Genel Energy 'comfortable' with risk profile of operating in Iraqi Kurdistan

London-listed Genel Energy on March 15 maintained its 2022 output guidance at roughly the same level as the 2021 average of 31,710 b/d and said it continued to see bright prospects in Iraqi Kurdistan despite a dispute with authorities over the termination of two production-sharing contracts.

In an earnings call, Genel CEO Bill Higgs said the company was maintaining good relations with the Kurdistan Regional Government and that both sides have been able to compartmentalize their arbitration over the Bina Bawi and Miran oil fields without affecting other areas of cooperation.

"We are certainly comfortable with the risk profile of operating in Kurdistan," Higgs said, noting that Genel has operated in the region for 20 years.

Genel is pursuing compensation for the KRG's termination of the production sharing contracts at the two fields, through London-seated international arbitration.

The dispute revolves around the delayed development of the fields, which has been in the works since at least 2014 with several amendments to the original agreement.

In other parts of Kurdistan, Genel said it was seeing promising results from its newly producing Sarta field, which is offsetting a decline at the Taq Taq field.

Genel is the operator at Sarta, holding a 30% stake alongside Chevron and the regional government. The company said it was appraising the field's full potential with new exploratory wells and testing operations.

At Taq Taq, Genel said it hoped to resume drilling in the second half of 2022.

Production at Tawke, including from the Peshkabir field, "remains robust", Genel said. The operator of the development, Oslo-listed DNO, was expected to boost drilling, to support output of about 105,000 b/d in 2022.

In East Africa, Genel and Taiwanese oil company OPIC are developing an exploration plan for a license block in Somaliland, aiming to drill the first well in 2023. OPIC, a subsidiary of Taiwan's CPC, farmed into the license block in December for a 49% working interest.

Genel officials said the new oil prospects were extremely promising.

"We have a feeling that the stars are aligning for Somaliland," Paul Weir, Genel's chief operating officer, said on the earnings call.

Like many oil companies, Genel has benefited financially from the rise in crude prices over the past several months, with its revenue doubling in 2021, though it still ended the year at a loss. The company expects free cash flow of over $250 million expected in 2022, if Brent averages $90/b.

Even so, it is maintaining its capital expenditure guidance of between $140 million and $180 million for the year.