Kurdistan-focused oil and gas companies are suffering, but hanging on Report

Insight 06 July 2016

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Report summary

Times are tough in the Kurdistan Region of Iraq. The low oil price has added to the Kurdistan Regional Government's financial woes. As a result, Kurdistan-focused companies have suffered from a lack of payments from the KRG, and recent reserve downgrades along with low oil prices have increased the strain. Yet, we expect the Kurdistan-focused IOCs, with the possible exception of Gulf Keystone, to survive in the short-term. However, more will struggle if the climate doesn’t improve over the coming two to three years.

Executive summary
Operating in Kurdistan remains tough
- Although regular payments to IOCs have restarted, they remain at risk
  - Reserve downgrades have knocked confidence in the region
  - Companies look to bide time until climate improves
    - Net cash flow from upstream operations and gearing for Kurdistan-focused companies
- Cost control is an area of focus
- M&A deals are unlikely, but more relinquishment possible
Revised investment plans reduce the supply outlook