Genel Energy Publishes Sustainability Report

Genel Energy has published its first comprehensive Sustainability Report, prepared in accordance with the Global Reporting Initiative ('GRI') Standards core option.

Bill Higgs, Chief Executive of Genel, said:

"Genel has had a longstanding commitment to positively impact the communities in which we operate. This has focused on three core areas - economic development, education, and health, and I am delighted to detail our activities in these areas in our first comprehensive Sustainability Report. Having a positive impact on the local community is just one part of our responsibility however, and we continue our journey to meet head on the challenges associated with the energy transition. Stepping up to these challenges is vital to our business, and this is reflected in ESG metrics being incorporated into our corporate key performance indicators and remuneration evaluations. The publication of today's Sustainability Report is a further indication of our commitment to this area.

"We are aware that we have a long way to go in a rapidly changing landscape. Nevertheless, we have the talent, skill sets, and commitment at the highest levels of the Company to meet the challenges ahead. In my view, Genel has the right low-cost and low-carbon assets, in the right locations, and with the right footprint, to thrive in a future of fewer and better natural resources projects."

"The Sustainability Report is a complement to our Annual Report, and will be issued annually, publicly detailing our ESG activities as we strive to be a socially responsible contributor to the global energy mix.

"Genel has a low-cost and low-carbon asset portfolio, with the recent commissioning of the enhanced oil recovery project at the Tawke PSC having materially reduced flaring, reducing the carbon intensity of our portfolio to 7kg CO2e/bbl of scope 1 and 2 emissions.

"It has been a long-stated aim of Genel to have a positive impact both by contributing to economic development and directly supporting local communities through improved infrastructure and the provision of opportunities for improved health, development and employment.

"Since 2006, Genel has invested almost $60 million in social projects. 245 social investment and community projects have been funded and successfully delivered, and each year up to 550 local community patients receive free treatment from the TTOPCO medical team. Supporting the development of the local economy is also crucial, and Genel has spent over $36 million on contracts with local companies. Currently, almost 250 local people are employed at TTOPCO, and 23 local community-centred companies are providing services to Genel's operations across the KRI, with our operations indirectly supporting a further 350 local people through such contracts.

"As well as looking to have a wider societal benefit, our commitment to having a beneficial impact begins with operational excellence and the taking care of our workforce. For the last four years, Genel has achieved zero lost time injuries with more than 12 million working hours since the last incident. This has been achieved through the promotion of a strong HSE culture and extensive workforce training and engagement at all levels.

"Our focus on sustainability has not been lessened by the ongoing COVID-19 pandemic, and the Report illustrates the key values that drive our decision making and support the delivery of our strategic goals."

Click here to download the full report.

(Source: Genel Energy)

The post Genel Energy Publishes Sustainability Report first appeared on Iraq Business News.

Genel Energy considers new Bond Issue

By John Lee.

Genel Energy has engaged Pareto Securities to organise a roadshow with international credit investors. The Company may, subject to market conditions and acceptable terms on the new issue, raise a new five-year bond of up to $300 million to replace the Company's existing bond maturing in December 2022.

Genel had cash in excess of $350 million at 30 August 2020, and net cash of $55 million. Acdording to a company statesment, it "maintains a positive outlook, a strategy of maintaining a robust balance sheet through cycles, and is proactively managing its liquidity runway and debt maturity profile".

(Source: Genel Energy)

The post Genel Energy considers new Bond Issue first appeared on Iraq Business News.

Genel Energy Shares Fall on Asset Impairment

By John Lee.

Shares in Genel Energy were trading down 4.5 percent on Thursday morning after the company announced its unaudited results for the six months ended 30 June 2020.

Bill Higgs, Chief Executive of Genel, said:

"Genel's robust business model, which is designed to provide resilience in a challenging environment, has demonstrated its value as the Company negotiates the headwinds facing the sector in 2020. Our low-cost production and the capital flexibility within our development programme have enabled us to preserve the strength of our balance sheet even while investing in growth.

"Given the lower oil price and overdue payments, the fact that we still expect to end 2020 in a net cash position - even after dividend distributions and making the investment to bring Sarta to production this year - is a testament to our resilience, and we have today confirmed an interim dividend of 5¢ per share."

