Half Yearly Report

RNS Number : 6073K

Genel Energy PLC

23 August 2012

 



23 August 2012

        Genel Energy plc (GENL)

Half Year results for the six months to 30 June 2012

 

Genel Energy plc, the London listed exploration and production company and largest independent oil producer in the Kurdistan Region of Iraq, announces its half year results for the six months to 30 June 2012.

 

Results¹ summary

	H1 2012	H1 2011
Revenue2 ($m)	123.1	-
Profit / (loss) before tax2  ($m)	22.3	(5.7)
Cash flow from operating activities2 ($m)	82.4	(9.5)
Free cash flow2,3 ($m)	5.4	(9.5)
Net cash ($m)	1,829.7	2,038.0
EPS2 (cents per share)	8.19	(48.30)
Production (kbopd, working interest)4	39	41

 

¹ Results are from continuing operations and unaudited

² The Company was incorporated on 1 April 2011 and acquired its first trading business on 21 November 2011.  The reported results and financial statements for the comparative H1 2011 therefore do not include any trading, only corporate and other costs incurred from 1 April 2011 to 30 June 2011.  The reported results and financial statements for H1 2012 include the results of the trading business as well as the corporate and other costs

³ Free cash flow is cash flow from operating activities less capital expenditure

⁴ H1 2011 shows production of GEIL prior to acquisition

Highlights

·    Expanded our position as the leading independent oil and gas producer in the increasingly attractive Kurdistan Region

·    Development plans on track to deliver material production capacity growth at both Taq Taq and Tawke - currently 76,000 bopd (net), targeting 140,000 bopd (net) in 2014 

·    Construction of the new export pipeline infrastructure in the Kurdistan Region underway 

·    Appraisal programme delivering results; Net 2P reserves increased by 14% to 468 mmbbls following significant reserve upgrade at the Tawke field 

·    Significant resource additions acquired in the Kurdistan Region: 44% interest in Bina Bawi  and additional interests in Chia Surkh (40%) and Miran (26%), adding over 500 mmboe of net contingent and prospective resources with significant upside 

·    2012-13 major exploration programme of 7 high impact exploration wells targeting 650 mmboe of unrisked resource potential, proceeding to schedule

·     Established a high impact African exploration portfolio through the acquisition of material positions in Somaliland, Morocco, Cote d'Ivoire and Malta (circa 25,000 km² net exploration acres)

·     Free cash flow positive in the first half, with capital expenditure on the exploration, appraisal and development programme in the Kurdistan Region funded entirely from operating cash flow

·     Good progress in building operating and technical capability

Outlook

·     Average net working interest production for the full year expected to be circa 40,000 bopd, excluding any export sales. Sales revenue guidance for 2012 remains at circa $250-$300 million

·     Continuing progress on the appraisal and development programmes at Taq Taq and Tawke to deliver production capacity growth and resource additions

·     Exploration programme to continue throughout 2012: completion of additional testing on Peshkabir 1 and Ber Bahr 1, key wells to be spudded at Taq Taq Deep, Tawke Deep and Chia Surkh 10

·     Significant cash resources of circa $1 billion (post the Bina Bawi and Miran acquisitions and the Miran loan) available for future acquisitions

·     Pursuing further opportunities to deepen resource potential in the Kurdistan Region at the same time as geographical diversification through the acquisition of a high impact exploration portfolio within the Middle East and Africa

Commenting today Tony Hayward, chief executive, said:

"Genel has had a successful year to date, with strong operational progress across our business, further acquisitions in the Kurdistan Region and early steps taken to develop a high impact African exploration portfolio. We continue to build production capacity at both Taq Taq and Tawke and we are pleased that the construction of the pipeline infrastructure in the Kurdistan Region, which will allow us to more efficiently access the export market, has begun. We continue to add proven reserves as our two producing fields are further appraised and our high impact Kurdistan exploration programme is progressing to plan with considerable activity planned through the second half and into 2013.

With the Bina Bawi and Miran acquisitions, we have reaffirmed our position as the leading oil and gas company in the Kurdistan region and at the same time we have expanded our footprint with the acquisition of our first exploration licences in Africa. With our operations in the Kurdistan Region self-financing, we have circa $1billion available to invest in new opportunities and are actively exploring a number of compelling opportunities in the Middle East and Africa."

