Gulf Keystone Petroleum Limited (GKP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Gulf Keystone Petroleum Limited Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so and these will be available via your Investor Meet company dashboard. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Jon Harris. Good afternoon, sir.

Thank you. Hello, and thank you for joining this presentation following the announcement of our 2022 full year results this morning. My name is Jon Harris, and I'm GKP's Chief Executive Officer. I'm joined today by Ian Weatherdon, Chief Financial Officer, who will be talking through our financial performance in a bit. We're delighted to be presenting on the Investor Meet Company platform for the first time. And we are continually looking for opportunities to engage with and receive feedback from all our investors, and we're pleased that you have joined us today. During the meeting, we will talk through who we are, our operational and financial performance in 2022 and our outlook for 2023. We will also answer any questions you may have, which we will do following the presentation. Before we start, I would first like to play a recent video of our operations in the Shaikan Field. [Presentation]

I hope you enjoyed watching that video, and I think it is really important to see our operations and people in action to get a sense of what we're doing in the Shaikan Field in Kurdistan. I'd like to remind you that the presentation slides for this meeting are available to view on our website. I will leave you to review the legal disclaimer in your own time. Slide 3, introducing Gulf Keystone. Before we talk through our results today, I'd like to provide a brief introduction to the company for those of you who don't know us. We've been doing business for over 15 years in Kurdistan, which is a semiautonomous region in Northern Iraq. We're the operator of the Shaikan Field, about 60 kilometers northwest of Erbil, Kurdistan's capital. We have an 80% working interest in the field with the remaining 20% held by our partner MOL. The Shaikan production sharing contract was awarded by the Kurdistan regional government in 2007, with first oil discovered in 2009 through Shaikan-1, our first exploration and appraisal well. We have about 500 staff members, most of which are in Kurdistan. We are proud that our Kurdistan workforce is comprised of 3/4 local Kurds, and we are committed to ongoing personal and professional development to increase that proportion over time. We have an international investor base with our shares traded on the London Stock Exchange. Today, we have 16 producing wells in the field and are drilling our 17th Shaikan-18. Oil is produced by our 2 production facilities, PF-1 and PF-2, which you can see on the slide. So you can see on the slide, which is PF-1. First commercial production was achieved through PF-1 in 2013, followed by first production at PF-2 in 2014. Today, Shaikan crude is exported via the Kurdistan export pipeline, which crosses into Turkey at Fyshkhabour in the Northwest of Kurdistan before traveling to Ceyhan on the Mediterranean coast. We sell all of our crude to the Kurdistan regional government as to all other producers in the region, the KRG are responsible for exporting and marketing the crude themselves. They sell Shaikan crude as part of the Kurdistan blend or KBT in Ceyhan. The oil and gas industry is an integral part of the region's economy, accounted for more than 80% of the KRG's revenues. The Shaikan Field is truly a world-class asset, as we will talk about over the next few slides. It has already delivered 117 million barrels in production to date, and we see significant potential for future development and growth. Next slide, please. I'd like to spend a few moments reminding you of our strategy. We have a clear strategy of balancing investment in profitable production growth with sustainable shareholder returns while maintaining a robust balance sheet and prudent liquidity levels. Looking at our track record. This has created significant value for GKP investors over the past few years. Between 2019 and 2022, we have grown production from Shaikan Field by 34%, while returning $415 million in cash to shareholders via dividends and buybacks, almost all of today's market capitalization. Against the backdrop of commodity price volatility as well as the COVID-19 pandemic and challenges from operating in Kurdistan, we've also been able to maintain a strong balance sheet, ending each year with net cash. Looking ahead, we are focused on extending our track record of delivery. Slide 4, operational -- 2022 operational and financial highlights. 2022 was a year of strong operational and financial performance as we continue to deliver against our strategy. As always, as we -- we are focused on safety as a priority with no LTIs in the year and only 1 recordable incident. Higher oil prices and production, combined with capital discipline and cost control, enabling us to generate record profitability and cash flow. In terms of growth, 2022 saw a significant increase in operational activity in the field as we commenced execution of the Jurassic scope of the Shaikan Field development plan in agreement with the Ministry of Natural Resources, while we advanced towards approval of the full field development plan. The 2022 Competent Person's Report published today reconfirms the quality of the Shaikan Field, and the scale of the opportunity we have in front of us to create value for all our stakeholders. We are realizing the benefit of our 2022 investments with production exceeding 55,000 barrels of oil per day in the last few years, a very important milestone for the company. As we progress, we are reviewing our capital program and adjusting investments based on the timeliness of payments from the Kurdistan regional government and the outlook for oil prices. While we continue to grow, we paid record dividends of $215 million in 2022. We are pleased also to declare today a $25 million ordinary dividend for the year, increasing total dividends declared in 2023 to $50 million. At the same time, we are focused on maintaining a robust balance sheet, which remains debt-free following the redemption of our $100 million bond in August last year. Turning now to sustainability highlights on Slide 5. Improving the sustainability of our operations is of utmost importance to our strategy, and we continue to make good progress in the year. We are pleased to announce that our annual report disclosures for 2022 will be fully consistent with the recommendations published by the TCFD, Taskforce on Climate-related Financial Disclosures. This demonstrates how our focus on climate-related risks and opportunities is embedded in our strategy and our governance, including our risk management. Our primary climate-related opportunity is the Gas Management Plan, which will enable us, subject to timely sanction and implementation, to eliminate almost all of our routine flaring or more than half our Scope 1 emissions intensity by 2025. We have also been exploring other decarbonization opportunities, which will enable us to reduce our emissions further. In particular, we have identified a project to eliminate methane venting from our production facility storage tanks, which we are targeting to complete in 