Shares in Genel Energy jumped 12 percent on Tuesday morning after the firm announced increased profits in its unaudited results for the six months ended 30 June 2018.
Murat Özgül, Chief Executive of Genel, said:
“Genel continues to deliver on its focus. We are generating significant free cash flow, averaging over $10 million a month in the first half of 2018 and moving us rapidly towards a net cash position.
“The impressive performance we have seen at Peshkabir will further increase cash generation, and the ongoing appraisal success provides the potential for both production to exceed guidance and for proven and probable reserves to increase.
“Growing cash generation provides a solid bedrock from which we are able to pursue multiple growth opportunities, with Bina Bawi oil offering exciting potential within the Genel portfolio.
“With 11 wells currently drilling or to be drilled on our producing assets in the Kurdistan Region of Iraq in H2 2018, of which eight are expected to be completed and adding to production by the end of the year, we are well positioned to both add value through the drill bit and further bolster our financial strength.”
Results summary ($ million unless stated)
| H1
2018 |
H1
2017 |
FY
2017 |
|
| Production (bopd, working interest) | 32,100 | 37,100 | 35,200 |
| Revenue | 161.1 | 87.1 | 228.9 |
| Net gain arising from the RSA | – | – | 293.8 |
| EBITDAX1 | 137.4 | 64.7 | 475.5 |
| Depreciation and amortisation | (63.6) | (45.7) | (117.4) |
| Exploration expense | (0.5) | (4.8) | (1.9) |
| Impairment of property, plant and equipment | – | – | (58.2) |
| Operating profit | 73.3 | 14.2 | 298.0 |
| Cash flow from operating activities | 125.1 | 114.2 | 221.0 |
| Capital expenditure | 34.1 | 41.0 | 94.1 |
| Free cash flow2 | 70.1 | 54.6 | 99.1 |
| Cash3 | 233.2 | 245.7 | 162.0 |
| Total debt | 300.0 | 422.8 | 300.0 |
| Net debt4 | 63.8 | 158.3 | 134.8 |
| Basic EPS (¢ per share) | 21.3 | 8.4 | 97.1 |
- EBITDAX is earnings before interest, tax, depreciation, amortisation, exploration expense and impairment which is operating profit adjusted for the add back of depreciation and amortisation ($63.6 million), exploration expense ($0.5 million) and impairment of property, plant and equipment (nil)
- Free cash flow is net cash generated from operating activities less cash outflow due to purchase of intangible assets ($10.5 million) and purchase of property, plant and equipment ($29.5 million) and interest paid ($15.0 million)
- Cash reported at 30 June 2018 excludes $17.5 million of restricted cash
- Reported IFRS debt less cash
Highlights
- Net working interest production averaged 32,100 bopd in H1 2018, in line with guidance
- Peshkabir continues to exceed expectations, with the successful Peshkabir-4 and 5 wells boosting gross current field production to 35,000 bopd
- Peshkabir-5 has successfully proved the westward extension of the field, with an increase in proven and probable reserves expectedto follow
- Net working interest production currently c.35,500 bopd
- $151 million of cash proceeds received in H1 2018 (H1 2017: $139 million), boosted by the impact of the Receivable Settlement Agreement and a higher oil price, with strong free cash flow generation of $70 million
- Cash of $233 million at 30 June 2018 ($162 million at 31 December 2017)
- Net debt of $64 million at 30 June 2018 ($135 million at 31 December 2017)
Outlook
- 11 wells set to be under drilling operations across assets in the Kurdistan Region of Iraq in H2 2018, with eight expected to be completed and contributing to production by the end of the year
- Cash generation expected to remain strong in H2 2018, with monthly free cash flow of over $10 million
- Genel expects to be in a net cash position around the end of 2018
- Field development plan for Bina Bawi oil complete and set to be submitted to the Ministry of Natural Resources, with Bina Bawi and Miran gas plans to also be submitted in H2 2018
- 2018 guidance refined:
- Production guidance of c.32,800 bopd reiterated, with the potential for this to be exceeded through an ongoing positive performance at Peshkabir and the resumption of drilling at Tawke and Taq Taq
- Capital expenditure net to Genel is forecast to be $95-125 million (previously $95-140 million):
– Tawke PSC and Taq Taq net to Genel of $70-80 million (previously $60-85 million), as work ramps up across both licences
– Miran and Bina Bawi capex of $15-30 million (previously $25-40 million), as the work programme focuses on progression of the high-value oil opportunity at Bina Bawi
– African exploration cost unchanged at$10-15 million, with the majority relating to seismic shooting offshore Morocco, which will be covered by restricted cash
– Opex of c.$30 million and G&A of c.$15 million cash cost unchanged
(Source: Genel Energy)