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LONDON (Alliance News) - Shareholders of Genel Energy PLC experienced further woes on Thursday after the company reported more than a USD1.10 billion loss in 2015 and confirmed revenue, which dropped substantially during the year, will fall even further in 2016.
The loss comes only days after the company reported a dramatic fall in reserves at its flagship Taq Taq field in the Kurdistan region of Iraq, which led to a USD1.00 billion impairment that contributed to the substantial loss in 2015.
Genel's USD1.16 billion pretax loss in 2015 widened from the USD312.8 million loss in 2014, with revenue dropping to USD343.9 million from USD519.7 million in 2014, pushing its gross profit down to only USD135.6 million from USD316.6 million.
The impairment related to the Taq Taq field was partly offset by a fall in exploration write-off costs in 2015 to USD173.0 million compared to USD476.8 million the year before. Impairments in 2014 only amounted to USD80.9 million.
The steep fall in revenue was the result of lower oil prices, with a large rise in production failing to offset those price falls. Production in 2015 increased to 84,900 barrels of oil per day from the 69,400 barrels being produced each day in 2014.
Production in 2015 was at the lower end of Genel's original guidance of 85,000 to 90,000 barrels of oil per day, with revenue coming in a touch higher than Genel's guidance in February of USD342.0 million. However, that revenue guidance was previously lowered from between USD350.0 million and USD375.0 million.
However, the outlook remains bleak for Genel, which reiterated its warning that revenue and production will fall in 2016. Production in 2016 is now set to be lower than what was guided last month.
Production will fall to the region of 60,000 to 70,000 barrels per day this year, and Genel said this will only generate revenue of around USD160.0 million to USD220.0 million based on an oil price of USD35 a barrel.
In February, Genel said production would average 80,000 barrels a day in 2016 before falling to a range of 65,000 to 75,000 barrels a day in 2017 and 50,000 to 70,000 barrels a day in 2018.
If the oil price managed to increase to around USD45 a barrel, revenue in 2016 would be in the region of USD200.0 million to USD275.0 million, said Genel. Brent was trading just below USD37 a barrel on Thursday morning.
The downgrade to the reserves at Taq Taq earlier this week showed the estimated amount of oil left to be recovered from the field falling by over 65% to 172 million barrels from 499 million barrels.
Genel, like its peers, has taken steps to counter lower oil prices, reducing capital expenditure in 2015 to USD157.2 million from USD676.9 million. In 2016, that budget will be slashed further to USD80.0 million to USD100.0 million.
"We recognise and share the disappointment of the recent Taq Taq reserves update. Both Taq Taq and Tawke remain low-cost oil fields by any global benchmark. The fields are set to be significantly cash generative going forward, with a discretionary investment programme aiming to maximise the value of the remaining reserves," said Chief Executive Murat Ozgul.
On a brighter note, the Kurdistan regional government released a statement at the start of February confirming it intends to pay foreign oil producers for the oil exported out of the country via the Iraq-Turkey pipeline, something Genel has been working toward for a while.
"The instigation of the new payment mechanism by the KRG Ministry of Natural Resources in February 2016 provided clarity over the timing and quantum of our monthly receipts for export payments, recognising our receivable and putting in place the process through which it will be recovered," said Ozgul.
Genel shares were trading up 7.6% to 83.68 pence per share on Thursday morning, following steep declines earlier this week after reporting the fall in reserves at Taq Taq. The stock had closed last Friday at 124.00p, and it is a fraction of its 52-week high of 648.50p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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