Kurdistan-Focused Genel Halves Capex

Genel Energy, focused on Iraqi Kurdistan, has slashed its capital expenditure budget for 2020 by up to 50%, it said on May 14, in light of the Covid 19-induced oil price crash and operational challenges caused by the pandemic.

Capex is now projected at $100mn for the year, versus an original guidance of $160-200mn. Around half of the remaining investments will be spent on the producing Tawke and Taq Taq oilfields and the Sarta and Qara Dagh fields still under development.

In its trading update, Genel said it produced 34,170 b/d of oil in the three months ending March 31, in line with its forecast, and had received $98mn in cash proceeds in the first four months of 2020. At th end of April it had $404mn of cash on account with $106mn in net cash. It confirmed it would pay $27.8mn in dividends to shareholders on its register on May 29.

"Despite the impact of Covid-19 creating a challenging environment for our industry, Genel’s resilient business model and robust financial position, with over $100mn in net cash and an asset cashflow breakeven of $30/b, leaves us well placed to withstand the consequences of the pandemic as we continue to deliver our strategy," Genel CEO Bill Higgs said. "We have cut our cloth appropriately against this backdrop and halved our capital expenditure for 2020, protecting our balance sheet while still progressing Sarta, and positioning us to take advantage of growth opportunities as the landscape improves."

Genel currently only produces oil, but it is looking to develop gas resources at its 100%-owned Miran and Bina Bawi gas fields in Iraqi Kurdistan. The company said it had received documentation in mid-April from the Kurdistan regional government (KRG), including a new draft production-sharing contract (PSC) for Bina Bawi.

Under the PSC, KRG proposed separating the field's Jurassic oil reservoirs from its deeper Triassic gas, with the former being developed on standard terms. Negotiations continue, and Genel says it "continues to seek a viable and balanced commercial way forward for the development of Bina Bawi's gas and oil resources."

Genel is minimising spending at Bina Bawi until progress is made in talks.