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)

By John Lee.

Genel Energy has announced the completion of competent person’s reports (‘CPRs’) relating to the oil reserves and resources at Taq Taq, Bina Bawi, and Miran.

McDaniel and Associates have updated the CPR relating to the Taq Taq field (Genel 44% working interest, joint operator).

RPS Energy Consultants Ltd. (‘RPS’), as part of its work on the updated CPRs for the Bina Bawi and Miran West fields (Genel 100% and operator), has finalised its evaluation of the oil resources at both fields.

Murat Özgül (pictured), Chief Executive of Genel, said:

“The 40% replacement of 1P reserves at Taq Taq follows the success of well TT-29w, and reflects the stability in cash-generative production that we have seen from the field in the second half of 2017. The significant increase in high-value Bina Bawi 2C oil resources offers a tangible opportunity for near-term value creation.”

Taq Taq oil reserves

Taq Taq gross 2P reserves as of 31 December 2017 are estimated by McDaniel at 54.7 MMbbls, compared to 59.1 MMbbls as of 28 February 2017, with the difference being production in the intervening period, partly offset by a small upward technical revision.

The CPR results in a 12% reserves replacement for 2P and 40% reserves replacement at the higher confidence 1P level as a result of stabilising production and the integration of well TT-29w. A reconciliation from the reserves reported in the CPR released in February 2017 to the updated estimates in the CPR published today, is shown in the following table:

Gross oil reserves (MMbbls – McDaniel)

1P

2P

3P

28 February 2017

25.8

59.1

95.0

Production

(5.0)

(5.0)

(5.0)

Technical revisions

2.0

0.6

0.1

31 December 2017

22.8

54.7

90.1

Bina Bawi and Miran oil resources

Bina Bawi gross 2C light (c.45◦ API) oil resources as of 31 December 2017 are estimated by RPS at 37.1 MMbbls, compared to 13 MMbbls as of July 2013. The increase reflects higher recovery factors than initially estimated due to integrating learnings from analogue carbonate fields of similar oil quality. As the high-quality Bina Bawi oil is in close proximity to export infrastructure, the field represents a potentially attractive near-term development candidate for the Company.

Miran West gross 2C heavy (c.15◦ API) oil resources as of 31 December 2017 are estimated by RPS at 23.7 MMbbls, compared to 52 MMbbls as of April 2013. Volumes have reduced as RPS has adjusted its view on the oil water contact uncertainty range and also adjusted its view on reservoir properties, including data from MW-5 drilled in July 2013.

Because of field experience at Taq Taq, Genel management has taken the view that it is unlikely that any matrix will contribute to primary depletion at Miran and, as such, has taken a more conservative view and will only record 18.5 MMbbls of viable 2C contingent resources at the field.

Gross 2C Contingent Resources oil (MMbbls – RPS)

2013

31 December 2017

Bina Bawi

12.9

37.1

Miran West

52.0

23.7

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

Oil (MMbbls – RPS)

Miran West

Oil (MMbbls – RPS)

1C

15.2

1C

6.1

2C

37.1

2C

23.7

3C

78.4

3C

67.6

(Source: Genel Energy)

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)

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)

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)

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)

By Ahmed Tabaqchali. Originally published by Iraq in Context; re-published by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Between February 2017 and mid-October, Rosneft signed a number of deals with the Kurdish Regional Government (KRG) that established for it, and by extension for Russia, a major position as both an investor and stakeholder in the Kurdish Region of Iraq (KRI)’s hydrocarbon resources and infrastructure.

The move was interpreted, especially by the KRG, as implicit support for the KRG in its bid for independence, especially in light of the latest deal signed following the reassertion of Iraq’s federal control over Kirkuk and other disputed territories. While there is an element of truth to this thinking, the deals are part of a wider geopolitical positioning for Russia as a major gas supplier to Europe and as an emerging power in the Middle East.

The deals provide Rosneft, and by extension Russia, effective control of the KRG’s Oil & Gas infrastructure, and a controlling stake in the region’s finances in more ways than one.

