Genel Energy intends to launch a farm-out process on its exploration acreage onshore Somaliland in the third quarter as “significant hydrocarbon potential” has been uncovered by seismic work.
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The Anglo-Turkish independent is looking to attract suitors to reduce its capital outlay on a planned exploration drilling campaign after a number of leads and prospects were identified from 2D seismic data acquired last year on its SL-10-B and SL-13 blocks, in which it holds a 75% operating stake in both.
“A number of potentially high-impact exploration targets have been identified within play types directly analogous to the prolific Yemeni rift basins,” the London-listed company said in its first-half results statement.
It added seismic processing “confirms the longstanding view that the block has significant hydrocarbon potential”, with the company looking to drill an initial exploration well in 2020.
Genel now intends to determine potential resource volumes for drilling prospects before initiating the farm-out effort late in the current quarter. It has previously estimated the two blocks could hold total oil resources of more than 1 billion barrels.
The company also holds a 50% stake in the Odewayne block onshore the north-east African Republic of Somaliland with seismic processing work ongoing in the tract that is tagged as having similar resource potential of 1 billion barrels.
Genel disclosed it also intends to start a farm-out process on its Sidi Moussa block off Morocco, in which it holds a 75% operating stake, in the first quarter of next year after completing licence obligations including a 3D seismic survey carried out last year.
The company further stated it “continues to actively pursue growth and is assessing opportunities to make value-accretive additions to the portfolio” after recording cash flow of $75.6 million in the first half, supported by strong production from the DNO-operated Tawke licence in Iraqi Kurdistan in which it holds a 25% stake.
The figure, which included a delayed $19 million payment from the Kurdish authorities recorded after the period, was up from $70.1 million a year ago and leaves Genel with a cash pile of $390 million as of 5 August.
Its first-half revenue of $194.3 million increased from $161.1 million in the same period of 2018, with operating profit of $91.9 million up from $73.3 million to put the company on course to reverse a full-year loss in 2018 of $254.6 million.
Genel also expects to deliver “material cash flow” in the second half even as investments increase, with capital expenditure for the full year targeted at the top end of a range between $150 million and $170 million as spending more than doubled in the first half to $72.2 million from $34.1 million a year ago.
Chief executive Bill Higgs said “this cash generation, and our strong balance sheet allows us to both increase investment in growing the business as well as returning cash to shareholders via dividends”, though he added capital discipline remained a priority.
Genel is engaged in developing the first phase of the Sarta block in Kurdistan, due on stream in mid-2020, after acquiring a stake from US operator Chevron earlier this year and also aims to drill a well next year at its operated Qara Dagh block in the region acquired in the same deal.
Furthermore, the company remains in talks with the Kurdistan Regional Government (KRG) on commercial terms for a development of the Bina Bawi oilfield and Miran gas field in the autonomous region of northern Iraq.
Genel is now seeking approval from the KRG for a commercial proposal entailing joint funding with the latter of future midstream gas infrastructure as well as the Bina Bawi field development plan.
It would then commission a front-end engineering and design study for the award of an engineering, procurement, construction, installation and commissioning contract relating to the midstream development, based on funding from the Bina Bawi oil development.
The company, which owns a 100% operating stake in both fields, said: “Negotiations between Genel and the KRG are ongoing regarding commercial terms for a staged and integrated oil and gas development.”
Genel, which wants to use revenue from Bina Bawi oil output to fund full-scale gas production from a phased project with Miran, said it is “increasingly confident” that construction on Bina Bawi could start next year.
Higgs was quoted by Reuters as saying that commercial terms could be agreed by April 2020.