By John Lee.

Shares in Genel Energy were trading down four percent on Wednesday morning after the company announced its audited results for the year ended 31 December 2018, in which it wrote down its Miran asset by $424 million.

Despite this, Genel says it can now initiate “a material and sustainable dividend policy“, with payments starting in 2020.

The company’s shares are up 17 percent since the start of the year.

Murat Özgül, Chief Executive of Genel, said:

Genel’s strategy at the start of 2018 was clear – generate material free cash flow from producing assets, build and invest in a rich funnel of transformational development opportunities, and return capital to shareholders at the appropriate time. We are delivering on this strategy.

“2018 was another year of material free cash flow generation, we continued to transform our balance sheet and the addition of assets with the potential of Sarta and Qara Dagh led to a very successful delivery on the first two parts of our strategy. We will continue to develop opportunities and invest ingrowth. As we do so, a robust cash flow outlook and our confidence in Genel’s future prospects underpins our initiation of a material and sustainable dividend policy.

Results summary ($ million unless stated)

2018 2017
Production (bopd, working interest) 33,700 35,200
Revenue 355.1 228.9
EBITDAX1 304.1 475.5
  Depreciation and amortisation (136.2) (117.4)
  Exploration credit / (expense) 1.5 (1.9)
  Impairment of property, plant and equipment (58.2)
  Impairment of intangible assets (424.0)
Operating (loss) / profit (254.6) 298.0
Cash flow from operating activities 299.2 221.0
Capital expenditure 95.5 94.1
Free cash flow2 164.2 99.1
Cash3 334.3 162.0
Total debt 300.0 300.0
Net cash / (debt)4 37.0 (134.8)
Basic EPS (¢ per share) (101.6) 97.1
Underlying EPS (¢ per share)5 109.0 65.1
  1. EBITDAX is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($136.2 million), exploration credit ($1.5 million) and impairment of intangible assets ($424.0 million)
  2. Free cash flow is net cash generated from operating activities less cash outflow due to purchase of intangible assets ($39.7 million), purchase of property, plant and equipment ($65.3 million) and interest paid ($30.0 million)
  3. Cash reported at 31 December 2018 excludes $10.0 million of restricted cash
  4. Reported cash less ($334.3 million) less reported balance sheet debt ($297.3 million)
  5. EBITDAX less net gain arising from the Receivable Settlement Agreement (‘RSA’) divided by the weighted average number of ordinary shares

Highlights

  • $335 million of cash proceeds were received in 2018 (2017: $263 million)
  • Strong cash flow generation, with free cash flow totalling $164 million in 2018 (2017: $99 million), an increase of 66%
  • Financial strength continues to increase,with unrestricted cash balances at 28 February 2019 of $378 million, andnet cash at $81 million
  • Addition of Sarta and Qara Dagh to the portfolio in 2019 brings further near-term production and material growth potential
  • Increase in 1P and 2P reserves as of 31 December 2018 to 99 MMbbls (31 December 2017: 97 MMbbls) and 155 MMbbls (31 December 2017: 150 MMbbls) respectively, including Sarta
  • As disclosed in our trading statement, the carrying value of the Miran licence has been under review. Due to the focus on the development of Bina Bawi, while Genel continues to see significant opportunity in the licence, this has resulted in an accounting impairment to the carrying value

Outlook

  • Production guidance maintained – net production during 2019 is expected to be close to Q4 2018 levels of 36,900 bopd, an increase of c.10% year-on-year
  • Capital expenditure guidance updated to include spend on Sarta and Qara Dagh, with net capital expenditure now forecast to be $150-170 million (from c.$115 million)
  • Opex and G&A guidance unchanged at c.$30 million and c.$20 million respectively
  • Genel expects to generate material free cash flow of over $100 million in 2019, inclusive of investment in Sarta and Qara Dagh
  • Given the strong free cash flow forecast of the business, even after investment in growth opportunities, Genel is initiating a material and sustainable dividend policy
    • The Company intends to pay a minimum dividend of $40 million per annum starting in 2020, with the intention for this to grow
    • The dividend will be split between an interim and final dividend, to be paid one-third/two-thirds
    • The Company is set to approach bondholders to request a temporary waiver of the dividend restriction, which limits dividends to 50% of annual net profit, in relation to accelerating the start of distribution to 2019
  • The Company continues to actively pursue growth and appraise opportunities to make value-accretive additions to the portfolio

More details – 40 pages of them! – here.

(Sources: Genel Energy, Yahoo!)

By John Lee.

A Turkish airline will start new services from Diyarbakir and Gaziantep to Erbil from 21st March.

