REG-Genel Energy PLC Genel Energy PLC: Half-Year Results
02/08/2022 07:15
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Genel Energy PLC (GENL)
Genel Energy PLC: Half-Year Results
02-Aug-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside
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2 August 2022
Genel Energy plc
Unaudited results for the period ended 30 June 2022
Genel Energy plc (‘Genel’ or ‘the Company’) announces its unaudited
results for the six months ended 30 June 2022.
Paul Weir, Interim Chief Executive of Genel, said:
“Our cash generation in the first half of the year has been exceptionally
strong – driven by our low-cost, high-margin oil production and
disciplined capital allocation. We remain focused on the delivery of our
long-established strategy of putting capital to work to grow our
production and cash generation, while retaining our resilience and paying
a material and progressive dividend.
We generated $129 million in free cash flow and are well on track to
generate over a quarter of a billion dollars of free cash flow for the
full year. This continues to build our balance sheet strength and
optionality, providing us with the funds to add the right assets at the
right price. Our cash flow this year benefits from the recovery of
receivables and our override payments, and we are focused on replacing
these by building a portfolio that supports the resilience,
sustainability, and progression of our material dividend.”
Results summary ($ million unless stated)
H1 2022 H1 2021 FY 2021
Average Brent oil price ($/bbl) 108 65 71
Production (bopd, working interest) 30,420 32,760 31,710
Revenue 245.6 151.5 334.9
EBITDAX1 212.3 123.1 275.1
Depreciation and amortisation (84.4) (81.8) (172.8)
Impairment of oil and gas assets - - (403.2)
Reversal of impairment of receivables 12.8 - 24.1
Operating profit / (loss) 140.7 41.3 (276.8)
Cash flow from operating activities 216.3 91.1 228.1
Capital expenditure 74.7 58.2 163.7
Free cash flow2 128.7 22.2 85.9
Cash 412.1 266.4 313.7
Total debt 280.0 280.0 280.0
Net cash / (debt)3 141.3 (2.2) 43.9
Basic EPS (¢ per share) 45.4 9.3 (111.4)
Dividends declared for the period (¢ per share) 6 6 18
1. EBITDAX is operating profit / (loss) adjusted for the add back of
depreciation and amortisation, impairment of property, plant and
equipment, impairment of intangible assets and reversal of impairment
of receivables
2. Free cash flow is reconciled on page 8
3. Reported cash less IFRS debt (page 8)
Summary
• Material cash generation from low-cost and high-margin oil production:
◦ Net production averaged 30,420 bopd in H1 2022 (H1 2021: 32,760
bopd)
◦ Low production cost of $4.4/bbl and strength of oil price
delivered a margin per barrel of $32/bbl (H1 2021: $20/bbl)
◦ Free cash flow of $129 million (H1 2021: $22 million)
• Financial strength provides options for capital allocation:
◦ $75 million of capital expenditure in H1 2022, of which $41
million was spent at Taq Taq and Tawke, and $27 million on Sarta
appraisal
◦ Genel took on operatorship at Sarta on 1 January 2022, with
Sarta-5 and Sarta-1D subsequently being completed
◦ Cash of $412 million (31 December 2021: $314 million)
◦ Net cash of $141 million (31 December 2021: net cash of $44
million)
• A socially responsible contributor to the global energy mix:
◦ Zero lost time injuries ('LTI') and zero tier one loss of primary
containment events at Genel and TTOPCO operations
▪ Two million work hours since the last LTI, as we seek to
repeat the performance of six years without an LTI up to
September 2021
◦ As we mark 20 years of operations in the Kurdistan Region of Iraq
(‘KRI’), the Genel20 Scholars initiative has launched, with Genel
funding the opportunity for 20 economically disadvantaged
students to have a life-enhancing education at the American
University of Kurdistan
Outlook
• Production guidance for 2022 maintained as around the same level as
2021, currently tracking between 30-31,000 bopd for the full-year
• 2022 capital expenditure guidance of between $140 million and $180
million tightened to $150 million to $170 million
• Genel expects free cash flow of over $250 million in 2022, pre
dividend payments
• Appraisal at Sarta is ongoing, with results of the Sarta-6 well
expected around the end of the year
• The Company continues to actively pursue new business opportunities,
focused on production and cash generation
• The London seated international arbitration regarding Genel’s claim
for substantial compensation from the KRG following Genel’s
termination of the Miran and Bina Bawi PSCs is ongoing
• Interim dividend retained at 6¢ per share:
◦ Ex-dividend date: 15 September 2022
◦ Record date: 16 September 2022
◦ Payment date: 14 October 2022
Enquiries:
Genel Energy
+44 20 7659 5100
Andrew Benbow, Head of Communications
Vigo Consulting
+44 20 7390 0230
Patrick d’Ancona
There will be a presentation for analysts and investors today at 0900 BST,
with an associated webcast available on the Company's
website, 1 www.genelenergy.com.
This announcement includes inside information.
Disclaimer
This announcement contains certain forward-looking statements that are
subject to the usual risk factors and uncertainties associated with the
oil & gas exploration and production business. Whilst the Company believes
the expectations reflected herein to be reasonable in light of the
information available to them at this time, the actual outcome may be
materially different owing to factors beyond the Company’s control or
within the Company’s control where, for example, the Company decides on a
change of plan or strategy. Accordingly, no reliance may be placed on the
figures contained in such forward looking statements. The information
contained herein has not been audited and may be subject to further
review.
CEO STATEMENT
The first half of 2022 has generated exceptionally strong free cash flow.
Our production remains robust, driven by the ongoing performance of Tawke,
and the oil price has underpinned a leap in free cash flow to $129 million
in the period. This further strengthens our balance sheet and provides us
with an opportunity to invest in building out our portfolio and fulfil our
goal of being a world-class creator of shareholder value.
A clear direction
Our strategy is well-established – generate cash, invest in growing
production and cash generation, and pay a material and progressive
dividend. The first half of the year delivers on the first rung of this
strategy, with cash generation that equates to around a quarter of our
current market capitalisation.
Management is focused on investing capital in order to increase long term
resilient cash generation and support our progressive dividend long after
the end of override and receivable recovery payments this year. We know
exactly what we want to achieve and what we need to do to get there.
Seeking to add new income streams
Our first priority for investment remains our production portfolio. Tawke
drilling continues apace, and we look forward to drilling a well at Taq
Taq in the second half of the year. We have evolved into a fully-fledged
operator through taking on the operatorship of Sarta, and while the asset
has not yet lived up to production expectations, its production generated
operational free cash flow in the first half of 2022, which contributes
towards funding our ongoing appraisal work. We continue to work on
improving production and we will learn more through our ongoing appraisal
campaign from the results of Sarta-6.
Looking further ahead, we are excited by the opportunity that Somaliland
presents. It is a geography that ticks all of the right boxes for new
drilling. It is highly prospective, with geology analogous to prolific
Yemen basins. It is onshore drilling with a clear route to market via the
port of Berbera, and importantly there is the opportunity to make a huge
difference to the lives of people in the local community. This is what we
mean when we talk about having a portfolio that fits into a future of
fewer and better natural resources projects, and we look forward to
drilling a well around the end of 2023.
While Sarta retains upside potential, should Somaliland exploration be
successful it will be some time before we see a positive impact on our
cash flow, and hence our focus is firmly on putting our capital to work
through the addition of new income streams. We continue to run the rule
over opportunities, with strict criteria focused on near-term cash
generation and the ability to support and grow our material dividend.
Making a positive impact
As we look forward to the impact we could have in Somaliland, we are
celebrating 20 years of operations in the KRI. We are proud of the
difference we have made in that time. Revenue generated from Taq Taq and
Tawke for the KRG totals more than $21 billion, and Genel operations have
formed new supply chains and supported tens of thousands of jobs. We have
also had an impactful social investment programme, with over 250 projects
having been completed.
