Genel Energy’s 2015 loss widens to $1.16 bln after slashing oil field reserves
LONDON - ReutersGenel Energy, the oil explorer chaired by former BP boss Tony Hayward, reported its biggest-ever annual loss after writing off $1 billion because its largest operational oilfield holds less oil than it previously thought.
Genel, one of the main oil producers in the Kurdistan Regional Government (KRG), lost more than a third of its market value to an all-time low on Feb. 29 after announcing it had halved the reserves estimate for Taq Taq in Northern Iraq.
Oil prices that have fallen around 70 percent in the last 18 months had also eroded the value of the remaining reserves at the field.
The write-off meant Genel made a full-year pretax loss of $1.16 billion from a loss of $312.8 million in 2014.
Genel nevertheless expects to spend $80-120 million this year on projects including Taq Taq.
“We recognize and share the disappointment of the recent Taq Taq reserves update,” Genel Chief Executive Murat Özgül said in a statement.
“Both Taq Taq and Tawke remain low-cost oil fields by any global benchmark.”
Production costs are forecast at less than $2 a barrel this year, the company said.
It maintained its 2016 production guidance of 60,000-70,000 barrels per day (bpd) and a revenue forecast of $200-275 million assuming oil prices average $45 a barrel.
“With its cash generative assets and strong balance sheet Genel could be an attractive merger/takeover target for a partner,” said Daniel Slater, analyst at Arden Partners.
Hayward, who set up Genel with financier Nat Rothschild and former Goldman Sachs banker Julian Metherell, last year signaled his readiness to sell the company should a buyer hunting “high-quality assets” make an approach, the Financial Times reported.
Genel shares clawed back some of the losses, and were up 6 percent on March 3.
The company is also planning to make progress this year on developing its gas fields in the KRG. It is banking on a 3 percent annual gas demand growth in neighboring Turkey to boost the fields’ prospects.
Genel, which is owed $423 million by the cash-strapped KRG mainly for oil exports, said it had received payments under a new scheme but these would likely fall due to an outage at one of the main oil pipelines into Turkey.
“The outage is clearly disappointing. We do have a local market we can fall back on in the event of pipeline outage,” Genel Chief Financial Officer Ben Monaghan told Reuters.
KRG promised in February to start paying oil producers according to the terms of their contracts, on top of a percentage of monthly netback revenue derived from each field to help them recover costs.