Gulf Keystone announces the launch of an offering (the Offering) of senior unsecured convertible bonds due October 2017 (the Convertible Bonds) in a principal amount of USD$ 200 million, which may be increased in the event the Company exercises in full its increase option of up to USD$ 25 million (the Increase Option). In addition, the Company has granted to BNP Paribas an over allotment option of up to USD$ 25 million exercisable up to the close of business on 16 October 2012 (the Over allotment Option). The Offering is being made by way of a Reg. S. Institutional Private Placement.
Funds raised via the Offering will enhance the Company's liquidity position and contribute to the Company's ongoing move to the large-scale staged development of its Shaikan block in the Kurdistan Region of Iraq, which was declared a commercial discovery in August 2012, and its aggressive exploration and appraisal of its other three blocks in the region. Together with the Company's existing cash resources, the additional financing will be deployed in order to, inter alia:
- Complete and submit the Shaikan field development plan by the end of January 2013, select development concept and move to the large-scale staged development in 2013, with the goal of achieving 150,000 barrels of oil per day (bopd) by 2015 and full plateau production thereafter.
- Finalise the Company's on-going work on the commissioning of Shaikan's two new early production facilities (PF-1 and -2), which will allow the Company to produce up to 40,000 bopd by mid-2013, processing the crude to export specification. PF-1 and -2 will be equipped with an amine unit to sweeten gas, with the potential addition of a Claus sulphur recovery unit, allowing gas delivery to a nearby trunk gas pipeline, which is expected to be constructed.
- Create in-field infrastructure network, including flowlines and wellhead separators, connecting Shaikan production wells to PF-1 and -2.
- Explore the undrilled horizons in the Shaikan block, with the Shaikan-7 well targeting the deeper Triassic and the Permian.
- Continue the current aggressive exploration and appraisal of the neighboring Akri-Bijeel, Sheikh Adi and Ber Bahr blocks in addition to further activity throughout 2013.
Further funds will become available to the Company in the event that the Kurdistan Regional Government exercises its Third Party Assignment option under the terms of the Production Sharing Contracts regarding the Shaikan and Akri-Bijeel blocks. In addition, the Company continues to evaluate the ongoing process of the sale of the Company's 20% interest in the Akri-Bijeel block as the forthcoming results of the three wells currently being drilled and planned early production from the Bijell discovery are taken into consideration.
The Convertible Bonds will be convertible into common shares of the Company. The Convertible Bonds are expected to carry a coupon of between 5.875% and 6.625% per annum payable semi-annually in arrear and the conversion price is expected to be set at a premium of between 25% and 30% to the volume weighted average share price of Gulf Keystone on the AIM market between opening and closing of the market today. The Convertible Bonds will be issued and redeemable at 100% of their principal amount and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the Convertible Bonds in 2017.
The final terms of the Offering will be determined at the time of pricing which is expected to be announced just after the close of the market today. Closing and settlement are expected on 18 October 2012. It is the Company's intention that an application will be made for the Convertible Bonds to be admitted to listing on the Official List of the UK Listing Authority and admitted to trading on the Professional Securities Market of the London Stock Exchange by no later than 30 November 2012.
BNP Paribas is acting as Sole Bookrunner and Lead Manager of the Offering.
Todd F Kozel, Executive Chairman and CEO of Gulf Keystone, commented: "We welcome this important financing initiative, which, in addition to being an important milestone for the Company in support of our transition from the exploration and appraisal phase to the fully-fledged development of the world class Shaikan discovery, shows an increasing confidence of international markets in doing business in the Kurdistan Region of Iraq."