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)

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 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)

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)

By John Lee.

Genel Energy and DNO have said that the Tawke partners have received $62.19 million from the Kurdistan Regional Government (KRG) as payment for March 2018 crude oil deliveries to the export market from the Tawke licence.

Genel’s net share of the payment is $15.52 million.

The Taq Taq partners have received a gross payment of $6.20 million from the KRG for oil sales during March 2018; Genel’s net share of this payment is $3.41 million.

Genel has also received an override payment of $8.37 million from the KRG, representing 4.5% of Tawke gross licence revenues for the month of March 2018, as per the terms of the Receivable Settlement Agreement.

In total, Genel’s net share of payments relating to March 2018 exports totals $27.30 million.

(Source: Genel Energy)

Genel Energy notes the announcement from DNO ASA, as operator of the Tawke PSC, that the Tawke partners have received $47.23 million from the Kurdistan Regional Government (‘KRG’) as payment for February 2018 crude oil deliveries to the export market from the Tawke licence. Genel’s net share of the payment is $11.81 million.

The Taq Taq partners have received a gross payment of $6.80 million from the KRG for oil sales during February 2018. Genel’s net share of the payment is $3.74 million.

The Company has also received an override payment of $6.85 million from the KRG, representing 4.5% of Tawke gross licence revenues for the month of February 2018, as per the terms of the Receivable Settlement Agreement.

Gross production from the Tawke licence stood at 111,618 bopd during February, of which only 102,999 bopd was exported due to a planned pipeline outage; the balance was placed into interim storage at Fishkhabur and exported the following month.

In total, Genel’s net share of payments relating to February 2018 exports totals $22.40 million.

(Source: Genel Energy)

Genel Energy has announced that the Taq Taq partners have received a gross payment of $8.30 million from the Kurdistan Regional Government (KRG) for oil sales during January 2018. Genel’s net share of the payment is $4.57 million.

Genel also notes the announcement from DNO ASA, as operator of the Tawke PSC, that the Tawke partners have received $56.44 million from the KRG as payment for January 2018 crude oil deliveries to the export market from the Tawke licence. Genel’s net share of the payment is $14.07 million.

The Company has received an override payment of $7.86 million from the KRG, representing 4.5% of Tawke gross licence revenues for the month of January 2018, as per the terms of the Receivable Settlement Agreement.

In total, Genel’s net share of payments relating to January 2018 exports totals $26.50 million.

(Source: Genel Energy)

Genel Energy has announced a return to profit.

In its audited results for the year ended 31 December 2017, Murat Özgül (pictured), Chief Executive of Genel, said:

Another year of consistent payments by the KRG and a disciplined capital allocation strategy helped to generate material free cash flow in 2017. This was enhanced in the latter part of the year by the Receivable Settlement Agreement, from which Genel expects to generate sustainable and significant free cash flow going forward.

“The strong financial performance of 2017, and the promise of more to come, facilitated the successful refinancing in December, which solidified a significant improvement in the balance sheet and provides a strong platform for growth.

“We will continue with our strategy of maximising free cash flow as we focus investment on our producing assets, specifically on the Tawke PSC, where the performance of Peshkabir remains highly encouraging. Prudent expenditure will also be made on the other assets within our portfolio that provide material value creation opportunities.

“We will continue to construct the building blocks for value creation from Bina Bawi and Miran, while cost-effectively progressing our exploration assets in Africa.”

Results summary ($ million unless stated)

2017

2016

Production (bopd, working interest)

35,200

53,300

Revenue

228.9

190.7

EBITDAX1

475.5

130.7

  Depreciation and amortisation

(117.4)

(128.9)

  Exploration expense

(1.9)

(815.1)

  Impairment of property, plant and equipment

(58.2)

(218.3)

  Impairment of receivables

(191.3)

Operating profit / (loss)

298.0

(1,222.9)

Cash flow from operating activities

221.0

131.0

Capital expenditure

94.1

61.2

Free cash flow before interest2

141.8

59.1

Cash3

162.0

407.0

Total debt

300.0

674.6

Net debt4

134.8

241.2

Basic EPS (¢ per share)

97.1

(448.6)

1.     EBITDAX is earnings before interest, tax, depreciation, amortisation, exploration expense and impairment which is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($117.4 million), exploration expense ($1.9 million) and impairment of property, plant and equipment ($58.2 million)

2.     Free cash flow before interest is net cash generated from operating activities less cash outflow due to purchase of intangible assets and purchase of property, plant and equipment (oil and gas assets only)

