Iraq: IOCs in Kurdistan region see shares retreat as non-essential staff evacuated

The apparent stability and growing prosperity of Iraq’s more liberal and pro-business Kurdistan region has been undermined in recent weeks as Islamic State insurgents make significant advances into the Kurdish-controlled region. IOCs that were previously unaffected by the growing violence elsewhere in Iraq, are now seeing their share prices retreat in a manner reflecting those of the Kurdish forces.

Genel Energy, one of the IOC’s reaping the benefit of the export pipeline to Ceyhan in Turkey, has seen its shares shed 17% since the start of the month. London-listed Gulf Keystone Petroleum put out a statement on 7 August confirming that its production and trucking operations at its giant Shaikan field “remain safe and secure”, but this did little to prevent its shares falling by more than 11%. Norway’s DNO - , which has exploration, development and production interests in Kurdistan - was also hit, with its shares sliding 9.5%.

Following the lead of Chevron, ExxonMobil, Afren and Taqa, these companies, as well as Hess and its partner Petroceltic, have suspended operations in the  Kurdistan region and started to evacuate non-essential staff amid spreading violence in the region.

Last week Kurdish forces lost several  towns to Islamic State displacing 150,000 people largely from the Yazidi religious minority to according to a UN estimate. 

Considered to be ‘devil worshippers’ by the Islamic State, the Yazidis pray five times a day to the Malek Taus, the Peacock Angel also known as Shaytoun in the Kurdish language. Unfortunately, Shaytoun also means ‘devil’ in Arabic. The Islamic State has been accused of issuing an ultimatum to the Yazidi community to convert to Islam or face death, and reports from refugees state that these threats have been enacted through beheadings. 

The Kurdistan Regional Government has sent its Peshmerga forces to tackle the threat and the US has started air strikes, however, resulting in the recapture of two towns from Sunni militants on 10 August, one of the first victories for a military force that until now has been in retreat.

In a statement released 11 August, Petroceltic said “In conjunction with Hess Middle East New Ventures, our partner and the operator of our exploration activities in the Kurdistan Region of Iraq, we have been closely monitoring recent events in the region. While these developments have not directly impacted our exploration activities to date, in line with other operators in the region, it has been decided, as a precautionary measure, to temporarily secure and suspend operations (including the drilling of Shireen-1 exploration well in the Dinarta licence) and to evacuate non-essential personnel”.

Hess operates Iraqi Kurdistan's Dinarta and Shakrok fields, in which Petroceltic and the Kurdistan Regional Government have stakes of 16% and 20% respectively. The partners started drilling their first well, Shireen-1, on the Dinarta block in June and had expected exploration work to last five months. However, they decided to plug and abandon the Shakrok-1 well after disappointing exploration results.

Oryx Petroleum announced on 8 August that it had implemented a number of precautionary measures to protect its employees from the security developments in the region.  In the western portion of the Hawler license area the drilling operations at the Ain Al Safra and Banan sites have been temporarily suspended, both sites secured, and non-essential personnel relocated to Erbil given the proximity of such locations to recently reported hostilities in northern Iraq. 

In the central portion of the Hawler license area, drilling operations and facilities construction at the Demir Dagh field remain secure and operational but continue at reduced levels primarily due to the departure of certain third-party service company personnel from the site. Production from the Demir Dagh field has also been shut-in. 

The situation is moving fast in Iraq and with no sign of any easy solution to the advance of the Islamic State, which now controls parts of Syria and Iraq, including key oilfields that are funding the militants, investors should stay wary.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

Algeria: Sonatrach exercises pre-emption rights in Petroceltic's farm-out

Petroceltic confirmed on 7 October that it has received formal notification that Sonatrach is exercising its rights under the Isarene Production-Sharing Contract ("PSC") to pre-empt the Company's proposed sale of an 18.375% interest in the PSC.

The commercial terms and proceeds of pre-emption are similar to those agreed between the Company and a potential third party purchaser and comprise a US$20 million payment on completion, a US$140 million development and two contingent payments of US$10 million each based on the achievement of certain early production and technical completion milestones. Following the completion of the transaction, Sonatrach will hold a 43.375% participating interest, Petroceltic will hold 38.25% and Enel will hold the remaining 18.375%.
 

