Annual report and

accounts 2021

Gulf Keystone Petroleum Limited Annual report and accounts 2021

About us

Gulf Keystone is the operator of the Shaikan

Field, one of the largest developments in the

Kurdistan Region of Iraq.

43,440 bopd

record gross annual average production,

representing a 19% increase vs 2020

MOSUL

TALL'AFAR

DOHUK

ERBIL

KIRKUK

CHEMCHEMAL

SULEIMANIAH

2021 full-year highlights

$100 million

of dividends distributed to shareholders

$164.6 million

profit after tax

$222.7 million

adjusted EBITDA, almost four times greater

than2020

$169.9 million

cash at year end

2021 timeline

January:

New Chief Executive

Officer, Jon Harris,

appointed

March:

Reinstatement of

annualdividend policy

ofat least $25 million

June:

Resumption of drilling

activities ahead of

schedule

July:

Payment of $25 million

annual ordinary dividend

August:

Payment of $25 million

special dividend

International Border

Oil Pipelines

Shaikan Licence

Block Licences

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 1

September:

Completed

debottlenecking of

PF-2, increasing total

field processing capacity

toc.57,500 bopd

October:

Payment of $50 million

interim dividend and

record 2021 gross

monthly production of

45,654 bopd

November:

Submission of

draft Shaikan Field

Development Plan to

the Ministry of Natural

Resources

2021 full-year highlights

GKP is a responsible energy company developing natural

resources for the benefit of all our stakeholders, delivering

social and economic benefits by working safely and

sustainably with integrity and respect.

Our

asset

on pages 14 to 17

CEO

review

on pages 6 and 7

Sustainability

report

on pages 28 to 45

Strategic report

Our investment case 2

Chairman’s statement 4

Chief Executive Officer’s review 6

Operational review 8

Financial review 10

Our asset 14

Operating in Kurdistan 16

Crude oil payments 17

Business model 18

Strategy and objectives 20

Key performance measures 22

Stakeholder engagement 24

Sustainability report 28

Management of principal risks

anduncertainties 46

Viability statement 56

Governance

Board of Directors 58

Corporate governance report 60

Nomination Committee report 70

Audit and Risk Committee report 73

Safety and Sustainability

Committeereport 77

Technical Committee report 79

Remuneration Committee report 81

Directors’ report 99

Directors’ responsibilities statement 101

Financial statements

Independent auditor’s report 102

Consolidated income statement 109

Consolidated statement of

comprehensive income 109

Consolidated balance sheet 110

Consolidated statement

of changes in equity 111

Consolidated cash flow statement 112

Summary of significant

accounting policies 113

Notes to the consolidated

financial statements 121

Non-IFRS measures 137

Report on Payments to Governments 139

Glossary 140

Directors and advisers IBC

Key shareholder engagements IBC

Governance

Strategic report

Financials

2 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Our investment case

Long life asset with proven

production track record

Robust financial

position

• The Shaikan Field ranks among the largest energy

developments in Kurdistan and has significant

growth potential

• 100 million stock tank barrels (MMstb) produced

to date

• Estimated 489 MMstb of 2P reserves left to

produce as at 31 December 2021

(1)

, equivalent to

a2P gross reserves life index of around 30years

(2)

>100 MMstb

oil produced from the Shaikan Field to date

30 years

estimated 2P gross reserves life index

(2)

• The Shaikan Field is highly cash generative

• Rigorous focus on maintaining capital discipline

and our leading low cost structure

• Robust balance sheet, enabling us to safeguard

the future of the Company and our ability to deliver

against our strategy through economic and

commodity cycles

$2.7/bbl

gross Opex in 2021

$122.2 million

free cash flow in 2021

(1) Based on the 31 December 2020 Competent Person’s Report adjusted

for 2021 production.

(2) 489 MMstb of estimated gross 2P reserves as at 31 December 2021/

gross average production for 2021 of 43,440 bopd.

Shaikan Field production history (‘000 bopd)

1.4

2013

17.8

30.5

34.8

43.4

2014 2015 2016 2021

35.3

2017

31.6

32.9

36.6

2018 2019 2020

Cash balance 2017-2021 ($m)

160

2017

296

191

148

170

2018 2019 2020 2021

$100m

bond

Covenant

$15m

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 3

Balancing sustainable growth

with shareholder returns

Safety and sustainability

underpin our business

• Committed to balancing investment in sustainable

growth with shareholder returns

• Delivered against this promise in 2021, reinstating

our annual dividend policy of at least $25 million

and paying total dividends of $100 million

• 2021 gross average production increased 19%

to 43,440 bopd, the third year of consecutive

production growth since 2018

• Submitted a draft Field Development Plan to the

MNR to capitalise on the significant future growth

potential of the Shaikan Field

19%

increase in gross average production in 2021

$100 million

dividends paid in 2021

• Focused on enhancing the safety

andsustainability of our business

• Strategic priorities include minimising

environmental impact, workforce safety,

enhancing diversity & inclusion, generating local

economic value and strong governance and

compliance

• The Gas Management Plan will enable us to

eliminate routine flaring and significantly reduce

our carbon intensity per barrel by 2025

>50%

reduction in scope 1 and 2 CO

emissions

perbarrelby2025

“A”

MSCI ESG Research rating

(4)

(3) As at 30 March 2022. (4) MSCI ESG Research as at 24 September 2021. MSCI ESG Research

aims to measure a company’s resilience to long-term, financially relevant

ESG risks. Companies are rated on a AAA-CCC scale relative to the

standards and performance of their industry peers. “A” is at the upper

end of the “average” rankings of BB, BBB and A.

MSCI ESG rating history

Oct 2018 Dec 2019 Sep 2020 Sep 2021

AAA

BBB

CCC

BBB

$340 million cumulative shareholder

distributions declared since 2019

$340 million

2019 2020 2021 2022 YTD

(3)

400

350

250

300

200

150

100

140

Dividends Share buybacks

To read about GKP’s principal risks and uncertainties, and how the Company manages them, please see pages 46 to 55.

Governance

Strategic report Financials

4 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

We are focused on driving

sustainable growth and

value from the Shaikan

Field for the benefit of

allstakeholders.

Jaap Huijskes

Non-Executive Chairman

Chairman’s

statement

2021 was characterised by both an improvement in the oil price and

operational environment. The price of Dated Brent averaged $71/bbl

in the year, up $29/bbl versus the 2020 average, driven by the partial

recovery of global demand and the continued regulation by OPEC+

ofsupply. At the same time, COVID-19 restrictions gradually loosened,

with a return to more normal working patterns in the field. Having

taken rapid action in 2020 to protect staff, reduce costs and preserve

liquidity, the Company was able to capitalise on these better conditions.

Since the beginning of the year, the price of Brent crude has continued

to increase, although it remains volatile. While the improvement in oil

price drives increased cash flow, I and the Board are deeply concerned

about the primary reason for the increase, the invasion of Ukraine.

Ourthoughts are with the many Ukrainian citizens who have had to

fleetheir homes or have lost their lives due tothe conflict.

In 2021, Gulf Keystone generated significant cash flow due to its

strong leverage to the recovery in oil price, increased production

and continued cost and capital discipline. Inline with the Company’s

strategy of balancing investment in sustainable growth with

shareholder distributions, in March 2021 the Board reinstated the

Company’s dividend policy of paying at least $25 million annually to

shareholders. Total dividends of $100 million were subsequently paid

in2021, given continuing strong oilprices and cash generation.

Since the beginning of 2022, Gulf Keystone has paid a $50 million

interim dividend and we are pleased to have declared $90 million of

additional dividends, comprising a $25 million 2021 annual ordinary

dividend for shareholder approval at the Company’s AGM on

24June2022 and a $65 million interim dividend payable in May 2022.

Including these, prior dividends and $50 million of share buybacks,

since 2019 the Company has distributed $340 million to shareholders.

Capitalising on a strong balance sheet and improving operating

conditions, the Company also resumed investment in the Shaikan

Field,restarting drilling activities ahead of schedule in June and

bringing two new wells, SH-13 and SH-14, on stream by the end of the

year. The Company also resumed engagement with the MNR on Gulf

Keystone’s vision to develop the Shaikan Field’s almost 800 MMstb of

2P reserves and 2C resources, resulting in the submission of a draft

Field Development Plan (“FDP”) towards the end of 2021.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 5

Phase 1 of the draft FDP is expected to enable Gulf Keystone to

increase gross production plateau to between 85,000-95,000 bopd

while reducing carbon intensity per barrel by over 50% through the

implementation of a Gas Management Plan. We are committed to

ensuring the FDP generates significant value for all of Gulf Keystone’s

stakeholders. We continue to actively engage the MNR to obtain

approval of the draft FDP and in the meantime have focused our

capital expenditure programme for 2022 on production, safety

andpreparatory activities.

Sustainability continues to be a strategic focus for the Board, which is

supported by Gulf Keystone’s Safety and Sustainability Committee.

With the submission of the draft FDP, the Board was pleased to

see the Company’s Gas Management Plan, and its objectives of

reducing carbon intensity and eliminating routine flaring, move a step

closer. The Company also continued to make significant social and

economic contributions to Kurdistan through local employment and

community engagement programmes, local supply chain investment

and generation of revenues from the field for our host government,

theKRG.

The Board continued to engage with Gulf Keystone’s shareholders

in 2021, both at the Annual General Meeting (“AGM”) and on a more

frequent basis with the Company’s major shareholders. We welcome

ongoing engagement and feedback from all investors and encourage

all GKP shareholders to participate in our 2022 AGM. This year,

the Company’s remuneration policy will be subject to a binding

shareholder vote at the AGM. The Board has made minor changes to

the current policy, which was approved at the 2019 AGM with support

in excess of 98%.

The only change to the Board over the last year was the appointment

of Jon Harris as Gulf Keystone’s new CEO in January 2021. Jon has

been instrumental in successfully resuming investment in the Shaikan

Field and advancing negotiations with the MNR as we seek approval

oftheFDP.

On behalf of the Board, I would like to thank Jon, the rest of the

leadership team and all of Gulf Keystone’s employees for another

strong year of operational and financial delivery. In addition, I would

like to thank all of our stakeholders for their ongoing support. We are

excited about the future and we look forward to further progress in

driving sustainable growth and value from the Shaikan Field for the

benefit of all of Gulf Keystone’s stakeholders.

Jaap Huijskes

Non-Executive Chairman

29 March 2022

Governance

Strategic report Financials

6 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Jon Harris

Chief Executive Officer

We continue to deliver

against our strategic

commitment tobalance

growth with shareholder

returns.

Chief Executive

Officer’s review

I am pleased to report strong operational and financial delivery for

Gulf Keystone in 2021. By growing production from the Shaikan Field

and maintaining our rigorous focus on cost and capital discipline, we

were able to capitalise on our leverage to an improving oil price and

generate revenue of $301 million and adjusted EBITDA of $223million.

We delivered on our strategy of balancing investment in sustainable

growth and shareholder returns, as we resumed drilling activities

and submitted a draft Field Development Plan (“FDP”) to the Ministry

of Natural Resources (“MNR”) while also returning $100 million of

dividends toourshareholders.

The foundation of our performance is a rigorous focus on safety,

whichis one of Gulf Keystone’s core values. Despite carefully managing

the resumption of drilling activities, we were disappointed to record a

lost time incident (“LTI”) in October. We are committed to continuous

learning and carried out detailed investigations and implemented

remedial actions to safeguard against future incidents.

Gross average production in 2021 was 43,440 bopd, atthe top

end of our tightened guidance range of 42,000-44,000 bopd.

This represented a 19% increase versus the prior year and the third

consecutive year of production growth. Higher production was driven

by the contribution from well workovers taking place in 2020 and 2021

and the contribution of two new wells, SH-13 and SH-14, at the end of

the year.

We were pleased to successfully restart drilling activities in June, ahead

of schedule. Despite a promising start, the need for an acid stimulation

programme on SH-13 and equipment failures and wellbore issues in the

subsequent side-track on SH-14 created delays. Nonetheless, we were

able to surmount these challenges to bring SH-13 and SH-14 on stream

towards the end of the year and spud SH-15 in early 2022.

We also continued to progress development of the full potential of the

Shaikan Field’s significant reserves and resources with the submission

of a draft FDP to the MNR towards the end of 2021. This was the result

of several months of constructive engagement with the MNR and our

partner MOL following the resumption of discussions in 2021.

The draft FDP comprises a plan to increase Phase 1 gross production

plateau to between 85,000-95,000 bopd while significantly reducing

our carbon intensity. We plan to achieve this by expanding Jurassic

gross production plateau up to 85,000 bopd and testing the Triassic

reservoir, targeting gross production plateau of up to 10,000 bopd.

Atthe same time, we will implement a Gas Management Plan to

eliminate routine flaring through the reinjection of natural gas into the

reservoir, underpinning our target to more than halve our scope 1 and

2 emissions per barrel by 2025. The Gas Management Plan is critical

to our licence to operate in Kurdistan and responds to both GKP’s and

the KRG’s desire to eliminate routine flaring and reduce the emissions

intensity of the region’s production.

In keeping with our commitment to eliminate routine flaring, wehave

applied to endorse the World Bank’s “Zero Routine Flaring by 2030”

initiative. Beyond the Gas Management Plan, we are exploring

the viability of several other projects to reduce our scope 1 and 2

emissionsintensity further beyond the 2025 target.

Our focus on climate risk is just one part of our ESG agenda and

sustainability strategy. Our other priorities include working safely,

minimising our impact on the local environment, supporting and

developing our people, generating economic value in Kurdistan and

maintaining strong governance and compliance. We are particularly

proud of our social and economic contribution to Kurdistan, our home

for over 15 years, and see significant opportunities from the FDP for

further local job creation, workforce development and investment in

our local supply chain and communities as we generate increasing

revenues for the KRG and the region from the Shaikan Field. In 2021,

$356 million was generated for the KRG, primarily from production

entitlements, royalties and capacity building payments.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 7

While we continued to invest in growth in 2021, we also delivered

against our strategic commitment to balance growth with shareholder

returns. We understand the importance of cash returns to our

shareholders and we were pleased to reinstate our dividend policy of

distributing at least $25 million annually, subsequently distributing total

dividends in the year of $100 million. Since the beginning of 2022, we

have distributed a further $50 million and we are delighted to declare

$90 million of additional dividends, comprising a $25 million 2021

ordinary annual dividend for shareholder approval at the Company’s

AGM on 24 June 2022 and a $65 million interim dividend payable in

May 2022.

We have entered 2022 with momentum and hit the milestone in

February of 100 MMstb cumulative gross production from the Field

since inception. Gross average production year to date has been

around c.45,500 bopd, and we remain focused on delivering our

2022gross average production guidance of 44,000-50,000 bopd.

As a Company, we are deeply saddened and concerned about the

invasion of Ukraine and the resulting humanitarian crisis. Our thoughts

are with the people of Ukraine and we are all hoping for a swift and

peaceful end to the conflict.

While there has been no impact on our operations to date, we are

closely monitoring the developing situation in Ukraine. This includes

potential sanctions being imposed on Russian entities, which could

adversely impact our business.

We also continue to monitor the broader political and regulatory

environment in the Kurdistan Region and Federal Iraq following

the recent ruling by the Iraqi Federal Supreme Court regarding the

Kurdistan Region Oil & Gas Law. We have noted the KRG’s strong

opposition to the ruling and agreement by both the KRG and the

Federal Government to engage on what has been a long-standing

issue.To date, we have seen no impact from the ruling on our business.

While the timing of approval of the FDP is uncertain given the scale

of the project, constructive engagement continues with the MNR,

and further progress is required before we fully execute FDP activity,

including drilling beyond SH-15. For the remainder of 2022, we are

focused on executing activity that enables us to expedite the FDP

following approval. This includes activities to prepare for expansion

of our production facilities to include water handling and preparation

of well pads and installation of flowlines to enable a continuous drilling

programme. We are also focused on well interventions and workovers.

Net capital expenditure guidance for 2022 is $85-$95 million.

We are targeting gross Opex of $2.9-$3.3/bbl, with the increase

versus 2021 primarily due to increased operational activity and the

continued catch-up of previously scheduled work programmes

deferred due to COVID-19.

Assuming timely payment of invoices and continuing strong oil prices,

we are expecting strong cash flow generation in 2022. This would

provide flexibility to fund a potential increase in capital expenditure,

with progress on the FDP, and the opportunity for further distributions

to shareholders, while preserving adequate liquidity and maintaining a

robust balance sheet.

I would like to thank the teams in Kurdistan and the UK for their hard

work and contributions to a strong year of performance. I would also

like to give my thanks to our Chief Operating Officer, Stuart Catterall,

who has retired from Gulf Keystone after five years with the Company.

Stuart has helped us steer the Company through a volatile oil price

cycle and the COVID-19 pandemic, enabling us to emerge stronger

andmore focused on driving sustainable value from the Shaikan Field.

Stuart will be succeeded by John Hulme who joins us at the end of

April from Noreco where he was their COO. John brings a wealth of

experience from more than 30 years in the industry, previously working

at Exxon, Anadarko, Santos and Newfield. I look forward to welcoming

John to GKP.

Jon Harris

Chief Executive Officer

29 March 2022

Governance

Strategic report Financials

8 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Operational review

As ever, a rigorous focus on safety underpinned all our activity.

Asdrilling restarted, we took extra precautions to ensure all drilling

and operational staff on site were prepared. Unfortunately, we were

disappointed to incur one lost time incident (“LTI”) during drilling

operations after over 660LTI-freedays.

Following a challenging year in 2020 from the COVID-19 pandemic,

the rollout of vaccinations in 2021 facilitated a gradual improvement

in operating conditions. We were pleased to see 97% of our staff

get double vaccinated in the year following a successful awareness

campaign. This enabled us to ease health protocols on site, including

a move from three shifts back to two, although access to our offices in

Erbil and London remained restricted with employees encouraged to

work from home.

We achieved gross average production of 43,440 bopd in

2021, towards the upper end of our tightened guidance range of

42,000-44,000 bopd and a 19% increase versus 2020. Higher

production was driven by a full year of production from SH-9, the

successful workover of SH-12 towards the end of 2020 and enhanced

production from the installation in 2021 of a multiphase pump on SH-5

and a jet pump in SH-10. We also completed two new wells, SH-13

and SH-14, towards the end of 2021. Both plant andpipeline uptime

remained high at above99%.

Following an extended hiatus in 2020 due to the COVID-19 pandemic,

we successfully restarted drilling activities in June 2021, ahead of

schedule. Rapid mobilisation was made possible by a cohesive

effort across the whole organisation and our excellent relationships

with our suppliers. Despite the early completion of SH-13, progress

subsequently slowed as an acid stimulation programme was required

on the well to access the broader fracture network. During the drilling

of SH-14, equipment failures and wellbore issues in the subsequent

side-track led to delays, in turn resulting in a deferral of spudding

SH-15 to January 2022. Nonetheless, despite these issues, SH-13

andSH-14 were brought on stream towards the end of the year. We also

completed the debottlenecking of PF-2, increasing total field capacity

to c.57,500 bopd.

Draft Shaikan Field Development Plan

With the submission of the draft Field Development Plan to the MNR in

November 2021, we took an important step towards unlocking the full

potential of the Shaikan Field. Constructive discussions continue with

the MNR and, while final timing of approval remains uncertain due to the

complexity of the project, we are pleased to provide an interim update

on the progress that we have made to date on Phase 1 of the draft FDP.

Final details and cost estimates may vary and we expect to provide an

update upon FDP approval.

Gulf Keystone’s operational performance was solid in 2021, with

a continued increase in production, the successful resumption of

drilling activities and the submission of a draft Field Development

Plan to the MNR.

43.4

43.9

44.2

43.3

44.9

‘000 bopd

March

2021

August

2021

September

2021

October

2021

December

2021

January

2022

February

2022

March

2022

(1)

November

2021

April

2021

May

2021

June

2021

July

2021

41.0

41.4

42.4

45.7

45.1

44.6

46.1

45.4

SH12 shut-inSH-13 & SH-14 online

Record production

on SH-10 jet pump

and strong well

performance

Well testing

SH-5

multiphase

pump

Gross average production (March 2021 – March 2022)

(1) As at 28 March 2022.

44-50

2022 guidance

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 9

As a result of a series of optimisations, we are now targeting to increase

Phase 1 gross plateau production to between 85,000-95,000 bopd,

including up to 85,000 bopd from the Jurassic reservoir and up to

10,000 bopd from the Triassic reservoir.

In addition, we have updated the Gas Management Plan from

processing and export of gas with recovery of elemental sulphur, to

reinjection of gas into the reservoir, underpinning our target to eliminate

routine flaring and more than halve our scope 1 and 2 emissions per

barrel by 2025. The project is expected to be executed in parallel with

the Phase 1 increase in oil production.

From FDP approval, the expected duration of the Phase 1 Jurassic and

Triassic projects is 36 to 42 months and the Gas Management Plan is

18 to 24 months. Total Phase 1 gross Capex is currently estimated to be

$800-$925 million, up around $160 million from the previous FDP with

the objective of increasing production towards 95,000 bopd through

project optimisations. We continue to review opportunities to further

optimise the project.

While the focus remains on delivering Phase 1 of the FDP, we are

committed to exploiting the further potential of the field with a vision

of increasing production beyond 85,000-95,000 bopd through the

expansion of the Triassic reservoir and a Cretaceous reservoir pilot.

Current operational activity and 2022 outlook

Gross average production since the beginning of the year has been

c.45,500 bopd. After acid stimulations, current SH-13 production is in

line with expectations, while we continue to explore options to further

increase SH-14 production. Following the early appearance of trace

quantities of water, SH-12 is currently shut-in while we investigate

near-term production options ahead of the installation of planned

waterhandling facilities.

Looking ahead to the rest of the year, we remain focused on delivering

gross average production of 44,000-50,000 bopd, reflecting

the anticipated production contribution from SH-15, which is

currently being hooked up ahead of targeted start-up in Q2 2022,

and the benefits of an intervention and workover campaign with

our existing wells with the primary focus of production assurance

andenhancement, where possible.

We remain confident in Shaikan Field gross 2P reserves of 489 MMstb

and gross 2C resources of 293 MMstb, based on the 31 December

2020 Competent Person’s Report adjusted for 2021 production from

2P reserves of around 16 MMstb.

Constructive engagement continues with the MNR on the FDP,

andfurther progress is required before we fully execute FDP activity,

including drilling beyond SH-15. In 2022, we are focused on executing

activity that enables us to expedite the FDP following approval.

Thisincludes activities to prepare for expansion of our production

facilities to include water handling and a continuous drilling programme.

Net capital expenditure guidance for 2022 is $85-$95 million.

Sustainability

We continue to work hard on enhancing the sustainability of our

business, with Board approval of our sustainability strategy and

roadmap in 2021. We remain focused on a number of core priorities.

First, we continue to target zero harm across our operations,

particularly as operational activity continues to increase. Second, the

Gas Management Plan will enable us to reduce our carbon intensity by

more than 50% by 2025 and we are also exploring the viability of other

projects that could enable us to reduce our scope 1 and 2 emissions

further. Third, we continue to develop our people and identify

opportunities to enhance diversity and inclusion across our business.

Lastly, we remain intensely focused on amplifying the broader social

and economic value of the Shaikan Field and our operations for

Kurdistan. We look forward to updating you on our progress.

Jon Harris

Chief Executive Officer

29 March 2022

43,440

To 85,000-95,000

2021 gross

production

Jurassic expansion

and Triassic test

Phase 1

gross production

ramp-up (bopd)

(1) Scope 1 and 2 emissions intensity.

Draft Shaikan Field Development Plan

2025 target2020 baseline

Gas Management Plan

carbon intensity

(1)

reduction (kg/bbl)

Targeting >50%

reduction vs 2020

baseline

Governance

Strategic report Financials

10 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

We are committed to

adisciplined approach

tocapital allocation

andcost control, and

maintaining a prudent

level of liquidity and

robust financial position.

Financial review

Ian Weatherdon

Chief Financial Officer

Key financial highlights

Year ended Year ended

31 December 31 December

2021 2020

Gross average production

(1)

bopd 43,440 36,625

Dated Brent

(1)

$/bbl 70.8 42.0

Realised price

(1)

$/bbl 49.7 20.9

Revenue $m 301.4 108.4

Operating costs $m 34.4 27. 4

Gross operating costs per barrel

(1)

$/bbl 2.7 2.6

Other general and administrative expenses $m 13.6 12.3

Incurred in relation to Shaikan Field $m 4.1 5.0

Corporate G&A $m 9.5 7.3

Share option expense $m 8.5 1.2

Adjusted EBITDA

(1)

$m 222.7 56.7

Profit/(loss) after tax $m 164.6 (47. 3)

Basic earnings/(loss) per share cents 77.14 (22.45)

Revenue and arrears receipts

(1)

$m 221.7 101.1

Net capital expenditure

(1)

$m 50.8 45.9

Free cash flow

(1)

$m 122.2 (22.9)

Dividends $m 100.0 —

Cash and cash equivalents $m 169.9 147.8

Face amount of the Notes $m 100.0 100.0

Net cash

(1)

$m 69.9 47.8

(1) Gross average production, Dated Brent, realised price, gross operating costs per barrel, adjusted EBITDA, revenue and arrears receipts being actual cash

received during the year, net capital expenditure, free cash flow and net cash are either non-financial or non-IFRS measures and, where necessary, are explained

in the summary of non-IFRS measures.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 11

Strategically, Gulf Keystone is committed to a disciplined approach

to capital allocation and cost control, and maintaining a prudent level

of liquidity and robust financial position. By taking decisive action in

2020 to reduce capital expenditures, operating costs and general and

administrative (“G&A”) expenses, the Company entered 2021 with a

strong balance sheet and well positioned to capitalise on improving

macro-economic fundamentals. In 2021, the Company restarted its

development programme, generated a significant increase in adjusted

EBITDA and paid dividends of $100million, while further strengthening

the balance sheet.

Adjusted EBITDA

Adjusted EBITDA grew almost four-fold in 2021 to $222.7 million

(2020: $56.7 million), driven by a strong increase in the oil price and

higher production, partly offset by higher operating costs, share option

expense and capacity building payments.

Gross average production was 43,440 bopd in 2021, up 19% from

36,625 bopd in 2020 and towards the upper end of the Company’s

tightened 2021 guidance range of 42,000-44,000 bopd. With Gulf

Keystone’s leverage to the strengthening of the Dated Brent price from

an average of $42.0/bbl in 2020 to $70.8/bbl in 2021, the realised price

per barrel more than doubled to $49.7/bbl, resulting in an almost tripling

in revenue from $108.4 million in 2020 to $301.4 million in 2021.

Revenue was partially offset by a corresponding $15.2 million increase

in capacity building payments to $23.5 million (2020: $8.4 million),

which is a component of the KRG’s entitlement from the Shaikan Field.

Gulf Keystone continues to maintain strict control over its cost

base. Gross operating costs per barrel increased 4% to $2.7/bbl in

2021(2020:$2.6/bbl), in the middle of the Company’s 2021 guidance

range of $2.5-$2.9/bbl. The increase in operating costs in 2021

to $34.4million(2020: $27.4 million), primarily due to increased

production, maintenance and well services activity that was

deferredfrom 2020,was substantially offset by higher production.

Other G&A, comprising Shaikan Field and corporate support costs,

were slightly higher in 2021 at $13.6million (2020: $12.3 million),

reflecting increasing activity levels. Share option expense in the period

increased by $7.3 million, principally due to tax settlements related

to the exercise of former Directors’ contractual Value Creation Plan

share option entitlements being made in cash and an increase in

accrued national insurance contributions resulting from the increased

shareprice.

223

300

250

200

2020 adjusted

EBITDA

150

100

Brent

price

Production Operating

costs

Other

G&A

Share option

expense

2021 adjusted

EBITDA

CBP

(1)

149

(15)

(7)

(1)

(7)

(1) Capacity building payments.

Adjusted EBITDA

Governance

Strategic report Financials

12 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Financial review continued

Cash flows

400

350

300

Opening cash

(31 December 2020)

250

200

Adjusted

EBITDA

Capex Put option Working capital Dividends Cash balance

(29 March 2022)

Interest

148

100

150

Closing cash

(31 December 2021)

223

(51)

(10)

(1)

(39)

(100)

170

183

Cash increased in 2021 from $147.8 million to $169.9 million. TheGroup

has notes outstanding with a principal balance of $100.0 million (2020:

$100.0 million) that do not mature until July 2023, resulting in net cash of

$69.9 million at 31 December 2021. The cash balance has consistently

exceeded the $100.0 million notes outstanding since issue in 2018 and

the Company continues to retain significant covenant headroom.

The Company generated cash from operating activities of

$178.6million in 2021, up from $42.6 million in 2020 due

principallytothe increase in adjusted EBITDA.

In 2021, the Company received revenue receipts of $221.7 million

from the KRG for crude oil sales related to the December 2020 to

August 2021 invoices and partial repayment of arrears related to the

outstanding November 2019 to February 2020 invoices. Of the original

outstanding arrears of $73.3 million net to GKP, a total of $32.4 million

was repaid in 2021, based on an arrangement with the KRG and IOCs

operating in Kurdistan

(1)

. Despite continued collection of arrears, the

delays to payments from the KRG have contributed to a working capital

increase of $38.5 million (2020: $9.0 million increase).

Since the beginning of 2022, the Company has received a further

$106.4 million net to GKP for crude oil sales and arrears related to the

September 2021 to November 2021 invoices. As at 29 March 2022,

theoutstanding arrears balance was $21.9 million net to GKP.

With the improvement in oil prices and continuous payments from

the KRG, Gulf Keystone restarted its investment programme in the

Shaikan Field and resumed drilling activities in June. During the

year, the Company invested net capital expenditure of $50.8 million

(2020:$45.9 million), primarily on the completion of the SH-13 and

SH-14 wells, related civil and flowline works and the debottlenecking

of PF-2. Net capital expenditure was slightly lower than final 2021

guidance of approximately $55 million.

As at 31 December 2021, there were $437 million gross of

unrecoveredcosts, subject to potential cost audit by the KRG.

TheR-factor, calculated as cumulative gross revenue receipts of

$1,478million divided by cumulative gross costs of $1,543 million,

was0.96. Theunrecovered cost pool and R-factor are used to

calculate monthly cost oil and profit oil entitlements, respectively,

owedto the Company from crude oil sales.

Free cash flow generation was $122.2 million in 2021, an increase of

$145.1 million versus the prior year (2020: ($22.9) million), enabling

the Company to continue to deliver against its commitment of

balancing investment in growth with returns to shareholders.

InMarch2021, GulfKeystone reinstated its dividend policy of paying

at least $25million annually. Given continuing strong oil prices and

cash generation in the year, the Company paid total dividends of

$100 million. Since the beginning of 2022, Gulf Keystone has paid

anadditional dividend of $50 million to shareholders.

The Group performed a cash flow and liquidity analysis based on

which the Directors have a reasonable expectation that the Group has

adequate resources to continue to operate for the foreseeable future.

Therefore, the going concern basis of accounting is used to prepare

the financial statements.

(1) The repayment of arrears related to January 2021 and February 2021 were calculated based on 50% of the difference between average monthly Dated Brent

price and $50/bbl multiplied by the gross Shaikan crude sold in a month. The KRG advised IOCs that since the Dated Brent price had remained consistently

well above $50/bbl, the 50% difference would be changed to 20% from March 2021 and onwards.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 13

Outlook

The Company has a strong balance sheet with cash and cash

equivalents of $182.7 million at 29 March 2022.

Looking ahead to 2022, we are currently planning to invest net

capital expenditure of $85-$95 million. This includes the drilling of

SH-15, well interventions and workovers and activity that enables us

to expedite the FDP following approval, including preparatory work

for the continued expansion of our production facilities to include

water handling and for a continuous drilling programme. Constructive

engagement continues with the MNR on the FDP, and further progress

is required before we fully execute FDP activity, including drilling

beyond SH-15. With progress on the FDP, we expect to resume

drillingand increase 2022 capital guidance.

We are targeting gross Opex of $2.9-$3.3/bbl, driven by increased

operational activity and the continued catch-up of previously

scheduled work programmes deferred due to COVID-19. 2022 annual

gross average production is expected to be44,000-50,000bopd.

Given the strong oil price outlook and our flexible spending programme,

we currently have no hedging programme in place. Weconsider

hedging on an ongoing basis, taking into account macro-economic

andcorporate considerations.

In line with our commitment to balancing investment in growth with

returns to shareholders, we are pleased to declare $90million of

dividends, comprising a $25million 2021 ordinary annual dividend for

shareholder approval at the Company’s AGM on 24 June 2022 and a

$65 million interim dividend payable in May 2022.

Assuming timely payment of invoices and continuing strong oil prices,

we are expecting strong cash flow generation in 2022. This would

provide flexibility to fund a potential increase in capital expenditure,

with progress on the FDP, and the opportunity for further distributions

to shareholders, while preserving adequate liquidity and maintaining a

robust balance sheet.

Ian Weatherdon

Chief Financial Officer

29 March 2022

Governance

Strategic report Financials

14 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Our asset

Location & size

The Shaikan Field is one of the largest energy developments in Kurdistan by reserves and production. Located around 60 kilometres

north-west of Erbil, the largest city in Kurdistan, and at the north-west end of the Zagros Fold-belt, the Field spans an area of approximately

280 square kilometres.

History & production

The Shaikan Field Production Sharing

Contract (“PSC”) was awarded in 2007,

with oil discovered in 2009 through the

SH-1 well and first commercial production

achieved in July 2013. Since then, over

100 MMstb of oil has been produced, with

gross average production increasing from

1,361 bopd in 2013 to 43,440 bopd in 2021.

Gross average production grew 19% in

2021, marking the third consecutive year

of growth.

Infrastructure

The number of Shaikan Field production wells was expanded to 13 in 2021, following the start-up of SH-13 and SH-14 towards the end of the

year. The Field’s wells produce into two production facilities, PF-1 and PF-2, which have a total capacity of around 57,500 bopd following

recent debottlenecking work.

Shaikan Field map

Key

Wells

Facilities

Shaikan flowlines

Pipeline tie-in

Kurdistan Export Pipeline

River network

Block boundaries

Shaikan Field production history (‘000 bopd)

The Shaikan Field is a long life asset, with a proven

production track record and significant growth potential.

2014

17.8

2015

30.5

2016

34.8

2021

43.4

2013

1.4

2018

31.6

2019

32.9

2020

36.6

2017

35.3

PF-2

PF-1

PIPE YARD

SH-15

SH-1

SH-3

SH-2

SH-4

SH-6

SH-5

SH-7

SH-8

SH-10

SH-11

SH-12

SH-9

SH-13

SH-14

KILOMETRES

0 5

2.5

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 15

Reserves & resources

The Shaikan Field consists of three reservoirs, the Cretaceous, the Jurassic and the Triassic, with the Cretaceous being the shallowest and

the Triassic the deepest. Crude oil contained in the Cretaceous and Jurassic reservoirs is relatively heavy, with the Cretaceous containing

bituminous oil between 12-15° API and the Jurassic holding heavy oil with a slightly higher API of 15-17°. The Triassic reservoir contains light oil

with gas condensate of between 38-43° API. The reservoir is constructed of three layers or “horizons”, the Kurra Chine A (“KCA”), theKurra

Chine B (“KCB”) and the Kurra Chine C (“KCC”).

Production to date has been entirely from the Jurassic reservoir, in which all of the Field’s 489 MMstb estimated gross 2P reserves at

31December 2021

(1)

are located (see table below). As part of the Field Development Plan, Gulf Keystone plans to test the Triassic reservoir,

which is estimated to contain 157 MMstb of gross 2C resources at 31 December 2021

(1)

Gross reserves and resources based on the Competent Person’s Report at 31 December 2020 and estimated gross reserves and

resources at 31 December 2021 based on adjustments for 2021 production were:

Reserves Resources

Formation (MMstb) 1P 2P 2C

(2)

2P+2C

(3)

31 December 2021

Jurassic 224 489 80 569

Triassic — — 157 157

Cretaceous — — 56 56

Total – gross 224 489 293 782

31 December 2020

Jurassic 240 505 80 585

Triassic — — 157 157

Cretaceous — — 56 56

Total – gross 240 505 293 798

The reconciliation of changes in reserves and resources between the Competent Person’s Report and the Company’s estimates at

31December 2021 is as follows:

Reserves Resources

Gross (MMstb) 1P 2P 2C

(2)

2P+2C

(3)

31 December 2020 240 505 293 798

Production (16) (16) — (16)

31 December 2021 224 489 293 782

GKP’s 80% net working interest

(3)

(“WI”) share of estimated reserves and resources at 31 December 2021 were:

Reserves Resources

Formation (80% WI) (MMstb) 1P 2P 2C

(2)

2P+2C

(3)

Jurassic 179 391 64 455

Triassic — — 125 125

Cretaceous — — 45 45

Total – net WI 179 398 234 625

(1) Based on the 31 December 2020 Competent Person’s Report adjusted for 2021 production.

(2) Contingent resources volumes are classified as such because there is technical and commercial risk involved with their extraction. In particular, there

may be a chance that accumulations containing contingent resources will not achieve commercial maturity. The 2C (best estimate) contingent resources

presented are not risked for chance of development.

(3) Aggregated 2P+2C estimates should be used with caution as 2C contingent resources are commercially less mature than the 2P reserves.

(4) Net working interest reserves and resources do not represent the net entitlement resources under the terms of the Production Sharing Contract (“PSC”).

Governance

Strategic report Financials

16 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Operating

in Kurdistan

Our asset continued

Kurdistan’s oil and gas industry

The oil and gas industry in Kurdistan is relatively young

compared to other producing regions in the world with the

KRGconcluding Production Sharing Contracts with a number

oflocal and international oil companies from 2007. Since then,

the discovery and development of oil fields, like the Shaikan Field,

have enabled Kurdistan to become a major global producer,

producing around 445,000 bopd in 2021

(1)

. Between 2017 and

2021, the Shaikan Field’s contribution to totalKRG production

grew from 6% to 10%

(1)

(see chart).

The oil and gas industry provides a significant contribution to

Kurdistan’s economy, primarily through oil revenues, investment

in local goods and services and employment. In 2021, 275, or74%,

of Gulf Keystone’s workforce was local at the end of the year,

with more than 600 local people indirectly employed through

contractors. $49 million, or 58%, of our total purchasing and

contracting in the year was spent with local suppliers. Inaddition,

the Shaikan Field generated $355.8 million for theKRG from

production entitlements, royalties and capacity building payments.

Read more about Gulf Keystone’s economic value generation in

Kurdistan in the Sustainability report on pages 28 to 45.

Shaikan Field production as % of KRG production (2017-2021)

100,000

200,000

500,000

400,000

600,000

300,000

2018

2019 2020 20212017

bopd

(1) Source: Deloitte reviews of Kurdistan Regional Government of Iraq’s

oil production, export, consumption and revenue; KRG production

defined as “total exported and consumed”.

Crude marketing and export

The KRG is responsible for marketing and exporting all crude from the Shaikan Field. Crude exports continued reliably in 2021 with

all production exported via the Kurdistan Export Pipeline to Fishkhabour, from where production then travels to Ceyhan through the

Iraq-Turkey Pipeline (see map). Pipeline uptime was in excess of 99%.

The realised price for Shaikan crude of $49.7/bbl in 2021 was based on an average Dated Brent price of $70.8/bbl less a quality discount

and transportation costs for use of export pipelines totalling $21.2/bbl, in accordance with the principles ofthe Crude Oil Sales Agreement.

Pipeline export map

6% 8% 7% 8% 10%

KRG production ex

Shaikan Field production

(1)

Shaikan Field production

Key

Oil Pipelines International Border

Shaikan Licence

Kurdistan

KRG-Iraqi Forces Demarcation

CEYHAN PIPELINE

TERMINAL

IRAQ – TURKEY

PIPELINE

FISHKHABOUR

DOHUK

SHAIKAN

TALL’AFAR

MOSUL

ERBIL

TIKRIT

KIRKUK

CHEMCHEMAL

SULEIMANIAH

KURDISTAN

EXPORT PIPELINE

KILOMETRES

0 100

TURKEY

IRAN

SYRIA

IRAQ

MEDITERRANEAN

SEA

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 17

Crude oil

payments

Net crude oil payments since December 2020

Crude oil payments

A total of nine payments were received in 2021 from the KRG covering production sold from December 2020 to August 2021. Payments for

September to November 2021 were received in the first quarter of 2022. In addition, in March 2021, the KRG began repaying arrears related

to the outstanding November 2019 to February 2020 invoices, with the first repayment received for January 2021 production.

The KRG has continued to repay the arrears balance alongside payments for crude oil sales, based on an arrangement with the KRG and

IOCs operating in Kurdistan

(3)

. As at 29 March 2022, the outstanding arrears balance was $21.9 million net to GKP.

(1) Source: EIA Brent spot prices.

(2) $3.3 million net to GKP for the March 2021 arrears was received as part of the April 2021 arrears payment.

(3) The repayment of arrears related to January 2021 and February 2021 was calculated based on 50% of the difference between average monthly

Dated Brent price and $50/bbl multiplied by the gross Shaikan crude sold in a month. The KRG advised IOCs that since the Dated Brent price had

remained consistently well above $50/bbl, the 50% difference would be changed to 20% from March 2021 and onwards.

December

2020

May

2021

June

2021

July

2021

September

2021

October

2021

November

2021

August

2021

January

2021

February

2021

March

(2)

2021

April

2021

$14m

$21m

$3m

$24m

$4m

$25m

$5m

$25m

$5m

$24m

$4m

$25m

$5m

$33m

$7m

$30m

$7m

$17m

$3m

$18m

$6m

$22m

$3m

Month of

production

$m (net)

Payment received Revenue arrears received

Gross

prod.

(kbopd) 43.0 44.4 41.6 43.4 43.9 44.2 43.3 41.1 41.4 42.4 45.7 45.1

Brent

price

(1)

($/bbl) $50.0 $54.8 $62.3 $65.4 $64.8 $68.5 $73.2 $75.2 $70.8 $74.5 $83.5 $81.1

Governance

Strategic report Financials

18 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Business model

Our purpose: GKP is a responsible energy company

developing natural resources for the benefit of all our

stakeholders, delivering social and economic benefits by

working safely and sustainably with integrity and respect.

Focus on safe operations

No LTI

recorded for over 160 days

(1)

One LTI in 2021; full investigation completed, followed by remedial actions

Long life asset

782 MMstb

estimated gross 2P reserves

+2C contingent resources

(2)

>30 years

gross 2P reserves life index

(3)

Local and empowered workforce

74%

of GKP’s employees are local

to Kurdistan

>600

local workers employed

through GKPcontractors

Financial strength

$170m

cash as at 31December2021

$100m

bond due mid-2023

Low-cost structure

<$35/bbl

Brent price covers operating

costs, G&A and interest

expense

$2.7/bbl

gross Opex in 2021

(1) As at 29 March 2022.

(2) Based on the 31 December 2020 Competent Person’s Report adjusted

for 2021 production.

(3) 489 MMstb of estimated gross 2P reserves as at 31 December 2021/

gross average production for 2021 of 43,440 bopd.

Develop

The Shaikan Field is one of the largest energy developments in

Kurdistan by reserves and production, with significant growth potential.

The Company submitted a draft Field Development Plan to the Ministry

of Natural Resources in 2021, which comprises a plan to increase

gross production to 95,000 bopd while achieving a greater than 50%

reduction in scope 1 and 2 CO

emissions per barrel by 2025 through

the elimination of routine flaring. The FDP is subject to review and

approval by the MNR.

Our strategic priorities

Safety and

sustainability

Value

creation

Capital

discipline

and cost

focus

Robust

financial

position

Read more on pages 14 and 15

Inputs Our core activities

Underpinned by our values and culture

1. Safety 2. Social responsibility

3. Trust through open

communication

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 19



Investors

Gulf Keystone is committed to balancing investment in

growth with shareholder returns, while maintaining a robust

financial position. The Company delivered on its promise in

2021, paying $100 million of dividends, whilemaintaining a

net cash position.



Kurdistan

Kurdistan is part of Gulf Keystone’s DNA. Through our ongoing

operations and by creating local jobs, investing in the local

supply chain and supporting local communities, Gulf Keystone

makes a significant contribution to Kurdistan’s oil and gas

industry, society and economy. The Company is planning to

make further significant contributions as it commits to a new

Field Development Plan to deliver sustainable growth.



Communities

Gulf Keystone takes pride in its engagement with

communities and has a strong relationship with the areas

local to Shaikan. The Company is one of the largest

employers in Kurdistan and has a high staff localisation ratio,

with many employees hired from neighbouring villages. Itis

committed to local workforce development through jobs,

training and careeropportunities.



Workforce

Gulf Keystone’s workforce is integral to the Company’s ability

to deliver its strategy. Through annual equity awards under

the Long-Term Incentive Plan (“LTIP”), all employees are able

toshare in the Company’s success.



Host government andpartner

The Company continues to work with its host government,

the KRG, and partner, MOL, to generate value from the

Shaikan Field. In 2021, $356 million was generated for

the government, primarily from production entitlements,

royalties and capacity buildingpayments.

In 2021, Gulf Keystone delivered gross average

production of 43,440bopd, towards the upper

end of its guidance range, the Company’s highest

gross annual average production rate to date

from the Shaikan Field and a 19% increase versus

2020. This record was achieved with continuing

reliable production from the Field, with over 99%

plant and pipeline uptime. In February 2022,

the Company hit the milestone of 100 MMstb

cumulative gross production from the Field.

Operating responsibly

Strong

governance

framework

Sustainability

underpins our

business model

Read more on pages 8 and 9

Read more on pages 60 to 69 Read more on pages 28 to 45

Produce

Outputs

4. Innovation and excellence 5. Integrity and respect 6. Teamwork

Governance

Strategic report Financials

20 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Our strategy is to create value for all stakeholders by

drivingsustainable and profitable production growth

fromthe staged development of the Shaikan Field,

balanced with distributions to shareholders.

