Genel Energy shares gain on 2020 Results

Genel Energy has announced its audited results for the year ended 31 December 2020. The shares closed the day up more than 2 percent.

Bill Higgs, Chief Executive of Genel, said:

"2020 was a uniquely challenging year for everyone. As for Genel, our continued progress and strong performance in 2020 has laid the foundation for a year of growth and operational catalysts in 2021. We continued investment in Sarta, which entered production in November, and the field is generating cash as we now move to rapidly appraise its exciting potential. Three appraisal wells will be drilled at the licence in 2021. The QD-2 well at Qara Dagh is also set to spud shortly, as we look to evaluate the potential to add a fifth producing field.

"As we make this investment in growth, the low-cost and high-margin nature of our growing oil production means that we expect to generate significant free cash flow at the prevailing oil price. In turn, this gives us the confidence in our material and sustainable dividend distribution, including a final dividend of 10 cents per share announced today, as we continue to offer investors a compelling mix of growth and returns."

Results summary ($ million unless stated)

2020 2019
Average Brent oil price ($/bbl) 42 64
Production (bopd, working interest)  31,980 36,250
Revenue  159.7 377.2
EBITDAX1  114.6 321.8
  Depreciation and amortisation  (153.7) (158.5)
  Exploration expense (2.2) (1.2)
  Impairment of oil and gas assets2 (286.3) (29.8)
  Impairment of receivables (36.9) -
Operating (loss) / profit (364.5) 132.3
Cash flow from operating activities 129.4 272.9
Capital expenditure 109.7 158.1
Free cash flow4 (4.4) 99.0
Dividends declared (¢ per share) 15 15
Cash 354.5 390.7
Cash after post-year end payments5 273.5 377.1
Total debt after settlement of called bonds5 280.0 300.0
Net cash6 6.2 92.8
Basic EPS (¢ per share) (152.0) 37.8
Underlying EPS (¢ per share)3 41.8 116.9

 

  1. EBITDAX is operating loss / (profit) adjusted for the add back of depreciation and amortisation ($153.7 million), exploration expense ($2.2 million), impairment of property, plant and equipment ($242.0 million), impairment of intangible assets ($44.3 million) and impairment of receivables ($36.9 million)
  2. Despite production in line with expectations, the low oil price in June 2020 resulted in an impairment of production assets at the half-year results, which under IFRS cannot be reversed despite the improved oil price outlook
  3. Underlying EPS is EBITDAX divided by weighted average number of ordinary shares
  4. Free cash flow is reconciled on page 13
  5. On 8 January 2021, shortly after the balance sheet date, the Company paid $81.0 million to settle $77.1 million of old bonds reducing its gross debt balance to $280.0 million, with $267.7 million reported under IFRS in the balance sheet (2019: Cash reported at 31 December 2019 less interim dividend paid ($13.6 million) on 8 January 2020)
  6. Reported cash less IFRS debt (page 13)

Highlights

  • Zero lost time injuries ('LTI') and zero tier one loss of primary containment events in 2020 at Genel and TTOPCO operations
    • No LTIs since 2015, with over 13 million work hours since the last incident as of end-2020
  • Net production averaged 31,980 bopd in 2020 (2019: 36,250 bopd), following the pause in the drilling programme at Tawke, appropriate to the external environment
    • First oil from Sarta achieved in November 2020, with asset now producing over 10,000 bopd
  • $173 million of cash proceeds were received in 2020 (2019: $317 million)
  • The low-production cost per barrel of $2.8/bbl in 2020 helped deliver cash generation of $85 million in the year from producing assets
    • Free cash outflow of $4 million following material capital expenditure on growth assets
  • Dividends of 15¢ per share announced in 2020 (2019: 15¢ per share)
  • Net cash of $6 million at 31 December 2021 following the call of the old 2022 bond, with cash of $274 million and reported IFRS debt of $268 million
  • Carbon intensity of 13 kgCO2e/bbl for scope 1 and 2 emissions in 2020, significantly below the global oil and gas industry average of 20 kgCO2e/boe

