Good morning, everyone, and thanks for joining us at short notice. I am Jon Harris, CEO of Gulf Keystone Petroleum. Before we start, I would like to note this important legal disclaimer, which I will leave you to review at your leisure. We are excited to announce today that GKP and ShaMaran Petroleum have agreed to merge. To talk you through the rationale and benefits of the transaction, I am joined by Garrett Soden , ShaMaran's President and CEO, and Gabriel Papineau-Legris, Gulf Keystone's Chief Financial Officer. The combination of GKP and ShaMaran will create a leading independent oil producer focused on Kurdistan and Iraq. We believe there are several compelling reasons to merge, which will create significant value for our investors. First, the combination creates a large, more diversified business by bringing together four world-class assets in Kurdistan and Iraq.
Pro forma working interest production is around 53,000 bbl of oil per day, almost doubling the current contribution from Shaikan, and placing the combined business among the top 10 largest independent listed in Europe. Pro forma working interest 2P reserves total 323 million barrels, with further reserves and resources upside potential from ShaMaran's new investment in the Hamrin field in Iraq. The combined portfolio of low-cost, long-life assets is highly complementary and will create a more resilient and stable business. ShaMaran's non-operated positions in Sarsang and Atrush, which are the adjacent blocks to the north of Shaikan, are highly cash generative. Their cash flow will help unlock growth from Shaikan as we prepare to embark on a multi-year development program to more than double current production. They will also support investment in ShaMaran's Hamrin field, which has large growth and long-life potential.
ShaMaran's assets, including Hamrin, are operated by HKN Energy, a proven operator in Kurdistan who we know well. HKN have a strong track record and operational approach that aligns with Gulf Keystone's strategy. The transaction also puts the combined company on a stronger footing to pursue further opportunities for inorganic growth in the region. Finally, the combined business will be valued at over $1 billion on a pro forma basis, with a step change in liquidity for investors and better access to financing for our growth plans. We plan in due course to uplist GKP's current Oslo listing to the main market of the Oslo Børs and discontinue GKP's London Stock Exchange listing and ShaMaran's Stockholm listing to provide a single liquid trading venue for shareholders.
More importantly, we believe the combined company will be able to distribute more attractive and more sustainable returns to shareholders through the upcoming field development period and beyond. We will look to formalize the combined company's distribution policy around completion. Before we go into further details, I would like to invite Garrett to share his views on today's significant transaction. Garrett?
Thank you, Jon. We are excited to join Gulf Keystone to build a larger platform for growth in Kurdistan and Federal Iraq. This merger between Gulf Keystone and ShaMaran has been discussed for some time and makes a lot of sense for both companies, because the assets are very complementary in terms of geographic proximity and our production reserves and cash flow profile. We expect significant synergies by putting the two companies together, consolidating the listings to one listing in Oslo, stripping out some of the public company overhead, and working together with our partner, HKN, on having the most efficient operations between the three assets in Kurdistan, as well as the new Hamrin asset in Federal Iraq, also operated by HKN. In addition, the Lundin family is a key part of this transaction.
They have a track record of creating value in oil and gas, most notably through the Johan Sverdrup discovery and development offshore Norway, now with Aker BP. They were early into Kurdistan almost 20 years ago and have participated in the full exploration and development life cycle there, starting with an exploration block, discovering oil, developing the assets, growing through M&A, and now generating significant cash flow. Lukas Lundin was always excited about Kurdistan as a unique petroleum province with great geology, very large onshore structures, and low operating costs. The family continues to be very supportive of the Kurdistan consolidation story and believes this deal will be accretive for the shareholders of both companies. The Lundins will be the largest shareholder of the combined company with William Lundin as the Non-Executive Chair.
