By John Lee.

Share in Genel Energy closed Thursday up 2.75% after the company announced an update on activity at the Taq Taq field (Genel 44% working interest), as testing of the TT-20z well has now been completed.

In a statement, the company said the well has entered production at an initial rate of 2,000 bopd with a 24/64″ choke, and this figure is expected to rise. With the inclusion of this production, gross production from the Taq Taq field is currently c.15,500 bopd, with Genel’s overall net production now c.39,000 bopd.

The well flowed oil from all three zones tested, with a maximum combined flow rate of c.4,000 bopd with a 40/64″ choke.

The statement added:

“The well is further proof of the remaining potential on the flanks of Taq Taq field. With Taq Taq wells an attractive capital allocation option, the rig has moved to drill the TT-33 well, on the southern flank of the field. The well was spudded on 25 March, and is expected to take 90 days to complete.”

(Source: Genel Energy)

Genel Energy has announced the appointment of Dr. Bill Higgs as Chief Executive Officer, and as a member of the Board of Directors, with immediate effect. Esa Ikaheimonen, Chief Financial Officer, has also been appointed to the Board.

Dr. Higgs joined Genel as Chief Operating Officer in October 2017, and has since led on the delivery and expansion of our Kurdistan Region of Iraq oil business. Having 30 years of global exploration, development and operations experience, Bill is a qualified geologist with extensive expertise in all engineering and other technical and commercial aspects of hydrocarbon development and production.

As well as being an Executive Director and Chief Operating Officer for Ophir Energy plc and Chief Executive Officer of Mediterranean Oil and Gas, he previously spent 23 years at Chevron across a number of global roles.

Murat Özgül will not stand for re-election at the Annual General Meeting, and has stepped down from the Board with immediate effect. Murat has taken up a transitional role as Special Adviser to the Board. He will remain with the Company until early 2020 to support key strategic initiatives, notably the progression of plans for the development of the Bina Bawi licence, where negotiations with the Kurdistan Regional Government (‘KRG’) are continuing.

Mr. Özgül became CEO of Genel in July 2015, at a challenging time in both the oil industry as a whole and in the regional political situation. The Company had net debt of c.$220 million and was owed a net trade receivable with the KRG of c.$378 million. Regular payments for oil exports began shortly thereafter, and the Receivable Settlement Agreement (‘RSA’) was signed in August 2017. The RSA and continuing monthly payments have transformed the Company and its financial position. As at 28 February 2019, Genel had a net cash position of $81 million.

Murat Özgül, Special Adviser to the Board:

“It has been a pleasure to have worked with all of our stakeholders and everyone at Genel as CEO. I am delighted that the Company is in such a strong position and is generating sufficient cash flow from assets in the Kurdistan Region of Iraq that Genel can both ramp up investment in growth, initiate a material and sustainable dividend policy, and still generate material free cash flow. I look forward to seeing Bill and the team deliver the tremendous potential in the portfolio, and working with him over the coming months.”

Stephen Whyte, Chairman of Genel:

Murat has made an invaluable contribution to the development of Genel. He was integral to the signing of the Receivable Settlement Agreement, which transformed the Company’s financial prospects, and we look forward to continue working with him as we progress the Bina Bawi licence.

“Bill was recruited by the Board as a potential successor to Murat, and has already made a tremendous contribution to our operations and the addition of further growth prospects. He is the right person to continue growing the Company and delivering on our strategy, as we look to provide investors with a compelling proposition combining both growth and a material annual return.

In accordance with Listing Rule 9.6.13(1) the Company confirms that Dr. Higgs is currently a director of San Leon Energy plc and between August 2014 and July 2017 was a director of Ophir Energy plc. Esa Ikaheimonen is currently a director of Independent Oil & Gas PLC, between February 2016 and August 2018 was a director of Vantage Drilling International, was Chairman of Transocean Partners plc from April 2014 to June 2015, and non-executive director of Ahlstrom plc from April 2011 to April 2015. There is no other information required to the disclosed under Listing Rule 9.6.13R(2) to 9.613(6) inclusive.

