Genel and DNO secure ‘landmark’ oil payment deals in Kurdistan

Jon Oronero
Aug 25, 2017 · 2 min read

Genel Energy and DNO of Norway, two of the big foreign oil producers in the semi-autonomous Kurdistan region of Iraq, have reached what they have described as “landmark” agreements with the local government to settle payments they were owed for exports of crude.

The companies were owed sizeable sums by the Kurdistan Regional Government, dating from a period between mid-2014 and the third quarter of 2015 when officials in the region’s capital Erbil were struggling to balance the books against the crash in oil prices. At the same time, Iraq’s central government in Baghdad was withholding budget payments to the KRG, which was also having to divert resources towards the fight against Isis. Monthly payments to foreign oil companies started again in autumn 2015 and have been regular since then but London-listed Genel was owed what it describes as “receivables” of more than $471.2m. DNO said in its half-year results on Thursday that it was carrying $58m on its balance sheet at the end of June in relation to sums owed in exchange for exports from its Tawke oilfield in Kurdistan.

The Oslo-based company has accepted a further 20% stake in the Tawke field, which was previously held by the KRG, to settle the outstanding sums, taking its overall holding in the licence to 75%. Genel owns the remaining 25%. DNO will also receive an additional 3% of revenues from the licence each month from the KRG for five years, which the company said would boost its balance sheet and future cash flow. Genel will receive an additional 4.5% of revenues from the field for five years and will no longer have to make capacity building payments, which amount to a tax on production, on its profits from Tawke for the life of the project. Murat Özgül, chief executive of Genel, said the deal would “significantly” increase cash generation from the Tawke field over the next five years. “This definitive agreement is the positive culmination of a constructive dialogue with the KRG, and promises to generate value for all stakeholders,” he said.

The agreements were seen as positive after a difficult couple of years for Kurdistan-focused explorers and Genel in particular, which has twice had to downgrade its estimate of how much oil can be extracted from another field in the region, called Taq Taq. Tony Hayward, the former chief executive of BP, and City financier Nat Rothschild, who built Genel into the company it is today and once expected it to reach the FTSE 100, both departed its board this year.

Source: Nathalie Thomas for the Financial Times

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