2024. As we progress, we are seeing increase in emissions primarily to higher production. Looking at our social performance. GKP continues to make a material contribution to Kurdistan and its people. We generated $515 million of revenue net for the KRG in 2022, a 53% increase versus the prior year. We continue to be a large employer of local people with almost 350 Kurdistan nationals working for us at the end of the year, equivalent to 74% of our in-country workforce. We also spent $64 million with local suppliers, a 31% increase versus last year and increased our investment impact for local community projects by 30% to over $1 billion gross. Finally, strong governance of business ethics continues to underpin how we do our business. We were pleased in the year to have developed our code of business conduct and training program, which we have rolled out all our staff at the beginning of 2023. We have had a 100% compliance rate this year with all staff completing the training and signing the compliance certificate. We look forward to providing you with further updates on our sustainability strategy and performance with the publication of our annual report. I will now provide more detail on the operational performance, Slide 7. Shaikan offers significant potential for growth and returns. Shaikan Field is a world-scale asset and is the foundation for our strategy and value creation. Since first commercial production in 2013, we have produced over 117 million barrels of oil, while this is remarkable, the 2022 Competent Person's Report published today, an external independent audit of our reserves and resources show there is still significant growth potential to exploit. The CPR has confirmed 817 million barrels of gross 2P reserves and 2C resources. As you can see from the chart on the right, 2P reserves have increased 7% to 506 million barrels after adjusting for production of 33 million barrels. Based on last year's -- sorry, this resulted in 100% reserves replacement versus the 2020 CPR, driven by increasing Jurassic reservoir plateau rate from 75,000 barrels a day to 85,000 barrels of oil per day. Based on last year's production of 44,200 barrels of oil per day, there is significant running room to further develop the field and grow production with a 2P-reserves-to-production ratio of around 31 years. Slide 8. 2022 operational activity. 2022 was a year of significant operational activity in the Shaikan Field. Working hours increased by 50% to 2.2 million while we were more than doubled net capital expenditure to $115 million. The increase in activity was the result starting the execution of the Jurassic scope of the Field Development Plan as we laid the foundations for material increase in future production growth. We drilled and brought online the first 2 wells in the FDP sequence, Shaikan-15 and Shaikan-16, and spudded the third Shaikan-17. We also prepared well pads and flow lines to enable a continuous drilling program and completed early engineering, procurement and construction works for the production facilities expansion. Finally, we continued our well workover program to optimize production. Move on to Slide 9, these 2022 production in line with guidance. Gross average production was 44,202 barrels of oil production in 2022, 2% higher than 2021. Incremental production from new wells was mostly offset by our continued management of well production rates ahead of water handling. Production was also impacted in the fourth quarter by a temporary shut-in of a well due to an isolated electrical submersible pump failing. Despite the small increase, our 2022 investments and progress on executing the Jurassic scope has started to bear significant fruit so far in 2023. We've seen strong production from Shaikan-16, which has been ramping up this quarter. We drilled, completed and brought on stream Shaikan-17 in February, under budget and ahead of schedule, thanks to performance improvement we are seeing from our continuous drilling program. Year-to-date production has averaged around 48,900 barrels of oil per day and with a big step-up in production in March to date of around 53,500. In the last few years -- sorry, last few years, last few dates, we have reached record highs with production exceeding 55,000 barrels of oil per day, an important milestone for the company. As we look ahead to the rest of the year, we remain focused on delivering our production guidance of between 46,000 to 52,000 barrels of oil per day. We continue to manage well production rates ahead of water handling installation. We're also continuing to see natural declines across the field of between 6% and 8% per annum, and they're optimizing production from a single well near the gas cap to -- sorry, near the gas cap due to higher gas production rates. Slide 10, 2023 work program. Looking ahead to the rest of the year, we are currently reviewing our capital program and net capital expenditure guidance due to continued delays to KRG payments, which Ian will talk about shortly. Our current CapEx guidance of $160 million to $175 million includes $30 million to $35 million for completion of 17 and the drilling and completion of Shaikan-18, which we expect to start in Q2 of this year; $45 million to $50 million for investment in well pad preparation and long lead items for our continuous drilling program; and $85 to $90 million for the advancement of the production facility expansion with water handling installation and the capacity increase to 85,000 barrels of oil per day expected to be completed in the second half of 2024. With clarity around KRG payments, we will consider continued drilling following Shaikan-18. However, with continued payment delays, we will review potential reductions to our capital program. Slide 11, transitioning to increased investment in profitable growth -- sorry, Slide 12. Our intention is to transition to increased investment in profitable production growth to exploit the significant potential of the Shaikan Field, enhance the longevity and sustainability of our distributions capacity and generate economic value for Kurdistan. This is, of course, predicated by better clarity on KRG payments and continued robust oil prices. Ultimately, we plan to do this by executing the full Field Development Plan. The FDP has 3 components: increasing Jurassic production up to 85,000 barrels of oil per day by expanding our production facilities and drilling new wells; testing the Triassic reservoir and producing up to 10,000 barrels of oil per day and bringing total production up to 95,000 barrels of oil per day; implementing a gas management plan to eliminate almost all of our routine flaring, a requirement for PSC, and more than half our Scope 1 emissions intensity. While the timing of the FDP approval remains uncertain, we are making good progress towards key sanction milestones, such as finalizing the technical scope of the FDP last year and continue to advance the gas management plan tendering process while considering financing options. In the interim, we're executing the Jurassic scope for the field development plan, with a flexible capital program. We remain focused on capital discipline, predicating all investment on timely KRG payments and robust oil prices. With that, I will now hand over to Ian for the financial view. Ian?

