Where's The Akri-Bijeel Reserve Numbers Already?



GUKYF have a 20% interest in the Akri Bijeel block covering the Bijeel and Bakrman discoveries.

Operator MOL indicated in March that an accelerated works program was on track.

MOL also indicated that updated reserves and OIIP numbers would be forthcoming followed by 4 months of silence!

Gulf Keystone Petroluem (OTCPK:GUKYF) published a Competent Person's Report (CPR) - link - on the 13th of March 2014 placing a baseline estimate of reserves on its 4 blocks in Kurdistan. Included in those estimates were numbers for the Akri Bijeel block, which is operated by MOL Hungarian Oil and Gas Plc (MGYOY) with a 80% working interest alongside Gulf's 20% working interesting.

The following was declared as 2C contingent resources for the 2 fields on the block:

Gross Net




Gas Total
Akri Bijeel 41 10 43 5 1 5
Bakrman 2 3 3 - - -

Gulf in effect told the market that there were no 2P reserves on this block and assigned almost negligible reserves to the 2 discoveries.

To say that MOL were quick in the face of this news is an understatement. On the very same morning they released a news release titled "Early production has started from Bijeel Field on the Akri-Bijeel Block, accelerated work program on track" - link.

Inside this release was the following statement with regards to Gulf's estimates:

Operator [Kalegran Ltd. (a 100% subsidiary of MOL] is in the progress of accessing data provided by recent well tests as well as by the interpretation of 3-D seismic. After finishing the assessment of the whole block submission of the Field Development Plan is due by end of April 2014. An updated Total Original Oil In Place (OIIP) and reserve potential estimate of the block will be part of the Field Development Plan. Reserve potential estimates relate to Akri-Bijeel block in the 'Third-Party Audit' material published today by Gulf Keystone Petroleum Ltd., with a cut-off date of 31 December 2013, is very conservative, does not calculate with the latest positive results and is significantly lower than the current best estimate of the Operator.

"Excellent" Gulf shareholders cried (as I did). The operator of the block believes these reserve numbers are too low and will in a matter of weeks release more information. Gulf's estimates were below market expectations and the stock sold off on the news from above $2.60 (150p) to sit now at $1.45 (83p). Any upgrade to reserves would demonstrate the conservative nature of the CPR report and act as a shot in the arm for Gulf.

It's now fast approaching the end of July and shareholders would be forgiven for asking: Where the heck are these updated reserve numbers from MOL?

Well, the devil is in the detail. MOL said that a the Field Development Plan ((FDP)) was due for submission by the end of April 2014. This is a true statement. They did not say they would release reserves at this time. The FDP needs to be approved by the Management Committee assigned by the Ministry of Natural Resources (MNR) of the Kurdistan Regional Government (KRG). Luckily the approval process is well described in the block's Production Sharing Contract (NASDAQ:PSC) - link -sections 12.8 to 12.10 of specific interest. While there is room for the process to be delayed by the MNR, the timeline looks like the following:

Date Notes Estimated Date
31st Oct 2013 Declaration of commercial discovery (link)
+180 days Deadline for submission of FDP 29th Apr 2014
+60 days Deadline for approval of Management Committee 28th Jun 2014
+60 days

For a meeting to be held if modifications are required.

27th Aug 2014
+30 days For approval of any modifications 26th Sep 2014

If the government does not delay the approval process then the FDP can be expected to be approved on or before the 26th September 2014. So not in fact any time soon. Of course the MNR and operator can be presumed to have worked closely together to telegraph the contents of the FDP and get this show on the road.

So, if like me, you are asked "where are the MOL reserve numbers promised at the end of April?!" then please refer to this article for possible response.

Disclosure: The author is long GUKYF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long the London listed main security GKP and not the U.S. listed GUKYF.

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