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Genel Energy Returns to Profit

Genel Energy has announced a return to profit.

In its audited results for the year ended 31 December 2017, Murat Özgül (pictured), Chief Executive of Genel, said:

“Another year of consistent payments by the KRG and a disciplined capital allocation strategy helped to generate material free cash flow in 2017. This was enhanced in the latter part of the year by the Receivable Settlement Agreement, from which Genel expects to generate sustainable and significant free cash flow going forward.

“The strong financial performance of 2017, and the promise of more to come, facilitated the successful refinancing in December, which solidified a significant improvement in the balance sheet and provides a strong platform for growth.

“We will continue with our strategy of maximising free cash flow as we focus investment on our producing assets, specifically on the Tawke PSC, where the performance of Peshkabir remains highly encouraging. Prudent expenditure will also be made on the other assets within our portfolio that provide material value creation opportunities.

“We will continue to construct the building blocks for value creation from Bina Bawi and Miran, while cost-effectively progressing our exploration assets in Africa.”

Results summary ($ million unless stated)

2017

2016

Production (bopd, working interest)

35,200

53,300

Revenue

228.9

190.7

EBITDAX1

475.5

130.7

  Depreciation and amortisation

(117.4)

(128.9)

  Exploration expense

(1.9)

(815.1)

  Impairment of property, plant and equipment

(58.2)

(218.3)

  Impairment of receivables

–

(191.3)

Operating profit / (loss)

298.0

(1,222.9)

Cash flow from operating activities

221.0

131.0

Capital expenditure

94.1

61.2

Free cash flow before interest2

141.8

59.1

Cash3

162.0

407.0

Total debt

300.0

674.6

Net debt4

134.8

241.2

Basic EPS (¢ per share)

97.1

(448.6)

1.     EBITDAX is earnings before interest, tax, depreciation, amortisation, exploration expense and impairment which is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($117.4 million), exploration expense ($1.9 million) and impairment of property, plant and equipment ($58.2 million)

2.     Free cash flow before interest is net cash generated from operating activities less cash outflow due to purchase of intangible assets and purchase of property, plant and equipment (oil and gas assets only)

3.     Cash reported at 31 December 2017 excludes $18.5 million of restricted cash

4.     Reported debt less cash

Highlights

  • $263 million of cash proceeds received in 2017 (2016: $207 million), with strong free cash flow generation of $142 million (2016: $59 million)
  • Year-end net debt of $135 million, a 44% reduction year-on-year (2016: $241 million)
  • Year-end gross debt of $300 million, a 56% reduction year-on-year (2016: $675 million), with debt extended until 2022 and interest cost reduced by 40%
  • Receivable Settlement Agreement resulted in cash benefit of $26 million in Q4 2017
  • Focused capital allocation – 66% of capital expenditure was spent on cash-generative producing assets, and has been cost recovered
  • Drilling success at Peshkabir, with gross production rising to c.15,000 bopd at year-end
  • Taq Taq field production stabilised in H2 2017, with Q4 average of 14,035 bopd in line with Q3 average of 14,080 bopd
  • In January 2018 Bina Bawi and Miran CPRs confirmed c.45% uplift to gross 2C raw gas resources to 14.8 Tcf

Outlook

  • Combined net production from the Tawke and Taq Taq PSCs during 2018 is expected to be close to Q4 2017 levels of 32,800 bopd, unchanged from previous guidance
  • Genel expects to continue the generation of material free cash flow in 2018
  • Tangible steps to be taken to further de-risk gas resources and unlock value from Bina Bawi and Miran, including the high-value oil resources
  • Capital allocation discipline to continue, with ongoing prioritisation of spend on cash-generative producing assets. Capital expenditure guidance unchanged at c.$95-140 million net to Genel
  • Opex and G&A cash cost guidance unchanged at c.$30 million and c.$15 million respectively

More here.

(Source: Genel Energy)

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Obtaining Second Citizenship: Which Programmes Are Affordable?

Press Release

We live in a very uncertain world, currently fraught with geopolitical tensions, social upheaval and economic ups and downs. For these reasons – and more – people around the world, and especially in the Middle East, are increasingly looking for second citizenships to protect their assets and, more importantly, ensure a secure and prosperous future for themselves and their families.

The motivations for seeking a second citizenship are ranging from a desire to avoid difficult and often painfully long visa application processes to a desire for the peace and stability that often eludes many countries.

Jeremy Savory, founder & CEO, Savory & Partners, one of the largest companies in the Middle East that provides citizenship-by-investment programmes, commented:

“There are certain countries in the world where it’s legal to obtain citizenship, provided you meet certain criteria, one of which is the financial contribution you need to make, [through] real estate, financial products, or a one-time investment, which is non-refundable.”

“Right now, there are a lot of countries in this region where people don’t feel like they can travel freely into the Schengen zone in Europe, or to the UK or the US,” he says.

