Genel Energy PLC (GENL)
Genel Energy PLC: Half-Year Results
02-Aug-2023 / 07:00 GMT/BST
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2 August 2023
Genel Energy plc
Unaudited results for the period ended 30 June 2023
Genel Energy plc ('Genel' or 'the Company') announces its unaudited results for the six months ended 30 June 2023.
Paul Weir, Chief Executive of Genel, said:
"The closure of the Iraq-Türkiye pipeline on 25 March 2023 has resulted in minimal sales and no payments from the KRG
since that date. This has materially impacted both our current and expected cash flows, with the current period seeing
a free cash out flow.
Approval of the Iraqi budget in June put in place a framework for the restart of payments and exports, with production
from Kurdistan incorporated in the budget, and this was an important step. Discussions are now ongoing between Iraq and
Türkiye regarding the commercial and political arrangements that would enable the resumption of exports.
As we await a positive outcome to discussions between Iraq and Türkiye, we retain a material cash position, prioritised
for investment in new assets, and remain clear and determined on our direction of travel. We have accelerated the
ongoing reshaping of our portfolio, organisation, and plans, and we continue to diligently review assets and businesses
that can support delivery of the business that we have framed over the past 12 months.
Given the USD170 million impact so far that the lack of payments and revenue is expected to have on our liquidity at
year-end, and with no clear line of sight on when either pipeline exports or payments will restart, we have taken the
decision to suspend the dividend. We remain committed to building a business with predictable, repeatable, and
diversified cash flows, which would ultimately support the re-establishment of a dividend programme."
Results summary (USD million unless stated)
H1 2023 H1 2022 FY 2022
Average Brent oil price (USD/bbl) 80 108 101
Production (bopd, working interest) 13,440 30,420 30,150
Revenue 51.3 245.6 432.7
EBITDAX1 19.4 212.3 361.6
Depreciation and amortisation (27.2) (84.4) (149.2)
Net impairment/write-off of oil and gas assets (17.7) - (201.3)
Net (Impairment)/reversal of impairment of receivables (9.9) 12.8 8.2
Exploration expense (0.3) - (1.0)
Operating (loss) / profit (35.7) 140.7 18.3
Cash flow from operating activities 39.2 216.3 412.4
Capital expenditure 47.5 74.7 143.1
Free cash flow2 (35.1) 128.7 234.8
Cash 425.0 412.1 494.6
Total debt 273.0 280.0 274.0
Net cash / (debt)3 158.2 141.3 228.0
Basic (LPS) / EPS (¢ per share) (14.6) 45.4 (2.6)
Dividends declared for the period (¢ per share) - 6 18 1. EBITDAX is operating (loss)/profit adjusted for the add back of depreciation and amortisation, impairmentof property, plant and equipment, impairment of intangible assets and impairment/reversal of impairment ofreceivables 2. Free cash flow is reconciled on page 7 3. Reported cash less debt reported under IFRS (page 7)
Summary
-- The prolonged closure of the Iraq-Türkiye pipeline has
materially impacted production, which averaged13,440 bopd in H1 (H1
2022: 30,420)
-- Two payments totalling USD61 million were received from the
Kurdistan Regional Government ('KRG') in theperiod, with USD110
million now overdue
-- Given the loss of cash flow in the period and the lack of
visibility on both the timing of pipelineexports resuming and the
re-establishment of a reliable record of payments, Genel has
suspended its dividendprogramme
-- In addition, the Company will assess the timing of further
investment in Somaliland following thecompletion of civil
engineering work, based on the financial outlook at the time
-- Work on assessing the future plans for Sarta, with a goal of
making operations profitable, has been mademore challenging by the
investment environment, and consequently Genel has informed the
Ministry of NaturalResources of its intention to surrender the
asset and terminate the Sarta PSC
-- Significant cash balance of USD425 million at 30 June 2023
(USD496 million at 31 March 2023) is prioritisedfor addition of new
assets
-- Net cash of USD158 million at 30 June 2023 (USD229 million at
31 March 2023)? Total debt of USD273 million at 30 June 2023
(USD274 million at 31 March 2023)
-- 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 andTTOPCO operations ? Three million
work hours since the last LTI
Outlook
-- As a consequence of the reduction in operational activity,
Genel has right-sized the organisation andreduced spend compared to
expectations at the start of 2023? Genel currently expects full
year capital expenditure to be c.USD70 million (original guidance
USD100-125million), with two thirds of this already spent
-- Limited local sales are ongoing from the Tawke licence
-- Genel continues to actively review and work up opportunities
to invest our cash to build a business thatdelivers resilient,
reliable, and diversified cash flows that support a repeatable
dividend programme in thelong-term
-- The London-seated international arbitration regarding Genel's
claim for substantial compensation from theKRG following the
termination of the Miran and Bina Bawi PSCs is progressing. The
trial remains scheduled forFebruary 2024
Enquiries:
Genel Energy
+44 20 7659 5100
Andrew Benbow, Head of Communications
Vigo Consulting
+44 20 7390 0230
Patrick d'Ancona
Genel will host a live presentation on the Investor Meet Company
platform on Wednesday 2 August at 1000 BST. The presentation is
open to all existing and potential shareholders. Questions can be
submitted at any time during the live presentation. Investors can
sign up to Investor Meet Company for free and add to meet Genel
Energy PLC via: https://
www.investormeetcompany.com/genel-energy-plc/register-investor
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. While 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
The first half of the year has been dominated by the lengthy
outage of the Iraq-Türkiye export pipeline, which has caused the
suspension of both our production and payments from the Kurdistan
Regional Government. Only two payments were received in the period
before the pipeline was shut. This has exacerbated our receivable
position and has led to a material decline in our expected cash
flows. Previous expectations for our year-end 2023 cash position
have been impacted by around USD170 million so far (USD110 million
outstanding for oil produced that was expected to be received this
year, and a loss of cash as a result of the lack of production for
the months from April to July 2023).
This lack of cash receipts has led to the suspension of the
dividend. The Company is committed to building a business with
predictable, repeatable, and diversified cash flows that would
support the re-establishment of a dividend programme.
We continue to see positive news flow about a potential restart
and it is reported that there has been inter-government dialogue,
but there remains no clear visibility on exactly when exports will
resume.
We remain of the belief that the shut-down will not continue in
the long-term, and the Prime Minister of the Kurdistan Region of
Iraq ('KRI') has committed to International Oil Companies operating
in Kurdistan that the terms under PSCs will not be reviewed, and
that all amounts owed will be paid.
The Federal Government of Iraq budget has been approved, which
puts in place a framework that should enable exports to restart
quickly once agreement has been reached between Türkiye and Iraq.
The budget states that Kurdistan production will be sold by the
Iraqi State Oil Marketing Organisation ('SOMO') and, in return, the
KRG will receive budget payments from the Federal Government of
Iraq. While agreements are in place on paper, we await to see how
they are practically implemented on the ground.
Given the ongoing uncertainty, we have made decisions to
minimise our spend, while accelerating our cost-reduction and
efficiency drive that was already underway.
Further investment in Sarta, already challenging from a
technical and economic point of view, is now not feasible, and we
have informed the Ministry of Natural Resources of our intention to
surrender the licence and terminate the PSC. This is a
disappointing outcome for an asset of which the field partners had
great expectations. The team did a great job in bringing it to
production quickly and professionally, but the geology was not what
had been expected, and the licence has been impaired
accordingly.
