LONDON (ShareCast) - UBS has upgraded its recommendation for Anglo-Turkish oil explorer Genel Energy from 'neutral' to 'buy', saying that "oil and money [are] both flowing" in the Kurdistan region of Iraq.
The bank said that Genel is Kuridistan's leading resource holder with an estimated 1.6bn barrels (bbl) of oil equivalents and is "enviably positioned as export markets open".

It has raised its target price for the shares from 800p to 875p.

On Friday, the Kurdistan Regional Government (KRG) announced that oil exports via the Khurmala-Fishkabur pipeline to Turkey have risen to 300,000bbl per day, on track to hit the 500,000bbl/day target by the first quarter of 2015.

UBS said that the KRG will make an inaugural payment of $75m to producers this month, including Genel, for exports in line with their contractual entitlement and has promised that further regulator payments will follow.

"With multiple cargoes shipped and paid for, this route to market for Kurdish oil, which bypasses Iraqi infrastructure, is being legitimised. And it is scaleable. The KRG's plans to grow exports to 1m bbl per day by end-2015 are being de-risked," UBS said.

The bank said it had worried that a "significant strain" on KRG's finances - from humanitarian and defence issues - could have resulted in a delay in payments to contractors.

"The payments loop has closed quicker than expected. Record production levels confirm contractors are making good operational progress on the ground, notwithstanding the political and security situation in the wider region," UBS said.

Genel was trading 8.8% higher at 812.5p by 11:22 on Monday.

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