executive Directors, all of whom are
considered to be independent. The members
of the Committee are Martin Angle
(Committee Chair), Kimberley Wood and
Wanda Mwaura, who joined the Committee
after her appointment to the Board on
1 July 2022. Following the 2023 AGM when
it is anticipated Mr Angle will be appointed
as Chairman, he will step down from the
Committee in accordance with Provision
24 of the UK Corporate Governance Code.
The composition of the Committees will
be reconsidered following the 2023 AGM.
It is recognised that, in the event Mr Angle
is appointed Chairman of the Board, he can
no longer act as Chair of the Audit and
Risk Committee.
The meetings are also typically attended
by other Non-Executive Directors,
Jon Harris (CEO), Ian Weatherdon (CFO),
Michael Cameron (Group Financial
Controller), Alasdair Robinson (Chief Legal
Officer and Company Secretary), Deloitte LLP
(external auditor) and, as appropriate,
representatives from finance management
and representatives from operations.
Review of the Committee’s
activities
Eight Audit and Risk Committee meetings
were held in the financial year. Meetings are
held at key times during the Group’s reporting
and audit calendar.
Matters discussed
During the year, the main focus of the
Audit and Risk Committee has been to
support and oversee the Group’s ongoing
monitoring, review and evaluation of its risk
management systems and internal controls,
ensure the robustness and integrity of the
Group’s financial reporting and assess the
effectiveness of both the internal and external
audit processes.
The Committee has devoted significant time
to reviewing those areas that are integral to
the Group’s core management and financial
processes, as well as engaging regularly with
management and the external auditor.
The Committee worked closely with
the management team to ensure these
recommendations were implemented in an
efficient and timely manner. The Committee
has been proactive in requesting information
in order to fulfil its role. During the course
of the year, the Committee has received
sufficient information on a timely basis to
enable it to discharge its duties effectively.
Significant issues considered by
the Audit and Risk Committee
in 2022
The Committee assesses whether suitable
accounting policies have been adopted and
whether management have made appropriate
estimates and judgements. The Committee
reviews reports prepared by management
that provide details on the main financial
reporting judgements and estimates.
The Committee also reviews reports by the
external auditor on the full-year and half-year
results of the Group that highlight any issues
identified by the auditor and provide further
insights into the judgements and estimates
used by management.
Governance 96
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Audit and Risk Committee report continued
The significant issues considered in the year are detailed below:
Significant issue
How the issue was addressed by the Committee
Revenue recognition: In order to recognise revenue, management
must be able to measure reliably the economic benefit to be received
and the costs associated with the sale and it must be probable that
the Group will receive the economic benefits.
In 2022, the Group has continued to recognise revenue in line
with IFRS 15 Revenue from Contracts with Customers. Since
1 September 2022, there has been no lifting agreement in place with
the KRG and it is has been necessary to assess whether this impacts
revenue recognition. The key judgement for the revenue recognition
is considering whether the accounting policy remains appropriate
and whether under this policy it is reasonable to recognise the
invoices for the months where no lifting agreement is in place and
remain unpaid.
Impairment and carrying value of oil and gas assets: An
assessment of any impairment and carrying value of the Group’s
assets is required under International Financial Reporting Standards.
This assessment involves management making a number of
judgements and assumptions including identifying indicators of
impairment and estimating future oil prices, production profiles,
costs and discount rates.
Going concern and viability statement: The appropriateness
of preparing the Group financial statements for the year on
a going concern basis and the preparation of the long-term
viability statement.
(1)
Inflated at 2% thereafter.
The Committee considered whether recognition of revenue in
relation to oil sales was appropriate. The Committee discussed the
key judgements with management and reviewed the information
provided. The Committee also had discussions with the external
auditor in respect of the Group’s accounting policy. Based on
these reviews and discussions, for the period from 1 January to
31 August 2023, the Committee agreed that the Group should
continue to invoice and recognise revenue in accordance with the
terms set out in the lifting agreement and the draft Term Sheet.
For the period from 1 September to 31 December 2023 for which
no lifting agreement was in place and the amounts remained unpaid
at year end, the Committee separately assessed and agreed the
Group should recognise revenue in accordance with the terms set
out in the MNR’s proposed pricing mechanism for Shaikan oil sales,
changing the reference price from Dated Brent to the Kurdistan Blend
(“KBT”) effective 1 September 2022. Subsequent to year end, the
Group received payment from the KRG for September 2022 oil sales,
which was consistent with the proposed new terms.
The Committee also agreed that the expected credit loss provisions
had been appropriately calculated.
The Committee considered reports from management and reviewed
the impairment indicator assessment which included impacts of
climate change and geopolitical factors. The Committee agreed that
the Iraqi Supreme Court ruling in February 2022 and the change to
the basis of calculating realised prices from 1 September 2022 were
indicators of potential impairment and that a full evaluation should
be completed. The Committee was satisfied that the base case
and the range of scenarios, including a base case derived from the
31 December 2022 Brent oil price forward curve, a stress case price
deck noted below and the expected cash flow approach applied
to the Iraqi Supreme Court ruling on 15 February 2022 used for the
impairment indicator assessment were reasonable. The Committee
agreed with management’s conclusion that no impairment
write-down was required.
Brent $/bbl
(Nominal)
Base
Stress
2023
83.4
60.0
2024
2025
2026
2027
2028(1)
78.2
56.1
74.5
57.2
71.7
58.4
69.6
59.5
68.1
60.7
The Committee considered reports and analysis prepared by
management, taking into account the external auditor’s review
of these papers and their observations. The analysis involved
stress testing the assumptions and in particular reviewing the
potential impact arising from there being no lifting agreement
from 1 September 2022, and potential delays in revenue receipts.
The Committee reviewed the mitigating actions available and
concluded that management’s recommendation to prepare the
financial statements on a going concern basis was appropriate.
The Committee reviewed the assessment of the principal risks facing
the Group, the stress test scenarios and possible mitigating actions
over the three-year viability statement period. Based on this review,
the Committee approved the disclosure included under the long-term
viability statement.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
97
Internal audit
The Audit and Risk Committee has oversight
responsibilities for the internal audit function.
During the year, the Committee considered
the appropriateness of the appointment of
an internal auditor and recommended for
Board approval the appointment of an internal
auditor in 2023. The Board approved the
recommendation.
The Committee undertakes detailed analysis
of higher-risk internal procedures and
controls on a periodic basis, recent examples
being cyber security, payments, inventory
and supply chain management. In addition,
specialist advisers are engaged, where
necessary, to review key controls in high-risk
areas to ensure that internal assurance is
achieved. The lack of an internal audit function
has not had any impact on the work of the
external auditor.
External auditor
The Audit and Risk Committee is responsible
for reviewing the effectiveness of the external
audit process taking into consideration
relevant professional and regulatory
requirements and the Group’s policy on
external audit, including ensuring that the
auditor remains objective and independent.
To fulfil its responsibility regarding
independence, the Committee considered:
• the external auditor’s plan for the current
year, noting the role of the audit partner
who signs the audit report and who, in
accordance with professional rules, has not
held office for more than five years, and any
changes in the key audit staff;
• the overall extent of non-audit services
provided by the external auditor, in
addition to its case-by-case approval of
the provision of non-audit services by the
external auditor;
• the external auditor’s written confirmation
of independence to the Audit and Risk
Committee; and
• the past service of the external auditor,
which was first appointed in 2006.
Audit tendering
In light of applicable law and regulation, the
Group’s external audit was tendered in 2022,
resulting in a decision to appoint BDO LLP
as the Group’s auditor from 2023. BDO has
shadowed Deloitte through the audit for the
financial year ending 31 December 2022.
With respect to the existing auditor, Deloitte
LLP, since their initial appointment in 2006,
there have been four rotations of the senior
statutory auditor in line with the required
rotation timetable, the last rotation being after
completion of the audit for the year ended
31 December 2020.
Effectiveness of external auditor
To assess the effectiveness of the external
audit process, the auditor is asked on an
annual basis to describe the steps that
they have taken to ensure objectivity and
independence, including where the auditor
provides non-audit services. Gulf Keystone
monitors the auditor’s performance,
behaviour and effectiveness during the
exercise of their duties, which informs
the Committee’s decision to recommend
reappointment on an annual basis.
The external auditor’s fulfilment of the agreed
audit plan and any variations from the plan
and the robustness and perceptiveness
of the auditor in its assessment of the key
accounting and audit judgements are also
considered when making a judgement
on auditor effectiveness. The Committee
monitored the efficiency of the audit process
and the performance of the auditor and was
satisfied that the audit process was effective.
Non-audit services
As a safeguard to help to avoid the objectivity
and independence of the external auditor
becoming compromised, the Committee
has a formal policy governing the supply of
non-audit services by the external auditor.
The Group engages external advisers to
provide non-audit services based on cost
and the skills and experience required for the
work. The Group may engage the external
auditor to provide a limited range of non-audit
services where this is the most effective and
efficient way of procuring such services,
provided that the Group is satisfied that the
auditor’s objectivity and independence will
not be compromised as a result.
In 2022, Deloitte LLP provided the following
non-audit services to the Group:
•
interim review of the half-year results;
• advisory services relating to ESG and
TCFD; and
• other assurance services, including
in respect of ESEF tagging.
In 2021, Deloitte LLP was appointed to
advise the Company on its ESG strategy
and implementation. Deloitte was appointed
following a formal tender process and in
accordance with all procedures in place to
preserve auditor independence.
A breakdown of the fees paid to the external
auditor in respect of audit and non-audit
work is included in note 4 to the consolidated
financial statements. In 2021, the Company
implemented a Non-audit Services Policy
which stipulates a cap limiting non-audit fees
to 70% of the average prior three years of audit
fees. Taking 2022, this cap was exceeded
largely due to Deloitte being engaged for
the half-year results review (which is not
considered an audit fee) and with respect
to ESG market developments and work in
relation to TCFD and ESEF, where Deloitte’s
experience and credentials were felt to be of
particular value to the Company. However,
non-audit services fees were less than
audit fees for the year and the Committee is
satisfied that the non-audit services have not
impacted the independence of Deloitte, who
will be replaced by BDO in 2023. In making
this assessment, the Committee considered
the nature of the non-audit work involved and
the compliance processes in place at Deloitte
to ensure audit independence. Going forward,
the Company aims to ensure that the 70% cap
is not breached.
The Committee considered the potential
threats that engagement of Deloitte LLP
to perform non-audit services may pose to
auditor independence. Deloitte LLP ensured
that necessary safeguards were put in
place to reduce the independence threats
to an acceptable level. The Committee was
satisfied that, given the nature of the work
and the safeguards in place, the provision of
non-audit services did not undermine auditor
objectivity and independence.
Committee evaluation
In early 2023, an externally facilitated
review of the Audit and Risk Committee’s
performance and effectiveness was
completed which did not raise any substantive
issues concerning the performance of the
Committee. This was conducted alongside a
full Board and Committee evaluation.
Martin Angle
Chair of the Audit and Risk Committee
22 March 2023
Governance 98
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Safety and Sustainability Committee report
David Thomas
Chair of the Safety and
Sustainability Committee
• analysis of market and industry trends
related to climate change; and
• HSE operational planning for key field
activities (for example, rig operations).
Role
The role of the Safety and Sustainability
Committee is to monitor the development
and implementation of the Group’s health and
safety, environmental, social responsibility
and ESG governance policies and to ensure
that appropriate management systems and
processes are in place to minimise any HSE
risks associated with the Group’s activities,
including the impact of the Group’s operations
on GHG emissions and local communities.
The Committee’s activities form an integral
part of the Group’s HSE governance process,
which includes the following key elements:
Board and management site visits, external
and internal audits, third-party inspections,
Permit to Work audits, regulatory inspections,
safety walkabouts and ensuring visible safety
leadership. The Group has robust governance
processes in place to ensure that the
appropriate framework exists to ensure that
all matters of an ESG nature are appropriately
considered and actioned.
2022 membership and meeting
attendance
Safety and
Member Sustainability
since Committee
David Thomas
8 Dec 2016
Jaap Huijskes
6 Dec 2017
Kimberley Wood 11 Oct 2018
Jon Harris
26 Jan 2021
John Hulme(1)
23 Jun 2022
4/4
4/4
4/4
4/4
2/2
(1) John Hulme, COO, is a member of the
Executive Committee but not a Board
member.
The Safety and Sustainability Committee has
written terms of reference which were last
updated in March 2022. A copy of the terms
of reference is available on the Company’s
website. In accordance with its terms of
reference, the Committee is authorised to:
• oversee the development of policies and
guidelines for the management of all risks
relating to safety, sustainability and ESG,
incorporating health, safety, security and
environmental and social risks within the
Group’s operations;
Committee activities during 2022
The Committee seeks to meet formally
four times a year. During 2022 it met on four
occasions (in March, June, October and
November). The Committee has a number of
standing agenda items which are considered
at each meeting and will supplement these
with specific agenda items as necessary.
In 2022, the topics considered included:
• HSE performance and statistics, including
a review of any incidents which have
occurred and lessons learned;
• ESG strategy plan formulation and
implementation, including production of the
Group’s Sustainability report;
• progress for the year against the Health,
Safety and Environmental (“HSE”)
improvement plan;
• security review and risk assessment;
• the formulation, approval and delivery of
the Group’s annual CSR plan and initiatives,
including review of key initiatives;
• the Group’s strategy on the reduction of
GHG emissions, including the formulation
of specific targets relating thereto;
• progress against GKP’s target to
achieve full consistency with TCFD
recommendations in fiscal year 2022;
• review of the Group’s GHG emissions
data to improve the accuracy and scope
of reporting, including the publication of
scope 3 emissions data and independent
verification of the Group’s 2022 GHG
emissions;
Gulf Keystone Petroleum Limited Annual report and accounts 2022
99
• oversee the quality of safety and ESG
(incorporating health, safety, security,
environment and corporate social
responsibility) policies, processes,
governance, management and the
methods to create appropriate behaviours
and decisions, including relevant key
performance indicators;
• review health and safety performance
to assess the effectiveness of health
and safety programmes and to make
recommendations for improvement,
where appropriate;
• review, and if appropriate approve, specific
corporate social responsibility projects
within the agreed budgeted level approved
by the Board;
• evaluate the effectiveness of the Group’s
policies and systems for identifying
and managing health, safety, security,
environmental and social risks within the
Group’s operations;
• assess the policies and systems within
the Group for ensuring compliance
with applicable legal and regulatory
requirements;
• assess the performance of the Group
with regard to the impact of health, safety,
security, environmental and social decisions
and impact of actions upon employees,
communities and other stakeholders.
It shall also assess the impact of such
decisions and actions on the reputation of
the Group and make recommendations to
the Board on areas for improvement;
• working in conjunction with the Technical
Committee, the Board of Directors, and
management as appropriate, specifically
consider the level of greenhouse gas
emissions (“GHG”) generated by the
Company, and review challenging and
achievable targets to reduce these;
• on behalf of the Board, receive reports from
management concerning all fatalities and
serious accidents within the Group and
actions taken by management as a result of
such fatalities or serious accidents;
• evaluate and oversee, on behalf of the
Board, the quality and integrity of any
reporting to external stakeholders
concerning safety, sustainability and
ESG issues;
• review the results of any independent
audits of the Group’s performance in regard
to safety, sustainability or ESG matters,
review any strategies and action plans
developed by management in response to
issues raised and, where appropriate, make
recommendations to the Board concerning
the same; and
• consider the position of the Group with
respect to international best practice
for safety, sustainability and ESG and
emerging legal requirements including
relevant corporate governance
developments.
In 2021 the Company engaged Deloitte to act
as the Company’s ESG advisers. Working
with Deloitte, the Company developed a
detailed ESG strategy roadmap which will be
implemented as the Company strives to meet
its emission reduction targets.
Composition
As at 31 December 2022, the Safety and
Sustainability Committee comprised three
of the independent Non-Executive Directors,
David Thomas (Chair), Jaap Huijskes and
Kimberley Wood, the CEO, Jon Harris, and
the COO, John Hulme. John Hulme was
appointed to the Committee on 23 June
2022. The Company’s Head of HSE and
Sustainability, Patrick Bersebach, the CSR
Manager, Sirwan Dara, and the Security
Manager, Serdar Abdullah, also attend
meetings, along with other management and
staff members as required. Alasdair Robinson
acts as Secretary to the Committee.
Governance
The Company endeavours to ensure that
no harm comes to people as a result of
its operations and that any effect on the
environment is minimised. It also looks to
have a beneficial long-term impact on the
communities located in the vicinity of the
Shaikan Field. The Group aims to ensure that
all employees and contractors understand
that working safely is the absolute priority and
that they are responsible for their own safety
and the safety of those around them.
The importance of these areas to the Group
is demonstrated by the priority given to them
at all levels in the organisation, from the daily
toolbox talks in the Shaikan Field through
to the regular weekly senior management
meetings, and Safety and Sustainability
Committee and Board meetings. At Board
meetings, a formal report is provided on these
matters to the Directors by the COO and the
Safety and Sustainability Committee Chair.
Sustainability
Recognising the importance of sustainability
to both society and business organisations,
the Company has included a detailed
Sustainability report in the annual report and
accounts; please refer to page 32 to 51.
This sets out the Company’s culture as it relates
to sustainability issues, the management
processes which it has in place, and focuses
on a number of the environmental and social
initiatives which have been launched and
implemented over the past few years. In
addition, the report includes key environmental
and safety performance statistics.
Health and safety
During 2022, the Committee monitored and
supported the Company’s 2022 HSE Action
Plan implementation and was pleased to
see an overall achievement of 98% of plan
objectives during the year. The Committee
was encouraged by the level of incident or
potential incident reporting which occurred
during the year and the open reporting culture
which has continued to be developed in
the organisation. Unfortunately, there was
one Lost Time Incident in early 2023; a full
review is being undertaken and lessons
learned embedded in the Company’s culture
and processes. The Company also held
emergency response simulation exercises
during the year.
Security
The security situation in Kurdistan remained
stable during the year, enabling staff travel
patterns and field operations to continue, with
use of the Company’s COVID-19 and standard
security precautions. The Board and the
Committee keep the security situation under
constant review through specialist advice
and local security experts. The Company
has response plans in place which can be
activated immediately if required.
Environment
During 2022, the Company took a proactive
role in the implementation of a number
of specific initiatives to minimise any
environmental impact from the Company’s
operations. These are described more fully
in the Sustainability report.
Corporate social responsibility
Since the formal CSR programme was
initiated in 2017, the Company has continued
to progress several social initiatives,
with a specific focus on sustainability.
These are also more fully described in the
Sustainability report.
David Thomas
Chair of the Safety and Sustainability
Committee
22 March 2023
Governance 100
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Technical Committee report
David Thomas
Chair of the Technical Committee
2022 membership and meeting attendance
David Thomas
Jaap Huijskes
Jon Harris
Gabriel Papineau-Legris(2)
John Hulme(1, 2)
Member
since
8 Dec 2016
6 Dec 2017
26 Jan 2021
8 Dec 2016
23 Jun 2022
Technical
Committee
3/3
3/3
3/3
3/3
1/1
(1) Appointed to the Committee on 23 June 2022.
(2) Gabriel Papineau-Legris (CCO) and John Hulme (COO) are both members of the Executive
Committee but are not Board members.
Committee activities during 2022
The Committee met three times in 2022.
In addition to standing agenda items, the
following key matters were discussed:
• the Company’s Field Development Plan
(“FDP”) and its submission in draft form to
the Ministry of Natural Resources (“MNR”);
• production planning and forecasting
(including 2023 production guidance);
• produced gas management strategy,
including the Gas Management Plan as
contained in the FDP;
• production enhancement initiatives
(including ESP installation programmes);
• drilling strategy and progress;
• operational risk reviews;
• well workover options; and
• Shaikan subsurface re-mapping and
re-modelling project.
In March 2023, the Company announced
that an updated Competent Person’s Report
(“CPR”) had been completed by its independent
reserves auditor, ERC Equipoise. The updated
CPR confirmed that the gross 1P, 2P+2C
reserves and resources volumes of the Shaikan
Field were in line with the previous (2020) CPR,
after adjusting for production over the period.
In summary, the results of the CPR were as
follows:
• gross 1P reserves of 199 MMstb;
• gross 2P reserves of 506 MMstb; and
• gross 2P reserves + 2C contingent
resources of 817 MMstb.
Full details of the Shaikan Field reserves and
resources are set out on page 16.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
101
Role
The Technical Committee was established
in late 2016 to provide support and guidance
for the Shaikan Field development planning
and project execution activities and has the
following specific objectives to:
• provide assurance that development plans
are in line with the Company’s strategy and
have been optimised in the context of the
current and forecast funding position;
• review and approve the Shaikan Field
reserves and resources estimates and
revisions;
• ensure that the Company has the
appropriate resources and project
management systems in place to
successfully execute the development
projects on time and within budget;
• provide the Board with assurance that the
key operational and project execution risks
have been identified and that the required
risk management processes and mitigation
measures are in place;
• provide a detailed review of the Company’s
FDP prior to its submission to the MNR,
and to report to and advise the Board
accordingly; and
• review and recommend for executive
approval any information relating to the
Shaikan FDP and reserves and resources
estimates for public release.