While we are confident that exports to Ceyhan will resume in the
future, we are focused on preserving maximum liquidity available to
invest in new production assets in order to diversify and increase
the resilience of our cash flows. This is of even greater
importance following the decision to exit Sarta.
We have a clear business model and plan and a remaining
liquidity balance that supports cash generative diversification of
the business. We have a dedicated team in place analysing
opportunities that will take the business in the right direction by
adding near-term income, diversifying our portfolio and delivering
reliable and repeatable cash flows.
OPERATING REVIEW
Production
Production in the first half of 2023 was negatively impacted by
the closure of the Iraq-Türkiye pipeline. Production continued
until storage capacity at fields was reached. For Tawke this was at
the end of March, Sarta 3 April, and Taq Taq 22 May.
Upon reopening of the export pipeline, Genel fields have the
potential to rapidly resume production. Sarta will remain shut-in
as Genel relinquishes the asset.
Gross production Net production Gross production Net production
(bopd)
Q2 2023 Q2 2023 H1 2023 H1 2023
Tawke 0 0 46,970 11,740
Taq Taq 1,884 829 2,760 1,220
Sarta 48 14 1,605 480
Total 1,932 843 51,335 13,440
PRODUCING ASSETS
Tawke PSC (25% working interest)
Gross production from the Tawke licence averaged 93,880 bopd
during the first quarter of 2023, with the Peshkabir field
contributing 49,480 bopd (59,360 bopd in Q4 2022) and the Tawke
field 44,400 bopd (47,140 bopd in Q4 2022) during this period.
Production in Q1 2023 was in line with expectations, and down
from the previous quarter due to planned well workovers initiated
in February. There was no production in Q2 due to the export
pipeline being closed.
Given the uncertain timing of export resumption and,
importantly, of payments by the KRG for previous oil sales, the
operator DNO (in full alignment with Genel) scaled back spend,
including drilling. While five wells were completed and another
three wells spudded in Q1 2023, no new wells have been spudded
since and the number of active rigs at the Tawke licence will drop
from four at the start of 2023 to none in the second half of the
year.
Limited local sales began in June, selling stored oil to the
local market.
Sarta (30% working interest)
Genel had previously stated that the Company's focus was on
making ongoing production from Sarta profitable. Given the
investment required to achieve this, and the current uncertainty
over a resumption of payments, Genel has informed the Ministry of
Natural Resources of its intention to surrender the asset and
thereby terminate the Sarta PSC.
Taq Taq (44% working interest, joint operator)
Prior to the closure of the Iraq-Türkiye pipeline, production
from Taq Taq was in line with expectations, having averaged 3,610
bopd in Q1. In line with Genel's focus on reducing costs, and lack
of clarity regarding the resumption of payments, the planned
drilling of a well at Taq Taq in 2023 has now been dropped.
PRE-PRODUCTION ASSETS
Somaliland
The Environmental, Social and Health Impact Assessment is now
complete, and civil work continues for the drilling of the Toosan-1
well on the highly prospective SL10B13 block (51% working interest
and operator).
Once civil works are complete, in line with Genel's focus on
reducing costs, the Company will assess timing of further
investment based on the financial outlook at the time.
Morocco
The farm-out programme on the Lagzira block (75% working
interest and operator) is ongoing.
FINANCIAL REVIEW
The ongoing closure of the Iraq-Türkiye pipeline resulted in no
sales for the period of pipe shutdown from the end of March to the
end of the period.
(all figures USD million) H1 2023 H1 2022 FY 2022
Brent average oil price USD80/bbl USD108/bbl USD101/bbl
Revenue 51.3 245.6 432.7
Production costs (21.7) (24.1) (51.1)
Cost recovered production asset capex (39.7) (41.3) (85.9)
Production business net (expense) / income after cost recovered capex (10.1) 180.2 295.7
G&A (excl. non-cash) (9.3) (8.6) (19.2)
Net cash interest1 (2.2) (12.5) (19.2)
Working capital 42.7 (38.2) (9.7)
Payments for deferred receivables 16.5 46.3 94.4
Payment delays (49.5) - (44.4)
Free cash flow before investment in growth (11.9) 167.2 297.6
Pre-production capex (7.8) (33.4) (57.2)
Working capital and other (15.4) (5.1) (5.6)
Free cash flow (35.1) 128.7 234.8
Dividend paid (33.5) (32.3) (47.9)
Other - 2.0 -
Purchases of own bonds (1.0) - (6.0)
Net change in cash (69.6) 98.4 180.9
Cash 425.0 412.1 494.6
1 Net cash interest is bond interest payable less bank interest
income (see note 5)
Financial priorities of 2023
The table below summarises our progress against the 2023
financial priorities of the Company as set out in our 2022
results.
2023 financial priorities Progress
-- In the face of a reduction in
-- Maintain business resilience and balance sheet strength income, capital expenditure materially
reduced, and interim dividend suspended
-- Put our significant cash balance to work, earning -- Genel continues to actively screen
appropriate returns to deliver value to shareholders primarily and work up opportunities
through our dividend programme and diversify our cash generation -- Final dividend paid
-- Deliver the 2023 work programme on time and on budget,
and continue simplification of the business with a focus on
optimisation and cost control and investment in business -- Work programme reduced due to
improvement external conditions
Financial results
Income statement
(all figures USD million) H1 2023 H1 2022 FY 2022
Brent average oil price USD80/bbl USD108/bbl USD101/bbl
Production (bopd, working interest) 13,440 30,420 30,150
Profit oil 18.2 88.4 149.2
Cost oil 31.3 70.8 141.1
Override royalty 1.8 86.4 142.4
Revenue 51.3 245.6 432.7
Production costs (21.7) (24.1) (51.1)
G&A (excl. depreciation and amortisation) (10.2) (9.2) (20.0)
EBITDAX 19.4 212.3 361.6
Depreciation and amortisation (27.2) (84.4) (149.2)
Exploration expense (0.3) - (1.0)
Net impairment / write-off of oil and gas assets (17.7) - (201.3)
Net (impairment) / reversal of impairment of receivables (9.9) 12.8 8.2
Net finance expense (5.0) (14.6) (25.4)
Income tax expense - - (0.2)
(Loss) / Profit (40.7) 126.1 (7.3)
H1 2023 production of 13,440 bopd is reduced from the
comparative period (H1 2022: 30,420 bopd) because of the pipeline
closure. This has resulted in a reduction in revenue from USD246
million to USD51 million alongside the change in pricing from Brent
to the realised sales price for Kurdistan blend crude ('KBT')
starting from September 2022 and the completion of Tawke overriding
royalty by July 2022.
Production costs of USD22 million decreased from the prior
period (H1 2022: USD24 million), with cost per barrel USD9.0/ bbl
in 2023 (H1 2022: USD4.4/bbl), principally caused by pipeline
closure, fixed costs, and Sarta being loss-making.
Corporate cash costs were USD9 million (H1 2022: USD9 million),
in line with previous period.
The decrease in revenue resulted in a similar decrease to
EBITDAX, which was USD19 million (H1 2022: USD212 million). EBITDAX
is presented in order to illustrate the cash profitability of the
Company and excludes the impact of costs attributable to
exploration activity, which tend to be one-off in nature, and the
non-cash costs relating to depreciation, amortisation, impairments
and write-offs.
