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Executives

Tony Hayward - CEO and Executive Director

Julian Metherell - CFO and Executive Director

Charles Proctor - Head - Business Development

Mehmet Ogutcu - Non-Executive Independent Director

Analysts

Michael Alsford - Citi

Henry Morris - Goldman Sachs

Yuriy Kukhtanych - Wood & Company

David Farrell - Macquarie

Alastair Pringle - Nomura

Genel Energy PLC (OTCPK:GEGYF) H12013 Earnings Call July 31, 2013 9:00 AM ET

Tony Hayward

Ladies and gentleman, good afternoon and welcome to Genel Energy’s First Half Results Presentation. I have just noticed also that the back of the room here which says hold fast and sit sure which seems quite an appropriate, way of introducing our afternoon, I’m joined today by Julian Metherell who you all know is CFO and Head Of Business Development Charles Proctor and as usual we’ve got a number colleagues. In the audience Mehmet Sepil who needs no introduction; Murat Ozgul who runs Kurdistan, President of Genel’s operations in Kurdistan; John Hurst, Exploration Manager; and particularly pleased to welcome (inaudible) who in until recently the Turkish Counsel General (inaudible) he just joined the team as the Deputy Head of Government and Public Affair, we’re really pleased to get (inaudible) some of you who have been missing on trips down the Kurdistan region, he’s going to be helping us down that but also in our adventurous further filled in North African, he’s a great addition to the team.

I would like to begin today’s presentation with a brief recap of our progress in the first half of 2013. Julian will then cover the formal results and then Charles will take you through the considerable progress we’re making in building a very material gas business to add to our already world-class oil business. We have of course the usual disclaimer which I don’t intend to read but you’re already familiar with what it says, so let me begin.

The first half of 2013 has been a very successful period for Genel. We’ve enjoyed strong operating performance and that has been reinforced with significant political momentum on the ground in the Kurdistan region of Iraq. Production for the first half is 41,500 barrels a day up 7% from last year when we remain on track to meet guidance between 45,000 and 55,000 barrels a day for the year.

Over the last couple of months, our working interest production is averaged more than 50,000 barrels a day as explored through Turkey have stabilized and domestic sales have remained strong. Revenues were $161 million up 31% from last year and we remain on track to meet our full year guidance of $300 million to $400 million, and overall production capacity, we remain on track to have 140,000 barrels a day of net production capacity by year-end 2014.

We see very material results editions with important appraisal success at (inaudible) which Charles will cover later and in at Turkey. Charles will also cover the significant progress we’ve made towards commercializing both oil and gas at Miran and Bina Bawi. We’ve enjoyed a great run of exploration success even in Kurdistan three from three is really excellent result. I’ll update you shortly and where we’re with Chia Surkh, Ber Bahr, and Tawke Deep.

Taken together, the exploration and appraisal success has added more than 500 million barrels of oil equivalent net to our contingent resources, that’s an increase of over 50% clearly quite material for what's still relatively a small company, and in addition, a higher impact African exploration program which is targeting some 3.3 billion barrels of oil equivalent of gross unrisked resource remains on track to kick off before the end of the year.

Perhaps the most important thing is the progress we’re seeing on the ground with respect to independent export infrastructure, it’s a clear signal of the continuing and growing political momentum between the Kurdistan Region of Iraq and Turkey, and finally we finish the first half of 2013 in very good shape financially, profit was more than $100 million and we retained $867 million of cash on the balance sheet.

So onto exploration then as I said we’ve enjoyed considerable exploration success in the first half, three discoveries from three wells, the important was at Chia Surkh where we made a significant new oil discovery. We now estimate recoverable reserves between 250 on 500 barrels of oil. Chia Surkh 10 was drilled on the crest of large anticline covering some 55 square kilometers with a mat vertical closure of 550 meters. The well penetrated in the legacy Miocene intubated carbonate in a vaporized sequence.

Two testings have also flowed at 11,950 barrels of 41 API oil and 15 million (inaudible) of gas. On the second internal 3200 barrels and 8 million standard cubic feet of gas, Chia Surkh 11 the first appraisal well has been drilled 5 kilometers to the northwest of Chia Surkh 10 and some 75 meters down deep on the structure, it’s penetrated a great side of carbon column of some 170 meters.

We’ve TD the well in the last week for operational reasons without countering the oil water contact and currently completing logging operations prior to testing. As I’ve said based on the available data we believe most likely recoverable reserves in Chia Surkh of between 250 million and 500 million barrels of oil. We’ve planned to conduct a 3D seismic survey in the second half of the year undrilled further appraisal wells in addition to commencing an early productions scheme in the course of 2014.

This is significant additional prospect ever seen in the block both (inaudible) are well defined leads that we believe will mature into the prospects really for drilling in the quarter 2014. In addition to Chia Surkh in the course of the first half, we successfully side tract the Ber Bahr one well achieving sustain flow 2100 barrels a day of 15 API oil from the middle Jurassic Sargelu Formation which shortly commence a 3D seismic survey and plan to drill appraisal well in it early next year.

We anticipate early production from the middle of 2014. Our current estimate of recoverable reserves is between 50 and 100 million barrels.

The Tawke Deep drilled to test the deeper reservoirs beneath of Tawke field successfully produced 1,500 barrels a day of 26, 28 API oil from the Upper Jurassic some 200 meters below the main Cretaceous reservoir. Based on this and continued appraisal and development drilling success, the operated DNO the recoverable reserves at Tawke now reached 1 billion barrels. And finally in the KRI, the Taq Taq Deep well is currently drilling 2,600 meters on its way to a target for 5,400 meters. We expect to see results in the fourth quarter.

And in Africa as you know we’ve contracted the four (inaudible) rig for 10 well program. We expect the first well in Morocco to start in the fourth quarter on the first well in Malta to start early in the first quarter next year. We also continue to make solid program in the development of Taq Taq. Well capacity today is some 140,000 barrels a day and we’ll continue to grow as we complete the drill out of the field.

Construction of the Phase two of the central processing facility has begun and will be complete by the middle of next year, giving us facility capacity of 200,000 barrels a day. At Tawke, DNO who recently completed the first horizontal well in the field, which is now been put on production at a record rate of 25,000 barrels a day. The comparison the most productive vertical well in the field flows at around 10,000 barrels a day. Drilling operations are nearing completion on the second horizontal well and DNO are preparing to drill a third horizontal well this quarter. We’re planning our first horizontal well at Taq Taq towards the end of the year.

