--UPDATE, ADDS BROKER COMMENTS--
Genel Energy (LON:GENL) boss Murat Özgül says the Kurdistan based oil firm is well positioned to weather the downturn and thrive when the oil cycle turns.
In a statement, ahead of the company’s full year results, the chief executive highlighted that its operations have low production costs (below US$2 per barrel), and moreover pointed to its robust cash position and low capital commitments.
Genel’s share of production from the Tawke and Taq Taq fields averaged 75,900 barrels of oil per day in the fourth quarter. For the year Genel averaged 84,900 barrels per day, which is up 22% on 2014 and compares to guidance of 85,000 to 90,000 bopd for 2015.
The company highlighted that it ended 2015 with some US$455mln of cash.
Overall, the group’s operations are expected to see cash breakeven at a Brent oil price of US$20 per barrel for 2016.
Genel also highlighted that the majority of its spending plans for 2016 are discretionary, giving it flexibility against a backdrop of low oil prices.
In the coming year it expects cash spending to average US$20mln per month. This compares to an average of US$25mln of monthly export payments received from the Kurdistan authorities over the past four months.
Some US$100mln has so far been received from the Kurdistan Regional Government since the current payment arrangements began in September.
"2015 was a very challenging year for the oil industry, with pronounced oil price weakness which has continued into 2016,” Özgül said in a statement.
“In addition, the funding of the security effort in northern Iraq, influx of refugees into the KRI and cessation of budget transfers from Baghdad continue to place a very significant strain on the KRG's finances.
“Against this backdrop, the recent receipt of four consecutive payments for pipeline exports is highly encouraging.”
Barclays Capital repeated an ‘overweight’ rating for Genel following today’s update.
“Genel’s resilient financial position continues to provide us with confidence that it can navigate the prevailing oil price environment,” Barclays analyst James Hosie said in a note.
“Management appears to have taken a firm position in its ongoing dialogue with the KRG by linking future investment levels to export payments. We suspect some investors may question whether current oil prices and the signalled fall in production could impact the KRG’s ability to maintain existing monthly payments to Genel and its peers.
“However, we believe the importance of avoiding further production declines to the KRG budget places Genel in a strong position”