Depreciation of USD24 million (H1 2022: USD56 million) and Tawke
intangibles amortisation of USD3 million (H1 2022: USD28 million)
decreased due to lower production and pipeline closure.
The Company has reported an impairment expense of USD18 million
relating to Sarta. A net impairment expense of USD10 million has
been recognised relating to the expected credit loss on overdue
receivables. Further explanation is provided in note 2 to the
financial statements.
Interest income of USD11 million (H1 2022: USD0.5 million) has
significantly increased as a result of the increase in interest
rates, in turn reducing our cost of debt. Bond interest expense of
USD13 million (H1 2022: USD13 million) was in line with previous
period. Other finance expense of USD3 million (H1 2022: USD2
million) related to non-cash discount unwinding on provisions.
In relation to taxation, under the terms of KRI production
sharing contracts, corporate income tax due is paid on behalf of
the Company by the KRG from the KRG's own share of revenues,
resulting in no corporate income tax payment required or expected
to be made by the Company. Tax presented in the income statement
was related to taxation of the service companies (H1 2023: nil, H1
2022: nil).
Capital expenditure
Capital expenditure was reduced to USD48 million (H1 2022: USD75
million), with spend on production and pre-production assets
combined of USD44 million, and exploration assets of USD4
million:
(all figures USD million) H1 2023 H1 2022 FY 2022
Cost recovered production capex 39.7 41.4 85.9
Pre-production capex - oil 3.8 27.0 47.5
Other exploration and appraisal capex 4.0 6.3 9.7
Capital expenditure 47.5 74.7 143.1
Cash flow, cash, net cash and debt
Gross proceeds received totalled USD61 million (H1 2022: USD254
million).
(all figures USD million) H1 2023 H1 2022 FY 2022
Brent average oil price USD80/bbl USD108/bbl USD101/bbl
EBITDAX 19.4 212.3 361.6
Working capital 19.8 4.0 50.8
Operating cash flow 39.2 216.3 412.4
Producing asset cost recovered capex (37.9) (33.1) (77.8)
Development capex (16.0) (22.2) (50.4)
Exploration and appraisal capex (6.1) (17.7) (20.0)
Interest and other (14.3) (14.6) (29.4)
Free cash flow (35.1) 128.7 234.8
Free cash flow is presented in order to illustrate the free cash
generated for equity. Free cash outflow was USD35 million (H1 2022:
USD129 million inflow) with an overall decrease due to delay in
proceeds and lower Brent.
(all figures USD million) H1 2023 H1 2022 FY 2022
Free cash flow (35.1) 128.7 234.8
Dividend paid (33.5) (32.3) (47.9)
Other - 2.0 -
Bond repayment (1.0) - (6.0)
Net change in cash (69.6) 98.4 180.9
Opening cash 494.6 313.7 313.7
Closing cash 425.0 412.1 494.6
Debt reported under IFRS (266.8) (270.8) (266.6)
Net cash / (debt) 158.2 141.3 228.0
The 2025 bonds have two financial covenant maintenance
tests:
Financial covenant Test H1 2023
Equity ratio (Total equity/Total assets) > 40% 53%
Minimum liquidity > USD30m USD425m
Net assets
Net assets at 30 June 2023 were USD457 million (31 December
2022: USD528 million) and consist primarily of oil and gas assets
of USD330 million (31 December 2022: USD327 million), net trade
receivables of USD95 million (31 December 2022: USD117 million) and
net cash of USD158 million (31 December 2022: USD228 million).
Liquidity / cash counterparty risk management
The Company monitors its cash position, cash forecasts and
liquidity on a regular basis. The Company holds surplus cash in
treasury bills or on time deposits with a number of major financial
institutions. Suitability of banks is assessed using a combination
of sovereign risk, credit default swap pricing and credit
rating.
Going concern
The Directors have assessed that the Company's forecast
liquidity provides adequate headroom over forecast expenditure for
the 12 months following the signing of the half-year condensed
consolidated financial statements for the period ended 30 June 2023
and consequently that the Company is considered a going
concern.
The Company is in a net cash position with no near-term maturity
of liabilities.
Principal risks and uncertainties
The Company is exposed to a number of risks and uncertainties
that may seriously affect its performance, future prospects or
reputation and may threaten its business model, future performance,
solvency or liquidity. The following risks are the principal risks
and uncertainties of the Company, which are not all of the risks
and uncertainties faced by the Company: the KRI natural resources
industry and regional risk, notably the current closure of the
Iraq-Türkiye pipeline and lack of oil export payments, as well as
the recovery of the USD110 million outstanding receivable; the
development and recovery of oil reserves; reserve replacement;
M&A activity; corporate governance failure; capital structure
and financing; local community support; the environmental impact of
oil and gas extraction; and health and safety risks. Further detail
on many of these risks was provided in the 2022 Annual Report.
Statement of directors' responsibilities
The directors confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a true and fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on thecondensed set of
financial statements, and a description of the principal risks and
uncertainties for the remainingsix months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-partytransactions described
in the last annual report.
The directors of Genel Energy plc are listed in the Genel Energy
plc Annual Report for 31 December 2022. A list of current directors
is maintained on the Genel Energy plc website:
www.genelenergy.com
By order of the Board
Paul Weir
CEO
1 August 2023
Luke Clements
CFO
1 August 2023
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.
Condensed consolidated statement of comprehensive income
For the period ended 30 June 2023
Audited
Unaudited Unaudited
Year
6 months to 30 June 6 months to 30 June
2023 2022 to 31 Dec
2022
Note USDm USDm USDm
Revenue 3 51.3 245.6 432.7
Production costs 4 (21.7) (24.1) (51.1)
Depreciation and amortisation of oil assets 4 (27.2) (84.3) (149.1)
Gross profit 2.4 137.2 232.5
Exploration expense 4 (0.3) - (1.0)
Net write-off of intangible assets 4,8 - - (75.8)
Impairment of property, plant and equipment 4,9 (17.7) - (125.5)
Net (impairment) / reversal of impairment of 4,10 (9.9) 12.8 8.2
receivables
General and administrative costs 4 (10.2) (9.3) (20.1)
Operating (loss) / profit (35.7) 140.7 18.3
Operating (loss) / profit is comprised of:
EBITDAX 19.4 212.3 361.6
Depreciation and amortisation 4 (27.2) (84.4) (149.2)
Exploration expense 4 (0.3) - (1.0)
Net write-off of intangible assets 4,8 - - (75.8)
Impairment of property, plant and equipment 4,9 (17.7) - (125.5)
Net (impairment) / reversal of impairment of 4,10 (9.9) 12.8 8.2
receivables
Finance income 5 10.5 0.5 6.7
Bond interest expense 5 (12.7) (13.0) (25.9)
Other finance expense 5 (2.8) (2.1) (6.2)
(Loss) / Profit before income tax (40.7) 126.1 (7.1)
Income tax expense 6 - - (0.2)
(Loss) / Profit and total comprehensive (expense) / (40.7) 126.1 (7.3)
income
Attributable to:
Owners of the parent (40.7) 126.1 (7.3)
(40.7) 126.1 (7.3)
(Loss) / Earnings per ordinary share ¢ ¢
Basic 7 (14.6) 45.4 (2.6)
Diluted 7 (14.6) 45.0 (2.6)
(LPS) / EPS excluding impairments1 (4.7) 40.8 66.7
1(LPS) / EPS excluding impairment is profit / (loss) and total
comprehensive income / (expense) adjusted for the add back of net
impairment/write-off of oil and gas assets and net
impairment/reversal of impairment of receivables divided by
weighted average number of ordinary shares.