As we mark the 20 year milestone, we are increasing the scope of our
social ambitions. We were pleased to announce the launch of the Genel20
Scholars programme, which is set to provide the opportunity for
disadvantaged students to have a life-enhancing education. Genel is
funding scholarship opportunities for 20 high school graduates to pursue
bachelor studies at the American University of Kurdistan. We look forward
to updating you on other Genel20 initiatives as the year progresses.
We also aim to minimise our environmental impact and keep emissions as low
as possible. The Peshkabir-Tawke gas project continues to capture
otherwise flared gas, and phase 2 of this is set to start in Q4. Work is
also ongoing at Sarta, and we are pleased to have completed the solar
panel and battery storage unit at the Sarta-1D wellsite, powering
production equipment and reducing the use of diesel generators, therefore
lowering our emissions.
Outlook and dividend
We expect production to continue at around the same level as the first
half of the year for the remainder of 2022. This production will continue
to be materially cash generative, delivering over $250 million of free
cash flow, boosted again by the receipt of override and receivable
recovery payments.
Our focus is on continuing our material cash generation once these
payments cease, and this is a key priority for our capital allocation
going forward. Also a priority is paying our well-established material and
sustainable dividend, and our interim dividend has been maintained at 6¢
per share. It is our clear strategic goal to utilise our balance sheet to
add long-term cash generation that would support the progression of this
dividend.
OPERATING REVIEW
Production
Gross production Net production Gross production Net production
(bopd)
H1 2022 H1 2022 H1 2021 H1 2021
Tawke 106,700 26,680 111,140 27,780
Taq Taq 4,850 2,130 6,490 2,860
Sarta 5,380 1,610 7,080 2,120
Total 116,930 30,420 124,710 32,760
Production of 30,420 bopd is a decrease of 7% on the prior year period, a
result of ongoing declines at our mature producing fields and pilot
production at Sarta falling due to interference between wells having a
negative impact.
PRODUCING ASSETS
Tawke PSC (25% working interest)
Gross production of 106,700 bopd, with a high-level of activity maintained
throughout H1 2022.
Sarta (30% working interest)
Gross production of 5,380 bopd in H1 2022, 1,610 bopd net to Genel.
In the first half of 2022 we have sought to optimise production from
existing Mus-Adaiyah take points at Sarta-1D, 2 and 3, diversify our
source of production to add incremental barrels through two ongoing pilot
production tests of the Najmah and Butmah reservoirs, while lifting the
constraint of produced water storage through the successful, low-cost
conversion of the legacy Sarta-4 site into a water disposal well.
As we explore avenues to optimise production, overall field production
reduced to an average of c.4,000 bopd in June as Mus-Adaiyah production at
Sarta-2 was temporarily suspended while we successfully gained access to
and restimulated the Najmah reservoir. The Najmah is producing in line
with initial expectations having recovered 70,000 incremental barrels of
15.5 API oil to date. At Sarta-1D a pilot production test of the Butmah (a
new resource discovered by the Sarta-1D well) has been ongoing since early
July. In line with the test results the interval has produced a mix of oil
and water with 50,000 incremental barrels of 29 API oil recovered to date.
Plans are being crystalised to continue the Najmah production test through
a recompletion at Sarta-3, planned for Q4 2022, allowing for higher volume
Mus-Adaiyah production to resume from Sarta-2. To optimise Mus-Adaiyah
production from Sarta-2 we are procuring Electrical Submersible Pumps that
when fitted will add incremental barrels and maximise production under the
steadily increasing water cut and declining pressures observed in that
reservoir.
Alongside optimising pilot production, appraisal has been a key focus for
this year. While the results of well testing at Sarta 5 disappointed, as a
consequence of the poor reservoir quality intersected at this location,
the multiple oil shows in combination with the oil recovered to surface
from the Najmah demonstrate that there may be more to play for in this
south-eastern portion of the licence and appropriate next steps in its
appraisal are under consideration.
At Sarta-6, the second potentially high-impact appraisal well, the well
has reached target depth, logging has been undertaken and the well is
being completed. Testing is now set to begin in November, following a
change to a more cost-efficient rigless testing model. Plans have been
progressed to quickly capitalise on any success at Sarta-6 through
immediately adding it to production. Should the well disappoint, focus
will revert to maximising the value of the cash generative high-margin
production in and around the existing production hub.
As we develop the field we will continue to focus on emissions. The
installation of a solar panel and battery storage unit at the Sarta-1D
wellsite completed in July. This development is intended to power
production equipment at the site, which will reduce the use of diesel
generators and therefore lower emissions.
Taq Taq (44% working interest, joint operator)
Taq Taq continues to perform at the top end of expectations ahead of a
resumption of drilling. As the margins at Taq Taq have increased a well is
expected to spud around the end of 2022.
PRE-PRODUCTION ASSETS
Somaliland
Following the successful farm-out in December 2021, preparation is under
way for the drilling of a well on the highly prospective SL10B13 block.
The prospect to be drilled has been identified, agreed with our partner,
and an optimal well location selected in order to best target the stacked
Mesozoic reservoir objectives with individual prospective resource
estimates ranging from 100 to 200 MMbbls.
Qara Dagh (40% working interest, operator)
The evaluation of the QD-2 well and its results is underway, with a
decision on licence next steps to be taken later this year.
Morocco
A Petroleum Agreement is set to be signed with ONHYM for the Lagzira
license, following which a farm-out campaign is scheduled to commence
later this year.
FINANCIAL REVIEW
Overview of financial performance
The ongoing strength of the oil price has led to a material year on year
increase in our net income after cost recovered capital expenditure,
despite a small decrease in production.
Our material cash generation once again more than funds our capital
allocation priorities, with capital expenditure in the first half of 2022
focused firmly on the ongoing appraisal of Sarta, and the payment of our
material and progressive final dividend, which was paid in June and
represented an increase by of 20% on the year before.
Overall we generated $129 million in free cash flow in the first half of
the year, resulting in cash of $412 million, and a net cash position of
$141 million.
(all figures $ million) H1 2022 H1 2021 FY 2021
Brent average oil price $108/bbl $65/bbl $71/bbl
Revenue 245.6 151.5 334.9
Production costs (24.1) (21.7) (45.9)
Cost recovered production asset capex (41.3) (19.3) (49.9)
Production business net income after cost 180.2 110.5 239.1
recovered capex
G&A (excl. non-cash) (8.6) (6.7) (12.4)
Net cash interest2 (12.5) (13.1) (26.1)
Working capital (38.2) (12.2) (19.7)
Payments for deferred receivables 46.3 13.6 35.1
Changes to payment days - (30.4) (65.0)
Free cash flow before investment in growth 167.2 61.7 151.0
Pre-production capex (33.4) (38.9) (88.6)
Working capital and other (5.1) (0.6) 23.5
Free cash flow 128.7 22.2 85.9
Dividend paid (32.3) (29.0) (44.4)
Other 2.0 (0.3) (1.3)
Net change in cash before 2020 refinancing 98.4 (7.1) 40.2
(Repayment) / new issuance of bonds - (81.0) (81.0)
Net change in cash 98.4 (88.1) (40.8)
Cash 412.1 266.4 313.7
Amounts owed for deferred receivables1 68.3 145.0 114.6
1 Nominal value of deferred receivables is $30.5 million (H1 2021: $107.2
million, FY 2021: $76.8 million) and $37.8 million of invoiced override
revenue where payment was suspended from March 2020 to December 2020 (see
note 1)
2 Net cash interest is bond interest payable less bank interest income
(see note 5)
Financial priorities of 2022
The table below summarises our progress against the 2022 financial
priorities of the Company as set out at our 2021 results.
