Iraq a “Potentially Vulnerable” Energy Supplier

By John Lee.

The International Energy Agency (IEA) has warned that Iraq is a “potentially vulnerable” energy supplier.

In its Oil Market Report, it says that in the medium term, “heightened security concerns might make it more difficult for Iraq to build production capacity“.

More here.

(Source: IEA)

“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)

Atrush Field performing “Exceptionally Well”

By John Lee.

ShaMaran Petroleum has reported that the Atrush Field continues to perform “exceptionally well“.

Average production for the month of November was 43,360 bopd. The CK-15 well is now online and wells currently are undergoing normal-course maintenance.

The Company reiterates its Atrush 2019 average daily production guidance of between 30,000 and 35,000 bopd and a target 2019 exit rate between 45,000 bopd and 50,000 bopd. The Company shares in this production, pursuant to a production sharing contract, with a working interest of 27.6%.

Since the beginning of the year, production has increased 56% and the Company has invested significantly in infrastructure to facilitate continued production growth.

The Atrush field is located 85 km northwest of Erbil and is one of the largest new oil developments in the Kurdistan Region of Iraq. The field was first discovered in 2011 and oil production started in July 2017. In its over two years of production the Atrush field has sold all its production to the Kurdistan Regional Government of Iraq at international market prices.

(Source: ShaMaran Petroleum)

Atrush Field performing “Exceptionally Well”

By John Lee.

ShaMaran Petroleum has reported that the Atrush Field continues to perform “exceptionally well“.

Average production for the month of November was 43,360 bopd. The CK-15 well is now online and wells currently are undergoing normal-course maintenance.

The Company reiterates its Atrush 2019 average daily production guidance of between 30,000 and 35,000 bopd and a target 2019 exit rate between 45,000 bopd and 50,000 bopd. The Company shares in this production, pursuant to a production sharing contract, with a working interest of 27.6%.

Since the beginning of the year, production has increased 56% and the Company has invested significantly in infrastructure to facilitate continued production growth.

The Atrush field is located 85 km northwest of Erbil and is one of the largest new oil developments in the Kurdistan Region of Iraq. The field was first discovered in 2011 and oil production started in July 2017. In its over two years of production the Atrush field has sold all its production to the Kurdistan Regional Government of Iraq at international market prices.

(Source: ShaMaran Petroleum)

GKP launches second Share Buyback Programme

Gulf Keystone Petroleum (GKP) has provided an operational and corporate update. 

Operational

  • Average gross production for the year up to 30 November 2019 of 32,127 barrels of oil per day (“bopd”).
  • November gross production averaged 40,582 bopd, with current production rates from the field at c.42,000 bopd.
  • GKP is therefore on track to meet its original gross production guidance for 2019 of 32,000-38,000 bopd.
  • The first well of the drilling campaign, SH-12 came onstream on 13 November. During commissioning, the well produced at rates up to 4,600 bopd, in line with expectations and is currently producing at c.4,000 bopd. 
  • The second well in the drilling campaign, SH-9 is a crucial part of the long-term field gas management plan and is designed to assess the gas reinjection potential of the Jurassic formation. The well, which was spudded on 19 October, encountered a faulted section requiring the well to be side-tracked to the Jurassic reservoir target.
  • The SH-9 side-track necessitates a revision to the drilling schedule. Assuming a duration of one month for the side-track, the Company now expects to reach the 55,000 bopd gross production target at Shaikan in Q3 2020.
  • The planned maintenance and debottlenecking shutdown at PF-2 was completed safely during October.
  • The PF-1 export pipeline is complete. Full oil export operations are expected to commence in the next 24 hours marking the end of export by trucking from the Shaikan Field.
  • Operations at Shaikan remain safe and secure, with no Lost Time Incidents (“LTI”) recorded in over 500 days.

Corporate

  • Cash balance of $206 million as at 9 December 2019.
  • With a robust cash position and the Company’s confidence in its delivery of the Shaikan project, a second share buyback programme for a further $25 million has been approved and an initial tranche of $15 million will be initiated today.

Jón Ferrier, CEO, commented:

The Company has made significant progress on a number of fronts; with the successful addition of SH-12 to the PF-2 production inventory and drilling of the gas appraisal well SH-9 where operations continue.  The imminent start of export through the PF-1 pipeline means all production from Shaikan will now be exported directly via pipeline, benefitting safety, reducing environmental impact and improving netbacks. 

“We are pleased to confirm that we are on track to achieve our initial average production guidance for 2019, and whilst the need to side-track SH-9 has slightly impacted our timing guidance for delivering 55,000 bopd, we remain on course to achieve further significant production growth in 2020.  

We are also pleased to announce the launch of a second $25 million share buyback programme, which is in line with our focus on returning value to shareholders, whilst retaining the capital necessary to grow the business.

(Source: GKP)

GKP launches second Share Buyback Programme

Gulf Keystone Petroleum (GKP) has provided an operational and corporate update. 

