Genel cuts forecasts as KRG owes more than $400 mln

LONDON - Reuters

Genel Energy, one of the main oil producers in Iraqi Kurdistan, has cut its full-year production and revenue forecasts after reducing investment because of weak prices and a debt it says is owed by the Kurdistan Regional Government (KRG).

The London-listed company, which says is owed around $400 million, said on Oct. 20 it will not invest in increasing production at its oilfields until the KRG makes regular payments for exports.

There are signs that the payments are starting to flow.

The oil producer said on Oct. 20 it had received a net payment of $16.5 million for oil exported from its Taq Taq field and said it expected payments for exports from its other fields imminently.

Genel received $24.5 million from the KRG last month, improving the producer’s cash position and raising expectations for more stable payments.

“As the payments come through we can restart the capital expenditure programme and that will then have a consequent impact on production,” Genel Chief Financial Officer Ben Monaghan told Reuters.

Shares in Genel, chaired by former BP Chief Executive Tony Hayward, were down 5 percent at 318 pence by 0905 GMT, cutting their losses on details of the latest payments.

Oil producers across the globe are trying to deal with the financial fallout of a sharp decline in crude prices.

In Iraqi Kurdistan, that has been compounded by a dispute with Baghdad, which slashed funds to the region last year, rendering it unable to pay its own employees’ salaries, let alone oil company dues.

Genel cut its 2015 production forecast by 5,000-10,000 barrels per day (bpd) to 85,000-90,0000 bpd. It also lowered its revenue estimate for the year to $350-375 million from a range of $350-400 million, assuming Brent prices of $50 per barrel.

As a result of lower investments in its oilfields Genel also reduced its capital expenditure forecast for 2015 to $150-175 million, down from $150-200 million.

“Continued regular payments will strengthen the balance sheet, allow for new development planning and increase momentum on the gas project, which should help Genel recover from recent sector underperformance,” said analysts at J.P. Morgan Cazenove.

Last month, Genel purchased OMV’s partner stake in the Bina Bawi gas field, a project set to help Iraqi Kurdistan meet its gas supply agreement with Turkey.