Condensed consolidated balance sheet
At 30 June 2023
Unaudited Unaudited
Audited 31 Dec 2022
30 June 2023 30 June 2022
Note USDm USDm USDm
Assets
Non-current assets
Intangible assets 8 80.4 165.1 79.1
Property, plant and equipment 9 249.2 362.4 248.1
329.6 527.5 327.2
Current assets
Trade and other receivables 10 100.6 165.0 121.7
Cash and cash equivalents 425.0 412.1 494.6
525.6 577.1 616.3
Total assets 855.2 1,104.6 943.5
Liabilities
Non-current liabilities
Trade and other payables (0.8) (3.5) (1.2)
Deferred income (5.9) (10.0) (6.5)
Provisions (53.7) (45.4) (52.2)
Interest bearing loans 11 (266.8) (270.8) (266.6)
(327.2) (329.7) (326.5)
Current liabilities
Trade and other payables (64.9) (91.8) (82.4)
Deferred income (6.5) (6.5) (6.8)
(71.4) (98.3) (89.2)
Total liabilities (398.6) (428.0) (415.7)
Net assets 456.6 676.6 527.8
Owners of the parent
Share capital 43.8 43.8 43.8
Share premium account 3,863.9 3,914.1 3,897.4
Accumulated losses (3,451.1) (3,281.3) (3,413.4)
Total equity 456.6 676.6 527.8
Condensed consolidated statement of changes in equity
For the period ended 30 June 2023
Share Share premium Accumulated losses Total equity
capital
USDm USDm USDm
USDm
At 1 January 2022 43.8 3,947.5 (3,410.2) 581.1
Profit and total comprehensive income - - 126.1 126.1
Contributions by and distributions to owners
Share-based payments - - 2.8 2.8
Dividends paid1 - (33.4) - (33.4)
At 30 June 2022 (Unaudited) 43.8 3,914.1 (3,281.3) 676.6
At 1 January 2022 43.8 3,947.5 (3,410.2) 581.1
Loss and total comprehensive expense - - (7.3) (7.3)
Contributions by and distributions to owners
Share-based payments - - 4.1 4.1
Dividends provided for or paid1 - (50.1) - (50.1)
At 31 December 2022 (Audited) and 1 January 2022 43.8 3,897.4 (3,413.4) 527.8
Loss and total comprehensive expense - - (40.7) (40.7)
Contributions by and distributions to owners
Share-based payments - - 3.0 3.0
Dividends provided for or paid1 - (33.5) - (33.5)
At 30 June 2023 (Unaudited) 43.8 3,863.9 (3,451.1) 456.6
1 The Companies (Jersey) Law 1991 does not define the expression
"dividend" but refers instead to "distributions". Distributions may
be debited to any account or reserve of the Company (including
share premium account).
Condensed consolidated cash flow statement
For the period ended 30 June 2023
Audited
Unaudited Unaudited
Note 31 Dec
30 June 2023 30 June 2022
2022
USDm USDm USDm
Cash flows from operating activities
(Loss) / Profit for the period / year (40.7) 126.1 (7.3)
Adjustments for:
Net finance expense 5 5.0 14.6 25.4
Taxation 6 - - 0.2
Depreciation and amortisation 28.5 85.9 152.0
Exploration expense 4 0.3 - 1.0
Net impairments, write-offs / (write-backs) 4 27.6 (12.8) 193.1
Other non-cash items (royalty income and share-based cost) (0.9) (3.7) (7.4)
Changes in working capital:
Decrease in trade receivables 12.5 11.8 47.2
Decrease / (Increase) in other receivables 0.8 (0.5) -
(Decrease) / Increase in trade and other payables (4.3) (5.5) 1.7
Cash generated from operations 28.8 215.9 405.9
Interest received 5 10.5 0.5 6.7
Taxation paid (0.1) (0.1) (0.2)
Net cash generated from operating activities 39.2 216.3 412.4
Cash flows from investing activities
Net payments of intangible assets (6.1) (17.3) (20.0)
Net payments of property, plant and equipment (53.9) (55.3) (128.2)
Net cash used in investing activities (60.0) (72.6) (148.2)
Cash flows from financing activities
Dividends paid to company's shareholders (33.5) (32.3) (47.9)
Bond repayment 11 (1.0) - (6.0)
Lease payments (1.7) - (3.8)
Interest paid (12.6) (13.0) (25.6)
Net cash used in financing activities (48.8) (45.3) (83.3)
Net (decrease) / increase in cash and cash equivalents (69.6) 98.4 180.9
Cash and cash equivalents at the beginning of the period / year 494.6 313.7 313.7
Cash and cash equivalents at the end of the period / year 425.0 412.1 494.6
Notes to the consolidated financial statements
1. Basis of preparation
Genel Energy Plc - registration number: 107897 (the Company), is
a public limited company incorporated and domiciled in Jersey with
a listing on the London Stock Exchange. The address of its
registered office is 12 Castle Street, St Helier, Jersey, JE2
3RT.
The half-year condensed consolidated financial statements for
the six months ended 30 June 2023 are unaudited and have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority, with Article of 106 of the
Companies (Jersey) Law 1991 and with IAS 34 'Interim Financial
Reporting' as adopted by the European Union and were approved for
issue on 1 August 2023. They do not comprise statutory accounts
within the meaning of Article 105 of the Companies (Jersey) Law
1991. The half-year condensed consolidated financial statements
should be read in conjunction with the annual financial statements
for the year ended 31 December 2022, which have been prepared in
accordance with IFRS as adopted by the European Union. The same
accounting policies and methods of computation are followed in the
interim financial report as compared with the 31 December 2022
annual financial statements. The annual financial statements for
the year ended 31 December 2022 were approved by the board of
directors on 21 March 2023. The report of the auditors was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under the Article 113A of Companies
(Jersey) Law 1991. The financial information for the year to 31
December 2022 has been extracted from the audited accounts.
Items included in the financial information of each of the
Company's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in
US dollars to the nearest million (USD million) rounded to one
decimal place, except where otherwise indicated.
Going concern
The Company regularly evaluates its financial position, cash
flow forecasts and its compliance with financial covenants by
considering multiple combinations of oil price, discount rates,
production volumes, payments, capital and operational spend
scenarios.
The Company has reported cash of USD425.0 million, with no debt
maturing until the second half of 2025 and significant headroom on
both the equity ratio and minimum liquidity financial
covenants.
The Federal Iraq Supreme Court majority decision in February
2022 regarding the Kurdistan Oil and Gas Law (2007) and the
subsequent actions taken by the Federal Minister of Oil in Baghdad
Commercial Court did not have a significant impact on the Company's
operations.
However, since then, the International Chamber of Commerce in
Paris ruling in favour of Iraq in the long running arbitration case
against Türkiye concerning the Iraqi-Turkish pipeline agreement
signed in 1973, resulted in Türkiye suspending exports through the
pipeline since 25 March 2023. The KRG has consistently reiterated
that it will pay IOCs all that it owes and fulfil its contractual
commitments under the PSCs. Management assess that exports and
payments will resume and the going concern status of the business
remains appropriate. To test the resilience of the business model,
an extreme downside scenario is considered where no proceeds for
the overdue or new invoices until the end of HY 2024. Breach of
covenants risk is assessed as remote in this scenario.
