Takeover hopes revive for Gulf Keystone

A reduction in legal bills linked to the Excalibur case meant that the operating loss fell 43 per cent to $19.3m (£12m), although net cash outflow for the period increased by a fifth to $22.3m. In addition, the company will be able to recover its legal expenses from a £17.5m security bond lodged by Excalibur in the English Commercial Court.

Following approval of the development plan by Kurdistan authorities, commercial production kicked off in July and a rate of 12,400 barrels of oil per day (bopd) had been achieved by early September - by which time 179,063 barrels had been sold into the local market. However, production was then temporarily halted at the request of Kurdish authorities.

The resolution of the Excalibur case will allow the recently rejigged management team to focus on the impending drilling programme, which includes up to eight wells on Shaikan in 2014, and finalising plans for the development of the Kurdistan production facilities. Management said that growing cash flows from Shaikan should allow it to pursue a cash-neutral approach to growing its operations, too. A second production facility at Shaikan is also nearing completion, which will raise capacity to meet the initial output target of 40,000 bopd. The development of two additional facilities at a combined cost of $400m-$500m is expected to increase production to 150,000 bopd midway through 2016.

With more drilling and appraisal at the Skeikh Adi and Ber Bahr blocks, capital expenditure for 2014 is now estimated at $471m. By the end of this year, investors will also have a clearer idea of the extent of the group's reserve base, as an independent report must be produced as a condition of the proposed move from Aim to the main market.