Iraq Contributes to Schlumberger Results

By John Lee.

US-based Schlumberger has reported that Iraq has contributed to its revenue growth in the region.

In its full-year results for 2019, the company said:

“Sequential international growth was led by the Middle East & Asia area, where revenue increased 5% driven by higher year-end product sales in Kuwait, Iraq, and Oman.”

(Source: Schlumberger)

China’s Zhongman wins $27m Iraqi Drilling Contract

By John Lee.

China’s Zhongman Petroleum and Natural Gas Group Corp., Ltd. (ZPEC) has reportedly announced a new drilling contract with Weatherford in Southern Iraq.

Chinese media reports that the deal is worth approximately $27 million, and follows another contract with Weatherford in Iraq agreed in December.

The oil field was not identified.

(Source: Eastmoney)

“Successful Year” for Genel Energy

By John Lee.

Shares in Genel Energy closed Thursday up more than 4 percent after the company issued the following trading and operations update in advance of the Company’s full-year 2019 results, which are scheduled for release on 17 March 2020. The information contained herein has not been audited and may be subject to further review.

Bill Higgs (pictured), Chief Executive of Genel, said:

2019 was a successful year for Genel, and we continue to deliver on our promises. We increased our highly cash-generative production in line with guidance, paid a material dividend, grew our operating capabilities, and added new assets to the portfolio that will bear fruit in 2020.

“Our ongoing cash generation, with confidence of regular payments and in the security of the Kurdistan Region of Iraq, means that it is business as usual and our investment plans are moving forward at pace. This increasing investment in our growth assets is more than covered by expected free cash flow, and will see production diversify and increase as Sarta comes onstream in the summer, with enough remaining to underpin an increase in our already significant dividend.

FINANCIAL PERFORMANCE

  • $317 million of cash proceeds were received in 2019 (2018: $335 million)
  • Capital expenditure of $161 million (2018: $95 million), in line with initial guidance, as spending increased on growth assets
  • Free cash flow (‘FCF’) of $99 million in 2019, pre dividend payment
    • Cash proceeds and FCF were impacted by the non-receipt of $54 million in payments from the Kurdistan Regional Government (‘KRG’) relating to export sales in August and September 2019, due in November and December
    • Pro-forma FCF in 2019 was $153 million (2018: $164 million), or $0.55 per share
  • $26 million of outstanding payments from the KRG, constituting the full amount in respect to export sales in August 2019, has subsequently been received in 2020
  • Dividends of $42 million declared in 2019
    • Maiden dividend of $27 million (10¢ per share) paid in June 2019
    • A further $15 million distributed (5¢ per share) in January 2020
  • Cash of $387 million at 31 December 2019 ($334 million at 31 December 2018)
  • Net cash of $90 million at 31 December 2019 (net cash of $37 million at 30 December 2018)

OPERATING PERFORMANCE

  • 2019 net production averaged 36,250 bopd (2018: 33,690 bopd), in line with guidance and an increase of 8% on the prior year
  • Q4 averaged 35,410 bopd, an increase from 34,720 bopd in Q3
  • 19 new wells were brought onto production in 2019 across all assets
  • Production by asset was as follows:
(bopd) Gross production

2019

Net production

2019

Net production

2018

Tawke PSC 123,940 30,990 28,260
Taq Taq 11,960 5,260 5,430
Total 135,900 36,250 33,690

PRODUCTION ASSETS

  • Tawke PSC (25% working interest)
    • Tawke PSC gross production averaged 123,940 bopd, of which Peshkabir contributed 55,190 bopd
    • Production in Q4 2019 averaged 122,800 bopd, of which Peshkabir contributed 58,910 bopd
    • There will be an active drilling campaign in 2020 on the Tawke field, aiming to minimise decline rates
    • At Peshkabir, the P-12 well is currently appraising the eastern flank of the field, and is set to complete shortly
  • Taq Taq PSC (44% working interest and joint operator)
    • Taq Taq gross field production averaged 11,960 bopd in 2019
    • Production in Q4 2019 averaged 10,703 bopd
    • Following the successful drilling of the TT-34 well, which has now entered production at over 2,000 bopd with 20/64″ choke, production at Taq Taq has averaged c.12,800 bopd in the year to date
    • The latest well on the northern flank of the field, TT-35, spud on 6 January. This completes the drilling programme with the Sakson-605 rig
    • Further activity at Taq Taq is focused on maximising cash generation, with the optimised cost structure and 2020 work programme, which could see up to six wells drilled, under review

