Research that is free to access for all investors. Companies commission these providers to write research about them.
Brokers who write research on their corporate clients and make it available through our main bundle offering.
Research that is paid for directly by asset managers. Only accessible to institutional investors permissioned for access.
Event in Progress:
View the latest research on other companies in the sector.
Genel has announced its Q1 trading update, reporting steady production sold into the local market, maintaining cash while we wait for a resumption of exports. The company also continues to look at acquisitions to diversify the portfolio, with the recent Oman country entry representing a first step here.
Genel Energy PLC
Genel recently released its 2024 results, completed a bond refinancing, and announced the result of its KRG arbitration. The results were in line with the January trading statement, delivering positive free cash flow from domestic market sales. Genel lost the KRG arbitration process, however Genel completed a successful bond refinancing and has a substantial cash pile meaning the company continues through 2025 with flexibility and financial firepower.
Genel has released its full year 2025 results. These were well trailed in the January trading statement, and today’s results remain in line with what has already been released. Going forward, we expect focus to remain on the resumption of KRI oil exports, which appears to be making some progress, while the recent entry into Oman will help add to the work programme, alongside the potential for more acquisitions.
Trump's policies dampen growth forecasts
GENL ZPHR OQEP DELT
Genel has released its full year 2024 trading update, confirming a year of robust production and cash flows based on discounted oil sales into the local market. The outlook is for a similar production performance in 2025 as we continue to await both a resumption of exports and potential new acquisitions to diversify the company’s portfolio.
European gas prices stay elevated
GENL ZPHR SAVE
Genel has released its Q3 trading statement, reporting ongoing cash flows from Tawke with production sold into the local market. These are covering costs and supporting the company’s net cash position as it continues to await a potential resumption of KRI oil exports, progress on its arbitration case, and potential acquisitions.
Genel has released its H1 2024 results. These reflect ongoing Tawke sales into the local KRI oil market, helping cover company costs and preserve cash while we await the potential return of pipeline exports, a result from the Miran/Bina Bawi arbitration process, and potential new acquisitions.
We have updated our forecasts for Genel, realigning our expectations for 2024 production and revenues, now basing these on a full year of local sales, with an assumption of exports resuming in early 2025. This still leaves the cash position broadly flat over 2024, based on limited spending, preserving the company’s ability to invest as appropriate.
Genel has released its full year 2023 results. The January trading statement has already given guidance on several key metrics, and the results today reflect this. Expenditure was significantly reigned in during the year after the export pipeline was closed in March 2023, and material local oil sales have now helped the company move into a cash flow neutral position while resumption of exports is awaited.
Genel has announced updated reserves numbers for the end of 2023. These are largely unchanged for Tawke and Taq Taq, with technical upgrades making up for production, with a small downward revision for the removal of Sarta.
Genel has released its full year 2023 trading statement, reporting that on the back of domestic oil sales and cost cuts it is likely to move into a broadly cash flow neutral situation in the coming months, helping preserve the balance sheet while we wait for pipeline exports to resume.
Genel has released an update on production from its Tawke field (Genel 25%). This has previously been reported as having been achieving Q4 2023 levels of double those achieved in Q3 (Q3 levels were 26.0mbbl/d gross), with a significant boost from the Peshkabir field having been brought back onstream in mid-October. Average December Tawke production rates are now reported as approaching 90mbbl/d gross to date, with 65.0mbbl/d gross average currently expected for Q4 as a whole. Volumes continue to be sold into the local market at prices in the US$30s per barrel.
Genel has released its Q3 2023 trading update, reporting a measure of Q3 cash flows based on the resumption of Tawke production, helping balance costs while wider negotiations to bring the export pipeline back onstream continue.
Peshkabir back online, Tawke licence production up. Genel has released an update on its Tawke licence (Genel 25%). The company had already announced average gross production from Tawke of 26.0mbbl/d for Q3 2023, with the Tawke main field having been brought back onstream on 18 July. Today Genel announces that the Peshkabir field has also now been brought back onstream, on 16 October, and that Q4 total Tawke licence production to date has averaged around double Q3 levels, driven by a combination of a full period of Tawke main production plus the new contribution from Peshkabir.
Genel has announced a production update for its Tawke asset (Genel 25%), where gross production for Q3 2023 is reported at 26.0mbbl/d. This follows the asset coming back onstream for local sales in mid-July, selling volumes at prices around 50% of previous levels achieved via the export pipeline, but with sales and cash payments direct with customers.
US refiners running hard
GENL ITM DNO DNO
Genel has announced a material restart of production at its Tawke field, which is now onstream at around 40mbbl/d gross (Genel 25%).
Genel has released its H1 2023 results. As fully expected, these have been significantly impacted by the shut-in of KRI pipeline oil exports in March, meaning no production or booked revenues for Genel since that time, nor any cash payments from the KRG.
Genel has released its Q1 trading statement. This includes suspension of production guidance and a significant pull back in CAPEX spending given then ongoing shut-in of the KRI oil export pipeline, in line with several KRI peers.
Arbitration ruling has led to suspension of pipeline exports. Genel (along with KRI peers DNO, Gulf Keystone and ShaMaran) has announced the temporary suspension of oil exports through the Turkey pipeline to Ceyhan on the Mediterranean coast. This follows a ruling in Paris on an arbitration case between the central Baghdad government and Turkey (ongoing since 2014), with the International Chamber of Commerce arbitration panel ruling that Turkey cannot export KRI oil via the pipeline without permission from Baghdad. Following this, Turkey has suspended exports through the pipeline, which most recently consisted of around 400mbbl/d of KRI oil and 100mbbl/d oil from elsewhere in Iraq.
Numbers in line with January trading statement. Genel has released its full year results to December 2022. The company released a trading statement in January reporting full year net production of 30.2mbbl/d, CAPEX of US$140m, free cash flow of US$233m, gross cash of US$495m and net cash of US$228m. Today’s report bears these numbers out, meaning there is a limited amount of new news in the statement from a numbers point of view
Reserves down on volumes produced, partly counteracted by Tawke technical upgrade. Genel has released an update on its reserves as of the end of 2022. These are lower overall largely as a result of 2022 production, with net 2P moving to 92.2mmbbl at the end of 2022 from 104.2mmbbl at the end of 2021.
Genel has released a full year trading update. This reports full year net production of 30.2mbbl/d, within the 30-31mbbl/d guidance range. Net production for Q4 2022 was 29.6mbbl/d, from 30.2mbbl/d in Q3, representing a broadly steady performance supported by the Tawke drilling carried out during the year.
Sarta update
US crude draw bolsters prices
GENL HBR SEA DNO DNO
Q3 2022 trading update
Tawke update
H1 2022 results
Trading update
Sarta-5 well flow test result
Forecast and valuation update
Full year 2021 results
What are the implications of the Ukraine situation and higher oil and gas prices?