Once production and payments restart, the Company's low-cost
assets and flexibility on commitment of capital mean that it is
resilient to low oil prices, with the only customer, the KRG,
demonstrating its ability to pay consistently in times of financial
stress.
Longer term, our low-cost, low-carbon assets, located in a
region where oil revenues provide a material proportion of funding
to the government and its people means that we are well positioned
to address the appropriate challenges and demands that climate
change initiatives are bringing to the sector. Given the footprint
and the benefit to society generated, we see our portfolio as being
well-positioned for a future of fewer and better natural resources
projects, while the global energy mix continues to require
hydrocarbons.
As a result, the Directors have assessed that the Company's
forecast liquidity provides adequate headroom over its forecast
expenditure for the 12 months following the signing of the
half-year condensed consolidated financial statements for the
period ended 30 June 2023 and consequently that the Company is
considered a going concern.
2. Summary of significant accounting policies
The accounting policies adopted in preparation of these
half-year condensed consolidated financial statements are
consistent with those used in preparation of the annual financial
statements for the year ended 31 December 2022.
The preparation of these half-year condensed consolidated
financial statements in accordance with IFRS requires the Company
to make judgements and assumptions that affect the reported
results, assets and liabilities. Where judgements and estimates are
made, there is a risk that the actual outcome could differ from the
judgement or estimate made. The Company has assessed the following
as being areas where changes in judgements or estimates could have
a significant impact on the financial statements.
Significant estimates
The following are the critical estimates that the directors have
made in the process of applying the Company's accounting policies
and that have the most significant effect on the amounts recognised
in the financial statements.
Estimation of hydrocarbon reserves and resources and associated
production profiles and costs
Estimates of hydrocarbon reserves and resources are inherently
imprecise and are subject to future revision. The Company's
estimation of the quantum of oil and gas reserves and resources and
the timing of its production, cost and monetisation impact the
Company's financial statements in a number of ways, including:
testing recoverable values for impairment; the calculation of
depreciation, amortisation and assessing the cost and likely timing
of decommissioning activity and associated costs. This estimation
also impacts the assessment of going concern.
Proved and probable reserves are estimates of the amount of
hydrocarbons that can be economically extracted from the Company's
assets. The Company estimates its reserves using standard
recognised evaluation techniques which are based on Petroleum
Resources Management System 2018. Assets assessed as having proven
and probable reserves are generally classified as property, plant
and equipment as development or producing assets and depreciated
using the units of production methodology. The Company considers
its best estimate for future production and quantity of oil within
an asset based on a combination of internal and external
evaluations and uses this as the basis of calculating depreciation
and amortisation of oil and gas assets and testing for impairment
under IAS 36.
Hydrocarbons that are not assessed as reserves are considered to
be resources and the related assets are classified as exploration
and evaluation assets. These assets are expenditures incurred
before technical feasibility and commercial viability is
demonstrable. Estimates of resources for undeveloped or partially
developed fields are subject to greater uncertainty over their
future life than estimates of reserves for fields that are
substantially developed and being depleted and are likely to
contain estimates and judgements with a wide range of
possibilities. These assets are considered for impairment under
IFRS 6.
Once a field commences production, the amount of proved reserves
will be subject to future revision once additional information
becomes available through, for example, the drilling of additional
wells or the observation of long-term reservoir performance under
producing conditions. As those fields are further developed, new
information may lead to revisions.
Assessment of reserves and resources are determined using
estimates of oil and gas in place, recovery factors and future
commodity prices, the latter having an impact on the total amount
of recoverable reserves.
Change in accounting estimate
Where the Company has updated its estimated reserves and
resources any required disclosure of the impact on the financial
statements is provided in the following sections. Estimation of oil
and gas asset values (note 8 and 9)
Estimation of the asset value of oil and gas assets is
calculated from a number of inputs that require varying degrees of
estimation. Principally oil and gas assets are valued by estimating
the future cash flows based on a combination of reserves and
resources, costs of appraisal, development and production,
production profile and future sales price and discounting those
cash flows at an appropriate discount rate.
Future costs of appraisal, development and production are
estimated taking into account the level of development required to
produce those reserves and are based on past costs, experience and
data from similar assets in the region, future petroleum prices and
the planned development of the asset. However, actual costs may be
different from those estimated.
Discount rate is assessed by the Company using various inputs
from market data, external advisers and internal calculations. A
post tax nominal discount rate of 14% derived from the Company's
weighted average cost of capital (WACC) is used when assessing the
impairment testing of the Company's oil assets at year-end. Risking
factors are also used alongside the discount rate when the Company
is assessing exploration and appraisal assets.
Estimation of future oil price and netback price
The estimation of future oil price has a significant impact
throughout the financial statements, primarily in relation to the
estimation of the recoverable value of property, plant and
equipment and intangible assets. It is also relevant to the
assessment of ECL and going concern.
The Company's forecast of average Brent oil price for future
years is based on a range of publicly available market estimates
and is summarised in the table below.
USD/bbl 2023 2024 2025 2026
HY2023 forecast 82 78 74 70
FY2022 forecast 82 78 74 70
HY2022 forecast 90 80 70 70
The netback price is used to value the Company's revenue, trade
receivables and its forecast cash flows used for impairment
testing. It is the aggregation of reference oil price average less
transportation costs, handling costs and quality adjustments.
Effective from 1 September 2022, sales have been priced by the MNR
under a new pricing formula based on the realised sales price for
Kurdistan blend crude ('KBT') during the delivery month, rather
than on dated Brent. The Company does not have direct visibility on
the components of the netback price realised for its oil because
sales are managed by the KRG, but invoices are currently raised for
payments on account using a netback price provided by the KRG. Due
to lack of this visibility, the Company has used an estimated
c.USD12/bbl discount on its Brent forecast based on the realised
price in 2023 for its impairment testing. A sensitivity analysis of
netback price on producing asset values has been provided in note
9.
Change in accounting estimate - Sarta PSC (note 9)
At 31 December 2022, the Company's assessment on the recoverable
value of the Sarta PSC had resulted with an impairment expense of
USD125.5 million following the disappointing results of the two
appraisal well and pilot production.
In 2023, the Company has informed the KRG of its intention to
exit the Sarta licence as it sees no line of sight on either making
the extant production profitable or the combination of macro and
asset specific conditions supporting risking of further capital.
Therefore, the remaining recoverable value of the Sarta PSC has
been reduced to nil and an impairment expense of USD17.7 million
has been booked at 30 June 2023.
Estimation of the recoverable value of deferred receivables and
trade receivables (note 10)
As of 31 December 2022, all amounts owed for deferred
receivables have been collected and as a result the Company has
released the expected credit loss (ECL) provision of USD10.8
million and booked another USD4.6 million ECL provision for the
outstanding five months of export payments.
As of 30 June 2023, the Company is owed six months of payments.
Management has compared the carrying value of trade receivables
with the present value of the estimated future cash flows based on
a discount rate of 14% and a number of collection scenarios. The
ECL is the weighted average of these scenarios and is recognised in
the income statement. The weighting is applied based on expected
repayment timing by considering the recovery of previous deferred
receivables. The result of this assessment is an ECL provision of
USD14.5 million. Sensitivity of the calculation to difference
scenarios has been provided in note 10.
