Saudi Arabia - joining the dots

A series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy

AIM - Assets In Market

AIM - Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum

Iran negotiations - is the end nigh?

Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum

Yemen: The Islamic Chessboard?

Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum

Acquisition Criteria

Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum

Valuation Series

Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum

Showing posts with label DNO. Show all posts
Showing posts with label DNO. Show all posts

Thursday 28 May 2020

The Kurdish Crush


The Kurdistan producers are in a tough spot brought about by COVID-19 and the collapse in oil prices. Earlier this year, the KRG said it would delay payments in respect of October 2019 to February 2020 deliveries as its cash to pay producers was stuck in a Lebanese bank account with the bank itself facing liquidity issues.

The KRG had struck a deal to pay producers for the backlog later in 2020. Payments in respect sales from March 2020 were not affected and continue to be paid. However at the current low oil prices, payments to producers have slumped.

Tawke: Received USD8.5 million for April deliveries split between partners DNO and Genel. This compares to the March payment of USD34.6 million.

Taq Taq: Received USD1.9 million, down from USD4.6 million in March with Genel's net share of the payment being USD1.1 million.

Shaikan: Gulf Keystone had submitted an invoice to the KRG for a nil amount as the realised price was negative with the Shaikan crude/transportation discount being below Brent.

Saturday 22 June 2019

Kurdistan steps up efforts to eliminate gas flaring


The Kurdistan Ministry of Natural Resources ("MNR") has asked the Shaikan field partners (Gulf Keystone and MOL) to re-submit a revised FDP for the field to address additional MNR requests on gas management.

The next well planned on the field will now be used to assess the feasibility of gas reinjection into the Jurassic formation, rather than as an originally planned Jurassic production well.

Whilst a key driver to be reservoir management and ultimate recovery rates, it is noted that the MNR is keen to eliminate flaring in Kurdistan.

Gulf Keystone has previously stated that the elimination of gas flaring is the single most complex and expensive component of the field’s development, and additional gas-handling capacity would be required to handle the gas-rich light oil in the underlying Triassic reservoir.

At nearby DNO’s Tawke field, work is scheduled to begin later this year on building the gas-gathering and processing facilities to enable reinjection of Peshkabir’s associated gas into the Tawke field, to reduce flaring and increase the latter recoverable reserves; this gas-gathering and injection system is forecast to be operational in early 2020.

Monday 17 June 2019

Dry well in the Barents near Korpfjell


The 7335/3-1 exploration well on Production Licence 859 has drilled a dry well.

The partners on the licence are: Equinor 65% operator, Lundin 15%, DNO 20%.

The licence lies in the Barents Sea and the 7335/3-1 well is located c.8km southeast of the Korpfjell gas discovery.

Both the primary and secondary exploration targets encountered sandy and poor reservoirs. The well was drilled by the West Hercules drilling rig to 4,268m below the sea surface and water depth was 239m The well has not been permanently plugged and abandoned.

The West Hercules rig will now move to drill a wildcat well 7324/6-1 in PL855 in the Barents Sea.

Tuesday 4 December 2018

Brasse's growth halts as Faroe's Rungne well disappoints

Faroe announced in November that the Rungne well came in disappointing with only sub-commercial levels of gas found. Although encountering hydrocarbons, the estimated volumes of 12-57bcf gas and 0.5-3.9mmboe condensates will mean the discovery is non-commercial on a standalone basis. Nevertheless it could form a future tie-back to Brage or Oseberg.

Faroe's exploration programme continues with Brasse East which could be another chance for Faroe to grow the Brasse Area prior to taking FID. Faroe is currently going through concept selection for the field with two potential hosts: Brage or Oseberg.

Related posts:

Thursday 2 August 2018

All Tawke on Peshkabir: Is Tawke production declining?


The Tawke PSC encompasses the Tawke and Peshkabir fields. In 2017, operator DNO commenced production at Peshkabir and in 2018, drilled the Peshkabir-4 and -5 wells taking production up to 30-35mbopd.