GENL HTG HUR JOG LAM RKH SENX UJO EQT ENW MATD ITM AXL IO7 BWLVF
Market update - 21/02/2022
GENL SAVE IO7
Reserves update
Market update - 04/01/2022
GENL SEA SOU
Qara Dagh-2 well suspended
Somaliland farm out
Termination of Miran and Bina Bawi PSCs
Market update - 05/11/2021
Genel Energy PLC Molecular Energies PLC
Market update - 04/11/2021
Genel Energy PLC Lansdowne Oil & Gas plc
Q3 2021 trading update
Market update - 20/08/2021
Genel Energy PLC SDX Energy PLC
Market update - 03/08/2021
Genel Energy PLC IOG PLC
H1 2021 results
Market update - 26/05/2021
GENL UJO PPCGF
Initial March oil production payments received
AGM statement
February oil production payments received
AUCTUS PUBLICATIONS Bahamas Petroleum Company (BPC LN)C; Target price of 1.90p: Getting ready to start high impact drilling – The Saffron #2 well in Trinidad is expected to spud mid-May. The well is expected to add 200-300 bbl/d production and to derisk ~11 mmbbl recoverable resources. The well is expected to cost US$3 mm and generate US$1.8-2.6 mm cashflow per year. In a success case, BPC would drill 5-9 follow-on wells in 2021 to add 1.0-1.5 mbbl/d. In Suriname, drilling is expected to start at Weg Naar Zee in July 2021. Base production In Trinidad during January and February was 450-500 bbl/d. Our Core NAV and ReNAV continue to be respectively ~1.5p and 1.9p per share representing 150% and 200% upside. On 2.4 mbbl/d in 2022 (assuming drilling success at Saffron and in Suriname), the shares would trade at EV/DACF multiples of only 2.9x. Our unrisked NAVs for Saffron and Weg Naar Zee are respectively 1.01 p and 0.49 p per share representing ~150% and 80% of the current share price. SDX Energy (SDX LN)C; Target price of £0.40: Good set of results, FY21 guidance re-iterated – YE20 2P reserves were 11.1 mmboe with 2C resources of 0.9 mmboe. FY20 production had already been reported. SDX held US$10 mm in cash at YE20 with receivables stable compared to 3Q20 and payables down US$4 mm compared to the end of September. SDX has re-iterated its FY21 production guidance of 5,620-5,920 boe/d with US$25.0-25.6 mm. The high impact Hanut-1X is expected to be spudded in 3Q21. The shares continue to offer deep value. They trade at EV/DACF multiples of only 1.3x in 2021. Our Core NAV is 35% above the current share price. IN OTHER NEWS ________________________________________ AMERICAS Arrow Energy (AXL CN): Reserves update in Colombia – YE20 2P reserves were 7.0 mmboe (-3.3 mmboe vs YE19 mostly as a result of the divestment of Llanos-23). Canacol Energy (CNE CN): FY20 results – YE20 2P reserves in Colombia were 227 bcf (+10% vs YE19). 4Q20 production was 170.1 mmcf/d. At YE20, Canacol held US$68.3 mm in cash. Frontera Energy (FEC CN): Share buy back programme – Frontera will start a share buy programme for up to 10% of its “public float”. Pemex: Giant discovery in Mexico – Pemex has discovered a 1-2 bn bbl field in Tabasco in the southern part of the Gulf of Mexico. Tullow Oil (TLW LN): Dry hole in Suriname – The Goliathberg-Voltzberg North exploration well was dry. ASIA PACIFIC Jadestone Energy (JSE LN): Reserves update in Australia and New Zeland – YE20 2P reserves at Montara/Stag and Maari were estimated at 37.1 mmbbl and 16 mmbbl respectively with 2C contingent resources at Lemang of 19.6 mmboe. EUROPE Condor Petroleum (CPI CN): Operating update in Turkey and FY20 results – FY20 WI production in Turkey was 171 boe/d. At YE20, the company held 0.3 mmboe 2P reserves. Condor continues to discuss with the Uzbekistan authorities with regards to acquiring producing licences in the country. At YE20, Condor had C$12.3 mm in cash and no debt. Independent Oil & Gas (IOG LN): Resources increase in the UK – Following interpretation of 3D seismic, Goddard contingent resources have increased from 108 bcf to 132 bcf. The two Goddard flanks gross mid-case prospective resources have been revised to 27 bcf and 16 bcf, with geological chance of success up to 71% from 48%. Southsea has been estimated to hold gross mid-case prospective resources of 31 bcf with 48% chance of success. On the P2442 licence, the gross 2C contingent resource estimates at the Abbeydale discovery have been increased from 6 bcf to 23 bcf. The Thornbridge and Kelham prospects are estimated to hold respectively 66 bcf (32% chance of success) and 31 bcf (80% chance of success). Independent held £80.4 mm in cash at YE20 with net debt of £14.1 mm. First gas is expected in 3Q21 with Phase 1 gross capex of £306 mm. Ineos: Acquisitions in Denmark – Ineos is acquiring 61.5% WI in the Syd Arne field and a 4.8% share of the Solsort deposit from Hess for US$150 mm. Syd Arne produced 5,800 bbl/d net to Hess in 4Q20. Jersey Oil & Gas (JOG LN): Raising £15 mm of new equity – Jersey has raised £15 mm of new equity priced at £1.65 per share. The net proceeds will be utilised to fund the next phase of workstreams on the project and augment existing cash reserves during farm-out discussions. Premier Oil (PMO LN): FY20 results = FY20 production was 61.4 mboe/d (Chrysaor: 173 mboe/d) with FY21 production guidance of 61-66 mboe/d (Chrysaor: 140-155 mboe/d) reiterated. First gas at Tolmount continues to be expected in 2Q21. Premier YE20 net debt was US$2.1 bn with a forecasted combined net debt of US$2.9 bn (down from US$3.2 bn) on closing of the merger with Chrysaor at the end of March. FY21 capex is expected to be US$315 mm (Chrysaor: US$750-850 mm). At YE20, Premier held 151 mmboe of 2P reservres and 845 mmboe of 2P reserves plus 2C resources. MIDDLE EAST AND NORTH AFRICA Delek Drilling: Update in Israel – 1.53 bcf/d of gas and 2.6 mbbl/d of condensate were sold from Tamar and Leviathan in 2020. Genel Energy (GENL LN): FY20 results – FY21 Production guidance remains slightly above FY production of 31,980 bbl/d with US$150-200 mm capex. Genel will pay a final dividend of US$0.10 per share. Gulfsands Petroleum (GPX LN): Mandatory offer by Waterford Finance – Waterford now holds 52.45% of Gulfsands and is required to make a mandatory offer at a price of 4.035p per share for the shares per share it does not own. Zenith Energy (ZEN LN): Acquisition in Tunisia – Zenith is acquiring 45% WI in the Ezzaouia Concession from Candax Energy for US$0.15 mm in cash on completion and US$0.1 mm in Zenith shares. In addition, Zenith will pay a royalty of US$0.35/bbl or production capped at US$0.05 mm per year for up to 10 years. The concession currently produces 465 bbl/d. Zenith believes that production could reach 1,000 bbl/d with production optimisation and work overs. SUB-SAHARAN AFRICA Tlou Energy (TLOU LN/TOU AU): Raising equity for Bostwana CBM – Tlou has raised £2.6 m of new equity priced at 3.5 p per share for its CBM project in Bostwana. EVENTS TO WATCH NEXT WEEK ________________________________________ 25/03/2021: EnQuest (ENQ LN): 4Q20 results
GENL HBR CEG CNE FEC JSE JOG TLW SDXEF
Full year 2020 results
January oil production payments
Market update - 08/03/2021
GENL SOU UOG
Sarta-2 well now on production
Reserves and resources update
Valuation and forecast update
Genel Energy (GENL LN): Comprehensive trading update, active work programme slated for 2021 | PetroTal (PTAL LN): Successful agreement reached with Petroperu
Genel Energy PLC PetroTal Corp.
