Thursday, 6 August 2015

Genel Interims

by Will Forbes




This is the first interim results statement under Genel’s new management, with a new CEO and CFO taking the reins. In the near-term, we expect them to  focus on operational delivery in Kurdistan rather than seeking expansionist acquisitions in/outside the core area.

Genel’s interims add only incrementally to the overall story. Revenue, production and capex guidance all remain unchanged and operations at the fields continue, safe from ISIS. The company has disclosed capex estimates for the Miran/Bina Bawi gas condensate development, which highlights the very low development costs that KRG-focused projects benefit from. Upstream full life costs are estimated at less than $2/boe, with additional midstream capex (of $2.5bn) expected to be funded/managed by the KRG. These are extremely low by global benchmarks and underline the appeal of Kurdistan operations in a $50/bbl world.

Given the KRG statement a few days ago on starting payments to contractors (see our previous blog post here), the next few months will hopefully see positive news. Should the payments start in September (and ramp up in early 2016) as promised, we should see a marked increase in interest for Genel, DNO, GKP and others as they get paid for their production and start to recoup past profits (the Genel net KRG receivable alone now stands at $378.4m). The lack of payments visibility has been a major obstacle to the long-term story for contractors and the KRG. Once cash is flowing, the companies can start to invest more materially in other projects (for Genel this includes at Peskabir, Ber Bahr and Chia Surkh) where discoveries await appraisal and development.

African exploration has taken a back seat as expected, with relinquishment of Juby Maritime and studies continuing on the other two licences (Mir Left and Sidi Moussa). Somaliland remains a longer-term play (one we remain positive on), Ethiopia has a drill-or-drop decision due in January 2016 and the 24% interest in Cote D’Ivoire is under consideration for a farm-down before a commitment well in 2H2015.


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