Genel Energy Shares Fall 10% After Warning on Output -- Update

By Alex MacDonald

LONDON--Genel Energy PLC's (GENL.LN) shares fell after the U.K.-listed energy company warned that oil output and revenue this year would be at the lower end of its guidance range, largely due to lower production from its Taq Taq field in Kurdistan.

The company, chaired by BP PLC's (BP.LN) former chief executive Tony Hayward, reported a 38% drop in production to 53,100 barrels of oil a day for the three months ended Sept. 30 compared with the same period a year before. This reflected a 24,000 decline in daily oil barrel output at its 44%-owned Taq Taq field and a 9,000 drop in daily output at its 25%-owned Tawke field in Kurdistan.

The company now expects 2016 oil output and revenue to be at the lower end of its previously cut guidance range of 53,000 to 60,000 barrels a day and $200 million to $230 million in revenue.

Genel said oil payments owed by the Kurdistan Regional Government of Iraq had risen to $437 million at the end of September from $412 million in June. This reflected a delayed payment in August, as the regional government grapples with the need to pay fighters to battle against Islamic State militants and pay public salaries.

Genel's shares were down 10% at 83.75 pence share at 1027 GMT, resulting in a market capitalization of 233 million pounds ($284 million). The company's shares have fallen 51% this year, reflecting a $1 billion write-down of the company's Taq Taq reserves earlier this year.

Genel CEO Murat Ozgul said he remained optimistic about receiving future payments from the Kurdistan government.

"With export volumes at [the] Ceyhan [pipeline] having increased following a new deal with the federal government, and the recent recovery in the oil price, this bodes well for the region's cash flows," he said.

However, brokerage Stifel said Genel's trading update was uninspiring.

"The key news is Taq Taq, which continues to decline in production and which, unless it can be remediated, seems to be undershooting the...production profile established earlier in the year," it said in a note.

The brokerage said Genel would need to offset Taq Taq's lower production with more oil from Tawke's recent three-well drilling campaign to reach the bottom of its output guidance range.

Genel is working on a Taq Taq development plan, which is due to be completed at the start of 2017.

The company said it had cut this year's capital expenditure to below the previous range of $90 million to $110 million, with reduced spending at Taq Taq and Tawke as well as lower forecast expenditure on its Miran and Bina Bawi gas prospects, whose pre-front end engineering and design studies are due to be completed around year-end.

-Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

October 26, 2016 07:32 ET (11:32 GMT)

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