Outlook

  • Production guidance for 2021 maintained as slightly above the 2020 average of 31,980 bopd, with the potential for a higher exit rate and further growth in 2022 depending on success of the Sarta appraisal programme
    • Margin of $15 per working interest barrel expected in 2021 at average Brent oil price $60/bbl, with receivable recovery payments increasing that to $20/bbl
  • 2021 capital expenditure guidance maintained at $150 million to $200 million, with the current macro environment and outlook supporting investment at the top end of this range
    • c.$100 million expenditure is forecast to be spent on growth assets, with three appraisal wells at Sarta targeting a material 2C resource and the QD-2 well, set to spud shortly, aiming to open up a new producing field
  • Operating costs still expected to be c.$50 million (2020: $33 million), equating to c.$4/bbl in 2021 ($2.8/bbl in 2020), retaining our advantageous low operating cost position, with the increase from 2020 due to the addition of Sarta early production costs
  • Given the increase in Brent oil price and confidence in ongoing payments from the Kurdistan Regional Government ('KRG'), including override and receivable recovery payments, Genel expects to generate cash in 2021 post-dividend payments
    • Receivable recovery payments expected to generate c.$50 million in 2021 at an oil price of $60/bbl
    • A $5/bbl change in Brent impacts cash generation by c.$35 million in 2021
  • Due to Genel's robust financial position and confidence in the Company's future prospects, the Board is accordingly recommending a final dividend of 10¢ per share (2020: 10¢ per share), a distribution of $27.9 million

More here.

(Source: Genel Energy)

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Basra-Aqaba Pipeline may be extended into Egypt

By John Lee.

Iraqi and Egyptian officials have discussed the possibility of extending the Basra-Aqaba pipeline to Egypt.

The matter was discussed at a meeting on Wednesday between Iraq's Oil Minister Ihssan Abdul-Jabbar Ismail the Egyptian Ambassador to Iraq.

A press release after the meeting said that extending the pipeline into Egypt would be "an important addition and a new outlet for Iraqi oil exports to North Africa".

(Source: Ministry of Oil)

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Genel Energy Non-Exec to Step Down

Genel Energy has  announces that after over nine years on the Board, George Rose (pictured), Independent Non-Executive Director, will not be standing for re-election at the forthcoming Annual General Meeting.

The Board will continue to keep its size and composition under review, including the balance between independent and non-independent directors in light of the recommendations under the UK Corporate Governance Code, to ensure the Board as a whole contains a broad range of skills, experience and backgrounds.

David McManus, Chairman of Genel, said:

"I would like to record the Board's thanks to George for his very significant contribution to Genel over his long tenure as a director, and in his roles on its committees. His guidance and his support have been invaluable. We wish him the best in his future endeavours."

(Source: Genel Energy)

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Jiyad: The Federal Oil and Gas Law in Iraq

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Federal Oil and Gas Law in Iraq:

A sudden alarming move that calls for caution and readiness to encounter

In a very surprising and sudden move it was announced that the "Opinion Board" (Hayaatul raay  هيئة الرأي) of the Ministry of Oil (MoO) discussed and approved the final version of the Federal Oil and Gas Law (FOGL) at its meeting on Wednesday, February 24, 2021.

In a statement by Ministry's Press Office, Minister of Oil Ihsan A. Ismail confirms this final version will be referred to the Council of Ministers (CoM) for approval after it was reviewed by the "concerned authorities in the Ministry", and then CoM will review this text, and in turn refer it to the House of Representatives (HoR) to enact it as law.

The Press Office did not provide, in its brief statement, any important or new information about the components and contents of this final version of the bill, or on its similarity to any of the previously presented drafts (a minimum of three), or to what prompted the Ministry to take this action at this particular timing in this way!!

The real reasons behind this "suddenness" at this particular time could be explained by or related to many issues or events that are dominating the current political environment. It could be linked to the stalled approval of 2021 budget law, or to the ongoing back and forth dialogue between the federal government and KRG (including efforts by some politicians and heads of some politico-religious groups), or with the end of the current government's mandate and the HoR term, as the national election is rescheduled from June to October this year, or with the current debate at HoR regarding the 15 year old Federal Supreme Court Law (FSCL), or with the coordination efforts (covert or overt) between the announcement of this bill and the proposed first amendment to the Iraqi National Oil Company (INOC law), which seems to be expedited by the Head of the Oil and Energy Committee in the House of Representatives (Haybat Al-Halbousi) ... or all of these ... or a combination of them ... or maybe even others.

Each of the previously presented versions of FOGL is complex, incoherent, long and highly politicized; all has been under consideration for more than fifteen years, and much was written about the law throughout that period.

Because of the urgency, importance and necessity for discussing this "final version" of the law seriously and professionally to protect the country's hydrocarbon wealth in serving the Iraq interest and the rights of future generations, I find it imperative to make very brief assessment on the background and what has been revealed on this abrupt move.

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq's Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

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SAHARA ME Sponsors SPE-Baghdad Technical Event

Advertising Feature

SAHARA Middle East Petroleum Services, a prominent local oilfield services company, has sponsored the SPE-Baghdad Chapter Upstream Technical Event.

The company, which provides Well Services, Chemical Management Services, and Midstream-Downstream Technical Solutions, presented case studies on a holistic approach to well integrity and formation evaluation through spectral noise and high accuracy temperature simulations for highly challenging wells.