(Source: Genel Energy)

Genel Energy has announced that, at the bondholder meeting held today, the Company’s proposal was adopted and the waiver of the dividend restriction in 2019 has been confirmed.

With respect to the 2018 financial year, a year in which free cash flow totalled $164 million, the Board has accordingly recommended a final dividend of 10¢ per share, a total distribution of $27.9 million.

As previously stated, given the strong free cash flow forecast of the business even after investment in growth opportunities, the Company intends to pay a minimum dividend of $40 million per annum. This will be split between an interim and final dividend, to be paid one-third/two-thirds. The final dividend reflects this split and will be subject to shareholder approval at the AGM on 16 May 2019.

Genel intends to announce an interim dividend of 5¢ per share as part of the 2019 half-year results, which are scheduled for 6 August 2019.

Bill Higgs, Chief Executive of Genel, said:

“Genel has highly cash generative assets and material growth opportunities in the portfolio. Even after drilling 20 wells in 2019 and progressing the exciting opportunities at Sarta and Qara Dagh, we still expect to generate over $100 million in free cash flow. We will continue to focus on delivering on our strategy as we begin the distribution of a material and sustainable dividend, and aim to provide investors with a compelling mix of growth and returns.”

FINAL DIVIDEND PAYMENT TIMETABLE

  • Annual General Meeting: 16 May 2019
  • Ex-dividend date: 23 May 2019
  • Record Date: 24 May 2019
  • Payment Date: 24 June 2019

(Source: Genel Energy)

By John Lee.

Shares in Genel Energy were trading down four percent on Wednesday morning after the company announced its audited results for the year ended 31 December 2018, in which it wrote down its Miran asset by $424 million.

Despite this, Genel says it can now initiate “a material and sustainable dividend policy“, with payments starting in 2020.

The company’s shares are up 17 percent since the start of the year.

Murat Özgül, Chief Executive of Genel, said:

Genel’s strategy at the start of 2018 was clear – generate material free cash flow from producing assets, build and invest in a rich funnel of transformational development opportunities, and return capital to shareholders at the appropriate time. We are delivering on this strategy.

“2018 was another year of material free cash flow generation, we continued to transform our balance sheet and the addition of assets with the potential of Sarta and Qara Dagh led to a very successful delivery on the first two parts of our strategy. We will continue to develop opportunities and invest ingrowth. As we do so, a robust cash flow outlook and our confidence in Genel’s future prospects underpins our initiation of a material and sustainable dividend policy.

Results summary ($ million unless stated)

2018 2017
Production (bopd, working interest) 33,700 35,200
Revenue 355.1 228.9
EBITDAX1 304.1 475.5
  Depreciation and amortisation (136.2) (117.4)
  Exploration credit / (expense) 1.5 (1.9)
  Impairment of property, plant and equipment (58.2)
  Impairment of intangible assets (424.0)
Operating (loss) / profit (254.6) 298.0
Cash flow from operating activities 299.2 221.0
Capital expenditure 95.5 94.1
Free cash flow2 164.2 99.1
Cash3 334.3 162.0
Total debt 300.0 300.0
Net cash / (debt)4 37.0 (134.8)
Basic EPS (¢ per share) (101.6) 97.1
Underlying EPS (¢ per share)5 109.0 65.1
  1. EBITDAX is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($136.2 million), exploration credit ($1.5 million) and impairment of intangible assets ($424.0 million)
  2. Free cash flow is net cash generated from operating activities less cash outflow due to purchase of intangible assets ($39.7 million), purchase of property, plant and equipment ($65.3 million) and interest paid ($30.0 million)
  3. Cash reported at 31 December 2018 excludes $10.0 million of restricted cash
  4. Reported cash less ($334.3 million) less reported balance sheet debt ($297.3 million)
  5. EBITDAX less net gain arising from the Receivable Settlement Agreement (‘RSA’) divided by the weighted average number of ordinary shares