Thanks very much, Jon. As you can see from this slide, we delivered strong financial results in 2022, and we're building on momentum from 2021. If you look at the top 2 charts, adjusted EBITDA and EBITDA as earnings before interest, tax, depreciation and amortization, maybe a simpler way to look at that is cash flow from operations, and our profit, both of those were up 60% during the year. The key drivers to those increases were an increase in the Dated Brent price from $71 last year to $101 in 2022, our increase in production and continued cost control. This, in turn, enabled us to more than double our net CapEx in the field. You'll see it increasing to $115 million, and also to deliver record dividends in 2022 of $215 million. Next slide, please. This slide is a snapshot of our free cash flow during the year. You'll see a carryover of EBITDA. EBITDA was $359 million in the year, and this underpinned our free cash flow generation. And when we talk about free cash flow, we think about it as what we generated from operations less what we reinvest in the field, and then that's what's remaining for dividends and for financing. If you take the free cash flow, you will see that it also includes $115 million related to our investment. When you put all of that together, free cash flow in 2022 was $266 million. That's a big step up from 2021, where it was $122 million. And this enabled us, as you'll see on the right there, to pay $215 million in dividends and also repay our bond during the year, leaving us debt-free at the end of the year. And ultimately, at the end of 2022 and also coincidentally currently at about $119 million in cash. Next slide, please. This slide lays out our spending performance, and this is an ongoing priority for us. We are one of the lowest-cost operators when we benchmark ourselves to our peers. And as we continue to ramp up, we continue to maintain strict financial discipline. On the left side, you'll see that gross OpEx per barrel increased slightly in 2022 to $3.20 a barrel, and that was in line with our guidance. And this slight decrease was driven by increased staff costs related to increased activities and incremental maintenance activity. You'll see also that our guidance is $3 to $3.40, in effect, in line with our performance in 2022. So we're holding the line. On the right side, our other G&A expenses, you'll see that we are slightly down in 2022. Next slide, please. In 2022, we received $450 million from the KRG, and this included payments for both ongoing crude sales and also a settlement of historical arrears. And so far, in 2023, we've received an additional $66 million for the August and September 2022 invoices. As you can see from the chart here, towards the end of last year, we started to see an increase in the time it takes for the KRG to pay monthly oil sales invoices. The most recent September invoice was received more than 3 months late. Our October to December invoices, which amount to net $76 million are currently overdue and we're continuing to engage with the KRG with the objective to reestablish a more timely consistent payment routine. As Jon previously noted, timely payments are important for us to continue the ongoing development of the Shaikan Field. And strategically, we maintain a flexible capital program. And that's important because it enables us as circumstances allow to ramp up our capital spend and also as necessary to ramp down capital spend. So for example, if we continue to experience further payment delays, we have flexibility built into the portfolio. Also, a number of you would be aware that the -- and particularly based upon our September announcement that the KRG has proposed a new pricing mechanism for oil sales. Instead of using Brent as a reference price, they are now looking to Kurdistan blend. And this Kurdistan blend is what they tell us the amount that they're realizing for the oil that they market on our behalf. While we haven't agreed to this change, if we were to apply the mechanism for September to December 2022, this would result in a decrease in our average realized price of around $12 a barrel relative to the prior pricing mechanism. Given oil price volatility, it is difficult to predict how this pricing will evolve in the future. But it is interesting to note, again, looking at the slide in the bottom left corner -- or bottom right corner, I beg your pardon, you can see how the discount has actually trended down. And we moved from that roughly average $12 down to $6 in February. And also another useful reference point is if we were to actually look back at those discounts over 2022, we saw those discounts going down to as low as $4 as well. Next slide, please. We have a disciplined financial framework, which underpins our track record of balancing growth, shareholder returns and maintaining a robust balance sheet. In 2022, we paid a sector-leading dividend of just over 40%. And as you can see from the chart here, that over the past 5 years, we have delivered top quartile total shareholder returns. So that factors in share price growth and also dividends, which are assumed to be reinvested to come up total shareholder returns. Given returns on incremental capital investment are attractive as payback accelerates with cost recovery, we are now transitioning to increase investments. If you look at our cost recovery pool, so this is in effect what we've spent historically, which we recover through production, unrecovered costs at the end of 2021 were $437 million gross. And with the benefit of oil prices and production growth in 2022, that reduced down to $213 million gross by the end of the year. And if you actually then layer in the delayed payments, if we'd actually received those on a timely basis, we would have unrecovered costs of around $150 million gross at the end of the year. By increasing profitable production, we expect to be able to enhance the sustainability and longevity of shareholder distributions. And as Jon previously noted, we're very pleased today to be announcing the declaration of a final 2022 ordinary annual dividend of $25 million, which is in line with our dividend policy. This increases the total dividends that we've declared this year to $50 million. Looking at it another way, that equates to a very competitive dividend yield of 11%, and we sit here in March. We remain committed to distributing excess cash to shareholders by way of dividends and share buybacks, and we'll continue to review distribution decisions based on our financial framework. We have that laid out on the slide here, but just to highlight some of the key things that we think about as a Board when we're considering dividends are oil prices, KRG payment timeliness, consider our capital program, cash flow generation and liquidity. And as we project forward, and as we move closer to FDP, we intend to review our financial framework and dividend policy. Next slide, please. Maintaining a robust balance sheet is a strategic priority to Gulf Keystone. It provides us resilience through the commodity price cycle and enables us to manage potential downside risks, including those associated with operating in Kurdistan. With strong free cash flow generation in 2022, we repaid $100 million bond leaving us debt-free which provides us with significant financial capacity. And as we progress towards FDP, we will continue to review our capital structure and financing requirements. With that, I'd like to now hand it back to you, Jon.