Trading statement
November production payments received
Override payments to resume
October production payments received
Genel Energy (GENL LN): First oil at Sarta confirmed | Union Jack Oil* (UJO LN): Final commissioning of Wressle in January 2021, £1m loan to Egdon, Director share purchase | President Energy (PPC LN): Positive testing results at LB-01 | Jersey Oil & Gas (JOG LN): Conditional SPA signed, likely portfolio expansion
GENL UJO JOG PPCGF
Sarta project first oil
Q3 trading update
September production payments received
GeoPark (GPRK US)C; Target price US$20.00 per share: All eyes on CPO-5 - We see the CPO-5 block becoming a key area of focus in the next 18 months and the main reason behind the acquisition of AMERISUR in January 2020. By YE20, GeoPark will drill two wells on the highly prospective CPO-5 block. This will include an imminent development/appraisal well in the Indico light oil field followed by an exploration well. The only existing well in the Indico field is still flowing naturally at >5 mbbl/d since first oil in December 2018. The implied very strong reservoir performance and the fact that the oil pool boundaries have not been encountered yet suggest the field offers production and reserves upside that could start to be unlocked with upcoming drilling. In 2021, GeoPark could drill an additional 5-7 wells at CPO-5 comprising a combination of exploration, delineation and development wells. According to the latest CPR, 3-4 new Indico wells could add 7.5-12.5 mbbl/d gross production (2.5-4.2 mbbl/d net to GeoPark) in 1-2 years. The exploration program for 2021 will likely test the continuity of the Guadalupe play encountered on Llanos-34 into CPO-5. The share price trades at ~55% discount to our Core NAV of ~US$17. Overall there could be 350-700 mmboe gross prospective resources across the Llanos blocks (including CPO-5) that GeoPark is imminently starting to explore. Our target price of US$20 per share reflects our ReNAV. It represents ~150% upside to the current levels. IN OTHER NEWS ________________________________________ AMERICAS Gran Tierra Energy (GTE CN/LN): Production update in Colombia – During 3Q20 to date, production has averaged ~18.700 boe/d increasing to an average of 21,250 boe/d during September, reflecting the resumption of production at the Suroriente and PUT-7 Blocks in the southern Putumayo region, as well as at several minor fields, and by the recommencement of workover activities at the Acordionero oil field. As of August 31, 2020, Gran Tierra has collected total VAT and income tax receivables of ~US$51 mm; the company expects to collect approximately another US$25 to $35 mm before YE20. FY21 WI production is expected to be >30,000 boe/d. Pantheon Resources (PANR LN): Resources update in Alaska – The SMD horizon at the Talitha prospect is estimated to hold 302 mmbbl prospective resources. 91 wells would be required to develop the field that would reach 90 mbbl/d peak production. Pantheo holds 89.2% of the project. EUROPE IGas Energy (IGAS LN): 1H20 results – 1H20 net production in the UK was d ~1,940 boe/d. Cash balances as at 30 June 2020 were £2.6 mm with net debt of £11.2 mm. IGas reiterated its FY20 production guidance 1,850 - 2,050 boe/d, with underlying cash operating expenses anticipated to be $34/boe. Royal Dutch Shell (RDSA/B LN): Selling assets in Norway – Shell is selling its interests in the Kvitebjørn and Valemon fields in the North Sea to PGNiG. UK Oil & Gas (UKOG LN): Updated volumetric at UK asset – The Loxley Accumulation is now expected to hold 23-70 bcf recoverable resources. ~78% of the overall Loxley gas accumulation's gas resource are interpreted to lie within the Company's PEDL234 acreage. MIDDLE EAST AND NORTH AFRICA Genel Energy (GENL LN): Receives payment from the KRG – Genel has received a total net payment of US$10.8 mm for sales at Tawke and Taq Taq in August. Maha Energy (MAHA-A SS): Oman entry – Maha has been awarded 100% WI in the onshore Block 70 that includes the shallow undeveloped Mafraq heavy oil field. The Block is located in the middle of the oil producing Ghaba Salt Basin in the central part of Oman. The Mafraq oil field was discovered by Petroleum Development Oman in 1988 and was further delineated by four wells and 3D seismic in stages until 2010. The Mafraq field is estimated to contain between 185 – 280 mmbbl of original oil in place. The productive reservoir is located at approximately 430 m below ground level. SUB-SAHARAN AFRICA Africa Energy (AEC SS/AFE CN): Private placement – Africa Energy has raised US$28 mm of new equity priced at SEK3.00 per share. San Leon Energy (SLE LN): 1H20 results – Gross oil sales at OML-18 were 25.2 mbbl/d during 1H20 with gas sales of 39.1 mmcf/d. Production downtime and “losses” were respectively 15% and 20% over the period. San Leon held US$22.6 mm in cash as at 18 September (US$6.8 mm is held in escrow for the Oza transaction).
GENL 0MDP 0GEA SHEL UKOG
August production payments; debt issue
Genel Energy (GENL LN): July sales payments received from the KRG | San Leon Energy (SLE LN): Further consolidation in Nigeria | Tower Resources* (TRP LN): Successful refinancing agreed
GENL TRP SZX1
July oil production payments received
Revenue miss by 1%, but EBITDA in line Impairment of USD 321m Capex focused on Sarta for H2 Sound capital structure supports bond pricing
H1 2020 results
June production payments received
Genel Energy (GENL LN): May sales payments received from the KRG | Gulf Keystone Petroleum (GKP LN): Prudent approach to capital discipline | Mosman Oil & Gas* (MSMN LN): Sale of Welch to complete early next month
GENL GKP MSMN
PetroTal (PTAL LN/TAL CN)C: FY19 results | Wentworth Resources (WRL LN)C: Trading update in Tanzania | Touchstone Exploration (TXP LN/CN): Very good well results in Trinidad | Trinity Exploration and Production (TRIN LN): Trading update in Trinidad | Genel Energy (GENL LN): Payment from KRG | Gulf Keystone Petroleum (GKP LN): Operating update in Kurdistan | Tethys Oil (TETY SS): Production update in Oman | Tlou Energy (TLOU LN): Raising A$3 mm of new equity
GENL SLG TXP 0PRL 55L
May oil production payments received
April 2020 payments received
Genel Energy (GENL LN): Production levels at Tawke fall in the absence of infill drilling | Hurricane Energy (HUR LN): Licence commitments at Lincoln extended
Genel Energy PLC Hurricane Energy Plc
Genel Energy (GENL LN): Trading update, regular payments from KRG, cashflow breakeven >US$30/bbl | Touchstone Exploration (TXP LN): Net debt falls by 68%, Chinook to be drilled in July 2020 | Echo Energy (ECHO LN): 2020 interest payments waived for Lombard Odier loan
GENL TXP NTVO
Bina Bawi update
March payment received, new payment proposal
October 2019 Tawke and Taq Taq payments received
Genel Energy (GENL LN): Strong FY19 results, dividend maintained | EnQuest (ENQ LN): Highly leveraged and under-hedged | SDX Energy (SDX LN): Encouraging well result in Morocco | 88 Energy (88E LN): Production hole at Charlie-1 commences | Jadestone Energy (JSE LN): FDP delay allows redirection of capital | Hurricane Energy (HUR LN): Impressive FY19 results
GENL ENQ 88E JSE HUR SDXEF
CWI production ~1% above our estimate Revenue beat by 10% and EBITDA by 15% Declared USD 0.1/sh in dividend, and open to bond buyback Supportive report, but Covid-19 will impact operations
Full year 2019 results
Oil price update – what does it mean for oil and gas equities?
GENL GEEC GKP HTG HUR JOG LAM PANR HBR RKH IO7 SENX BWLVF
Model update
Genel Energy (GENL LN): 8% increase in average production
August production payments received
Taq Taq update
KRG payment delay
This note takes a look at UK oil and gas sector equities from the supermajors down to the small cap E&Ps, the extent to which they outperform a simple bet on oil prices, and whether there are common characteristics that can allow investors to pick winners in the space. We conclude that outperformance is possible and has been achieved by numerous names in the last ten years, with the core hallmarks being asset base augmentation, either by progressing assets and/or via acquisition, and possessing the agency to achieve this. We also include profiles of the oil and gas stocks in our coverage.
Genel has released an update on its Somaliland exploration portfolio, reporting that the company has taken 100% in its SL10B13 block post acquisition of partner East Africa Resource Group’s 25% stake. The previously announced farm out process continues, targeting, we would expect, funding of drilling going forward. Initial studies (in particular 2D seismic interpretation and oil seep sampling) have helped indicate a working petroleum system and identify several targets containing around 200mmbbl (mean prospective) – material size, particularly given the onshore location.
