Notice of Meeting of Noteholders

Not for release, publication or distribution, directly or indirectly, in whole or in part in or into the United States or any jurisdiction other than the United Kingdom and Bermuda where to do so would constitute a contravention of the relevant laws or regulations of such jurisdiction.  This announcement (and the information contained herein) does not contain or constitute an offer to sell or the solicitation of an offer to purchase, nor shall there be any sale of securities in any jurisdiction where such offer, solicitation or sale would constitute a contravention of the relevant laws or regulations of such jurisdiction.

 

 

 

12 March 2015

 

Gulf Keystone Petroleum Ltd. (LSE: GKP)

("Gulf Keystone" or "the Company")

 

Notice of Meeting of Noteholders

US$250 million 13.0 per cent. Guaranteed Notes due 2017
(Regulation S Notes: ISIN XS1056559245 / Common Code 105655924;
Rule 144A Notes: ISIN XS1056559088 / Common Code: 105655908)
(the "Notes")

Gulf Keystone, the operator of the world class Shaikan field in the Kurdistan Region of Iraq, today announces that it is inviting the holders ("Noteholders") of its US$250 million 13.0 per cent. guaranteed notes due 2017 to approve a proposal to make certain amendments to the Trust Deed constituting the Notes and to the Conditions contained therein.

Key Points

Ø As announced on 25 February 2015, Gulf Keystone has recently engaged in discussions with a number of parties in relation to possible asset transactions or a sale of the Company. Concurrently, the Company is exploring a number of funding alternatives, including an equity raise within the Company's authorised but unissued share capital (collectively, the "Corporate Actions"). As a result, the Company is seeking the removal of the Book Equity Ratio ("BER") Put Option in order to strengthen the Company's ability to negotiate with the interested parties regarding the Corporate Actions.

 

Ø The Company expects the BER will be below 0.4 in its 2014 financial results primarily due to an expected impairment of the Akri-Bijeel asset.

 

Ø The Company views the Akri-Bijeel Block as a non-core asset, which has been held for sale. Its expected impairment is the result of a technical accounting requirement under IFRS and is not as a result of the Company's liquidity position.

 

Ø To the extent that the BER is below 0.4 for 60 days following the date the Company releases its 2014 Annual Report and Accounts, the Company will be required to make an offer to purchase the Notes (the BER Put Option).

 

Ø The Company's current liquidity position was recently enhanced by the US$26 million (gross) pre-payment for future Shaikan crude oil export sales announced on 25 February 2015, with the Company's cash balance as of the date of this announcement being US$90.4 million.

 

Ø Gulf Keystone is currently preparing to resume production from the Shaikan field, which was suspended in mid-February, and crude oil export deliveries by truck to the Turkish coast.

 

Ø The Company continues to work with the Kurdistan Regional Government's Ministry of Natural Resources ("MNR") to establish a regular payment cycle for past and future crude oil export sales and payment of arrears and to finalise an early pipeline access solution for the Shaikan crude.

 

Ø As stated on 25 February 2015, the Company intends to meet its existing debt payment obligations. 

 

Ø The Company has confidentially discussed the consent solicitation with a number of significant Noteholders, and, based on the Noteholders' responses during those discussions, expects them to be supportive. 

 

Commenting on today's announcement, Sami Zouari, Gulf Keystone's CFO said:

 

"Our financing approach is to ensure that we are in a strong position to be able to generate value for our stakeholders.  As such, and due to the expected impairment of the non-core Akri-Bijeel Block, which has been held for sale by the Company, we believe that it is appropriate to seek the removal of the Book Equity Ratio Put Option in order to progress and complete a number of strategic and funding options.

 

Concurrently, we are working with the MNR in order to establish a regular payment cycle for past and future Shaikan crude oil export sales, which we are currently preparing to resume."