Great. Ian, thank you very much. Slide 20, let's take a look at our outlook. We're really excited about the remainder of the year and remain focused on delivering against our clear strategy. Building on progress last year, we continue to execute the drastic scope of the FDP as we progress towards the full approval of the development plan. We're already seeing the benefits of our investments with production rates in excess of 55,000 barrels a day in the last few days. We plan to start up Shaikan-18 in Q2 as we remain focused on delivering 2023 production guidance of between 46,000 and 52,000 barrels of oil per day. We are currently targeting net CapEx for the year of $160 million to $175 million and gross OpEx of between $3 and $3.40 per barrel. We're currently reviewing our capital program as we seek further clarity from the KRG on payment timing and our 2023 net CapEx guidance is, therefore, subject to change. As ever, we remain focused on balancing investment in growth with shareholder distributions, following a $50 million dividends declared to date, the Board will continue to review opportunities to return excess cash to shareholders, in line with the disciplined financial framework. At the same time, we'll continue to maintain a robust balance sheet and prudent liquidity levels to manage uncertainties. We continue to engage with the KRG and the Ministry of Natural Resources regarding our payments. Following recent political news at the Iraqi cabinet and the KRG have agreed a budget and a method to allocate the Kurdistan's share of budget, taking into account Kurdistan's oil revenues. We are optimistic that approval by the Iraqi parliament and implementation was swiftly followed. It has been reported that any action following the FSC ruling has been suspended while negotiations continue. Our operations remain unaffected by the FSC ruling to date. With that, I'll now hand you back to the operator for questions. Thank you.