PRE-PRODUCTION ASSETS

  • Sarta (30% working interest)
    • Civil construction work at the Sarta field is continuing on schedule, with flowlines laid and buried and foundations in place for oil storage tanks, andGenel expects production to start in the summerof 2020
    • Phase 1A represents a low-cost pilot development of the Mus-Adaiyah reservoirs, designed to recover 2P gross reserves estimated by Genel at 34 MMbbls
    • Unrisked gross mid case resources relating to the Mus-Adaiyah reservoir are estimated by Genel at c.150 MMbbls, with overall unrisked gross P50 resources currently estimated by the Company at c.500 MMbbl
  • Qara Dagh (40% working interest and operator)
    • Civil construction works are progressing in preparation for the upcoming drilling operations, and the well pad and camp are on schedule for completion by the end of January
    • Environmental permits were granted in December 2019
    • The well will test the structural crest 10 km to the north-west of the QD-1 well, which tested sweet, light oil from Cretaceous carbonates
    • The QD-2 well is on track to spud in Q2 2020
    • Unrisked gross mean resources at Qara Dagh are currently estimated by Genel at c.200 MMbbls
  • Bina Bawi (100% working interest and operator)
    • Negotiations between Genel and the Kurdistan Regional Government (‘KRG’) regarding commercial terms for the gas and oil development at Bina Bawi made significant progress in the third quarter of 2019, resulting in an understanding on commercial terms for a staged and integrated oil and gas development being reached
    • Genel is now waiting to receive draft legal agreements reflecting this understanding
    • Genel is continuing the necessary readiness work required to enable rapid progress towards gas and oil developments upon receipt of signed documents
  • Somaliland – SL10B13 block (100% working interest and operator)
    • A farm-out process relating to this highly prospective block began in Q4 2019, with Stellar Energy Advisors appointed to run the process. A number of companies are now assessing the opportunity
    • Genel plans to conclude the farm-out process in H1 2020, aiming to minimise the cost to the Company of a well that could be spud in 2021
  • Morocco – Sidi Moussa block (75% working interest and operator)
    • The farm-out campaign is set to begin in Q2 2020, aimed at bringing a partner onto the licence prior to considering further commitments

ESG

  • Safety remains a priority for the Company, and our focus on this has led to zero lost time incidents (‘LTI’) and zero losses of primary containment in 2019 at Genel operations
    • There has not been an LTI since 2015, with over 11 million hours worked since the last incident
  • The operator of the Tawke PSC expects routine flaring to be eliminated on the licence in March 2020, with gas from the Peshkabir field set to be reinjected into the Tawke field in order to improve long-term reserves recovery
  • The search for a permanent Chairman is well progressed

OUTLOOK AND 2020 GUIDANCE

  • Net production in 2020 is expected to be close to Q4 2019 levels of 35,410 bopd, with an exit rate c.10% higher than this due to the expected addition of production from Sarta
    • Genel expects to drill over 20 producing wells in 2020
  • 2020 capital expenditure is expected to be $160-200 million, of which $120-150 million will be cost recoverable spend on assets on production in 2020. Other spend includes:
    • c.$35-40 million on the Qara Dagh 2 well
    • Under $10 million maintenance expenditure at Bina Bawi and Miran. Capital expenditure expectations for Bina Bawi in 2020 will be updated once legal agreements with the KRG have been signed
    • Under $2 million on African exploration assets
  • Operating costs per barrel expected to be $3/bbl, amongst the lowest in the industry
  • Opex: c.$40 million
  • G&A: c.$15 million
  • The Company expects full recovery of outstanding payments in Q1, and for regular payments to resume, as they had since September 2015
  • The Company continues to actively pursue growth and is analysing numerous opportunities to make value-accretive additions to the portfolio, but will only proceed with opportunities that fit our strict strategic criteria
  • Genel expects to generate c.$100 million in free cash flow, pre-dividend payments, in 2020
    • Given the ongoing strength of cash generation, confidence in the regularity of payments from the KRG, and the positive outlook for the Company, Genel reaffirms its commitment to growing the dividend

(Source: Genel Energy)

DNO Production Increases

DNO ASA, the Norwegian oil and gas operator, today announced a 29 percent year-on-year increase in its net Company Working Interest (CWI) production in 2019 to 104,800 barrels of oil equivalent per day (boepd) on the back of acquisitions and a record drilling campaign.

In the Kurdistan region of Iraq, production from the two fields in the Tawke license climbed from 113,100 barrels of oil per day (bopd) in 2018 (79,700 bopd CWI) to 124,000 bopd in 2019 (87,400 bopd CWI). Production of 122,800 bopd in the fourth quarter of 2019 was up 3,000 bopd from the previous quarter. The Company is operator of the Tawke license with a 75 percent interest.

