(Alliance News) - Genel Energy PLC on Thursday said it swung to a profit in 2019 due to non-repeat of a substantial impairment charge.
The company posted a USD104.6 million pretax profit for 2019, versus a USD283.6 million loss in 2018, which included a USD424.0 million impairment relating to the Miran field in Iraq.
Genel's performance in 2019 also benefited from an increase in revenue to USD377.2 million from USD355.1 million.
It declared and proposed total dividends of 15.0 cents per share versus nothing the year before.
Chief Executive Bill Higgs said: "The industry is currently facing headwinds that challenge companies to demonstrate their resilience and flexibility. Genel has a business model and strategy designed to shelter us from such extreme circumstances, with low-cost oil production, robust finances, and flexibility in our expenditure allowing us to pay a material dividend while retaining sufficient liquidity to capitalise on opportunities and take advantage of future upside. Our strong balance sheet with limited capital commitments allows us to invest in the most value accretive areas and pay this dividend at the prevailing oil price, even in a scenario with a temporary delay in payments from the [Kurdistan regional government]. We are a business that can generate excess cash at a sustained oil price of [USD40 per barrel]."
On Wednesday, Genel said that DNO ASA - operator of the Tawke production sharing contract - was still "committed to completing the USD100 million gas capture, transport and reinjection project in Kurdistan". The project is aimed at reducing carbon dioxide emissions and improving oil recovery, with gas reinjection to start in April.
However, development at the licence has been scaled back as a result of border closings, quarantines, and various restrictions surrounding the Covid-19 pandemic.
By March end, the number of active drill rigs at Tawke will fall to one from four at the start of 2020. Operations are set to ramp up again quickly once things improve.
"DNO further stated that its ability to maintain its level of spending has also been strained by interruptions and delays to monthly payments for its oil exports from Kurdistan; the last payment received in January covered September 2019 exports," said Genel.
A drop in capital expenditure at Tawke improves Genel's 2020 cash flow generation, though will produce a lower exit rate production which will hut 2021.
"Due to this delayed expenditure, Genel's 2020 net production guidance of close to Q4 2019 levels of 35,410 [barrels of oil per day] is expected to be impacted," said Genel.
Separately on Wednesday, Genel reported on its net oil reserves. At the end of 2019, its had proved oil reserves of 68.8 million barrels, down from 99.3 million barrels at the end of 2018. This was due to 13.2 million barrels produced in the year as well as a reduction of 17.2 million barrels after technical revisions.
Proved and probable oil reserves shrank as well, dropping to 123.8 million barrels from 154.9 million, again on production and technical revisions.
Higgs said Wednesday: "Genel's producing assets are profitable even at an oil price of $30/bbl and this, coupled with our robust balance sheet, supports investment in growth and the payment of a material dividend. The reduction of reserves at Tawke largely relates to production towards the end of the life of the field, and consequently our mid-term production outlook is materially unchanged and there is no reserves impact on our business plan."
Shares in Genel were up marginally at 54.63 pence in London on Thursday.
By Anna Farley; annafarley@alliancenews.com
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Genel Energy (GENL)