Enquiries:

Genel Energy                                                                                                                                    [phone]

Julian Metherell, Chief Financial Officer                                                             

Natalie Fortescue, Investor Relations

M: Communications                                                                                                                       [phone]

Patrick d'Ancona                                                             

Andrew Benbow

There will be a conference call for analysts and investors today at 14:00pm GMT, with an associated presentation available on the company's website at www.genelenergy.com.

Operating review

Overview

Genel Energy places the highest priority on safe and reliable operations and there have been no fatalities or Lost Time Injuries (LTIs) in the first half of 2012.

The steady performance of our producing assets has allowed the Company to continue its programme of exploration, appraisal and development of existing assets in the Kurdistan Region.

Revenue for the first half of 2012 of $123.1 million was generated entirely from domestic sales at $55-60 per barrel resulting in operating cash flow of $82.4 million and a profit before tax of $22.3 million.   Capital expenditure of $77.0 million in the first half was funded entirely from operating cash flow resulting in free cash flow for the period of $5.4 million. As of 30 June 2012 the Company had funds of $1.8 billion, and has circa $1billion available post Bina Bawi and Miran acquisitions and the Miran loan.

Production and Development

Genel Energy's net working interest production for the first half of the year averaged 39,000 bopd, compared to 41,000 bopd in the corresponding period in 2011. As previously reported, on 1 April 2012 the Kurdistan Regional Government (KRG) instructed contractors operating in the Kurdistan Region to halt the export of crude oil. Consequently there have been no exports from either of the Company's two producing fields, Taq Taq and Tawke, since then. This contrasts to the first half of 2011, when Genel Energy was exporting.  If there are no export sales for the rest of the year, average daily production for the full year is expected to remain at circa 40,000 bopd.

On 1 August, the KRG announced that oil exports from the region would recommence in the first week in August. Total exports from the Kurdistan Region commenced initially at 100,000 bopd for a month, and if payments are forthcoming this could increase to 200,000 bopd. The KRG have said that the resumption of exports is a goodwill gesture and that they hope that the federal government responds favourably by making all outstanding payments due to the International Oil Companies and implementing measures previously agreed between the KRG and the Federal Government.

As part of the continuing process of normalising terms in the Kurdistan Region, Genel Energy has reached agreement with the KRG to apply the fiscal terms and conditions of the existing Production Sharing Contract (PSC) covering the Taq Taq licence, replacing the temporary arrangements previously in place. As part of the agreement a reconciliation of past accounts and application of contract fiscal terms has been agreed. A similar exercise was agreed by DNO international (DNO), the operator of the Tawke field. Neither of these agreements have had a material impact on Genel Energy's sales and the Company expects overall revenues for the year to remain unchanged at $250 - $300m. The reconciliation calculations do not include outstanding payments due to contractors for export sales made through the Iraqi pipeline system in 2009 and again in 2011-12. When these payments are made, Genel Energy will receive its pro rata share as provided for under the PSC.   

Taq Taq (44% working interest, Operator)

Gross production from the Taq Taq field has averaged 66,000 bopd in the period under review compared to 64,000 bopd in the first half of 2011. Gross 2P reserves are 647 mmbbls, 285 mmbbls net to Genel Energy. During the period the Company has continued to progress the appraisal and development programme. Gross production capacity is currently 130,000 bopd and remains on track to deliver production capacity of 200,000 bopd by 2014.

Field development drilling has continued in the period with 2 of the 5 wells planned for 2012 completed. Taq Taq 17 drilled to a depth of 2,300 metres and flowed at a cumulative rate of circa 26,000 bopd from multiple, independently tested zones. The well, which cost less than $7 million, is now connected to the existing processing facilities.

The Taq Taq 19 development well which was drilled to a depth of 2,330 metres, penetrated a 300 metre gross oil column in the upper Cretaceous Shiranish formation in line with prognosis and is currently being evaluated.

The tender process for the second phase of construction of the central processing facility is complete and the construction work will start shortly. It is planned to be operational in the second half of 2013, adding an additional 90,000 bopd processing capacity. Other facility and infrastructure upgrades on Taq Taq are ongoing.