William is the CEO of International Petroleum Corp, a $3 billion market cap company, which is just now completing an almost $1 billion heavy oil development in Canada on budget and ahead of schedule. I believe it will add significant value to Gulf Keystone shareholders and the Kurdistan region to have an industrial sponsor like the Lundins as the major shareholder to drive value with the Shaikan development. And of course, we now have a second major development with the new 25% interest in Hamrin in Federal Iraq with HKN. This also has exciting production reserves and cash flow upside over the next decade. Production of around 20,000 bbl a day today, with a target of reaching approximately 60,000 bbl a day by 2028. The long-term upside is substantial, with up to 1 billion barrels of gross reserves and resources. So together, the combination is compelling. Thanks, Jon.
Thanks, Garrett. Let's move on, please. The transaction is structured as a statutory merger under Bermuda law, where both Gulf Keystone and ShaMaran are incorporated. On completion, Gulf Keystone will continue as the surviving entity. ShaMaran shareholders will receive newly issued Gulf Keystone shares for a stake of approximately 50% in the combined company. Gulf Keystone shareholders will receive a $50 million special dividend on closing. The transaction has the full support of both Gulf Keystone and ShaMaran boards. It also has the support of each company's large shareholder, being the Lundin family, who holds around 25.6% of ShaMaran, and Lansdowne Partners Austria GmbH, who hold around 13% of Gulf Keystone. The Lundin family will become the largest shareholder in the combined company and will be represented by William Lundin as the new Non-Executive Chair of the proposed board of directors.
William Lundin will be joined by a high-quality group of directors with deep experience in oil and gas and Kurdistan. Dave Thomas, Gulf Keystone's current Chair, will continue as Vice Chair. David will be joined by four Non-Executive Directors, including ShaMaran's current Chair, Chris Bruijnzeels, and current CEO, Garrett Soden, and current GKP board members, Julien Balkany and Marianne Daryabegui . Gabriel and I will continue in our roles for the combined company, while I remain on the board and Gabriel will step down. As I mentioned on the previous slide, we intend for the combined company to ultimately have a single liquid listing on the main market of the Oslo Børs. Both Gulf Keystone and ShaMaran dual listed on Euronext Growth Oslo earlier this year, and we see Oslo as the natural listing for the combined company. The Oslo Stock Exchange is a leading hub for international energy capital markets.
Investors active in the equity and debt markets in Oslo have an excellent understanding of Kurdistan and our companies and a strong track record of support. The uplisting of Gulf Keystone's current Oslo listing to the main market of the Oslo Børs, as well as delisting from the London Stock Exchange, will take place in due course, with further details on timing to be set out shortly. The listing of ShaMaran shares and Swedish Depository Receipts in Stockholm will cease in connection with the completion of the transaction. Looking ahead, we are targeting completion around the middle of 2027. Special general meetings for shareholder approval are expected to take place on or around 22nd December 2026. Both companies have also reached out to the Kurdistan Regional Government to seek their approval for the transaction. We will keep investors updated as we aim to progress quickly to completion.
The merger will create a large, more diversified, and more resilient company. Gulf Keystone's production will almost double on a working interest basis from 28,000 bbl of oil a day to 53,000 bbl of oil a day, with estimated 2P reserves will increase by almost 1/3 to 323 million barrels. Looking at both reserves and resources, ShaMaran's investment in the Hamrin field is expected to contribute a large potential upside. The combined business will be valued at over $1 billion on a pro forma basis. We believe that this is just the starting point, and we expect investors to give credit for the enhanced value creation capability of the combined business. At 53,000 bbl of oil per day, combined company will rank among the ten largest independents in Europe. As we will talk about shortly, the company has significant potential to grow current production.
The combined company will have one of the leanest cost bases among international and Kurdistan peers, benefiting from low-cost onshore production. As both companies have proven, low production costs underpin cash flow generation and provide significant resilience. We are also looking to further improve the lean G&A of both companies by targeting annual synergies of up to $5 million. With that, I'll now hand over to Gabriel.