AnadoluJet, a subsidiary of Turkish Airlines, plans to offer three flights per week to each location.

(Source: AnadoluJet)

Shares in Gulf Keystone Petroleum (GKP) were trading up 3 percent on Monday after the company provided an operational and corporate update on its operations in Iraqi Kurdistan.

Analyst Peel Hunt has reportedly re-issued its “Buy” rating during the morning.

Operational

  • Operational activity continues at the Shaikan Field (pictured) to complete the debottlenecking programme in 2019, in order to achieve the near-term production target of 55,000 bopd in Q1 2020
  • Progress is continuing with the export pipeline from PF-1 to the main export pipeline, which remains on schedule to become operational mid-year, at which point trucking of crude oil will be eliminated
  • The SH-1 workover to replace the existing tubing with larger bore tubing, has now been successfully concluded.  The result was positive with an increase in production from the well of approximately 50% to over 6,500 bopd
  • The IOT Rig 1 has been demobilised.  It will now complete a short workover for another operator nearby before returning to Shaikan for the remaining workovers in the 55,000 bopd expansion programme.  This will include the SH-3 tubing change-out, along with installation of Electric Submersible Pumps (“ESPs”) in wells SH-5, SH-10 and SH-11
  • DQE’s Rig 40 is currently being prepared ahead of the imminent Jurassic drilling campaign, which remains on schedule to be mobilised for the SH-H well later this month

Corporate

  • A renewal of the crude oil sales agreement has been signed between Gulf Keystone Petroleum International Ltd and the Kurdistan Regional Government (“KRG”)
    • The KRG will purchase Shaikan crude oil directly injected at PF-2 into the Atrush export pipeline at the monthly average Dated Brent oil price minus a total discount of c.$21 per barrel for crude
    • Until the PF-1 pipeline is completed, the KRG will continue to purchase crude oil delivered by truck at a discount of c.$22 per barrel
    • The above discounts account for quality, domestic and international transportation costs
    • The agreement is effective from 1 January 2019 until 31 December 2020
  • The Company has received final clearance from Sonatrach in relation to the Ferkane Permit (Block 126). This officially marks Gulf Keystone’s exit from its Algerian operations.
    • This positive development will allow the Company to release $10 million of past liabilities

Outlook

Despite Q1 production having been affected by SH-1 being offline for the workover, and the export system being shut-down for maintenance for a week earlier this month, the Company maintains its 2019 gross average production guidance in the range of 32,000 – 38,000 bopd

 (Sources: GKP, Yahoo!, Financial Headlines)

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

In a bid to control armed violence and high crime rates, the Kurdistan Regional Government has given gun owners six months to register their arms and give up their heavy weapons. KRG Interior Minister Karim Sinjari issued the Feb. 10 decree to restrict the possession of such weapons to the armed forces.

People must register all pistols and rifles at security centers. After the deadline, anyone with unregistered or illegal weapons will be prosecuted.

“We are now making preparations for implementing the decree. We printed forms for registering weapons, and this week we will announce the opening of security centers where people can register their weapons or hand over their heavy arms,” Sami Jalal, the Interior Ministry’s chief of staff, told Al-Monitor.

Click here to read the full story.

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

In a bid to control armed violence and high crime rates, the Kurdistan Regional Government has given gun owners six months to register their arms and give up their heavy weapons. KRG Interior Minister Karim Sinjari issued the Feb. 10 decree to restrict the possession of such weapons to the armed forces.

People must register all pistols and rifles at security centers. After the deadline, anyone with unregistered or illegal weapons will be prosecuted.

“We are now making preparations for implementing the decree. We printed forms for registering weapons, and this week we will announce the opening of security centers where people can register their weapons or hand over their heavy arms,” Sami Jalal, the Interior Ministry’s chief of staff, told Al-Monitor.

Click here to read the full story.

KRG Prime Minister Nechirvan Barzani received Jordanian Minister of Industry, Trade, and Supply Dr. Tariq al-Hammouri, Jordanian Ambassador to Iraq Montaser Oklah, Consul General of The Hashemite Kingdom of Jordan to the Kurdistan Region Haitham Abu Alfoul, and their accompanying delegation.

Minister al-Hammouri highlighted historical relations between the Kurdistan Region and Jordan and expressed willingness to further strengthen and develop these relations, particularly in the fields of trade and banking. He also conveyed the support of His Majesty King Abdullah II of Jordan and his government to the Kurdistan Region.