3Q19 WI production was 34,720 bbl/d (GMP FEe: 35.7 mbbl/d) including 29,940 bbl/d for the Tawke PSC and 4,780 bbl/d for Taq Taq (GMP FEe: 5.7 mbbl/d). FY19 production guidance is maintained at at close to 4Q18 levels of 36,900 bbl/d (GMP FEe: 36.1 mbbl/d). Genel generated free cash flow of US$121 mm (GMP FEe: US$100 mm) in the first nine months of 2019, with capital expenditure of US$110 mm (GMP FEe: US$120 mm). The FY19 capital expenditure guidance is maintained towards the top end of the US$150-170 mm range. Net cash at the end of September was US$115 mm (US$85 mm). The company has declared an Interim dividend of US$0.05 per share to be paid on 8 January 2020. Operations are on track at Qara Dagh and Sarta. Genel and the KRG are still negotiating commercial terms for Bina Bawi.
Genel Energy (GENL) – Positive trading update | President Energy (PPC): President’s gas flows through the Estancia Vieja and Las Bases pipeline | Touchstone Exploration (TXP) – Increase in credit facility, rig moves to the Cascadura location | Mosman Oil and Gas* (MSMN): Investment during and post the financial year is yielding encouraging upside | Baron Oil (BOIL)* – Increase in credit facility, rig moves to the Cascadura location
GENL TXP MSMN SNDA PPCGF
Genel Energy (GENL): Tawke to maintain 120kbopd in 2020 | Echo Energy (ECHO) - Tapi Aike Update
Genel Energy PLC Nativo Resources PLC
We attended a site visit this week to Genel’s operations in the KRI, visiting the company’s producing Taq Taq oil field, Bina Bawi gas discovery and Sarta oil development project.
1H19 production was 37.4 mbbl/d (GMP FEe: 38 mbbl/d) with gross production from the Tawke PSC of 126.7 mbbl/d and at Taq Taq of 13.2 mbbl/d (GMP FEe: 14 mbbl/d)
Genel has announced a share buyback programme of up to US$10m, over a period from now until 5 July (when the company enters a close period).
The deadline to meet the conditions precedent relating to the Bina Bawi gas lifting agreement has lapsed. Genel and the KRG will however focus on negotiating updated commercial terms based on a staged and integrated oil and gas development where the oil project would fund the gas. The current production sharing contract for Bina Bawi lasts for a further 12 months. We see a scenario where no agreement is reached by then and the PSC is terminated. The company also expects that the deadline for the Miran conditions precedent will lapse on 31 May 2019.
Well TT-20z at Taq Taq enetered production at an IP rate of 2 mbbl/d. taking gross production at the field to 15.5 mbbl/d. Genel’s overall WI production (including Tawke and Peshkabir) is now 39 mbbl/d.
Genel Energy (GENL LN); Speculative Buy, £3.20: Good well results in Kurdistan | Africa Oil (AOI CN/SS); BUY, C$2.60: Buys move shares in Eco (Atlantic) (ECO LN/EOG CN) (not covered)
Genel Energy PLC Africa Oil Corp.
FY18 production, YE18 2P reserves at Taq Taq and Tawke, the recent addition of 10 mmbbl at Sarta and YE18 net cash had been reported previously.
Genel Energy (GENL LN); Speculative Buy, £3.20: Looking beyond Bina Bawi and Miran | More oil in Ghana
The acquisitions of 30% in Sarta and 40% of Qara Dagh have been approved by the authorities and completed. At Sarta, Genel has booked an initial 10 mmbbl of net 2P reserves relating to the initial phase of the project (recompletion of the Sarta-2 well and placing Sarta-3 on production).
YE18 2P gross reserves at Taq Taq were 50.5 mmbbl down from 54.7 mmbbl at YE17 mostly reflecting FY18 production.
Overall YE18 gross 2P reserves on the Tawke licence have marginally decreased to 502 mmbbl (from 513 mmbbl at YE17). While gross 2P reserves at Peshkabir have increased by 51 mmbbl to 126 mmbbl, this has been offset by a 63 mmbbl reduction at the Tawke field.
The Tawke field produced 74 mbbl/d in January. The Tawke-52 Cretaceous well is due to come on stream shortly. The Peshkabir field produced 54 mbbl/d in January. The Peshkabir-9 well is to be placed on production this month. Up to four wells will be drilled in 2019. Overall up to 14 new wells will be drilled on the Tawke licence in 2019, of which 10 are currently approved as firm, in the Cretaceous and Jeribe reservoirs to stabilise production. A deep Tawke well could also be drilled.
The TT32 well flowed up to 5.5 mbbl/d from one of the tested zones. The well has now been put in production at 3.1 mbbl/d. In addition, the free water level was encountered 29 metres deeper than the pre-drill estimate and only 57 metres above the original field-wide free water level. Including TT-32, Taq Taq overall production is 13,750 bbl/d.
The deadline to meet the conditions precedent related to the Bina Bawi gas lifting agreement has been extended until 30 April 2019. The deadline to meet the conditions precedent relating to the Miran gas lifting agreement has also been extended until 31 May 2019.
Genel is acquiring from Chevron 30% and 40% interests in the Sarta and Qara Dagh licences, respectively. In return for the interests in Sarta, Genel will pay 50% of ongoing field development costs until a specific production target is reached and a success fee on achievement of a production licence.
FY18 production was 33.7 mbbl/d (Genel guidance: 32.8 mbbl/d, GMP FEe: 34.5 mbbl/d) with FY18 capex of US$95 mm (GMP FEe: US$94 mm).
3Q18 production stood at 33.7 mbbl/d (GMP FEe: 32.2 mbbl/d). Gross production at the Tawke licence (Tawke+Peshkabir) and Taq Taq was respectively 113.1 mbbl/d (106 mbbl/d), and 12.24 (GMP FEe: 13 mbbl/d).
1H18 WI production was 32.1 mbbl/d with current production now standing at 35.5 mbbl/d. Genel generated US$125.1 mm net cash from operating activities in 1H18 (GMP FEe: US$150 mm) with US$71.1 mm free cash flow. Net debt at the end of June was US$64 mm (GMP FEe: US$39 mm).
Norwegian rig workers end strike | Genel Energy (GENL LN): HOLD, £3.00; Receipt of payment for KRI oil exports in Kurdistan | ShaMaran Petroleum (SNM CN) (not covered): Payment update in Kurdistan | TransGlobe Energy (TGL LN/CN)1; BUY, £3.70: Dry hole in Western Desert has negligible impact on valuation
GENL 0VH4 TGL
The Peshkabir-4 well has been placed in production at a rate of 10 mbbl/d. A total of 11 zones flowed between 1.5-7.0 mbbl/d per zone. At the Peshkabir-5 well, four zones have already been tested at 1.5-7.5 mbbl/d per zone. When this well comes on stream in August, the target of 30 mbbl/d gross production at the field is expected to be surpassed. A further four wells will be completed at Peshkabir in 2H18. Genel currently generates Free Cash Flow of c. US$10 mm per month
Independent Oil & Gas (IOG LN) (not covered): Pipeline integrity in the North Sea | Genel Energy (GENL LN); HOLD, £3.00: Strong performance at Peshkabir
We are revisiting our valuation for Genel Energy following a meeting with management and recent developments. Given the strong performance of the Peshkabir wells, we have increased our expected production plateau for the field from 30 mbbl/d to 50 mbbl/d. This is partially offset by steeper declines at Tawke. Our overall production forecast for Genel is increased by 5.5 mbbl/d in 2019 (+15%). Importantly, Peshkabir production is part of the Tawke PSC where Genel is also paid 5% of the field’s gross production. Upcoming wells at Peshkabir will be drilled in the possible reserves area with 215 mmbbl upside (gross 3P reserves of 290 mmbbl versus gross 2P reserves of only 75 mmbbl). We have included in our ReNAV this risked upside associated to Genel’s WI 25% interest in Peshkabir. Given the political complexities of the Miran/Bina Bawi gas development, Genel intends to initially develop 37 mmbbl light oil at Bina Bawi as a standalone project. With only US$10 mm capex required to reach first oil, this is a very simple development. However, separating the oil from the gas/condensate project might not be straightforward as the oil resources were initially considered as a “sweetener” to develop the gas. We have now split both projects in our ReNAV and risked Bina Bawi oil at 30% (10% for gas/condensate). Overall our ReNAV has been increased from £1.81 to £2.63. The shares trade above that level. We reiterate our REDUCE recommendation.