2022 financial priorities Progress
• Maintain our financial strength • Material cash generation
and put that financial strength to • Material recovery of deferred
work through investing in growth receivables
opportunities • Net cash increased
• Progression of Sarta appraisal
• Focus of capital allocation on
• Maximise NPV by prioritising cash generative investment in
highest value investment in assets the Tawke PSC, restart of
with ongoing or near-term cash and drilling at Taq Taq expected in
value generation H2, and production optimisation
ongoing at Sarta
• Deliver 2022 work programme on • Work programme progressing,
time and on budget capital expenditure guidance
maintained
• Continue to focus on growing our
income streams and cash • Allocation of capital to Sarta
generation, bringing greater appraisal programmes
resilience and diversity to the • Continue to explore
business and supporting our value-accretive additions
sustainable and progressive
dividend programme
Dividend
The Company is committed to a sustainable and progressive dividend that is
supported by resilient, diversified and predictable production and a
robust cash generation outlook.
At the full year results, the Board approved a 20% increase in the final
dividend, with payments relating to the 2021 financial year totalling $44
million. This is now our baseline dividend, which is material and
sustainable for the foreseeable future, even after the end of override and
receivable recovery payments.
It is our intention to progress the dividend in line with the progression
of the underlying business. We are focused on utilising our strong balance
sheet to build our production and cash generation outlook both organically
and through asset acquisitions. This is a key priority. Should we be able
to progress our portfolio while still retaining a material cash balance,
we will explore other options to maximise shareholder value, including
optimising our debt position and the payment of a special dividend.
The payment timetable for the Interim dividend, retained at 6¢ per share,
is below:
◦ Ex-dividend date: 15 September 2022
◦ Record date: 16 September 2022
◦ Payment date: 14 October 2022
Financial results
Income statement
(all figures $ million) H1 2022 H1 2021 FY 2021
Brent average oil price $108/bbl $65/bbl $71/bbl
Production (bopd, working interest) 30,420 32,760 31,710
Profit oil 88.4 57.6 120.6
Cost oil 70.8 43.3 100.4
Override royalty 86.4 50.6 113.9
Revenue 245.6 151.5 334.9
Production costs (24.1) (21.7) (45.9)
G&A (excl. depreciation and amortisation) (9.2) (6.7) (13.9)
EBITDAX 212.3 123.1 275.1
Depreciation and amortisation (84.4) (81.8) (172.8)
Impairment / write-off of intangible assets - - (403.2)
Reversal of impairment of receivables 12.8 - 24.1
Net finance expense (14.6) (15.7) (31.0)
Income tax expense - - (0.2)
Profit / (Loss) 126.1 25.6 (308.0)
Despite the decrease in working interest production of 30,420 bopd (H1
2021: 32,760 bopd), revenue has increased from $152 million to $246
million principally caused by the higher Brent oil price.
Production costs of $24 million increased from the prior period (H1 2021:
$22 million), with cost per barrel $4.4/bbl in H1 2022 (H1 2021:
$3.7/bbl). Both increases have been caused principally by lower
production.
General and administration costs were $9 million (H1 2021: $7 million), of
which corporate cash costs were $8 million (H1 2021: $6 million).
The increase in revenue resulted in a similar increase to EBITDAX, which
was $212 million (H1 2021: $123 million). EBITDAX is presented in order to
illustrate the cash profitability of the Company, and excludes the impact
of costs attributable to exploration activity, which tend to be one-off in
nature, and the non-cash costs relating to depreciation, amortisation,
impairments and write-offs.
Depreciation of $56 million (H1 2021: $59 million) and Tawke intangibles
amortisation of $28 million (H1 2021: $23 million) were broadly in line
with last period in total.
Bond interest expense of $13 million (H1 2021: $13 million) was in line
with previous period.
In relation to taxation, under the terms of the KRI production sharing
contracts, corporate income tax due is paid on behalf of the Company by
the KRG from the KRG's own share of revenues, resulting in no corporate
income tax payment required or expected to be made by the Company. Tax
presented in the income statement was related to taxation of the service
companies (H1 2022: nil, H1 2021: nil).
Capital expenditure
Capital expenditure is the aggregation of spend on production assets ($41
million) and pre-production assets ($33 million) and is reported to
provide investors with an understanding of the quantum and nature of
capital investment. Capital expenditure for the period was $75 million,
predominantly focused on production assets and the Sarta PSC ($27
million):
(all figures $ million) H1 2022 H1 2021 FY 2021
Cost recovered production capex 41.4 19.3 49.9
Pre-production capex – oil 27.0 15.3 55.4
Pre-production capex – gas - 1.3 5.0
Other exploration and appraisal capex 6.3 22.3 53.4
Capital expenditure 74.7 58.2 163.7
Cash flow, cash, net cash and debt
Gross proceeds received totalled $254 million (H1 2021: $123 million), of
which $66 million (H1 2021: $29 million) was received for the override
royalty and $46 million (H1 2021: $14 million) for receivable recovery.
(all figures $ million) H1 2022 H1 2021 FY 2021
Brent average oil price $108/bbl $65/bbl $71/bbl
EBITDAX 212.3 123.1 275.1
Working capital 4.0 (32.0) (47.0)
Operating cash flow 216.3 91.1 228.1
Producing asset cost recovered capex (33.1) (21.1) (46.9)
Development capex (22.2) (16.0) (41.6)
Exploration and appraisal capex (17.7) (16.8) (24.1)
Interest and other (14.6) (15.0) (29.6)
Free cash flow 128.7 22.2 85.9
Free cash flow is presented in order to illustrate the free cash generated
for equity. Free cash flow was $129 million (H1 2021: $22 million) with an
overall increase mainly as a result of higher Brent.
(all figures $ million) H1 2022 H1 2021 FY 2021
Free cash flow 128.7 22.2 85.9
Dividend paid (32.3) (29.0) (44.4)
Other 2.0 (0.3) (1.3)
Bond refinancing - (81.0) (81.0)
Net change in cash 98.4 (88.1) (40.8)
Opening cash 313.7 354.5 354.5
Closing cash 412.1 266.4 313.7
Debt reported under IFRS (270.8) (268.6) (269.8)
Net cash / (debt) 141.3 (2.2) 43.9
The 2025 bonds have two financial covenant maintenance tests:
Financial covenant Test H1 2022
Equity ratio (Total equity/Total assets) > 40% 61%
Minimum liquidity > $30m $412 million
Net assets
Net assets at 30 June 2022 were $677 million (31 December 2021: $581
million) and consist primarily of oil and gas assets of $528 million (31
December 2021: $539 million), trade receivables of $157 million (31
December 2021: $158 million) and net cash of $141 million (31 December
2021: $44 million net cash).
Liquidity / cash counterparty risk management
The Company monitors its cash position, cash forecasts and liquidity on a
regular basis. The Company holds surplus cash in treasury bills or on time
deposits with a number of major financial institutions. Suitability of
banks is assessed using a combination of sovereign risk, credit default
swap pricing and credit rating.
Going concern
The Directors have assessed that the Company’s forecast liquidity provides
adequate headroom over forecast expenditure for the 12 months following
the signing of the half-year condensed consolidated financial statements
for the period ended 30 June 2022 and consequently that the Company is
considered a going concern.
The Company is in a net cash position with no near-term maturity of
liabilities.
Principal risks and uncertainties
The Company is exposed to a number of risks and uncertainties that may
seriously affect its performance, future prospects or reputation and may
threaten its business model, future performance, solvency or liquidity.
The following risks are the principal risks and uncertainties of the
Company, which are not all of the risks and uncertainties faced by the
Company: the development and recovery of oil reserves; reserve
replacement; M&A activity; the KRI natural resources industry and regional
risk (see update on Iraqi Federal Supreme Court ruling below); corporate
governance failure; capital structure and financing; local community
support; the environmental impact of oil and gas extraction; and health
and safety risks. Further detail on many of these risks was provided in
the 2021 Annual Report.