[Operator Instructions] But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via our investor dashboard. Jon, Ian, as you can see there in the Q&A tab, we've received a number of questions throughout your presentation this afternoon. Thank you to all of those on the call for taking the time to submit their questions. But guys, if I may just hand back to you to respond to those questions where it's appropriate to do so, and then I'll pick up from you at the end. Thank you.

Great. Thanks very much. So we've had some questions in, and I'm just going to take them in the order that I see them. Can -- first question, can you please elaborate on why the MNR are not approving the FDP? What are the ongoing discussions centering around? It is mystifying why they're taking so long. Okay. So what we're trying to do is trying to get into a position where we have kind of certainty over the schedule and the cost. And to do that, therefore, we have to -- have been out and gone out to tender for the gas management plan, which is what we're doing currently. And also we're tendering -- we have been tendering for a second rig and some -- also some corrosion-resistant alloy materials, which we're going to need to do to appraise the Triassic. So once we get those answers in, then we can basically put those into the model, into the full development plan we'll have, if you like, a schedule, and we'll have costs and economics, which both work for us and for Kurdistan government. And that's the point at which we will then agree on both sides with our -- with themselves and with also with our Board of Directors. So that's why it's taking some time. We're actually waiting for a firm schedule and pricing. The next one is how can we track KBT prices? Ian?

Happy to take that. Thanks, Jon. Yes. As I've spoken about before, we previously moved from a discount. And it's been relatively fixed for a number of years. For us, historically, it was $21 a barrel. And there was a slight change to that mechanism in 2022. So it was anywhere between $21 and $23 a barrel. And that was relatively straightforward because it was relative to Dated Brent. So it was easy for you to understand and actually easy for us to understand. What the KRG has advised us is that given the fact that there is different -- volatilities is sometimes a differential between Brent and KBT increases and decreases that they'd like to move to a mechanism whereby they are paid on the amount that they actually realize for selling the crude in the market. And we've had, as was noted, we've had extensive discussions with them, which are ongoing. And in order for you to get a view and the way that we actually get the view is, on a monthly basis, Deloitte, who is working on behalf of the MNR, they take an independent look at contracts and prices, they actually publish what KBT is. And that is the mechanism that we have to understand what it is. So what we could do is, by all means, we could share the link to the Deloitte, the place on the website, where there's a Deloitte link. So what I would do is I would probably ask Aaron to follow up separately afterwards with that link. And that's what we're using for our preparation of -- I'm going to call them interim invoices as we go through the negotiation processes. And projecting forward, very difficult to see what that discount could be, but we're very heartened to see that, that's typed in February by considerably, perhaps as a result of the benefit of some of the easing intentions from the previous Supreme Court ruling and the like. So we'll have to see how that progresses over time.