Great. Thank you, Jon. This merger creates a highly complementary portfolio of low-cost, long-life assets. Our operated position in the Shaikan field in Kurdistan will be strengthened by ShaMaran's non-operating position in the Sarsang and Atrush fields. As you can see from the map, they are the adjacent blocks just to the north of Shaikan. We are deeply familiar with the quality of these assets. They are highly cash generative, benefit from low costs, low CapEx requirements, and large outstanding cost pools. Together, their cash flow profiles will support the planned Shaikan development, which we are preparing to start next year. They will also support ShaMaran's Hamrin field, which was announced this morning. We are very excited by this opportunity. Hamrin is a large, long-life producing field in Federal Iraq, just to the south of the prolific Kirkuk fields.
Like Sarsang and Atrush, the Hamrin field is operated by HKN Energy. ShaMaran will have a 25% shareholding in HKN Hamrin, which holds the Hamrin development and production contract. Current production from the field is around 20,000 bbl a day, and ShaMaran and the operator see large growth potential with estimated reserves and resources of 500 million to 1 billion barrels gross. Next slide, please. I'd now like to drill down a little further into the significant growth potential of the combined business. From a GKP perspective, we're continuing to progress preparations to the return of the field development and drilling next year. We are targeting to more than double Shaikan's existing production through a multi-year development program focused on expanding the producing Jurassic reservoir and testing the Triassic reservoir.
The Jurassic has estimated working interest 2P of 256 million barrels, while the Triassic has almost 100 million barrels of working interest 2C resources. Worth noting that the Sarsang production also comes from the Triassic reservoir, and we will be able to benefit from the Sarsang learnings when we start testing the Triassic on Shaikan. We are firming up our development plans with the Kurdistan Regional Government as we speak. Our momentum towards return to growth has been boosted by the recent commencement of the top-up receivable recovery and the reconciliation of export sales to international prices. ShaMaran is also bringing significant growth opportunity to the combined business with its investment in the Hamrin field with a 25 years initial term. The initial phase of development will target a tripling of current field production to approximately 60,000 bbl of oil by 2028, or 15,000 bbl net to ShaMaran.
Further phases of development could target more than doubling those production levels to above 30,000 bbl on a net basis. Under the development and production contract, HKN and ShaMaran are incentivized to invest with a high level of cost recovery above 20,000 bbl and profit sharing above 40,000 bbl. Initial investment is modest at $50 million, with CapEx in later phases estimated in the range of $2- $3 per incremental barrels. We like the low-cost growth optionality ShaMaran-Hamrin investment provides, which sits well alongside the opportunity from Shaikan. Together, Shaikan and Hamrin could increase the working interest production of the combined company towards 100,000 bbl a day. Hamrin will also provide the combined company with new exposure to Federal Iraq as the government looks to increase export volume to the strategically important Iraq-Turkey pipeline. Next slide, please.
Finally, we believe the merger will create significant value for both GKP and ShaMaran shareholders. Firstly, we are creating a stronger company with greater scale, a highly complementary portfolio, and a stronger cash flow profile, which will be better able to unlock the significant growth potential from Shaikan and Hamrin, but also beyond this enlarged portfolio. Second, the combined company will be able to deliver more attractive and more sustainable shareholder returns, in particular to the approaching development, with greater stability through the ups and downs of the operating environment and commodity cycles. Looking to 2027, both companies will be permitted to each distribute up to $50 million in dividends if the deal has not closed by late August 2027. This would supplement GKP shareholders' $50 million special dividends on closing.
In total, this represents potential of up to $100 million dividends for GKP shareholders in 2027 by the completion of the merger. In the coming months, we intend to formalize the distribution policy of the combined company to provide investors with better visibility on our stronger distribution capacity. Third, the company will have greater capital markets relevance with improved liquidity, better access to financing, and ultimately a single listing in Oslo. Finally, the combined company will maintain a robust balance sheet and prudent liquidity levels, continuing GKP's consistent and conservative financial profiles over the past few years. GKP is currently contemplating the issuance of a new bond to fund our growth plans, and we will update the market in due course in relation to this fundraising process. Next slide, please.