Petroceltic CEO Brian O'Cathain said: "The decision by Sonatrach to exercise its pre-emptive right is a clear indication of the current value and long-term upside potential of the Isarene asset. Since 2005, Petroceltic has enjoyed an excellent relationship with Sonatrach and we believe that this decision represents a positive endorsement of the technical, commercial and development work undertaken over the last nine years. Sonatrach's decision to pre-empt confirms that the timely development of the Ain Tsila field is strategically important to Algeria and we look forward to working together to achieve this shared objective."
 

Sonatrach and Petroceltic are currently working to finalise all the necessary regulatory approvals to facilitate the signing of the amendment to the PSC. Petroceltic said further announcements will be made as appropriate.
 

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.
 

© 2013 Menas Associates

Petroceltic wins another Algeria job

Petroceltic has signed KCA Deutag for a second drilling rig on the appraisal campaign on the Isarene Permit in Algeria. Last week, the company raised £37 million to subsidise the expansion. It has also hired two contractors to assist desktop-work on the Final Discovery Report for the licence.

Speaking about the developments Petroceltic's chief executive Brian O'Cathain said: "The contract for the second rig will see a significant increase in the pace of appraisal activity on the Ain Tsila discovery following the recent successful fund raising and the farm out to ENEL.

The award of contracts for the conceptual and geotechnical studies is of importance as they mark the start of the move from the exploration and appraisal phases of the production sharing contract into the pre-development phase."

The second drill rig has been contracted for three wells which means that the enlarged drill programme will stretch to at least six wells before the end of 2011. Petroceltic expects the rig to be mobilised in June with drilling expected to start in July 2011.

Sources: Upstream, Proactive Investors, Petroceltic

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

Petroceltic announces encouraging early results from Isarene well

Petroceltic has discovered "larger-than-expected" quantities of gas in AT-5 well on the Isarene permit in Algeria. The drilling, which began on 9th January, reached a total depth of 2,049 metres on 2nd March after drilling delays caused by equipment failures on the contracted drilling rig.

Logs at AT-5 showed the objective Ordovician reservoir to be fully gas bearing, and a gross gas column of 75.5 metres was logged, with no gas water contact seen in the well. The company is testing what it calls a “major pop-up” feature in the north of the field associated with enhanced un-stimulated gas productivity.

Petroceltic's Chief executive Brian O'Cathain said: "The results of well AT-5 are encouraging to date, the presence of natural fractures at this location augurs well for the test results, and the overall gas column logged was greater than expected at this location.”

Sources: Irish Independent, Oil Voice, Petroceltic Investors

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

Petroceltic signs new drilling-rig contract

Petroceltic has signed a drilling rig contract with Dalma for their land rig 12. The 2000 horsepower drilling rig is currently stacked in Hassi Messaoud, Algeria, and is set to be mobilised immediately to the Isarene permit for appraisal of four wells.

Rig 12 has been in Algeria since its construction in 2007, and is expected to be on location ready to begin drilling in October 2010. The duration of the programme is expected to be between six and seven months, and will focus on appraising the gas discoveries made on the Isarene permit by Petroceltic during 2009/10. The programme is funded by the US$120 million equity placing completed by Petroceltic in April 2010. Petroceltic has a 75 per cent interest in the Isarene permit in association with Sonatrach, the Algerian state Oil and Gas Company holds the remaining 25 per cent.

“Securing this rig is a significant step towards re-starting drilling operations on the Isarene permit. We expect to drill a minimum of four appraisal wells including at least one horizontal well. Drilling operations are scheduled to start in October 2010, as originally planned, with a view to the submission of a development plan to the Algerian Authorities at the end of this appraisal campaign. We intend to announce results following completion of the individual fracture stimulation and well testing programmes for each well,” said, chief executive of Petroceltic, Brian O’Cathain.

To find out more about Petroceltic please visit Petroceltic’s web site, which you can find here.

For more news and expert analysis about Algeria please see Algeria Focus, Sahara Focus and Algeria Politics & Security.

© 2010 Menas Associates