 

Background  

Further to the Company's announcement of 25 February 2015, Gulf Keystone has recently engaged in discussions with a number of parties in relation to possible asset transactions or a sale of the Company. Concurrently, the Company is exploring a number of funding alternatives, including an equity raise within the Company's authorised but unissued share capital as approved at Gulf Keystone's 2014 Annual General Meeting (collectively, the "Corporate Actions"). These discussions are preliminary and, as such, there can be no certainty that any offers will be received and any transaction concluded, or any certainty as to the terms on which any offer might be made or funding alternative consummated. The Company is seeking the removal of the BER Put Option in the Consent Solicitation (as defined below) in order to strengthen the Company's ability to negotiate with the interested parties regarding the Corporate Actions.

The Company expects that, primarily due to an expected impairment of its Akri-Bijeel asset at the end of 2014, the BER of the Company as at 31 December 2014 will be below 0.4 when it reports its 2014 financial results. The Company views the Akri-Bijeel Block as a non-core asset, which has been held for sale. The expected impairment of the asset is the result of a technical accounting requirement under IFRS and is not as a result of the Company's liquidity position. The Book Equity Ratio is the ratio of Book Equity to Total Assets and is an atypical covenant in high yield debt instruments. To the extent that Book Equity Ratio is below 0.4 for 60 days following the date the Company releases its 2014 Annual Report and Accounts, which date is expected to be at the end of April 2015, the Company will be required to make an offer to purchase Notes at 101 per cent. plus accrued and unpaid interest at around the end of September, pursuant to Condition 4.11 in the Terms and Conditions of the Notes contained in Schedule 4 of the Trust Deed. The Company believes that the requirement to offer to purchase the Notes could undermine its efforts around the Corporate Actions and could deter third parties from engaging with it in connection with the Corporate Actions. The Company is requesting the removal of the Book Equity Ratio Put Option as: (a) it relates primarily to a technical accounting requirement; (b) removing it will provide greater operational flexibility; and (c) removing it will allow us to optimally negotiate the Corporate Actions.

The Company has confidentially discussed the Consent Solicitation with a number of significant Noteholders, and, based on the Noteholders' responses during those discussions, expects them to be supportive.

Notice of Meeting of Noteholders

The Company is inviting the Noteholders to approve, by an extraordinary resolution (the "Extraordinary Resolution"), a proposal to make certain amendments (the "Proposed Amendments") to the Trust Deed (as defined below) and the Terms and Conditions of the Notes (the "Consent Solicitation").

A notice (the "Notice") convening a meeting of the Noteholders to be held at 2.00 p.m. (London time) on 7 April 2015 (the "Meeting") was delivered to Euroclear and Clearstream (each as defined in the Notice) on 12 March 2015.  The Meeting will be held at the offices of Paul Hastings (Europe) LLP at Ten Bishops Square, Eighth Floor, London E1 6EG, United Kingdom, for the purpose of considering and, if thought fit, passing the Extraordinary Resolution as set out in the Notice, which will be proposed as an Extraordinary Resolution in accordance with the provisions of the Trust Deed dated 17 April 2014 (as amended or supplemented from time to time, the "Trust Deed") made between the Company, Gulf Keystone Petroleum International Limited and BNY Mellon Corporate Trustee Services Limited.

Consent Fees

The Company will make a cash payment of the "Early Consent Fee" in an amount equal to US$5.00 for each US$1,000 in principal amount of the Notes outstanding as at 1 April 2015 (the "Expiration Date") and paid to Holders whose Consent is validly delivered prior to 5.00 p.m. London time, on 23 March 2015 (such date and time, as may be extended, amended or earlier terminated, the "Early Consent Time") and accepted pursuant to the terms of this Consent Solicitation Memorandum.  The "Late Consent Fee" shall be in an amount equal to US$1.50 for each US$1,000 in principal amount of the Notes outstanding as at the Expiration Date and paid to Holders whose Consent is validly delivered prior to 5.00 p.m. (London time) (the "Expiration Time") on the Expiration Date but after the Early Consent Time and is accepted pursuant to the terms of this Consent Solicitation Memorandum. 

