Genel oil output from Kurdish assets falls 7% in H1, as company eyes Africa for growth

London-listed Genel Energy, which operates in the Kurdistan region of Iraq, reported a 7% fall in crude oil output in the first half of 2022 due to declining rates at some of its producing assets as it looks to tap new reservoirs in Africa, it said in an earnings report Aug. 2.

Net production for the first six months of 2022 from the Tawke, Taq Taq and Sarta fields in Kurdistan reached 30,420 b/d from 32,760 b/d for the same period of 2021.

The fall in output was due to "ongoing declines at our mature producing fields and pilot production at Sarta falling due to interference between wells having a negative impact," Genel said in its disclosure to the London Stock Exchange.

Genel holds a 25% working interest in the Tawke concession, a 30% stake in Sarta and is a joint operator with 44% rights to Taq Taq.

The company maintains a production guidance of 30,000-31,000 b/d for 2022, unchanged from 2021.

Well testing at Sarta-5 was disappointing due to poor reservoir quality, the company said.

Kurdish potential

Genel is considering exploration in the southeastern potion of the license following potential seen in the Najmah reservoir.

It plans to resume drilling at Taq Taq, where production is "at the top end of expectations". The company plans to spud a well at the field around the end of 2022, tapping into higher margins for the play.

"Tawke drilling continues apace, and we look forward to drilling a well at Taq Taq in the second half of the year," CEO Paul Weir said.

"We have evolved into a fully-fledged operator through taking on the operatorship of Sarta," he said. "We continue to work on improving production and we will learn more through our ongoing appraisal campaign from the results of Sarta."

Genel, which holds a 40% interest as an operator in the Qara Dagh field in the KRG, is currently evaluating potential from the QD-2 well that was spudded. A decision on license will be taken later this year, it said.

African expansion

The company also has set its eyes on assets in Africa, with preparations underway for drilling of a well in the "highly prospective" SL10B13 block in Somaliland. Early estimates suggest potential of around 100 million-200 million barrels.

"We are excited by the opportunity that Somaliland presents. It is a geography that ticks all of the right boxes for new drilling. It is highly prospective, with geology analogous to prolific Yemen basins," Weir said.

Genel is also set to sign an agreement with Morocco's National Office of Hydrocarbons and Mines for a license to operate the Lagzira block.

A farm-out campaign is expected to start later this year, according to the company.

Genel's spending in the first half of the year rose 28.3% to $74.7 million. Producing assets have the greater share of the capex at $41 million, with the remainder allocated to those at pre-production stage. Of the overall spend, $27 million will be channeled into the Sarta development, the company said.

Genel's revenue for the first half rose 61.8% to $246 million in spite of output declines due to higher crude oil prices.

Production costs rose 9% to $24 million in the first six months of the year, with cost per barrel at $4.4/b from $3.7/b for the same period last year.

"Both increases have been caused principally by lower production," the company said.