Genel Energy PLC: Half-Year Results

Genel Energy PLC (GENL) 
Genel Energy PLC: Half-Year Results 
 
06-Aug-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. 
 
         6 August 2019 
 
         Genel Energy plc 
 
         Unaudited results for the period ended 30 June 2019 
 
 Genel Energy plc ('Genel' or 'the Company') announces its unaudited results 
         for the six months ended 30 June 2019. 
 
         Bill Higgs, Chief Executive of Genel, said: 
 
   "These results demonstrate the continued success of our strategy - highly 
         cash generative production underpins capital investment in growth 
      opportunities that deliver rapid returns and enables a compelling cash 
         return to shareholders through our dividend. 
 
Our production grew 17% in H1 2019, and pro forma free cash flow rose to $76 
   million. This cash generation, and our strong balance sheet, allows us to 
  both increase investment in growing the business as well as returning cash 
      to shareholders via dividends. Accordingly, we have today announced an 
         interim dividend of $14 million. 
 
     Disciplined capital allocation remains at the core of our business. The 
        speed with which our investments pay back means that cash is quickly 
recycled to create most value for shareholders. The cash that our production 
  generates funds work now underway at Sarta and Qara Dagh, with plenty left 
      over to both pay a dividend and seek new opportunities, as we progress 
         Genel's growth strategy." 
 
Results summary ($ million unless stated) 
 
                                         H1     H1      FY 
 
                                       2019   2018    2018 
 
Production (bopd, working interest)  37,400 32,100  33,700 
Revenue                               194.3  161.1   355.1 
EBITDAX 1                             167.3  137.4   304.1 
Depreciation and amortisation        (74.8) (63.6) (136.2) 
Exploration (expense) / credit        (0.6)  (0.5)     1.5 
Impairment of intangible assets           -      - (424.0) 
Operating profit / (loss)              91.9   73.3 (254.6) 
Cash flow from operating activities   142.3  125.1   299.2 
Capital expenditure                    72.2   34.1    95.5 
Free cash flow2                        56.7   70.1   164.2 
Pro forma free cash flow2              75.6   70.1   164.2 
Dividend payments                      27.4      -       - 
Cash3                                 353.3  233.2   334.3 
Total debt                            300.0  300.0   300.0 
Net cash (debt)4                       55.8 (63.8)    37.0 
Basic EPS (¢ per share)                27.2   21.3 (101.6) 
Underlying EPS (¢ per share)1          59.9   49.2   109.0 
 
1) EBITDAX is operating profit / (loss) adjusted for the add back of 
depreciation and amortisation ($74.8 million) and exploration expense 
($0.6 million). Underlying EPS is EBITDAX divided by the weighted average 
number of ordinary shares 
 
2) Free cash flow is set out on page 7 and does not include $18.9 million, 
invoiced for Tawke production and due in June 2019 and received late on 9 
July 2019, with the delay due to a change in the Operator's banking 
arrangements. Pro forma free cash flow of $75.6 million includes this 
payment. 
 
3) Cash reported at 30 June 2019 excludes $10 million of restricted cash 
and the $18.9 million noted above 
 
4) Reported IFRS debt less cash 
 
Highlights 
 
· Working interest production averaged 37,400 bopd in H1 2019 (H1 2018: 
32,100 bopd), an increase of 17% compared to H1 2018 
 
· 8 wells completed in H1 2019, resulting in year-on-year production 
increases at both the Tawke and Taq Taq PSCs 
 
· Free cash generation of $57 million in H1 2019 (H1 2018: $70 million), 
which increases to $76 million when including the post period receipt of 
$19 million, with annual free cash flow yield of c.20% of current market 
capitalisation 
 
· Net cash of $56 million at 30 June 2019 (net debt of $64 million at 30 
June 2018) 
 
· Following the receipt of all payments relating to April 2019, Genel 
had $390 million of cash as of 5 August 2019, a net cash position of $92 
million 
 
