Jamal Orazbayeva, oil and gas research analyst at Westhouse Securities, suggests investors opt for exploration and production stocks that have short-term protection from lower oil prices, but also catalysts that could spark a share price surge. Her top three picks are Genel Energy (LON:GENL), Ithaca Energy (LON:IAE) and Faroe Petroleum (LON:FPM), but she is wary of debt-laden Afren (LON:AFR).
Significant drop in projected revenue...only offset by material capex reduction,Could we see GENL testing new lows if oil price remains sub $47? Weak $$$revenue achievement as they pump an ever increasing amount of finite resource with the obvious macro risk backdrop of Iraq/ Kurdistsn. Hard to see why PE of 16 justified currently.
Erbil: KRG fails to pay Salaries & Student grants for past 2 months, despite recieving over $1bn payments from Iraq Central Gov -------------------------------------------------------------------------------------------------------------- Gulf Charity Petroleum.... Genel Charity Energy..... DNO Charity ASA..
I've just covered it as one of my two 'Tips for 2015' on ShareProphets as well, although not in quite such detail as mine was just a quick tip rather than an in-depth look at the company. It is one I covered earlier in the year as a buy in the 900s as well - i got that one wrong! But then again i wasn't really expecting oil at $60, and at the time it was more the IS stuff that had caused a drop and there have been plenty of positives since then and had it not been for oil prices at these levels, I'd expect it to have been well above the level i tipped it at!
Genel tipped as one of Share magazines investment for 2015, Article below:
We expect Kurdistan-focused oil producer Genel Energy (GENL) to be a beneficiary of a recovery in the oil price and with it sentiment toward the wider sector in 2015. At the plc level the group is poised to deliver internally funded production growth, capitalising on an improved backdrop in its main base of operations. A material change in Genel’s outlook of late can be traced to two significant developments. First on 13 November the group agreed a new production sharing agreement (PSA) for its Bina Bawi and Miran gas and condensate fields with the Kurdistan Regional Government (KRG) (which controls the semiautonomous part of northern Iraq in which Genel operates). Under the terms Genel will enjoy a 100% working interest, with entitlement to 100% of oil revenues until $1.25 billion of back costs are recovered and 50% on an ongoing basis. The KRG is targeting gas exports in 2018 but will take all the costs and responsibility for the construction of the gas facilities. As a result Investec has cut its estimated capital expenditure for the group as a whole over the next five years almost in half from $4.2 billion to $2.2 billion. This makes it possible for Genel to fund its own expansion and potentially frees up cash to pay a dividend at some point in the future. The second big development came on 2 December as the KRG finally reached a deal with Baghdad on sharing oil revenues. Under the new agreement, which comes into effect on 1 January 2015, Kurdistan will export 250,000 barrels of oil per day (bopd) while the disputed province of Kirkuk will sell 300,000 bopd through Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO. The Kurdish region will keep 17% of Iraq’s budget expenditure and Kurdish officials will also take a seat on SOMO’s board. The KRG also followed through on a promise to pay producers for previous exports from the region – Genel receiving a payment of $24 million for its share from the Taq Taq and Tawke fields. With a pipeline to Turkey up and running all the pieces are in place ahead of a guided increase in Genel’s production from around 66,000 barrels of oil equivalent per day (boepd) to between 90,000-100,000 boepd in 2015. The key risks are a further deterioration in the macro backdrop, missed output targets, a renewed escalation in violence in Iraq and the possibility export payments from the KRG dry up. At current levels though the balance between risk and reward looks attractive.
Genel has spent about $1.4 billion on acquisitions and plans to continue to grow, Sepil said. While crude futures have slumped about 44 percent this year to trade below $55 in New York, the London-based explorer produces oil at a cost of $5 a barrel, Sepil said. “Even if the price falls to $20 a barrel, we are making a lot of profit.”
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