Investors should stay away from E&P companies working in Kurdistan, Panmure Gordon research analyst Ashley Kelty has said.
Commenting on Genel Energy’s results this morning, Kelty warned that progress in resuming exports would be slow.
Some production has restarted and is being sold locally, he noted, but at prices “well discounted” to Brent.
“This state of stasis is likely to carry on for some time, with no obvious resolution to the dispute over the export pipeline, despite several false dawns after talks between officials. This means that investors would be well advised to avoid the KRG centric E&Ps for the time being.”
Genel reported net production of 12,410 barrels per day of oil for 2023, down from 30,150 bpd in 2022. The company’s production comes from the Tawke licence, operated by DNO. Taq Taq shutdown in May last year and remains offline.
Company CEO Paul Weir said Genel had reshaped the business, following the closure of the Iraq-Turkey pipeline in March 2023.
“We have cut all non-essential activity and significantly reduced spend, while developing a new source of income through domestic sales,” said Weir.
As at the end of 2023, Genel had debt of $248 million and net cash of $119mn. Panmure Gordon’s Kelty described the cash pile as “healthy”, saying Genel can “carry on for some time before investors need to get jittery”.
Genel reported proceeds of $101mn in 2023, down from $473mn in 2022.
Weir said the company expected domestic sales would cover costs from March onwards. “We also continue to work hard to add new assets to increase and diversify our income streams,” Weir said.
Genel has cut its workforce by more than two thirds over the year. Capital expenditure was $71mn for the year, of which $24mn was spent in the second half.
Weir said there was “real potential” for Genel to improve in 2024. Resuming exports and receiving payments for production is the most obvious positive. The CEO also mentioned, though, that the company had $107mn in receivables, for oil sales between October 2022 and March 2023.
It is also taking Kurdistan Regional Government (KRG) to arbitration on the Miran and Bina Bawi assets. KRG terminated these licences, while Genel said it spent more than $1.4 billion on development. The two-week hearing will start on February 19, with Genel expecting results this year.
ShaMaran Petroleum also announced an update on operations this week. The company reported that Atrush has been constrained through limitations at local refineries.
The TSXV listed minnow reported its Atrush oil had sold at an average of $33 per barrel, and Sarsang at $42. Brent averaged $82 in 2023. ShaMaran seems confident despite these challenges, though, striking a deal with HKN Energy to buy out TAQA’s involvement in Kurdistan.