Oil producers Gulf Keystone Petroleum (LSE: GKP) Genel Energy (LSE: GENL) Afren Plc (LSE:AFR) all fell earlier today, with both Genel and Afren revealing that they were evacuating some of their staff from Iraq, as militants continued to make gains within the country.
Initially, Gulf Keystone, Genel and Afren started the day by falling by more than 4%. However, after this initial overreaction, the companies have seen their shares rally to near break-even, as investors digest the news.
Yet more trouble
Embattled independent oil producer, Afren revealed this morning that it was suspending operations temporarily at its Barda Rash field in the Kurdistan region of Iraq, because of heightened security tensions in the area.
In a statement the company revealed that it was withdrawing “non-essential” field personnel from the region. Other regional operations were unaffected.
The company did try and allay investor concerns by saying that this withdrawal will have not have a significant effect on its cash flow. Still, this news comes at a bad time for the company.
Indeed, last week it was revealed that Afren had suspended its chief executive and chief operating officer, for allegedly benefitting from unauthorised payments. The withdrawal from Iraq adds yet more uncertainty to Afren’s future.
Nevertheless, the Barda Rash field is one of Afren’s smaller assets. According to the company’s website, Afren has a 60% working interest in Barda Rash, which reported gross production of 448 barrels of oil equivalent per day at the end of last year.
Finding support
Even as Afren revealed that it was taking these precautionary measures, the City took solace in the fact that the U.S. had authorized airstrikes against Islamist militants in the region. Hopefully, with the might of the U.S. air force supporting local troops, the advance of the militias can be stopped before they reach the oil fields of Genel and Gulf Keystone.
The operations of Gulf Keystone and Genel currently remain unaffected by the violence, and it’s unlikely that they will come under attack any time soon.
Yesterday, Gulf Keystone issued a statement saying that its operations in the Kurdistan region of Iraq “remain safe and secure“, but that it will “continue to monitor the situation closely and operate with increased security as a precaution.“
Genel followed with a statement this morning, in which the company said its Kurdistan operations were unaffected, but that it was “taking the prudent and precautionary step of withdrawing non-essential personnel from our non-producing assets in the region.“
A risky pick
The Barda Rash field is located near the edge of Kurdish territory, the main fields owned by Genel and Gulf Keystone are located deeper within Kurdistan. In particular, Gulf Keystone’s Shaikan field is located around 100km north of Barda Rash. Genel’s key Tawke field is located more than 200km north of Barda Rash, deep inside Kurdish territory and close to Turkey.
Genel’s other key asset, the Taq Taq field is located more than 200km south of Barda Rash, more than 100km inside Kurdish territory. So, for the time being these assets appear to be safe and secure.
