Genel Energy has cut capital expenditure to just over $100 million for 2020, while operating expenditure will be reduced by 10% to around $40mn.
The Kurdistan-focused explorer said the capex reduction was down by around 50%. The company’s assets reach cashflow breakeven at an oil price of less than $30 per barrel, it noted.
“Despite the impact of COVID-19 creating a challenging environment for our industry, Genel’s resilient business model and robust financial position, with over $100 million in net cash and an asset cashflow breakeven of $30 per barrel, leaves us well placed to withstand the consequences of the pandemic as we continue to deliver our strategy,” said Genel’s CEO Bill Higgs.
“We have cut our cloth appropriately against this backdrop and halved our capital expenditure for 2020, protecting our balance sheet while still progressing Sarta, and positioning us to take advantage of growth opportunities as the landscape improves.”
The pandemic has made challenges to Genel beyond the oil price impact, with the company saying it had made moving people and equipment more difficult.
Capex plans will see around half going to the Tawke and Taq Taq licences, while $30mn will go on Sarta and $10mn on Qara Dagh. Spending in the first four months of 2020 reached $45mn.
Production in the first quarter was 34,170 barrels per day. This is in line with guidance provided in January, although Genel has dropped its forecasts following the capex cuts.
Three rigs have been released, of five, at the Tawke PSC and no more drilling is planned at Taq Taq this year. Construction is moving forwards at Sarta, although first oil has been pushed back to the fourth quarter, from the third.
Drilling at Qara Dagh has been halted, with Genel claiming force majeure. The Peshkabir to Tawke gas capture, transport and reinjection plan has been completed, the company said last week, and is undergoing commissioning.
The company’s cash reserves look healthy, at $404mn as of April 30 and net cash of $106mn.
Genel’s decision to cut capex is in line with fellow Kurdistan explorer and producer DNO, which cut from $650mn to around $300mn.