Results summary ($ million unless stated)

H1 2020 H1 2019 FY 2019
Production (bopd, working interest) 32,100 37,400 36,250
Revenue 88.4 194.3 377.2
EBITDAX1 65.1 167.3 321.8
  Depreciation and amortisation (82.6) (74.8) (158.5)
  Exploration expense (1.3) (0.6) (1.2)
  Impairment of oil and gas assets (286.3) - (29.8)
  Impairment of trade receivables (34.9) - -
Operating (loss) / profit (340.0) 91.9 132.3
Underlying (loss) / profit2 (32.2) 76.6 134.9
Cash flow from operating activities 85.5 142.3 272.9
Capital expenditure 58.5 72.2 158.1
Free cash flow3 6.5 56.7 99.0
Dividends paid 41.3 27.4 27.4
Cash4 355.3 353.3 390.7
Total debt 300.0 300.0 300.0
Net cash5 57.2 55.8 92.8
Basic EPS (¢ per share) (128.9) 27.2 37.8
Underlying EPS (¢ per share)2 (11.7) 27.4 49.0
Average Brent oil price ($/bbl) 40 65 64
  1. EBITDAX is operating (loss) /profit adjusted for the add back of depreciation and amortisation ($82.6 million), exploration expense ($1.3 million), impairment of property, plant and equipment ($242.0 million), impairment of intangible assets ($44.3 million) and impairment of trade receivables ($34.9 million).
  2. Underlying EPS is underlying profit (page 9) divided by weighted average number of shares
  3. Free cash flow is reconciled on page 10
  4. Cash reported at 30 June 2020 excludes $3.1 million of restricted cash, and takes into account the dividend paid in June
  5. Reported cash less IFRS debt (page 10)

Highlights

  • Cash of $355 million at 30 June 2020 ($353 million at 30 June 2019)
  • Net cash of $57 million at 30 June 2020 (net cash of $56 million at 30 June 2019)
    • $110 million received from the Kurdistan Regional Government ('KRG') in H1 2020
    • Updated payment mechanism introduced in April, under which the KRG committed to settling monthly sales invoices by the middle of the following month
    • $121 million remains outstanding in relation to oil sales from November 2019 to February 2020 - discussions continue with the KRG over settlement arrangements
  • Despite the monies outstanding, the fall in oil price and non-payment of the override, $6.5 million of free cash flow was generated in H1 2020 due to Genel's low-costs and resilient business model allowing flexible expenditure
    • Production cost of $2.9/bbl in H1 2020
    • Capital expenditure of $58.5 million in H1 as spending cut due to the external environment
    • G&A costs of $6.6 million, a reduction of c.30% year-on-year, as activity is rephased
  • Production of 32,100 bopd in H1 2020, due in part to the impact of COVID-19, coupled with payment uncertainty, resulting in reduced drilling activity at the Tawke PSC
    • Production averaged 33,000 bopd in July 2020, following fast tracking of activity at the Tawke PSC against an improved backdrop
  • Continued focus on safety: zero lost time incidents and zero losses of primary containment in the period
  • Impairments of $286 million largely due to reduction in Brent oil price forecast
  • Interim dividend of 5¢ per share confirmed (2019: 5¢ per share)

Outlook

  • Genel's low-cost production, flexible capital investment programme, and robust balance sheet makes it resilient to lower oil prices, and the Company expects to retain a net cash position at the end of 2020 at the prevailing oil price, while still investing in key growth assets
  • Capex of c.$45 million expected in H2, with c.50% to be spent on moving Sarta to production in Q4, where work has continued despite the challenges resulting from COVID-19
  • Genel continues discussions with the KRG regarding the recovery of the $121 million receivable

(Source: Genel Energy)

Genel Energy appoints new Non-Exec Director

By John Lee.

Genel Energy has announced the appointment of Canan Ediboğlu as an Independent Non-Executive Director, with immediate effect.

Canan has significant industry, financial, and corporate experience. She has been a non-executive board member of ING Bank in Turkey since 2010, and Tupraş since 2017. Canan was formerly non-executive Board member of Aygaz between 2011 and 2017, and a non-executive Board member of Pyrsmia Turkey between 2013 and March of this year.

Prior to this, Canan spent almost 30 years at Royal Dutch Shell, culminating in her role as the country chair and CEO of Shell Turkey, roles she held between 2001 and 2009. She was previously CFO of Shell Turkey, preceded by a series of positions at the company across numerous aspects of the business, notably marketing, treasury and planning. During her tenure as CEO and country chair, she was involved in leading a significant number of acquisitions and nurtured the growth of Shell in Turkey.