2022 membership and meeting
attendance
The members of the Committee are: David
Thomas (Committee Chair, independent
Non-Executive Director), Jaap Huijskes
(Non-Executive Chairman), Jon Harris
(CEO), John Hulme (COO) and Gabriel
Papineau-Legris (CCO).
The Committee is supported in its activities by
key members of the London-based technical,
commercial and finance teams and by the
Erbil-based projects and operations teams.
Members of these teams are regularly invited
to participate in Committee meetings to
provide input in relation to the Committee’s
deliberations.
Generally, the Committee plans to meet on
a quarterly basis, but adjusts the meeting
timings to coincide with key decision points
within the project development schedule or
the release of significant new technical or
reserves-related information.
David Thomas
Chair of the Technical Committee
22 March 2023
Governance 102
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report
Kimberley Wood
Chair of the Remuneration Committee
Matters discussed by the
Remuneration Committee in 2022
The Committee held five Committee meetings
in 2022 and met on an informal basis to
discuss the following remuneration matters:
• reviewed and agreed 2021 bonus
performance outcomes for executives and
senior management and resulting bonus
pay-outs;
• reviewed the Remuneration Policy and
engaged with shareholders on areas of
change ahead of the 2022 AGM;
• reviewed and approved executive and
senior management remuneration
changes ahead of the 2022 Remuneration
Policy vote;
2022 membership and meeting
attendance
Member Remuneration
Committee
since
Kimberley Wood
(Chair)
12 Oct 2018
5/5
5/5
5/5
• approved bonus KPIs for 2022;
• approved 2022 LTIP awards to all eligible
participants and associated performance
targets;
• reviewed and approved the draft Directors’
Martin Angle
16 Jul 2018
remuneration report; and
• reviewed and agreed salary and bonus
review for the wider workforce, including
how to help staff most impacted by cost of
living increases.
David Thomas
8 Dec 2016
Gulf Keystone Petroleum Limited Annual report and accounts 2022
103
Part one: Annual Statement
from the Chair of the
Committee
Dear Shareholder,
On behalf of the Remuneration Committee,
I am pleased to present the Directors’
remuneration report for the year ended
31 December 2022. The Remuneration
Committee and I were delighted to receive
support in excess of 99% for the Directors’
Remuneration Policy and the Annual Report
on Remuneration at the AGM in June 2022.
During 2022 we were primarily focused on
implementing the new policy.
The work of the Remuneration Committee in
2022 was conducted against a backdrop of
continued strong recovery from the impact
of the COVID-19 pandemic and an upturn in
oil prices, whilst ensuring we supported our
employees most impacted by cost of living
pressures. The Remuneration Committee set
robust and challenging targets for the annual
bonus scheme and ensured the right policies
and practices were in place to attract, retain
and motivate all employees.
Performance and implementation
of the Remuneration Policy
in 2022
Annual bonus
Based on the Remuneration Committee’s
assessment of GKP and individual
performance in 2022, the bonus awarded
to the CEO was 74.9% of maximum (93.6%
of base salary) and the CFO was awarded
72.4% of maximum (72.4% of base salary).
30% of the annual bonus is to be deferred
in shares for three years after award date.
These payments reflect the attainment of
personal objectives combined with Company
performance as measured by the corporate
KPIs. Further details can be found on page 115
of the Directors’ remuneration report.
Long-term incentives
The final assessment and vesting of Gulf
Keystone’s 2020 LTIP award will take place
in late April 2023. All employees participate in
the plan. The award is currently expected to
vest at 88.2% of maximum, which, assuming a
share value of £2.0698, is estimated to deliver
a value of £2,144,891 for the CFO, including
dividend equivalents worth £804,557
which will be awarded in shares. The actual
vesting amount will be disclosed via an RNS
announcement and in the 2023 annual report.
As the CEO joined GKP in 2021, he is not
entitled to any awards from the 2020 LTIP.
The Committee is conscious that this is a
significant sum and has carefully considered
whether making adjustments would be
appropriate and believes this is not warranted
for the following reasons:
• the 2020 LTIP is an all-employee plan, and
any adjustment would unfairly impact the
wider workforce while adjusting only for
certain employees would be inconsistent
and unfair;
• GKP’s market value is influenced by
commodity prices. Prevailing commodity
prices at the point LTIPs are granted
therefore impact the number of shares
awarded. This volatility means there will
be years where a higher number of shares
are awarded due to lower oil prices but
other years when the number of shares
will be lower due to elevated oil prices.
This variability is inherent in the business
model and will sometimes benefit and
sometimes penalise participants; and
• Company performance has been
strong since the award of the 2020 LTIP
including significant share price growth,
sector-leading dividends in 2022 and
strong relative TSR performance (currently
tracking to 67th percentile of peer group
and well above index performance).
However, following a shareholder
consultation or should there be any material
change in performance and/or expected
outcomes between now and the final vesting,
the Committee may decide the exercise of
discretion is necessary.
The exercise of reasonable discretion has
been a feature of GKP’s approach in recent
years where the formulaic outcome does not
align with the overall shareholder experience
and this remains unchanged – for example,
zero bonuses were awarded to Executive
Directors for 2020 despite the achievement
of important operational and financial targets
and strong individual contributions.
The CEO and CFO received conditional
awards of 339,768 and 210,811 options
respectively over shares (equivalent to
200% and 150% of salary) on 1 April 2022.
The awards are subject to both absolute
and relative total shareholder return (“TSR”)
targets being met, each measure having a
50% weighting. Again, the Remuneration
Committee will have the discretion to review
vesting outcomes to ensure a fair reflection of
performance.
The former CEO and former CFO participated
in the VCP, for which they received an award in
December 2016. In May 2022, they received
final awards of 1,884,798 and 1,623,828
options respectively. The incumbent CEO and
CFO are not entitled to participate in the VCP,
which has now been terminated.
Instances of the exercise of discretion
by the Remuneration Committee
No discretion was exercised by the
Remuneration Committee outside the normal
Remuneration Policy guidelines.
Remuneration across the workforce
GKP fosters an inclusive culture across the
whole workforce which is reflected in our
Remuneration Policy. Base salaries for all
employees are benchmarked on a regular
basis and targeted at median. The annual
bonus plan is open to all employees, the
outcome of which is linked to both corporate
and individual targets. The corporate targets
are the same for all who participate. In
addition, all permanent employees working
for the Company at the time of grant received
an award in 2022 under the 2014 LTIP which
aligns their interests with the long-term
success of GKP and to the structure of
rewards available to Executive Directors.
The Committee and Board are given regular
briefings on the pay, incentive and benefit
arrangements for the wider workforce. The
Board also regularly engages with employees
through briefing sessions and town hall
meetings, gaining valuable feedback directly
from employees, as well as receiving updates
from the Chief HR Officer who attends all
Committee meetings by invitation.
Governance 104
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
2023 AGM
At the 2023 AGM, our Directors’ remuneration
report (pages 105 to 110) will be the subject of
an advisory vote, in accordance with the 2013
Regulations.
The Committee believes the remuneration
outcomes for 2022 reflect an appropriate
outcome taking into account the global
context and the shareholder experience
during this period. We hope and trust
that shareholders will recognise this as
a continuation of our strategy for reward
which fairly reflects the performance of
the Company. Finally, on behalf of the
Remuneration Committee, I would like to
thank all shareholders for their continued
support and hope that you will vote in favour
of the resolution contained within the report
at the AGM on 16 June 2023.
Yours sincerely,
Kimberley Wood
Chair of the Remuneration Committee
22 March 2023
Summary of remuneration for
Executive Directors in 2023
In light of the current business context
and following a detailed remuneration
benchmarking review, the Remuneration
Committee decided to award the CEO and
the CFO increases in salary of 6.8% and
6% respectively, effective January 2023.
The salary review budget for all other
employees, including senior managers, was
7% and a consistent process for determining
increases applies across the workforce.
No increases were made to their annual
bonus and LTIP entitlements.
Both the CEO and CFO will be eligible for
a 2023 bonus. The Committee will review
the Company’s achievements, KPIs and
performance targets and publish these in
the 2023 Directors’ remuneration report.
The 2023 bonus measures incorporate
targets on safety and sustainability (including
environment and emissions-related targets);
value creation (covering shareholder value,
project delivery and production targets);
financial and operational achievements; and
people, culture and values initiatives. Further
information is set out on page 118 of
the Directors’ remuneration report.
The CEO and CFO are entitled to participate
in the LTIP where performance-based shares
are granted up to a maximum of 200% and
150% of salary, respectively, in line with policy.
The 2023 LTIP award will have performance
conditions based on absolute and relative
TSR. The Committee is considering
incorporating an ESG metric in 2024 that will
make up no more than 20% of the total award.
Further information is set out on page 118 of
the Directors’ remuneration report.
Fees for the Chair and Non-Executive
Directors in 2023
After a thorough review of Chair and
Non-Executive Director fees, the Chair
and Non-Executive Director fees have been
increased from £160,000 to £175,000
and £60,000 to £64,000 respectively from
January 2023. These fees are still below
their pre-2021 levels.
Basis of preparation of the report
As GKP is not incorporated in the UK, it is
not subject to UK company law or the UK
Corporate Governance Code. However, the
Company’s Byelaws require it to comply with
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (the “2013
Regulations”). The Directors’ remuneration
report has been prepared in accordance with
such 2013 Regulations as amended.
As a responsible corporate citizen, GKP
is committed to following best practice,
maintaining high corporate governance
standards and the principles enshrined in the
UK Corporate Governance Code (the “Code”)
which are taken into account to the extent they
are considered appropriate for the Company.
As GKP only has 28 employees in the UK,
not all elements of the Code or certain 2018
changes to the 2013 Regulations, including
the CEO pay ratio, are relevant or applicable.
As noted above, the Committee has regard to
wider workforce reward but considers that a
ratio calculation would not be meaningful with
such a small UK workforce.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
105
Part two: Directors’
Remuneration Policy
Introduction
Part two provides an overview of
the Directors’ Remuneration Policy.
It describes the elements of remuneration
and summarises the approach the
Remuneration Committee will adopt in certain
circumstances, such as the exercise of
discretion, the recruitment of new Directors
and the making of any payments for loss
of office.
Purpose and role of the
Remuneration Committee
The Remuneration Committee determines
and agrees with the Board the overall
Remuneration Policy for the Executive
Directors and Executive Committee
members. Within the terms of the agreed
policy, key responsibilities of the Committee
include:
• determining and agreeing with the Board
the framework and broad policy for the
remuneration of the Company’s Executive
Directors and setting remuneration for the
Non-Executive Chairman of the Board,
the Executive Directors and the Executive
Committee (being those individuals
considered to be Persons Discharging
Managerial Responsibilities (“PDMR”);
• when setting the Remuneration
Policy, reviewing and having regard to
remuneration and related policies across
the Group and the wider workforce,
aligning incentives and rewards with
culture and the overall strategy of the
Company. When conducting its last major
review of the Remuneration Policy, the
Committee took into account simplicity,
clarity, risk management, predictability and
proportionality, as well as alignment
to culture, as part of the process;
• reviewing the design of all share incentive
plans for approval by the Board and
shareholders. For any such plans,
determining each year whether awards will
be made, and if so, the overall amount of
such awards, the individual awards to the
Executive Directors and members of the
Executive Committee and the performance
targets to be used;
• agreeing pension arrangements, service
agreements and termination payments for
Executive Directors and members of the
Executive Committee and ensuring that
any termination payments are fair to the
individual and the Company; and
• overseeing any major changes in employee
benefits structures throughout the
Company and/or the Group and giving
advice on any such changes.
The Remuneration Committee also reviews
and approves overall remuneration levels for
employees below the level of the Executive
Committee but does not set individual
remuneration levels for such individuals.
This oversight role allows the Committee
to consider pay policies and employment
conditions throughout the Company when
designing packages for the Executive
Directors and other key employees, and the
alignment of incentives and rewards with
culture. The Committee considers the general
level of increases applied to basic pay across
the Company when reviewing Executive
Directors’ base salaries.
The Remuneration Committee operates
within written terms of reference agreed by
the Board. These are reviewed periodically
to ensure that the Committee remains up to
date with best practices appropriate to GKP,
its strategy and the business and regulatory
environment in which it operates. Terms of
reference are in place and reviewed annually,
the latest version being in March 2023.
They are available on the Company’s website.
Governance 106
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
Remuneration Policy table
The Company’s Directors’ Remuneration Policy is described in the following table.
Remuneration
element
Link to
strategy
Base salary
Essential to
attract and retain
key executives.
Operation
Opportunity
Reviewed annually based on:
• role, experience and individual
performance;
• pay awards elsewhere in the
Group;
• external market; and
• general economic environment.
Policy is to benchmark
to the relevant market
median.
Normally, salary
increases for Executive
Directors will be in
line with the average
employee increase.
Benefits
Helps attract
and retain key
executives.
Directors may be entitled to a
car allowance, private medical
insurance, death in service benefit
and income protection in line with
the wider workforce.
Benefit levels reflect
those typically available
to senior managers
within GKP.
Pension
Helps executives
provide for
retirement and
aids retention.
Up to 10% of salary; may be
provided as a cash allowance.
Pension allowances are not
included in base salary for annual
bonus or other executive rewards.
10% of base salary for
Executive Directors,
aligned to rates
applicable to the UK
workforce.
Annual bonus
Rewards
achievement
of annual key
performance
indicators.
Targets and weightings are set
annually; performance is measured
over a single year.
Bonus awards are determined
after the year end based on
achievement of targets.
Clawback provisions apply.
Maximum bonus
opportunity is 125%
of annual salary for
the CEO and 100%
for other Executive
Directors.
Remuneration
Committee discretion
The Committee retains
discretion to:
• select the appropriate
•
market comparator group;
and
increase salaries above the
general employee average;
in general, this would be to
reflect significant additional
responsibilities.
If a Director is recruited
from or required to move
overseas, the Committee may
provide additional benefits
tailored to the circumstances
(e.g. relocation expenses).
If additional benefits are
introduced for the wider
workforce, the Committee
reserves the right to extend
these to Executive Directors
on equivalent terms.
The Committee may
agree with an Executive
Director that the cash
allowance will be paid into a
pension arrangement at no
additional cost.
The Committee may, in
exceptional circumstances,
change performance
measures and targets and
their respective weightings
part way through a
performance year, if there
is a significant event which
causes the Committee to
believe the original measures,
weightings and targets are no
longer appropriate.
Discretion may also be
exercised if the Committee
believes the bonus outcome
is not a fair and accurate
reflection of business
performance.
Safety is of central
importance to the business
and the Committee may
reduce bonus awards if there
is a serious safety event.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
107
Remuneration
element
Link to
strategy
Operation
Opportunity
LTIP
Incentivises
executives
to deliver key
financial targets
over the longer
term, with
particular focus
on shareholder
return.
Helps retain key
executives.
Shareholding
requirements
Aligns the
interests of
executives and
shareholders.
Awards are usually granted
annually to participants, but grants
may be made at other times, such
as on recruitment or promotion of
an executive.
Awards are in the form of nil-cost
share options, nominal-cost share
options or conditional shares. In
special circumstances they may be
cash-settled.
Awards normally vest after
three years to the extent that
performance targets can be based
on a combination of share price,
financial, operational and strategic
metrics as determined by the
Committee. At least 60% of the
award will be based on absolute
and/or relative TSR.
A payment equal to the value
of dividends which would have
accrued on vested awards may
be made following the release of
awards to participants, either in
the form of cash or as additional
shares.
It is the Company’s practice to
make awards under an LTIP to all
employees of the Company as
appropriate in a range of values
based on seniority.
Specific malus and clawback
provisions apply (see page 108).
For LTIPs granted from 2023, once
vested, the shares received (net
of tax) must be held for at least a
two-year period before they can be
sold (subject to the shareholding
requirements).
Formal requirements apply to
Executive Directors. Participation
in long-term incentives may be
scaled back or withheld if the
requirements are not met or
maintained.
When eligible, the
maximum value of the
shares subject to award
to the CEO is 200% of
annual salary and for
the CFO it is 150% of
salary.
At threshold
performance up to
30% of the award vests.
The threshold amount
has been reduced to
25% for LTIPs granted
from 2023.
At least 200% of salary
holding required for all
Executive Directors.
Post-exit: Executive
Directors are required
to retain the lower of
actual shares held and
shares equal to 200%
of salary for two years
post-exit in respect
of shares which vest
related to grants of
LTIPs from 2023.
Remuneration
Committee discretion
The Committee may, in
exceptional circumstances,
change the performance
measures and targets and
their respective weightings
part way through a
performance period, if there
is a significant event which
causes the Committee to
believe the original measures,
weightings and targets are no
longer appropriate. The new
measures and targets will be
no more or less difficult than
those they replace.
Discretion may also be
exercised if the Committee
believes the LTIP outcome
is not a fair and accurate
reflection of business
performance.
Safety is of central
importance to the business
and the Committee may
reduce or eliminate LTIP
awards if there is a serious
safety event.
The Committee also has
discretion in determining
when awards are granted, the
form of the award and those
eligible within the constraints
of the LTIP rules.
The Committee has discretion
to change the shareholding
requirements – in particular
where compassionate
circumstances apply.
Governance 108
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
Malus and clawback
These provisions allow the Committee
in certain circumstances (such as gross
misconduct, a material misstatement of the
Group financial statements or decisions
taken outside of the Group’s risk appetite)
the discretion to:
• reduce bonus pay-outs;
• cancel entitlement of bonus;
• prevent or reduce vesting of the LTIP;
and/or
• allow the Company to claim back up to
100% of an award which has vested/
been paid.
Remuneration scenarios for
Executive Directors based
on policy
The charts below provide an illustration of the
potential future reward opportunities for the
CEO and CFO, and the potential split between
the different elements of remuneration
under four different performance scenarios:
“Minimum”, “On-target”, “Maximum” and
“Maximum (including 50% share price
appreciation on long-term incentive awards)”.
Potential reward opportunities are based
on GKP’s Remuneration Policy, applied
to the 2023 base salaries and pension
opportunities. The annual bonus and LTIP are
based on the maximum opportunities as set
out under the Remuneration Policy. Please
note the LTIP awards granted in a year do
not normally vest until the third anniversary
of the date of grant and the projected values
in the second and third scenarios are based
on the face value at award rather than vesting
(i.e. the scenarios exclude the impact of any
share price movement over the period).
The exception to this is the final scenario
which, in line with the requirements of the
Companies (Miscellaneous Reporting)
Regulations 2018, illustrates the maximum
outcome assuming 50% share price
appreciation for the purpose of LTIP value.
The “Minimum” scenario reflects base salary,
pension and benefits (i.e. fixed remuneration)
which are the only elements of the executives’
remuneration packages not linked to
performance.
The “On-target” scenario reflects fixed
remuneration as above, plus annual bonus
pay-out of 60% of maximum (75% of salary
for the CEO and 60% of salary for the CFO)
and LTIP at 50% of maximum award (100%
and 75% of salary for the CEO and CFO
respectively).
The “Maximum” scenario is shown on two
bases: excluding and including the impact
of share price appreciation on the value of
LTIP outcomes. In both cases, the scenario
includes fixed remuneration and full pay-out
of all incentives, with the final scenario also
including the impact of a 50% increase in
GKP’s share price on the value of the LTIP.
CEO
Minimum
100%
£551
On-target
40%
26%
34%
£1,374
Fixed
Bonus
LTIP
Maximum
27%
Maximum + 50% share price growth
22%
28%
23%
45%
£2,079
55%
£2,549
CFO
0
500
1,000
1,500
£’000
2,000
2,500
3,000
Minimum
100%
£463
On-target
47%
24%
29%
£984
Maximum
32%
27%
41%
£1,428
Maximum + 50% share price growth
27%
22%
51%
£1,717
0
500
1,000
1,500
£’000
2,000
2,500
3,000
Gulf Keystone Petroleum Limited Annual report and accounts 2022
109
Reasonable expenses incurred by
the Non-Executive Chairman and the
Non-Executive Directors in the performance
of their duties (including travel and
accommodation benefits) may be reimbursed
or paid for directly by the Company,
as appropriate.
Each Non-Executive Director receives a
basic fee. Additional fees are paid to the
Non-Executive Chairman of the Board and
the Chairs of the Board Committees. In the
event that the Board requires the formation
of an additional Board Committee, fees for
the Chair (and, where relevant, membership)
of such Committee will be determined by the
Board at the time. Non-Executive Directors
do not participate in any of the Company’s
benefits or incentive plans.
Inspection of documents and
re-election of Directors
Directors’ service contracts and appointment
letters will be available for inspection prior to
and during the 2023 AGM.
All Directors are required to stand for
re-election annually in accordance with the
Company’s Byelaws.
Executive Directors’ recruitment
policy
Remuneration packages for future Executive
Directors will be aligned to the Policy
described, including a maximum annual
bonus opportunity of 125% of salary for
the CEO and 100% of salary for any other
Executive Director and an annual LTIP grant
of up to 200% of salary for the CEO and
150% of salary for the CFO or any other
Executive Director. Relocation packages
are assessed on their individual merits.
It is not the Company’s policy ordinarily
to buy out executives from pre-existing
incentive arrangements, but the Committee
will consider compensating a new Executive
Director for the loss of incentives awarded
by a previous employer, if it believes such
compensation is warranted taking into
account the terms of the award forfeited.
