Malcy’s blog Today19 Mar 2020 16:08
Genel Energy
I wrote about Genel yesterday and a few of my expectations were in today’s results but you didn’t need to be Einstein to know that the company are in a strong cash position with significant free cash flow giving them massive flexibility to choose what to spend it on. Production was 36,250 b/d and free cash flow was $99m before the divvi and they have declared an unchanged divvi of 10c again which as the CEO says puts them on a yield of 20% whilst ‘managing the downside risks’.
Managing the risks as well as setting the strategy for the current environment is how Genel are playing things right now and with the highest netback despite waiting for some delayed KRG payments are very well placed to do so. Plans for this year are to bring on Sarta which has come on very swiftly since our visit and still may be the biggest field in the area while the company are keen to press ahead with Bina Bawi if only the Government would clear the paperwork. Qara Dagh-2 which was scheduled for 2Q 2020 will now also be waiting in the starting blocks all ready to go when the conditions are appropriate.
As I said yesterday this control of the situation is not ‘by chance’, it is a strategy for the current environment and with operating costs per barrel and cash on hand the company has elected to maintain the dividend at a 20% yield which shows enormous confidence and strength. Emissions of 7kg CO2/bbl mean that the company is ‘a socially responsible contributor’ and ticks yet another box. They have acknowledged that they are two months behind on payments but ‘they expect the Government to deliver on this promise’. Overall, holders of Genel can be as happy as is possible at the moment that the company are managing their high quality asset base as well as possible and that includes the downside risk, with plenty more to come with any uptick the 20% yield shows incredible strength.
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