Update on Iraqi Federal Supreme Court ruling
As noted in our Annual Report, the Iraq Federal Supreme Court handed down
a majority judgement on 15 February 2022 that purported to deem the oil
and gas law regulating the oil industry in Kurdistan unconstitutional.
Following the Federal Supreme Court ruling, the KRG issued a statement
stating that the ruling was ‘unjust, unconstitutional, and violates the
rights and constitutional authorities of the Kurdistan Region’, also
stating that it ‘will take all constitutional, legal, and judicial
measures to protect and preserve all contracts made in the oil and gas
sector.’
Genel also notes reports of decisions made in absentia on 4 July in the
Baghdad Commercial Court against Genel and several International Oil and
Gas companies operating in Kurdistan. Any such decision was made without
Genel having formal legal representation.
The PSCs that Genel subsidiaries are a party to were signed with the KRG
and are governed by English law. Genel continues to monitor the situation
closely and is working proactively with advisors in the UK, US, Erbil, and
Baghdad, and is in dialogue with the KRG and other stakeholders to protect
the interests of the Company. Refer also to the principal risks and
uncertainties update set out on pages 9 and 10.
Genel also notes the ongoing case, commenced in 2014, by the Federal
Government of Iraq against Botas and the Turkish Government relating to
the Iraq-Turkey Pipeline, which is being heard in the International
Chamber of Commerce’s International Court of Arbitration in Paris.
Statement of directors’ responsibilities
The directors confirm that these condensed interim financial statements
have been prepared in accordance with International Accounting Standard
34, ‘Interim Financial Reporting’, as adopted by the European Union and
that the interim management report includes a true and fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred during the first
six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
• material related-party transactions in the first six months and any
material changes in the related-party transactions described in the
last annual report.
The directors of Genel Energy plc are listed in the Genel Energy plc
Annual Report for 31 December 2021. A list of current directors is
maintained on the Genel Energy plc website: 2 www.genelenergy.com
By order of the Board
Paul Weir
Interim CEO
1 August 2022
Luke Clements
CFO
1 August 2022
Disclaimer
This announcement contains certain forward-looking statements that are
subject to the usual risk factors and uncertainties associated with the
oil & gas exploration and production business. Whilst the Company believes
the expectations reflected herein to be reasonable in light of the
information available to them at this time, the actual outcome may be
materially different owing to factors beyond the Company’s control or
within the Company’s control where, for example, the Company decides on a
change of plan or strategy. Accordingly, no reliance may be placed on the
figures contained in such forward looking statements.
Condensed consolidated statement of comprehensive income
For the period ended 30 June 2022
Audited
Unaudited Unaudited
Year
6 months to 30 6 months to 30
June 2022 June 2021 to 31 Dec
2021
Note $m $m $m
Revenue 3 245.6 151.5 334.9
Production costs 4 (24.1) (21.7) (45.9)
Depreciation and amortisation 4 (84.3) (81.7) (172.7)
of oil assets
Gross profit 137.2 48.1 116.3
Impairment / write-off of 4,8 - - (403.2)
intangible assets
Reversal of impairment of 4,10 12.8 - 24.1
receivables
General and administrative 4 (9.3) (6.8) (14.0)
costs
Operating profit / (loss) 140.7 41.3 (276.8)
Operating profit / (loss) is
comprised of:
EBITDAX 212.3 123.1 275.1
Depreciation and amortisation 4 (84.4) (81.8) (172.8)
Impairment / write-off of 4,8 - - (403.2)
intangible assets
Reversal of impairment of
receivables 4,10 12.8 - 24.1
Finance income 5 0.5 0.1 0.2
Bond interest expense 5 (13.0) (13.2) (26.3)
Other finance expense 5 (2.1) (2.6) (4.9)
Profit / (Loss) before income 126.1 25.6 (307.8)
tax
Income tax expense 6 - - (0.2)
Profit / (Loss) and total
comprehensive income / 126.1 25.6 (308.0)
(expense)
Attributable to:
Owners of the parent 126.1 25.6 (308.0)
126.1 25.6 (308.0)
Earnings / (Loss) per ¢ ¢ ¢
ordinary share
Basic 7 45.4 9.3 (111.4)
Diluted 7 45.0 9.2 (111.4)
Underlying1 40.8 9.3 25.8
1 Underlying EPS / (LPS) is loss and total comprehensive income /
(expense) adjusted for the add back of impairment / write-off of
intangible assets, and reversal of impairment receivables divided by
weighted average number of ordinary shares.
Condensed consolidated balance sheet
At 30 June 2022
Unaudited Unaudited
Audited31 Dec 2021
30 June 2022 30 June 2021
Note $m $m $m
Assets
Non-current assets
Intangible assets 8 165.1 704.9 186.8
Property, plant and 9 362.4 367.6 352.5
equipment
Trade and other 10 - 31.4 18.4
receivables
527.5 1,103.9 557.7
Current assets
Trade and other 10 165.0 95.9 145.0
receivables
Cash and cash 412.1 266.4 313.7
equivalents
577.1 362.3 458.7
Total assets 1,104.6 1,466.2 1,016.4
Liabilities
Non-current liabilities
Trade and other payables (3.5) (103.7) (4.9)
Deferred income (10.0) (16.5) (14.0)
Provisions (45.4) (47.6) (42.6)
Interest bearing loans 11 (270.8) (268.6) (269.8)
(329.7) (436.4) (331.3)
Current liabilities
Trade and other payables (91.8) (93.2) (97.5)
Deferred income (6.5) (7.5) (6.5)
(98.3) (100.7) (104.0)
Total liabilities (428.0) (537.1) (435.3)
Net assets 676.6 929.1 581.1
Owners of the parent
Share capital 43.8 43.8 43.8
Share premium 3,914.1 3,962.9 3,947.5
Accumulated losses (3,281.3) (3,077.6) (3,410.2)
Total equity 676.6 929.1 581.1
Condensed consolidated statement of changes in equity
For the period ended 30 June 2022
Share Share Accumulated
capital premium losses Total equity
$m $m $m $m
At 1 January 2021 43.8 3,991.9 (3,105.9) 929.8
Profit and total - - 25.6 25.6
comprehensive expense
Contributions by and
distributions to owners
Share-based payments - - 3.0 3.0
Purchase of shares for - - (0.3) (0.3)
employee share awards
Dividends provided for or - (29.0) - (29.0)
paid1
At 30 June 2021 (Unaudited) 43.8 3,962.9 (3,077.6) 929.1
At 1 January 2021 43.8 3,991.9 (3,105.9) 929.8
Loss and total comprehensive - - (308.0) (308.0)
expense
Contributions by and
distributions to owners
Share-based payments - - 5.0 5.0
Purchase of shares for - - (1.3) (1.3)
employee share awards
Dividends provided for or - (44.4) - (44.4)
paid1
At 31 December 2021 (Audited) 43.8 3,947.5 (3,410.2) 581.1
and 1 January 2022
Profit and total - - 126.1 126.1
comprehensive income
Contributions by and
distributions to owners
Share-based payments - - 2.8 2.8
Dividends paid1 - (33.4) - (33.4)
At 30 June 2022 (Unaudited) 43.8 3,914.1 (3,281.3) 676.6
1 The Companies (Jersey) Law 1991 does not define the expression
“dividend” but refers instead to “distributions”. Distributions may be
debited to any account or reserve of the Company (including share premium
account).