However, the limited disclosure by DNO means it is difficult to break out the production on the Tawke PSC between the Tawke and Peshkabir fields. Based on various disclosures between DNO and partner Genel, it appears that production at Tawke is declining, masked by an uptick in Peshkabir.

The Tawke PSC has been producing just c.110mbopd. However closer study reveals that Peshkabir production is now compensating on falling production on the main Tawke field, and hence maintaining the c.110mbopd levels across the PSC.



Although more production history is required, there are now concerns of the problems encountered at TaqTaq by Genel where reserves and production were significantly reduced as water started to be produced from the reservoirs.

#Tawke #Peshkabir #TaqTaq #waterbreakthrough #Kurdistan #DNO #Genel

Thursday 24 May 2018

Kurdistan uncertainty: imposing higher export charges

All’s well in western Kurdistan
DNO export payments

Kurdistan operators received payment for January crude exports in April. The increasing oil price should feed through into the payments over the next few months as operators get paid for sales made in Q1 2018.

However just as the improving oil price is about to kick in, it appears that Kurdistan is looking to reap some of the benefits back from the operators. In April 2018, DNO disclosed that the discount to Brent on its Tawke crude had increased from USD12/bbl to USD13.15/bbl. This has been dressed up as an increase in the transportation tariff and quality discount, although this may mask the underlying reason for the increase driven by desire of the KRG to extract more money.

Despite increasing record of payments, Kurdistan remains an uncertainty for oil & gas companies with upcoming elections in Federal Iraq and ruling on the legality of crude exports from the region. Surprises of sudden increases in export tariffs do not help its case either.

We also question the ability of Kurdistan to maintain payments to operators given its accumulated debts, particularly to civil servants and Peshmerga, as well as the loss of export revenue from the disputed Kirkuk fields.

Related links:

Wednesday 18 April 2018

Kurdistan E&Ps get paid for January sales

Genel has announced that the Tawke and Taq Taq partners have received payment from the KRG for January oil sales.

  • The Tawke partners (DNO 75% and Genel 25%) have received USD56 million and will also share in a USD13 million overriding payment
  • The Taq Taq partners partners received USD8 million this month
The continuing payments by the KRG is constructive for sentiment and critical in bringing interest and investment back into the region. Many E&Ps have held off investing in the country with payments being a big concern. While the continuing payments are clearly positive, questions remain on the longer term ability of the KRG to pay producers given loss of crucial income following the referendum with the taking back of the Kirkuk area by Baghdad. For now the KRG is managing, largely with the help of investment/cash injection by Rosneft at the end of large year.

Monday 12 March 2018

All’s well in western Kurdistan


The western part of Kurdistan appears to be holding up following the referendum last autumn. Although there is much to do to reconcile the fragile relationship between Federal Iraq and the Kurdistan region, things for now appear to have stabilised – however upcoming elections in both is limiting any meaningful progress with political candidates not willing to make any bold reconciliatory moves to avoid alienating voters.

The operators in western Kurdistan continue their business. They are getting paid by the KRG although the ability to maintain payments given loss of Kirkuk revenues, which has been reclaimed by Federal Iraq, remains in question. Exports through the Fishkabour-Ceyhan pipeline has not been interrupted despite threats last summer by the Turkish to halt exports through the pipeline if the referendum went ahead – that threat has not been followed through by action luckily for Kurdistan where oil exports remains its financial lifeline.

Based on our discussions with operators, the key constraint to operations is staff and supplies. With the regional airport closed, it has been difficult to get the right manpower and supplies to the oil fields. Transportation is currently from Turkey or from Baghdad. 


Sarsang (HKN 37% operator, KRG 25%, Marathon 20%, Total/Maersk 18%)
Total has taken over Maersk’s stake in the light oil field following the acquisition of Maersk; it may consider divesting the interest given lack of obvious synergies with the wider global portfolio and presence in Federal Iraq. At the end of last year, the field was producing at 15mbbl/d and will be continuing to ramp-up this year potentially reaching 30mbbl/d by year end.

