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| Genel Energy shares drop 40% after oilfield's value slashed by $1bn | |
| (35 minutes later) | |
| Shares in the former BP boss Tony Hayward’s Kurdistan-focused oil company Genel Energy have plunged more than 40% after it slashed the estimated value of its largest oilfield by $1bn (£720m). | Shares in the former BP boss Tony Hayward’s Kurdistan-focused oil company Genel Energy have plunged more than 40% after it slashed the estimated value of its largest oilfield by $1bn (£720m). |
| Genel said it had revised down reserves held within Taq Taq to 356m barrels from a 683m-barrel figure given in 2011. | Genel said it had revised down reserves held within Taq Taq to 356m barrels from a 683m-barrel figure given in 2011. |
| Half of the impairment on the value of Taq Taq was down to the reserve revision and half due to the stubbornly low oil price, it said. North Sea Brent crude is about $36 a barrel compared with $115 in the summer of 2014 and many predict it will remain below $70 until 2018. | Half of the impairment on the value of Taq Taq was down to the reserve revision and half due to the stubbornly low oil price, it said. North Sea Brent crude is about $36 a barrel compared with $115 in the summer of 2014 and many predict it will remain below $70 until 2018. |
| The downward revision on Taq Taq is likely to overshadow the company’s annual profit figures, to be released on Thursday. | The downward revision on Taq Taq is likely to overshadow the company’s annual profit figures, to be released on Thursday. |
| The admission sent Genel’s shares into a tailspin, knocking £141m off its stock market value. It will be a blow for its largest individual investor, Nat Rothschild, scion of the banking dynasty of the same name. His 8% stake was worth £28m at the beginning of the day but just £16.5m by the close of trading. | The admission sent Genel’s shares into a tailspin, knocking £141m off its stock market value. It will be a blow for its largest individual investor, Nat Rothschild, scion of the banking dynasty of the same name. His 8% stake was worth £28m at the beginning of the day but just £16.5m by the close of trading. |
| The slump marks a huge reversal of fortunes for Genel since it floated in 2011. Shares were sold for £10 in the initial public offering, while a bonus scheme that has since lapsed was designed to pay out if the shares hit £12.50. | The slump marks a huge reversal of fortunes for Genel since it floated in 2011. Shares were sold for £10 in the initial public offering, while a bonus scheme that has since lapsed was designed to pay out if the shares hit £12.50. |
| It has been held back by inconsistent payments from the Kurdistan regional government and the rock-bottom oil price. | It has been held back by inconsistent payments from the Kurdistan regional government and the rock-bottom oil price. |
| The fresh falls saw the stock close the day at 74p, less than one-tenth of the float price. | The fresh falls saw the stock close the day at 74p, less than one-tenth of the float price. |
| Hayward, Genel’s chairman, who left BP in 2010 after the controversial response to the Gulf of Mexico oil spill, said the revision was “very disappointing”. But he insisted that “while it’s a major setback, it is by no means the end of Genel”. | Hayward, Genel’s chairman, who left BP in 2010 after the controversial response to the Gulf of Mexico oil spill, said the revision was “very disappointing”. But he insisted that “while it’s a major setback, it is by no means the end of Genel”. |
| He pointed to the company’s very low cost of production, a major strength given the low oil price. Genel also expects to benefit from its Miran and Bina Bawi fields, from which it expects to supply about 20% of Turkey’s gas. | He pointed to the company’s very low cost of production, a major strength given the low oil price. Genel also expects to benefit from its Miran and Bina Bawi fields, from which it expects to supply about 20% of Turkey’s gas. |
| The key reason for the reduced estimate of the Taq Taq field, in which Genel holds a 44% stake, was a reassessment of how porous the upper part of the field is. Greater porosity makes it easier to extract oil trapped in rocks below the surface. | The key reason for the reduced estimate of the Taq Taq field, in which Genel holds a 44% stake, was a reassessment of how porous the upper part of the field is. Greater porosity makes it easier to extract oil trapped in rocks below the surface. |
| The company also holds a 25% stake in the 675m-barrel Tawke field. | The company also holds a 25% stake in the 675m-barrel Tawke field. |
| It took the decision to revise its estimate of Taq Taq’s size after a review in conjunction with the consultants McDaniel & Associates. It said the move had been spurred by evidence of declining production at the field during 2015. | It took the decision to revise its estimate of Taq Taq’s size after a review in conjunction with the consultants McDaniel & Associates. It said the move had been spurred by evidence of declining production at the field during 2015. |
| The company left its production guidance for 2016 unchanged at up to 70,000 barrels per day. | The company left its production guidance for 2016 unchanged at up to 70,000 barrels per day. |
| While the plunging share price could prove an opportunity for a potential buyer, one source said Genel was still interested in growing by acquisition. They said the company had plenty of cash on the balance sheet and would not need a rights issue, despite the Taq Taq downgrade. | While the plunging share price could prove an opportunity for a potential buyer, one source said Genel was still interested in growing by acquisition. They said the company had plenty of cash on the balance sheet and would not need a rights issue, despite the Taq Taq downgrade. |