Following her retirement from Royal Dutch Shell, Canan advised Accenture on the setting up of their energy business in Turkey, and spent nine years advising Maersk and APM Terminals on their port investments and improving their networking in Turkey. She is the former President of PETDER (Turkish Association of Petroleum Industrialists) and Chair of the Oil Industry Council Turkish Union of Chambers and Commodity Exchanges.

Canan is also an active member of various NGOs, and is a board member of the Turkish Autism Society, the Global Relations Forum, and Embarq - the Centre for Sustainable Transport, having previously been a Board member of WWF Turkey for a number of years.

With the appointment of Canan to the Board, the commitment made by the Company to return the Board to an equal balance of independent versus non-independent Directors has been fulfilled.

David McManus, Chairman of Genel, said:

"We are delighted to welcome Canan to the Board. She has a wealth of relevant industry and financial experience, as well as extensive work with NGOs. Canan will bring further insight and perspective to the Board as we aim to fulfil our goal of generating significant shareholder value, while acting as a socially responsible contributor to the global energy mix."

No information is required to be disclosed under Listing Rule 9.6.13R.

Genel instructed independent board search and advisory consultants Russell Reynolds in connection with the appointment.

(Source: Genel Energy)

Genel Energy “Robust Financial Position”

Genel Energy has issued the following trading and operations update ahead of the Company's Annual General Meeting ('AGM'), which is being held today.

The information contained herein has not been audited and may be subject to further review.

Bill Higgs (pictured), Chief Executive of Genel, said:

"Despite the impact of COVID-19 creating a challenging environment for our industry, Genel's resilient business model and robust financial position, with over $100 million in net cash and an asset cashflow breakeven of $30/bbl, leaves us well placed to withstand the consequences of the pandemic as we continue to deliver our strategy.

"We have cut our cloth appropriately against this backdrop and halved our capital expenditure for 2020, protecting our balance sheet while still progressing Sarta, and positioning us to take advantage of growth opportunities as the landscape improves."

FINANCIAL PERFORMANCE

  • $98 million of cash proceeds received in the first four months of 2020
  • Cash of $404 million at 30 April 2020 ($391 million at 31 December 2019)
  • Net cash of $106 million at 30 April 2020 ($93 million at 31 December 2019)
  • Capital expenditure of $45 million in the first four months of 2020, with point forward expenditure cut significantly due to the impact of COVID-19
  • Final dividend of 10¢ per share (2019: 10¢ per share), a distribution of c.$27.8 million, to be paid to shareholders on the register on 29 May 2020, pending approval at today's AGM

OPERATING PERFORMANCE

  • Production in the first quarter of 2020 averaged 34,170 bopd, in line with January's guidance, guidance that has been removed following the decision to reduce investment to a level appropriate for the external environment
  • As well as impacting the oil price and hence investment plans for 2020, COVID-19 has provided operational challenges in relation to the movement of people and equipment. This has been less of a challenge for producing fields than pre-production assets, and the reduced work plan put in place in Q2 is progressing in line with expectations
  • Production by asset was as follows:
(bopd) Gross production

Q1 2020

Net production

Q1 2020

Tawke 61,490 15,370
Peshkabir 53,710 13,430
Taq Taq 12,200 5,370
Total 127,400 34,170

PRODUCTION ASSETS

  • Tawke PSC (25% working interest)
    • Production at the Tawke PSC averaged 115,200 bopd in the first quarter of 2020, with the Tawke field producing 61,490 bopd, and Peshkabir 53,710 bopd
    • Five development wells have been completed on the licence. Three drilling rigs were released as the 2020 activity plan was amended to reflect the external environment, while a workover rig continues to service production wells
    • A drilling rig has been stacked at each field and can be quickly mobilised when conditions warrant
  • Taq Taq PSC (44% working interest and joint operator)
    • Taq Taq gross field production averaged 12,200 bopd in the first quarter of 2020
    • The latest well on the northern flank of the field, TT-35, spud on 6 January, and completed in April. The well is currently adding c.600 bopd to production. This completed the planned drilling programme with the Sakson-605 rig, which has now been released
    • Activity at TaqTaq is focused onmaximisingcash generation. Appropriate for the external environment, it is not expected that there will be any further drilling activity in 2020