To summarize, we have announced today the merger of Gulf Keystone and ShaMaran to create the leading independent oil producer focused on Kurdistan and Iraq. The combined business will benefit from increased scale and diversification by bringing together a highly complementary portfolio of assets. Stronger cash flow and greater resilience will de-risk the growth potential of both companies' assets while creating a larger platform for shareholder value and enhanced distributions. In conclusion, I would like to welcome ShaMaran shareholders and the Lundin family, who will become the combined company's largest shareholder. With that, I will hand back to the operator for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question via the conference call, please press star one on your telephone keypad. For those listening through the webcast, you can submit a written question by clicking on the control panel at the bottom of your screen and selecting the questions icon to type it in. Thank you. We will now take our first question from Teodor Nilsen of SB1 Markets. Your line is open. Please go ahead.
Good morning, Jon, Garrett, and Gabriel, and thanks for taking my questions and congrats on a deal that looks great. A few questions from my side. First, on the Hamrin field. Have you done any due diligence and technical work? If you could shed some light on how that process has been, that would be useful. Also maybe talk about more the long-term production outlook for Hamrin. Second question is on synergies. You mentioned $5 million. I assume that is mainly related to overhead and G&A. Could you also talk about suppliers and funding, and if you see any synergies on that? My last question is on the timeline. You aim for completion by mid-2027, as far as I understand. What are the key risks around that target? Thanks.
Garrett, do you want to talk about the due diligence on Hamrin?
Sure. I can talk about it from the ShaMaran perspective, of course. We are partners with HKN and Atrush and Sarsang already, so very close to them and have followed their entry into Iraq from the beginning. We had our own technical resources that we share with IPC review the Hamrin block, and we had external technical consultants that we've used in the Lundin Group to review desktop review, given the limited information available from these fields in Iraq that were previously operated by the North Oil Company. ShaMaran and the Lundin Group are comfortable with the technical upside here, and we've shared that with Gulf Keystone.
Thanks, Garrett. From a Gulf Keystone perspective, our technical team has done due diligence on, as Garrett said, the information that they shared with us to a level that, again, we've been very excited by the prospect. Also the size of this resource, it really is considerable, which has allowed us to ascribe some value to it in the deal process.
And if you want, in terms of the G&A synergies, we talked about $5 million. Obviously, ShaMaran is not an operator. So basically, we know HKN is also a very lean operator. I think ultimately, we will definitely be able to engage with HKN, share best practice from both sides, us on them and them on us. But I think at this stage, it was a little bit too early to ascribe some dollar amount to it. But absolutely makes total sense to make sure that we optimize operations. And we have a very similar mindset with HKN in terms of how we operate, how we develop, how we deploy capital. I think that is great. Also, another element around potential synergy is by combining, you become a much larger company. For example, when we are talking about raising debt, you have an enhanced credit profile, more diversified business scale.
I think this is also something that over time will unlock values to investors. Yes. With regards to the timeline, obviously, there is going to be the usual shareholder approvals that we are expecting later this year. There is going to be the regulatory and listing usual approvals and processes, which we are very comfortable with. And obviously, the other one is going to be the government approval that typically comes at the end. And we have already engaged with them to inform them about the transaction, and we are going to in tandem with Garrett and the team to make sure we have a swift process. But at this stage, we felt that the middle of next year was a fair estimate of the closing timeline.
Okay. Thank you.
Thank you. We will now take our next question from Werner Riding of Peel Hunt. Your line is open. Please go ahead.
Yeah, morning all. I'd just like to test the 50/50 post-combination agreement a little bit more. Given GKP contributes the proven world-class operated Shaikan field and a debt-free balance sheet, what are the key value drivers? You touched on it somewhat, but within the ShaMaran portfolio that justify existing Gulf Keystone shareholders only owning 50% of the combined group?
Yeah. Sure, Werner. Basically, we spent quite a lot of time to assess the combined profiles of the two businesses, the two assets. One of the elements driving the 50/50 has obviously been the $50 million dividend adjustments. The other one is that we saw quite a lot of near-term free cash flow potential into ShaMaran's non-operated assets in Kurdistan already. There are very little CapEx. They are into full cost recovery. They have much lower discount due to the lighter, better quality of the oil. The next three or four years, there is a lot of free cash flow generation from those assets, which come at a time that is helping to fund the Shaikan side of it.
