TIDMGENL
RNS Number : 8978U
Genel Energy PLC
24 January 2017
24 January 2017
Genel Energy plc
Trading and operations update
Genel Energy plc ('Genel' or 'the Company') issues the following
trading and operations update in advance of the Company's full-year
2016 results, which are scheduled for release on 30 March 2017. The
information contained herein has not been audited and may be
subject to further review.
Murat Özgül, Chief Executive of Genel, said:
"2016 was a major step forward for the monetisation of oil
exports from the Kurdistan Region of Iraq. We received $207 million
in cash proceeds for oil sales and receivable recovery. These
payments in turn allowed for work programmes to resume at Taq Taq
and Tawke. The KRG has confirmed that payments will continue,
allowing us to plan with confidence for 2017."
2016 PRODUCTION AND CURRENT PERFORMANCE
-- 2016 net production averaged 53,300 bopd. Production and
sales by field for 2016 were as follows:
(bopd) Export Domestic Refinery Total Total Genel
via pipeline sales sales sales production net production
-------- -------------- --------- --------- -------- ------------ ----------------
Taq
Taq 41,000 1,600 17,600 60,200 60,100 26,500
-------- -------------- --------- --------- -------- ------------ ----------------
Tawke 105,500 1,000 400 106,900 107,300 26,800
======== ============== ========= ========= ======== ============ ================
Total 146,500 2,600 18,000 167,100 167,400 53,300
Note: Difference between production and sales relates to
inventory movements at both fields
-- During 2016, Taq Taq natural field declines were partially
offset by the three development sidetracks drilled and completed
during the year. Taq Taq has averaged 35,300 bopd in January 2017
to date. A total of 18 wells are currently producing, with five of
these wells accounting for c.80% of field production. Taq Taq field
water production is currently 12,500 bopd, representing a water cut
of 27%, significantly less than total water handling capacity of
55,000 bopd
-- Good progress is being made on the updated Field Development
Plan and Competent Person's Report for Taq Taq. Both are on track
for completion in Q1 2017
-- At Tawke, the 2016 development programme helped offset
natural well decline at the field. Tawke has averaged 113,900 bopd
in January 2017 to date
-- Net production to Genel from Taq Taq and Tawke has averaged
44,000 bopd in January 2017 to date
FINANCIAL PERFORMANCE
-- $207 million cash proceeds (pre capacity building payments) were received in 2016, of which:
o $153 million against 2016 sales
o $24 million relates to the January 2016 payment for December
2015 sales
o $30 million relates to the recovery of historical
receivables
-- A total of $210 million was invoiced for 2016 sales, with
almost all of the difference between this figure and the $153
million above representing amounts owed by the Kurdistan Regional
Government ('KRG') for Q4 2016
-- In January 2017 the Tawke partners received a payment of $39
million related to October 2016 exports. Genel's share of this
amount is not included in end-2016 unrestricted cash balances
-- Capital expenditure for 2016 totalled $61 million, below the
$90-110 million guidance range, as previously communicated
-- Similar to the process which occurred at the start of 2016,
the Company is currently in discussions with the KRG regarding the
pricing mechanism for crude sales from Taq Taq and Tawke, as well
as the proxy formula used by the KRG to calculate payments for
current sales from Taq Taq and Tawke
-- The carrying value of the receivable for unpaid production
will be tested for impairment as part of the end-2016 results
process, taking into account the latest views on historical
netbacks, timing of recovery, future oil prices, and the production
outlook at Taq Taq and Tawke
-- Unrestricted cash balances at 31 December 2016 stood at $408
million ($405 million at 30 September 2016)
-- Net debt at 31 December 2016 stood at $240 million ($241 million at 30 September 2016)
2017 ACTIVITY
Kurdistan Region of Iraq
-- KRI oil production assets
- At Taq Taq (Genel 44% working interest, joint operator), the
firm 2017 work programme consists of a workover of the TT-07z well
and a new appraisal well, TT-29, in the north of the field. Both
activities will be undertaken by a 1,500 bhp rig which is expected
to be on location in February 2017. Additional activity, including
further Cretaceous sidetracks, Cretaceous and Pilaspi development
wells and installation of Electric Submersible Pumps in existing
wells is contingent on regular and predictable export payments from
the KRG for Taq Taq sales as well as partner approval. The Company
expects production from the Taq Taq field to average 24-31,000 bopd
in 2017
- At Tawke (Genel 25% working interest), the operator DNO ASA
expects production from the field to remain stable at the current
rate of 115,000 bopd in 2017, based on expected investment
levels
-- KRI gas assets (Miran 75% operated interest and Bina Bawi 80% operated interest)
- The pre-FEED and upstream Gas Development Plan studies for the
Miran and Bina Bawi gas fields are expected to complete shortly
- Firm 2017 activity is expected to be largely technical and
commercial in nature, with a strategy to enhance the value of the
KRI gas project. In the event of a successful farm-out, contingent
activity could take the form of the environmental and social impact
assessment and FEED for the gas treatment and processing
facilities, as well as extended well tests and further 3D seismic
on the Bina Bawi licence
- Discussions are ongoing with the KRG relating to the
finalisation of the PSC amendments and gas lifting agreement.