Other cases, however, are more unique. Savory & Partners has helped a Bedoon, one of the more than 100,000 officially “stateless” individuals that call the GCC home.

“This wasn’t about getting a second passport. It was actually this person’s first passport. Trying to prepare a file for someone that doesn’t have much to go on in terms of showing they exist is very tricky,” he says of the case.

For some, having a second passport is nothing more than a sound financial decision. “We’ve had royal family members come to us and say that whenever they want to buy a property, they submit their passport copy, it says “HRH” on it and the price goes up,” Mr. Savory notes. “The cost of getting the passport will save that price increase.”

Citizenship and residency programmes around the world are vastly different, each with their own requirements, benefits, timeframes and obligations.

Citizenships from St Lucia and Dominica, for example, can be obtained in a few months with investments from as little as $100,000 without any obligation to live there for any amount of time.

Permanent residency from countries such as Spain and Portugal, on the other hand, require investments of €500,000 ($623,000) and can take as long as ten years to process.

Perhaps understandably, the most in-demand citizenships are those for countries in the European Union.

“The benefits that come with it [EU citizenship] are innumerable. Having said that, it’s priced accordingly,” Savory says.

In Malta you’re looking at not less than €1m ($1,23m) worth of investments when it’s all put together of which typically 55 percent – 75 percent is non-recoverable whereas Cyprus is €2m ($2.45m) in real estate of your choice as long as the paperwork process is correct.

An individual’s chosen second citizenship is largely based on their particular needs. An ultra-high net worth individual, for example, is likely looking for more than ease of travel.

An important distinction – which consultants at Savory & Partners often find themselves explaining to potential clients – is between citizenship programmes and residency programmes.

A residency programme, for example, will only lead to citizenship if one actually resides in the country and is able to demonstrate both a tangible physical presence in the country as well as a fiscal presence. In some cases, applicants need to pass language tests. These types of programmes can often take significant amounts of time to complete.

People should be transparent in the application, and there should be nothing to hide. That’s never truer than in today’s times when the topic of sovereignty is highly sensitive.

Additionally, Savory & Partners is very straightforward with potential clients about their chances of success – even if there aren’t any – which differentiates it from the many companies operating around the world that promise what they can’t deliver.

“I think maybe sometimes clients come to our company because we can tell them ‘it’s not going to happen’, or that they need to do this and change that. There are a lot of companies that say ‘yes’ without actually knowing what the solution is or saying ‘yes’ and knowing full well that ‘no’ is the answer. Clients need to know they are getting qualified [expertise] and are aware of the situation,” Jeremy explains.

“We don’t take on all files because we are happy about the success rate we have and the high volume of files we have already. I don’t want to have a client that isn’t successful, especially if it’s something we could have avoided. We really invest our time and in-house due diligence policies to make sure the clients we take on get their citizenship. Contractually, if they don’t, we have to refund them the full amount of our fees.”

For those inclined to seek a second citizenship the timing is right. Affordability is there, although application checks are becoming more and more stringent. If you are rejected for a visa, then you are automatically ineligible for half the country programmes.

While this strong demand has led new countries – such as Montenegro, Armenia, Kazakhstan and others – to introduce or plan to introduce citizenship or residency by investment programmes, it has also brought with it problems that make finding the right citizenship by investment agent essential.

“It’s getting tougher to obtain a second passport definitely, but I think that gives me comfort. The higher levels of governance then the longer such programmes can continue to exist for those seeking second passports. I had to earn every government accreditation available, so I welcome increased industry scrutiny and regulation,” Mr. Savory concludes.

(Source: Savory & Partners)

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WSC Wins $35m Contract in Basra

By John Lee.

Malaysia-based Wah Seong Corporation Berhad (WSC) has announced that its indirect wholly-owned subsidiary Wasco Engineering International Ltd (WEIL) has been awarded a contract by Basrah Gas Company (BGC) for the design, packaging and sale of gas compressor packages and associated plant and site facilities.

The contract is valued at $34.6 million.

The scope of work of the contract involves provision of gas compressors and process equipment such as tri-ethylene glycol (TEG) unit, fuel gas conditioning skid, pipe racks, slug catcher, knock out drum, vent stack, site facilities such as office and workshop containers, lighting, safety equipment, fire and gas detectors, power generators and air compressors.

The activities undertaken will include engineering, detail design, procurement and packaging of the above process equipment. The activity is expected to commence in March 2018, and to be completed by end of 2018.

The contract is for the provision of engineering, design, supply and fabrication services which are within the business scope of the Engineering Division of the WSC Group and the risks are the normal operational risks associated with the said business. The WSC Group has previously supplied similar packages to the same customer in Iraq.

The contract is expected to contribute positively to the earnings of WSC Group over the contract period. The contract is project specific and is not renewable.

