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DNO: Revenues and Investment Rise Sharply

DNO ASA, the Norwegian oil and gas operator, today announced a 50 percent hike in 2018 spending in the Kurdistan region of Iraq to USD 250 million net to the Company on the back of higher revenues and regular export payments.

Annual 2017 revenues stood at USD 347 million, up 72 percent from 2016, bolstered by fourth quarter revenues of USD 116 million, the highest quarterly level in more than three years.

The Company fast tracked the development of the Peshkabir field with two wells currently producing a total of 16,000 barrels of oil per day (bopd) and commingled for export with another 97,000 bopd from the other DNO-operated field, Tawke, on the same license.

DNO’s Executive Chairman Bijan Mossavar-Rahmani:

“We made the Peshkabir Cretaceous discovery early in 2017, initiated early production in June, tripled output by year’s end and already have exported two million barrels with an estimated value of USD 100 million – more than twice the investment to date. And we have only started to appraise and develop this field which continues to surprise to the upside.”

A total of six Peshkabir wells will be drilled this year with field production expected to reach 30,000 bopd by summer and continue to ramp up in the second half of the year.

At the Tawke field, plans are being finalized with partner Genel Energy plc to drill four wells in 2018, in addition to the currently drilling Tawke-48 well slated for completion by end-February.

Elsewhere in Kurdistan, DNO has re-entered and sidetracked the Hawler-1 well to appraise the Benenan heavy oil field in the Erbil license, achieving a technical milestone with the first ever multilateral well and the first ever dual completion in Kurdistan. Testing will commence shortly, and if successful, will be followed by additional wells.

The Company received 12 monthly Kurdistan export payments during 2017 totaling USD 380 million net to DNO. The landmark August 2017 receivables settlement agreement, which increased DNO’s stake in the Tawke and Peshkabir fields from 55 percent to 75 percent plus three percent of gross license revenues over five years, contributed to higher export payments.

Operational cash flow more than tripled to USD 339 million in 2017 and DNO exited the year with a net cash position of USD 30 million versus net debt of USD 139 million at end-2016.

(Source: DNO)

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DNO: Revenues and Investment Rise Sharply

DNO ASA, the Norwegian oil and gas operator, today announced a 50 percent hike in 2018 spending in the Kurdistan region of Iraq to USD 250 million net to the Company on the back of higher revenues and regular export payments.

Annual 2017 revenues stood at USD 347 million, up 72 percent from 2016, bolstered by fourth quarter revenues of USD 116 million, the highest quarterly level in more than three years.

The Company fast tracked the development of the Peshkabir field with two wells currently producing a total of 16,000 barrels of oil per day (bopd) and commingled for export with another 97,000 bopd from the other DNO-operated field, Tawke, on the same license.

DNO’s Executive Chairman Bijan Mossavar-Rahmani:

“We made the Peshkabir Cretaceous discovery early in 2017, initiated early production in June, tripled output by year’s end and already have exported two million barrels with an estimated value of USD 100 million – more than twice the investment to date. And we have only started to appraise and develop this field which continues to surprise to the upside.”

A total of six Peshkabir wells will be drilled this year with field production expected to reach 30,000 bopd by summer and continue to ramp up in the second half of the year.

At the Tawke field, plans are being finalized with partner Genel Energy plc to drill four wells in 2018, in addition to the currently drilling Tawke-48 well slated for completion by end-February.

Elsewhere in Kurdistan, DNO has re-entered and sidetracked the Hawler-1 well to appraise the Benenan heavy oil field in the Erbil license, achieving a technical milestone with the first ever multilateral well and the first ever dual completion in Kurdistan. Testing will commence shortly, and if successful, will be followed by additional wells.

The Company received 12 monthly Kurdistan export payments during 2017 totaling USD 380 million net to DNO. The landmark August 2017 receivables settlement agreement, which increased DNO’s stake in the Tawke and Peshkabir fields from 55 percent to 75 percent plus three percent of gross license revenues over five years, contributed to higher export payments.

Operational cash flow more than tripled to USD 339 million in 2017 and DNO exited the year with a net cash position of USD 30 million versus net debt of USD 139 million at end-2016.

(Source: DNO)

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Genel Energy Updates on Operations in Kurdistan

Genel Energy has issued a trading and operations update in advance of the Company’s full-year 2017 results, which are scheduled for release on 22 March 2018. The information contained herein has not been audited and may be subject to further review.

Murat Özgül, Chief Executive of Genel, said:

“A strong final quarter of 2017 completed a very positive year for Genel. During the quarter, the successful Peshkabir-3 well result tripled production at the field to c.15,000 bopd, a figure that is expected to grow in 2018, while at Taq Taq the TT-29w well was brought on production.

