Genel Targets Turkey Gas Deal This Year To Overcome Oil Troubles

Reuters

LONDON, March 30 (Reuters) - Genel Energy, the oil producer chaired by former BP boss Tony Hayward, expects to strike a gas-export partnership deal with Turkey Energy Company this year, it said on Thursday, as it tries to overcome setbacks in oil exploration.

Genel slipped further into the red last year after it again downgraded reserves at its flagship oilfield and weak oil prices ate into profits, it said.

The Iraqi Kurdistan-focused company wrote off $779 million in relation to its exploration assets, leading to an annual operating loss of $1.2 billion after a $1.1 billion operating loss in 2015.

Revenue slipped to $190.7 million, missing a 2016 target of $200 million to $230 million, which it cut twice last year.

Genel announced on Tuesday that reserves at its Taq Taq oilfield had been cut by around 66 percent and that it would suspend the field's full-year production target of 35,000 to 43,000 barrels per day.

Shares in Genel touched an all-time low following the announcement on Tuesday but recouped some losses on Thursday, trading up 8.6 percent by 0829 GMT.

The company is now relying on tapping gas resources at its Miran and Bina Bawi fields in Iraq Kurdistan and Chief Executive Murat Oezguel told Reuters it is likely to sign a partnership deal with government-backed Turkey Energy Company (TEC) this year.

"We have commenced discussions for upstream and midstream with TEC," Oezguel said, adding Genel was holding parallel talks with other big companies, although a deal with TEC was a priority.

Analysts recognised the gas assets as being potentially transformative for the company but were concerned about progress.

"Miran/Bina Bawi continues to hold great potential, but progress is measured, and it may still be some time before it has a significant impact on the share price," said Daniel Slater, analyst at Arden Partners.

Genel's net debt rose to $241.2 million at the end of last year. It said it intends to buy back a minimum of $50 million worth of bonds.

"We do not think the business can support the amount of debt it currently carries, hence a small tender offer this morning," Stifel analysts, who have a "hold" recommendation on the stock, said.

Genel's receivables, debt owed by the Kurdistan Regional Government for oil exports, fell to $253.5 million at the end of the year, compared with $437 million at the end of September.

(Editing by David Evans and Susan Thomas)

Copyright 2017 Thomson Reuters. Click for Restrictions.

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