Strategy and objectives

Our strategic priorities are as follows:

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Strategic objective

The Group is committed to high ESG standards with a focus

on safety, theenvironment, our people and local communities,

underpinned by strong governance processes

2021 progress

• Submission of draft FDP to MNR, comprising a Gas Management

Plan to eliminate routine gas flaring and reduce scope 1 and 2

emissions per barrel by >50% by 2025

• Increase in TRIR, due to two recordable incidents in 2021;

remedial actions implemented, zero LTIs for over 160 days since

incident

(1)

• Substantial completion of HSE improvement programme

• Developed ESG roadmap to progress the sustainability strategy

• December 2021 Kurdistan staff localisation rate of 74%. 2021

voluntary turnover rate of 1.7%

• Zero production outages related to COVID-19, with 97% of

GKPI’s workforce receiving vaccinations

• Refer to the Sustainability report on pages 28 to 45 for more detail

on safety and sustainability initiatives and 2021 performance

2022 priorities

• Continue to target zero harm across our operations and

improvement of the Company’s total recordable incident

rate(“TRIR”)

• Deliver HSE and corporate social responsibility (“CSR”)

programmes

• Progress discussions with MNR to secure approval of the FDP,

including the Gas Management Plan

• Endorse the World Bank’s “Zero Routine Flaring by 2030” initiative

• Explore viability of additional projects to further reduce scope 1

and 2 emissions intensity beyond the 2025 target

• Work towards full compliance with TCFD for fiscal year 2022

• Ensure high level of staff localisation and retention

• Further build capability of workforce, drive engagement and

well-being and advance diversity and inclusion

Link to key performance measures

• Safety performance (TRIR)

Strategic objective

• Deliver sustainable and profitable production growth and

distributions toshareholders

2021 progress

• Annual gross average production of 43,440 bopd, towards the

upper end of tightened guidance range of 42,000-44,000 bopd

• Resumed drilling activities ahead of schedule; SH-13 and SH-14

brought online, SH-15 spudded

• Submitted draft FDP following constructive engagement with

partner MOL and MNR

• $222.7 million adjusted EBITDA, primarily driven by a strong

increase in the oil price and higher production

• Reinstated dividend policy of at least a $25 million annual

dividend

• Paid $100 million of dividends to shareholders in 2021

2022 priorities

• Deliver annual gross average production guidance range of

44,000 –50,000 bopd

• Progress discussions with MNR to secure approval of the FDP

• Maintain dividend policy of paying at least $25 million

toshareholders

• With continuing strong oil prices and cash flow generation,

there may be opportunities to consider further distributions

toshareholders

Link to key performance measures

• Gross production (bopd)

• Adjusted EBITDA ($m)

Strategic objective

• Prudent, disciplined and proactive management of capital

expenditures and underlying cost base

2021 progress

• Net Capex of $50.8 million, below final 2021 guidance of

approximately $55 million

• Gross Opex per barrel of $2.7/bbl, within 2021 guidance range of

$2.5-$2.9/bbl

• Other G&A expenses of $13.6 million, slightly higher versus 2020

reflecting increasing activity levels

2022 priorities

• Deliver annual net Capex guidance range of $85-$95 million

• Deliver annual gross Opex per barrel guidance range of

$2.9-$3.3/bbl

• Maintain position as leading low-cost operator among Kurdistan

Region of Iraq and international E&P peers

Link to key performance measures

• Operating costs ($m)

• Other G&A expenses ($m)

• Net capital expenditure ($m)

Strategic objective

• Maintain adequate liquidity to fund the development of

the Shaikan Field over time while allowing for shareholder

distributions

2021 progress

• $122.2 million of free cash flow generated in 2021, an increase of

$145.1million versus the prior year

• Cash balance of $169.9 million as at 31 December 2021, in excess

of $100million outstanding debt due in 2023

• Significant headroom under current Nordic bond financial

covenants

2022 priorities

• Adequate liquidity to fund 2022 and forward work programme

• Maintain robust balance sheet

• Ready access to debt market

Link to key performance measures

• Adjusted EBITDA ($m)

• Net cash ($m)

Successful delivery of our strategic objectives is underpinned by a robust and rigorous risk management process.

(1) As at 29 March 2022.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 21

Our strategic priorities are as follows:

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Strategic objective

The Group is committed to high ESG standards with a focus

on safety, theenvironment, our people and local communities,

underpinned by strong governance processes

2021 progress

• Submission of draft FDP to MNR, comprising a Gas Management

Plan to eliminate routine gas flaring and reduce scope 1 and 2

emissions per barrel by >50% by 2025

• Increase in TRIR, due to two recordable incidents in 2021;

remedial actions implemented, zero LTIs for over 160 days since

incident

(1)

• Substantial completion of HSE improvement programme

• Developed ESG roadmap to progress the sustainability strategy

• December 2021 Kurdistan staff localisation rate of 74%. 2021

voluntary turnover rate of 1.7%

• Zero production outages related to COVID-19, with 97% of

GKPI’s workforce receiving vaccinations

• Refer to the Sustainability report on pages 28 to 45 for more detail

on safety and sustainability initiatives and 2021 performance

2022 priorities

• Continue to target zero harm across our operations and

improvement of the Company’s total recordable incident

rate(“TRIR”)

• Deliver HSE and corporate social responsibility (“CSR”)

programmes

• Progress discussions with MNR to secure approval of the FDP,

including the Gas Management Plan

• Endorse the World Bank’s “Zero Routine Flaring by 2030” initiative

• Explore viability of additional projects to further reduce scope 1

and 2 emissions intensity beyond the 2025 target

• Work towards full compliance with TCFD for fiscal year 2022

• Ensure high level of staff localisation and retention

• Further build capability of workforce, drive engagement and

well-being and advance diversity and inclusion

Link to key performance measures

• Safety performance (TRIR)

Strategic objective

• Deliver sustainable and profitable production growth and

distributions toshareholders

2021 progress

• Annual gross average production of 43,440 bopd, towards the

upper end of tightened guidance range of 42,000-44,000 bopd

• Resumed drilling activities ahead of schedule; SH-13 and SH-14

brought online, SH-15 spudded

• Submitted draft FDP following constructive engagement with

partner MOL and MNR

• $222.7 million adjusted EBITDA, primarily driven by a strong

increase in the oil price and higher production

• Reinstated dividend policy of at least a $25 million annual

dividend

• Paid $100 million of dividends to shareholders in 2021

2022 priorities

• Deliver annual gross average production guidance range of

44,000 –50,000 bopd

• Progress discussions with MNR to secure approval of the FDP

• Maintain dividend policy of paying at least $25 million

toshareholders

• With continuing strong oil prices and cash flow generation,

there may be opportunities to consider further distributions

toshareholders

Link to key performance measures

• Gross production (bopd)

• Adjusted EBITDA ($m)

Strategic objective

• Prudent, disciplined and proactive management of capital

expenditures and underlying cost base

2021 progress

• Net Capex of $50.8 million, below final 2021 guidance of

approximately $55 million

• Gross Opex per barrel of $2.7/bbl, within 2021 guidance range of

$2.5-$2.9/bbl

• Other G&A expenses of $13.6 million, slightly higher versus 2020

reflecting increasing activity levels

2022 priorities

• Deliver annual net Capex guidance range of $85-$95 million

• Deliver annual gross Opex per barrel guidance range of

$2.9-$3.3/bbl

• Maintain position as leading low-cost operator among Kurdistan

Region of Iraq and international E&P peers

Link to key performance measures

• Operating costs ($m)

• Other G&A expenses ($m)

• Net capital expenditure ($m)

Strategic objective

• Maintain adequate liquidity to fund the development of

the Shaikan Field over time while allowing for shareholder

distributions

2021 progress

• $122.2 million of free cash flow generated in 2021, an increase of

$145.1million versus the prior year

• Cash balance of $169.9 million as at 31 December 2021, in excess

of $100million outstanding debt due in 2023

• Significant headroom under current Nordic bond financial

covenants

2022 priorities

• Adequate liquidity to fund 2022 and forward work programme

• Maintain robust balance sheet

• Ready access to debt market

Link to key performance measures

• Adjusted EBITDA ($m)

• Net cash ($m)

Successful delivery of our strategic objectives is underpinned by a robust and rigorous risk management process.

We are focused on the safety and sustainability

ofouroperations and capital and cost discipline,

whilemaintaining a robust financial position.

Governance

Strategic report Financials

22 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Key performance measures

Safety performance

(TRIR)

2018 2019

2.61

2020 2021

0.71

1.37

0.75

Adjusted EBITDA

($m)

2018 2019

123

2020 2021

223

150

Operating costs

($m)

3.2

3.9

2.6

2.7

2018 2019

2020 2021

Other G&A expenses

($m)

2018 2019 2020 2021

Why we measure this

• The Company is committed to safe, reliable operations and HSE is

apriority.

• Safety performance and improvements in safety management are

measured by several measures, including TRIR.

• We require employees and contractors to work in a safe and responsible

manner and provide them with the training and equipment to do so.

Why we measure this

• Indicator of the Group’s cash generation to fund expenditures and return

capital to shareholders.

Why we measure this

• The Company monitors operating costs to ensure they remain in line with

the budget.

• Costs are carefully controlled with a focus on remaining a

low-costoperator.

Why we measure this

• A key metric for the Company is to control G&A expenses, including

business, corporate and support costs.

• Performance is measured relative to budget and the ability to identify

andimplement cost reductions.

Link to strategic priorities Link to remuneration

Yes

Link to strategic priorities

 

Link to remuneration

Link to strategic priorities



Link to remuneration

Yes

Link to strategic priorities



Link to remuneration

Yes

Performance

• TRIR increased in 2021 due to two incidents (a lost time incident and a

medical treatment case) during drilling operations.

• Both incidents were investigated and the Company implemented a

number of remedial actions.

• As at 29 March 2022, there have been more than 160 LTI-free days since

the last incident in December 2021.

• The Company’s 2021 HSE improvement plan was substantially complete

on 31 December 2021.

Performance

• Revenue increase of $193 million driven by 19% increase in gross average

production and leverage to the strengthening of the Dated Brent price.

• Increase in absolute operating costs due to ramp up of operational activity

and catch up on scopes deferred from 2020. Opex of $2.7/bbl in line

withguidance.

• Increase in share option related expense due to settlement in cash of tax

payable on exercise of Value Creation Plan share options.

Performance

• Increase primarily driven by ramp-up in operational activity in 2021,

following cost-saving measures implemented in 2020 as a result of the

COVID-19 pandemic and lower oil prices.

• Majority of increase relates to increased activity due to higher production,

maintenance and well services following deferral of these scopes in 2020.

• Gross operating costs of $2.7 per barrel (2020: $2.6 per barrel) within

2021 guidance range of $2.5 - $2.9 per barrel.

Performance

• 2021 costs, excluding stock-based compensation, were up slightly from

2020, reflecting increasing activity levels.

Net capital expenditure

($m)

2018 2019

2020 2021

Net cash

($m)

2018 2019

2020 2021

196

Gross production

(bopd)

2018 2019

31,563

32,883

2020 2021

36,625

43,440

Gulf Keystone sets performance measures

and assesses progress against these

targets on a regular basis.

Why we measure this

• Net capital expenditure includes the Company’s net expenditure on oil

asset investments.

• Net capital expenditure is incurred in an efficient, controlled and timely

manner to profitably develop oil reserves.

Why we measure this

• Maintaining a robust balance sheet and adequate liquidity provides

the flexibility to execute our strategy and fund the development of the

ShaikanField.

Why we measure this

• Indicator of our revenue generation potential.

• Measure of progress towards achieving our annual production guidance

and driving sustainable production growth.

Link to strategic priorities



Link to remuneration

Yes

Link to strategic priorities Link to remuneration

Yes

Strategic priorities key:

Safety and sustainability

Value creation

Capital discipline and cost focus

Robust financial position

Performance

• Increase in 2021 following recommencement of investment in the

ShaikanField.

• Majority of expenditure on completion of SH-13 and SH-14 wells,

relatedcivil and flowline works and the debottlenecking of PF-2.

• Net capital expenditure lower than 2021 guidance due to revised spud

date of SH-15 and the deferral of installation of two electric submersible

pumps, partially offset by the higher cost of SH-14.

Performance

• Increase in 2021 due to higher adjusted EBITDA, more than offsetting

theslight increase in net capital expenditure and payment of $100 million

of dividends.

Performance

• 2021 gross average production of 43,400 bopd, at the top end of the

tightened 42,000–44,000 bopd guidance range.

• 19% increase versus 2020 driven by the contribution from well workovers

taking place in 2020 and 2021 and the contribution of two new wells,

SH-13 and SH-14, at the end of the year.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 23

Safety performance

(TRIR)

2018 2019

2.61

2020 2021

0.71

1.37

0.75

Adjusted EBITDA

($m)

2018 2019

123

2020 2021

223

150

Operating costs

($m)

3.2

3.9

2.6

2.7

2018 2019

2020 2021

Other G&A expenses

($m)

2018 2019 2020 2021

Why we measure this

• The Company is committed to safe, reliable operations and HSE is

apriority.

• Safety performance and improvements in safety management are

measured by several measures, including TRIR.

• We require employees and contractors to work in a safe and responsible

manner and provide them with the training and equipment to do so.

Why we measure this

• Indicator of the Group’s cash generation to fund expenditures and return

capital to shareholders.

Why we measure this

• The Company monitors operating costs to ensure they remain in line with

the budget.

• Costs are carefully controlled with a focus on remaining a

low-costoperator.

Why we measure this

• A key metric for the Company is to control G&A expenses, including

business, corporate and support costs.

• Performance is measured relative to budget and the ability to identify

andimplement cost reductions.

Link to strategic priorities Link to remuneration

Yes

Link to strategic priorities

 

Link to remuneration

Link to strategic priorities



Link to remuneration

Yes

Link to strategic priorities



Link to remuneration

Yes

Performance

• TRIR increased in 2021 due to two incidents (a lost time incident and a

medical treatment case) during drilling operations.

• Both incidents were investigated and the Company implemented a

number of remedial actions.

• As at 29 March 2022, there have been more than 160 LTI-free days since

the last incident in December 2021.

• The Company’s 2021 HSE improvement plan was substantially complete

on 31 December 2021.

Performance

• Revenue increase of $193 million driven by 19% increase in gross average

production and leverage to the strengthening of the Dated Brent price.

• Increase in absolute operating costs due to ramp up of operational activity

and catch up on scopes deferred from 2020. Opex of $2.7/bbl in line

withguidance.

• Increase in share option related expense due to settlement in cash of tax

payable on exercise of Value Creation Plan share options.

Performance

• Increase primarily driven by ramp-up in operational activity in 2021,

following cost-saving measures implemented in 2020 as a result of the

COVID-19 pandemic and lower oil prices.

• Majority of increase relates to increased activity due to higher production,

maintenance and well services following deferral of these scopes in 2020.

• Gross operating costs of $2.7 per barrel (2020: $2.6 per barrel) within

2021 guidance range of $2.5 - $2.9 per barrel.

Performance

• 2021 costs, excluding stock-based compensation, were up slightly from

2020, reflecting increasing activity levels.

Shaikan

Corporate

Net capital expenditure

($m)

2018 2019

2020 2021

Net cash

($m)

2018 2019

2020 2021

196

Gross production

(bopd)

2018 2019

31,563

32,883

2020 2021

36,625

43,440

Gulf Keystone sets performance measures

and assesses progress against these

targets on a regular basis.

Why we measure this

• Net capital expenditure includes the Company’s net expenditure on oil

asset investments.

• Net capital expenditure is incurred in an efficient, controlled and timely

manner to profitably develop oil reserves.

Why we measure this

• Maintaining a robust balance sheet and adequate liquidity provides

the flexibility to execute our strategy and fund the development of the

ShaikanField.

Why we measure this

• Indicator of our revenue generation potential.

• Measure of progress towards achieving our annual production guidance

and driving sustainable production growth.

Link to strategic priorities



Link to remuneration

Yes

Link to strategic priorities Link to remuneration

Yes

Strategic priorities key:

Safety and sustainability

Value creation

Capital discipline and cost focus

Robust financial position

Performance

• Increase in 2021 following recommencement of investment in the

ShaikanField.

• Majority of expenditure on completion of SH-13 and SH-14 wells,

relatedcivil and flowline works and the debottlenecking of PF-2.

• Net capital expenditure lower than 2021 guidance due to revised spud

date of SH-15 and the deferral of installation of two electric submersible

pumps, partially offset by the higher cost of SH-14.

Performance

• Increase in 2021 due to higher adjusted EBITDA, more than offsetting

theslight increase in net capital expenditure and payment of $100 million

of dividends.

Performance

• 2021 gross average production of 43,400 bopd, at the top end of the

tightened 42,000–44,000 bopd guidance range.

• 19% increase versus 2020 driven by the contribution from well workovers

taking place in 2020 and 2021 and the contribution of two new wells,

SH-13 and SH-14, at the end of the year.



Gross Opex per

barrel ($/bbl)

Governance

Strategic report Financials

24 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Stakeholder engagement

Investors

Statement by the Directors in performance of their

statutory duties in accordance with section 172(1)

ofthe Companies Act 2006

The Board of Directors of Gulf Keystone Petroleum Limited consider,

both individually and together, that they have acted in the way they

consider, in good faith, would be most likely to promote the success of

the Company for the benefit of its members as a whole (having regard

to the stakeholders and matters set out in s172 of the Companies Act

2006 (“section 172”)) in the decisions taken during the year ended

31December 2021.

In doing so, the Directors have taken account of the likely long-term

consequences of decisions made in the year, the interests of Gulf

Keystone’s employees, the Company’s business relationships with

suppliers and its single customer, the host government, and the impact

of the Company’s operations on the community and the environment.

The Directors have also acted with regard to the desirability

ofGulfKeystone maintaining a reputation for high standards of

business conduct, and the need to act fairly as between members

oftheCompany.

When formulating the Company’s strategy, the Directors consider

the longer-term and broader consequences and implications of its

business on key stakeholders and factors relating to climate change.

The need to be a responsible energy company is embedded in Gulf

Keystone’s corporate purpose and is the focus of the Company’s

ESGstrategy.

As part of GKP’s commitment to effective stakeholder engagement,

and in accordance with section 172, the Company sets out its key

stakeholder groups and corresponding approach to engagement with

them. GKP’s stakeholder engagement strategies are tailored for each

of these key audiences to continue a mutually beneficial dialogue with

those who are invested in, or impacted by, the Company’s operations.

Key engagement topics

• Operational and financial

performance

• Valuation considerations

• Capital allocation

• Financing strategy

• Risk management

• Shareholder distributions

• ESG

How we engaged in 2021

• Active and ongoing investor

relations programme engaging

with equity and debtinvestors

• Clear and timely investor

communications,including

the London Stock Exchange’s

Regulatory News Service

• Regular meetings with

sell-side analysts

• AGM held with open invitation

to all shareholders with the

ability to submit questions

electronically via the

Company’swebsite

• Consulted with GKP

shareholders regarding

remuneration policy

Why we engage

• We are dependent on access

to equity and debt funding

• Our investors have valid views

on strategic, financial and

operational decision making

which we must take into

account

Ongoing engagement with our stakeholders remains

apriority and is critical to Gulf Keystone’s success.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 25

Host government

Key engagement topics

• Community investment

strategy and plans

• Shaikan Field performance

• Shaikan Field Development

Plan

• Commercial arrangements

• Health and safety

• Environmental matters

• Crude oil sales payments

How we engaged in 2021

• Regular meetings and

correspondence with senior

KRG and MNR officials

• Crude Oil Sales Agreement

renewal

• Generate revenues from

the Shaikan Field for the

government, comprising

production entitlements,

royalties and capacity

buildingpayments

Why we engage

• We work closely with our

host government,the KRG,

to ensure alignment on

developing and producing

resources for the benefit of all

stakeholders, business and

operational strategy and our

licence tooperate

• The KRG is responsible for

marketing and exporting all

crude from the Shaikan Field

Local communities

Key engagement topics

• Local employment

• Development of local staff and

contractors

• Health and safety

• Major incident prevention

• CSR initiatives

• Protection of the environment

How we engaged in 2021

• Active and ongoing

engagement with

localcommunities

• Support and funding for local

community initiatives

• Proactive staff localisation

policy

• Proactive use of local supplier

and servicecompanies

Why we engage

• The support of local

communities is essential

for the mutually beneficial

development and operation of

the ShaikanField

Governance

Strategic report Financials

26 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Stakeholder engagement continued

Workforce

Key engagement topics

• Health, safety and security

• Learning and development

• Remuneration and benefits

• Company strategy

• Gulf Keystone’s purpose,

values and culture

• Team collaboration

• ESG and climate change

How we engaged in 2021

• Regular safety briefings across

the Company

• Regular “town hall” briefings

• Regular “teach-ins” by

departments

• Team meetings and office visits

• Clear communication of

targets and attainment of

incentive schemes

• Clear communication of

policies and procedures,

including “working from

home”and vaccination

protocols

Why we engage

• The Company’s workforce is

essential to the success of the

Company

Joint venture partner

Key engagement topics

• HSE

• CSR strategy and initiatives

• Shaikan Field performance

• Shaikan Field Development Plan

• Work programme and budget

• Commercial arrangements

• Crude oil sales payments

• ESG and climate change

How we engaged in 2021

• Regular multi-disciplinary

meetings anddialogue

• Approval of work programmes

and budgets

Why we engage

• Partner alignment is critical

for the development and

operation of the Shaikan Field

to achieve its full potential

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 27

Suppliers and contractors

Key engagement topics

• Fair and transparent

contracting processes

• Long-term partnerships

• Collaborative approach

• Fair payment terms

• Consistency of application

ofbusiness ethics practices

How we engaged in 2021

• Rigorous contracting

processes strictly in

accordance with the MNR set

tendering processes for all

suppliers, resulting in broad

participation

• Active contract management

• Focus on working with

businesses that are involved

with local communities

• Regular communication with all

suppliers and the MNR Tender

Committee

Why we engage

• The support and performance

of suppliers and contractors

enables the Company to

deliver against its strategy

Environment

Key engagement topics

• Elimination of routine flaring

• >50% reduction in scope 1 and

2 emissions per barrel by 2025

How we engaged in 2021

• Submitted draft FDP to

the MNR, which includes a

Gas Management Plan that

underpins the Company’s

2025 emissions intensity

reduction target

• Continued to minimise

our impact on the local

environment, in particular by

protecting air quality, managing

water and waste and assessing

and managing the impact of

our facilities

Why we engage

• We are focused on minimising

our impact on the environment,

particularly regarding climate

change and reducing our

emissions footprint

The Company’s impact on the environment continues to be a key consideration in stakeholder engagement.

Governance

Strategic report Financials

28 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

CEO’s introduction

The sustainability of our business, in particular the integration of

sustainability into our corporate purpose, values, strategy and culture,

is fundamental for our ability to create long-term value for all our

stakeholders. As an E&P company operating in Kurdistan, we have a

particular set of responsibilities related to our environmental, social

and governance performance which guide our sustainability strategy

and its priorities. These strategic priorities, and the material factors

that underpin them, have been identified as the result of a materiality

assessment exercise, which included interviews with our stakeholders,

including our investors, workforce, government and local community

stakeholders (read more on page 30). Through regular engagement,

we ensure that our sustainability strategy remains current,

focusedandefficient.

So what is important to Gulf Keystone and the sustainability of

ourbusiness?

We are keenly aware of the role that we and our industry must play in

addressing climate risk, while ensuring the world maintains access to

secure and affordable supplies of energy. We also must minimise our

impact on the local environment where our operations are situated and

which we and our local communities rely upon.

Regarding social aspects, striving for safe operations, with zero harm

to our employees and contractors, is our number one priority. We are

also focused on the development of our people and creating a diverse

and inclusive environment for them to work in. Our economic and social

contribution in Kurdistan is also paramount, as we support local jobs,

invest in the local supply chain and generate revenues from the field

for the government and its people, as is regular interaction with and

investment in the communities local to the Shaikan area.

We strive to maintain a robust governance and compliance framework,

with a commitment to the highest standards of ethical conduct at all

levels of the organisation.

Safety and sustainability is one of Gulf Keystone’s key strategic

priorities (see the Strategy and objectives section on pages 20 and 21).

Oursustainability strategy is sponsored by our Chief Operating Officer,

reporting directly to me, and supported by our HSE and Sustainability

team. The Board has direct oversight over the strategy through

the Safety and Sustainability Committee. All short-term employee

bonuses include an element of safety and sustainability based on

theachievement of certain objectives during the year and we are also

proposing to our shareholders this year the introduction of an ESG

performance condition to the Company’s Long-Term Incentive Plan

(“LTIP”) from 2023, with a weighting of 20%. You can read more about

this in the Remuneration Committee report, beginning on page 81.

In 2021, we continued to make strides in executing our sustainability

strategy. We moved a step closer to our 2025 target of more than

halving our scope 1 and 2 emissions per barrel by submitting a draft

FDP to the Ministry of Natural Resources, which includes a Gas

Management Plan focused on eliminating routine flaring.

We also completed substantially all of our HSE improvement plan,

continued to maintain a high level of local employment, with a total of

275 local people employed directly by Gulf Keystone and over 600

through our local contractors, invested $49 million in our local supply

chain through purchasing and contracting, continued to support a

variety of local community projects and generated $356 million for the

Kurdistan Regional Government from the Shaikan Field. In addition, we

refreshed our Company-wide compliance training programme.

There were some areas where we need to work harder. Our carbon

emissions and intensity increased in 2021, due to higher production

and changes in the gas-oil ratio from particular wells, making the

Gas Management Plan and meeting our 2025 target even more

important. While we are a diverse organisation in terms of nationalities

and ethnicity, we need to do more on gender diversity and attracting

morewomen to work at Gulf Keystone and in our industry.

Jon Harris

Chief Executive Officer

Safety and sustainability

underpin our business.

Sustainability report

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 29

Our sustainability strategy:

Environment Social Governance

Strategic

priorities

• Address climate risk

• Minimise our impact on

the environment

• Workforce health

andsafety

• Support and develop

ourpeople

• Enhance diversity

andinclusion

• Generate economic value

inKurdistan

• Engage with and invest in

our local communities

• Robust corporate

governance and

compliance

• Highest standards

ofbusiness ethics

Material

factors

• Emissions

• Air quality

• Facility impact

management

• Water management

• Waste management

• Soil remediation

• Workforce health

andsafety

• Learning and

development

• Diversity and inclusion

• Local employment

• Local supply

chain purchasing

andcontracting

• Payments to host

government

• Community engagement

andinvestment

• Board oversight

• Internal controls and

policies

• Risk management

• Anti-bribery

andcorruption

Key current

targets

• Eliminate routine flaring

• Reduce carbon intensity

per barrel by >50% by

2025

(1)

• Full TCFD compliance for

fiscal year 2022

• Zero harm • Outstanding governance

andcompliance

Alignment

withSDGs

Looking ahead to this year, we will continue to make progress on

delivering our sustainability strategy. We continue to target zero harm

across our operations and will be sharpening our focus further on

safety as operational activity continues to ramp up.

We are exploring the viability of several projects to reduce our scope

1 and 2 emissions intensity further beyond the 2025 target and we

are continuing to work towards full TCFD compliance, which will be

implemented for fiscal year 2022 reporting. We are also developing

plans to further build the capability of our workforce, drive engagement

and well-being and advance diversity and inclusion. I look forward to

updating you on ourachievements.

Jon Harris

Chief Executive Officer

29 March 2022

Governance

Strategic report Financials

30 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Identification of material ESG factors

forGulfKeystone

In 2020, Gulf Keystone used the recognised process, known as

materiality assessment, to assess and evaluate the universe of

material ESG factors and identify which factors were most relevant

to GKP and its stakeholders.

The Company started with a broad universe of ESG factors and

narrowed them down to a selection of relevant and material ESG

factors for GKP. The importance of these factors to the Company

andits stakeholders was then measured. This process was

guided by: interviews with theCompany’s stakeholders; the SASB

materiality metrics, to identify which ESG areas are considered

material for companies in the oil and gas exploration and production

sector; benchmarking of peer company reporting; and a review of

relevant public information andinternal documentation.

Material ESG factors

Importance to GKP’s stakeholders

Environment

A. Climate change/gasflaring

B. Environmental

management

C. Biodiversity

Social

D. Process safety

E. Occupational health

F. Employee training

anddevelopment

G. Diversity

H. Human rights

I. Community engagement

J. Community investment

K. Economic valuegenerated

Governance

L. Business ethics and

anti-corruption

M. Effective governance

Importance to GKP

(1) >50% reduction measured against a baseline carbon intensity of 38kg/bbl in 2020.

Low

Medium

Medium High

Low High

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 31

Environment

Material SDG alignment:Why is this important to our business model and strategy?

Our business is inextricably linked to environmental considerations. We care deeply

about addressing climate risk and are focused on transforming our emissions

footprint. We also seek to minimise our impact on the local environment, in particular

by protecting air quality, managing water and waste and assessing and managing the

impact of our facilities.

Targets:

Eliminate

routine flaring

Reduce carbon

intensity per

barrel by >50%

by 2025

(1)

Full TCFD

compliance

for fiscal

year2022

Our performance

Unit of

Material factors Indicator measurement 2019 2020 2021 Standard Alignment

Emissions Total scope 1 emissions (80% WI) ktCO

e 342 407 505 SECR, TCFD

(3),(4)

Total scope 2 emissions (80% WI) ktCO

e 10 8 13 SECR, TCFD

(3),(4)

Emission intensity kgCO

e per barrel 35.7 37.9 40.8 SECR, IPIECA

(3),(6)

Total S O

emissions (80% WI) ktSO

65 71 82 SASB

(5)

Water and wastewater Total water withdrawn (80% WI) m

22,944 11,467 88,432 SASB, IPIECA

(5),(6)

management

(2)

Waste management Recycled solid non-hazardous waste % of total waste 86 92 86 IPIECA

(6)

Recycled solid hazardous waste % of total waste 5 6 28 IPIECA

(6)

Recycled liquid non-hazardous waste % of total waste 100 100 100 IPIECA

(6)

Recycled liquid hazardous waste % of total waste 100 100 100 IPIECA

(6)

(1) >50% reduction measured against a baseline carbon intensity of

38kg/bbl in 2020.

(2) 2019 and 2020 data are estimates, with the installation of water

metering devices in 2021 to better understand the amount of

waterwithdrawn.

References

(3) Streamlined Energy and Carbon Reporting (“SECR”).

(4) Task Force on Climate-related Financial Disclosures (“TCFD”).

(5) Sustainability Accounting Standards Board (“SASB”).

(6) International Petroleum Industry Environmental Conservation

Association (“IPIECA”).

Governance

Strategic report Financials

32 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Addressing climate risk

Emissions

Our aim is to more than halve our emissions intensity per barrel by 2025

by eliminating routine gas flaring from all our operations. Thisobjective

is underpinned by implementation of the Gas Management Plan

(seecase study below).

While we progress implementation of the Gas Management Plan,

wehave seen a gradual increase in our carbon emissions and intensity

since 2019, primarily due to increasing production and changes in

the gas-oil ratio from particular wells. We have seen the same trend

regarding our sulphur dioxide emissions, which will be virtually

eliminated following implementation of the Gas Management Plan.

Looking beyond 2025, we are identifying and reviewing potential

projects that could further materially reduce our carbon intensity.

Weexpect to conduct feasibility studies for these projects in 2022

and will provide more information on progress and the evolution of

ouremissions in the future.

Minimising our impact on the environment

Air quality monitoring

Given the proximity of our operations to local villages, air quality around

our facilities is continuously measured as part of the Company’s air

quality monitoring programme. During 2021 we were pleased to report

that the air quality tested was well within the Kurdistan regulatory limits.

Air quality is monitored in three ways:

Stationary field monitoring

The Company operates four Scentinal SL-50 air quality monitoring

stations which constantly measure a wide range of air quality

parameters, such as H

S, Methane, VOC, NOx, PM2.5 and PM10.

This data is monitored and reported monthly to the Ministry of Natural

Resources.

Additionally, the Company deploys passive diffusion tubes at ten

locations near the Shaikan Field and neighbouring villages to ensure

the levels of H

S, O

, VOC, SO

and NO

remain below Kurdistan

stipulations. These tubes are deployed and recovered monthly

foranalysis.

Environment continued

Case study

Gas Management Plan

The Gas Management Plan is a critical element of Gulf Keystone’s

sustainability strategy, underpinning our target of more than

halving our emissions intensity per barrel by 2025. It is also

fundamental for our licence to operate in Kurdistan as the

government seeks to reduce gas flaring.

The Gas Management Plan is designed to eliminate routine gas

flaring from our operations by reinjecting the associated natural gas

that is produced with our oil production back into the reservoir, a

method that is used elsewhere in Kurdistan and globally. Todo this,

the project involves the installation of additional facilities to collect

the associated gas from PF-1 and PF-2, transport it to the new

production facility PF-3 via pipeline and subsequently reinject it

into the reservoir through a dedicated gas injection well.

In addition, a portion of the associated gas will be utilised to

generate electricity, with power generation centralised at PF-3

and distributed to PF-1 and PF-2 via overhead lines to replace the

majority of diesel power generation at the facilities.

The project is expected to save several million tonnes of carbon

emissions over the life of the Field once implemented. In keeping

with our commitment to eliminate routine flaring, we have applied

to endorse the World Bank’s “Zero Routine Flaring by 2030”

initiative. We will provide more detail on the project upon approval

of the Field Development Plan by the MNR.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 33

Handheld Photo-ionisation Detector (“PID”)

The Company uses a handheld PID, which can detect more than

400gaseous pollutants, providing a helpful, portable method for

tracking air quality.

Gas surveys

The Company conducts gas surveys of the Shaikan block, aimed at

identifying any natural gas seeps at surface level to provide insights to

the underlying geology. Surveys are conducted using very sensitive

hydrogen sulphide (H

S), methane (CH

) and sulphur dioxide (SO

)

detectors deployed from a land vehicle, together with sensors

deployed from a drone to cover inaccessible areas.

A survey in 2019 confirmed the presence of three known seeps,

together with the discovery of a fourth seep in the area. Generally low

ppb levels of H

S and SO

and typical low ppm background levels of

were detected, indicating overall low levels of seepage.

A second survey was conducted in 2021 in order to verify the results

of the baseline survey. Apart from areas where there are known

anthropogenic inputs (e.g. in close proximity to the production facilities,

local villages, main roads), similar levels of these three gases were

observed. Follow-up monitoring is planned in and around the four

identified seeps.

Facility impact management

Before any facilities or access roads are built, flowlines installed or

wells drilled, the Company conducts an environmental and social

impact assessment (“ESIA”) during the design phase so any potential

impacts can be identified and mitigation plans agreed with the KRG

before construction. In 2021, one ESIA was conducted related to the

drilling of a future well.

Specific measures to minimise the impact of Gulf Keystone facilities on

the environment include:

1. Site selection and locating well pads, access roads and flowlines as

far as possible away from environmentally sensitive targets, such as

human habitations and places of ecological and cultural significance.

GKP maximises the use of existing field infrastructure and studies

survey data for site selection.

2. Adequate waste management with a strong focus on waste

minimisation and recycling.

3. Implementing civil engineering designs that prevent or minimise

impacts on the natural hydrology, drainage systems and erosion

patterns; maximising the use and reuse of local fill material from the

area of land disturbance; ensuring potentially hazardous materials

are contained on site (this will include drainage systems that capture,

for example, contaminated run-off from accidental spills and leaks)

and enhancing future site restoration plans.

4. Equipment specification, maintenance and operational control.

Selecting equipment that is fuel efficient, maintaining the equipment

so it meets specification and minimises emissions, and controlling

operations.

5. Operational management control: ensuring documentation is in

place to deliver operational activity in line with project environment,

social and safety objectives; ensuring the requirements of GKP’s

health and safety and environmental management systems are

met; and ensuring the recommendations of the development

environmental management plan are adhered to. This involves

demonstrable design and planning documentation together with

inspection and reporting regimes to assure GKP management

and the MNR that environmental and social impacts are kept to

aminimum by GKP and its contractors.

6. Unplanned events: emergency response and contingency plans are

developed, resourced and rehearsed to mitigate unforeseen events

that could have a significant environmental or social impact.

Governance

Strategic report Financials

34 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Minimising our impact on the environment continued

Soil remediation

We aim to manage contaminated soil, surface water and ground water

to prevent, minimise or mitigate risks to public health and safety of the

environment. All waste drilling cuttings and fluids must be managed

in line with Kurdistan legislation and international standards, and

pits, which are excavated next to well pads and used to hold drilling

fluid, should be remediated after drilling operations are completed.

Allhistoric pits have been remediated and, in 2021, given all current

pitswere in use, no remediation was required.

Water and wastewater management

Water at both production facility camps is supplied via water wells,

which are sampled and analysed on a monthly basis to ensure they

meet the World Health Organization (“WHO”) guidelines. Site water

storage tanks are chlorinated on a weekly basis.

In 2021, the Company installed metering devices at both production

facilities, PF-1 and PF-2, to better understand the amount of water

withdrawn. Water withdrawn in 2021 increased versus the prior year

because of more accurate measurement and increased operational

activity. In addition to the installation of water meters, a water treatment

unit was installed at one of our production facilities to improve drinking

water quality. In 2022, another water treatment facility will be installed

in the second production facility.

Sewage wastewater is continuously treated via sewage treatment

units, with samples taken from the inlet and outlet streams to ensure the

units are operating efficiently and the quality of the effluent meets World

Bank Guidelines.

Wastewater with oil traces is collected and transported via vacuum

trucks to an MNR-approved refinery that specialises in producing

engine oil and lubricants of different grades from waste containing

oil/hydrocarbons. One of the products from this process is engine

oilwhich is then sold locally.

Waste management

Gulf Keystone maintains high standards in waste management. During

2021, the Company recycled 100% of its non-hazardous liquid waste,

100% of its hazardous liquid waste, 86% of its non-hazardous solid

waste and 28% of its hazardous solid waste, the latter increasing

from around 6% in 2020 due to better process efficiency and the

increased recycling capacity of our contractors. All the waste recycled

had cradle-to-grave traceability. To ensure third parties comply with

Company requirements and local legislation, tools such as GPS vehicle

tracking, waste transfer documentation and quarterly contractor

auditing were used.

Oil-based mud (“OBM”) cuttings

Gulf Keystone is committed to collecting oil-based mud cuttings and

disposing of them through a third-party provider in accordance with

Kurdistan environmental regulations.

In addition to disposal, we have found a way to feed OBM to asphalt

production in Kurdistan. The drill cuttings are transported in sealed

containers on flatbed trucks to the asphalt company. The trucks are

equipped with GPS to track their journey and their manifests signed

and stamped upon arrival. In 2021, a total of 37 tonnes of OBM waste

was collected and transported to the asphalt plant, where it was reused

as raw material for road construction. From 37 tonnes of oily waste,

11tonnes of asphalt were produced.

Environment continued

TCFD

We recognise climate change as one of the biggest environmental threats the world faces. To demonstrate our commitment to climate-related

risks, we have embedded the four pillars of the TCFD into our business to provide transparency on our understanding and management of

climate-related risks. We continue to work to achieve full compliance with TCFD reporting requirements for the 2022 fiscal year.

Our summary is provided below.

Governance

The Board is responsible for approving and monitoring GKP’s ambitions in relation to

reducing the Company’s impact on climate change, and to operating in a responsible

and ethical manner.

Index

The Board’s oversight of

climate-related risks and

opportunities.

• The Safety and Sustainability Committee oversees the management of GKP’s

climate-related risks and opportunities, all under the supervision and oversight

of the Board.

• The Chair of the Safety and Sustainability Committee has overall accountability

for sustainability.

• The Committee meets formally four times a year.

• Safety and Sustainability

Committee report

• Pages 77 and 78

Management’s role in assessing and

managing climate-related risks and

opportunities.

• Gulf Keystone’s Chief Operating Officer is the executive sponsor for

sustainability, responsible for maintaining the risk register in relation to climate

change and proposing targets and projects to the Executive Committee and the

Safety and Sustainability Committee for consideration.

• Heads of Department are also responsible for assessing and managing

climate-related risks and opportunities.

• Safety and Sustainability

Committee report

• Pages 77 and 78

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 35

Strategy

GKP continues to work to embed climate change and sustainability into all aspects

of its strategy where possible, including the Company’s financial planning, stress test

scenarios and review of risks and uncertainties. In particular, the potential impacts of

climate change are considered in the Group’s viability and impairment assessments

though inclusion of carbon tax, adjustment of future oil price estimates to reflect the

potential impact of meeting the Paris Agreement targets, and considerations around

climate change impacts on the Group’s costs and production reliability.

Index

Climate-related risks and

opportunities the organisation has

identified over the short, medium

and long term.

• Short term (0-5 years) – market shift in terms of new and more robust legislation

and regulations and increased cost of capital for high-carbon industries.

Opportunity for increased positive ESG perception in the market by achieving the

Company’s target of more than halving scope 1 and 2 emissions intensity by 2025.

Hiring and retaining a talented workforce could become more challenging

without a positive sustainability strategy.

• Medium term (5-10 years) – changing climate conditions could cause disruption

to operations and supply chains, as well as putting our employees and

contractors, local communities and environment at risk.

• Long term (10+ years) – reduced market demand for oil and gas as renewable

fuels become more widely available.

• Risks and uncertainties

• Pages 46 to 55

Impact of climate-related risks and

opportunities on the organisation’s

businesses, strategy and financial

planning.

• GKP’s scenario analysis helps guide strategic and risk management decisions

under complex and uncertain conditions, including climate change.

• Providing a better understanding of the risks and uncertainties GKP may

face against future outcomes enables the Company to build a climate-risk

mitigationstrategy.

• The Company is targeting a >50% reduction in its scope 1 and scope 2 emissions

intensity by 2025 through the implementation of the Gas Management Plan.

• Risks and uncertainties

• Pages 46 to 55

• Viability statement

• Pages 56 and 57

• Gas Management Plan

casestudy

• Page 32

Resilience of the organisation’s

strategy, taking into consideration

different climate-related scenarios,

including a 2°C orlowerscenario.

• The first step of assessing the Company’s resilience to two climate-related

scenarios has been completed for 1.5°C (Paris-aligned) and 4°C (fossil-fuelled

growth) scenarios.

Risk

management

Climate change is already factored into certain aspects of the Company’s strategy,

including the risk management process.

Index

Processes for identifying and

assessing climate-related risks.

• Existing ESG and climate-related risks will be consolidated in an ESG register in

2022 and linked to the corporate risk register.

• Risks and uncertainties

• Pages 46 to 55

Processes for managing

climate-related risks.

• We have identified processes for managing climate-related risks in operations,

supply chain and HSE which we are currently implementing.

How processes for identifying,

assessing and managing

climate-related risks are integrated

into the organisation’s overall risk

management.

• Gulf Keystone maintains a detailed risk register that encompasses all identified

risks (which includes climate change and sustainability-related risks), the impact

of those risks, the mitigating controls the Company has in place to reduce those

risks to an acceptable level and the actions it must take to further mitigate risks

that are not deemed to be at an acceptable level.

• This register is regularly reviewed by the Executive Committee and the Audit and

Risk Committee.

• Risks and uncertainties

• Pages 46 to 55

Metrics

andtargets

Despite the challenges presented by the pandemic, Gulf Keystone remains

committed to reducing scope 1 and 2 CO

emissions per barrel by more than 50% by

2025 through the implementation of the Gas Management Plan.

Index

Metrics used by the organisation

to assess climate-related risks and

opportunities in line with its strategy

and risk management process.

• The Company uses key metrics and targets to manage and monitor

its performance in reducing its impact on the environment, providing a

straightforward and transparent measure to GKP’s stakeholders.

• Environment performance

highlights

• Page 31

Scope 1 and scope 2 greenhouse

gas (“GHG”) emissions, and the

related risks.

• GKP actively monitors scope 1 and scope 2 absolute emissions and intensity

throughout the year and discloses them on an annual basis.

• Data is calculated in line with the GHG Protocol.

• Environment performance

highlights

• Page 31

Targets used by the organisation to

manage climate-related risks and

opportunities and performance

against targets.

• The Company is targeting a >50% reduction in its scope 1 and scope 2 emissions

intensity by 2025 through the implementation of the Gas Management Plan.

Thisproject is expected to eliminate routine flaring.

• Environment performance

highlights

• Page 31

Governance

Strategic report Financials

36 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Social

Material SDG alignment:Why is this important to our business model and strategy?

Gulf Keystone’s relationship with, and contribution to, society has been critical to

the development of the Company as it stands today and is fundamental for its future

success. As a large employer of over 390 people in Kurdistan and the UK, we are

responsible for creating a safe, diverse and inclusive working environment for each one

of our staff and are focused on providing the learning and development opportunities

they need to advance their careers. Our operations generate significant economic

value, creating local jobs, supporting local suppliers and generating revenues for the

host government from the Shaikan Field. We also regularly engage with and invest in

our local communities, as we continue to strengthen the relationships we have built

over 15 years working in Kurdistan.

Target:

Zero harm

Our performance

Unit of

Material factors Indicator measurement 2019 2020 2021 Standard Alignment

Workforce health Total recordable incident rate (“TRIR”) Incidents per 2.61 0.71 1.37 SASB

(3)

and safety million man-hours

Lost time incident rate (“LTIR”) Incidents per 0.52 0.00 0.68 IPIECA, GRI

(4),(5)

million man-hours

Gender diversity Proportion of female staff in workforce % 9 10 7 GRI, WEF

(5),(6)

(as at 31 December)

Economic value Proportion of local staff in workforce % 74 84 74 IPIECA

(4)

generation in Kurdistan (as at 31 December)

Local supplier purchasing and $m 40 21 49 GRI

(5)

contracting (80% WI)

Proportion of total purchasing and % 27 42 58 IPIECA

(4)

contracting with local suppliers (80% WI)

Payments to host government

(7)

$m 221.6 120.6 355.8 GRI

(5)

References

(1) Streamlined Energy and Carbon Reporting (“SECR”).

