REG-Genel Energy PLC Genel Energy PLC: Half-Year Results
02/08/2023 07:15
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Genel Energy PLC (GENL)
Genel Energy PLC: Half-Year Results
02-Aug-2023 / 07:00 GMT/BST
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2 August 2023
Genel Energy plc
Unaudited results for the period ended 30 June 2023
Genel Energy plc (‘Genel’ or ‘the Company’) announces its unaudited results for
the six months ended 30 June 2023.
Paul Weir, Chief Executive of Genel, said:
“The closure of the Iraq-Türkiye pipeline on 25 March 2023 has resulted in
minimal sales and no payments from the KRG since that date. This has materially
impacted both our current and expected cash flows, with the current period
seeing a free cash out flow.
Approval of the Iraqi budget in June put in place a framework for the restart
of payments and exports, with production from Kurdistan incorporated in the
budget, and this was an important step. Discussions are now ongoing between
Iraq and Türkiye regarding the commercial and political arrangements that would
enable the resumption of exports.
As we await a positive outcome to discussions between Iraq and Türkiye, we
retain a material cash position, prioritised for investment in new assets, and
remain clear and determined on our direction of travel. We have accelerated the
ongoing reshaping of our portfolio, organisation, and plans, and we continue to
diligently review assets and businesses that can support delivery of the
business that we have framed over the past 12 months.
Given the $170 million impact so far that the lack of payments and revenue is
expected to have on our liquidity at year-end, and with no clear line of sight
on when either pipeline exports or payments will restart, we have taken the
decision to suspend the dividend. We remain committed to building a business
with predictable, repeatable, and diversified cash flows, which would
ultimately support the re-establishment of a dividend programme.”
Results summary ($ million unless stated)
H1 2023 H1 2022 FY 2022
Average Brent oil price ($/bbl) 80 108 101
Production (bopd, working interest) 13,440 30,420 30,150
Revenue 51.3 245.6 432.7
EBITDAX1 19.4 212.3 361.6
Depreciation and amortisation (27.2) (84.4) (149.2)
Net impairment/write-off of oil and gas assets (17.7) - (201.3)
Net (Impairment)/reversal of impairment of (9.9) 12.8 8.2
receivables
Exploration expense (0.3) - (1.0)
Operating (loss) / profit (35.7) 140.7 18.3
Cash flow from operating activities 39.2 216.3 412.4
Capital expenditure 47.5 74.7 143.1
Free cash flow2 (35.1) 128.7 234.8
Cash 425.0 412.1 494.6
Total debt 273.0 280.0 274.0
Net cash / (debt)3 158.2 141.3 228.0
Basic (LPS) / EPS (¢ per share) (14.6) 45.4 (2.6)
Dividends declared for the period (¢ per share) - 6 18
1. EBITDAX is operating (loss)/profit adjusted for the add back of
depreciation and amortisation, impairment of property, plant and equipment,
impairment of intangible assets and impairment/reversal of impairment of
receivables
2. Free cash flow is reconciled on page 7
3. Reported cash less debt reported under IFRS (page 7)
Summary
• The prolonged closure of the Iraq-Türkiye pipeline has materially impacted
production, which averaged 13,440 bopd in H1 (H1 2022: 30,420)
• Two payments totalling $61 million were received from the Kurdistan
Regional Government (‘KRG’) in the period, with $110 million now overdue
• Given the loss of cash flow in the period and the lack of visibility on
both the timing of pipeline exports resuming and the re-establishment of a
reliable record of payments, Genel has suspended its dividend programme
• In addition, the Company will assess the timing of further investment in
Somaliland following the completion of civil engineering work, based on the
financial outlook at the time
• Work on assessing the future plans for Sarta, with a goal of making
operations profitable, has been made more challenging by the investment
environment, and consequently Genel has informed the Ministry of Natural
Resources of its intention to surrender the asset and terminate the Sarta
PSC
• Significant cash balance of $425 million at 30 June 2023 ($496 million at
31 March 2023) is prioritised for addition of new assets
• Net cash of $158 million at 30 June 2023 ($229 million at 31 March 2023)
◦ Total debt of $273 million at 30 June 2023 ($274 million at 31 March
2023)
• 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
◦ Three million work hours since the last LTI
Outlook
• As a consequence of the reduction in operational activity, Genel has
right-sized the organisation and reduced spend compared to expectations at
the start of 2023
◦ Genel currently expects full year capital expenditure to be c.$70
million (original guidance $100-125 million), with two thirds of this
already spent
• Limited local sales are ongoing from the Tawke licence
• Genel continues to actively review and work up opportunities to invest our
cash to build a business that delivers resilient, reliable, and diversified
cash flows that support a repeatable dividend programme in the long-term
• The London-seated international arbitration regarding Genel’s claim for
substantial compensation from the KRG following the termination of the
Miran and Bina Bawi PSCs is progressing. The trial remains scheduled for
February 2024
Enquiries:
Genel Energy
+44 20 7659 5100
Andrew Benbow, Head of Communications
Vigo Consulting
+44 20 7390 0230
Patrick d’Ancona
Genel will host a live presentation on the Investor Meet Company platform on
Wednesday 2 August at 1000 BST. The presentation is open to all existing and
potential shareholders. Questions can be submitted at any time during the live
presentation. Investors can sign up to Investor Meet Company for free and add
to meet Genel Energy PLC via:
1 https://www.investormeetcompany.com/genel-energy-plc/register-investor
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. While 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 the year has been dominated by the lengthy outage of the
Iraq-Türkiye export pipeline, which has caused the suspension of both our
production and payments from the Kurdistan Regional Government. Only two
payments were received in the period before the pipeline was shut. This has
exacerbated our receivable position and has led to a material decline in our
expected cash flows. Previous expectations for our year-end 2023 cash position
have been impacted by around $170 million so far ($110 million outstanding for
oil produced that was expected to be received this year, and a loss of cash as
a result of the lack of production for the months from April to July 2023).
