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Genel down 40 % in London75.16 -49.59 (-39.75%) Genel EnergyShares in Kurdistan oil producer Genel fell by more than 25% this morning after the firm announced a 75% reduction in proven and probable (2P) reserves for its Taq Taq field. This field generated around 60% of Genel’s oil production last year. Genel has previously reported 2P reserves of 683m barrels for Taq Taq. However, after production rates started to decline last year, Genel commissioned a review of Taq Taq’s reservoir model. The result is that estimates of the field’s original 2P reserves have been cut to 356m barrels. From this, 184m barrels have already been produced since 2011. This leaves Taq Taq’s 2P current reserves at just 172m barrels. Genel’s 44% working interest equates to reserves of about 76m barrels. The firm also has 169m barrels of 2P reserves in the Tawke field. This gives Genel total 2P oil reserves of 244m barrels, down from 429m barrels previously. As I write, Genel shares are down by 25%, at 92p. Is this cheap enough to buy? Genel’s current valuation implies a value of $2.48 per barrel for its 2P reserves. This does seem cheap, given that Genel has production costs of less than $2 per barrel. However, the risk of further operational, political or payment problems seems high. Genel shares could easily double in value if market conditions improve — but I’d only buy these shares with money I could afford to lose. To be honest, I believe there are better buys elsewhere in today's market. One example is the small-cap pharma stock featured in 1 Top Small-Cap Stock From The Motley Fool. The company in question isn't troubled by the oil price or nearby war zones. Operating from the safety of the UK, it's targeting a £4bn global market with one of its flagship products. |
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Msg # | Subject | Author | Recs | Date Posted |
964 | Re: Genel down 40 % in London | Public_Heel | 0 | 2/29/2016 3:29:57 PM |