Stephen Whyte, Chairman of Genel Energy, gave the following update on the business at the Company’s Annual General Meeting, held in London on Thursday:

Genel had a very successful 2018, with free cash flow generation of $164 million even while making significant investment in growth.

2019 has seen us continue this success. We are delivering year-on-year production growth, we have made portfolio additions that perfectly complement our existing asset base, and our cash position continues to strengthen.

Genel is participating in 20 wells this year, the most of any IOC in the Kurdistan Region of Iraq (‘KRI’). Drilling on the Tawke and Peshkabir fields is ongoing, with activity ramping up as we progress through 2019. Year to date production from the Tawke PSC is currently c.126,800 bopd, with Peshkabir driving impressive growth compared to the prior year’s period.

The drilling programme at Taq Taq has now delivered three successful wells, and year to date production is currently c.13,300 bopd, an increase from the 2018 average of 12,350 bopd. We are continuing to achieve successful results from the flanks of the field, and are drilling ahead at pace.

Total Genel working interest production across all assets is 37,600 bopd, running slightly ahead of our expected 10% increase in year-on-year production.

Even as we invest to deliver this production increase we continue to improve our cash position, generating almost $50 million in free cash flow in the first four months of the year. We expect to keep up this impressive run rate. Our current expectation is that we will generate well over $100 million in free cash flow over the course of 2019, prior to the payment of the dividend, even after increasing expenditure on our growth opportunities.

The results at Peshkabir show the significant success that can be obtained from our low-cost, rapid return operations in the KRI. While investing to increase production from 12,000 bopd to 55,000 bopd over the course of the year, Genel still generated $50 million of free cash flow from the asset. This level of return is hard to match anywhere else in the world, and illustrates why we continue to look for further opportunities in the KRI.

Put simply, the KRI is a very good place in which to operate. Payments have been made on a monthly basis for over three and a half years now, the political situation continues to improve – with Baghdad having made budget payments to the Kurdistan Regional Government for over a year – and the low-cost of operations helping to set a breakeven oil price at an asset level of $20/bbl.

We are still looking to diversify the portfolio, but we will not ignore further opportunities in the KRI – and indeed continue to focus on these where our presence on the ground and regional expertise mean we can maximise their value potential for shareholders.

In that context, as you are probably aware by now, we were delighted to add Sarta and Qara Dagh to the portfolio. They tick all of the boxes, as we partner with Chevron on assets that offer a mixture of near-term production and long-term growth potential.

Sarta is expected to enter production in the middle of 2020, and we will develop the field utilising a similar strategy to the one that was so successful (and cash-generative) at Peshkabir. While we do not want to get ahead of ourselves there are hydrocarbons throughout the structure in all of the typical KRI reservoirs, from the Tertiary down to the Triassic.

We are focused on building an even stronger business with material growth potential, providing a clear and compelling investment case that offers the opportunity for a significant increase in shareholder value. As we prioritise that growth, we have also initiated a material and sustainable dividend, providing investors with a compelling mix of growth and returns.

I am delighted that Bill Higgs is now sitting alongside me as CEO, and that Esa Ikaheimonen, our CFO, has also joined the Board.

On a personal level, the transition that I was keen to oversee is now complete. As such I have decided that this will be my last AGM as Chairman of Genel, and I will leave the Company for new challenges once a suitable successor has been identified. When I joined the Board two years ago the share price was under 80p, production was declining, Genel had unpaid oil receivables of over $400 million and $142 million in net debt.

Genel’s production and net cash position is now rising, the portfolio is positioned to provide material organic growth, and Genel now has the right team to deliver that growth. Management has a wealth of experience in the sector, experience that can also be utilised to make further value-accretive portfolio additions and optimise our growing cash pile to generate value for shareholders.”

Genel will announce results for the six months ending 30 June 2019 on Tuesday 6 August 2019.

(Source: Genel Energy)

DNO, as operator of the Tawke field in Iraqi Kurdistan, has today issued an update on licence activity.

Gross production from the Tawke licence, containing the Tawke and Peshkabir fields, averaged 126,759 bopd during the first quarter of 2019.

