Welcome to Gulf Keystone's 2024 full-year results. My name is Jon Harris, and I'm the CEO. Today, I'm joined by Gabriel Papineau-Legris, our CFO, who will be taking you through our financial performance. Over the next few slides, we will run through our operational and financial performance in 2024 and the outlook for the remainder of 2025. Following that, we will open up the line for questions. Next slide, please. This is our regular legal disclaimer, and I'll leave you to review at your leisure. I'd like to remind you that the presentation slides are available on our website. Next slide, please. We delivered a strong operational and financial performance in 2024, in a year of recovery following the suspension of pipeline exports in 2023. We returned to consistently strong production levels, with volumes almost doubling, supported by a full year of local sales.
We did this safely, with zero lost-time incidents in the year. We continue to extend this track record and have been operating almost 800 days without a lost-time injury. We remained extremely disciplined on capital and costs, with the lowest capital budget we have had since 2017. Combined with higher production over that of 2023, this discipline underpinned free cash flow generation, enabling us to restart shareholder distributions, totaling USD 45 million in the year. We are pleased to announce today the declaration of a USD 25 million interim dividend, in line with our current shareholder distribution framework. 2024 distributions supported top quartile total shareholder return of 24% in the year versus our Kurdish and international E&P peers. As we focus on maximizing shareholder value from local sales, we also continue to engage with government stakeholders regarding an exports restart solution, which I will touch on shortly.
Turning now to our production and local sales performance and outlook. In 2024, we returned to consistently strong levels of production, with gross average production of 40,689 barrels of oil per day. After a slow start in Q1, during which the local market was developing to absorb increasing supply from producers in the region, we saw strong underlying market demand from Q2 onwards. This enabled a number of months of high production at levels we have last seen prior to the shutting of the Iraq-Turkey pipeline, or ITP. In fact, we had our best month of production ever in September, of around 48,500 barrels of oil per day.
Strong underlying demand from the local market was tempered by temporary disruptions from a lack of trucks during regional holidays, in particular the two Eid celebrations in April and June, and politically motivated road closures related to the Kurdistan regional elections in October. Production was also reduced, as planned, during the shutdown of PF1 in mid-November, as we installed safety upgrades and carried out maintenance. Realized prices averaged around USD 27 a barrel in the year. As with production volumes, we saw lower prices in Q1, which then improved and stabilized in the second half of the year at around USD 27-28 per barrel. Looking ahead, we are pleased to see local market demand in the near term remaining strong. Gross production has averaged around 46,400 barrels of oil per day so far this year, with realized prices averaging between USD 27 and USD 29 a barrel.
In light of our year-to-date performance, we are pleased to reiterate 2025 gross average production guidance of between 40,000-45,000 barrels of oil per day. The guidance remains subject to stable local sales demand and continues to reflect a number of assumptions, including the estimated decline of the field of around 6-10% a year, the expected impact on production from the planned PF2 shutdown later in the year, and the estimated reduction in trucking availability during regional holidays. Should we see any unforeseen disruptions in the local market or the restart of exports, we expect to review guidance. Moving on now to field activity. We continue to be extremely disciplined in field investment and costs in the current local sales environment. At the same time, we are focused on maintaining safe and reliable production capacity.
In 2024, we spent USD 18 million of net capex primarily on executing safety upgrades at PF1, maintenance, and some production optimization. The PF1 safety upgrades involved the installation of a new integrated control and safety system, while vessels associated with the flare and amine system were replaced to handle higher pressures, as you can see from the pictures on the slide. Looking ahead to this year, we are executing a very similar work program to 2024 at PF2. We are planning to execute safety upgrades and maintenance, accounting for around USD 20 million of net capex. The work is currently scheduled for the final quarter of this year, and we will require the shutdown of the facility for around three weeks, similar to PF1 in 2024. We're also expecting to spend around USD 5-$10 million of net capex on production optimization, an increase versus last year.
The program consists of a number of low-cost, quick payback well interventions. In total, we expect net CapEx this year of between USD 25 million and USD 30 million. In addition to the current program, we are exploring additional plant initiatives to enhance production, in particular water handling at PF2. It is too early to provide details today, but we are firming up options and expect to review them later in 2025, based on our liquidity position and the operating environment at the time. Next slide, please. We are continuing to engage with government stakeholders regarding a solution to restart Kurdistan exports. We and other IOCs have held a number of meetings with the Kurdistan Regional Government and the federal government of Iraq. We have been seeking more detail around agreements on payment, surety, receivables, repayment, and the preservation of our contractual rights.
