Genel Increases Chia Surkh Stake to Take Over as Sole Contractor

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Genel Energy (LSE:GENL) said today that they will increase their interest in the Chia Surkh exploration block from 20 % to 80 %, thereby becoming the government’s sole contractor for the region. This initiative is largely seen as an essential strategy in the company’s attempts to strengthen its position in the region.

Chia Surkh covers an area of 984 km2 in the southern part of the Kurdistan Region has the potential to extract over 300 million barrels of oil from the region.

Boosting its interest from 20 % to 80 %

Genel Energy is using its’ existing cash reserves to acquire 40 % interest currently held by Forbes & Manhattan (Kurdistan) inc., and 20 % interest currently held by Petoil Petroleum, where Genel will pay them $68 million and $26 million respectively.  The Government of Iraq are going to reportedly maintain their 20 % carried interest in the region.

The deal is going to bring in another 183.4 millions of oil barrels(mmboe) of unexploited prospective resources to the company’s portfolio. This is based on the findings made by the independent U.S. assessors McDaniel & Associates, who determined that the Chia Surkh region had an unexploited average potential resources amounting to 305.7mmboe, as of 30 June 2011.

Nonetheless, the acquisition is based on the receipts of several assents, endorsements, and assertions. Notably, it includes receipts from Longford’s shareholders and the Kurdistan Regional Government and completion on or before 1 March 2012. Genel Energy‘s acquisition of the 20 % interest owned by Petoil Petroleum can only be exercised once only the Longford acquisition has been completed.

CEO Comments

“These are excellent deals for Genel. For what we consider a very good price, they give us 80 per cent of a high-quality asset in one of the last great hydrocarbon provinces accessible to international investors. Becoming operator will allow us to take the lead in shaping and driving forward a thorough exploration and appraisal programme.

“This is a block which saw a limited amount of surface exposure drilling in the earlier part of the 20(th) century, an era when explorers were seeking billion-barrel finds. Two of those historic wells tested hydrocarbons, one oil and the other gas.

“More recent seismic data, acquired in 2010, confirmed Chia Sukh as a faulted anticline that contains three or four structures we consider interesting,” Hayward said. “Operations are already in train for an exploration well this year. We anticipate further drilling over the next two years as we conduct a comprehensive exploration programme to fully evaluate the block.”

Company Spotlight

Genel Energy is the largest oil producer in the Kurdistan Region of Iraq. The company was established in 2011 following the merger of Vallares Plc and Genel Energy International Limited.

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