With this progress at both Taq Taq and Tawke, we anticipate working interest production of 140,000 barrels a day by the end of 2014. As I said Charles will cover Miran and Bina Bawi in more detail later but in short we’ve made very good progress in the first half of the year.

Miran, we started up an extended well test on the shallow oil discovery at 3,000 barrels a day and are currently putting in place a permanent early production facility. Petrofac, on their behalf completed a front end engineering and designing study for the development of the gas field. On the KRG, agreed a heads of terms for gas sales agreement for 10 billion cubic meters a year to Turkey beginning in late 2016.

At Bina Bawi, we declared commerciality and started up an extended well test that was reproducing at around 1,000 barrels a day. We expect that to ramp up to 3,000 barrels a day in the near future. We also completed the drilling and testing of Bina Bawi 4 and Bina Bawi 5. They’ve confirmed a gross hydrocarbon column in excess of 1,500 meters, and in doing so, made very significant resource additions. As I said, Charles will cover all of this in more detail shortly.

In addition to the strong operational momentum we’re delivering, we’re also benefiting from strong political momentum. As has been widely reported, Turkey and the Kurdistan regional government signed a bilateral energy cooperation agreement in March of this year, and we’re now seeing the benefits of that play out on the ground.

Firstly, Taq Taq crude oil is being exported by truck through Turkey to Mersin on the Mediterranean coast where it’s being sold at international prices. Exports are today running at 30,000 to 40,000 barrels a day constrained by logistics and port handling facilities. Contractors are receiving full entitlement for the barrels sold. Secondly, a Turkish state-backed energy company has signed for 6 exploration license with the KRG and also agreed to take a 20% share and Exxon license in the Kurdistan regional of Iraq. Thirdly, independent KRI infrastructure continues to be built out. The 300,000 barrel a day Khurmala to Dohuk like is now mechanically complete. And the line from Dohuk to Fishkabur is under construction. Welding is complete within 15 kilometers with the Turkish border.

And fourthly, with respect to gas sales, the original agreement included a heads of terms for sales of 10 bcma of KRI gas to Turkey beginning in late 2016. The heads of terms is now being translated into a detailed commercial gas contract. In summary, the agreement is being implemented at place and the scale. I think it’s fair to say that this train is well and clearly left the station. This map lays out in detail where we are with the oil pipeline. The first section from Taq Taq to Khurmala is complete and fully operational with the capacity of 150,000 barrels a day, which we expect to be able to push close to 200,000 barrels a day. The second section from Khurmala to Dohuk with the capacity of 300,000 barrels a day is mechanically complete and be ready to operate by the end of third quarter.

The final section to Fishkabur is under construction and should be complete and ready to operate in the fourth quarter. We expect the entire system capable of exporting some 300,000 barrels a day to be fully operational by around the end of the year. It would be a major inflection point for the Kurdistan region of Iraq and of course for Genel. It will allow us to increase production and realize full international prices for all of our production.

Let me now hand over to Julian to take you through the first half numbers in a bit more detail.

Julian Metherell

Thank you, Tony, and good afternoon everybody. I will now take you through our half year results, provide updates on our guidance for the full year and conclude with a brief overview of our financial strategy going forward.

Starting with the numbers, with the production and the income statement, our average daily production in the first half was 415,000 barrels per day an increase of 7% compared to the first half of last year.

As the chart in the top left of this slide shows production has improved materially over the period with daily production over the last three months averaging over 50,000 barrels a day. We would expect this level to be maintained for the rest of the year.

There are two reasons that explain the lower production in the first quarter. Low domestic market demand during the New-Year holiday in March, and the company’s policy to prioritize price rather than volume in the domestic market.

In the second quarter where production was higher, domestic demand returned to more normal levels, but much more significantly production benefitted from the increasing volumes of oil being exported by truck from our Taq Taq field through Turkey to the international markets. Currently there are 30,000 to 40,000 barrels a day being exported through Turkey. On the income statement, you can see that the strong production performances generated revenue of a $161 million, up 31% compared to the same period last year.

In addition I would like to draw your attention to two particular positive developments that have contributed to revenue increasing ahead of production. Firstly the domestic market has proved to be strong. And at $60 to $70 a barrel is now realizing higher prices than it did this time last year. Secondly the Turkish export route is operational and as Tony said, we are receiving full PSC entitlement at international prices, less transportation costs, so realizing $75 a barrel. Both of these benefits to revenue go straight through to our bottom line and to cash.

In cost of sales, the overall decrease compared to last year is principally caused by lower depreciation. Depreciation is lower than last year as a result of a change to one of the inputs used in its calculation. Previously when calculating depreciation, we derived production from revenue entitlement. Now we are in a more normalized environment and have enjoyed six months of receiving full entitlement for our production under the PSC.

And we have moved to a basis depreciation that uses the company’s share of actual barrels produced. These changes, I am sure you are all aware, also brings us more into line with general industry accounting standards. The changes resulted in a $55 million benefit to the depreciation charge leaving us with a gross profit of $99 million, a material increase from the same period last year.

But low gross profit you will see that the successful side-track of the Ber Bahr 1 well has led to the reversal of the impairment we took in the second half of last year. This results in a $22 million benefit to the income statement.

Other alternate cost which include central cost in M&A are down from $19 million in the first half of last year to $14 million in this period. This brings us to our bottom line and our reported profit for the period of a $109 million compared to last year’s $22 million. On the back of our half year numbers and our current operating levels, we reiterate our previous guidance for the full year production and revenue to continue the output strength that we have seen since 2011.

General working interest production capacity of 80,000 barrels a day; production range 45,000 to 55,000 barrels a day; and the revenue range of $300 million to $400 million.

Let me turn to capital expenditure. In Kurdistan we have continued our strategy of deploying operating cash flow on our significant capital investment programs and have spent $220 million in the period, an increase of $100 million on the same period last year. Of the $220 million spent in Kurdistan, $60 million has been invested in expanding production capacity on facilities at our producing assets at Taq Taq on Turkey.

A $100 million on further appraisal and development of our Miran and Bina Bawi licenses, and the remaining $60 million on exploration with successful wells at Chia Surkh, Tawke, and the side track of Ber Bahr.

In Africa we have spent $45 million on 3D Seismic and analysis across all of our high-end packed exploration portfolio, as well as preparing for first wells in Morocco and Malta.

For the full year we are raising our guidance to a range of $500 to $550 million, principally as a result of the exploration success we have enjoyed in the KRI and the pace of progress on the development of our Kurdistan assets, notably the successful appraisal well testing at Bina Bawi, and accelerated development at the Miran oil business and of the Dohuk field. We will however continue to run the business in line with our stated strategy of broad cash flow neutrality in the KRI.

