Gazprom Neft commissions Second Well at Sarqala

Gazprom Neft subsidiary Gazprom Neft Middle East B.V. has commissioned a second well — the Sarqala-2 — at its Sarqala field (within the Garmian block), located in the Kurdistan Region of Iraq (KRI).

The new well is currently producing 11,000 barrels per day (bpd), with potential to increase this to 15,000. Total daily production at the field has now increased more than two-fold, exceeding 21,000 bpd.

Sergei Petrov, General Director, Gazprom Neft Middle East B.V. commented:

“The Sarqala-2 well is operating under high reservoir pressure and temperature. But by using exceptional technical solutions in well construction we have been able to make significant reductions in operating costs, as well as bringing the project in on time.”

Denis Sugaipov, Director of Major Projects Upstream at Gazprom Neft, added:

“Thanks to the commissioning of this new well we have been able to confirm our geological prognoses and obtain updated information on strata composition at the Sarqala field. The geology of the KRI is, generally, under-researched, so this new well is of major importance in terms of gaining knowledge and experience of the field.”

First oil from the Garmian block was obtained in 2011, with commercial crude shipments from the field commencing as early as 2015. As at 15.04.2018 total cumulative production at the field stood at seven million barrels of oil.

The first phase of expanding gathering and treatment capacity to 25,000 bpd is now complete, with work continuing on expanding infrastructure to accommodate 35,000 bpd. Drilling of the Sarqala-3 well is planned for Q3 2018, completing Phase I of field development.

(Source: Gazprom Neft)

DNO Expands and Accelerates Kurdistan Operations

DNO ASA, the Norwegian oil and gas operator, today announced expansion and acceleration of operations in the Kurdistan region of Iraq while building up its North Sea exposure.

First quarter revenues, the highest in nearly four years, stood at USD 142 million and net profit at USD 18 million. The Company exited the quarter with cash balances of USD 518 million plus USD 76 million in treasury shares and marketable securities.

The Company added a third license in Kurdistan following government and partner approvals of the previously announced transaction with ExxonMobil. Effective 10 April 2018, DNO assumed operatorship of the Baeshiqa license with a 40 percent (32 percent participating) interest alongside ExxonMobil, Turkish Energy Company and the Kurdistan Regional Government.

At the Tawke license, the Company fast tracked development of the Peshkabir field with three new wells. The recently completed Peshkabir-4 well will shortly undergo production testing and the Peshkabir-5 well is drilling ahead at 2,250 meters. The Peshkabir-6 well was spudded as a development well last week and will also explore the field’s deeper Triassic formation.

We have the wind on our back,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani, “with higher oil prices, timely export payments in Kurdistan, a growing portfolio of quality assets, efficient drilling and bold strategy execution.

On the DNO-operated Tawke license containing the Peshkabir and Tawke fields, 15,000 barrels of oil per day (bopd) of production from two Peshkabir wells are comingled with 90,000 bopd from the flagship Tawke field for export through Turkey.

A new Tawke Cretaceous well was brought onstream earlier this month at more than 5,000 bopd. The Company will drill additional Tawke development wells in 2018 following mobilization of a fourth rig.

Elsewhere, the Company acquired 28.71 percent of North Sea-focused Faroe Petroleum plc at a price of GBP 1.25 per share through four separate transactions in April, complementing DNO’s existing portfolio of 19 exploration licenses offshore Norway and the United Kingdom.

DNO’s current cash balance stands at USD 356 million plus USD 280 million in treasury shares and marketable securities. The Company’s outstanding bond debt remains at USD 400 million and the equity ratio at 61 percent.

(Source: DNO)

Genel Energy receives Payment for January Sales

Genel Energy has announced that the Taq Taq partners have received a gross payment of $8.30 million from the Kurdistan Regional Government (KRG) for oil sales during January 2018. Genel’s net share of the payment is $4.57 million.

Genel also notes the announcement from DNO ASA, as operator of the Tawke PSC, that the Tawke partners have received $56.44 million from the KRG as payment for January 2018 crude oil deliveries to the export market from the Tawke licence. Genel’s net share of the payment is $14.07 million.

The Company has received an override payment of $7.86 million from the KRG, representing 4.5% of Tawke gross licence revenues for the month of January 2018, as per the terms of the Receivable Settlement Agreement.

In total, Genel’s net share of payments relating to January 2018 exports totals $26.50 million.

