On Thursday, Genel Energy (LSE:GENL) was up 4pc after it said it had received approval from the Kurdistan Regional Government (KRG) to acquire stakes in two blocks owned by Chevron (NYSE:CVX).
The Sarta and Qara Dagh block are located in the Kurdistan Region of Iraq and the acquisition adds an initial 10 million barrels of oil (MMbbls) to the firm’s net 2P reserves. Genel has taken a 30pc interest in Sarta PSC with Chevron retaining operatorship and a 50pc interest. Meanwhile, Genel and Chevron each hold a 40% interest in the Qara Dagh PSC with Genel becoming operator. The KRG owns the remaining 20pc interest in both blocks.
At Sarta, the company reports plans for ‘phase 1A’ are agreed. Both the Sarta-2 and Sarta-3 wells flowed around 7,500 barrels of oil per day (bopd) during testing. The former will be recompleted while Sarta-3 well will be put onto production. In addition, a central processing facility will be constructed with a capacity of 20,000 bopd and a further well will be drilled within a year of first oil, which is expected to flow in 2020. In total, Genel estimates it will spend $60m on the license by the end of 2020.
Also in 2020, Genel plans to drill a second well on the Qara Dagh block. Work is currently underway to identify the best location for the Qara Dagh-2. It is hoped that the success of the Qara Dagh-1 well can be replicated. This was drilled in 2011 and tested oil in two zones from the Shiranish formation.
After a torrid time during the oil price rout of 2016 – exasperated by concerns over reduced payments from the KRG – conditions have improved significantly for Genel shareholders. Today’s £2.17 is still a far cry from the heady days of £11 per share back in 2014, but the company is making good progress in line with its peers as the oil market stabilises. One advantage it has over many others in the sector is the low cost of its operations.
The firm is continuing to reinvest cashflow and is expected to spend $100m in 2019 on developing it’s flagship Taq Taq and larger Tawke fields.
Earlier this month, Genel added the TT-32 well onto production, contributing 3,100 bopd and reported it had spudded a horizontal sidetrack well called TT-20z.