This slide gives you an overview of our cash flows for the period. We report a strong operating cash flow of around $180 million which is a $100 million higher than reported for the first half of 2012. At the half year, Kurdistan CapEx was $220 million with $45 million on Africa. $43 million of acquisition cash flow relates principally to the final payment of the Miran asset we acquired from Heritage last year. This leaves us with the significant net cash balance of $867 million at the end of the period.

Let me say a few words to finish on our capital strategy. Our balance sheet is strong and as we have stated previously we will continue to evolve our capital structure to reflect the future business needs of the company. Key considerations will be, our confidence in oil export revenues, portfolio management actions, for example a possible sell down of the Miran field, CapEx needs of the current portfolio, access to debt markets where given the improving political environment in the KRI, we are seeing any encouraging increase in credit appetite for Kurdistan, new business opportunities where the focus remains primarily on new exploration access opportunities as opposed to material acquisitions and the commodity price environment. Clearly, there is significant strength and flexibility in the current capital structure which brings with it material competitive advantage for company of Genel's size, however, there may be potential opportunities to return excess capital to investors in 2014.

I’ll now hand you over to Charles. He’s going to take you through the material progress we’ve made on the plans for Miran and Bina Bawi.

Charles Proctor

Thanks, Julian and good afternoon ladies and gentlemen. Over the next few minutes, as Tony indicated, I’ll be providing you with an update on the progress we’ve made in establishing what is fast becoming a very material world class gas business in the KRI.

During the first half of the year, we’ve made significant steps in each of the elements of the work, which we’ve been carrying out in parallel. On resources, where we’ve added significant volumes through two appraisals wells which are not been completed of Bina Bawi, mean recoverable gas resources across the portfolio and are some 8 trillion cubic feet of gas growth with an additional 10 tcf of upside. In total, that’s up to around 3 billion barrels of oil equivalent gross.

On cost, we’re through the competition of a feed study for Miran; we’ve established a strong understanding of the scope, schedule and the cost associated with building required processing facilities for these fields. In doing so we’ve confirmed that our gas resources in KRI are amongst the lowest cost in the region and indeed in the world.

And markets, where important milestones have been passed both the exports and for domestic sales. As part of the Bilateral Energy Cooperation Agreement signed by Turkey in the KRG in March of this year ahead of terms for gas sales agreement was agreed.

This has established the basis with 10 billion cubic meters of gas a year to be sold from KRI to Turkey beginning in late 2016 or early 2017. And in the domestic market, we’ve recently agreed the terms under which we will sell gas from the (inaudible) field in Taq Taq PSC to a local power plant.

Whilst the volumes at (inaudible) are relatively modest, this is highly significant in demonstrating the opportunity to sell gas into the local market in the near term at attractive returns and in addition to the progress on the commercialization of the gas resources during the first half of the year we’ve produced first oil at Marin and Bina Bawi both important sources of early revenue and value generation from those fields.

If I can lead you with one message at the end of this section is that we have a big resource, it’s highly cost competitive and has clear routes for monetization. Taken together, this provides us with the opportunity to generate material shareholder value.

Let me now provide you with some more detail on each of those areas in turn. First on resources and in particular the successful appraisal program of Bina Bawi, during the second quarter, OMV the operator completed an extensive testing program on the Bina Bawi 4 and 5 appraisal wells.

These wells were drilled to the south west of the Bina Bawi 3 well. The Bina Bawi 4 well TD closed to 4700 meters, the first well in the KRI to reach the premium and Bina Bawi 5 TD 3400 meters.

Drill Stem Tests together with MDT results have confirmed a continuous, hydraulically connected gas column in excess of 1,100 meters in both wells. The top Kurra Chine formation in these two wells is 400 meters down dip from the crest, which is tested by Bina Bawi 3. And so in total we have confirmed a minimum gas column of at least 1,500 meters on this structure. There is potential for up to an additional 500 meters of hydrocarbon column, below the basal test in Bina Bawi 4 and down to the structural spill point. The DSTs were completed over the full extent of the drilled Triassic section, including the Geli Khana and across the entire Kurra Chine section. Observed productivity has been higher the perforated zones between 30 to 60 meters and across the Kurra Chine, rates of around 20 million scfd were recorded in each of the zones with highest achieved rate limited by tubing and surface test equipment.

Cumulative production across the section in the Kurra Chine were some 60 million scfd. And in addition in the Geli Khana, a non-acidized stabilized flow rate of 10 million scfd was achieved.

So, based on the latest well and test results, we now estimate gross mean recoverable gas resources of Bina Bawi of 4.4 trillion cubic feet gross with an upside estimate of approaching 8 tcf.

With a condensate gas ratio of 10 barrels per mmscf, condensate resources are estimated as an additional 50 million to 100 million barrels which was around 50 million barrels of oil in the shallower Jurassic takes test gross mean recoverable resources to around 850 mmboe for the field. In the upside case, this increases to close to 1.5 billion boe.

Taken together, Miran and Bina Bawi provide Genel with a world class gas resource. Gross mean recoverable resources shown on the slides across our discovered gas field in the KRI total some 8 trillion cubic feet with the potential for recoverable resources to be considerably in excess of 10 TCF in an upside scenario.

In addition, the Miran Deep prospect which we plan to drill in 2014 has the potential to add significant additional volumes and our current pre-drill estimate is for TCF of recoverable resources for that prospect.

So the KRI is rapidly emerging as not just a major oil province but also as a very significant gas province. And as with the oil sector, Genel has established the leading resource position and is now well placed to be at the forefront of building this into a major business in its own right. But of course the gas to work, not only do you need large volumes but that development must be cost competitive and it must have access to market.

This chart shows the long run marginal cost of the alternative sources of gas to the Turkish border using Wood-Mackenzie data. Existing suppliers are shown in dark blue with the two major potential and the original suppliers the KRI and East (inaudible) in green. The various LNG options are shown in light blue. It's worth noting that these LNG suppliers do of course have a far wider choice competing customers and so don’t necessarily represent realistic sources for the supply of material volumes to Turkey.

Now, it's perhaps not surprising the large volumes of oil and gas just across the border would be cost competitive. For the extent of the competitive advantage underlying why we believe the KRI gas provides the basis for an attractive long term and highly sustainable business.