(2) Task Force on Climate-related Financial Disclosures (“TCFD”).

(3) Sustainability Accounting Standards Board (“SASB”).

(4) International Petroleum Industry Environmental Conservation Association (“IPIECA”).

(5) Global Reporting Initiative (“GRI”).

(6) Water Environment Federation (“WEF”).

(7) See the Report on Payments to Governments for 2021 for full disclosure.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 37

Workforce health and safety

The health and safety of our workforce is a fundamental Gulf Keystone

value and integrated into every aspect of our daily operations. Our

target for health and safety is zero harm across our operations and

we focus on maintaining high standards by encouraging visible safety

leadership at all levels of the organisation, engaging continuously with

the workforce through training and development and fostering an open

and honest incident reporting and investigation culture.

Health and safety is a line responsibility for the executive team and

delegated to the whole organisation. The Board oversees health

and safety through the Safety and Sustainability Committee while

the Executive Committee addresses the topic at regular operational

meetings such as the weekly senior management meeting and the

Operations and Development Leadership Team meeting. The COO

holds weekly health and safety and sustainability meetings with the

Head of HSE and Sustainability to ensure that the Company’s HSE

Action Plan, HSE-related Company metrics and daily HSE actions are

appropriately addressed.

HSE Management System

Working with the KRG and the Company’s local communities, as well as

specialist consultants, Gulf Keystone has put in place a comprehensive

HSE and Security Policy (available to view on the Company’s website),

managed and executed by the Company’s HSE Management System.

The HSE Management System follows the “plan – do – check – act”

process, outlined in the ISO standards on environmental management

and occupational health and safety management

(1)

. This system is

driven through a combination of commitment, leadership, planning

assessment and mitigation of risk, and employment of trained and

competent personnel to carry out the work. The performance

is monitored to identify any shortfalls, as well as introducing

improvements where required – providing a comprehensive

investigation process. Along with the implementation of the system,

a“maturity index” was developed to monitor progress, which is

reviewed on an annual basis and agreed improvements are then

included in the following year’s HSE plan.

An important element of GKP’s HSE Management System is

developed through its formal Competency Based Framework to train

and develop local staff. This programme includes a combination of

mentoring: online, internal/external training, and a formal assessment

to demonstrate competence. The HSE Management System is

fundamental in supporting the development of the HSE culture

withinGKP.

GKP Life Saving Rules

While Gulf Keystone’s HSE and Security Policy and HSE

ManagementSystem underpin the Company’s approach to health

and safety, GulfKeystone’s Life Saving Rules, which are based on the

International Association of Oil & Gas Producers’ Life Saving Rules,

provide all staff and contractors with the practical guidance they need

in the field. TheLife Saving Rules are regularly discussed at safety

briefings across the Company and reviewed continually to ensure

theyremain appropriate for current operational activity.

Emergency response

The Company has established tiered emergency response plans,

which are regularly tested through a combination of drills and exercises

covering different operations-related and security-related scenarios.

During 2021, five emergency response exercises were held, either

virtually or on site with the support of an external consultancy.

(1) Environmental Management Standard ISO 14001: 2015, the Occupational Health and Safety Management Standard OHSAS 18001:2007/ISO 45001:2018

and the IOGP Guidelines for the Development and Application of Health, Safety and Environmental Management Systems (6.36/210).

Governance

Strategic report Financials

38 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Workforce health and safety continued

Land clearance activity

Each time our operations expand into a new area of the Shaikan

Field,we make the land safe beforehand by surveying for and clearing

unexploded ordnance. In 2021, we surveyed 978,363 m

of land in

preparation for future FDP activity, finding two pieces of ordnance that

were safely disposed of by a government agency. Through this vital

activity, we protect our staff and contractors, and reclaim the use of

land for our local communities.

2021 health and safety performance

With the resumption of drilling activity in 2021, Gulf Keystone stepped

up safety training and stand-downs for staff. Despite these efforts, one

lost time incident and one recordable incident were recorded during

drilling activities (see chart). Full investigations were carried out for

both incidents and remedial actions implemented. Since the lost time

incident, over 160 LTI-free days

(1)

have been completed.

Social continued

3.0

Twelve-month rolling LTIR per one million hours worked

Benchmark LTIR for Kurdistan, IOGP Stats 0.5

Benchmark LTIR for Company less than 50 million man-hours, IOGP Stats 0.47

Twelve-month rolling working hours

Dec

2021

May

2021

Aug

2021

Jan

2021

Twelve-month rolling TRIR per one million hours worked

Benchmark TRIR for Kurdistan, IOGP Stats 2.51

Benchmark TRIR Company less than 50 million man-hours, IOGP Stats 1.4

Incidents per one million hours worked

Oct

2021

Nov

2021

Mar

2021

Sep

2021

Jun

2021

Feb

2021

Apr

2021

Jul

2021

2.5

2.0

1.5

1.0

0.5

1,600,000

1,400,000

1,200,000

1,000,000

800,000

Rolling working man-hours

600,000

400,000

200,000

(1) As at 29 March 2022.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 39

Gulf Keystone continued to manage the effects of the COVID-19

pandemic in 2021, with the priority in the year ensuring as many

employees as possible received vaccinations against the virus.

Acampaign to educate employees on the benefit of the vaccination

was carried out, resulting in a Company-wide vaccination rate of 97%.

The success of the campaign enabled a return to more normal working

patterns in the field, including a move from three shifts to two, although

access to our offices in Erbil and London remained restricted with

employees encouraged to work from home. Social distancing, mask

wearing and increased hygiene standards at all Company sites and

offices continued to be maintained.

HSE Plan 2021

The HSE Plan is the Company’s roadmap for improving HSE and

monitoring HSE-related metrics throughout the year. The HSE Plan is

proposed by the COO to the Executive Committee and endorsed by

the Safety and Sustainability Committee.

In 2021, the HSE Plan comprised action points addressing topics

such as improvements to the HSE Management System, process

safety, training, contractor management, emergency preparedness,

environmental protection and health and medical care. The Company

achieved 99% completion of the 2021 actions.

Case study

Production facility

operational safety

study

Gulf Keystone has a comprehensive suite of documents,

drawings, procedures and plans describing the PF1 and

PF2 production facilities, their management, operations

and maintenance, developed throughout the lifecycle of the

field. Similarly, safety and environmental studies (e.g. hazard

identification (“HAZID”), hazard and operability (“HAZOPS”),

quantified risk assessments (“QRAs”), environmental impact

assessments (“EIAs”) have been undertaken in parallel and

integrated into these plans and procedures. In an initiative to

consolidate this information and ensure any gaps were identified

and filled, the Company undertook a systematic review of both

PF1 and PF2 and developed a simple operational safety case,

framed around identified major accident hazards (“MAHs”).

Following an initial review of the documentation, an independent

HAZID study was conducted for both production facilities, with

participation of operating, engineering and safety staff. A total

of 17 MAH scenarios were identified and each reviewed in detail

in a series of “bowtie” workshops to identify the barriers and

controls currently in place to mitigate these MAHs. Gaps were

identified, documented and a prioritised action plan established

to fill these.

Governance

Strategic report Financials

40 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Social continued

Our people

At Gulf Keystone we recognise that our success is dependent on

the skills, motivation and commitment of our people. To obtain these

qualities, we are focused on creating a safe, diverse and inclusive

working environment for each one of our staff and providing them with

the learning and development opportunities they need to advance their

careers. We are also committed to local employment, hiring directly

from the local communities in Kurdistan that support us.

GKP’s culture

Getting the best out of our people starts with the environment they

work in. Our culture is underpinned by our core values – safety; social

responsibility; trust through open communication; innovation and

excellence; integrity and respect; and teamwork – and all employees

and contractors are encouraged to come to work every day with these

in mind. Regular meetings, briefing sessions, town hall sessions as

well as “coffee chats” and surveys give our people the opportunity to

feel close to the organisation, to listen and discuss progress and help

to facilitate the interaction between employees at all levels, providing

insight into our performance and Company growth objectives.

Commitment to local employment

We are committed to the localisation of our Kurdistan workforce in

a structured way, ensuring the safe and effective development and

operation of the Shaikan Field. We have several strategies in place to

help meet these requirements which protect our good standing with

our employees, the MNR and local stakeholders:

• our organisation development plan and objectives are aligned with

our business strategy;

• we have a clear succession planning and localisation

programme;and

• our resourcing, employment and development decisions are

driven by our commitment to develop our Kurdistan workforce

bothtechnically and professionally.

As at 31 December 2021, we had 275 local employees in Kurdistan,

or 74% of our total headcount. In addition, through our contractors

we provided work in 2021 to over 600 local workers who support our

field and office facilities, providing services such as security, catering,

cleaning and laundry. Since 2018, over 100 employees have been

promoted into more senior positions and several employees have

replaced expatriate staff in senior technical or management positions.

We work hard to attract and retain the most talented individuals and

develop them into high calibre professionals. Our skills level within the

local workforce is monitored carefully to ensure that our development

plans are successful. This category includes trained operations staff,

technicians, supervisors and managers. In terms of engagement,

our employee retention rate remains excellent, with a 2021 voluntary

turnover level of 1.7%, well below our target of 5%, and we are proud

that close to 50% of our local workforce has been with the Company

for over five years. This is a strong indicator of the high employee

engagement and positive people culture within our business.

Diversity and inclusion

At Gulf Keystone we value a diverse workforce. We treat people

fairly, equally and without prejudice irrespective of gender, age, race,

disability, sexual orientation and other attributes and this is reflected in

both our Diversity and Equal Opportunities policies.

We make a concerted effort to attract female employees to improve

our gender diversity and to create opportunities for development

and promotion into senior leadership positions. In 2022, we plan

to introduce a global women’s network to promote women’s

advancement across the Company through education, networking

events and volunteering activities.

We work hard to foster an inclusive culture that creates a strong

sense of belonging. We believe that our individual differences and

perspectives bring enhanced value to our teams and enable us to

findmore innovative solutions to solving problems. In 2022, we plan

tofocus learning activities to equip managers with the skills to improve

workplace inclusion, increase cultural sensitivity and intelligence and

promote equity best practices.

Learning and development

We provide training and development opportunities for all our

employees and have ambitious development objectives and

localisation targets for our workforce in Kurdistan. We are committed

todeveloping our local workforce and providing both technical and

non-technical management training programmes.

Amongst our training opportunities we deliver a bespoke Gulf Keystone

Management Development Programme together with a Coaching and

Mentoring Programme for our managers and supervisors. We offer

a mini-MBA programme to our employees to learn more about our

business and industry in general. In addition, we offer online training

courses through Harvard’s “ManageMentor” programme which

provides a range of educational and soft skills courses. We are also

delivering English language training as we consider that this is critical

for our employees to be successful in their future careers.

We have invested in providing structured technical training

programmes for our employees working in our subsurface and HSE

groups. In 2021, we commenced our engineering apprenticeship

programme which includes placements across a range of engineering

disciplines and will offer our local graduates the opportunity to receive

formal training across a range of functions.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 41

Staff testimonial

Khudaida Hassan

Darweesh

Production Superintendent

My name is Khudaida Hassan Darweesh. I grew up in

Kurdistanand hold a Bachelor of Science in Geology from

MosulUniversity. I started work for Gulf Keystone in March

2013 as Plant Lead Operator in Production Facility 1 when the

facility was still under construction. I worked with the team to

successfully commission and start up the facility.

In June 2014, I was promoted to Process Supervisor and

moved to Production Facility 2. It was a great opportunity

and challenge to learn and progress in this senior position.

Duringthis time, I completed the SAIT Gas Process Operations

certificate, followed by a course in energy leadership skills. I also

worked closely with the managers and superintendents at the

Production Facility, who became my mentors.

As a result of my training and working with team,

Iwaspromotedto Plant Superintendent in January 2017.

Followingmypromotion, I went on to complete a mini-MBA

course, the Management Development Programme and

Harvard’s “ManageMentor” programme, all sponsored by Gulf

Keystone. Ilove how the Company supports our learning and

development and, in turn, encourages us to teach what we have

learned to our more junior colleagues.

Staff testimonial

Dunia Awdo

Government Liaison Officer

My name is Dunia Awdo and I’m from Shaqlawa, close to

Erbil in Kurdistan. I hold a bachelor’s degree from Salahaddin

University’s College of Languages – English department. I have

been working with Gulf Keystone for twelve years.

I joined the HR department at Gulf Keystone in 2010 as an

HRAssistant, which was the start of my career in the industry.

Iquickly found the chance to build on my former experience and

gain more skills and knowledge when I moved to the position

of Government Liaison Assistant in 2012, then Government

Liaison Officer in 2018. My role has grown considerably over

thelast few years and I’m responsible for coordinating Company

activities with all KRG Ministries and Government Directorates

and keeping the Company updated with all Government

instructionsand policies.

I have been able to develop my talents and skills through

various Gulf Keystone initiatives, including a Leadership and

Communication training course in 2019, the Management

Development Programme in 2021 and the Harvard

“ManageMentor” programme.

I am delighted to be a member of the Gulf Keystone family.

TheCompany is committed to creating a collaborative

workplace that shows strength in diversity and where

everyoneis treated fairly and with respect.

Governance

Strategic report Financials

42 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Generating economic value for Kurdistan

Kurdistan is part of Gulf Keystone’s DNA and since the Company’s

entry into the region in 2007, we have generated significant economic

value by creating local jobs, investing in the local supply chain and

generating value from the Shaikan Field for our host government,

theKRG.

Creating local jobs

As at 31 December 2021, 275, or 74%, of Gulf Keystone’s employees

were local. In addition to direct employment, the Company’s operations

are also responsible for significant indirect employment through

the engagement of local contractors. In 2021, major Gulf Keystone

contracts with local companies supported over 600 jobs among local

villagers. The Company engages with local stakeholders to ensure

that direct and indirect employment is shared amongst the villages

surrounding the Shaikan operations.

Supporting the local supply chain

In 2021, $49 million, or 58%, of our total purchasing and contracting in

the year was spent locally, with 17 new contracts entered into with local

Shaikan companies for services ranging from security to construction.

The proportion of total expenditure spent with local suppliers has

increased over the past three years, demonstrating our commitment

tosupporting the local supply chain.

Generating value from the Shaikan Field

Since first commercial production in 2013, the Shaikan Field has

generated increasing revenues for our host government, the KRG,

through production entitlements, royalties and capacity building

payments. In 2021, with the sharp recovery in the oil price and

increased production from the field, $355.8 million in total was

generated for the KRG. For further information, please refer to

theReport on Payments to Governments for 2021 on page 139.

Local community engagement and investment

Gulf Keystone’s relationships with the communities located close to

the Shaikan Field is critical to the Company’s success. Through regular

engagement and investment, Gulf Keystone continues to deepen these

relationships, listening to local stakeholders regarding all aspects of

Field operations and supporting local community initiatives.

Engaging with and listening to local stakeholders

We operate in Kurdistan at the pleasure of our hosts, in particular the

local communities situated in the Shaikan area. Beginning from the

early phases of our operations, we identify and assess the possible

impacts of our operations and projects on the communities, and we

communicate with local stakeholders and local authorities to mitigate

issues and negative impacts. We maintain close relationships with local

authorities, share information on safety, security and other issues, and

set professional standards for local employees and contractors.

Social continued

The Company has in place a formal procedure for our local

communities to provide all types of feedback regarding our operations.

The procedure is connected to our corporate values and incorporates

guidance on best practice from the International Finance Corporation

(“IFC”) Standards. Grievances and the resulting conclusions are

documented in a tracking system, which enables us to analyse,

trackandmitigate future issues.

Supporting and funding local community initiatives

Gulf Keystone works closely with its local communities to

identifyprogrammes that promote local economic growth and

social development. Our primary focus is on supporting agriculture,

thesecond largest sector of Kurdistan’s economy after oil and

gas, andon education and enterprise. We also support our local

communities with Good Neighbour projects, which provide vital

infrastructure tailored to requests received from local stakeholders.

During 2021, we supported 18 villages within the Shaikan area with

various sustainable projects across agriculture, education, water,

electrical and health. In total, around $800,000 was provided by

GulfKeystone to fund the projects.

Agriculture

We continued to provide support in 2021 to local farmers and livestock

breeders, helping them to generate a sustainable income and to better

deal with the challenges of operating in an area often impacted by

drought. In summary, the Company:

• Distributed 123 metric tonnes of certified wheat seed and fertilisers

to over 440 farmers.

• Supplied 1,500 olive trees and a cold press olive extractor; olive trees

have numerous benefits, particularly for the Shaikan area, given they

are drought resistant, can live for hundreds of years, start bearing

fruit in less than five years and can produce more than 200kg of

olives annually.

• Donated three metric tonnes of black barley seeds to sheep breeders

and distributed 24 metric tonnes of fodder to 120 sheep and goat

breeders to assist with the challenges of reduced pastural land.

We also continued our support for a local beekeeping project,

disbursing three boxes of live bees and two boxes of beehives to

eachbeekeeper in the area. The project, which began in 2019, has

beena success to date, with honey production in 2021 increasing

60% to almost a tonne. The project is focused on encouraging a

new generation of beekeepers in the Shaikan area, with many of the

participants in the project newcomers to bee husbandry.

Education and training

Gulf Keystone provided funding for a local NGO, AOACO, to run

anauto mechanic training course covering a range of skills, including

engine and electrical repairs and air conditioning. Thirty students from

13nearby villages participated, with five participants going on to start

their own business following the course. Read more about the project

inLuqman’s testimonial.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 43

Local community testimonial

Bangin

Bangin is a six-year-old first-grader at Afriva school in the

Shaikan area. He has sickle cell anaemia, a chronic illness

that needs ongoing treatment. He also suffers from poor

eyesight, needing to sit at the front of the classroom to see his

teachers write on the white board. Unable to afford a visit to an

ophthalmologist, Bangin was one of 220 students in the Shaikan

area to receive glasses following the visit to his school by the eye

test screening programme funded by Gulf Keystone.

Bangin receiving his glasses from his headmaster

Good Neighbour projects

Gulf Keystone has been involved in several “Good Neighbour”

projects, with the objective of providing our local communities

withtheinfrastructure they need most.

In 2021, we provided vital medical equipment to the intensive care

hospital in Duhok as part of our continued support related to the

COVID-19 pandemic. We also developed local water infrastructure

by drilling a water well, constructing water tanks and a water supply

network and connecting existing water wells to the electricity grid.

In addition, we provided four generators to villages to help them with

power outages during the summer season and purchased five air

blowers for a local fire department.

Health

Gulf Keystone supported a team of ophthalmologists and optometrists

to examine more than 1,600 students in 15 schools located around

the Shaikan area. The initiative resulted in the distribution of 220

pairs of glasses to local students, with many students and their

parents previously unaware of visual impairments. Ten students were

referred for further examination and five others scheduled for surgical

procedures. Read more about the project in Bangin’s testimonial.

Local community testimonial

Luqman

Luqman was one of the local Shaikan villagers who benefited

from the Gulf Keystone funded auto mechanic training course.

After completing the course, he was able to develop his own

business and manage a repair shop in the Chra sub-district.

Thebusiness assists him in providing food and daily living

expenses for his family. He currently repairs generator motors,

electric heaters and various other appliances. In the future,

heintends to expand his services to vehicle maintenance.

Luqman at work repairing a car

Governance

Strategic report Financials

44 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Sustainability report continued

Governance

Material SDG alignment:Why is this important to our business model and strategy?

Outstanding governance, compliance and ethical conduct are the bedrock of

our organisation and underpin our purpose as a responsible energy company.

Bycombining the correct tone and culture with a strong governance structure and

relevant policies, procedures, training and communication, we ensure that we are able

to operate effectively, legally and ethically, safeguarding the long-term sustainability of

our business for all our stakeholders.

Targets:

Outstanding governance, compliance and

ethicalconduct

Our performance

Unit of

Material factors Indicator measurement 2019 2020 2021 Standard Alignment

Board oversight Proportion of independent % 67% 57% 57% UK Corporate

Directors on Board

(1)

Governance Code

Proportion of independent Directors % 100% 100% 100% UK Corporate

on Nomination Committee Governance Code

Proportion of independent Directors % 100% 67% 100% UK Corporate

on Audit and Risk Committee Governance Code

Proportion of independent Directors % 100% 100% 100% UK Corporate

on Remuneration Committee Governance Code

Proportion of female Directors on Board % 17% 14% 14% UK Corporate

Governance Code

Director Board meeting attendance % 96% 98% 100% UK Corporate

Governance Code

(1) Includes independent Non-Executive Chairman.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 45

Role of the Board

The Board of Gulf Keystone Petroleum Limited meets regularly to

consider strategy and policy, major capital expenditure and all aspects

of the Group’s activities and business operations. This includes active

involvement in the environmental, safety, social and governance

matters relating to the Company’s operations. The Board has a formal

schedule of matters reserved specifically for decision by the Board.

Effectively, no decision of any material consequence is made other

than by the Directors and all Directors participate in the key areas of

decision-making. Further details on the Board’s role can be found in

theCorporate governance report on pages 60 to 69.

Board independence and diversity

The Board is composed of two Executive Directors, the Chief

Executive Officer and Chief Financial Officer, and five Non-Executive

Directors, four of whom are independent, including the Non-Executive

Chairman.

It is recognised that diversity is a key element for the Board, and that

diversity extends to a number of different facets. The Company is

currently looking to enhance the diversity of its Board through the

recruitment of an additional Non-Executive Director.

Board and executive oversight of sustainability

In 2019, GKP amended the terms of reference of the existing Heath,

Safety, Environmental and Corporate Social Responsibility Committee

to bring in a broader remit for responsibilities on environmental

(including emissions), social and governance matters. The Committee

was renamed the Safety and Sustainability Committee and has primary

responsibility within the organisation for ensuring appropriate systems

are in place to manage health, safety, security and environmental risks,

corporate social responsibility, as well as implementing and monitoring

appropriate governance processes. This includes the formulation

of relevant KPIs and making recommendations of improvement

whereappropriate.

The Safety and Sustainability Committee meets four times per year

and reports into the Board on all matters discussed. All significant

decisions affecting sustainability matters are considered by the Board

upon the recommendation of the Safety and Sustainability Committee.

Committee meetings are attended by management representing

health and safety, security, environmental and social matters and

governance. All Board members are encouraged to attend whether

ornot they are Committeemembers.

Gulf Keystone’s Chief Operating Officer is executive sponsor

for sustainability and has an open and regular dialogue with the

Safety and Sustainability Committee. He is supported by the HSE

andSustainability team, headed up by Gulf Keystone’s Head of HSE

and Sustainability, who is supported by a Sustainability Manager.

Linking executive and employee remuneration to

safety andsustainability

The Company has implemented remuneration KPIs linked to the

implementation of safety and sustainability, including the sustainability

strategy. These KPIs are used to determine bonus entitlements

throughout the organisation, thus helping to ensure that all staff are

fully cognisant of the importance of safety and sustainability to the

Company’s future success and delivery of shareholder value. In 2021,

safety and sustainability accounted for a potential 25% of the Company

performance element of executive and employee bonus entitlements.

In addition, the Company is proposing to its shareholders this year

the introduction of an ESG performance condition to the Company’s

Long-Term Incentive Plan (“LTIP”) from 2023, with a weighting of 20%.

Ethics and compliance

The Company fully appreciates that it must operate an ethics and

compliance programme which is fully compliant with the highest

standards. Failure to do so could endanger the Company’s licence

tooperate.

Gulf Keystone operates a zero tolerance approach to bribery and

corruption. It is essential that the Company maintains transparent

relationships free from corruption with the host government, suppliers,

contractors and local communities. This protects our reputation and

our licence to operate, as well as the ability to access funding and

operate effectively.

The Company operates an independent whistleblowing service in the

event any employee wishes to raise a concern, either online or over the

phone, on an anonymous basis. There were no whistleblower cases

handled by the service in 2021.

A comprehensive compliance training programme, which

incorporates, amongst other matters, anti-bribery and corruption,

handling of confidential information, conflicts of interest and

whistleblowing is undertaken on a periodic basis for all staff and

contractors, the last such programme being completed in March 2022.

Governance

Strategic report Financials

46 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Management of principal

risksanduncertainties

Risk assessment framework

The Board regularly considers the Group’s principal and emerging risks

and reviews reports from the Audit and Risk, Safety and Sustainability

and Technical Committees.

The Group considers potential emerging risks and maintains risk

registers that incorporate strategic, ESG, commercial, financial,

operations, projects, information technology and operational

technology risks. The risk registers include clear definitions of the risk,

potential impact, mitigating controls the Group has in place to reduce

the impact or probability of the risk to an acceptable level, and actions

to further mitigate the impact or probability of the risk. The Company

invites specialist advisers to attend meetings with the Board and

management to provide an assessment of particular risks which may

affect the Company, such as geopolitical, security and cyber security

risks, thus enabling the Company to understand and plan for the

mitigation of these risks.

The risk register is reviewed by senior management on a regular

basis following consultation with owners of the risks and external

consultants, as appropriate.

The Audit and Risk Committee regularly reviews the status of the

Group’s key risks and performs an ongoing review of effectiveness of

the internal control and risk management systems to ensure risks are

appropriately identified, monitored and reported to the Board and are

aligned with the Group’s strategy.

The Safety and Sustainability Committee is primarily responsible

for ensuring that appropriate systems are in place to manage health,

safety, security and environmental risks as well as corporate social

responsibility.

The Technical Committee regularly reviews the Group’s principal

operational risks. It supports ongoing production operations and the

Company’s Shaikan development planning and project execution

activities and ensures that appropriate processes are in place to

manage project execution risks.

The Board monitors the Company’s risk management and internal

control systems by means of reports from the various committees

anddirect consideration of risk within the Board meeting agenda.

BOARD

Responsible for the overall system of

internal control and risk management

Audit and Risk

Committee

Responsible for monitoring the

effectiveness of the Company’s

risk management framework and

internalcontrols

Safety and

Sustainability

Committee

Ensures appropriate systems are in place

to manage safety, health, environmental

and community risks

Technical

Committee

Ensures that appropriate processes are

in place to manage Shaikan development

planning and project execution risks

SENIOR

MANAGEMENT

Responsible for implementation and

management of internal control and risk

management systems

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 47

Principal risks

The Board has carried out a robust assessment of the principal and emerging risks facing the Group, including those that would threaten its

business model, future performance, solvency or liquidity. The following table indicates the principal post-mitigation risks the Group faces.

Thelistis not exhaustive nor in priority order, and may change.

Key risk factor Potential impact Mitigation

Strategic

Political, social and economic

instability

Risk owner:

CEO

Kurdistan and Iraq as a whole and the

neighbouring region have a history of

political, social and economic instability

which continue to represent a risk to the

Group, its operations and its personnel.

Uncertainty may arise from changes in

the KRG leadership or changes in the

continued administration ofthe Shaikan

licence by the KRG.

Link to strategic priorities

   

Change in year

There has been a history of tension

between the political parties in the

Kurdistan Region of Iraq and with the

central government of Iraq.

Any changes in the government could

generate uncertainty and may cause a

material adverse impact to the Group,

including changes in PSC terms.

Other consequences of political, social

and economic instability may include

unrest or armed conflict, limits on

production (including restrictions related

to OPEC actions) or cost recovery,

import and export restrictions, price

controls, uncertainty over payment

mechanisms for export sales, imposition

of additional costs and taxes, tax

increases and other retroactive tax

claims, revocation of licence to operate,

expropriation of property, cancellation

of contract rights and an increase in

regulatory burdens and fiscal pressures

on the KRG.

The Group engages in continuous dialogue with

advisers and the KRG.

The Group acts as a responsible operator and adheres

to the terms and requirements of the PSC and FDP,

and holds regular, minuted meetings with the MNR.

In November 2021, a draft FDP was submitted to the

MNR which contains theGMP.

The Board closely monitors future spending plans

and ensures that an adequate cash balance and

other potential sources of liquidity are identified

and maintained to enable theCompany to manage

potential future uncertainties.

The Group has a corporate social responsibility policy

which has led to several local initiatives and promotes a

strong relationship with thelocalcommunities.

Disputes regarding title or

exploration andproduction

rights

Risk owner:

CEO

The Iraqi government disputes the

validity of the PSCs granted by the KRG.

Link to strategic priorities

 

Change in year

If the validity of the PSCs was

successfully challenged, the Group

could be required by the KRG or another

administration to accept terms that

are materially less favourable than the

current PSC.

In February 2022 a majority decision of

the Iraqi Supreme Court ruled that the

Kurdistan Region of Iraq Oil and Gas

Law (“KROGL”) was unconstitutional.

The ruling also provides that the Iraqi

Ministry of Oil may pursue annulment

ofProduction Sharing Contracts issued

by the Kurdish Regional Government

(“KRG”). The KRG responded that

“it will take all constitutional, legal,

and judicial measures to protect and

preserve all contracts made in the oil

and gassector”.

This is an industry-wide risk faced by all international

oil companies operating in the Kurdistan Region

ofIraq.

The Group will continue to engage with KRG officials

on this matter and will react as any implications

of the ruling become clearer. The Group is also in

discussions with external legal counsel and other

advisers onthematter.

The Group cannot control or completely mitigate

disputes between the KRG and other parties.

TheGroup closely monitors the local situation.

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Key to strategic

priorities

Key to change

inyear

NEW

Newly

identified

Increased

level of risk

Similar level

of risk

Decreased

level of risk

Governance

Strategic report Financials

48 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Management of principal

risksanduncertainties continued

Principal risks continued

Key risk factor Potential impact Mitigation

Strategic

Business conduct and

anti-corruption

Risk owner:

Anti-Bribery Officer

Due to the nature of the industry sector

and the region in which the Group

operates, it is exposed to the risk that

the Group, or parties acting on its

behalf, breach relevant laws, including

anti-bribery and corruption laws.

Link to strategic priorities

 

Change in year

Violation of anti-bribery or corruption

regulations by the Group, or those

acting on its behalf, may result in a

criminal case against Gulf Keystone

and/or its employees which may lead

to reputational damage, monetary

losses, fines, imprisonment of staff

andrevocation oflicence to operate.

The Chief Legal Officer and Company Secretary is the

Anti-Bribery Officer for the Group and reports directly

to the Audit and Risk Committee.

The Group has various policies, including anti-bribery

and corruption, whistleblowing and prevention of tax

evasion, and has implemented training programmes

toensure understanding and promote compliance.

All employees, agents and other associated persons

are made fully aware of the Group’s policies and

procedures regarding ethical behaviour, business

conduct and transparency. All staff and certain

contractors are required to certify compliance

withpolicies.

The Group has robust controls around contracting,

payment approvals and the non-facilitation of

taxevasion.

Export route availability

Risk owner:

CCO

Risks associated with availability and

accessibility of infrastructure allowing

the Group to sell oil to export markets,

and changes to export route forced on

the Group which affect profitability.

Link to strategic priorities

  

Change in year

Loss of revenue or reduction in

profitability. The Group relies on

the international pipeline between

Fishkhabour (in Kurdistan) and

Ceyhan (in Turkey) and the Kurdistan

Export Pipeline for delivery of oil.

These pipelines may be subject to

interruption due to a variety of reasons,

including, butnot limited to, technical,

maintenance, repairs, damage by

military operations, terrorism, theft,

smuggling, regional politics, arbitration

ruling or sanctions.

The Kurdish Pipeline Company (“KPC”)

which owns the Kurdistan Export

Pipeline, is 60% owned by Rosneft.

Inthe event Rosneft is subject to certain

sanctions by virtue of the Russian

invasion of Ukraine, the Company may

no longer be able to access the pipeline.

Please also refer to “Risk of economic

sanctions impacting the Group” on

page49.

The Crude Oil Sales Agreement betweenthe Group

and the MNR provides for access to the Kurdistan

Export Pipeline and is currently renewedon a

monthlybasis.

Each PF is equipped with storage tanks that could

mitigate the impact of short-term pipeline disruptions.

Additional storage at PF-1 is planned aspart of the FDP.

The option to export oil by means of trucking

operations could be reimplemented but it would take

time to do so. Plans to recommission truck loading

facilities have been identified, however there is a

possibility that the Group may notbe able to maintain

the current or future production rate using this method.

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Key to strategic

priorities

Key to change

inyear

NEW

Newly

identified

Increased

level of risk

Similar level

of risk

Decreased

level of risk

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 49

Key risk factor Potential impact Mitigation

Strategic

Risk of economic sanctions

impactingtheGroup

Risk owner:

Chief Legal Officer and

CompanySecretary

The imposition of foreign economic

sanctions impacts the ability of the

Group to operate, or to produce,

transport or market crude oil.

Link to strategic priorities

 

Change in year

NEW

In the event foreign economic sanctions

(be it country, sectoral or specific)

are made on Russian or other owned

companies, this could have an impact

onGKP’s ability to operate, or to

produce, transport or market crude

oil. In particular, the Kurdistan Pipeline

Company (“KPC”) which owns the

export pipeline, is partly owned by a

Russian entity, and specific economic

sanctions could entail that the Company

is unable toaccess thispipeline.

The Group continues to monitor the current economic

sanctions imposed on a country, sectoral and specific

basis and takes regular professional advice relating to

this. The Group is considering possible outcomes and

monitors the potential sanctions-related risks affecting

the Groupof all suppliers and stakeholders.

Stakeholder misalignment

Risk owner:

CEO

The Group’s long-term strategy and

plans may not be fully aligned with all

stakeholder groups due to the diverse

nature of the stakeholders (including,

but not limited to, shareholders,

bondholders, the KRG, the MNR,

joint venture partners and local

communities).

Link to strategic priorities

   

Change in year

Ineffective or poorly executed strategy

may lead to loss of investor confidence

and reduction in the Company’s share

price or credit quality, which reduces

the Group’s ability to access finance and

increases vulnerability to a takeover.

Misalignment with our joint venture

partner, the KRG or the MNR may

result in delays or modifications to

the development project, potentially

impacting economic returns.

The inability to finalise commercial

negotiations with the MNR confirming

either no changes are required to

the existing PSC or that the PSC

willbe amended in line with current oil

sales invoice terms could potentially

negatively impact profitability and

stakeholder value.

Amount of recoverable costs may be

challenged and reduced, adversely

impacting profit and cash generation

fromoperating activities.

Local community opposition may lead

to project delays, inability to gain land

lease extensions, significant security

risk to our employees and contractors

or, in extreme cases, loss of licence

tooperate.

The Group employs an Investor Relations team

which maintains regular dialogue with the Group’s

stakeholder base and releases all key developments

to the market through the London Stock Exchange’s

Regulatory News Service and the Nordic ABM of the

Oslo Bors.

Discussions between the Group, MOL and the MNR

regarding the Gas Management Plan resumed in

2021 and a draft FDP was submitted in November

2021, which is being reviewed by and discussed

withtheMNR.

The Company continues to progress commercial

negotiations with the MNR tofinalise PSC terms with

the overarching objective of at least maintaining the

value ofthe current contract.

Shaikan Management Committee meetings

including representatives of the MNR, MOL and

GKP are held periodically to discuss issues and

ensure alignment. Key decisions from meetings

areformallydocumented.

Strong community relations are vital to our ability to

achieve local support for new projects. Gulf Keystone

strives to be a good corporate citizen and fosters its

reputation through strong and positive relationships

with the governments and communities where we

dobusiness.

The Group continues to collaborate with local and

government stakeholders and has a CSR strategy to

complement its existing community welfare initiatives.

Governance

Strategic report Financials

50 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Management of principal

risksanduncertainties continued

Principal risks continued

Key risk factor Potential impact Mitigation

Strategic

Climate change and

sustainability

Risk owner:

CEO

Climate change and sustainability are

material issues for the global economy

and for the Group. Introduction of

regulations or the physical impact of

climate change may have a significant

effect on the long-term viability of the

Group.

Link to strategic priorities

   

Change in year

The transition to a low carbon economy

may lead to a decline in oil demand

resulting in lower oil prices, costs

relating to flaring emissions or carbon

taxes, reduced access to or increased

cost of funding and insurance,

disruptions to the supply chain,

increasing challenges to attract and

retain talent, and increased compliance

and monitoring costs related to new

regulatory frameworks.

The Group may also be impacted by

physical risks due to climate changes,

including increasing frequency and

magnitude of extreme weather events

impacting operations, production

efficiency losses, disruptions to

the supply chain and weakened

international cooperation.

Additionally, conflicting stakeholder

expectations and/or a lower oil price

may lead to an inability of the Group to

develop the asset.

Gulf Keystone is committed to implementing

the recommendations of the Task Force on

Climate-related Financial Disclosures (“TCFD”),

targeting full compliance by fiscal year 2022 as per

Standard Listing requirements.

The Company has formulated its sustainability

strategy and an ESG implementation roadmap has

been approved by the Board.

A specific ESG risk register has been created to

closely track and review existing and evolving ESG

risks more effectively.

The ability to achieve the Group’s targets of reducing

emissions intensity and eliminating routine flaring is

dependent on finalisation of the Gas Management

Plan with our partner MOL and the MNR and its

subsequent implementation. A draft FDP, containing

a proposal for the Gas Management Plan, was

submitted to the MNR in November 2021.

Wherever possible, the Group will improve the

efficiency of its operations and processes in order

toreduce emissions and consumption.

The Group continuously monitors air quality and its

management of waste, water and wastewater, soil

remediation and the impact of its facilities as part of its

commitment to minimise impact on the environment

and local communities.

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Key to strategic

priorities

Key to change

inyear

NEW

Newly

identified

Increased

level of risk

Similar level

of risk

Decreased

level of risk

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 51

Key risk factor Potential impact Mitigation

Strategic

Global pandemic (e.g.

COVID-19)

Risk owner:

CEO

The effects of a global pandemic

such as COVID-19 may be severe

and far-reaching, affecting the global

economy, our business, our workforce

and the local communities in which we

operate.

Link to strategic priorities

   

Change in year

Over the long term, a pandemic and

its effects on the global economy may

threaten the viability of the Group. In the

short term, the deterioration of market

conditions and volatile oil prices could

reduce the Group’s revenue generation

potential and adversely impact the

Group’s profitability and liquidity

position.

A pandemic may adversely affect the

health and safety of our staff, the KRG’s

ability to make ongoing revenue or

arrears payments, field operations and

expansion activities and increase cyber

security vulnerabilities due to remote

working.

The Group has taken several actions in order to

manage the impact of the COVID-19 pandemic,

asfollows:

• Implemented a vaccination campaign resulting

in 97% of GKPI’s workforce receiving double

vaccinations.

• The Crisis Management Team, with representatives

in the UK and Kurdistan, meets as required to

develop and review plans to effectively manage the

response.

• The Company actively monitors advice from the

World Health Organization and Public Health

England and receives regular independent medical

advice relating to the COVID-19 outbreak to ensure

best practice precautions are being applied.

• Clear guidelines and health precautions on

how employees should protect themselves and

reduce exposure and transmission have been

communicated to the organisation.

• Implementation of a remote working policy, along

with additional guidance relating to cyber-safety

practices, and health screening of staff and

contractors entering work sites.

The Company monitors the environment for potential

signs of new or emerging pandemics.

The Company ensures that it maintains adequate

liquidity and operational flexibility to protect itself from

the effects of a pandemic.

Cyber security

Risk owner:

CFO

As the Group becomes more reliant

on information technology systems,

software and cloud computing,

it becomes more vulnerable to

maliciouscyber attacks.

Link to strategic priorities

  

Change in year

A cyber security breach could disrupt

our operational and development

activities, put employees at risk,

result in the disclosure of confidential

information, which could adversely

affect the share price, damage our

reputation and create significant

financial and legal exposure for the

Group.

As a result of current global events there

could be an increase in the frequency

and severity of cyber attacks.

The Group has developed focused information and

operational technology cyber risk registers to facilitate

identification, management and mitigationof potential

risks.

The Group has implemented a cyber security strategy

and roadmap to continuously identify and remediate

system vulnerabilities.

The Group has contracted a recognised Managed

Security Services Provider that employs several

tools to manage cyber security risks on an ongoing

basis, including third-party monitoring, vulnerabilities

management, red team tests, dark web monitoring,

endpoints andperimeter security and ongoing

cybersecurity awareness training.

The Group has invested in staff and software to

monitor, maintain and regularly upgrade its systems,

processes and network.

The Group enrolled on the Early Warning Service

carried out by the UK National Cyber Security Centre.

Governance

Strategic report Financials

52 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Management of principal

risksanduncertainties continued

Principal risks continued

Key risk factor Potential impact Mitigation

Operational

Health, Safety and

Environment (“HSE”) risks

Risk owner:

COO

The Group, its staff and contractors and

local communities may be exposed to

specific risks inrelation to HSE matters.

Identified risk areas include, but are not

limited to, H

S leaks at the production

facilities, loss of containment, road

traffic accidents and other accidents at

production facilities and well sites.

Link to strategic priorities



Change in year

Consequences may include

accidents resulting in loss of life or

injury, significant pollution of the local

environment, destruction of facilities,

disruption to business activities, risk of

litigation and reputational damage with

an associated financial loss.

The Board has established a Safety and Sustainability

Committee to ensure that the Company has a robust

HSE strategy with clear lines of accountability and

commitment throughout the organisation.

The Company has formulated its sustainability

strategy and the ESG roadmap was approved by the

Safety and Sustainability Committee in November

2021, and subsequently approved by the Board in

January 2022. In addition, a specific ESG risk register

was created to track and review ESG risks more

effectively.

The Group has comprehensive HSE and operations

management procedures, including emergency and

incident response plans. The HSE Action Plan for

2021 included improvement and compliance initiatives

and was 99% complete by the end of 2021 (see “Key

performance measures” section on pages 22 and 23).

In 2021 the Company completed a thorough review of

the safety case for the FDP. The 2022 HSE Action Plan

has been established, including key actions from the

safety case, and progress will be closely monitored

during the year.

Gas flaring

Risk owner:

COO

GKP relies on flaring as a disposal

method for the gas produced as a

by-product of its oil production, which

creates an environmental impact. There

is a risk that the Group does not achieve

its target of reducing scope 1 and 2 CO

emissions per barrel by more than 50%

by 2025, which is subject to approval of

the FDP.

Link to strategic priorities

  

Change in year

The KRG may enforce a ban on gas

flaring and/or introduce a financial

penalty or other sanctions for gas

flaring, resulting in reduction or

cessation of production or a less

favourable Shaikan asset valuation.

The Group maintains active dialogue with the regional

authorities to ensure that it complies with the existing

emissions regulations.

Harmful gas emissions are closely monitored by

the HSE department, with any variances outside

normal levels investigated and reported to executive

management.

The Group uses a clean flare stack to improve the

combustion of flared gas.

The ability to achieve a reduction of routine flaring is

dependent on finalisation of the Gas Management

Plan with our partner MOL and the MNR and its

subsequent implementation. A draft FDP, containing

a proposal for the Gas Management Plan, was

submitted to the MNR in November 2021.

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Key to strategic

priorities

Key to change

inyear

NEW

Newly

identified

Increased

level of risk

Similar level

of risk

Decreased

level of risk

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 53

Key risk factor Potential impact Mitigation

Operational

Security

Risk owner:

COO

The Group is exposed to security risks

by virtue of the location of its operations.

These include the threat of terrorist

attack, military action and local protests

and unrest at Gulf Keystone sites.

Link to strategic priorities

Change in year

Political unrest, armed conflict in Iraq

or other security issues may lead

to loss of life or injury to personnel,

personnel evacuations, disruption to

operations, costs to repair facilities,

increased costs of doing business due

to increased security and reduced staff

retention, reputational damage with the

associated financial loss and loss of

investor confidence.

There can be no assurance that the

Group will be able to obtain or maintain

effective security over any of the

Group’s assets or personnel.

The Board has established a Safety and Sustainability

Committee to ensure that the Company has a robust

HSE strategy with clear lines of accountability and

commitment throughout the organisation.

The wells and facilities are protected by external

security consultants and local government forces who

work closely with the Group’s internal security team.

The Company retains external security advisers

who prepare detailed risk assessments, security

procedures and contingency plans which can be

activated when threats arise.

Local communities are an essential source of

intelligence about the nature, severity and likelihood

of any threat. The Group ensures it maintains good

relations with the local population and considers the

impact of all decisions on them.

Field delivery risk

Risk owner:

COO

The Company does not achieve its

stated investment case and economic

and production returns do not match

expectations.

The major identified risks within this

area are the following:

• Loss of a well due to water or gas

breakthrough, pressure decline or

mechanical failure.

• Damage to wells during drilling due

toloss of drill fluids.

• Well locations are sub-optimal.

Link to strategic priorities

  

Change in year

Failure to control development and

production risks may manifest as project

delays, cost overruns, high production

costs, early field decommissioning

and, ultimately, lower than expected

reserves.

Water breakthrough in advance

of the installation of appropriate

water-handling facilities may result in

temporary well shut-ins, failure to meet

production targets and damage to the

production facilities.

Gas breakthrough in volumes

exceeding the limit of the gas

processing capacity could result in

reduced oil production and shutting-in

the well with gas breakthrough.

Drilling operations issues might result

in cost overruns and project delays, and

possibly even the suspension of drilling

operations.

Technical and financial approvals are required for all

material projects and for all dedicated project teams.

All projects are closely monitored to ensure the project

delivers against plan, which enables actions to be

taken to maintain progress, and minimise budget

overruns.