Discussions are ongoing but remain inconclusive, and we stay hopeful of reaching a solution in the near future. We are ready to restart exports quickly, provided we have the right agreements in place. We continue to see a number of sources of potential value to Gulf Keystone from the restart. A potential return to international prices, repayment of our outstanding receivables, and recognition by Federal Iraq of the legitimacy of the Kurdish oil and gas industry could all be transformative for our cash flow and cost of capital. The Shaikan Field has significant untapped potential, with gross 2P reserves of 443 million barrels at the end of 2024 and a reserves life of around 30 years using 2024's production.
The restart of exports would also be a significant positive step for Kurdistan and Iraq, both in unlocking additional revenue from a vital source of global oil supply, which is currently sold for significant discounted prices, but also signaling that Kurdistan and Iraq are open for business and are attractive destinations for international investment. With that, I will now hand over to Gabriel for the financial review.
Thank you, Jon. We delivered much-improved financial performance in 2024 relative to 2023, as we were able to meet increasing demand from the local sales market with more efficient operations. Increased EBITDA, combined with minimal investment in the Shaikan Field, underpinned a return to material free capital generation, in turn funding USD 45 million of shareholder distribution and strengthening our balance sheet. Next slide, please. Adjusted EBITDA increased by 52% to USD 76 million in 2024. The improvement was primarily driven by the 86% increase in gross average production to over 40,600 barrels of oil per day. Higher volumes more than offset the decline in average realized price to USD 26.8 per barrel as we transitioned to a full year of discounted local sales and the increase in operating costs associated with a full year of production capacity after the temporary shut-in during the second quarter of 2023.
Adjusted EBITDA also benefited from the 59% reduction in share option expense from USD 10.8 million to USD 4.4 million, reflecting the lower vesting of the LTIP award last year compared to 2023, and the absence of one-off costs incurred in the first half of 2023 related to the wind-down of activity. Turning now to OpEx costs and G&A. We continue to exercise tight cost control while maintaining and enhancing the production capacity of the Shaikan Field. As production increased, gross OpEx per barrel decreased by 21% to USD 4.4 per barrel, reaffirming our position as a leading low-cost operator among our Kurdistan and international peers. Other G&A expenses were slightly higher at USD 11.4 million versus USD 10.5 million in 2023, with the reinstatement of performance-based staff bonuses and one-off retention awards partly offset by the absence of non-recurring corporate costs in the first half of 2023.
Combining OpEx and other G&A expense with our capital expenditures, our average run rate in 2024 was USD 6.8 million net per month, below our guidance for the year of around USD 7 million per month. Looking to 2025, we reiterate our guidance as we expect stable operating costs within a range of USD 50-55 million net and a reduction in other G&A expenses to less than USD 10 million. Next slide, please. Stronger adjusted EBITDA and lower net capex enable us to generate USD 65 million of free cash flow relative to a USD 13 million outflow in the previous year. Net capex reduced by 69% from USD 58 million in 2023 to USD 18 million in 2024, reflecting our lean work program compared to the busy expansion works that were in progress prior to the ITP closure.
Free cash flow generation has strengthened our balance sheet, increasing our cash balance from USD 82 million at the end of 2023 to USD 102 million at the end of 2024. Liquidity has further improved so far this year, supported by strong local sales and cost control, with our cash balance as at yesterday was USD 115 million. Now, moving on to shareholder distributions. We have a strong commitment to shareholder returns, provided we have sufficient cash available to fund the liquidity needs of the business and to manage our operating environment. That is evident by our track record over the years, and you can see from the chart that we have completed or declared over USD 500 million of dividends and share buybacks since 2019. Throughout, we have balanced shareholders' returns with investment in profitable production growth while maintaining an appropriate balance sheet to navigate the operating environment in Kurdistan and the commodity cycle.
Last year, we were pleased to restart shareholder distributions following the decision in 2023 to suspend our ordinary dividend policy as a result of the ITP closure. By the end of 2024, we had been able to pay total distribution to shareholders of USD 45 million, comprising of USD 35 million of dividend, and the completion of a USD 10 million share buyback launched in May. We are pleased today to announce the declaration of a USD 25 million interim dividend for payment in April. This is the first semiannual dividend to be paid under the shareholder distribution framework that we announced last October. Under this framework, the board will review the company's capacity to declare a dividend at the full year and the half-year results. In addition, the board will continue to consider share buybacks opportunistically throughout the year, following today the expiry of the program launched in October 2024.
When assessing our distribution capacity, the board looks at a number of factors regarding the liquidity needs of the business and our operating environment. The primary reference point is typically the next year of CapEx and costs to fund an essential investment in the Shaikan Field. The board also looks at the outlook for local sales and any potential liquidity needs of the business, including from the transition from local sales to Ceyhan port, for which the payment terms are still unknown. With that, I will now hand it back to Jon to wrap up.
