Tony Hayward nets £14m in first Middle East adventure

  • @BawdenTom

Tony Hayward has outlined plans to dominate the vast reserves of newly accessible oil in the semi-autonomous Kurdistan region of northern Iraq. The former BP chief executive said his $2.1bn (£1.3bn) acquisition of Genel Enerji was just the beginning of his activities in the region.

Potential targets are understood to include Gulf Keystone, the Aim-listed oil explorer focused on Kurdistan, which is rumoured to be preparing for a sale, as well as other operators in the region. The group, which has enough cash to finance an estimated $4bn of further acquisitions, has also identified Libya as a potentially rich source of business, putting operators in the country on its list of possible targets.

Mr Hayward, who resigned from BP 14 months ago in the wake of the Gulf of Mexico oil spill, has gained the Turkey-based, Kurdistan-focused oil producer through his Vallares acquisition vehicle in a deal that will gift him a share windfall of about £14m. Nat Rothschild, another co-founder, will get about £136m.

Genel Enerji will be merged into the London-listed Vallares in an all-share reverse takeover which the cash shell will partly fund by issuing $2.1bn of new shares. The resulting company, to be called Genel Energy, will be listed in the FTSE 100 and run by Mr Hayward.

Mr Hayward said: "The Kurdistan region of Iraq is undoubtedly one of the last great oil and gas frontiers. Arguably, it is the last big onshore 'easy' oil province available for exploration by private companies anywhere in the world." He said Genel's cash reserves provided the opportunity "to participate aggressively in the significant consolidation we expect to see in the [Kurdistan] region over the next few years and to expand elsewhere if good opportunities arise".

The group refused to be drawn on potential takeover targets, but it is understood that Genel would take a good look at Gulf Keystone, should the £1bn company come on to the market.

Although Gulf Keystone said in a recent statement that its "board is not in discussions with regard to a sale of the company", it stopped short of categorically denying reports that it was organising a beauty parade of banks to conduct a "strategic review" – normally a precursor to an eventual sale.

Genel Energy has an estimated 356 billon barrels of proved and probable oil reserves, while the Kurdistan region is thought to house about 40 billion barrels of oil and 60 trillion cubic feet of gas. Exploration and development costs in the region are low – because the oil is relatively easy to find and extract – while its increasing stability is attracting international players who have long been put off by uncertainty over whether contracts signed with the Kurdistan regional government will be recognised by Baghdad. However, hopes are growing that Iraq's parliament will formalise contracts signed with Kurdistan by the end of the year.

In July, America's Hess signed a joint venture with the Aim-listed Petroceltic to develop 2,000 sq km in Kurdistan and the FTSE 250 explorer Afren invested $588m in the region.

Julian Metherall, a former Goldman Sachs banker and co-founder of Vallares, will be the finance director. He said Genel "could look to create a second leg to the business.... There could well be opportunities in Libya."

Mehmet Sepil, the current chief executive of Genel, who was fined a record £1m by the FSA for insider trading last year, will take up the non-board role of president. Before the deal, Genel Enerji was controlled by Mehmet Emin Karamehmet, who is challenging an 11-year jail sentence related to the collapse of Pamukbank in 2002. His stake is worth about $1bn.