All wells are monitored to ensure early detection of,

and reaction to, any abnormalities. Zones within wells

which are producing water may be isolated while other

zones in the well are brought on production. Wells

are regularly tested to look for any changes in gas/

oil ratio and to provide an early warning of any gas

breakthrough.

Reservoir modelling is carried out to improve

our understanding and forecasting of this event.

Ourcurrent analysis does not show inclement water

breakthrough.

Water-handling and desalting facilities are included

inthe Group’s capital programme.

Design of future development wells takes account

of the updated modelling to optimally locate the

producing interval from wells at a depth to minimise

therisk of early gas and water breakthrough.

Governance

Strategic report Financials

54 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Management of principal

risksanduncertainties continued

Principal risks continued

Key risk factor Potential impact Mitigation

Operational

Reserves

Risk owner:

COO

Recoverable reserves are below

expectations, which will affect the

revenue and economic viability of

thefield.

Link to strategic priorities

Change in year

Due to natural uncertainty in the

volumes of hydrocarbons in place and

the proportion of those hydrocarbons

that might be recoverable, the actual

reserves may be lower than our most

likely forecast.

An updated, independent third-party evaluation of the

Company’s reserves as at 31 December 2020 was

issued by ERCE in early 2021. The report reaffirmed

the reserves and resources estimates of the 2016

CPR, after adjusting principally for production.

The Company continues to evolve and optimise its

Field Development Plans. A draft FDP was submitted

tothe MNR in November 2021.

The Group bases its forecasts and investment

planning on a range of possible outcomes that

includea low-side case.

Phasing of the project investment is considered

against the low-side scenario and the investment

plans adjusted accordingly.

Data acquired from well production and pressure

measurements and the results from new wells

are used to help model the reservoir and reduce

uncertainty over time.

Seismic data has been reprocessed and the structural

model has been rebuilt in order to better understand

the subsurface.

Financial

Liquidity and funding

capability

Risk owner:

CFO

The Group has insufficient working

capital to meet short-term operational

requirements or has insufficient funding

in place to pursue the full Shaikan

development programme.

Link to strategic priorities

  

Change in year

Lack of liquidity may result in the Group

not being able to function as a going

concern and being unable to meet its

operational commitments.

Lack of funding in the long term may

result in the Group’s inability to fully

achieve its strategy, failure to reach the

stated field plateau, failure to service its

debt and inability to deliver a return to

investors.

Lack of capital discipline and

operational cost focus may result in

significant unplanned cash outflows

andinadequate liquidity.

The Group currently has a significant cash balance.

The Group invests capital in phases and has a flexible

capital programme, enabling it to quickly adjust

levels of spending to adapt to changes in market

circumstances.

A draft FDP including a GMP was submitted to the

MNR in November 2021. The Group is proactively

reviewing options to finance the FDP.

The Board and management ensure that the strategy

planning process is robust. The Group’s business

plan is regularly reviewed and revisited by the Board

to ensure that it reflects any changes to internal or

external factors.

Business planning and corporate performance

management processes are used to control spend.

These processes involve the review of multiple

scenarios to assess a possible range of outcomes.

The Group carefully manages debt maturities and

considers potential sources of funding to ensure

there are available funds to repay debt outstanding

onmaturity.

Safety and

sustainability

Value

creation

Capital discipline

and cost focus

Robust

financial position

Key to strategic

priorities

Key to change

inyear

NEW

Newly

identified

Increased

level of risk

Similar level

of risk

Decreased

level of risk

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 55

Key risk factor Potential impact Mitigation

Financial

Oil revenue payment

mechanism

Risk owner:

CFO

There is uncertainty relating to the

revenue payment mechanism for oil in

Kurdistan.

There can be no assurance that

PSC operators will be paid their full

contractual entitlement.

Link to strategic priorities

 

Change in year

Delays in, or lack of, revenue payments

from the KRG could adversely impact

the Group’s ability to develop and invest

in the asset, to operate efficiently and

to make necessary working capital

payments.

Irregular receipts of revenue payments

may damage investor confidence in the

Group and the region and make any

fundraising difficult.

Changes in the terms of the Crude

Oil Sales Agreement may have an

unfavourable effect on revenue.

Recently payment terms have slipped

from the contractual 60 days per the

Crude Oil Sales Agreement to around

90 days.

The Group continues to monitor the political situation

in the Kurdistan Region of Iraq and maintains dialogue

and relations with the relevant national and regional

authorities.

The Group has maintained accurate records of liftings

and applies robust assumptions when estimating

historic revenue arrears. The Group’s position is

regularly communicated to the MNR.

Export oil sales quantities are currently agreed by

three parties (including an independent pipeline

operator) to reduce uncertainty regarding delivery

volumes.

The Crude Oil Sales Agreement between the

Group and the MNR provides for oil sales payments

according to revenue entitlement and is renewed on a

monthly basis. The Company is pursuing with the MNR

a longer-term contractual arrangement.

The KRG has proposed a mechanism to repay

outstanding arrears of $73.3 million relating to

November 2019 to February 2020 invoices.

Theoutstanding balance is $21.9 million net

toGKPat29March 2022.

Commodity prices

Risk owner:

CFO

A material decline in oil prices may

adversely affect the Group’s cash flows,

asset valuations, production operations

or result in delays to the Shaikan

development.

Low oil prices may adversely impact

the KRG’s ability to meet its payment

obligations towards the region’s

producers.

Link to strategic priorities

 

Change in year

The Group’s revenues, profitability

and future rate of growth will depend

substantially on prevailing oil prices,

which can be volatile and subject to

fluctuation.

A sustained low oil price environment

would have an adverse effect on the

Group’s liquidity and ability to develop

the asset. In addition, it may lead to a

reduction in the Group’s commercial

reserves and an impairment of its asset.

The Group monitors and, where possible, reduces

costs while maintaining safe operations.

The Group’s cash forecast is constantly monitored

and it maintains surplus cash to manage short-term

uncertainty.

In establishing the annual work programme and

budget, the Group considers a range of forward oil

curves to assess the potential impact on cash flows

and liquidity. Commodity prices are monitored on an

ongoing basis.

While a hedging programme is not currently in place,

the Board considers hedging on an ongoing basis,

taking into account macro-economic and corporate

considerations.

Governance

Strategic report Financials

56 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Viability statement

Stress test scenarios

1. Low oil price environment

2. Oil revenue

paymentinterruptions

3. Delays to the development

programme

4. Decreasing reservoir

productivity

5. Impacts of climate change

6. Inability to access

debtmarket

7. Inability to access

exportpipeline

Downside

assumptions

Mitigating actions Reference to

principal risks

anduncertainties

(1)

• Brent price reduction

to $50/bbl flat in 2023

onwards, to reflect

the potential impact

of meetingthe Paris

Agreement targets

• Revenue receipts

interruptions

• Reduced production

• Cost increases

• Introduction of a carbon tax

• Repayment of $100 million

Notes

• Limited pipeline access

(1) Principal risks which were not specifically modelled were either considered not likely to have an impact within the viability period or their financial effect was

covered within the overall downside economic risks implicit within the stress testing.

• Political, social and

economic instability

• Disputes regarding title or

exploration and production

rights

• Export route availability

• Risk of economic sanctions

impacting Group

• Oil revenue payment

mechanism

• Stakeholder misalignment

• Climate change and

sustainability

• Gas flaring

• Commodity prices

• Global pandemic

• Field delivery risk

• Reserves

• Liquidity and funding

capability

In accordance with the UK Corporate Governance Code, the Directors

have carefully assessed the Group’s viability and prospects over a

longer period than the twelve months required by the going concern

provision. The Board assesses the business over a number of time

horizons for different reasons, including the following:

a) annual Corporate Budget (i.e. 2022);

b) medium-term Corporate Budget; and

c) life-of-field plan used to produce an internal view of the value of

theCompany.

The Board concluded that a three-year period most appropriately

reflects the underlying prospects and viability of the Group for the

following reasons:

a) it is aligned with the Group’s strategic planning cycle;

b) it is expected to be the peak investment period under the draft FDP;

and

c) should the risks and uncertainties identified by the Group on pages

46 to 55 have an impact on the Group, it is reasonable to believe that

they will occur within this period.

Notwithstanding, the Group will continue to monitor the business over

all time horizons noted above.

The Directors’ viability assessment has been made with reference to

the Group’s strategy and business model, as detailed on pages 18 to21,

and to the risks, uncertainties and available mitigating action plans, as

detailed on pages 46 to 55.

The Group conducted an annual planning process which consisted

of the review of the Group’s strategy and performance, preparation

of a work plan and budget and review of risks, uncertainties and

opportunities over the three-year assessment period.

The Directors reviewed the Group’s cash flow projections which were

prepared using the following base assumptions:

• average Brent price of $81/bbl in 2022 and $55/bbl thereafter;

• cost assumptions in line with the draft FDP;

• production profiles in line with the draft FDP;

• maintain current level of debt; and

• regular revenue receipts.

The assessment demonstrated that the Group is in a strong financial

position, with a significant cash balance and ability to meet liabilities as

they fall due.

Further, the Directors have considered the financial and operational

impact of severe but plausible scenarios that could threaten GKP’s

viability. This was done through modelling the individual and combined

effects of various risks and uncertainties in order to establish the

Group’s ability to meet its working capital requirements. Additionally,

the Directors considered possible mitigating actions. The modelled

stress scenarios and potential mitigating actions considered are

asfollows:

• Deferrals and reductions

incapital expenditure

• Further optimisation of the

development programme

• Further rationalisation of

the operational cost base

• Oil export via trucking

• Dividend policy adjustment

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 57

In February 2022, a majority decision of the Iraqi Supreme Court

ruled that the Kurdistan Region of Iraq Oil and Gas Law (“KROGL”)

was unconstitutional and provides that the Iraqi Ministry of Oil may

pursue annulment of Production Sharing Contracts issued by the

Kurdish Regional Government (“KRG”). The KRG responded that

“itwill take all constitutional, legal, and judicial measures to protect

andpreserve all contracts made in the oil and gas sector”. While the

Iraqi government has disputed the validity of the PSCs and the ruling

has not to date impacted our business, itis not possible to determine

potential future implications. The Group will continue to engage with

KRG officials on this matter and will react as any implications of the

ruling becomeclearer.

Based upon the Directors’ robust assessment of the principal risks

facing the Group, the stress test scenarios and possible mitigating

actions, as described above, the Directors have a reasonable

expectation that the Group will be able to continue to operate

and meetits liabilities as they fall due over the three-year viability

assessment period. In the event the stress test scenarios assumptions

are more severe than what the Directors reasonably considered as

severe but plausible, including potential adverse implications of the

Federal Iraqi Supreme Court ruling, significant changes to the Group’s

operational and development plans, including a further curtailment

of activities and reductions in staff, amongst other things, would be

required and there could be an impact on the Group’s viability.

Governance

Strategic report Financials

58 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Board of Directors

Appointed November 2017

Skills and experience

Jaap Huijskes was appointed Non-Executive Chairman of Gulf

Keystone in April 2018, having been a Non-Executive Director since

November 2017.

Jaap has worked in the upstream oil and gas sector for nearly

30years. He started his career with Shell and worked in a variety of

project engineering and other roles around the world. Jaap’s last

role with Shell was as Project Director for the Sakhalin II project,

followed by a short period at head office as Executive Vice

President for all of Shell’s upstream projects. Jaap left Shell to join

OMV, as their board member responsible for all upstream activities.

OMV’s upstream activities at the time included significant

exploration activities in the Kurdistan Region of Iraq.

Jaap is currently Non-Executive Chairman at Energie Beheer

Nederland.

Appointed January 2020

Skills and experience

Ian Weatherdon joined Gulf Keystone in January 2020 as

ChiefFinancial Officer.

Ian has over 30 years’ experience in the international oil and gas

industry. Prior to joining GKP, he was CFO of Sino Gas & Energy

Holdings, an energy company focused on developing natural gas

assets in China. Previously, he held various executive roles at

Talisman Energy Inc., the Canadian exploration and production

company, which was acquired by Repsol, including: Vice President

of Finance & Planning for the Asia-Pacific region, CFO of Equión

Energía Limited, a Colombian joint venture between Talisman and

Ecopetrol SA, and Vice President of Investor Relations.

Ian has a B. Comm from the University of Calgary and is a Canadian

Chartered Accountant.

Appointed January 2021

Skills and experience

Jon Harris joined Gulf Keystone in January 2021 as Chief Executive

Officer.

Jon has over 30 years’ experience in the oil and gas industry

andjoined GKP from SASOL Limited, an integrated energy and

chemicals company based in South Africa where he was Executive

Vice President, Upstream. Prior to this, he spent 25 years with BG

Group in various international roles, including Executive Vice

President Technical and General Manager Production Operations,

as well as senior management assignments in the United States,

Trinidad and Tobago and Egypt.

Jon received a Masters of Engineering from the University of

Leeds,UK.

Appointed July 2018

Skills and experience

Martin Angle was appointed as Deputy Chairman in June 2019

having been Senior Independent Non-Executive Director since

joining the Board in July 2018.

Martin has had a distinguished executive career holding senior

positions in investment banking, industry and private equity.

He has served as a Non-Executive Director on a number of Boards

both in the UK and overseas including Pennon Group, where he

chaired the Remuneration Committee, Savills plc (Senior

Independent Director), National Exhibition Group (Chairman)

andDubai International Capital.

Martin is currently Deputy Chairman and Senior Independent

Director of Spire Healthcare plc, a Non-Executive Director of

OceanBiomedical Inc. (USA) and is a Hon. Professor in the College

of Social Sciences and International Studies, University of Exeter.

He is a Chartered Accountant and holds a BSc (Hons) in Physics

from the University of Warwick.

Jaap Huijskes

Non-Executive Chairman

Ian Weatherdon

Chief Financial Officer

Jon Harris

Chief Executive Officer

Martin Angle

Deputy Chairman and

SeniorIndependent Director

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 59

Appointed July 2020

Skills and experience

Garrett Soden was re-appointed as a Non-Executive Director of

Gulf Keystone in July 2020. He is a shareholder representative of

Lansdowne Partners Austria GmbH and thus is deemed

non-independent.

Garrett has worked with the Lundin Group for more than a decade

and has extensive experience as a senior executive and board

member of various public companies in the natural resources

sector. He is currently President and CEO of Africa Energy Corp.,

aCanadian oil and gas exploration company focused on SouthAfrica.

He is also a Non-Executive Director of Panoro Energy ASA.

Garrett holds a BSc honours degree from the London School of

Economics and an MBA from Columbia Business School.

Appointed October 2018

Skills and experience

Kimberley Wood was appointed as a Non-Executive Director

ofGulf Keystone in October 2018.

Kimberley is a legal professional with 20 years’ experience and a

specialist in the energy sector. She was Head of Oil and Gas for

Europe and Middle East at Norton Rose Fulbright LLP and remains

a Senior Consultant for the firm. She is included in Who’s Who Legal

Energy 2021 and as an expert in Energy and Natural Resources in

Women in Business Law, 2021. Kimberley is also the European

Regional Forum Liaison Officer for the Oil & Gas Law Committee

ofthe International Bar Association (“IBA”).

Kimberley is also a Non-Executive Director of Energean plc,

AfricaOil Corp., and Valeura Energy Inc.

Appointed October 2016

Skills and experience

David Thomas was appointed as a Non-Executive Director of

Gulf Keystone in October 2016.

David is an experienced oil and gas professional with 40 years

intheindustry. He started his career as a Petroleum Engineer

working for Conoco in the North Sea and Dubai. Subsequently,

hejoined Lasmo where he became Group GM Operations and,

following the company’s acquisition, held three international

regional Vice President roles with Eni. David’s subsequent Board

directorships have included positions as President and COO of

Centurion Energy and CEO of Melrose Resources. In 2015 he

briefly served on a caretaker Board at Afren and is currently the

CEO of Cheiron in Egypt.

David has a BSc in Mining Engineering from Nottingham University

and an MSc in Petroleum Engineering from Imperial College.

Kimberley Wood

Non-Executive Director

David Thomas

Non-Executive Director

Garrett Soden

Non-Executive Director

Governance

Strategic report Financials

60 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Corporate

governance report

Jaap Huijskes

Non-Executive Chairman

Our commitment to the

highest standards of

corporate governance,

ethics and integrity are

essential in delivering

sustainable success

for our stakeholders.

Dear Shareholder,

The Board recognises that a continual

commitment to the highest standards of

corporate governance, ethics and integrity

is essential in delivering sustainable success

for our stakeholders. Strong corporate

governance is core to our culture, which

ultimately benefits the long-term interests of

all of our stakeholders. In addition to having

a comprehensive governance and policy

framework in place, the highest priority is given

to fostering a culture of safety, governance,

sustainability, environmental, social and

ethical considerations, underpinned by the

Company’s corevalues.

In promoting the long-term sustainable

success of the Company, the Board

encourages a transparent and open culture

to ensure effective contributions from all

Directors, management and the wider

workforce. Communication is key to this and

despite the logistical challenges associated

with COVID-19 in 2020 and 2021, we have

sought to maintain and enhance this aspect

of our culture as we interact with our staff

and other stakeholders. In 2021, the Board

undertook an internal evaluation of its

performance and governance. Thiscovered

a number of aspects of the Board’s role,

performance and governance, and the

general conclusion was positive, with only

minor amendments to existing practices

proposed. A further, externally facilitated

evaluation was completed in early 2022.

Thishighlighted some enhancements which

could be made as the Company evolves.

These are more fully described in the report

ofthe Nomination Committee.

The Company maintains an absolute

zero-tolerance approach to bribery and

corruption. It has in place a number of policies

and procedures to maintain this, including

regular training. This runs alongside the

Company’s Whistleblowing Policy, Information

Handling Policy, Share Dealing Code and

Diversity Policy. The Board considers the

robustness and appropriateness of such

policies and procedures, ensuring that

operating with integrity remains a top priority,

and will review and amend these policies

as appropriate in the spirit of continuous

enhancement.

Jaap Huijskes

Non-Executive Chairman

29 March 2022

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 61

Introduction

It is the duty of the Board of Directors that

it must act in a manner, in good faith, which

will be most likely to promote the success of

the Company for the benefit of its members

as a whole, and taking account of the likely

consequences of any decision in the long

term. The maintenance of high standards

of governance is integral to this, and the

Board sets the tone for the highest ethical

compliance. The Board aims to create a

culture which demands the same commitment

and performance from all employees and

contractors in all business activities. The

governance processes applied across the

Group are set out below and in the individual

Committee reports.

The Board accepts responsibility for

preparing the annual report and accounts

which it considers, taken as a whole, are fair,

balanced and understandable, and provide

the information necessary for shareholders

to assess the Company’s performance,

business model and strategy.

Compliance with the 2018 UK

Corporate Governance Code

(the“Code”)

In respect of the year ended 31 December

2021, Gulf Keystone Petroleum Limited, a

Bermuda registered company, voluntarily

adhered to the Code (available from

www.frc.org.uk). The Board recognises the

value of the Code to the business and it will

take all necessary measures it can to comply.

In line with our commitment to maintaining

best practices of corporate governance, the

Board confirms that Gulf Keystone Petroleum

Limited applied the principles and complied

with all of the provisions of the 2018 Code

throughout the year save as disclosed in this

Corporate governance report.

Board leadership and purpose

The Board is accountable to shareholders

and other stakeholders for the creation of a

sustainable, long-term business. The Board

oversees a robust governance framework

with clear procedures, lines of responsibility

and delegated authorities to ensure that

the Company’s strategy and values are

implemented, and key risks assessed and

managed effectively. The Board also engages

with the Company’s stakeholders on an

ongoing basis to ensure their long-term

interests are understood and preserved.

Thisincludes investors, the host government

and local communities, staff and contractors,

business partners and suppliers. It is

recognised that the nature of the Company’s

business requires specific expertise at Board

level and this is regularly reviewed to ensure it

is appropriate.

Key responsibilities of the Board include:

• health and safety;

• ethical compliance;

• environmental and social governance;

• strategy development and objectives;

• operational and technical review;

• financial performance, structure and capital

management;

• corporate planning and KPIs;

• stakeholder and workforce engagement;

• people, culture and values;

• risk management;

• Board development and effectiveness; and

• governance and regulatory compliance.

When considering these responsibilities, the

Chairman encourages an open, respectful

and collaborative working environment

where all Directors voice their opinions and

contribute to constructive debate.

Division of responsibilities

The Board is led by the Chairman, who

promotes a culture of openness and debate

and is responsible for the leadership of the

Board and its overall effectiveness. The

Chairman also facilitates constructive Board

relations and the effective contribution of

all Non-Executive and Executive Directors,

and ensures that Directors receive accurate,

timely and clear information. The Chairman

is supported on the Board by three

independent Non-Executive Directors, one

of whom is the Senior Independent Director,

a further Non-Executive Director who is a

non-independent shareholder representative,

and the CEO and CFO. The CEO is

responsible for operational management,

and the development and implementation

of strategy in conjunction with the senior

leadership team. The Chief Legal Officer

attends Board and Committee meetings as

Secretary to ensure corporate governance

and regulatory compliance.

The Company has a formal register of

“Matters Reserved for the Board” which is

reviewed and approved on a regular basis, and

there is a clear separation of responsibilities

between the Board and management.

Somematters may be delegated to the Board

Committees: the Safety and Sustainability

Committee; the Technical Committee; the

Audit and Risk Committee; the Remuneration

Committee; and the Nomination Committee.

Each Board Committee has terms of

reference in place which are reviewed and

approved on a regular basis. The Board is

satisfied that the Committees have sufficient

time and resources to carry out their duties

effectively.

The Executive Committee comprises the

CEO, CFO, Chief Operations Officer, Chief

Commercial Officer, Chief Legal Officer and

Chief HR Officer. They meet on a regular

basis, at least weekly, to discuss significant

management matters. The senior leadership

team, comprising functional heads of

departments and the Executive Committee,

also meets on a regular basis to discuss

management matters.

Governance

Strategic report Financials

62 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Corporate governance report continued

Composition, succession

andevaluation

The Nomination Committee is primarily

responsible for reviewing the composition

and balance of the Board, and for

recommending any new appointments to the

Board and Committees. Appointments and

succession planning are based on merit and

in accordance with the Company’s Diversity

Policy. During the year, one new appointment

to the Board was made: JonHarris was

appointed as CEO in succession to

JónFerrier.

All Directors are subject to annual re-election

by shareholders.

A formal, externally facilitated Board and

Committee evaluation takes place at least

every three years, the last one being in 2022.

This is more fully described within the report

of the Nomination Committee.

Audit, risk and internal control

The Audit and Risk Committee is primarily

responsible for ensuring that the financial

performance of the Company is measured

and reported, in conjunction with the

Company’s auditors. This Committee will also

review and report on the risk identification,

mitigation and management, identifying

specific “deep dives” on particular risks,

as appropriate. It is recognised that risk

management is of crucial importance to a

company of the profile of Gulf Keystone.

Therisk process is therefore placed as an

integral part of the Company’s strategy

formulation and execution.

The Board acknowledges that it must have

in place a sound system of internal control

to safeguard the assets and value of the

business and to ensure reliability of financial

information. In this respect, a regular review is

undertaken by the Audit and Risk Committee

to consider the adequacy of and whether

enhancements to current internal control

systems are necessary.

Remuneration

The Remuneration Committee is primarily

responsible for devising and monitoring the

Company’s remuneration policies to ensure

that they are consistent with corporate

governance guidelines and the Company’s

objectives, and it is assisted by external

remuneration consultants, Mercer Kepler.

Adetailed report of all remuneration matters

is contained in the Directors’ remuneration

report. The Company’s Remuneration Policy

was formally approved by shareholders at

the Annual General Meeting in 2019 and will

further be considered at the AGM in 2022.

Adherence with the

UKCorporateGovernance Code

Although the Company is not subject to

the UK Corporate Governance Code 2018

(“the Code”) on account of its Bermudan

incorporation and standard listing on the

London Stock Exchange, the Company has

voluntarily agreed to adhere to the Code so

far as practicable. We firmly believe that this

voluntary adherence establishes a solid basis

from which to conduct Board and managerial

decision-making acting in the best interests

of the Company and its stakeholders. A copy

of the Code is available on the website of the

Financial Reporting Council (“FRC”) on

www.frc.org.uk.

As at the date of this report, the Board

considers that it and the Company have

complied with the principles and provisions

of the Code, except for the following matters,

using the provision references set out in the

July 2018 version of the Code:

Provision 5 – There is no formal workforce

engagement scheme in place. This has been

reviewed by the Board in conjunction with its

advisers, Mercer Kepler. It was concluded

that GKP had a very transparent culture with

regular staff engagement initiatives and an

open reporting line which encouraged staff

participation. Taking this, and the size and

nature of the business into account, it was

considered that it was an unnecessary step

to formalise this into a formal workforce

engagement scheme. The Board will keep this

under review, taking into account GKP’s size

and legal and regulatory requirements in its

locations.

Provision 36 – The policy for

post-employment shareholding requirements

is being put for consideration by shareholders

within the Remuneration Policy at the

2022AGM.

The information contained in this report, and

elsewhere in this annual report and accounts,

describes the manner in which Gulf Keystone

has applied the main principles of governance

set out in the Code and complied with

individual Code provisions.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 63

The Board

The composition of the Board is a key constituent of the Company’s corporate governance. As an international oil company, Gulf Keystone’s

business carries a diverse range of risks and it is important that these are covered by the skills and knowledge of the Board. For each Board

appointment a number of factors will be considered, including skills, experience, diversity and ability. This is replicated in senior management

positions and in the Company’s succession planning.

The Company’s Byelaws were amended on 17 July 2014 to provide for annual re-election of the Directors. Accordingly, all of the Directors stand for

re-election by shareholders at every AGM.

The following Board changes were made during 2021: Jon Harris was appointed CEO on 18 January 2021, replacing Jón Ferrier who retired on

31January 2021.

As at the date of this report, the Directors of the Company are:

Date of Date of last

Name Role appointment re-election

Jaap Huijskes Non-Executive Chairman 29 November 2017 18 June 2021

Jon Harris CEO 18 January 2021 18 June 2021

Ian Weatherdon CFO 13 January 2020 18 June 2021

David Thomas Non-Executive Director 13 October 2016 18 June 2021

Martin Angle Deputy Chairman and 16 July 2018 18 June 2021

Senior Independent Director

Kimberley Wood Non-Executive Director 1 October 2018 18 June 2021

Garrett Soden Non-Executive Director 14 July 2020 18 June 2021

Board composition,

independence and diversity

As at the date of this report, the Board is

comprised of two Executive Directors and

five Non-Executive Directors (including

the Chairman). In accordance with Code

Provision 9, the Chairman was independent

on appointment. The Company regards

the other Non-Executive Directors as

independent according to Code Provision 10,

save for Garrett Soden who is representing

funds managed by Lansdowne Partners

Austria GmbH.

The independence of each of the

Non-Executive Directors is considered

upon appointment, at each Board

evaluation and at any other time a Director’s

circumstances change in a way that warrants

reconsideration, and by their ongoing actions.

The Board considers whether the

Non-Executive Director is independent

of management and any business or

other relationship that could materially

interfere with the exercise of objective and

independent judgement by the Director

or the Director’s ability to act in the best

interests of all stakeholders. In particular, the

Board has considered any positions which

the Non-Executive Director holds, or held,

in companies with which Gulf Keystone

has commercial relationships. None of the

Non-Executive Directors participate in

share compensation schemes, including the

Company Share Options Plan and Executive

Bonus Schemes.

The Company’s Executive and Non-Executive

Directors are recruited from a variety of

backgrounds and bring different experience

and perspectives, ensuring that the

Company’s Directors have capacity and

capability to meet the needs of the business.

The Company places high importance on

having diverse Board composition to enable

robust consideration and challenge of

the strategies proposed by the Executive

Directors. The balance of skill diversity of the

Board is specifically considered at the annual

Board evaluation and by the Nomination

Committee.

The experience provided by the Board covers,

inter alia, financial/capital markets, legal,

commercial, technical (including petroleum

engineering, geology, operations and HSE)

and project management. The Company

actively considers Board composition on

a regular basis to ensure the Board has the

necessary balance of skills, experience,

knowledge, independence and diversity to

discharge its duties.

Board appointments are undertaken through

a formal, rigorous and transparent procedure

run by external search consultants.

Jon Harris was appointed to the Board

in January 2021 following an external

recruitment process managed by Korn Ferry

which was based on merit and objective

criteria including diversity. Korn Ferry has no

other connection with the Company or any of

its Directors.

The Company has in place a Diversity

Policy which seeks to ensure that there

is no discrimination within the Company

on the basis of gender, sexual orientation,

ethnicity, age, disability or other minority.

Itisrecognised that diversity is a key element

for the Board, and that diversity extends to a

number of different facets. The Company is

currently looking to enhance the diversity of its

Board through the recruitment of an additional

Non-Executive Director. Theoperation of

this is monitored on a continual basis and a

report is prepared for each scheduled Board

meeting which sets out the breakdown of staff

according to parameters. This includes the

gender balance of those considered to be

senior management. The implementation of

the Diversity Policy has resulted in enhanced

awareness throughout the organisation of the

benefits of a diverse workforce. The Diversity

Policy will be strictly adhered to in the

recruitment process for any Board position.

The current gender balance of the Board is

sixmale and one female.

Governance

Strategic report Financials

64 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Corporate governance report continued

Board induction

New Directors receive a full and appropriate

induction on joining the Board. This

includes meetings with functional heads

of department, other Board members

and the Company’s principal advisers as

appropriate. A comprehensive induction pack

is also prepared which includes historical

Board and Committee papers and minutes,

Company compliance policies (for example

the Anti-Bribery and Corruption Policy),

organisational structure charts, relevant legal,

insurance and regulatory information.

The Company will also provide training on a

periodic basis to the Directors on relevant

matters. All Directors undergo anti-bribery

and corruption, and also compliance, training

on the same cycle as staff, with the latest such

cycle having been completed in March 2022.

The role of the Board

The Board leads the Company in the delivery

of its strategic goals, generating long-term

sustainable success whilst putting in place

and respecting the necessary controls within

which the Company must operate to ensure

appropriate assessment and management

of risk and respect for the environment. The

Board establishes the Company’s purpose,

values and strategy, and ensures that these

are aligned with its culture.

The Board has a formal schedule of matters

specifically reserved to it for decision-making

on certain aspects of the business which is

approved on an annual basis. They cover the

key strategic, financial and operational issues

facing the Group and include:

• the Group’s strategic aims and objectives;

• annual operating and capital expenditure

budgets;

• changes to the Group’s capital,

management or control structures;

• dividend policy and dividend

recommendation;

• half-yearly reports, final results, annual

report and accounts;

• the overall system of internal control and

risk management;

• major capital projects, corporate actions

and investment;

• acquisitions and disposals; and

• changes to the structure, size and

composition of the Board.

A Delegation of Authority is reviewed by the

Board on a regular basis to ensure there are

appropriate controls in place for management

decisions. In addition, terms of reference

are set and approved for each of the Board

sub-committees; these are available on

the Company’s website. The Board and

its Committees have access to the advice

and services of the Chief Legal Officer and

Company Secretary and, if necessary, the

Board and its individual Directors have the

ability to seek external expert advice at the

expense of the Company.

Board and Committee meetings are attended

by members of the senior management

team upon invitation. At each Board meeting

any attendees are requested to declare any

conflicts of interest they may have, including

in relation to significant shareholdings. The

Board will ensure that the influence of third

parties will not compromise or override

independent judgement.

Division of responsibilities

between Non-Executive Chairman

and Chief Executive Officer

The Company maintains a clear division of

responsibilities between the independent

Non-Executive Chairman and the Chief

Executive Officer. The Non-Executive

Chairman is responsible for leading the

Board in an ethical manner and for guiding

the Directors in the development of the

Company’s strategy. The Non-Executive

Chairman chairs the Board meetings and

oversees implementation of the Board’s

decisions. On occasions, the Non-Executive

Chairman will meet with key shareholders

and stakeholders to articulate the Company’s

strategy.

In running the Board, the Non-Executive

Chairman is responsible for creating an

environment that facilitates robust and

constructive challenge whilst promoting a

culture of openness and debate. In creating

this environment, the Non-Executive

Chairman encourages open communications

and aims to ensure that the Non-Executive

Directors’ challenges and suggestions are

considered dispassionately and on their

merits. The Non-Executive Chairman is

responsible for setting the Board’s agenda

and ensuring that adequate time is available

for discussion of all agenda items including

strategic issues.

As part of the Board evaluation undertaken

in early 2022, the Board evaluated the

Non-Executive Chairman’s external

commitments. The Board is satisfied that the

Non-Executive Chairman has committed

sufficient time to his duties in relation to the

Company.

The Chief Executive Officer is responsible

for the overall management of the business,

delivering successful achievement of the

Company’s KPIs and providing leadership

to the management team and staff whilst

communicating and fostering the underlying

culture and principles of the Company to all

staff and stakeholders.

The role of the Senior

IndependentDirector (“SID”)

Martin Angle was appointed as SID on

16July2018. The SID is responsible for

assisting the Non-Executive Chairman with

effective communications with shareholders

and is available to shareholders should

there be any concern which could not be

resolved through the normal channels of

the Non-Executive Chairman, Executive

Directors or the Investor Relations team.

TheSID is available to meet shareholders

if they have specific concerns. The SID

also ensures that there is a clear division of

responsibility between the Non-Executive

Chairman and Chief Executive Officer and,

as necessary, acts as a conduit between

the Board’s Non-Executive Directors and

Executive Directors. Martin Angle also acts

as Deputy Non-Executive Chairman of the

Board. The Board is satisfied that the SID

demonstrates complete independence in

therole.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 65

Board meetings and attendance

Board meetings are held on a regular basis and no decision of any consequence is made other than by the Directors. A total of nine scheduled

Board meetings were held during the year ended 31 December 2021. In addition to those scheduled meetings, the Board held a further seven

strategy review meetings. These meetings were attended by all Directors and, if appropriate, senior management, with discussions being minuted.

No formal decisions were made at these meetings.

The Directors’ attendance record at the scheduled Board meetings and Board Committee meetings for the year ended 31 December 2021 is

shown in the table below. For Board and Board Committee meetings, attendance is expressed as the number of meetings that each Director

attended followed by the number of meetings held for the period she/he was a Director during the year. The number of meetings attended by

eachDirector is shown out of the total number she/he was eligible to attend.

Audit Safety and

Full Board and Risk Remuneration Nomination Sustainability Technical

meetings Committee Committee Committee Committee Committee

Jaap Huijskes 9/9 3/3 4/4 4/4

Martin Angle 9/9 8/8 4/4 3/3

Garrett Soden

(1)

9/9 3/3

David Thomas 9/9 4/4 4/4 4/4

Kimberley Wood 9/9 8/8 4/4 3/3 4/4

Jón Ferrier

(2)

2/2

Jon Harris

(3)

8/8 4/4 4/4

Ian Weatherdon 9/9

Stuart Catterall

(4)

4/4 4/4

Gabriel Papineau-Legris 4/4

(1) Resigned from the Audit and Risk Committee on 9 June 2021.

(2) Resigned on 31 January 2021.

(3) Appointed to the Board on 18 January 2021.

(4) Resigned from the Safety and Sustainability Committee and the Technical Committee on 18 February 2022 upon his retirement.

The Board will generally hold scheduled meetings over two days. In advance of the Board meeting, on the first day, meetings of the Audit and Risk,

Nomination and Remuneration Committees may be held as appropriate. Meetings of the Technical Committee and Safety and Sustainability

Committee will generally be held approximately one to two weeks in advance of the Board meeting. The formal agenda for the Board meeting

willbe determined by the Non-Executive Chairman following consultation with the Chief Executive Officer and the Chief Legal Officer.

Current Board Committees

Audit and Risk

Safety and Sustainability

Martin Angle (Chair)

Kimberley Wood

David Thomas (Chair)

Jaap Huijskes

Kimberley Wood

Jon Harris

Kimberley Wood (Chair)

David Thomas

Martin Angle

David Thomas (Chair)

Jaap Huijskes

Jon Harris

Gabriel Papineau-Legris

Jaap Huijskes (Chair)

Kimberley Wood

Martin Angle

Remuneration

Technical

Nomination

Governance

Strategic report Financials

66 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Corporate governance report continued

The Board Committees

The Company has five Board Committees: the

Audit and Risk Committee, the Remuneration

Committee, the Nomination Committee, the

Safety and Sustainability Committee and the

Technical Committee. Each Board Committee

has specific written terms of reference issued

by the Board and adopted by the relevant

Committee, updated on a regular basis and

published on the Company’s website.

All Committee Chairs report orally on the

proceedings of their Committees at the

meetings of the Board. Whereappropriate, the

Committee Chairs also makerecommendations

to the Board in accordance with their relevant

terms of reference. In addition, the minutes

and papers of the Committee meetings are

distributed to all Board members in advance

ofCommittee meetings.

To ensure Directors are kept up to date

on developing issues and to support the

overall effectiveness of the Board and its

Committees, the Non-Executive Chairman

and Committee Chairs communicate regularly

with the Chief Executive Officer and other

executive management.

Alasdair Robinson acts as Company

Secretary to each Committee.

There were a number of changes to

the Board and Committee composition

during 2021. JonHarris was appointed

to the Board on 18 January 2021 as Chief

Executive Officer, replacing JónFerrier

whoresigned on 31January2021.

JonHarrisreplaced Mr Ferrier as a

member of the Technical Committee and

the Safety and Sustainability Committee

on 26January2021.On9June2021,

GarrettSoden resigned as a member of the

Audit and Risk Committee. Stuart Catterall

resigned from the Safety and Sustainability

Committee and the Technical Committee

on18February2022 upon his retirement.

The key governance mandates of the Board’s

five main Committees are shown on the

following pages.

Audit and Risk Committee

As at 31 December 2021, the Audit and Risk

Committee comprised two Non-Executive

Directors, both of whom are considered to

be independent. The members were: Martin

Angle (Chair) and Kimberley Wood.

The Committee members have been selected

to provide the wide range of financial and

commercial expertise necessary to fulfil the

Committee’s duties. The Board considers

each Committee member’s experience to

be recent and relevant for the purposes of

the Code; in particular, the Chair possesses

relevant financial expertise. This Committee

meets at least three times per year. During

the year ended 31 December 2021, the

Committee met eight times.

The terms of reference of the Audit and Risk

Committee are documented and agreed by

the Board and are available in the corporate

governance section of Gulf Keystone’s

corporate website: www.gulfkeystone.com.

The terms of reference are reviewed regularly

and were last updated in January 2022. The

Audit and Risk Committee report is set out on

pages 73 to 76.

Nomination Committee

As at 31 December 2021, the Nomination

Committee comprised three Non-Executive

Directors, who are considered to be

independent, including the Non-Executive

Chairman of the Board. The members were:

Jaap Huijskes (Chair), Kimberley Wood and

Martin Angle. There were no changes to the

composition of the Committee in 2021.

The Nomination Committee met on three

occasions during the year on a formal basis.

The terms of reference of the Nomination

Committee are documented and agreed by

the Board and are available in the corporate

governance section of Gulf Keystone’s

corporate website: www.gulfkeystone.com.

The terms of reference are reviewed regularly

and were last updated in December 2021.

The Nomination Committee report is set out

on pages 70 to 72.

Remuneration Committee

As at 31 December 2021, the Remuneration

Committee comprised three Non-Executive

Directors: Kimberley Wood (Chair),

DavidThomas and Martin Angle. There

were no changes to the composition of the

Committee in 2021.

This Committee, which meets at least

twice per year, is responsible for making

recommendations to the Board concerning

the compensation of the Executive Directors

and the Non-Executive Chairman, as well as

the level and structure of remuneration for

senior management.

The Committee is also responsible for the

determination of the Group’s Remuneration

Policy. The Remuneration Committee met on

four occasions during the year.

The terms of reference for the Remuneration

Committee are available in the corporate

governance section of Gulf Keystone’s

corporate website: www.gulfkeystone.com.

The terms of reference are reviewed regularly

and were last updated in March 2021.

The Remuneration Committee report is set

out on pages 81 to 98.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 67

Safety and Sustainability Committee

As at 31 December 2021, the Safety and

Sustainability Committee comprised three

Non-Executive Directors, one Executive

Director and the Chief Operating Officer,

being David Thomas (Chair), Jaap Huijskes,

Kimberley Wood, Jon Harris (CEO) and

Stuart Catterall (COO). On 26 January

2021, JonHarris replaced Jón Ferrier on the

Committee. Stuart Catterall resigned from the

Committee on 18 February 2022.

The Committee was formed in June 2020 in

succession to the HSE and CSR Committee.

It aims to meet at least four times a year and

met four times during 2021. The primary

function of the Committee is to oversee

the development of the Group’s policies

and guidelines for the management of ESG

including evaluating HSE and social risks,

evaluate the effectiveness of these policies

and their ability to ensure compliance with

applicable legal and regulatory requirements,

overseeing the quality and integrity of

reporting to external stakeholders concerning

safety and sustainability, and reviewing the

results of any independent audits of the

Group’s performance in regard to safety and

sustainability making recommendations,

where appropriate, to the Board concerning

the same. The Committee also reviews

ESG and safety performance and examines

specific safety issues as requested by the

Board, and will also review all governance

matters which are relevant to the work of the

Committee. The Committee provides visible

leadership on HSE matters through site visits

to the production facilities and drilling sites as

well as aiming to hold a Committee meeting

once a year in Erbil at the field facilities,

although due to restrictions on account of

COVID-19, this was not possible in 2021.

The terms of reference of the Safety and

Sustainability Committee are documented

and agreed by the Board and are available

in the corporate governance section of

GulfKeystone’s corporate website:

www.gulfkeystone.com. The terms of

reference are reviewed regularly and were

lastupdated in March 2022.

The Safety and Sustainability Committee

report is set out on pages 77 and 78.

Technical Committee

As at 31 December 2021, the Technical

Committee comprised two Non-Executive

Directors, one Executive Director, the Chief

Operating Officer (“COO”) and the Chief

Commercial Officer (“CCO”), being David

Thomas (Chair), Jaap Huijskes, Jon Harris

(CEO), Stuart Catterall (COO) and Gabriel

Papineau-Legris (CCO). On 26 January

2021, Jon Harris replaced Jón Ferrier on the

Committee. Stuart Catterall resigned from the

Committee on 18 February 2022.

The Committee’s main remit is to support

the Company’s Shaikan development

planning and project execution activities.

TheCommittee also has the following

specificobjectives:

• provide assurance that development plans

are in line with the Company’s strategy and

have been optimised;

• review and approve Shaikan Field reserves

and resources estimates and revisions;

• ensure that the Company has the

appropriate resources and project

management systems in place to

successfully execute development projects

on time and within budget;

• provide the Board with assurance that

the key project execution risks have

been identified and that the required risk

management processes and mitigation

measures are in place;

• provide oversight, where appropriate, for

any material contract tendering exercises;

and

• review and recommend for executive

approval any information relating to the

Shaikan FDP and reserves and resources

estimates for public release.

The Committee met four times in 2021.

The terms of reference of the Technical

Committee are documented and agreed by

the Board and are available in the corporate

governance section of Gulf Keystone’s

corporate website: www.gulfkeystone.com.

The terms of reference are reviewed regularly

and were last updated in March 2021.

The Technical Committee report is set out on

pages 79 and 80.

Information and support

The Company is committed to supplying

the Board and its Committees with full

and timely information, including detailed

financial, operational and corporate

information, toenable Directors and

Committee members to discharge their

responsibilities. TheCommittees are provided

with sufficient resources to undertake their

duties. AllDirectors have access to the

advice of senior management and, where

appropriate, the services of other employees

and the Company Secretary and Chief Legal

Officer for all governance and regulatory

matters. Independent professional advice

is also available to Directors in appropriate

circumstances, at the Company’s expense.

Board members also keep up to date with

developments in relevant law, regulation

and best practice to maintain their skills

andknowledge.

Relevant analysis and reports are prepared

by management prior to all Board and

Committee meetings, allowing the Board

to effectively address all of the items on the

relevant meeting’s agenda. Documents and

reports are provided to the Board in a timely

manner allowing for sufficient time to review

the information prior to the meeting and raise

questions where necessary. Management

discusses the detail and format of Board

reports on an ongoing basis to ensure

the Board is appropriately informed of

allrelevantinformation.

Performance evaluation of the

Board and its Committees

Following the financial year end, the

Board undertook an externally facilitated

performance evaluation and governance

review in early 2022. This entailed detailed

consideration, analysis and discussion of the

results of the evaluation undertaken by Evalu8

Limited. A summary of this is included in the

report of the Nomination Committee.

Governance

Strategic report Financials

68 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Corporate governance report continued

Business ethics

The Company adopts a zero-tolerance

approach to bribery and corruption and

has adopted a number of measures

and procedures to ensure ongoing

compliance with relevant anti-bribery

laws.AnAnti-Bribery Policy is in place which

is regularly reviewed and updated by the

Board. This policy also includes provisions on

Conflicts of Interest and the Criminal Finances

Act. Training is undertaken on a regular

basis through both physical presentations

(in Kurdistan and the UK, where possible),

and online training courses. A number of

procedures underlie the Policy, including

the maintenance of registers covering, for

example, gifts and hospitality. The latest

compliance training cycle was completed

inMarch 2022.

An external whistleblowing service, Navex

Global, is maintained in order to provide

a mechanism whereby staff may make

anonymous reports if necessary, which

is designed to encourage staff to “speak

up”. Inthe event any reports are received

through this service, the matter is brought to

the attention of the Board and a full review is

undertaken on the allegations. The Board will

then determine whether there is a need for

a further independent investigation of such

matters and for follow-up action.

