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As the largest oil producer in the Kurdistan Region of Iraq, the union of Vallares plc with Genel Energy International places us among the top two independent UK-listed E&P companies by 2P reserves, with an estimated unrisked resource base of 1.4 billion barrels of oil equivalent – including proved and probable reserves of 356 million barrels.
Ex-BP chief Tony Hayward set for Genel windfall
Former BP (LON:BP) chief executive Tony Hayward is one of three directors who will share an almost £160 million payout after exercising a right to a 6.67 percent stake in Genel Energy (LON:GENL).
The others are financier Nat Rothschild and former banker Julian Metherell. They did so by exercising their B-shares, for which they paid a reported £15 million.
The three are the founders of London-listed Vallares, which merged with Turkey’s Genel to create a London listed oil explorer focused on Kurdistan.
They initially invested £85 million in Vallares, which was set up to acquire undervalued assets in emerging oil regions.
When the merger was unveiled last year, Hayward described Kurdistan as the last great oil frontier.
“Arguably, it is the last big onshore 'easy' oil province available for exploration by private companies anywhere in the world,” he added.
The US Geological Survey estimates the Kurdistan Region of Iraq's yet-to-find hydrocarbons at 40 billion barrels of oil and 60 trillion cubic feet of gas - which puts it on a par with the North Sea.
Of the 49 wells drilled there over the last six years, more than 70 per cent have been successful.
However the politics of the region are problematic, a point recognised in a research note issued by JP Morgan Cazenove this morning.
But while the situation looks “messy”, autonomy for this portion of northern Iraq looks possible, according to analyst Jessica Saadat.
“The political situation in Iraq has deteriorated since the departure of US troops at the end of 2011, and we believe that a decentralised, federalised Iraq looks like an increasingly feasible outcome,” she said in a note to clients.
“If this were to occur, we believe strong trade relations with Turkey could ultimately create a commercial export route for the Kurdish oil producers.”
However a price target of 1,200 pence a share (current price 860 pence) suggests the market isn’t fully recognising Genel’s full potential.
One potential catalyst might be the results from the first Ber Bahr field it shares with Gulf Keystone Petroleum (LON:GKP), which have the potential to add 179 pence to its net asset value, Saadat concluded.
