Kurdistan-focused oil producer Genel Energy PLC (LON:GENL) has salved investor’s pain from a disappointing set of full-year 2016 results by launching a buy-back offer for bondholders which would be a “win for shareholders, subject to advantageous pricing,” according to broker WH Ireland.
In midday trading, Genel shares were over 8%, or 4.75p higher at 63.00p.
The company – which is chaired by former BP PLC boss Tony Hayward – said it intends to buy back a minimum of US$50mln in nominal value of its bonds, and will seek to cancel all bonds repurchased, including current treasury bonds with nominal value of US$55.4mln.
The move came as Genel separately revealed that its revenues dropped to US$190.7mln for the full-year to December 31 2016, down from US$243.9mln in 2015, as production fell to 53,300 barrels per day, down from 84,900 in 2015.
The group’s underlying operating excluding exploration costs (EBITDAX) was US$130.7mln, down from US$279.4mln in 2015, while its net debt held fairly steady at US$241.2mln, against US$238.8mln a year earlier.
Taq Taq …
Earlier this week, Genel today revealed a 65% drop in proved and probable reserves at the Taq Taq field in the Kurdistan region of northern Iraq following a review of the competent persons report by McDaniel and Associates.
Taq Taq is now deemed to have 59.1mln barrels of reserves, down from 171.8mln.
The company said the downgrade reflected significant uncertainty over the fracture porosity in the Shiranish formation in an ‘un-swept’ portion of the reservoir, which McDaniel said remains “very difficult to estimate”.
READ: Genel downgrades Taq Taq reserves ...
Taq Taq’s production continues to decline presently produces some 19,000 barrels per day, down from 36,000 at the end of 2016. Genel made a US$181mln impairment for Taq Taq in its 2016 results.
In today’s results statement, Murat Özgül, Genel’s chief executive said "While 2016 was a challenging year at Taq Taq, Tawke continues to produce at a stable level, and regular payments for our oil production in the Kurdistan Region of Iraq helped generate free cash flow in the year.”
In a note to clients on Genel, WH Ireland’s analysts said: “We note that drilling more wells at Taq Taq to target to ‘generate positive cash flow from operations on an annual basis’ is low benchmark for allocating capital anywhere and particularly to a region with heightened political risks.”
They also noted Genel’s comment that “of great encouragement is the momentum behind the development of the Miran and Bina Bawi gas fields”.
However, the analysts said “we wonder if capital allocation to develop gas in the area makes any sense at all given the systematic write-downs reported on oil assets, which by their nature are much much less politically exposed than gas which would be dependent on fixed transport routes and long-term offtake agreements etc”.