Interim Management Statement

RNS Number : 6194D

Genel Energy PLC

18 May 2012

 



Genel Energy plc

18 May 2012

Genel Energy plc

Interim Management Statement

Genel Energy plc ("Genel Energy" or the "Company) issues the following Interim Management Statement for the period from 1 January 2012 to today. This statement is issued ahead of Genel Energy's Annual General Meeting, which is being held at 2pm on 22 May 2012 at the Atlantic Hotel, Le Mont de la Pulente, St Brelade, Jersey JE3 8HE.

Tony Hayward, chief executive of Genel Energy said:

"Genel has enjoyed another strong operational quarter. We are pleased to be making good progress across all areas of our business. Operations are performing well and we continue to build production capacity at both Taq Taq and Tawke. We are adding proven reserves as our two producing fields are fully appraised and our high impact exploration drilling programme of 7 wells remains on track. We are consolidating our leadership position in the Kurdistan region through the disciplined acquisition of quality opportunities on attractive terms. Meanwhile we are evaluating a number of acquisition opportunities within the Africa and Middle East region"

Highlights

·    Net working interest production for the quarter of 2012 averaged 45,500 bopd, up 27% from the first
quarter of 2011

·    As a consequence of the restriction on exports from the Kurdistan Region of Iraq, Genel Energy's
working interest production is expected to average c 45,000 bopd in 2012. Sales revenue guidance for 
2012 remains unchanged at c$250-300 million supported by strong sales into the domestic market

·    Development drilling programme and facility upgrades at Taq Taq and Tawke are on track for production
capacity target of 200,000 bopd for Taq Taq in 2014 and 100,000 bopd for Tawke by the end of 2012. Studies are underway to support 150,000-200,000 bopd from Tawke in 2014

·    EPC tenders to build the KICE pipeline are being reviewed, and options for optimising the  pipeline 
infrastructure investment and financing are being discussed with the KRG

·    Reserves upgrade at Tawke field: Gross proven and probable reserves increased 78 per cent to 509
mmbbls (127 mmbbls net) in January 2012 and a further 44% to 734 mmbbls (184 mmbbls net) in May 2012, as a result of the successful drilling and testing of Tawke 16 in the northern flank of the field

·     Extensive seven well exploration programme covering the next 12 months is underway:  Peshkabir-1
 and Ber Bahr-1 drilled and currently being tested, Miran East 1 spudded

·     Acquired an additional interest in the Chia Surkh field, taking Genel Energy interest to 60 per cent, and
 assumed operatorship

·     Announced intention to acquire a 23 per cent interest in the Bina Bawi exploration licence, adding
 500mmboe-1bnboe of gross contingent resources

·     Strong cash position with cash of $1.8 billion

 

Production and Development

Genel Energy's net working interest production for the first quarter of 2012 averaged 45,500 bopd, up 27% from the first quarter of 2011.

On the 1^st April the Kurdistan Regional Government (KRG) instructed contractors operating in the Kurdistan Region to halt the export of crude oil. Consequently since the 2^nd April the portion of crude oil produced by the Company's two producing fields, Taq Taq and Tawke, which was destined for export via the Iraqi national pipeline has been halted.  As a result, average daily production for the full year is expected to be c 45,000 bopd. However, the Company reiterates its sales revenue guidance of c$250-300 million for this year driven by increased crude oil sales into the domestic market.

Taq Taq

Gross production from the Taq Taq field has averaged 71,000 bopd in the year to date and the  appraisal and development programme that Genel Energy has committed to, is on track to deliver production capacity of 200,000 bopd by 2014.

Field development drilling has continued in the period with Taq Taq 17 completed and being tested, and Taq Taq 19 currently being drilled.  Taq Taq 19 is targeting an area of the field further north where there are fewer well penetrations and has the potential to provide further upside to estimates of the oil in place. Results from Taq Taq 19 are due in the 3^rd  quarter of 2012.

Proposals for the second phase of construction of the central processing facility have been received and are being evaluated. The construction work will start in the second quarter of 2012.

Pipeline Update

Plans for the construction of the KICE pipeline from Taq Taq to the main Kirkuk-Ceyhan export pipeline are ongoing. EPC tenders have been received and are currently being evaluated. The Company is in advanced discussions with KRG on specific details of the project including timing, financing and the options for optimising the route. Construction is expected to begin once those discussions have concluded.

Tawke

Gross production from the Tawke field has averaged 45,000 bopd in the year to date, and Genel Energy and DNO International are on track to deliver production capacity of 100,000 bopd by the end of 2012. Studies are underway to support production capacity of 150,000 - 200,000 bopd in 2014.

