Genel Energy PLC: Full-Year Results

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Genel Energy PLC (GENL) 
Genel Energy PLC: Full-Year Results 
 
20-March-2019 / 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. 
 
20 March 2019 
 
   Genel Energy plc 
 
Audited results for the year ended 31 December 2018 
 
   Genel Energy plc ('Genel' or 'the Company') announces its audited results 
   for the year ended 31 December 2018. 
 
    Murat Özgül, Chief Executive of Genel, said: 
 
   "Genel's strategy at the start of 2018 was clear - generate material free 
   cash flow from producing assets, build and invest in a rich funnel of 
   transformational development opportunities, and return capital to 
   shareholders at the appropriate time. We are delivering on this strategy. 
 
2018 was another year of material free cash flow generation, we continued to 
transform our balance sheet and the addition of assets with the potential of 
Sarta and Qara Dagh led to a very successful delivery on the first two parts 
   of our strategy. We will continue to develop opportunities and invest in 
   growth. As we do so, a robust cash flow outlook and our confidence in 
   Genel's future prospects underpins our initiation of a material and 
   sustainable dividend policy." 
 
Results summary ($ million unless stated) 
 
                                                2018    2017 
Production (bopd, working interest)           33,700  35,200 
Revenue                                        355.1   228.9 
EBITDAX 1                                      304.1   475.5 
Depreciation and amortisation                (136.2) (117.4) 
Exploration credit / (expense)                   1.5   (1.9) 
Impairment of property, plant and equipment        -  (58.2) 
Impairment of intangible assets              (424.0)       - 
Operating (loss) / profit                    (254.6)   298.0 
Cash flow from operating activities            299.2   221.0 
Capital expenditure                             95.5    94.1 
Free cash flow2                                164.2    99.1 
Cash3                                          334.3   162.0 
Total debt                                     300.0   300.0 
Net cash / (debt)4                              37.0 (134.8) 
Basic EPS (¢ per share)                      (101.6)    97.1 
Underlying EPS (¢ per share)5                  109.0    65.1 
 
1) EBITDAX is operating profit / (loss) adjusted for the add back of 
depreciation and amortisation ($136.2 million), exploration credit ($1.5 
million) and impairment of intangible assets ($424.0 million) 
 
2) Free cash flow is net cash generated from operating activities less 
cash outflow due to purchase of intangible assets ($39.7 million), 
purchase of property, plant and equipment ($65.3 million) and interest 
paid ($30.0 million) 
 
3) Cash reported at 31 December 2018 excludes $10.0 million of restricted 
cash 
 
4) Reported cash less ($334.3 million) less reported balance sheet debt 
($297.3 million) 
 
5) EBITDAX less net gain arising from the Receivable Settlement Agreement 
('RSA') divided by the weighted average number of ordinary shares 
 
Highlights 
 
· $335 million of cash proceeds were received in 2018 (2017: $263 million) 
 
· Strong cash flow generation, with free cash flow totalling $164 million 
in 2018 (2017: $99 million), an increase of 66% 
 
· Financial strength continues to increase, with unrestricted cash 
balances at 28 February 2019 of $378 million, and net cash at $81 million 
 
· Addition of Sarta and Qara Dagh to the portfolio in 2019 brings further 
near-term production and material growth potential 
 
· Increase in 1P and 2P reserves as of 31 December 2018 to 99 MMbbls (31 
December 2017: 97 MMbbls) and 155 MMbbls (31 December 2017: 150 MMbbls) 
respectively, including Sarta 
 
· As disclosed in our trading statement, the carrying value of the Miran 
licence has been under review. Due to the focus on the development of Bina 
Bawi, while Genel continues to see significant opportunity in the licence, 
this has resulted in an accounting impairment to the carrying value 
 
   Outlook 
 
· Production guidance maintained - net production during 2019 is expected 
to be close to Q4 2018 levels of 36,900 bopd, an increase of c.10% 
year-on-year 
 
· Capital expenditure guidance updated to include spend on Sarta and Qara 
Dagh, with net capital expenditure now forecast to be $150-170 million 
(from c.$115 million) 
 
