It wasn’t that long ago that Tony Hayward announced to the market that Genel ‘have enough’ Kurdistan assets and planned to look else where for future acquisitions/growth such as East Africa and North Africa.
Hayward’s reasoning behind the comment was based on Kurdistan assets soaring in value post Exxon’s move into the region. Today Hayward did a u-turn and promptly delivered an RNS that shows Genel are far from done in growing their Kurdistan Interests.
The deal might also suggest that Hayward is becoming more bullish on the region after seeing several set backs occur due to politics and delayed O&G laws.
The numbers on the deal are interesting too as benchmarks have been hard to find. Genel have paid $175mln for a 23% stake in the new Bina Bawi licence. This would value the full licence value (at present) at $760mln.
Hayward forecasts that Bina Bawi has around 500mln to 1bln in contingent resources. If you assume the middle number of $750mln, then this values the purchase of contingent resources at $1pb.
This is clearly cheap and certainly has very little Exxon froth involved.
The numbers will be of interest to GKP who is currently looking to sell its AB interest of 12.8%. The AB licence has already discovered 2.4bln (p50) which equates to 307mln barrels net to GKP. Further drilling is under way north-west of this discovery with a new well called Aqra-1. The well should TD around early July and should increase oip numbers further.
GKP BoD’s have already hinted that they expect to gain around $350mln to $500mln for their 12.8% share of the AB licence.
Using Genel’s recent $1pb price – it would seem to fit with the lower numbers forecast by GKP. However, this assumes that operator ‘MOL’ find no further oil. If they do notch up another 2.4bln barrel find, then it could push GKP’s share up to the $615mln level.
Hence it is no surprise that GKP appear to be waiting for the current Aqra-1 drill to complete before accepting final bids for their 12.8% share.
That said – there’s no reason why a price per barrel cannot be agreed upfront and simply upgraded should any further discoveries be made within the next 12 weeks etc. PWP are currently handling the sale process of GKP’s 12.8& AB interests.
GKP recently said in an RNS that several interested bidders are looking at their AB interests. If the value is close to $1pb, then I would imagine Mr Hayward is one of them. It’s a nice bite size purchase for Genel who have a war chest of around $1.9bln to spend.
14th May 2012, Genel Energy plc
GENEL ACQUIRES SIGNIFICANT NEW ACREAGE IN THE KURDISTAN REGION OF IRAQ
In a step that further builds its resource base in the Kurdistan Region of Iraq, Genel Energy plc (“Genel Energy” or “Genel”) today announced it is to acquire a 23 per cent stake in the Bina Bawi exploration licence. The Bina Bawi licence lies alongside the producing Taq Taq oilfield where current potential output is some 80,000 barrels a day and is projected to rise to some 200,000 barrels a day.
Bina Bawi licence covers an area of 246 square kilometres to the east of Erbil. Genel said two of the three wells drilled on the block to date had encountered significant hydrocarbons.
The acquisition will be made through the purchase for $175 million of all of the share capital of A&T Petroleum Company Ltd, current holders of the stake. A&T is wholly owned by Petoil Petroleum and Petroleum Products International Exploration and Production Inc. The deal will be financed from Genel’s existing cash resources.
Genel CEO Tony Hayward said: “What we are acquiring is very high-quality acreage in an area immediately adjacent to Taq Taq, one of our major established fields which we plan in due course to link by a pipe line to the region’s main export pipeline from Kirkuk to Ceyhan.
“The transaction fits neatly with our strategy of building our Kurdistan resource base through the steady, considered addition of promising acreage.”
Genel said the first well drilled on the block in 2007 on a large surface anticline Bina Bawi-1, had encountered significant shows of 35-degree API oil while drilling through the Cretaceous zone and tested 6 million standard cubic feet of gas a day in the Triassic zone.
The third well, Bina Bawi-3, completed recently by block operator OMV on the same structure, had encountered a gross hydrocarbon column of more than 800 metres in the Jurassic zone. Two Jurassic reservoir intervals tested separately had achieved an aggregate flow rate of more than 4,000 barrels a day of light, 44 to 47-degree API oil.
Genel said a further gross hydrocarbon column, estimated at over 1,000 metres, in the Triassic zone of Bina Bawi-3, remained untested but had confirmed the gas find made in the first well in 2007.
The overall results of Bina Bawi-3 continue to be reviewed, including the evaluation of deeper potential targets in the Triassic reservoirs. Further exploration/appraisal drilling is planned for this year and next, along with an early production test that should start up in early 2013.
“Our estimate is that the Bina Bawi discovery has contingent resources of some 500 million to 1 billion barrels of oil and oil equivalent, with some additional prospective upside,” Hayward said.
On completion of the purchase, which is subject to various consents, approvals and assurances, including from the Kurdistan Regional Government (KRG), Genel Energy will hold a 23 per cent interest in the Bina Bawi production sharing contract, OMV a 36 per cent operated interest and Prime Natural Resources a 21 per cent interest. The KRG will retain a 20 per cent working interest which is carried by the contractors on a pro rata basis.
“Genel Energy is already the biggest oil producer in the region and has one of the strongest reserves base” Hayward said. “This deal enhances that position and confirms our continuing confidence in the immense potential of the Kurdistan Region and our determination to play a leading role in its ongoing development.”