· Addition of Sarta and Qara Dagh to the portfolio in January 2019 
provides near-term production and material future growth potential 
 
· Maiden dividend distribution of 10¢ per share paid on 24 June 2019 
 
· Interim dividend of 5¢ per share confirmed 
 
· Genel retains an open mandate for a share buy-back programme of up to 
$10 million, and will continue to review purchasing opportunities 
 
Outlook 
 
· Net production guidance in 2019 maintained at close to Q4 2018 levels of 
36,900 bopd, an increase of c.10% year-on-year 
 
· Drilling programme ongoing, with over 10 wells set to be completed by 
early 2020 
 
· Active discussions with the Kurdistan Regional Government ('KRG') 
regarding Bina Bawi are ongoing, focused on agreeing the detailed 
commercial terms for the integrated Phase 1 oil and gas development and 
approval of the associated field development plans 
 
· Work continuing at Sarta to prepare for production by the middle of 2020 
 
· QD-2 well location agreed at Qara Dagh, well pad civil engineering work 
set to begin 
 
· Farm-out process relating to Somaliland acreage to begin in late Q3 2019 
 
· Genel expects to generate material free cash flow in H2 2019, even while 
investment in growth increases 
 
· 2019 capital expenditure is expected to be towards the top end of the 
$150-170 million guidance range 
 
· Searches for a new Chairman and Chief Operating Officer are progressing 
 
· The Company continues to actively pursue growth and is assessing 
opportunities to make value-accretive additions to the portfolio 
 
         For further information, please contact: 
 
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 0930 BST, 
         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. The information contained 
         herein has not been audited and may be subject to further review. 
 
CEO STATEMENT 
 
      Genel aims to be a world-class creator of shareholder value by growing 
    high-margin production through rapid development and an efficient use of 
    capital, recycling cash flows into an expanding asset portfolio with the 
   potential to deliver significant growth, while generating sufficient cash 
throughout the investment cycle to fund a material and progressive dividend. 
 
GENERATING CASH WHILE INVESTING IN GROWTH 
 
   The oil we produce is good quality, low-cost, and highly cash generative, 
         with a development model focused on optimising cost and minimising 
development risk. This makes our business highly cash generative. Setting us 
 apart from the majority of our peers both within the region and outside, we 
   have been able to materially increase production without significant cash 
    out - in fact our asset portfolio generates material free cash flow even 
         while increasing production. 
 
This is best illustrated by the Tawke PSC, where production at Peshkabir has 
    increased from 12,000 bopd at the end of 2017 to over 55,000 bopd. While 
doing so Peshkabir continues to generate material free cash flow, adding $32 
million in the first half of 2019. Overall, capital expenditure in the first 
  half of $72 million has nearly doubled from last year, but still free cash 
         flow increased year-on-year. 
 
  Our low-cost production also makes us resilient to oil price fluctuations, 
    and we generate cash at a low oil price. As an illustration, even if the 
 Brent oil price averaged $36/bbl in 2019 we would still generate sufficient 
         cash to pay our dividend of $40 million from free cash flow. 
 
     The level and speed of our cash generation allows us the optionality to 
         recycle capital into those areas that promise to create the maximum 
  shareholder value. The priority remains investing in our current producing 
   assets to underpin this cash generation, and subsequently spending is now 
         set to ramp up at Sarta and Qara Dagh. 
 
       Commercial discussions continue on Bina Bawi, and we are increasingly 
     confident of making sufficient progress to enable work on the ground to 
    begin next year, with the potential for Bina Bawi oil to also add to our 
    production in 2020. And we will continue to generate free cash flow even 
         after making these investments in growth. 
 
         A MATERIAL AND PROGRESSIVE DIVIDEND 
 
  With our strong cash generation, even while investing in growth and adding 
assets to the portfolio, paying a dividend was the ultimate intended outcome 
         of our strategy. With our portfolio having the potential to double 
         production in coming years, and an M&A strategy focused on boosting 
   near-term cash generation, we see the baseline annual distribution of $40 

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