YE17 gross 2P reserves stood at 513 mmbbl (down from 536 mmbbl at YE16) reflecting a 17 mmbbl addition only partially offsetting FY17 production of 40 mmbbl. The 2P reserves on the Tawke licence include 75.1 mmboe at Peshkabir (up from 32.1 mmboe at YE16) and 437.5 mmbbl at Tawke (down from 503.8 mmboe at YE16 given production and a 27.8 mmboel downward net revision). YE17 2C resources on the licence were 91 mmboe, down from 211 mmboe last year as some of the 110.9 mmboe 2C resources at Peshkabir have been converted to 2P reserves and the balance revised down.
Genel Energy (GENL LN); HOLD, £1.60: Reserves and resources update at Tawke and Peshkabir
Taq Taq gross 2P reserves at YE17 are reported to be 54.7 mmbbl (28 February 2017: 59.1 mmbbl) with the difference being production, partly offset by a small upward technical revision. Bina Bawi gross 2C light (c.45◦ API) oil resources at YE17 were 37.1 mmbbl (July 2013: 13 mmbbl). The increase reflects higher recovery factors than implied by analogue carbonate fields of similar oil quality. Miran West gross 2C heavy (c.15◦ API) oil resources at YE17 were 23.7 mmbbl (April 2013: 52 mmbbl). Volumes have reduced due to an adjusted view on the oil water contact uncertainty range and on reservoir properties, including data from MW-5 drilled in July 2013. Because of field experience at Taq Taq, Genel management has taken the view that it is unlikely that any matrix will contribute to primary depletion at Miran and, as such, has taken a more conservative view and will only record 18.5 mmbbl of 2C resources at the field.
DNO operated production in Kurdistan is currently 113,000 bbl/d, consisting of 97,000 bbl/d from the Tawke field (GENL WI 25%) and 16,000 bbl/d from the Peshkabir field (GENL WI 25%). We currently carry 1H18 gross production of a total of 118,500bbl/d from Tawke and Peshkabir. Six Peshkabir wells will be drilled this year with the company expecting field production to reach 30,000 bbl/d by summer and continue to ramp up in 2H18 (GMP FEe 2H18: 5,000 bbl/d gross).
FY17 WI production stood at 35.2 mbbl/d (GMP FEe: 35.6 mbbl/d) including 7.9 mbbl/d at Taq Taq and 27.3 mbbl/d at Tawke. In 2018 to date, gross production from Taq Taq has averaged 14,540 bbl/d (up from 14.0 mbbl/d in 4Q17), with the TT-29w, TT-30, and TT-31 wells contributing to the stabilisation in production. During 2018, Genel expects to undertake an extended well test of Bina Bawi-4 and continue to look for a farm-in partner for its gas asset. Net debt at the end of 2017 was US$135 mm (GMP FEe: US$117 mm). FY17 capital expenditure totalled US$95 mm (in line with guidance), with the majority of spend at Taq Taq and Tawke (US$64 mm). Genel forecasts FY18 production in line with FY17. FY18 capex is estimated at US$95-140 mm including US$60-85 mm at Taq Taq and Tawke, US$25-40 mm at Miran/Nina Bawi and US$10-15 mm in Africa. The exact level of activity will be driven by regularity of payments in Kurdistan and progress at Miran/Bina Bawi.
Cabot Energy (CAB LN); Speculative Buy, £0.08: FY18 production guidance | Genel Energy (GENL LN); HOLD, £1.60: Trading Update and 2018 outlook
Genel Energy PLC Cabot Energy
Miran and Bina Bawi have been estimated to hold gross 2C resources of 14,792 bcf of raw gas and 132 mmbbl of condensates, up 40% compared to YE16 estimates. Importantly, the revised Bina Bawi 1C gross raw gas resource estimate is more than 50% higher than the gas volume agreed to for the field under the Gas Lifting Agreement. The revised Miran West 1C gross raw gas resource estimate is in line with the volume agreed to for the field in the GLA.
Genel has received net payments of c. US$19 mm for its shares of oil sales at Taq Taq and Tawke in September. In addition, Genel has also received an override payment of US$6.55 mm from the KRG, representing 4.5% of Tawke gross field revenues for the month of October 2017.
The Peshkabir field now produces 15 mbbl/d following the completion of the Peshkabir horizontal well. This well has been tested at a multi-zone (Cretaceous and Jurassic) combined oil rate of 12.5 mbbl/d. All 11 zones were tested at an average oil flow rate per zone of 5,340 bbl/d with the highest test rate of 7.2 mbbl/d. There was only one gas zone. Genel holds 25% of the asset.
The TT-29w well on the northern flank at Taq Taq encountered the oil water contact on the level at least 145 m deeper than pre-drill estimates. Good quality oil bearing reservoirs were encountered in the Cretaceous and Kometan with six zones tested with test rates of up to 6,400 bbl/d of 48 degree API oil. Four of the five tests in the Shiranish produced dry oil, with one test tight. The Kometan reservoir test produced oil with a 40-50% water cut. The well has been put in production at a rate of 3,200 bbl/d. The TT-30 Pilaspi new development new well is currently producing around c.650 bbl/d. A further Pilaspi development well (TT-31) is planned before YE17. Gross oil production from the Taq Taq field is currently 15,100 bbl/d. Gross oil field production averaged 13,700 bbl/d in November 2017 and has averaged 18,300 bbl/d in 2017 to date. This compares to our forecast of 14 mbbl/d over 4Q17.
Cabot Energy (CAB LN)1 ; Speculative Buy, £0.08: 2P reserves boost | Jadestone Energy (JSE CN); Speculative Buy, C$1.00: Corporate update | Genel Energy (GENL LN); HOLD, £1.90: Payment from Kurdistan for September override | Tethys Oil (TETY SS)6 ; REDUCE, SEK60: Production capacity increase continues as production is capped | Africa Oil (AOI CN); BUY, C$3.00: Disappointing update in Kenya | Tullow Oil (TLW LN); REDUCE, £1.85: 3Q17 IMS | Victoria Oil & Gas (VOG LN)1,6; BUY, £1.80: Large net pay at La-108
GENL AOI TLW VOG CAB TTHYF
3Q17 WI oil production stood at 33,810 bbl/d (GMP FEe: 34.6 mbbl/d) including 27,610 bbl/d for the Tawke PSC and 6,200 bbl/d at Taq Taq. Tawke PSC gross production in 3Q17 averaged 110,460 bbl/d (GMP FEe: 113.5 mbbl/d), including contribution from the Peshkabir-2 well of 4,670 bbl/d.
Frontera Energy (FEC CN)1,6; BUY, C$53.00: Transitioning back to growth: Guatiquia Block exploration and development potential | Jadestone Energy (JSE CN); Speculative Buy, C$1.00: Production update in Australia | Genel Energy (GENL LN); HOLD, £1.90: First payment under receivable settlement agreement
The recent Kurdistan independence referendum, which returned an overwhelming majority in favour of independence, has, in our view, brought the political volatility in the KRI into focus for the market. For us, the ongoing negative impact of this counteracts the value of Tawke and Taq Taq, and makes material progress on the Miran/Bina Bawi gas project less likely. For these reasons, we are moving our recommendation from Add to Neutral, and moving our price target from 170p to 120p.