· Opex and G&A guidance unchanged at c.$30 million and c.$20 million 
respectively 
 
· Genel expects to generate material free cash flow of over $100 million 
in 2019, inclusive of investment in Sarta and Qara Dagh 
 
· Given the strong free cash flow forecast of the business, even after 
investment in growth opportunities, Genel is initiating a material and 
sustainable dividend policy 
 
· The Company intends to pay a minimum dividend of $40 million per annum 
starting in 2020, with the intention for this to grow 
 
· The dividend will be split between an interim and final dividend, to 
be paid one-third/two-thirds 
 
· The Company is set to approach bondholders to request a temporary 
waiver of the dividend restriction, which limits dividends to 50% of 
annual net profit, in relation to accelerating the start of distribution 
to 2019 
 
· The Company continues to actively pursue growth and appraise 
opportunities to make value-accretive additions to the portfolio 
 
   Enquiries: 
 
Genel Energy                          [phone] 
 
Andrew Benbow, Head of Communications 
 
Vigo Communications                   [phone] 
 
Patrick d'Ancona 
 
  There will be a presentation for analysts and investors today at 0900 GMT, 
   with an associated webcast available on the Company's website, 
   www.genelenergy.com [1]. 
 
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. 
 
   CHAIRMAN'S STATEMENT 
 
   I am pleased to welcome you to Genel Energy's eighth annual results 
   statement. Political stability in the Kurdistan Region of Iraq and a 
recovery in the oil price provided a positive backdrop for our operations in 
 2018. With a firm focus on our renewed strategy, Genel delivered across all 
   key areas of its business, with the economic tailwinds helping to deliver 
 material free cash flow and to create significant shareholder value. Highly 
 cash generative and growing production, supplemented by recent additions to 
the portfolio, and our financial strength, position us well to continue this 
   performance in coming years. 
 
   Delivering on our strategy 
 
  Our strategic bedrock remains our highly cash-generative producing assets. 
   The success of Peshkabir, where production grew almost five-fold over the 
year to over 50,000 bopd, ahead of schedule and under budget, provided rapid 
   growth on the Tawke PSC. The increase at Peshkabir was supported by the 
   redeployment of Taq Taq's early processing facility, and field management 
 work at the Taq Taq field itself helped to stabilise production and provide 
   a base from which we expect to now add growth in 2019. The combination of 
  the two led to Genel slightly outperforming on production guidance for the 
   year. 
 
   Maximising the value of these assets, and generating material free cash 
flow, was our core priority and positions us to now focus on progressing the 
  material opportunities in our portfolio. As we demonstrated our capability 
to grow and expand operations, we moved firmly into a net cash position, and 
 our free cash flow will continue to more than fund our investment programme 
   for the foreseeable future. Our financial strength will increase further 
   even as we ramp up our disciplined expenditure, allowing us to initiate a 
 material and sustainable dividend policy. Our compelling mix of operational 
   expertise and balance sheet strength has helped us to join up with major 
   partners as we look to provide a long-term increase in shareholder value. 
 
   Growth on all key metrics 
 
As we progress through 2019 we continue to grow on all key metrics. Our cash 
   position is rising on a monthly basis, our production is forecast to 
increase 10% year-on-year, and the addition of Sarta and growth at Peshkabir 
   has delivered an increase in our 2P reserves. 
 
   Last year we stated that Genel aimed to add assets that build on the 
   strengths of the current portfolio, prioritising areas of low to moderate 
   political risk while retaining a focus on cash generation. Given the 
  successful elections and ongoing improvement in the economic situation, we 
   now see the KRI as such an area, as reflected in the reduction of our 
   internal discount rate and reinforced by well over three years of 
   consecutive payments for oil exports. 
 
 We were delighted with the addition of stakes in Sarta and Qara Dagh to the 
   Genel portfolio, which are a key step as we continue to develop 
 opportunities to expand our portfolio of high-value assets. Being chosen as 
   a partner by Chevron was a strong endorsement of Genel's technical and 
   commercial strengths, and the projects are an ideal fit for our strategy. 

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