Genel Energy puts in solid performance in 2018

The AIM-traded firm said free cash flow totalled $164m in 2018, improving 66%, representing a free cash flow yield of 27% on the year-end share price.

Unrestricted cash balances as at 31 December were $334m, rising from $162m year-on-year, with net cash standing at $37m, compared to net debt of $135m as at 31 December 2017.

Capital expenditure for 2018 totalled $95m, of which $70m was cost recoverable spend on producing assets.

Genel Energy said 2018 net production averaged 33,690 barrels of oil per day (bopd), with the fourth quarter averaging 36,920 bopd.

Looking ahead, the board said it expected the company to generate “material” free cash flow in 2019, explaining that it generates positive free cash flow at and above an oil price of $20 per barrel.

It said that, in light of Genel’s balance sheet strength and ongoing material cash generation, management was appraising the most effective model for balanced capital allocation in order to take advantage of growth opportunities, make value accretive additions to the portfolio, and pave the way to returning capital to shareholders at the appropriate time.

Combined net production from the Tawke and Taq Taq PSCs during 2019 was expected to be close to fourth quarter 2018 levels.

Capital expenditure net to Genel was forecast to be around $115m, with the majority being cost-recoverable spend on current producing assets.

Capital expenditure would include Tawke and Taq Taq, net to Genel of around $100m; and Bina Bawi and Miran maintenance capex of around $10m.

Genel said there was the potential for that last figure to be updated should there be positive developments on Bina Bawi commercial discussions.

African exploration cost would be below $5m, largely comprising processing costs relating to Moroccan seismic.

Opex for the year was expected to be $30m, with general and administrative expenses to be around $20m.

The company said it was continuing to actively pursue growth, and appraise opportunities to make value-accretive additions to its portfolio.

“2018 was a very positive year for Genel, which saw us generate material free cash flow and further transform the balance sheet,” said chief executive Murat Özgül.

“An expected year-on-year increase in production means we are set to continue this performance in 2019, with low-cost assets forecast to generate over $100m in free cash flow even if the oil price averages $45/bbl.”

Özgül said that, as the firm generated cash, it would continue to invest in the business to maximise the value of its existing portfolio.

“We are also working hard to bring in new assets that are complementary to our cash generation story.

“We are focused on building a stronger company with sustainable and material cash flow and multiple growth opportunities from which to create significant shareholder value.”