On the demand side, Turkish growth has averaged 10% a year over the last 10 years, the highest of any country in Europe or Eurasia. Indeed of the global market, only China has seen high growth rates over this period. This has taken over a consumption in Turkey to 46 bcma in 2012 making a one of the larger markets in the region already, what is the chart on the right hand side shows with the consumption level of just 600 cubic meter per capita, there is a lot more growth potential in this market.

This slide shows how currently contracted supply volumes stack up against projected levels of demand growth. We have assumed that Russian and Iranian contracts which are due to expire in the next few years get extended and that the next phase of (inaudible) comes on stream in 2018, even at moderated growth rates of between 3% to 5% a year Turkey needs to source an additional 20 to 35 million cubic meters a year of gas to meet projected demand growth over the 10 years.

The 10 bcma of sales volume which Tony referred to earlier included in the Turkey-KRG Energy cooperation agreement as shown in green. They represent an important contribution both to the overall supply position but they also provide an opportunity to bring additional and much needed diversification to Turkey’s sources of gas supplying.

In terms of market size and proximity, Turkey clearly represents the first port of call for exported gas and together with domestic markets will provide the platform for the first phases of Miran and Bina Baw development. Along the term, the opportunity clear exists for transit through Turkey and for sales elsewhere in Europe.

So the fundamentals are clear, we have a large volume of highly cost competitive gas and we are right next door to a large growth market. So, how are we going to convert this potential into a high value of business? The monetization process will occur in a series of steps, first early oil and then a series of domestic gas projects and finally the phased development of large scale export projects.

The slide shows the timeline against which we are progressing each of these activities and you will see that 2013 has already been and will continue to be a busy year as we start to put our plans in action. On early oil, we started producing oil at both Miran and Bina Baw earlier in the year but Miran and Extended Well Test on the oil-bearing Upper Cretaceous reservoirs was completed in the first quarter and produced up to 3,000 barrels a day.

An early production facility is now under development and will be commissioned during the third quarter to provide a more permanent production facility for Miran oil going forward. Oil production at Miran will ramp up as we bring additional wells on line during 2014 and beyond.

At Bina Bawi we started production for ETW in March, initial production from the Bina Bawi three well has been around 1,000 barrels a day and we expect this to ramp to 3,000 through the remainder of this year and the Bina Bawi six well which we spotted earlier this week will further appraise the ultimate potential of this oil project.

Domestic gas projects provide the opportunity to further early revenue generation. These are typically projects of around a 100 million scuffs a day supplying local power and industrial customers.

By taking advantage of existing infrastructure and utilities, which are frequently owned by customers and without the need for export infrastructure, these projects can be executed both for low levels of capital and in a shorter timeframe. The purchase prices available, these projects generate a similar level of value for BOE to export projects but with higher return achieved as a result of the significantly lower capital requirement of Genel.

And we just started work on the first such project, the Summail 1 well drilled in the Dohuk PSC at the end of the 2011, discovered gas in the Cretaceous formations. During the first half of 2013, a development concept has been finalized for a production of up to 120 million scuffs a day of gas which will be sold to the existing Dohuk power plant which is currently running on fuel oil. A detailed term-sheet has been agreed between operator DNO, Genel and the KRG and we expect to enter into a fully termed gas sales agreement and to take the final investment decision on this projects the third quarter of this year.

First gas sales are forecast to begin in early 2014 and Genel net revenues from Summail in 2014 are forecast to be between $30 and $40 million net. We're now on discussions with a number of similar projects and have identified a total of up to 500 million scuffs a day of potential demand and will progress these projects if we can secure attractive commercial terms for Genel. We've also made considerable steps in progressing the major export developments that we expect to comprise the main off take the Miran and Bina Bawi. During the first half of the year Petrofac have completed a feed study which has provided us with a detailed basis of design and a thorough understanding of the cost and schedule associated with the development of Miran. This study has confirmed capital costs of around $4 per boe for the processing facilities with a 30 month schedule for the projects from award of contracts to first gas sales.

Whilst the field work has been conducted for Miran, the outfit clearly provides valuable data with direct application to the development of Bina Bawi; the work has therefore given us a strong foundation to understand the possible synergies and economies of scale that could be realized with the optimized phased development of gas resources in the KRI. And in parallel with the feed study work has of course continued to further understand Miran resources, in particular we spotted the Miran West 5 well in early July and intend to conduct an extended well test on this well towards the end of this year. This will provide additional data on the productivity of Miran wells to support planning for the development wells; they will also attempt to confirm the gas-water contact that hasn't yet been reached on this structure.

As part of the broader KRG-Turkey energy discussions as we said earlier, significant progress has been made in establishing the basis for a major export gas sales agreement. Headline terms are agreed by the two governments in March, for sales volumes of 10 bcma starting at the end of 2016 or early 2017 and this now being translated into a detailed contract. We expect the negotiations for this to continue through the remainder of the year, with the agreement of a final GSA by the end of 2013. Final investment decision on the first phase of the export gas development will follow shortly thereafter.

So in summary, through the course of the year we've made considerable progress in establishing the foundations for what will be a transformational new gas business in the KRI. Genel has the leading resource ownership position in what is fast emerging as a world class gas province. We're a Turkish company on the doorstep of Turkey, one of the world's fastest growing major gas markets.

Government to government, heads of terms are now in place and there is considerable momentum behind agreeing a GSA by the end of the year. Selective sales of gas to domestic customers together with early oil production provide the opportunity to generate cash flow and attractive returns in the very near term.

Taken with our strong track record in the KRI and our Turkish roots Genel is therefore uniquely positioned to convert this significant resource space into a very material and valuable new business. At the right time though as we mature the business we will look to bring in a new partner, reducing our own interest in Miran to bring in additional financial capability and complementary skills and experience.

Over the next few years this business will ramp up in a number of value accretive phase as shown in the slide, a series of domestic projects providing attractive, low cost, fast track monetization opportunities, then the phased development of high cost more complex export projects for which we will likely bring in a partner and beyond that as the province plays out there will clearly be opportunities to expand even further with additional domestic sales and exports to Turkey and beyond. Once completed we will have established a truly world class long term new business adding significant value to Genel shareholders.

I'll now pass you back to Tony.

Tony Hayward

Thank you very much, Charles, great job. I hope the message is clear, we intend to own the gas business in the KRI and believe we are uniquely positioned to do so. Over the last 18 months our business has developed very significantly and it's appropriate that I finish the day's presentation with a reminder of our strategy, how we're thinking about it, and how we're thinking about the development of our business, and the milestones for you to measure our progress by over the next 12 months. Our strategy is largely unchanged, it is to maintain the highest level of corporate governance to create value with a drill bit, I believe we demonstrated our ability to do just that in the first half of 2013. To manage our KRI business on a broadly cash flow neutral basis, to maximize shareholder returns through monetization, at all points in the exploration, development and production cycle, and in doing so return any excess cash to shareholders and to build a material exploration and production company over the next three to five years.