Highlights

  • $335 million of cash proceeds were received in 2018 (2017: $263 million)
  • Strong cash flow generation, with free cash flow totalling $164 million in 2018 (2017: $99 million), an increase of 66%
  • Financial strength continues to increase,with unrestricted cash balances at 28 February 2019 of $378 million, andnet cash at $81 million
  • Addition of Sarta and Qara Dagh to the portfolio in 2019 brings further near-term production and material growth potential
  • Increase in 1P and 2P reserves as of 31 December 2018 to 99 MMbbls (31 December 2017: 97 MMbbls) and 155 MMbbls (31 December 2017: 150 MMbbls) respectively, including Sarta
  • As disclosed in our trading statement, the carrying value of the Miran licence has been under review. Due to the focus on the development of Bina Bawi, while Genel continues to see significant opportunity in the licence, this has resulted in an accounting impairment to the carrying value

Outlook

  • Production guidance maintained – net production during 2019 is expected to be close to Q4 2018 levels of 36,900 bopd, an increase of c.10% year-on-year
  • Capital expenditure guidance updated to include spend on Sarta and Qara Dagh, with net capital expenditure now forecast to be $150-170 million (from c.$115 million)
  • Opex and G&A guidance unchanged at c.$30 million and c.$20 million respectively
  • Genel expects to generate material free cash flow of over $100 million in 2019, inclusive of investment in Sarta and Qara Dagh
  • Given the strong free cash flow forecast of the business, even after investment in growth opportunities, Genel is initiating a material and sustainable dividend policy
    • The Company intends to pay a minimum dividend of $40 million per annum starting in 2020, with the intention for this to grow
    • The dividend will be split between an interim and final dividend, to be paid one-third/two-thirds
    • The Company is set to approach bondholders to request a temporary waiver of the dividend restriction, which limits dividends to 50% of annual net profit, in relation to accelerating the start of distribution to 2019
  • The Company continues to actively pursue growth and appraise opportunities to make value-accretive additions to the portfolio

More details – 40 pages of them! – here.

(Sources: Genel Energy, Yahoo!)

By John Lee.

Genel Energy has announced that approval has been given by the Kurdistan Regional Government (KRG) regarding the acquisition of stakes from Chevron in the Sarta and Qara Dagh (pictured) blocks, in the Kurdistan Region of Iraq.

According to a statement from the company, the acquisitions have now closed and Genel therefore has 30% equity in the Sarta PSC, with Chevron holding 50% and the KRG the remaining 20%. Final investment decision relating to Sarta phase 1A development has now been taken.

Phase 1A begins with two wells, recompleting the Sarta-2 well and placing the Sarta-3 well on production, both of which flowed approximately 7,500 bopd on test, and the construction of a central processing facility with a 20,000 bopd capacity. Another well is expected to follow within twelve months of first oil, and further production capacity will be added as the field is developed and production ramps up. First oil is expected in 2020, with a total cost to Genel estimated at $60 million to the end of 2020.

Genel has booked an initial 10 MMbbls of net 2P reserves relating solely to this preliminary phase of the project. Unrisked gross mid case resources relating to the Mus-Adaiyah reservoir only are estimated by Genel at c.150 MMbbls, with overall unrisked gross P50 resources currently estimated by the Company at c.500 MMbbls.

Genel now holds 40% equity in the Qara Dagh PSC and is the operator, with Chevron holding 40% and the KRG the remaining 20%. Work is underway on assessing the optimal location for the Qara Dagh-2 well, which is set to be drilled in 2020. Unrisked gross mean resources at Qara Dagh are currently estimated by Genel at c.200 MMbbls.

Shares in Genel Energy have risen 9 percent over the past 24 hours.