Efforts are also continuing in order to bring in partners to the
KRI gas assets through a farm-down of the Miran and Bina Bawi
licences
- At end-2015, the carrying value of the Miran and Bina Bawi
fields in the Company's accounts was $1,427 million. The carrying
value of the Miran and Bina Bawi fields will be tested for
impairment as part of the end-2016 results process. Taking into
account the latest views on discount rates and financing options,
amongst other factors, management expects to record a material
impairment of the carrying value in its 2016 accounts
-- KRI exploration and appraisal
- As announced on 9 January 2017, the Peshkabir-2 well on the
Tawke PSC flowed 3,800 bopd of 28deg API oil from Cretaceous
reservoirs in the southern flank of the Peshkabir field. The well,
currently drilling ahead of schedule and under budget, is expected
to reach total depth of 3,500 metres and will be completed,
following evaluation of the Jurassic, by early February. The Tawke
partners are considering a number of options to step up the
appraisal of the new discovery, as well as the potential for early
Peshkabir production via the existing Tawke facilities
- In January 2017, the Company signed a Sales and Purchase
Agreement to transfer its 40% interest in the Chia Surkh licence to
its partner, Petoil, subject to approval by the Ministry of Natural
Resources. Petoil will pay Genel an initial consideration of $2
million, and an additional $25 million in staged payments
contingent on future crude oil production from the Chia Surkh
licence. Genel will recognise an impairment of the Chia Surkh
carrying value of $198 million in its 2016 accounts
- The Company has formally relinquished its 40% interest in the
Dohuk licence. The relinquishment of the 40% operated interest in
the Ber Bahr licence is awaiting final approval from the KRG
Africa
-- The Company is currently in discussions with the Moroccan
government over the nature, scope, and timing of the activity
related to the maximum future exploration commitment of c.$30
million
-- Onshore Somaliland, the acquisition of 2D seismic data on the
Odewayne (Genel 50%, operator) and SL-10B/13 (Genel 75%, operator)
blocks is due to commence by March 2017. The data will be acquired
as part of a Somaliland government owned speculative 2D seismic
acquisition project, with the Company purchasing the associated
data from the government
2017 OUTLOOK AND GUIDANCE
-- Company production guidance for 2017 is set at 35-43,000
bopd. This assumes the delivery of the Taq Taq work programme as
stated above and a prudent level of contingency with respect to the
Tawke operator's current 2017 production expectation. The work
programmes at Taq Taq and Tawke are subject to change depending on
the results of development drilling and payments from the KRG for
current sales and receivable recovery
-- Capital expenditure, net to Genel, at the Taq Taq and Tawke
fields in 2017 is forecast at $50-75 million. Expenditure on the
KRI gas business is estimated at $10 million. Capex on the 2017
Africa exploration programme is estimated at $40 million, which
includes the c.$30 million Morocco exploration expense mentioned
above
-- 2017 operating expenditure, net to Genel, at the Taq Taq and
Tawke fields is estimated at $30-35 million
-ends-
For further information, please contact:
Genel Energy
Phil Corbett, Head of Investor
Relations
Andrew Benbow, Head of Public
Relations +44 20 7659 5100
Vigo Communications
Patrick d'Ancona +44 20 7830 9700
This announcement includes inside information.
Notes to editors:
Genel Energy is an independent oil and gas exploration and
production company listed on the main market of the London Stock
Exchange (LSE: GENL). The Company, with headquarters in London and
offices in Ankara and Erbil, is one of the largest London-listed
independent oil producers, and is the largest holder of reserves
and resources in the Kurdistan Region of Iraq. Through its Miran
and Bina Bawi gas fields, the Company is set to be a cornerstone
provider of gas to Turkey under the KRI-Turkey Gas Sales Agreement.
Genel also continues to pursue further growth opportunities within
the Middle East and Africa. For further information, please refer
to www.genelenergy.com.
Disclaimer
This announcement contains certain forward-looking statements
that are subject to the usual risk factors and uncertainties
associated with the oil & gas exploration and production
business. Whilst the Company believes the expectations reflected
herein to be reasonable in light of the information available to
them at this time, the actual outcome may be materially different
owing to factors beyond the Company's control or within the
Company's control where, for example, the Company decides on a
change of plan or strategy. Accordingly no reliance may be placed
on the figures contained in such forward looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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