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Genel Energy cuts spending as Covid-19 delays work on Kurdish projects

Company declares force majeure at one development and pushes back the start-up date of another

Source: Upstream, by Josh Lewis

London-listed company Genel Energy has revealed it is slashing capital expenditure due to the current market conditions created by the double whammy of low oil prices and the coronavirus.

Genel stated earlier this year that it intended to increase its capital spend in 2020 to between $160 million and $200 million. However, on Thursday it revealed it now anticipated 2020 capex to be just over $100 million.

About half of that figure will be spent on the Tawke and Taq Taq production sharing contracts in the Kurdistan region of Iraq, while roughly $30 million will be spent at the Sarta development and $10 million at Qara Dagh.

Delayed developments

Genel also revealed on Thursday that, due to the impact of Covid-19, first oil from Sarta has been pushed back from the third quarter to the fourth.

Meanwhile, at Qara Dagh, Genel has notified the Kurdistan regional government of a force majeure event due to the ongoing uncertainty caused by the Covid-19 pandemic preventing the operator from meeting its contractual obligations as scheduled.

The company was due to spud the QD-2 well at the field during the current quarter, prior to the pandemic impacting supply chains and movement of people into Kurdistan.

Genel said work was continuing to ensure it was well placed to drill the QD-2 well once external conditions improve and the force majeure event ceases.

“Despite the impact of Covid-19 creating a challenging environment for our industry, Genel’s resilient business model and robust financial position, with over $100 million in net cash and an asset cashflow breakeven of $30 per barrel, leaves us well placed to withstand the consequences of the pandemic as we continue to deliver our strategy, “ Genel chief executive Bill Higgs said.

“We have cut our cloth appropriately against this backdrop and halved our capital expenditure for 2020, protecting our balance sheet while still progressing Sarta, and positioning us to take advantage of growth opportunities as the landscape improves.”

Drilling slows at producing fields

At its producing assets, Genel revealed three drilling rigs had been released from the Tawke PSC during the first quarter as it changed its planned activities to reflect the current market conditions.

It added a drilling rig has been stacked at each field within the PSC. However, it added they could be quickly mobilised when conditions improve.

Meanwhile, at the Taq Taq PSC, Genel released the Sakson-605 rig after wrapping up drilling of the TT-35 well, with no further drilling expected at the PSC for the rest of the year.

Genel’s net production from its producing assets, which also include Peshkabir, averaged 34,170 barrels per day in the first quarter.

The company noted this was in line with its guidance issued in January, however it has since removed its production guidance following the decision to cut spending.

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