Atrush (TAQA 39.9% operator, Shamaran 20.1%, Marathon 15%, KRG 25%)
First production was achieved in July 2017 and production has ramped up to c.26mbopd. The Phase I facilities are complete with five producers drilled and well capacity of over 40mbopd, although production is currently constrained by facilities at 30mbopd. 2P of 103mmboe and 2C of 304mmboe at the end of 2017 – further conversion of resources into reserves as more wells are drilled and further phases of the development are defined. 

The export pipeline from Atrush to the KRG pipeline is operational and the Atrush oil sales agreement was renewed in February 2018 with crude selling at Brent less USD15.73/bbl including quality discount and transportation costs.

With further appraisal work, debottlenecking and expansion of the development, production could reach 100mbopd.

Source: Shamaran February 2018 investor presentation


Shaikan (Gulf Keystone 58% operator, KRG 27.5%, MOL 14.5%)
Production in 2018 is expected to be 27-32mbopd. Subject to continued payments, Gulf Keystone would look to invest in additional wells and capacity this year to take production capacity up to 55mbopd.

In January 2018, Gulf Keystone signed a new oil sales agreement with the KRG at a price of Brent less USD22/bbl including quality discount and transportation costs. Shaikan crude is largely trucked to Fishkabour for injection into the export pipeline to Ceyhan. Shaikan should begin exporting via the Atrush tie-in pipeline shortly which will reduce trucking requirements and reduce netbacks.

Ain Sifni (Hunt Oil 80% operator, KRG 20%)
Production continues to hover around 10mbbl/d and the operator continues to progress the development which could see production grow to 30mbbl/d. Crude is currently trucked to Fishkabour for injection into the export pipeline to Ceyhan. As production grows, Ain Sifni production could also tie into the Atrush export line.

Thursday 15 February 2018

Kurdistan players receive payment for November exports

Genel Energy and DNO have received payment from the KRG for November oil sales.

DNO received USD54.73 million for crude oil deliveries to the export market from the Tawke. The funds will be shared by DNO and Genel pro-rata to the companies' interests in the licence (75% DNO/25% Genel). Separately, a payment of USD4.7 million was received by DNO, representing 3% of gross Tawke licence revenues during November, as provided for under receivables settlement agreement from August 2017.

The Taq Taq partners have received a gross payment of USD11.05 million, with Genel's share of the payments being USD6.08 million.

Monday 22 January 2018

Kurdistan payments and new oil sales agreements

Kurdistan producers receive payment for October sales
Gulf Keystone signs new oil sales agreement with the KRG

DNO has reported a payment of USD54 million for Tawke production from the Kurdistan Regional Government. This is in respect of October oil deliveries. The payment will be shared between the licence partners WHO 75% and Genel 25%. Although there is a lag in payments between production and receipt, this is viewed as normal with October sales invoiced in November and approval by the Government in December with payment the following month. The continued stream of payments demonstrates the importance of oil exports to Kurdistan, especially following the independence referendum last year which threw doubt on the region's ability to carry on managing its finances.

In December, DNO reported production from its two field on the Tawke PSC averaged 110mbopd. Production is expected to climb from these levels as operations ramp up at the Peshkabir field. With higher oil prices and continued payment, DNO could begin to undertake infill drilling on the PSC later this year.

Last week, Gulf Keystone also announced that it had agreed a new PSC-linked oil sales agreement with the Government for its Shaikan crude, reinforcing continued progress in the region around oil company activities. Under the agreement, the KRG agreed to buy crude at Brent less USD22/bbl reflecting a quality discount and transportation costs. Kurdistan crude has historically been marketed following a SOMO (Federal Iraq’s State Organisation for marketing of Oil) formula which provides for a discount of c.USD0.4/bbl of API quality. With Shaikan crude at 18˚ (vs. Brent 38˚) suggesting a USD8/bbl discount plus pipeline export costs to Ceyhan estimated at USD4/bbl, the USD22/bbl discount agreed with the KRG seems to be extremely high. This is likely due to additional discounts on Kurdistan originating crude, where the international buyer community could be thin, resulting from political sensitivities of taking on crude from the disputed region.