(Source: Genel Energy)

GKP Confirms Payment for January Sales

By John Lee.

Gulf Keystone Petroleum (GKP) has confirmed that a gross payment of $23.1 million ($17.8 million net to GKP) has been received from the Kurdistan Regional Government (KRG) for Shaikan crude oil sales during January 2018.

(Source: Gulf Keystone)

GKP Shares Rise on Annual Results

Shares in Gulf Keystone Petroleum (GKP), operator of the Shaikan Field in the Kurdistan Region of Iraq, closed up more than 4 percent on Wednesday following the announcement of its results for the year ended 31 December 2017.

Highlights to 31 December 2017 and post reporting period

Operational

  • Strong safety performance during 2017; 3 million man-hours without a Lost Time Incident achieved.
  • Average gross production of 35,298 barrels of oil per day (“bopd”) – in the middle of 32,000-38,000 bopd guidance for the year.
  • Plant uptime of 99% in 2017.
  • Shaikan production for Q1 2018 averaged 31,588 bopd.
  • Gross production guidance for 2018 is set at 27,000-32,000 bopd. 

Financial

  • Signing of the Crude Oil Sales Agreement, which was announced in January 2018, represents a key milestone for the Company.
  • Moved to a more transparent invoicing mechanism with the MNR; payment now linked to international oil price and total production at Shaikan.
  • Profit for the first time since entry to Kurdistan – net profit of $14.1 million (2016: net loss of $17.4 million).
  • Revenue of $172 million (2016: $194 million).
  • The cash component of revenue increased by 28% to $157 million from $122 million in 2016.
  • Positive cash flow driven by steady operating activities, payments from KRG and limited investment.
  • 11 payments received during 2017 from the KRG amounting to $132 million net (2016: $114 million net to GKP).
  • Cash balance of $160 million as at 31 December 2017 (2016: $93 million).
  • Continued cost optimisation, with additional initiatives to lower costs achieved against stable production.
  • Reduction of operating costs per barrel year-on-year to $2.8/bbl (2016: $3.5/bbl).
  • Further reduction of G&A to $21.3 million from $25.5 million in 2016.
  • GKP has received payments in Q1 2018 from the KRG totalling $75.1 million gross ($59.3 million net).
  • Robust financial position as at 10 April 2018, with cash balance of $203 million against $100 million of debt.

Corporate developments

  • Jaap Huijskes assumes the role of Non-Executive Chairman, as of today.
  • Updated KPIs were introduced in 2017, as part of GKP’s continued efforts to achieve high standards of corporate governance.

Outlook

  • The Crude Oil Sales Agreement is an important commercial event and moves the business closer to finalising commercial negotiations with the MNR
  • Subject to finalising certain commercial and contractual matters, the Company is ready to resume investment into Shaikan in 2018.

Jón Ferrier, Gulf Keystone’s Chief Executive Officer, said: 

We are pleased to have reported a net profit for the year of $14.1 million, compared with a net loss of $17.4 million in 2016.  We made considerable commercial progress during the year and into 2018, with the signing of the Shaikan Crude Oil Sales Agreement being a key milestone for the Company. 

“We were pleased to achieve average gross production of 35,298 bopd at Shaikan, in the middle of our target guidance of 32,000-38,000 bopd for 2017.  We are confident that once we are able to restart investment into Shaikan we will be able to lift production towards our near-term target of 55,000 bopd, a step towards the full field development.

“I would like to thank our shareholders for their support, our hosts the Kurdistan Region of Iraq, and all Gulf Keystone employees, for their commitment and professionalism during 2017.  I would also like to welcome our incoming new Chairman, Jaap Huijskes, and reiterate our thanks to his predecessor, Keith Lough.

More here.

(Sources: GKP, Yahoo)

Power-sharing deal could end dispute over Kirkuk Elections

By Omar Sattar for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News

For the first time since 2005, Kirkuk governorate in Iraq will hold elections Dec. 22 to select its local governing council. Parliament included the multiethnic province of the Kurds, Arabs and Turkmens in the provincial election law approved March 3.

The decision follows an agreement among the three groups’ representatives in parliament and was greatly welcomed by all segments, especially the Kurds, who for years have demanded that elections be held in Kirkuk. Khalid al-Mafraji, an Arab parliament member from Kirkuk, told Al-Monitor that negotiations took more than a year.