Other estimates
The following are the other estimates that the directors have
made in the process of applying the Company's accounting policies
and that have effect on the amounts recognised in the financial
statements.
Decommissioning provision
Decommissioning provisions are calculated from a number of
inputs such as costs to be incurred in removing production
facilities and site restoration at the end of the producing life of
each field which is considered as the mid-point of a range of cost
estimation. These inputs are based on the Company's best estimate
of the expenditure required to settle the present obligation at the
end of the period inflated at 2% (2022: 2%) and discounted at 4%
(2022: 4%). 10% increase in cost estimates would increase the
existing provision by c.USD5 million and 1% increase in discount
rate would decrease the existing provision by c.USD4 million, the
combined impact would be c.USD1 million. The cash flows relating to
the decommissioning and abandonment provisions are expected to
occur between 2028 and 2036.
Taxation
Under the terms of KRI PSC's, corporate income tax due is paid
on behalf of the Company by the KRG from the KRG's own share of
revenues, resulting in no corporate income tax payment required or
expected to be made by the Company. It is not known at what rate
tax is paid, but it is estimated that the current tax rate would be
between 15% and 40%. If this was known, it would result in a gross
up of revenue with a corresponding debit entry to taxation expense
with no net impact on the income statement or on cash. In addition,
it would be necessary to assess whether any deferred tax asset or
liability was required to be recognised.
New standards
The following new accounting standards, amendments to existing
standards and interpretations are effective on 1 January 2023.
Amendments to IFRS 17 Insurance contracts: Initial Application of
IFRS 17 and IFRS 9 - Comparative Information (issued on 9 December
2021), Amendments to IAS 12 Income Taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction (issued on
7 May 2021), Amendments to IAS 1 Presentation of Financial
Statements and IFRS Practice Statement 2: Disclosure of Accounting
policies (issued on 12 February 2021), Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors:
Definition of Accounting Estimates (issued on 12 February 2021),
IFRS 17 Insurance Contracts (issued on 18 May 2017); including
Amendments to IFRS 17 (issued on 25 June 2020) . These standards
did not have a material impact on the Company's results or
financial statements disclosures in the current reporting
period.
The following new accounting standards, amendments to existing
standards and interpretations have been issued but are not yet
effective and/or have not yet been endorsed by the EU: Amendments
to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures: Supplier Finance Arrangements (Issued on 25 May 2023),
Amendments to IAS 12 Income taxes: International Tax Reform -
Pillar Two Model Rules (issued 23 May 2023), Amendments to IAS 1
Presentation of Financial Statements: Classification of Liabilities
as Current or Non-current - Deferral of Effective Date (issued on
15 July 2020); and Non-current Liabilities with Covenants (issued
on 31 October 2022), Amendments to IFRS 16 Leases: Lease Liability
in a Sale and Leaseback (issued on 22 September 2022). Nothing has
been early adopted, and these standards are not expected to have a
material impact on the Company's results or financials statement
disclosures in the periods they become effective. 3. Segmental
information
The Company has two reportable business segments: Production and
Pre-production. Capital allocation decisions for the production
segment are considered in the context of the cash flows expected
from the production and sale of crude oil. The production segment
is comprised of the producing fields on the Tawke PSC (Tawke and
Peshkabir), the Taq Taq PSC (Taq Taq) and the Sarta PSC (Sarta)
which are located in the KRI and make sales predominantly to the
KRG. The pre-production segment is comprised of discovered resource
held under the Qara Dagh PSC (written-off in 2022) located in the
KRI and exploration activity, principally located in Somaliland and
Morocco. 'Other' includes corporate assets, liabilities and costs,
elimination of intercompany receivables and intercompany payables,
which are non-segment items.
For the 6-month period ended 30 June 2023
Pre-production Total
Production Other
USDm USDm USDm USDm
Revenue from contracts with customers 49.5 - - 49.5
Revenue from other sources 1.8 - - 1.8
Cost of sales (48.9) - - (48.9)
Gross profit 2.4 - - 2.4
Exploration expense - (0.3) - (0.3)
Impairment of property, plant and equipment (17.7) - - (17.7)
Net impairment of receivables (9.9) - - (9.9)
General and administrative costs - - (10.2) (10.2)
Operating loss (25.2) (0.3) (10.2) (35.7)
Operating loss is comprised of
EBITDAX 29.6 - (10.2) 19.4
Depreciation and amortisation (27.2) - - (27.2)
Exploration expense - (0.3) - (0.3)
Impairment of property, plant and equipment (17.7) - - (17.7)
Net impairment of receivables (9.9) - - (9.9)
Finance income - - 10.5 10.5
Bond interest expense - - (12.7) (12.7)
Other finance expense (1.7) - (1.1) (2.8)
Loss before income tax (26.9) (0.3) (13.5) (40.7)
Capital expenditure 43.5 4.0 - 47.5
Total assets 412.6 29.4 413.2 855.2
Total liabilities (99.1) (18.6) (280.9) (398.6)
Total assets and liabilities in the 'Other' column are
predominantly cash and debt balances.
For the 6-month period ended 30 June 2022
Pre-production Total
Production Other
USDm USDm USDm USDm
Revenue from contracts with customers 238.8 - - 238.8
Revenue from other sources 6.8 - - 6.8
Cost of sales (108.4) - - (108.4)
Gross profit 137.2 - - 137.2
Reversal of impairment of receivables 10.8 - 2.0 12.8
General and administrative costs - - (9.3) (9.3)
Operating profit / (loss) 148.0 - (7.3) 140.7
Operating profit / (loss) is comprised of
EBITDAX 221.5 - (9.2) 212.3
Depreciation and amortisation (84.3) - (0.1) (84.4)
Reversal of impairment of receivables 10.8 - 2.0 12.8
Finance income - - 0.5 0.5
Bond interest expense - - (13.0) (13.0)
Other finance expense (1.2) (0.1) (0.8) (2.1)
Profit / (Loss) before income tax 146.8 (0.1) (20.6) 126.1
Capital expenditure 68.4 6.3 - 74.7
Total assets 626.1 97.1 381.4 1,104.6
Total liabilities (120.5) (17.6) (289.9) (428.0)
Revenue from contracts with customers includes USD79.5 million
arising from the 4.5% royalty interest on gross Tawke PSC revenue
("the ORRI").
Total assets and liabilities in the 'Other' column are
predominantly cash and debt balances.
For the 12-month period ended 31 December 2022
Total
Production Pre-production Other
USDm USDm USDm USDm
Revenue from contracts with customers 419.5 - - 419.5
Revenue from other sources 13.2 - - 13.2
Cost of sales (200.2) - - (200.2)
Gross profit 232.5 - - 232.5
Exploration expense - (1.0) - (1.0)
Net write-off of intangible asset - (75.8) - (75.8)
Impairment of property, plant and equipment (125.5) - - (125.5)
Reversal of impairment of receivables 10.8 - 2.0 12.8
Impairment of receivables (4.6) - - (4.6)
General and administrative costs - - (20.1) (20.1)
Operating profit / (loss) 113.2 (76.8) (18.1) 18.3
Operating profit / (loss) is comprised of
EBITDAX 381.6 - (20.0) 361.6
Depreciation and amortisation (149.1) - (0.1) (149.2)
Exploration expense - (1.0) - (1.0)
Net write-off of intangible assets - (75.8) - (75.8)
Impairment of property, plant and equipment (125.5) - - (125.5)
Reversal of impairment of receivables 10.8 - 2.0 12.8
Impairment of receivables (4.6) - - (4.6)
Finance income - - 6.7 6.7
Bond interest expense - - (25.9) (25.9)
Other finance expense (3.3) (0.4) (2.5) (6.2)
Profit / (Loss) before income tax 109.9 (77.2) (39.8) (7.1)
Capital expenditure 133.4 9.7 - 143.1
Total assets 447.3 23.5 472.7 943.5
Total liabilities (111.9) (17.7) (286.1) (415.7)
Revenue from contracts with customers includes USD94.5 million
arising from the ORRI and USD34.7 million in relation to the
suspended ORRI.