Genel Energy PLC (Genel) is a London-listed oil and gas production company with assets in the Kurdistan region of Northern Iraq (KRI), Somaliland and Morocco. Political instability in Iraq and the rise of ISIS created a particularly challenging stock market sentiment for companies active in the region, such as Genel Energy PLC, with concerns about security compounding those from irregular oil sales payments. More recently, sharp production declines and subsequent reserves downgrades at one of Genel Energy PLC’s main oil asset increased the pressure on the company already suffering from the collapse in the oil price. We believe that after recent reserves downgrades and with potential progress anticipated for the Miran/Bina Bawi gas development, it might be a good time to revisit the equity story, with a view on the mediumterm development of these assets.
Trinity Exploration & Production (TRI NLN) (not covered): 1H17 update in Trinidad & Tobago | Genel Energy (GENL LN); HOLD, £0.90: Payment from KRG
Genel Energy PLC Trinity Exploration & Production Plc
Echo Energy (ECHO LN) (not covered): Divestment of Egyptian asset | Genel Energy (GENL LN); Speculative Buy, £1.10: Payment for oil export in Kurdistan
Genel Energy (GENL LN); Speculative Buy, £1.10: Payment for export from Kurdistan
Northern Petroleum (NOP LN)1: Speculative Buy, £0.10: Canadian production asset acquisition | Genel Energy (GENL LN): Speculative Buy, £1.50: Export payment for Taq Taq in Kurdistan | Cairn Energy (CNE LN); HOLD, £2.60: FY16 results | Aminex (AEX LN) (not covered) & Solo LN (SOLO LN) (not covered): Ntorya-2 Well Test in Tanzania
GENL CNE AEX CAB
Ascent Resources (AST LN) (not covered): Result of flow test in Slovenia | IGas Energy (IGAS LN) (not covered): Mandatory redemption offer to secured bondholders | SDX Energy (SDX LN/CN)1 ; BUY, £0.65: Game-changing acquisition continues aggressive expansion in North Africa | Genel Energy (GENL LN); SPEC. BUY, £1.50: Residual payment for June 2016 export in Kurdistan | Seplat Petroleum (SEPL LN); SPEC. BUY, £1.50: Court Proceedings relating to US$20.5 mm in escrow | Asset Forfeiture in Nigeria
GENL SEPL STAR AST SDXEF
Genel Energy (GENL LN); SPEC. BUY, £2.70: Tawke Update | Gulf Keystone Petroleum (GKP LN) (not covered): Payment update
Genel Energy PLC Gulf Keystone Petroleum Limited
Geopark (GPRK-NYSE) 1,6 ; BUY, US$6.50 | Royal Dutch Shell (RDSA/B LN) (not covered) – To divest malaysian assets | EnQuest (ENQ LN); SPEC. BUY, £0.60 – Capital Restructuring and £82 mm Equity issue. | Rosneft Acquiring 50% of Bashneft in Russia | Genel Energy (GENL LN); SPEC. BUY, £3.50 | SACoil (SAC LN) ; SPEC. BUY, £0.016
GENL SAC 0MDP SHEL ENQ
Condor Petroleum (CPI-TSX); BUY, C$4.25 | Genel Energy (GENL-LSE); Speculative Buy, £3.50 | SacOil Holdings (SAC-AIM); Speculative Buy, £0.016
GENL SAC CPI
Market: Slightly positive, as the delay in payment had been a concern. This continues to be in our view.
Market Reaction: Neutral.
Overall, no particularly material new information. Excluding oil prices, the story remains geared towards regional politics, which has been further clouded by the aftermath of the recent failed coup in Turkey (our views). There are two important levers to the story: (i) continued payments by the KRG for oil production (we note the reduction of the KRG's budget shortfall and possible renewed discussions between Baghdad and Erbil that could be positive developments), (ii) getting gas terms for Miran/Bina Bawi finalised in 2H16 according to the Company (but history has taught us that this could be easily delayed again).
Market reaction: slightly positive.
Genel Energy has reduced its production guidance for FY16 from 60-70 mbbl/d to 53-60 mbbl/d.
Market Reaction: negative as investors will probably be disappointed by the production guidance reduction, (particularly in the context of the KRG continuously respecting its payment engagements) and even if 4 mbbl/d appears to be associated with downtime (and there are some delays in the work programme), concerns on the performance of the Taq Taq and Tawke reservoirs are likely to resurface.
Market Reaction: Slightly Positive. This payment structure follows last month's pattern. The fact that the KRG continues to respect the agreement with the international producers is encouraging.
Market Reaction: neutral. In line with last month, Genel received only a partial payment for May export at Taq Taq. Last month, the balance was received a few days later. Gross production at Taq Taq over the first two months of 2Q16 is a bit below our forecast for the full quarter.
Market reaction: slightly negative. This late and partial payment will inevitably raise questions on the sustainability of payments from the KRG. The story continues to be very geared to the volatile geopolitical situation in the region.
Production over 1Q16 had already been disclosed through regular monthly updates and the production growth targets at Tawke are not very different from our expectations.
The Company had already published the conclusion of the Taq Taq Reserves Report in February. Some additional details were provided today.
Market reaction: neutral. April production for Tawke is stronger than we are forecasting for the average of 2Q16. March was very low compared to the 1Q16 average but this was expected given the pipeline issues. DNO (DNO NO) reported a gross payment of US$20.1 mm from the KRG for March crude oil deliveries to the export and local markets from the Tawke field. This includes US$16.9 mm for March deliveries and US$3.2 mm for receivables. Tawke deliveries for export in March averaged 74,546 bbl/d (FCCe 1Q16 97,750 bbl/d) and were impacted by the extended closure of the Turkish segment of the export pipeline during the first half of the month. Tawke deliveries to the local market in March averaged 4,446 bopd (FCCe 1Q16 17,250 bbl/d). During April to date, Tawke deliveries for export have averaged 117,256 bbl/d (FCCe 2Q16 102,000 bbl/d).
Market Reaction: Slightly Positive. This payment appears to be a bit above our expectations.
Market Reaction: slightly positive. This adds US$20 mm to our Core and ReNAVs.
Market Reaction: Slightly positive. While we appreciate the gross payments have dropped about 23-25% compared to January, the reduction is not as steep as we feared given the context of extended pipeline shutdown and the constrained contribution from fields from Kirkuk operated by NOC. These events could have impacted the amounts that the KRG would have been willing to pay DNO and Genel. Genel received a total of US$8.3 mm for export payment in February. This includes US$1.4 mm for receivable recovery. Gross oil sales from Taq Taq in February were 62.1 mbbl/d. In a separate statement DNO (DNO NO) received a gross payment for Tawke export of US$13.46 mm including US$2.17 mm for receivable recovery. This represents US$4.75 mm net to Genel. Tawke deliveries for export in February averaged 66.4 mbbl/d down from an average of 119.4 mbbl/d in January. In addition, Tawke deliveries to the local market in February averaged 6.7 mbbl/d.
Market Reaction: slightly negative on the reserves. However while the reduction of reserves will negatively impact our ReNAV, investors might actually be relieved by the relatively small reduction of reserves at Tawke. Following the drastic cut witnessed at Taq Taq, some investors were concerned a reduction of the same order of magnitude could take place at Tawke. In addition the reduction of reserves at Tawke appears to be due to investment decision rather than purely issues with the geology. Given the discount at which Genel bonds trade, the buy back offer is likely to be value accretive to Genel's Equity. DNO (DNO NO) reported a reduction of the Gross 2P reserves at Tawke from 680.3 mmbbl down to 543 mmbbl reflecting 49.3 mmbbl production and the reclassification of the balance (around 80 mmbbl) as Contingent Resources. The reclassification is pending both a review of enhanced recovery options at Tawke and a decision to commit funds towards a field-wide redevelopment program. Net, net, YE15 Genel WI 2P Reserves are reduced from 263.9 mmbbl as announced at the time of the FY15 Results earlier this month down to 241.9 mmbbl. Gross 1P Reserves have increased from 319.9 mmbbl up to 387.0 mmbbl. Genel is also launching a buy back programme for at least US$50 mm in nominal value of Bonds.