This lack of cash receipts has led to the suspension of the dividend. The
Company is committed to building a business with predictable, repeatable, and
diversified cash flows that would support the re-establishment of a dividend
programme.
We continue to see positive news flow about a potential restart and it is
reported that there has been inter-government dialogue, but there remains no
clear visibility on exactly when exports will resume.
We remain of the belief that the shut-down will not continue in the long-term,
and the Prime Minister of the Kurdistan Region of Iraq (‘KRI’) has committed to
International Oil Companies operating in Kurdistan that the terms under PSCs
will not be reviewed, and that all amounts owed will be paid.
The Federal Government of Iraq budget has been approved, which puts in place a
framework that should enable exports to restart quickly once agreement has been
reached between Türkiye and Iraq. The budget states that Kurdistan production
will be sold by the Iraqi State Oil Marketing Organisation (‘SOMO‘) and, in
return, the KRG will receive budget payments from the Federal Government of
Iraq. While agreements are in place on paper, we await to see how they are
practically implemented on the ground.
Given the ongoing uncertainty, we have made decisions to minimise our spend,
while accelerating our cost-reduction and efficiency drive that was already
underway.
Further investment in Sarta, already challenging from a technical and economic
point of view, is now not feasible, and we have informed the Ministry of
Natural Resources of our intention to surrender the licence and terminate the
PSC. This is a disappointing outcome for an asset of which the field partners
had great expectations. The team did a great job in bringing it to production
quickly and professionally, but the geology was not what had been expected, and
the licence has been impaired accordingly.
While we are confident that exports to Ceyhan will resume in the future, we are
focused on preserving maximum liquidity available to invest in new production
assets in order to diversify and increase the resilience of our cash flows.
This is of even greater importance following the decision to exit Sarta.
We have a clear business model and plan and a remaining liquidity balance that
supports cash generative diversification of the business. We have a dedicated
team in place analysing opportunities that will take the business in the right
direction by adding near-term income, diversifying our portfolio and delivering
reliable and repeatable cash flows.
OPERATING REVIEW
Production
Production in the first half of 2023 was negatively impacted by the closure of
the Iraq-Türkiye pipeline. Production continued until storage capacity at
fields was reached. For Tawke this was at the end of March, Sarta 3 April, and
Taq Taq 22 May.
Upon reopening of the export pipeline, Genel fields have the potential to
rapidly resume production. Sarta will remain shut-in as Genel relinquishes the
asset.
Gross production Net production Gross production Net production
(bopd)
Q2 2023 Q2 2023 H1 2023 H1 2023
Tawke 0 0 46,970 11,740
Taq Taq 1,884 829 2,760 1,220
Sarta 48 14 1,605 480
Total 1,932 843 51,335 13,440
PRODUCING ASSETS
Tawke PSC (25% working interest)
Gross production from the Tawke licence averaged 93,880 bopd during the first
quarter of 2023, with the Peshkabir field contributing 49,480 bopd (59,360 bopd
in Q4 2022) and the Tawke field 44,400 bopd (47,140 bopd in Q4 2022) during
this period.
Production in Q1 2023 was in line with expectations, and down from the previous
quarter due to planned well workovers initiated in February. There was no
production in Q2 due to the export pipeline being closed.
Given the uncertain timing of export resumption and, importantly, of payments
by the KRG for previous oil sales, the operator DNO (in full alignment with
Genel) scaled back spend, including drilling. While five wells were completed
and another three wells spudded in Q1 2023, no new wells have been spudded
since and the number of active rigs at the Tawke licence will drop from four at
the start of 2023 to none in the second half of the year.
Limited local sales began in June, selling stored oil to the local market.
Sarta (30% working interest)
Genel had previously stated that the Company’s focus was on making ongoing
production from Sarta profitable. Given the investment required to achieve
this, and the current uncertainty over a resumption of payments, Genel has
informed the Ministry of Natural Resources of its intention to surrender the
asset and thereby terminate the Sarta PSC.
Taq Taq (44% working interest, joint operator)
Prior to the closure of the Iraq-Türkiye pipeline, production from Taq Taq was
in line with expectations, having averaged 3,610 bopd in Q1. In line with
Genel’s focus on reducing costs, and lack of clarity regarding the resumption
of payments, the planned drilling of a well at Taq Taq in 2023 has now been
dropped.
PRE-PRODUCTION ASSETS
Somaliland
The Environmental, Social and Health Impact Assessment is now complete, and
civil work continues for the drilling of the Toosan-1 well on the highly
prospective SL10B13 block (51% working interest and operator).
Once civil works are complete, in line with Genel’s focus on reducing costs,
the Company will assess timing of further investment based on the financial
outlook at the time.
Morocco
The farm-out programme on the Lagzira block (75% working interest and operator)
is ongoing.
FINANCIAL REVIEW
The ongoing closure of the Iraq-Türkiye pipeline resulted in no sales for the
period of pipe shutdown from the end of March to the end of the period.