Pipeline update

In response to continued industry exploration success, the KRG recently announced its pipeline infrastructure plans for the Kurdistan Region, in order to facilitate the export of its crude oil production via the construction of a new one million bopd capacity pipeline to the Turkish border. 

The first phase, which is almost 50 per cent compete, is the construction of a 20" pipeline from the Taq Taq oilfield to Khurmala giving Taq Taq  access to the Erbil refinery and the existing Kirkuk to Ceyhan export infrastructure. KAR Group, the private Kurdish construction company, is building the pipeline, which has an initial capacity of 150,000 bopd that may be increased to some 200,000 bopd with the addition of pumps. It is expected to be mechanically complete by the end of September and operational in the fourth quarter of 2012. The second phase, which is expected to complete by the end of 2013, is the construction of a one million bopd capacity pipeline from Khurmala to the Fishkabur pump station on the border with Turkey.

As a consequence of the construction of the pipeline, Genel Energy will not be pursuing its previously announced plans to develop the Kurdistan Iraq Crude Export (KICE) pipeline.

Tawke (25% working interest)                  

Gross production from the Tawke field has averaged 39,000 bopd in the first half of 2012 compared to 53,000 bopd in the same period of 2011.

As with Taq Taq, Genel Energy and the operator of the field DNO have continued to progress the development and appraisal programme at Tawke and are on track to deliver gross production capacity of 100,000 bopd by the end of 2012 and 200,000 bopd in 2014.

Gross 2P reserves at Tawke have been significantly upgraded in the period and now stand at 734 mmbbls, 184 mmbbls net to Genel Energy. In January 2012 the Company upgraded gross 2P reserves by 78 per cent to 509 mmbbls following a new reserves audit carried out by DeGolyer & McNaughton. In addition, as previously announced, the successful completion and testing of Tawke 16 added significant potential new reserves to the field. Tawke 16 was drilled at a location north of what was interpreted to be the northern reservoir boundary based on early seismic. It flowed at a cumulative rate in excess of 25,000 barrels per day of 26-27º API gravity oil from multiple, independently tested zones. This resulted in a further upgrade to the gross 2P reserves of 44 per cent to 734 mmbbls, announced by DNO and verified by DeGolyer & MacNaughton in May 2012. The well is connected to the existing pipeline and processing facilities. 

At the start of the year Tawke had 13 producing wells and production capacity of 75,000 bopd. The planned 2012 development drilling programme of 3 wells in addition to Tawke 16, is on track.  Tawke 14 which spudded on the 13 March, drilled through the main field bounding fault and entered the Tertiary Gercus formation. The well will be side-tracked following the drilling of Tawke 19.

Tawke 18 spudded on the 28 May and is currently drilling ahead approximately two thirds of the way to the planned total depth of circa 3000 metres. The well is designed to add additional production from the cretaceous towards the 100,000 bopd target for the end of 2012. The well will also test an exploration target below the main field bounding fault.

A workover operation was completed on the Tawke 15 well drilled in 2011. The well has now tested 7,000 bopd and has been connected to the existing pipeline and processing facilities. 

The upgrade of the processing facilities and pipeline capacity planned for 2012 is on schedule.

Exploration and Appraisal

Exploration

Genel Energy's current exploration programme comprises seven high impact wells to be completed during the second half of 2012 and the early part of 2013 targeting over 650 mmboe of unrisked resource potential. This is by far the largest and most widespread exploration programme being conducted by anyone in the Kurdistan Region. During the first half of 2012, 2 of the 7 wells (Ber Bahr 1 and Peshkabir 1) have completed and are subject to further testing and evaluation, and one other well (Miran East 1) spudded. One further well (Kewa Chirmila) has spudded since the half year and preparations are underway to spud 3 more exploration wells (Tawke Deep, Taq Taq Deep and Chia Surkh 10) before the year end.

Ber Bahr 1

As previously announced, the Ber Bahr 1 well completed drilling and initial testing during the period under review. The well was drilled to 3933m in the Chia Zairi formation. The well encountered a 300m oil column in the Jurassic with matrix porosity of 17%. Two drill stem tests over the interval failed to flow and yielded inconclusive results, with evidence of perforations plugged with heavy oil. The well has been temporarily suspended while a work over rig is moved to the location to conduct an extended well test. Further evaluation with the right flow test equipment is required to determine the commercial viability of the well.  Results are expected in the fourth quarter.

