March 19, 2020 / 9:03 AM / 2 months ago

UPDATE 1-Genel Energy expects lower spending in 2020, posts annual profit

(Adds CEO quote, shares, details on spending, background)

March 19 (Reuters) - Iraqi Kurdistan-focussed Genel Energy said on Thursday capital expenditures can be reduced to as little as $60 million this year as it looks to combat a plunge in oil prices, while posting an annual operating profit.

Based on current oil prices, Genel expects capital expenditure to be around $100 million in 2020, compared with $158.1 million last year.

Shares of the London-listed company were 10.6% higher at 60.4 pence by 0845 GMT, marking their biggest intraday jump since August 2018.

Oil and gas companies, including Saudi Aramco, Exxon Mobil, Chevron Corp and BP, have said they will cut their spending in the wake of an oil price crash, triggered by the coronavirus pandemic and a price war between Saudi Arabia and Russia.

Genel said its producing assets were profitable even at an oil price of $30 a barrel, but the lower capital spending would impact its 2020 net production outlook of nearly 35,410 barrels of oil per day. Global oil benchmark Brent crude was trading at $27.06 a barrel by 0845 GMT on Thursday.

The oil and gas producer said it expects operating costs for the year to be $3 a barrel.

“Genel’s portfolio is advantageously positioned in a low oil price environment. Our cost of producing a barrel of oil in 2020 ... is amongst the lowest in the world,” Chief Executive Officer Bill Higgs said.

The company said its ability to maintain spending was also being impacted by a delay in payments for oil exports from the government of the semi-autonomous region of Kurdistan. The last payment, received in January, covered last September’s exports.

Genel reported an operating profit of $132.3 million for the year ended Dec. 31, compared with a loss of $254.6 million a year earlier. It recommended a final dividend of 10 cents per share. (Reporting by Shanima A in Bengaluru; Editing by Aditya Soni)

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