(Source: WSC)

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DNO announces Higher Revenues, Profits, Production, Reserves

DNO ASA, the Norwegian oil and gas operator, today released its 2017 Annual Report and Accounts together with its 2017 Annual Statement of Reserves and Resources and reported improvements across key financial and operational metrics.

Annual 2017 revenues climbed to USD 347 million, up 72 percent from year earlier levels. Operating profit totaled USD 521 million, up from USD 6 million in 2016, with the recognition as other income of USD 556 million under the August 2017 Kurdistan Receivables Settlement Agreement.

Excluding the settlement agreement and non-cash impairments, operating profit in 2017 more than doubled to USD 72 million. And notwithstanding a doubling of operational spend to USD 259 million, the Company ended the year with a cash balance of USD 430 million.

Company Working Interest (CWI) production increased to 73,700 barrels of oil equivalent per day (boepd) from 69,200 boepd in 2016 (operated production in 2017 was 113,500 boepd, up from 112,600 boepd in 2016). Lifting costs last year averaged USD 3.6 per barrel of oil equivalent.

Iraqi Kurdistan

DNO’s production continues to be driven by the Tawke field in Kurdistan, where output in 2017 averaged 105,500 barrels of oil per day (bopd).

The adjacent Peshkabir field, brought on stream midyear, contributed another 3,600 bopd to bring total Tawke license production to 109,100 bopd in 2017. The Company plans to bolster production from the license with 10 new wells in 2018.

“We are committed this year to continue to outdrill, outproduce and outperform all other international companies in Kurdistan – combined,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani.

At yearend 2017, DNO’s CWI 1P reserves climbed to 240 million barrels of oil equivalent (MMboe) from 219 MMboe at yearend 2016, after adjusting for production during the year, technical revisions and an increase in DNO’s operated stake in the Tawke license from 55 percent to 75 percent.

On a 2P basis, DNO’s CWI reserves stood at 384 MMboe (up from 368 MMboe) and on a 3P basis, DNO’s CWI reserves stood at 666 MMboe (up from 521 MMboe). DNO’s yearend 2017 CWI contingent resources (2C) were estimated at 99 MMboe, down from 161 MMboe at yearend 2016, following reclassification of certain contingent resources to reserves.

On a gross basis, at yearend 2017, 1P reserves at the Tawke license containing the Tawke and Peshkabir fields totaled 348 MMboe (353 MMboe at yearend 2016) after adjusting for production of 40 MMboe during the year and technical revisions; 2P reserves totaled 513 MMboe (536 MMboe at yearend 2016); 3P reserves totaled 880 MMboe (725 MMboe at yearend 2016) and 2C resources totaled 91 MMboe (211 MMboe at yearend 2016) following reclassification.

International petroleum consultants DeGolyer and MacNaughton carried out the annual independent assessment of the Tawke and Peshkabir fields. DNO internally evaluated the remaining assets.

(Source: DNO)

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Iran says IS Resurgence could Hamper Iraq Oil Deal

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

The Islamic State (IS) appears to be staging a comeback in parts of Iraq, which could endanger the country’s oil deal with Iran.

Hamid Hosseini, the Iranian secretary-general of the Iran-Iraq Chamber of Commerce, warned in late February that the countries’ plan can’t be implemented fully because of security concerns. The countries signed a bilateral agreement in July 2017 to install a pipeline to transport Kirkuk’s crude oil to Iran to be refined. In the meantime, the oil is being transported by trucks, which are vulnerable to attacks.

The Kurdish military, or peshmerga forces, took control of Kirkuk in 2014 after Iraqi forces fled as IS swept through the area. But in October, Iraqi forces reclaimed the oil-rich territory from the Kurds.

IS has been blamed for numerous recent attacks in the area. On Feb. 19, IS fighters ambushed a convoy of the Baghdad government’s Shiite Popular Mobilization Units (PMU) in the Hawija district, southwest of Kirkuk, killing 27. On Feb. 27, gunmen had targeted the Turkmen Front with a rocket shell. Since Hosseini’s warning, security has deteriorated both in Kirkuk and Hawija. Local authorities have called for military enforcement.

Masrour Barzani, the head of Kurdistan security, stressed that the “IS offensive in Kirkuk province is not coming to an end anytime soon.”

These developments cast clouds of uncertainty over any investment attempts in Kirkuk city, particularly in the oil sector. Yet Rakan al Jibouri, Kirkuk’s Baghdad-appointed interim governor, doesn’t agree, though he acknowledges “there are unsecured areas.”

“This won’t obstruct the development of oil facilities and exportation projects, as the agreement signed by the [Iraqi] Ministry of Oil on Feb. 8 to construct a new refinery clearly demonstrates otherwise,” Jibouri told Al-Monitor.

