REG-Genel Energy PLC Genel Energy PLC: Trading and operations update

Genel EnergyAnnouncement

04/11/2021 07:05

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   Genel Energy PLC (GENL)
   Genel Energy PLC: Trading and operations update

   04-Nov-2021 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   4 November 2021

    

                                Genel Energy plc

                                        

                         Trading and operations update

                                        

   Genel Energy plc ('Genel' or  'the Company') issues the following  trading
   and operations  update in  respect of  the third  quarter and  first  nine
   months of 2021.

    

   Bill Higgs, Chief Executive of Genel, said:

   "Genel's  low-cost  and  high-margin  production  continues  to   generate
   material  positive  cash  flow  which,  coupled  with  our  confidence  in
   predictable payments going  forward, allows  us to further  invest in  our
   growth assets  with  sufficient surplus  to  support our  competitive  and
   progressive dividend, with the interim dividend increased by 20%.

    

   I am  pleased  that drilling  is  back  underway at  Tawke,  and  drilling
   operations at Peshkabir, Sarta, and Qara Dagh are ongoing. We continue  to
   work hard to deliver  results from the appraisal  programmes at Sarta  and
   Qara Dagh, and remain excited about their potential, although disappointed
   that the testing programme  will be later  than we had  forecast due to  a
   combination of geological and operational challenges, supply chain issues,
   and well approval delays."

    

   FINANCIAL PERFORMANCE

     • $187 million of  cash proceeds received  in the first  nine months  of
       2021 ($142 million in the first nine months of 2020)
     • Free cash flow  before investment  in growth  was $99  million in  the
       first nine months of 2021 ($36 million in first nine months of  2020),
       despite the expected industry-wide reversion to payments three  months
       in arrears by the Kurdistan Regional Government ('KRG') meaning  seven
       payments have been received in the nine-month period
     • Total capital expenditure of $106  million, with $71 million spent  in
       the first nine months of 2021 on progressing Sarta and Qara Dagh
     • Free cash  flow  of $33  million  in the  first  nine months  of  2021
       (outflow of $5 million in the first nine months of 2020)

     • Cash of $277  million at 30  September 2021 ($266  million at 30  June
       2021)

          ◦ Net cash of $8 million at 30 September 2021 (net debt of $2
            million at 30 June 2021)

     • Interim dividend of 6¢ per share (2020: 5¢ per share), a  distribution
       of c.$18 million, to be paid to shareholders on the register as of  12
       November 2021

    

   OPERATING UPDATE

     • Net production averaged 32,005 bopd in the first nine months  of 2021,
       with net production in Q3 averaging 30,520 bopd (Q2 2021: 32,475 bopd)
     • Production by field was as follows:

    

             Gross production Net production
    (bopd)
                 Q3 2021         Q3 2021
   Tawke          45,260          11,310
   Peshkabir      59,920          14,980
   Sarta          5,960           1,790
   Taq Taq        5,530           2,430
   Total         116,670          30,520

    

    

   PRODUCTION ASSETS

     • Tawke PSC (25% working interest)

          ◦ Gross production at the Tawke PSC averaged 109,150 bopd in the
            first nine months of 2021, of which Peshkabir contributed 61,430
            bopd, and 105,180 bopd in Q3, of which Peshkabir contributed
            59,920 bopd while being impacted for shut-ins and maintenance

          ◦ The Peshkabir-Tawke gas project, which was commissioned in
            mid-2020, has injected eight billion cubic feet of otherwise
            flared gas as of the end of the third quarter, capturing 480,000
            tonnes of CO2 equivalent. In September, a second phase of the gas
            capture project to reinject and retain gas in the Tawke reservoir
            and avoid flaring was initiated
          ◦ Drilling at the Tawke field resumed in Q3 2021 after an 18-month
            pause during which natural production decline was slowed through
            pressure support from gas injection and workovers

   Sarta (30% working interest)

     ◦ Gross production averaged 6,680 bopd in the first nine months of 2021,
       and 5,960 bopd in Q3
     ◦ Production in Q3 has come  predominantly from the Sarta-2 well,  after
       the Sarta-3  well was  taken offline  at the  end of  Q2 in  order  to
       monitor and manage reservoir  pressure in the thinner,  volumetrically
       smaller Mus  reservoir  and water  ingress  from part  of  the  deeper
       Adaiyah  reservoir,  both  of   which  are  informing  the   long-term
       production strategy for the field
     ◦ This strategy includes plans to convert the legacy Sarta-4 well into a
       water disposal well in Q1 2022 to optimise Sarta oil production
     ◦ Q3 production has  been in  line with  expectations for  the Mus  only
       reservoir accessible with the Sarta-2 well
     ◦ The Sarta-1D  well is  drilling ahead  in the  reservoir section  with
       testing expected  early  in  the  new year,  now  via  the  production
       flowline, in order to  accommodate the recent industry-wide  directive
       from the Ministry of Natural Resources ('MNR') prohibiting the burning
       of  oil  during  well  test  operations.  Sarta-1D  addition  to   the
       production stream is expected in Q1 2022
     ◦ The Sarta-5  well is  set to  enter the  primary reservoir  objectives
       imminently and testing will take place in Q1 2022 once the appropriate
       equipment is in place to comply with the MNR's well testing directive
     ◦ The Sarta-6 well will spud once the Sarta-5 well has been drilled  and
       completed
     ◦ In line  with  the  farm-in  agreement  Chevron  is  set  to  transfer
       operatorship of the field to Genel on 1 January 2022

     • Taq Taq PSC (44% working interest and joint operator)

          ◦ Gross production averaged 6,170 bopd in the first nine months of
            2021, and 5,530 bopd in Q3
          ◦ Additional activity at the field is set to resume in 2022, with a
            view to increasing cash generation from the licence, with returns
            boosted by the improved oil price