(all figures $ million) H1 2023 H1 2022 FY 2022
Brent average oil price $80/bbl $108/bbl $101/bbl
Revenue 51.3 245.6 432.7
Production costs (21.7) (24.1) (51.1)
Cost recovered production asset capex (39.7) (41.3) (85.9)
Production business net (expense) / income after cost (10.1) 180.2 295.7
recovered capex
G&A (excl. non-cash) (9.3) (8.6) (19.2)
Net cash interest1 (2.2) (12.5) (19.2)
Working capital 42.7 (38.2) (9.7)
Payments for deferred receivables 16.5 46.3 94.4
Payment delays (49.5) - (44.4)
Free cash flow before investment in growth (11.9) 167.2 297.6
Pre-production capex (7.8) (33.4) (57.2)
Working capital and other (15.4) (5.1) (5.6)
Free cash flow (35.1) 128.7 234.8
Dividend paid (33.5) (32.3) (47.9)
Other - 2.0 -
Purchases of own bonds (1.0) - (6.0)
Net change in cash (69.6) 98.4 180.9
Cash 425.0 412.1 494.6
1 Net cash interest is bond interest payable less bank interest income (see
note 5)
Financial priorities of 2023
The table below summarises our progress against the 2023 financial priorities
of the Company as set out in our 2022 results.
2023 financial priorities Progress
• In the face of a reduction in
• Maintain business resilience and income, capital expenditure
balance sheet strength materially reduced, and interim
dividend suspended
• Put our significant cash balance to • Genel continues to actively
work, earning appropriate returns to screen and work up
deliver value to shareholders primarily opportunities
through our dividend programme and • Final dividend paid
diversify our cash generation
• Deliver the 2023 work programme on time
and on budget, and continue
simplification of the business with a • Work programme reduced due to
focus on optimisation and cost control external conditions
and investment in business improvement
Financial results
Income statement
(all figures $ million) H1 2023 H1 2022 FY 2022
Brent average oil price $80/bbl $108/bbl $101/bbl
Production (bopd, working interest) 13,440 30,420 30,150
Profit oil 18.2 88.4 149.2
Cost oil 31.3 70.8 141.1
Override royalty 1.8 86.4 142.4
Revenue 51.3 245.6 432.7
Production costs (21.7) (24.1) (51.1)
G&A (excl. depreciation and amortisation) (10.2) (9.2) (20.0)
EBITDAX 19.4 212.3 361.6
Depreciation and amortisation (27.2) (84.4) (149.2)
Exploration expense (0.3) - (1.0)
Net impairment / write-off of oil and gas assets (17.7) - (201.3)
Net (impairment) / reversal of impairment of (9.9) 12.8 8.2
receivables
Net finance expense (5.0) (14.6) (25.4)
Income tax expense - - (0.2)
(Loss) / Profit (40.7) 126.1 (7.3)
H1 2023 production of 13,440 bopd is reduced from the comparative period (H1
2022: 30,420 bopd) because of the pipeline closure. This has resulted in a
reduction in revenue from $246 million to $51 million alongside the change in
pricing from Brent to the realised sales price for Kurdistan blend crude
(‘KBT’) starting from September 2022 and the completion of Tawke overriding
royalty by July 2022.
Production costs of $22 million decreased from the prior period (H1 2022: $24
million), with cost per barrel $9.0/bbl in 2023 (H1 2022: $4.4/bbl),
principally caused by pipeline closure, fixed costs, and Sarta being
loss-making.
Corporate cash costs were $9 million (H1 2022: $9 million), in line with
previous period.
The decrease in revenue resulted in a similar decrease to EBITDAX, which was
$19 million (H1 2022: $212 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 $24 million (H1 2022: $56 million) and Tawke intangibles
amortisation of $3 million (H1 2022: $28 million) decreased due to lower
production and pipeline closure.
The Company has reported an impairment expense of $18 million relating to
Sarta. A net impairment expense of $10 million has been recognised relating to
the expected credit loss on overdue receivables. Further explanation is
provided in note 2 to the financial statements.
Interest income of $11 million (H1 2022: $0.5 million) has significantly
increased as a result of the increase in interest rates, in turn reducing our
cost of debt. Bond interest expense of $13 million (H1 2022: $13 million) was
in line with previous period. Other finance expense of $3 million (H1 2022: $2
million) related to non-cash discount unwinding on provisions.
In relation to taxation, under the terms of 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 2023: nil, H1
2022: nil).
Capital expenditure
Capital expenditure was reduced to $48 million (H1 2022: $75 million), with
spend on production and pre-production assets combined of $44 million, and
exploration assets of $4 million:
(all figures $ million) H1 2023 H1 2022 FY 2022
Cost recovered production capex 39.7 41.4 85.9
Pre-production capex – oil 3.8 27.0 47.5
Other exploration and appraisal capex 4.0 6.3 9.7
Capital expenditure 47.5 74.7 143.1
Cash flow, cash, net cash and debt
Gross proceeds received totalled $61 million (H1 2022: $254 million).
(all figures $ million) H1 2023 H1 2022 FY 2022
Brent average oil price $80/bbl $108/bbl $101/bbl
EBITDAX 19.4 212.3 361.6
Working capital 19.8 4.0 50.8
Operating cash flow 39.2 216.3 412.4
Producing asset cost recovered capex (37.9) (33.1) (77.8)
Development capex (16.0) (22.2) (50.4)
Exploration and appraisal capex (6.1) (17.7) (20.0)
Interest and other (14.3) (14.6) (29.4)
Free cash flow (35.1) 128.7 234.8
Free cash flow is presented in order to illustrate the free cash generated for
equity. Free cash outflow was $35 million (H1 2022: $129 million inflow) with
an overall decrease due to delay in proceeds and lower Brent.
(all figures $ million) H1 2023 H1 2022 FY 2022
Free cash flow (35.1) 128.7 234.8
Dividend paid (33.5) (32.3) (47.9)
Other - 2.0 -
Bond repayment (1.0) - (6.0)
Net change in cash (69.6) 98.4 180.9
Opening cash 494.6 313.7 313.7
Closing cash 425.0 412.1 494.6
Debt reported under IFRS (266.8) (270.8) (266.6)
Net cash / (debt) 158.2 141.3 228.0
The 2025 bonds have two financial covenant maintenance tests:
Financial covenant Test H1 2023
Equity ratio (Total equity/Total assets) > 40% 53%
Minimum liquidity > $30m $425m
Net assets
Net assets at 30 June 2023 were $457 million (31 December 2022: $528 million)
and consist primarily of oil and gas assets of $330 million (31 December 2022:
$327 million), net trade receivables of $95 million (31 December 2022: $117
million) and net cash of $158 million (31 December 2022: $228 million).