(Sources: Genel Energy, Yahoo!)

Genel Energy has announced that McDaniel and Associates (‘McDaniel’) has completed the competent person’s report (‘CPR’) relating to the oil reserves at Taq Taq as at 31 December 2018.

Field performance in 2018, and notably the success of the TT-29w well drilled on the northern flank of the field, has led to an upwards technical revision of reserves, resulting in a 62% reserves replacement at the 1P level.

This revision does not take into account the recent positive results from the TT-32 well, which completed in 2019 and is currently adding over 3,000 bopd to field production.

Drilling in 2019 is targeting opportunities on the flanks of the field, with the TT-20z well nearing completion and three others then to follow. Should the wells match the performance of TT-29w and TT-32, Taq Taq could deliver a significant year-on-year production increase, with room for further growth in 2020.

The Company expects to announce CPR reports for other assets in the portfolio prior to the announcement of full-year results on 20 March 2019.

(Source: Genel Energy)

Shares in DNO ASA, the Norwegian oil and gas operator, were trading up five percent on Monday afternoon following the company’s announcemnt that it has replaced 2018 production through additions to reserves, marking the second consecutive year in which the Company’s replacement of proven reserves reached or exceeded 100 percent of production.

“DNO’s stellar record of reserves replacement through the drill bit is a result of stepped up spending on our portfolio of quality assets coupled with rapid-fire execution,” said Bijan Mossavar-Rahmani, DNO’s Executive Chairman. “And the barrels we continue to add are among the lowest cost in the industry, anywhere,” he expounded.

Yearend 2018 Company Working Interest (CWI) proven (1P) reserves stood at 240 million barrels of oil (MMbbls), unchanged from yearend 2017 after adjusting for production and technical revisions. On a CWI proven and probable (2P) reserves basis, DNO replaced 98 percent of its 2018 production, exiting the year with CWI 2P reserves of 376 MMbbls (384 MMbbls in 2017).

At 2018 production rates, DNO’s 1P reserves life is 8.2 years and its 2P reserves life is 12.9 years.

Significantly, the Company’s 1P reserves replacement ratio (RRR) has reached or exceeded 100 percent in eight of the past ten years.

On a gross basis, at the Tawke license in the Kurdistan region of Iraq containing the Tawke and Peshkabir fields, yearend 2018 1P reserves stood at 348 MMbbls, unchanged from 2017 after adjusting for production of 41 MMbbls and upward technical revisions of 41 MMbbls. Tawke license 2P reserves stood at 502 MMbbls (513 MMbbls in 2017) and proven, probable and possible (3P) reserves at 697 MMbbls (880 MMbbls in 2017).

Broken down by field, Tawke field gross 1P reserves stood at 294 MMbbls (335 MMbbls in 2017), 2P reserves at 376 MMbbls (438 MMbbls in 2017) and 3P reserves at 477 MMbbls (588 MMbbls in 2017). Peshkabir field gross 1P reserves stood 54 MMbbls (13 MMbbls in 2017), 2P reserves at 126 MMbbls (75 MMbbls in 2017) and 3P reserves at 220 MMbbls (292 MMbbls in 2017).

International petroleum consultants DeGolyer and MacNaughton carried out the annual independent assessment of the Tawke license. The Company internally assessed the remaining licenses in its portfolio.

The 2018 Annual Statement of Reserves and Resources, prepared and published in accordance with Oslo Stock Exchange listing and disclosure requirements (Circular No. 1/2013), is attached and is also available on the Company’s website at www.dno.no.

(Sources: DNO, Yahoo!)

Genel Energy has announced an update on activity at the Taq Taq Field (Genel 44% working interest).

Testing of the TT-32 well has now completed. The well flowed oil from three separate zones, with a maximum individual zone flow rate of c.5,500 bopd with a 36/64″ choke.