But also one of the critical element that's probably not, because it's just been announced and hasn't been fully absorbed by the market, is really the Hamrin opportunity that we've really looked quite a bit and got excited with all the potential. It's a very long asset, 25 years, a long plateau potential. There's already several penetration in wells. There's going to be a lot of work to really understand what's in there. But on balance, the risk-reward, low case, high case, or even medium case, and then the higher case, there is definitely a value to be a fair value or fair share on both sides to justify the 50/50. Jon, do you want to add anything?
Yeah. I think the thing to remember is not all barrels are equal, basically. In this, they have a strong near-term cash flow generation. We're coming out of cost recovery. They have a pool north of $250 million. As Gabriel said, their discount in terms of what they receive for their barrels is not I think we talked about ours being hopefully single digit, but high single digit and maybe just into double digits for the discount, whereas they are receiving close to zero discount or even a premium to Sarsang. Again, it's important to remember that barrels aren't equal, but also they will generate, as a result, their production profile in the near term, significant cash.
Okay. Thanks for that. Thank you.
Thank you. We will now take a follow-up question from Teodor Nilsen of SB1 Markets. Please go ahead.
Thank you. Yeah, a couple of follow-ups there. First, on dividend policy. As far as I understood you, Gabriel, you said that you expect to announce a dividend policy after closing of the deal. Just very early stages here, how should we think around the new dividend policy? Will that be a fixed amount going forward, or will it be a percentage of some earnings or cash flow? Any thoughts around that would be useful. A second follow-up to that is on other M&A opportunities. Obviously, the Hamrin opportunity is probably unique, but are there more opportunities like Hamrin out there in Iraq? Any comments would be useful. Thanks.
Yeah, sure. No problem. On the dividend policy, I think we want to provide guidance sooner than after completion. That is, we said again, in the coming months, we want to come after. I think it is important to understand with the kind of diversified, broader size of the portfolio and the resilience of cash flow generation. I think it is going to be much more stable base. So we would like to aim, and again, it is more a sense of direction rather than being the actual policy. But I think it would be important to provide shareholders a base on a regular basis, whether it becomes a quarterly type of base dividend, and then supplemented by additional dividends in times of excess cash flow, when it comes to strong oil price or as the production ramp-ups. I think it is very important to turn the dividend potential into something that is very predictable.
Give us a little bit more time as we reintegrate the two types of profile, the CapEx requirement, as we work into budgets for next years. But at least that gives you a sense that we really believe that this combined portfolio has a much stable and potential for growth of dividends over time. We will get back to you on this. On the M&A opportunity, yeah, absolutely. I think it is definitely a game changer to be on the other side of the Hamrin field. I think strengthening the partnership with HKN is going to be great. Might be other opportunities in the future, either with them or on our own. I think we have already a lot of barrels and a lot of growth to go within our existing portfolio. But I think you should be thinking that we are not aiming to stop where we are.
If we see opportunities to deploy, we want to be the platform in Kurdistan and Iraq as a publicly listed vehicle to capture those opportunities.
Okay. Thank you. Just one final question, if I may. That is on reporting frequency. What do you plan to do there going forward?
Basically, the intention, obviously, is by moving to the listing to Oslo, we move to quarterly reporting. That is going to come with it. I think you get to think about this over the transition as we navigate between now and closing.
Okay. Makes full sense. Agree on that, too. Thank you.
Thank you. We'll now take our next question from Charlie Sharp of Canaccord Genuity. The line is open. Please go ahead.
Thanks for taking my question. Just really, it's a bit of a follow-up to Werner's question. Not necessarily specifically regarding the 50/50, but the answer really seemed to focus quite a bit, I felt, on the Hamrin field. I just wondered, do you see that as the more heavy investment profile for the combined company going forward rather than Shaikan? Or do you see it as a sort of, not an either/or, but it's both fields, full speed ahead? Thank you.