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 2023 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 KRI
natural resources industry and regional risk, notably the current closure of
the Iraq-Türkiye pipeline and lack of oil export payments, as well as the
recovery of the $110 million outstanding receivable; the development and
recovery of oil reserves; reserve replacement; M&A activity; 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 2022 Annual
Report.
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 2022. A list of current directors is maintained on the
Genel Energy plc website: 2 www.genelenergy.com
By order of the Board
Paul Weir
CEO
1 August 2023
Luke Clements
CFO
1 August 2023
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 2023
Audited
Unaudited Unaudited
Year
6 months to 30 6 months to 30
June 2023 June 2022 to 31 Dec
2022
Note $m $m $m
Revenue 3 51.3 245.6 432.7
Production costs 4 (21.7) (24.1) (51.1)
Depreciation and amortisation of 4 (27.2) (84.3) (149.1)
oil assets
Gross profit 2.4 137.2 232.5
Exploration expense 4 (0.3) - (1.0)
Net write-off of intangible assets 4,8 - - (75.8)
Impairment of property, plant and 4,9 (17.7) - (125.5)
equipment
Net (impairment) / reversal of 4,10 (9.9) 12.8 8.2
impairment of receivables
General and administrative costs 4 (10.2) (9.3) (20.1)
Operating (loss) / profit (35.7) 140.7 18.3
Operating (loss) / profit is
comprised of:
EBITDAX 19.4 212.3 361.6
Depreciation and amortisation 4 (27.2) (84.4) (149.2)
Exploration expense 4 (0.3) - (1.0)
Net write-off of intangible assets 4,8 - - (75.8)
Impairment of property, plant and 4,9 (17.7) - (125.5)
equipment
Net (impairment) / reversal of 4,10 (9.9) 12.8 8.2
impairment of receivables
Finance income 5 10.5 0.5 6.7
Bond interest expense 5 (12.7) (13.0) (25.9)
Other finance expense 5 (2.8) (2.1) (6.2)
(Loss) / Profit before income tax (40.7) 126.1 (7.1)
Income tax expense 6 - - (0.2)
(Loss) / Profit and total (40.7) 126.1 (7.3)
comprehensive (expense) / income
Attributable to:
Owners of the parent (40.7) 126.1 (7.3)
(40.7) 126.1 (7.3)
(Loss) / Earnings per ordinary ¢ ¢
share
Basic 7 (14.6) 45.4 (2.6)
Diluted 7 (14.6) 45.0 (2.6)
(LPS) / EPS excluding impairments1 (4.7) 40.8 66.7
1(LPS) / EPS excluding impairment is profit / (loss) and total comprehensive
income / (expense) adjusted for the add back of net impairment/write-off of oil
and gas assets and net impairment/reversal of impairment of receivables divided
by weighted average number of ordinary shares.
Condensed consolidated balance sheet
At 30 June 2023
Unaudited Unaudited Audited 31 Dec
2022
30 June 2023 30 June 2022
Note $m $m $m
Assets
Non-current assets
Intangible assets 8 80.4 165.1 79.1
Property, plant and 9 249.2 362.4 248.1
equipment
329.6 527.5 327.2
Current assets
Trade and other receivables 10 100.6 165.0 121.7
Cash and cash equivalents 425.0 412.1 494.6
525.6 577.1 616.3
Total assets 855.2 1,104.6 943.5
Liabilities
Non-current liabilities
Trade and other payables (0.8) (3.5) (1.2)
Deferred income (5.9) (10.0) (6.5)
Provisions (53.7) (45.4) (52.2)
Interest bearing loans 11 (266.8) (270.8) (266.6)
(327.2) (329.7) (326.5)
Current liabilities
Trade and other payables (64.9) (91.8) (82.4)
Deferred income (6.5) (6.5) (6.8)
(71.4) (98.3) (89.2)
Total liabilities (398.6) (428.0) (415.7)
Net assets 456.6 676.6 527.8
Owners of the parent
Share capital 43.8 43.8 43.8
Share premium account 3,863.9 3,914.1 3,897.4
Accumulated losses (3,451.1) (3,281.3) (3,413.4)
Total equity 456.6 676.6 527.8
Condensed consolidated statement of changes in equity
For the period ended 30 June 2023
Share capital Share Accumulated Total
premium losses equity
$m
$m $m $m
At 1 January 2022 43.8 3,947.5 (3,410.2) 581.1
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
At 1 January 2022 43.8 3,947.5 (3,410.2) 581.1
Loss and total - - (7.3) (7.3)
comprehensive expense
Contributions by and
distributions to owners
Share-based payments - - 4.1 4.1
Dividends provided for or - (50.1) - (50.1)
paid1
At 31 December 2022
(Audited) and 1 January 43.8 3,897.4 (3,413.4) 527.8
2022
Loss and total - - (40.7) (40.7)
comprehensive expense
Contributions by and
distributions to owners
Share-based payments - - 3.0 3.0
Dividends provided for or - (33.5) - (33.5)
paid1
At 30 June 2023 43.8 3,863.9 (3,451.1) 456.6
(Unaudited)
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 2023
Audited
Unaudited Unaudited
Note 31 Dec
30 June 2023 30 June 2022
2022
$m $m $m
Cash flows from operating activities
(Loss) / Profit for the period / year (40.7) 126.1 (7.3)
Adjustments for:
Net finance expense 5 5.0 14.6 25.4
Taxation 6 - - 0.2
Depreciation and amortisation 28.5 85.9 152.0
Exploration expense 4 0.3 - 1.0
Net impairments, write-offs / 4 27.6 (12.8) 193.1
(write-backs)
Other non-cash items (royalty income (0.9) (3.7) (7.4)
and share-based cost)
Changes in working capital:
Decrease in trade receivables 12.5 11.8 47.2
Decrease / (Increase) in other 0.8 (0.5) -
receivables
(Decrease) / Increase in trade and (4.3) (5.5) 1.7
other payables
Cash generated from operations 28.8 215.9 405.9
Interest received 5 10.5 0.5 6.7
Taxation paid (0.1) (0.1) (0.2)
Net cash generated from operating 39.2 216.3 412.4
activities
Cash flows from investing activities
Net payments of intangible assets (6.1) (17.3) (20.0)
Net payments of property, plant and (53.9) (55.3) (128.2)
equipment
Net cash used in investing activities (60.0) (72.6) (148.2)
Cash flows from financing activities
Dividends paid to company’s (33.5) (32.3) (47.9)
shareholders
Bond repayment 11 (1.0) - (6.0)
Lease payments (1.7) - (3.8)
Interest paid (12.6) (13.0) (25.6)
Net cash used in financing activities (48.8) (45.3) (83.3)
Net (decrease) / increase in cash and (69.6) 98.4 180.9
cash equivalents
Cash and cash equivalents at the 494.6 313.7 313.7
beginning of the period / year
Cash and cash equivalents at the end of 425.0 412.1 494.6