The free water level was encountered at 1458 metres, which was 29 metres deeper than the pre-drill estimate and only 57 metres above the original field-wide FWL. The oil column at the TT-32 well location is 169 metres. TT-32 has further demonstrated the remaining potential on the flanks of Taq Taq Field.

The well has now entered production at an initial rate of 3,100 bopd with a 24/64″ choke, ahead of previous expectations. With the inclusion of this production, gross production from the Taq Taq Field is currently c.13,750 bopd.

The horizontal sidetrack well TT-20z spud on 11 January. This well is targeting production from the Shiranish Formation on the western flank of the field, and drilling operations are expected to complete in mid-February.

Three further wells are scheduled to be drilled in 2019, as Genel continues to target the flanks of the field with the aim of delivering a year-on-year production increase.

(Source: Genel Energy)

Genel Energy has issued the following trading and operations update in advance of the Company’s full-year 2018 results, which are scheduled for release on 20 March 2019. The information contained herein has not been audited and may be subject to further review.

Murat Özgül, Chief Executive of Genel, said:

2018 was a very positive year for Genel, which saw us generate material free cash flow and further transform the balance sheet. An expected year-on-year increase in production means we are set to continue this performance in 2019, with low-cost assets forecast to generate over $100 million in free cash flow even if the oil price averages $45/bbl.

“As we generate cash we will continue to invest in the business to maximise the value of our existing portfolio. We are also working hard to bring in new assets that are complementary to our cash generation story. We are focused on building a stronger company with sustainable and material cash flow and multiple growth opportunities from which to create significant shareholder value.

FINANCIAL PERFORMANCE

  • $335 million of cash proceeds were received in 2018 ($263 million in 2017), an increase of 27%, of which $98 million was received in Q4
  • Free cash flow totalled $164 million in 2018 ($99 million in 2017), an increase of 66%, representing a free cash flow yield of 27% on the year-end share price
  • Unrestricted cash balances at 31 December 2018 were $334 million ($162 million at 31 December 2017), with net cash at $37 million ($135 million net debt at 31 December 2017)
  • Capital expenditure for 2018 totalled $95 million, of which $70 million was cost recoverable spend on producing assets

2018 OPERATING PERFORMANCE AND 2019 ACTIVITY OUTLOOK

  • 2018 net production averaged 33,690 bopd, with Q4 averaging 36,920 bopd. Production and sales by asset during 2018 was as follows:

  • Tawke PSC (Genel 25% working interest)
    • Tawke PSC production averaged 113,020 bopd in 2018, with production from Peshkabir contributing 27,660 bopd to this figure
    • Production in Q4 2018 averaged 127,220 bopd, of which Peshkabir contributed 50,130 bopd
    • The Peshkabir-8 well completed in December 2018, and is currently producing just under 10,000 bopd. Results of the Peshkabir-9 well are expected shortly
    • While further production wells are set to be drilled in 2019, Peshkabir activity in 2019 will focus on field management facilities and the utilisation of associated gas to enhance oil recovery at the Tawke field

 

  • Taq Taq PSC (Genel 44% working interest and joint operator)
    • Taq Taq field production averaged 12,350 bopd in 2018
    • Production in Q4 2018 averaged 11,640 bopd
    • Drilling operations on the TT-32 well have now been completed, and test production is underway. The well is currently flowing at a rate of over 3,000 bopd, and still cleaning up, with further zones to be tested ahead of an expected stabilised production rate of c.2,000 bopd
    • The rig has now moved to drill the horizontal sidetrack TT-20z well, which will drill the Shiranish in the western flank of the field with an aim to increasing productivity
    • Three further wells are scheduled to be drilled in 2019, as Genel continues to target the flanks of the field with the aim of delivering a year-on-year production increase

 