Total assets and liabilities in the 'Other' column are
predominantly cash and debt balances. 4. Operating (loss) /
profit
6 months to 30 6 months to 30
June June Year to 31 December
2022
2023 2022
USDm USDm USDm
Operating costs (21.6) (23.9) (50.7)
Trucking costs (0.1) (0.2) (0.4)
Production cost (21.7) (24.1) (51.1)
Depreciation of oil and gas property, plant and equipment (excl. (24.7) (56.3) (109.9)
RoU assets)
Amortisation of oil and gas intangible assets (2.5) (28.0) (39.2)
Cost of sales (48.9) (108.4) (200.2)
Exploration expense (0.3) - (1.0)
Write-off of intangible assets (note 8) - - (78.0)
Net reversal of accruals - - 2.2
Net write-off of intangible assets - - (75.8)
Impairment of property, plant and equipment (note 2,9) (17.7) - (125.5)
Reversal of impairment of other receivables - - 2.0
Reversal of impairment of trade receivables (note 2,10) 4.6 12.8 10.8
Impairment of receivables (note 2,10) (14.5) - (4.6)
Corporate cash costs (9.1) (8.6) (18.1)
Other operating expenses (0.2) - (1.1)
Corporate share-based payment expense (0.9) (0.6) (0.8)
Depreciation and amortisation of corporate assets (excl. RoU - (0.1) (0.1)
assets)
General and administrative expenses (10.2) (9.3) (20.1)
Trucking costs are not cost-recoverable and relate to the Sarta
licence only.
5. Finance expense and income
6 months to 30 June 6 months to 30 June
Year to 31 December 2022
2023 2022
USDm USDm USDm
Bond interest (12.7) (13.0) (25.9)
Other finance expense (non-cash) (2.8) (2.1) (6.2)
Finance expense (15.5) (15.1) (32.1)
Bank interest income 10.5 0.5 6.7
Finance income 10.5 0.5 6.7
Net finance expense (5.0) (14.6) (25.4)
Bond interest payable is the cash interest cost of the Company's
bond debt. Other finance expense (non-cash) primarily relates to
the discount unwind on the bond and the asset retirement obligation
provision. 6. Income tax expense
Current tax expense is incurred on profits of service companies.
Under the terms of the KRI PSCs, the Company is not required to pay
any cash corporate income taxes as explained in note 2. 7. (Loss) /
Earnings per share
Basic
Basic (loss) / earnings per share is calculated by dividing the
(loss) / profit attributable to owners of the parent by the
weighted average number of shares in issue during the period.
6 months to 30
June 6 months to 30 June Year to 31 December
2022 2022
2023
(Loss) / Profit attributable to owners of the parent (40.7) 126.1 (7.3)
(USDm)
Weighted average number of ordinary shares - number 1 278,923,402 277,842,136 278,654,909
Basic (loss) / earnings per share - cents per share (14.6) 45.4 (2.6)
1 Excluding shares held as treasury shares
Diluted
The Company purchases shares in the market to satisfy share plan
requirements so diluted earnings per share is adjusted for
performance shares, restricted shares, share options and deferred
bonus plans not included in the calculation of basic earnings per
share. Because the Company reported a loss for the period ended 30
June 2023, the performance shares, restricted shares and share
options are anti-dilutive and therefore diluted LPS is the same as
basic LPS:
6 months to 30
June 6 months to 30 Year to 31
June 2022 December 2022
2023
(Loss) / Profit attributable to owners of the parent (USDm) (40.7) 126.1 (7.3)
Weighted average number of ordinary shares - number1 278,923,402 277,842,136 278,654,909
Adjustment for performance shares, restricted shares, share options - 2,222,629 -
and deferred bonus plans
Weighted average number of ordinary shares and potential ordinary 278,923,402 280,064,765 278,654,909
shares
Diluted (loss) / earnings per share - cents per share (14.6) 45.0 (2.6)
1 Excluding shares held as treasury shares 8. Intangible
assets
Other
Exploration and evaluation assets Tawke Total
assets
RSA
USDm USDm USDm USDm
Cost
At 1 January 2022 81.4 425.1 7.5 514.0
Additions 6.3 - - 6.3
At 30 June 2022 87.7 425.1 7.5 520.3
At 1 January 2022 81.4 425.1 7.5 514.0
Additions 9.7 - - 9.7
Write-off in the year (78.0) - - (78.0)
Other (0.2) - - (0.2)
At 31 December 2022 and 1 January 2023 12.9 425.1 7.5 445.5
Additions 4.0 - - 4.0
Other (0.2) - - (0.2)
At 30 June 2023 16.7 425.1 7.5 449.3
Accumulated amortisation and impairment
At 1 January 2022 - (319.7) (7.5) (327.2)
Amortisation charge for the period - (28.0) - (28.0)
At 30 June 2022 - (347.7) (7.5) (355.2)
At 1 January 2022 - (319.7) (7.5) (327.2)
Amortisation charge for the year - (39.2) - (39.2)
At 31 December 2022 and 1 January 2023 - (358.9) (7.5) (366.4)
Amortisation charge for the period - (2.5) - (2.5)
At 30 June 2023 - (361.4) (7.5) (368.9)
Net book value
At 1 January 2022 81.4 105.4 - 186.8
At 30 June 2022 87.7 77.4 - 165.1
At 31 December 2022 and 1 January 2023 12.9 66.2 - 79.1
At 30 June 2023 16.7 63.7 - 80.4
30 June 2023 30 June 2022 31 Dec 2022
Book value USDm USDm USDm
Somaliland PSC Exploration 16.7 11.0 12.9
Qara Dagh PSC Exploration / Appraisal - 76.7 -
Exploration and evaluation assets 16.7 87.7 12.9
Tawke overriding royalty - 5.2 -
Tawke capacity building payment waiver 63.7 72.2 66.2
Tawke RSA assets 63.7 77.4 66.2
9. Property, plant and equipment
Other
Producing assets
assets Total
USDm USDm USDm
Cost
At 1 January 2022 3,117.2 17.1 3,134.3
Net additions 64.0 0.9 64.9
Other1 3.6 - 3.6
At 30 June 2022 3,184.8 18.0 3,202.8
At 1 January 2022 3,117.2 17.1 3,134.3
Net additions 129.1 0.9 130.0
Right-of-use assets - (0.4) (0.4)
Other1 5.9 - 5.9
At 31 December 2022 and 1 January 2023 3,252.2 17.6 3,269.8
Net additions 43.5 (0.1) 43.4
Other1 2.0 - 2.0
At 30 June 2023 3,297.7 17.5 3,315.2
Accumulated depreciation and impairment
At 1 January 2022 (2,769.2) (12.6) (2,781.8)
Depreciation charge for the period (57.7) (0.9) (58.6)
At 30 June 2022 (2,826.9) (13.5) (2,840.4)
At 1 January 2022 (2,769.2) (12.6) (2,781.8)
Depreciation charge for the year (112.8) (1.6) (114.4)
Impairment (note 2) (125.5) - (125.5)
At 31 December 2022 and 1 January 2023 (3,007.5) (14.2) (3,021.7)
Depreciation charge for the period (26.0) (0.6) (26.6)
Impairment (note 2) (17.7) - (17.7)
At 30 June 2023 (3,051.2) (14.8) (3,066.0)
Net book value
At 1 January 2022 348.0 4.5 352.5
At 30 June 2022 357.9 4.5 362.4
At 31 December 2022 and 1 January 2023 244.7 3.4 248.1
At 30 June 2023 246.5 2.7 249.2
1 Other line includes non-cash asset retirement obligation
provision and share-based payment costs.