Over the course of the last year our business has grown and developed very significantly, it now comprises four very distinct components.

Firstly a world class oil business which is set for very significant growth over the near medium term as the final pieces of the independent KRI infrastructure fall into place.

Secondly a transformational new gas business where our resource ownership, long standing relationships in the KRI and our Turkish provenance give us a significant competitive advantage to create value from gas.

Thirdly a high impact KRI exploration portfolio that has a lot more running room and fourthly a high impact African exploration portfolio where drilling will begin before the end of the year.

As this chart demonstrates we’ve achieved a great deal in the first half of 2013 and as I said at the beginning the significant operational momentum in the business is being reinforced by the political momentum on the ground as the KRG Turkey bilateral energy corporation agreement is implemented and as this chart demonstrates the momentum is not about to stop anytime soon in fact if anything things are only going to accelerate.

Let me finish with a high level summary of the outlook through the remainder of 2013 and into 2014, for 2013 as you’ve heard from Julian our production and revenue guidance is unchanged. We expect the independent KRI infrastructure to be complete by the end of the year. The developments at both Taq Taq and Tawke are on track to deliver 140,000 barrels a day of working interest production by year end 2014.

The appraisal and development programs at Miran and Bina Bawi both continue, early oil development is underway both fields and we expect to sign an export GSA before the end of the year. A high impact exploration program continues in the KRI with new wells targeting around billion barrels of gross resources at Chia Surkh, Taq Taq Deep and Miran Deep. and finally the African exploration program kick off in the fourth quarter with first well in Morocco followed by Malta early in 2014.

Ladies and gentleman, I think we’ve achieved a lot in the first half of 2013 and as you can see there is a great deal more to do and a great deal more to come.

Thank you very much for you time this afternoon. We’d now be delighted to take your questions. Let me just return to my seat so I can orchestrate the questioning, so we'll do sort of half and half. So we start the side down at the front and we’ve got our secret weapon all lined up with the microphone.

Question-and-Answer Session

Unidentified Analyst

I’ve got few questions first is on access to the export infrastructure both oil and gas, on gas will Miran and Bina Bawi be guaranteed a defined portion of the GSA volumes or could market share be diluted in the future by new gas developments and discovery, so I mean are you potentially competing for gas market share as part of that agreement and secondly on oil you’ve sort of had the advantage of being an early mover in both Taq Taq and Twake considerably more advanced than a number of the other fields in Kurdistan, but if we fast forward few years there could be a number of other parties calling on export infrastructure, so what are the risks as you see on your ability to scale the business, the oil business is quickly as you liked in terms of the ability to access the pipelines thinking about Chia Surkh potentially and then Julian and you sort of mentioned that the debt market and potential and reserve bank lending could be opening up for you, what are the sort of major milestones that potential capital providers are looking for that before that willing to enter into agreements?

Tony Hayward

Okay thank you, I will do with oil, I let Mehmet talk about gas and Julian will talk about the debt markets. So, on oil, the first phase would be 300,000 barrels a day. The reason there is probably barely 300,000 barrels a day of production in KRI today. I think that the big point is that once this is in place and the political will has occurred to make it happen the task of increasing the infrastructure on both sides is not that significant and the KRI could be done within 12 months, so you could loop this existing line certainly within 12 months and in Turkey there are plans to loop the leg of the (inaudible) so I think the really important thing is the political breakthrough that has a curve that is allowing this to happen with that in place it would be relatively straight forward to keep infrastructure development ahead of production capacity, Mehmet Ogutcu, gas?

Mehmet Ogutcu

Regarding the gas, to answer your question right now being Bina Bawi and Miran are only known two fields I mean there is only one more field that’s producing in Kurdistan called (inaudible) and now it’s utilized up to the maximum capacity because (inaudible) gas right now is going to power plants in the region and so any gas that is needed domestically today will come from those two fields and that’s why in the presentation Charles mentioned that we are already talking to local players, that there is a huge industry development in Kurdistan. There are a lot of different cement plants for example to very close to our field in Miran they’re building up a new cement plant they’re building up new still plant, they’re considering fertilizer, so to answer your question right now we don’t have any competition because there is no other gas that can be monetized at this point. With regard to pipelines, it if building up a gas pipeline probably is not on the critical path and as we mention 2017 is the target to take the gas to Turkey early 2007. If you look at the base of Taq Taq to border pipeline has been finished in the last 12 months, I don’t think that will be any problem because write off way issues are already resolved. I mean, most of that pipeline will probably use similar roads to Turkey.

Tony Hayward

Just to add to that, in terms of the gas sales agreement which is been negotiated between the KRG and Turkey with that in place the KRG will then come to the resource producers to match the commitments they’ve made with off take from the two available fields, which is the Miran and Bina Bawi. So there is no prospect so has being a sort of (prorating) at all at this stage.

Unidentified Analyst

On price for the gas is sort of the $8 million mark still something you comfortable with being able to achieve?

Unidentified Company Representative

I think that we’re not going to talk about prices because it’s very sensitive both domestic and internationally. But what I would say is that the prices that we’re talking about are going to give us very attractive returns in both the domestic market and the international market.

Tony Hayward

Just on debt, I mean, I think we’re living in a sort of virtual service as the political environment is improved as I mention when I spoke the credit appetite is clearly improving and we have a number of open conversations with banks around ranging from syndicated bank deals to high yield.

If you look at two of our sort of comparables, you’d look at (inaudible) whose high yield is down trading at 6%, DNO clearly has a three year bond out in the market at around 7%. And I think in current credit environment, we want to be confident that we could raise money in the bond market at those kind of prices which is obviously materially cheap but no current cost of equity.

And when people look at the credit of the business, we are a strong single B of the credit metrics. And as I say, the political environment is improving.

I mean I think we are a little way of thinking about RBL and project finance as we sit here today but roll the clock forward to end of this year when we expect to have the pipeline open and we’re being paid for export I think in 2014 is when we would look to have an RBL conversation when senior debt could be made available to business.

Unidentified Analyst

Thank you. I am Sameera (inaudible) from Argus Media Petroleum, Argus. My question is about the 300,000 barrel a day pipeline, export pipeline. Now, when this is finally ready at Fishkabur, what route to the market will it take, will it be looked as you were suggesting earlier to the Kirkuk-Jehan export pipeline or how will the oil then get to international market?

