Genel Energy Plc (GENL), the biggest oil and gas operator in Kurdistan, said shipments of crude to Turkey through a new pipeline will start shortly, allowing the company to receive higher prices for its Iraqi production.
The Kurdistan Regional Government, or KRG, “expects sales via the pipeline to commence in the near future and ramp up over the remainder of the year,” London-based Genel said today in a statement. Commissioning of the link is under way and some crude has already flowed to the port of Ceyhan in neighboring Turkey.
Chief Executive Officer Tony Hayward, the former head of BP Plc, has expanded Genel’s assets in the northern region of Iraq since taking over two years ago in the hope of starting exports. The KRG has signed deals with Turkey to ship oil and gas. Genel has risen 38 percent in London trading since the start of 2013.
The company expects to pump 60,000 barrels to 70,000 barrels a day this year, about 50 percent more than in 2013, assuming a ramp-up of exports in the second quarter. “The energy agreement between the KRG and Turkey and the completion of the Kurdistan independent pipeline infrastructure has paved the way for steadily rising oil-export volumes” from the Taq Taq and Tawke fields, it said in the statement.
“2014 production guidance may disappoint some,” said Brian Gallagher, an analyst at Investec Securities Ltd. in London. It “reflects cautiousness in forecasting volumes from a piped export system that is not fully ramped up yet.”
Commercial sales through the 40-inch pipeline to Turkey haven’t begun yet because more engineering works are needed, Chief Financial Officer Julian Metherell said by telephone.
The shares dropped as much as 3.3 percent and traded down 1.1 percent at 1,073 pence as of 9:18 a.m. London time.
Genel produced 44,000 barrels a day last year, little changed from 2012. Exports to Turkey by truck from the Taq Taq field have received as much as $80 a barrel, while domestic sales from the Tawke deposit have earned about $60 a barrel.
The KRG said this month that the first 2 million barrels of crude to pass through the pipeline will be sold at the end of January. The new export route gives Kurdistan its first unfettered access to international markets after years of disputes over oil payments with the federal government.
In an agreement that may herald an end to the confrontation, the KRG agreed last month to allow Baghdad authorities to oversee exports and manage revenue from the sales, according to Iraqi Oil Minister Abdul Kareem al-Luaibi.
Genel’s revenue in 2013 was $350 million. It expects sales of $500 million to $600 million this year, according to today’s statement. The company holds about $700 million in cash on its balance sheet and is in talks with banks to set up debt funding.
Investors including Hayward and financier Nathaniel Rothschild bought Genel, a Turkish company, in 2011 with more than $2 billion raised through an investment vehicle in an initial public offering. After slumping to as low as 595 pence in June 2012, the shares rose to a record 1,117 pence on Jan. 9.
The company plans to drill one well at the Taq Taq field this year. It also will drill two wells in Morocco and one in Malta. It intends to spend $550 million to $600 million on projects in 2014.
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