13th Nov 2014 09:34
LONDON (Alliance News) - Genel Energy PLC Thursday said production will continue to increase next year and said it has reached a deal with the Kurdistan regional government in Iraq to develop the Miran and Bina Bawi gas fields, which are set to commence production in 2016.
During the third quarter to the end of September, the company's net working interest production increased by 36% to an average of 72,000 barrels of oil equivalent per day compared to a year earlier. During October, production levels from the Taq Taq project in Iraq reached 126,000 barrels of oil equivalent per day, further increasing to 136,000 barrels of oil equivalent per day in November.
For the first nine months of the year, net working interest production levels totalled an average of 66,000 barrels of oil equivalent per day, a 47% increase compared to the same period in 2013, Genel said in a statement.
Sales during the third quarter saw an average domestic price of USD66 per barrel from the Taq Taq project and USD55 per barrel from the Tawke project, also in Iraq. Of the total sales in the quarter, 44% was made to the domestic market with the remaining 56% being exported.
Its exports are mainly made from Ceyhan, a town of the Kurdistan regional government, where it is expecting a payment mechanism to be set up in the first quarter of 2015 to ensure more regular payments.
"Exports will continue to rise and the Kurdistan regional government's firm commitment to ensure contractors receive full entitlements will see a normalised payment process for this production early in 2015."
Genel said it has reached a deal with the Ministry of Natural Resources of the Kurdistan regional government to develop the Miran and Bina Bawi gas fields, both of which will be combined under one production sharing contract. Genel said it is expecting this to be finalised by the end of the year.
The company is expecting first gas from the field to be ready for export in the first half of 2018, but said the Kurdistan regional government has the option to request first gas for domestic supply during 2016, when first oil production is expected.
In addition, Genel has agreed key terms to acquire international oil and gas company OMV's 36% stake in the Bina Bawi gas field for a total consideration of USD150 million in cash, with an initial payment of USD20 million and the remaining balance to be paid in two tranches after production begins.
"These agreements represent a win-win in the commercialisation of Miran and Bina Bawi. It materially de-risks the value of Genel's gas business, gives attractive project returns while significantly lowering our capital exposure, and provides revenues from early oil production," said Chief Executive Tony Hayward.
Genel's production and revenue guidance for the full year remains unchanged at between 60,000 to 70,000 barrels of oil equivalent per day to generate revenue between USD500 and USD600 million based on an oil price of USD80 per barrel, it said in a statement.
Production in 2015 is set to increase as Genel has set a guidance for next year of between 90,000 and 100,000 barrels of oil equivalent per day, also set to generate revenue of between USD500 and USD600 million at the same oil price.
Capital expenditure for the full year is expected to be around USD650 million, higher than the original target of between USD500 and USD600 million due to higher spending on the Sidi Moussa well offshore Morocco. Capital expenditure in 2015 is set to be much lower at around USD300 to USD350 million, said Genel in a statement.
At the end of September, the company reported a cash balance of USD660 million with USD170 million in net cash.
Genel shares were up 2.0% to 838.50 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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