We seek to avoid paying more than
necessary to secure a candidate and will
have regard to current Remuneration Policy,
shareholder guidance and market practice
when formulating remuneration for a new
Executive Director.
Where an existing employee is promoted
to the Board, the Policy described above
will apply from the date of promotion, and
there will be no retrospective application.
Existing remuneration, including incentives,
will continue, even if inconsistent with the
above Policy, until such time as they expire
or vest. Pension contributions from the date
of promotion will be aligned with chat of the
wider workforce.
Terms of the Executive Directors’
service contracts
Executive Directors are engaged on
rolling service contracts, which provide for
12 months’ written notice of termination from
the CEO and six months’ notice from other
Executive Directors, with the same notice
periods required from the Company.
In exceptional circumstances, the Committee
may agree to a longer notice period initially,
reducing to 12 or six months, as appropriate,
after one year.
Non-Executive Directors’ letters
of appointment
Non-Executive Directors are engaged
by letters of appointment terminable on
one month’s written notice from either the
individual or the Company.
The Non-Executive Chairman and
Non-Executive Directors receive an annual
fee paid in monthly instalments. The fee for
the Non-Executive Chairman is set by the
Remuneration Committee and the fees for
the Non-Executive Directors are approved
by the Board, on the recommendation of the
Non-Executive Chairman and Executive
Directors.
Fees are set at a level required to attract
and retain individuals with the necessary
experience to advise and assist with
establishing the Company’s strategy
and monitoring its progress towards the
successful implementation of that strategy.
Fees are reviewed regularly to ensure they
keep pace with market practice and the
demands of the role.
Governance 110
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
Termination payment policy
Any compensation payment made to an Executive Director for termination of employment will be determined with reference to the terms of the
individual’s service agreement and the rules of any incentive plan in which the individual is a participant. Those rules will differentiate between
“good” and “bad” leavers. The Company’s default policy is summarised in the table below, with Committee discretion to determine an alternative
treatment as necessary:
Service contracts do not contain liquidated damages clauses. There is no provision in an Executive Director’s service agreement providing for
compensation for loss of office or employment that occurs because of a change of control. However, on a change in control the following will
normally happen:
• the cash element of any bonus will be paid, at the discretion of the Remuneration Committee, on the date of the change of control. The amount
paid will be pro-rata and based on performance to date. The deferred element of the bonus will become exercisable on a change of control and
will vest; and
• the vesting of LTIP awards will be accelerated: the number of shares that vest will be determined by the Remuneration Committee taking
account of the Company’s performance since the grant date and the proportion of the normal vesting period which has elapsed.
The Remuneration Committee reserves the right to make additional payments, where such payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim arising in
connection with the termination of an Executive Director’s office or employment.
When deciding on the amount of any payment for loss of office, the Remuneration Committee will seek to minimise the cost to the Company to the
extent permitted by the circumstances of the particular case.
Remuneration element
Policy summary
Salary and benefits
A payment equivalent to monthly salary as if the executive had continued to be employed throughout
the contractual notice period. A lump sum may be paid in lieu of notice. Benefits will cease on
termination of employment.
The Committee will determine such mitigation as it considers fair and reasonable in the individual
circumstances.
Annual bonus
The Committee may make such payment as it deems appropriate taking into account the period up to
the date on which employment ceases and the level of performance achieved up to that date.
If the individual is deemed to be a “bad” leaver (for example, if dismissed owing to misconduct),
no bonus is payable for the year in which their employment terminates.
2014 LTIP
For “good” leavers whose employment ceases owing to ill-health, the award shall vest in full on the
normal vesting date. For “good” leavers who leave owing to death, the award shall vest in full immediately.
For “good” leavers due to other reasons which are considered to justify treatment as a good leaver, the
award shall vest on the normal vesting date based on performance and pro-rated for the time served.
Awards granted to a “bad” leaver lapse on cessation of employment.
External appointments
The Executive Directors may accept external appointments with the prior approval of the Board provided that such appointments do not prejudice
the individual’s ability to fulfil their duties to the Company and the Group, as a whole. Whether any related fees are retained by the individual or
remitted to the Company is considered on a case-by-case basis.
Considerations of shareholder views
When determining remuneration, the Remuneration Committee takes into account the guidelines of representative investor bodies, proxy
advisers and shareholder views. The Committee is always open to feedback from shareholders on remuneration policy and arrangements and
updates major shareholders on any changes.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
111
Part three: Annual Report on Remuneration
Introduction
This part of the report is subject to an advisory vote at the AGM on 16 June 2023. GKP’s auditor has reported on those sections (highlighted below)
which the Regulations require to be audited.
Remuneration Committee membership during 2022
The terms of reference of the Remuneration Committee, reviewed annually, are available on the Company’s website. As of 31 December 2022, the
Remuneration Committee comprised three independent Non-Executive Directors, all of whom had served on the Committee for the full financial year:
• Kimberley Wood (Chair);
• Martin Angle; and
• David Thomas.
The members had no personal financial interest in the decisions made by the Remuneration Committee. There were no conflicts of interest arising
from cross-directorships and no involvement in the Company’s day-to-day operations.
The Chair of the Committee may ask non-Committee members to attend meetings, including the Chair, other Board members and members
of the senior management team, including the Chief Human Resources Officer. The Company Secretary, or nominee, acts as secretary to the
Committee. No individuals are involved in decisions relating to their own remuneration. Details of the Committee’s principal activities during the
year ended 31 December 2022 and attendance of Committee members is included on page 85.
Advisers
The Remuneration Committee is informed of key developments and best practice in the field of remuneration and obtains advice from
independent external consultants, when required, on individual remuneration packages and executive remuneration practices in general.
After a competitive tender process, Mercer Limited (“Mercer”) was appointed as remuneration consultant from January 2020 onwards.
Services provided to the Remuneration Committee by Mercer during 2022 included the provision of advice on the Company’s equity plans and
executive remuneration levels; corporate governance support and best practice advice to the Remuneration Committee on the drafting of the
Directors’ remuneration report; and other ad-hoc projects. Fees paid to Mercer for services provided to the Committee during the financial year
were £71,350. Mercer has no connections with the Company other than an agreement for the provision of market data for the wider workforce and
no personal relationships with individual Directors.
Mercer is a signatory to the Remuneration Consultants’ Code of Conduct (www.remunerationconsultantsgroup.com) which requires its
advice be objective and impartial.
Alignment of the Remuneration Policy to purpose and strategy
Our purpose
GKP is a responsible energy company developing natural resources for the benefit of all our stakeholders, delivering social
and economic benefits by working safely and sustainably with integrity and respect.
Strategic priorities for 2023:
Relevant incentive metrics:
Safety and sustainability
• ESG roadmap
implementation
• HSE plan
• Safety performance(1)
• Loss of containment
• People, culture, values
Read more
on page 24
Value creation
• Shareholder value
• Project delivery
• Production
Read more
on page 24
Capital discipline and cost focus
• Financial and
distribution strategy
• Operating efficiency
Read more
on page 25
Robust financial position
• Budget discipline
Read more
on page 25
(1) Safety performance figures are based on TRIFR (recordable incidents per million man-hours) applied to drilling, production and export operations.
Governance 112
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
Statement of shareholder voting
The following table shows the results of votes on the 2021 Directors’ remuneration report at the 2022 AGM held on 24 June 2022.
Directors’ remuneration report
for year to 31 December 2021
2022 Remuneration Policy
Votes for
Votes against
110,847,974
(99.11%)
110,834,274
(99.11%)
993,865
(0.89%)
993,689
(0.89%)
Single total figure of remuneration table for the year (audited)
Total votes cast
(excluding withheld)
111,841,839
Votes withheld
96,552
111,829,963
107,978
2022
Salary/fees
£’000
Pension
£’000
Benefits
£’000
Executive Directors
Jon Harris
Ian Weatherdon(1)
440
364
Non-Executive Directors
Martin Angle
Jaap Huijskes
Garrett Soden
David Thomas
Kimberley Wood
Wanda Mwaura(2)
84
160
60
80
70
39
44
36
—
—
—
—
—
—
34
39
—
—
—
—
—
—
Annual
bonus
£’000
412
263
—
—
—
—
—
—
Total
1,297
80
73
675
Other
£’000
LTIP(1)
£’000
Total
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
—
—
—
—
—
—
—
—
—
—
2,145
930
2,847
—
—
—
—
—
—
84
160
60
80
70
39
518
439
84
160
60
80
70
39
412
2,408
—
—
—
—
—
—
2,145
4,270
1,450
2,820
(1)
Ian Weatherdon’s LTIP is based on an estimate of the 2020 LTIP using a share price of £2.0698 and includes estimated dividends of £0.8 million. Final vesting will
be disclosed in the relevant RNS and updated in the 2023 annual report.
(2) Wanda Mwaura joined the Board on 1 July 2022 and her fee is denominated in USD.
2021
Salary/fees
£’000
Pension
£’000
Benefits
£’000
Executive Directors
Jon Harris
Ian Weatherdon
Jón Ferrier(1)
401
364
38
Non-Executive Directors
Martin Angle
Jaap Huijskes
Garrett Soden
David Thomas
Kimberley Wood
80
160
60
80
70
Total
1,253
40
36
6
—
—
—
—
—
82
Annual
bonus
£’000
408
295
—
—
—
—
—
—
Other(2)
£’000
LTIP(3)
£’000
Total
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
—
—
451
—
—
—
—
—
—
—
857
720
3,593
4,091
—
—
—
—
—
80
160
60
80
70
449
425
498
80
160
60
80
70
408
295
3,593
—
—
—
—
—
8
25
3
—
—
—
—
—
36
703
451
3,593
6,118
1,822
4,296
(1) Jón Ferrier left the Board effective 31 January 2021.
(2) Jón Ferrier’s payment relates to payment in lieu of notice and accrued holiday.
(3) LTIP figures represent value vesting from the VCP for Jón Ferrier.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
113
Historical CEO pay
Single figure remuneration
Bonus percentage of maximum payable
Vested LTIP awards as percentage of maximum
2017
£’000
768
50%
0%
2018
£’000
973
76%
0%
2019
£’000
824
50%
0%
2020
£’000
552
0%
0%
2021
£’000
857
81%
0%
2022
£’000
930
74.9%
0%
Percentage change in Director remuneration
The following table shows the percentage change in the remuneration of the Directors between the years ended 31 December 2020 and
31 December 2022 and the average percentage change for the remuneration in the Group as a whole excluding the CEO.
2020
2021
2022
Executive Directors
Jon Harris(1)
Ian Weatherdon(2)
Non-Executive Directors
Martin Angle
Jaap Huijskes
Garrett Soden
David Thomas
Kimberley Wood
Wanda Mwaura(3)
Group percentage
change
Salary/fees
Benefits
N/A
N/A
0%
0%
(14%)
0%
0%
N/A
N/A
N/A
0%
0%
0%
0%
0%
N/A
Annual
bonus
N/A
N/A
Salary/fees
Benefits
Annual
bonus
Salary/fees
Benefits
Annual
bonus
N/A
0%
N/A
60%
N/A
N/A
0%
0%
67%
37%
5%
(11%)
(11%)
(11%)
(14%)
(11%)
(13%)
N/A
0%
0%
0%
0%
0%
N/A
(6%)
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
6%
0%
(23%)
7%
57%
97%
9%
5%
22%
(1) Jon Harris joined the Company in January 2021.
(2) Ian Weatherdon did not receive a bonus for 2020.
(3) Wanda Mwaura joined the Board effective 1 July 2022.
Governance
114
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
TSR performance
The following charts compare the change in value of a £100 investment in the Company and in both the FTSE 250 Index and the FTSE Oil & Gas
Producers Index. The TSR performance has been assessed from 1 January 2017 due to a major repricing occurring in 2016:
Total shareholder return (“TSR”) from 1 January 2017 to 31 December 2022
Gulf Keystone
FTSE 250
FTSE UK Oil & Gas
400
300
200
100
7
1
0
2
y
r
a
u
n
a
J
1
n
o
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
0
Jan
2017
Jul
2017
Jan
2018
Jul
2018
Jan
2019
Jul
2019
Jan
2020
Jul
2020
Jan
2021
Jul
2021
Jan
2022
Jul
2022
Dec
2022
Relative importance of spend on pay
Total employee pay(1)
Profit after tax
Gross operating costs(2)
Shareholder distributions(3)
2022
$’000
2021
$’000
Percentage
change
53,642
41,724
266,094
164,597
52,344
42,965
214,789
100,000
29%
62%
22%
115%
(1) Staff costs are shown gross before amounts recharged to operations.
(2) Gross operating costs are deemed to be a fair measure of the Company’s operational expenditure and are also reported as part of the non-IFRS measure of gross
operating costs per barrel in the Company’s financial statements.
(3) Shareholder distributions comprise payment of dividends.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
115
Implementation of the Directors’ Remuneration Policy in 2022
Executive Directors’ base salary provision
The CEO received an increase in salary of 4.8% to £440,000. No increase in salary was awarded to the CFO for 2022. The salary review budget
for all other employees, including senior managers, was 4-6% of payroll for 2022.
Annual bonus plan (audited)
During 2022, GKP operated its annual executive performance bonus plan. The maximum bonus potential was 125% of base salary for the CEO
and 100% of base salary for the CFO, with performance assessed against a combination of corporate metrics (weighted 80% of total) and
individual objectives (weighted 20%).
2022 performance elements
Corporate performance
(80% of bonus)
Corporate performance elements (80% of bonus)
Individual performance
20%
Safety and sustainability
20%
Value creation
12%
Financial
26%
Production
30%
People, culture
& values 12%
The following table describes the corporate KPIs set for 2022.
Metric
Safety and sustainability
Value creation
Financial
Production
People, culture, values
Total
KPIs
Weighting
ESG
HSE improvement plan
Safety performance (TRIFR)
Shareholder value and
project delivery
Financial and distributions strategy
Budget execution
Gross production (bopd) – annual average
Maintenance
Build workforce capability,
advance diversity, equity and
inclusion and drive workforce
engagement and wellbeing
8.3%
5.8%
5.9%
12%
14%
12%
24%
6%
12%
100%
Results
Score
100%
93%
90%
50%
79%
86%
32%
97%
98%
Weighted
score
8.3%
5.4%
5.3%
6%
11.1%
10.3%
7.7%
5.8%
11.8%
71.7%
Governance
116
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
Implementation of the Directors’ Remuneration Policy in 2022 continued
Individual performance objectives (20% of bonus)
With respect to the personal element of the annual bonus for both the CEO and the CFO, the Committee considered that the successes of 2022
were substantially driven by the leadership. These successes included a great safety record with only one recordable incident despite large
increases in worked hours, progressing ESG reporting to TCFD requirements and further evaluating a number of carbon-reducing projects,
paying industry-leading dividends to shareholders and repaying the $100 million bond a year early, substantial progress on the FDP while
commencing the Phase 1 Jurassic scope with the MNR’s agreement and advancing the Gas Management Plan, safe and reliable operational and
drilling performance and, in addition, developing our Code of Business Conduct and improving our diversity. As such, a payment above the target
level but below the maximum possible was warranted.
Overall outcome
Reflecting performance, Executive Directors received the following bonus awards for 2022:
Executive
CEO
CFO
Bonus award
% of
base salary
% of
maximum
£411,840
93.60%
74.88%
£263,390
72.36%
72.36%
2020 LTIP vesting (audited)
The 2020 awards under the 2014 LTIP are due to vest on 28 April 2023; performance has been estimated up to 17 February 2023 for the
three-year performance. The 2020 award is based on relative TSR (50%) and absolute TSR (50%). A summary of the estimated performance
outcome is detailed below:
Performance measure
Weighting
Threshold performance Maximum performance
(100% vesting)
(30% vesting)
Performance outcome
Vesting outcome
Absolute TSR
Relative TSR
50%
50%
8% p.a. compound
12% p.a. compound
75.1% p.a.
Median vs.
peer group
Upper quartile
vs. peer group
Between median
and upper quartile
100%
76.5%
The overall estimated vesting of the 2020 award is 88.2%. Ian Weatherdon is estimated to receive 647,567 shares and a proportional amount in
shares for the dividends due. The actual level of vesting and any gains from increases in the share price will be disclosed in next year’s Directors’
remuneration report. As well as Mr Weatherdon, all employees participated in the plan.
No. of shares
granted in
2020
Estimated
vesting
Estimated
number of
% shares vesting
Estimated
value of
shares
vesting
£
Estimated
value of
dividends
at 124.2p
per share
£
Estimated
value
attributable
to share price
growth
£
Estimated
total
award value
£
Ian Weatherdon
733,871
88.2%
647,567
1,340,334
804,557
2,144,891
858,544
The performance period of the 2020 award ends on 28 April 2023, when the award vests. Vesting has been estimated at 88.2% based on
performance up to 17 February 2023 and values have been calculated using three month average share price of £2.0698 to 17 February 2023.
Performance is assessed using one month average returns up to the start and end of the performance period.
Pension provision for Executive Directors (audited)
In lieu of a pension provision, both the CEO and CFO received a taxable cash allowance equivalent to 10% of base salary, which is in line with the
workforce.
Benefits (audited)
Benefits received by the CEO and CFO included car allowance, private medical insurance, death in service and income protection insurance
totalling £34,258 and £39,036 respectively.
Value Creation Plan (“VCP”) awards granted/vested in 2022 (audited)
Legacy VCP awards vested for former CEO Jón Ferrier and former CFO Sami Zouari. They received awards of 1,884,798 and 1,623,828 shares
respectively. No more awards will be made under the VCP and it is now terminated.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
117
LTIP awards granted/vested in 2022 (audited)
The CEO and CFO received awards of 339,768 and 210,811 shares respectively, equivalent to 200% and 150% of salary each, on 1 April 2022.
The awards are subject to both absolute and relative total shareholder return (“TSR”) targets being met over a period of three years, each measure
having a 50% weighting.
The relative TSR peer group for the 2022 LTIP is:
Africa Oil
DNO
International Petroleum
ShaMaran Petroleum
Apache Corporation
Energean Oil & Gas
Kosmos Energy
TAQA
Capricorn Energy
(prev. Cairn)
EnQuest
Pharos Energy
Vaalco
(prev. Transglobe Energy)
Canadian Natural Resources
Genel Energy
SDX Energy
Tullow Oil
DANA Gas
Harbour Energy
No awards vested or were exercised by Executive Directors.
Other payments to past Directors and for loss of office (audited)
Legacy VCP awards vested during 2022 for former CEO Jón Ferrier and former CFO Sami Zouari. Jón Ferrier received 1,884,798 shares and cash
in lieu of dividends earned during the vesting period of £1,415,454, with Sami Zouari receiving 1,623,828 shares and cash in lieu of dividends earned
during the vesting period of £1,219,469. No more payments under the VCP will be made.
Statement of Directors’ shareholdings and share interests (audited)
Executive Directors are required to build and maintain a shareholding in the Company of at least 200% of salary within five years of appointment.
The net value of vested but unexercised share awards are included for this purpose and individuals have five years in which to acquire the
required levels. Participation in long-term incentive schemes may be scaled back or withheld if the requirements are not met or maintained.
The Remuneration Policy set out on pages 103 and 104 includes post-exit guidelines.
Directors’ shareholdings and share interests as at 31 December 2022 were as follows:
Executive Directors
Jon Harris
Ian Weatherdon
Non-Executive Directors
David Thomas
Jaap Huijskes
Martin Angle
Kimberley Wood
Garrett Soden
Shareholding
requirement
as a %
of salary
Beneficially
owned
shares
Vested but
unexercised
scheme
interests
Unvested
scheme
interests
subject to
performance
conditions(2)
Unvested
scheme
interests not
subject to
performance
conditions
Total
conditional
and
unconditional
interest in
shares
200%
200%
30,000
50,112
—
—
—
—
—
—
—
—
—
—
70,000
150,112
—
—
—
—
—
—
—
810,093
60,962
901,055
1,250,393
44,006
1,344,511
—
—
—
—
—
—
—
—
—
—
—
—
—
—
70,000
— 2,060,486
104,968(1) 2,315,566
(1) Shares equivalent to 30% of the 2022 bonus.
(2) Includes shares issued under the 2020, 2021 and 2022 LTIP awards.
Implementation of the Directors’ Remuneration Policy in 2023
Base salaries and benefits
In light of the current business context and the detailed remuneration benchmarking review, the Remuneration Committee decided to award the
CEO and the CFO increases in salary of 6.8% and 6% respectively. The salary review budget for all other employees, including senior managers,
was 7% – the level of budget was consistent across both the Company’s geographies.
Governance
118
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Remuneration Committee report continued
Implementation of the Directors’ Remuneration Policy in 2023 continued
Annual bonus
Payments under the executive annual bonus scheme will be determined based on performance against a range of KPIs.
Historically, the same Company KPIs have been used for both the executive and employee bonus plans for which all Company employees are
eligible. For 2023, we will again run the plans consistently and operate on the principle that Executive Directors will be treated no more favourably
than other employees.
The scorecard that will be used is as follows. Targets are commercially sensitive and will be disclosed in the 2023 annual report and accounts.