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 2023 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 2023. 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 2022, which have
been prepared in accordance with IFRS as adopted by the European Union. The
same accounting policies and methods of computation are followed in the interim
financial report as compared with the 31 December 2022 annual financial
statements. The annual financial statements for the year ended 31 December 2022
were approved by the board of directors on 21 March 2023. 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 2022 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 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 $425.0 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 Federal Iraq Supreme Court majority decision in February 2022 regarding the
Kurdistan Oil and Gas Law (2007) and the subsequent actions taken by the
Federal Minister of Oil in Baghdad Commercial Court did not have a significant
impact on the Company’s operations.
However, since then, the International Chamber of Commerce in Paris ruling in
favour of Iraq in the long running arbitration case against Türkiye concerning
the Iraqi-Turkish pipeline agreement signed in 1973, resulted in Türkiye
suspending exports through the pipeline since 25 March 2023. The KRG has
consistently reiterated that it will pay IOCs all that it owes and fulfil its
contractual commitments under the PSCs. Management assess that exports and
payments will resume and the going concern status of the business remains
appropriate. To test the resilience of the business model, an extreme downside
scenario is considered where no proceeds for the overdue or new invoices until
the end of HY 2024. Breach of covenants risk is assessed as remote in this
scenario.
Once production and payments restart, 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.
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 2023 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 2022.
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 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.
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 which are based on
Petroleum Resources Management System 2018. 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.
Change in accounting estimate
Where the Company has updated its estimated reserves and resources any required
disclosure of the impact on the financial statements is provided in the
following sections.
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. A post tax nominal discount rate
of 14% derived from the Company’s weighted average cost of capital (WACC) is
used when assessing the impairment testing of the Company’s oil assets at
year-end. 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 and going concern.
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 2023 2024 2025 2026
HY2023 forecast 82 78 74 70
FY2022 forecast 82 78 74 70
HY2022 forecast 90 80 70 70
The netback price is used to value the Company’s revenue, trade receivables and
its forecast cash flows used for impairment testing. It is the aggregation of
reference oil price average less transportation costs, handling costs and
quality adjustments. Effective from 1 September 2022, sales have been priced by
the MNR under a new pricing formula based on the realised sales price for
Kurdistan blend crude (‘KBT’) during the delivery month, rather than on dated
Brent. 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
provided by the KRG. Due to lack of this visibility, the Company has used an
estimated c.$12/bbl discount on its Brent forecast based on the realised price
in 2023 for its impairment testing. A sensitivity analysis of netback price on
producing asset values has been provided in note 9.
Change in accounting estimate – Sarta PSC (note 9)
At 31 December 2022, the Company’s assessment on the recoverable value of the
Sarta PSC had resulted with an impairment expense of $125.5 million following
the disappointing results of the two appraisal well and pilot production.
In 2023, the Company has informed the KRG of its intention to exit the Sarta
licence as it sees no line of sight on either making the extant production
profitable or the combination of macro and asset specific conditions supporting
risking of further capital. Therefore, the remaining recoverable value of the
Sarta PSC has been reduced to nil and an impairment expense of $17.7 million
has been booked at 30 June 2023.
Estimation of the recoverable value of deferred receivables and trade
receivables (note 10)
As of 31 December 2022, all amounts owed for deferred receivables have been
collected and as a result the Company has released the expected credit loss
(ECL) provision of $10.8 million and booked another $4.6 million ECL provision
for the outstanding five months of export payments.
As of 30 June 2023, the Company is owed six months of payments. Management has
compared the carrying value of trade receivables with the present value of the
estimated future cash flows based on a discount rate of 14% and a number of
collection scenarios. The ECL is the weighted average of these scenarios and is
recognised in the income statement. The weighting is applied based on expected
repayment timing by considering the recovery of previous deferred receivables.
The result of this assessment is an ECL provision of $14.5 million. Sensitivity
of the calculation to difference scenarios has been provided in note 10.
Other estimates
The following are the other estimates that the directors have made in the
process of applying the Company’s accounting policies and that have effect on
the amounts recognised in the financial statements.
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 which is considered as the mid-point of
a range of cost estimation. These inputs are based on the Company’s best
estimate of the expenditure required to settle the present obligation at the
end of the period inflated at 2% (2022: 2%) and discounted at 4% (2022: 4%).
