Genel gets approval on Miran

Earlier this month, frontier oil & gas specialist Genel Energy (GENL) announced that the Kurdistan Regional Government (KRG) had approved a Declaration of Commerciality (DoC) for the Miran field. It is currently estimated to contain 3.5 trillion cubic feet (tcf) of gas and 95m barrels of oil/condensate - but with the potential for as much as 8 tcf.

Progress towards that upper estimate could follow from exploration work planned for the second half of 2014 at the Miran East and Miran Deep prospects. The KRG's approval clears the way for Genel to initiate the commercial phase at Miran and the signing of a formal export agreement with Turkish authorities is expected by the year-end. Subsequent to the announcement, Genel, along with regional partner DNO International ASA (DNO), signed a sales agreement with the KRG. That will supply an initial 1 tcf of gas from the Summail field for use in power generation for the city of Dohuk, located 40 kilometres from the field. The unrisked potential of Genel's assets was also recently highlighted through testing at its Tawke field, where an exploration well drilled by DNO encountered a 930 metre horizontal oil-bearing section.

Credit Suisse says…

Outperformance. An early production facility for Miran oil was commissioned, with the first well brought on stream at around 2,000 barrels of oil per day (bopd), with an ambition to produce up to 30,000 bopd at peak. We conservatively expect the company to reach that in the second half of 2015 - one year later than is feasible. With the DoC, this allows for an earlier cost recovery related to the gas development. Our target price of 1,296p is set at our risked net asset value (NAV). The combination of a gas sales agreement and smooth operations of the export oil pipeline can take our value to 1,600p a share. Expect adjusted EPS of 65¢ for end-December 2013.

Wood & Co says.....

Buy. We have upped our price target to 1,192p from 1,170p on the back of strong reported operational first-half data and an increase in the mean recoverable gas resource for Bina Bawi in Kurdistan from 250m barrels of oil equivalent (boe) to 800m boe. Turkey may sign a gas supply agreement with the KRG by the year-end that would materially reduce Turkey's dependence on pipeline supplies from Iran (more than 20 per cent) and Russia (70 per cent). The agreement could potentially open the door for contracting Miran and the commencement of infrastructure development. Genel is also seeking to sell part of Miran as it says it is too big for the company to develop on its own. That may set a very import gas value benchmark for the region.