Category
KPI
Safety and sustainability HSE improvement, safety performance measures (TRIFR), loss of containment
Value creation
Production
Financial
ESG roadmap implementation
Shareholder value
Firm budget implementation
Annual average production (bopd)
Financial and distributions strategy
Budget discipline
Operating efficiency
People, culture, values
Build workforce capability
Embed a culture that supports engagement, wellbeing, diversity, inclusion and ethical business conduct
Weighting
20%
30%
20%
20%
10%
LTIP
Jon Harris and Ian Weatherdon will be eligible to receive an LTIP grant of 200% and 150% of base salary, respectively, which is expected to be
granted after the announcement of the 2022 results. The following three-year TSR performance conditions will be attached to the vesting of
the award.
Performance measure
Absolute TSR
Relative TSR
Weighting
50%
50%
Threshold performance
(25% vesting)
Maximum performance
(100% vesting)
8% p.a. compound
12% p.a. compound
Median vs.
peer group
Upper quartile
vs. peer group
Linear interpolation will be used for performance between threshold and maximum. There will be no payment for the relevant tranche where
performance is below threshold.
Relative TSR will be compared to that achieved over the same period against listed companies selected by the Remuneration Committee on the
basis of their relevance and comparability. The peer group is detailed below:
Africa Oil
DNO
International Petroleum
ShaMaran Petroleum
Apache Corporation
Energean Oil & Gas
Kosmos Energy
Capricorn Energy
EnQuest
Canadian Natural Resources
Genel Energy
Pharos Energy
SDX Energy
TAQA
Vaalco
Tullow Oil
DANA Gas
Harbour Energy
Any awards under the LTIP made after the 2022 AGM will be based on the Remuneration Policy set out on pages 103 and 104.
The Remuneration Committee has the discretion to review vesting outcomes to ensure a fair reflection of performance. In making this assessment,
the Committee will consider, amongst other factors, the underlying performance of the Company over the period including operational milestones,
production levels, safety, individual performance and the broader experience of stakeholders over the period.
Further details will be provided in next year’s Directors’ remuneration report.
Non-Executive Directors
After a thorough review of the Chair and Non-Executive Director fees in 2020, the Chair and Non-Executive Director fees have been increased
from January 2023 from £160,000 to £175,000 and £60,000 to £64,000 respectively. For Wanda Mwaura, whose fee is paid in US dollars, the fee
was increased from $90,000 to $96,000.
This Directors’ remuneration report was approved by the Board on 22 March 2023 and signed on its behalf by:
Kimberley Wood
Chair of the Remuneration Committee
22 March 2023
Gulf Keystone Petroleum Limited Annual report and accounts 2022
119
Directors’ report
The Directors are pleased to present their
report on the affairs of the Company, together
with the consolidated financial statements of
the Company and auditor’s report, for the year
ended 31 December 2022. A review of the
business is set out in the preceding sections
of this annual report and accounts, including
the Chairman’s statement, Chief Executive
Officer’s review, Financial review and
Operational review, which are incorporated
into this report by reference. The Corporate
governance report also forms part of
this report.
Results and dividends
The Company’s financial results for the year
ended 31 December 2022 are set out in the
consolidated financial statements.
The Company made a profit after
taxation for the year of $266.1 million
(2021: $164.6 million). During 2022, an
ordinary dividend of $25 million was paid,
in line with the Company’s ordinary dividend
policy of at least $25 million per year.
The ordinary dividend was supplemented
by the payment of three interim dividends,
totalling $140 million, and a special dividend
of $50 million. In total, $215 million of
dividends were paid to shareholders in 2022
(2021: $100 million). In 2023 to date, an interim
dividend of $25 million has been paid. A final
$25 million ordinary dividend for 2022 will
also be paid subject to approval at the AGM on
16 June 2023.
Capital structure
Full details of the authorised and issued
share capital, together with movements in the
Company’s issued share capital during the
year, are shown in note 20 to the consolidated
financial statements. The business is financed
by means of internally generated cash flow
and, as appropriate, debt and external share
capital.
Share rights and restrictions
There are no specific restrictions on the size
of a holding or on the transfer of common
shares, both of which are governed by the
general provisions of the Company’s Byelaws
and prevailing legislation. The Directors
are not aware of any agreements between
holders of the Company’s common shares
that may result in restrictions on the transfer
of securities or on voting rights. No person
has any special rights of control over the
Company’s share capital and all issued
common shares are fully paid.
Details of the employee share schemes are
set out in note 24 to the consolidated financial
statements and details of the Directors’
awards are included in the Remuneration
Committee report.
Voting rights and Byelaw
amendments
The Company’s Byelaws may only be
revoked or amended by the shareholders
of the Company by a resolution passed by
a majority of not less than three-quarters
of such shareholders as vote in person or,
where proxies are allowed, by proxy at a
general meeting.
Resolutions put to the vote of any general
meeting are decided on a show of hands
unless a poll is demanded in accordance with
the Company’s Byelaws.
The Company’s Byelaws are available
on the Company’s website at
www.gulfkeystone.com.
Directors
With regard to the appointment and
replacement of Directors, the Company is
governed by its Byelaws, the Companies Act
(Bermuda) and related legislation. All of the
Directors are required to stand for re-election
by the shareholders each year at the AGM.
Directors’ indemnities
The Company has made qualifying third-party
indemnity provisions for the benefit of its
Directors during the year and these remain in
force at the date of this report.
Directors’ interests in shares
As at 31 December 2022, the following
Directors who held office had interest in the
common shares of the Company(1):
• Jon Harris (Chief Executive Officer) –
•
30,000 common shares;
Ian Weatherdon (Chief Financial Officer) –
50,112 common shares; and
• Garrett Soden (non-independent
Non-Executive Director) – 70,000
common shares.
At the date of this report, the Employee
Benefit Trust (“EBT”) held 0.4 million
(2021: 0.2 million) common shares of
the Company.
Significant shareholdings
As at 28 February 2023, being the date of the most recent analysis of the Company’s share register, the Company discloses the following
significant shareholdings:
Shareholder
Lansdowne Partners Austria GmbH
Stichting Value Partners Family Office
Hargreaves Lansdown Stockbrokers Ltd.
Interactive Investor
Ophorst Van Marwijk Kooy Vermogensbeheer N.V.
Mr Gertjan Koomen
Dimensional Fund Advisors LP
Acadian Asset Management LLC
Halifax Stockbrokers
Barclays Stockbrokers
Number of
common
shares
Percentage
of issued
share capital
32,549,217
22,301,570
13,747,823
13,152,902
10,075,320
9,876,782
9,463,637
9,031,297
6,765,852
5,777,656
15.05
10.31
6.36
6.08
4.66
4.57
4.38
4.18
3.13
2.67
The Company’s share register analysis was provided by Investor Insight, based on information available at the time of publication.
(1)
Includes common shares held directly, by family members and through the Gulf Keystone EBT which are held subject to the discretion of the EBT Trustee.
Governance
120
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Directors’ report continued
Political donations
No political donations were made and no
political expenditure was incurred during
the year.
Employee and stakeholder
engagement
Details of the Company’s engagement
with employees and external stakeholders
are described in the Sustainability report
on pages 32 to 51 and in our Stakeholder
engagement report and Section 172
statement on pages 28 to 31.
Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position, are
set out in the Chairman’s statement, the Chief
Executive Officer’s review, the Operational
review and the Management of principal risks
and uncertainties. The financial position of
the Group at the year end and its cash flows
and liquidity position are included in the
Financial review.
As at 22 March 2023, the Group had
$118.8 million of cash and no debt. The Group
continues to closely monitor and manage
its liquidity. Cash forecasts are regularly
produced and sensitivities run for different
scenarios including, but not limited to,
change in commodity prices, different
production rates from the Shaikan block,
cost contingencies, disruptions, climate
change and delays to revenue receipts and
geopolitical risks on the Group’s operations,
including the Iraqi Supreme Court ruling on
15 February 2022.
In the current year, further consideration
has been given to the impact on the Group’s
working capital position due to delays in
revenue receipts from the KRG and the
proposed revision to the lifting agreement:
• Revenue receipt: The timing of revenue
receipts over the last 12 months has
increased from an average of 20-30 days
past due to 100 days for the most recent
September production month payment.
At the date of this report, $76.0 million is
overdue for October to December 2022 oil
sales; and
• Lifting agreement: There has been
no lifting agreement in place since
1 September 2022 and negotiations are
ongoing around the pricing mechanism of
oil sales. Instead of a Dated Brent based
pricing mechanism, the KRG has proposed
a Kurdistan Blend (“KBT”) based pricing
mechanism to recognise the value they
receive for oil sales, as further described in
note 2.
The Directors believe an agreement will
ultimately be reached on the terms of a
revised lifting agreement, and we reasonably
expect that overdue balances will be paid and
payments will return to a more regular basis.
However, a deferral of revenue receipts from
the KRG for an extended period of time could
result in liquidity pressures within the 12 month
going concern period.
The Directors have considered sensitivities
to assess the impact on the Group’s liquidity
position if revenue receipts from the KRG are
deferred for an extended period of time. While
the payments of such amounts are outside of
management’s control, the Directors believe
sufficient mitigating actions are available
to withstand potential further delays in
revenue receipts until such receipts return
to more routine payment terms. Mitigating
actions include deferring planned capital
expenditures, reducing operating and general
and administrative expenses and managing
supplier payment timing.
Overall, the Group’s forecasts, taking into
account the applicable risks, stress test
scenarios and potential mitigating actions,
show that it has sufficient financial resources
for the 12 months from the date of approval of
the 2022 annual report and accounts.
Based on the analysis performed,
the Directors have a reasonable expectation
that the Group has adequate resources to
continue to operate for the foreseeable future.
Thus the going concern basis of accounting
is used to prepare the annual consolidated
financial statements.
Significant agreements – change
of control
There are a number of agreements that take
effect, alter or terminate upon a change of
control of the Group, including the Shaikan
PSC and employee share plans. The Directors
are not aware of any agreements between
the Group and its Directors or employees that
provide for compensation for loss of office
or employment that occurs because of a
takeover bid.
Auditor
Each of the persons who is a Director at the
date of approval of this annual report and
accounts confirms that:
• so far as the Director is aware, there is no
relevant audit information of which the
Group’s auditor is unaware; and
• the Director has taken all the steps that
he/she ought to have taken as a Director in
order to make himself/herself aware of any
relevant audit information and to establish
that the Group’s auditor is aware of that
information.
In line with best practice, the Company has
conducted a competitive tender process to
appoint a new auditor as Deloitte LLP, the
Company’s current auditor, is approaching
the 20-year maximum term. The Company
intends to appoint BDO LLP as auditor for the
financial year commencing 1 January 2023.
The appointment is subject to shareholder
approval at the 2023 Annual General Meeting.
On behalf of the Board
Jon Harris
Chief Executive Officer
22 March 2023
Gulf Keystone Petroleum Limited Annual report and accounts 2022
121
Directors’ responsibilities statement
This responsibility statement was approved
by the Board of Directors on 22 March 2023
and is signed on its behalf by:
Jon Harris
Chief Executive Officer
22 March 2023
Ian Weatherdon
Chief Financial Officer
22 March 2023
The Directors are responsible for preparing
the annual report and the financial statements
in accordance with applicable law and
regulations.
Company law requires the Directors to
prepare financial statements for each financial
year. Under that law the Directors are required
to prepare the Group financial statements in
accordance with United Kingdom adopted
International Financial Reporting Standards
(“IFRSs”) and Article 4 of the International
Accounting Standards (“IAS”) Regulation.
Under IAS 1 the Directors must not approve
the accounts unless they are satisfied that
they give a true and fair view of the state of
affairs of the Company and of the profit or loss
of the Company for that period. In preparing
these financial statements, International
Accounting Standard 1 requires that Directors:
• properly select and apply accounting
policies;
• present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
• provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance; and
• make an assessment of the Company’s
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the financial statements comply with the
Bermuda Companies Act 1981. They are also
responsible for safeguarding the assets of the
Company and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ responsibility
statement
We confirm that to the best of our knowledge:
• the financial statements, prepared
in accordance with United Kingdom
adopted International Financial Reporting
Standards, give a true and fair view of the
assets, liabilities, financial position and
profit or loss of the Company and the
undertakings included in the consolidation
taken as a whole;
• the Strategic report includes a fair review of
the development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face; and
• the annual report and financial statements,
taken as a whole, are fair, balanced
and understandable and provide the
information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
Governance 122
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Independent auditor’s report
to the members of Gulf Keystone Petroleum Limited
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Gulf Keystone Petroleum Limited (the ‘Company’) and its subsidiaries (the ‘Group’):
• give a true and fair view of the state of the Group’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended;
• have been properly prepared in accordance with United Kingdom adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Bermuda Companies Act 1981.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated balance sheet;
• the consolidated statement of changes in equity;
• the consolidated cash flow statement;
• the summary of significant accounting policies; and
• the related notes 1 to 27.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted international
accounting standards.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Carrying value of oil and gas assets; and
• Revenue recognition.
Within this report, key audit matters are identified as follows:
NEW Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
Significant changes
in our approach
The materiality that we used for the Group financial statements was $10m which was determined on the basis of
3.8% of Group profit before tax.
The Group’s business is a single component, and therefore all of the operations of the Group were subject to a full
scope audit by the UK audit team.
We have determined materiality on the basis of Group profit before tax in the current year, whereas in the prior year
it was determined on the basis of net assets. Current year materiality is representative of 1.7% of net assets (2021:
1.5%). We have also performed additional audit procedures in response to the assessed increased risk associated
with revenue recognition. There were no other significant changes in our audit approach, including the identified
key audit matters, compared to the prior year.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
123
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included:
• Assessing the historical accuracy of management’s cash flow forecasts by comparison of actual versus budgeted cash flow performance
for 2022;
• Assessing the impact of climate change on the Group;
• Benchmarking the oil price assumption against external data and historical levels;
• Evaluating the cash flow forecasts within the going concern assessment for appropriateness, which involved checking for consistency
against the cash flows forecasts included within the impairment model (including the planned capital expenditures associated with the
Field Development Plan (“FDP”)), reviewing the mechanical accuracy of the calculations, and assessing the forecast liquidity position
throughout the going concern period;
• Considering the impact on liquidity headroom of recent delays in revenue receipts and ongoing negotiations with the Kurdistan Regional
Government (“KRG”) in respect of the proposed pricing mechanism for oil sales, as explained further in the revenue recognition key audit
matter section;
• Assessing the sensitivities run by the Directors;
• Assessing the mitigating actions that could be taken by the Directors to maximise liquidity headroom including not paying dividends, deferring
planned capital expenditures in respect of the FDP, reducing operating and general and administrative expenses, and managing supplier
payment timing; and
• Assessing the appropriateness of the going concern disclosures.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in
relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Financials 124
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Independent auditor’s report continued
to the members of Gulf Keystone Petroleum Limited
Report on the audit of the financial statements continued
5. Key audit matters continued
5.1. Carrying value of oil and gas assets
Key audit matter
description
In accordance with IAS 36 Impairment of Assets, management is required to perform a review of any producing
assets (being the Shaikan Field in Kurdistan) for indicators of impairment at each reporting date. The assessment
of the carrying value of producing assets requires management to exercise judgement in identifying the indicators
of impairment, such as a decrease in oil price or a downgrade of proved and probable reserves.
As part of its impairment indicators evaluation, management considered key developments which occurred during
2022 including the impact of climate change, oil prices, field productivity, on-going negotiations in respect of a
new FDP and lifting agreement, in addition to the impacts of local and global geopolitical factors. Management
concluded that the ruling by the Iraqi Federal Supreme Court as explained further on page 143 of the financial
statements to be an impairment indicator because it could result in the Group losing its licence to operate the
Shaikan field. Management also identified the KRG’s proposed changes to the lifting agreement, and hence the oil
price realised by the Group from September 2022 onwards, to be an impairment indicator.
To support their impairment conclusion, management have prepared a full impairment analysis, including an
updated valuation model which is based on the best estimates of future cash flows based on the latest estimates for
the FDP. Management also analysed various scenarios and ran sensitivities versus their base case assumptions.
Management’s impairment analysis is supportive of the carrying value of the oil and gas assets recognised in the
financial statements as at 31 December 2022 and therefore no impairment charge was recorded.
The calculation of the recoverable amount requires judgement in estimating future oil prices, in particular the
future oil price realised by the Group after discounts have been applied, an appropriate asset-specific discount
rate, production profiles based on the latest reserves estimates, and the best estimate of future expenditure to be
incurred in relation to the FDP. The reserve estimates used reflect management’s latest internal estimates but were
also compared to the results of a new independent reserves report recently completed by ERC Equipoise Limited
(“ERCE”) at 31 December 2022. The impact of climate change on the Shaikan asset was also considered, including
the potential impact on future oil prices (including possible changes in demand), carbon taxes, and access to
funding, which each have a potential impact on management’s future investment decisions. Management have
included the latest estimate of the cost to install a gas reinjection system under the gas management plan (“GMP”)
by the end of 2025, which will help mitigate the potential impact of future carbon taxes on the Shaikan asset and
hence the Group. Management have also assumed that the Group will continue to retain control of the Shaikan
asset for the remainder of the licence period to 2043.
As a result of the inherent estimation uncertainty in relation to the factors above, we consider the assessment of
the recoverable amount of Shaikan to remain a key judgement. We also considered there to be a potential fraud risk
that the assumptions, such as the realised oil price and discount rate, applied within the impairment assessment
could be subject to conscious or unconscious bias.
Further details of the key considerations have been disclosed in the Audit and Risk Committee report on page 96
and in the ‘Key sources of estimation uncertainty’ disclosure on page 143. Property, plant and equipment is
disclosed in note 11 to the financial statements.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
125
How the scope of
our audit responded
to the key audit
matter
Our audit work assessed the reasonableness of management’s key assumptions in determining that no
impairment was required as at 31 December 2022 for the Shaikan asset.
Specifically our work included, but was not limited to, the following procedures:
• obtaining an understanding of relevant controls over the impairment process, including management review
controls, and testing their operating effectiveness;
• obtaining management’s latest risk registers, including their climate risk register, to inform our independent risk
assessment around impairment;
• engaging our internal climate change specialists to aid the audit team’s challenge of the appropriateness and
completeness of management’s climate-related assumptions and associated disclosures;
• engaging our internal valuation specialists to determine an independent range for the discount rate,
assessing whether the independent range is reflective of the current risks associated with the Shaikan asset,
and comparing that to the rate applied by management for the purpose of the impairment analysis;
• evaluating management’s assumption that the Group will continue to operate the Shaikan field for the remainder
of its licence; this included assessing the likelihood of a successful enforcement of the Iraqi Supreme Court
ruling through inquiries of the Group’s internal and external legal counsel;
• making inquiries of and holding meetings with various employees of the Group including key operational,
commercial, and finance personnel, in order to understand the current status and future intentions for the
Shaikan field, including the current status of FDP negotiations;
• considering the potential impact of climate change including the impact on headroom of a reduced oil price,
the potential impact of the introduction of a carbon tax in Kurdistan, and increasing expenditure requirements;
• benchmarking and analysis of oil price assumptions against independent data points, including forward curves,
economist forecasts, the IEA’s World Energy Outlook 2022 publication, and other market data;
• comparing forecasted production and expenditure levels per the valuation model with actual historical
production and the estimates set out in the latest draft of the FDP;
• engaging our internal reservoir engineering specialists to aid in our review and challenge of the latest
independent ERCE report, and assess the significance of differences noted between management’s latest
reserves estimates employed in the impairment model and the ERCE report;
• assessing the inputs within the impairment valuation model for consistency with the base case assumptions per
management’s impairment analysis, and reviewing the mechanical accuracy of the valuation model;
• assessing the sensitivity analysis performed on the key assumptions in the valuation model to determine
whether there was headroom to support Shaikan’s book value under certain downside scenarios, including
those relating to a reduced oil price; and
• assessing the relevant disclosures in relation to the carrying value of oil and gas assets.
Key observations
Based on our analysis, we are satisfied that management’s impairment assessment including the assumptions
employed has been appropriately prepared in accordance with the requirements of IAS 36 Impairment of Assets,
that no impairment of the Shaikan asset is required, and that the related disclosures are appropriate.
Financials 126
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Independent auditor’s report continued
to the members of Gulf Keystone Petroleum Limited
Report on the audit of the financial statements continued
5. Key audit matters continued
5.2. Revenue recognition
Key audit matter
description
Revenue totalling $460.1 million (2021: $301.4 million) has been recognised during the year, being wholly
comprised of oil sales for the year.
The Group has continued to recognise revenue in accordance with the terms of the Shaikan Production
Sharing Contract (“PSC”), the draft Term Sheet and, up to 31 August 2022, a Crude Oil Sales Agreement (or
“lifting agreement”). These documents have been used to govern the terms of Shaikan crude oil sales since
1 October 2017. The Group has not signed a new lifting agreement with the KRG since the previous agreement
expired on 31 August 2022, meaning that there is an element of uncertainty in respect of revenue recognition for oil
sales from 1 September 2022 to 31 December 2022. Production and export of oil has however continued whilst the
negotiations around the terms of a revised lifting agreement are ongoing.
The KRG have proposed a new pricing mechanism based upon the average monthly Kurdistan blend (“KBT”)
sales price realised by the KRG at Ceyhan, Turkey, as advised by the KRG and published in their publicly available
quarterly oil sales reports. The Company has not accepted the proposal and therefore continues to invoice the
KRG for oil sales based on the previous pricing formula.
