Genel Energy has issued the following trading and operations update ahead of the Company’s Annual General Meeting (‘AGM’), which is being held today.
The information contained herein has not been audited and may be subject to further review.
Bill Higgs (pictured), Chief Executive of Genel, said:
“Despite the impact of COVID-19 creating a challenging environment for our industry, Genel’s resilient business model and robust financial position, with over $100 million in net cash and an asset cashflow breakeven of $30/bbl, leaves us well placed to withstand the consequences of the pandemic as we continue to deliver our strategy.
“We have cut our cloth appropriately against this backdrop and halved our capital expenditure for 2020, protecting our balance sheet while still progressing Sarta, and positioning us to take advantage of growth opportunities as the landscape improves.“
FINANCIAL PERFORMANCE
- $98 million of cash proceeds received in the first four months of 2020
- Cash of $404 million at 30 April 2020 ($391 million at 31 December 2019)
- Net cash of $106 million at 30 April 2020 ($93 million at 31 December 2019)
- Capital expenditure of $45 million in the first four months of 2020, with point forward expenditure cut significantly due to the impact of COVID-19
- Final dividend of 10¢ per share (2019: 10¢ per share), a distribution of c.$27.8 million, to be paid to shareholders on the register on 29 May 2020, pending approval at today’s AGM
OPERATING PERFORMANCE
- Production in the first quarter of 2020 averaged 34,170 bopd, in line with January’s guidance, guidance that has been removed following the decision to reduce investment to a level appropriate for the external environment
- As well as impacting the oil price and hence investment plans for 2020, COVID-19 has provided operational challenges in relation to the movement of people and equipment. This has been less of a challenge for producing fields than pre-production assets, and the reduced work plan put in place in Q2 is progressing in line with expectations
- Production by asset was as follows:
| (bopd) | Gross production
Q1 2020 |
Net production
Q1 2020 |
| Tawke | 61,490 | 15,370 |
| Peshkabir | 53,710 | 13,430 |
| Taq Taq | 12,200 | 5,370 |
| Total | 127,400 | 34,170 |
PRODUCTION ASSETS
- Tawke PSC (25% working interest)
- Production at the Tawke PSC averaged 115,200 bopd in the first quarter of 2020, with the Tawke field producing 61,490 bopd, and Peshkabir 53,710 bopd
- Five development wells have been completed on the licence. Three drilling rigs were released as the 2020 activity plan was amended to reflect the external environment, while a workover rig continues to service production wells
- A drilling rig has been stacked at each field and can be quickly mobilised when conditions warrant
- Taq Taq PSC (44% working interest and joint operator)
- Taq Taq gross field production averaged 12,200 bopd in the first quarter of 2020
- The latest well on the northern flank of the field, TT-35, spud on 6 January, and completed in April. The well is currently adding c.600 bopd to production. This completed the planned drilling programme with the Sakson-605 rig, which has now been released
- Activity at TaqTaq is focused onmaximisingcash generation. Appropriate for the external environment, it is not expected that there will be any further drilling activity in 2020
PRE-PRODUCTION ASSETS
- Sarta (30% working interest)
- Civil construction work at the Sarta field is nearing completion, with the facility build ongoing
- Due to delays in the movement of people and equipment caused by the impact of COVID-19, first oil is now expected in Q4 2020, rather than Q3
- Phase 1A represents a low-cost pilot development of the Mus-Adaiyah reservoirs, designed to recover 2P gross reserves estimated by Genel at 34 MMbbls
- Qara Dagh (40% working interest and operator)
- The QD-2 well was on track to spud in Q2 2020 prior to COVID-19 impacting supply chains and the movement of people in to the KRI
- Due to ongoing uncertainty caused by COVID-19, Genel notified the KRG of the occurrence of a force majeure event preventing the Company from being able to perform its contractual obligations as scheduled
- Work continues to take place to ensure that Genel is in the best possible position to start to drill the QD-2 well once external conditions improve and the force majeure event ceases
- Bina Bawi (100% working interest and operator)
- Genel received documentation in mid-April from the KRG following the commercial understanding reached in September 2019
- Negotiations regarding this documentation are ongoing, as Genel continues to seek a viable and balanced commercial way forward for the development of Bina Bawi’s gas and oil resources
- Somaliland – SL10B13 block (100% working interest and operator)
- A farm-out process relating to this highly prospective block began in Q4 2019, and a number of companies continue to assess the opportunity
- Morocco – Sidi Moussa block (75% working interest and operator)
- The farm-out campaign is set to begin in Q3 2020, aimed at bringing a partner onto the licence prior to considering further commitments
ESG
- Zero lost time incidents and zero losses of primary containment in 2020 to date at Genel and TTOPCO operations
- There has not been an LTI since 2015, with almost 12 million hours worked since the last incident
- The Peshkabir-to-Tawke gas capture, transport and reinjection project to effectively end CO2 emissions at Peshkabir and boost oil recovery at Tawke is completed and undergoing commissioning
- Multiple projects are ongoing to support local communities in the Kurdistan Region of Iraq, with activities in the Qara Dagh region continuing despite the force majeure event
- Genel will issue a sustainability report in September 2020
OUTLOOK
- Payments from the KRG are ongoing, with an updated payment mechanism put in place under which the KRG has committed to settling monthly sales invoices by the fifteenth day of the following month, as announced on 17 April 2020
- $11.1 million received in April for oil sales during March 2020
- 2020 capital expenditure reduced by c.50% from the top end of the original guidance range of $160-200 million and now expected to be just over $100 million, of which around half will be spent on the Tawke and Taq Taq PSCs, c.$30 million on Sarta, and c.$10 million on Qara Dagh
- Point forward expenditure expected to be c.$60 million in 2020
- Operating costs per barrel expected to be $3/bbl in 2020
- Producing asset cashflow breakeven in 2020 at an oil price of less than $30/bbl, taking into account the 2020 capital expenditure programme and the updated payment mechanism
- Opex: reduction of 10% compared to original guidance of c.$40 million
- G&A: unchanged at c.$15 million (a reduction of c.20% from 2019)
- Genel continues to analyse opportunities to repurchase bonds at a value-accretive price
- The Company continues to actively pursue growth and is analysing opportunities to make value-accretive additions to the portfolio that are consistent with Genel’s strategy
(Source: Genel Energy)