Subject to the terms and conditions specified in the Consent Solicitation Memorandum, Noteholders who: (a) submit a valid electronic voting instruction through the Clearing Systems in favour of the Extraordinary Resolution by no later than the Expiration Time on the Expiration Date and pursuant to which the Registered Holder will appoint D.F. King Limited (the "Information and Tabulation Agent") as proxy to vote in favour of the Extraordinary Resolution at the Meeting; or (b) wish to appoint someone else as their proxy to attend the Meeting and submit a valid electronic voting instruction through the Clearing Systems arranging for the appointment pursuant to the Trust Deed of such a proxy to vote in favour of the Proposed Amendments at the Meeting by no later than the Expiration Time on the Expiration Date (each of (a) and (b), a form of "Consent"), and whose validly delivered Consent is accepted pursuant to the terms of this Consent Solicitation Memorandum, will be entitled to receive the Early Consent Fee or the Late Consent Fee, as applicable, if the Extraordinary Resolution is duly passed at the Meeting and becomes effective in accordance with its terms and the Supplemental Trust Deed is executed to effect the Proposed Amendments. Holders who have submitted a Consent at or prior to the Early Consent Time may not revoke such Consent after the Early Consent Time, and Holders who have submitted a Consent after the Early Consent Time may not revoke such Consent at any time, in each case unless otherwise required by law or permitted by the Clearing Systems or the Trust Deed.

Nothing in the Consent Solicitation or in the Consent Solicitation Memorandum requires the Company to implement the Extraordinary Resolution, even if it is approved. If the Company withdraws or does not implement the Extraordinary Resolution for any reason then no Early Consent Fees or Late Consent Fee will be payable to any Noteholder.

Quorum and Required Votes

The quorum required for the Proposed Amendments to be considered at the Meeting is one or more holders of the Notes or proxies present in person representing 75 per cent. in principal amount of the Notes outstanding.

To be passed at the Meeting, the Extraordinary Resolution requires a majority of not less than 75 per cent. of the votes cast. If passed, the Extraordinary Resolution shall be binding on all the Noteholders, whether or not present at the Meeting, and each of them shall be bound to give effect to it accordingly.

Expected Timeline

The following summary of key dates is qualified in its entirety by the more detailed information appearing in the Consent Solicitation Memorandum.

Holders of Notes should take note of the following dates in connection with the Consent Solicitation. However, the dates below are subject to modification in accordance with the terms of the Consent Solicitation.

Date	Calendar Date/Time	Event
Consent Solicitation Launch Date	12 March 2015	Commencement of the Consent Solicitation.
Early Consent Time	5.00 p.m. London time on 23 March 2015, unless extended or earlier terminated by the Company in its sole discretion.	The time prior to which Holders must validly deliver a Consent to the Proposed Amendments in order to qualify for the Early Consent Fee. Deadline for revoking a Consent.
Expiration Time on Expiration Date	5.00 p.m. London time on 1 April 2015.	The time prior to which Holders must validly deliver a Consent to the Proposed Amendments in order to qualify for the Late Consent Fee.
Meeting	2.00 p.m. London time on 7 April 2015.	The meeting of Holders to consider the Proposed Amendments, as described in the Notice.
Announcement of Consent Solicitation Results	As soon as practical after the Meeting.	The date on which the result of the Consent Solicitation is announced by the Company.
Consent Fees Payment Date	Promptly following the date on which the Supplemental Trust Deed is executed, subject to the terms and conditions in the Consent Solicitation Memorandum.	The Proposed Amendments take effect upon execution of the Supplemental Trust Deed. Promptly thereafter, the Company deposits the amount necessary to pay the Early Consent Fee to Holders who validly delivered Consents prior to the Early Consent Time and deposits the amount necessary to pay the Late Consent Fee to Holders who validly delivered Consents prior to the Expiration Time, with the Information and Tabulation Agent.

           

The complete terms and conditions of the Consent Solicitation are described in the Consent Solicitation Memorandum, copies of which may be obtained by contacting D.F. King Limited, the information and tabulation agent for the Consent Solicitation, as set out below.  Additional information concerning the Consent Solicitation may be obtained by contacting the solicitation agents.