Yeah. Hi, Charlie. Essentially it's both, but in terms of the amount of capital, the contract that HKN assigned has a very high cost recovery percentage. It's now a bit, it's very similar to Shaikan, which is coming out of cost recovery, in terms of being able to invest and recover the cost very quickly from production. Same with Hamrin, because it's already producing 20,000 bbl a day. We see it as, I think we're going to have to invest considerable sums in Shaikan, but it almost looks like it's self-funding from a Hamrin perspective. If you look at where the majority of the capital is going to go, it's going to go into Shaikan.
Okay. Thank you.
Thank you. We have no further questions on the line. I will now hand over to Aaron for webcast questions.
Great. Thanks, Laura. Good morning, everyone. I have got a few questions here from the webcast. I would just like to start with the intended LSE delisting. There have been a few questions from a number of retail shareholders. Basically, grouping those together, how will U.K. long-term holders be impacted by that delisting? What are our thoughts on timing and process? What is the logic for that, rather than keeping dual listed? How will we ensure that U.K. shareholders are able to transfer successfully to Norway? Gabriel will probably take that.
Yeah. No, that is a very important question that we definitely looked into as we prepared on this transaction. Basically, if you wind back a little bit, earlier this year we went and did the first step with the dual listing. As part of this process we really wanted to understand, okay, the Euronext Growth in Oslo is an unregulated market, similar to AIM. But basically over time you want to be on the regulated market of the Oslo Børs, which is similar to the main market in the U.K. To do so, basically you need to have accounting standards. Basically, we have transferred our accounting standards from UK IFRS to IASB IFRS. So that is one of the thing that is already completed. Basically, the other element is to complete a CPR, which we are in the process of doing for the end of the year.
We have a very good grasp of the process of going from the Euronext Growth to the main market. We are aiming to go as early as the beginning of next year to really kick that process. By the time we are already into the main market, then basically once in the main market, it should allow a much seamless movement between the two because we are going to be talking about two regulated markets. Also we have been engaging, or we understand the various investor platforms out there and basically the ability for them to be holding Norwegian stocks, which is the case in many of them. Basically, we are very much focused on getting the offlisting done as soon as possible. Basically this is not going to create any issues for our own shareholders.
For this word, I also have GKP shares in an ISA, and basically I really want to make sure that there is as little impact to the investors and they can continue to hold our stock. We cannot discuss tax circumstances for each individual, but our focus is really to make sure that there is little impact and making sure that by being on the main market in Oslo allows the shares to still continue into the ISA and the likes, depending on the platform that you are on, of course.
Thanks, Gabriel. Maybe we could just talk about what we see about Oslo that we like and why we think that is the natural home for the company.
Yeah. We have had a lot of engagement over the past with investors, analysts, and Oslo has been a natural place for the energy sector, whether it is for seismic companies, drilling groups offshore, and in Kurdistan as well, for that to be clear. There are now several companies. ShaMaran has been also having a dual listing. We do. You have DNO historically who has had a long presence, and there is a lot of institutional and retail understanding of the sector. But when we look specifically at our transaction, by having both ShaMaran and Gulf Keystone already having a listing, an overlap with Oslo, it felt just naturally, instead of having three different listing venues with costs associated with all of them, to consolidate into a platform that allows one single trading ship at lower cost. We are going to be talking about billion-plus companies.
We are aiming by consolidating the volume into a single place that will also increase liquidity to shareholders to be able to trade in and out of the business.
That is great. Thank you, Gabriel. Next question is from Nik Stefanou , who we all know well as an analyst. He has got three questions here, more on the deal. The first question is, can we give a bit more color on the reconciliation to PSC terms that is currently going on in Kurdistan, and how that will affect the further phases of growth for Shaikan? Maybe give that one to you, Jon.
Sure. We have been negotiating the PSC change for some time. It effectively mitigates, or it offsets some of our receivables we have from 2022, 2023 against some of our contingent liabilities on our balance sheet and payables, which are considerable. As a result, it also brings in government's carried interest, which has always been talked about and has always been out there for us, and something that the government have been very keen on, of course. We feel that actually bringing them in from the carried interest because we end up reducing the CBP payments, that actually that is kind of the wash, actually. But our headline working interest goes down to 61.5%. It also cleans up our costs over the last sort of five or six years.
