Genel Energy plc issues the following trading and operations update in advance of the Company's full-year 2019 results, which are scheduled for release on 17 March 2020.

Bill Higgs, Chief Executive of Genel, said:
"2019 was a successful year for Genel, and we continue to deliver on our promises. We increased our highly cash-generative production in line with guidance, paid a material dividend, grew our operating capabilities, and added new assets to the portfolio that will bear fruit in 2020.
 
Our ongoing cash generation, with confidence of regular payments and in the security of the Kurdistan Region of Iraq, means that it is business as usual and our investment plans are moving forward at pace. This increasing investment in our growth assets is more than covered by expected free cash flow, and will see production diversify and increase as Sarta comes onstream in the summer, with enough remaining to underpin an increase in our already significant dividend."

FINANCIAL PERFORMANCE

• $317 million of cash proceeds were received in 2019 (2018: $335 million)
• Capital expenditure of $161 million (2018: $95 million), in line with initial guidance, as spending increased on growth assets  
• Free cash flow ('FCF') of $99 million in 2019, pre dividend payment 
• Cash proceeds and FCF were impacted by the non-receipt of $54 million in payments from the Kurdistan Regional Government ('KRG') relating to export sales in August and September 2019, due in November and December
• Pro-forma FCF in 2019 was $153 million (2018: $164 million), or $0.55 per share 
• $26 million of outstanding payments from the KRG, constituting the full amount in respect to export sales in August 2019, has subsequently been received in 2020
• Dividends of $42 million declared in 2019 
• Maiden dividend of $27 million (10¢ per share) paid in June 2019
• A further $15 million distributed (5¢ per share) in January 2020 
• Cash of $387 million at 31 December 2019 ($334 million at 31 December 2018) 
• Net cash of $90 million at 31 December 2019 (net cash of $37 million at 30 December 2018)

OPERATING PERFORMANCE 

• 2019 net production averaged 36,250 bopd (2018: 33,690 bopd), in line with guidance and an increase of 8% on the prior year
• Q4 averaged 35,410 bopd, an increase from 34,720 bopd in Q3
• 19 new wells were brought onto production in 2019 across all assets

Production by asset was as follows:

PRODUCTION ASSETS

Tawke PSC (25% working interest) 

• Tawke PSC gross production averaged 123,940 bopd, of which Peshkabir contributed 55,190 bopd
• Production in Q4 2019 averaged 122,800 bopd, of which Peshkabir contributed 58,910 bopd
• There will be an active drilling campaign in 2020 on the Tawke field, aiming to minimise decline rates
• At Peshkabir, the P-12 well is currently appraising the eastern flank of the field, and is set to complete shortly 

Taq Taq PSC (44% working interest and joint operator) 

• Taq Taq gross field production averaged 11,960 bopd in 2019
• Production in Q4 2019 averaged 10,703 bopd
• Following the successful drilling of the TT-34 well, which has now entered production at over 2,000 bopd with 20/64" choke, production at Taq Taq has averaged c.12,800 bopd in the year to date
• The latest well on the northern flank of the field, TT-35, spud on 6 January. This completes the drilling programme with the Sakson-605 rig
• Further activity at Taq Taq is focused on maximising cash generation, with the optimised cost structure and 2020 work programme, which could see up to six wells drilled, under review

OUTLOOK AND 2020 GUIDANCE

• Net production in 2020 is expected to be close to Q4 2019 levels of 35,410 bopd, with an exit rate c.10% higher than this due to the expected addition of production from Sarta   
• Genel expects to drill over 20 producing wells in 2020

2020 capital expenditure is expected to be $160-200 million, of which $120-150 million will be cost recoverable spend on assets on production in 2020. Other spend includes: 

• c.$35-40 million on the Qara Dagh 2 well 
• Under $10 million maintenance expenditure at Bina Bawi and Miran. Capital expenditure expectations for Bina Bawi in 2020 will be updated once legal agreements with the KRG have been signed
• Under $2 million on African exploration assets
• Operating costs per barrel expected to be $3/bbl, amongst the lowest in the industry
• Opex: c.$40 million 
• G&A: c.$15 million

The Company expects full recovery of outstanding payments in Q1, and for regular payments to resume, as they had since September 2015 and continues to actively pursue growth and is analysing numerous opportunities to make value-accretive additions to the portfolio.

Genel expects to generate c.$100 million in free cash flow, pre-dividend payments, in 2020.

Given the ongoing strength of cash generation, confidence in the regularity of payments from the KRG, and the positive outlook for the Company, Genel reaffirms its commitment to growing the dividend. 

Link to Genel Energy Iraq country profile