Gulf Keystone reports strong year, flags softer production in 2026

(Sharecast News) - Gulf Keystone Petroleum shares fell more than 6% on Tuesday after the Kurdistan-focused oil producer reported a solid operational performance in 2025 but flagged lower production guidance for 2026 and continued uncertainty around export pricing and longer-term agreements. The company said disciplined capital spending and resilient output supported strong free cash flow generation last year, alongside the resumption of pipeline exports after more than two and a half years.

Pipeline exports via the Iraq-Türkiye Pipeline resumed on 27 September, allowing the group to transition away from trucking sales, with volumes ramping up quickly towards full well capacity.

Gross average production in 2026 to 20 January stood at around 40,600 barrels of oil per day, with output expected to increase towards 44,000 daily barrels following the restart of a well after a jet pump replacement and the completion of ongoing workovers.

The company also highlighted its safety record, noting more than three years without a lost time incident and approximately 5.3 million working hours since the last LTI.

"2025 was a strong year for GKP, with production towards the top end of our tightened guidance range," said chief executive Jon Harris.

"Capex and cost discipline helped deliver material free cash flow generation underpinning $50m of dividend payments.

"Kurdistan pipeline exports restarted in September after over two and half years and regular exports liftings and associated payments, which commenced in the fourth quarter, have continued into 2026 following a smooth extension of the interim agreements."

Cash collected from crude sales in 2025 totalled $122m, compared with $144m a year earlier, reflecting $108m from local sales during the first nine months and $14m from export sales in September and October, which were received in December.

Export sales were realised at around $30 per barrel, higher than the average $28 per barrel achieved on local sales, with the company accruing a receivable to reflect the expected reconciliation to international prices under interim export agreements.

Net capital expenditure for the year was $34m, primarily related to safety upgrades, workovers and initial spending on water handling facilities, while operating costs were broadly flat at $53m, equating to gross opex of $4.3 per barrel.

Gulf Keystone returned $50m to shareholders through semi-annual dividends in April and September and ended 2025 with a cash balance of $78m and no debt.

As at 21 January 2026, cash stood at $88m, including recent export receipts.

Looking ahead, the company guided for average gross production of between 37,000 and 41,000 barrels of oil per day in 2026, reflecting planned maintenance activity, including a shutdown at PF-2 later in the year, and natural field declines in the absence of drilling.

Net capital expenditure is expected to be $40m to $50m, with spending focused on protecting base production, upgrading facilities and completing the installation of water handling, which was expected to support incremental production of 4,000 to 8,000 daily barrels from early 2027.

"Looking ahead, we expect 2026 to be a pivotal year," Harris added.

"Assuming continued consistent exports payments and a return to international prices, we intend to swiftly resume drilling later in the year.

"This will position us to organically grow production in 2027 as additional volumes from the installation of water handling are also expected to come on stream. We will remain disciplined, coupling incremental capital investments with shareholder distributions to continue delivering value for all stakeholders."

The company said regular export liftings and payments continued following the extension of interim agreements to the end of March 2026, alongside an independent review of IOC invoices and costs.

Negotiations with the Kurdistan Regional Government over historical commercial matters, including past oil sales arrears, were ongoing.

Gulf Keystone also confirmed it was committed to returning excess cash to shareholders and was continuing to assess a potential secondary listing on Euronext Growth Oslo, subject to market conditions.

At 1011 GMT, shares in Gulf Keystone Petroleum were down 6.2% at 174.09p.

Reporting by Josh White for Sharecast.com.