Due to the uncertainty in respect of the pricing mechanism which will be employed, the Directors have concluded it is
appropriate to recognise revenue based on the mechanism proposed by the KRG from September to December 2022,
and any difference between the proposed and final pricing mechanism will be reflected in future periods.
There has also been a delay in settlement of outstanding receivables with the KRG. At year end, no amounts had
been received in respect of August to December oil deliveries, although those relating to August and September
have been settled subsequent to year end, with the amount received for September being consistent with the
KRG’s proposed new pricing mechanism.
The key judgements in relation to revenue recognition are:
• whether revenue should be recognised for the oil sales from 1 September to 31 December 2022 in the absence
of a signed lifting agreement in respect of those oil sales;
• the amount of revenue which should be recognised for the oil sales from 1 September to 31 December 2022
above, considering the uncertainty in respect of the pricing mechanism and the absence of a signed lifting
agreement; and
• the extent of the risk in relation to unpaid revenue amounts at 31 December 2022, in particular the valuation of the
expected credit loss (“ECL”) and the appropriateness of the assumptions used notably the timing of payments,
probability of default and loss given default.
Further details of the key considerations have been disclosed in the Audit and Risk Committee report on page 96
and in the ‘Critical judgements in applying the Group’s accounting policies’ disclosure on page 142. Revenue is
disclosed in note 2 to the financial statements.
How the scope of
our audit responded
to the key audit
matter
We have assessed the appropriateness of the revenue recognition policy in light of current year developments and
recalculated the revenue recognised for oil sales for the year. We have performed the following procedures:
• obtaining an understanding of relevant controls over the revenue recognition process, including management
review controls;
• obtaining an understanding of the latest negotiations between the Group and the KRG in respect of the
proposed updated pricing mechanism within the draft lifting agreement for oil sales from 1 September 2022
through enquiry of key management personnel;
• challenging the Directors on their assessment of the accounting implications by reference to the relevant
accounting standard, being IFRS 15 Revenue from Contracts with Customers;
• recalculating the expected monthly entitlement revenue for the oil sales in line with the Shaikan PSC, the draft
Term Sheet, and the latest lifting agreements. For oil sales from September 2022 onwards, the recalculation was
performed by reference to the draft lifting agreement proposed by the KRG which is under negotiation between
the Group and the KRG. Our calculations were based on production in the year per the approved delivery
reports, the average Dated Brent price or (from 1 September onwards) the KBT price for the month, less quality
and transportation discounts;
• vouching all cash receipts in 2022 and reviewed post year end bank statements to confirm the extent to which
the receivables outstanding at 31 December 2022 have subsequently been received;
• challenging the ECL assumptions used, through benchmarking of the assumptions employed against external
sources, and recalculating the provision; and
• assessing the relevant disclosures in relation to revenue recognition.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
127
Key observations
Based on our analysis, management have continued to recognise revenue appropriately in accordance with IFRS
15. We concur with the recognition of $460.1m of oil sales for the year ended 31 December 2022. We also concur
with the appropriateness of the carrying value of the associated receivables, including the ECL recognised against
those receivables.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Materiality
$10m (2021: $8m)
Basis for determining
materiality
Rationale for the
benchmark applied
3.8% of profit before tax (2021: 1.5% of net assets)
We consider that profit before tax is of particular relevance to users of the financial statements, and is a key
measure of performance used by the Group. The significant increase in profit before tax during the year has
resulted in large distributions being made to shareholders; we consider a profit metric to be more reflective of the
improved financial performance during the year. The determined materiality also represents 1.7% of net assets.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole.
Performance
materiality
Basis and rationale for
determining
performance
materiality
Group financial statements
70% (2021: 70%) of Group materiality
In determining performance materiality, we considered the following factors:
• The quality of the control environment and conclusions from our testing of Group-wide internal controls;
• The low level of historical uncorrected misstatements within the consolidated financial statements; and
• The lack of significant changes in the underlying business during the year which would impact on our ability
to forecast the expected level of misstatement.
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of $500k (2021: $400k),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
7.1. Identification and scoping of components
Our audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide internal controls, and assessing the
risks of material misstatement. Our audit planning identified the Group’s business to be a single component, and therefore all of the operations of
the Group were subject to a full scope audit by the UK audit team. Our audit work was performed primarily at the Group’s head office in London.
Specified audit procedures in respect of the Group’s property, plant and equipment and inventory balances were performed by a Deloitte member
firm based in Kurdistan under the direction of the UK audit team.
7.2. Our consideration of the control environment
The Group operates a single asset, being the Shaikan field, and all revenues associated with Shaikan are earned from the KRG. As discussed in the
key audit matters section above, we tested controls over the impairment assessment for the Shaikan field; and we also obtained an understanding
of relevant controls over revenue.
In addition, we have obtained an updated understanding of the IT environment in the current year. This included understanding the changes to the
main accounting system, SUN, and performing audit procedures over the associated data migration from the previous system.
Financials 128
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Independent auditor’s report continued
to the members of Gulf Keystone Petroleum Limited
Report on the audit of the financial statements continued
7. An overview of the scope of our audit continued
7.3. Our consideration of climate-related risks
Management has considered climate change as part of their risk assessment process when considering the principal risks and uncertainties
facing the Group. This is set out in the strategic report on page 62, the principal risks set out on page 71 and accounting policies on page 143.
From the perspective of the impact on the FY22 financial statements, the climate-related risks have been identified to be most impactful on the
carrying value of producing oil and gas assets and the associated impairment assessment. This is consistent with our evaluation of the climate
related risks facing the Group and is linked to the key audit matter as highlighted in section 5.1 above, where we have described both the risks
related to these assumptions and our audit procedures in relation to the challenge of these assumptions.
Our climate change procedures also included:
• Assessing the impact on our risk assessment and planned audit procedures, aided by the involvement of our climate specialists, for example by
understanding how certain physical and transition climate risks translate to potential implications specific to the Group, and then the potential
financial impact of these on the underlying account balances and disclosures. This included consideration of the potential impact of climate
change on the carrying value of oil and gas assets if the oil price was consistent with the price curve implied by the Net Zero Emissions by 2050
(“NZE”) scenario presented within the IEA’s World Energy Outlook 2022 publication;
• Assessing whether the impact of climate risks are material through considering specific estimates and assumptions, and determining whether
those estimates and assumptions are reasonable; and
• Reading the climate related disclosures, aided by the involvement of our climate specialists, throughout the annual report and financial
statements, including in the Group’s TCFD disclosures within the Strategic Report, to consider whether the climate impacts and disclosures
are materially consistent with the climate impacts and disclosures within the financial statements and with the knowledge the audit team have
obtained during the audit.
As described above, we have considered the potential impacts of climate change as part of our key audit matter relating to the carrying value of oil
and gas assets. We also considered the potential impact of climate change elsewhere in the financial statements, including but not limited to the
decommissioning provision and the going concern assumption in a reduced oil price environment.
8. Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon.
The Directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
129
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies,
key drivers for Directors’ remuneration, bonus levels and performance targets;
• the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
• the results of our enquiries of management and members of the Board and the Audit and Risk Committee about their own identification and
assessment of the risks of irregularities, including those specific to the oil and gas industry;
• the results of our enquiries with the Group’s internal and external legal counsel about potential and actual litigation and claims;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
•
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance, including
consideration of the potential implications of the Iraqi Supreme Court ruling (as explained further on page 143 of the financial statements);
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.
• the matters discussed among the audit engagement team and relevant internal specialists, including valuations, IT, reservoir engineering,
and climate specialists, regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following area: carrying value of oil and gas assets. In common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws
and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the Bermuda Companies Act 1981 and the UK Listing Rules.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance
with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s operating licence and
environmental regulations, as well as relevant legal regulations in both Kurdistan and Iraq.
11.2. Audit response to risks identified
As a result of performing the above, we identified the carrying value of oil and gas assets as a key audit matter related to the potential risk of fraud
or non-compliance with laws and regulations. The key audit matters section of our report explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws
and regulations described as having a direct effect on the financial statements;
• enquiring of management, members of the Board and the Audit and Risk Committee, including those responsible for whistleblowing,
and in-house legal counsel concerning any instances of fraud noted during the year, and actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due
to fraud;
• reading minutes of meetings of those charged with governance; and
•
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale
of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Financials 130
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Independent auditor’s report continued
to the members of Gulf Keystone Petroleum Limited
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by our engagement letter
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the UK Companies Act
2006 as if the Act had applied to the Company.
13. Corporate Governance Statement
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified, as set out on page 136;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate,
as set out on pages 76 and 77;
• the Directors’ statement on fair, balanced and understandable, as set out on page 121;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, as set out on page 67;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems, as set out on
page 66; and
• the section describing the work of the Audit and Risk Committee, as set out on pages 94 to 97.
14. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Section 90 of the Bermuda Companies Act 1981. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report
and/or those matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial statements form
part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA
in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual
financial report has been prepared using the single electronic format specified in the ESEF RTS.
David Paterson ACA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
22 March 2023
Gulf Keystone Petroleum Limited Annual report and accounts 2022
131
Consolidated income statement
For the year ended 31 December 2022
Revenue
Cost of sales
(Increase)/decrease of impairment provision on trade receivables
Gross profit
Other general and administrative expenses
Share option related expenses
Profit from operations
Finance revenue
Finance costs
Foreign exchange gains
Profit before tax
Tax credit
Profit after tax for the year
Profit per share (cents)
Basic
Diluted
Notes
2
3
14
4
5
7
7
8
9
9
2022
$’000
2021
$’000
460,113
301,389
(158,651)
(111,721)
(1,960)
7,065
299,502
196,733
(12,202)
(13,643)
(13,756)
(8,490)
273,544
174,600
648
419
(9,655)
(11,353)
1,232
57
265,769
163,723
325
874
266,094
164,597
123.52
118.62
77.14
73.04
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022
$’000
2021
$’000
Profit after tax for the year
Items that may be reclassified to the income statement in subsequent periods:
Fair value losses arising in the period
Cumulative losses arising on hedging instruments reclassified to revenue
Exchange differences on translation of foreign operations
Total comprehensive income for the year
266,094
164,597
—
—
(1,950)
(2,021)
3,753
(254)
264,144
166,075
Financials
132
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Consolidated balance sheet
As at 31 December 2022
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Exchange translation reserve
Accumulated losses
Total equity
31 December
2022
$’000
Notes
31 December
2021
$’000
10
11
18
13
14
4,307
3,583
436,443
404,205
1,576
1,385
442,326
409,173
6,372
6,018
176,203
179,200
119,456
169,866
302,031
355,084
744,357
764,257
15
(128,561)
(98,800)
15
16
17
(325)
(789)
—
(99,123)
(42,546)
(43,841)
(42,871)
(143,753)
(171,432)
(242,553)
572,925
521,704
20
20
216,247
528,125
213,731
742,914
(4,718)
(2,768)
(166,729)
(432,173)
572,925
521,704
The financial statements were approved by the Board of Directors and authorised for issue on 22 March 2023 and signed on its behalf by:
Jon Harris
Chief Executive Officer
Ian Weatherdon
Chief Financial Officer
Gulf Keystone Petroleum Limited Annual report and accounts 2022
133
Consolidated statement of changes in equity
For the year ended 31 December 2022
Attributable to equity holders of the Company
Share
capital
$’000
Share
premium
$’000
Treasury
shares
$’000
Notes
Cost of
hedging
reserve
$’000
Exchange
translation Accumulated
losses
$’000
reserve
$’000
Total
equity
$’000
Balance at 1 January 2021
211,371
842,914
(2,592)
(1,732)
(2,514)
(593,422)
454,025
Profit after tax for the year
Cash flow hedge – fair value movements
Exchange difference on
translation of foreign operations
Total comprehensive income/
(expense) for the year
Dividends paid
Employee share schemes
Share options exercised
25
24
—
—
—
—
—
—
—
Share issues
20
2,360
—
—
—
—
(100,000)
—
—
—
Balance at 31 December 2021
213,731
742,914
Profit after tax for the year
Exchange difference on translation
of foreign operations
Total comprehensive income
for the year
Dividends paid
Employee share schemes
Share issues
25
24
20
—
—
—
—
—
2,516
—
—
—
(214,789)
—
—
Balance at 31 December 2022
216,247
528,125
—
—
—
—
—
—
2,592
—
—
—
—
—
—
—
—
—
—
1,732
—
—
—
(254)
164,597
164,597
—
—
1,732
(254)
1,732
(254)
164,597
166,075
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(100,000)
1,604
1,604
(2,592)
(2,360)
—
—
(2,768)
(432,173)
521,704
—
266,094
266,094
(1,950)
—
(1,950)
(1,950)
266,094
264,144
—
—
—
—
(214,789)
1,866
(2,516)
1,866
—
(4,718)
(166,729)
572,925
Financials
134
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Consolidated cash flow statement
For the year ended 31 December 2022
Operating activities
Cash generated from operations
Interest received
Interest paid
Payment of put option premium
Net cash generated from operating activities
Investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Payment of dividends
Payment of leases
Notes redemption
Notes repayment fee
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year being bank balances and cash on hand
Notes
2022
$’000
2021
$’000
21
7
16
10
21
25
22
16
16
383,846
189,155
648
419
(10,194)
(10,000)
—
(1,043)
374,300
178,531
(2,074)
(2,725)
(105,291)
(52,959)
(107,365)
(55,684)
(214,789)
(100,000)
(458)
(688)
(100,000)
(2,000)
—
—
(317,247)
(100,688)
(50,312)
22,159
169,866
147,826
(98)
(119)
119,456
169,866
Gulf Keystone Petroleum Limited Annual report and accounts 2022
135
Summary of significant accounting policies
General information
Gulf Keystone Petroleum Limited (the “Company”) is domiciled and incorporated in Bermuda (registered address: Cedar House, 3rd Floor,
41 Cedar Avenue, Hamilton, HM12, Bermuda); together with its subsidiaries it forms the “Group”. On 25 March 2014, the Company’s common
shares were admitted, with a standard listing, to the Official List of the United Kingdom Listing Authority (“UKLA”) and to trading on the London
Stock Exchange’s Main Market for listed securities. Previously, the Company was quoted on Alternative Investment Market, a market operated
by the London Stock Exchange. In 2008, the Company established a Level 1 American Depositary Receipt programme in conjunction with
the Bank of New York Mellon, which has been appointed as the depositary bank. The Company serves as the holding company for the Group,
which is engaged in oil and gas exploration, development and production, operating in the Kurdistan Region of Iraq.
Amendments to International Financial Reporting Standards (“IFRS”) that are mandatorily effective for the
current year
In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB)
that are mandatorily effective for an accounting period that begins on or after 1 January 2022.
The following new accounting standards, amendments to existing standards and interpretations are effective on 1 January 2022: Reference
to the Conceptual Framework (Amendments to IFRS 3), Property, Plant and Equipment – Proceeds before Intended Use (Amendments to
IAS 16), Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37), and Annual Improvements to IFRS Standards 2018-2020.
These standards do not and are not expected to have a material impact on the Company’s results or financial statement disclosures in the
current or future reporting periods.
New and revised IFRSs issued but not yet effective
At the date of approval of these financial statements, the Group has not applied the following new and revised IFRSs that have been issued
but are not yet effective by United Kingdom adopted International Accounting Standards:
IFRS 17
Insurance Contracts
Amendments to IFRS 4
Amendments to IAS 1
Applying IFRS 9 ‘Financial Instruments’ with IFRS 4 ‘Insurance Contracts’; Extension of the
Temporary Exemption from Applying IFRS 9
Classification of Liabilities as Current or Non-current; Classification of Liabilities as Current or
Non-current – Deferral of Effective Date; Non-current Liabilities with Covenants
Amendments to IFRS 16
Lease Liability in a Sale and Leaseback
Amendments to IFRS 17
Initial Application of IFRS 17 and IFRS 9 – Comparative Information; Amends IFRS 17 to address
concerns and implementation challenges that were identified after IFRS 17 Insurance Contracts
was published in 2017
Amendments to IAS 1 and
IFRS Practice Statement 2
Disclosure of Accounting Policies
Amendments to IAS 8
Definition of Accounting Estimates
Amendments to IAS 12
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group
in future periods.
Statement of compliance
The financial statements have been prepared in accordance with United Kingdom adopted International Accounting Standards.
Basis of accounting
The financial statements have been prepared under the historical cost basis, except for the valuation of hydrocarbon inventory and the valuation
of certain financial instruments, which have been measured at fair value, and on the going concern basis. Equity-settled share-based payments
are recognised at fair value at the date of grant, and are not subsequently revalued. The principal accounting policies adopted are set out below.
Financials
136
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Summary of significant accounting policies continued
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the
Chairman’s statement, the Chief Executive Officer’s review, the Operational review and the Management of principal risks and uncertainties.
The financial position of the Group at the year end and its cash flows and liquidity position are included in the Financial review.
As at 22 March 2023, the Group had $118.8 million of cash and no debt. The Group continues to closely monitor and manage its liquidity.
Cash forecasts are regularly produced and sensitivities run for different scenarios including, but not limited to, change in commodity prices,
different production rates from the Shaikan block, cost contingencies, disruptions and delays to revenue receipts, impact of climate change
and geopolitical risks on the Group’s operations, including the Iraqi Supreme Court ruling on 15 February 2022, as further described in key
sources of uncertainty below.
In the current year, further consideration has been given to the impact on the Group’s working capital position due to delays in revenue receipts
from the KRG and the proposed revision to the lifting agreement:
• Revenue receipts: The timing of revenue receipts over the last 12 months has increased from an average of 20-30 days past due to 100 days
for the most recent September production month payment. At the date of this report, $76.0 million is overdue for October to December 2022
oil sales; and
• Lifting agreement: There has been no lifting agreement in place since 1 September 2022 and negotiations are ongoing around the pricing
mechanism of oil sales. Instead of a Dated Brent based pricing mechanism, the KRG has proposed a Kurdistan Blend (KBT) based pricing
mechanism to recognise the value they receive for oil sales, as further described in note 2.
The Directors believe an agreement will ultimately be reached on the terms of a revised lifting agreement, and we reasonably expect that
overdue balances will be paid and payments will return to a more regular basis. However, a deferral of revenue receipts from the KRG for
an extended period of time could result in liquidity pressures within the twelve-month going concern period.
The Directors have considered sensitivities to assess the impact on the Group’s liquidity position if revenue receipts from the KRG are deferred
for an extended period of time. While the payment of such amounts are outside of management’s control, the Directors believe sufficient mitigating
actions are available to withstand potential further delays in revenue receipts until such receipts return to more routine payment terms. Mitigating
actions include deferring planned capital expenditures, reducing operating and general and administrative expenses and managing supplier
payment timing.
Overall, the Group’s forecasts, taking into account the applicable risks, stress test scenarios and potential mitigating actions, show that it has
sufficient financial resources for the twelve months from the date of approval of the 2022 annual report and accounts.
Based on the analysis performed, the Directors have a reasonable expectation that the Group has adequate resources to continue to operate
for the foreseeable future. Thus the going concern basis of accounting is used to prepare the annual consolidated financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and
operating policies of an investee entity, so as to obtain benefits from its activities.
Joint arrangements
The Group is engaged in oil and gas exploration, development and production through unincorporated joint arrangements; these are classified
as joint operations in accordance with IFRS 11. The Group accounts for its share of the results and net assets of these joint operations. Where the
Group acts as Operator of the joint operation, the gross liabilities and receivables (including amounts due to or from non-operating partners)
of the joint operation are included in the Group’s balance sheet.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
137
Sales revenue
The recognition of revenue is considered to be a key accounting judgement.
Revenue is earned based on the entitlement mechanism under the terms of the Shaikan Production Sharing Contract (“PSC”). Entitlement has
two components: cost oil, which is the mechanism by which the Company recovers its costs incurred, and profit oil, which is the mechanism
through which profits are shared between the Company, its partner and the Kurdistan Regional Government (“KRG”). The Company is liable for
capacity building payments calculated as a proportion of profit oil entitlement. Entitlement from cost oil and profit oil are reported as revenue,
and capacity building payments are included in cost of sales.
All oil is sold by the Shaikan Contractor (the Company and Kalegran BV, a subsidiary of MOL Hungarian Oil & Gas Plc, (“MOL”)) to the KRG,
who in turn resell the oil. The selling price is determined in accordance with the principles of the crude oil lifting agreement.
Under IFRS 15: Revenue from contracts with customers, GKP considers that control of crude oil is transferred from the Shaikan Contractor to the
KRG at the delivery point as defined in the lifting agreement, this being the export pipeline; at this point the Shaikan Contractor is due economic
benefits which can be reliably measured and are probable to be received. The consideration is variable and is dependent upon the monthly
average oil market price with deductions for quality and transportation fees, with other fees and royalties due as determined by commercial
agreements; revenue is reported net of these deductions.
Effective 1 September, 2022, the KRG proposed a new pricing mechanism for crude oil sales. Under the new pricing mechanism, the realised sales
price for a month is based on the average market price realised by the KRG for the Kurdistan blend (KBT) sold at Ceyhan, Turkey, as advised by
the KRG. The change in the benchmark market price from Brent to KBT has not yet been agreed and no lifting agreement has been in place since
1 September 2022. Nonetheless, the Shaikan Contractor continued to produce and the KRG continued to accept delivery of oil at the delivery
points. GKP continues to consider that control of crude oil was transferred at the delivery points despite no commercial agreement being in place
and as such has recognised revenue based on the proposed new pricing terms. A summary of the currently estimated financial impact of the
proposed change in pricing mechanism is detailed in note 2.
