As Gulf Keystone Petroleum’s shares fell 40%, $500US million worth of company bonds have been converted to equity and have therefore diluted current shareholders to a 5% stake of the company. This is while the company has also appointed a new chairman, Keith Lough to replace Andrew Simon.
Lower oil prices and “adverse geopolitical developments” have led GKP to default on debt obligations and cash flow problems.
Andrew Simon issued the following statement: ur Shareholders, and those of the o”other Kurdistan focused operators, have suffered significant value destruction over recent months, as a result of the low oil price and extraordinary regional geo-politics. For us this has been further compounded by a debt burden of over US$600 million repayable next year. To address the liquidity and significant leverage situation faced by the Company, we have to restructure the balance sheet now. A new and strengthened management team and Board have been working tirelessly for the benefit of all stakeholders, to ensure GKP’s survival. Following months of negotiation, and in the absence of deliverable alternatives, the Board believes the proposed restructuring offers the best possible outcome for all.“
Jón Ferrier, CEO of GKP also added, “without the restructuring and the improved liquidity delivered by the transaction, the Company cannot avoid insolvency or capture the significant future potential of the Shaikan field. In my view this is the best possible transaction for existing stakeholders in these very challenging circumstances, and I urge stakeholders to support it. For the Shareholders who are able, the opportunity exists to partly offset the dilution of the necessary debt equitisation and capture any future increase in equity value by participating in the open offer. We acknowledge the cooperation of our significant Guaranteed Noteholders and Convertible Bondholders, and are grateful for the continued support of our current largest Shareholders, Capital.
With the support of the MNR, which has established a pattern of payments, and with a stabilising oil price environment and sustainable debt levels, we have the foundations of a strong future equity story for a restructured GKP to develop the Shaikan field and unlock its potential as one of the most significant assets in Kurdistan. Without a successful consensual restructuring, Shareholders and Convertible Bondholders have no realistic chance of preserving current value or participating in future value.“