Capitalised terms have the meanings assigned to them elsewhere in this release, in the Consent Solicitation Memorandum or in the Trust Deed, as applicable.

This press release is for informational purposes only, and the Consent Solicitation is being made only pursuant to terms of the Consent Solicitation Memorandum. The Consent Solicitation is not being made to, and Consents are not being solicited from, holders of Notes in any jurisdiction in which it is unlawful to make such solicitation or grant such Consent. None of the Company, the guarantor of the Notes, the solicitation agents, the information and tabulation agent or the trustee under the Trust Deed makes any recommendation as to whether or not holders of Notes should deliver any Consents. Each holder of Notes must make its own decision as to whether or not to deliver a Consent.

Further Information

A complete description of the terms and conditions of the Consent Solicitation is set out in the Consent Solicitation Memorandum. Further details about the transaction can be obtained from:

The Solicitation Agents

Deutsche Bank AG, London Branch

Reid Payne

Tel : +442075476153

Email: [email protected]

 

Gayatri Narayan

Tel : +442075473693

Email: [email protected]

Perella Weinberg Partners UK LLP

Tanguy Riviere

Tel: +44 20 7268 2874

Email: [email protected]

 

Yue Zhou

Tel: +44 20 7268 2844

Email: [email protected]

Requests for assistance in completing and delivering the electronic voting instructions or requests for copies of the Consent Solicitation Memorandum and other related documents should be directed to the Information and Tabulation Agent:

Information and Tabulation Agent

D.F. King Limited

85 Gresham Street

London EC2V 7NQ

United Kingdom

Tel: +44-20-7920-9700

Email: [email protected]

 

 

Enquiries:

 

Gulf Keystone Petroleum:	+44 (0) 20 7514 1400
Anastasia Vvedenskaya, Head of Investor Relations
Media Relations and Financial PR Adviser:	+44 (0)20 7520 9266
Mark Antelme

 

 

or visit: www.gulfkeystone.com 

 

 

Notes to Editors:

 

·           Gulf Keystone Petroleum Ltd. (LSE: GKP) is an independent oil and gas exploration, development and production company focused on the Kurdistan Region of Iraq.

·           Gulf Keystone Petroleum International (GKPI) holds Production Sharing Contracts for four exploration blocks in Kurdistan, the Shaikan, Sheikh Adi, Ber Bahr and Akri-Bijeel blocks.

·           GKPI is the operator of the Shaikan Block, which is a major commercial discovery, with a working interest of 75% and is partnered with MOL Kalegran Limited (a 100% subsidiary of MOL Hungarian Oil and Gas plc.) and Texas Keystone Inc., which have working interests of 20% and 5% respectively.  Texas Keystone Inc. holds its interest in trust for Gulf Keystone, pending transfer of its interest to the Company.

·           Gulf Keystone is moving into the large-scale phased development of the Shaikan field targeting 100,000 bopd of production capacity during Phase 1 of the Shaikan Field Development Plan following its approval in June 2013.

 

 

Disclaimer

 

This announcement contains certain forward-looking statements.  These statements are made by the Company's Directors in good faith based on the information available to them up to the time of their approval of this announcement but such statements should be treated with caution due to inherent uncertainties, including both economic and business factors, underlying such forward-looking information.  This announcement has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.  This announcement should not be relied on by any other party or for any other purpose.

 

This communication and the information contained herein is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States unless they are registered or are exempt from registration. Any public offering of securities to be made in the United States would be made by means of a prospectus that would contain detailed information about the company and its management, as well as financial statements. The company does not intend to register any portion of this offering in the United States or to conduct a public offering in the United States or any other jurisdiction. Any public offering of securities to be made in the United States would be made by means of a prospectus that would contain detailed information about the Company and its management, as well as financial statements. Copies of this communication are not being, and should not be, distributed in or sent into the United States.