Within the oil space it has established this in three ways. The first was by providing USD 1.5bn in financing via forward oil sales payable over 3-5 years. This would be payable in kind from the KRG’s exports, until recently at about 550,000-600,000 barrels per day (bbl/d). However, the loss of the Kirkuk fields takes away about 430,000 bbl/d of production or eventually about half of the KRG’s exports.

This leaves the KRG with a tiny revenue stream after payments to International Oil Companies (IOC)’s, from which to make payments on forward oil sales of up USD 3.5 bn including Rosneft’s USD 1.5bn. A complicating factor is the repayment of other KRG debt, estimated at over USD 21bn by end of 2017, which will have to be factored into debt payment sustainability.

Genel Energy has announced that it has finalised documentation of previously agreed terms of Amended and Restated Production Sharing Contracts (‘PSC’s) and Gas Lifting Agreements (‘GLA’s) for both the Miran and Bina Bawi gas fields.

The Amended and Restated PSCs and GLAs for Miran and Bina Bawi incorporate the commercial terms as announced in the term sheets signed in 2015 by Genel and the Kurdistan Regional Government (‘KRG’) and reiterated in the Appendix below.

With the PSC and GLA terms formally confirmed, Genel will now be able to progress the project. The Company remains committed to developing these large scale, low-cost, onshore gas fields, which will form the cornerstone of gas exports to Turkey under the 2013 KRG-Turkey Gas Sales Agreement.

The GLAs contain conditions precedent, which, inter alia, include the execution of final agreements on the midstream gas processing facilities and pipeline transportation, the execution of the financing documents and the completion of updated competent person’s reports for Miran and Bina Bawi.

Both Genel and the KRG have the option to terminate the GLAs by February 2018. If the conditions precedent are not satisfied within 12 months, the KRG has a right to terminate the GLAs. In the event of termination, and a subsequent failure to conclude new gas lifting agreements within one year period, the KRG can also terminate the Miran and Bina Bawi PSCs.

During the three year period following such a termination, Genel would have a right of first refusal to participate in the development of the Miran and Bina Bawi gas fields with a 49% working interest on the same terms offered to any third party.

Murat Özgül, Chief Executive of Genel, said:

“We are very pleased to have signed definitive agreements for our gas project and are now focused on the next step of concluding negotiations with potential partners, and moving the gas project towards the FID. We are determined that 2017 will be a watershed year as we seek to create a gas business that will be transformational for both Genel and the KRG.”

(Source: Genel Energy)

By John Lee.

Genel Energy has issued the following trading and operations update in advance of the Company’s full-year 2016 results, which are scheduled for release on 30 March 2017.

In the statement (see below), the company said it expects a significant drop in production in 2017. Share were trading down 11 percent on Tuesday.

The information shown below has not been audited and may be subject to further review:

Murat Özgül, Chief Executive of Genel, said:

“2016 was a major step forward for the monetisation of oil exports from the Kurdistan Region of Iraq. We received $207 million in cash proceeds for oil sales and receivable recovery. These payments in turn allowed for work programmes to resume at Taq Taq and Tawke. The KRG has confirmed that payments will continue, allowing us to plan with confidence for 2017.”

 2016 PRODUCTION AND CURRENT PERFORMANCE

  • 2016 net production averaged 53,300 bopd. Production and sales by field for 2016 were as follows:

  • During 2016, Taq Taq natural field declines were partially offset by the three development sidetracks drilled and completed during the year. Taq Taq has averaged 35,300 bopd in January 2017 to date. A total of 18 wells are currently producing, with five of these wells accounting for c.80% of field production. Taq Taq field water production is currently 12,500 bopd, representing a water cut of 27%, significantly less than total water handling capacity of 55,000 bopd
  • Good progress is being made on the updated Field Development Plan and Competent Person’s Report for Taq Taq. Both are on track for completion in Q1 2017
  • At Tawke, the 2016 development programme helped offset natural well decline at the field. Tawke has averaged 113,900 bopd in January 2017 to date
  • Net production to Genel from Taq Taq and Tawke has averaged 44,000 bopd in January 2017 to date