10% increase in cost estimates would increase the existing provision by c.$5
million and 1% increase in discount rate would decrease the existing provision
by c.$4 million, the combined impact would be c.$1 million. The cash flows
relating to the decommissioning and abandonment provisions are expected to
occur between 2028 and 2036.
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 2023. Amendments to IFRS 17
Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative
Information (issued on 9 December 2021), Amendments to IAS 12 Income Taxes:
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (issued on 7 May 2021), Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting
policies (issued on 12 February 2021), Amendments to IAS 8 Accounting policies,
Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
(issued on 12 February 2021), IFRS 17 Insurance Contracts (issued on 18 May
2017); including Amendments to IFRS 17 (issued on 25 June 2020) . These
standards did not have a material impact on the Company’s results or financial
statements disclosures in the current reporting period.
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 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures: Supplier Finance Arrangements (Issued on 25
May 2023), Amendments to IAS 12 Income taxes: International Tax Reform – Pillar
Two Model Rules (issued 23 May 2023), Amendments to IAS 1 Presentation of
Financial Statements: Classification of Liabilities as Current or Non-current -
Deferral of Effective Date (issued on 15 July 2020); and Non-current
Liabilities with Covenants (issued on 31 October 2022), Amendments to IFRS 16
Leases: Lease Liability in a Sale and Leaseback (issued on 22 September 2022).
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 periods they become effective.
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 (written-off in 2022) located 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 2023
Pre-production Total
Production Other
$m $m $m $m
Revenue from contracts with customers 49.5 - - 49.5
Revenue from other sources 1.8 - - 1.8
Cost of sales (48.9) - - (48.9)
Gross profit 2.4 - - 2.4
Exploration expense - (0.3) - (0.3)
Impairment of property, plant and (17.7) - - (17.7)
equipment
Net impairment of receivables (9.9) - - (9.9)
General and administrative costs - - (10.2) (10.2)
Operating loss (25.2) (0.3) (10.2) (35.7)
Operating loss is comprised of
EBITDAX 29.6 - (10.2) 19.4
Depreciation and amortisation (27.2) - - (27.2)
Exploration expense - (0.3) - (0.3)
Impairment of property, plant and (17.7) - - (17.7)
equipment
Net impairment of receivables (9.9) - - (9.9)
Finance income - - 10.5 10.5
Bond interest expense - - (12.7) (12.7)
Other finance expense (1.7) - (1.1) (2.8)
Loss before income tax (26.9) (0.3) (13.5) (40.7)
Capital expenditure 43.5 4.0 - 47.5
Total assets 412.6 29.4 413.2 855.2
Total liabilities (99.1) (18.6) (280.9) (398.6)
Total assets and liabilities in the ‘Other’ column are predominantly cash and
debt balances.
For the 6-month period ended 30 June 2022
Pre-production Total
Production Other
$m $m $m $m
Revenue from contracts with customers 238.8 - - 238.8
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 receivables 10.8 - 2.0 12.8
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 receivables 10.8 - 2.0 12.8
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 tax 146.8 (0.1) (20.6) 126.1
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 arising from the
4.5% royalty interest on gross Tawke PSC revenue (“the ORRI”).
Total assets and liabilities in the ‘Other’ column are predominantly cash and
debt balances.
For the 12-month period ended 31 December 2022
Total
Production Pre-production Other
$m $m $m $m
Revenue from contracts with 419.5 - - 419.5
customers
Revenue from other sources 13.2 - - 13.2
Cost of sales (200.2) - - (200.2)
Gross profit 232.5 - - 232.5
Exploration expense - (1.0) - (1.0)
Net write-off of intangible asset - (75.8) - (75.8)
Impairment of property, plant and (125.5) - - (125.5)
equipment
Reversal of impairment of 10.8 - 2.0 12.8
receivables
Impairment of receivables (4.6) - - (4.6)
General and administrative costs - - (20.1) (20.1)
Operating profit / (loss) 113.2 (76.8) (18.1) 18.3
Operating profit / (loss) is
comprised of
EBITDAX 381.6 - (20.0) 361.6
Depreciation and amortisation (149.1) - (0.1) (149.2)
Exploration expense - (1.0) - (1.0)
Net write-off of intangible assets - (75.8) - (75.8)
Impairment of property, plant and (125.5) - - (125.5)
equipment
Reversal of impairment of 10.8 - 2.0 12.8
receivables
Impairment of receivables (4.6) - - (4.6)
Finance income - - 6.7 6.7
Bond interest expense - - (25.9) (25.9)
Other finance expense (3.3) (0.4) (2.5) (6.2)
Profit / (Loss) before income tax 109.9 (77.2) (39.8) (7.1)
Capital expenditure 133.4 9.7 - 143.1
Total assets 447.3 23.5 472.7 943.5
Total liabilities (111.9) (17.7) (286.1) (415.7)
Revenue from contracts with customers includes $94.5 million arising from the
ORRI and $34.7 million in relation to the suspended ORRI.
Total assets and liabilities in the ‘Other’ column are predominantly cash and
debt balances.
