Genel revenues slide as pipeline remains closed

(Sharecast News) - Genel Energy reported a significant decline in revenue to $84.8m in its full-year results on Tuesday, from $401.9m in 2022, attributed in part to the average Brent oil price dropping to $82 compared to $101 year-on-year. The London-listed firm said EBITDAX decreased substantially to $32.8m in 2023 from $349.1m, as it swung to an operating loss of $19.2m from a $146.6m profit.

Free cash flow declined to -$71m from $234.8m in the prior year.

Operational highlights included the suspension of the Iraq-Türkiye pipeline since March last year, with ongoing discussions but no clarity on when exports would resume.

However, local sales remained consistent since the end of January, the board reported, with the Tawke production sharing contract (PSC) generating sufficient funds to cover organisational spend.

Furthermore, Genel increased Tawke PSC 2P reserves, maintaining 79 million barrels net to the company at the licence.

The company said it had undertaken significant restructuring efforts, reducing its workforce by 70% and slashing costs across all business areas.

Notably, it exited Sarta and Qara Dagh, resulting in a $19m write-off related to Sarta, while it extended its Somaliland licence until 2026.

Despite financial challenges, Genel said it maintained a strong balance sheet, with cash reserves of $120m at the end of 2023 and total debt reduced to $248m.

The company said it expected to sustain net cash well above $100m throughout 2024.

Looking ahead, potential catalysts for significant shareholder value creation in 2024 included the potential reopening of the ITP, which could boost cash generation, and the pursuit of overdue payments totaling $107m from the Kurdistan Regional Government (KRG) for oil sales.

The company said it would continue to explore opportunities to acquire new assets to enhance and diversify its income streams.

"We have continued the journey that we commenced in 2022 to, firstly, refocus the business on areas where it can be profitable and deliver shareholder value and, secondly, optimise the organisation to create a reshaped and resilient business with the potential for transformational value accretion through several catalysts," said chief executive officer Paul Weir.

"We are a leaner, simplified company that retains clear objectives - generating resilient and sustainable cash flows, diversifying our income through the addition of new assets, and maintaining a strong balance sheet.

"We have reduced our workforce and cut costs significantly, exited the Sarta and Qara Dagh licences, worked with our operating partner to develop a new income stream from local sales, and spent considerable time defending our contractual rights under the Bina Bawi and Miran PSCs, where we invested over $1.4bn before their termination in December 2021."

Weir said those actions meant the company was well-positioned in 2024, with a "reshaped and resilient" business and a strong balance sheet.

"In the absence of value accretive mergers and acquisitions, we expect to maintain net cash of more than $100m even if the suspension of exports continues to the end of the year.

"Genel has established a sound platform from which to spring forward.

"The re-opening of the pipeline has the potential to more than double cash generation."

The company could expect to recover the $107m of overdue receivables, Paul Weir added, saying it had the capacity and intent to acquire new assets.

"On the Miran and Bina Bawi oil and gas assets arbitration, having now completed the evidential hearing, our views on the merits of our case are unchanged since the arbitration was launched in December 2021."

At 1348 GMT, Genel Energy shares were down 1.31% at 82.9p.

Reporting by Josh White for Sharecast.com.