Condensed consolidated cash flow statement
For the period ended 30 June 2022
Audited
Unaudited Unaudited
31 Dec
30 June 2022 30 June 2021
2021
Note $m $m $m
Cash flows from operating
activities
Profit / (Loss) for the year 126.1 25.6 (308.0)
Adjustments for:
Net finance expense 5 14.6 15.7 31.0
Taxation 6 - - 0.2
Depreciation and amortisation 85.9 83.0 175.3
(Reversal) / Impairment 4 (12.8) - 379.1
write-off
Other non-cash items (3.7) (2.9) (5.4)
Changes in working capital:
Decrease / (Increase) in trade 11.8 (25.9) (42.4)
receivables
(Increase) in other receivables (0.5) - (0.4)
(Decrease) in trade and other (5.5) (4.3) (1.4)
payables
Cash generated from operations 215.9 91.2 228.0
Interest received 5 0.5 - 0.2
Taxation paid (0.1) (0.1) (0.1)
Net cash generated from operating 216.3 91.1 228.1
activities
Cash flows from investing
activities
Net payments of intangible assets (17.3) (16.8) (24.1)
Net payments of property, plant and (55.3) (37.1) (88.5)
equipment
Net cash used in investing (72.6) (53.9) (112.6)
activities
Cash flows from financing
activities
Dividends paid to company’s (32.3) (29.0) (44.4)
shareholders
Purchase of own shares - (0.3) (1.3)
Bond refinancing: part-settlement 11 - (81.0) (81.0)
and new issuance
Other - (1.7) (3.3)
Interest paid (13.0) (13.3) (26.3)
Net cash used in financing (45.3) (125.3) (156.3)
activities
Net increase / (decrease) in cash 98.4 (88.1) (40.8)
and cash equivalents
Cash and cash equivalents at the 313.7 354.5 354.5
beginning of the period / year
Cash and cash equivalents at the 412.1 266.4 313.7
end of the period / year
Notes to the consolidated financial statements
1. Basis of preparation
Genel Energy Plc – registration number: 107897 (the Company) is a public
limited company incorporated and domiciled in Jersey with a listing on the
London Stock Exchange. The address of its registered office is 12 Castle
Street, St Helier, Jersey, JE2 3RT.
The half-year condensed consolidated financial statements for the six
months ended 30 June 2022 are unaudited and have been prepared in
accordance with the Disclosure and Transparency Rules of the Financial
Conduct Authority, with Article of 106 of the Companies (Jersey) Law 1991
and with IAS 34 ‘Interim Financial Reporting’ as adopted by the European
Union and were approved for issue on 1 August 2022. They do not comprise
statutory accounts within the meaning of Article 105 of the Companies
(Jersey) Law 1991. The half-year condensed consolidated financial
statements should be read in conjunction with the annual financial
statements for the year ended 31 December 2021, which have been prepared
in accordance with IFRS as adopted by the European Union. The annual
financial statements for the period ended 31 December 2021 were approved
by the board of directors on 14 March 2022. The report of the auditors was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under the Article 113A of Companies (Jersey) Law
1991. The financial information for the year to 31 December 2021 has been
extracted from the audited accounts.
Items included in the financial information of each of the Company's
entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The
condensed consolidated financial statements are presented in US dollars to
the nearest million ($ million) rounded to one decimal place, except where
otherwise indicated.
Going concern
The Company regularly evaluates its financial position, cash flow
forecasts and its compliance with financial covenants by considering
multiple combinations of oil price, discount rates, production volumes,
payments, capital and operational spend scenarios.
The Company has reported cash of $412.1 million, with no debt maturing
until the second half of 2025 and significant headroom on both the equity
ratio and minimum liquidity financial covenants. The strength of the
balance sheet is expected to be enhanced through 2022 and into 2023.
The Company’s low-cost assets and flexibility on commitment of capital
mean that it is resilient to low oil prices, with the only customer, the
KRG, demonstrating its ability to pay consistently in times of financial
stress. There is considered to be sufficient cash in the business and
still more room for flexibility if needed given the nature of the
discretionary capex planned.
Longer term, our low-cost, low-carbon assets, located in a region where
oil revenues provide a material proportion of funding to the government
and its people means that we are well positioned to address the
appropriate challenges and demands that climate change initiatives are
bringing to the sector. Given the footprint and the benefit to society
generated, we see our portfolio as being well-positioned for a future of
fewer and better natural resources projects, while the global energy mix
continues to require hydrocarbons.
As a result, the Directors have assessed that the Company’s forecast
liquidity provides adequate headroom over its forecast expenditure for the
12 months following the signing of the half-year condensed consolidated
financial statements for the period ended 30 June 2022 and consequently
that the Company is considered a going concern.
2. Summary of significant accounting policies
The accounting policies adopted in preparation of these half-year
condensed consolidated financial statements are consistent with those used
in preparation of the annual financial statements for the year ended 31
December 2021.
The preparation of these half-year condensed consolidated financial
statements in accordance with IFRS requires the Company to make judgements
and assumptions that affect the reported results, assets and liabilities.
Where judgements and estimates are made, there is a risk that the actual
outcome could differ from the judgement or estimate made. The Company has
assessed the following as being areas where changes in judgements or
estimates could have a significant impact on the financial statements.
Significant judgements
The significant judgements that the directors have made in the process of
applying the Company’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements
include recognition of revenue generated by the override royalty which is
explained in the context of the significant estimates below.
Significant estimates
The following are the critical estimates that the directors have made in
the process of applying the Company’s accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements.
Estimation of hydrocarbon reserves and resources and associated production
profiles and costs
Estimates of hydrocarbon reserves and resources are inherently imprecise
and are subject to future revision. The Company’s estimation of the
quantum of oil and gas reserves and resources and the timing of its
production, cost and monetisation impact the Company’s financial
statements in a number of ways, including: testing recoverable values for
impairment; the calculation of depreciation, amortisation and assessing
the cost and likely timing of decommissioning activity and associated
costs. This estimation also impacts the assessment of going concern and
the viability statement.
Proved and probable reserves are estimates of the amount of hydrocarbons
that can be economically extracted from the Company’s assets. The Company
estimates its reserves using standard recognised evaluation techniques.
Assets assessed as having proven and probable reserves are generally
classified as property, plant and equipment as development or producing
assets and depreciated using the units of production methodology. The
Company considers its best estimate for future production and quantity of
oil within an asset based on a combination of internal and external
evaluations and uses this as the basis of calculating depreciation and
amortisation of oil and gas assets and testing for impairment under IAS
36.
Hydrocarbons that are not assessed as reserves are considered to be
resources and the related assets are classified as exploration and
evaluation assets. These assets are expenditures incurred before technical
feasibility and commercial viability is demonstrable. Estimates of
resources for undeveloped or partially developed fields are subject to
greater uncertainty over their future life than estimates of reserves for
fields that are substantially developed and being depleted and are likely
to contain estimates and judgements with a wide range of possibilities.
These assets are considered for impairment under IFRS 6.
Once a field commences production, the amount of proved reserves will be
subject to future revision once additional information becomes available
through, for example, the drilling of additional wells or the observation
of long-term reservoir performance under producing conditions. As those
fields are further developed, new information may lead to revisions.
Assessment of reserves and resources are determined using estimates of oil
and gas in place, recovery factors and future commodity prices, the latter
having an impact on the total amount of recoverable reserves.
Estimation of oil and gas asset values (note 8 and 9)
Estimation of the asset value of oil and gas assets is calculated from a
number of inputs that require varying degrees of estimation. Principally
oil and gas assets are valued by estimating the future cash flows based on
a combination of reserves and resources, costs of appraisal, development
and production, production profile and future sales price and discounting
those cash flows at an appropriate discount rate.
Future costs of appraisal, development and production are estimated taking
into account the level of development required to produce those reserves
and are based on past costs, experience and data from similar assets in
the region, future petroleum prices and the planned development of the
asset. However, actual costs may be different from those estimated.