3.     Cash reported at 31 December 2017 excludes $18.5 million of restricted cash

4.     Reported debt less cash

Highlights

  • $263 million of cash proceeds received in 2017 (2016: $207 million), with strong free cash flow generation of $142 million (2016: $59 million)
  • Year-end net debt of $135 million, a 44% reduction year-on-year (2016: $241 million)
  • Year-end gross debt of $300 million, a 56% reduction year-on-year (2016: $675 million), with debt extended until 2022 and interest cost reduced by 40%
  • Receivable Settlement Agreement resulted in cash benefit of $26 million in Q4 2017
  • Focused capital allocation – 66% of capital expenditure was spent on cash-generative producing assets, and has been cost recovered
  • Drilling success at Peshkabir, with gross production rising to c.15,000 bopd at year-end
  • Taq Taq field production stabilised in H2 2017, with Q4 average of 14,035 bopd in line with Q3 average of 14,080 bopd
  • In January 2018 Bina Bawi and Miran CPRs confirmed c.45% uplift to gross 2C raw gas resources to 14.8 Tcf

Outlook

  • Combined net production from the Tawke and Taq Taq PSCs during 2018 is expected to be close to Q4 2017 levels of 32,800 bopd, unchanged from previous guidance
  • Genel expects to continue the generation of material free cash flow in 2018
  • Tangible steps to be taken to further de-risk gas resources and unlock value from Bina Bawi and Miran, including the high-value oil resources
  • Capital allocation discipline to continue, with ongoing prioritisation of spend on cash-generative producing assets. Capital expenditure guidance unchanged at c.$95-140 million net to Genel
  • Opex and G&A cash cost guidance unchanged at c.$30 million and c.$15 million respectively

More here.

(Source: Genel Energy)

Genel Energy plc has announced that it has received an override payment of $7.05 million from the Kurdistan Regional Government (KRG).

The payment represents 4.5% of Tawke gross field revenues for the month of November 2017, as per the terms of the Receivable Settlement Agreement. 

Taken together with the monthly entitlement payments for Taq Taq and Tawke announced yesterday, Genel’s net share of payments relating to November 2017 exports totals $26.81 million.

(Source: Genel Energy)

By John Lee.

Genel Energy has announced the completion of competent person’s reports (‘CPRs’) relating to the oil reserves and resources at Taq Taq, Bina Bawi, and Miran.

McDaniel and Associates have updated the CPR relating to the Taq Taq field (Genel 44% working interest, joint operator).

RPS Energy Consultants Ltd. (‘RPS’), as part of its work on the updated CPRs for the Bina Bawi and Miran West fields (Genel 100% and operator), has finalised its evaluation of the oil resources at both fields.

Murat Özgül (pictured), Chief Executive of Genel, said:

“The 40% replacement of 1P reserves at Taq Taq follows the success of well TT-29w, and reflects the stability in cash-generative production that we have seen from the field in the second half of 2017. The significant increase in high-value Bina Bawi 2C oil resources offers a tangible opportunity for near-term value creation.”

Taq Taq oil reserves

Taq Taq gross 2P reserves as of 31 December 2017 are estimated by McDaniel at 54.7 MMbbls, compared to 59.1 MMbbls as of 28 February 2017, with the difference being production in the intervening period, partly offset by a small upward technical revision.

The CPR results in a 12% reserves replacement for 2P and 40% reserves replacement at the higher confidence 1P level as a result of stabilising production and the integration of well TT-29w. A reconciliation from the reserves reported in the CPR released in February 2017 to the updated estimates in the CPR published today, is shown in the following table:

Gross oil reserves (MMbbls – McDaniel)

1P

2P

3P

28 February 2017

25.8

59.1

95.0

Production

(5.0)

(5.0)

(5.0)

Technical revisions

2.0

0.6

0.1

31 December 2017

22.8

54.7

90.1

Bina Bawi and Miran oil resources

Bina Bawi gross 2C light (c.45◦ API) oil resources as of 31 December 2017 are estimated by RPS at 37.1 MMbbls, compared to 13 MMbbls as of July 2013. The increase reflects higher recovery factors than initially estimated due to integrating learnings from analogue carbonate fields of similar oil quality. As the high-quality Bina Bawi oil is in close proximity to export infrastructure, the field represents a potentially attractive near-term development candidate for the Company.

Miran West gross 2C heavy (c.15◦ API) oil resources as of 31 December 2017 are estimated by RPS at 23.7 MMbbls, compared to 52 MMbbls as of April 2013. Volumes have reduced as RPS has adjusted its view on the oil water contact uncertainty range and also adjusted its view on reservoir properties, including data from MW-5 drilled in July 2013.

Because of field experience at Taq Taq, Genel management has taken the view that it is unlikely that any matrix will contribute to primary depletion at Miran and, as such, has taken a more conservative view and will only record 18.5 MMbbls of viable 2C contingent resources at the field.

Gross 2C Contingent Resources oil (MMbbls – RPS)

2013

31 December 2017

Bina Bawi

12.9

37.1

Miran West

52.0

23.7

Appendix

Summary of Contingent Resources – Development unclarified (Gross 100% working interest basis) attributable to the Bina Bawi and Miran West fields as of 31 December 2017.

Gross (100% WI) Contingent Resources

Gross (100% WI) Contingent Resources

Bina Bawi

Oil (MMbbls – RPS)

Miran West

Oil (MMbbls – RPS)

1C

15.2

1C

6.1

2C

37.1

2C

23.7

3C

78.4

3C

67.6

(Source: Genel Energy)