“Payments for oil sales were received from the Kurdistan Regional Government (‘KRG’) in every month of 2017, totalling over $260 million net to Genel and leading to $140 million of free cash flow in the year. The 2017 payments were bolstered by the receipt of override payments in the fourth quarter under the Receivable Settlement Agreement (‘RSA’), and payments have continued in early 2018.

“The recently announced CPRs reaffirmed the potential of the Bina Bawi and Miran fields, with combined 1C gross raw gas resource estimates higher than the gas volumes agreed under the Gas Lifting Agreements. The upstream field development plans are expected to complete shortly, and will help define the roadmap to unlocking the value in these major resources.

“The successful debt refinancing in late 2017, and the expectation of ongoing material free cash flow, provides us with a solid platform and financial flexibility to execute our growth plans during 2018 and beyond.“

2017 OPERATING PERFORMANCE AND 2018 ACTIVITY OUTLOOK

  • 2017 net production averaged 35,200 bopd, with Q4 averaging 32,760 bopd. Production and sales by asset during 2017 was as follows:

(bopd)

Export via pipeline

Refinery sales

Total      sales

Total production

Genel net production

Taq Taq

11,700

6,350

18,050

18,050

7,940

Tawke PSC

108,250

10

108,260

109,050

27,260

Total

119,950

6,360

126,310

127,100

35,200

Note: Difference between production and sales relates to inventory movements

  • Tawke PSC (Genel 25% working interest)
    • Tawke PSC production averaged 109,050 bopd in 2017, with aggregate production from the Peshkabir-2 and Peshkabir-3 wells contributing 3,590 bopd to this figure. Combined production from the two fields currently averages c.110,000 barrels of oil per day
    • Preparations are underway to drill the Peshkabir-4 well. Additional drilling activity is planned on both the Tawke and Peshkabir fields during 2018, with overall activity levels dependent on production performance, drilling results, field studies, and ongoing payments from the KRG
  • Taq Taq PSC (Genel 44% working interest and joint operator)
    • Taq Taq field production averaged 18,050 bopd in 2017
    • Production in Q4 2017 averaged 14,035 bopd (Q3 2017 14,080 bopd). Ahead of the completion of a number of wells in Q4 2017, the overall rate of production decline slowed during the year due to the implementation of a proactive well intervention and production optimisation programme
    • In 2018 to date, production from Taq Taq has averaged 14,540 bopd, with the TT-29w, TT-30, and TT-31 wells contributing to the stabilisation in production from the beginning of Q4
    • As previously announced in late 2017, the TT-29w well was brought onto production after encountering a deeper free water level and more extensive oil bearing cretaceous reservoirs on the northern flank of the field than previously forecast. The results of the well will be analysed ahead of finalising the 2018 drilling programme, with field activity likely to be weighted towards the second half of the year. The ongoing Taq Taq well intervention programme, focused on the provision of artificial lift and water shut off in existing wells, will continue throughout 2018
    • Going forward, the Company will revert to reporting Taq Taq field production on a quarterly basis, as part of its corporate level disclosures
  • Bina Bawi and Miran (Genel 100% and operator)
    • As announced on 23 January 2018, Genel has agreed a 12 month extension to the conditions precedent schedule contained within the Gas Lifting Agreements for the Bina Bawi and Miran PSCs
    • CPRs for the Bina Bawi and Miran West gas fields concluded a c.40% increase in the combined 2C gas resources compared to the pro-forma end-2016 2C resource
    • The field development plans, being carried out by Baker Hughes, are on schedule to be completed shortly, and will help define the roadmap to unlocking the value of the assets
    • Genel will continue its systematic efforts to maximise the value of Bina Bawi and Miran, which includes optimising the cost and schedule of the proposed upstream developments
      • § In 2018 Genel expects to undertake an extended well test of Bina Bawi-4, which will provide valuable data on well deliverability and gas composition
    • The Company will continue to build momentum behind the development of Bina Bawi and Miran, and will continue engagement with potential farm-in partners for upstream participation at an optimal time to secure maximum value for Genel shareholders
  • African exploration update
    • Onshore Somaliland, the acquisition of 2D seismic data on the SL-10B/13 (Genel 75%, operator) and Odewayne (Genel 50%, operator) blocks has now completed – the first time that seismic has been obtained in this highly prospective area for over 25 years. The project acquired c.3,150 km in total, including infill 2D seismic acquisition of targeted high-graded areas. Processing of the data has commenced, and will facilitate seismic interpretation and the associated development of a prospect inventory, in turn guiding the optimal strategy to maximise future value
    • As announced in November 2017, Genel’s prior commitment to drill one well on the Sidi Moussa licence, offshore Morocco (Genel 60% working interest), has been replaced by an obligation to carry out a 3D seismic campaign across the Sidi Moussa acreage, significantly reducing anticipated expenditure. Planning is ongoing, with seismic acquisition set to begin in 2018, which is expected to materially de-risk the prospectivity of the Sidi Moussa licence