At Tawke, 2019 production stood at 68,800 bopd, with wells drilled last year contributing 13 percent of field production at yearend. At Peshkabir, 2019 production stood at 55,200 bopd, with wells drilled in 2019 contributing 40 percent of field production at yearend.

Even though Tawke is now a mature field, we are continuously finding ways to slow its decline while teasing additional production from the newer Peshkabir field, all the while probing for other opportunities in Kurdistan,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani.

Elsewhere in Kurdistan, DNO reported a discovery in the Baeshiqa-2 exploration well last November after flowing variable rates of light oil and sour gas to surface from the upper part of Triassic Kurra Chine B reservoir following acid stimulation. Further testing of this and several other Jurassic and Triassic zones will determine the next steps towards appraisal and assessment of commerciality. DNO holds a 32 percent interest and operatorship of the Baeshiqa license.

Meanwhile, the Peshkabir-to-Tawke gas injection project designed to increase oil recovery rates at Tawke while eliminating flaring at Peshkabir will be completed in March 2020. Once completed, CO2 emissions from DNO’s operated fields will average 7 kilograms per barrel of oil equivalent (boe) produced, compared to an average of 9 kilograms per boe on the Norwegian Continental Shelf and a global average of 18 kilograms per boe.

DNO retained a strong cash balance of USD 480 million at yearend 2019 plus USD 144 million in marketable securities. Following a delay in export payments last month from the Kurdistan Regional Government to oil operators, DNO has since yearend received payment for its August oil sales totaling USD 52 million net to the Company.

(Source: DNO)

New Head of Petroleum Contracts and Licensing Directorate (PCLD)

By John Lee.

A former head of Iraq’s state-run Missan Oil Company (MOC) has reportedly been appointed to run the Ministry of Oil’s Petroleum Contracts and Licensing Directorate (PCLD).

According to Reuters, Ali Maarij, who ran the MOC until becoming a member of parliament in 2014, will take over from Abul Mahdi al-Ameedi, who reached retirement age late last year.

The PCLD oversees oil contracts and negotiates energy deals with international companies.

(Source: Reuters)

New Well at Taq Taq is Close to Production

Genel Energy has announce an update on activity at the Taq Taq field (Genel 44% working interest), as testing of the TT-34 well is nearing completion.

The well has produced from all zones tested, at a maximum combined flow rate of over 3,900 bopd with 28/64″ choke. With the inclusion of test production, gross production from the Taq Taq field is currently c.13,650 bopd.

Individual zone testing is now underway, which will determine the long-term production strategy. Genel expects the well to be placed on production around the middle of January with an initial flow rate of 1,500-2,000 bopd.

The rig has moved to drill the TT-35 well, also on the northern flank of the field, which is now preparing to spud.

(Source: Genel)

Chevron pulls US staff from Kurdistan

By John Lee.

Chevron has reportedly removed all of its American oil workers from Iraqi Kurdistan as a security precaution, following the killing of Iranian Quds Force leader Qasem Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis.

The company currently has interests in the Sarta and Qara Dagh blocks.

(Sources: Reuters, CNN)

Iraq seeks bids for Iraq-Jordan Oil Pipeline

By John Lee.

Iraq’s Ministry of Oil has invited bids fto build the Iraq-Jordan oil pipeline.

The first phase will be built on the Iraqi side, stretching 700 km from Rumaila to Haditha. This will have a capacity of 2.25 million barrels per day (bpd). This will be built on an engineering, procurement, construction and financing (EPCF) contract model.

The second phase, on the Jordanian side, will run 900 km from Haditha to the port of Aqaba. This section will be built on a Build Own Operate Transfer (BOOT) model.

Bids will be accepted from qualified companies up to the end of May, with a decision to be made by the end of 2020.

(Source: Ministry of Oil)

Oil Exports Slightly Down in December

By John Lee.

Iraq’s Ministry of Oil has announced preliminary oil exports for November of 106,265,307 barrels, giving an average for the month of 3.428 million barrels per day (bpd), down from the 3.500 million bpd exported in November.

These exports from the oilfields in central and southern Iraq amounted to 103,090,550 barrels, while exports from Kirkuk amounted to 2,827,050 barrels. Exports to Jordan were 347,707 barrels.

Revenues for the month were $6.700 billion at an average price of $63.051 per barrel.

November export figures can be found here.

(Source: Ministry of Oil)