Market Reaction: Neutral. This press release does not appear to contain new material information. The delay of one quarter on the Miran/Bina Bawi project is unlikely to surprise the market in our view. WI Production over the period had already been reported at 84.9 mbbl/d. FY15 Cash Flow stood at US$71.2 mm (FCCe: US$84 mm). YE15 Net Debt had already been reported at US$239 mm. Production guidance for FY16 remains at 60-70 mbbl/d (FCCe: 62.3 mbbl/d) with guided capex of US$80-120 mm in Kurdistan (FCCe: US$109 mm). 2P reserves at YE15 were 264 mmbbl in line with our expectations and reflecting production and reserves already reported at Taq Taq. Contingent resources increased by 21% to 1,252 mmboe, mainly as result of the acquisition of a further 44% non-operated interest in the Bina Bawi field, offset by minor revisions associated with portfolio management and the relinquishment of Ber Bahr. Regarding the gas development, the progress towards converting the PSC amendments and gas supply term sheets into fully termed documents has been slower than antici pated with signature now expected in 2Q16 (1Q16 previously). At the Peshkabir appraisal well, scheduled for 2H16, the operator estimates 32 mmbbl and 225 mmbbl of 2P reserves and prospective resources respectively for the Peshkabir structure. Genel is holding a presentation to Analysts today at 08:30 am (UK Time).
Main Take Aways: FY16 Guidance maintained. The KRG Export pipeline is likely to be back in a couple of days. In any case, Genel is now paid the same prices for local sales by the KRG as for export. The same terms also applying.
Gross 2P Reserves at Taq Taq have been reduced from c. 540 mmboe at the end of 2014 to 172 mmboe at the end of 2015. The reduc on is much more dras c than we an cipated. Genel has put in place a programme to try to recover some of the “lost reserves”. FY16 overall produc on guidance remains 60-70 mbbl/d. Gross produc on at Taq Taq for 2017 and 2018 is es mated at 65-75 mbbl/d and 50-70 mbbl/d, respec vely. We have reduced our ReNAV for Genel from £3.41 to £3.11 per share as we had previously curtailed the produc on pro le and apply a 15% discount rate to projected cash ow. Given the high sensi vity of reserves at Taq Taq to very small changes in reservoir property, the high uncertainty gives a wide range of es mates for recoverable oil. With the KRG pipeline down for two weeks, regional poli cs also remain challenging. However the shares are fundamentally very cheap even on the Brent Forward Curve. Specula ve Buy recommenda on reiterated with a target price reduced from £3.30 to £3.10 per share.
Market Reaction: negative. We had already reduced drastically our future production estimates for Taq Taq in October last year following the underperformance of the field from 170 mbbl/d in 2017 and 2018 but our 2018 forecast of 70 mmbbl/d is probably still too high. We currently value Genel's interest in Taq Taq at £1.27 per share based on our estimates of 320 mmbbl 2P reserves at YE15 (versus new estimates of 172 mmbbl).
Genel is due to release its 2015 results on 3 March. The company has already had two important pieces of newsflow in 2016 a) the new payment mechanism for exports giving greater clarity on how payments are calculated and expected timing and b) the planned resumption of investment in Tawke to support production announced by operator DNO. The new payment mechanism has been a double edged sword as it been based directly on PSC entitlements (including using current oil prices), overall causing a fall in Genel’s monthly payment from c.US$25m to US$16.2m. Overall, though the positive news on payment clarity and Tawke investment has driven some recovery in the shares, it has not fully compensated for the effect of the fall in the oil price and share sales by Genel founder Mehmet Sepil over the past few months.
Market Reaction: slightly positive. We were only anticipating production at Tawke of 105 mbbl/d in 3Q16 under a limited new investment scenario rather than 135 mbbl/d by mid year highlighted by DNO. This announcement probably suggests that Capex at Tawke will now include the Contingent component highlighted by Genel (about US$20 mm net to Genel).
Market reaction: slightly positive particularly in light of the US$3.46 mm payment against receivable.
Market Reaction: Neutral. While the payment is down compared to last year, this is in line with the recent announcement by the KRG. Assuming a similar gross payment for Tawke, Genel could receive a total of US$13 mm this month.
Market reaction: slightly positive. The reduction of the monthly payment to a level consistent with entitlements had already been flagged by Genel. The further 5% payment to start repaying outstanding receivables is not very material but is an encouraging sign.
Our ReNAV for Genel has been reduced from £5.22 to £3.73 per share. This reflects (1) lower estimates for plateau production at Taq Taq and Tawke with a possible upcoming reserves reduction, (2) delayed first oil at Miran by one year, (3) reduction in the contribution of domestic sales to the overall cash flow in 2016 and (4) relinquishment of the Ben Bahr licence. Our New Core NAV stands at £2.29 per share. On the Brent Forward Curve, our Core NAV and ReNAV would respectively be £1.28 and £2.49 per share.
Market Reaction: neutral. While production guidance in 2016 is below our expectations this is offset by a much lower level of spending. We carried Ber Bahr at £0.06 per share. In the context of current commodity prices and assuming sustained payment from the KRG at current levels, Genel would have a stable balanced sheet with over US$450 mm cash and a balanced budget in 2016. The main risk remains geopolitics and development in the region.
Market Reaction: slightly positive. The payment is in line with previous payments. We continue seeing the regional context as being very difficult.
Market Reaction: slightly positive, as this is the fourth monthly payment made by the KRG. It is in line with previous payments. We continue seeing the regional context as being very difficult.
We have been through a process of reviewing our Genel forecasts and as a result our recommendation on the shares. We now expect production to have fallen significantly in Q4 on the back of reduced CAPEX at Taq Taq and Tawke. Further CAPEX to support and increase production is dependent on export payments – currently under threat due to the fall in oil prices in the last few weeks. We see a risk that if payments are interrupted it could hit investment and importantly cause further production declines (or even just a lack of recovery) in 2016. This could become clear in the 20 January trading statement or in export payment interruption in Q1 (the November repayment for Taq Taq was two weeks late possibly providing an early signal here). We still believe in the strength of Genel’s balance sheet (which includes US$481m of cash) and the long-term value of both its oil and its gas assets in Kurdistan. The catalyst to be had from sustained and increasing export payments is now under threat in our view however as a result of the oil price fall. The shares have to a large extent already responded to this but nevertheless we now move our recommendation from a Buy to a Neutral given this short-term risk.
Market Reaction: Slightly positive. This follows on from Gulf Keystone's announcement on 2nd December. Despite the oil price dropping, the KRG continues to honour its payments. The region's geopolitics remain difficult and low oil prices are making things worse.
Market Reaction: slightly positive given that this is the third payment made by the KRG. It could also be seen as a response to this morning's media reports that the London Court of International Arbitration had ordered the KRG to pay US$1.98 bn to Pearl Petroleum for unpaid invoices. The KRG indicated that this is a partial ruling and that the proceedings continue. We continue viewing the ongoing litigation process as a key area of uncertainty for the KRG as the materiality of the amount has the potential to constrain any payments to IOCs. The KRG Ministry of Natural Resources has authorised the release of the November payments to the oil exporting companies in the Kurdistan Region, in line with the previous monthly payments made in September and October.
Market Reaction: Slightly negative given that the implied valuation of the transaction is below our valuation (US$60 mm vs US$200 mm that we carried in our model). We doubt that the market was anyway ascribing much value to Chia Surkh as this stage (contingent resources). The decision of Petol to fund further appraisal drilling in Kurdistan as early as 1Q16 could be seen as encouraging. Maintaining our assumptions of Chia Surkh but reducing Genel's WI down to 40% (adjusted for Petoil carry) would reduce our Core NAV and RENAV by £0.15 per share.
