Genel Cuts 2015 Oil Output Forecast on Iraq Payment Delays

Genel Energy Plc, an oil producer in Iraqi Kurdistan, reduced its output forecast for this year after suffering delays to payments for its exports.
The London-based company said Tuesday it expects to pump 85,000 to 90,000 barrels a day in 2015, compared with a previous forecast of 90,000 to 100,000. It also lowered guidance for spending and revenue. Shares of the company dropped 5.8 percent. Oil producers in Kurdistan including Genel, Gulf Keystone Petroleum Plc and DNO ASA have been caught for years in a spat over revenue-sharing between the regional authorities and Iraq’s federal government. In December, both parties agreed to allow increased oil shipments, yet payment eluded the companies until last month as the oil-price slump and the costs of fighting Islamic State militants put pressure on government resources.
“Given the payment situation has been irregular, we stopped investing in the drilling of the fields,” Genel’s Chief Financial Officer Ben Monaghan said in a phone interview. “Inevitably with conventional oil fields, if you stop investing, the production will begin to decline.”
Spending Cut
The Kurdish authorities resumed payments to oil companies in September. Genel said in a separate filing Tuesday that partners in the Taq Taq oil field received a gross payment of $30 million for exports, of which its own share was $16.5 million, matching the amount received last month.
Shares of the company pared a loss of as much as 9.6 percent following confirmation of the payment, and traded 5.8 percent lower at 315.75 pence as of 10:45 a.m. in London.
The company is still awaiting a payment for its share of the Tawke field which should be “imminent,” Andrew Benbow, a Genel spokesman said. Genel received a payment of $8 million for its share in the Tawke field last month.
“The reduction of production at Taq Taq and Tawke in the current uncertain political context in Kurdistan is an issue,” FirstEnergy Capital LLP wrote in an e-mailed note. “We appreciate this is likely to be a way to put pressure” on the Kurdish authorities to boost payments, it said.
Genel lowered its capital-expenditure forecast for this year to $150 million to $175 million from previous guidance of $150 million to $200 million. The company also narrowed its forecast range for 2015 sales to $350 million to $375 million from $350 million to $400 million, based on a Brent price of $50 a barrel in the fourth quarter. Brent is currently trading at about $48.50.