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Abu Dhabi, UAESaturday 17 November 2018

Genel Energy to boost Kurdish oil output following DNO lead

Production rises in Iraqi region as both firms look to increase flows from new and existing wells

A drilling rig in the Miran block in Iraqi Kurdistan co-owned by Genel Energy and Heritage Oil. Genel may start drilling in Somaliland next year, it said. Sebastian Meye/Corbis
A drilling rig in the Miran block in Iraqi Kurdistan co-owned by Genel Energy and Heritage Oil. Genel may start drilling in Somaliland next year, it said. Sebastian Meye/Corbis

Iraqi Kurdistan-focused Genel Energy is likely to significantly increase its oil production guidance next year, chief financial officer Esa Ikaheimonen said on Tuesday.

The output boost is expected to come from 11 wells currently being drilled in three fields in the region, eight of which are expected to begin producing this year.

London-listed Genel reaffirmed its 2018 production guidance of 32,800 barrels of oil per day in its half-year results on Tuesday.

"We maintained that guidance ... signalling that even with the existing level we would exceed guidance," Mr Ikaheimonen told Reuters.

"There is a good chance that we enter the new year with a significantly updated level of production," he added.

Genel's shares were up nearly 6 per cent by 07.38 GMT after gaining more than 150 per cent since the start of the year due to higher oil prices and a stronger production outlook.

The company's production averaged 32,100 bpd in the first half of the year, down 13 per cent from a year earlier.

That was mostly as a result of declining production from Taq Taq, once considered its flagship oilfield.

Oil production and revenue for international producers operating in the Kurdistan Regional Government has been stable over the past year despite political turmoil following a controversial independence referendum in there last October.

The company's core earnings rose sharply in the first six months of the year to $137.4 million on recovering oil prices.

Genel generated $70 million in cash flow and said it plans to wipe out its net debt by the end of the year.

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Other than drilling in existing wells, Genel is also focusing on the development of new production in the Bina Bawe field.

The company is preparing to submit development plans to Kurdish authorities, Ikaheimonen said.

The Bina Bawe oilfield is expected to produce 15,000 bpd by 2020-2021, Ikaheimonen said.

Separately, UAE state news agency WAM reported last week that DNO, the Norwegian oil and gas operator, said a fourth well has started production at the Peshkabir field in the Kurdistan region pushing total output past the previously published target of 30,000 barrels of oil per day (bopd).

The Peshkabir-5 well is currently producing around 8,000 bopd from three Cretaceous and two Jurassic zones through temporary test facilities and the oil trucked to Fish Khabur for export. Seven Cretaceous zones and two Jurassic zones were flow tested, with individual zones ranging between 3,600 bopd and 7,200 bopd.

"At around 35,000 bopd, Peshkabir has now leapfrogged into second place after Tawke among the Kurdistan fields operated by the international oil companies," said Bijan Mossavar-Rahmani, DNO's executive chairman. "We are setting our sights on higher production and accelerating field development," he added.

The Peshkabir-5 well was designed to appraise the western extension of the field and drilled to a measured depth of 2,918 metres in 57 days at a cost of $12.1 million.

Two other wells, Peshkabir-6 and Peshkabir-7, have now reached target depth of 4,250 metres and 3,750 metres, respectively, and will commence production testing this month.

The Peshkabir field was brought on production in 2017 and the two drilled wells last year, Peshkabir-2 and Peshkabir-3, have produced at a constant combined rate of around 15,000 bopd. The Peshkabir-4 well, completed in July, is currently producing around 12,000 bopd.

DNO operates and has a 75 per cent interest in the Tawke licence, which contains the Tawke and Peshkabir fields, with partner Genel Energy holding the remainder.

DNO holds stakes in onshore and offshore licences at various stages of exploration, development and production in the Kurdistan region of Iraq, Yemen, Oman, the UAE, Tunisia and Somaliland. Its largest shareholder is UAE-based RAK Petroleum.