Hayward, the former BP CEO whose tenure ended abruptly following the 2010 Deepwater Horizon Gulf of Mexico spill, formed Genel in 2011 and the company became the biggest oil and gas producer in Iraqi Kurdistan but now is struggling with the oil price rout, regional conflict and a large reserves downgrade.
Earlier this year, Genel announced it was chopping in half the reserves estimate at its flagship Taq Taq field in northern Iraq, with a subsequent $1B writeoff that led to its biggest-ever annual loss.
Genel Energy (OTCPK:GEGYF) falls by as much as 41% in London trading after saying it will take a ~$1B impairment after reducing its estimate for gross recoverable proven and probable reserves at the Taq Taq deposit to 356M barrels from 683M barrels.
The charge, which will be included in Genel’s 2015 results due to be released on March 3, is equivalent to more than 3.5x the company’s market cap of £204 million ($283M).
The Taq Taq field, located in the Kurdistan region of Iraq, is forecast to produce ~80K bbl/day of oil a day in 2016 on a gross basis, and to fall to 65K-75K bbl/day of oil in 2017 and 50K-70K in 2018.
DNO says it received $30M as partial payment towards oil exported from the Tawke field, which will be shared with license partner Genel Energy, and Gulf Keystone received a $15M payment for crude oil export sales from the Shaikan field; Genel announced yesterday that the Taq Taq field partners had received a $30M payment from the KRG.
The payments appear to reflect an improvement and a regularity of payments which began in September.
Gulf Keystone Petroleum (OTCQX:GUKYF -7.4%) plunges as a deadline approaches for Kurdistan to make good on a pledge to pay regional oil producers, Bloomberg reports.
Gulf Keystone, Genel Energy (OTCPK:GEGYF) and DNO (OTCPK:DTNOF) are awaiting a November payment from the Kurdistan's regional government for the ~300K bbl/day they jointly produce, and failure to pay would undermine the companies’ finances and their ability to expand output.
Gulf Keystone says it remains in talks with the KRG and expects the next payment to be in line with those received in September and October.
Kurdistan-focused Genel Energy (OTCPK:GEGYF) lowers its production forecast for this year because of earlier delays in export payments, although it has now received two monthly payouts from the regional government.
Genel says it now expects to pump 85K-90K bbl/day in 2015, compared with a previous forecast of 90K-100K, and it narrows full-year guidance for capital spending to $150M-$175M from $150M-$200M and revenue to $350M-$375M from $350M-$400M.
The government paid Gulf Keystone $15M for exports of crude from the Shaikan field this month, following a similar payment in September and in line with pledges to resume regular compensation to international oil companies for exports from the region.
Genel Energy (OTCPK:GEGYF) chairman Tony Hayward says the payment situation has "turned a corner," as the increase of oil exports in recent months and independent sales from the Ceyhan oil terminal in Turkey have raised enough revenue for the government to cover its domestic budget as well as pay the oil companies.
Kurdistan said it allocated $75M of revenue from the sale of crude oil for payments; operators of the Taq Taq oil field, including Genel, will receive $30M with the same amount will go to Tawke field operator DNO (OTCPK:DTNOF), and Gulf Keystone expects to get $12M of $15M allocated for the Shaikan field, with the remainder going to its partners.
The payments would be the first scheduled compensation to companies that have been caught for years in a dispute over revenue sharing between Kurdistan and Iraq’s federal government.
BP (BP -5.3%) is downgraded to Underperform from Neutral at BofA/Merrill, which foresees a shortfall in free cash flow as the company faces a three-legged “trilemma” in accordance with the need to maintain dividend, credit rating and its reserve basis.
BofA projects falling refining markets at European Integrated oil companies, with the decline in the midstream industry expected to be below “mid-cycle levels” by 2016, which will cause companies to cut capex in order to maintain and deliver dividends on time.
The firm prefers exposure to Lundin Petroleum (OTCPK:LNDNF) and Genel (OTCPK:GEGYF) due to the high quality of their exploration and production sectors.
The Kurdistan Regional Government says it will begin allocating part of revenue from oil exports to producers on a monthly basis from September to cover their running expenses, and may make additional revenue available to the companies to start paying dues for past exports as shipments rise next year.
The payments would be the first stable compensation for the companies’ exports, which have been caught for years in a dispute over revenue sharing between the KRG and Iraq’s federal government.
Genel Energy (OTCPK:GEGYF) says CEO Tony Hayward, best known as BP's CEO during the 2010 Gulf of Mexico, will become chairman following the resignation of Rodney Chase.
Hayward will be replaced as Genel's CEO by Murat Ozgul, a company veteran and president of its Turkey and Kurdistan region.
Genel also says its H1 net production rose 41% Y/Y to 88.8K bbl/day with full-year guidance of 90K-100K bbl/day, but is putting all exploration work on hold for this year to rein in costs as it awaits nearly $400M in payments from Kurdistan's government; FY 2015 revenue guidance is unchanged at $350M-$400M, assuming a Brent crude price of $50/bbl.
Genel Energy (OTCPK:GEGYF, OTC:GEGYY) says it plans to cut capital spending to $200M-$250M, 30% less than original guidance and ~70% below the $670M spent in 2014, and will take a non-cash charge of $480M related to exploration expenses in Malta, Angola and Morocco.
Genel says it produced an average 69K boe/day in 2014 based on its stake in oil and gas fields in the Kurdistan region of Iraq and in Africa, and reaffirms plans to produce 90K-100K boe/day in 2015.
Expects to report FY 2014 revenue at the lower end of its $500M-$600M guidance range, and lowers its 2015 revenue guidance to $350M-$400M from an earlier $500M-$600M.
Genel Energy (OTCPK:GEGYF) says it received part of the $24M it is due for its share of oil sales from two fields in Kurdistan, breaking an impasse on payments amid political wrangling between Kurdistan and Iraq over oil exports.
Genel’s shares have suffered as officials in Kurdistan have been locked in a standoff with the central government in Baghdad over how Kurdistan can sell its oil, but today Genel is up more than 7% in London.
Separately, Iraq reportedly has agreed on an oil export deal with Kurdistan, which could put an end to these sorts of impasses that have divided the country; the news appears to have snuffed out an overnight rally in crude prices.
Genel Energy (OTCPK:GEGYF) signs an agreement with the Kurdistan regional government on development plans for two natural gas fields, and agreed to terms with energy firm OMV (OTC:OMVJF) to acquire its stake in one of the fields.
The Miran and Bina Bawi fields, with combined estimated resources of 11.4Y cf of gas, are valued by analysts at ~$2.6B and are expected to help the Kurdistan government meet a gas export deal it signed with Turkey last year.
Genel will pay $150M for OMV's 36% stake in the Bina Bawi field and take over the operation.