“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)

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)

What is the fate of Baghdad-Erbil’s Oil-for-Budget Agreement?

By Dana Taib Menmy for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

What is the fate of Baghdad-Erbil’s oil-for-budget agreement amid ongoing protests?

The Kurdistan Region of Iraq has vast proven oil and gas resources; however, mismanagement, corruption and ruling parties’ monopoly on power have brought the region to the brink of financial collapse amid longstanding controversies with the Iraqi government over the region’s share of federal budget.

Following extensive negotiations, the Kurdistan Regional Government (KRG) announced Nov. 27 that a final oil-for-budget deal with the Iraqi federal government had been reached in which the KRG agreed to submit 250,000 barrels per day of crude oil to Iraqi State Oil Marketing Company in return for receiving a fair share of the country’s budget for 2020.

The KRG currently produces 500,000 barrels per day, and has been exporting most of its oil independently through Turkey since 2013.

Click here to read the full story.

What is the fate of Baghdad-Erbil’s Oil-for-Budget Agreement?

By Dana Taib Menmy for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

What is the fate of Baghdad-Erbil’s oil-for-budget agreement amid ongoing protests?

The Kurdistan Region of Iraq has vast proven oil and gas resources; however, mismanagement, corruption and ruling parties’ monopoly on power have brought the region to the brink of financial collapse amid longstanding controversies with the Iraqi government over the region’s share of federal budget.

Following extensive negotiations, the Kurdistan Regional Government (KRG) announced Nov. 27 that a final oil-for-budget deal with the Iraqi federal government had been reached in which the KRG agreed to submit 250,000 barrels per day of crude oil to Iraqi State Oil Marketing Company in return for receiving a fair share of the country’s budget for 2020.

The KRG currently produces 500,000 barrels per day, and has been exporting most of its oil independently through Turkey since 2013.

Click here to read the full story.

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)

KRG Delays Payments to Oil Firms

By John Lee.

The Kurdistan Regional Government (KRG) has delayed payments to oil producers by several weeks.

In statements to the markets on on Thursday, Genel Energy, Gulf Keystone Petroleum (GKP) and Shamaran Petroleum said that payments relating to invoices for oil production in August and September, which were due to be paid in November and December, will be received in January 2020.

(Sources: Genel Energy, Gulf Keystone Petroleum (GKP), Shamaran Petroleum)

KRG Delays Payments to Oil Firms

By John Lee.

The Kurdistan Regional Government (KRG) has delayed payments to oil producers by several weeks.

In statements to the markets on on Thursday, Genel Energy, Gulf Keystone Petroleum (GKP) and Shamaran Petroleum said that payments relating to invoices for oil production in August and September, which were due to be paid in November and December, will be received in January 2020.

(Sources: Genel Energy, Gulf Keystone Petroleum (GKP), Shamaran Petroleum)

Oil Trail reveals Turkey funding Syrian Kurdish rivals

By Amberin Zaman for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Oil trail reveals Turkey funding Syrian Kurdish rivals

At the Halifax Security Forum, an annual event attended by high-powered government officials, business titans and assorted other movers and shakers from across the globe, national security adviser Robert O’Brien took the stage with PBS’ Nick Shifrin and let the cat out of the bag.

When the veteran correspondent grilled O’Brien Nov. 23 about President Donald Trump’s decision to keep US troops in northeastern Syria “for the oil,” noting that the Pentagon’s Syrian Kurdish allies were selling it to the Syrian regime in defiance of sanctions, O’Brien responded, “Some of it goes to the regime. Some of it is used locally. Some of it goes to Iraqi Kurdistan. Some of it goes to Turkey.

The key, though, is not where the oil goes but where the revenue goes.” The main thing, he concluded, was to ensure that none of it got to the Islamic State.

Click here to read the full story.