Workforce engagement

The Company has noted the provisions

contained in the Code with respect to

workforce engagement. In the context of

the size of the Company, the Board does not

intend to appoint either a Director from the

workforce or a designated Non-Executive

Director to ensure engagement with the

workforce. However, the Company does

run a system of regular “town hall” events

across its offices and production facilities

which enable an open forum for discussion

with its workforce. This matter is reviewed

on a regular basis by management and,

where appropriate, its advisers. The current

conclusion is that the Company is not of

a sufficiently complex nature to warrant

the need for additional levels of workforce

engagement processes.

Risk management and

internalcontrol

The Board acknowledges its responsibility

for establishing and monitoring the Group’s

systems of internal control. While the systems

of internal control cannot provide absolute

assurance against material misstatement

or loss, the Group’s systems are designed

to provide the Directors with reasonable

assurance that material emerging and

principal risks are identified on a timely

basisand dealt with appropriately. The Board

regularly reviews the effectiveness of the

systems of internal control and considers

the significant business risks and the control

environment. The Board is satisfied that

effective controls are in place and that

risks have been identified and mitigated

asappropriate.

The Group is subject to a variety of risks,

which derive from the nature of the oil and gas

exploration, development and production

business and relate to the countries in which

it conducts its activities. The key procedures

that have been established and which are

designed to provide effective control are

asfollows:

• regular meetings between executive

management and the Board to discuss

allissues affecting the Group;

• detailed analysis of risk reviews undertaken

at Audit and Risk Committee meetings

(strategic, financial, ESG, IT and cyber

risks) and Technical Committee meetings

(operational and project risks);

• a clearly defined framework for investment

appraisal with Board approval required as

appropriate;

• regular analysis and reporting on the

Company’s risk register; and

• reviews of the Company’s risk management

systems, controls and culture by external

advisers.

The Board also believes that the ability to

work in partnership with the host government

is a critical ingredient in managing risk

successfully.

The Directors have derived assurance over

the control environment from the following

internal and external controls during 2021:

• implementation of policies and procedures

for key business activities;

• an appropriate organisational structure;

• specific delegations of authority for all

financial and other transactions;

• segregation of duties where appropriate

and cost effective;

• management and financial reporting,

including KPIs;

• reports from the Group Audit and Risk,

Safety and Sustainability, and Technical

Committees; and

• reports from the Group’s external auditor

on matters identified during their audit.

The above procedures and controls have

been in place in respect of the Group for the

2021 accounting period and up to the date of

approval of the annual report and accounts.

There were no significant weaknesses or

material failings in the risk management and

internal control system identified in any of the

above reviews and reports. Further details on

the Company’s principal risks and procedures

in place and to how these are managed and

mitigated are contained on pages 46 to 55.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 69

Relations with investors and

stakeholders

Regular communications with the Company’s

institutional and retail equity investors,

as well as bondholders, are given high

priority by the Board. The Non-Executive

Chairman, Senior Independent Director, Chief

Executive Officer, Chief Financial Officer and

members of the Investor Relations team are

the Company’s principal spokespersons,

engaging with investors, analysts, the press

and other interested parties. Communication

is undertaken through site visits, shareholder

presentations, attendance and presentations

at industry conferences, one-on-one

meetings, conference calls and other

written and oral mediums. Throughout

2021, the Group held a number of investor

presentations which are available to view on

the Group’s website. It is recognised that 2021

was a difficult year for organising physical

meetings or site visits, and therefore many of

the investor interactions had to be carried out

through video conference calls, including the

Annual General Meeting.

The Company is committed to maintaining this

constructive dialogue with all its investors and

will continue to provide regular updates on

its operations and corporate developments.

The Company has an established practice

of issuing regulatory announcements on

the Group’s operations and/or any new

price-sensitive information. The Group’s

website, www.gulfkeystone.com, which

is regularly updated, contains a wide range

of information on the Group, including a

dedicated investor section where investors

can find the Company’s share price, financial

information, regulatory announcements,

investor presentations and corporate

webcasts with the Group’s management.

A list of the Company’s significant

shareholders as at the date of this report can

be found in the Directors’ report and on the

Group’s website, at www.gulfkeystone.com.

The Company will also seek to engage with

its wider stakeholders on a regular basis. This

includes, for example, the Ministry of Natural

Resources in Kurdistan, the Company’s joint

venture partner, MOL Group, residents local

to the Company’s operations, suppliers,

contractors and employees.

Information pursuant to

theTakeover Directive

The Company has provided the additional

information required by the Disclosure

and Transparency Rules of the UK Listing

Rules (and specifically the requirements of

DTR7.2.6 in respect of directors’ interests

in shares; appointment and replacement of

directors; powers of the directors; restrictions

on voting rights and rights regarding control of

the Company) in the Directors’ report.

Annual General Meeting

At the Company’s Annual General Meeting

(“AGM”) held on 18 June 2021, all resolutions

were successfully passed. However,

resolutions 2 and 6, being the re-election of

the Company’s Chairman and Chief Financial

Officer, failed to attain the support of 80% of

the shareholders who voted. Substantially

all the votes against resolutions 2 and 6

were from a single major shareholder.

Inaccordance with Provision 4 of the 2018

UK Corporate Governance Code, the Board

consulted with the single shareholder, and,

as part of this exercise, also consulted with

the Company’s other major shareholders.

Feedback received from the single

shareholder encompassed issues principally

related to the Company’s operational

progress, organisational structure and capital

allocation. The Company also received

feedback from other major shareholders,

all of which were supportive of resolutions 2

and 6. The Board has carefully considered

the issues and has addressed them, to the

extent possible or necessary. The Company

reported on this matter on 17 December 2021

in accordance with the Code and also stated

that the independent members of the Board

continued to hold every confidence in both

the Chairman and Chief Financial Officer,

recognising the value and contribution each

bring to the Company.

The 2022 AGM will be held on 24June2022.

The Notice of AGM accompanies this annual

report and accounts and sets out the business

to be considered at the meeting. The Board

uses the AGM to communicate with private

and institutional investors and welcomes their

participation. The 2022 AGMwill be held by

video conference. Boththe annual report and

accounts and Notice of AGM areavailable on

the Company’swebsite.

Jaap Huijskes

Non-Executive Chairman

29 March 2022

Governance

Strategic report Financials

70 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Nomination

Committee report

Jaap Huijskes

Non-Executive Chairman

Role

In accordance with its terms of reference, the

Nomination Committee (the “Committee”) is

a committee of the Board of Directors of the

Company which is primarily responsible for:

• reviewing the structure, size and

composition of the Board and

recommending changes;

• considering and recommending

succession planning strategy for Executive

and Non-Executive Directors and key

senior management positions;

• identifying and nominating for the approval

of the Board candidates to fill Board

vacancies or new positions as and when

they arise;

• reviewing the Company’s policy on diversity

and inclusion and the progress made in

achieving the policy’s objectives; and

• the Committee will lead an annual

evaluation of the performance of the Board,

its Committees, the Chairman and the

individual Directors. The Committee will

consider an externally facilitated approach

to this at least every three years.

Composition

The Nomination Committee currently

comprises three independent Non-Executive

Directors: Jaap Huijskes (Chair), Martin Angle

and Kimberley Wood.

The meetings may be attended by Alasdair

Robinson (Chief Legal Officer and Secretary

to the Committee), Clare Kinahan (Chief

HR Officer), other Non-Executive and

Executive Directors, and external advisers

asappropriate.

2021 membership and meeting attendance Matters discussed

Member Nomination

since Committee

Jaap Huijskes 6 December 2017 3/3

Martin Angle 16 July 2018 3/3

Kimberley Wood 3 October 2019 3/3

January 2021

• Board evaluation

• Committee composition

• Terms of reference review

June 2021

• Board composition including review

of diversity, skill set and regulatory

requirements

• Committee composition

December 2021

• Board and Executive Committee

succession review

• Non-Executive Director recruitment

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 71

Review of the Committee’s

activities

The Nomination Committee meets at least

twice per year. During 2021, the Committee

met formally on three occasions. In addition,

a number of informal meetings took place to

discuss matters relevant to the Committee,

and on some occasions, matters of a

Nomination Committee nature may be

discussed in full Board meetings.

Some of the key matters considered by

the Committee during the year ended

31December 2021 were: considering the

balance and composition of the Board and

Committees; the recruitment of further

independent Non-Executive Directors;

succession planning for the Board and

Executive Committee, Board Committee

composition; and Board evaluation.

On 18 January 2021, Jon Harris was

appointed as CEO and Executive Director

upon the retirement of Jón Ferrier. JonHarris

was appointed following an extensive

search process, externally led by Korn Ferry.

JonHarris has over 30 years’ experience in

the oil and gas industry including 25 years

with BG Group in various international roles,

including Executive Vice President Technical

and General Manager Production Operations,

as well as senior management assignments

in the United States, Trinidad and Tobago

and Egypt. Further information on Jon Harris

is detailed in the section on the Board of

Directors on pages 58 and 59.

Diversity

The Committee recognises the benefits

of diversity across all areas of the Group

and believes that a diverse Board is a

positive factor in business success, brings

a broader, more rounded perspective to

decision-making, and makes the Board

more effective. When recruiting, the Board

endeavours to consider a wide and diverse

talent pool whilst also taking into account the

optimum make-up of the Board, including

the benefits of differences in skills, industry

experience, business model experience,

gender, race, disability, age, nationality,

background and other attributes that

individuals may bring.

In 2018, Gulf Keystone implemented a formal

Diversity Policy throughout the organisation.

The policy states that:

“The Company does not discriminate against

workers or consultants on the basis of

their gender, sexual orientation, marital or

civil partner status, gender reassignment,

race, colour, nationality, ethnic or national

origin, religion or belief, disability or age.

TheCompany will also seek to accommodate

the religious observations and beliefs of

all workers and consultants. The principle

of non-discrimination and equality of

opportunity applies equally to the treatment

of former workers, visitors, clients, customers

and suppliers by members of the Company’s

current workforce.”

The Diversity Policy applies across all facets

of the business, including its administrative,

management and supervisory functions.

Diversity statistics are provided in each

scheduled Board meeting showing the

breakdown of senior management (and

their direct reports) and staff by a number

of metrics. These are reviewed in detail

by the Board and the Committee. In the

event the statistics demonstrate a trend or

weighting which is not in accordance with

the Diversity Policy, this will be investigated,

and, if necessary, rectified. In the event

an individual has concerns about matters

of a diversity nature, the Company has in

place a confidential third-party managed

whistleblowing service which is available

to the individual. Excluding the Board of

Directors, the current gender balance of

the Executive Committee is three male

andonefemale.

Board tenure Board experience

Under one year

Over one year

Over two years

Over three years

Oil and gas

Engineering

Technical/commercial

Finance

Legal

Governance

Strategic report Financials

72 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Succession

During 2021, the Committee has continued

to review succession planning and the

active engagement and development

of the Company’s staff. This included

the consideration and development of

succession planning for the Executive

Directors and the Executive Committee.

The Company has a structured training

programme for executives which includes

access to the Harvard “ManageMentor”

training system.

Process used for Board

appointments

The Committee adopts a formal, rigorous and

transparent procedure for the appointment of

new Directors to the Board.

In appointing Non-Executive Directors, the

Board’s practice is to use external recruitment

consultants appointed following a formal

pitch process. A detailed job profile and

engagement scope will be agreed with the

selected recruitment consultant following a

review of the balance and composition of the

Board. New Directors are subject to a formal

induction process covering all facets of the

business including asset review, technical,

operations, finance, legal, ESG and HR.

In 2021 Korn Ferry was engaged to run the

selection process for the appointment of a

new CEO.

Board evaluation

The Company aims to undertake an externally

facilitated Board evaluation process every

three years. In early 2022, the Company

undertook an externally facilitated evaluation

with Evalu8 Limited. The evaluation covered

the following topics and covered the Board

and all Board Committees, with all Board

members participating:

• composition, succession and evaluation;

• Board/Committee strategy and Company

purpose;

• leadership;

• meetings, contributions and relationship

with the Board;

• effectiveness;

• accountability;

• remuneration; and

• relations with shareholders.

The review concluded that the Board as a

whole considered the overall governance

and associated processes of the Company

were strong with only a small number of

enhancements being proposed to improve

overall effectiveness. These included:

• enhanced diversity at the Board and

Committee level;

• enhanced communication with major

shareholders;

• improved transparency on certain

matters(e.g. remuneration) between

the Board/Committees and senior

management; and

• additional training for Directors.

There are no arrangements or

understandings between any Director

orexecutive officer and any other person

pursuant to which any Director or executive

officer was selected to serve. There are no

family relationships between the Directors.

Jaap Huijskes

Chair of the Nomination Committee

29 March 2022

Nomination Committee report continued

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 73

Audit and Risk

Committee report

Martin Angle

Chair of the Audit and Risk Committee

January 2021

• External audit

• Risk review

• Cyber review

• D&O insurance

• Audit tender

March 2021 (two meetings)

• 2020 full-year results

• Report from the external auditor on the

2020 audit

• Principal accounting judgements and

estimates affecting the Group based on

reports from both the Group’s management

and external auditor

• Auditor independence

• Going concern and viability statement

• Risk register review, including climate

change risks

• Management representation letter

• Private session with external auditor

• Cyber security

• Terms of reference

June 2021

• Risk review, including climate change risks

• Review of specific control areas

• Internal audit

• ERP review

• Cyber security

• Insurance review

• Non-audit services policy

August/September 2021 (two

meetings)

• 2021 half-year results

• Report from the external auditor on

outcome of interim review

• Principal accounting judgements and

estimates affecting the Group based on

reports from both the Group’s management

and external auditor

October 2021

• Risk register review, including climate

change risks

• Cyber security

• Insurance review

• ERP system implementation

December 2021

• External audit engagement letter and fee

quotation

• 2021 Deloitte audit planning report

• Auditor independence

• Risk register review, including climate

change risks

• Internal audit

• ERP system implementation

• Non-audit fee spend

Member Audit and Risk

since Committee

Martin Angle 16 July 2018 8/8

Garrett Soden

(1)

2 September 2020 3/3

Kimberley Wood 12 October 2018 8/8

(1) Non-independent. Resigned from the Committee on 9 June 2021.

2021 membership and meeting attendance

Matters discussed

Governance

Strategic report Financials

74 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Audit and Risk Committee report continued

Role

The Audit and Risk Committee is the

committee of the Board of Directors that

is primarily responsible for overseeing

the financial reporting, internal risk

management and control functions, the

internal audit requirements, and for making

recommendations to the Board in relation

to the appointment of the Group’s internal

(ifapplicable) and external auditor.

In accordance with its terms of reference, the

Committee, which reports its findings to the

Board, is authorised to:

• monitor the integrity of the Group’s financial

statements and announcements, and

significant financial accounting estimates

and judgements;

• review the effectiveness of the Group’s

risk management framework and internal

controls and risk management systems;

• consider and make recommendations with

respect to the Group’s risk appetite and

review, on behalf of the Board, the Group’s

risk profile;

• monitor and review the need for, and,

if appropriate, the effectiveness of, the

Group’s internal audit function;

• oversee the Company’s corporate and

operations technology functions, including

cyber security controls and processes;

• advise the Board on the appointment of the

external auditor and on the remuneration

for both audit and non-audit work;

• discuss the nature and scope of the audit

with the external auditor, and review the

audit findings ahead of reporting to the

Board; and

• assess the performance, independence

and objectivity of the external auditor and

any supply of non-audit services.

Composition

As at 31 December 2021 and the date of

this report, the Committee comprised two

Non-Executive Directors, both of whom are

considered to be independent. The members

of the Committee are Martin Angle (Chair)

and Kimberley Wood. Garrett Soden resigned

from the Committee on 9 June 2021.

The meetings are also attended on a selective

basis by Jon Harris (CEO), IanWeatherdon

(CFO), Nadzeya Kernoha (Head of Finance),

Alasdair Robinson (ChiefLegal Officer and

Company Secretary), representatives from

finance management, representatives from

operations and Deloitte LLP (external auditor).

Review of the Committee’s

activities

Eight Audit and Risk Committee meetings

were held in the financial year and a number

of informal meetings were also held. Meetings

are held at key times during the Group’s

reporting and audit calendar.

Matters discussed

During the year, the main focus of the

Audit and Risk Committee has been to

support and oversee the Group’s ongoing

monitoring, review and evaluation of its risk

management systems and internal controls,

ensure the robustness and integrity of the

Group’s financial reporting and assess the

effectiveness of both the internal and external

audit processes.

The Committee has devoted significant time

to reviewing those areas that are integral to

the Group’s core management and financial

processes, as well as engaging regularly with

management and the external auditor.

The Committee worked closely with

the management team to ensure these

recommendations were implemented in an

efficient and timely manner. The Committee

has been proactive in requesting information

in order to fulfil its role. During the course

of the year, the Committee has received

sufficient information on a timely basis to

enable it to discharge its duties effectively.

Significant issues considered

bythe Audit and Risk Committee

in 2021

The Committee assesses whether suitable

accounting policies have been adopted and

whether management have made appropriate

estimates and judgements. The Committee

reviews reports prepared by management

that provide details on the main financial

reporting judgements and estimates.

TheCommittee also reviews reports by the

external auditor on the full-year and half-year

results of the Group that highlight any issues

identified by the auditor and provide further

insights into the judgements and estimates

used by management.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 75

The significant issues considered in the year are detailed below:

Significant issue How the issue was addressed by the Committee

Revenue recognition: In order to recognise revenue,

management must be able to measure reliably the

economic benefit to be received and the costs

associated with the sale and it must be probable that

the Group will receive the economic benefits.

In 2021, the Group has continued to recognise revenue

when cash receipt is assured. The key judgement for

the revenue recognition is considering whether the

current accounting policy remains appropriate and

whether under this policy it is reasonable to recognise

the invoices that remained unpaid as of 31 December

2021 as revenue for the year.

The Committee considered whether recognition of revenue in relation to oil sales

was appropriate. The Committee discussed the key judgements with management

and reviewed the information provided, including details of communications with

the KRG and MNR. The Committee also had discussions with the external auditor

in respect of the Group’s revenue recognition policy. Based on these reviews and

discussions, the Committee agreed with management’s conclusion that the Group

should recognise revenue in relation to oil exported when the receipt of cash was

assured. The Committee was satisfied that the revenue recognition policy for oil

sales for the year ended 31 December 2021 was appropriate. The Committee was

also satisfied with the judgement that recognising revenue for the invoices that

remained unpaid as of 31 December 2021 is appropriate.

Impairment and carrying value of oil and gas assets:

An assessment of any impairment and carrying value

of the Group’s assets is required under International

Financial Reporting Standards. This assessment

involves management making a number of judgements

and assumptions including identifying indicators of

impairment and estimating future oil prices, production

profiles, costs and discount rates.

The Committee considered reports from management and reviewed the

impairment indicator assessment which included impacts of climate change and

geopolitical factors. The Committee was satisfied that the base case and the range

of scenarios, including a base case Brent oil price of $81/bbl for 2022 and $55/bbl

real thereafter based on the price prevailing at 31 December 2021 and a stress case

of $80/bbl for 2022 and $50/bbl real thereafter, used for the impairment indicator

assessment, were reasonable. The Committee agreed with management’s

conclusion with regard to the Iraqi Supreme Court ruling on 15 February 2022 that

it is not possible to determine the potential future implications on the impairment

assessment at present, although to date it has not had any adverse impact on the

Group’s operations. The Committee agreed with management’s conclusion that no

impairment indicators existed for the Group’s assets.

Going concern and viability statement: The

appropriateness of preparing the Group financial

statements for the year on a going concern basis and

the preparation of the long-term viability statement.

The Committee considered reports and analysis prepared by management, taking

into account the external auditor’s review of these papers and their observations.

The analysis involved stress testing the assumptions. The Committee concluded

that management’s recommendation to prepare the financial statements on a going

concern basis was appropriate.

The Committee reviewed the assessment of the principal risks facing the Group,

the stress test scenarios and possible mitigating actions over the three-year

viability statement period. Based on this review, the Committee approved the

disclosure included under the long-term viability statement.

Internal audit

The Audit and Risk Committee has oversight

responsibilities for the internal audit function.

The Committee has been considering the

appropriateness of the appointment of an

internal auditor and the matter is under active

consideration by the Committee.

The Committee also undertakes detailed

analysis of higher risk internal procedures and

controls on a periodic basis, recent examples

being cyber security, payments, inventory

and supply chain management. In addition,

specialist advisers are engaged, where

necessary, to review key controls in high risk

areas. The lack of an internal audit function

has not had any impact on the work of the

external auditor.

External auditor

The Audit and Risk Committee is responsible

for the development, implementation and

monitoring of the Group’s policy on external

audit, including ensuring that the auditor

remains objective and independent. To fulfil

its responsibility regarding independence, the

Committee considered:

• the external auditor’s plan for the current

year, noting the role of the audit partner

who signs the audit report and who, in

accordance with professional rules, has not

held office for more than five years, and any

changes in the key audit staff;

• the overall extent of non-audit services

provided by the external auditor, in

addition to its case-by-case approval of

the provision of non-audit services by the

external auditor;

• the external auditor’s written confirmation

of independence to the Audit and Risk

Committee; and

• the past service of the external auditor,

which was first appointed in 2006.

Governance

Strategic report Financials

76 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Audit and Risk Committee report continued

Audit tendering

The Audit and Risk Committee has noted the

changes to the Code and the Guidance for

Audit Committees issued by the Financial

Reporting Council, each in the context of

tendering for the external audit contract at

least every ten years. The Group’s external

audit was last tendered in 2011, resulting in a

decision to retain Deloitte LLP as the Group’s

auditor. Since the appointment of Deloitte

LLP in 2006, there have been four senior

statutory auditors in line with the required

rotation timetable, the last rotation being after

completion of the audit for the year ended

31December 2020.

In line with guidance issued by the FRC

encouraging companies to consider delaying

tenders for new auditors, principally related to

current COVID-19 constraints, the Company

applied for and received the FRC’s approval

for a two-year extension to the appointment

of Deloitte LLP as the Company’s auditor.

As a result, Deloitte will continue to serve as

the Company’s auditor for the financial year

ending 31 December 2022. The Company

plans to progress the audit tender in 2022

to allow, as appropriate, the new auditor to

shadow Deloitte through the audit for the

financial year ending 31 December 2022.

There are no contractual obligations that

restrict the choice of external auditor.

Effectiveness of external auditor

To assess the effectiveness of the external

audit process, the auditor is asked on an

annual basis to describe the steps that

they have taken to ensure objectivity and

independence, including where the auditor

provides non-audit services. Gulf Keystone

monitors the auditor’s performance,

behaviour and effectiveness during the

exercise of their duties, which informs

the Committee’s decision to recommend

reappointment on an annual basis. The

external auditor’s fulfilment of the agreed audit

plan and any variations from the plan and the

robustness and perceptiveness of the auditor

in its assessment of the key accounting and

audit judgements are also considered when

making a judgement on auditor effectiveness.

The Committee monitored the efficiency of

the audit process and the performance of the

auditor. Following the above, the Audit and

Risk Committee has recommended to the

Board that Deloitte LLP be reappointed.

Non-audit services

As a safeguard to help to avoid the objectivity

and independence of the external auditor

becoming compromised, the Committee

has a formal policy governing the supply of

non-audit services by the external auditor.

TheGroup engages external advisers to

provide non-audit services based on cost

and the skills and experience required for

thework. The Group may engage the external

auditor to provide a limited range of non-audit

services where this is the most effective and

efficient way of procuring such services,

provided that the Group is satisfied that the

auditor’s objectivity and independence will

notbe compromised as a result.

In 2021, Deloitte LLP provided the following

non-audit services to the Group:

• interim review of the half-year results;

• advisory services relating to ESG; and

• other assurance services.

In 2021, Deloitte LLP was appointed to

advise the Company on its ESG strategy

and implementation. Deloitte was appointed

following a formal tender process and in

accordance with all procedures in place to

preserve auditor independence.

A breakdown of the fees paid to the external

auditor in respect of audit and non-audit

work is included in note 4 to the consolidated

financial statements. In 2021, the Company

implemented a Non-audit Services Policy

which stipulates a cap limiting non-audit fees

to 70% of the average prior three years of

audit fees. Taking 2021 as a whole, this cap

was exceeded largely due to Deloitte being

engaged for the half-year results review

(which is not considered an audit fee) and with

respect to ESG strategy implementation and

compliance. However, non-audit services

fees were less than audit fees for the year and

the Committee is satisfied that the non-audit

services do not impact the independence of

the auditor.

The Committee considered the potential

threats that engagement of Deloitte LLP

to perform non-audit services may pose to

auditor independence. Deloitte LLP ensured

that necessary safeguards were put in

place to reduce the independence threats

to an acceptable level. The Committee was

satisfied that, given the nature of the work

and the safeguards in place, the provision of

non-audit services did not undermine auditor

objectivity and independence.

Committee evaluation

In early 2022, an externally facilitated

review of the Audit and Risk Committee’s

performance and effectiveness was

completed which did not raise any issues

other than of a minor administrative nature.

This was conducted alongside a full Board

and Committee evaluation.

Martin Angle

Chair of the Audit and Risk Committee

29 March 2022

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 77

Safety and Sustainability

Committee report

Committee activities during 2021

The Committee seeks to meet formally four

times a year. During 2021 it met on four occasions

(in March, June, September and November),

and also held a “workshop” specifically for

ESG. TheCommittee has a number of standing

agenda items which are considered at each

meeting, and will supplement these with specific

agenda items as necessary. In 2021, the topics

considered included:

• HSE performance and statistics, including

a review of any incidents which have

occurred and lessons learned;

• ESG strategy plan formulation and

implementation, including production of the

Group’s Sustainability report;

• progress for the year against the HSE

improvement plan;

• security review and risk assessment;

• the formulation, approval and delivery of

the Group’s annual CSR plan and initiatives,

including review of key initiatives;

• the Group’s strategy on the reduction of

GHG emissions, including the formulation

of specific targets relating thereto; and

• HSE operational planning for key field

activities (for example, rig operations).

Due to travel restrictions on account of

COVID-19, no site visits by the Committee to

the Shaikan Field were possible during 2021

but it is hoped that this will be possible in 2022.

Role

The role of the Safety and Sustainability

Committee is to monitor the development

and implementation of the Group’s health and

safety, environmental, social responsibility

and ESG governance policies and to ensure

that appropriate management systems and

processes are in place to minimise any HSE

risks associated with the Group’s activities,

including the impact of the Group’s operations

on GHG emissions and local communities.

David Thomas

Chair of the Safety and Sustainability Committee

Safety and

Member Sustainability

since Committee

David Thomas 8 December 2016 4/4

Jaap Huijskes 6 December 2017 4/4

Kimberley Wood 11 October 2018 4/4

Jon Harris 26 January 2021 4/4

Stuart Catterall 11 January 2017 4/4

2021 membership and meeting attendance

The Committee’s activities form an integral

part of the Group’s HSE governance process,

which include the following key elements:

Board and management site visits, external

and internal audits, third-party inspections,

Permit to Work audits, regulatory inspections,

safety walkabouts and ensuring visible safety

leadership. The Group has robust governance

processes in place to ensure that the

appropriate framework exists to ensure that

all matters of an ESG nature are appropriately

considered and actioned.

The Safety and Sustainability Committee has

written terms of reference which were last

updated in March 2022. A copy of the terms

of reference is available on the Company’s

website. In accordance with its terms of

reference, the Committee is authorised to:

• oversee the development of policies and

guidelines for the management of all risks

relating to safety, sustainability and ESG,

incorporating health, safety, security and

environmental and social risks within the

Group’s operations;

• oversee the quality of safety and ESG

(incorporating health, safety, security,

environment and corporate social

responsibility) policies, processes,

governance, management and the

methods to create appropriate behaviours

and decisions, including relevant key

performance indicators;

Governance

Strategic report Financials

78 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Safety and Sustainability

Committee report continued

Role continued

• review health and safety performance

to assess the effectiveness of health

and safety programmes and to make

recommendations for improvement, where

appropriate;

• review, and if appropriate approve, specific

corporate social responsibility projects

within the agreed budgeted level approved

by the Board;

• evaluate the effectiveness of the Group’s

policies and systems for identifying

and managing health, safety, security,

environmental and social risks within the

Group’s operations;

• assess the policies and systems within

the Group for ensuring compliance

with applicable legal and regulatory

requirements;

• assess the performance of the Group

with regard to the impact of health,

safety, security, environmental and social

decisions and impact of actions upon

employees, communities and other

stakeholders. It shall also assess the

impact of such decisions and actions on

the reputation of the Group and make

recommendations to the Board on areas for

improvement;

• working in conjunction with the Technical

Committee, the Board of Directors, and

management as appropriate, specifically

consider the level of greenhouse gas

emissions (“GHG”) generated by the

Company, and reviewing challenging and

achievable targets to reduce these;

• on behalf of the Board, receive reports from

management concerning all fatalities and

serious accidents within the Group and

actions taken by management as a result of

such fatalities or serious accidents;

• evaluate and oversee, on behalf of the

Board, the quality and integrity of any

reporting to external stakeholders

concerning safety, sustainability and ESG

issues;

• review the results of any independent

audits of the Group’s performance in regard

to safety, sustainability or ESG matters,

review any strategies and action plans

developed by management in response to

issues raised and, where appropriate, make

recommendations to the Board concerning

the same; and

• consider the position of the Group with

respect to international best practice

for safety, sustainability and ESG and

emerging legal requirements including

relevant corporate governance

developments.

Composition

As at 31 December 2021, the Safety and

Sustainability Committee comprised three of

the independent Non-Executive Directors,

David Thomas (Chair), JaapHuijskes and

Kimberley Wood, the CEO, Jon Harris,

and the COO, Stuart Catterall. JonHarris

was appointed to the Committee on

26January2021. StuartCatterall resigned

on 18 February2022 upon his retirement.

TheCompany’sHead of HSE and

Sustainability, Patrick Bersebach, the CSR

Manager, Sirwan Dara, and the Security

Manager, Serdar Abdullah, also attend

meetings, along with other management and

staff members as required. Alasdair Robinson

acts as Secretary to the Committee.

Governance

The Company endeavours to ensure that

no harm comes to people as a result of

its operations and that any effect on the

environment is minimised. It also looks to

have a beneficial long-term impact on the

communities located in the vicinity of the

Shaikan Field. The Group aims to ensure that

all employees and contractors understand

that working safely is the absolute priority and

that they are responsible for their own safety

and the safety of those around them.

The importance of these areas to the Group

is demonstrated by the priority given to them

at all levels in the organisation, from the daily

toolbox talks in the Shaikan Field through

to the regular weekly senior management

meetings, and Safety and Sustainability

Committee and Board meetings. At Board

meetings, a formal report is provided on these

matters to the Directors by the COO and the

Safety and Sustainability Committee Chair.

Sustainability

Recognising the importance of sustainability

to both society and business organisations,

the Company has included a detailed

Sustainability report in the annual report

andaccounts; please refer to pages 28 to 45.

This sets out the Company’s culture

as it relates to sustainability issues, the

management processes which it has in place,

and focuses on a number of the environmental

and social initiatives which have been

launched and implemented over the past

few years. In addition, the report includes

key environmental and safety performance

statistics. In 2021 the Company engaged

Deloitte to act as the Company’s ESG

advisers. Working with Deloitte, the Company

developed a detailed ESG strategy roadmap

which will be implemented as the Company

strives to meet its emission reduction targets.

Health and safety

During 2021, the Committee monitored and

supported the Company’s 2021 HSE Action

Plan implementation and was pleased to see

an overall achievement of 99% during the

year. The Committee was encouraged by the

level of incident or potential incident reporting

which occurred during the year and the open

reporting culture which has continued to be

developed in the organisation. Unfortunately,

there was one lost time incident during the

year; a full review was undertaken and lessons

learned embedded in the Company’s culture

and processes. The Company also held

emergency response simulation exercises

during the year.

Security

The security situation in Kurdistan remained

stable during the year, enabling staff travel

patterns and field operations to continue, with

use of the Company’s COVID-19 and standard

security precautions. The Board and the

Committee keep the security situation under

constant review through specialist advice

and local security experts. The Company

has response plans in place which can be

activated immediately if required.

Environment

During 2021, the Company took a proactive

role in the implementation of a number

of specific initiatives to minimise any

environmental impact from the Company’s

operations. These are described more fully in

the Sustainability report.

Corporate social responsibility

Since the formal CSR programme was

initiated in 2017, the Company has continued

to progress several social initiatives, with a

specific focus on sustainability. These are

also more fully described in the Sustainability

report.

David Thomas

Chair of the Safety and Sustainability

Committee

29 March 2022

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 79

Committee activities during 2021

The Committee met four times in 2021.

In addition to standing agenda items, the

following key matters were discussed:

• the Company’s Field Development Plan

(“FDP”) and its submission in draft form to

the Ministry of Natural Resources (“MNR”);

• production planning and forecasting

(including 2022 production guidance);

• produced gas management strategy,

including gas management plan as

contained in the FDP;

• production enhancement initiatives

(including ESP installation programmes);

• drilling strategy and progress;

• operational risk reviews;

• well workover options;

• Shaikan subsurface re-mapping and

re-modelling project; and

• review and approval of 31 December 2020

Competent Person’s (Reserves) Report

(“CPR”).

In February 2021, the Company announced

that an updated CPR as at 31 December

2020 had been completed by its independent

reserves auditor, ERC Equipoise. The updated

CPR confirmed that the gross 1P, 2P+2C

reserves and resources volumes of the

Shaikan Field were in line with the previous

(2016) CPR, after adjusting for production

over the period.

In summary, the results of theCPR were

asfollows:

• gross 1P reserves of 240 MMstb;

• gross 2P reserves of 505 MMstb; and

• gross 2P reserves + 2C contingent

resources of 798 MMstb.

Full details of the Shaikan Field reserves and

resources are set out on page 15.

Technical

Committee report

David Thomas

Chair of the Technical Committee

Member Technical

since Committee

David Thomas 8 December 2016 4/4

Jaap Huijskes 6 December 2017 4/4

Jon Harris

(1)

26 January 2021 4/4

Stuart Catterall 11 January 2017 4/4

Gabriel Papineau-Legris 8 December 2016 4/4

(1) Appointed to the Committee on 26 January 2021.

2021 membership and meeting attendance

Governance

Strategic report Financials

80 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Technical Committee report continued

Role

The Technical Committee was established

in late 2016 to provide support and guidance

for the Shaikan Field development planning

and project execution activities and has the

following specific objectives to:

• provide assurance that development plans

are in line with the Company’s strategy and

have been optimised in the context of the

current and forecast funding position;

• review and approve the Shaikan Field

reserves and resources estimates and

revisions;

• ensure that the Company has the

appropriate resources and project

management systems in place to

successfully execute the development

projects on time and within budget;

• provide the Board with assurance that the

key operational and project execution risks

have been identified and that the required

risk management processes and mitigation

measures are in place;

• provide a detailed review of the Company’s

FDP prior to its submission to the MNR,

and to report to and advise the Board

accordingly; and

• review and recommend for executive

approval any information relating to the

Shaikan FDP and reserves and resources

estimates for public release.

2021 membership and meeting

attendance

The members of the Committee are:

DavidThomas (Committee Chair,

independent Non-Executive Director),

JaapHuijskes (Non-Executive Chairman),

Jon Harris (CEO), Stuart Catterall (COO)

andGabriel Papineau-Legris (CCO).

JónFerrier (former CEO) resigned from

theCommittee on 26January 2021 and

was replaced by Jon Harris. Stuart Catterall

resigned on 18February 2022 upon his

retirement.

The Committee is supported in its activities by

key members of the London-based technical,

commercial and finance teams and by the

Erbil-based projects and operations teams.

Members of these teams are regularly invited

to participate in Committee meetings to

provide input in relation to the Committee’s

deliberations.

Generally, the Committee plans to meet on

a quarterly basis, but adjusts the meeting

timings to coincide with key decision points

within the project development schedule or

the release of significant new technical or

reserves-related information.

David Thomas

Chair of the Technical Committee

29 March 2022

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 81

Remuneration

Committee report

Kimberley Wood

Chair of the Remuneration Committee

Part one: Annual Statement

from the Chair of the

Committee

Dear Shareholder,

On behalf of the Remuneration Committee,

I am pleased to present the Directors’

remuneration report for the year ended

31 December 2021. During 2021, the

Committee undertook a review of the current

Remuneration Policy to ensure it continues to

support GKP’s corporate strategy, values and

stakeholder expectations and ensures that

outcomes fairly reflect GKP’s performance.

The work of the Remuneration Committee

in 2021 was conducted against a backdrop

of recovery from the unprecedented impact

in 2020 from the COVID-19 pandemic and

a return to more normal levels of oil prices

and operational activity. The Remuneration

Committee set robust and challenging targets

for the annual bonus scheme and ensured the

right policies and practices were in place to

attract, retain and motivate all employees.

For the last six years, no salary increases have

been awarded to the Executive Directors.

Following a detailed benchmark review, the

Remuneration Committee decided to award

an increase in salary to the CEO of 4.8%

to £440,000 and this broadly aligns with

the wider workforce increase of 4% to 6%.

Noincrease in pay was awarded for the CFO

in 2022 following benchmarking analysis.

Member Remuneration

since Committee

Kimberley Wood (Chair) 12 October 2018 4/4

Martin Angle 16 July 2018 4/4

David Thomas 8 December 2016 4/4

2021 membership and meeting attendance

Matters discussed by the

Remuneration Committee in 2021

The Committee held four Committee

meetings in 2021 and also met on an

informal basis on a further two occasions

to discuss the following remuneration

matters:

• reviewed 2020 bonus performance

outcomes for executives and senior

management and resulting bonus

pay-outs;

• reviewed executive and senior

management remuneration and

proposals for the broader workforce;

• approved bonus KPIs for 2021;

• approved LTIP awards to all eligible

participants and associated

performance targets;

• reviewed and approved the VCP

pay-outs to former Executive Directors;

• reviewed and approved the draft

Directors’ remuneration report;

• reviewed the Company’s incentive

structure for Executive Directors

and other staff, resulting in a revised

Remuneration Policy to put to a

shareholder vote at the 2022 AGM;

• reviewed the Committee’s terms of

reference; and

• reviewed and agreed salary and bonus

review for wider workforce.

Governance

Strategic report Financials

82 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part one: Annual Statement

from the Chair of the

Committee continued

Changes to the Remuneration

Policy

Our current Policy was approved at the

2019 AGM with support in excess of 98%.

In this context and recognising the value of

continuity and the overarching purpose of

the Remuneration Committee as discussed

above, we are proposing relatively minor

changes to the Policy, primarily to align it with

best practice. The proposed revisions are

asfollows.

Shares vesting from future Long-Term

Incentive Plan (“LTIP”) awards made to

Executive Directors will be subject to a

holdingperiod of two years.

We are introducing post-exit shareholding

requirements for Executive Directors in line

with the Investment Association guidelines.

We are amending the performance conditions

for the LTIP. At present, conditions are

written directly into the Policy which creates

unhelpful inflexibility since any change

would require a new vote. The Committee

and Board have agreed that it would be

desirable for the Policy to allow one or more

ESG condition(s) to be operated alongside

the existing absolute and relative total

shareholder return (“TSR”)conditions.

TheCommittee will consult with shareholders

prior to introducing ESG conditions, noting

that ESG is expected to carry a weighting

of 20% and be implemented no earlier than

2023. To reassure shareholders, the Policy

provides that at least 60% of the performance

conditions will be linked to TSR.

2021 Board changes

We were pleased to welcome Jon Harris as

the new CEO of GKP on 18 January 2021.

Jon joined on a salary of £420,000 p.a. with

a pension allowance of 10% of salary, which

is aligned to GKP’s UK workforce. He was

eligible for a 2021 bonus (pro-rated for time in

role during 2021) and a grant under the 2014

LTIP in line with the Remuneration Policy.

Jon’s base salary remains in line with market

competitive rates. Further details of the new

CEO package can be found on page 86 of the

Directors’ remuneration report.

Jón Ferrier, the departing CEO, retired from

the Company and Board on 31 January 2021

after a period of handover. As announced

at the time, due to legacy contractual

requirements that will not apply to the

current Executive Directors or any future

appointments, Jón will continue to participate

in the VCP, subject to performance, as if he

remained an employee. He did not receive

any severance compensation on departure

except for contractual pay in lieu of notice.

Further details can be found on page 97 of the

Directors’ remuneration report.

Performance and implementation

of the Remuneration Policy in 2021

Annual bonus

Based on the Remuneration Committee’s

assessment of GKP and individual

performance in 2021, the bonus awarded

to the CEO was 101% of his pro-rated base

salary out of a maximum potential of 125% and

the CFO was awarded 81% of salary out of a

potential of 100%. 30% of the annual bonus

is to be deferred in shares for three years

after award date. These payments reflect the

attainment of personal objectives combined

with Company performance as measured

in the corporate KPIs. Further details can

be found on page 96 of the Directors’

remuneration report.

Long-term incentives

The CEO and CFO received conditional

awards of 470,325 and 305,711 options

respectively over shares (equivalent to 200%

and 150% of salary) on 1 April 2021. The award

is subject to both absolute and relative total

shareholder return (“TSR”) targets being

met, each measure having a 50% weighting.

Theexercise of reasonable discretion

has been a feature of GKP’s approach in

recent years where the formulaic outcome

does not align with the overall shareholder

experience and this remains unchanged.

The Remuneration Committee will have the

discretion to review vesting outcomes to

ensure a fair reflection of performance.

The former CEO and former CFO both

continue to participate in the VCP, for which

they received an award in December 2016.

Following the first two measurement dates in

May 2018 and April 2019, a total of 3,769,595

and 3,247,656 nil-cost options were granted,

respectively. No further nil-cost options

can be accrued under the VCP as the cap

was met at the second measurement date.

The first vesting date for these nil-cost

options in May 2020 resulted in no options

vesting as performance conditions were not

attained. On the second measurement date

in May 2021, the performance conditions

were met and 50% of the nil-cost options

vested. The third and final measurement

date is 30 days following the release of the

Company’s financial results in March 2022

with vesting dependent upon compound

TSR performance. The incoming CEO and

CFO are not entitled to participate in the VCP,

which has been closed to new entrants since

2016. Only one award was ever made under

the VCP.

Instances of the exercise of discretion

by the Remuneration Committee

No discretion was exercised by the

Remuneration Committee outside the

normalRemuneration Policy guidelines.

Remuneration across the workforce

GKP fosters an inclusive culture across the

whole workforce which is reflected in our

Remuneration Policy. Base salaries for all

employees are benchmarked on a regular

basis and targeted at median. The annual

bonus plan is open to all employees, the

outcome of which is linked to both corporate

and individual targets. The corporate

targets are the same for all who participate.

Inaddition, all permanent employees working

for the Company at the time of grant received

an award in 2021 under the 2014 LTIP which

aligns their interests with the long-term

success of GKP and to the structure of

rewards available to Executive Directors.

The Committee and Board are given regular

briefings on the pay, incentive and benefit

arrangements for the wider workforce.

TheBoard also regularly engages with

employees through briefing sessions,

surveysand town hall meetings, gaining

valuable feedback directly from employees

aswell as receiving updates from the Chief HR

Officer who attends all Committee meetings

by invitation.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 83

Summary of remuneration for

Executive Directors in 2022

In light of the current business context and the

detailed remuneration benchmarking review,

the Remuneration Committee decided to

award the CEO an increase in salary of 4.8%.

No increase in salary was awarded to the

CFO for 2022. The salary review budget for all

other employees, including senior managers,

was 4-6% of payroll for 2022.

Both the CEO and CFO will be eligible for

a 2022 bonus. The Company will review

the Company’s achievements, KPIs and

performance targets and publish these in

the 2022 Directors’ remuneration report.

The 2022 bonus measures will incorporate

targets on safety and sustainability (including

ESG and HSE improvement targets); value

creation (covering shareholder value and

project delivery); financial and operational

achievements; and people, culture and values

initiatives. Further information is set out on

page 98 of the Directors’ remuneration report.

The CEO and CFO are entitled to participate

in the LTIP where performance-based shares

are granted up to a maximum of 200% and

150% of salary, respectively, in line with policy.

The 2022 LTIP award will have performance

conditions based on absolute and relative

TSR. Further information is set out on page 98

of the Directors’ remuneration report.

Remuneration outcome for the Chair

and Non-Executive Directors

After a thorough review of Chair and

Non-Executive Director fees in 2020, the

Chair and Non-Executive Director fees were

reduced in 2021. There will be no change to

fees in 2022 save for an increase of £5,000

for the role of Senior Independent Director to

reflect additional workload.

Basis of preparation of the report

As GKP is not incorporated in the UK, it is

not subject to UK company law or the UK

Corporate Governance Code. However, the

Company’s Byelaws require it to comply with

the Large and Medium-sized Companies

and Groups (Accounts and Reports)

(Amendment) Regulations 2013 (the “2013

Regulations”). The Directors’ remuneration

report has been prepared in accordance with

such 2013 Regulations as amended.

As a responsible corporate citizen, GKP

is committed to following best practice,

maintaining high corporate governance

standards and the principles enshrined in the

UK Corporate Governance Code (the “Code”)

which are taken into account to the extent they

are considered appropriate for the Company.

As GKP only has 25 employees in the UK,

not all elements of the Code or certain 2018

changes to the 2013 Regulations, including

the CEO pay ratio, are relevant or applicable.

As noted above, the Committee has regard to

wider workforce reward but considers that a

ratio calculation would not be meaningful with

such a small workforce.

Shareholder consultation

and2022AGM

Three remuneration-related resolutions will

be proposed at the 2022 AGM. As I have

referred to above, our revised Remuneration

Policy, described on pages 87 to 92, will be

the subject of a binding vote. In addition,

ourDirectors’ remuneration report

(pages81 to 98) will be the subject of an

advisory vote, in accordance with the 2013

Regulations.