PRE-PRODUCTION ASSETS

  • Sarta (30% working interest)
    • Civil construction work at the Sarta field is nearing completion, with the facility build ongoing
    • Due to delays in the movement of people and equipment caused by the impact of COVID-19, first oil is now expected in Q4 2020, rather than Q3
    • Phase 1A represents a low-cost pilot development of the Mus-Adaiyah reservoirs, designed to recover 2P gross reserves estimated by Genel at 34 MMbbls
  • Qara Dagh (40% working interest and operator)
    • The QD-2 well was on track to spud in Q2 2020 prior to COVID-19 impacting supply chains and the movement of people in to the KRI
    • Due to ongoing uncertainty caused by COVID-19, Genel notified the KRG of the occurrence of a force majeure event preventing the Company from being able to perform its contractual obligations as scheduled
    • Work continues to take place to ensure that Genel is in the best possible position to start to drill the QD-2 well once external conditions improve and the force majeure event ceases
  • Bina Bawi (100% working interest and operator)
    • Genel received documentation in mid-April from the KRG following the commercial understanding reached in September 2019
    • Negotiations regarding this documentation are ongoing, as Genel continues to seek a viable and balanced commercial way forward for the development of Bina Bawi's gas and oil resources
  • Somaliland - SL10B13 block (100% working interest and operator)
    • A farm-out process relating to this highly prospective block began in Q4 2019, and a number of companies continue to assess the opportunity
  • Morocco - Sidi Moussa block (75% working interest and operator)
    • The farm-out campaign is set to begin in Q3 2020, aimed at bringing a partner onto the licence prior to considering further commitments

ESG

  • Zero lost time incidents and zero losses of primary containment in 2020 to date at Genel and TTOPCO operations
    • There has not been an LTI since 2015, with almost 12 million hours worked since the last incident
  • The Peshkabir-to-Tawke gas capture, transport and reinjection project to effectively end CO2 emissions at Peshkabir and boost oil recovery at Tawke is completed and undergoing commissioning
  • Multiple projects are ongoing to support local communities in the Kurdistan Region of Iraq, with activities in the Qara Dagh region continuing despite the force majeure event
  • Genel will issue a sustainability report in September 2020

OUTLOOK

  • Payments from the KRG are ongoing, with an updated payment mechanism put in place under which the KRG has committed to settling monthly sales invoices by the fifteenth day of the following month, as announced on 17 April 2020
    • $11.1 million received in April for oil sales during March 2020
  • 2020 capital expenditure reduced by c.50% from the top end of the original guidance range of $160-200 million and now expected to be just over $100 million, of which around half will be spent on the Tawke and Taq Taq PSCs, c.$30 million on Sarta, and c.$10 million on Qara Dagh
    • Point forward expenditure expected to be c.$60 million in 2020
  • Operating costs per barrel expected to be $3/bbl in 2020
  • Producing asset cashflow breakeven in 2020 at an oil price of less than $30/bbl, taking into account the 2020 capital expenditure programme and the updated payment mechanism
  • Opex: reduction of 10% compared to original guidance of c.$40 million
  • G&A: unchanged at c.$15 million (a reduction of c.20% from 2019)
  • Genel continues to analyse opportunities to repurchase bonds at a value-accretive price
  • The Company continues to actively pursue growth and is analysing opportunities to make value-accretive additions to the portfolio that are consistent with Genel's strategy

(Source: Genel Energy)

Negotiations Continue on Bina Bawi Oilfield

By John Lee.

Shares in Genel Energy plc were trading lower in Friday after the company said negotiations were continuing regarding the Bina Bawi field in Iraqi Kurdistan.

In a statement, the company said:

"Extensive documentation was received in mid-April from the Kurdistan Regional Government ('KRG') following the commercial understanding reached in September 2019. The documentation, which requires further negotiation, includes a new draft Production Sharing Contract ('PSC') that seeks to separate the Jurassic oil development from the deeper Triassic natural gas development, with oil being developed on standard terms for the Kurdistan Region of Iraq.

"Genel has been informed by the KRG that while negotiations are ongoing with respect to these documents it will not exercise the notice of an intention to terminate the Bina Bawi PSC. Genel continues to seek a viable and balanced commercial way forward for the development of Bina Bawi's gas and oil resources, and is constructively engaging with the KRG to accelerate progress.

"Genel continues to minimise spending on Bina Bawi until further tangible progress is made during these negotiations."