Discount rate is assessed by the Company using various inputs from market
data, external advisers and internal calculations resulting in a post-tax
nominal discount rate of 13% derived from the Company’s weighted average
cost of capital (WACC) . Risking factors are also used alongside the
discount rate when the Company is assessing exploration and appraisal
assets.
Estimation of future oil price and netback price
The estimation of future oil price has a significant impact throughout the
financial statements, primarily in relation to the estimation of the
recoverable value of property, plant and equipment and intangible assets.
It is also relevant to the assessment of ECL, going concern and the
viability statement.
The Company’s forecast of average Brent oil price for future years is
based on a range of publicly available market estimates and is summarised
in the table below:
$/bbl 2022 2023 2024 2025
HY2022 forecast 100 90 80 70
YE2021 forecast 75 75 70 70
HY2021 forecast 65 65 65 65
The netback price is used to value the Company’s revenue, trade
receivables and its forecast cash flows used for impairment testing and
viability. It is the aggregation of Brent oil price average less
transportation costs, handling costs and quality adjustments. The Company
does not have direct visibility on the components of the netback price
realised for its oil because sales are managed by the KRG, but invoices
are currently raised for payments on account using a netback price agreed
with the KRG.
Estimation of the recoverable value of deferred receivables (note 10)
At the end of March 2020, in line with other International Oil Companies
(IOCs) in Kurdistan, the KRG informed the Company that payments owed for
sales made in the four months from November 2019 to February 2020 would be
deferred. For Genel this amounted to $120.8 million. This resulted in an
impairment to receivables of $34.9 million.
Since January 2021, the KRG has been paying amounts owed under a
reconciliation model.
At 30 June all amounts owed for deferred receivables have been requested
for payment and are expected to be collected by 30 September 2022 and as a
result the Company has released the remaining ECL provision of $10.8
million.
The Company has provided the detailed disclosures required by IFRS 9 ECL
assessment in note 10.
Recognition of revenue generated by the override royalty, arising from the
RSA
Since 2017 when the RSA was signed, the Company has received override
revenue from Tawke sales. At the end of March 2020, the KRG informed the
Company that this override income was suspended for a minimum period up to
December 2020. Because management did not have visibility on how or when
this contractual right would be received, it assessed that the criteria
for revenue recognition under IFRS15, specifically on payment terms and
collectability, have not been met. The total amount of override revenue
for the period between 1 March 2020 to 31 December 2020 that has not been
recognised is $37.8 million.
The KRG has communicated that override income owed will be paid by the
reconciliation model explained above. Final position on resolution on this
has not yet been reached and with receipt of cash still dependent on oil
price and production, the revenue will be recognised once cash has been
received and there is clarity on quantum.
Decommissioning provision
Decommissioning provisions are calculated from a number of inputs such as
costs to be incurred in removing production facilities and site
restoration at the end of the producing life of each field and that
require varying degrees of estimation. These inputs are based on the
Company’s best estimate of the expenditure required to settle the present
obligation at the end the period inflated at 2% (2021: 2%) and discounted
at 4% (2021: 4%). The cash flows relating to the decommissioning and
abandonment provisions are expected to occur between 2028 and 2043.
Taxation
Under the terms of KRI PSC's, corporate income tax due is paid on behalf
of the Company by the KRG from the KRG's own share of revenues, resulting
in no corporate income tax payment required or expected to be made by the
Company. It is not known at what rate tax is paid, but it is estimated
that the current tax rate would be between 15% and 40%. If this was known
it would result in a gross up of revenue with a corresponding debit entry
to taxation expense with no net impact on the income statement or on cash.
In addition, it would be necessary to assess whether any deferred tax
asset or liability was required to be recognised.
New standards
The following new accounting standards, amendments to existing standards
and interpretations are effective on 1 January 2022. Amendments to IFRS 3
Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37
Provisions, Contingent Liabilities and Contingent Assets; and Annual
Improvements 2018-2020 (All issued 14 May 2020). Nothing has been early
adopted, and these standards are not expected to have a material impact on
the Company’s results or financials statement disclosures in the current
or future reporting periods.
The following new accounting standards, amendments to existing standards
and interpretations have been issued but are not yet effective and/or have
not yet been endorsed by the EU: Amendments to IAS 1 Presentation of
Financial Statements: Classification of Liabilities as Current or
Non-current and Classification of Liabilities as Current or Non-current (1
Jan 2023), Amendments to IAS 12 Income Taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction (1 Jan 2023),
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17
and IFRS 9 – Comparative Information (1 Jan 2023), Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2:
Disclosure of Accounting policies (1 Jan 2023), Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors:
Definition of Accounting Estimates (1 Jan 2023), IFRS 17 Insurance
Contracts (issued on 18 May 2017); including Amendments to IFRS 17 (1 Jan
2023).
3. Segmental information
The Company has two reportable business segments: Production and
Pre-production. Capital allocation decisions for the production segment
are considered in the context of the cash flows expected from the
production and sale of crude oil. The production segment is comprised of
the producing fields on the Tawke PSC (Tawke and Peshkabir), the Taq Taq
PSC (Taq Taq) and the Sarta PSC (Sarta) which are located in the KRI and
make sales predominantly to the KRG. The pre-production segment is
comprised of discovered resource held under the Qara Dagh PSC, the Bina
Bawi PSC (derecognised in 2021) and the Miran PSC (derecognised in 2021),
all in the KRI and exploration activity, principally located in Somaliland
and Morocco. ‘Other’ includes corporate assets, liabilities and costs,
elimination of intercompany receivables and intercompany payables, which
are non-segment items.
For the 6-month period ended 30 June 2022
Pre-production Total
Production Other
$m $m $m $m
Revenue from contracts with 238.8 - - 238.8
customers
Revenue from other sources 6.8 - - 6.8
Cost of sales (108.4) - - (108.4)
Gross profit 137.2 - - 137.2
Reversal of impairment of 10.8 - 2.0 12.8
receivables
General and administrative costs - - (9.3) (9.3)
Operating profit / (loss) 148.0 - (7.3) 140.7
Operating profit / (loss) is
comprised of
EBITDAX 221.5 - (9.2) 212.3
Depreciation and amortisation (84.3) - (0.1) (84.4)
Reversal of impairment of 10.8 - 2.0 12.8
receivables
Finance income - - 0.5 0.5
Bond interest expense - - (13.0) (13.0)
Other finance expense (1.2) (0.1) (0.8) (2.1)
Profit / (Loss) before income 146.8 (0.1) (20.6) 126.1
tax
Capital expenditure 68.4 6.3 - 74.7
Total assets 626.1 97.1 381.4 1,104.6
Total liabilities (120.5) (17.6) (289.9) (428.0)
Revenue from contracts with customers includes $79.5 million (30 June
2021: $46.5 million, 31 December 2021: $101.9 million) arising from the
4.5% royalty interest on gross Tawke PSC revenue (“the ORRI”).
Total assets and liabilities in the other segment are predominantly cash
and debt balances.