Tony Hayward

It will be tied into the Kirkuk-Jehan pipeline…

Unidentified Analyst

And is this not contingent on an agreement with the Iraqi government between the KRG and the Federal Iraqi government?

Tony Hayward

No.

Unidentified Analyst

Okay.

Tony Hayward

Let me answer that because that’s a debate I mean we know bought that some time seeing it should only be Iraqi oil that should go to this pipeline, so Iraq, all of this coming to that pipeline. That’s the political answer Turkish authorities gave. So I mean Kurdistan all is Iraqi oil, so they are seeing, it should be only down for Iraqi, so we don’t see again that’s the political position that Turkish government has declared so far.

Unidentified Analyst

Just a follow up question on the same subject, just to understand logistically what’s happened, I saw the time point was semi controlled at the moment. So is it at that semi controlled point which were the central Iraqi government has military interpretation at another location if they should book?

Tony Hayward

I think your question is right. So, there is one connection point at this point that they are using. Most probably, it will be a different connection point but on the same pipeline because the other one has bought the controlled. I don’t think if they can agree on using that and the other option is go little of north few kilometers and put up on another pumping station, which is in the Kurdistan sector.

Michael Alsford - Citi

It’s Michael Alsford from Citi; I’ve got couple of questions if I could please. So you talk about the exports of oil from the Kurdistan and obviously infrastructure is moving ahead very well. Could you maybe talk about in the absence of an agreement say between the KRG and Bagdad and I know there are ongoing discussions there. How do you see the payment of money to the contractors in KRG because as you say Iraqi oil is Iraqi oil but it would be co-mingled. So will the existing payment agreement that goes by Baghdad be in place and then are you still waiting for payment from Baghdad or will it more directly from Turkey?

And then just secondly on Miran you expressly mentioned obviously the high but just tightly you have that, could you perhaps talk about whether you are in active discussions around sell down because clearly FID is not far away hopefully on Miran or is that something that you would expect later on in the lifecycle of the project?

Tony Hayward

Are you asking existing mechanism or are you asking after export starts through the pipeline?

Michael Alsford - Citi

After exports start through the pipeline…

Unidentified Company Representative

Again, I think Turkish authorities answered this so we can only say what they said. What they are saying is this is Iraqi oil coming to Turkey, so all the accounts and everything will be transparent, so all the proceeds, will also be declared to Bagdad so that person, Iraqi’s can do reconciliation in between each other. Actually there is an ongoing process to that. You have to realize. Right now they are trying to do reconciliation for the pass anyhow. I am sure you read in the papers that Turkish clergies claiming, about I think $17 billion that they think Bagdad also. So what they are trying to do is to create a mechanism where those exports, refinery sales and everything will be reconciled. And turkey is saying that we will be all but transparent, the numbers will be announced to Bagdad so also to clergy.

Tony Hayward

Let me just add a bit if I can. I think the first clue is what’s happening today, with (inaudible) exports, the contractor’s risk are being paid, they are taking their share and are partly remitting the balance to the KRG. And the KRG is also having taken over the cost, how much they keep and how much they remit to Bagdad.

It seems to me there’s a bit of the clues as to how things might operate in the future. The second thing is about two months ago, the KRG passed a very important law. It’s called a revenue reconciliation law. It intensified the outstanding dues that they believe Bagdad owes them with respect to oil exports not paid and a large number of other central budget allocation items. They also believe there had been due which has not been paid, which was what Mehmet was referring to, the reconciliation. It amounts to a very large number. So I think in the early days, the likelihood is, there will be a balancing mechanism occurring whereby the vast majority perhaps all of the revenues are retained by the KRG against the revenues they believe they should have been paid and haven’t been paid by the central government.

Unidentified Analyst

Thank you, and on Miran?

Tony Hayward

We have a lot of people who have expressed a lot of interest, principally potential consumers of the Gas in Turkey. So I think it’s unlikely we will bring in an upstream partner, because we are not seeing that add very much, but bringing in someone who is going to be using it in Turkey is probably quite a good idea. So that’s where we will be looking. But it’s a bit early. We want to have the gas sales agreement in place, properly defined projects so we can get proper value for it.

Tony Hayward

Yes, we stay on the left.

Henry Morris - Goldman Sachs

It's Henry Morris from Goldman Sachs. I got two questions. The first, Tony you mentioned that some of the export volumes for the first half were constrained for actual export capacity from Turkey. It is just a trucking related issue or is it saying keep an eye on when pipeline exports materially ramp up next year?

Tony Hayward

It’s a trucking related issue. It’ the challenge of 500 or 600 trucks travelling couple of thousand kilometers and the constrains in the port whether offloading the trucks. Okay, it’s clearly a very different, the Kirkuk-Jehan pipeline was at its peak was doing 1.5 million barrels a day plus with 9 million barrels a day of storage at the Jehan end. It’s got plenty of capacity.

In fact the biggest challenge is having enough oil to make it operate properly which has been one of the ongoing issues with Northern Iraq exports. Once we get settled in Turkey we are not constrained at all by infrastructure wise in the pipeline, the end of it with respect to tankage.

Henry Morris - Goldman Sachs

And a second one, of course you said there is a significant amount of cash on the balance sheet and you listed a number of items here and that you would want to have confidence in before thinking about a potential return of that cash. Is it the case that if you had confidence and you saw a significant pick up in your oil export revenue that you could expedite a return of that cash, would you want to see for example [0:04:43](inaudible) Miran first before thinking what to do that balance?

Tony Hayward

I think I will just, it’s sort of five criteria, and I think we would look at them all. Export revenues clearly key to it. Debt market is another source of cash, and yes we would -what we do with the portfolio; we will materially impact our capital program going forward and then we will clearly signal today the appropriate time. We don’t intend to move forward with a 100% of Miran, but you know the great advantage we have today is we continue to move forward with the project like that because we’ve got the capital to do it, and then step off and to put that maximizes value unlike that of other smaller companies that are forced to get off in suboptimal times. So yes, a project like Miran, and when we partner, we will dictate I think, will be a criteria as to one routine capital.

Can we keep going to the right?

Yuriy Kukhtanych - Wood & Company

I have a question, on domestic Gas sales. Currently Bina Gas which operates Khurmala field is not receiving any revenues for the domestic gas sales and making money out of condensate sales only from the field. My question is why would the KRG pay the money for domestic gas sales for Miran and Bina Bawi fields simultaneously allowing you to realize full prices on oil sales from those fields?