Ministry spokesman Asim Jihad also told Al-Monitor the present security situation won’t affect Kirkuk oil investments. “The Iranian official’s [Hosseini’s] statement reflects his state’s point of view. The Iraqi side is committed to upholding the agreement as long as Iran is not backing down.”

Jihad said the contract provides for exporting 30,000-60,000 barrels of oil a day via trucks from Kirkuk fields to the border zone near Kermanshah, Iran.

“Work is still underway to install an oil pipeline to Iran with a capacity of over 250,000 barrels [per day],” Jihad added. “Moving forward, we are going to stop using trucks, which are more exposed, require more security measures and cost more.”

Moreover, one of the reasons behind the agreement was “Iran’s need of large amounts of Iraqi oil for refinement purposes, as well as for complementary industries in Iranian areas across [the border].” Jihad said Iraq will also benefit because it will be able to export oil abroad at lower costs.

All that said, however, Jihad noted the Oil Ministry has no authority to assess the security situation: “The ministry is only concerned with the technical end of things.”

Iskander Witwit, a member of the Iraqi parliament’s Security and Defense Committee, contradicted Hosseini’s evaluation. “We haven’t recorded any indications of oil investments in Kirkuk being too risky,” Witwit told Al-Monitor.

He said the Kurdish peshmerga wants “security anarchy so that the oil trade project between Iraq and Iran fails, because the [Kurdistan Regional Government (KRG)] wants oil to be transported through its soil.” The KRG, he said, “seeks to stop all oil and economic projects as long as Kirkuk is not under its control.”

Witwit also challenged a statement by Hosseini that security is at risk because Iran doesn’t have X-ray machines to inspect trucks coming from Iraq.

“This is an irrational reason,” Witwit said. “Truck security is both countries’ responsibility, and oil-transporting trucks are registered and take off from secured points to their designated destination. Therefore, they can’t possibly be used for any other purposes, considering the strict security measures in oil zones. Also, army and PMU troops are dispatched throughout the route used by the trucks.”

Meanwhile, it appears Iraq is moving ahead to expand its export options. Aziz Abdullah, the head of the Iraqi parliament’s Oil and Energy Committee, told Al-Monitor, “Talks between the [Iraqi] federal government and the [KRG] government on transporting oil via Ceyhan [Turkey] pipe have reached advanced stages.”

Ahmad al Askari, the head of the Energy Committee of the Kirkuk Provincial Council, believes those talks reflect Iraq’s “new direction not to solely rely on one window that could be shut on account of political disagreements.”

Speaking to Al-Monitor, Askari added, “Political and security concerns compelled Iraq to consider more than one means of exporting Kirkuk oil. Iraq started a pipeline to Turkey’s Ceyhan port that doesn’t go through the [Kurdish] region, besides the one that does go through the region. In addition, trucks have been moving to Iran since Iraqi forces took over Kirkuk.”

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ZhenHua expands China’s role in Iraq’s Oil Sector

By John Lee.

Iraq Oil Report reports that the China ZhenHua Oil Company, a subsidiary of state-owned arms manufacturer Norinco, is poised to make two new investments in Iraq’s oil sector.

It says the company is forming a new oil trading joint venture with the State Oil Marketing Organization (SOMO) and is negotiating the upstream development of the East Baghdad oil field.

Click here to read the full report (subscription needed).

(Source: Iraq Oil Report)

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“Iraq’s Energy Future Lies to the North”

By John Lee.

A new report from the Washington Institute for Near East Policy says that Iraqi hydrocarbons “will either be exploited by Iran and its allies or used for Iraq’s own benefit, transforming the country into an energy export hub between the Gulf states, Turkey, and Europe. The United States has a strong strategic interest in promoting the latter outcome.”

Authors James F. Jeffrey, a former US ambassador to Iraq and Turkey, and Michael Knights, who has worked extensively on energy projects inside Iraq, suggest that the US should put its weight behind a north-south energy corridor in which Iraq serves as an energy hub between ever-friendlier Gulf states and Turkey, ultimately forming an export bridge to Europe.

They add that Washington should also support the Basra-Haditha-Aqaba pipeline project to bring Iraqi oil and gas to Jordan.

The full paper can be read here.

(Source: The Washington Institute for Near East Policy)

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Iraq to launch new “Basrah Medium” Crude Oil Grade

By John Lee.

Platts reports that Iraq plans to launch a new Basrah Medium crude oil grade “whenever logistics allow,” to provide “more stability” in existing grades.

It quotes Ali Nazar al-Shatari, the Deputy Director General of the State Oil Marketing Organization (SOMO) as saying the new grade will have an API gravity of 29-30 degrees, with 2 percent sulphur.

Basrah Heavy will remain largely the same at 23 degrees API and 4 percent sulphur, while Basrah Light will be become even lighter, rising to 34 API degrees, up from an average of 29-31 degrees currently.

(Source: Platts)