For the 6-month period ended 30 June 2021
Pre-production Total
Production Other
$m $m $m $m
Revenue from contracts with 147.4 - - 147.4
customers
Revenue from other sources 4.1 - - 4.1
Cost of sales (103.4) - - (103.4)
Gross profit 48.1 - - 48.1
General and administrative costs - - (6.8) (6.8)
Operating profit / (loss) 48.1 - (6.8) 41.3
Operating profit / (loss) is
comprised of
EBITDAX 129.8 - (6.7) 123.1
Depreciation and amortisation (81.7) - (0.1) (81.8)
Bond interest expense - - (13.2) (13.2)
Other finance expense (0.8) (0.4) (1.3) (2.5)
Profit / (Loss) before income 47.3 (0.4) (21.3) 25.6
tax
Capital expenditure 34.6 23.6 - 58.2
Total assets 687.8 575.3 203.1 1,466.2
Total liabilities (137.1) (109.8) (290.2) (537.1)
For the 12-month period ended 31 December 2021
Total
Production Pre-production Other
$m $m $m $m
Revenue from contracts with 322.9 - - 322.9
customers
Revenue from other sources 12.0 - - 12.0
Cost of sales (218.6) - - (218.6)
Gross profit 116.3 - - 116.3
Write-off of intangible asset - (403.2) - (403.2)
Reversal of impairment on 24.1 - - 24.1
receivables
General and administrative - - (14.0) (14.0)
costs
Operating profit / (loss) 140.4 (403.2) (14.0) (276.8)
Operating profit / (loss) is
comprised of
EBITDAX 289.0 - (13.9) 275.1
Depreciation and amortisation (172.7) - (0.1) (172.8)
Write-off of intangible assets - (403.2) - (403.2)
Reversal of impairment of 24.1 - - 24.1
receivables
Finance income - - 0.2 0.2
Bond interest expense - - (26.3) (26.3)
Other finance expense (2.1) (0.2) (2.6) (4.9)
Profit / (Loss) before income 138.3 (403.4) (42.7) (307.8)
tax
Capital expenditure 105.3 58.4 - 163.7
Total assets 644.0 88.3 284.1 1,016.4
Total liabilities (118.2) (22.4) (294.7) (435.3)
4. Operating profit / (loss)
6 months to 30 6 months to 30
June June Year to 31
December 2021
2022 2021
$m $m $m
Operating costs (23.9) (21.5) (45.5)
Trucking costs (0.2) (0.2) (0.4)
Production cost (24.1) (21.7) (45.9)
Depreciation of oil and gas (56.3) (58.6) (115.1)
property, plant and equipment
Amortisation of oil and gas (28.0) (23.1) (57.6)
intangible assets
Cost of sales (108.4) (103.4) (218.6)
Impairment / write-off of - - (403.2)
intangible assets (note 8)
Reversal of impairment of 12.8 - 24.1
receivables (note 10)
Corporate cash costs (8.6) (6.2) (12.2)
Other operating expenses - - (0.2)
Corporate share-based payment (0.6) (0.5) (1.5)
expense
Depreciation and amortisation (0.1) (0.1) (0.1)
of corporate assets
General and administrative (9.3) (6.8) (14.0)
expenses
Trucking costs are not cost-recoverable and relate to the Sarta licence
only, where production is in its early stages.
5. Finance expense and income
6 months to 30 6 months to 30
June June Year to 31
December 2021
2022 2021
$m $m $m
Bond interest (13.0) (13.2) (26.3)
Other finance expense (2.1) (2.6) (4.9)
(non-cash)
Finance expense (15.1) (15.8) (31.2)
Bank interest income 0.5 0.1 0.2
Finance income 0.5 0.1 0.2
Net finance expense (14.6) (15.7) (31.0)
Bond interest payable is the cash interest cost of the Company bond debt.
Other finance expense (non-cash) primarily relates to the discount unwind
on the bond and the asset retirement obligation provision.
6. Income tax expense
Current tax expense is incurred on profits of service companies. Under the
terms of the KRI PSCs, the Company is not required to pay any cash
corporate income taxes as explained in note 1.
7. Earnings / (Loss) per share
Basic
Basic earnings / (loss) per share is calculated by dividing the profit /
(loss) attributable to owners of the parent by the weighted average number
of shares in issue during the period.
6 months to 30
June 6 months to 30 Year to 31
June 2021 December 2021
2022
Profit / (Loss) attributable 126.1 25.6 (308.0)
to owners of the parent ($m)
Weighted average number of 277,842,136 275,446,155 276,408,652
ordinary shares – number 1
Basic earnings / (loss) per 45.4 9.3 (111.4)
share – cents per share
1 Excluding shares held as treasury shares
Diluted
The Company purchases shares in the market to satisfy share plan
requirements so diluted earnings per share is adjusted for performance
shares, restricted shares, share options and deferred bonus plans not
included in the calculation of basic earnings per share. Because the
Company reported a loss for the year ended 31 December 2021, the
performance shares, restricted shares and share options are anti-dilutive
and therefore diluted LPS is the same as basic LPS:
6 months to 30
June 6 months to 30 Year to 31
June 2021 December 2021
2022
Profit / (Loss) attributable 126.1 25.6 (308.0)
to owners of the parent ($m)
Weighted average number of 277,842,136 275,446,155 276,408,652
ordinary shares – number1
Adjustment for performance
shares, restricted shares, 2,222,629 3,067,145 -
share options and deferred
bonus plans
Weighted average number of
ordinary shares and potential 280,064,765 278,513,300 276,408,652
ordinary shares
Diluted earnings / (loss) per 45.0 9.2 (111.4)
share – cents per share
1 Excluding shares held as treasury shares
8. Intangible assets
Exploration and Tawke Other
evaluation assets Total
RSA assets
Cost $m $m $m $m
At 1 January 2021 1,541.5 425.1 7.4 1,974.0
Additions 23.6 - 0.1 23.7
Discount unwind of contingent 4.7 - - 4.7
consideration
Other 0.3 - - 0.3
At 30 June 2021 1,570.1 425.1 7.5 2,002.7
At 1 January 2021 1,541.5 425.1 7.4 1,974.0
Additions 33.2 - 0.1 33.3
Other 1.3 - - 1.3
Derecognition of accumulated (1,005.3) - - (1,005.3)
costs
Write-off in the year (489.3) - - (489.3)
At 31 December 2021 and 1 81.4 425.1 7.5 514.0
January 2022
Additions 6.3 - - 6.3
At 30 June 2022 87.7 425.1 7.5 520.3
Accumulated amortisation and
impairment
At 1 January 2021 (1,005.3) (262.1) (7.2) (1,274.6)
Amortisation charge for the - (23.1) (0.1) (23.2)
period
At 30 June 2021 (1,005.3) (285.2) (7.3) (1,297.8)
At 1 January 2021 (1,005.3) (262.1) (7.2) (1,274.6)
Amortisation charge for the - (57.6) (0.3) (57.9)
period
Derecognition of accumulated 1,005.3 - - 1,005.3
impairment
At 31 December 2021 and 1 - (319.7) (7.5) (327.2)
January 2022
Amortisation charge for the - (28.0) - (28.0)
period
At 30 June 2022 - (347.7) (7.5) (355.2)
Net book value
At 1 January 2021 536.2 163.0 0.2 699.4
At 30 June 2021 564.8 139.9 0.2 704.9
At 31 December 2021 and 1 81.4 105.4 - 186.8
January 2022
At 30 June 2022 87.7 77.4 - 165.1
30 June 30 June 31 Dec
2022 2021 2021
Book value $m $m $m
Bina Bawi PSC Discovered gas and - 367.4 -
oil, appraisal
Miran PSC Discovered gas and - 122.6 -
oil, appraisal
Somaliland PSC Exploration 11.0 35.2 10.6
Qara Dagh PSC Exploration / 76.7 39.6 70.8
Appraisal
Exploration and evaluation 87.7 564.8 81.4
assets
Tawke overriding royalty 5.2 56.2 27.5
Tawke capacity building payment waiver 72.2 83.7 77.9
Tawke RSA assets 77.4 139.9 105.4
9. Property, plant and equipment
Other
Producing assets
Assets Total
Cost $m $m $m
At 1 January 2021 3,036.3 22.6 3,058.9
Additions 34.6 0.2 34.8
Net change in payable (5.0) - (5.0)
Other1 2.5 - 2.5
At 30 June 2021 3,068.4 22.8 3,091.2
At 1 January 2021 3,036.3 22.6 3,058.9
Additions 69.3 0.4 69.7
Right-of-use assets - 1.5 1.5
Transfer of right-of-use assets 7.4 (7.4) -
Other1 4.2 - 4.2
At 31 December 2021 and 1 January 2022 3,117.2 17.1 3,134.3
Additions 64.0 0.9 64.9
Other1 3.6 - 3.6
At 30 June 2022 3,184.8 18.0 3,202.8
Accumulated depreciation and impairment
At 1 January 2021 (2,651.4) (11.8) (2,663.2)
Depreciation charge for the period (58.6) (1.8) (60.4)
At 30 June 2021 (2,710.0) (13.6) (2,723.6)
At 1 January 2021 (2,651.4) (11.8) (2,663.2)
Depreciation charge for the period (115.1) (3.5) (118.6)
Impairment (2.7) 2.7 -
At 31 December 2021 and 1 January 2022 (2,769.2) (12.6) (2,781.8)
Depreciation charge for the period (57.7) (0.9) (58.6)
At 30 June 2022 (2,826.9) (13.5) (2,840.4)
Net book value
At 1 January 2021 384.9 10.8 395.7
At 30 June 2021 358.4 9.2 367.6
At 31 December 2021 and 1 January 2022 348.0 4.5 352.5
At 30 June 2022 357.9 4.5 362.4
1 Other line includes non-cash asset retirement obligation provision and
share-based payment costs.
