Genel Energy Plc, one of a handful of foreign oil producers in Iraqi Kurdistan, lost more than a third of its market value on Feb. 29 after the company halved the reserves estimate for its largest operational field.
The company said it expected to write down the value of its holding in the Taq Taq Field in Iraqi Kurdistan by $1 billion, blaming a steep fall in oil prices and the lowered expectations of reserves.
Genel estimated that Taq Taq had proven and probable reserves of 356 million barrels (MMbbl) of oil as of Dec. 31, down from the 683 million it had estimated in June 2011.
At least two analysts said the cut was much larger than expected.
“I was expecting perhaps a 10, maybe 20 percent cut in reserves and obviously this is more akin to a 50 percent cut,” Arden Partners analyst Daniel Slater told Reuters.
The slashing of reserves estimate will put more pressure on the company, which is already struggling with oil prices at their multi-year lows and millions in debt owed by the Kurdistan Regional Government (KRG) for oil exports.
Just earlier this month, the company told Reuters it would resume drilling at Taq Taq in the coming weeks to ramp up production.
Genel said in January it was reviewing its reservoir model and investment profile for Taq Taq, after seeing some production declines at the field last year.
Since 2011, Taq Taq had produced 184 MMbbl on a gross basis.
Genel kept its full-year production forecast of 60,000-70,000 barrels of oil per day (bbl/d), but said that Taq Taq production would fall to 50,000-70,000 bbl/d by 2018, from the about 80,000 bbl/d expected for this year.
Firstenergy Capital analyst Stephane Foucaud said the lower reserves at Taq Taq would further pressure Genel's cash flow situation as it was one of the company's two main producing assets.
Genel has a 44 percent interest in Taq Taq, which is located 85 km southeast of the city of Erbil. A unit of China Petroleum & Chemical Corp holds 36 percent and KRG the remaining.
Genel also has a minority interest in Tawke, another field in the region.
Its shares were down 38 percent, marking their steepest ever single-day decline, at 79 pence at 1141 GMT.
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