The agreement binds the Independent High Electoral Commission to review voters’ records in coordination with the ministries of Interior, Commerce, Planning and Health. If they aren’t able to review the records before the elections, the commission will be obliged to undertake an audit within six months after the elected council begins its work.

“The most important articles of the agreement relate to sharing power,” Mafraji said. The largest bloc in the election will appoint the governor, and the two deputy positions will go to the other two groups. Moreover, federal positions will be determined by the governorate’s residents, according to party size. The agreement also states that the constitution and the law take precedence over the governorate’s council, parliament and the federal government.

The electoral law will remain in effect for four years. Shakhawan Abdullah, who represents Kirkuk in the Kurdistan Democratic Party in parliament, told Al-Monitor, “The agreement between the three components of Kirkuk’s governorate will be effective for only one electoral round, and the elections will not be held in the same way in four years’ time.”

Abdullah believes the provincial election law presents a good opportunity to resolve conflicts in the governorate and give it more administrative powers, like other governorates. The governorate has gone without elections all these years for various reasons. Oil-rich Kirkuk is a disputed area claimed by both the central government in Baghdad and the Kurdish Regional Government (KRG) in Erbil. Its situation is also unique because of its ethnic diversity and disagreements among them.

The constitution stipulates the conflicts in the governorate must be normalized in three stages. The first stage is to allow the return of displaced Kurds and Arabs who emigrated during the regime of deposed Iraqi President Saddam Hussein.

The second stage is to carry out a population census, and the last stage is to hold a general referendum on whether Kirkuk should become a new region, like the autonomous Kurdistan Region, or be annexed to the Kurdistan Region.

All of those procedures were to be carried out before 2007, which wasn’t done. This caused political conflict, partly because of the disagreement between Baghdad and the KRG over having elected authorities with the right to control the governorate’s future.

The Kurdistan independence referendum in September, which included Kirkuk, ended in crisis, and the central government subsequently took over the governorate and cut the Kurds’ authority. The coming elections will give Baghdad and the KRG a chance to solve the current dispute over Kirkuk’s administration.

However, the most important problem that may affect holding elections in Kirkuk is the agreement on a unified record of voters, which may raise doubts about the election results. Iraq hasn’t conducted a census in decades. Ali Khalil, the Arab bloc member of the governorate council, told Al-Monitor that Arabs weren’t in favor of the agreement’s clause that allows an audit to be delayed until after the elections if records can’t be reviewed before then.

“How would we elect a new governorate council while doubting voters’ records at the same time?” Khalil asked.

The Kirkuk local elections will provide a chance to reduce tension in the governorate, a good way to determine the real size of each of the three ethnic groups and a way to form a more legitimate administration — but it could lead to negative results. If one segment is counted and found to have significantly fewer representatives than before, that segment might refuse to accept the election results.

GKP appoints new Non-Exec Chairman

Gulf Keystone Petroleum (GKP) has announced the appointment of Jacobus (“Jaap”) Huijskes as Non-Executive Chairman effective as of 11 April 2018, immediately following the announcement of the Company’s 2017 Full Year Results.  

Jaap Huijskes, who replaces Keith Lough as Chairman, joined the Board of Gulf Keystone in November 2017 as a Non-Executive Director.  Today’s news follows the January 2018 announcement of Mr Lough’s intention to step down from the Board.  Mr Huijskes selection was the result of a process undertaken by the Nominations Committee and was unanimously supported by the Board. 

Jaap Huijskes has had a distinguished career in the oil and gas sector, including relevant experience in the Kurdistan region of Iraq.  He was most recently a Director at OMV (AG:OMV), the largest listed Austrian oil and gas company, where he was responsible for Exploration and Production (E&P) and oversaw the Company’s expansion into new territories.  He also played a key role in OMV’s operations in the Kurdistan region of Iraq. 

Prior to this, Mr Huijskes held a number of senior positions at Shell, including Executive Vice President of Upstream Major Projects and Project Director at the Sakhalin Energy Investment Company, which was set up to develop the Sakhalin-II oil and gas project in Russia.  He holds a Masters in Mechanical Engineering from Delft University of Technology in The Netherlands. 

In addition to serving on the Board of Gulf Keystone, Mr Huijskes is currently Non-Executive Chairman of the Dutch state-owned integrated oil and gas company, Energie Beheer Nederland. He was a member of OMV’s Executive Board for E&P between 2010 and 2016.