Prime Minister Barzani thanked His Majesty King Abdullah II for his support to the Kurdistan Region during difficult periods, and expressed the willingness of the Kurdistan Region to strengthen relations with Jordan, particularly in the economic field. He hoped that Jordanian businessmen would take advantage of investment opportunities in the Kurdistan Region.

The post ISIS situation in the region and the crisis of displaced persons in the Kurdistan Region and refugees in Jordan were also discussed.

They also stressed the eradication of terrorism through coordination among the countries of the region and the international community.

(Source: KRG)

Pearl Petroleum Company Limited, the consortium led by Crescent Petroleum and Dana Gas of the UAE, has signed a new 20-year Gas Sales Agreement (GSA) with the Kurdistan Regional Government (KRG) to enable production and sales of an additional 250 MMscf/day that the consortium aims to produce by 2021 as part of their expansion plans in the Kurdistan Region of Iraq (KRI) in order to boost much needed local domestic electricity generation.

Pursuant to the Settlement Agreement reached between the parties in August 2017, this new gas sales agreement was signed on 19th February 2019 by Dr. Ashti Hawrami, Minister of Natural Resources on behalf of the Kurdistan Regional Government, and Mr. Majid Jafar, CEO of Crescent Petroleum and Board Managing Director of Dana Gas, on behalf of Pearl Petroleum.

All approvals for the agreement, including by the the Kurdistan Region Council for Oil & Gas Affairs and the Board of Pearl Petroleum, have since been granted, with  project work now under implementation.

The Kurdistan Gas Project was established in 2007 as Dana Gas and Crescent Petroleum entered into agreement with the Kurdistan Regional Government (KRG) for certain exclusive rights to appraise, develop, produce, market, and sell petroleum from the Khor Mor and Chemchemal fields in the Kurdistan Region of Iraq (KRI).

Production from the newly built plant in Khor Mor began just 15 months later, in October 2008. In 2009, Pearl Petroleum was formed as a consortium with Dana Gas and Crescent Petroleum as shareholders, and with OMV, MOL, and RWE joining the consortium subsequently with a 10% share each.

The $700 million expansion underway at the Khor Mor plant will include the addition of two new production trains at the Khor Mor plant, as well as drilling of new wells with plans to raise production from the current 400 MMscf/day to reach 650 MMscf/day by 2021 based on this latest GSA, and then to 900 MMscf/day beyond that by 2022.

This follows the 30% production increase from debottlenecking throughput at the Khor Mor plant, which brought current total production to 106,000 barrels of oil equivalent per day (boepd), making it the largest regional private sector upstream gas operation in Iraq today.

Gas sales commenced late in 2018 under a gas sales agreement signed in January of that year, and all payments have been received in a timely manner in full, which gives confidence for the investment and expansion plans currently underway by the Consortium. The Kurdistan Gas Project, which recently commemorated 10 years of continuous production, supplies natural gas from the Khor Mor field by pipeline to power plants in Bazian, Chemchemal and Erbil, as well as LPG and condensate, which are sold in the local markets.

In August 2017, Pearl Petroleum reached a full and final settlement with the KRG of the arbitration between them, including settlement of past receivables and committing to expand their investment and operations in the region. These expansion plans include the multi-well drilling program currently underway in both the Khor Mor & Chemchemal fields, as well as installation of additional gas processing and liquids extraction facilities. The fields are operated jointly by Crescent Petroleum and Dana Gas on behalf of Pearl Petroleum.

Total investment in the Kurdistan Gas Project to date exceeds $1.6 billion, with total cumulative production of over 260 million barrels of oil equivalent (boe), delivering billions of dollars in fuel cost savings and wider economic benefits for the Kurdistan Region and Iraq as a whole. That impact will continue to grow as production capacity expands in the coming years.

Dr. Ashti Hawrami, Minister of Natural Resources of the Kurdistan Regional Government (KRG) said:

“This agreement is an important step for us as we deliver improved services to the people of the Kurdistan Region of Iraq through enhanced electricity generation from the increase in gas production by the Consortium. The Kurdistan Region holds significant reserves of gas and the KRG is committed to playing a positive role in the growing gas and electricity needs of Iraq and the region.”

Mr. Majid Jafar, CEO of Crescent Petroleum and Board Managing Director of Dana Gas, commented:

“This gas sales agreement opens a new chapter in the expansion of the Kurdistan Gas Project that will see a further investment of over $700 million in coming years to expand production up to 900 MMscf/day, further fueling the Region’s economic growth and development. We look forward to developing the significant resources from these important fields, for the benefit of the Kurdistan Region and all of Iraq.”