The Remuneration Committee ensures

that, in carrying out its obligations, it takes

account of the views and opinions of all its

stakeholders; this includes consulting with

our major shareholders and with leading

proxy advisers. I am aware that some

shareholders have reservations about the

legacy VCP plan which was implemented

at the 2016 AGM. This is a legacy plan that

is closed to new entrants and will be fully

wound down following the measurement date

that will be 30 days following the release of

the Company’s financial results for the year

ended 31 December 2021. For the avoidance

of doubt, current or future Executive Directors

do not participate in the VCP.

The Committee believes the remuneration

outcomes for 2021 reflect an appropriate

outcome taking into account the global

context and we hope that shareholders

will recognise this as a continuation of our

strategy for reward which fairly reflects the

performance of the Company. Finally, on

behalf of the Remuneration Committee,

Iwould like to thank shareholders for their

continued support and hope that you will vote

in favour of the resolutions contained within

the report at the AGM on 24 June 2022.

Yours sincerely,

Kimberley Wood

Chair of the Remuneration Committee

29 March 2022

Governance

Strategic report Financials

84 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Remuneration at a glance

Remuneration Policy objective

What does the Policy seek to achieve?

The Group’s Remuneration Policy seeks to ensure that the Company is able to attract, retain and motivate its Executive Directors and members

of the Executive Committee. The retention of key management and the alignment of management incentives to the Group’s purpose are the key

objectives of this Policy.

Alignment of the Remuneration Policy to purpose and strategy

Our purpose

GKP is a responsible energy company developing natural resources for the benefit of all our stakeholders,

deliveringsocialandeconomicbenefits by working safely and sustainably with integrity and respect.

Safety and sustainability

Value creation

Capital discipline and cost focus

Robust financial position

• Zero harm in operations and delivery

• ESG roadmap implementation

• HSE improvement plan

• Safety performance

• People, culture, values

• Shareholder value

• Project delivery

• Production

• Financial and distribution strategy

• Budget discipline

(1) Safety performance figures are based on TRIFR (recordable incidents per million man-hours) applied to drilling, production and export operations.

Strategic priorities for 2022: Relevant incentive metrics:

on page 96

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 85

Summary of Remuneration Policy

The key aspects of the Remuneration Policy to be approved by shareholders at the 2022 AGM is set out below.

What has changed

Remuneration element Structure and opportunity since last Policy

Base salary Salary increases will not typically exceed the average employee increase. None.

Benefits Includes car allowance, private medical insurance, income protection insurance,

critical illness cover, death-in-service insurance and relocation benefits. None.

Pensions Pension allowance is 10% of salary, in line with the rest of the workforce. No change (previous legacy

terms for former CEO have

ceased due to his retirement).

Annual bonus Maximum bonus opportunity is 125% of annual salary for the CEO and None.

100% for other Executive Directors, based on achievement of annual objectives.

30% of the annual bonus is deferred in shares for three years after award date.

Malus and clawback provisions apply.

Target bonus is 60% of maximum.

2014 LTIP Typically granted annually and in the form of nil-cost share options, Awards are subject to a

nominal-cost share options or conditional shares. two-year holding period

Awards vest after three years to the extent that performance targets have been met. post vesting.

When eligible, the maximum opportunity is 200% of annual salary for CEO and

150% of salary for CFO. At threshold performance up to 30% of the award vests.

Malus and clawback provisions apply.

In-post shareholding At least 200% of salary holding required for all Executive Directors. None.

requirements

Post-exit Executive Directors are required to hold any shares acquired through LTIPs granted Introduction of post-exit

shareholding after the 2022 AGM up to the in-post shareholding requirements for two years shareholding requirements

requirements post-cessation of employment. in line with the IA guidelines.

Governance

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86 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part one: Annual Statement from the Chair of the Committee continued

2021 remuneration outcomes

Implementation in 2021

• Salaries of £420,000 (pro-rated for time in role during 2021) and £364,000 paid during the year to the CEO and CFO, respectively.

• 2021 bonus pay-outs of 101% and 81% of salary equating to £408,442 and £294,840 for the CEO and CFO respectively, with 30% of the bonus

being deferred for three years and paid in shares.

• The CEO and CFO were granted LTIP awards of 200% and 150% of salary respectively.

• Neither Executive Director was eligible for the vesting of any LTIP award or for the legacy VCP.

• Pension allowance of 10% of salary for both the CEO and CFO.

• Benefits included private medical insurance, death in service and income protection for the CEO and CFO.

£'000

£100

£200

£500

£400

£0

£1,000

£300

CFO

364

CEO

(1)

401

£600

£900

£800

£700

408

295

Pension and benefits

Bonus

Salary

(1) CEO figures pro-rated for time spent in role.

Implementation in 2022

CEO CFO

2022 base salary £440,000 (+4.8%) £364,000 (no change)

Benefits Aligned to Policy Aligned to Policy

Pension 10% of salary 10% of salary

Annual bonus Maximum opportunity of 125% of salary. Maximum opportunity of 100% of salary.

80% dependent on performance against 80% dependent on performance against

corporate KPIs and 20% on corporate KPIs and 20%

individual strategic objectives on individual strategic objectives

LTIP 200% of salary, vesting dependent on 150% of salary, vesting dependent on

absolute and relative TSR performance absolute and relative TSR performance

over three years over three years

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 87

Part two: Directors’

Remuneration Policy

Introduction

Part two provides an overview of theDirectors’

Remuneration Policy. Itdescribes the

elements of remuneration and summarises

the approach the Remuneration Committee

will adopt in certaincircumstances, such as

the exercise of discretion, the recruitment

of new Directorsand the making of any

paymentsforloss of office.

Purpose and role of the

Remuneration Committee

The Remuneration Committee

determines and agrees with the Board

the overall Remuneration Policy for

the Executive Directors and Executive

Committee members. Within the terms

of the agreed policy, key responsibilities

oftheCommitteeinclude:

• determining and agreeing with the Board

the framework and broad policy for the

remuneration of the Company’s Executive

Directors and setting remuneration for the

Non-Executive Chairman of the Board,

the Executive Directors and the Executive

Committee (being those individuals

considered to be Persons Discharging

Managerial Responsibilities (“PDMR”);

• when setting remuneration policy for

Directors, reviewing and having regard to

remuneration and related policies across

the Group, aligning incentives and rewards

with culture. When conducting its last major

review of the Remuneration Policy, the

Committee took into account simplicity,

clarity, risk management, predictability,

proportionality as well as alignment to

culture as part of the process;

• reviewing the design of all share incentive

plans for approval by the Board and

shareholders. For any such plans,

determining each year whether awards

willbe made, and if so, the overall amount

ofsuch awards, the individual awards to the

Executive Directors and the performance

targets to be used;

• agreeing pension arrangements, service

agreements and termination payments

for Executive Directors and ensuring that

any termination payments are fair to the

individual and the Company; and

• overseeing any major changes in employee

benefits structures throughout the

Company and/or the Group and giving

advice on any such changes.

The Remuneration Committee also reviews

and approves overall remuneration levels for

employees below executive level but does

not set individual remuneration levels for such

individuals. This oversight role allows the

Committee to take into account pay policies

and employment conditions throughout the

Company when designing packages for the

Executive Directors and other key employees,

and the alignment of incentives and rewards

with culture. The Committee considers the

general level of increases applied to basic

pay across the Company when reviewing

Executive Directors’ base salaries.

The Remuneration Committee operates

within written terms of reference agreed by

the Board. These are reviewed periodically

to ensure that the Committee remains up to

date with best practices appropriate to GKP,

its strategy and the business and regulatory

environment in which it operates. Terms of

reference are in place and reviewed annually,

the latest version being in March 2021. They

are available on the Company’s website.

Governance

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88 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part two: Directors’ Remuneration Policy continued

Remuneration Policy table

The Company’s Directors’ Remuneration Policy to be voted on at the 2022 AGM is described in the following table.

Remuneration

element Link to strategy Operation Opportunity

Remuneration Committee

discretion

Base salary

Essential to attract

and retain key

executives.

Reviewed annually based

on:

• role, experience and

individual performance;

• pay awards elsewhere in

the Group;

• external market; and

• general economic

environment.

Policy is to

benchmark to the

relevant market

median.

Normally, salary

increases for

Executive Directors

will be in line with the

average employee

increase.

The Committee retains discretion to:

• select the appropriate market

comparator group; and

• increase salaries above the

general employee average;

in general, this would be to

reflect significant additional

responsibilities.

Benefits

Helps attract and

retain key executives.

Directors may be entitled

to a car allowance, private

medical insurance, death in

service benefit and income

protection in line with the

wider workforce.

Benefit levels reflect

those typically

available to senior

managers within

GKP.

If a Director is recruited from or

required to move overseas, the

Committee may provide additional

benefits tailored to the circumstances

(e.g. relocation expenses).

If additional benefits are introduced

for the wider workforce, the

Committee reserves the right to

extend these to Executive Directors

on equivalent terms.

Pension

Helps executives

provide for retirement

and aids retention.

Up to 10% of salary; may

be provided as a cash

allowance.

Pension allowances are

not included in base salary

for annual bonus or other

executive rewards.

10% of base salary for

Executive Directors,

aligned to rates

applicable to the UK

workforce.

The Committee may agree with an

Executive Director that the cash

allowance will be paid into a pension

arrangement at no additional cost.

Annual bonus

Rewards

achievement

of annual key

performance

indicators.

Targets and weightings are

set annually; performance is

measured over a single year.

Bonus awards are

determined after the year

end based on achievement

of targets.

Clawback provisions apply.

Maximum bonus

opportunity is 125%

of annual salary for

the CEO and 100%

for other Executive

Directors.

The Committee may, in exceptional

circumstances, change performance

measures and targets and their

respective weightings part way

through a performance year, if there

is a significant event which causes

the Committee to believe the original

measures, weightings and targets are

no longer appropriate.

Discretion may also be exercised if

the Committee believes the bonus

outcome is not a fair and accurate

reflection of business performance.

Safety is of central importance to the

business and the Committee may

reduce bonus awards if there is a

serious safety event.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 89

Remuneration

element Link to strategy Operation Opportunity

Remuneration Committee

discretion

LTIP

Incentivises

executives to deliver

key financial targets

over the longer term,

with particular focus

on shareholder

return.

Helps retain key

executives.

Awards are usually granted

annually to participants,

but grants may be made

at other times, such as on

recruitment or promotion of

an executive.

Awards are in the form

of nil-cost share options,

nominal-cost share options

or conditional shares. In

special circumstances they

may be cash-settled.

Awards normally vest after

three years to the extent that

performance targets can

be based on a combination

of share price, financial,

operational and strategic

metrics as determined by

the Committee. At least

60% of the award will be

based on absolute and/or

relative TSR.

A payment equal to the

value of dividends which

would have accrued on

vested awards may be

made following the release

of awards to participants,

either in the form of cash or

as additional shares.

It is the Company’s practice

to make awards under an

LTIP to all employees of the

Company as appropriate in

a range of values based on

seniority.

Specific malus and

clawback provisions apply

(see page 90).

Once vested, the shares

received (net of tax) must be

held for at least a two-year

period before they can

be sold (subject to the

shareholding requirements).

Note: this provision is

subject to shareholder

approval at the 2022 AGM.

When eligible, the

maximum value of

the shares subject

to award to the CEO

is 200% of annual

salary and for the

CFO it is 150% of

salary.

At threshold

performance up to

30% of the award

vests.

The Committee may, in exceptional

circumstances, change the

performance measures and targets

and their respective weightings part

way through a performance period,

if there is a significant event which

causes the Committee to believe the

original measures, weightings and

targets are no longer appropriate.

The new measures and targets will

be no more or less difficult than those

they replace.

Discretion may also be exercised

if the Committee believes the LTIP

outcome is not a fair and accurate

reflection of business performance.

Safety is of central importance to the

business and the Committee may

reduce or eliminate LTIP awards if

there is a serious safety event.

The Committee also has discretion

in determining when awards are

granted, the form of the award and

those eligible within the constraints

ofthe LTIP rules.

Governance

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90 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part two: Directors’ Remuneration Policy continued

Remuneration Policy table continued

Remuneration

element Link to strategy Operation Opportunity

Remuneration Committee

discretion

Shareholding

requirements

Aligns the interests

of executives and

shareholders.

Formal requirements apply

to Executive Directors.

Participation in long-term

incentives may be scaled

back or withheld if the

requirements are not met

ormaintained.

At least 200%

of salary holding

required for all

Executive Directors.

Post-exit: Executive

Directors are

required to retain the

lower of actual shares

held and shares

equal to 200% of

salary for two years

post-exit in respect

of shares which vest

from grants of LTIP

awards after the

approval of this Policy

at the 2022 AGM.

The Committee has discretion

to change the shareholding

requirements – in particular where

compassionate circumstances apply.

Malus and clawback

These provisions allow the Committee in certain circumstances (such as gross misconduct, a material misstatement of the Group financial

statements or decisions taken outside of the Group’s risk appetite) the discretion to:

• reduce bonus pay-outs;

• cancel entitlement of bonus;

• prevent or reduce vesting of the LTIP; and/or

• allow the Company to claim back up to 100% of an award which has vested/been paid.

Remuneration scenarios for Executive Directors based on policy

The charts below provide an illustration of the potential future reward opportunities for the CEO and CFO, and the potential split between the

different elements of remuneration under four different performance scenarios: “Minimum”, “On-target”, “Maximum” and “Maximum (including

50% share price appreciation on long-term incentive awards)”.

CEO

Bonus

Fixed LTIP

Minimum

On-target

Maximum

+50% share

price growth

£’000

27% 28% 45% £1,942

21% 23% 56% £2,382

40%

26%

34%

100%

0 500 1,000

3,000

1,500

£512

£1,282

2,5002,000

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 91

Potential reward opportunities are based

on GKP’s Remuneration Policy, applied

to the 2022 base salaries and pension

opportunities. The annual bonus and LTIP

are based on the maximum opportunities

set out under the Remuneration Policy. Note

that the LTIP awards granted in a year do not

normally vest until the third anniversary of the

date of grant and the projected values in the

second and third scenarios are based on the

face value at award rather than vesting (i.e.

the scenarios exclude the impact of any share

price movement over the period).

The exception to this is the final scenario

which, in line with the requirements of the

Companies (Miscellaneous Reporting)

Regulations 2018, illustrates the maximum

outcome assuming 50% share price

appreciation for the purpose of LTIP value.

The “Minimum” scenario reflects base salary,

pension and benefits (i.e. fixed remuneration)

which are the only elements of the executives’

remuneration packages not linked to

performance.

The “On-target” scenario reflects fixed

remuneration as above, plus annual bonus

pay-out of 60% of maximum (75% of salary

for the CEO and 60% of salary for the CFO)

and LTIP at 50% of maximum award (100%

and 75% of salary for the CEO and CFO

respectively).

The “Maximum” scenario is shown on two

bases: excluding and including the impact

of share price appreciation on the value of

LTIP outcomes. In both cases, the scenario

includes fixed remuneration and full pay-out

of all incentives, with the final scenario also

including the impact of a 50% increase in

GKP’s share price on the value of the LTIP.

Executive Directors’

recruitmentpolicy

Remuneration packages for future Executive

Directors will be aligned to the policy

described, including a maximum annual

bonus opportunity of 125% of salary for

the CEO and 100% of salary for any other

Executive Director and an annual LTIP grant

of up to 200% of salary for the CEO and

150% of salary for the CFO or any other

Executive Director. Relocation packages

are assessed on their individual merits. It is

not the Company’s policy ordinarily to buy

out executives from pre-existing incentive

arrangements, but the Committee will

consider compensating a new Executive

Director for the loss of incentives awarded

by a previous employer, if it believes such

compensation is warranted taking into

account the terms of the award forfeited.

Weseek to avoid paying more than

necessary to secure a candidate and will

have regard to current Remuneration Policy,

shareholder guidance and market practice

when formulating remuneration for a new

ExecutiveDirector.

Where an existing employee is promoted

to the Board, the Policy described above

will apply from the date of promotion, but

there willbe no retrospective application of

the Policy. Existing remuneration, including

incentives, will continue, even if inconsistent

with the Policy above, until such time as they

expire orvest. Pension contributions from the

date ofpromotion will be aligned with that of

the wider workforce.

Terms of the Executive Directors’

service contracts

Executive Directors are engaged on rolling

service contracts, which provide for twelve

months’ written notice of termination from

the CEO and six months’ notice from other

Executive Directors, with the same notice

periods required from the Company.

In exceptional circumstances, the Committee

may agree to a longer notice period initially,

reducing to twelve or six months, as

appropriate, after one year.

Non-Executive Directors’ letters

of appointment

Non-Executive Directors are engaged

by letters of appointment terminable on

one month’s written notice from either the

individual or the Company.

The Non-Executive Chairman and

Non-Executive Directors receive an annual

fee paid in monthly instalments. The fee for

the Non-Executive Chairman is set by the

Remuneration Committee and the fees for

the Non-Executive Directors are approved

by the Board, on the recommendation of the

Non-Executive Chairman and Executive

Directors.

Fees are set at a level required to attract

and retain individuals with the necessary

experience to advise and assist with

establishing the Company’s strategy

and monitoring its progress towards the

successful implementation of that strategy.

Fees are reviewed regularly to ensure they

keep pace with market practice and the

demands of the role.

CFO

Bonus

Fixed LTIP

Minimum

On-target

Maximum

+50% share

price growth

£’000

33% 27% 40% £1,355

27% 23% 50% £1,628

48%

23%

29%

100%

0 500 1,000

2,000

1,500

£445

£937

Governance

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92 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part two: Directors’

Remuneration Policy

continued

Non-Executive Directors’ letters

of appointment continued

Reasonable expenses incurred by

the Non-Executive Chairman and

the Non-Executive Directors in the

performance of their duties (including travel

and accommodation benefits) maybe

reimbursedor paid for directly by the

Company, as appropriate.

Each Non-Executive Director receives a

basic fee. Additional fees are paid to the

Non-Executive Chairman of the Board and

the Chairs of the Board Committees. In the

event that the Board requires the formation

ofan additional Board Committee, fees for

the Chairs (and, where relevant, membership)

of such Committee will be determined by the

Board at the time. Non-Executive Directors

do not participate in any of the Company’s

benefits or incentive plans.

Inspection of documents

andre-election of Directors

Directors’ service contracts and appointment

letters will be available for inspection prior to

and during the 2022 AGM.

All Directors are required to stand for

re-election annually in accordance with

theCompany’s Byelaws.

Termination payment policy

Any compensation payment made to

an Executive Director for termination of

employment will be determined with reference

to the terms of the individual’s service

agreement and the rules of any incentive

plan in which the individual is a participant.

Those rules will differentiate between “good”

and “bad” leavers. The Company’s default

policy is summarised in the table below,

with Committee discretion to determine an

alternative treatment as necessary:

Service contracts do not contain liquidated

damages clauses. There is no provision in

an Executive Director’s service agreement

providing for compensation for loss of office

or employment that occurs because of a

change of control. However, on a change in

control the following will normally happen:

• the cash element of any bonus will be

paid, at the discretion of the Committee,

on the date of the change of control. The

amount paid will be pro-rated and based on

performance to date. The deferred element

of the bonus will become exercisable on a

change of control and will vest; and

• vesting of LTIP awards will be accelerated:

the number of shares that vest will be

determined by the Committee taking

account of the Company’s performance

since the grant date and the proportion

of the normal vesting period which

haselapsed.

The Committee reserves the right to make

additional payments, where such payments

are made in good faith in discharge of an

existing legal obligation (or by way of damages

for breach of such an obligation) or by way

of settlement or compromise of any claim

arising in connection with the termination of

anExecutive Director’s office or employment.

When deciding on the amount of any payment

for loss of office, the Committee will seek

to minimise the cost to the Company to the

extent permitted by the circumstances of the

particular case.

External appointments

The Executive Directors may accept external

appointments with the prior approval of the

Board provided that such appointments do

not prejudice the individual’s ability to fulfil

their duties to the Company and the Group, as

a whole. Whether any related fees are retained

by the individual or remitted to the Company is

considered on a case-by-case basis.

Considerations of

shareholderviews

When determining remuneration, the

Committee takes into account the guidelines

of representative investor bodies and

proxy advisers and shareholder views.

TheCommittee is always open to feedback

from shareholders on remuneration policy

and arrangements and updates major

shareholders on any changes regularly.

Remuneration element Policy summary

Salary and benefits

A payment equivalent to monthly salary as if the executive had continued to be employed throughout

the contractual notice period. A lump sum may be paid in lieu of notice. Benefits will cease on

termination of employment.

The Committee will determine such mitigation as it considers fair and reasonable in each case.

Annual bonus

The Committee may make such payment as it deems appropriate taking into account the period up

to the date on which employment ceases and the level of performance achieved up to that date.

If the individual is deemed to be a “bad” leaver (for example, if dismissed owing to misconduct) no

bonus is payable for the year in which employment terminates.

2014 LTIP

For “good” leavers whose employment ceases owing to ill-health, the award shall vest in full on

the normal vesting date. For “good” leavers who leave owing to death, the award shall vest in full

immediately.

For “good” leavers due to other reasons which are considered to justify treatment as a good leaver,

the award shall vest on the normal vesting date based on performance and pro-rated for the time

served.

Awards granted to a “bad” leaver lapse on cessation of employment.

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 93

Part three: Annual Report

onRemuneration

Introduction

This part of the report is subject to an

advisory vote at the AGM on 24June2022.

GKP’s auditor has reported on those

sections (highlighted below) which the

Regulations require to be audited.

Remuneration Committee

membership during 2021

The terms of reference of the Committee,

reviewed annually, are available on the

Company’s website. As of 31 December 2021,

the Committee comprised three independent

Non-Executive Directors, all of whom had

served on the Committee for the full financial

year:

• Kimberley Wood (Chair);

• Martin Angle; and

• David Thomas.

The members had no personal financial

interest in the decisions made by the

Committee. There were no conflicts of interest

arising from cross-directorships and no

involvement in the Company’s day-to-day

operations.

The Chair of the Committee may ask

non-Committee members to attend meetings,

including other Board members and

members of the senior management team,

including the Chief Human Resources Officer.

TheCompany Secretary, or nominee, acts as

secretary to the Committee. Noindividuals

are involved in decisions relating to their own

remuneration. Details of the Committee’s

principal activities during the year ended

31December 2021 and attendance of

Committee members is included on page 81.

Advisers

The Committee is informed of key

developments and best practice in the field

of remuneration and obtains advice from

independent external consultants, when

required, on individual remuneration packages

and executive remuneration practices in

general. Aftera competitive tender process,

MercerLimited (“Mercer”) was appointed as

remuneration consultant from January2020

onwards.

Services provided to the Committee by

Mercer during 2021 included the provision

of advice on the Company’s equity plans and

executive remuneration levels; corporate

governance support and best practice

advice to the Remuneration Committee on

the drafting of the Directors’ remuneration

report; and other ad-hoc projects. Feespaid

to Mercer for services provided to the

Committee during the financial year were

£34,498. Mercer has no connections with the

Company or individual Directors other than an

agreement for the provision of market data for

the wider workforce.

Mercer is a signatory to the Remuneration

Consultants’ Code of Conduct

(www.remunerationconsultantsgroup.com)

which requires its advice be objective and

impartial.

Statement of shareholder voting

The following table shows the results of votes on the 2020 Directors’ remuneration report at the 2021 AGM held on 18 June 2021.

Tota l

votes cast

Votes Votes (excluding Votes

for against withheld) withheld

Directors’ remuneration report for year to 31 December 2020 97,828,443 6,774,781 104,603,224 14,865

(93.52%) (6.48%)

Governance

Strategic report Financials

94 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part three: Annual Report on Remuneration continued

Single total figure of remuneration table for the year (audited)

Salary Annual Total fixed Total variable

/fees Pension Benefits bonus Other

(2)

LTIP

(3)

Total remuneration remuneration

2021 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Executive Directors

Jon Harris 401 40 8 408 — — 857 449 408

Ian Weatherdon 364 36 25 295 — — 720 425 295

Jón Ferrier

(1)

38 6 3 — 451 3,593 4,091 498 3,593

Non-Executive Directors

Martin Angle 80 — — — — — 80 80 —

Jaap Huijskes 160 — — — — — 160 160 —

Garrett Soden 60 — — — — — 60 60 —

David Thomas 80 — — — — — 80 80 —

Kimberley Wood 70 — — — — — 70 70 —

Total 1,253 82 36 703 451 3,593 6,118 1,822 4,296

(1) Jón Ferrier left the Board effective 31 January 2021.

(2) Jón Ferrier’s payment relates to payment in lieu of notice and accrued holiday.

(3) LTIP figures represent value vesting from the VCP for Jón Ferrier.

Salary/ Annual Total fixed Total variable

fees Pension Benefits bonus Other LTIP

(3)

Total remuneration remuneration

2020 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Executive Directors

Jón Ferrier 450 68 34 — — — 552 552 —

Ian Weatherdon

(1)

355 36 10 — 129 — 530 530 —

Non-Executive Directors

Martin Angle 90 — — — — — 90 90 —

Jaap Huijskes 180 — — — — — 180 180 —

Garrett Soden

(2)

33 — — — — — 33 33 —

David Thomas 90 — — — — — 90 90 —

Kimberley Wood 80 — — — — — 80 80 —

Total 1,278 104 44 — 129 — 1,555 1,555 —

(1) Ian Weatherdon received £129k relocation expenses on his move from Hong Kong to London.

(2) Garrett Soden rejoined the Company in July 2020.

(3) No LTIP or VCP awards vested in 2020.

Historical CEO pay

2017 2018 2019 2020 2021

£’000 £’000 £’000 £’000 £’000

Single figure remuneration 768 973 824 552 857

Bonus percentage of maximum payable 50% 76% 50% 0% 81%

Vested LTIP awards as percentage of maximum 0% 0% 0% 0% 0%

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 95

Percentage change in Director remuneration

The following table shows the percentage change in the remuneration of the Directors between the years ended 31 December 2020 and

31December 2021 and the average percentage change for the remuneration in the Group as a whole excluding the CEO.

Annual

Salary/ Fees Benefits bonus

Executive Directors

Jon Harris

(1)

N/A N/A N/A

Ian Weatherdon

(2)

0% 60% N/A

Non-Executive Directors

Martin Angle (11%) 0%

Jaap Huijskes (11%) 0%

Garrett Soden (14%) 0%

David Thomas (11%) 0%

Kimberley Wood (13%) 0%

Group percentage change 7% 57% 97%

(1) Jon Harris joined the Company in January 2021.

(2) Ian Weatherdon did not receive a bonus for 2020.

TSR performance

The following charts compare the change in value of a £100 investment in the Company and in both the FTSE 250 Index and the FTSE Oil & Gas

Producers Index. The TSR performance has been assessed from 1 January 2017 due to a major repricing occurring in 2016: Total shareholder

return (“TSR”) from 1 January 2017 to 31 December 2021.

Total shareholder return (“TSR”) from 1 January 2017 to 31 December 2021

Relative importance of spend on pay

2021 2020 Percentage

$’000 $’000 change

Total employee pay 41,724 35,724 17%

Profit/(loss) after tax 164,597 (47,342) 448%

Gross operating costs

(1)

42,965 34,251 25%

Shareholder distributions

(2)

100,000 20,164 396%

(1) The Company reported oil production costs in previous years. Gross operating costs are deemed to be a better measure of the Company’s operational expenditure

and are also reported as part of the non-IFRS measure of gross operating costs per barrel in the Company’s financial statements.

(2) Shareholder distributions comprise payment of dividends in 2021 and share buybacks in 2020.

250

200

100

150

Value of £100 invested on 1 January 2017

Gulf Keystone

FTSE 250

FTSE UK Oil & Gas

Jan

2017

Jul

2021

Jul

2019

Jul

2018

Jan

2021

Jan

2022

Jul

2020

Jan

2020

Jul

2017

Jan

2018

Jan

2019

Governance

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96 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part three: Annual Report on Remuneration continued

Implementation of the Directors’ Remuneration Policy in 2021

Executive Directors’ base salary provision

There were no salary increases for Executive Directors during the financial year ending 31 December 2021.

Annual bonus plan (audited)

During 2021, GKP operated its annual executive performance bonus plan. The maximum bonus potential was 125% of base salary for the CEO and

100% of base salary for the CFO, with performance assessed against a combination of corporate metrics (weighted 80% of total) and individual

objectives (weighted 20%).

2021 performance elements

Individual performance 20%Corporate performance elements (80% of bonus)

Corporate performance elements (80% of bonus)

Production 25%Safety and sustainability 25% Value creation 30% Financial 20%

The following table describes the corporate KPIs set for 2021.

Results

Weighted

Metric KPIs Weighting Score score

Safety and Zero harm in operations and delivery 7.5% 100% 7.5%

sustainability ESG 3.75% 90% 3.4%

Human capital 3.75% 90% 3.4%

HSE improvement plan 5% 90% 4.5%

Safety performance (TRIFR) 5% 75% 3.8%

Value creation Shareholder value and project delivery 15% 20% 3%

Recommence 55k expansion project 15% 100% 15%

Financial Financial and distributions strategy 10% 100% 10%

Direct Capex 2.5% 12% 0.4%

Direct Opex 2.5% 84% 2.1%

Direct G&A 2.5% 70% 1.8%

Staff costs 2.5% 90% 2.3%

Production Gross production (bopd) – annual average 20% 88.8% 17.8%

Maintenance 5% 100% 5%

Total 100% 80%

The executives are commended for the good performance achieved against the HSE, Financial and Production KPIs together with successfully

recommencing the 55k expansion project. The Remuneration Committee approved the executive bonus on 80% for corporate performance

objectives.

Individual performance objectives (20% of bonus)

With respect to the personal element of the annual bonus for both the CEO and the CFO, the Committee considered that the successes of 2021,

including the early commencement of drilling activities, the payment of $100 million in dividends, material progress on the FDP and the GMP, as

well as the development of an ESG strategy, were substantively driven by the leadership and efforts of both executives and, as such, a payment

above the target level but below the maximum possible was warranted.

Overall outcome

Reflecting performance, Executive Directors received the following bonus awards for 2021:

Bonus % of

Executive award base salary

CEO £408,442 101%

CFO £294,840 81%

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 97

Pension provision for Executive Directors (audited)

In lieu of a pension provision, both the CEO and CFO received a taxable cash allowance equivalent to 10% of base salary. Theoutgoing CEO

received a taxable cash allowance equivalent to 15% of base salary.

Benefits (audited)

Benefits received by the CEO included private medical insurance totalling £8,000. The CFO received private medical insurance, death in service

and income protection insurance totalling £25,000.

Value Creation Plan (“VCP”) awards granted/vested in 2021 (audited)

Following measurement dates in May 2018 and April 2019, the number of nil-cost options received by the former CEO and former CFO

is 3,769,595 and 3,247,656 respectively. No further nil-cost options can be awarded under the plan rules. Following assessment of TSR

performance at the fourth measurement date in May 2021, 50% of the nil-cost options vested. Sustained TSR performance will be tested

againin2022. This will be subject to disclosure at that time and in the next Annual Report on Remuneration.

LTIP awards granted/vested in 2021 (audited)

The CEO and CFO received awards of 470,325 and 305,711 shares respectively, equivalent to 200% and 150% of salary each, on 1 April 2021.

Theawards are subject to both absolute and relative total shareholder return (“TSR”) targets being met over a period of three years, each measure

having a 50% weighting.

No awards vested or were exercised by Executive Directors.

Leaver arrangements for Jón Ferrier (audited)

Jón Ferrier retired and stepped down from the Board on 31 January 2021 and was accorded good leaver status. Details of Mr Ferrier’s leaver

arrangements, which are in accordance with the Remuneration Policy approved by shareholders at the 2019 AGM, are set out below.

• Mr Ferrier was paid in full until his departure date on 31 January 2021. He received £417,692 in lieu of notice and £33,385 in lieu of vacation due

but not taken in line with the Company’s accumulated leave policy. Pension and other benefits ceased on his departure date.

• Mr Ferrier will not receive a pro-rated annual bonus in respect of the year ending 31 December 2021.

• As a good leaver, Mr Ferrier retained 3,769,595 unvested nil-cost performance-based share awards, granted under the VCP, 50% of which

vested in May 2021. The final measurement date will occur at the end of April 2022.

Other payments to past Directors and for loss of office (audited)

VCP awards vested for former CEO Jón Ferrier of £3,593,000 and former CFO Sami Zouari of £2,976,000.

Statement of Directors’ shareholdings and share interests (audited)

Executive Directors are required to build and maintain a shareholding in the Company of at least 200% of salary within five years of appointment.

The net value of vested but unexercised share awards are included for this purpose and individuals have five years in which to acquire the required

levels. Participation in long-term incentive schemes may be scaled back or withheld if the requirements are not met or maintained. The new

Remuneration Policy set out on pages 87 to 92 includes post-exit guidelines.

Directors’ shareholdings and share interests as at 31 December 2021 were as follows:

Unvested Unvested Total

scheme scheme conditional

Shareholding Vested but interests interests not and

requirement Beneficially unexercised subject to subject to unconditional

as a % owned scheme performance performance interest in

of salary shares interests conditions conditions shares

Executive Directors

Jon Harris 200% 30,000 — 470,325 — 500,325

Ian Weatherdon 200% 50,112 — 1,039,582 — 1,089,694

Non-Executive Directors

David Thomas — — — — — —

Jaap Huijskes — — — — — —

Martin Angle — — — — — —

Kimberley Wood — — — — — —

Garrett Soden — 70,000 — — — 70,000

— 150,112 — 1,509,907 — 1,660,019

Governance

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98 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Remuneration Committee report continued

Part three: Annual Report on Remuneration continued

Implementation of the Directors’ Remuneration Policy in 2022

Base salaries and benefits

In light of the current business context and the detailed remuneration benchmarking review, the Remuneration Committee decided to award the

CEO an increase in salary of 4.8%; no increase in salary was awarded to the CFO for 2022. The salary review budget for all other employees,

including senior managers, was 4-6% of payroll for 2022.

Annual bonus

Payments under the executive annual bonus scheme will be determined based on performance against a range of KPIs.

Historically, the same Company KPIs have been used for both the executive and employee bonus plans for which all Company employees are

eligible. For 2022, we will again run the plans consistently and operate on the principle that Executive Directors will be treated no more favourably

than other employees.

The scorecard that will be used is as follows. Targets are commercially sensitive and will be disclosed in the 2022 annual report and accounts.

Category KPI Weighting

Safety and sustainability Zero harm, HSE improvement and safety performance measures (TRIFR) 20%

ESG roadmap implementation

Value creation Shareholder value 20%

Project approval and delivery

Production Annual average production (bopd) 25%

Maintenance

Financial Financial and distributions strategy 25%

Project implementation and delivery

People, culture, values Build workforce capability to include localisation 10%

Advance diversity, equity and inclusion

Drive employee engagement and well-being

LTI P

Jon Harris and Ian Weatherdon will be eligible to receive an LTIP grant of 200% and 150% of base salary, respectively, which is expected to be granted

after the announcement of the 2021 results. The following three-year TSR performance conditions will be attached to the vesting of the award.

Threshold performance Maximum performance

Performance measure Weighting (30% vesting) (100% vesting)

Absolute TSR 50% 8% p.a. compound 12% p.a. compound

Relative TSR 50% Median vs. peer group Upper quartile vs. peer group

Linear interpolation will be used for performance between threshold and maximum. There will be no payment for the relevant tranche where

performance is below threshold.

Relative TSR will be compared to that achieved over the same period against listed companies selected by the Remuneration Committee

on the basis of their relevance and comparability. The peer group will be confirmed in the relevant RNS and in next year’s Annual Report on

Remuneration.

Subject to shareholder approval, any awards under the LTIP made after the 2022 AGM will be based on the new Remuneration Policy set out on

pages 87 to 92.

The Committee has the discretion to review vesting outcomes to ensure a fair reflection of performance. In making this assessment, the

Committee will consider, amongst other factors, the underlying performance of the Company over the period including operational milestones,

production levels, safety, individual performance and the broader experience of stakeholders over the period.

Further details will be provided in next year’s Directors’ remuneration report.

This Directors’ remuneration report was approved by the Board on 29 March 2022 and signed on its behalf by:

Kimberley Wood

Chair of the Remuneration Committee

29 March 2022

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 99

The Directors are pleased to present their report on the affairs of

the Group, together with the consolidated financial statements of

the Company and auditor’s report, for the year ended 31 December

2021. A review of the business is set out in the preceding sections of

this annual report and accounts, including the Chairman’s statement,

ChiefExecutive Officer’s review, Financial review and Operational

review, which are incorporated into this report by reference.

TheCorporate governance report also forms part of this report.

Results and dividends

The Group’s financial results for the year ended 31 December 2021

areset out in the consolidated financial statements.

The Group made a profit after taxation for the year of $164.6 million

(2020: loss of $47.3 million). The Directors resumed the dividend

programme of at least $25 million per year. During 2021, an ordinary

dividend of $25 million was paid, followed by a special dividend of

$25million and an interim dividend of $50 million (2020: no dividends

were paid). To date in 2022, an interim dividend of $50 million has been

paid. A further $65 million interim dividend is expected to be paid on

13May 2022, based on a record date of 29 April 2022 and ex-dividend

date of 28 April 2022. The final $25 million 2021 ordinary dividend will

be paid subject to approval at the AGM on 24 June 2022.

Capital structure

Full details of the authorised and issued share capital, together

with movements in the Company’s issued share capital during the

year, are shown in note 20 to the consolidated financial statements.

Thebusiness is financed by means of debt (see note 16 to the

consolidated financial statements) and external share capital.

Share rights and restrictions

There are no specific restrictions on the size of a holding or on the

transfer of common shares, both of which are governed by the general

provisions of the Company’s Byelaws and prevailing legislation.

TheDirectors are not aware of any agreements between holders of

the Company’s common shares that may result in restrictions on the

transfer of securities or on voting rights. No person has any special

rights of control over the Company’s share capital and all issued

common shares are fully paid.

Details of the employee share schemes are set out in note 24 to the

consolidated financial statements and details of the Directors’ awards

are included in the Remuneration Committee report.

Voting rights and Byelaw amendments

The Company’s Byelaws may only be revoked or amended by the

shareholders of the Company by a resolution passed by a majority of

not less than three-quarters of such shareholders as vote in person or,

where proxies are allowed, by proxy at a general meeting. Resolutions

put to the vote of any general meeting are decided on a show of hands

unless a poll is demanded in accordance with the Company’s Byelaws.

The Company’s Byelaws are available on the Company’s website at

www.gulfkeystone.com.

Directors

With regard to the appointment and replacement of Directors, the

Company is governed by its Byelaws, the Companies Act (Bermuda)

and related legislation. All of the Directors are required to stand for

re-election by the shareholders each year at the AGM.

Directors’ indemnities

The Company has made qualifying third-party indemnity provisions for

the benefit of its Directors during the year and these remain in force at

the date of this report.

Directors’ interests in shares

As at 31 December 2021, the following Directors who held office had

interest in the common shares of the Company

(1)

• Jon Harris (Chief Executive Officer) – 30,000 common shares;

• Ian Weatherdon (Chief Financial Officer) – 50,112 common

shares;and

• Garrett Soden (non-independent Non-Executive Director) –

70,000common shares.

At the date of this report, the Employee Benefit Trust (“EBT”) and

ExitEvent Trustee held 0.2 million (2020: 0.1 million) common shares

oftheCompany.

Directors’ report

(1) Includes common shares held directly, by family members and through the Gulf Keystone EBT which are held subject to the discretion of the EBT Trustee.

Governance

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100 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Directors’ report continued

Significant shareholdings

As at 28 February 2022, being the date of the most recent analysis of the Company’s share register, the Company discloses the following

significant shareholdings:

Number of Percentage

common of issued

Shareholder shares share capital

Lansdowne Partners Austria GmbH 32,500,000 15.21

Van Lanschot Kempen NV 23,950,695 11.21

Mr Gertjan Koomen 10,068,552 4.71

BlackRock Investment Management (UK) Ltd. 9,290,778 4.35

Hargreaves Lansdown Stockbrokers Ltd. 8,969,330 4.20

Interactive Investor 8,408,999 3.93

Dimensional Fund Advisors LP 8,361,221 3.91

InsingerGilissen Bankiers NV 8,307,232 3.89

Acadian Asset Management LLC 7,490,897 3.50

Société Générale 5,999,762 2.81

The Company’s share register analysis was provided by Investor Insight, based on information available at the time of publication.

Going concern

The Group’s business activities, together with the factors likely to

affect its future development, performance and position, are set out

in the Chairman’s statement, the Chief Executive Officer’s review,

the Operational review and the Management of principal risks and

uncertainties. The financial position of the Group at the year end and

itscash flows and liquidity position are included in the Financial review.

As at 29 March 2022, the Group had $182.7 million of cash. TheGroup

continues to closely monitor and manage its liquidity. Cash forecasts

are regularly produced and sensitivities run for different scenarios

including, but not limited to, change in commodity prices, different

production rates from the Shaikan block, cost contingencies,

disruptions to revenue receipts, impact of climate change and

geopolitical risks on the Group’s operations, etc. In the current

year, these have included both the Iraqi Supreme Court ruling on

15February2022 and export route availability as a result of the

evolvingsanctions situation due to the Russian invasion of Ukraine,

as further described in note 29. The Group’s forecasts, taking into

accountthe applicable risks, stress test scenarios and potential

mitigating actions, show that it has sufficient financial resources

forthetwelve months from the date of approval of the 2021 annual

reportsand accounts.

Based on the analysis performed, the Directors have a reasonable

expectation that the Group has adequate resources to continue to

operate for the foreseeable future. Thus, the going concern basis

of accounting is used to prepare the annual consolidated financial

statements.

Significant agreements – change of control

There are a number of agreements that take effect, alter or terminate

upon a change of control of the Group, including the Shaikan PSC and

employee share plans. The Directors are not aware of any agreements

between the Group and its Directors or employees that provide for

compensation for loss of office or employment that occurs because

ofa takeover bid.

Auditor

Each of the persons who is a Director at the date of approval of this

annual report and accounts confirms that:

• so far as the Director is aware, there is no relevant audit information

of which the Group’s auditor is unaware; and

• the Director has taken all the steps that he/she ought to have taken

as a Director in order to make himself/herself aware of any relevant

audit information and to establish that the Group’s auditor is aware

ofthat information.

On behalf of the Board

Jon Harris

Chief Executive Officer

29 March 2022

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 101

Directors’ responsibilities statement

The Directors are responsible for preparing the annual report and the

financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for

each financial year. Under that law the Directors are required to prepare

the Group financial statements in accordance with United Kingdom

adopted International Financial Reporting Standards (“IFRSs”) and

Article 4 of the International Accounting Standards (“IAS”) Regulation.

Under IAS 1 the Directors must not approve the accounts unless they

are satisfied that they give a true and fair view of the state of affairs of

the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, International Accounting

Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and

understandableinformation;

• provide additional disclosures when compliance with the specific

requirements in IFRSs are insufficient to enable users to understand

the impact of particular transactions, other events and conditions on

the entity’s financial position and financial performance; and

• make an assessment of the Company’s ability to continue as a

goingconcern.

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Company’s

transactions and disclose with reasonable accuracy at any time the

financial position of the Company and enable them to ensure that the

financial statements comply with the Bermuda Companies Act 1981.

They are also responsible for safeguarding the assets of the Company

and hence for taking reasonable steps for the prevention and detection

of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of

the corporate and financial information included on the Company’s

website. Legislation in the United Kingdom governing the preparation

and dissemination of financial statements may differ from legislation in

other jurisdictions.

Directors’ responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with United

Kingdom adopted International Financial Reporting Standards,

givea true and fair view of the assets, liabilities, financial position

andprofit or loss of the Company and the undertakings included

inthe consolidation taken as a whole;

• the Strategic report includes a fair review of the development and

performance of the business and the position of the Company and

the undertakings included in the consolidation taken as a whole,

together with a description of the principal risks and uncertainties

that they face; and

• the annual report and financial statements, taken as a whole,

arefair, balanced and understandable and provide the information

necessary for shareholders to assess the Company’s position and

performance, business model and strategy.

This responsibility statement was approved by the Board of Directors

on 29 March 2022 and is signed on its behalf by:

Jon Harris

Chief Executive Officer

29 March 2022

Ian Weatherdon

Chief Financial Officer

29 March 2022

Governance

Strategic report Financials

102 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Report on the audit of the financial statements

1. Opinion

In our opinion the financial statements of Gulf Keystone Petroleum Limited (the “Parent Company”) and its subsidiaries (the “Group”):

• give a true and fair view of the state of the Group’s affairs as at 31 December 2021 and of the Group’s profit for the year then ended;

• have been properly prepared in accordance with United Kingdom adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Bermuda Companies Act 1981.

We have audited the financial statements which comprise:

• the consolidated income statement;

• the consolidated statement of comprehensive income;

• the consolidated balance sheet;

• the consolidated statement of changes in equity;

• the consolidated cash flow statement;

• the summary of significant accounting policies; and

• the related notes 1 to 29.

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted international

accounting standards.

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities

under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the

financial statements in the UK, including the Financial Reporting Council’s (the “FRC’s”) Ethical Standard as applied to listed entities, and we

have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Summary of our audit approach

Key audit matters

The key audit matters that we identified in the current year were:

• revenue recognition; and

• carrying value of oil and gas assets.

Within this report, key audit matters are identified as follows:

NEW

Newly identified

Increased level of risk

Similar level of risk

Decreased level of risk

Materiality

The materiality that we used for the Group financial statements was $8 million which was determined on the

basis of1.5% of net assets.

Scoping

The Group’s business is a single component, and therefore all of the operations of the Group were subject

toafull scope audit by the UK audit team.

Significant changes

in our approach

There were no significant changes in our audit approach, including the identified key audit matters, compared

to the prior year.

