Genel Energy Boosts Stake in Miran to 51%, Likely to Buy Out Remainder

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Researched by Industrial Info Resources (Sugar Land, Texas)--Genel Energy PLC (Ankara, Turkey) (LN:GENL), an Anglo-Turkish oil company that focuses on Iraqi Kurdistan operations, announced a deal to acquire a 26% stake in the Miran license from Heritage Oil (Jersey, United Kingdom) (LN:HOIL) for $156 million in cash. With the agreement, Genel's interest will increase from 25% to 51%. Genel will become joint operator. A separate loan agreement between the two companies should also allow Genel to acquire Heritage's remaining 49% stake for a further $294 million at some point later this year.

The Miran Block covers about 1,105 square meters in the southern part of Kurdistan. The Miran structure lies about 65 kilometers from the Kirkuk oilfield and 60 kilometers from the Taq Taq field. The Miran block contains a large resource of 800 million barrels of oil equivalent, which is 80% gas. Commercialization of the block through the domestic market is planned after 2013. The company also plans to begin exporting gas to Turkey in 2017.

"The investment will enhance our position as the leading oil and gas company in Iraqi Kurdistan," said Tony Hayward, Genel Energy's CEO. "At the same time, we have expanded our footprint with the acquisition of our first exploration licenses in Africa. With our operations in the Kurdistan region self-financing, we have $1 billion available to invest in new opportunities and are actively exploring a number of compelling opportunities in the Middle East and Africa."

On deal completion, Genel agreed to donate $30 million to local projects over the next three years, which was requested by the Kurdistan regional government. In early August 2012, Genel has announced the acquisition of an additional 21% in the Bina Bawi exploration block in Iraqi Kurdistan from Hawler Energy for $240 million. Earlier this year, Genel also bought an initial 23% stake in the license for $175 million.

"If you're a believer in Kurdistan's hydrocarbon potential and that the political risks are likely to diminish over time, then this could prove to be very attractive business over time," said Phil Corbett, an analyst at Deutsche Bank in London.

First Half Results

Separately, Genel Energy reported a first half pretax profit of $22.3 million on revenues of $123.1 million. According to financial statements, revenue was generated entirely from domestic sales at $55 to $60 per barrel, resulting in an operating cash flow of $82.4 million.

On April 1, 2012, the Kurdistan regional government instructed contractors operating in the Kurdistan region to halt the export of crude oil. Consequently, since then, there have been no exports from either of Genel's two producing fields, Taq Taq and Tawke. This contrasts to the first half of 2011, when Genel was exporting. If there are no export sales for the rest of the year, average daily production for the full year is expected to remain at 40,000 barrels of oil per day or even rise further. Genel plans to complete seven high-impact wells in the second half of this year, targeting more than 650 million barrels of oil equivalent of unrisked resource potential.

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