  • Bina Bawi and Miran (Genel 100% and operator)
    • Field development plans for both Bina Bawi and Miran oil and gas are under discussion with the KRG, and may entail a phased development approach in order to reduce initial capital expenditure and achieve the earliest date for first gas. An extension to the conditions precedent is expected to be granted shortly
    • Genel is reviewing the value of the Miran PSC carried in the Company accounts, and will update this as part of the year-end results process

 

  • African exploration update
    • Onshore Somaliland, seismic processing has now completed on the SL-10-B/13 block (Genel 75% working interest, operator) and analysis and interpretation is underway. Initial indications confirm the Company view that the block has hydrocarbon potential. Genel continues to develop a prospect inventory and assess next steps ahead of a farm-out process and potentially spudding a well in 2020. On the Odewayne block further seismic processing is being considered in order to complete the Company’s understanding of the prospectivity of the block
    • On the Sidi Moussa block offshore Morocco (Genel 75% working interest, operator), the acquisition of a c.3,500 km2 multi-azimuth broadband 3D seismic survey completed in November. PSTM and PSDM processing will continue through 2019. Genel has no additional work commitments relating to the licence. A decision will be made on whether to drill a well, and the appropriate equity level, once processing has progressed sufficiently

2019 GUIDANCE

  • Genel expects to generate material free cash flow in 2019
    • Genel generates positive free cash flow at and above an oil price of $20/bbl
  • In light of the Company’s balance sheet strength and ongoing material cash generation, management is appraising the most effective model for balanced capital allocation in order to take advantage of growth opportunities, make value accretive additions to the portfolio, and pave the way to returning capital to shareholders at the appropriate time
  • Combined net production from the Tawke and Taq Taq PSCs during 2019 is expected to be close to Q4 2018 levels
  • Capital expenditure net to Genel is forecast to be c.$115 million, with the majority being cost-recoverable spend on current producing assets. Capex includes:
    • Tawke and Taq Taq net to Genel of c.$100 million
    • Bina Bawi and Miran maintenance capex of c.$10 million, with the potential for this figure to be updated should there be positive developments on Bina Bawi commercial discussions
    • African exploration cost of under $5 million, largely comprising processing costs relating to Moroccan seismic
  • Opex: c.$30 million
  • G&A: c.$20 million
  • The Company continues to actively pursue growth and appraise opportunities to make value-accretive additions to the portfolio

(Source: Genel Energy)

Tawke Licence:

The Kurdistan Regional Government notes the updates by DNO and Genel Energy on November 1st regarding production increases under the Tawke Production Sharing Contract (PSC).

The KRG is pleased with the efforts of the Tawke PSC Contractors in the Peshkabir area of the Tawke PSC Licence, where production has risen to over 50,000 barrels per day (bpd) within 18 months, exceeding expectations.

The recent boost in production at the Peshkabir area has more than compensated for the natural decline of the main Tawke field area, where production is now down to about 80,000 bpd, from 109,000 bpd in July 2017. Overall production under the Tawke PSC Licence reached 126,000 during October, compared to 114,000 bpd in July 2017. The current average is around 130,000 bpd (click here to view the chart).

Pipeline Upgrades:

The KRG has also recently completed an upgrade of its export pipeline by installing another pumping station at Shaikhan, which boosts capacity of the pipeline from 700,000 bpd to 1 million bpd. This extra capacity will accommodate future production growth from KRG producing fields, and can also be used by the federal government to export the currently stranded oil in Kirkuk and surrounding areas.

Oil Export:

The KRG currently exports over 400,000 bpd of crude oil. The KRG’s policy of maintaining consistent and timely payments to its producing oil companies has led to more investment in its oil fields, stabilising production levels and paving the way for further production increases during 2019.

These export achievements generate more revenues that will help to reduce the KRG’s overall debts and aid the economic revival and sustainability of the Kurdistan Region. The KRG’s policy of supporting its producers provides further evidence that Kurdistan’s PSCs are a win-win for investors and the citizens of the Kurdistan Region.

(Source: KRG)