In January 2012 the Company announced a reserves upgrade of 78 per cent to 509 mmbbls in the gross proven and probable reserves on the Tawke field as verified by DeGolyer & MacNaughton. In addition, as previously announced, the successful completion and testing of Tawke 16 added significant potential new reserves to the field. Tawke 16 was drilled at a location north of what was interpreted to be the northern reservoir boundary based on early seismic. It flowed at a cumulative rate in excess of 25,000 barrels per day of 26-27º API gravity oil from multiple, independently tested zones. The potential upside in the north flank represents about 500 mmbbls of oil in place and c.150 mmbbls of additional reserves. These reserves were included in a further upgrade to the gross proven and probable reserves of 44 per cent to 734 mmbbls announced by the operator of the Tawke field, DNO International and verified by DeGolyer & MacNaughton, in May 2012. 

The planned 2012 development drilling programme of 3 wells in addition to Tawke 16, commenced in the first quarter.

A workover operation was completed on the Tawke 15 well drilled in 2011. The well has now tested 7,000 bopd and has been connected to the existing pipeline and processing facilities. 

The upgrade of the processing facilities and pipeline capacity planned for 2012 is on schedule.

Exploration and Appraisal

Genel Energy's current exploration programme comprises seven high impact wells to be completed during the rest of 2012 and the early part of 2013. This is by far the largest and most widespread exploration programme being conducted by anyone in the Kurdistan Region. Good progress has been made during the first quarter with 2 of the 7 wells being tested having reached target depth and one other well spudded.

Well	Estimated timing	License interest (%)	Prospective gross resource (mmboe)
Ber Bahr 1	Q2 2012	40	500
Peshkabir 1	Q3 2012	25	300
Kewa-Chirmila	Q3 2012	44	TBC
Miran East 1	Q3 2012	18.75	50
Chia Surkh 10	Q4 2012	60	300
Taq Taq Deep	Q1/2 2013	44	250
Tawke Deep	Q1/2 2013	25	200

Ber Bahr 1

Ber Bahr 1, in the Ber Bahr licence area, has reached its total depth of 3,930 metres and a well testing programme has commenced. Results are expected at the end of the second quarter.

Peshkabir 1

Peshkabir 1 which is targeting a large anticline directly along strike from the Tawke field, has reached its total depth of 4,092 metres and a well testing programme is underway. An open hole drill stem test demonstrated the presence of moveable oil in the Upper Cretaceous. The well will be tested by a minimum of five planned flow tests. Results are expected in the third quarter of 2012.

Miran East 1

The Miran East-1 exploration well which is being drilled on the eastern structure of the existing discovery made on the Miran west structure, spudded in March 2012. The well is targeting exploration potential within the Cretaceous and Jurassic reservoir intervals of the eastern structure, contiguous with the hydrocarbon bearing Miran West structure. Drilling of Miran East-1 is expected to take approximately seven months with multiple intervals to be evaluated and tested as the well is drilled.

Corporate Activity

The Company completed its acquisition of an additional 40 per cent of the Chia Surkh exploration block for $68 million on the 1^st May.  As a result Genel Energy owns 60 per cent of a block estimated to contain some 300 million barrels of gross unrisked prospective resources.  Genel Energy has also assumed the operatorship and can now commence a thorough exploration and appraisal programme.

As previously announced, Genel Energy has agreed to acquire a 23 per cent stake in the Bina Bawi exploration licence for $175 million. The Bina Bawi licence lies alongside the producing Taq Taq field and two of the three wells drilled on the block to date have encountered significant hydrocarbons. The Bina Bawi discovery is estimated to contain contingent resources of between 500 million to 1 billion boe. Completion is dependent on various consents, approvals and assurances, including from the KRG.

Finance

Capital expenditure for 2012 is expected to be in line with previous guidance of c$200-250 million and remains fully funded by cash generated from current operations in the Kurdistan Region. At 18 May 2012, the Company had $1.8 billion of cash resources on the balance sheet.

Directorate change

As previously announced on 20 April, Genel Energy appointed Chakib Sbiti as an independent non-executive director of the Company. Mr Sbiti has significant knowledge and experience of the oil sector, having spent over 30 years working in a variety of roles for Schlumberger, the world's largest oilfield services company.   

Future announcements

Genel Energy's 2012 Half Year Results will be announced on Thursday 23^rd August 2011.

For further information, please contact:

Genel Energy Julian Metherell, Chief Financial Officer Natalie Fortescue, Investor Relations

[phone]

RLM Finsbury Ed Simpkins Jenny Davey

[phone]

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 additional offices in Ankara and Erbil, is the largest independent oil producer and the largest holder of reserves in the Kurdistan Region of Iraq. For further information, please refer to www.genelenergy.com

Forward looking statements:

This statement includes forward-looking statements that reflect the Company's intentions, beliefs or current expectations. Forward-looking statements involve all matters that are not historical fact. Such statements are made on the basis of assumptions and expectations that the Company currently believes are reasonable, but could prove to be wrong. Such forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause the Company's actual results of operations, financial condition, liquidity, prospects or opportunities, to differ materially from those expressed in, or suggested by, these forward-looking statements. The Company and each of its directors, officers, employees and advisors expressly disclaim any obligation or undertaking to release any update of or revisions to any forward-looking statements, and any change in the Company's expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation. No information included is intended to be a profit forecast or a financial projection or prediction.

 

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