30 June 2023 30 June 2022 31 Dec 2022
Book value USDm USDm USDm
Tawke PSC Oil production 215.2 197.1 199.1
Taq Taq PSC Oil production 31.3 31.8 28.8
Sarta PSC Oil production/development - 129.0 16.8
Producing assets 246.5 357.9 244.7
An impairment review was conducted by Management and the Board
which resulted in a reduction in the carrying value of the Sarta
PSC to nil and in an impairment expense of USD17.7 million as of 30
June 2023. Further explanation is provided in note 2.
The sensitivities below provide an indicative impact on net
asset value of a change in netback price, discount rate, production
or pipeline reopening, assuming no change to any other inputs.
Taq Taq Tawke
Sensitivities USDm USDm
Netback price +/- USD5/bbl +/- 2 +/- 29
Discount rate +/- 1% +/- 0 +/- 8
Production +/- 10% +/- 2 +/- 31
10. Trade and other receivables
30 June 2023 30 June 2022 31 Dec 2022
USDm USDm USDm
Trade receivables - current 95.1 157.0 117.0
Other receivables and prepayments 5.5 8.0 4.7
100.6 165.0 121.7
As of 30 June 2023, the Company is owed six months of payments
(31 December 2022: five months).
Period when sale made
Deferred
receivables
Not due Overdue 2023 Overdue 2022 2020 2019 Total nominal ECL provision Trade
receivables
USDm USDm USDm USDm USDm USDm USDm USDm
30 June 2022 126.5 - - 30.5 - 157.0 - 157.0
31 December 60.7 - 44.4 16.5 - 121.6 (4.6) 117.0
2022
30 June 2023 - 49.3 60.3 - - 109.6 (14.5) 95.1
30 June 2023 30 June 2022 31 Dec 2022
Movement on trade receivables in the period
USDm USDm USDm
Carrying value at the beginning of the period 117.0 158.1 158.1
Revenue from contracts with customers 49.5 238.8 384.8
Revenue recognised for suspended ORRI - - 34.7
Cash proceeds (61.2) (254.0) (473.3)
Cash for local sales (0.6) - -
Offset of payables due to the KRG - - (0.1)
Reversal of previous year's expected credit loss (note 2) 4.6 - 10.8
Expected credit loss for current period (note 2) (14.5) 10.8 (4.6)
Capacity building payments 0.2 3.3 5.2
Sarta processing fee payments 0.1 - 1.4
Carrying value at the end of the period 95.1 157.0 117.0
Recovery of the carrying value of the receivable
The Company expects to recover the full nominal value of
USD109.6 million receivables owed from the KRG, but the terms of
recovery are not determined. An explanation of the assumptions and
estimates in assessing the net present value of the deferred
receivables are provided in note 2.
Total
USDm
Nominal balance to be recovered 109.6
Estimated net present value of total cash flows 95.1
Sensitivities/Scenarios
The table below shows the sensitivity of the net present value
of the overdue trade receivables to start and timing of repayment
that the company has used during its ECL assessment. Each scenario
has been weighted in accordance with the management's expected
outcome.
Months it takes to recover the nominal amount owed
NPV14.0 (USDm)
0 3 6 9 12 15 18 21 24
0 110 107 105 104 102 101 99 97 96
3 106 105 103 102 100 98 97 95 94
Months until repayment commences
6 103 102 100 98 97 95 94 92 91
9 99 98 97 95 94 92 91 89 88
11. Interest bearing loans and net cash
Net other
1 Jan 2023 Discount unwind Dividend paid 30 June 2023
Repurchase changes
USDm USDm USDm USDm USDm USDm
2025 Bond 9.25% (non-current) (266.6) (1.1) 0.9 - - (266.8)
Cash 494.6 - (1.0) (33.5) (35.1) 425.0
Net cash 228.0 (1.1) (0.1) (33.5) (35.1) 158.2
As of 30 June 2023, the fair value of the USD273 million of
bonds held by third parties is USD256.6 million (30 June 2022:
USD276.6 million, 31 December 2022: USD257.6 million).
The Company repurchased USD1 million of its existing USD274
million senior unsecured bond at a price equal to 95% of the
nominal amount.
The bonds maturing in 2025 have two financial covenant
maintenance tests:
Financial covenant Test H1 2023 H1 2022 FY 2022
Equity ratio (Total equity/Total assets) > 40% 53% 61% 56%
Minimum liquidity > USD30m USD425.0m USD412.1m USD494.6m
1 Jan Dividend
Discount unwind Net other changes 30 June 2022
2022 paid
USDm USDm USDm USDm USDm
2025 Bond 9.25% (non-current) (269.8) (1.0) - - (270.8)
Cash 313.7 - (32.3) 130.7 412.1
Net cash 43.9 (1.0) (32.3) 130.7 141.3
1 Jan 2022 Discount unwind Dividend paid Net other changes 31 Dec 2022
Repurchase
USDm USDm USDm USDm USDm USDm
2025 Bond 9.25% (non-current) (269.8) (2.5) 5.7 - - (266.6)
Cash 313.7 - (6.0) (47.9) 234.8 494.6
Net cash 43.9 (2.5) (0.3) (47.9) 234.8 228.0
12. Capital commitments
Under the terms of its production sharing contracts ('PSC's) and
joint operating agreements ('JOA's), the Company has certain
commitments that are generally defined by activity rather than
spend. The Company's capital programme for the next few years is
explained in the operating review and is in excess of the activity
required by its PSCs and JOAs.
INDEPENT REVIEW REPORT TO GENEL ENERGY PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, "Interim Financial
Reporting" and the requirements of the Disclosure and Transparency
Rules of the Financial Conduct Authority.
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the condensed
consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated cash flow statement
and the notes to the interim financial statements.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting" and the
requirements of the Disclosure and Transparency Rules of the
Financial Conduct Authority.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority and the Companies (Jersey) Law 1991.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
1 August 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
-----------------------------------------------------------------------------------------------------------------------
Dissemination of a Regulatory Announcement that contains inside
information in accordance with the Market Abuse Regulation (MAR),
transmitted by EQS Group. The issuer is solely responsible for the
content of this announcement.
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ISIN: JE00B55Q3P39, NO0010894330
Category Code: IR
TIDM: GENL
LEI Code: 549300IVCJDWC3LR8F94
Sequence No.: 261683
EQS News ID: 1693649
End of Announcement EQS News Service
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