Commenting on today’s announcement, Jaap Huijskes, said:

I am delighted to have been selected to take on the Non-Executive Chairman role.  Gulf Keystone has a strong investment case, underpinned by a great asset and management team. 

“With recent positive progress, including the signing of the important Shaikan Crude Oil Sales Agreement, we are looking forward to recommencing investment into the field and generating value for our investors, as well as the Kurdistan Region of Iraq.  I look forward to leading the Board and supporting the Company at this exciting time.

“On behalf of the Board and everyone at GKP, I would like to thank Keith Lough for his leadership and significant contribution to the business over the past two years.  It was a challenging period for the Company and we are grateful for his hard work and wise counsel.  We wish him the very best for the future.  

(Source: GKP)

KRG, Pearl agreement to boost Electricity Generation

The Kurdistan Regional Government (KRG) and Pearl Petroleum have signed an agreement to increase production of gas from the Khor Mor field later this year, to boost much needed electricity generation for the people of the Kurdistan Region and Iraq as a whole.

The 10-year gas sales agreement will enable gas production from Khor Mor field to increase by 25% later this year, from 320 million cubic feet per day currently to 400 million cubic feet per day.

Dr Ashti Hawrami, KRG Minister of Natural Resources, said:

“We are pleased to see the further commitment of expansion and investment by the companies and the anticipated growth in gas supplies will make a positive contribution to the growing domestic needs for more electricity.”

As part of a final settlement of arbitration in August 2017, Pearl Consortium, which is led by Crescent Petroleum and Dana Gas, committed to expanding their investment and operations in the region.

The companies plan a multi-well drilling program in the Khor Mor and Chemchemal fields, as well as installation of new gas processing and liquids extraction facilities. The overall aim is to increase gas production by a further 125% within two years, to 900 million cubic feet per day.

KRG also welcomes Dana Gas and Crescent Petroleum’s expansion of their local training and employment programs, as agreed in the arbitration settlement. The companies employ close to 500 full-time local personnel representing over 80% localisation, and have training programmes to increase this figure further.

See also the Dana Gas press release on the Gas sales agreement (external link)

(Source: KRG)

Genel Energy Returns to Profit

Genel Energy has announced a return to profit.

In its audited results for the year ended 31 December 2017, Murat Özgül (pictured), Chief Executive of Genel, said:

Another year of consistent payments by the KRG and a disciplined capital allocation strategy helped to generate material free cash flow in 2017. This was enhanced in the latter part of the year by the Receivable Settlement Agreement, from which Genel expects to generate sustainable and significant free cash flow going forward.

“The strong financial performance of 2017, and the promise of more to come, facilitated the successful refinancing in December, which solidified a significant improvement in the balance sheet and provides a strong platform for growth.

“We will continue with our strategy of maximising free cash flow as we focus investment on our producing assets, specifically on the Tawke PSC, where the performance of Peshkabir remains highly encouraging. Prudent expenditure will also be made on the other assets within our portfolio that provide material value creation opportunities.

“We will continue to construct the building blocks for value creation from Bina Bawi and Miran, while cost-effectively progressing our exploration assets in Africa.”

Results summary ($ million unless stated)

2017

2016

Production (bopd, working interest)

35,200

53,300

Revenue

228.9

190.7

EBITDAX1

475.5

130.7

  Depreciation and amortisation

(117.4)

(128.9)

  Exploration expense

(1.9)

(815.1)

  Impairment of property, plant and equipment

(58.2)

(218.3)

  Impairment of receivables

(191.3)

Operating profit / (loss)

298.0

(1,222.9)

Cash flow from operating activities

221.0

131.0

Capital expenditure

94.1

61.2

Free cash flow before interest2

141.8

59.1

Cash3

162.0

407.0

Total debt

300.0

674.6

Net debt4

134.8

241.2

Basic EPS (¢ per share)

97.1

(448.6)

1.     EBITDAX is earnings before interest, tax, depreciation, amortisation, exploration expense and impairment which is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($117.4 million), exploration expense ($1.9 million) and impairment of property, plant and equipment ($58.2 million)

2.     Free cash flow before interest is net cash generated from operating activities less cash outflow due to purchase of intangible assets and purchase of property, plant and equipment (oil and gas assets only)