Dr. Patrick Allman-Ward, CEO of Dana Gas, added:

“Dana Gas and our partners in Pearl Petroleum are particularly proud to be investing further in the gas sector of the Kurdistan Region of Iraq, delivering a reliable source of cleaner energy, and supporting local economic development.  The continuing receipt of payments in a timely manner gives confidence for our continued investment commitment as we enter our second decade of production.”

As part of its work in the KRI, Pearl has implemented a corporate social responsibility program to support local communities, including providing school supplies, drinking water treatment, generators and fuel enabling 24-hour electricity for local villages, mobile medical units, and youth sports facilities, as well as financial support for 1,000 orphans from the Chemchemal area in partnership with a local charity Foundation.

These initiatives are assisting the local communities in improving their standard of living, health, well-being, security and stability and the development of human capital.

(Source: Dana Gas)

By Alexander Southworth, Iraq Britain Business Council (IBBC).

Exploring Tech in Iraq: ‘Hackasuly – Promoting Tech Literacy for a New Generation of Iraqis’

Education is the most powerful weapon which you can use to change the world”. In a country which has seen its fair share of weapon misuse over the last few decades Mandela’s quote could not be more relevant in the climate of present-day Iraq.

With a beleaguered state education system and struggling infrastructure, there exists a community within the Tech Sector that is trying to navigate these challenges and promote education of Iraqi youths through the cultivation of digital skills that will help them reach their goals and find meaningful employment.

In the IBBC’s Tech Series: Exploring Tech in Iraq, we speak to some of the innovators and founders of tech organisations making a difference in Iraq.

One such organisation, HackaSuly, is an initiative that aims to promote technology in Sulaimani, Kurdistan and wider Iraq through tech events, hackathons, meetups and to create a network of tech enthusiasts.

We spoke to one of the founders, Hero Mohammed, to find out more about HackaSuly’s events, how they are empowering young Iraqis, the inspiration behind the founding of the organisation and any advice she has to aspiring tech entrepreneurs.

I believe there is a great potential in Iraq for the tech-industry. The people of Iraq are hungry for stability, innovation and facilities after decades of war and conflict” – Hero Mohammed, Founder of HackaSuly

Growing up in Sulaimani, Iraqi Kurdistan, Hero describes her desire to participate in coding challenges and tech events but due to a near complete lack of opportunities, this simply was not possible. In 2015, she helped organise HackaErbil, the first Hackathon in Iraq, which would inspire her to embark on a journey to help others in the community to have the opportunities her peers did not have as college students. Building on the success of that first event, Hero started by organising the first hackathon in Sulaimani with the help of some friends.

So how exactly does HackaSuly help young coders through its events? HackaSuly is trying to help young coders to develop their skills and match them with the existing tech market demands. In the meanwhile, they are encouraged to update themselves with cutting-edge technologies and tools.

Until now, they have had three different types of events.

  1. Meet and code (Co-founded with Razhan Hameed): regular weekly coding meetups for coders and people who are interested in coding to come together, collaborate and share their knowledge and skills.
  2. HackaSuly Hackathon (co-organised with Snur Hamid): an annual hackathon that brings together developers, designers and entrepreneurs to come up with ideas that have a technological implementation, form teams and develop their prototypes over a weekend.
  3. Suli Tech Festival (Co-founded and co-organised with Razhan Hameed in collaboration with five one labs): a day-long tech celebration in Sulaimani. The Festival brought together young innovators and members of the local tech community with leaders and companies in the industry. The goal was to help promote technology, generate more interest in the field, and expand knowledge of career opportunities (from the participant’s side) and potential hires (from the business’ side) in the tech industry in Sulaimani. The Festival contained a number of exciting events over the course of the day, including: a welcome speech by the Deputy Prime Minister of Kurdistan Regional Government, a Coding Challenge, an Intro Workshop to Web Development, a Tech Career Fair and Project Presentations.

While events of this nature may be common in more tech-developed countries, their establishment in Iraq brings many serious challenges. Hero describes how their ideas and events are new to the society in general and the biggest challenge has being delivering their message. Explaining the events and ideas especially when seeking funds and support have been challenging. When they first started with the HackaSuly hackathon, there was significant difficultly making people within the tech industry, even professionals, understand what a hackathon is.

Support has been key to growing the operation, Hero states great support has been forthcoming from local and international NGOs and private sector companies, especially those that are operating within the Iraqi tech industry, many as part of their Social Responsibility programs. More support is necessary to keep momentum growing, especially government contributions.

