March 18, 2020 / 10:10 AM / 18 days ago

Independent oil firms BW, Genel, DNO, Panoro slash investment

OSLO, March 18 (Reuters) - Independent oil firms BW Energy , Genel, DNO and Panoro announced investment cutbacks on Wednesday as they sought to preserve cash amid a crash in crude prices and disruptions from the coronavirus outbreak.

DNO, with key operations in the Kurdistan region of Iraq as well as the North Sea, halted dividends and cut its planned capital expenditure (capex) for 2020 by 30%, or $300 million, to shore up its balance sheet, the company said.

“Steps have already been taken to suspend most discretionary drilling and capital projects across the company’s portfolio and to focus instead on key projects in its core operating area in the Kurdistan region of Iraq,” DNO added.

The company also initiated staff cuts and said it would discuss cost reductions with suppliers and contractors.

Oil prices fell to multi-year lows on Tuesday as the outlook for demand darkened even as global output has surged.

As the coronavirus led to travel restrictions, the company would reduce the number of active drilling rigs to two from six in Kurdistan, while scrapping its production guidance for 2020, it added.

DNO said its ability to maintain spending was also impacted by delayed payments for oil exports from the government of the semi-autonomous region of Kurdistan (KRG). The last payment, received in January, covered last September’s exports.

“Our estimates suggest that KRG is not able to pay oil companies below Brent oil price of $50-55 a barrel,” Sparebank 1 Markets analyst Teodor Sveen-Nilsen wrote in a note to clients.

“At the current oil price, we expect the Kurdistan players to report very low or none cash payments from KRG,” he added.

London-listed Genel Energy, which is also involved in the Kurdish Tawke license, similarly noted capex would fall and that output could suffer from a lack of drilling, but said its mid-term production outlook was essentially unchanged.

BW Energy will meanwhile postpone oil drilling and field development projects in Gabon this year and is cutting its 2020 budget for capex by 50% to $125 million, the company announced.

Panoro, which operates in Gabon and elsewhere, said it would slash its capex by 40% and that the coronavirus outbreak could slow down its development in Tunisia, leading to a cut in output guidance of 6% for the year.

“The safety of our people and operations is our absolute priority, Panoro Chief Executive John Hamilton said in a statement.

“Our focus is on protecting our highly valuable reserves and resources and preserving cash until the extraordinary macro environment improves,” he added.

Genel’s shares fell by 15.3%, DNO by 6.6% and Panoro by 8.2% at 0941 GMT, while BW Energy rose 0.4%. (Editing by Elaine Hardcastle)

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