Thanks, Gabriel. To summarize, we are really pleased with our performance in 2024 and have entered 2025 in a strong position. Looking ahead, we remain focused on two priorities. Firstly, we are continuing to maximize shareholder value from local sales. We have reiterated today our annual production guidance of between 40,000-45,000 barrels of oil per day, subject to stable local market demand. With the delivery of our CapEx and cost guidance, that would enable generation of free cash flow, underpinning our continued commitment to shareholder distributions, evidenced by the announcement today of the USD 25 million interim dividend. Secondly, we are continuing to work towards unlocking significant potential upside from the restart of pipeline exports. We are continuing to engage with the KRG and the Iraqi government following recent meetings as we seek arrangements regarding payment surety, receivables repayment, and contract terms.
We are ready to quickly restart exports with the right agreements in place. With that, I will now hand you back to the operator for Q&A.
Thank you. Ladies and gentlemen, if you would like to ask a question on today's call, please signal by pressing Star one on your telephone keypad. Again, that is Star one for your questions today. We will pause for a brief moment. Our first question today comes from Charlie Sharp from Canaccord. Please go ahead. Your line is now open.
Thank you very much, and thank you for the presentation, gentlemen. Just a question, really. Looking ahead, obviously the tone, the mood seems to be that the export pipeline will reopen at some point. Who knows exactly when? What do you have in mind in terms of the development project on Shaikan once the exports restart? What's the sort of timetable for ramping up investment, and what are the key items that you'll expect to put in place early on? Thank you.
Charlie, thank you. The sort of timeframes really are, well, okay, we have enough equipment, drilling equipment to drill the first well, and we have nearly enough equipment to drill the first three wells. We would have to contract a rig, but there are some available in the market in Kurdistan, and we would see if it opens tomorrow and we see sort of stable payments of production, then we would see sort of beginning Q1, Q2 of next year to recommence drilling. I think in line with that, we would also look at some of the work around, as we said in the presentation, looking at water handling, which we are going to consider kind of sanctioning later in the year depending on what we get from the tenders coming back in.
We would have to kind of do some pad expansions for that drilling, but we could do that in the time between now and when the drilling rig would be available. Really, we're talking about, we would like to see a regularization of exports and payments from that, and following that, we would, well, we would probably start tendering the rig ahead of that. We would look at the beginning of next year to start drilling.
Great. Thank you.
Thank you.
Thank you. We are moving to our next question, which comes from Werner Riding from Peel Hunt. Please go ahead. Your line is open.
Thanks. Yes, very similar question, actually. Assuming your contract term economics are preserved and the mechanisms put in place to deal with your arrears and pipeline exports restart, it was really to kind of get a bit more detail on the quantum of your investment requirements that will need to take place, I guess, both immediately and then over the following 12 to 24 months in order to accelerate development and increase production. That's my first question.
Okay. So.
The quantum of CapEx, sorry.
Okay. Actually, like I said, we've got nearly enough equipment to do the first three wells, which is the sort of timeline that once we started drilling, we can then reorder the equipment going forward. We can get going with a quite small amount of capital. We've got flow lines in stock. We've got the drilling equipment we need in stock. We just don't have to, we'd have to go out and tender the rig. Once we got going, typically a well cost, a capital well cost, is sort of somewhere between USD 15 million and USD 20 million a well. We would almost certainly, in the first couple of years, I suspect, be drilling maybe three or four wells a year. That would be in the order of USD 80 million-USD 100 million for the capex. Train 3 at PF1 is nearly complete.
Wouldn't take like USD 5 or USD 6 million to complete it. The water handling at Train 2, we're actually looking to do a lease to purchase. The initial outflow of CapEx is quite small, and we'll update you on that if we sanction it later this year. I think the only thing we would think of, the other kind of key pillars of the FDP or the plan that we had before, Charlie, sorry, Werner, you recall, is basically the Triassic. This is also something that we see a lot of benefit into it, and we'd like to go and get some data flow. I think there's definitely some potential with this reservoir. Also the long-term plan around gas management. This is something that also we will need to be mindful as part of the development, but it's too early to guide for quantum or time like this.
You heard the order of magnitude we were talking about.
Okay. Thank you. Just on the dividend and cash distributions, could the dividend drop away as your CapEx needs increase, or will this be maintained with your investment plans, with them being covered by, I guess, progressively increasing operating cash flows?
Yeah, that's a good question. When we put in place the framework, before it was written in kind of the context of the local sales, I think from when we go back to export, definitely the dividends and distribution as a whole are an important component of the equity story of GKP. You can expect that this will still be in place. That's the intention. We need to just make sure that we get the right kind of capital program to ensure the continuation of distributions, but also this will always be underpinned by regular payments.
That is the element that we will need to be very mindful in terms of as we develop the capital program, we'll want to ensure that there are sufficient and several kind of exit ramps should we see some payment default or stalling so we can adapt the capital spend with the actual inflow. Yeah, we'll come back to the market, obviously, as we get back to the investment plans, but we assure you that the dividends remain a strong part of our commitments and capital allocation going forward.