Iraqi Kurdistan-focused oil shares hit by IS advance (updated)

Forza Petroleum

07/08/2014 22:08

* Islamic State advance raises fears for Kurdistan oil 
fields 
    * DNO shares down as much as 24 percent 
    * Gulf Keystone Petroleum down as much as 13 percent 
 
 (Adds comment from Marathon Oil) 
    By David Sheppard 
    Aug 7 (Reuters) - Shares of energy companies operating in 
Iraqi Kurdistan plunged on Thursday and two U.S. companies 
evacuated some staff as Islamic State militants advanced within 
45 kilometers (28 miles) of Arbil, a key hub for oil producers. 
    Companies that produce oil in the semi-autonomous region, 
including Oslo-listed DNO ASA  DNO.OL , as well as London-listed 
Gulf Keystone Petroleum Ltd  GKP.L  and Genel Energy Plc 
 GENL.L  saw double-digit declines in their share prices as the 
radical Sunni militants seized 15 towns.  ID:nL6N0QD2GL  
    While the companies said their oil fields continued to 
operate, there are growing concerns about the security risks 
faced by firms active in Iraqi Kurdistan, seen as a beacon of 
relative stability in the region. 
    "Investors are now taking into account the risk," ABG Sundal 
Collier analyst Oeyvind Hagen said, adding it remained difficult 
to judge how far into the Kurdish region the Islamists could 
penetrate. 
    Shares in DNO fell as much as 24 percent and Gulf Keystone 
Petroleum was down 13 percent at their lowest point, before 
paring losses. Genel shares were down over 10 percent. 
    Gulf Keystone said it had increased security at its flagship 
Shaikan field, Iraqi Kurdistan's largest, but added that 
production and trucking operations were continuing safely. 
    DNO operates the Tawke field, in which Genel is also a 
partner, which produces around 120,000 barrels of oil per day. 
    Other Kurdistan oil producers including London-listed Afren 
PLC  AFRE.L  and Toronto-listed Oryx Petroleum Corporation Ltd 
 OXC.TO , which operates the fields closest to the militants 
advance, declined to comment. Shares of Oryx were down as much 
as 11 percent. 
    Chevron Corp  CVX.N  and Exxon Mobil  XOM.N  said on 
Thursday they were evacuating staff from Kurdistan as the 
militants advanced.  IDnL2N0QD1EP  
    The companies have been drilling and testing new wells in 
the region. Exxon said little about its Kurdistan holdings at an 
analysts meeting earlier this year. As recently as last week, 
Chevron executives told investors they were "very encouraged" by 
initial Kurdistan well results. 
    Marathon Oil Corp  MRO.N , a U.S. oil and gas company that 
is also drilling in Kurdistan said in a statement that all of 
its employees are currently accounted for but evacuation is 
under consideration if the security situation worsens.    
     
    PESHMERGA PULL BACK 
    Energy companies have flocked to Iraqi Kurdistan in recent 
years, hoping to access what is believed to be one of the 
world's last huge conventional onshore oil deposits. 
    The regional capital Arbil houses many western oil workers 
and executives, and has seen an investment boom despite tensions 
with Baghdad over the control of oil sales and revenues. 
    Most worrying for investors this week has been the pullback 
of the Kurdistan Regional Government's Peshmerga soldiers. 
    Facing militants freshly armed with U.S.-made heavy weapons 
seized from the Iraqi army, the Peshmergas have given up several 
towns since Sunday. 
    Witnesses on Thursday said the militants had seized the town 
of Makhmur, around 40 km from the regional capital Arbil, but 
Kurdish officials told local media their forces remained in 
control there and television channels broadcast footage of 
Peshmerga fighters driving around the town. 
    The militant group said in a statement on its Twitter 
account that its fighters had seized 15 towns, the strategic 
Mosul dam on the Tigris River and a military base.  
    DNO, which describes its prospects in Iraqi Kurdistan as 
'the jewel in the crown' on its website, was the first 
international energy company to enter the Iraqi Kurdistan region 
in 2004. 
    Production from the region accounted for 55 percent of its 
revenue last year. 
 
 (Additional reporting by Isabel Coles in Arbil, Ernest Scheyder 
in New York, Nia Williams in Calgary, Karolin Schaps and Sarah 
Young in London, Ole Petter Skonnord, Terje Solsvik and Balazs 
Koranyi in Oslo; Editing by David Sheppard, William Hardy and 
Marguerita Choy) 
 ((Balazs.Koranyi@thomsonreuters.com)(+47 2331 6596)(Reuters 
Messaging: balazs.koranyi.thomsonreuters.com@reuters.net)) 
 
Keywords: IRAQ SECURITY/SHARES