During past PSC negotiations with the Ministry of Natural Resources (“MNR”), it was tentatively agreed that the Shaikan Contractor would provide
the KRG a 20% carried working interest in the PSC. This would result in a reduction of GKP’s working interest from 80% to 61.5%. To compensate
for such decrease, capacity building payments expense would be reduced to 20% of profit petroleum. While the PSC has not been formally
amended, it was agreed that GKP would invoice the KRG for oil sales based on the proposed revised terms from October 2017. The financial
statements reflect the proposed revised working interest of 61.5%. Relative to the PSC terms, the proposed revised invoicing terms result in a
decrease in both revenue and cost of sales and on a net basis are slightly positive for the Company.
As part of earlier PSC negotiations, on 16 March 2016, GKP signed a bilateral agreement with the MNR (the “Bilateral Agreement”). The Bilateral
Agreement included a reduction in the Group’s capacity building payment from 40% to 30% of profit petroleum. Subsequent to signing the
Bilateral Agreement, further negotiations resulted in the capacity building payment rate being reduced from 30% to 20%, which has formed
the basis for all oil sales invoices to date as noted above. Since PSC negotiations have not been finalised, GKP has included a non-cash payable
for the difference between the capacity building rate of 20% and 30%, which is recognised in cost of sales and other payables.
The Company is in dialogue with the MNR to confirm whether to proceed with a formal amendment to the PSC to reflect current invoice terms.
Income tax arising from the Company’s activities under its PSC is settled by the KRG on behalf of the Company. Since the Company is not able
to measure the amount of income tax that has been paid on its behalf the notional income tax amounts have not been included in revenue or in
the tax charge.
Finance revenue
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective rate of interest applicable, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on
initial recognition.
Intangible assets
Intangible assets include computer software and are measured at cost and amortised over their expected useful economic lives of three years.
Financials 138
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Summary of significant accounting policies continued
Property, plant and equipment (“PPE”)
Oil and gas assets
Development and production assets
Development and production assets are accumulated on a field-by-field basis and represent the costs of acquisition and developing the
commercial reserves discovered and bringing them into production, together with the exploration and evaluation expenditure incurred in finding
commercial reserves, directly attributable overheads and costs for future restoration and decommissioning. These costs are capitalised as part
of PPE and depreciated based on the Group’s depreciation of oil and gas assets policy.
The net book values of producing assets are depreciated generally on a field-by-field basis using the unit of production (“UOP”) basis which
uses the ratio of oil and gas production in the period to the remaining commercial reserves plus the production in the period. Costs used in the
calculation comprise the net book value of the field, and estimated future development expenditures required to produce those reserves.
Commercial reserves are proven and probable (“2P”) reserves which are estimated using standard recognised evaluation techniques.
The reserves estimate used in 2022 are based on the June 2022 draft FDP submitted to the MNR. The previous independent reserves report
at 31 December 2020 did not reflect various known updates since completion of the report. A new Competent Person’s Report reserves report
has been completed by ERC Equipoise at 31 December 2022 and will be applied prospectively in the depreciation, depletion and amortisation
(“DD&A”) calculation from 1 January 2023.
Other property, plant and equipment
Other property, plant and equipment are principally equipment used in the field which are separately identifiable to development and production
assets, and typically have a shorter useful economic life. Assets are carried at cost, less any accumulated depreciation and accumulated
impairment losses. Costs include purchase price, construction and installation costs.
These assets are expensed on a straight-line basis over their estimated useful lives of 3 years from the date they are put in use.
Fixtures and equipment
Fixtures and equipment assets are stated at cost less accumulated depreciation and any accumulated impairment losses. These assets are
expensed on a straight-line basis over their estimated useful lives of 5 years from the date they are available for use.
Impairment of PPE and intangible non-current assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset, or group of assets,
is estimated in order to determine the extent of the impairment loss (if any).
For assets which do not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell (“FVLCTS”) and value in use. In assessing FVLCTS and value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Any impairment identified is immediately recognised as an expense. Conversely, any reversal of an impairment is immediately recognised
as income.
Borrowing costs
Borrowing costs directly relating to the acquisition or construction of qualifying assets, which are assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are capitalised and added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
139
Taxation
Tax expense or credit represents the sum of tax currently payable or recoverable and deferred tax.
Tax currently payable or recoverable is based on taxable profit or loss for the year. Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the
balance sheet date.
As described in the revenue accounting policy section above, it is not possible to calculate the amount of notional tax in relation to any tax liabilities
settled on behalf of the Group by the KRG.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient future taxable profits will be available to allow all or part assets to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax
laws and rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity.
Foreign currencies
The individual financial statements of each company are presented in the currency of the primary economic environment in which it operates
(its functional currency). For the purpose of the consolidated financial statements, the results and the financial position of the Group are expressed
in US dollars, which is the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency are
recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried
at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Gains and losses arising on retranslation are included in the income statement for the year.
On consolidation, the assets and liabilities of the Group’s foreign operations which use functional currencies other than US dollars are translated
at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity in the Group’s translation reserve.
On the disposal of a foreign operation, such translation differences are reclassified to profit or loss.
Inventories
Inventories, except for hydrocarbon inventories, are stated at the lower of cost and net realisable value. Cost comprises direct materials and,
where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and
condition. Cost is calculated using the weighted average cost method. Hydrocarbon inventories are recorded at net realisable value with changes
in the value of hydrocarbon inventories being adjusted through cost of sales.
Financials 140
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Summary of significant accounting policies continued
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group has become a party to the contractual
provisions of the instrument.
Trade receivables
Trade receivables are measured at amortised cost using the effective interest method less any impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial assets at fair value through profit and loss
Financial assets are held at fair value through profit and loss (“FVTPL”) when the financial asset is either held for trading or it is designated as
FVTPL. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss.
The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the other
gains and losses line in the income statement.
Derivative financial instruments
The Group may utilise derivative financial instruments to manage its exposure to oil price, foreign exchange or interest rate risk.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair
value at each balance sheet date. The resulting gain or loss is recognised in the profit or loss immediately unless the derivative is designated
and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a liability.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than twelve months and
it is not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
The Group uses hedge accounting for certain derivative instruments. The Group uses cash flow hedge accounting when hedging the exposure
to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognised firm commitment.
At the inception of the hedge relationship, the Group formally designates and documents the relationship between the hedging instrument and
the hedged item, along with its risk management objectives and its strategy for undertaking the hedge transaction. Furthermore, at the inception
of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair
values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationship meets all of the following hedge
effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from the economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for
that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge)
so that it meets the qualifying criteria again.
The Group designates only the intrinsic value of option contracts as a hedged item, i.e. excluding the time value of the option. The changes in the
fair value of the time value of the option are recognised in other comprehensive income and accumulated in the cost of hedging reserve. If the
hedged item is transaction-related, the time value is reclassified to profit or loss when the hedged item affects profit or loss. If the hedged item
is time-period related, then the amount accumulated in the cost of hedging reserve is reclassified to profit or loss on a rational basis – the Group
applies straight-line amortisation. Those reclassified amounts are recognised in profit or loss. If the hedged item is a non-financial item, then the
amount accumulated in the cost of hedging reserve is removed directly from equity and included in the initial carrying amount of the recognised
non-financial item. Furthermore, if the Group expects that some or all of the profit or loss accumulated in cost of hedging reserve will not be
recovered in the future, that amount is immediately reclassified to profit or loss.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
141
Cash flow hedge
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash
flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the
cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss and is included in the revenue line item.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria
(after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised.
The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow
hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction
is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses (“ECL”) on trade receivables and contract assets, as well as on financial
guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial
recognition of the respective financial instrument.
The Group always recognises lifetime expected credit losses for trade receivables, contract assets and lease receivables. The expected credit
losses on these financial assets are estimated based on observed market data and convention, existing market conditions and forward-looking
estimates at the end of each reporting period, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial
recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures
the loss allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.
In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are
possible within 12 months after the reporting date.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs, which are charged to share premium.
Borrowings
Interest-bearing loans and overdrafts are recorded at the fair value of proceeds received, net of transaction costs. Finance charges, including
premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to
the extent that they are not settled in the year in which they arise. The liability is carried at amortised cost using the effective interest rate method
until maturity.
Trade payables
Trade payables are stated at amortised cost. The average maturity for trade and other payables is one to three months.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of
economic benefits that can be reliably estimated.
Decommissioning provision
Provision for decommissioning is recognised in full when there is an obligation to restore the site to its original condition. The amount recognised
is the present value of the estimated future expenditure for restoring the sites of drilled wells and related facilities to their original status.
A corresponding amount equivalent to the provision is also recognised as part of the cost of the related oil and gas asset. The amount recognised
is reassessed each year in accordance with local conditions and requirements. Any change in the present value of the estimated expenditure is
dealt with prospectively. The unwinding of the discount is included as a finance cost.
Financials 142
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Summary of significant accounting policies continued
Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the instruments at
the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 24. The fair
value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to equity reserve.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of
the liability. At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured,
with any changes in fair value recognised in profit or loss for the period. Details regarding the determination of the fair value of cash-settled
share-based transactions are set out in note 24.
Leases
The Group assesses whether a contract contains a lease at inception of the contract. The Group recognises a right-of-use asset and
corresponding lease liability in the consolidated balance sheet for all lease arrangements longer than twelve months, where it is the lessee
and has control of the asset. For all other leases, the Group recognises the lease payments as an operating expense on a straight-line basis
over the term of the lease.
The lease liability is initially measured at the present value of the future lease payments from the commencement date of the lease. The lease
payments are discounted using the interest rate implicit in the lease or, if not readily determinable, the company specific incremental
borrowing rate.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made. The lease liability is recognised in creditors as
current or non current liabilities depending on underlying lease terms.
The right-of-use assets are initially recognised on the balance sheet at cost, which comprises the amount of the initial measurement of
the corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease and any lease
incentive received.
For short-term leases (periods less than 12 months) and leases of low value, the Group has opted to recognise lease expense on a straight
line basis.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the accounting policies described above, the Group is required to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both
current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the directors
have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised
in the financial statements.
Revenue
The recognition of revenue, particularly the recognition of revenue from exports, is considered to be a key accounting judgement.
The Group began commercial production from the Shaikan Field in July 2013 and historically made sales to both the domestic and export
markets. The Group considers that revenue can be reliably measured as it passes the delivery point into the export pipeline. The critical
accounting judgement applied in preparing the 2022 financial statements is that it is appropriate to recognise revenue for deliveries from
1 September 2022 based on the proposed new pricing mechanism, notwithstanding that there is no signed lifting agreement for that
period and the pricing mechanism has not yet been agreed. Further details of this judgement are provided in the sales revenue accounting
policy above. In making this judgement, consideration was given to the fact that, subsequent to the year end, the Group received payment
for September 2022 deliveries at an amount that was consistent with the proposed new pricing terms.
A summary of the currently estimated financial impact of the proposed change in pricing mechanism is detailed in Note 2.
Any future agreements between the Company and the KRG might change the amounts of revenue recognised.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
143
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Carrying value of producing assets
In line with the Group’s accounting policy on impairment, management performs an impairment review of the Group’s oil and gas assets at least
annually with reference to indicators as set out in IAS 36. The Group assesses its group of assets, called a cash-generating unit (“CGU”), for
impairment, if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Where indicators are
present, management calculates the recoverable amount using key estimates such as future oil prices, estimated production volumes, the cost of
development and production, potential climate change transition risk impacts, pre-tax discount rates that reflect the current market assessment
of the time value of money and risks specific to the asset, commercial reserves and inflation. The key assumptions are subject to change based on
market trends and economic conditions. Where the CGU’s recoverable amount is lower than the carrying amount, the CGU is considered impaired
and is written down to its recoverable amount.
The Group’s sole CGU at 31 December 2022 was the Shaikan Field with a carrying value of $391.0 million (2021: $358.3 million). The Group
performed an impairment trigger assessment and concluded that the Iraqi Supreme Court ruling in February 2022 and the change in the
proposed basis of calculating the realised oil price from September 2022 were potential impairment triggers. Accordingly a full impairment
evaluation was completed and it was concluded that no impairment write-down was required.
The key areas of estimation in the impairment assessment are as follows:
• Commodity prices for the current year were based on the forward curve as at December 2022 for the period 2023 to 2028 with inflation of
2% per annum thereafter. Prices at 31 December 2021 were determined based on the latest internal estimates, benchmarked with external
sources of information;
• All prices below are nominal and no impairment arose under either the base or stress case.
Scenario ($/bbl – nominal)
31 December 2022 – base case
31 December 2022 – stress case
31 December 2021 – base case
31 December 2021 – stress case
2022
n/a
n/a
81
80
2023
83.4
75.1
56.1
51.0
2024
78.2
70.4
57.2
52.0
2025
74.5
67.1
58.4
53.1
2026
71.7
64.5
59.5
54.1
2027
69.6
62.6
60.7
55.2
2028
68.1
61.3
61.9
56.3
• The Group continues to develop its assessment of the potential impacts of climate change and the associated risks, the transition to a
low-carbon future and our ambition to reduce scope one per barrel CO2 emissions by at least 50% by 2025 versus the original 2020 baseline of
38 kgCO2e per barrel dependent on the timely sanction and implementation of the Gas Management Plan. The International Energy Agency’s
(“IEA”) Announced Pledges Scenario (“APS”) and Net Zero Emissions (“NZE”) climate scenario oil prices and carbon taxes were used to
evaluate the potential impact of the principal climate change transition risks. The APS being that governments will meet, in full and on time, all
of the climate-related commitments that they have announced, including longer term net zero emissions targets and pledges in Nationally
Determined Contributions (“NDCs”) to reduce national emissions and adapt to the impacts of climate change leading to a global temperature
rise of 1.7°C in 2100. The NZE being the normative scenario pathway to the stabilisation of global average temperatures at 1.5°C above
pre-industrial levels. Neither adoption of the APS price scenario nor NZE price scenario, both with and without the addition of an incremental
carbon tax, resulted in an impairment arising.
• Discount rates that are adjusted to reflect risks specific to the Shaikan Field and the Kurdistan Region of Iraq (“KRI”). The impairment analysis
was based on a pre-tax nominal 15% discount rate (2021: 15%). The impact of an increase in the discount rate to 20% was considered to reflect
potential increased geopolitical risks and no impairment was identified;
• Operating costs and capital expenditure that are based on financial budgets and internal management forecasts. Costs assumptions
incorporate management experience and expectations, including the impact of forecast short term inflationary pressures, as well as the nature
and location of the operation and the risks associated therewith. Base case costs assumptions used in the assessment reflect the latest cost
estimates for the FDP, which includes the estimated cost of implementing a Gas Management Plan, as part of our ambition to reduce scopeone
emissions as outlined above;
• Commercial reserves and production profiles used in the assessment are consistent with the latest draft FDP and materially consistent with the
figures shown in the new independent reserves report recently completed by ERC Equipoise at 31 December 2022; and
• Timing of revenue receipts.
In February 2022, the Iraqi Federal Supreme Court (“FSC”) had ruled that the Kurdistan Oil and Gas Law (“KROGL”) was unconstitutional and
subsequently the Iraqi Ministry of Oil commenced proceedings in the Baghdad Commercial Court against International Oil Companies (“IOCs”),
including Gulf Keystone, operating in the KRI seeking to nullify the PSCs issued under the KROGL. The Company understands that the Baghdad
Commercial Court has issued adverse judgements against many of the IOCs, including Gulf Keystone, in absentia. The KRG continues to affirm
that KROGL is validly constituted and the PSCs issued are valid and in full force and effect. The Company’s operations in the Shaikan Field are
currently unaffected. However, the matter continues to be closely monitored, including any potential impact on the restrictions placed on the
export of crude oil, service contractors or any other parties by the Iraqi Ministry of Oil.
Financials
144
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
1 Geographical information
The Group’s non-current assets, excluding deferred tax assets and other financial assets, by geographical location are detailed below:
Kurdistan
United Kingdom
2022
$’000
2021
$’000
436,213
402,787
4,537
5,001
440,750
407,788
The Chief Operating Decision Maker, as per the definition in IFRS 8, is considered to be the Board of Directors. The Group operates in a single
segment, that of oil and gas exploration, development and production, in a single geographical location, the Kurdistan Region of Iraq. As a result,
the financial information of the single segment is the same as set out in the consolidated statement of comprehensive income, the consolidated
balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes.
2 Revenue
Oil sales
Hedging losses reclassified to revenue
2022
$’000
2021
$’000
460,113
305,142
—
(3,753)
460,113
301,389
The Group accounting policy for revenue recognition is set out in the ‘Summary of significant accounting policies’, with revenue recognised upon
crude oil passing the delivery points into the export pipeline.
From 1 January 2022 to 31 August 2022 the realised sales price was based on the weighted monthly average Dated Brent price, which was
$107.3/bbl during the period (2021: $70.8/bbl) less a weighted monthly average discount of $23.3 (2021: $21.2) per barrel for quality and pipeline
tariff costs. Since 1 September 2022 there has been no lifting agreement in place between the Shaikan Contractor and the KRG; production
and export has continued whilst negotiations are ongoing. The KRG proposal is for a new pricing mechanism based upon the average monthly
Kurdistan blend (“KBT”) sales price realised by the KRG at Ceyhan, as advised by the KRG. The Company has not accepted the proposal and
continues to invoice the KRG for oil sales based on the pre-1 September 2022 pricing formula.
Oil sales during 2022 were impacted by $2.4 million of backdated pipeline tariff increases related to 2021 (2021: nil).
Considering the uncertainty in respect of the pricing mechanism, the Company has concluded that it is appropriate to recognise revenue based
on the proposed mechanism from September to December 2022. The revenue impact of the proposed pricing mechanism for the period is
estimated to be a reduction of $23.4 million. Taking into account the associated reduction in capacity building payments results in a total reduction
of profit after tax for the year of $21.7 million. Any difference between the proposed and final pricing mechanism will be reflected in future periods.
Information about major customers
All oil sales revenue relates to sales to the KRG.
3 Cost of sales
Operating costs
Capacity building payments
Change in oil inventory value
Depreciation of oil and gas assets and operational assets
Impairment of surplus drilling stock
2022
$’000
41,835
34,927
2021
$’000
34,372
23,529
555
(348)
80,225
54,168
1,109
—
158,651
111,721
Capacity building payments have been recorded in line with the proposed pricing mechanism (see note 2); any difference between the proposed
and final pricing mechanism will be reflected in future periods.
Further details on the depreciation of oil and gas assets and operational assets, as well as the recognition of capacity building payments, are set
out in the Summary of significant accounting policies section.
The Company updated the depreciation calculation based on the June 2022 draft FDP submitted to the MNR including an internal reserves and
cost update. This resulted in a higher DD&A per barrel rate. The new DD&A rate constitutes a change in accounting estimate and is reflected in the
financial statements effective 1 January 2022.
The impairment of surplus drilling stocks includes the carrying value of items not anticipated to be used in future drilling operations.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
145
4 Other general and administrative expenses
Depreciation and amortisation
Auditor’s remuneration (see below)
Other general and administrative costs
2022
$’000
1,563
703
9,936
12,202
Of the $12.2 million of general and administrative expenses, $5.2 million (2021: $4.1 million) were incurred in relation to the Shaikan Field.
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor for other services to the Group
– audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Advisory services
Other assurance services (including a half year review)
Total fees
5 Share option related expense
Share-based payment expense
Payments related to share options exercised
Share-based payment related provision for taxes
2022
$’000
430
26
456
112
135
703
2022
$’000
3,266
8,690
1,800
13,756
2021
$’000
940
583
12,120
13,643
2021
$’000
318
28
346
107
130
583
2021
$’000
2,255
4,142
2,093
8,490
On the final exercise of the legacy Value Creation Plan (“VCP”) share options by former Directors, the Company elected to make required tax
withholding settlements in cash instead of issuing and selling additional shares. This together with payment of dividends accumulated during the
vesting period are the main components of the payments related to share options exercised.
The legacy VCP scheme totalled $9.5 million of the $13.8 million expense (2021: $3.4 million). There are no further VCP share options outstanding
and the plan has been terminated.
6 Staff costs
The average number of employees and contractors (including Executive directors) employed by the Group was 460 (2021: 349); the number of
full-time equivalents of these workers was 317 (2021: 237).
Kurdistan
United Kingdom
Total
Staff costs were as follows:
Wages and salaries
Social security costs
Share-based payment (see note 24)
Average number
of employees
Average number
of full-time equivalents
2022
421
39
460
2021
317
32
349
2022
280
37
317
2021
205
32
237
2022
$’000
2021
$’000
46,879
36,835
2,503
4,260
53,642
1,880
3,009
41,724
Staff costs include costs relating to contractors who are long-term workers in key positions, and are included in PPE additions, cost of sales and
other general and administrative expenditure depending on the nature of such costs. Staff costs are shown gross before amounts recharged to
joint operations.
