UK’s oil producer Genel Energy said it reached a final agreement with Iraq’s Kurdistan Regional Government (KRG) to settle unpaid revenues.
In the settlement, Genel Energy will receive a 4.5 per cent of Tawke gross field revenues for a five year period from August 1 2017 to July 31 2022.
“Cash flow is expected to be materially enhanced over the course of the agreement, delivering significant value creation for all stakeholders,” Genel said in a statement about sales from Tawke.
Additionally, Genel’s capacity building payments on the profit share element of its Tawke entitlement will be eliminated over the entire life of the Tawke field. KRG 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 around US$30 million net to Genel have been set off against the receivable by KRG.
"A key part of our strategic focus in 2017 was the acceleration of the recovery of the receivable for unpaid oil sales, and this agreement successfully achieves this through significantly increasing cash generation from the Tawke PSC over the next five years,” said Murat Özgül, chief executive of Genel.
“This definitive agreement is the positive culmination of a constructive dialogue with the KRG, and promises to generate value for all stakeholders.”
Tawke and Taq Taq unpaid invoices for June and July 2017 are expected to be paid in September and October 2017 respectively, in line with the payment track record established by the KRG during 2017.
Tawke field gross production has averaged 109,000 barrels of oil per day in the year to 31 July 2017, with Brent prices averaging $51 per barrel. Assuming similar production and oil prices over the period from 1 August 2017 to 31 December 2017, the Genel Override would generate proceeds of c.$30 million and the Tawke CBP elimination would result in c.$12 million of savings in the period, Genel said.
Seperately, KRG also settled outstanding debt to oil and gas producer DNO.
KRG gave DNO a 20 per cent interest in Tawke, pushing the Norwegian firm’s total stake to 75 per cent for the license containing the Tawke and Peshkabir fields.
DNO will also receive three percent of gross license revenues each month from KRG over a five-year period as part of the settlement, effective August 1.
"The government is very pleased with the productive and cooperative approach taken by both DNO and Genel in these negotiations, and looks forward to working with them to maximise revenues and to optimise potential reserves of the Tawke and Taq Taq license areas," KRG said in a seperate statement. "We believe that this initiative will convey a strong positive message to the investors that the Government is fully committed to a robust win-win partnership with all the International Oil Companies operating in Kurdistan."