(Source: Genel Energy)

Genel Energy Report on Payments to Govts for 2019

Report on payments to governments for the year 2019

Introduction and basis for preparation

This report sets out details of the payments made to governments by Genel Energy plc and its subsidiary undertakings ('Genel') for the year ended 31 December 2019 as required under the Disclosure and Transparency Rules of the UK Financial Conduct Authority (the 'DTRs') and in accordance with our interpretation of the Industry Guidance issued for the UK's Report on Payments to Governments Regulations 2014, as amended in December 2015 ('the Regulations').

The DTRs require companies in the UK and operating in the extractives sector to publicly disclose payments made to governments in the countries where they undertake exploration, prospection, development and extraction of oil and natural gas deposits or other materials.

This report is available to download at www.genelenergy.com/investor-relations/results-reports-presentations.

Governments

All of the payments made in relation to licences in the Kurdistan Region of Iraq ('KRI') have been made to the Ministry of Natural Resources of the Kurdistan Regional Government ('KRG').

Production entitlements

Production entitlements are the host government's share of production during the reporting period from projects operated by Genel. Production entitlements from projects that are not operated by Genel are not covered by this report. The figures reported have been produced on an entitlement basis rather than on a liftings basis. Production entitlements are paid in-kind and the monetary value disclosed is derived from management's calculation of revenue from the field.

Royalties

Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the Royalties are described within our Production Sharing Contracts and can vary from project to project. Royalties have been calculated on the same barrels of oil equivalent basis as production entitlements.

Materiality threshold

Total payments below £86,000 made to a government are excluded from this report as permitted under the Regulations.

payments to governments - 2019

Country/Licence KRI Total (1) Taq Taq (2)
Production entitlement (bbls) 2,158,407.69 2,158,407.69
Royalties in kind (bbls) 435,881.47 435,881.47
Total (bbls) 2,594,289.16 2,594,289.16
Value of production entitlements ($ million) 128.43 128.43
Value of royalties ($ million) 25.80 25.80
Capacity building payments ($ million) (3) 4.63 4.63
Total ($ million) 158.86 158.86
  1. Under the lifting arrangements implemented by the KRG, the KRG takes title to crude at the wellhead and then transports it to Ceyhan in Turkey by pipeline. The crude is then sold by the KRG into the international market. All proceeds of sale are received by or on behalf of the KRG, out of which the KRG then makes payment for cost and profit oil in accordance with the PSC to Genel, in exchange for the crude delivered to the KRG. Under these arrangements, payments are in fact made by or on behalf of the KRG to Genel, rather than by Genel to the KRG. For the purposes of the reporting requirements under the Regulations however, we are required to characterise the value of the KRG's entitlement under the PSC (for which they receive payment directly from the market) as a payment made to the KRG. Therefore, estimated value in $millions is not paid to the KRG, and is calculated to meeting the reporting requirements under the regulations.
  2. The amount reported for Taq Taq, is the gross payment made to the KRI by the operating company (TTOPCO), Genel's share of thesepayments is equal to 55% (withthe exception of capacity building payments).
  3. Capacity building payments reported are payments made by Genel directly to the KRI in cash as required by the PSC.

(Source: Genel Energy)

Genel Energy’s new Deputy Chairman Buys Shares

By John Lee.

Genel Energy's newly-appointed Senior Independent Non-Executive Director and Deputy Chairman has purchased shares in the company.

Former UK Minister for Defence Sir Michael Fallon bought 9,000 shares on Thursday at £1.0967 per share, for a total price of £9,870.30.

He was appointed to the board in early February.

(Source: Genel Energy)

Genel Energy “Resilient to an Oil Price of $30”

Genel Energy has announces its audited results for the year ended 31 December 2019.

Bill Higgs, Chief Executive of Genel, said:

"The industry is currently facing headwinds that challenge companies to demonstrate their resilience and flexibility. Genel has a business model and strategy designed to shelter us from such extreme circumstances, with low-cost oil production, robust finances, and flexibility in our expenditure allowing us to pay a material dividend while retaining sufficient liquidity to capitalise on opportunities and take advantage of future upside.

"Our strong balance sheet with limited capital commitments allows us to invest in the most value accretive areas and pay this dividend at the prevailing oil price, even in a scenario with a temporary delay in payments from the KRG. We are a business that can generate excess cash at a sustained oil price of $40/bbl.

"Given the resilience of the business, our strong performance in 2019, and our view of future prospects, we have retained our dividend of 10¢ per share, deferring an increase until external conditions improve.