Financials
146
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
7 Finance costs and finance revenue
Notes interest expense (see note 16)
Unwinding of finance and arrangement fees (see note 16)
Notes repayment fee (see note 16)
Finance lease interest
Unwinding of discount on provisions (see note 17)
Total finance costs
Finance revenue
Net finance costs
On 2 August 2022 the Group redeemed the $100m notes and paid an early repayment fee (see note 16).
8 Income tax
Current year credit
Prior year adjustment
Deferred UK corporation tax credit (see note 18)
Tax credit attributable to the Company and its subsidiaries
2022
$’000
2021
$’000
(5,833)
(10,000)
(879)
(2,000)
(77)
(866)
(489)
—
(123)
(741)
(9,655)
(11,353)
648
419
(9,007)
(10,934)
2022
$’000
216
—
109
325
2021
$’000
75
28
771
874
The Group is not required to pay taxes in Bermuda on either income or capital gains. The Group has received an undertaking from the Minister of
Finance in Bermuda exempting it from any such taxes at least until the year 2035.
In the Kurdistan Region of Iraq, the Group is subject to corporate income tax on its income from petroleum operations under the Kurdistan PSC.
Under the Shaikan PSC, any corporate income tax arising from petroleum operations will be paid from the KRG’s share of petroleum profits.
Due to the uncertainty over the payment mechanism for oil sales in Kurdistan, it has not been possible to measure reliably the taxation due that
has been paid on behalf of the Group by the KRG and therefore the notional tax amounts have not been included in revenue or in the tax charge.
This is an accounting presentational issue and there is no taxation to be paid.
The annual UK corporation tax rate for the year ended 31 December 2022 was 19.0% (2021: 19.0%).
On 3 March 2021, the UK Government announced that the corporation tax rate in the UK will increase to 25% for companies with taxable
profits above £250,000 with effect from 1 April 2023, as well as announcing a number of other changes to allowances and treatment of losses.
These changes were substantively enacted as at 31 December 2021.
Deferred tax is provided for due to the temporary differences, which give rise to such a balance in jurisdictions subject to income tax.
All deferred tax arises in the UK.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
147
9 Profit per share
The calculation of the basic and diluted profit per share is based on the following data:
Profit after tax for basic and diluted per share calculations ($’000)
Number of shares (‘000s):
Basic weighted average number of ordinary shares
Basic EPS (cents)
2022
2021
266,094
164,597
215,420
213,384
123.52
77.14
The Group followed the steps specified by IAS 33 in determining whether potential common shares are dilutive or anti-dilutive.
Reconciliation of dilutive shares:
Number of shares (‘000s)
Basic weighted average number of ordinary shares outstanding
Effect of potential dilutive share options
Diluted number of ordinary shares outstanding
Diluted EPS (cents)
2022
2021
215,420
213,384
8,909
11,962
224,329
225,346
118.62
73.04
The weighted average number of ordinary shares in issue excludes shares held by Employee Benefit Trust (“EBT”).
The diluted number of ordinary shares outstanding is calculated on the assumption of the exercise of all potentially dilutive share options.
10 Intangible assets
Year ended 31 December 2021
Opening net book value
Additions
Amortisation charge
Foreign currency translation differences
Closing net book value
At 31 December 2021
Cost
Accumulated amortisation
Net book value
Year ended 31 December 2022
Opening net book value
Additions
Amortisation charge
Foreign currency translation differences
Closing net book value
At 31 December 2022
Cost
Accumulated amortisation
Net book value
Computer
software
$’000
933
2,742
(25)
(67)
3,583
4,722
(1,139)
3,583
3,583
2,074
(859)
(491)
4,307
6,305
(1,998)
4,307
The amortisation charge of $859,000 (2021: $25,000) for computer software has been included in other general and administrative expenses
(see note 4).
Financials
148
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
11 Property, plant and equipment
Year ended 31 December 2021
Opening net book value
Additions
Disposals
Revision to decommissioning asset
Depreciation charge
Accumulated depreciation eliminated on disposal
Foreign currency translation differences
Closing net book value
At 31 December 2021
Cost
Accumulated depreciation
Net book value
Year ended 31 December 2022
Opening net book value
Additions
Impairment of surplus drilling stocks
Revision to decommissioning asset
Depreciation charge
Foreign currency translation differences
Closing net book value
At 31 December 2022
Cost
Accumulated depreciation
Net book value
Oil and gas
assets
$’000
Fixtures and
equipment
$’000
Right of use
assets
$’000
Total
$’000
402,620
46,165
—
7,429
1,187
203
—
—
1,662
405,469
76
46,444
(1,432)
—
(1,432)
7,429
(54,120)
(351)
(612)
(55,083)
—
(1)
—
(6)
1,405
(21)
1,405
(28)
402,094
1,033
1,078
404,205
831,924
7,363
2,246
841,533
(429,830)
(6,330)
(1,168)
(437,328)
402,094
1,033
1,078
404,205
402,094
114,909
(1,109)
(2,161)
(80,177)
—
1,033
1,595
—
—
(359)
(12)
1,078
404,205
—
—
—
116,504
(1,109)
(2,161)
(347)
(80,883)
(101)
(113)
433,556
2,257
630
436,443
943,563
8,946
2,145
954,654
(510,007)
(6,689)
(1,515)
(518,211)
433,556
2,257
630
436,443
The net book value of oil and gas assets at 31 December 2022 is comprised of property, plant and equipment relating to the Shaikan block with a
carrying value of $433.6 million (2021: $402.1 million).
The additions to the Shaikan asset during the year include costs relating to the drilling and completion of SH-15 and SH-16, and SH-17 that was
completed early 2023, well pad preparation, PF-1 and PF-2 expansion and water handling activities, and subsurface studies.
The decrease in the decommissioning asset represents the change in accounting estimates as detailed in note 17 partially offset by additional
decommissioning activities arising from capital projects completed during the year and revisions to decommissioning cost estimates.
The DD&A charge of $80.2 million (2021: $54.1 million) on oil and gas assets has been included within cost of sales (note 3). The depreciation
charge of $0.4 million (2021: $0.4 million) on fixtures and equipment and $0.3 million (2021: $0.6 million) on right of use assets has been included in
general and administrative expenses (note 4).
Right of use assets at 31 December 2022 of $0.6 million (2021: $1.1 million) consisted principally of buildings.
For details of the key assumptions and judgements underlying the impairment assessment, refer to the “Critical accounting estimates and
judgements” section of the Summary of significant accounting policies.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
149
12 Group companies
Details of the Company’s subsidiaries and joint operations at 31 December 2022 is as follows:
Name of subsidiary
Gulf Keystone Petroleum (UK) Limited
6th Floor
New Fetter Place
8-10 New Fetter Lane
London EC4A 1AZ
Gulf Keystone Petroleum International Limited
Cedar House, 3rd Floor
41 Cedar Avenue
Hamilton HM12
Bermuda
Name of joint operation
Shaikan
13 Inventories
Warehouse stocks and materials
Crude oil
14 Trade and other receivables
Current receivables
Trade receivables
Other receivables
Prepayments and accrued income
Reconciliation of Trade Receivables
Gross carrying amount
Less: Impairment allowance
Carrying value at 31 December
Place of incorporation
United Kingdom
Proportion of
ownership interest
100%
Bermuda
100%
Principal activity
Management, support,
geological, geophysical
and engineering services
Exploration, evaluation,
development and
production activities
in Kurdistan
Location
Kurdistan
Proportion of
ownership interest
Principal
activity
80%
Production and
development activities
2022
$’000
6,074
298
6,372
2021
$’000
5,318
700
6,018
2022
$’000
2021
$’000
158,032
174,634
16,828
1,343
3,622
944
176,203
179,200
2022
$’000
2021
$’000
161,112
175,754
(3,080)
(1,120)
158,032
174,634
Gross trade receivables of $161.1 million (2021: $175.8 million) are comprised of invoiced amounts due from the KRG for crude oil sales totalling
$148.9 million (2021: $163.6 million) related to August – December 2022 and a share of Shaikan amounts due from the KRG that the Group
purchased from MOL amounting to $12.2 million (2021: $12.2 million).
As detailed in the Summary of significant accounting policies, sales revenue for September – December 2022 production and Note 2, the revenue
and corresponding receivable have been recognised based on a proposed pricing mechanism. On 8 March 2023 GKP received payment for
crude oil sales relating to September 2022 in line with the proposed pricing mechanism; this does not indicate that GKP has accepted the terms of
this proposed pricing mechanism.
At 31 December 2022, overdue trade receivables relating to oil sales for August to October 2022 aggregated $99.1 million (2021: $60.4 million).
Since year end, $69.0 million has been received; $40.8 million relating to August oil sales and $28.2 million relating to September oil sales,
which reflects the proposed pricing mechanism based upon discounted KBT. While the Group expects to recover the full value of the outstanding
invoices and purchased revenue arrears, the ECL on the overdue receivable balance of $3.1 million (2021: $1.1 million) was provided against the
receivables balance in line with the requirements of IFRS 9. During the year, a $2.0 million charge was recognised due to the increase in the ECL
provision (2021: credit of $7.1 million); driven by an estimated increase in the probability of counterparty default as well as an extension to the
expected date of receipt of outstanding receivables.
Financials
150
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
14 Trade and other receivables continued
Reconciliation of Trade Receivables continued
The Group received the final payments in relation to the arrears outstanding at 31 December 2021 in relation to November 2019 to February 2020
invoices totalling $41.0 million during 2022. This was settled in line with the KRG’s proposal to pay 50% of the difference between the monthly
average dated Brent price and $50/bbl multiplied by the gross Shaikan crude oil volumes sold in the month.
ECL sensitivities
The Group’s profit before tax was not materially sensitive to movements of +/-10% in production level, Brent price, loss given default or probability
of default.
Other receivables
Other receivables includes an amount relating to advances to suppliers of $11.5 million (2021: $0.4 million) related to property, plant and equipment
that are included within investing activities in the consolidated cash flow statement.
Included within Other receivables is an amount of $0.4 million (2021: $0.4 million) being the deposits for leased assets which are receivable after
more than one year. There are no receivables from related parties as at 31 December 2022 (2021: nil). No impairments of other receivables have
been recognised during the year (2021: nil).
15 Trade and other payables
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The directors consider that the carrying amount of trade payables approximates their fair value.
Current liabilities
Trade payables
Accrued expenditures
Other payables
Current lease liabilities (see note 22)
2022
$’000
3,499
40,642
84,035
385
2021
$’000
6,494
25,961
65,927
419
128,561
98,800
Other payables include $70.7 million (2021: $56.4 million) of amounts payable to the KRG that are not expected to be paid in cash, but rather offset
against historic revenue due from the KRG, which have not yet been recognised in the financial statements. Within this amount, $34.2 million
(2021: $22.6 million) relates to a non-cash payable for the difference between the capacity building rate of 20% and 30% (see Summary of
significant accounting policies, Sales revenue).
Non-current liabilities
Non-current lease liability (see note 22)
16 Long term borrowings
Liability component at 1 January
Interest expense, including unwinding of finance & arrangement fees, and notes early repayment fee
Interest paid during the year
Principal repaid in year
Settlement of notes early repayment fee
Liability component at 31 December
Liability component reported in:
Current liabilities (see note 15)
Non-current liabilities
2022
$’000
325
2021
$’000
789
2022
$’000
2021
$’000
103,482
102,993
8,712
10,489
(10,194)
(10,000)
(100,000)
(2,000)
—
—
—
103,482
2022
$’000
—
—
—
2021
$’000
4,359
99,123
103,482
Gulf Keystone Petroleum Limited Annual report and accounts 2022
151
In July 2018, the Group completed the private placement of a 5-year senior unsecured $100 million bond issue (the “Notes”). The unsecured Notes
were guaranteed by Gulf Keystone Petroleum International Limited and Gulf Keystone Petroleum (UK) Limited, two of the Company’s subsidiaries,
and the key terms are summarised as follows:
• maturity date was 25 July 2023;
• the Notes were redeemable in full with a prepayment penalty; and
• the interest rate was 10% per annum with semi-annual payment dates.
During the year, the Group was not in breach of any terms of the Notes.
On 2 August 2022 the Group redeemed the $100m bond and paid a 2% early repayment fee.
The Notes were traded on the Norwegian Stock Exchange and the fair value at the prevailing market price as at the balance sheet date was:
Notes
2022
$’000
2021
$’000
—
103,750
As at year end, the Group’s remaining contractual liability comprising principal and interest based on undiscounted cash flows is as follows:
Within one year
Within two years
17 Provisions
Decommissioning provision
At 1 January
New provisions and changes in estimates
Unwinding of discount
At 31 December
2022
$’000
—
—
—
2021
$’000
10,000
105,639
115,639
2022
$’000
2021
$’000
43,841
35,671
(2,161)
866
7,429
741
42,546
43,841
The $2.2m decrease in new provisions and changes in estimates comprises an increase relating to new drilling and facilities work of $7.6 million
(2021: $10.5 million), offset by a reduction of $9.8 million (2021: $3.1 million) due to changes in inflation and discount rates. The provision for
decommissioning is based on the net present value of the Group’s estimated share of expenditure, inflated in line with the table below and
discounted at 3.8% (2021: 2.0%), which may be incurred for the removal and decommissioning of the wells and facilities currently in place and
restoration of the sites to their original state. Most expenditures are expected to take place towards the end of the PSC term in 2043.
Annual Inflation Assumption (%)
2022
2023
2024
2025-2043
2022
—
5.00%
3.00%
2.75%
2021
2.00%
2.00%
2.00%
2.00%
Financials
152
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
18 Deferred tax asset
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior
reporting periods. The deferred tax assets arise in the United Kingdom.
Accelerated tax Share-based
Tax losses
payments carried forward
$’000
$’000
732
321
(4)
1,049
241
(109)
1,181
—
831
—
831
223
(87)
967
Total
$’000
617
771
(3)
1,385
325
(134)
1,576
depreciation
$’000
(115)
(381)
1
(495)
(139)
62
(572)
At 1 January 2021
(Charge)/credit to income statement
Exchange differences
At 31 December 2021
(Charge)/credit to income statement
Exchange differences
At 31 December 2022
19 Financial instruments
Financial assets
Cash and cash equivalents
Receivables
Financial liabilities
Trade and other payables
Borrowings
2022
$’000
2021
$’000
119,456
169,866
162,990
178,258
282,446
348,124
128,886
—
128,886
99,589
99,123
198,712
All financial liabilities, except for non-current lease liabilities (see note 15), are due to be settled within one year and are classified as current
liabilities. All financial liabilities are recognised at amortised cost.
Fair values of financial assets and liabilities
With the exception of the Notes, and the receivables from the KRG which the Group expects to recover in full (see note 14), the Group considers
the carrying value of all its financial assets and liabilities to be materially the same as their fair value. On 2 August 2022 the company redeemed
the Notes, therefore no amount remained outstanding at 31 December 2022 (2021: fair value as determined using market values of $103.8 million;
carrying value of $99.1 million).
In making the above assessment, consideration has been given to the fair value hierarchy set out in IFRS 13. Fair value hierarchy levels 1 to 3 are
based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market date (unobservable inputs).
The fair value of the Notes disclosed above is based on Level 1 in the hierarchy.
The financial assets balance includes a $3.1 million provision against trade receivables (2021: $1.1 million) (see note 14). All financial assets, except
derivatives designated as a hedge, are measured at amortised cost.
Capital Risk Management
The Group manages its capital to ensure that the entities within the Group will be able to continue as going concerns while maximising the return
to stakeholders through the optimisation of the debt and equity structure. The capital structure of the Group consists of cash, cash equivalents,
Notes (in prior year) and equity attributable to equity holders of the parent. Equity comprises issued capital, reserves and accumulated losses as
disclosed in note 20 and the Consolidated statement of changes in equity.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
153
Capital Structure
The Company’s Board of Directors reviews the capital structure on a regular basis and will make adjustments in light of changes in economic
conditions. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital.
Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis
on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in
the Summary of significant accounting policies.
Financial Risk Management Objectives
The Group’s management monitors and manages the financial risks relating to the operations of the Group. These financial risks include
market risk (including commodity price, currency and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk.
As at year end, the Group did not hold any derivative assets to hedge against commodity price declines or any other financial risks. The Group
does not use derivative financial instruments for speculative purposes.
The risks are closely reviewed by the Board on a regular basis and, where appropriate, steps are taken to ensure these risks are minimised.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in oil prices, foreign currency exchange rates and changes in interest
rates in relation to the Group’s cash balances.
There have been no changes to the Group’s exposure to other market risks. The risks are monitored by the Board on a regular basis.
The Group conducts and manages its business predominantly in US dollars, the operating currency of the industry in which it operates.
The Group also purchases the operating currencies of the countries in which it operates routinely on the spot market. Cash balances are held in
other currencies to meet immediate operating and administrative expenses or to comply with local currency regulations.
At 31 December 2022, a 10% weakening or strengthening of the US dollar against the other currencies in which the Group’s monetary assets
and monetary liabilities are denominated would not have a material effect on the Group’s net assets or profit.
Interest rate risk management
The Group’s policy on interest rate management is agreed at the Board level and is reviewed on an ongoing basis. The current policy is to maintain
a certain amount of funds in the form of cash for short-term liabilities and have the rest on relatively short-term deposits, usually between one
and three months, to maximise returns and accessibility. Prior to redeeming the Notes in August 2022, the Company paid interest on its Notes
semi-annually in cash at 10% per annum.
Based on the exposure to interest rates for cash and cash equivalents at the balance sheet date, a 0.5% increase or decrease in interest rates
would not have a material impact on the Group’s profit. A rate of 0.5% is used as it represents management’s assessment of a reasonable change
in interest rates.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at
31 December 2022, the maximum exposure to credit risk from a trade receivable outstanding from one customer is $161.1 million
(2021: $175.8 million). Although the Group is confident in the recovery of the trade receivables balance, a provision of $3.1 million (2021: $1.1 million)
was recognised against the trade receivables balance.
The credit risk on liquid funds is limited because the counterparties for a significant portion of the cash and cash equivalents at the balance sheet
date are banks with investment grade credit ratings assigned by international credit-rating agencies.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors. It is the Group’s policy to finance its business by means
of internally generated funds, external share capital and debt. The Group seeks to raise further funding as and when required.
Financials 154
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
20 Share capital
Authorised
Common shares of $1 each (2021: $1 each)
Non-voting shares of $0.01 each
Preferred shares of $1,000 each
Series A Preferred shares of $1,000 each
Balance at 1 January 2021
Dividends paid
Shares issued
Balance at 31 December 2021
Dividends paid
Shares issued
Balance at 31 December 2022
2022
$’000
2021
$’000
231,605
231,605
500
20,000
40,000
500
20,000
40,000
292,105
292,105
Common shares
No. of shares
‘000
Share capital Share premium
$’000
$’000
Total amount
$’000
211,371
211,371
842,914
1,054,285
—
—
(100,000)
(100,000)
2,360
2,360
—
2,360
213,731
213,731
742,914
956,645
—
2,516
—
(214,789)
(214,789)
2,516
—
2,516
216,247
216,247
528,125
744,372
At 31 December 2022, a total of 0.4 million common shares at $1 each were held by the EBT (2021: 0.1 million at $1 each). These common shares
were included within reserves.
Rights attached to share capital
The holders of the common shares have the following rights (subject to the other provisions of the Byelaws):
(i) entitled to one vote per common share;
(ii) entitled to receive notice of, and attend and vote at, general meetings of the Company;
(iii) entitled to dividends or other distributions; and
(iv) in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for a reorganisation or otherwise or upon a
distribution of capital, entitled to receive the amount of capital paid up on their common shares and to participate further in the surplus assets
of the Company only after payment of the Series A Liquidation Value (as defined in the Byelaws) on the Series A Preferred Shares.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
155
21 Cash flow reconciliation
Cash flows from operating activities
Profit from operations
Adjustments for:
Notes
2022
$’000
2021
$’000
273,544
174,600
Depreciation, depletion and amortisation of property, plant and equipment (including the right of use assets)
80,883
Amortisation of intangible assets
Increase/(Decrease) of provision for impairment of trade receivables
Put option hedging losses reclassified to revenue
Share-based payment expense
Impairment of PPE items
Operating cash flows before movements in working capital
Increase in inventories
Decrease/(Increase) in trade and other receivables
Increase in trade and other payables
Income taxes received
Cash generated from operations
Reconciliation of property, plant and equipment additions to cash flows from purchase of property, plant and equipment:
Associated cash flows
Additions to property, plant and equipment
Movement in working capital
Non-cash movements
Capitalised share option charges
Foreign exchange differences
Purchase of property, plant and equipment
Movement in financing related liabilities
The Group’s financing related liabilities are comprised of borrowings and lease liabilities. The movements in borrowings are shown in note 16
and the movements in lease liabilities in the year were primarily cash payments of $0.7 million (2021: $0.7 million).
14
24
859
1,960
—
1,866
1,109
55,111
25
(7,065)
3,752
1,197
—
360,221
227,620
(354)
(258)
11,640
12,339
—
(75,259)
36,977
75
383,846
189,155
2022
$’000
2021
$’000
116,617
(11,214)
46,417
6,927
—
(112)
(409)
24
105,291
52,959
Financials
156
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
22 Lease Liabilities
During 2022, the total cash outflows relating to leased assets was $0.5 million (2021: $0.7 million); this amount is the total of capital repayments,
interest charges and foreign exchange impact.
