By John Lee.
Shares in Genel Energy were down 10 percent in early trading on Wednesday, after the company issued a trading and operations update in advance of the Company's full-year 2015 results, which are scheduled for release on 3 March 2016.
Murat Özgül (pictured), Chief Executive of Genel, said:
"2015 was a very challenging year for the oil industry, with pronounced oil price weakness which has continued into 2016. In addition, the funding of the security effort in northern Iraq, influx of refugees into the KRI and cessation of budget transfers from Baghdad continue to place a very significant strain on the KRG's finances.
"Against this backdrop, the recent receipt of four consecutive payments for pipeline exports is highly encouraging. These payments, totalling almost $100 million, have stabilised our receivable and maintained our healthy cash position. We recognise the efforts that the KRG has made to meet its commitments to IOCs in a very difficult economic environment.
"With low oil prices expected to persist in the near-term, we have focused on cost control by cutting capital expenditure and overheads. With production costs of less than $2 per barrel, a robust cash position, low capital commitments and a material resource base, Genel is well positioned to weather the downturn and thrive when the oil cycle turns."
RESILIENCE IN A LOW OIL PRICE ENVIRONMENT
- The Company's producing oil assets in the Kurdistan Region of Iraq ('KRI') benefit from low production costs, which are forecast at less than $2/bbl in 2016
- The Company's producing oil assets deliver a cash breakeven (defined as PSC entitlement revenues equal to capital expenditure and cash operating expenditure) at a Brent oil price of c.$20/bbl in 2016
- In 2016, cash spend at the group level (i.e. operating and capital expenditure, general and administrative expense and debt servicing) is forecast to average c.$20 million per month, against an average monthly export payment of $25 million since September 2015
- Cash balances of $455 million at end 2015 and a 2019 maturity on the Company's bond provide a robust basis from which to navigate a period of low oil prices
- The majority of planned 2016 KRI activity and capital expenditure is discretionary, which confers significant flexibility against a backdrop of low oil prices