Gulf Keystone, a leading independent operator and producer in the Kurdistan Region of Iraq, today provides an operational and corporate update.

Jon Harris, Gulf Keystone's Chief Executive Officer, said:
"We are pleased to announce that we have submitted a draft Field Development Plan to the Ministry of Natural Resources. While the timing of FDP approval is uncertain given the scale of the project, this is an important step forward to develop the significant potential of the Shaikan Field while more than halving CO2 per barrel by eliminating routine flaring.

Production performance has been strong, reaching a record monthly average high in October, and we are on track to meet our tightened 2021 gross average production guidance. With our leverage to oil prices and low cost base, strong production has translated into robust cash flow generation. We have experienced operational challenges with SH-13 and SH-14 and, subject to well productivity, we are now targeting to increase gross production towards 55,000 bopd in January."

Shaikan Field Development Plan ("FDP")

• Following extensive constructive engagement with the Ministry of Natural Resources ("MNR"), Gulf Keystone and its partner Kalegran B.V. (a subsidiary of MOL Hungarian Oil & Gas plc) ("MOL") have submitted a draft FDP to the MNR
• The FDP includes the continued ramp-up of Jurassic oil production, an appraisal of the Triassic reservoir and a Gas Management Plan to more than halve CO2 per barrel by eliminating routine flaring
• The FDP is subject to review and final approval by the MNR, the timing of which is uncertain given the scale of the project. Final investment decision ("FID") is also subject to approval of both Boards of Directors of Gulf Keystone and MOL, and the Company will provide an update at the appropriate time

Operational

• Following over 660 days without a Lost Time Incident ("LTI"), we were disappointed to have an LTI during drilling operations in October. Following the incident, we have completed a full investigation and have put in place a number of remedial actions
• Gross average production from the field in 2021 to date of c.43,300 bopd, in line with tightened 2021 guidance, with record gross average production in October of 45,654 bopd
• SH-14 has been drilled, completed and is currently being hooked-up, following delays caused by equipment failures and wellbore issues in the subsequent side-track
• Following the rig move from the SH-13/SH-14 well pad, an acid stimulation programme is now underway on SH-13 to access the broader fracture network in the reservoir after an area of low fracture connectivity was encountered. Acid stimulation is commonly used in carbonate reservoirs such as Shaikan
• Activities are ongoing to start production from SH-13 and SH-14 and the increase in gross production towards 55,000 bopd, subject to well productivity, is now expected in January
• Preparations are ongoing to spud SH-15 (formerly referred to as SH-G) which is now expected to be brought onstream in Q2 2022
• Planned installation of two electric submersible pumps deferred to 2022 after successful trial of lower cost jet pump solution at SH-10 and stronger than expected SH-11 reservoir performance

Financial

• $283.2 million ($221.7 million net to GKP) received from the Kurdistan Regional Government in 2021 to date for payments of crude oil sales and recovery of outstanding arrears. $32.4 million of the original total net arrears balance of $73.3 million has now been recovered
• The delayed payment for September 2021 crude oil sales and arrears (gross: $37.8 million; net to GKP: $29.6 million) is expected to be paid shortly
• Following the payment of the $50 million interim dividend on 8 October 2021, $100 million of dividends have been distributed to shareholders in 2021, in line with the Company's strategy of balancing investment in growth with shareholder returns
• Robust balance sheet, with a cash balance of $176 million as at 16 December 2021

Outlook

• On track to meet tightened 2021 average gross production guidance of 42,000 to 44,000 bopd
• 2021 net Capex guidance lowered from $75-$85 million to approximately $55 million, principally due to the revised spud date of SH-15 and deferral of installation of SH-10 and SH-11 electric submersible pumps, partially offset by the higher cost of SH-14
• 2021 gross Opex guidance of $2.5 to $2.9/bbl remains unchanged
• With continuing strong oil prices and cash flow generation, there may be opportunities to consider further distributions to shareholders and to optimise the capital structure