4. Operating (loss) / profit
6 months to 30 6 months to 30
June June Year to 31
December 2022
2023 2022
$m $m $m
Operating costs (21.6) (23.9) (50.7)
Trucking costs (0.1) (0.2) (0.4)
Production cost (21.7) (24.1) (51.1)
Depreciation of oil and gas
property, plant and equipment (24.7) (56.3) (109.9)
(excl. RoU assets)
Amortisation of oil and gas (2.5) (28.0) (39.2)
intangible assets
Cost of sales (48.9) (108.4) (200.2)
Exploration expense (0.3) - (1.0)
Write-off of intangible assets - - (78.0)
(note 8)
Net reversal of accruals - - 2.2
Net write-off of intangible assets - - (75.8)
Impairment of property, plant and (17.7) - (125.5)
equipment (note 2,9)
Reversal of impairment of other - - 2.0
receivables
Reversal of impairment of trade 4.6 12.8 10.8
receivables (note 2,10)
Impairment of receivables (note (14.5) - (4.6)
2,10)
Corporate cash costs (9.1) (8.6) (18.1)
Other operating expenses (0.2) - (1.1)
Corporate share-based payment (0.9) (0.6) (0.8)
expense
Depreciation and amortisation of - (0.1) (0.1)
corporate assets (excl. RoU assets)
General and administrative expenses (10.2) (9.3) (20.1)
Trucking costs are not cost-recoverable and relate to the Sarta licence only.
5. Finance expense and income
6 months to 30 6 months to 30
June June Year to 31 December
2022
2023 2022
$m $m $m
Bond interest (12.7) (13.0) (25.9)
Other finance expense (2.8) (2.1) (6.2)
(non-cash)
Finance expense (15.5) (15.1) (32.1)
Bank interest income 10.5 0.5 6.7
Finance income 10.5 0.5 6.7
Net finance expense (5.0) (14.6) (25.4)
Bond interest payable is the cash interest cost of the Company’s bond debt.
Other finance expense (non-cash) primarily relates to the discount unwind on
the bond and the asset retirement obligation provision.
6. Income tax expense
Current tax expense is incurred on profits of service companies. Under the
terms of the KRI PSCs, the Company is not required to pay any cash corporate
income taxes as explained in note 2.
7. (Loss) / Earnings per share
Basic
Basic (loss) / earnings per share is calculated by dividing the (loss) / profit
attributable to owners of the parent by the weighted average number of shares
in issue during the period.
6 months to 30
June 6 months to 30 Year to 31
June 2022 December 2022
2023
(Loss) / Profit attributable to (40.7) 126.1 (7.3)
owners of the parent ($m)
Weighted average number of ordinary 278,923,402 277,842,136 278,654,909
shares – number 1
Basic (loss) / earnings per share – (14.6) 45.4 (2.6)
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 period
ended 30 June 2023, 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 2022 December 2022
2023
(Loss) / Profit attributable to (40.7) 126.1 (7.3)
owners of the parent ($m)
Weighted average number of ordinary 278,923,402 277,842,136 278,654,909
shares – number1
Adjustment for performance shares,
restricted shares, share options - 2,222,629 -
and deferred bonus plans
Weighted average number of ordinary
shares and potential ordinary 278,923,402 280,064,765 278,654,909
shares
Diluted (loss) / earnings per share (14.6) 45.0 (2.6)
– cents per share
1 Excluding shares held as treasury shares
8. Intangible assets
Exploration and Other
evaluation assets Tawke Total
assets
RSA
$m $m $m $m
Cost
At 1 January 2022 81.4 425.1 7.5 514.0
Additions 6.3 - - 6.3
At 30 June 2022 87.7 425.1 7.5 520.3
At 1 January 2022 81.4 425.1 7.5 514.0
Additions 9.7 - - 9.7
Write-off in the year (78.0) - - (78.0)
Other (0.2) - - (0.2)
At 31 December 2022 and 1 January 12.9 425.1 7.5 445.5
2023
Additions 4.0 - - 4.0
Other (0.2) - - (0.2)
At 30 June 2023 16.7 425.1 7.5 449.3
Accumulated amortisation and
impairment
At 1 January 2022 - (319.7) (7.5) (327.2)
Amortisation charge for the period - (28.0) - (28.0)
At 30 June 2022 - (347.7) (7.5) (355.2)
At 1 January 2022 - (319.7) (7.5) (327.2)
Amortisation charge for the year - (39.2) - (39.2)
At 31 December 2022 and 1 January - (358.9) (7.5) (366.4)
2023
Amortisation charge for the period - (2.5) - (2.5)
At 30 June 2023 - (361.4) (7.5) (368.9)
Net book value
At 1 January 2022 81.4 105.4 - 186.8
At 30 June 2022 87.7 77.4 - 165.1
At 31 December 2022 and 1 January 12.9 66.2 - 79.1
2023
At 30 June 2023 16.7 63.7 - 80.4
30 June 30 June 31 Dec
2023 2022 2022
Book value $m $m $m
Somaliland PSC Exploration 16.7 11.0 12.9
Qara Dagh PSC Exploration / - 76.7 -
Appraisal
Exploration and 16.7 87.7 12.9
evaluation assets
Tawke overriding royalty - 5.2 -
Tawke capacity building payment waiver 63.7 72.2 66.2
Tawke RSA assets 63.7 77.4 66.2
9. Property, plant and equipment
Other
Producing assets
assets Total
$m $m $m
Cost
At 1 January 2022 3,117.2 17.1 3,134.3
Net additions 64.0 0.9 64.9
Other1 3.6 - 3.6
At 30 June 2022 3,184.8 18.0 3,202.8
At 1 January 2022 3,117.2 17.1 3,134.3
Net additions 129.1 0.9 130.0
Right-of-use assets - (0.4) (0.4)
Other1 5.9 - 5.9
At 31 December 2022 and 1 January 2023 3,252.2 17.6 3,269.8
Net additions 43.5 (0.1) 43.4
Other1 2.0 - 2.0
At 30 June 2023 3,297.7 17.5 3,315.2
Accumulated depreciation and impairment
At 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)
At 1 January 2022 (2,769.2) (12.6) (2,781.8)
Depreciation charge for the year (112.8) (1.6) (114.4)
Impairment (note 2) (125.5) - (125.5)
At 31 December 2022 and 1 January 2023 (3,007.5) (14.2) (3,021.7)
Depreciation charge for the period (26.0) (0.6) (26.6)
Impairment (note 2) (17.7) - (17.7)
At 30 June 2023 (3,051.2) (14.8) (3,066.0)
Net book value
At 1 January 2022 348.0 4.5 352.5
At 30 June 2022 357.9 4.5 362.4
At 31 December 2022 and 1 January 2023 244.7 3.4 248.1
At 30 June 2023 246.5 2.7 249.2
1 Other line includes non-cash asset retirement obligation provision and
share-based payment costs.
