Gulf Keystone, ShaMaran Merge to Build $1B Iraq-Focused Oil Producer

Key Points

• Gulf Keystone and ShaMaran have agreed to merge, creating an Iraq-focused oil producer valued at more than $1 billion with approximately 53,000 barrels per day of pro forma working-interest production and 323 million barrels of 2P reserves.
• The combined portfolio will include Gulf Keystone’s Shaikan field, ShaMaran’s Sarsang and Atrush interests, and a 25% stake in Iraq’s Hamrin field. Management sees potential to increase production toward 100,000 barrels per day through Shaikan and Hamrin development.
• The deal is targeted for completion around mid-2027, subject to approvals. ShaMaran shareholders will receive roughly 50% of the combined company, while Gulf Keystone shareholders are slated for a $50 million special dividend; the group also expects up to $5 million in annual synergies and plans to consolidate its listing in Oslo.

Gulf Keystone Petroleum LON: GKP and ShaMaran Petroleum have agreed to merge in a transaction that the companies said would create a Kurdistan- and Iraq-focused independent oil producer with pro forma working-interest output of about 53,000 barrels of oil per day.

Under the proposed statutory merger, which will be conducted under Bermuda law, Gulf Keystone will remain the surviving entity. ShaMaran shareholders will receive newly issued Gulf Keystone shares representing approximately 50% of the combined company, while Gulf Keystone shareholders are set to receive a $50 million special dividend upon closing.

Gulf Keystone Chief Executive Officer Jon Harris said the combined group would have four producing assets across Kurdistan and Federal Iraq, estimated working-interest 2P reserves of 323 million barrels, and a pro forma value exceeding $1 billion. The companies are targeting completion around the middle of 2027, subject to shareholder, regulatory, listing and Kurdistan Regional Government approvals.

Portfolio combines Shaikan with ShaMaran assets

The transaction would combine Gulf Keystone’s operated Shaikan field with ShaMaran’s non-operated interests in the Sarsang and Atrush fields in Kurdistan, as well as ShaMaran’s newly announced investment in the Hamrin field in Federal Iraq.

Harris said production would rise from Gulf Keystone’s current working-interest contribution of roughly 28,000 barrels per day to approximately 53,000 barrels per day. The companies said that level would place the combined group among the 10 largest listed independent producers in Europe.

Gulf Keystone CFO Gabriel Papineau-Legris said Sarsang and Atrush are adjacent to Shaikan and are expected to provide cash flow support for the company’s planned multi-year Shaikan development program. He described the two assets as low-cost operations with limited capital expenditure requirements and substantial outstanding cost pools.

ShaMaran has acquired a 25% interest in HKN Hamrin, which holds the Hamrin development and production contract. Current field production is approximately 20,000 barrels per day, according to the presentation. ShaMaran and operator HKN Energy are targeting production of around 60,000 barrels per day by 2028, equal to 15,000 barrels per day net to ShaMaran.

The companies said Hamrin has estimated gross reserves and resources ranging from 500 million to 1 billion barrels. Papineau-Legris said further development phases could lift net production to more than 30,000 barrels per day. The initial investment is expected to be about $50 million, with later-phase capital expenditure estimated at $2 to $3 per incremental barrel.

ShaMaran President and CEO Garrett Soden said the company and the Lundin Group conducted technical reviews of Hamrin, including work by external consultants, despite limited information being available from the field’s previous operator. He said the companies were comfortable with the technical upside.

Growth plans and synergies

Gulf Keystone plans to begin Shaikan field development and drilling next year. The program is intended to more than double existing Shaikan production by expanding output from the Jurassic reservoir and testing the Triassic reservoir.

According to Papineau-Legris, Shaikan’s Jurassic reservoir has estimated working-interest 2P reserves of 256 million barrels, while the Triassic holds nearly 100 million barrels of working-interest 2C resources. He said production at Sarsang also comes from the Triassic reservoir, potentially providing operational learnings for Shaikan.

The companies said that, over time, the Shaikan and Hamrin development opportunities could increase combined working-interest production toward 100,000 barrels per day. Papineau-Legris said most capital spending would be directed toward Shaikan, while Hamrin could be closer to self-funding because its contract provides for up to 70% cost recovery from existing production.

The merger is expected to generate up to $5 million in annual synergies, primarily from reducing public-company overhead and general and administrative expenses. Management also pointed to potential operational efficiencies through collaboration with HKN Energy, which operates Sarsang, Atrush and Hamrin.

In explaining the equal ownership split, Papineau-Legris cited expected near-term free cash flow from ShaMaran’s Kurdistan assets, their lower capital requirements, and the longer-term value potential of Hamrin. Management also said the ShaMaran assets receive more favorable oil-price realizations than Shaikan, with Sarsang at times receiving little or no discount, or a premium.

Oslo listing and shareholder returns

The companies intend to consolidate trading in Oslo. Gulf Keystone plans to uplift its existing Euronext Growth Oslo listing to the main market of the Oslo Børs and subsequently discontinue its London Stock Exchange listing. ShaMaran’s Stockholm shares and Swedish Depositary Receipts would cease trading upon transaction completion.

Papineau-Legris said Oslo was viewed as a natural venue due to its energy-sector investor base and familiarity with Kurdistan-focused companies. The companies expect that a single listing will reduce costs and improve trading liquidity. Gulf Keystone also expects to move to quarterly reporting as part of its Oslo main-market listing plans.

The Lundin family, which owns about 25.6% of ShaMaran, would become the largest shareholder in the combined company. William Lundin is expected to become non-executive chair, while Gulf Keystone’s current chair, Dave Thomas, would become vice chair. Lansdowne Partners Austria GmbH, which owns approximately 13% of Gulf Keystone, also supports the deal.

Management said it intends to formalize a distribution policy in the coming months. If the merger has not closed by late August 2027, each company would be permitted to distribute up to $50 million in dividends, in addition to Gulf Keystone’s planned $50 million closing special dividend. The companies said this could represent up to $100 million of potential 2027 dividends for Gulf Keystone shareholders by the time of completion.

Gulf Keystone is also considering issuing a new bond to fund growth plans, while ShaMaran has begun its own financing marketing process. Papineau-Legris said the companies would provide further updates on financing decisions in due course.

About Gulf Keystone Petroleum (LON:GKP)

Gulf Keystone Petroleum Limited engages in oil and gas exploration, development, and production in the Kurdistan Region of Iraq. The company operates Shaikan field that covers an area of approximately 280 square kilometers, which is located north-west of Erbil. It also provides management, support, geological, geophysical, and engineering services. The company was incorporated in 2001 and is based in Hamilton, Bermuda.

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