Okay. Thanks, Ian. Can the Board of Directors provide a clear explanation for the continued delays in the stepping up of the oil production to over 50,000 barrels of oil per day and ultimately, the planned 55,000 barrels a day, given the amount of money being spent to achieve this production increase, what is wrong? Okay. So I think in terms of the history, initially, we suffered a delay at the beginning when we contracted for a drilling rig, which ultimately proved to be not really up to scratch. So we had to spend some time recertifying it and getting it to be up to scratch and then we started drilling. Unfortunately, we would then stopped or slowed down completely with COVID started and also the very low Brent oil price as well, of course, that's the pause, I think, virtually slightly over a year. We then restarted drilling. And what we saw is lately, we've had some issues with regards to salt and water, which will cause us to have to choke back some of our wealth. And now the field deliverability with the last 2 wells has finally allowed us to get over 55,000 barrels a day, along with some other workovers to wells where we need to go in and reperforate or perforate some different zones to increase the production from those wells. So I think nothing is wrong. With that, in fact, it just took us slightly longer than we -- slightly longer than we expected to overcome some of the challenges. One was the drilling rig. The second one was some of the water production. And now we're going to address that production by installing water handling in these latest trains that we are spending money on. Next question, how will the expected CapEx for the FDP be funded? Ian?

Great. Thanks very much, Jon. If you think about a typical oil and gas development, typically, what happens is all of the capital is funded upfront before you actually sell 1 barrel. We're very fortunate to -- with the Shaikan asset, be able to progress the development in stages with a modular program, which enables us to pace it up and down. So when you think about it, we're sitting here looking forward to progress the FDP. And as Jon noted, we're currently at 55,000 barrels a day, and that's a significant cash flow engine. We can take a look at that, and we can look at it from a capital allocation lens. We can reinvest some of that into our operations into driving the FDP. And as we spoke about, we're actually driving the Jurassic component of the FDP right now in order to realize a step-up in production and cash flow. And the advantage to this approach is it's scalable. As the business environment evolves, we can adjust accordingly. Now that's generally when you think about drilling, it's very easy to dial it up and up and down. Of course, we like to maintain a continuous drilling program to maintain the benefits of learning. The facilities expansion to get to 85, that's a smaller commitment. Again, probably something that you could consider over time the cash flow from the business. Probably the difference to me is when you start to think about the gas management project, the gas management project, and while we actually don't have clear view on what that could cost because we're in the middle of the tendering process currently. But over time, we'll understand that. But that feels to me because it will likely be a larger capital commitment. And previously, we haven't provided recent guidance, but previously we guided to $250 million. But if you think about potentially some cost pressures and the like, that feels like something that we could consider financing. And the great thing about financing is, as you'd be aware, currently, our primary source of funding is the Nordic bond market. Now the gas management plan has the benefit of being a green investment. And I say that because it's our path to reduce by more than 50% our carbon intensity, and we're targeting to do that by 2025, subject to timely sanction of the gas management plan and timely execution as well. So when we think about the green footprint there and how that benefits the environment, that potentially opens up other sources of funding. Those could be development funding or otherwise, and we continue to look at different options and have discussions with different parties around that. With firming up the funding and bringing the gas management project together, that feels like something that you would fund that provides flexibility in terms of ensuring that when you make that upfront commitment, you've got the funds committed. And also, it enables us through that investment phase to be able to continue on with our strategic intent, not only to continue to grow production but also continue to be able to reward our shareholders. Jon, I'll hand it back to you.

Thanks, Ian. Another question. Do you have to pause -- if you have to pause investment in Kurdistan, will you consider acquiring assets in a different country? I think we don't typically talk about M&A. I think if we had an opportunity, obviously, it would have to compete with the risk profile of investing in a Jurassic expansion or as Ian just spoken about the program within the Field Development Plan or returning cash to shareholders or being accretive if there was an accretive possibility out there that matched some of those returns. And we would look at -- we would judge it on its merits, basically. One but last question. Are the Board considering any share buybacks? Ian?