Tuesday 16 January 2018

Norway awards record 75 exploration licences in 2017 APA

Norway has awarded a record number of 75 exploration licences in the APA 2017 licensing round to 34 companies. The licences comprised 45 in the Norwegian North Sea, 22 in the Norwegian Sea and 8 in the Barents Sea.

Statoil was the biggest winnder with 31 awards. Supermajors ConocoPhillips, ExxonMobil, Shell and Total also picked up licences.

Of the E&Ps:

  • Aker BP was the winner with 23 licences (14 as operator)
  • Lundin has been awarded 14 licences (5 as operator)
  • DNO has been awarded in 10 licences
  • Faroe Petroleum has been awarded 8 licences (four as operator)
  • Cairn Energy has been awarded 5 licences

The Annual Predefined Areas or APA round was introduced in 2003 to encourage exploration and development of discoveries near existing infrastructure. Across all the awards this time, there are three licences with firm drilling commitments, with the remaining having drill or drop options in the next 12-24 months.

Tuesday 19 December 2017

Kurdistan producers get paid for September

DNO and Genel Energy have reported receipt of USD54 million from the KRG for September crude sales from the Tawke licence - shared by DNO (USD40.7 million) and Genel (USD13.6 million) in line with the interests in the licence.

In addition, a payment of USD10.8 million has been received by Genel and DNO, representing 7.5% of gross Tawke licence revenues during October 2017, as provided for under the receivables settlement agreement.

Separately, the Taq Taq field partners have received a payment of $9.7m from the KRG for September oil sales - Genel's net share of the payment is USD5.3 million.

This is the first set of payments that has been made following Kurdistan’s independence election and the choking back of oil exports from the Kirkuk Area, which has limited the KRG’s cash flows. Although a positive, concerns will continue around the continuity of payments.

Wednesday 11 October 2017

Kurdish operators receive July crude export payments

Kurdish operators have announced receipt of oil sales payments from the KRG today towards July exports:
DNO has confirmed that the Tawke partners have received USD39.5 million
Genel has confirmed that the Taq Taq partners have received and USD10.4 million

These payments are in line with recent payments and should be the last under the "old" system (i.e. before the recent change in terms in exchange for settlement fo historical receivables).

Payment for August sales should be made in November - these should increase with DNO's greater share in Tawke and Genel's elimination of the 30% Capacity Building Payment. However, the recent referendum results casts uncertainty on the way forward between the neighbours in the region and therefore the risk to Kurdistan's financial position and therefore payments has increased.

Wednesday 9 August 2017

Kurdistan E&Ps have been paid for May shipments

Kurdistan E&Ps have been paid for May shipments.

The Tawke partners have confirmed receipt of USD39.6 million. The amounts will be shared pro-rata by DNO (55%) and Genel (25% WI) and comprises USD33.2 million towards May deliveries and USD6.4 million towards past receivables.

The Taq Taq partners have received USD12.2 million and will be shared pro-rata by Genel (44% WI) and Addax (36% WI). The payment comprises USD11.1 million towards May deliveries and USD1.2 million towards past receivables.

Thursday 4 May 2017

DNO: Branching out

 

In a move as surprising as TransGlobe's entry into Canada, DNO has announced the acquisition or Origo Exploration, a UK and Norway focussed private explorer backed by GNRI, Riverstone and Temasek. As consideration, DNO will assume Origo's exploration commitments and licence obligations.

Origo has interests in 11 blocks offshore UK and Norway, with 20-30% non-operated interest in each block. This portfolio is expected to generate around three exploration drilling opportunties per year. The management team and staff will be reataiend as part of the acquisition as will its office in Stavanger.

