Genel Energy has announced its audited results for the year ended 31 December 2020. The shares closed the day up more than 2 percent.
Bill Higgs, Chief Executive of Genel, said:
“2020 was a uniquely challenging year for everyone. As for Genel, our continued progress and strong performance in 2020 has laid the foundation for a year of growth and operational catalysts in 2021. We continued investment in Sarta, which entered production in November, and the field is generating cash as we now move to rapidly appraise its exciting potential. Three appraisal wells will be drilled at the licence in 2021. The QD-2 well at Qara Dagh is also set to spud shortly, as we look to evaluate the potential to add a fifth producing field.
“As we make this investment in growth, the low-cost and high-margin nature of our growing oil production means that we expect to generate significant free cash flow at the prevailing oil price. In turn, this gives us the confidence in our material and sustainable dividend distribution, including a final dividend of 10 cents per share announced today, as we continue to offer investors a compelling mix of growth and returns.“
Results summary ($ million unless stated)
| 2020 | 2019 | |
| Average Brent oil price ($/bbl) | 42 | 64 |
| Production (bopd, working interest) | 31,980 | 36,250 |
| Revenue | 159.7 | 377.2 |
| EBITDAX1 | 114.6 | 321.8 |
| Depreciation and amortisation | (153.7) | (158.5) |
| Exploration expense | (2.2) | (1.2) |
| Impairment of oil and gas assets2 | (286.3) | (29.8) |
| Impairment of receivables | (36.9) | – |
| Operating (loss) / profit | (364.5) | 132.3 |
| Cash flow from operating activities | 129.4 | 272.9 |
| Capital expenditure | 109.7 | 158.1 |
| Free cash flow4 | (4.4) | 99.0 |
| Dividends declared (¢ per share) | 15 | 15 |
| Cash | 354.5 | 390.7 |
| Cash after post-year end payments5 | 273.5 | 377.1 |
| Total debt after settlement of called bonds5 | 280.0 | 300.0 |
| Net cash6 | 6.2 | 92.8 |
| Basic EPS (¢ per share) | (152.0) | 37.8 |
| Underlying EPS (¢ per share)3 | 41.8 | 116.9 |
- EBITDAX is operating loss / (profit) adjusted for the add back of depreciation and amortisation ($153.7 million), exploration expense ($2.2 million), impairment of property, plant and equipment ($242.0 million), impairment of intangible assets ($44.3 million) and impairment of receivables ($36.9 million)
- Despite production in line with expectations, the low oil price in June 2020 resulted in an impairment of production assets at the half-year results, which under IFRS cannot be reversed despite the improved oil price outlook
- Underlying EPS is EBITDAX divided by weighted average number of ordinary shares
- Free cash flow is reconciled on page 13
- On 8 January 2021, shortly after the balance sheet date, the Company paid $81.0 million to settle $77.1 million of old bonds reducing its gross debt balance to $280.0 million, with $267.7 million reported under IFRS in the balance sheet (2019: Cash reported at 31 December 2019 less interim dividend paid ($13.6 million) on 8 January 2020)
- Reported cash less IFRS debt (page 13)
Highlights
- Zero lost time injuries (‘LTI’) and zero tier one loss of primary containment events in 2020 at Genel and TTOPCO operations
- No LTIs since 2015, with over 13 million work hours since the last incident as of end-2020
- Net production averaged 31,980 bopd in 2020 (2019: 36,250 bopd), following the pause in the drilling programme at Tawke, appropriate to the external environment
- First oil from Sarta achieved in November 2020, with asset now producing over 10,000 bopd
- $173 million of cash proceeds were received in 2020 (2019: $317 million)
- The low-production cost per barrel of $2.8/bbl in 2020 helped deliver cash generation of $85 million in the year from producing assets
- Free cash outflow of $4 million following material capital expenditure on growth assets
- Dividends of 15¢ per share announced in 2020 (2019: 15¢ per share)
- Net cash of $6 million at 31 December 2021 following the call of the old 2022 bond, with cash of $274 million and reported IFRS debt of $268 million
- Carbon intensity of 13 kgCO2e/bbl for scope 1 and 2 emissions in 2020, significantly below the global oil and gas industry average of 20 kgCO2e/boe
Outlook
- Production guidance for 2021 maintained as slightly above the 2020 average of 31,980 bopd, with the potential for a higher exit rate and further growth in 2022 depending on success of the Sarta appraisal programme
- Margin of $15 per working interest barrel expected in 2021 at average Brent oil price $60/bbl, with receivable recovery payments increasing that to $20/bbl
- 2021 capital expenditure guidance maintained at $150 million to $200 million, with the current macro environment and outlook supporting investment at the top end of this range
- c.$100 million expenditure is forecast to be spent on growth assets, with three appraisal wells at Sarta targeting a material 2C resource and the QD-2 well, set to spud shortly, aiming to open up a new producing field
- Operating costs still expected to be c.$50 million (2020: $33 million), equating to c.$4/bbl in 2021 ($2.8/bbl in 2020), retaining our advantageous low operating cost position, with the increase from 2020 due to the addition of Sarta early production costs
- Given the increase in Brent oil price and confidence in ongoing payments from the Kurdistan Regional Government (‘KRG’), including override and receivable recovery payments, Genel expects to generate cash in 2021 post-dividend payments
- Receivable recovery payments expected to generate c.$50 million in 2021 at an oil price of $60/bbl
- A $5/bbl change in Brent impacts cash generation by c.$35 million in 2021
- Due to Genel’s robust financial position and confidence in the Company’s future prospects, the Board is accordingly recommending a final dividend of 10¢ per share (2020: 10¢ per share), a distribution of $27.9 million
(Source: Genel Energy)
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