    

   PRE-PRODUCTION ASSETS

     • Qara Dagh (40% working interest and operator)

          ◦ The QD-2 well, appraising the crest of a 50 km long structure at
            Qara Dagh, spud in April 2021
          ◦ Drilling is ongoing, with the well having been side-tracked in
            response to encountering more complex geology above the target
            reservoir than expected by the joint venture
          ◦ Given the current challenging drilling conditions, Genel is
            evaluating options to optimally deliver the primary well
            objectives
          ◦ Genel is now targeting the completion of drilling and testing at
            QD-2 in Q1 2022

     • Bina Bawi and Miran (100% working interest and operator)

          ◦ In August, Genel received notice from the Ministry of Natural
            Resources of the KRG of its intention to terminate the Bina Bawi
            and Miran PSCs
          ◦ Genel subsequently issued notices of dispute to the KRG under
            each PSC contesting the right of the KRG to issue any such
            termination notice. Genel will take steps to protect its rights
            under the PSCs and, if necessary, seek compensation
          ◦ Genel will update the market on future developments

     • African exploration assets

          ◦ A farm-out process relating to the highly prospective SL10B13
            block (100% working interest and operator) in Somaliland is
            continuing, and active engagement with respect to the opportunity
            is ongoing
          ◦ Genel continues to work towards a farm-out campaign aimed at
            bringing a partner onto the Lagzira licence offshore Morocco (75%
            working interest and operator).

    

   ESG

     • Our  sustainability  report  in   accordance  with  Global   Reporting
       Initiative standards was issued in August 2021, giving a comprehensive
       overview of our ESG activities and positions
     • Following 14 million work  hours since a lost  time injury ('LTI')  at
       Genel and TTOPCO operations, a member of the contractor drilling  team
       regrettably sustained  a foot  injury  during drilling  operations  at
       Sarta-5. Action has  been taken  to prevent  a recurrence  of such  an
       incident, as we strive to repeat  the performance of the previous  six
       years of LTI free operations
     • Following the Annual General Meeting ('AGM') on 6 May 2021 the Company
       announced that  all the  resolutions put  forward to  the meeting  had
       passed with  the requisite  majority of  votes and  acknowledged  that
       resolutions 3, 4,  6, 18 and  19, had  a c.40% of  votes cast  against
       them. In accordance with  Provision 4 of  the UK Corporate  Governance
       Code 2018,  the Company  wishes  to provide  an  update on  the  views
       received from  shareholders  and actions  taken  in respect  of  these
       resolutions

          ◦ In light of the votes received against the resolutions, the
            Company has engaged with major shareholders to understand their
            views. Noting that proxy agencies were all in favour of the above
            resolutions, and following discussions with shareholders, the
            Board considers the votes cast against the resolutions to
            primarily reflect differing opinions held by the Company's major
            shareholders in relation to a number of matters. As a
            consequence, the Company does not believe it is necessary or
            appropriate to take any additional action

    

   OUTLOOK

     • Following the strength  of the  oil price, Genel  expects to  generate
       free cash flow in 2021 despite material investment in growth

          ◦ At a Brent oil price of $85/bbl, our barrels generate $28/bbl of
            cash flow, sufficient to deliver a material surplus after funding
            growth expenditure, corporate costs, and interest
          ◦ $132 million still outstanding from the KRG for oil sales from
            November 2019 to February 2020 and the suspended override from
            March to December 2020 
          ◦ The inclusion of Sarta production in our receivable recovery
            payments is a positive step and increases the pace of recovery of
            monies owed

     • Following the  production performance  of Sarta  in 2021  being  below
       expectations, and  delays  in drilling  at  Tawke, Genel  now  expects
       production in the year to be slightly below the 2020 average of 31,980
       bopd
     • 2021 capital expenditure expected to be c.$165 million (guidance  $150
       million to $200 million), following  delays in approvals from the  KRG
       and ongoing supply chain challenges caused by COVID-19 leading to some
       planned activity moving to Q1 2022
     • Payments from the  KRG continue to  be received consistently.  Ongoing
       constructive engagement  with the  MNR regarding  our oil  operations,
       coupled  with  their  recent  communication  urging  the  industry  to
       increase production,  means that  we hope  to see  increased speed  of
       approvals for all  operators, facilitating  more efficient  operations
       and supporting production rises in the near future

    

                                     -ends-

    

   For further information, please contact:

    

   Genel Energy
                                         +44 20 7659 5100
   Andrew Benbow, Head of Communications
                                          
   Vigo Consulting
                                         +44 20 7390 0230
   Patrick d'Ancona 

    

   This announcement includes inside information.

    

   Notes to editors:

   Genel Energy is  a socially responsible  oil producer listed  on the  main
   market   of    the    London    Stock   Exchange    (LSE:    GENL,    LEI:
   549300IVCJDWC3LR8F94). The  Company is  one of  the largest  London-listed
   independent hydrocarbon producers, with an asset portfolio that  positions
   us well for a future of fewer and better natural resources projects. Genel
   has low-cost and low-carbon production from the Taq Taq and Tawke licences
   in the  Kurdistan  Region of  Iraq,  providing financial  resilience  that
   allows investment in growth and the payment of a material and  sustainable
   dividend, even at a low oil price. Genel also continues to pursue  further
   growth  opportunities.   For   further  information,   please   refer   to
    1 www.genelenergy.com.

    

   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.

    

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   ISIN:          JE00B55Q3P39, NO0010894330
   Category Code: TST
   TIDM:          GENL
   LEI Code:      549300IVCJDWC3LR8F94
   Sequence No.:  125963
   EQS News ID:   1246071


    
   End of Announcement EQS News Service

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References

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