30 June 30 June 31 Dec
2022 2021 2021
Book value $m $m $m
Tawke PSC Oil production 197.1 206.1 196.4
Taq Taq PSC Oil production 31.8 45.6 37.2
Sarta PSC Oil production/development 129.0 106.7 114.4
Producing 357.9 358.4 348.0
assets
An impairment trigger assessment review was conducted by Management and
the Board which concluded that there were no impairment triggers noted.
10. Trade and other receivables
30 June 2022 30 June 2021 31 Dec 2021
$m $m $m
Trade receivables – current 157.0 88.5 139.7
Trade receivables – non-current - 31.4 18.4
Other receivables and prepayments 8.0 7.4 5.3
165.0 127.3 163.4
At 31 December 2021 and 30 June 2022, the Company is owed three months of
payments, which is the assessed operating cycle for establishing current
and overdue receivables.
Period when sale made
Deferred
receivables
Not due 2020 2019 Total ECL Trade receivables
nominal provision
$m $m $m $m $m $m
30 June 55.7 55.4 43.7 154.8 (34.9) 119.9
2021
31 December 92.1 55.4 21.4 168.9 (10.8) 158.1
2021
30 June 126.5 30.5 - 157.0 - 157.0
2022
At 30 June 2022 the Company is owed $30.5 million of overdue receivables,
which are expected to be received by the end of September 2022.
Movement on trade receivables in the 30 June 2022 30 June 2021 31 Dec 2021
period
$m $m $m
Carrying value at the beginning of 158.1 94.0 94.0
the period
Revenue from contracts with 238.8 147.4 322.9
customers
Cash proceeds (254.0) (122.5) (281.3)
Offset of payables due to the KRG - - (2.9)
Expected credit loss reversal (see 10.8 - 24.1
note 1)
Capacity building payments 3.3 1.0 1.3
Carrying value at the end of the 157.0 119.9 158.1
period
Of which non-current - 31.4 18.4
11. Interest bearing loans and net cash / (debt)
1 Jan Discount Dividend Net other 30 June
unwind changes 2022
2022 paid
$m $m $m $m $m
2025 Bond 9.25% (269.8) (1.0) - - (270.8)
(non-current)
Cash 313.7 - (32.3) 130.7 412.1
Net cash 43.9 (1.0) (32.3) 130.7 141.3
At 30 June 2022, the fair value of the $280 million of bonds held by third
parties is $276.6 million (30 June 2021: $274.4 million, 31 December 2021:
$287.8 million).
The bonds maturing in 2025 have two financial covenant maintenance tests:
Financial covenant Test H1 2022 H1 2021 FY 2021
Equity ratio (Total equity/Total assets) > 40% 61% 63% 57%
Minimum liquidity > $30m $412.1m $266.4m $313.7m
1 Jan Discount Dividend Net other 30 June
unwind changes 2021
2021 Buyback paid
$m $m $m $m $m $m
2022 Bond 10.0% (80.6) (0.4) 81.0 - - -
(current)
2025 Bond 9.25% (267.7) (0.9) - - - (268.6)
(non-current)
Cash 354.5 - (81.0) (29.0) 21.9 266.4
Net cash / (debt) 6.2 (1.3) - (29.0) 21.9 (2.2)
1 Jan Discount Dividend Net 31 Dec
2021 unwind paid other 2021
Buyback changes
$m $m $m $m $m $m
2022 Bond 10.0% (80.6) (0.4) 81.0 - - -
(current)
2025 Bond 9.25% (267.7) (2.1) - - - (269.8)
(non-current)
Cash 354.5 - (81.0) (44.4) 84.6 313.7
Net cash 6.2 (2.5) - (44.4) 84.6 43.9
In October 2020, the Company issued a new $300 million senior unsecured
bond with maturity in October 2025. The new bond has a fixed coupon of
9.25% per annum. In connection with the issue, the Company repurchased
$222.9 million of its existing $300.0 million senior unsecured bond issue
with maturity date in December 2022 at a price of 107 per cent. On 22
December 2020, the Company wrote to the Trustees confirming that they were
exercising the right to call the remaining $77.1 million of the 2022 bond
at the call price of 105 per cent. This settlement completed on 8 January
2021.
12. Capital commitments
Under the terms of its production sharing contracts (‘PSC’s) and joint
operating agreements (‘JOA’s), the Company has certain commitments that
are generally defined by activity rather than spend. The Company’s capital
programme for the next few years is explained in the operating review and
is in excess of the activity required by its PSCs and JOAs.
INDEPENDENT REVIEW REPORT TO GENEL ENERGY PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in
all material respects, in accordance with International Accounting
Standard 34, ‘‘Interim Financial Reporting’’ and the requirements of the
Disclosure and Transparency Rules of the Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of
financial statements in the half-yearly financial report for the six
months ended 30 June 2022 which comprises the condensed consolidated
statement of comprehensive income, the condensed consolidated balance
sheet, the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and the notes to the interim
financial statements.
Basis for conclusion
We conducted our review in accordance with International Standard on
Review Engagements (UK) 2410, “Review of Interim Financial Information
Performed by the Independent Auditor of the Entity” (“ISRE (UK) 2410”). A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might
be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, ‘‘Interim Financial
Reporting’’ and the requirements of the Disclosure and Transparency Rules
of the Financial Conduct Authority.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those
performed in an audit as described in the Basis for conclusion section of
this report, nothing has come to our attention to suggest that the
directors have inappropriately adopted the going concern basis of
accounting or that the directors have identified material uncertainties
relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance
with ISRE (UK) 2410, however future events or conditions may cause the
group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial
report in accordance with the Disclosure Guidance and Transparency Rules
of the United Kingdom’s Financial Conduct Authority and the Companies
(Jersey) Law 1991.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to
the Company a conclusion on the condensed set of financial statement in
the half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are
less extensive than audit procedures, as described in the Basis for
Conclusion paragraph of this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom’s
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person entitled
to rely upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report
to any other person or for any other purpose and we hereby expressly
disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
1 August 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
══════════════════════════════════════════════════════════════════════════
ISIN: JE00B55Q3P39, NO0010894330
Category Code: IR
TIDM: GENL
LEI Code: 549300IVCJDWC3LR8F94
Sequence No.: 178545
EQS News ID: 1410803
End of Announcement EQS News Service
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