OREANDA-NEWS. London-listed Iraqi Kurdistan producer Genel Energy recorded a loss of $4.2mn in the first half of this year, compared with a profit of $31.4mn during the same period last year, as production dropped. But Genel said it has now restarted investments following regular payments for crude by the Kurdistan Regional Government (KRG).

The firm emphasised efforts to raise recoverable reserves at its Taq Taq field after a major downgrade earlier this year.

Genel crude production decreased to 56,400 b/d in the first half of this year, 36pc down from the same period a year earlier. Longstanding disputes between Iraq's central government and the KRG have deprived firms operating in the Kurdish region of payments for oil exported, weighing on production and delaying investments in the fields.

But the KRG has made payments in nine consecutive months as it tries to sustain operator confidence. "The receipt of nine consecutive monthly payments from the KRG, from the resumption of payments in September 2015 to the end of June 2016, has delivered $193mn in cash proceeds to Genel, and the move to payments based on contractual entitlements has given greater clarity and confidence in ongoing receipts," Genel chief executive Murat Ozgul said. That said, at the end of June receivables from the KRG still stood at $412.4mn, against $422.9mn a year before.

Genel said the consistency of payments from the KRG was already "having an impact on production levels following the declines seen earlier in the year". Regular payments facilitated resumption of activity at Taq Taq and Tawke, with the 2016 work programme showing results, the company said.

The firm has cut its capital expenditure (capex) nearly by a third to $31.4mn in the first half of 2016, from $93.3mn a year earlier. But Genel expects regular payments from the KRG to continue, and investment at the Tawke field has restarted. Capex guidance for the full year has been narrowed to $90mn-$110mn, $70mn-$80mn of which will be devoted to the Taq Taq and Tawke fields.

The company maintained its early July guidance on production from the Taq Taq and Tawke fields at 53,000-60,000 b/d for 2016, down from the March forecast of 60,000-70,000 b/d.

Genel's Taq Taq field produced an average of 68,800 b/d in the first half of 2016, a 46pc decrease compared from the same period a year earlier. July production has averaged 62,000 b/d, compared with around 63,000 b/d in May and June, and Genel said it is now actively managing the reservoir to reduce water ingress across the field. Genel will analyse reservoir performance in order to optimise the development plan. It said there is a wide range between estimates of possible reserves and proven reserves on the field and it is focusing on activity that will narrow this range and strengthen future reserve calculation. The firm has a 44pc stake in the field.