DNO could use this platform to establish a North Sea base (organically and through acquisitions), and although the strategic logic of this acquisition is currently unclear, it presents a new region for DNO to replicate its past exploration and operational success. It also signals the fact that DNO may see limited attractive opportunities in Kurdistan to reinvest its growing cash base on a risk-reward basis.


Origo Portfolio
Source: Company information, NPD

Friday 29 July 2016

Kurdistan consolidation? DNO's proposed offer for Gulf Keystone

On Friday 29th July, DNO made a proposal to acquire Gulf Keystone for USD300 million in cash and shares. The tactics around the timing of this offer are unclear, given that Gulf Keystone are part way through a creditor restructuring. Negotiations during creditor processes are generally messy with the potential acquirer having to become involved in discussions with the debt holders, who hold significant power given their ability to "pull the plug" on the distressed company and/or dictate restructuring terms that lead to massive dilution of the existing shareholder base.

The offer of USD300 million, which comprises c.USD120 million in cash and the remainder in shares, represents:
  • a 20% premium to the share price of $0.0109 at which, on 14th July 2016, Gulf Keystone issued shares representing 5.6% of its share capital; and
  • a 20% premium to the price at which Gulf Keystone intends to issue further shares. 
DNO further noted that the cash element of the offer would provide an early exit for noteholders and bondholders unable or unwilling to hold equity in DNO.

The acquisition of Gulf Keystone would create further scale and operational synergies for DNO in Kurdistan, and the enlarged entity would operate the Tawke and Shaikan oil fields, with current combined net production of c.89mbopd. Gulf Keystone holds a 58% stake in and operates the Shaikan oil field at a current level of ~40,000b/d, which is transported daily by road tanker to DNO's unloading and storage hub at Fish Khabur for onward pipeline transport to export markets.

For the past couple of years, Gulf Keystone's debt has dominated its story and a combination with DNO together with a clean balance sheet is likely to be viewed favourably by the KRG. However, it is noted that the heavy-oil Shaikan project is a high capex and low margin business that would generate a relatively low rate of return for DNO. As with Genel at Miran, DNO will likely need the support of a farminee to push ahead with the full field development.

Tuesday 22 March 2016

Further payments by the KRG

DNO and Genel Energy announced on 22 March that the Tawke and Taq Taq participants have been paid by the Kurdistan Regional Government (“KRG”) for oil sales during February. News of another month of payment should help boost sentiment.

Given that the export pipeline was out of service during the second half of February, sales at Taq Taq and Tawke were down materially month-on-month at 62,091bopd and 73,124bopd, respectively. Sales into the local market from both fields were, however, invoiced at the wellhead export netback price, in line with the payment mechanism announced by the KRG on 1 February; this process helped limit the month-on-month reduction in revenues. Flows into the export pipeline resumed on 11 March.

Genel, as operator of Taq Taq received USD12.6 million for oil exports, down from January’s USD16.3million. An additional USD2.5 million payment has been made towards recovery of the receivable, down from USD3.2 million.

DNO, as operator of Tawke has reported receipt of USD11.29 million for exports, down from USD17.99 million in January. An additional USD2.17 million has been paid for past deliveries, down from USD3.46 million in January.

Saturday 9 January 2016

Kurdistan producers receive fourth consecutive payment from the KRG

Tawke processing facilities
Source: KRG
On 6th January, DNO and Genel announced that partners of the DNO-operated Tawke field have received a gross payment of USD30 million from the Kurdistan Regional Government for oil exported through the Kurdistan Region of Iraq-Turkey pipeline. This represents the fourth export payment by the KRG since payments recommenced in September.

On 5th January, Genel also confirmed that the Taq Taq field partners had received a gross payment of USD30 million from the KRG for oil exported through the Kurdistan Region of Iraq-Turkey pipeline with Genel’s share of the payment being USD16.5 million.

It is interesting to note that payments to the oil companies have remained flat (at USD75 million per month) during the past four months, despite a collapse in the oil price from c.USD50/bbl at the start of September to c.USD36/bbl at the end of December 2015. This means that the international oil companies' share of Kurdistan's oil revenues is slowly creeping up.