Genel Acquires 36% Stake in Bina Bawi from OMV

Source: 11/13/2014, Location: Middle East

Genel Energy plc is pleased to announce that it has reached an agreement with the Ministry of Natural Resources (MNR) of the Kurdistan Regional Government (“KRG”) for the development of the Miran and Bina Bawi gas fields.

In addition, Genel has agreed key terms with OMV to acquire its 36% operated stake in the Bina Bawi gas field. The total consideration will be $150 million in cash. An initial payment of $20 million will be paid on completion of the deal, with the remaining $130 million paid in two instalments after first gas. This is subject to finalisation of documentation and OMV’s corporate approvals.

The agreement with the MNR for the development of Miran and Bina Bawi states that:
- The Miran and Bina Bawi fields are to be combined under one Production Sharing Contract (“PSC”). This is expected to be approved by year-end 2014. Following approval, Genel will become the sole contractor and have a 100% equity interest in both fields

-The responsibilities of Genel will be drilling of the gas wells and installation of flowlines and first stage condensate separation at Miran and Bina Bawi. The Company will also be responsible for the development of the oil resources at Miran and Bina Bawi

- The KRG will assume responsibility for the gas treatment facilities and gas offtake arrangements from the fields

- The tender process for the gas treatment plant will commence in the first half of 2015 and first gas production for export will commence in H1 2018. The KRG also has an option to request gas for domestic consumption commencing in 2016

- Genel’s entitlement will be 100% of oil revenues until all licence back costs are fully recovered. The Company’s share of oil revenues will then revert to 50%. First oil production is expected in 2016

- Genel will also receive 100% of the revenues for condensate extracted at first stage separation and a fee of $0.78 per thousand cubic feet for the raw gas delivered into the gas treatment facilities

The Company expects that a final investment decision for the development of the fields will be made in H1 2015.

Genel’s current estimate of combined gross mean raw gas resources at Miran and Bina Bawi is 11.4 trillion cubic feet (“tcf”), which is expected to deliver gross mean sales gas of 8.4 tcf. Combined gross mean oil resources at Miran and Bina Bawi are now estimated at 34 mmbbls, with combined gross mean condensate resources from first stage separation estimated at 45 mmbbls. Gross contractor capital investment for oil and gas is estimated at $3.3 billion, which represents a unit development cost of less than $2/boe. Unit opex is estimated at less than $1/boe.

Tony Hayward, chief executive of Genel Energy, said:
“These agreements represent a win-win in the commercialisation of Miran and Bina Bawi. It materially de-risks the value of Genel’s gas business, gives attractive project returns while significantly lowering our capital exposure, and provides revenues from early oil production. For the KRG, it unlocks the Miran and Bina Bawi gas resource and will enable it to satisfy domestic gas demand and its obligations under the KRG-Turkey Gas Sales Agreement. We are proud to be playing a key role in the next phase of the development of the KRI oil and gas sector.”

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Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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