Operational

  • Average gross production for the year up to 30 November 2019 of 32,127 barrels of oil per day (“bopd”).
  • November gross production averaged 40,582 bopd, with current production rates from the field at c.42,000 bopd.
  • GKP is therefore on track to meet its original gross production guidance for 2019 of 32,000-38,000 bopd.
  • The first well of the drilling campaign, SH-12 came onstream on 13 November. During commissioning, the well produced at rates up to 4,600 bopd, in line with expectations and is currently producing at c.4,000 bopd. 
  • The second well in the drilling campaign, SH-9 is a crucial part of the long-term field gas management plan and is designed to assess the gas reinjection potential of the Jurassic formation. The well, which was spudded on 19 October, encountered a faulted section requiring the well to be side-tracked to the Jurassic reservoir target.
  • The SH-9 side-track necessitates a revision to the drilling schedule. Assuming a duration of one month for the side-track, the Company now expects to reach the 55,000 bopd gross production target at Shaikan in Q3 2020.
  • The planned maintenance and debottlenecking shutdown at PF-2 was completed safely during October.
  • The PF-1 export pipeline is complete. Full oil export operations are expected to commence in the next 24 hours marking the end of export by trucking from the Shaikan Field.
  • Operations at Shaikan remain safe and secure, with no Lost Time Incidents (“LTI”) recorded in over 500 days.

Corporate

  • Cash balance of $206 million as at 9 December 2019.
  • With a robust cash position and the Company’s confidence in its delivery of the Shaikan project, a second share buyback programme for a further $25 million has been approved and an initial tranche of $15 million will be initiated today.

Jón Ferrier, CEO, commented:

The Company has made significant progress on a number of fronts; with the successful addition of SH-12 to the PF-2 production inventory and drilling of the gas appraisal well SH-9 where operations continue.  The imminent start of export through the PF-1 pipeline means all production from Shaikan will now be exported directly via pipeline, benefitting safety, reducing environmental impact and improving netbacks. 

“We are pleased to confirm that we are on track to achieve our initial average production guidance for 2019, and whilst the need to side-track SH-9 has slightly impacted our timing guidance for delivering 55,000 bopd, we remain on course to achieve further significant production growth in 2020.  

We are also pleased to announce the launch of a second $25 million share buyback programme, which is in line with our focus on returning value to shareholders, whilst retaining the capital necessary to grow the business.

(Source: GKP)

ShaMaran Exceeds 20,000,000 Barrels at Atrush

ShaMaran Petroleum has reported that the Atrush oil field total production has exceeded 20,000,000 barrels.

ShaMaran President and Chief Executive Officer Dr. Adel Chaouch said:

“This cumulative production milestone demonstrates Atrush’s upward path to higher production and has been attained ahead of target.  We look forward to further future production achievements and operational improvements in the Atrush block.”

The Company maintains its Atrush 2019 average daily production guidance of between 30,000 and 35,000 bopd with the prior week’s average production of 46,000 bopd which is within our target exit rate between 45,000 bopd and 50,000 bopd. The Company shares in this production, pursuant to a production sharing contract, with a working interest of 27.6%.

The Atrush field is located 85 km northwest of Erbil and is one of the largest new oil developments in the Kurdistan Region of Iraq. The field was first discovered in 2011 and oil production started in July 2017.

In its over two years of production the Atrush field has sold all its production to the Kurdistan Regional Government of Iraq at international market prices less a discount based on quality and transportation charges.

(Source: ShaMaran)

ShaMaran Exceeds 20,000,000 Barrels at Atrush

ShaMaran Petroleum has reported that the Atrush oil field total production has exceeded 20,000,000 barrels.

ShaMaran President and Chief Executive Officer Dr. Adel Chaouch said:

“This cumulative production milestone demonstrates Atrush’s upward path to higher production and has been attained ahead of target.  We look forward to further future production achievements and operational improvements in the Atrush block.”

The Company maintains its Atrush 2019 average daily production guidance of between 30,000 and 35,000 bopd with the prior week’s average production of 46,000 bopd which is within our target exit rate between 45,000 bopd and 50,000 bopd. The Company shares in this production, pursuant to a production sharing contract, with a working interest of 27.6%.

The Atrush field is located 85 km northwest of Erbil and is one of the largest new oil developments in the Kurdistan Region of Iraq. The field was first discovered in 2011 and oil production started in July 2017.

In its over two years of production the Atrush field has sold all its production to the Kurdistan Regional Government of Iraq at international market prices less a discount based on quality and transportation charges.

(Source: ShaMaran)

Iraq to Reduce Oil Production from October

By John Lee.

Oil minister Thamer al-Ghadhban (pictured) has said Iraq will reduce oil production from October, in the hope of achieving stability in the world oil market.

He added that talks with Iraqi Kurdistan on coordinating the export of oil from the two regions were in “advanced stages“.

(Source: Iraqi Ministry of Oil)

New Drilling Contracts Awarded at Majnoon

By John Lee.

Basra Oil Company (BOC) has signed two contracts for new drilling at the giant Majnoon oil field.

China’s Hilong Oil Service & Engineering Company is to drill 80 oil wells at a cost of $54 million, while the Iraqi Drilling Company (IDC) will drill 43 oil wells at a cost of $255 million.

Oil Minister Thamir al-Ghadhban said the contracts are part of BOC’s plan to increase the production at Majnoon to 400,000 barrels per day by 2022.

(Source: Iraqi Ministry of Oil)