Tony Hayward

The simple answer is, we have a PSC in (inaudible).

Mehmet Ogutcu

But let us also give you more information. The gas today, producing is only from (inaudible) Khurmala. But it is only going to local power plants. And the way local power plants are operated in Kurdistan, it’s a toll fee arrangement so Kurdistan government is supposed to give the gas or fuel oil whatever free of charge to producers and then government pays $3.02 for the operation as a polling fee.

So, I don’t know the details of the gas agreement but I think the deal is KRG is not paying them through the gas but they are paying them through the condensate. So any condensate that goes to Turkey right now is not only Taq Taq oil going to Turkey, I think there is about 15,000 barrels of condensate everyday going to Turkey and then I guess should be compensated, I’m not sure but that’s the way I know through that gas, but the gas we’re going to provide is not going to go through power plants that we are talking, when we say industry, we mean cement plants, we’ve talked about steel factories, restriction over that private investment. right now, these guys are either buying fuel oil from Kurdistan and they’re hoping to get gas also from the gas suppliers.

So, to answer your question, we are not talking about concept of Miran or Bina Bawi supplying the local demand for the power, we are talking about the Bina Bawi and Miran supplying either going to Turkey for export or us dealing with directly the industry makers or that like the first, they are over that, they want gas to. So, total different concept than gas concept and Tony is right, oil and gas don’t have PSC (inaudible).

Unidentified Analyst

I’m sticking with transportation, the realizations of Taq Taq export $75 to something like $25 or $30 is being lost on transportation. So, where are discussions in terms of price for the product access to the pipeline, tariff agreements, are you having those discussions with people and who were those discussions with?

Tony Hayward

So, let's just talk about the 75. Taq Taq is realizing at most in print minus couple of dollars and the reason for that is a new create on the market, people don’t know what is (inaudible) and whenever you bring new creates to market it takes time to establish a benchmark. But it’s being pretty well bid actually in the last three or four cargos, so the differential of being a new crude is closing. The transportation cost today are about 21 bucks. So, that’s how you get back to mid-70s price.

When it comes to the pipeline the final details of the transport if these are being negotiated not by us but by between the KRG in Turkey. But it’s clearly going to be very materially less than $21 a barrel; I mean my guess is it will end up between $5 and $10 probably, with that say government to government negotiation which is what they do always is. And then we’ll access the infrastructure, the access to the infrastructure, the cooperating cost will be a traditionally our, it will be somewhere between probably $1 in Turkey and $1 in Kurdistan or couple of bucks in Turkey with a (inaudible) applied to Turkey.

Very significant delta from what we’re receiving today, very significant.

Unidentified Analyst

Turkish utilities and equity gas, I’m assuming the act of bit like Japanese utilities and they don’t like to take high equity sticks, they don’t like to take commercial risk so on this basis is it fair to assume that you are happy to remain operator of Miran and …

Tony Hayward

I think if we’re bringing utility to almost it’s pretty clear we’ll be remaining the operator and we don’t think we’d also take utility to appraise it upstream development. And also not agree with you about the appetite for risk, I think they see a tremendous opportunity in the spark spread in Turkey to access low cost gas continue to sell high cost barrel. So, that’s why there is so much enthusiasm.

Unidentified Analyst

And the other one on the contract that Turkey and the KRG are currently negotiating just around the price obviously you can't comment on it, but I’m just wondering whether within the contract there is a certain formula that determines the price or whether it’s a fix price on real basis.

Unidentified Company Representative

I think Turkey is negotiated enough gas contracts, so they’ve know what a good gas contract looks like. Of course it has a formula, of course it has price reopened, of course it has ACQ and MCQ, everything else you get in the gas contract. I mean how many gas contracts has Turkey negotiated in the last 20 years, a lot, with some of the toughest gas negotiators on the plant.

Tony Hayward

But I guess this question is typical touch for Miran used, that using the past tense. The answer is no. I think formula probably will be developed because that’s what Turkey and Europe suffers from in the past. So there will be probably not only few low end but they are negotiating and it will be finalized.

Unidentified Analyst

And the final question is just on the two year rig contract you have for West Africa. Do you intent to use that as currency to get access to additional acreage, let's say Morocco.

Tony Hayward

Well I think the answer to that is yes, we have a lot of people we'd like slight loss on the rig and the basis for that would be access mostly to opportunities and when we conclude them, we’ll sort of tell you about that, we got three or four discussions, slight negotiations ongoing at the moment.

Unidentified Analyst

Just two questions please or one question and one observation. On your production guidance of 45 to 55 KBD, is that not a bit conservative because today you are considering you already producing 60,000 (inaudible) producing at over 1,000 barrels a day. And second question please, so in terms of the kind of timing on the farm out that you planning on Miran so I didn’t catch it earlier, what is the anticipated timing, is that going to be a next year event or is that still this year?

Tony Hayward

So, it almost certainly be in next year because we want to make certain we have crystallized clearly the value in the project prior to embarking on that and as Julian said we have no pressure to do anything anytime particularly. I think on production, I have a very conservative CFO, he change his strips completely since he left Goldman, so we decided, we would just stick with what we have said at the beginning of the year and we feel very comfortable that will be in that range we may well end up towards the top end of the range but we think would be range, so no reason to change.

David Farrell - Macquarie

Are you going to give the facilities costs for the Miran development, I was wondering if you could give the full kind of project cost on the BOE basis, and within that will be Genel or the KRG has to spend the CapEx for the gas pipeline to the Turkish part and then the second question was, (inaudible) mentioned that it’s already to tie-in (inaudible) board is that mean that there is an additional pumping facilities and storage facilities that have to be constructed probably within that Tawke (inaudible) license as well.

Tony Hayward

Are you talking about the oil pipeline in the (inaudible)?

David Farrell - Macquarie

Yes.

Unidentified Company Representative

I think that (inaudible) probably going to occur on the other side of the border, you don’t have to have the pumps of the same point as you tie the line in (inaudible).

David Farrell - Macquarie

And are they currently being constructed that?

Tony Hayward

On compare to disclose is that there is a clear plan of how to do it, our clear plan is to what pumps are required and how to put it all together. And I imagine that there will be some practices of how this will going to work in the course of the fourth quarter. I think in terms of gas pipeline CapEx, not decided yet but frankly it's not a big deal in the total scheme is thing, it’s probably $100 million to $200 million the gas pipeline, whether it would be funded as part of the projects recoverable under the PHC or held outside the project, we haven’t sorted that yet but it’s not going to be a major issue one way or the other.