Tawke production currently averages c.73,000 bopd, and Peshkabir c.54,000 bopd. There is an active 2019 drilling campaign underway at the Tawke and Peshkabir fields, with a total of up to four Peshkabir wells and up to 14 Tawke wells.

The Peshkabir-9 well was completed and placed on production during the first quarter. The Peshkabir-10 well was spud in February and will come onstream shortly. The Peshkabir-11 well will spud later this month. Peshkabir production averaged 53,830 bopd during the first quarter.

Peshkabir has now generated $1 billion in gross revenue, or four times the total spend to date.

At the Tawke field, the Tawke-52 Cretaceous well was completed and placed on production during the quarter. The Tawke-54 Cretaceous well was spud in February and came onstream in mid-April, and the Tawke-55 Cretaceous well spud in April. Tawke field production averaged 72,929 bopd during the first quarter.

(Source: Genel Energy)

DNO ASA, the Norwegian oil and gas operator, today reported USD 35 million in first quarter 2019 operating revenues from its newly acquired North Sea assets, bringing the total quarterly figure across the portfolio to USD 204 million.

The Company generated a net profit of USD 51 million and exited the quarter with a cash balance of USD 254 million plus USD 109 million in treasury shares and marketable securities.

Company Working Interest (CWI) production averaged 107,600 barrels of oil equivalent per day (boepd) during the first quarter, up 36 percent from 79,100 boepd in the first quarter of 2018. Kurdistan contributed 89,400 barrels of oil per day (bopd) and the North Sea contributed 18,200 boepd.

Operated Kurdistan production from the Tawke and Peshkabir fields averaged 126,800 bopd during the quarter, up from 109,400 in the first quarter of 2018.

The Company plans to more than double capital and exploration expenditures to USD 440 million this year, up from USD 200 million last year. Planned 2019 expenditure in Kurdistan is USD 250 million and USD 190 million in the North Sea.

DNO has launched an active drilling program of up to 36 wells across the portfolio, representing the highest number of wells in the Company’s 48-year history.

DNO’s Executive Chairman, Bijan Mossavar-Rahmani (pictured), said:

“With our recent acquisition, DNO has transformed into a more balanced company. We continue to generate significant cash from ultra-low cost, short-cycle, highly prolific fields in Kurdistan but now with a strong, second leg in the North Sea.”

(Source: DNO)

By John Lee.

Genel Energy has announced that it “will only proceed with significant investment in Bina Bawi once an agreement is reached on a commercial framework that provides a clear route to monetisation.

In a statement, the company said:

As previously announced, the deadline to meet the conditions precedent relating to the Bina Bawi gas lifting agreement (‘GLA’) was extended until 30 April 2019, as discussions with the Kurdistan Regional Government (‘KRG’) on the commercial framework relating to the development of the licence continued.

“Having reached agreement that the existing GLA does not reflect the commercial realities of the proposed development, Genel and the KRG (‘the Parties’) have jointly agreed to let the GLA lapse on 30 April 2019 and focus on negotiating updated commercial terms based on a staged and integrated oil and gas development. The Parties are progressing the negotiation of a project scope based on a phased approach and ramp up of the gas development, with an initial phase of c.250 MMscfd raw gas capacity, and an accelerated development of the oil scope, where the KRG and Genel will jointly fund the first phase gas development utilising the revenue from Bina Bawi oil.

“The Parties have agreed to focus on finalising the commercial arrangement for this solution as soon as practical. The current production sharing contract (‘PSC’) provides a further 12 month period from 30 April 2019 within which to agree a new GLA. Should no agreement be reached in twelve months, the KRG has a right to terminate the PSC.

“In line with our capital allocation strategy, the Company will only proceed with significant investment in Bina Bawi once an agreement is reached on a commercial framework that provides a clear route to monetisation.

“The deadline for the Miran conditions precedent will be reached on 31 May 2019 and the Company similarly expects that the Miran GLA will lapse.

Meanwhile, analysts at Numis Securities have reportedly upgraded the shares to a “buy” rating.

(Sources: Genel Energy, thisismoney.co.uk)

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)