3.     Cash reported at 31 December 2017 excludes $18.5 million of restricted cash

4.     Reported debt less cash

Highlights

  • $263 million of cash proceeds received in 2017 (2016: $207 million), with strong free cash flow generation of $142 million (2016: $59 million)
  • Year-end net debt of $135 million, a 44% reduction year-on-year (2016: $241 million)
  • Year-end gross debt of $300 million, a 56% reduction year-on-year (2016: $675 million), with debt extended until 2022 and interest cost reduced by 40%
  • Receivable Settlement Agreement resulted in cash benefit of $26 million in Q4 2017
  • Focused capital allocation – 66% of capital expenditure was spent on cash-generative producing assets, and has been cost recovered
  • Drilling success at Peshkabir, with gross production rising to c.15,000 bopd at year-end
  • Taq Taq field production stabilised in H2 2017, with Q4 average of 14,035 bopd in line with Q3 average of 14,080 bopd
  • In January 2018 Bina Bawi and Miran CPRs confirmed c.45% uplift to gross 2C raw gas resources to 14.8 Tcf

Outlook

  • Combined net production from the Tawke and Taq Taq PSCs during 2018 is expected to be close to Q4 2017 levels of 32,800 bopd, unchanged from previous guidance
  • Genel expects to continue the generation of material free cash flow in 2018
  • Tangible steps to be taken to further de-risk gas resources and unlock value from Bina Bawi and Miran, including the high-value oil resources
  • Capital allocation discipline to continue, with ongoing prioritisation of spend on cash-generative producing assets. Capital expenditure guidance unchanged at c.$95-140 million net to Genel
  • Opex and G&A cash cost guidance unchanged at c.$30 million and c.$15 million respectively

More here.

(Source: Genel Energy)

DNO announces Higher Revenues, Profits, Production, Reserves

DNO ASA, the Norwegian oil and gas operator, today released its 2017 Annual Report and Accounts together with its 2017 Annual Statement of Reserves and Resources and reported improvements across key financial and operational metrics.

Annual 2017 revenues climbed to USD 347 million, up 72 percent from year earlier levels. Operating profit totaled USD 521 million, up from USD 6 million in 2016, with the recognition as other income of USD 556 million under the August 2017 Kurdistan Receivables Settlement Agreement.

Excluding the settlement agreement and non-cash impairments, operating profit in 2017 more than doubled to USD 72 million. And notwithstanding a doubling of operational spend to USD 259 million, the Company ended the year with a cash balance of USD 430 million.

Company Working Interest (CWI) production increased to 73,700 barrels of oil equivalent per day (boepd) from 69,200 boepd in 2016 (operated production in 2017 was 113,500 boepd, up from 112,600 boepd in 2016). Lifting costs last year averaged USD 3.6 per barrel of oil equivalent.

Iraqi Kurdistan

DNO’s production continues to be driven by the Tawke field in Kurdistan, where output in 2017 averaged 105,500 barrels of oil per day (bopd).

The adjacent Peshkabir field, brought on stream midyear, contributed another 3,600 bopd to bring total Tawke license production to 109,100 bopd in 2017. The Company plans to bolster production from the license with 10 new wells in 2018.

We are committed this year to continue to outdrill, outproduce and outperform all other international companies in Kurdistan – combined,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani.

At yearend 2017, DNO’s CWI 1P reserves climbed to 240 million barrels of oil equivalent (MMboe) from 219 MMboe at yearend 2016, after adjusting for production during the year, technical revisions and an increase in DNO’s operated stake in the Tawke license from 55 percent to 75 percent.

On a 2P basis, DNO’s CWI reserves stood at 384 MMboe (up from 368 MMboe) and on a 3P basis, DNO’s CWI reserves stood at 666 MMboe (up from 521 MMboe). DNO’s yearend 2017 CWI contingent resources (2C) were estimated at 99 MMboe, down from 161 MMboe at yearend 2016, following reclassification of certain contingent resources to reserves.

On a gross basis, at yearend 2017, 1P reserves at the Tawke license containing the Tawke and Peshkabir fields totaled 348 MMboe (353 MMboe at yearend 2016) after adjusting for production of 40 MMboe during the year and technical revisions; 2P reserves totaled 513 MMboe (536 MMboe at yearend 2016); 3P reserves totaled 880 MMboe (725 MMboe at yearend 2016) and 2C resources totaled 91 MMboe (211 MMboe at yearend 2016) following reclassification.

International petroleum consultants DeGolyer and MacNaughton carried out the annual independent assessment of the Tawke and Peshkabir fields. DNO internally evaluated the remaining assets.

(Source: DNO)