FINANCIAL PERFORMANCE

  • $263 million of cash proceeds were received in 2017 ($207 million in 2016), of which $72 million was received in Q4
  • Following the signing of the Receivable Settlement Agreement, effective 1 August 2017:
    • $19 million in override payments for the Tawke field were received in Q4
    • An additional $7 million of cash flow was generated from the elimination of the capacity building payment on Genel’s profit oil from the Tawke PSC
  • $19 million in payments for oil sales during October 2017 received post-period in January 2018
  • Free cash flow (pre interest payments) totalled $140 million in 2017 
  • In December 2017, the Company successfully completed the refinancing of its existing bonds, reducing the outstanding bond debt from $421.8 million to $300 million by way of an early redemption of a notional amount of $121.8 million. The new 5 year bond has a coupon of 10% per annum
  • Following the successful refinancing, unrestricted cash balances at 31 December 2017 stood at $162 million ($268 million at 30 September 2017). IFRS net debt at 31 December 2017 stood at $135 million ($138 million at 30 September 2017)
  • Capital expenditure for 2017 totalled $95 million (in line with guidance), with the majority of spend on the Taq Taq and Tawke PSCs ($64 million)

2018 GUIDANCE

  • Combined net production from the Tawke and Taq Taq PSCs during 2018 is expected to be close to Q4 2017 levels (as disclosed above)
  • Capital expenditure net to Genel is forecast to be c.$95-140 million, spanning a range of firm and contingent spend, with activity levels dependent on ongoing drilling results and progress on Miran and Bina Bawi. It is expected that capex  will be funded entirely from operational cash flow, and includes:
    • Tawke and Taq Taq net to Genel of $60-85 million
    • Miran and Bina Bawi capex of $25-40 million
    • African exploration cost of $10-15 million
  • Opex: c.$30 million
  • G&A: c.$15 million cash cost
  • Based on a continuation of payments throughout 2018, Genel expects to generate material free cash flow in 2018

(Source: Genel Energy)

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Genel Energy gets more time for Gas Project

Genel Energy has announce that it has agreed with the Kurdistan Regional Government (KRG) a 12 month extension to the schedule for satisfying the conditions precedent (‘CPs’) contained within the Gas Lifting Agreements (‘GLA’s) for the Bina Bawi and Miran fields signed in February 2017.

The revised date by which the CPs are to be satisfied or waived is 9 February 2019.

The CPs contained within the February 2017 GLAs included, inter alia, the execution of final agreements on the midstream gas processing facilities and pipeline transportation, and the completion of updated competent person’s reports (‘CPRs’) for Bina Bawi and Miran.

The CPRs relating to the contingent gas resources at the Bina Bawi and Miran West fields have recently been completed, details of which were announced on 19 January 2018.

(Source: Genel Energy)

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DNO Reports Payment for Tawke Deliveries

DNO ASA, the Norwegian oil and gas operator, today reported receipt of USD 53.71 million from the Kurdistan Regional Government as payment for October 2017 crude oil deliveries to the export market from the Tawke license.

The funds will be shared by DNO and partner Genel Energy plc pro-rata to the companies’ interests in the license.

The payment to DNO of three percent of gross Tawke license revenues during October 2017, as provided for under last August’s receivables settlement agreement, was previously received by the Company.
  
DNO operates and has a 75 percent interest in the Tawke license, which contains the Tawke and Peshkabir fields. Combined production from the two fields currently averages 110,000 barrels of oil per day.

(Source: DNO)

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Bina Bawi and Miran West gas resource update

Genel Energy has announced that RPS Energy Consultants, as part of its work on the updated competent person’s reports (‘CPRs’) for the Bina Bawi and Miran West fields (Genel 100% and operator), has finalised its evaluation of the contingent gas resources at both assets:

  • The RPS evaluation confirms a significant upgrade to the combined 2C gross (100% working interest (‘WI’)) raw gas resource estimate for the Bina Bawi and Miran West fields:
    • The RPS assessment of the combined gross 2C raw gas resource for both fields now stands at 14,792 Bscf, a figure which excludes associated condensate volumes attributable to the upstream partners
    • The RPS assessment of the combined gross 2C condensate volumes potentially recovered from raw gas production at both fields totals 137 MMstb
    • As at end-2016 Genel’s reported 2C resources included net raw gas resources from Miran and Bina Bawi totalling 1,421 MMboe1, which related to Genel’s respective 80% and 75% interests in the Bina Bawi and Miran PSCs at that time
    • In February 2017 the Company increased its interest in both PSCs to 100%, resulting in a combined pro-forma end-2016 Genel 2C resource of 1,815 MMboe (10,530 Bscf2)
    • The 2018 RPS estimates of combined 2C resources from both fields have increased c.40% compared to the pro-forma end-2016 2C resource
  • The revised Bina Bawi 1C gross raw gas resource estimate is more than 50% higher than the gas volume agreed to for the field under the Gas Lifting Agreement (‘GLA’). The revised Miran West 1C gross raw gas resource estimate is in line with the volume agreed to for the field in the GLA

A comparison of the revised 2C gross contingent resource numbers for both fields and the Company’s end-2016 number, which was based on the 2013 RPS reports plus the addition of the Company’s assessment of non-hydrocarbon gases, is summarised in the following table. Further detail is provided in an appendix to this announcement.