FINANCIAL PERFORMANCE

  • $207 million cash proceeds (pre capacity building payments) were received in 2016, of which:
    • $153 million against 2016 sales
    • $24 million relates to the January 2016 payment for December 2015 sales
    • $30 million relates to the recovery of historical receivables
  • A total of $210 million was invoiced for 2016 sales, with almost all of the difference between this figure and the $153 million above representing amounts owed by the Kurdistan Regional Government (‘KRG’) for Q4 2016
  • In January 2017 the Tawke partners received a payment of $39 million related to October 2016 exports. Genel’s share of this amount is not included in end-2016 unrestricted cash balances
  • Capital expenditure for 2016 totalled $61 million, below the $90-110 million guidance range, as previously communicated
  • Similar to the process which occurred at the start of 2016, the Company is currently in discussions with the KRG regarding the pricing mechanism for crude sales from Taq Taq and Tawke, as well as the proxy formula used by the KRG to calculate payments for current sales from Taq Taq and Tawke
  • The carrying value of the receivable for unpaid production will be tested for impairment as part of the end-2016 results process, taking into account the latest views on historical netbacks, timing of recovery, future oil prices, and the production outlook at Taq Taq and Tawke
  • Unrestricted cash balances at 31 December 2016 stood at $408 million ($405 million at 30 September 2016)
  • Net debt at 31 December 2016 stood at $240 million ($241 million at 30 September 2016)

2017 ACTIVITY

Kurdistan Region of Iraq

  • KRI oil production assets
    • At Taq Taq (Genel 44% working interest, joint operator), the firm 2017 work programme consists of a workover of the TT-07z well and a new appraisal well, TT-29, in the north of the field. Both activities will be undertaken by a 1,500 bhp rig which is expected to be on location in February 2017. Additional activity, including further Cretaceous sidetracks, Cretaceous and Pilaspi development wells and installation of Electric Submersible Pumps in existing wells is contingent on regular and predictable export payments from the KRG for Taq Taq sales as well as partner approval. The Company expects production from the Taq Taq field to average 24-31,000 bopd in 2017
    • At Tawke (Genel 25% working interest), the operator DNO ASA expects production from the field to remain stable at the current rate of 115,000 bopd in 2017, based on expected investment levels
  • KRI gas assets (Miran 75% operated interest and Bina Bawi 80% operated interest)
    • The pre-FEED and upstream Gas Development Plan studies for the Miran and Bina Bawi gas fields are expected to complete shortly
    • Firm 2017 activity is expected to be largely technical and commercial in nature, with a strategy to enhance the value of the KRI gas project. In the event of a successful farm-out, contingent activity could take the form of the environmental and social impact assessment and FEED for the gas treatment and processing facilities, as well as extended well tests and further 3D seismic on the Bina Bawi licence
    • Discussions are ongoing with the KRG relating to the finalisation of the PSC amendments and gas lifting agreement. Efforts are also continuing in order to bring in partners to the KRI gas assets through a farm-down of the Miran and Bina Bawi licences
    • At end-2015, the carrying value of the Miran and Bina Bawi fields in the Company’s accounts was $1,427 million. The carrying value of the Miran and Bina Bawi fields will be tested for impairment as part of the end-2016 results process. Taking into account the latest views on discount rates and financing options, amongst other factors, management expects to record a material impairment of the carrying value in its 2016 accounts
  • KRI exploration and appraisal
    • As announced on 9 January 2017, the Peshkabir-2 well on the Tawke PSC flowed 3,800 bopd of 28° API oil from Cretaceous reservoirs in the southern flank of the Peshkabir field. The well, currently drilling ahead of schedule and under budget, is expected to reach total depth of 3,500 metres and will be completed, following evaluation of the Jurassic, by early February. The Tawke partners are considering a number of options to step up the appraisal of the new discovery, as well as the potential for early Peshkabir production via the existing Tawke facilities
    • In January 2017, the Company signed a Sales and Purchase Agreement to transfer its 40% interest in the Chia Surkh licence to its partner, Petoil, subject to approval by the Ministry of Natural Resources. Petoil will pay Genel an initial consideration of $2 million, and an additional $25 million in staged payments contingent on future crude oil production from the Chia Surkh licence. Genel will recognise an impairment of the Chia Surkh carrying value of $198 million in its 2016 accounts
    • The Company has formally relinquished its 40% interest in the Dohuk licence. The relinquishment of the 40% operated interest in the Ber Bahr licence is awaiting final approval from the KRG