Unidentified Analyst

It should be a very simple question, given you success with the international drilling campaign thinking of in the fourth quarter, do you really got too much in your plate?

Tony Hayward

Definitely not, we have got a great team and I think we haven’t talked about it today but in the course of the last six months, we build some a lot of capability in the company, and actually we clearly have the finally way to deal with continue success and I think we are increasingly confident that we have the human capital to do with the continued success, we are building a really good, not only good exploration team under John Hurst but a very good operational team under a lady called Don Sommers (ph) who joined us from Mild Shop (ph) about four months ago so we are building a lot of real operating capability and we feel pretty good about that actually.

Alastair Pringle - Nomura

In you presentation, you had a slide on political momentum and that’s pretty much just focused on the KRG on Turkey, could you talk a little bit about the momentum between the KRG and Baghdad.

Tony Hayward

As you know as we speak with the KRI prime minster Mr. Massoud Barzani is in Ankara, that’s for just to reiterate once again the good health, robust health of Turkey's relations with the KRG so that’s for Erbil and Ankara bit, between Erbil and Baghdad, things also were going may be a little bit on the positive side but as we speak honestly Baghdad has other worries really to take there under a constant resilient Al-Qaeda attack on a daily basis, so definitely Baghdad’s priorities are maybe for the survival and as for prime minister of Maliki you know that he is not going to be re-elected so decelerated himself and between the two as far as for the oil and finance committees to that was also delayed for the time being so the initial thrust did not may be arrive to the result that was intended which is to reach final consensus about the issues between the two, I hope that answers your question.

Alastair Pringle - Nomura

Just a follow up, do you think that a change of personnel might be necessary so about the top with the elections coming up in 2014 for the things to see a bit more momentum there?

Tony Hayward

You mean on the Baghdad…

Alastair Pringle - Nomura

Yes, the relation yes.

Tony Hayward

And also honestly speaking I mean that’s definitely as you can imagine that’s for the Iraqis I mean both Iraqi kurdan, Iraqi Arabs to decide how to move forward from here but as we speak what we know is that there will be change anyway, it's not up to us to decide affairs of the Iraqis but I think the issues are real and already there was kind of an expression of good intentions after the visits, the recent visits as you can imagine and there was some, they agreed at least to form certain committees between the two (inaudible) visit to Baghdad and Mr. Maliki's visit to Erbil, we might see some development on that front with the change of as you said, at the top level.

Unidentified analyst

Just to add I mean to the question Bagdad and Erbil right now are talking to each other, but does it, will it create, it has to create two things for us on either oil or revenue share, at this point it's hard to say, we're, I wish we could say yes, we believe it will happen, but it’s going very slow, but the lines are open that's the difference, I mean, if you look at what was happening four months ago, (inaudible) troops and Bagdad forces were almost, it came to a point where they might even start fighting, so it's not there anymore, at least these visits between Maliki and Barzani, Maliki coming to Arbid and Barzani going to Baghdad created a much different atmosphere. Right now everybody is cool, will it end up resolving all the oil issues, you know we cannot say it will but we're hopeful to.

Tony Hayward

I think the only thing I would add is in the meantime Kurdistan has put itself in a position to continue down the path that it's been on for the last 18 months, and they show every sign of doing just that in the absence of anything else from Baghdad.

Unidentified company representative

Any other questions, let me take few, Mohammad I will come back to you, if everyone else has had one you can come back and have another go.

Brian Gallagher - Investec Bank

Just wondering what the status is on your full listing at the moment, and what kind of milestone needs to be passed to get that.

Tony Hayward

Well, we've been in a pretty detailed discussion with the UK lay over the last 12 months. I think the final issues that they are focused on is politics, not surprisingly and I think when we are exporting via pipeline and being paid on increased volumes we will have another very strong conversation and I think we would be confident that we would get to the right answer assuming that we maintain the momentum we have to do on a physical front.

You can have the last question if this is it.

Unidentified analyst

My question is this, when do you envisage exporting from Taq Taq through the Kirkuk - (inaudible) pipeline, when do you think that link will be made.

Tony Hayward

We said before the end of the year.

Unidentified analyst

That's to the border…

Unidentified company representative

That's before the end of the year.

Unidentified analyst

All the way to Chechen.

Tony Hayward

When you get to the border you get to the pipeline.

Unidentified analyst

To Chehan? And how do you see volumes ramping up.

Unidentified company representative

As the capacity is 300,000 barrels a day we have today somewhere north of a 100,000 barrels a day in Taq Taq, which we better increase, somewhat, we don't know how much. By the middle of next year we'll have 200,000 barrels a day in Taq Taq, and Tawke has a 100,000 barrels a day today and it’ll have 200,000 barrels a day at the end of next year, so you can sort of do the math and there's a few other bits and pieces as well.

Unidentified analyst

So the pipeline will be fully utilized pretty soon.

Tony Hayward

The pipeline will be close to utilized from the time it's properly commissioned I would say, not completely but, and in the course of next year the objective will be to fill the available infrastructure which will be the basis on which new infrastructure starts being constructed and that would definitely happen.

Okay we're going to make this the last question, because I thought we'd finished but we obviously haven't.

Unidentified analyst

Just a very big question on Chia Surkh, because today we all received information that estimated resources in the Chia Surkh field may be upgraded to one billion barrels, and I'm just wondering this huge upgrade from, 300 million to one billion it comes primarily from on the one well drilled or from CS 11 well, from results from that well.

Tony Hayward

I think you've misunderstood actually, what we said was that the Chia Surkh structure which is being drilled by two wells, the initial discovery well and now the first appraisal well which was drilled significant geographical offset and somewhere down (inaudible) from the structure, on the basis of those two wells the range in that structure is 250-500 million barrels, there in addition on the Chia Surkh license two other prospects that are very analogous to the Chia Surkh prospect and on that basis, the volume on the lessons could easily be a billion barrels.

Unidentified analyst

It's not an estimate for recoverable resources, just a prospect.

Tony Hayward

The 250-500 is recoverable oil not resources its oil in Chia Surkh and the billion barrels is on the basis that if the one or other or both of the other prospects were successful. Clearly the risk has been significantly reduced, thank you.

Tony Hayward

Okay ladies and gentlemen thank you very much for coming along today and we wish you all a happy and successful summer, I guess we'll see you all in the autumn but for those of you who can there's sort of coffee and biscuits and even maybe some alcohol outside, so I hope to see you outside.

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