Gross (100% WI) 2C Contingent Resources Raw gas (Bscf)

Previous

Revised

change

Bina Bawi

6,472

8,230

27%

Miran West

3,688

6,562

78%

RPS’s updated analysis of the raw gas resources on both fields has benefitted from updated reservoir simulation modelling combined with analogue analysis jointly created and developed by the Company and Baker Hughes since the original reports were produced. As a consequence, the recovery factors for the gas reservoirs in both fields have, in most resource categories, been increased to reflect a better understanding of potential reservoir performance. Further appraisal activity, which is currently under consideration, could help refine reservoir performance and these recovery factor estimates.

Volumes agreed under the GLAs total 2,800 Bscf from Bina Bawi, and 2,000 Bscf from Miran West over a 12 year period, consisting of a two year build-up period and 10 year plateau period. The revised 2C and 3C raw gas resources for both fields significantly exceed these volumes. Following the completion of the upstream field development plans (‘FDPs’), sufficient progress on the midstream facilities and sales gas export route, and subsequent final investment decision, the Company expects that a percentage of the contingent raw gas resources will be converted to reserves, dependent on the volumes set to be produced under the FDPs.

 

The upstream FDPs for the gas and oil fields in the Bina Bawi and Miran PSCs, which are being carried out by Baker Hughes, are expected to be completed shortly.

RPS is continuing its evaluation of the oil bearing reservoirs at both fields, the results of which will be announced once finalised.

Appendix

Summary of Contingent Resources – Development unclarified (Gross 100% working interest basis) attributable to the Bina Bawi and Miran West fields as of 31 December 2017

Gross (100% WI) Contingent Resources

Gross (100% WI) Contingent Resources

BINA BAWI

Raw gas (Bscf)

Condensate (MMstb)

MIRAN WEST

Raw gas (Bscf)

Condensate (MMstb)

1C

4,651

34

1C

1,967

18

2C

8,230

62

2C

6,562

75

3C

13,036

99

3C

18,429

233

1 Genel figure based on the 2013 RPS reports plus the addition of the Company’s assessment of non-hydrocarbon gases

2 Based on a conversion factor of 5.8 MMscf/bbl

(Source: Genel Energy)

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Genel receives Payment for Taq Taq Exports

By John Lee.

Genel Energy has announced that the Taq Taq partners have received a gross payment of $10.10 million from the Kurdistan Regional Government for oil sales during October 2017.

Genel’s net share of the payment is $5.55 million.

(Source: Genel Energy)

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Genel Shares Rise on Debt Reduction Plan

By John Lee.

Shares in Genel Energy closed the day up 5.9 percent on Wednesday, after the company’s bondholders approved its proposal to reduce the outstanding bond debt from $421.8 million to $300 million.

It will also extend maturity through amending and restating terms to a new 5 year tenor.

DNB Markets and Pareto Securities acted as managers for the refinancing.

(Source: Genel Energy)

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Genel Shares Rise on Debt Reduction Plan

By John Lee.

Shares in Genel Energy closed the day up 5.9 percent on Wednesday, after the company’s bondholders approved its proposal to reduce the outstanding bond debt from $421.8 million to $300 million.

It will also extend maturity through amending and restating terms to a new 5 year tenor.

DNB Markets and Pareto Securities acted as managers for the refinancing.

(Source: Genel Energy)

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Genel Energy confirms Payments for KRI Oil Exports

Genel Energy has announced the receipt of payments from the Kurdistan Regional Government (KRG) for oil sales during September 2017 from the Tawke and Taq Taq PSCs.

DNO ASA, as operator of the Tawke PSC, has announced the receipt of $54.32 million from the KRG as payment towards September 2017 crude oil deliveries to the export market from the Tawke licence. Genel’s net share of the payment is $13.58 million.

The Taq Taq field partners have received a gross payment of $9.70 million from the KRG for oil sales during September 2017. Genel’s net share of the payment is $5.33 million.

Genel has also received an override payment of $6.55 million from the KRG, representing 4.5% of Tawke gross field revenues for the month of October 2017, as per the terms of the Receivable Settlement Agreement.

Combined, Genel’s December 2017 net receipts total $25.46 million.

(Source: Genel Energy)