Analysed as:
Current liabilities (note 15)
Non-current liabilities (note 15)
Lease liability maturity analysis
Year 1
Year 2
Amounts payable under leases
Within one year
In the second to fifth year inclusive
Less future interest charges
Net present value of lease obligations
2022
$’000
2021
$’000
385
325
710
385
325
436
339
775
(65)
710
419
789
1,208
419
789
509
868
1,377
(169)
1,208
23 Commitments
Exploration and development commitments
Additions to property, plant and equipment are generally funded with the cash flow generated from the Shaikan Field. As at 31 December 2022,
gross capital commitments in relation to the Shaikan Field were estimated to be $41.9 million (2021: $20.6 million).
24 Share-based payments
Total share options charge
Capitalised share options charge
Share options charge in Income Statement
2022
$’000
3,266
—
3,266
2021
$’000
2,664
(409)
2,255
Value Creation Plan (“VCP”)
The VCP was approved by shareholders in December 2016. As at 31 December 2022, nil (2021: 3.5 million) nil-cost share options were
outstanding under the VCP. There will be no further awards under the plan.
During the year, the awards that were outstanding at 31 December 2021 vested, with the Company achieving a Total Shareholder Return (“TSR”)
of at least 8% compound annual growth, in accordance with the VCP rules.
Outstanding at 1 January
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2022
Number of
share options
’000
2021
Number of
share options
’000
3,508
7,017
(3,508)
(3,509)
—
—
3,508
3,508
No VCP options remained outstanding at 31 December 2022 with all remaining awards at 2021 year end fully exercised in 2022.
Staff Retention Plan
At the 2016 Annual General Meeting (“AGM”), shareholders approved the adoption of the Gulf Keystone Petroleum 2016 Staff Retention Plan
(“SRP”), which is designed to reward members of staff through the grant of share options at a zero exercise price.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
157
The exercise of the nil-cost awarded options is not subject to any performance conditions and can be exercised at any time after the three
year vesting period but within ten years after the date of grant. If options are not exercised within ten years, the options will lapse and will not be
exercisable. If an employee leaves the company during the three years from the date of grant, the options will lapse on the date notice to leave is
given to the company. Should an employee be regarded as a good leaver as defined in the scheme rules, the options may be exercised at any time
within a period of six months from departure date.
Outstanding at 1 January
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2022
Number of
share options
’000
2021
Number of
share options
’000
65
(55)
10
10
973
(908)
65
65
The weighted average share price at the date of exercise for share options exercised during the year was £2.56 (2021: £1.70).
During the year no options (2021: nil) were granted to employees under the Group’s SRP.
A charge of nil (2021: nil) in relation to the SRP is included in the total share options charge.
Share options outstanding at the end of the year have the exercise price of nil and the following expiry dates:
Expiry date
11 December 2026
30 June 2027
Options (’000)
2022
2021
9
1
10
12
53
65
The options outstanding at 31 December 2022 had a weighted average remaining contractual life of four years.
Long Term Incentive Plan
The Gulf Keystone Petroleum 2014 Long Term Incentive Plan (“LTIP”) is designed to reward members of staff through the grant of share options
at a zero exercise price, that vest three years after grant, subject to the fulfilment of specified performance conditions. These performance
conditions are 50% TSR over the vesting period and 50% the Group’s TSR relative to a bespoke group of comparators.
2022
Number of
share options
’000
2021
Number of
share options
’000
Outstanding at 1 January
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 31 December
Exercisable at 31 December
8,275
2,278
(586)
(1,182)
8,785
—
The weighted average share price at the date of exercise for share options exercised during the year was £2.44 (2021: £1.69).
The inputs into the calculation of fair values of the shares granted during the year are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividend yield (on the basis dividends equivalents received)
The options outstanding at 31 December 2022 had a weighted average remaining contractual life of two years.
The aggregate of the estimated fair value of options granted in 2022 is $5.0 million (2021: $4.3 million).
A charge of $3.1 million (2021: $2.5 million) in relation to the LTIP is included in the total share options charge.
2022
£2.44
Nil
57.7%
3 years
0.14%
Nil
7,254
2,747
(1,014)
(712)
8,275
—
2021
£2.26
Nil
58.7%
3 years
0.14%
Nil
Financials
158
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Notes to the consolidated financial statements
continued
25 Dividends
During 2022 a total of $215 million (2021: $100 million) of dividends were paid to shareholders including an ordinary dividend of $25 million
(11.561 US cents per Common Share), a special dividend of $50 million (23.12 US cents per Common Share) and interim dividends totalling
$140 million (65.27 US cents per Common Share).
To date in 2023 an interim dividend of $25 million has been paid. An ordinary dividend of $25 million is subject to approval at the AGM on
16 June 2023.
26 Related party transactions
The Company has a related party relationship with its subsidiaries and in the ordinary course of business, enters into various sales, purchase
and service transactions with joint operations in which the Company has a material interest. These transactions are under terms that are no less
favourable to the Group than those arranged with third parties.
Remuneration of Directors and Officers
The remuneration of the Directors and Officers who are considered to be key management personnel is set out below in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures. The Directors and Officers who served during the year ended 31 December 2022 were
as follows:
• J Huijskes – Non-Executive Chairman
• M Angle – Deputy Chairman
• G Soden – Non-Executive Director
• D Thomas – Non-Executive Director
• K Wood – Non-Executive Director
• W Mwaura – Non-Executive Director (appointed July 2022)
• J Harris – Chief Executive Officer
•
• G Papineau-Legris – Chief Commercial Officer
• C Kinahan – Chief Human Resources Officer
• A Robinson – Chief Legal Officer and Company Secretary
• S Catterall – Chief Operating Officer (resigned February 2022)
• J Hulme – Chief Operating Officer (appointed April 2022)
I Weatherdon – Chief Financial Officer
The values below are calculated in accordance with IAS 19 and IFRS 2.
Short-term employee benefits
Share-based payment – options
2022
$’000
4,725
1,499
6,224
2021
$’000
5,809
1,012
6,821
Further information about the remuneration of individual Directors is provided in the Directors’ Emoluments section of the Remuneration
Committee Report.
27 Contingent Liabilities
The Group has a contingent liability of $27.3 million (2021: $27.3 million) in relation to the proceeds from the sale of test production in the period
prior to the approval of the original Shaikan Field Development Plan (“FDP”) in June 2013. The Shaikan PSC does not appear to address expressly
any party’s rights to this pre-FDP petroleum. The sales were made based on sales contracts with domestic offtakers which were approved by
the KRG. The Group believes that the receipts from these sales of pre-FDP petroleum are for the account of the Contractor, rather than the KRG
and accordingly recorded them as test revenue in prior years. However, the KRG has requested a repayment of these amounts and the Group
is currently involved in negotiations to resolve this matter. The Group has received external legal advice and continues to maintain that pre-FDP
petroleum receipts are for the account of the Contractor. This contingent liability forms part of the ongoing Shaikan PSC amendment negotiations
and it is likely that it will be settled as part of those negotiations.
Gulf Keystone Petroleum Limited Annual report and accounts 2022
159
Non-IFRS measures
The Group uses certain measures to assess the financial performance of its business. Some of these measures are termed “non-IFRS
measures” because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure
calculated and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS.
These non-IFRS measures include financial measures such as operating costs and non-financial measures such as gross average production.
The Group uses such measures to measure and monitor operating performance and liquidity, in presentations to the Board and as a basis for
strategic planning and forecasting. The Directors believe that these and similar measures are used widely by certain investors, securities analysts
and other interested parties as supplemental measures of performance and liquidity.
The non-IFRS measures may not be comparable to other similarly titled measures used by other companies and have limitations as analytical
tools and should not be considered in isolation or as a substitute for analysis of the Group’s operating results as reported under IFRS.
An explanation of the relevance of each of the non-IFRS measures and a description of how they are calculated is set out below. Additionally,
a reconciliation of the non-IFRS measures to the most directly comparable measures calculated and presented in accordance with IFRS and
a discussion of their limitations is set out below, where applicable. The Group does not regard these non-IFRS measures as a substitute for,
or superior to, the equivalent measures calculated and presented in accordance with IFRS or those calculated using financial measures that
are calculated in accordance with IFRS.
Gross operating costs per barrel
Gross operating costs are divided by gross production to arrive at operating costs per barrel.
Gross production (MMstb)
Gross operating costs ($ million)(1)
Gross operating costs per barrel ($ per bbl)
2022
16.1
52.3
3.2
2021
15.9
43.0
2.7
(1) Gross operating costs equate to operating costs (see note 3) adjusted for the Group’s 80% working interest in the Shaikan Field.
Adjusted EBITDA
Adjusted EBITDA is a useful indicator of the Group’s profitability, which excludes the impact of costs attributable to tax (expense)/credit,
finance costs, finance revenue, depreciation, amortisation and impairment of receivables.
Profit after tax
Finance costs
Finance revenue
Tax credit
Depreciation of oil and gas assets
Depreciation of other PPE assets and amortisation of intangibles
Impairment of receivables
Adjusted EBITDA
2022
$ million
266.1
2021
$ million
164.6
9.7
(0.6)
(0.3)
80.2
1.4
2.0
11.4
(0.4)
(0.9)
54.1
1.0
(7.1)
358.5
222.7
Financials
160
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Non-IFRS measures continued
Net capital expenditure
Net capital expenditure is the value of the Group’s additions to oil and gas assets excluding the change in value of the decommissioning asset
or any asset impairment.
Net capital expenditure (note 11)
(1) The definition of net capital expenditure has been amended to no longer exclude the increase/decrease of drilling and other equipment.
2022
$ million
114.9
2021
Restated(1)
$ million
46.2
Net cash
Net cash is a useful indicator of the Group’s indebtedness and financial flexibility because it indicates the level of cash and cash equivalents less
cash borrowings within the Group’s business. Net cash is defined as cash and cash equivalents, less current and non-current borrowings and
non-cash adjustments. Non-cash adjustments include unamortised arrangement fees and other adjustments.
Outstanding Notes
Unamortised issue costs (note 16)
Cash and cash equivalents
Net cash
2022
$ million
2021
$ million
—
—
119.5
119.5
(99.1)
(0.9)
169.9
69.9
Free cash flow
Free cash flow represents the Group’s cash flows, before any dividends, share buybacks and notes redemption, including related fees.
Net cash generated from operating activities
Net cash used in investing activities
Payment of leases
Free cash flow
2022
$ million
2021
$ million
374.3
(107.4)
(0.4)
266.5
178.6
(55.7)
(0.7)
122.2
Gulf Keystone Petroleum Limited Annual report and accounts 2022
161
Report on Payments to Governments
for 2022
Introduction
This report sets out details of the
payments made to governments by Gulf
Keystone Petroleum Ltd and its subsidiary
undertakings (“Gulf Keystone”) for the
year ended 31 December 2022 as required
under Disclosure and Transparency
Rule 4.3A issued by the UK’s Financial
Conduct Authority (“DTR 4.3A”) and in
accordance with The Reports on Payments
to Governments Regulations 2014 (as
amended in 2015) (“the UK Regulations”)
and our interpretation of the Industry
Guidance on the UK Regulations issued by
the International Association of Oil & Gas
Producers. DTR 4.3A requires companies
listed on a stock exchange in the UK and
operating in the extractive industry to publicly
disclose payments to governments in the
countries where they undertake exploration,
prospection, discovery, development and
extraction of minerals, oil, natural gas deposits
or other materials.
Basis for preparation
Total payments below £86,000 made to a
government are excluded from this report,
as permitted under the UK Regulations.
All of the payments made in relation to
the Shaikan Production Sharing Contract
(“Shaikan PSC”) in the Kurdistan Region of
Iraq have been made to the Ministry of Natural
Resources (“MNR”) of the Kurdistan Regional
Government (“KRG”).
Production entitlements
Production entitlements are the host
government’s share of production during
the reporting period from the Shaikan Field
operated by Gulf Keystone. The figures
reported have been produced on an
entitlement basis, rather than on a liftings
basis. Production entitlements are paid in-kind
and the monetary value disclosed is derived
from management’s estimates based on the
monthly oil sales invoices.
Royalties
Royalties represent royalties paid in-kind
to governments during the year for the
extraction of oil. The terms of the royalties are
described within the Shaikan PSC. Royalties
have been calculated on the same basis as
production entitlements.
Licence fees and capacity building
payments
These include licence fees, rental fees, entry
fees, capacity building payments, security
fees and other considerations for licences or
concessions.
Infrastructure improvement
payments
These include payments for infrastructure
improvements, whether contractual or
otherwise, such as roads, other than in
circumstances where the infrastructure
is expected to be primarily dedicated to
operational activities throughout its useful life.
Summary of payments
Production entitlements in-kind(1) (mboe(2))
Production entitlements in-kind(1) ($’000)
Royalties in-kind(1) (mboe(2))
Royalties in-kind(1, 2) ($’000)
Licence fees and capacity building payments in-kind(3) ($’000)
Infrastructure improvement payments(4)
Total (mboe(2))
Total ($’000)
2022
5,280
392,974
1,292
96,136
25,009
732
6,571
514,851
(1) All of the crude oil produced by Gulf Keystone was sold by the KRG. All proceeds of sale were received by or on behalf of the KRG, out of which the KRG then
made payment for cost oil and profit oil in accordance with the Shaikan PSC to Gulf Keystone, in exchange for the crude oil delivered to the KRG. Under these
arrangements, payments were made by or on behalf of the KRG to Gulf Keystone, rather than by Gulf Keystone to the KRG. However, for the purposes of the
reporting requirements under the UK Regulations, we are required to characterise the value of the KRG’s production entitlements under the Shaikan PSC (for
which the KRG receives payment directly from the market) as a payment to the KRG.
(2) Thousand barrels of oil.
(3) Capacity building payments are deducted from the monthly crude oil sales invoice, no direct payment is made to the KRG. The value of licence, rental and security
fees has been accrued and is not expected to be paid, but rather offset against historic revenue due from the KRG, which have not yet been recognised in the
financial statements.
(4) Wheat improvement measures and training of farmers, hydroponic fodder units, drilling of water wells, construction of water supply network and purchase of
generators.
Financials
162
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Glossary
1P
2C
2P
AGM
bbl
bopd
Capex
CGU
proved reserves
best estimate of contingent resources
proved plus probable reserves
Annual General Meeting
barrel
barrels of oil per day
capital expenditure
cash-generating unit
COVID-19
Coronavirus
CPR
CSR
DD&A
E&P
EBITDA
EBT
ECL
Competent Person’s Report
corporate social responsibility
depreciation, depletion and amortisation
exploration and production
earnings before interest, tax, depreciation and
amortisation
employee benefit trust
expected credit losses
ERCE
ERC Equipoise Ltd
ESG
ESIA
ERP
ESP
FDP
environmental, social and governance
environmental and social impact assessment
Enterprise Resource Planning
electric submersible pump
Field Development Plan
FVTPL
fair value through profit and loss
G&A
GHG
GKP
GKPI
GMP
GRI
HSE
IA
IAS
IFRS
IOC
IOGP
general and administrative
greenhouse gas
Gulf Keystone Petroleum Limited
Gulf Keystone Petroleum International Limited
Gas Management Plan
Global Reporting Initiative
health, safety and environment
Investment Association
International Accounting Standards
International Financial Reporting Standards
International Oil Companies
International Association of Oil & Gas Producers
IPIECA
International Petroleum Industry Environmental
Conservation Association
ISAs (UK)
International Standards on Auditing (UK)
KPI
KRG
LTI
LTIP
LTIR
key performance indicator
Kurdistan Regional Government
Lost Time Incident
Long-Term Incentive Plan
Lost Time Incident Rate
MMbbls
million barrels
MMstb
MNR
MOL
OBM
OPEC
Opex
PDMR
PF-1
PF-2
PID
PPE
PSC
SASB
SDGs
SECR
SH
million stock tank barrels
Ministry of Natural Resources of the Kurdistan
Regional Government
Kalegran B.V. (a subsidiary of MOL Hungarian Oil &
Gas plc)
oil-based mud
Organization of the Petroleum Exporting Countries
operating costs
Persons Discharging Managerial Responsibilities
Shaikan Production Facility 1
Shaikan Production Facility 2
photo-ionisation detector
property, plant and equipment
Production Sharing Contract
Sustainability Accounting Standards Board
The UN’s Sustainable Development Goals
Streamlined Energy and Carbon Reporting
Shaikan
Shaikan PSC
PSC for the Shaikan block between the KRG, Gulf
Keystone Petroleum International Limited, Texas
Keystone, Inc and MOL signed on 6 November 2007
as amended by subsequent agreement
SID
SRP
TCFD
TRIR
TSR
UKLA
VCP
WEF
WHO
WI
$
Senior Independent Director
Staff Retention Plan
Task Force on Climate-related Financial Disclosures
Total Recordable Incident Rate
total shareholder return
United Kingdom Listing Authority
Value Creation Plan
Water Environment Federation
World Health Organization
working interest
US dollars
Gulf Keystone Petroleum Limited Annual report and accounts 2022
163
Directors and advisers
Registered office
Gulf Keystone Petroleum
Limited
c/o Coson Corporate Services
Limited
Cedar House
3rd Floor
41 Cedar Avenue
Hamilton HM12
Bermuda
Directors
Jaap Huijskes
Non-Executive Chairman
Jon Harris
Chief Executive Officer
Ian Weatherdon
Chief Financial Officer
Martin Angle
Deputy Chairman and Senior
Independent Director
Kimberley Wood
Non-Executive Director
David Thomas
Non-Executive Director
Wanda Mwaura
Non-Executive Director
Garrett Soden
Non-Executive Director
Bermudan Company
Secretary
Coson Corporate Services
Limited
Cedar House
3rd Floor
41 Cedar Avenue
Hamilton HM12
Bermuda
Bermudan legal adviser
Cox Hallett Wilkinson
Cedar House
3rd Floor
41 Cedar Avenue
Hamilton HM12
Bermuda
Legal advisers –
corporate
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2EG
United Kingdom
Legal advisers – dispute
resolution
Three Crowns LLP
New Fetter Place
8-10 New Fetter Lane
London EC4A 1AZ
United Kingdom
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
United Kingdom
Registrars
Computershare Investor
Services (Jersey) Limited
13 Castle Street
St Helier
Jersey JE1 1ES
Channel Islands
Joint corporate brokers
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
United Kingdom
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
United Kingdom
Banks
Barclays Bank PLC
Level 27
1 Churchill Place
London E14 5HP
United Kingdom
CitiBank, N.A. London
Branch
Citigroup Centre
25 Canada Square
Canary Wharf
London E14 5LB
United Kingdom
The Royal Bank of Scotland
Group plc
43 Curzon Street
London W1J 7UF
United Kingdom
Kurdistan International Bank
for Investment and
Development
Golan Street
Erbil
Kurdistan Region of Iraq
Byblos Bank S.A.L – Iraq
Street 60 – Near Sports Stadium
PO Box 34-0383
Erbil
Kurdistan Region of Iraq
Byblos Bank S.A.L – UK
Berkeley Square House
Suite 5, Berkeley Square
London W1J 6BS
United Kingdom
Bank of N.T. Butterfield &
Son Limited
65 Front Street
Hamilton HM 12
Bermuda
Financial adviser
Evercore
15 Stanhope Gate
London
W1K 1LN
Media relations
FTI Consulting
200 Aldersgate
London
EC1A 4HD
Financials 164
Gulf Keystone Petroleum Limited Annual report and accounts 2022
Key shareholder engagements
18 January 2023
Pareto Securities’ 18th Annual
E&P Independents Conference,
London
2 March 2023
SpareBank 1 Markets 2023
Energy Conference, Oslo
23 March 2023
2022 full-year results
announcement
16 June 2023
AGM, via webcast
1 September 2023
2023 half-year results
announcement
Designed and produced by
www.lyonsbennett.com
This report has been printed on Munken Kristall Smooth
True White, an FSC® certifi ed material. This document was
printed by Pureprint Group using its environmental print
technology, with 100% of dry waste diverted from landfi ll,
minimising the impact of printing on the environment. The
printer is a CarbonNeutral® company. Both the printer and
the paper mill are registered to ISO 14001.
G
u
l
f
K
e
y
s
t
o
n
e
P
e
t
r
o
l
e
u
m
L
i
m
i
t
e
d
A
n
n
u
a
l
r
e
p
o
r
t
a
n
d
a
c
c
o
u
n
t
s
2
0
2
2
Bermuda
Gulf Keystone Petroleum Limited
c/o Coson Corporate Services
Limited
Cedar House
3rd Floor
41 Cedar Avenue
Hamilton HM12
Bermuda
Kurdistan Region of Iraq
Gulf Keystone Petroleum
International Limited
3rd Floor
UB Centre
Bakhtyari
Erbil
United Kingdom
Gulf Keystone Petroleum (UK)
Limited
6th Floor
New Fetter Place
8-10 New Fetter Lane
London EC4A 1AZ
Further details regarding
shareholder information
can be found on our website.
www.gulfkeystone.com
G
u
l
f
K
e
y
s
t
o
n
e
P
e
t
r
o
e
u
m
L
m
l
i
i
t
e
d
A
n
n
u
a
l
r
e
p
o
r
t
a
n
d
a
c
c
o
u
n
t
s
2
0
2
2