Africa

  • The Company is currently in discussions with the Moroccan government over the nature, scope, and timing of the activity related to the maximum future exploration commitment of c.$30 million
  • Onshore Somaliland, the acquisition of 2D seismic data on the Odewayne (Genel 50%, operator) and SL-10B/13 (Genel 75%, operator) blocks is due to commence by March 2017. The data will be acquired as part of a Somaliland government owned speculative 2D seismic acquisition project, with the Company purchasing the associated data from the government

2017 OUTLOOK AND GUIDANCE

  • Company production guidance for 2017 is set at 35-43,000 bopd. This assumes the delivery of the Taq Taq work programme as stated above and a prudent level of contingency with respect to the Tawke operator’s current 2017 production expectation. The work programmes at Taq Taq and Tawke are subject to change depending on the results of development drilling and payments from the KRG for current sales and receivable recovery
  • Capital expenditure, net to Genel, at the Taq Taq and Tawke fields in 2017 is forecast at $50-75 million. Expenditure on the KRI gas business is estimated at $10 million. Capex on the 2017 Africa exploration programme is estimated at $40 million, which includes the c.$30 million Morocco exploration expense mentioned above
  • 2017 operating expenditure, net to Genel, at the Taq Taq and Tawke fields is estimated at $30-35 million

(Source: Genel Energy)

Genel Energy plc issues the following trading and operations update in respect of Q3 2016. The information contained herein has not been audited and may be subject to further review.

Murat Özgül (pictured), Chief Executive of Genel, said:

Genel has received $163 million in cash proceeds during 2016, underpinning the drilling of successful production wells across Taq Taq and Tawke.

“The KRG has made significant progress in restructuring the region’s economy. With export volumes at Ceyhan having increased following a new deal with the federal government, and the recent recovery in the oil price, this bodes well for the region’s cash flows. Despite the recent delay in payments, we remain optimistic that they will continue, facilitating further investment across our KRI assets.

Q3 2016 OPERATING PERFORMANCE

  • Q3 2016 net production averaged 53,100 bopd, an 8% decrease on the previous quarter
  • Production and sales by field during Q3 2016 were as follows:

screenhunter_4570-oct-26-10-09

  • Production by field for the nine months ending 30 September 2016 was as follows:

screenhunter_4571-oct-26-10-10

  • At Taq Taq (Genel 44% working interest) two side-track wells, TT-27x and TT-07z, were successfully  drilled and completed during the period, partially offsetting the decline from existing wells. A third  side-track, TT-16y, is in progress. Taq Taq production in October to date has averaged 50,000 bopd
  • Through development drilling and reservoir management, the focus at Taq Taq remains mitigating  field declines and reducing the concentration of production from the crest of the field
  • The Company is currently in the process of preparing a revised Field Development Plan (‘FDP’) for Taq  Taq, which is expected to be completed in early 2017. The revised FDP will establish the next phase of  the development plan, notably with respect to new development well locations and the overall  reservoir management strategy, while also identifying necessary resources and technologies required  to implement future activity.  In advance of the FDP completion, a tender has been initiated to  procure a more powerful drilling rig for the start of 2017, which would provide greater optionality  around development drilling at Taq Taq
  • Tawke (Genel 25% working interest) production in Q3 2016 was in line with the first half of the year.  Development activity recommenced during the period, with the Tawke-32 (Jeribe water injector),  Tawke-33, Tawke-34 (Jeribe producers), and Tawke-31 (Cretaceous producer) wells all being drilled.  The Tawke-37 (Jeribe producer) was drilled post period end, with all wells in the current campaign  adding to field output capacity. Tawke production in October to date has averaged 105,000 bopd, with  current production levels at 120,000 bopd
  • The Peshkabir-2 appraisal well on the Tawke licence commenced drilling in early October and is   expected to take around three months to complete
  • On the Chia Surkh PSC, work continues to establish a low cost development solution for the   discovered Tertiary oil resources, which are currently estimated at 3-10 mmbbls. An FDP submission is   targeted by the end of 2016. Consequently, the Company expects to write down the Chia Surkh   carrying value to a nominal amount. At end 2015, the Chia Surkh carrying value was $198 million