Genel Energy PLC (GENL) Genel Energy PLC: Half-Year Results 06-Aug-2020 / 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 2020 Genel Energy plc Unaudited results for the period ended 30 June 2020 Genel Energy plc ('Genel' or 'the Company') announces its unaudited results for the six months ended 30 June 2020. Bill Higgs, Chief Executive of Genel, said: "Genel's robust business model, which is designed to provide resilience in a challenging environment, has demonstrated its value as the Company negotiates the headwinds facing the sector in 2020. Our low-cost production and the capital flexibility within our development programme have enabled us to preserve the strength of our balance sheet even while investing in growth. Given the lower oil price and overdue payments, the fact that we still expect to end 2020 in a net cash position - even after dividend distributions and making the investment to bring Sarta to production this year - is a testament to our resilience, and we have today confirmed an interim dividend of 5¢ per share." Results summary ($ million unless stated) H1 2020 H1 2019 FY 2019 Production (bopd, working interest) 32,100 37,400 36,250 Revenue 88.4 194.3 377.2 EBITDAX1 65.1 167.3 321.8 Depreciation and amortisation (82.6) (74.8) (158.5) Exploration expense (1.3) (0.6) (1.2) Impairment of oil and gas assets (286.3) - (29.8) Impairment of trade receivables (34.9) - - Operating (loss) / profit (340.0) 91.9 132.3 Underlying (loss) / profit2 (32.2) 76.6 134.9 Cash flow from operating activities 85.5 142.3 272.9 Capital expenditure 58.5 72.2 158.1 Free cash flow3 6.5 56.7 99.0 Dividends paid 41.3 27.4 27.4 Cash4 355.3 353.3 390.7 Total debt 300.0 300.0 300.0 Net cash5 57.2 55.8 92.8 Basic EPS (¢ per share) (128.9) 27.2 37.8 Underlying EPS (¢ per share)2 (11.7) 27.4 49.0 Average Brent oil price ($/bbl) 40 65 64 1) EBITDAX is operating (loss) /profit adjusted for the add back of depreciation and amortisation ($82.6 million), exploration expense ($1.3 million), impairment of property, plant and equipment ($242.0 million), impairment of intangible assets ($44.3 million) and impairment of trade receivables ($34.9 million). 2) Underlying EPS is underlying profit (page 9) divided by weighted average number of shares 3) Free cash flow is reconciled on page 10 4) Cash reported at 30 June 2020 excludes $3.1 million of restricted cash, and takes into account the dividend paid in June 5) Reported cash less IFRS debt (page 10) Highlights · Cash of $355 million at 30 June 2020 ($353 million at 30 June 2019) · Net cash of $57 million at 30 June 2020 (net cash of $56 million at 30 June 2019) · $110 million received from the Kurdistan Regional Government ('KRG') in H1 2020 · Updated payment mechanism introduced in April, under which the KRG committed to settling monthly sales invoices by the middle of the following month · $121 million remains outstanding in relation to oil sales from November 2019 to February 2020 - discussions continue with the KRG over settlement arrangements · Despite the monies outstanding, the fall in oil price and non-payment of the override, $6.5 million of free cash flow was generated in H1 2020 due to Genel's low-costs and resilient business model allowing flexible expenditure · Production cost of $2.9/bbl in H1 2020 · Capital expenditure of $58.5 million in H1 as spending cut due to the external environment · G&A costs of $6.6 million, a reduction of c.30% year-on-year, as activity is rephased · Production of 32,100 bopd in H1 2020, due in part to the impact of COVID-19, coupled with payment uncertainty, resulting in reduced drilling activity at the Tawke PSC · Production averaged 33,000 bopd in July 2020, following fast tracking of activity at the Tawke PSC against an improved backdrop · Continued focus on safety: zero lost time incidents and zero losses of primary containment in the period · Impairments of $286 million largely due to reduction in Brent oil price forecast · Interim dividend of 5¢ per share confirmed (2019: 5¢ per share) Outlook · Genel's low-cost production, flexible capital investment programme, and robust balance sheet makes it resilient to lower oil prices, and the Company expects to retain a net cash position at the end of 2020 at the prevailing oil price, while still investing in key growth assets · Capex of c.$45 million expected in H2, with c.50% to be spent on moving Sarta to production in Q4, where work has continued despite the challenges resulting from COVID-19 · Genel continues discussions with the KRG regarding the recovery of the $121 million receivable Enquiries: Genel Energy +44 20 7659 5100 Andrew Benbow, Head of Communications Vigo Communications +44 20 7390 0230 Patrick d'Ancona There will be a presentation for analysts and investors today at 0900 BST, with an associated webcast available on the Company's website, 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 No natural resources company has been immune from the impacts of COVID-19 and the resulting collapse in demand and fall in the oil price. In the face of this material change in circumstances, we focused on controlling what is within our power to control in the near-term, while continuing to build the business fit for a future of fewer and better natural resources projects in the long-term. In this regard our business model positions us well both now, as we have a strong balance sheet and limited fixed capital expenditure, and for the future. We have a business model designed for tough times, and we moved quickly to rebase our spending appropriately for the external environment, reducing our full-year capital expenditure forecast by c.$75 million to just over $100 million, and continuing to focus on managing costs elsewhere in the business. Given the external environment, we continued to allocate capital to those areas that can provide the greatest returns and deliver shareholder value. Due to the oil price and lack of certainty over the deferred receivable and override payments, investing at Taq Taq is not currently a priority, and work at Tawke has the ability to rapidly scale up as the external environment improves. Despite the reduction in investment, production from Tawke has been in line with internal expectations, and the significant increase in production in July is an encouraging illustration of what can be achieved once investment resumes. The key focus of capital allocation in 2020 has been Sarta, where work is continuing along a critical path to production in Q4. Genel is already the only multi-licence producer in the KRI, and further diversifying production by bringing Sarta into production with its tremendous growth potential is a milestone that we are all looking forward to reaching. It is a testament to our balance sheet and careful financial management that, even with $121 million outstanding from the KRG for production in November 2019 to February 2020 and override payments unpaid, we are able to continue allocating capital to direct returns to shareholders, and our interim dividend of 5¢ per share has been retained. While the mechanism through which the receivable from the KRG will be recovered has yet to be finalised, we are confident that a solution that works for both parties will be found, as has been done in the past, and our discussions with the KRG continue. ESG As the external environment has deteriorated due to COVID-19, it has not lessened our focus on ESG. The safety of our workforce and contractors remains a key priority, and we are pleased to continue our record of not having a lost-time injury since 2015. We are also working hard on improving our ESG activities, and better communicating the things that we already do well. We recognise that we have a long way to go, but are proud of our track record in the KRI, where we have aimed to have a positive impact ever since our operations started almost 15 years ago. In this time, we have funded and
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