Please click here to view our video of the event.

You can learn more about SAHARA on our website: www.SAHARAMEA.com

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Sarta-2 Well enters Production

By John Lee.

Genel Energy has announced that the Sarta-2 well has entered production at the Sarta field (Genel 30% working interest), with gross field production now in excess of 10,000 bopd.

Genel expects this figure to increase from the existing two producing wells, as optimisation of facilities configuration continues post production start-up.

The company added that the high-impact 2021 appraisal drilling campaign is on track to begin at the start of Q2, with the Sarta-5 and Sarta-6 wells set to be drilled back to back.

(Source: Genel Energy)

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Iraq Oil Exports Rise in February

By John Lee.

Iraq's Ministry of Oil has announced initial oil exports for February of 82,877,757 barrels, giving an average for the month of 2.960 million barrels per day (bpd), up from the 2.868 million bpd exported in January.

These exports from the oilfields in central and southern Iraq amounted to approximately 79,105,329 barrels, while exports from Kirkuk amounted to 3,727,428 barrels.

Revenues for the month were $5.027 billion at an average price of $60.330 per barrel.

January's export figures can be found here.

(Source: Ministry of Oil)

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Fourth Oil Exec Jailed for Iraq Bribery

Paul Bond has today been sentenced to three and half years' imprisonment for conspiring with others to bribe Iraqi public officials to secure lucrative oil contracts in post-occupation Iraq.

Earlier this week, Bond, a former senior sales manager at SBM Offshore (SBM), was found guilty on two counts of conspiracy to give corrupt payments following a retrial of his case at Southwark Crown Court.

This was the fourth conviction the SFO secured in its wide-scale Unaoil bribery investigation, which uncovered the payment of over $17m worth of bribes to secure $1.7bn worth of contracts for Unaoil and its clients.

In 2007, the Iraqi Ministry of Oil set out a 'master plan' to rebuild Iraq's oil infrastructure, which had been destroyed after years of conflict. The post-occupation government tasked the state-owned South Oil Company (SOC) to commission the construction of new oil pipelines and the installation of single offshore mooring buoys (SPMs) in the Persian Gulf.

Together with Unaoil employees, Paul Bond funnelled $900,000 in bribes to Iraqi public officials at the SOC and the Ministry of Oil, which bought access to sensitive information, allowing Bond and others to skew the tendering process in SBM's favour. SBM went on to win a $55m contract for the provision of SPMs.

Lisa Osofsky, Director of the Serious Fraud Office, said:

"Bond and his co-conspirators manipulated the tendering process for an infrastructure project vital to Iraq's developing economy, with no regard for the impact.

The string of convictions in this case demonstrate the SFO's determination to root out and prosecute corrupt practices in all corners of the globe working with law enforcement partners across the world. "

Bond's conviction follows that of former Unaoil territory managers Stephen Whiteley and Ziad Akle, who were last year found guilty of conspiring to bribe Iraqi public officials to secure substantial oil contracts. In July 2019, Basil Al Jarah, Unaoil's former Iraq partner, pleaded guilty to five counts of conspiracy to give corrupt payments, and later asked for a number of additional offences to be taken into consideration, in total admitting to paying over $17m in bribes to secure contracts worth $1.7bn.

Ziad Akle was sentenced to five years' imprisonment, Stephen Whiteley to three years' imprisonment, and Basil Al Jarah to three years and four months' imprisonment for their crimes.

The SFO would like to thank the Australian Federal Police, the French Parquet National Financier, the Police Judiciaires of the Principality of Monaco, the Fiscal Information and Investigation Service (FIOD) of the Netherlands, the United States Department of Justice, Greater Manchester Police, the Metropolitan Police, the National Crime Agency and West Mercia Constabulary for their valuable assistance in this case.

More here.

(Source: SFO)

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Iraq “Pauses Oil Pre-Payment deal with China”

By John Lee.

Iraq has reportedly "put on hold" it oil contract with China's Zhenhua Oil.

The multi-billion-dollar agreement would have seen Zhenhua pre-pay Iraq's State Oil Marketing Organization (SOMO) for a regular supply of crude oil.

Oil prices have risen significantly since the deal was struck.

More here.

(Source: S&P Global)

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Iraqi Cabinet approves New “Alternative Energy” Power Plants

By John Lee.

The Iraqi Cabinet has agreed to approve a recommendation from the National Investment Commission (NIC) for the Ministry of Electricity to proceed with an investment project for the construction of seven "alternative energy" power plants.

The new power stations are to be built in Karbala, Wasit, Babylon, and Al-Muthanna provinces.

(Source: Govt of Iraq)

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