Peshkabir 1

During the period Genel Energy and the operator DNO completed the testing of the Peshkabir 1 well. The well was drilled to a total depth of 4,092 meters and targeted a large undrilled feature west of the currently producing Tawke field. Oil shows were encountered in the Cretaceous, Jurassic and Triassic intervals and six zones were tested. The Jurassic Sargelu formation tested 27-29 API oil and rates of up to 1,395 bopd with variable oil and water cut. The Triassic Kura Chine A and B intervals and the Cretaceous Mushora, Quamchuqa and Shiranish intervals produced formation water.

A detailed evaluation of the results of the well is now being undertaken, including the acquisition of approximately 200 square kilometres of 3-D seismic which is anticipated to be complete by the end of the year. The Peshkabir-1 well has been temporarily suspended for re-entry in late 2012/early 2013.

The operator DNO submitted a discovery notice to the KRG in respect of Peshkabir pursuant to the terms of the production sharing contract covering the Tawke license.

Miran East 1

The Miran East-1 exploration well, which is being drilled on the 'eastern structure' adjacent to the Miran gas discovery, spudded in March 2012 with an estimated target depth of c 4,000 metres. The well is targeting exploration potential within the Cretaceous and Jurassic reservoir intervals to the east of the current discovery. The well is currently at 3,700 metres in the main Jurassic reservoirs and is on schedule to reach target depth by November. Oil shows encountered while drilling in the Upper Cretaceous are consistent with wireline log interpretation indicating the presence of hydrocarbons and pressure data indicates that the structure is in communication with the existing discovery. 

Kewa Chirmila

The Kewa Chirmila well spudded on 4 August. It is currently drilling at circa 300 metres and is testing a shallow Tertiary Pilaspi formation prospect immediately to the south of Taq Taq. It will complete the Company's work programme obligations on the Taq Taq and Kewa Chirmila licence. Results are expected in the fourth quarter.

Tawke Deep

The Tawke Deep well (Tawke 17) is expected to spud in September and is testing the Jurassic and Triassic reservoirs that have yet to be penetrated in the Tawke licence. Gross pre drill unrisked resource is estimated at circa 200 mmboe. Results are expected in the first quarter of 2013.

Chia Surkh

Genel Energy completed the acquisition of an additional 40 per cent of the Chia Surkh exploration block on the 1st May. As a result the Company owns 60 per cent of the block and has assumed operatorship. The first exploration well Chia Surkh 10 is expected to spud in September 2012. The well will be drilled to a target depth of 2,500 metres and is designed to test the entire Miocene to Eocene section. A well drilled in the early 1950s on the same structure tested 41 API oil at rates of circa 4,500 bopd. The pre drill gross un-risked resource estimate is circa 300 mmboe.

Taq Taq Deep

The Taq Taq Deep well which is expected to spud before the end of the year will test the Jurassic and Triassic reservoirs in the Taq Taq structure. A well drilled in the mid-1970s on Taq Taq tested gas from the Jurassic/Triassic interval. The pre drill gross un-risked resource estimate is circa 250 mmboe.

Appraisal

Miran

Genel Energy completed its acquisition of an additional 26% interest in the Miran exploration block for $156m on 22 August 2012 and has become joint operator.

The appraisal programme for the Miran West discovery has continued during the first half of 2012. The Miran West-3 well which spudded in August 2011, was drilled to a total depth of 3,528 metres.  Testing of the main Jurassic reservoir resulted in a constrained flow of up to 22 MMscf/d of wet gas and a yield of 20 bbl/MMscf of 55 degree API condensate. The current operator Heritage Oil plc ("Heritage Oil") estimates that this well will be capable of delivering 50 MMscf/d of wet gas and 1,000 bbl/d condensate when put into production. The well has been suspended pending completion as a production well.

The Miran West-4 deviated appraisal well spudded on 21 June 2012 and reached target depth on 16 July. This is the fifth well drilled on the Miran field and the fourth on the Western structure. The well was drilled to a target depth of 1,905 metres and tested 1,350 bopd of 16-18 degree API oil in the Upper Cretaceous oil reservoir similar to Miran West 1 and Miran West 3.  Heritage Oil is carrying out an extended well test of the oil bearing reservoirs.

