Genel shares climb on long-awaited deal with the Kurdistan government

Courtney Goldsmith
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Iraqi Kurdistan Starts Oil Exports
Genel has been in a long-running dispute with the government over payments (Source: Getty)

Shares in Genel Energy jumped more than 20 per cent today after the company announced a long-awaited deal with the Kurdistan Regional Government (KRG) over unpaid entitlements for past oil sales.

The Kurdistan-focused company said cashflow would be "materially enhanced" over the course of the definitive agreement as payments for crude produced form its key Taq Taq and Tawke fields improve, which sent shares up 19.42 per cent to 155.25p in late afternoon trading.

The firm is also executing a production sharing contract (PSC) with the KRG for its Tawke field.

Under the agreement, Genel said it would waive rights to outstanding receivables for past oil sales.

In return, Genel will receive 4.5 per cent of Tawke gross field revenues for the five years to the end of July 2022 in addition to proceeds for current sales. Its capacity building payments on the profit share element of its Tawke entitlement will also be eliminated by the KRG over the entire life of the field.

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In the year to 31 July, gross production from the Tawke field averaged 109,000 barrels of oil per day (bopd) with the price of Brent crude oil averaging $51 per barrel.

Assuming similar production and oil prices over the period from 1 August 2017 to 31 December 2017, Genel said the deal would generate proceeds of around $30m (£23.3m) and the Tawke capacity building payments elimination would result in around $12m of savings in the period.

"A key part of our strategic focus in 2017 was the acceleration of the recovery of the receivable for unpaid oil sales, and this agreement successfully achieves this through significantly increasing cash generation from the Tawke PSC over the next five years," said Murat Ozgul, chief executive of Genel.

"This definitive agreement is the positive culmination of a constructive dialogue with the KRG, and promises to generate value for all stakeholders."

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