Iraq: Genel Energy announces unaudited results for the period ended 30 June 2024

Genel Energy has announced unaudited results for the period ended 30 June 2024.

Paul Weir, Chief Executive of Genel, said:

'We have continued to progress our priority workstreams, each of which can be transformational for the business, whilst maintaining our balance sheet strength by strict discipline on spend and capital allocation. 

Cash generative production continues from our flagship Tawke licence, where domestic sales demand has shown resilient consistency in the past 6 months and some recent price improvement.  We have efficiently closed down our unprofitable operated licences in the Kurdistan Region of Iraq (‘KRI’) and minimised our in-country footprint, while keeping people safe and continuing to act as a trusted partner to all our stakeholders. Significant cost reductions have been made across all aspects of the business wherever appropriate, and our organisational spend in the second half of the year will reduce further. The business has the potential to deliver significant shareholder value, well above the current market value of the business. The Tawke PSC is a world class asset with a long life ahead of it, and when exports restart can deliver over $100 million of entitlement free cash flow per annum to Genel, more than double the current level.

In association with our industry peers and other stakeholders, we continue to lobby regional and federal governments to break the current political impasse so that international exports of Kurdistan oil can resume in a manner that properly rewards IOCs that have chosen to invest in Kurdistan.  While progress is sporadic, recent participation by stakeholders in tripartite talks demonstrate that negotiations continue and support the view that a negotiated solution can be found.  

We continue to prioritise the acquisition of new assets to materially diversify our cash generation and reinvigorate our organic portfolio. Adding new assets to achieve geographical diversification is a strategic objective, but we will only buy an asset on terms that are clearly beneficial for our shareholders.

Regarding the London-seated Miran and Bina Bawi oil and gas assets arbitration, the written and evidentiary stages have now concluded. The timing of the award is not certain, but is expected before the end of 2024. Our view on the merits of our case remains unchanged since the arbitration process was initiated by the KRG in 2021.'

 Results summary ($ million unless stated)

1. EBITDAX is operating loss adjusted for the add back of depreciation and amortisation, net write-off/impairment of oil and gas assets and net ECL/reversal of ECL receivables
2. Free cash flow is reconciled on page 6
3. Reported cash less debt reported under IFRS (page 6)

 Summary

• We continue to sell domestically with the route to exports suspended
• Consistent production from the Tawke PSC, with minimal investment, has delivered average working interest production of 19,510 bopd in H1 2024 (H1 2023: 11,740 bopd)
• Domestic sales price has averaged $34/bbl for the period (2023: $35/bbl), with the last two months priced at $37/bbl, with all cash due for domestic sales received before the end of the period
• Net cash of $126 million (31 December 2023: $120 million)
  • Significant cash balance of $370 million (31 December 2023: $363 million)
  • Bond debt of $248 million (31 December 2023: $248 million)
• 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

• Continued consistent production from the Tawke PSC at similar levels to the first half
• Organisational spend around $3 million per month
• Interest income $1-2 million per month, with one bond interest payment of $11.5 million due in October 
• Our cash generation has been above expectations in the first half of the year, and we reiterate our previous guidance that we expect closing net cash balance at the end of the year to be well above $100 million
• We continue to seek progression towards building a business that delivers resilient, reliable, repeatable and diversified cash flows that support a dividend programme by:
  • maintaining a strong balance sheet
  • working, together with our peers, towards the restart of exports and access to international pricing
  • seeking diversification of our income through the purchase of new assets
• The process for 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 has now been concluded, with closing submissions exchanged in May and reply reports exchanged in June. It is now for the panel to deliberate and then make an award. The timing of the award is not certain but is expected before the end of the year.
• Reverse tender offer to buy back bond announced today

Click here for full announcement link

Source: Genel Energy