CEO's Message

With the Kurdistan Oil Export Pipeline (KOEP) closed for the entire second quarter, production from the Hawler license area remained substantially shut-in. The Corporation was limited in its ability to generate revenue, primarily from the sale of oil-in-inventory to the local market.

Concerning the reopening of the KOEP, there continues to be a lack of clarity surrounding the steps towards a resolution among the Kurdistan Regional Government, the Federal Government of Iraq and officials in the Republic of Turkey. No timeline has been provided to the Corporation regarding when exports will resume.

Due to the above and the ongoing delay in collection of overdue payments for oil sales, Forza Petroleum’s work program for the balance of 2023 remains suspended. Additional efforts have been made to reduce operating and administrative costs, as well as renegotiating facilities, equipment, and security expenditures. Further cost cutting will be required in the event the export pipeline does not reopen in the near-term.

In the meantime, the Corporation has pursued oil sales to the local market to cover necessary costs. In early July, OP Hawler Kurdistan Limited, the Corporation’s operating subsidiary in the Kurdistan Region, entered a 31-day contract to sell gross (100%) 8,000 bbl/d at $29/bbl. Full payment in accordance with production sharing contract entitlements was received from the buyer in advance.

A strong balance sheet, lean cost structure, and a supportive principal shareholder enable Forza Petroleum to endure an extended closure of the KOEP. We remain hopeful that meetings between the relevant governments will result in a prompt reopening of exports and resolution of all matters relating to the sale of oil produced from the Kurdistan Region.

Shane Cloninger     

Chief Executive Officer     

July 25, 2023