I think ultimately there is a very strong rationale for us for completing that, which we are hoping to do in the near term.
Great. The second question is just on the pro forma potential capital structure of the combined company with both companies, ShaMaran, GKP, considering bonds in the near term. Gabriel, can I hand that to you?
Yeah, exactly. We mentioned our interest to bring some debt on the balance sheet to be able to really get us ready to place our long lead orders, get us ready to be drilling next year, really plan on that basis for next year. So we're going to come to the market in due course. As pointed out, ShaMaran has initiated a marketing initiatives, and we've mentioned in our press release that we aim to initiate shortly after that. That's the intention, but no decisions been made. We're going to update the market in due course. But I think one thing's been clear is basically we've really kind of thought through those bond raise process, both as individual companies for until between now and completion, that those proceeds will enable each side of the business to really go after their growth opportunities.
But post-merger that it's rightly capitalized to ensure that we have the right balance sheet and it fits for the growth profile of the investment as well as the dividend for our shareholders. So I just say watch this space, Nik.
Thanks, Gabriel. Then just final question from Nik. Can we give a bit more color on the fiscal terms and contract take at Hamrin? In Federal Iraq, it's usually TSCs. Is this a PSC-like structure?
No, it's not neither a PSC nor a TSC. It's a development and production contract. It's kind of the newer version of contracts in Iraq. It's not dissimilar to a PSC in a sense that there's a cost recovery and then a sharing of the profits after that. But one of the key terms that I found very attractive was that there is up to 70% of cost recovery, and that's why when Jon was explaining that this is an asset that will be kind of self-funding, or you put the capital up front and then basically the capital is being paid in real time. It's very attractive. I think that's quite a great, it's definitely not a TSC.
Very good. Thanks, Gabriel. Next question, just on the top-up payment timing and when we're expecting to see that reconciliation to international prices. Jon, could you take that one?
You'll have seen on last Thursday, both ourselves and ShaMaran put out a press release to say that we were starting to get paid top-ups from a lifting on 7 October. We lifted a cargo on 7 October, and the payments from that will roll through to the IOCs between now and 7 November. There are two further cargoes that are allocated later this month, in fact, one on Friday and one the following week, which will amount to, I think, in the order of 1.6 million barrels, which will go to compensate for Q4 2025 top-ups. There was a mechanism in place to achieve that. In terms of H1 and H2 2026, we're speaking with SOMO and the Ministry of Oil and the KRG about the top-ups for this year.
Then we're looking also at the same time to end up with an agreement where we get paid international pricing as per contract going forward when the interim contract falls away in January. The timeline is we're expecting to get Q4 2025 top-ups through November, and then we're hoping to also get some further top-ups for 2026. But the exact timing of that is to be determined.
Thanks, Jon. So final question here on the webcast, can you just give an update on the general security situation in Kurdistan?
Okay. What we're seeing is in Kurdistan, the drone attacks have certainly diminished but haven't completely stopped. Unfortunately, the KDPI, the Iranian Kurds, in some of their refugee camps and where they've been staying in eastern Kurdistan, have still been attacked, unfortunately. We've not seen any. I think Erbil's been relatively quiet now for a few weeks, and we're seeing kind of like the, obviously with the quietening down of the U.S. to Iran situation, although people are aware that that may resume. Lots of saber-rattling, I think, on both sides. Hoping to get to a negotiated settlement of that soon. Obviously, we have seen continued hostilities between Saudi and the Houthis and, again, not sure about the involvement of other international players in that conflict and whether or not that might escalate.
Depending on whether the militia, the Iranian-sponsored militia, are responsible for firing drones and missiles into Saudi or other Gulf states may warrant a response. But currently we're seeing, we're enjoying a period of stability and relative safety that we haven't seen for a while. So.
Very good. Thank you, Jon, and thanks for everyone's time this morning. I'd like to hand back to the operator to close the call.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.