Genel Energy has announced a definitive agreement with the Kurdistan Regional Government (KRG) relating to unpaid entitlements for past oil sales from the Taq Taq and Tawke fields. The company's shares were trading up 7 percent on Thursday morning.
Cash flow is expected to be materially enhanced over the course of the agreement, delivering significant value creation for all stakeholders.
A Receivable Settlement Agreement ('RSA') has been signed between Genel and the KRG, with a Tawke Production Sharing Contract ('PSC') Amendment also being executed.
In return for cancelling and waiving its rights to outstanding receivables relating to unpaid entitlements for past oil sales, Genel will benefit from the following:
- In addition to proceeds for current sales, Genel will receive 4.5% of Tawke gross field revenues for the five year period from 1 August 2017 to 31 July 2022 ('the Genel Override')
- Genel's capacity building payments ('CBP') on the profit share element of its Tawke entitlement will be eliminated over the entire life of the Tawke field
- The KRG has agreed with all audit adjustments on the petroleum costs on the Tawke PSCs and on Genel's share of petroleum costs in the Taq Taq PSC for the period up to 31 July 2017
- Outstanding production bonuses and PSC liabilities on the Taq Taq and Tawke fields totalling c.$30 million net to Genel have been set off against the receivable and as a result are no longer payable
Under the previous mechanism for repaying the receivable, Genel received its pro-rata share of 5% of monthly field revenue from the Tawke field, which was liable for CBP. This mechanism will terminate effective 1 August 2017.