We are reiterating our Speculative Buy recommendation on Genel Energy with a target price of £5.20 following the Company’s publication of its 3Q15 IMS. With further investments in Kurdistan being suspended until there is more confidence in the regularity of export payment, production at Taq Taq and Tawke is declining fast. While the Company is already reducing its production guidance for FY15 from 90-100 mbbl/d to 85-90 mbbl/d, we are also reviewing our production forecast to “lower for longer” with production of only 80 mbbl/d in 2016 increasing to 103.5 mbbl/d in 2019 (117-126 mbbl/d over the period previously). No question that Genel has excellent assets, but we view the latest developments of the KRG domestic politics as making the region increasingly volatile. Our recommendation reflects the fact that the share price is slightly below our Core NAV with our RENAV representing over 60% upside. Importantly, with US$481 mm cash, Genel is a vehicle, which provides exposure to Kurdistan without near term balance sheet concerns.
Market Reaction: Negative. The anticipation of a payment of US$24.5 mm for export is encouraging. However, the reduction of production at Taq Taq and Tawke in the current uncertain political context in Kurdistan is a concern to us. We appreciate this is likely to be a way to put pressure on Erbil to boost payment and ensure repeatability and predictability of such payments.
This Morning’s News Genel Energy (GENL LN) Oil & Gas Prices
Genel recently reported its H1 results and released updated fiscal terms for its Miran/Bina Bawi gas development in Kurdistan. We have now updated our model for all of this leading to an earnings downgrade on changes to our assumptions on revenues and addition of exploration expense to our adjusted P&L in 2015, and lower forecast production and oil price deck in 2016. Our valuation also falls for a cut to our Brent oil price deck and our assumptions on onstream timing for Miran and Bina Bawi. Despite this we remain keen on the stock. Our new price target of 650p/share still leaves ample upside from current levels and the all-important catalyst of sustained payments for pipeline oil exports is now coming through with the first of these received earlier this month. Establishment of these will not only allow greater value to be attributed to Taq Taq and Tawke but also imply that the funds will be available to sink back into the gas development which can then also be attributed greater value by the market. Given this near term catalyst potential we remain on a Buy recommendation though have cut our price target from 950p to 650p based on the changes in our valuation.
Market Reaction: Slightly positive. Even though the overall headline number is higher than previously indicated, when including the KRG consideration (US$175 mm vs US$150 mm previous headline figure), the difference is non cash and the upfront payment is much less (US$5 mm vs US$20 mm previously), reducing Genel's near term exposure. We also view this announcement as a further step in taking Miran and Bina Bawi to development (total ReNAV of £1.78 per share). The fortune of the share price remains tightly correlated to geopolitics in the region.
This Morning’s News Genel Energy (GENL LN)
Market Reaction: Neutral. This is in line with our expectations and reflects Genel's stake in both projects.
Market Reaction: Neutral, this is line with the KRG announcement earlier this week indicating a payment of US$30 mm to the partners in Taq Taq.
Market Reaction: Slightly positive. The amount allocated is in line with our expectations of US$25-33 mm. While this is good news, maintaining material and recurrent payment remains key to the rerating of the shares. There have been a few false starts in the past.
Market Reaction: Positive. This supports previous indications by industry participants and is a step in the right direction. However, maintaining material and recurrent payment remains key to the rerating of the shares. Assuming 30% of the overall U$75-100 mm is allocated to Genel would suggest US$25-33 mm revenue for Genel representing 9-12% of the overall revenue guidance for 2015 (assuming 70% of revenue is for export). There have been a few false starts in the past.
Market Reaction: Neutral. The details on the terms associated to Miran/Bina Bawi appear to be the only material new information. The Company had previously indicated that the economic value of the project was unchanged. We were already anticipating a start-up in 2020 for Miran.
Despite the general nightmare plaguing the sector with the oil price fall there was some very good news yesterday for Genel. The KRG released a statement saying that now that it has largely taken control of oil exports from the Kurdistan region it is intending to “on a monthly basis allocate a portion of the revenue from its direct crude oil sales to the producing international oil companies”. This is great news for Genel and other contractors as it is a strong indication from the KRG that they intend to start paying them for exports, which is long awaited. There is no specific detail on the magnitude of the intended payments; however, the KRG statement also says that “as export rises in early 2016, the KRG envisages making additional revenue available to IOCs to enable them to begin to catch up on the past receivables due under their production sharing contracts”. This implies that cash payments could rise to over and above contractors’ revenue entitlements for contemporary production and hence sounds like, even before they ramp up to this level, payments to contractors are likely to be significant rather than token.
Market Reaction: Positive for sentiment as we were not expecting any material payment from the KRG for export in 2015. However, it remains to be seen how much will be allocated to international producers from September.
We are changing our recommendation from Outperform to Speculative Buy with a new target price of £6.20 per share (£8.30 per share previously) following the Company’s publication of its 1H15 IMS. With net debt much higher than we expected reflecting working capital movement and low realisations, we have also taken a more conservative stance on the risk profile of the development of the Bina Bawi/ Miran gas assets. We have moved this asset from our Core NAV to our Risked Upside. Our new recommendation reflects the fact that the share price is about 15% above our new Core NAV with an Unrisked NAV representing 65% upside. Importantly, with US$470 mm cash, Genel is a vehicle providing exposure to Kurdistan without near term balance sheet concerns.
Market Reaction: Slightly negative on what looks to be a very high net debt even when factoring a negative US$60 mm working capital movement and capex phasing (US$55 mm for FCCe in 1H15 vs actuals US$90 mm). This is partially offset by a US$50 mm capex guidance reduction for capex in 2015. WI production remains solid with 95.6 mbbl/d in May and June. The Bina Bawi farm-out transaction with OMV has not completed yet.
Market Reaction: Slightly Positive, as this is somewhat ahead of our expectations. We are forecasting gross production at Tawke of 140 mbbl/d in 2Q15 and 150 mbbl/d in 3Q15 which now looks too conservative.
Market Reaction: Neutral. While a much higher proportion of Tawke production is being exported compared to our expectations (87% vs FCCe: 50%) which will negatively impact revenue and cash flow in 1Q15, Genel had already flagged that export would be very high over the period. The level of production achieved in May is already above our 2Q15 forecasts (FCCe: 140 mbbl/d). Realised prices are in line with our expectations.
Gulf Keystone earlier today announced that it has engaged in discussions for the potential sale of assets or the entire company. It also mentions that it is expecting a gross US$26m payment through for Shaikan exports imminently.
Genel is due to release its full year 2014 results on Thursday 5 March. The key production, sales, CAPEX and cash metrics for 2014 have already been indicated in the January trading statement so we are not expecting any huge surprises in the results themselves. Really it is operational details that will be interesting both in the statement and the analyst presentation. Absolutely front and centre for the company at present is the situation around payments for pipeline oil exports in Kurdistan. Any steer from Genel as to when these could start to come through (only one has been received so far) could be positive for the shares which have fallen off of late on the lack of progress here. Otherwise we are looking for updates on the company’s three key projects – Taq Taq, Tawke and the Miran/Bina Bawi gas development –to make sure these continue on track: we are expecting significant production increases from Genel this year. Overall the company remains well capitalised with a large and growing production base allowing it to prosper at current oil prices. The main risk is payments for exports. We have a Buy recommendation and 950p price target.
We have now updated our forecasts post the trading statement released earlier today. The main change is to 2015 where we have put through a cut in our Brent assumption from US$70/bbl to US$50/bbl. This level should be conservative as we expect oil prices to begin rising again during H2 but seems a prudent level for now given the decline over the last two months. We have also incorporated further discounts to the selling price of export oil sales to allow for SOMO’s levels now that responsibility for marketing exports is passing to it under the new deal between Baghdad and the KRG. In addition we have cut 2015 production from 96mbbl/d to 92mbbl/d taking a more conservative view on export ramp up and also cut 2015 admin costs based on the company’s announced cost cutting programme. Overall our revenues fall from US$522m to US$390m for the year with earnings falling 64%.
