Genel confident in outlook amid strong oil prices

Genel Energy reported total revenue of $334.9m (£257.21m) in its full-year results on Tuesday, up from $159.7m year-on-year.

That came as the average Brent oil price rose to $71 per barrel in 2021 from $42 in 2020.

The London-listed firm said its working interest production was broadly stable in the 12 months ended 31 December at 31,710 barrels of oil per day, compared to 31,980 barrels per day in the prior year.

EBITDAX improved to $275.1m from $114.6m year-on-year, while its operating loss narrowed to $276.8m from $364.5m.

The company swung to a positive free cash flow of $85.9m in 2021, from a negative flow of $4.4m in 2020, and it ended the year with cash of $313.7m, down from $354.5m a year earlier.

Total debt after the settlement of bonds stood at $280m, in line with the prior period, and the company’s net cash at year-end grew to $43.9m from $6.2m.

Underlying earnings per share came in at 25.8 US cents, swinging from losses of 34.2 cents per share for 2020, while the firm’s basic losses per share narrowed to 111.4 cents from 152 cents.

Looking ahead, Genel maintained its production guidance for 2022 at around the same level as the 2021 average, noting that Sarta-1D entered production on 8 March at an initial rate of around 2,500 barrels of oil per day.

The board said it expected free cash flow of more than $250m for 2022, before dividend payments, at a Brent oil price of $90 per barrel, adding that an increase or decrease in Brent of $10 per barrel would impact annual cash flow by around $50m.

Cash flow in 2022 would benefit from 10 Tawke override payments, with the last one set to be paid for production in July.

The company also maintained its 2022 capital expenditure guidance at between $140m and $180m.

Due to the firm’s “robust” financial position and confidence in its future prospects, the board recommended a final dividend of 12 cents per share, up from 10 cents in 2020 and making for a total final distribution of $33.5m.

That would bring ordinary dividends declared for 2021 to 18 cents per share- a total distribution of $50m, and up from 15 cents in 2020.

Should the current oil price strength persist, Genel’s board said it would consider “incremental returns of cash” to shareholders in addition to its material and progressive dividend commitment.

“Our strategy and business model remain focussed on cash generation,” said chief executive officer Bill Higgs.

“Prior to the invasion of Ukraine and the associated increase in the oil price, we were well positioned for our free cash flow to materially increase from $86m in 2021 to around a quarter of a billion dollars this year.

“At the prevailing oil price, and given that there seems no quick resolution to the appalling events unfolding, this figure is expected to increase significantly.”

Higgs said the forecast extent of the company’s cash generation, from an existing position of financial strength, would provide the potential to deliver “significant growth” and further returns to shareholders.

“Our priority is investment in production to maximise the value of our existing assets, and continuing to develop Sarta.

“Given the strong outlook and ongoing cash generation, we have increased our final dividend by 20%, continuing to fulfil our aim of paying a material and progressive dividend.”

At 0909 GMT, shares in Genel Energy were up 1.46% at 152.4p.