Independent auditor’s report

to the members of Gulf Keystone Petroleum Limited

Governance

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 103

4. Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation

ofthe financial statements is appropriate.

Our evaluation of the Directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included:

• assessing the Group’s cash flow forecasts by comparison to actual cash flow performance in 2021;

• assessing the impact of COVID-19 and climate change on the Group;

• benchmarking the oil price assumption against external data and historical levels;

• evaluating the Group’s financing facility and assessing its committed nature, repayment terms and covenants;

• assessing the liquidity and covenant headroom within the model based on the cash flow forecasts and reviewing the model’s mechanical

accuracy;

• assessing the sensitivities run by the Directors;

• assessing the mitigating actions that could be taken by the Directors to maximise liquidity headroom including not paying dividends

andareduction in uncommitted capital expenditure; and

• assessing the appropriateness of the going concern disclosure.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or

collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from when

the financial statements are authorised for issue.

In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw

attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt

thegoing concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of

thecurrent period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.

These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing

the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do

not provide a separate opinion on these matters.

5. Key audit matters

5.1. Revenue recognition

Key audit matter

description

Revenue totalling $301.4 million (2020: $108.5 million) has been recognised during the year, relating to oil sales

and related hedging activities.

The Group has continued to estimate revenue on a “cash assured” basis, in accordance with the terms of the

Crude Oil Export Sales Agreement which has been governing Shaikan crude oil sales since 1 October 2017.

Receipt of outstanding amounts in relation to November 2019 to February 2020 revenue commenced in

March 2021 and continued in line with the mechanism proposed by the Ministry of Natural Resources (“MNR”),

the outstanding balance as at 31 December 2021 amounted to $43.1 million (2020: $77.3 million).

The key judgements in relation to revenue are:

• whether any circumstances occurred during the period that would trigger the Group to change its revenue

accounting policy from “cash assured” to an accruals basis;

• the mechanical accuracy of the complex invoice calculations, and whether these are in line with the Shaikan

Production Sharing Contract (“PSC”) and the Crude Oil Export Sales Agreement; and

• the extent of the risk in relation to unpaid revenue amounts, in particular the accuracy of the expected credit

loss(“ECL”) calculation and the appropriateness of the assumptions used, notably the timing of payments,

probability of default and loss given default.

In assessing whether the cash assured accounting policy basis remains appropriate, with the continued

non-recognition of certain historical revenues, the Directors note the Crude Oil Export Sales Agreement

was only effective from 1 October 2017 and does not apply to sales earlier than that date and the proposed

amendments to the Shaikan PSC are still under discussion between the parties and subject to change.

Further details of the key judgements are disclosed in the Audit and Risk Committee report on page 75 and in

the Critical accounting estimates and judgements disclosure on page 120. Revenue is disclosed in note 2 to the

financial statements.

104 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

5. Key audit matters continued

5.1. Revenue recognition

How the scope of

our audit responded

to the key audit

matter

We have assessed the appropriateness of the revenue recognition policy in light of current year developments

and recalculated the revenue recognised for oil sales for the year. In particular we have performed the

following:

• obtained an understanding of relevant controls over the revenue recognition process, including management

review controls;

• challenged management on its assessment of the accounting implications with reference to the relevant

accounting standard, being IFRS 15 Revenue from Contracts with Customers;

• recalculated the expected monthly entitlement revenue for the oil sales based on production in the year per the

approved delivery reports and average Brent prices, less quality and transportation discounts, in line with the

PSC and the Crude Oil Export Sales Agreement;

• vouched all cash receipts in 2021 and reviewed post year-end bank statements to confirm the extent to which

theoutstanding receivable as at 31 December 2021 has subsequently been received; and

• challenged the ECL assumptions used, through benchmarking with external sources, and recalculating

theprovision.

Key observations

Based on our analysis, recognising revenue on a “cash assured” basis is still appropriate under the

Crude Oil Export Sales Agreement. We concur with management’s treatment of sales for the year ended

31December2021 and that it is appropriate to recognise $301.4 million of revenue. We concur with the

appropriateness of the ECL calculation and the carrying value of receivables.

5.2. Carrying value of oil and gas assets

Key audit matter

description

In accordance with IAS 36 Impairment of Assets, management is required to perform a review of any producing

assets (being the Shaikan Field) for indicators of impairment at each reporting date. The assessment of the

carrying value of producing assets requires management to exercise judgement in identifying the indicators of

impairment, such as a decrease in oil price or a downgrade of proved and probablereserves.

As part of its impairment indicators evaluation management considered key developments that occurred

during 2021 including the impact of climate change, oil prices, field productivity, ongoing negotiations for a new

Field Development Plan (“FDP”) and impacts of local and global geopolitical factors. Management concluded

that no impairment indicators were present as at 31 December 2021.

In order to further support this conclusion, an updated valuation model was prepared, based on the latest

estimate of future production and expenditure levels as shown in the draft FDP submitted to the MNR in

November 2021 and also including sensitivities, which supported the carrying value of oil and gas properties.

The calculation of the recoverable amount requires judgement in estimating future oil prices, the applicable

asset-specific discount rate and the cost and production profiles of reserves’ estimates. The impact of climate

change on commodity prices and investment decisions was also considered, including the estimated cost

of installing a gas reinjection system to reduce carbon emissions. As a result of this, the assessment of the

recoverable amount of Shaikan remains a key judgement. We also considered there to be a potential fraud

risk that the assumptions, such as the oil price and discount rate, applied to the impairment assessment

could be subject to conscious or unconscious bias. In addition, as disclosed in the Critical accounting

estimates and judgements on page 120 and note 29 to the financial statements, management considered

the Iraqi Supreme Court ruling on 15 February 2022 and concluded that it is not possible to determine the

potential future implications on headroom at present, although to date it has not had any adverse impact on

theGroup’soperations.

Further details of the key judgements are disclosed in the Audit and Risk Committee report on page 75 and in

the Critical accounting estimates and judgements disclosure on page 120. Property, plant and equipment is

disclosed in note 11 to the financial statements.

Independent auditor’s report continued

to the members of Gulf Keystone Petroleum Limited

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 105

How the scope of

our audit responded

to the key audit

matter

Our audit work assessed the reasonableness of management’s key assumptions in determining that no

impairment indicators were present as at 31 December 2021 for the Shaikan asset.

Specifically our work included, but was not limited to, the following procedures:

• obtaining an understanding of relevant controls over the impairment process, including management review

controls;

• performing an independent assessment of impairment indicators;

• holding meetings with key operational and finance staff to understand the current status and future intentions

forthe Shaikan Field, including the current status of FDP negotiations;

• benchmarking and analysis of oil price assumptions against forward curves and other market data;

• recalculating and benchmarking of discount rates applied, with involvement from our fair value specialists;

• comparing forecasted production and expenditure levels per the valuation model with actual historical

production and the estimates set out in the draft FDP submitted to the MNR in November 2021;

• assessing the sensitivity analysis performed on the key assumptions in the valuation model to determine

whether there was headroom to support Shaikan’s book value under certain downside scenarios, including

those relating to a reduced oil price;

• considering the potential impact of climate change including the impact on headroom of a reduced oil price,

thepotential impact of the introduction of a carbon tax in Kurdistan and increasing expenditure requirements;

• considering the potential consequences of non-adjusting post balance sheet events, including the Iraqi

Supreme Court ruling on 15 February 2022 and export route availability as a result of the evolving sanctions

situation due to the Russian invasion of Ukraine; and

• assessing the relevant disclosures in relation to the carrying value of oil and gas assets.

Key observations

Overall, we are satisfied that the conclusion that no indicators of impairment were present has been

determined in accordance with the requirements of IAS 36 Impairment of Assets and that the related

disclosures are appropriate.

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a

reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in

evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements

Materiality

$8.0 million (2020: $6.7 million)

Basis for determining

materiality

1.5% of net assets (2020: 1.5% of net assets)

Rationale for the

benchmark applied

We consider that net assets is of particular relevance to users of the financial statements and is a key

measure of performance used by the Group. The chosen materiality figure represents 5% of profit before tax.

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected

misstatements exceed the materiality for the financial statements as a whole.

Group financial statements

Performance

materiality

70% (2020: 60%) of Group materiality

Basis and rationale for

determining

performance

materiality

In determining performance materiality, we considered the following factors:

• the quality of the control environment and conclusions from our testing of Group-wide controls;

• the low level of historical uncorrected misstatements within the consolidated financial statements;

• the lack of significant changes in the business in the year which would impact on our ability to forecast the

expected level of misstatement; and

• the reduced impact of COVID-19 on the control environment during the year.

106 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

6. Our application of materiality continued

6.3. Error reporting threshold

We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of $400k (2020: $335k),

as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit and Risk

Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Identification and scoping of components

Our audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the

risks of material misstatement. Our audit planning identified the Group’s business to be a single component, and therefore all of the operations

of the Group were subject to a full scope audit by the UK audit team. Our audit work was performed primarily at the Group’s head office in

London. Specified audit procedures in respect of the Group’s property, plant and equipment and inventory balances were performed by a

Deloitte member firm based in Kurdistan under the direction of the UK audit team.

7.2. Our consideration of climate-related risks

Management has considered climate change as part of their risk assessment process when considering the principal risks and uncertainties

facing the Group. This is set out in the Strategic report, Management of principal risks and uncertainties and Summary of significant

accounting policies. From the financial statements’ perspective, these risks have been focused on the carrying value of producing oil and gas

assets. This is consistent with our evaluation of the climate-related risks facing the Group and is linked to the key audit matter as highlighted in

section 5.2 above, where we have described both the risks related to these assumptions and our audit procedures in relation to the challenge

of these assumptions. Our climate change procedures also included:

• assessing the impact, with the involvement of our environmental, social and governance (“ESG”) specialists, on our risk assessment and

plannedaudit procedures, for example how physical and transition risks translate to financial implications and the potential impact of these

onthe underlying account balances and disclosures;

• assessing whether the impacts of climate on the range of estimates and assumptions made by management are reasonable; and

• reading the climate-related disclosures, with the involvement of our ESG specialists, in the Strategic report to consider whether they are

materially consistent with the financial statements and our knowledge obtained in the audit.

As described above, we have considered the potential impacts of climate change as part of our key audit matter relating to the carrying value

of oil and gas assets. We also considered the potential impact of climate change on the going concern assumption, by including the impact on

liquidity headroom of a reduced oil price.

8. Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report

thereon. The Directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,

we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the

financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a

material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Independent auditor’s report continued

to the members of Gulf Keystone Petroleum Limited

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 107

9. Responsibilities of Directors

As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial

statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to

enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing

as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate

the Group or to cease operations, or have no realistic alternative but to do so.

10. Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,

but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expectedto influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

11. Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities, including fraud, is detailed below.

11.1. Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and

regulations, we considered the following:

• the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration

policies,key drivers for Directors’ remuneration, bonus levels and performance targets;

• results of our enquiries of management and the Audit and Risk Committee about their own identification and assessment of the risks

ofirregularities;

• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:

• identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and

• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.

• the matters discussed among the audit engagement team and relevant internal specialists, including fair value, ESG and financial instrument

specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified

the greatest potential for fraud in the following areas: revenue recognition and the carrying value of oil and gas assets. In common with all

audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws

and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and

regulations we considered in this context included the Bermuda Companies Act and the UK Listing Rules.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance

with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s operating licence

and environmental regulations, as well as relevant legal regulations in both Kurdistan and Iraq.

108 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

11. Extent to which the audit was considered capable of detecting irregularities, including fraud continued

11.2. Audit response to risks identified

As a result of performing the above, we identified revenue recognition and the carrying value of oil and gas assets as key audit matters related

to the potential risk of fraud or non-compliance with laws and regulations. The key audit matters section of our report explains the matters in

more detail and also describes the specific procedures we performed in response to those key audit matters.

In addition to the above, our procedures to respond to risks identified included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws

and regulations described as having a direct effect on the financial statements;

• enquiring of management, the Audit and Risk Committee and in-house legal counsel concerning actual and potential litigation and claims;

• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to

fraud;

• reading minutes of meetings of those charged with governance; and

• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;

assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale

of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal

specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Report on other legal and regulatory requirements

12. Opinion on other matter prescribed by our engagement letter

In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the provisions of the

UK Companies Act 2006 as if that Act had applied to the Company.

13. Corporate governance statement

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate governance

statement is materially consistent with the financial statements and our knowledge obtained during the audit:

• the Directors’ statement with regard to the appropriateness of adopting the going concern basis of accounting and any material uncertainties

identified set out on page 114;

• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate

set out on page 56;

• the Directors’ statement on fair, balanced and understandable set out on page 101;

• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 46 to 55;

• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out

onpages46to 55; and

• the section describing the work of the Audit and Risk Committee set out on pages 73 to 76.

14. Use of our report

This report is made solely to the Company’s members, as a body, in accordance with section 90 of the Bermuda Companies Act 1981.

Ouraudit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in

an auditor’s report and/or those matters we have expressly agreed to report to them on in our engagement letter and for no other purpose.

Tothefullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s

members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (“FCA”) Disclosure Guidance and Transparency Rule (“DTR”) 4.1.14R, these financial

statements form part of the European Single Electronic Format (“ESEF”) prepared Annual Financial Report filed on the National Storage

Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (“ESEF RTS”). This auditor’s report provides no

assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.

David Paterson ACA (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

29 March 2022

Independent auditor’s report continued

to the members of Gulf Keystone Petroleum Limited

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 109

2021 2020

Notes $’000 $’000

Revenue 2 301,389 108 ,449

Cost of sales 3 (111,72 1) (121,507)

Decrease/(increase) of impairment provision on trade receivables 14 7, 0 6 5 (6, 7 76)

Gross profit/(loss) 196,733 (1 9 , 8 3 4)

Other general and administrative expenses 4 (1 3 , 6 4 3) (12,312)

Share option related expenses 5 (8,490) (1 , 2 3 5)

Profit/(loss) from operations 1 74 , 6 0 0 (3 3 , 3 81)

Finance revenue 7 41 9 1 , 278

Finance costs 7 (11 , 3 5 3) (14 , 0 87)

Foreign exchange gains/(losses) 57 (8 41)

Profit/(loss) before tax 1 63 ,72 3 (4 7 ,031)

Tax credit/(expense) 8 8 74 (311)

Profit/(loss) after tax for the year 16 4,597 (4 7, 3 4 2)

Profit/(loss) per share (cents)

Basic 9 7 7. 1 4 (2 2. 4 5)

Diluted 9 73 .04 (2 2. 4 5)

Consolidated statement of comprehensive income

For the year ended 31 December 2021

2021 2020

$’000 $’000

Profit/(loss) after tax for the year 164,597 (47, 3 4 2)

Items that may be reclassified to the income statement in subsequent periods:

Fair value losses arising in the period (2 , 021) (1 ,7 3 2)

Cumulative losses arising on hedging instruments reclassified to revenue 3 , 75 3 —

Exchange differences on translation of foreign operations (2 5 4) 707

Total comprehensive income/(expense) for the year 166 , 075 (4 8 , 3 67)

Consolidated income statement

For the year ended 31 December 2021

110 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

31 December 1 January

31 December 2020 2020

2021 Restated

(1)

Restated

(1)

Notes $’000 $’000 $’000

Non-current assets

Intangible assets 10 3, 583 9 3 3 4 5 4

Property, plant and equipment 11

404,205

405,469

(1)

432,507

(1)

Trade receivables 14 — 59,096 —

Deferred tax asset 18 1, 385 617 84 9

4 0 9 ,1 73 46 6,115 4 3 3 , 81 0

Current assets

Inventories 13 6,018

5,760

(1)

6,135

(1)

Trade and other receivables 14 179 , 200 3 7, 8 3 2

103,181

Derivative financial instruments 19 — 977 —

Cash and cash equivalents 169, 866 14 7 ,8 26 19 0,762

3 55 ,084 192, 395 300,0 78

Total assets 764 , 2 57 658,510 733, 888

Current liabilities

Trade and other payables 15 (98,80 0) (69, 123) (83, 981)

Non-current liabilities

Trade and other payables 15 (789) (1, 0 5 8) (1 , 9 8 9)

Borrowings 16 (9 9 ,1 2 3) (9 8 ,6 3 3) (9 8 ,192)

Provisions 17 (4 3,84 1) (35 ,67 1) (29, 807)

(143 ,753) (1 3 5 , 3 6 2) (1 2 9, 9 8 8)

Total liabilities (242,553) (204 ,4 8 5) (213 , 96 9)

Net assets 521 ,70 4 45 4,025 519,919

Equity

Share capital 20 21 3,7 31 211 , 371 22 9, 4 30

Share premium 20 74 2 , 9 1 4 84 2, 914 871 ,675

Treasury shares 20 — (2 ,5 92) (29,7 49)

Cost of hedging reserve — (1 ,7 3 2) —

Exchange translation reserve (2 ,768) (2, 514) (3, 22 1)

Accumulated losses (4 3 2 ,1 7 3) (59 3 ,42 2) (5 4 8 , 21 6)

Total equity 521 ,70 4 45 4,025 519 ,919

(1) The comparative consolidated balance sheet has been restated to reflect a reclassification of inventory items that are to be used in the development of the

Shaikan Field to property, plant and equipment. See note 28 for details regarding the restatement.

The financial statements were approved by the Board of Directors and authorised for issue on 29 March 2022 and signed on its behalf by:

Jon Harris Ian Weatherdon

Chief Executive Officer Chief Financial Officer

Consolidated balance sheet

As at 31 December 2021

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 111

Attributable to equity holders of the Company

Cost of Exchange

Share Share Treasury hedging translation Accumulated Total

capital premium shares reserve reserve losses equity

Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 January 2020 22 9,4 30 871 ,675 (29,7 49) — (3 ,2 21) (548 , 216) 519, 919

Net loss for the year — — — — — (47 ,342) (47 ,342)

Cash flow hedge – fair value movements — — — (1,7 32) — — (1,7 32)

Exchange difference on translation

of foreign operations — — — — 707 — 707

Total comprehensive (expense)/

income for the year — — — (1 ,732) 707 (4 7 , 342) (48 ,3 67)

Employee share schemes 24 — — — — — 2 ,6 37 2,6 37

Share buyback 20 — — (20 ,164) — — — (2 0,16 4)

Share options exercised — — 5 01 — — (50 1) —

Share cancellation 20 (18 , 05 9) (28 ,761) 46 , 82 0 — — — —

Balance at 31 December 2020 211 , 371 8 42 , 914 (2, 59 2) (1,732) (2 ,514) (593 , 422) 4 54 ,02 5

Net profit for the year — — — — — 16 4 ,5 97 16 4, 5 97

Cash flow hedge – fair value movements — — — 1 ,7 32 — — 1,7 32

Exchange difference on translation

of foreign operations — — — — (25 4) — (2 54)

Total comprehensive income/

(expense) for the year — — — 1 ,732 (2 54) 1 64, 597 166 ,075

Dividends paid 25 — (100, 00 0) — — — — (1 00 ,00 0)

Employee share schemes 24 — — — — — 1, 604 1 ,6 04

Share options exercised — — 2 , 59 2 — — (2, 5 92) —

Share issues 20 2 ,3 60 — — — — (2 , 36 0) —

Balance at 31 December 2021 213,731 742,914 — — (2 ,768) (4 32 ,173) 521,704

Consolidated statement of changes in equity

For the year ended 31 December 2021

112 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Consolidated cash flow statement

For the year ended 31 December 2021

2020

2021 Restated

Notes $’000 $’000

Operating activities

Cash generated from operations 21 189,155 56,7 34

Interest received 7 41 9 1 , 278

Interest paid 7 (10,000) (10, 000)

Payment of put option premium (1 , 04 3) (5 , 371)

Net cash generated from operating activities 178, 531 42 , 6 41

Investing activities

Purchase of intangible assets (2 ,72 5) (4 5 8)

Purchase of property, plant and equipment 21 (52 , 9 59) (63 ,76 0)

Net cash used in investing activities (55,684) (64 , 2 18)

Financing activities

Payment of dividends 25 (100, 000) —

Share buyback — (2 0 ,1 6 4)

Payment of leases (68 8) (1 , 31 7)

Net cash used in financing activities (1 0 0 ,6 8 8) (2 1, 4 81)

Net increase/(decrease) in cash and cash equivalents 22,159 (43,05 8)

Cash and cash equivalents at beginning of year 1 4 7, 8 2 6 1 90 ,762

Effect of foreign exchange rate changes (11 9) 122

Cash and cash equivalents at end of the year being bank balances and cash on hand 169, 866 14 7 , 826

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 113

Summary of significant accounting policies

General information

The Company is incorporated in Bermuda (registered address: Cedar House, 3rd Floor, 41 Cedar Avenue, Hamilton, HM12, Bermuda).

On25March 2014, the Company’s common shares were admitted, with a standard listing, to the Official List of the United Kingdom Listing

Authority (“UKLA”) and to trading on the London Stock Exchange’s Main Market for listed securities. Previously, the Company was quoted

on Alternative Investment Market, a market operated by the London Stock Exchange. In 2008, the Company established a Level 1 American

Depositary Receipt programme in conjunction with the Bank of New York Mellon, which has been appointed as the depositary bank.

TheCompany serves as the holding company for the Group, which is engaged in oil and gas exploration, development and production,

operatingin the Kurdistan Region ofIraq.

Amendments to International Financial Reporting Standards (“IFRSs”) that are mandatorily effective for

thecurrent year

In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (“IASB”)

that are mandatorily effective for an accounting period that begins on or after 1 January 2021.

The following new accounting standards, amendments to existing standards and interpretations are effective on 1 January 2021: Amendments

toIFRS 4 Insurance Contracts – deferral of IFRS 19, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform

–Phase 2, Amendments to IFRS 16 Leases: Covid-19-related rent concessions beyond 30 June 2021. These standards do not and are not

expected to have a material impact on the Company’s results or financial statement disclosures in the current or future reporting periods.

New and revised IFRSs issued but not yet effective

At the date of approval of these financial statements, the Group has not applied the following new and revised IFRSs that have been issued but are

not yet effective by United Kingdom adopted International Accounting Standards:

IFRS 17 Insurance Contracts

IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to IAS 1 Classification of Liabilities as Current or Non-current

Amendments to IFRS 3 Reference to the Conceptual Framework

Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended Use

Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract

Annual Improvements Standards Amendments to IFRS 1 First Time Adoption of IFRS, IFRS 9 Financial Instruments, IFRS 16 Leases

2018-20 and IAS 41 Agriculture

Amendments to IAS 1 and Disclosure of Accounting Policies

IFRS Practice Statement 2

Amendments to IAS 8 Definition of Accounting Estimates

Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in

future periods.

Statement of compliance

The financial statements have been prepared in accordance with United Kingdom adopted International Accounting Standards.

Basis of accounting

The financial statements have been prepared under the historical cost basis, except for the valuation of hydrocarbon inventory and the valuation of

certain financial instruments, which have been measured at fair value, and on the going concern basis. Equity-settled share-based payments are

recognised at fair value at the date of grant, but are not subsequently revalued. The principal accounting policies adopted are set out below.

114 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Summary of significant accounting policies continued

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the

Chairman’s statement, the Chief Executive Officer’s review, the Operational review and the Management of principal risks and uncertainties.

Thefinancial position of the Group at the year end and its cash flows and liquidity position are included in the Financial review.

As at 29 March 2022, the Group had $182.7 million of cash. The Group continues to closely monitor and manage its liquidity. Cash forecasts

areregularly produced and sensitivities run for different scenarios including, but not limited to, change in commodity prices, different production

rates from the Shaikan block, cost contingencies, disruptions to revenue receipts, impact of climate change and geopolitical risks on the Group’s

operations, etc. In the current year, these have included both the Iraqi Supreme Court ruling on 15 February 2022 and export route availability as

a result of the evolving sanctions situation due to the Russian invasion of Ukraine, as further described in note 29. The Group’s forecasts, taking

into account the applicable risks, stress test scenarios and potential mitigating actions, show that it has sufficient financial resources for the

twelvemonths from the date of approval of the 2021 annual report and accounts.

Based on the analysis performed, the Directors have a reasonable expectation that the Group has adequate resources to continue to operate for

the foreseeable future. Thus, the going concern basis of accounting is used to prepare the annual consolidated financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its

subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating

policies of an investee entity, so as to obtain benefits from its activities.

Joint arrangements

The Group is engaged in oil and gas exploration, development and production through unincorporated joint arrangements; these are classified

as joint operations in accordance with IFRS 11. The Group accounts for its share of the results and net assets of these joint operations. Where the

Group acts as Operator of the joint operation, the gross liabilities and receivables (including amounts due to or from non-operating partners) of the

joint operation are included in the Group’s balance sheet.

Sales revenue

The recognition of revenue, particularly the recognition of revenue from export sales of crude oil, is considered to be a key accounting judgement.

All oil is sold by the Shaikan Contractor (the Company and Kalegran BV, a subsidiary of MOL Hungarian Oil & Gas Plc (“MOL”)) to the Kurdistan

Regional Government (“KRG”), who in turn resell the oil. The selling price is determined in accordance with the principles of the crude oil export

sales agreement (“Crude Oil Sales Agreement”), based on the average monthly Dated Brent crude price less a quality discount and a pipeline tariff.

The sales agreement also specifies the delivery point and the payment terms relating to export sales of crude oil. The Crude Oil Sales Agreement

has been governing Shaikan crude oil sales from 1 October 2017 onwards.

As the payment mechanism for sales is developing within the Kurdistan Region of Iraq, the Group currently considers that revenue can best be

reliably measured when the cash receipt is assured. The assessment of whether cash receipt is assured is based on management’s evaluation

ofthe reliability of the KRG’s payments to the international oil companies operating in the Kurdistan Region of Iraq.

The value of sales revenue is determined after taking account of the following:

• all crude oil sales were made via the Kurdistan Export Pipeline. The point of sale is the point that the crude oil is injected into the Kurdistan

ExportPipeline; and

• GKP recognises revenue for its share of the revenue on a cash-assured basis and these amounts of recognised revenue may be lower than the

Company’s entitlement under the Shaikan PSC, giving rise to unrecognised revenue amounts.

During past PSC negotiations with the Ministry of Natural Resources (“MNR”), it was tentatively agreed that the Shaikan Contractor would provide

the KRG a 20% carried working interest in the PSC. This would result in a reduction of GKP’s working interest from 80% to 61.5%. To compensate

for such decrease, capacity building payments expense would be reduced from 40% to 20% of profit petroleum. While the PSC has not been

formally amended, it was agreed that GKP would invoice the KRG for oil sales based on the proposed revised terms from October 2017. Since

revenue is recognised on a cash-assured basis, the financial statements reflect the proposed revised working interest of 61.5%. Relative to the

PSC terms, the proposed revised invoicing terms result in a decrease in both revenue and cost of sales and on a net basis are slightly positive for

the Company.

As part of earlier PSC negotiations, on 16 March 2016, GKP signed a bilateral agreement with the MNR (the “Bilateral Agreement”). The Bilateral

Agreement included a reduction in the Group’s capacity building payment from 40% to 30% of profit petroleum. Subsequent to signing the

Bilateral Agreement, further negotiations resulted in the capacity building payment rate being reduced from 30% to 20%, which has formed the

basis for all oil sales invoices to date as noted above. Since PSC negotiations have not been finalised, GKP has included a non-cash payable for

thedifference between the capacity building rate of 20% and 30%, which is recognised in cost of sales and other payables.

The Company is in constructive dialogue with the MNR to confirm whether to proceed with a formal amendment to the PSC to reflect current

invoice terms or to revert to the original PSC terms.

Income tax arising from the Company’s activities under its PSC is settled by the KRG on behalf of the Company. However, the Company is not able

to measure the amount of income tax that has been paid on its behalf and, therefore, the notional income tax amounts have not been included in

revenue or in the tax charge.

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 115

Finance revenue

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective rate of interest applicable, which is the

rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on

initial recognition.

Intangible assets

Intangible assets include computer software and are measured at cost and amortised over their expected useful economic lives of three years.

Property, plant and equipment (“PPE”)

Oil and gas assets

Development and production assets

Development and production assets are accumulated on a field-by-field basis and represent the costs of acquisition and developing the

commercial reserves discovered and bringing them into production, together with the exploration and evaluation expenditure incurred in finding

commercial reserves, directly attributable overheads and costs for future restoration and decommissioning. These costs are capitalised as part

ofPPE and depreciated based on the Group’s depreciation of oil and gas assets policy.

The net book values of producing assets are depreciated generally on a field-by-field basis using the unit of production (“UOP”) basis which uses

the ratio of oil and gas production in the period to the remaining commercial reserves plus the production in the period. Production associated with

unrecognised export sales revenue is included in the depreciation, depletion and amortisation (“DD&A”) calculation. Costs used in the calculation

comprise the net book value of the field, and any anticipated costs to develop such reserves.

Commercial reserves are proven and probable (“2P”) reserves together with, where considered appropriate, a risked portion of 2C contingent

resources, which are estimated using standard recognised evaluation techniques.

The reserves estimate used in 2021 is based on values as at 31 December 2020 included in the Competent Person’s Reports (“CPRs”) prepared

by ERC Equipoise.

Other property, plant and equipment

Other property, plant and equipment are principally equipment used in the field which are separately identifiable to development and production

assets, and typically have a shorter useful economic life. Assets are carried at cost, less any accumulated depreciation and accumulated

impairment losses. Costs include purchase price, construction and installation costs.

These assets are expensed on a straight-line basis over their estimated useful lives of three years from the date they are put in use.

Fixtures and equipment

Fixtures and equipment assets are stated at cost less accumulated depreciation and any accumulated impairment losses. These assets are

expensed on a straight-line basis over their estimated useful lives of five years from the date they are available for use.

Impairment of PPE and intangible non-current assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any

indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset, or group of

assets,is estimated in order to determine the extent of the impairment loss (if any).

For assets which do not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the

cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are

discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks

specific to the asset for which the estimates of future cash flows have not been adjusted.

Any impairment identified is immediately recognised as an expense.

116 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Summary of significant accounting policies continued

Borrowing costs

Borrowing costs directly relating to the acquisition or construction of qualifying assets, which are assets that necessarily take a substantial

period of time to get ready for their intended use or sale, are capitalised and added to the cost of those assets, until such time as the assets are

substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from

the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

Taxation

Tax expense or credit represents the sum of tax currently payable or recoverable and deferred tax.

Tax currently payable or recoverable is based on taxable profit or loss for the year. Current tax assets and liabilities are measured at the amount

expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the

balance sheet date.

As described in the revenue accounting policy section above, it is not possible to calculate the amount of notional tax in relation to any tax liabilities

settled on behalf of the Group by the KRG.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial

statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability

method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent

that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are

not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets and liabilities

in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that

sufficient taxable profits will be available to allow all or part assets to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax

laws and rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income

statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity.

Foreign currencies

The individual financial statements of each company are presented in the currency of the primary economic environment in which it operates (its

functional currency). For the purpose of the consolidated financial statements, the results and the financial position of the Group are expressed in

US dollars, which is the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency are

recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are

denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at

fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and

losses arising on retranslation are included in the income statement for the year.

On consolidation, the assets and liabilities of the Group’s foreign operations which use functional currencies other than US dollars are translated

at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period.

Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity in the Group’s translation reserve.

On the disposal of a foreign operation, such translation differences are reclassified to profit or loss.

Inventories

Inventories, except for hydrocarbon inventories, are stated at the lower of cost and net realisable value. Cost comprises direct materials and,

where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and

condition. Cost is calculated using the weighted average cost method. Hydrocarbon inventories are recorded at net realisable value with changes

in the value of hydrocarbon inventories being adjusted through cost of sales.

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 117

Financial instruments

Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group has become a party to the contractual

provisions of the instrument.

Trade receivables

Trade receivables are measured at amortised cost using the effective interest method less any impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily

convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial assets at fair value through profit and loss

Financial assets are held at fair value through profit and loss (“FVTPL”) when the financial asset is either held for trading or it is designated as

FVTPL. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net

gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the other gains and

losses line in the income statement.

Derivative financial instruments

The Group may utilise derivative financial instruments to manage its exposure to oil price risk.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair

value at each balance sheet date. The resulting gain or loss is recognised in the profit or loss immediately unless the derivative is designated and

effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a liability.

Aderivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than twelve months

andit is not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.

Hedge accounting

The Group uses hedge accounting for certain derivative instruments. The Group uses cash flow hedge accounting when hedging the exposure

to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast

transaction or the foreign currency risk in an unrecognised firm commitment.

At the inception of the hedge relationship, the Group formally designates and documents the relationship between the hedging instrument and the

hedged item, along with its risk management objectives and its strategy for undertaking the hedge transaction. Furthermore, at the inception of

the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or

cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationship meets all of the following hedge effectiveness

requirements:

• there is an economic relationship between the hedged item and the hedging instrument;

• the effect of credit risk does not dominate the value changes that result from the economic relationship; and

• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and

thequantity of the hedging instrument that the Group uses to hedge that quantity of hedged item.

If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for

thatdesignated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge)

so that it meets the qualifying criteria again.

The Group designates only the intrinsic value of option contracts as a hedged item, i.e. excluding the time value of the option. The changes in the

fair value of the time value of the option are recognised in other comprehensive income and accumulated in the cost of hedging reserve. If the

hedged item is transaction-related, the time value is reclassified to profit or loss when the hedged item affects profit or loss. If the hedged item

is time-period related, then the amount accumulated in the cost of hedging reserve is reclassified to profit or loss on a rational basis – the Group

applies straight-line amortisation. Those reclassified amounts are recognised in profit or loss. If the hedged item is a non-financial item, then the

amount accumulated in the cost of hedging reserve is removed directly from equity and included in the initial carrying amount of the recognised

non-financial item. Furthermore, if the Group expects that some or all of the profit or loss accumulated in cost of hedging reserve will not be

recovered in the future, that amount is immediately reclassified to profit or loss.

118 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Summary of significant accounting policies continued

Financial instruments continued

Cash flow hedge

The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash

flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the

cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised

immediately in profit or loss and is included in the revenue line item.

The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after

rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is

accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time

remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to

occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses (“ECL”) on trade receivables and contract assets, as well as on financial

guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial

recognition of the respective financial instrument.

The Group always recognises lifetime expected credit losses for trade receivables, contract assets and lease receivables. The expected credit

losses on these financial assets are estimated based on observed market data and convention, existing market conditions and forward-looking

estimates at the end of each reporting period, including time value of money where appropriate.

For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial

recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures

theloss allowance for that financial instrument at an amount equal to twelve-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

Incontrast, twelve-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that

are possible within twelve months after the reporting date.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity

instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs, which are charged to share premium.

Borrowings

Interest-bearing loans and overdrafts are recorded at the fair value of proceeds received, net of transaction costs. Finance charges, including

premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to

the extent that they are not settled in the year in which they arise. The liability is carried at amortised cost using the effective interest rate method

until maturity.

Trade payables

Trade payables are stated at amortised cost. The average maturity for trade and other payables is one to three months.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of

economic benefits that can be reliably estimated.

Decommissioning provision

Provision for decommissioning is recognised in full when there is an obligation to restore the site to its original condition. The amount

recognisedisthe present value of the estimated future expenditure for restoring the sites of drilled wells and related facilities to their original status.

A corresponding amount equivalent to the provision is also recognised as part of the cost of the related oil and gas asset. The amount recognised

is reassessed each year in accordance with local conditions and requirements. Any change in the present value of the estimated expenditure is

dealt with prospectively. The unwinding of the discount is included as a finance cost.

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 119

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the instruments at the

grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 24. The fair value

determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on

the Group’s estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of

equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original

estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment

toequityreserve.

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the

liability. At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any

changes in fair value recognised in profit or loss for the period. Details regarding the determination of the fair value of cash-settled share-based

transactions are set out in note 24.

Leases

The Group assesses whether a contract contains a lease at inception of the contract. The Group recognises a right-of-use asset and

corresponding lease liability in the consolidated balance sheet for all lease arrangements longer than twelve months, where it is the lessee and has

control of the asset. For all other leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term

of the lease.

The lease liability is initially measured at the present value of the future lease payments from the commencement date of the lease.

Theleasepayments are discounted using the interest rate implicit in the lease or, if not readily determinable, the Company-specific incremental

borrowingrate.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest

method) and by reducing the carrying amount to reflect the lease payments made. The lease liability is recognised in creditors as current or

non-current liabilities depending on underlying lease terms.

The right-of-use assets are initially recognised on the balance sheet at cost, which comprises the amount of the initial measurement of the

corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease and any lease incentive

received.

For short-term leases (periods less than twelve months) and leases of low value, the Group has opted to recognise lease expense on a

straight-linebasis.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described above, the Directors are required to make judgements, estimates and

assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated

assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in

which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current

and future periods.

Critical judgements in applying the Group’s accounting policies

The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the Directors

have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the

financialstatements.

Revenue

The recognition of revenue, particularly the recognition of revenue from exports, is considered to be a key accounting judgement. The Group

began commercial production from the Shaikan Field in July 2013 and historically made sales to both the domestic and export markets. The Group

considers that revenue can be only reliably measured when the cash receipt is assured. The assessment of whether cash receipts are assured is

based on management’s evaluation of the reliability of the MNR’s payments to the international oil companies operating in the Kurdistan Region

ofIraq.

The judgement is not to recognise revenue in excess of the sum of the cash receipt that is assured and the amount of payables to the MNR that

can be offset against amounts due for previously unrecognised revenue in line with the terms of the Shaikan PSC, even though the Group may be

entitled to additional revenue under the terms of the Shaikan PSC. Any future agreements between the Company and the KRG might change the

amounts of revenue recognised.

120 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Summary of significant accounting policies continued

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk

of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Carrying value of producing assets

In line with the Group’s accounting policy on impairment, management performs an impairment review of the Group’s oil and gas assets at

least annually with reference to indicators as set out in IAS 36. The Group assesses its group of assets, called a cash-generating unit (“CGU”),

forimpairment, if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Where indicators are

present, management calculates the recoverable amount using key estimates such as future oil prices, estimated production volumes, the cost of

development and production, pre-tax discount rates that reflect the current market assessment of the time value of money and risks specific to the

asset, commercial reserves and inflation. The key assumptions are subject to change based on market trends and economic conditions. Where

the CGU’s recoverable amount is lower than the carrying amount, the CGU is considered impaired and is written down to its recoverable amount.

The Group’s sole CGU at 31 December 2021 was the Shaikan Field with a carrying value of $402.1 million. The Group performed a full impairment

indicator evaluation considering the impact of climate change, oil prices, field productivity, potential changes to future development plans, impacts

of local and global geopolitical factors, including the potential inability to access export pipeline due to sanctions (see note 29), and liquidity.

The potential impact of such factors together with other possible changes to key assumptions and available mitigating actions, showed that no

impairment indicators arose.

The key areas of estimation in the impairment assessment are as follows:

• commodity prices are based on latest internal forecasts, benchmarked with external sources of information to ensure they are within the range

ofavailable market and analyst forecasts;

2022 2023 onwards

Scenario $/bbl – Real $/bbl – Real

31 December 2021 – base case $81 $55

31 December 2021 – stress case $80 $50

31 December 2020 – base case $55 $55

31 December 2020 – stress case $40 $40

• the Group continues to develop its assessment of the potential impacts of climate change and the associated risks, the transition to a

low-carbonfuture and our ambition to reduce scope 1 and 2 per barrel CO

emissions by at least 50% by 2025. The potential effects of

climate change and the Paris Agreement were considered. It was concluded, based on benchmarking, that the stress case price deck used in

theimpairment assessment is reasonable to reflect the potential impact of meeting the Paris Agreement targets. The stress case also includes

anestimated cost of the introduction of a carbon tax in Kurdistan;

• discount rates that are adjusted to reflect risks specific to the Shaikan Field and the Kurdistan Region of Iraq. The impairment analysis was

based on a post-tax nominal 15% discount rate (2020: 15%). The impact of an increase in the discount rate to 20% was considered to reflect

potential increased geopolitical risks and no impairment was identified;

• operating costs and capital expenditure are based on financial budgets and internal management forecasts. Costs assumptions incorporate

management experience and expectations, as well as the nature and location of the operation and the risks associated therewith. Base case

costs assumptions used in the assessment are consistent with the November 2021 draft FDP submitted to the MNR, which includes the

estimated cost of implementing a Gas Management Plan, as part of our ambition to reduce scope 1 and 2 emissions as outlined above;

• commercial reserves and production profiles used in the assessment are consistent with the November 2021 draft FDP submitted to the

MNR;and

• timing of revenue receipts.

In February 2022, a majority decision of the Iraqi Supreme Court ruled that the Kurdistan Region of Iraq Oil and Gas Law (“KROGL”) was

unconstitutional and provides that the Iraqi Ministry of Oil may pursue annulment of Production Sharing Contracts issued by the Kurdish Regional

Government (“KRG”). The KRG responded that “it will take all constitutional, legal, and judicial measures to protect and preserve all contracts

made in the oil and gas sector”. While the Iraqi government has disputed the validity of the PSCs and the ruling has not to date impacted our

business, it is not possible to determine potential future implications. The Group will continue to engage with Ministry officials on this matter and will

react as any implications of the ruling become clearer.

Governance

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 121

1 Geographical information

The Group’s non-current assets, excluding deferred tax assets and other financial assets, by geographical location are detailed below:

2020

2021 Restated

$’000 $’000

Kurdistan 402,787 404,492

United Kingdom 5,001 1,910

407,788 406,402

The Chief Operating Decision Maker, as per the definition in IFRS 8, is considered to be the Board of Directors. The Group operates in a single

segment, that of oil and gas exploration, development and production, in a single geographical location, the Kurdistan Region of Iraq. As a result,

the financial information of the single segment is the same as set out in the consolidated statement of comprehensive income, the consolidated

balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes.

Information about major customers

Included in revenues are $305.1 million, which arose from sales to the KRG (2020: $108.4 million).

2 Revenue

2021 2020

$’000 $’000

Oil sales 305,142 108,449

Hedging losses reclassified to revenue (3,753) —

301,389 108,449

The Group accounting policy for revenue recognition is set out in the ‘Summary of significant accounting policies’, with revenue recognised

on a cash-assured basis.

During 2021, the cash-assured values recognised as oil sales were the invoiced revenue for the year amounting to $305.1 million (2020:

$108.4million). The oil sales price was calculated using the monthly average Dated Brent price, which was $70.8/bbl on average during the

year(2020: $42.0/bbl) less an average discount of $21.20/bbl (2020: $21.10/bbl) for quality and pipeline tariff costs.

Hedging losses were incurred on put options which were purchased to protect against a decline in Dated Brent prices below certain levels.

Putoptions were purchased for H1 2021 and Q3 2021, effectively establishing a floor price of $35/bbl and $40/bbl, respectively, over

approximately 60% of net entitlement production. The put options were designated as cash flow hedges. All the put options expired during

theyear and the associated hedging losses that had previously been deferred within the hedging reserve were reclassified to revenue.

3 Cost of sales

2021 2020

$’000 $’000

Operating costs 34,372 27,401

Capacity building payments 23,529 8,362

Changes in inventory valuation (348) 2,923

Depreciation of oil and gas assets 54,120 82,797

Depreciation of operational assets 48 24

111,721 121,507

Further details on the depreciation of oil and gas assets and operational assets is set out in the Summary of significant accounting policies section.

During the year, the Group received a Competent Person’s Report from ERC Equipoise Limited regarding the Shaikan Field’s reserves and

resources as at 31 December 2020. The use of the future capital expenditure and 2P reserves estimates from the report resulted in a lower

depreciation, depletion and amortisation (“DD&A”) per barrel rate. The new DD&A rate constitutes a change in accounting estimate and is

reflected in the financial statements effective 1 January 2021.

Notes to the consolidated financial statements

122 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

4 Other general and administrative expenses

2021 2020

$’000 $’000

Depreciation and amortisation 940 1,325

Auditor’s remuneration (see below) 583 574

Other general and administrative costs 12,120 10,413

13,643 12,312

Of the $13.6 million of general and administrative expenses, $4.1 million (2020: $5.0 million) were incurred in relation to the Shaikan Field.

2021 2020

$’000 $’000

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 318 350

(1)

Fees payable to the Company’s auditor for other services to the Group

– audit of the Company’s subsidiaries pursuant to legislation 28 28

Total audit fees 346 378

Advisory services 107 45

Other assurance services (including a half-year review) 130 151

Total fees 583 574

(1) The fees payable to the Company’s auditor in 2020 included $43,000 in respect of the 2019 audit.

5 Share option related expense

2021 2020

$’000 $’000

Share-based payment expense 2,255 2,440

Payments related to share options exercised 4,142 —

Share-based payment related provision for taxes 2,093 (1,205)

8,490 1,235

On the exercise of the Value Creation Plan (“VCP”) share options by former Directors, tax settlements were made in cash instead of using the

proceeds from selling additional shares. This and the payment of dividends accumulated during the VCP vesting period are the main components

of the payments related to share options exercised. As applicable, the future exercise of outstanding VCP share options is expected to be equity

settled although the Company may consider settling any related tax in cash.

6 Staff costs

The average number of employees and contractors (including Executive Directors) employed by the Group was 349 (2020: 354). The headcount

numbers are not adjusted for part-time, shift-work and rotational working arrangements.

Staff costs were as follows:

2021 2020

$’000 $’000

Wages and salaries 36,835 31,753

Social security costs 1,880 1,334

Share-based payment (see note 24) 3,009 2,637

41,724 35,724

Staff costs include costs relating to contractors who are long-term workers in key positions, and are included in PPE additions, cost of sales and

other general and administrative expenditure depending on the nature of such costs.