Great. Thanks, Jon. When we think about shareholder distributions, and we call them that because we do think on an ongoing basis, when we're taking a decision, when we got surplus cash as to whether we should pay a dividend or whether we should buy back shares. So it is an evergreen discussion. Now of course, in the recent past, we've tended towards dividends. And part of that has to do with the fact that we have taken feedback from our shareholders, and there's a general tendency towards paying dividends. It's what a number of our investors have suggested is their preference. But at the same time, I very much recognize the benefit of share buybacks as well. It provides some flexibility. You can do it in smaller tranches. You can dial it up and you can dial it down depending on the circumstances. And it also, because you're actually buying back your shares, it provides some long-term benefits to our shareholders. Now of course, against that, it potentially reduces liquidity in the trading of the stock. But all of these different considerations, these are things that we factor in as a Board and we take a distribution decision. And we took it recently, and we will continue to consider dividends versus buybacks going forward. Jon, back to you.

Great. Thanks, Ian. Okay, last question. Can the Board of Directors provide insight as to the way of moving forward to encourage the MNR to pay their monthly invoices for production output? This matter is seriously out of control. Can the company not consider matching outputs to payments? Okay. So I think you'll have heard during my -- during the presentation that we continue to engage both with the Kurdistan regional government and the Ministry of Natural Resources from senior technocrats to different bureaucrats in the Ministry to the Minister to the Diwan, the President of the Diwan, and also the Prime Minister himself, we've been engaging. We've been discussing with them about our ability to pay and their ability to catch up on the payments that are late. And we continue as do all other oil companies continue to engage on that front. I think as I said, we're very encouraged recently by the agreement of a budget in the cabinet -- the Iraqi government cabinet which kind of addresses the share that Kurdistan would expect if that budget law was passed. And also how it dealt with one of the stumbling blocks in the past of how Kurdistan oil revenues were treated within that budget. And I'm optimistic that, that will result in the law being passed by the government of Iraq soon. And then I'm looking forward to distributions to Kurdistan beginning. And that would obviously give increased amounts of money. And recently, there was a kind of payment of just below $300 million to the Kurdistan government for their share of last year's budget for November and December. So again, improving liquidity in Kurdistan is key, I think, to us reestablishing regular payments, and let's say, we have been paid this month, paid for August and September of last year's receivables in January and March of this year, and we would look for increased liquidity within Kurdistan to move us back to your regular payments also along with how they catch up in payments that are now late from November -- October through to December of last year, as Ian described. But I think, though, your suggestion of reducing output to match payments is it kind of an ever-decreasing circles in such that, that reduces the liquidity into Kurdistan, which would then result in lower payments to us. So I don't really support that as advice, but thank you for it. I think that's the last question. Over to operator.

Jon and Ian, absolutely thank you very much indeed for being so generous of your time and addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review, to then add any additional responses, of course, where it's appropriate to do so and we'll publish those out on the Investor Meet Company platform. But Jon, just really before redirecting those on the call to provide you their feedback which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that would be great.

Great. Thank you very much. Yes. Firstly, a big thank you for the retail investors who joined us this morning. You're very important to us. And I hope you found the presentation informative, insightful and hopefully exciting. We've got very exciting prospects this year. You'll have seen the CPR report basically reconfirmed the asset as being -- it's a fantastic asset, world-class asset, and we've got an awful lot of potential there to increase production and maintain that production for a very long time. And hopefully, you've also seen our operational performance. We've managed our costs very carefully. And we've now hit our long-term -- long-running target of 55,000 barrels a day. We're investing in continuing -- potential continuous drilling program going forward and put ourselves in that position. And we're also now installing additional capacity so that we can hit those targets that we talked about, but also deal with the water -- reinstalling water handling in that. So that will allow us to manage that challenge that we see occasionally in the field. And so with that, I'd like to thank Ian and everyone in team GKP for all their efforts of last year and the continued efforts because we -- I think in previous years, we've had some challenging issues, I do think we've now got ourselves in a position where we can overcome those and really drive our business forward. With that, thank you very much.

Jon, that's great, and Ian as well. Thank you, once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations? It's going to take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Gulf Keystone Petroleum Limited, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you.