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Genel Energy plc (LSE:GENL) continues to secure its position as the biggest oil and gas producer in the autonomous region of Kurdistan, in Iraq, and has recently signed a deal taking a further 26% interest in another oil field in the said region.
In a statement announced today, the London-listed firm said it signed a deal with FTSE 250 constituent, Heritage Oil plc (LSE:HOIL), paying the latter US$156 million for the said stake in, and making Genel a joint operator of, the Miran field and providing for a US$294 million loan, for a total value of US$450 million.
The loan itself is secured against Heritage’s remaining 49% stake in the Miran Production Sharing Contract and the entire issued stock capital of Heritage Energy Middle East Limited (HEME), Heritage’ wholly-owned subsidiary managing Heritage’s interest in the Miran PSC.
Maintaining the Lead
That may be a lot of cash but the consideration is as equally of value: a mean gas in place of 10.5 trillion cubic feet and 105 million barrels of oil equivalents – enough motivation for Genel, which will now have 51% interest in the said field, to take some more and be at the forefront of gas production in the region.
Yesterday, Genel announced it has completed the purchase of 21% stake in the Bina Bawi block, also in Kurdistan, at a price tag of US$240 million, effectively increasing its interest in the said field to 44%. Bina Bawi field was discovered in 2007 and further drilling resulted in additional significant oil and gas discoveries. In total, Genel holds interests in seven licences in Kurdistan, all containing huge amounts of oil and gas.
“Our belief in the significant potential of the region is stronger than ever and we aim to continue to play a leading role in the consolidation and development of the oil and gas sector in Kurdistan,” Tony Hayward, Chief Executive Officer of Genel, said in a statement.
Tensions in Kurdistan
But tensions in the relations between the Kurdistan Regional Government (KRG) and the Iraqi National Government pose a threat to the oil and gas industry within their boundaries. Baghdad has been questioning the constitutionality of the Erbil’s seal on production sharing contracts, threatening and banning oil players from securing new acreages outside of Kurdistan.
Total, Gazprom, Chevron, and ExxonMobil have seen its relations with the Iraqi National Government turned sour after these giant oil firms signed deals with the KRG without the nod from the central government, which threatens to end the firms’ contracts in the southern territories it controls.
This new deal between Genel and Heritage, is one of those deals signed without the national government’s approval but only has the nod of KRG, which has back in rights to the Miran PSC, signed in 2007, the same year an oil law was passed and became effective in the said region. Both companies seemed undeterred, at least for now, and it’s still business as usual, if not good business at all.
Company Spotlight
Genel Energy plc was incorporated in Jersey, following the merger of Vallares plc and Genel Energy International Limited in 2011 and enlisted on the London Stock Exchange during the same year. Shares were down 1.9% to £6.885 by 12:40 PM GMT, following the news.
On the other side of the deal, Heritage stocks were heavily traded, giving a 14.8% rise to £1.93 per share on the main market of LSE. Heritage Oil plc, an independent oil and gas exploration, appraisal, and development company, is a constituent of the FTSE 250 Index and is also listed on the Toronto Stock xchange (TSX:HOC).
