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Genel's Kurdistan operations remain safe and secure

Published: 07:47 06 Aug 2015 BST

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Production is forecast between 90,000 and 100,000 bopd for the whole year

Genel Energy (LON:GENL) told investors that its operations in Kurdistan remain safe and secure, whilst it repeated guidance for oil production in the order of 90,000 to 100,000 barrels per day (bpd) for 2015.

This reassurance comes amid ongoing fighting in the region against ISIS and as conflicts between Turkey and the PKK, a Kurdish militia, recently reignited.

The Iraq-based oil firm chaired by Tony Hayward expects full year revenue will amount to US$350mln to US$400mln, assuming a US$50 Brent oil price, though for many investors the key issue of outstanding payments remains.

In today’s interim financial results, for the six months to June 30, the company revealed a 4% rise in revenue to US$199.3mln whereas cash flow from operating activities was reported as US$0.0.

The group, which is owed hundreds of millions from already sold oil as a result of a shortfall of Iraqi budget payments to the Kurdistan Regional Government (KRG), said it had US$474mln of cash at the end of the six month period.

The KRG last week revealed plans to sell exported oil directly, and it represents something of a breakthrough for oil companies in the semi-autonomous region.

It is planned that the KRG will make monthly payments to producing oil companies, starting in September.

Payments are initially expected to help companies cover their costs whereas subsequent increases, in-line with rising exports, are planned for early 2016 so that owed payments can begin to be caught up on.

Murat Özgül, Genel’s chief executive, said: “In recent days the KRG has made a public commitment to pay international oil companies on a sustainable basis from September 2015.

“These regular and predictable payments will allow Genel to fully capitalise on our strategic opportunities.

“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."

On paper, Genel’s results were largely positive. At an average of 88,800 bopd oil production rose by around 40% compared to the corresponding period of 2014.

Earnings (EBITDAX) were up, at US$158mln versus US$138mln, whilst pre-tax profit remains in positive territory, at US$31mln, despite sharply lower crude prices.

Free cash flow was reported as minus US$211mln, whilst the amount of cash in the bank reduced to US$473mln (it was US$489mln at the end of 2014, and was US$973mln this time last year).

Genel said that it received around US$50mln of cash proceeds from the KRG for domestic crude sales.

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