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Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 123

7 Finance costs and finance revenue

2021 2020

$’000 $’000

Notes interest paid during the year (see note 16) (10,000) (10,000)

Unwinding of finance and arrangement fees (see note 16) (489) (440)

Finance lease interest (123) (221)

Put option premium — (2,662)

Unwinding of discount on provisions (see note 17) (741) (764)

Total finance costs (11,353) (14,087)

Finance revenue 419 1,278

Net finance costs (10,934) (12,809)

8 Income tax

2021 2020

$’000 $’000

Current year credit/(expense) 75 (90)

Prior year adjustment 28 —

Deferred UK corporation tax credit/(expense) (see note 18) 771 (221)

Tax credit/(expense) attributable to the Company and its subsidiaries 874 (311)

Under current Bermudian laws, the Group is not required to pay taxes in Bermuda on either income or capital gains. The Group has received an

undertaking from the Minister of Finance in Bermuda exempting it from any such taxes at least until the year 2035.

In the Kurdistan Region of Iraq, the Group is subject to corporate income tax on its income from petroleum operations under the Kurdistan PSC.

Under the Shaikan PSC, any corporate income tax arising from petroleum operations will be paid from the KRG’s share of petroleum profits. Due to

the uncertainty over the payment mechanism for oil sales in Kurdistan, it has not been possible to measure reliably the taxation due that has been

paid on behalf of the Group by the KRG and therefore the notional tax amounts have not been included in revenue or in the tax charge. This is an

accounting presentational issue and there is no taxation to be paid.

The annual UK corporation tax rate for the year ended 31 December 2021 was 19.0% (2020: 19.0%).

At the Budget 2021 on 3 March 2021, the UK Government announced that the corporation tax rate in the UK will increase to 25% for companies

with profits above £250,000 with effect from 1 April 2023, as well as announcing a number of other changes to allowances and treatment of losses.

These changes were substantively enacted as at 31 December 2021. Deferred tax is provided for due to the temporary differences, which give rise

to such a balance in jurisdictions subject to income tax. All deferred tax arises in the UK.

9 Profit/(loss) per share

The calculation of the basic and diluted profit per share is based on the following data:

2021 2020

$’000 $’000

Profit/(loss) after tax for basic and diluted per share calculations 164,597 (47, 342)

Number of shares (‘000s):

Basic weighted average number of ordinary shares 213,384 210,893

Basic EPS (cents) 77.14 (22.45)

The Group followed the steps specified by IAS 33 in determining whether potential common shares are dilutive or anti-dilutive.

124 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

9 Profit/(loss) per share continued

Reconciliation of dilutive shares:

2021 2020

$’000 $’000

Number of shares (‘000s):

Basic weighted average number of ordinary shares outstanding 213,384 210,893

Effect of dilutive potential ordinary shares 11,962 —

Diluted number of ordinary shares outstanding 225,346 210,893

Diluted EPS (cents) 73.04 (22.45)

The weighted average number of ordinary shares in issue excludes shares held by the Employee Benefit Trustee (“EBT”) and the Exit Event

Trustee.

The diluted number of ordinary shares outstanding including share options is calculated on the assumption of conversion of all potentially dilutive

ordinary shares.

As the Company reported a loss for the year ended 2020, the exercise of the outstanding share options would have reduced the reported loss per

share and, therefore, the share options were anti-dilutive.

10 Intangible assets

Computer

software

$’000

Year ended 31 December 2020

Opening net book value 454

Additions 458

Amortisation charge (3)

Foreign currency translation differences 24

Closing net book value 933

At 31 December 2020

Cost 1,980

Accumulated amortisation (1,047)

Net book value 933

Year ended 31 December 2021

Opening net book value 933

Additions 2,742

Amortisation charge (25)

Foreign currency translation differences (67)

Closing net book value 3,583

At 31 December 2021

Cost 4,722

Accumulated amortisation (1,139)

Net book value 3,583

The amortisation charge of $25,000 (2020: $3,000) for computer software has been included in other general and administrative expenses

(seenote 4).

Governance

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 125

11 Property, plant and equipment

Oil and gas Fixtures and Right-of-use

assets equipment assets Total

$’000 $’000 $’000 $’000

Year ended 31 December 2020

Opening net book value – restated 428,601 1,310 2,596 432,507

Additions 51,716 155 1,721 53,592

Lease modification — — (1,623) (1,623)

Revision to decommissioning asset 5,100 — — 5,100

Depreciation charge (82,797) (278) (1,044) (84,119)

Foreign currency translation differences — — 12 12

Closing net book value – restated 402,620 1,187 1,662 405,469

At 31 December 2020

Cost 778,329 7,160 3,602 789,091

Accumulated depreciation (375,709) (5,973) (1,940) (383,622)

Net book value – restated 402,620 1,187 1,662 405,469

Year ended 31 December 2021

Opening net book value 402,620 1,187 1,662 405,469

Additions 46,165 203 76 46,444

Disposals — — (1,432) (1,432)

Revision to decommissioning asset 7,429 — — 7,429

Depreciation charge (54,120) (351) (612) (55,083)

Accumulated depreciation eliminated on disposal — — 1,405 1,405

Foreign currency translation differences (1) (6) (21) (28)

Closing net book value 402,094 1,033 1,078 404,205

At 31 December 2021

Cost 831,924 7,363 2,246 841,533

Accumulated depreciation (429,830) (6,330) (1,168) (437,328)

Net book value 402,094 1,033 1,078 404,205

The net book value of oil and gas assets at 31 December 2021 is comprised of property, plant and equipment relating to the Shaikan block with a

carrying value of $402.1 million (2020 restated: $402.6 million).

The additions to the Shaikan asset during the year include the costs relating to the drilling and completion of SH-14 and SH-13, well flowlines

construction, PF-1 and PF-2 debottlenecking activities and subsurface studies. The increase in the decommissioning asset represents further

decommissioning obligations that arose on capital projects completed during the year and revisions to decommissioning cost estimates.

The DD&A charge of $54.1 million (2020: $82.8 million) on oil and gas assets has been included within cost of sales (note 3). The depreciation

charge of $0.4 million (2020: $0.3 million) on fixtures and equipment and $0.6 million (2020: $1.0 million) on right-of-use assets has been included

in general and administrative expenses (note 4).

Right-of-use assets at 31 December 2021 of $1.1 million (2020: $1.7 million) consisted principally of buildings.

For details of the key assumptions and judgements underlying the impairment assessment, refer to the “Critical accounting estimates and

judgements” section of the Summary of significant accounting policies.

See note 28 for further information on restated balances.

126 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

12 Group companies

Details of the Company’s subsidiaries and joint operations at 31 December 2021 is as follows:

Proportion of Principal

Name of subsidiary Place of incorporation ownership interest activity

Gulf Keystone Petroleum (UK) Limited United Kingdom 100% Management, support,

6th Floor geological, geophysical

New Fetter Place and engineering services

8-10 New Fetter Lane

London EC4A 1AZ

Gulf Keystone Petroleum International Limited Bermuda 100% Exploration, evaluation,

Cedar House, 3rd Floor development and

41 Cedar Avenue production activities

Hamilton HM12 in Kurdistan

Bermuda

Proportion of Principal

Name of joint operation Location ownership interest activity

Shaikan Kurdistan 80% Production and

development activities

13 Inventories

31 December 1 January

31 December 2020 2020

2021 Restated Restated

$’000 $’000 $’000

Warehouse stocks and materials 5,318 5,405 5,230

Crude oil 700 355 905

6,018 5,760 6,135

Warehouse stock and materials at 31 December 2021 contain write downs to net realisable value of nil (2020: $2.5 million) included in cost of sales.

The comparative inventory balances have been restated as items of inventory have been reclassified to property, plant and equipment. See note

28 for further information.

14 Trade and other receivables

Non-current receivables

2021 2020

$’000 $’000

Trade receivables — 59,096

Current receivables

2021 2020

$’000 $’000

Trade receivables 174,634 34,021

Other receivables 3,622 2,963

Prepayments and accrued income 944 848

179,200 37,832

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 127

Reconciliation of trade receivables

2021 2020

$’000 $’000

Gross carrying amount 175,754 101,302

Less: impairment allowance (1,120) (8,185)

Carrying value at 31 December 174,634 93,117

Gross trade receivables of $175.8 million (2020: $101.3 million) are comprised of invoiced amounts due from the KRG for crude oil sales totalling

$163.6 million (2020: $92.2 million) and a share of Shaikan revenue arrears the Group purchased from MOL amounting to $12.2 million (2020:

$9.1million). The amount due for crude oil sales includes past due trade receivables of $43.1 million

(1)

(2020: $77.3 million) related to November

2019 to February 2020 invoices.

While the Group expects to recover the full value of the outstanding invoices and purchased revenue arrears, the ECL on the overdue receivable

balance of $1.1 million (2020: $8.2 million) was provided against the receivables balance in line with the requirements of IFRS 9. During the year,

a$7.1 million gain was recognised due to the reduction of the ECL provision (2020: a loss of $6.8 million due to the increase of the ECL provision),

driven by a lower arrears balance.

The Group continues to receive payments in relation to the arrears from the outstanding invoices in line with the KRG’s proposal to pay 20% of the

difference between the monthly average Dated Brent price and $50/bbl multiplied by the gross Shaikan crude oil volumes sold in the month.

(1) The past due invoiced trade receivables amount excludes the associated capacity building payments due to the KRG which reduce the amount due to GKP to

$41.0 million (2020: $73.3 million).

ECL sensitivities

The Group’s profit before tax was not sensitive to movements of +/-10% in production level, Brent price, loss given default or probability of default.

Other receivables

Included within Other receivables is an amount of $0.4 million (2020: $0.4 million) being the deposits for leased assets which are receivable after

more than one year. There are no receivables from related parties as at 31 December 2021 (2020: nil). No impairments of other receivables have

been recognised during the year (2020: nil).

15 Trade and other payables

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.

The Directors consider that the carrying amount of trade payables approximates their fair value.

Current liabilities

2021 2020

$’000 $’000

Trade payables 6,494 2,212

Accrued expenditures 25,961 14,481

Other payables 65,927 51,612

Current lease liabilities (see note 22) 419 718

Tax liabilities — 100

98,800 69,123

Accrued expenditures include $4.4 million interest payable as at 31 December 2021 (2020: $4.4 million); see note 16.

Other payables include $56.4 million (2020: $46.5 million) of amounts payable to the KRG that are not expected to be paid, but rather offset

against revenue due from the KRG related to pre-October 2017 oil sales, which have not yet been recognised in the financial statements.

Withinthis amount, $22.6 million (2020: $14.8 million) relates to a non-cash payable for the difference between the capacity building rate

of20%and 30% (see Summary of significant accounting policies, Sales revenue).

Non-current liabilities

2021 2020

$’000 $’000

Non-current lease liability (see note 22) 789 1,058

128 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

16 Long-term borrowings

2021 2020

$’000 $’000

Liability component at 1 January 102,993 102,553

Interest expense, including unwinding of finance and arrangement fees 10,489 10,440

Interest paid during the year (10,000) (10,000)

Liability component at 31 December 103,482 102,993

Liability component reported in:

2021 2020

$’000 $’000

Current liabilities (see note 15) 4,359 4,360

Non-current liabilities 99,123 98,633

103,482 102,993

In July 2018, the Group completed the private placement of a five-year senior unsecured $100 million bond issue (the “Notes”). The unsecured

Notes are guaranteed by Gulf Keystone Petroleum International Limited and Gulf Keystone Petroleum (UK) Limited, two of the Company’s

subsidiaries, and the key terms are summarised as follows:

• maturity date is 25 July 2023;

• at any time prior to maturity, the Notes are redeemable by GKP in part or full with a prepayment penalty;

• the interest rate is 10% per annum with semi-annual payment dates; and

• the Company is permitted to raise up to $200 million of additional indebtedness at any time on market terms to fund capital and operating

expenditure, subject to certain requirements.

During the year, the Group was not in breach of any terms of the Notes.

The Notes are traded on the Norwegian Stock Exchange and the fair value at the prevailing market price as at the balance sheet date was:

Market 2021 2020

price $’000 $’000

Notes $103.75 103,750 102,500

As at 31 December 2021, the Group’s remaining contractual liability comprising principal and interest based on undiscounted cash flows is as

follows:

2021 2020

$’000 $’000

Within one year 10,000 10,000

Within two years 105,639 115,639

115,639 125,639

17 Provisions

2021 2020

Decommissioning provision $’000 $’000

At 1 January 35,671 29,807

New provisions and changes in estimates 7,429 5,100

Unwinding of discount 741 764

At 31 December 43,841 35,671

The provision for decommissioning is based on the net present value of the Group’s estimated share of expenditure, inflated at 2.0% (2020: 2.0%)

and discounted at 2.0% (2020: 2.0%), which may be incurred for the removal and decommissioning of the wells and facilities currently in place and

restoration of the sites to their original state. Most expenditures are expected to take place towards the end of the PSC term in 2043.

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 129

18 Deferred tax asset

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior

reporting periods. The deferred tax assets arise in the United Kingdom.

Tax losses

Accelerated tax Share-based carried

depreciation payments forward Total

$’000 $’000 $’000 $’000

At 1 January 2020 (27) 801 75 849

(Charge)/credit to income statement (85) (66) (70) (221)

Exchange differences (3) (3) (5) (11)

At 31 December 2020 (115) 732 — 617

(Charge)/credit to income statement (381) 321 831 771

Exchange differences 1 (4) — (3)

At 31 December 2021 (495) 1,049 831 1,385

19 Financial instruments

2021 2020

$’000 $’000

Financial assets

Cash and cash equivalents 169,866 147,826

Receivables 178,258 97,776

348,124 245,602

Derivative financial instruments

Put options used for hedging — 977

348,124 246,579

Financial liabilities

Trade and other payables 99,589 70,081

Borrowings 99,123 98,633

198,712 168,714

All financial liabilities, except for borrowings (see note 16) and non-current lease liabilities (see note 15), are due to be settled within one year and

are classified as current liabilities. All financial liabilities are recognised at amortised cost.

The maturity profile and fair values of the Notes are disclosed in note 16. The maturity profile of all other financial liabilities is indicated by their

classification in the balance sheet as “Current” or “Non-current”. Further information relevant to the Group’s liquidity position is disclosed in the

Directors’ report under “Going concern”.

Fair values of financial assets and liabilities

With the exception of the Notes, and the receivables from the KRG which the Group expects to recover in full (see note 14), the Group considers

the carrying value of all its financial assets and liabilities to be materially the same as their fair value. The fair value of the Notes, as determined using

market values at 31 December 2021, was $103.8 million (2020: $102.5 million) compared to the carrying value of $99.1 million (2020: $98.6 million).

In making the above assessment, consideration has been given to the fair value hierarchy set out in IFRS 13. Fair value hierarchy levels 1 to 3 are

based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are observable for the asset

orliability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on

observable market date (unobservable inputs).

The fair value of the Notes disclosed above is based on Level 1 in the hierarchy.

The financial assets balance includes an $1.1 million provision against trade receivables (2020: $8.2 million) (see note 14). All financial assets,

except derivatives designated as a hedge, are measured at amortised cost.

130 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

19 Financial instruments continued

Capital risk management

The Group manages its capital to ensure that the entities within the Group will be able to continue as going concerns while maximising the return

to stakeholders through the optimisation of the debt and equity structure. The capital structure of the Group consists of cash, cash equivalents,

Notes and equity attributable to equity holders of the parent. Equity comprises issued capital, reserves and accumulated losses as disclosed in

note 20 and the consolidated statement of changes in equity.

Capital structure

The Group’s Board of Directors reviews the capital structure on a regular basis and will make adjustments in light of changes in economic

conditions. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis

on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in

the Summary of significant accounting policies.

Financial risk management objectives

The Group’s management monitors and manages the financial risks relating to the operations of the Group. These financial risks include market

risk (including commodity price, currency and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk.

As at year end, the Group did not hold any derivative assets to hedge against commodity price declines or any other financial risks. The Group

does not use derivative financial instruments for speculative purposes.

The risks are closely reviewed by the Board on a regular basis and, where appropriate, steps are taken to ensure these risks are minimised.

Market risk

The Group’s activities expose it primarily to the financial risks of changes in oil prices, foreign currency exchange rates and changes in interest

rates in relation to the Group’s cash balances.

There have been no changes to the Group’s exposure to other market risks. The risks are monitored by the Board on a regular basis.

The Group conducts and manages its business predominantly in US dollars, the operating currency of the industry in which it operates. TheGroup

also purchases the operating currencies of the countries in which it operates routinely on the spot market. Cash balances are held in other

currencies to meet immediate operating and administrative expenses or to comply with local currency regulations.

At 31 December 2021, a 10% weakening or strengthening of the US dollar against the other currencies in which the Group’s monetary assets and

monetary liabilities are denominated would not have a material effect on the Group’s net assets or profit before tax.

Interest rate risk management

The Group’s policy on interest rate management is agreed at the Board level and is reviewed on an ongoing basis. The current policy is to maintain

a certain amount of funds in the form of cash for short-term liabilities and have the rest on relatively short-term deposits, usually between one and

three months, to maximise returns and accessibility. The Group must pay interest on its Notes semi-annually in cash at 10% per annum.

Based on the exposure to the interest rates for cash and cash equivalents at the balance sheet date, a 0.5% increase or decrease in interest rates

would not have a material impact on the Group’s profit for the year or the previous year. A rate of 0.5% is used as it represents management’s

assessment of a reasonable change in interest rates.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at 31 December

2021, the maximum exposure to credit risk from a trade receivable outstanding from one customer is $175.8 million (2020: $101.3 million). Although

the Group is confident in the recovery of the trade receivables balance, a provision of $1.1 million (2020: $8.2 million) was recognised against the

trade receivables balance.

The credit risk on liquid funds is limited because the counterparties for a significant portion of the cash and cash equivalents at the balance sheet

date are banks with investment grade credit ratings assigned by international credit-rating agencies.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors. It is the Group’s policy to finance its business by means of

internally generated funds, external share capital and debt. The Group seeks to raise further funding as and when required.

Governance

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Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 131

Fair value of derivative instruments

All derivatives are used to hedge against commodity price risk and are recognised at fair value on the balance sheet with valuation changes

recognised immediately in the income statement unless the derivatives have been designated as a cash flow hedge. Fair value is the amount for

which the asset or liability could be exchanged in an arm’s length transaction at the relevant date. Where available, fair values are determined

using quoted prices in active markets. To the extent that market prices are not available, fair values are estimated by reference to market-based

transactions or using standard calculation techniques for the applicable instruments and commodities involved.

For derivatives designated as a cash flow hedge, the movements in the fair value of the derivatives are recognised in other comprehensive income.

Derivatives’ maturity and the timing of their recycling into income or expense coincide.

The Group’s derivative instruments’ value was as follows:

2021 2020

$’000 $’000

Derivatives that are designated and effective as hedging instruments carried at fair value:

Put option — 977

— 977

To manage the Group’s oil price risk, put options were entered into during the year. The first tranche related to H1 2021 and was entered into at a

cost of $2.7 million hedging 1.6 MMbbl with a floor price of $35/bbl. A second tranche related to Q3 2021 was entered into at a cost of $1.0 million

hedging 0.8 MMbbl with a floor price of $40/bbl. Costs relating to the put options have been recognised in revenue (see note 2).

20 Share capital

2021 2020

$’000 $’000

Authorised

Common shares of $1 each (2020: $1 each) 231,605 231,605

Non-voting shares of $0.01 each 500 500

Preferred shares of $1,000 each 20,000 20,000

Series A Preferred shares of $1,000 each 40,000 40,000

292,105 292,105

Common shares

Share Share

No. of shares Amount capital premium

‘000 $’000 $’000 $’000

Balance 1 January 2020 229,430 1,101,105 229,430 871,675

Shares cancelled (18,059) (46,820) (18,059) (28,761)

Balance 31 December 2020 211,371 1,054,285 211,371 842,914

Dividends paid — (100,000) — (100,000)

Shares issued 2,360 2,360 2,360 —

Balance 31 December 2021 213,731 956,645 213,731 742,914

At 31 December 2021, a total of nil (2020: 1,000,000) common shares were held in treasury with a value of nil (2020: $2.6 million).

At 31 December 2021, a total of 0.1 million common shares at $1 each were held by the EBT and Exit Event Trustee (2020: 0.1 million at $1 each).

These common shares were included within reserves.

In 2019 and 2020, the Company carried out two buyback programmes. Following the buyback programmes’ completion, the Company held

19,059,064 shares in treasury, of which 18,059,064 were cancelled in late 2020.

Rights attached to share capital

The holders of the common shares have the following rights (subject to the other provisions of the Byelaws):

(i) entitled to one vote per common share;

(ii) entitled to receive notice of, and attend and vote at, general meetings of the Company;

(iii) entitled to dividends or other distributions; and

(iv) in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for a reorganisation or otherwise or upon a

distribution of capital, entitled to receive the amount of capital paid up on their common shares and to participate further in the surplus assets

of the Company only after payment of the Series A Liquidation Value (as defined in the Byelaws) on the Series A Preferred Shares.

132 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

21 Cash flow reconciliation

2020

2021

Restated

(1)

Notes $’000 $’000

Cash flows from operating activities

Profit/(loss) from operations 174,600 (33,381)

Adjustments for:

Depreciation, depletion and amortisation of property, plant and equipment (including right-of-use assets) 55,111 84,119

Amortisation of intangible assets 25 3

(Decrease)/increase of provision for impairment of trade receivables 14 (7,065) 6,776

Put option hedging losses reclassified to revenue 3,752 —

Share-based payment expense 24 1,197 2,440

Lease modification — (97)

Operating cash flows before movements in working capital 227,620 59,860

Increase in inventories (258) 374

(1)

Increase in trade and other receivables (75,259) (523)

Increase/(decrease) in trade and other payables 36,977 (2,977)

Income taxes received 75 —

Cash generated from operations 189,155 56,734

(1)

Reconciliation of property, plant and equipment additions to cash flows from purchase of property, plant and equipment:

2020

2021 Restated

$’000 $’000

Associated cash flows

Additions to property, plant and equipment 46,417 53,592

(1)

Movement in working capital 6,927 12,087

Non-cash movements

Finance lease additions — (1,721)

Capitalised share option charges (409) (197)

Foreign exchange differences 24 (1)

(1)

Purchase of property, plant and equipment 52,959 63,760

(1) The comparative cash flow reconciliation has been restated. For further details, see the statement of cash flows.

Movement in financing-related liabilities

The Group’s financing-related liabilities are comprised of borrowings and lease liabilities. The movements in borrowings are shown in note 16 and

the movements in lease liabilities in the year were primarily cash payments of $0.7 million.

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 133

22 Lease liabilities

2021 2020

$’000 $’000

Analysed as:

Current liabilities (note 15) 419 718

Non-current liabilities (note 15) 789 1,058

1,208 1,776

Lease liability maturity analysis

Year 1 419 209

Year 2 789 48

Year 3 — —

Year 4 — 1,519

Amounts payable under leases

Within one year 509 720

In the second to fifth year inclusive 868 1,396

1,377 2,116

Less future interest charges (169) (340)

Net present value of lease obligations 1,208 1,776

23 Commitments

Exploration and development commitments

Additions to property, plant and equipment are generally funded with the cash flow generated from the Shaikan Field. As at 31 December 2021,

gross capital commitments in relation to the Shaikan Field were estimated to be $20.6 million (2020: $0.6 million).

24 Share-based payments

2021 2020

$’000 $’000

Total share options charge 2,664 2,637

Capitalised share options charge (409) (197)

Share options charge in income statement 2,255 2,440

Value Creation Plan (“VCP”)

The VCP was approved by shareholders in December 2016. As at 31 December 2021, 3.5 million nil-cost share options were outstanding under

the VCP. There will be no further awards under the plan.

Outstanding awards will vest subject to the Company achieving a total shareholder return (“TSR”) of at least 8% compound annual growth, in

accordance with the VCP rules. Subject to achieving the requisite TSR, all the outstanding share options will vest following the measurement date

for the financial year ending on 31 December 2021.

The requisite TSR was achieved following the measurement date for the financial year ended 31 December 2020. The measurement date for the

financial year ended 31 December 2021 has not yet passed as at the date of this report.

2021 2020

Number of Number of

share options share options

’000 ’000

Outstanding at 1 January 7,017 7,017

Exercised during the year (3,509) —

Outstanding at 31 December 3,508 7,017

Exercisable at 31 December 3,508 —

The options outstanding at 31 December 2021 had a weighted average remaining contractual life of less than one year.

A charge of $0.1 million (2020: $0.8 million) in relation to the VCP is included in the total share options charge.

134 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

24 Share-based payments continued

Staff Retention Plan

At the 2016 Annual General Meeting (“AGM”), shareholders approved the adoption of the Gulf Keystone Petroleum 2016 Staff Retention Plan

(“SRP”), which is designed to reward members of staff through the grant of share options at a zero exercise price.

The exercise of the nil-cost awarded options is not subject to any performance conditions and can be exercised at any time after the three-year

vesting period but within ten years after the date of grant. If options are not exercised within ten years, the options will lapse and will not be

exercisable. If an employee leaves the Company during the three years from the date of grant, the options will lapse on the date notice to leave is

given to the Company. Should an employee be regarded as a good leaver, the options may be exercised at any time within a period of six months

from departure date.

2021 2020

Number of Number of

share options share options

’000 ’000

Outstanding at 1 January 973 1,129

Exercised during the year (908) (156)

Outstanding at 31 December 65 973

Exercisable at 31 December 65 973

The weighted average share price at the date of exercise for share options exercised during the year was £1.70 (2020: £1.43).

During the year no options (2020: nil) were granted to employees under the Group’s SRP.

A charge of nil (2020: $0.1 million) in relation to the SRP is included in the total share options charge.

Share options outstanding at the end of the year have the exercise price of nil and the following expiry dates:

Options (’000)

Expiry date 2021 2020

11 December 2026 12 516

9 January 2027 — 250

30 June 2027 53 207

65 973

The options outstanding at 31 December 2021 had a weighted average remaining contractual life of five years.

Long-Term Incentive Plan

The Gulf Keystone Petroleum 2014 Long-Term Incentive Plan (“LTIP”) is designed to reward members of staff through the grant of share options

at a zero exercise price, that vest three years after grant, subject to the fulfilment of specified performance conditions. These performance

conditions are 50% TSR over the vesting period and 50% the Group’s TSR relative to a bespoke group of comparators.

2021 2020

Number of Number of

share options share options

’000 ’000

Outstanding at 1 January 7, 254 2,629

Granted during the year 2 ,747 4,752

Exercised during the year (1,014) —

Forfeited during the year (712) (127)

Outstanding at 31 December 8,275 7, 254

Exercisable at 31 December — —

The weighted average share price at the date of exercise for share options exercised during the year was £1.69 (2020: n/a).

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 135

The inputs into the calculation of fair values of the shares granted during the year are as follows:

2021 2020

Weighted average share price £2.26 £0.88

Weighted average exercise price Nil Nil

Expected volatility 58.7% 54.6%

Expected life 3 years 3 years

Risk-free rate 0.14% 0.08%

Expected dividend yield (on the basis dividends equivalents received) Nil Nil

The options outstanding at 31 December 2021 had a weighted average remaining contractual life of two years.

The aggregate of the estimated fair value of options granted in 2021 is $4.3 million (2020: $2.6 million).

A charge of $2.5 million (2020: $1.7 million) in relation to the LTIP is included in the total share options charge.

25 Dividend

During 2021, an ordinary dividend of $25 million (11.697 US cents per common share) was paid, followed by a special dividend of $25 million

(11.697US cents per common share) and an interim dividend for 2021 of $50 million (23.394 US cents per common share) (2020: no dividends

were paid). To date in 2022, an interim dividend of $50 million has been paid. A further $65 million interim dividend is expected to be paid on

13May2022, based on a record date of 29 April 2022 and ex-dividend date of 28 April 2022. An ordinary dividend of $25 million is subject

toapproval at the AGM on 24 June 2022 and will be paid to shareholders on 15 July 2022 based on a record date of 1 July 2022.

26 Related party transactions

The Group has a related party relationship with its subsidiaries. The Company and its subsidiaries, in the ordinary course of business, enter into

various sales, purchase and service transactions with joint operations in which the Group has a material interest. These transactions are under

terms that are no less favourable to the Group than those arranged with third parties.

Remuneration of Directors and Officers

The remuneration of the Directors and Officers who are considered to be key management personnel is set out below in aggregate for each of the

categories specified in IAS 24 Related Party Disclosures. The Directors and Officers who served during the year ended 31 December 2021 were

as follows:

• J Huijskes – Non-Executive Chairman

• M Angle – Deputy Chairman

• G Soden – Non-Executive Director

• D Thomas – Non-Executive Director

• K Wood – Non-Executive Director

• J Harris – Chief Executive Officer (appointed 4 January 2021)

• I Weatherdon – Chief Financial Officer

• S Catterall – Chief Operations Officer (resigned 18 February 2022)

• G Papineau-Legris – Chief Commercial Officer

• J Barker – HR Director (resigned 10 September 2021)

• C Kinahan – Chief Human Resources Officer (appointed 2 August 2021)

• A Robinson – Chief Legal Officer and Company Secretary

The values below are calculated in accordance with IAS 19 and IFRS 2.

2021 2020

$’000 $’000

Short-term employee benefits 5,809 4,822

Share-based payment – options 1,012 1,273

6,821 6,095

Further information about the remuneration of individual Directors is provided in the Directors’ emoluments section of the Remuneration

Committee report.

136 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Notes to the consolidated financial statements

continued

27 Contingent liabilities

The Group has a contingent liability of $27.3 million (2020: $27.3 million) in relation to the proceeds from the sale of test production in the period

prior to the approval of the original Shaikan Field Development Plan (“FDP”) in July 2013. The Shaikan PSC does not appear to address expressly

any party’s rights to this pre-FDP petroleum. The sales were made based on sales contracts with domestic offtakers which were approved by

the KRG. The Group believes that the receipts from these sales of pre-FDP petroleum are for the account of the Contractor, rather than the KRG,

and accordingly recorded them as test revenue in prior years. However, the KRG has requested a repayment of these amounts and the Group

is currently involved in negotiations to resolve this matter. The Group has received external legal advice and continues to maintain that pre-FDP

petroleum receipts are for the account of the Contractor. This contingent liability forms part of the ongoing Shaikan PSC amendment negotiations

and it is likely that it will be settled as part of those negotiations.

28 Prior year restatement

The Group has identified that prior year inventory balances contained certain equipment to be used in the development of the Shaikan Field,

which will be consumed over a period in excess of one year. The Group determined that this equipment met the definition of property, plant and

equipment as defined by IAS 16 Property, Plant and Equipment and has restated the prior year financial statements to reflect this reclassification.

Comparative figures for the reclassification have been presented in the balance sheet and statement of cash flows, as detailed below. There is no

impact to the income statement.

Consolidated balance sheet

1 January

2020 1 January

As previously Reclassification 2020

reported of inventory Restated

$’000 $’000 $’000

Property, plant and equipment 407,602 24,905 432,507

Inventories 31,040 (24,905) 6,135

31 December

2020 31 December

As previously Reclassification 2020

reported of inventory Restated

$’000 $’000 $’000

Property, plant and equipment 374,702 30,767 405,469

Inventories 36,527 (30,767) 5,760

Statement of cash flows

31 December

2020 31 December

As previously Reclassification 2020

reported of inventory Restated

$’000 $’000 $’000

Cash generated from operations 50,873 5,862 56,734

Purchase of property, plant and equipment (57,899) (5,862) (63,760)

29 Subsequent events

Iraqi Supreme Court ruling

In February 2022, the Iraqi Supreme Court ruled that the Kurdistan Region of Iraq Oil and Gas Law is unconstitutional. The ruling also provides

that the Iraqi Ministry of Oil may pursue annulment of Production Sharing Contracts issued by the KRG. The KRG responded that “it will take all

constitutional, legal, and judicial measures to protect and preserve all contracts made in the oil and gas sector”. The ruling has not impacted the

Company’s operations and the Company is continuing to monitor the situation closely.

Export route availability

The Company currently exports all of its crude oil through the Kurdistan Export Pipeline, which is 60% owned by Rosneft. As a result of Russia’s

invasion of Ukraine on 24 February 2022, the Company is monitoring the evolving sanctions situation as certain specific sanctions on Rosneft

could impact the Company’s ability to access this pipeline.

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 137

Non-IFRS measures

The Group uses certain measures to assess the financial performance of its business. Some of these measures are termed “non-IFRS measures”

because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated

and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS. These

non-IFRS measures include financial measures such as operating costs and non-financial measures such as gross average production.

The Group uses such measures to measure and monitor operating performance and liquidity, in presentations to the Board and as a basis for

strategic planning and forecasting. The Directors believe that these and similar measures are used widely by certain investors, securities analysts

and other interested parties as supplemental measures of performance and liquidity.

The non-IFRS measures may not be comparable to other similarly titled measures used by other companies and have limitations as

analyticaltools and should not be considered in isolation or as a substitute for analysis of the Group’s operating results as reported under IFRS.

Anexplanation of the relevance of each of the non-IFRS measures and a description of how they are calculated is set out below. Additionally,

a reconciliation of the non-IFRS measures to the most directly comparable measures calculated and presented in accordance with IFRS and

a discussion of their limitations is set out below, where applicable. The Group does not regard these non-IFRS measures as a substitute for, or

superior to, the equivalent measures calculated and presented in accordance with IFRS or those calculated using financial measures that are

calculated in accordance with IFRS.

Gross operating costs per barrel

Gross operating costs are divided by gross production to arrive at operating costs per barrel.

2021 2020

Gross production (MMbbls) 15.9 13.4

Gross operating costs ($ million)

(1)

43.0 34.2

Gross operating costs per barrel ($ per bbl) 2.7 2.6

(1) Gross operating costs equate to operating costs (see note 3) adjusted for the Group’s 80% working interest in the Shaikan Field.

Adjusted EBITDA

Adjusted EBITDA is a useful indicator of the Group’s profitability, which excludes the impact of costs attributable to tax (expense)/credit, finance

costs, finance revenue, depreciation, amortisation and impairment of receivables.

2021 2020

$ million $ million

Profit/(loss) after tax 164.6 (47. 3)

Finance costs 11.4 14.1

Finance revenue (0.4) (1.3)

Tax (credit)/expense (0.9) 0.3

Depreciation of oil and gas assets 54.1 82.8

Depreciation of other PPE assets and amortisation of intangibles 1.0 1.3

Impairment of receivables (7.1) 6.8

Adjusted EBITDA 222.7 56.7

138 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Non-IFRS measures continued

Net capital expenditure

Net capital expenditure is the value of the Group’s additions to oil and gas assets excluding the change in value of the decommissioning asset and

movements in drilling and other equipment.

2020

2021 Restated

$ million $ million

Additions to oil and gas assets (note 11) 46.2 51.7

(Increase)/decrease of drilling and other equipment classified as oil and gas assets 4.6 (5.9)

Net capital expenditure 50.8 45.8

Net cash

Net cash is a useful indicator of the Group’s indebtedness and financial flexibility because it indicates the level of cash and cash equivalents less

cash borrowings within the Group’s business. Net cash is defined as cash and cash equivalents, less current and non-current borrowings and

non-cash adjustments. Non-cash adjustments include unamortised arrangement fees and other adjustments.

2020

2021 Restated

$ million $ million

Outstanding Notes (99.1) (98.6)

Unamortised issue costs (note 16) (0.9) (1.4)

Cash and cash equivalents 169.9 147. 8

Net cash 69.9 47.8

Free cash flow

Free cash flow represents the Group’s cash flows, before any dividends or share buybacks.

2020

2021 Restated

$ million $ million

Net cash generated from operating activities 178.6 42.6

Net cash used in investing activities (55.7) (64.2)

Payment of leases (0.7) (1.3)

Free cash flow 122.2 (22.9)

Governance

Strategic report Financials

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021 139

Report on Payments to Governments for 2021

Introduction

This report sets out details of the payments made to governments by Gulf Keystone Petroleum Ltd and its subsidiary undertakings

(“GulfKeystone”) for the year ended 31 December 2021 as required under Disclosure and Transparency Rule 4.3A issued by the UK’s Financial

Conduct Authority (“DTR 4.3A”) and in accordance with The Reports on Payments to Governments Regulations 2014 (as amended in 2015)

(“the UK Regulations”) and our interpretation of the Industry Guidance on the UK Regulations issued by the International Association of Oil &

Gas Producers. DTR 4.3A requires companies listed on a stock exchange in the UK and operating in the extractive industry to publicly disclose

payments to governments in the countries where they undertake exploration, prospection, discovery, development and extraction of minerals,

oil,natural gas deposits or other materials.

Basis for preparation

Total payments below £86,000 made to a government are excluded from this report, as permitted under the UK Regulations.

All of the payments made in relation to the Shaikan Production Sharing Contract (“Shaikan PSC”) in the Kurdistan Region of Iraq have been made

to the Ministry of Natural Resources (“MNR”) of the Kurdistan Regional Government (“KRG”).

Production entitlements

Production entitlements are the host government’s share of production during the reporting period from the Shaikan Field operated by

GulfKeystone. The figures reported have been produced on an entitlement basis, rather than on a liftings basis. Production entitlements

arepaidin-kind and the monetary value disclosed is derived from management’s calculation based on the monthly oil sales invoices.

Royalties

Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the royalties are described within

the Shaikan PSC. Royalties have been calculated on the same basis as production entitlements.

Licence fees and capacity building payments

These include licence fees, rental fees, entry fees, capacity building payments, security fees and other considerations for licences or

concessions.

Infrastructure improvement payments

These include payments for infrastructure improvements, whether contractual or otherwise, such as roads, other than in circumstances where

theinfrastructure is expected to be primarily dedicated to operational activities throughout its useful life.

Summary of payments

KRG

Production entitlements in-kind

(1)

(mboe

(2)

) 5,151

Production entitlements in-kind

(1)

($‘000) 255,763

Royalties in-kind

(1)

(mboe

(2)

) 1,255

Royalties in-kind

(1) (2)

($‘000) 62,320

Licence fees and capacity building payments in-kind

(3)

($‘000) 17,385

Infrastructure improvement payments

(4)

342

Total (mboe

(2)

) 6,406

Total ($‘000) 355,811

(1) All of the crude oil produced by Gulf Keystone was sold by the KRG. All proceeds of sale were received by or on behalf of the KRG, out of which the KRG then

made payment for cost oil and profit oil in accordance with the Shaikan PSC to Gulf Keystone, in exchange for the crude oil delivered to the KRG. Under these

arrangements, payments were made by or on behalf of the KRG to Gulf Keystone, rather than by Gulf Keystone to the KRG. However, for the purposes of the

reporting requirements under the UK Regulations, we are required to characterise the value of the KRG’s production entitlements under the Shaikan PSC

(forwhich the KRG receives payment directly from the market) as a payment to the KRG.

(2) Thousand barrels of oil.

(3) Capacity building payments are deducted from the monthly crude oil sales invoice, no direct payment is made to the KRG.

The value of licence, rental and security fees has been accrued and is not expected to be paid, but rather offset against revenue due from the KRG related to

pre-October 2017 oil sales, which have not yet been recognised in the financial statements.

(4) Drilling of water well, construction of water supply network and purchase of generators.

140 Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Glossary

1P proved reserves

2C best estimate of contingent resources

2P proved plus probable reserves

AGM Annual General Meeting

bbl barrel

bopd barrels of oil per day

Capex capital expenditure

CGU cash-generating unit

COVID-19 Coronavirus

CPR Competent Person’s Report

CSR corporate social responsibility

DD&A depreciation, depletion and amortisation

E&P exploration and production

EBITDA earnings before interest, tax, depreciation and

amortisation

EBT employee benefit trust

ECL expected credit losses

ERCE ERC Equipoise Ltd

ESG environmental, social and governance

ESIA environmental and social impact assessment

ERP Enterprise Resource Planning

ESP electric submersible pump

FDP Field Development Plan

FVTPL fair value through profit and loss

G&A general and administrative

GHG greenhouse gas

GKP Gulf Keystone Petroleum Limited

GKPI Gulf Keystone Petroleum International

GMP Gas Management Plan

GRI Global Reporting Initiative

HSE health, safety and environment

IA Investment Association

IAS International Accounting Standards

IFRS International Financial Reporting Standards

IOC International Oil Companies

IOGP International Association of Oil & Gas Producers

IPIECA International Petroleum Industry Environmental

Conservation Association

ISAs (UK) International Standards on Auditing (UK)

KPI key performance indicator

KRG Kurdistan Regional Government

LTI lost time incident

LTIP Long-Term Incentive Plan

LTIR lost time incident rate

MMbbls million barrels

MMstb million stock tank barrels

MNR Ministry of Natural Resources of the Kurdistan

Regional Government

MOL Kalegran B.V. (a subsidiary of MOL Hungarian Oil

& Gas plc)

OBM oil-based mud

OPEC Organization of the Petroleum Exporting Countries

Opex operating costs

PDMR Persons Discharging Managerial Responsibilities

PF-1 Shaikan Production Facility 1

PF-2 Shaikan Production Facility 2

PID photo-ionisation detector

PPE property, plant and equipment

PSC Production Sharing Contract

SASB Sustainability Accounting Standards Board

SDGs The UN’s Sustainable Development Goals

SECR Streamlined Energy and Carbon Reporting

SH Shaikan

Shaikan PSC PSC for the Shaikan block between the

KRG, GulfKeystone Petroleum International

Limited, TexasKeystone, Inc and MOL

signed on 6November2007 as amended by

subsequentagreement

SID Senior Independent Director

SRP Staff Retention Plan

TCFD Task Force on Climate-related

FinancialDisclosures

TRIR total recordable incident rate

TSR total shareholder return

UKLA United Kingdom Listing Authority

VCP Value Creation Plan

WEF Water Environment Federation

WHO World Health Organization

WI working interest

$ US dollars

Directors and advisers

Registered office

Gulf Keystone Petroleum

Limited

c/o Coson Corporate Services

Limited

Cedar House

3rd Floor

41 Cedar Avenue

Hamilton HM12

Bermuda

Directors

Jaap Huijskes

Non-Executive Chairman

Jon Harris

Chief Executive Officer

Ian Weatherdon

Chief Financial Officer

Martin Angle

Deputy Chairman and Senior

Independent Director

Garrett Soden

Non-Executive Director

David Thomas

Non-Executive Director

Kimberley Wood

Non-Executive Director

Bermudan Company

Secretary

Coson Corporate Services

Limited

Cedar House

3rd Floor

41 Cedar Avenue

Hamilton HM12

Bermuda

Bermudan legal adviser

Cox Hallett Wilkinson

Cedar House

3rd Floor

41 Cedar Avenue

Hamilton HM12

Bermuda

Legal advisers – corporate

Herbert Smith Freehills LLP

Exchange House

Primrose Street

London EC2A 2EG

United Kingdom

Legal advisers – dispute

resolution

Three Crowns LLP

New Fetter Place

8-10 New Fetter Lane

London EC4A 1AZ

United Kingdom

Auditor

Deloitte LLP

2 New Street Square

London EC4A 3BZ

United Kingdom

Registrars

Computershare Investor

Services (Jersey) Limited

13 Castle Street

St Helier

Jersey JE1 1ES

Channel Islands

Joint corporate brokers

Canaccord Genuity Limited

88 Wood Street

London EC2V 7QR

United Kingdom

Peel Hunt LLP

100 Liverpool Street

London EC2M 2AT

United Kingdom

Banks

Barclays Bank PLC

Level 27

1 Churchill Place

London E14 5HP

United Kingdom

CitiBank, N.A. London Branch

Citigroup Centre

25 Canada Square

Canary Wharf

London E14 5LB

United Kingdom

The Royal Bank of Scotland

Group plc

43 Curzon Street

London W1J 7UF

United Kingdom

Kurdistan International Bank for

Investment and Development

Golan Street

Erbil

Kurdistan Region of Iraq

Byblos Bank S.A.L – Iraq

Street 60 – Near Sports Stadium

PO Box 34-0383

Erbil

Kurdistan Region of Iraq

Byblos Bank S.A.L – UK

Berkeley Square House

Suite 5, Berkeley Square

London W1J 6BS

United Kingdom

Bank of N.T. Butterfield & Son

Limited

65 Front Street

Hamilton HM 12

Bermuda

Media relations

Celicourt Communications

Orion House

5 Upper St Martin’s Lane

London WC2H 9EA

United Kingdom

Key shareholder engagements

28 February 2022

ABG Sundal Collier E&P High Yield

Conference, Video conference, Oslo

3 March 2022

SpareBank 1 Markets 2022 Energy

Conference, Oslo

30 March 2022

2021 full-year results announcement

26 April 2022

Pareto Securities’ 17th Annual E&P

Independents Conference,

London

24 June 2022

AGM, by videoconference from

Computershare,

Dublin, Ireland

14-15 September 2022

Pareto Securities’ Energy

Conference, Oslo

Note: Throughout this report, the

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of the COVID-19 pandemic and is

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safety recommendations, which have

beenfollowed throughout.

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Gulf Keystone Petroleum Limited Annual report and accounts 2021

Bermuda

Gulf Keystone Petroleum Limited

c/o Coson Corporate Services

Limited

Cedar House

3rd Floor

41 Cedar Avenue

Hamilton HM12

Bermuda

Kurdistan Region of Iraq

Gulf Keystone Petroleum

International Limited

3rd Floor

UB Centre

Bakhtyari

Erbil

United Kingdom

Gulf Keystone Petroleum (UK)

Limited

6th Floor

New Fetter Place

8-10 New Fetter Lane

London EC4A 1AZ

Further details regarding

shareholder information

can be found on our website.

www.gulfkeystone.com

Gulf Keystone Petroleum LimitedAnnual report and accounts 2021

Gulf Keystone Petroleum Limited Annual report and accounts 2021