News Column

Genel Energy Profit Hit By Higher Costs Despite Jump In Production

August 5, 2014

Tom McIvor

LONDON (Alliance News) - Genel Energy PLC Tuesday said its pretax profit fell in its first half as higher revenue and production was offset by a significant increase in costs.

The oil and gas exploration and production company said its pretax profit fell 35% to USD70.7 million for the six months ended June 30 from USD109.1 million the previous year.

The company said revenue jumped 20% to USD192.1 million from USD160.6 million, as production attributable to Genel increased by over 50% to 63,000 barrels of oil equivalent per day.

Genel said its production increases resulted from continuing development at the Taq Taq and Tawke Fields in the Kurdistan region of Iraq, in which the company has interests.

The Taq Taq site, of which Genel holds 44%, averaged 92,000 barrels of oil per day during the half year, with 113,000 barrels per day during June. The Tawke field, of which Genel holds 25%, averaged 84,000 barrels of oil per day in the half, with 116,000 barrels per day in June.

Production was also boosted by the opening of the major KRI-Turkey pipeline, and Genel said it expects production to increase further in the second half as sales become regular and payments predictable.

However, the company said its cost of sales increased by 58% to USD97.6 million in the first half due to broadly expected depreciation and a doubling in production costs on the back of additional maintenance programmes and higher transportation and handling costs at Taq Taq, together with additional consumables expensed at the Tawke field.

In July, Genel said its operations in the Kurdistan region of Iraq remain safe and secure despite the ongoing conflict there and on Tuesday the company reiterated this point.

Iraq is facing a crisis as insurgents from a group called the Islamic State in Iraq and the Levant have taken control of the major Iraqi cities of Mosul and Tikrit and are in fierce combat with the Iraqi army and Kurd fighters.

"Operational momentum in the KRI is increasing, with the opening of the KRI-Turkey pipeline resulting in a significant rise in our production. Whilst we continue to monitor the situation closely, our operations in Kurdistan have been unaffected by events elsewhere in Iraq," Chief Executive Tony Hayward said in a statement.

The company also maintained its full-year production guidance at between 60,000 and 70,000 barrels of oil equivalent per day, maintained its revenue guidance at between USD500 to USD600 million and maintained capital expenditure guidance at USD550 to USD600 million.

Genel shares were down 1.4% to 953.25 pence on Tuesday.

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Source: Alliance News

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