30 June 30 June 31 Dec 2022
2023 2022
Book value $m $m $m
Tawke PSC Oil production 215.2 197.1 199.1
Taq Taq PSC Oil production 31.3 31.8 28.8
Sarta PSC Oil production/development - 129.0 16.8
Producing assets 246.5 357.9 244.7
An impairment review was conducted by Management and the Board which resulted
in a reduction in the carrying value of the Sarta PSC to nil and in an
impairment expense of $17.7 million as of 30 June 2023. Further explanation is
provided in note 2.
The sensitivities below provide an indicative impact on net asset value of a
change in netback price, discount rate, production or pipeline reopening,
assuming no change to any other inputs.
Taq Taq Tawke
Sensitivities $m $m
Netback price +/- $5/bbl +/- 2 +/- 29
Discount rate +/- 1% +/- 0 +/- 8
Production +/- 10% +/- 2 +/- 31
10. Trade and other receivables
30 June 2023 30 June 2022 31 Dec 2022
$m $m $m
Trade receivables – current 95.1 157.0 117.0
Other receivables and prepayments 5.5 8.0 4.7
100.6 165.0 121.7
As of 30 June 2023, the Company is owed six months of payments (31 December
2022: five months).
Period when sale made
Deferred
receivables
Not due Overdue Overdue 2020 2019 Total ECL Trade
2023 2022 nominal provision receivables
$m $m $m $m $m $m $m $m
30 June 126.5 - - 30.5 - 157.0 - 157.0
2022
31
December 60.7 - 44.4 16.5 - 121.6 (4.6) 117.0
2022
30 June - 49.3 60.3 - - 109.6 (14.5) 95.1
2023
Movement on trade receivables in the 30 June 2023 30 June 2022 31 Dec 2022
period
$m $m $m
Carrying value at the beginning of the 117.0 158.1 158.1
period
Revenue from contracts with customers 49.5 238.8 384.8
Revenue recognised for suspended ORRI - - 34.7
Cash proceeds (61.2) (254.0) (473.3)
Cash for local sales (0.6) - -
Offset of payables due to the KRG - - (0.1)
Reversal of previous year’s expected 4.6 - 10.8
credit loss (note 2)
Expected credit loss for current period (14.5) 10.8 (4.6)
(note 2)
Capacity building payments 0.2 3.3 5.2
Sarta processing fee payments 0.1 - 1.4
Carrying value at the end of the period 95.1 157.0 117.0
Recovery of the carrying value of the receivable
The Company expects to recover the full nominal value of $109.6 million
receivables owed from the KRG, but the terms of recovery are not determined. An
explanation of the assumptions and estimates in assessing the net present value
of the deferred receivables are provided in note 2.
Total
$m
Nominal balance to be recovered 109.6
Estimated net present value of total cash flows 95.1
Sensitivities/Scenarios
The table below shows the sensitivity of the net present value of the overdue
trade receivables to start and timing of repayment that the company has used
during its ECL assessment. Each scenario has been weighted in accordance with
the management’s expected outcome.
NPV14.0 ($m) Months it takes to recover the nominal amount owed
0 3 6 9 12 15 18 21 24
0 110 107 105 104 102 101 99 97 96
Months until repayment 3 106 105 103 102 100 98 97 95 94
commences 6 103 102 100 98 97 95 94 92 91
9 99 98 97 95 94 92 91 89 88
11. Interest bearing loans and net cash
Net
1 Jan Discount Dividend other 30 June
2023 unwind Repurchase paid 2023
changes
$m $m $m $m $m $m
2025 Bond 9.25% (266.6) (1.1) 0.9 - - (266.8)
(non-current)
Cash 494.6 - (1.0) (33.5) (35.1) 425.0
Net cash 228.0 (1.1) (0.1) (33.5) (35.1) 158.2
As of 30 June 2023, the fair value of the $273 million of bonds held by third
parties is $256.6 million (30 June 2022: $276.6 million, 31 December 2022:
$257.6 million).
The Company repurchased $1 million of its existing $274 million senior
unsecured bond at a price equal to 95% of the nominal amount.
The bonds maturing in 2025 have two financial covenant maintenance tests:
Financial covenant Test H1 2023 H1 2022 FY 2022
Equity ratio (Total equity/Total assets) > 40% 53% 61% 56%
Minimum liquidity > $30m $425.0m $412.1m $494.6m
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
1 Jan Discount Dividend Net other 31 Dec
2022 unwind paid changes 2022
Repurchase
$m $m $m $m $m $m
2025 Bond 9.25% (269.8) (2.5) 5.7 - - (266.6)
(non-current)
Cash 313.7 - (6.0) (47.9) 234.8 494.6
Net cash 43.9 (2.5) (0.3) (47.9) 234.8 228.0
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 2023 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
2023 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 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
═══════════════════════════════════════════════════════════════════════════════
Dissemination of a Regulatory Announcement that contains inside information in
accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
═══════════════════════════════════════════════════════════════════════════════
ISIN: JE00B55Q3P39, NO0010894330
Category Code: IR
TIDM: GENL
LEI Code: 549300IVCJDWC3LR8F94
Sequence No.: 261683
EQS News ID: 1693649
End of Announcement EQS News Service
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