Agreement for development of Miran and Bina Bawi
13 November 2014
Genel Energy plc
Agreement with MNR for development of Miran and Bina Bawi
Agreement reached for acquisition of Bina Bawi stake from OMV
Genel Energy plc ("Genel" or "the Company") is pleased to announce that it has reached an agreement with the Ministry of Natural Resources ("MNR") of the Kurdistan Regional Government ("KRG") for the development of the Miran and Bina Bawi gas fields.
In addition, Genel has agreed key terms with OMV to acquire its 36% operated stake in the Bina Bawi gas field. The total consideration will be $150 million in cash. An initial payment of $20 million will be paid on completion of the deal, with the remaining $130 million paid in two instalments after first gas. This is subject to finalisation of documentation and OMV's corporate approvals.
The agreement with the MNR for the development of Miran and Bina Bawi states that:
- The Miran and Bina Bawi fields are to be combined under one Production Sharing Contract ("PSC"). This is expected to be approved by year-end 2014. Following approval, Genel will become the sole contractor and have a 100% equity interest in both fields
- The responsibilities of Genel will be drilling of the gas wells and installation of flowlines and first stage condensate separation at Miran and Bina Bawi. The Company will also be responsible for the development of the oil resources at Miran and Bina Bawi
- The KRG will assume responsibility for the gas treatment facilities and gas offtake arrangements from the fields
- The tender process for the gas treatment plant will commence in the first half of 2015 and first gas production for export will commence in H1 2018. The KRG also has an option to request gas for domestic consumption commencing in 2016
- Genel's entitlement will be 100% of oil revenues until all licence back costs are fully recovered. The Company's share of oil revenues will then revert to 50%. First oil production is expected in 2016
- Genel will also receive 100% of the revenues for condensate extracted at first stage separation and a fee of $0.78 per thousand cubic feet for the raw gas delivered into the gas treatment facilities
The Company expects that a final investment decision for the development of the fields will be made in H1 2015.
Genel's current estimate of combined gross mean raw gas resources at Miran and Bina Bawi is 11.4 trillion cubic feet ("tcf"), which is expected to deliver gross mean sales gas of 8.4 tcf. Combined gross mean oil resources at Miran and Bina Bawi are now estimated at 34 mmbbls, with combined gross mean condensate resources from first stage separation estimated at 45 mmbbls. Gross contractor capital investment for oil and gas is estimated at $3.3 billion, which represents a unit development cost of less than $2/boe. Unit opex is estimated at less than $1/boe.
The benefits to the KRG from these agreements are as follows:
- Commercialisation of a major onshore, low-cost, gas resource which will generate significant revenue and value for the people of the Kurdistan Region of Iraq ("KRI")
- The option for early gas production into the domestic market, which stands to be an important contributor to industrial and economic growth
- The ability to fulfil export commitments to Turkey under the Gas Sales Agreement signed in November 2013
The benefits to Genel are as follows:
- The new structure will deliver attractive life of field returns and unlock significant value in Genel's gas business
- One PSC covering Miran and Bina Bawi simplifies the structure of the gas business
- Acquiring OMV's Bina Bawi interest will consolidate the ownership structure across both fields, streamline project management and provide flexibility in meeting development goals
- Gross contractor capital investment to first gas is reduced to c.$1 billion for the combined Miran and Bina Bawi developments
- Drilling activity and investment phased from 2016 onwards
Tony Hayward, chief executive of Genel Energy, said:
"These agreements represent a win-win in the commercialisation of Miran and Bina Bawi. It materially de-risks the value of Genel's gas business, gives attractive project returns while significantly lowering our capital exposure, and provides revenues from early oil production. For the KRG, it unlocks the Miran and Bina Bawi gas resource and will enable it to satisfy domestic gas demand and its obligations under the KRG-Turkey Gas Sales Agreement. We are proud to be playing a key role in the next phase of the development of the KRI oil and gas sector."
For further information, please contact:
Julian Metherell, Chief Financial Officer
Phil Corbett, Head of Investor Relations
Andrew Benbow, Head of Public Relations
|+44 20 7659 5100|
+44 20 7016 9573
Notes to editors:
Genel Energy is an independent oil and gas exploration and production company listed on the main market of the London Stock Exchange (LSE: GENL). The company, with headquarters in London and additional offices in Ankara and Erbil, is the largest independent oil producer in the Kurdistan Region of Iraq and, through value-accretive acquisitions, is building a high-impact exploration portfolio within the Middle East and Africa. For further information, please refer to www.genelenergy.com.
This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil & gas exploration and production business. Whilst the Company believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy. Accordingly no reliance may be placed on the figures contained in such forward looking statements.