Dohuk

The Summail-1 well completed at the end of 2011 discovered gas in the cretaceous Shiranish, Mushorah and Qamchuga formations and heavy oil in the Jurassic Sargelu, Chia Gara and Adaiyah formations. A 3D seismic survey has been completed and results are being evaluated by Genel Energy and the operator DNO.  Preparations are in progress to submit the Declaration of Commerciality and Appraisal Report to the KRG by 15 October.

Bina Bawi

The Company completed its acquisition of a 23 per cent stake in the Bina Bawi exploration licence for $175 million on 3 August and of a further 21 per cent interest for $240 million on the 20 August, bringing the Company's interest in Bina Bawi to 44 per cent. The Bina Bawi licence lies adjacent to the Taq Taq field and two of the three wells drilled on the block to date have encountered significant hydrocarbons.

The third well, Bina Bawi-3, was completed by the operator OMV in the first half of 2012. The well encountered a gross hydrocarbon column of more than 800 metres in the Jurassic zone and two Jurassic reservoir intervals tested separately achieved an aggregate flow rate of more than 4,000 barrels a day of light, 44 to 47-degree API oil. A further gross hydrocarbon column, estimated at over 1,000 metres, in the Triassic zone of Bina Bawi-3, remains untested but confirmed the gas find made in Bina Bawi-1 in 2007. The overall results of Bina Bawi-3 continue to be reviewed, including the evaluation of deeper potential targets in the Triassic reservoirs. The Bina Bawi discovery is estimated to contain contingent resources of between 500 million and 1 billion boe.

The field will be further appraised by two wells in the second half of 2012 and the first half of 2013. Bina Bawi-4 in the north of the field spudded on 17 June 2012 and is currently drilling at circa 1,500 metres with a target depth of circa 4,200 metres. The well is designed to test the Jurassic, Triassic and Permian reservoirs with results expected in the first quarter of 2013. Bina Bawi-5 will spud in the fourth quarter and is targeting the Jurassic and Triassic reservoirs. An extended well test is planned for early 2013.

Strategy Update

Genel Energy is committed to building a major E&P company over the next 3 to 5 years.   As the leading oil producer in the Kurdistan Region of Iraq with a portfolio of world-class production assets and exploration opportunities, the Company has a strong platform with which to pursue its growth. In order to deliver on its strategy Genel Energy intends to:

·     Expand our leading position in the Kurdistan Region by executing the aggressive development, appraisal and exploration programmes  currently underway, and by selectively adding to the existing acreage through value enhancing acquisitions

·     Diversify the portfolio geographically by targeting material opportunities in a focused set of frontier exploration plays in the Middle East and Africa

·     Extend the life of the Company's exploration portfolio so as to balance the Kurdistan appraisal and development programme with opportunities to add significant value through the drill bit

·     Acquire material equity positions in high quality exploration opportunities targeting more than 250 mmbbls of gross recoverable reserves and where the Company can obtain a sufficient depth of exposure to the hydrocarbon basin

As part of delivering this strategy, Genel Energy intends to continue to execute the development, appraisal and exploration programmes in the existing Kurdistan business on a cash flow neutral basis. This will allow the Company to use its significant cash resources of circa $1billion (post  Bina Bawi and Miran acquisitions and the Miran loan), to acquire new opportunities in the Middle East and Africa, as well as adding to the existing assets in the Kurdistan Region. Good progress has been made in the first half of the year.

Genel Energy has added to its existing portfolio in the Kurdistan Region with the acquisition of a 44 per cent interest in the Bina Bawi light oil and gas discovery, an additional 40 per cent interest in the Chia Surkh exploration licence and a further 26 per cent stake in the Miran block containing a commercial gas discovery.

The Company has also acquired its first interests outside of the Kurdistan Region through a combination of small scale corporate acquisitions, farm-ins and license activity, including the farm-ins to the Sidi Moussa Block, offshore Morocco and Area 4, offshore Malta announced this morning. The African portfolio now consists of two blocks in Somaliland (gross 18,332 km2, net 13,749 km2), two blocks in Morocco (gross 13,230 km2, net 6,677 km2), four blocks in Malta (gross 5,715 km2, net 4,286 km2), and one block in Cote d'Ivoire (gross 1,060 km2, net 254 km2). These assets constitute the first steps in building a portfolio of high impact exploration assets within the Middle East and Africa.

