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Genel Energy (LSE:GENL) has further enlarged its interests in the Kurdistan Region of Iraq by securing 23% stake in the Bina Bawi exploration licence through the acquisition of A&T Petroleum Company Ltd. for US$175 million.
The company has made the acquisition, still subject to “various consents, approvals, and assurances”, especially from the Kurdistan Regional Government (KRG), at a time when the Iraqi Oil Ministry is disputing the authority of the KRG to enter into agreements for oil exploration and production in the autonomous region.
Political Risk
In its statement contained in the 2011 Annual Financial Report, Genel Energy mentioned the possibility of “less favourable” contractor entitlements should the validity of the six Production Sharing Contracts held by the company is successfully challenged by the national government in Baghdad.
“What we are acquiring is very high-quality acreage,” stated Genel Energy’s Chief Executive Tony Hayward, who, along with the members of the Board of the company, declared the company has “good title to its oil and gas assets.”
Bina Bawi Licence
A total of 246 km2 has been added to the 956 km2 Taq Taq oilfield, which lies alongside the Bina Bawi licence and is now currently producing at a rate of 80,000 barrels of oil per day (bopd) from nine producing wells, as a result of the acquisition of A&T.
The 23% interest in the Bina Bawi exploration licence was held by A&T Petroleum Company, a wholly owned subsidiary of Petoil Petroleum and Petroleum Products International Exploration and Production Inc., itself a member of the Pet Holding Group of Companies.
OMV Group holds the operatorship of the licence for a 36% interest, together with Prime Natural Resources for 21% stake. KRG retains 20% interest carried on by contractors.
“Our estimate is that the Bina Bawi discovery has contingent resources of some 500 million to 1 billion barrels of oil and oil equivalent, with some additional prospective upside,” Mr. Hayward declared.
Genel Energy stated that two out three wells drilled in the acreage have yielded significant hydrocarbon results. The first well encountered about six million standard cubic feet of gas while the third well encountered more than 800 metres of oil. Flow testing had been done at a rate of 4,000 barrels a day of light oil.
CEO Comments
Mr. Howard, commenting further on the acquisition, said:
“The transaction fits neatly with our strategy of building our Kurdistan resource base through the steady, considered addition of promising acreage.”
“Genel Energy is already the biggest oil producer in the region and has one of the strongest reserves base. This deal enhances that position and confirms our continuing confidence in the immense potential of the Kurdistan Region and our determination to play a leading role in its ongoing development.”
Company Spotlight
Genel Energy holds the six production sharing contracts in the Kurdistan Region of Iraq and is the largest oil producer in the region, where it focuses its operations since 2002.
Admitted to the main listing on the London Stock Exchange, shares of Genel Energy remained almost unchanged following the news, adding only 0.50 pence to its price of £6.38 a share at 11:00 GMT.
References
↑ Company profile
↑ Genel Enery 2011 Annual Financial Report
↑ About Taq Taq Field
↑ Petoil Operations in Kurdistan
↑ OMV Group Kurdistan Interest
↑ Genel Energy Company Overview