"This is a yield of over 20% on our current share price, offering investors the compelling combination of a significant yield from a sustainable dividend and funded growth. Our portfolio positions us well for a future of fewer and better natural resources projects. It is low-cost and low-carbon - the right assets, in the right location, with the right footprint."

Results summary ($ million unless stated)

2019 2018
Production (bopd, working interest) 36,250 33,700
Revenue 377.2 355.1
EBITDAX1 321.8 304.1
  Depreciation and amortisation (158.5) (136.2)
  Exploration (expense) / credit (1.2) 1.5
  Impairment of oil and gas assets (29.8) (424.0)
Operating profit / (loss) 132.3 (254.6)
Underlying profit2 134.9 138.9
Cash flow from operating activities 272.9 299.2
Capital expenditure 158.1 95.5
Free cash flow3 99.0 172.7
Dividends declared 40.8 -
Cash4 390.7 334.3
Cash after dividend5 377.1 334.3
Total debt 300.0 300.0
Net cash6 92.8 37.0
Dividend (declared and proposed) per share (¢ per share) 15.0 -
Basic EPS (¢ per share) 37.8 (101.6)
Underlying EPS (¢ per share)2 49.0 49.8
  1. EBITDAX is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($158.5 million), exploration expense ($1.2 million) and impairment of property, plant and equipment ($29.8 million).
  2. Underlying profit is reconciled on page 13
  3. Free cash flow is reconciled on page 14
  4. Cash reported at 31 December 2019 excludes $3.0 million of restricted cash
  5. Cash reported at 31 December 2019 less interim dividend paid ($13.6 million) on 8 January 2020
  6. Reported cash less IFRS debt

Highlights

  • Ongoing strategic delivery from a strong financial platform, as highly cash-generative oil production increased to 36,250 bopd, up 8% year-on-year
  • Free cash flow ('FCF') of $99 million in 2019, pre dividend payment
    • This increases to $153 million (2018: $173 million), or $0.55 per share, taking into account the receipt of $54 million in payments from the Kurdistan Regional Government, due in 2019 and subsequently received in January 2020
  • Maiden dividend declared and $41 million distributed to shareholders
  • Cash of $391 million at 31 December 2019 ($334 million at 31 December 2018)
  • Net cash of $93 million at 31 December 2019 (net cash of $37 million at 31 December 2018)
  • Production cost of $2.9/bbl in 2019
  • Continued focus on safety: zero lost time incidents and zero losses of primary containment in 2019

Outlook

  • Genel is resilient to an oil price of $30/bbl, as low-cost production, a flexible capital structure, and robust balance sheet allows the payment of a material dividend, and the retention of a material net cash position at year-end 2020
  • Genel has significant capital allocation flexibility with limited commitments, is committed to retaining a strong balance sheet, and will ensure expenditure matches the external environment
    • Capital expenditure can be reduced to as little as $60 million in 2020, with an expectation that it will be around $100 million at the prevailing oil price, covering maintenance expenditure across our producing licences and investment at Sarta
    • Genel will sanction activity relating to the expenditure covered in the original $160 million to $200 million guidance range, as and when the external environment improves
  • COVID-19 is impacting the ease of operating in the Kurdistan Region of Iraq. Our producing operations are currently continuing with a reduced staff, but further activity is under review
    • Given the current market conditions, coupled with the delay in payments from the KRG, drilling activity at the Tawke PSC has been scaled back
    • Due to the delayed expenditure, 2020 net production guidance of close to Q4 2019 levels of 35,410 bopd is expected to be impacted, with the reduced producing asset work programme increasing cash flow generation in 2020 at the prevailing oil price, although a lower exit rate production will impact 2021
    • The Qara Dagh-2 well, which was set to spud in Q2 2020, is now likely to be delayed
  • Payments for production in October and November 2019, due in January and February 2020, have not been received. The KRG continues to state the importance of ongoing payments to oil companies, and we expect the government to deliver on this promise
  • Operating cash costs per barrel expected to be $3/bbl, amongst the lowest in the industry, fitting into a world of fewer and better natural resources projects
  • Genel is yet to receive draft legal documents reflecting the commercial understanding reached on Bina Bawi in September 2019, despite promises from the KRG
  • Emissions at Tawke and Taq Taq will reduce to 7kg CO2/bbl following completion of the enhanced oil recovery project at Tawke PSC in H1 2020
  • Given the resilience of the business and our strong performance in 2019, the Board is accordingly recommending a final dividend of 10¢ per share (2019: 10¢ per share), a distribution of c.$27.8 million, with a view to increasing the 2020 interim distribution should market conditions improve
  • Genel will seek to take advantage of opportunities to repurchase bonds at a value-accretive price

More here.

