Genel Energy confident of Kurdish payments after full year losses

Genel Energy, the Iraqi oil producer led by former BP chief Tony Hayward, extracted 58% more oil in 2014 than the year before and expressed its confidence that delayed payments from the Kurdistan regional government will resume shortly.

The company, listed among the small caps on London's main market, produced 69,000 barrels of oil per day in 2014, the upper end of the company's guidance but in line with market expectations.

A non-cash exploration write-off of $477m from drilling offshore Malta, Angola and Morocco, reversed the previous year's profits to a $314m net loss, which was higher than analyst forecasts.

But Hayward said the delayed payments from the autonomous Kurdish regional government (KRG) were expected to resume "as we move through 2015" after the Iraqi budget was passed into law in February, which gave a strong boost to the shares on Thursday.

Results showed trade receivables at the year end of $232.9m.

"In the first quarter of 2015 we have stepped up the domestic monetisation of our KRI production," Hayward said.

"Given that this production is amongst the lowest-cost in the world, and domestic realisations strong, this provides a significant interim source of revenue until predictable export payments are in place. "

Hayward forecast production would rise by 40% in 2015 and said management was also focused on the importance of a robust balance sheet, which allowed spending on growth at the Iraqi producing assets Taq Taq and Tawke.

Cash balances at the year end stood at roghly $490m, down from $660m three months before, and capital expenditure for 2015 was reiterated at $200m-$250m, a 70% reduction from 2014.

Analyst Jamal Orazbayeva at broker Westhouse Securities said he saw the update as neutral but noted that, in order to provide cash directly to contractors during the transition and regular payments for exports, the KRG has implemented a temporary domestic market sales channel under which contractors receive 50% of domestic sales proceeds.

"This has run for Taq Taq through February 2015 at $40-45 per barrel domestic price (equivalent to $50/b less transportation tariffs) and these domestic prices will be revised monthly in line with movements in international benchmarks."