An update from Genel Energy PLC (LSE:GENL, OTC:GEGYY)'s partner, DNO, indicates growing confidence in domestic Kurdistan sales, even though the revenue contributions remain "modest", said investment bank Stifel in a note to clients.
Operations at the Tawke field have been partially resumed with output averaging about 40,000 barrels of oil per day (bopd).
Half of this production is delivered to the Kurdistan Regional Government (KRG) as its entitlement, with the remainder being sold to local trading companies. Notably, the Peshkabir field remains closed.
The selling prices for the oil have been discounted, averaging just over half of what they were before the closure, assumed to be around $30 per barrel.
Payments are now being made upfront and directly to the operator. Stifel estimates that this arrangement results in monthly cash flows net to Genel of approximately $5 million, which should cover the second half of 2023's capital expenditures and operational expenses at Tawke.
For Genel to match Stifel's net asset value (NAV) projections or its previous cash profile, the export pipeline needs to reopen or domestic sales must expand significantly.
The bank's NAV for Genel stands at 143p per share - that's a significant premium to the current 78p price. Still, Stifel is currently neutral on the stock with a 'hold' recommendation.