--UPDATE, ADDS BACKGROUND AND BROKER COMMENT--
Genel Energy (LON:GENL) has struck a deal to buy-out its partner in the Bina Bawi gas field in Kurdistan.
The deal with OMV sees the London listed oil company acquire 36% of Bina Bawi in return for a US$5mln upfront payment and US$70mln of contingent future payments should the gas field achieve agreed threshold volumes.
A further US$75mln contingent payment could follow, two years after a second payment is made.
Genel will then own 80% of the project, with the Kurdistan Regional Government’s (KRG) 20% interest ‘carried’.
The deal is contingent upon approval from the KRG, which is anticipated shortly.
Bina Bawi is a large gas project, hosting between 4 and 12 trillion cubic feet of gas, and it has been appraised by five wells. Alongside Genel’s 75% owned Miran, with 2 to 7 trillion cubic feet, is forms a major onshore gas project which is expected to generate significant revenues.
VSA Capital, in a note, highlighted that Genel will now be able to advance development drilling at Bina Bawi, slated for 2016, and that ‘first gas’ is scheduled for next year as well.
“The first gas from Bina Bawi is expected for 2016 and will target domestic use in the first place then exports should start in 2018 mainly to Turkey,” the City broker said.
“Although it was expected by the market since it has previously been announced in November 2014, the completion of this deal is positive for GENL and now needs to be approved by the regional government.”
Genel also noted that upon the KRG’s approval of the transfer of OMV’s stake in Bina Bawi, the company will offset US$25mln against money owed by the KRG, in relation to past expenses at the Miran field.