(Source: Genel Energy)

Genel Energy Update on Oil Reserves

Genel Energy plc has updated its oil reserves and resources across its portfolio.

Bill Higgs (pictured), Chief Executive of Genel, said:

"Genel's producing assets are profitable even at an oil price of $30/bbl and this, coupled with our robust balance sheet, supports investment in growth and the payment of a material dividend. The reduction of reserves at Tawke largely relates to production towards the end of the life of the field, and consequently our mid-term production outlook is materially unchanged and there is no reserves impact on our business plan.

"Our production funds an approved but flexible capital programme that, in the right market conditions, enables us to drill the wells necessary to evaluate the potential to convert the 2C oil resources in our portfolio, validated for the first time by ERCE, into reserves and production, boosting our cash generation potential."

Net oil reserves (MMbbls) 1P 2P 3P
31 December 2018 99.3 154.9 219.3
Production (13.2) (13.2) (13.2)
Technical revisions (17.2) (17.8) (11.2)
31 December 2019 68.8 123.8 194.9

International petroleum consultants DeGolyer and MacNaughton assess that on a gross basis, at the Tawke licence in the Kurdistan Region of Iraq containing the Tawke and Peshkabir fields, year-end 2019 1P reserves stood at 228 MMbbls, compared to 348 MMbbls at year-end 2018, after adjusting for production of 45 MMbbls and a downward technical revision of 75 MMbbls. Tawke licence 2P reserves stood at 400 MMbbls (502 MMbbls in 2018) and 3P reserves at 641 MMbbls (697 MMbbls in 2018).

Broken down by field, Tawke field gross 1P reserves stood at 176 MMbbls (294 MMbbls in 2018), 2P reserves at 284 MMbbls (376 MMbbls in 2018) and 3P reserves at 421 MMbbls (477 MMbbls in 2018). Peshkabir field gross 1P reserves stood 51 MMbbls (54 MMbbls in 2018), 2P reserves at 116 MMbbls (126 MMbbls in 2018) and 3P reserves at 220 MMbbls (unchanged from 2018).

Genel continues to take a conservative view of the Enhanced Oil Recovery project at the Tawke PSC, and will look to book reserves in relation to the project, which has the potential to increase recovery over the life of field, once enhanced performance has been demonstrated at the field.DeGolyer and MacNaughton has included23MMbbls of 2P and 45 MMbbls of 3P gross reserves, working interest portions of which are not included in the table above.

At Taq Taq, there is a minor technical downward revision of 2.1 MMbbls of gross 2P reserves associated with the unsuccessful TT-33 well, and these now total 44 MMbbls, with gross 1P reserves increasing by 3.3 MMbbls to 20.1 MMbbls, illustrating the continued strong underlying performance of the asset. McDaniel & Associates carried out the independent assessment of the Taq Taq licence.

Genel's gross 2P reserves estimate relating to Phase 1A of the Sarta development remains 34.3 MMbbls.

CONVERTING RESOURCES TO RESERVES

Net oil resources (MMbbls) 1C 2C 3C
31 December 2018 36.8 73.7 121.3
Technical revisions 29.7 78.3 224.5
31 December 2019 66.5 152 345.8

Following completion of the acquisition in 2019, Genel estimated gross resources at Sarta to be c.500 MMbbls. This potential has now been validated through an external audit conducted by ERCE, who has estimated a mid-case total recoverable oil resource of 593 MMbbls, of which 264 MMbbls is classified as 2C resource. Production performance in 2020, and the results of the upcoming three well campaign in 2021, will set out a roadmap for the conversion of these resources into reserves.

The Bina Bawi oil development has been certified by ERCE as 17.1 MMbbls of 2C resources, 13.6 MMbbls of which are expected to be converted into 2P reserves should a commercial agreement be reached and FID be taken on the first phase of the oil project.

At Qara Dagh the QD-2 well will test the crestal portion of the prospect which, based on a rigorous re-mapping exercise, has a mean prospective resource estimated by Genel at c.400 MMbbls. Genel estimates that the downdip segment tested by the QD-1 well defines a 2C resource of 47 MMbbls.

(Source: Genel)