“I can imagine HackaSuly in 5 years… A large tech community across the country working together to make technology an important sector for the economic development of Kurdistan and Iraq” – Hero Mohammed, Founder of HackaSuly

Inspired by her strong love of coding and tech, Hero is one of the inspiring young innovators that are driving tech literacy and interest in a new generation of Iraqis. By creating a community of tech enthusiasts in Iraq and Iraqi Kurdistan, HackaSuly is empowering young people to believe in their abilities, learn new skills and create for themselves tech start-ups in Iraq’s fast growing tech Sector.

As Hero states: Access to new technologies can have many benefits for any developing countries. One such benefit is its impact on reducing the costs of production. Other ways technology is helping developing countries is by boosting economies through innovation, SMBs and advanced communication.

IBBC is holding a Tech Conference in Iraq in early 2019, where we aim to bring together the key innovators transforming the digital landscape in the country, explore solutions to better governance and industry reforms using technology and give a platform to young Iraqi entrepreneurs breaking the mould. For more information, and to get involved, please email: London@webuildiraq.org or visit: https://www.iraqbritainbusiness.org/event/tech-conference-in-baghdad.

(Source: IBBC)

By John Lee.

Genel Energy has announced that approval has been given by the Kurdistan Regional Government (KRG) regarding the acquisition of stakes from Chevron in the Sarta and Qara Dagh (pictured) blocks, in the Kurdistan Region of Iraq.

According to a statement from the company, the acquisitions have now closed and Genel therefore has 30% equity in the Sarta PSC, with Chevron holding 50% and the KRG the remaining 20%. Final investment decision relating to Sarta phase 1A development has now been taken.

Phase 1A begins with two wells, recompleting the Sarta-2 well and placing the Sarta-3 well on production, both of which flowed approximately 7,500 bopd on test, and the construction of a central processing facility with a 20,000 bopd capacity. Another well is expected to follow within twelve months of first oil, and further production capacity will be added as the field is developed and production ramps up. First oil is expected in 2020, with a total cost to Genel estimated at $60 million to the end of 2020.

Genel has booked an initial 10 MMbbls of net 2P reserves relating solely to this preliminary phase of the project. Unrisked gross mid case resources relating to the Mus-Adaiyah reservoir only are estimated by Genel at c.150 MMbbls, with overall unrisked gross P50 resources currently estimated by the Company at c.500 MMbbls.

Genel now holds 40% equity in the Qara Dagh PSC and is the operator, with Chevron holding 40% and the KRG the remaining 20%. Work is underway on assessing the optimal location for the Qara Dagh-2 well, which is set to be drilled in 2020. Unrisked gross mean resources at Qara Dagh are currently estimated by Genel at c.200 MMbbls.

Shares in Genel Energy have risen 9 percent over the past 24 hours.

(Sources: Genel Energy, Yahoo!)

Euphrates Advisors LLC and AUIS announce establishment of Euphrates Fund Scholarship

Euphrates Advisors LLC and American University of Iraq, Sulaimani (AUIS) announced today the establishment of the Euphrates Fund Scholarship (EFS), a generous grant that will cover the tuition of one University student each year.

Euphrates Advisors is an investment firm that manages the Euphrates Iraq Fund Ltd., which invests in Iraqi companies listed on the Iraq Stock Exchange (ISX). The Fund has invested more than $130 million since it was established in 2010.

Geoffrey Batt, managing director and founder of Euphrates Advisors LLC, said:

AUIS – by providing a rigorous higher education rooted in a liberal arts tradition to promising Iraqi youth – is playing an essential role in building a more prosperous and humane Iraq. We are proud to support your work with this scholarship.”

Euphrates Advisors has an existing relationship with AUIS, recruiting talented alumni to join its workforce. AUIS alumnus Qusay M. Muhyaldeen joined the firm as a consultant in the Baghdad office before moving on the the Washington, DC office as an analyst.

Grant Felgenhauer, Managing Partner of Euphrates Advisors, added:

“AUIS students graduate with deep critical thinking and analytical skills, together with a desire to contribute to the future development of Iraq — which is why we hire them.”

Christine van den Toorn, AUIS’ Executive Director of External Relations and Policy said of the scholarship:

“Through support like this from the private sector, AUIS is able to educate more Iraqi youth, preparing them to be engaged citizens and successful young professionals. The majority of our graduates work in the private sector, for leading US and multinational and local companies, and I’d say AUIS is really fueling the Iraqi private sector, and so we appreciate that they give back to AUIS in this way that benefits us both.”

To learn more about opportunities to support the education of Iraq’s future leaders, contact Christine van den Toorn (EU/MENA) at c.vandentoorn@auis.edu.krd, or Mrs. Liza O’Connor-Stroud (US) at liza.oconnor@auis.edu.krd.

(Source: AUIS)