Genel welcomes KRG oil exports payment pledge

London-listed Iraqi Kurdistan producer Genel Energy received about $50mn of cash proceeds from domestic sales in the semi-autonomous Kurdish region of northern Iraq (KRI) and welcomed the Kurdistan Regional Government's (KRG) pledge to pay international companies for oil exports on a sustainable basis from September.

"These regular and predictable payments will allow Genel to fully capitalise on our strategic opportunities," said new chief executive Murat Ozgul.

The firm boosted its production by 41pc to 88,800 b/d of oil equivalent (boe/d) in the first half of 2015 compared with a year earlier, thanks to capacity upgrades at the Taq Taq and Tawke oil fields, and reiterated its full-year output guidance of 90,000-100,000 boe/d. Despite the production increase, Genel's first-half profit dropped to $31.4mn from $70.7mn amid lower oil prices. Genel recorded no operating cash flow in the period, compared with $115mn in the first half of 2014, as the $50mn of domestic sales proceeds were offset by cash operating costs, with "the reduction from last year being a result of delayed payment for sales".

The company cut its capital expenditure (capex) by 70pc to $93.3mn in January-June compared with the first half of 2014. It envisages full-year capex in the range of $150mn-200mn.

"We remain committed to the Kurdistan Region of Iraq and will continue to invest in our existing oil fields while moving our major gas fields forward to development, creating significant value for both Genel and the KRG," Ozgul said.

Genel said it continued negotiations with the KRG this year "on the commercial framework for the development" of the Miran and Bina Bawi gas fields in the region. "There is now complete alignment along the value chain from the KRI-Turkey Gas Sales Agreement through the midstream to the upstream, which helps the KRG manage its obligations and de-risks the wider project," the company said.

Genel's exploration plans will be focused on less capital-intensive drilling in the KRI and Africa, given the current lower oil price environment. Levels of exploration activity in the KRI "will be subject to receipt of payments for exports from current oil production".

In the first half, 63pc of production from the Taq Taq field was supplied to the KRG for export through the KRG-Turkey pipeline system and 24pc was delivered to the Bazian refinery, with the rest sold domestically in the region.

Genel holds a 44pc working interest in the field and is its joint operator. A record production rate of 145,000 b/d was reached in early April after a temporary production facility was installed in the first quarter. The company said that the construction of the second central processing facility at the field is progressing, with commissioning and start-up expected at the end of this year.

At the Tawke field, where Genel holds a 25pc working interest, 81pc of output was supplied to the KRG for export through the KRG-Turkey pipeline system, 16pc was sold into the domestic market and the rest processed at the Tawke refinery. Following capacity upgrades, the field production reached a record output of 180,000 b/d at the end of May.

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