The Company has secured opportunities in three specific geological trends where we believe that there are opportunities to make material new discoveries: the rift basins of central and east Africa , the extension of the Libyan Sirte basin into Malta, and the Jurassic carbonate and submarine fan plays of northwest Africa. The Company intends to provide a strategy update on the 10th October, providing more details on the new acreage acquired in Africa and the planned work programme to deliver the African strategy.

Outlook

Average daily production for the full year is expected to remain at circa 40,000 bopd if there are no export sales.  Sales revenue guidance for the year remains at circa $250-300 million. However, if exports from the Kurdistan Region which resumed at the beginning of August were to  continue throughout the remainder of 2012, average daily production will be higher than the circa 40,000 bopd currently expected.

The development programmes at Taq Taq and Tawke and exploration and appraisal in the Kurdistan Region, will continue throughout the second half of 2012.  The programme includes the wells designed to test the deeper Jurassic and Triassic reservoirs on both Taq Taq and Tawke, the first exploration well on the Chia Surkh exploration licence and the completion of additional testing on Peshkabir 1 and Ber Bahr 1.

The Company plans to continue to evaluate opportunities to acquire additional acreage in the Kurdistan Region, the Middle East and Africa and to continue to build the technical capability to deliver our strategy.

Finance review

Results¹ summary

	H1 2012	H1 2011
Revenue2 ($m)	123.1	-
Operating profit / (loss)2 ($m)	17.8	(5.9)
Profit / (loss) before tax2 ($m)	22.3	(5.7)
EPS (cents)2	8.19	(48.30)
Cash flow from operating activities2 ($m)	82.4	(9.5)
Capex2 ($m)	77.0	-
Free cash flow2,3 ($m)	5.4	(9.5)
Net cash ($m)	1,829.7	2,038.0
Net assets ($m)	3,866.2	2,027.4

¹ Results are from continuing operations and unaudited

² The Company was incorporated on 1 April 2011 and acquired its first trading business on 21 November 2011.  The reported results and financial statements for H1 2011 therefore do not include any trading, only corporate and other costs incurred from 1 April 2011 to 30 June 2011.  The reported results and financial statements for H1 2012 include the results of the trading business as well as the corporate and other costs.

³ Free cash flow is cash flow from operating activities less capital expenditure

Financial Strategy

We fund our exploration and development programme in the Kurdistan Region principally from existing production and seek to deploy our cash resources to make appropriate value accretive acquisitions.

Acquisitions

On 1 May 2012, the Company increased its interest in the Chia Surkh block in the Kurdistan Region from 20% to 60% for a total consideration of $68m.

On 14 May, the Company acquired Barrus Petroleum Limited, an exploration company with assets in Morocco and Cote d'Ivoire for a total consideration of $27.7m, with $5m of this deferred and contingent on the successful acquisition of further assets.

On 3 August 2012, the Company completed the acquisition of a 23% stake in the Bina Bawi block in the Kurdistan Region through the acquisition of all of the share capital of A&T Petroleum Company Ltd (a subsidiary of Petoil Petroleum and Petroleum Products International Exploration and Production Inc.), the holder of the stake. The total consideration was $174.5m. On 20 August, the Company completed the acquisition of a further 21% in the Bina Bawi block from Hawler Energy Ltd for $240m. Following these acquisitions the Company's total interest in Bina Bawi is 44%.

On 21 August 2012, the Company announced the acquisition of an additional 26% interest in the Miran exploration block in the Kurdistan Region from Heritage Energy Middle East Limited ("HEME"), a wholly owned subsidiary of Heritage Oil Plc ("Heritage"), for $156m. In addition, the Company will provide a bilateral loan of $294m to Heritage, secured on Heritage's shares in HEME as well as HEME's remaining working interest in the Miran block. Either party to the loan can elect, subject to approval from Heritage's shareholders, for the loan to be repaid through the transfer to Genel Energy of Heritage's entire holding of shares in HEME rather than in cash.

Result for the period

The Group reported an operating profit for the period of $17.8m and profit before tax of $22.3m. Comparisons with the prior period are not meaningful because the Company was incorporated on 1 April 2011 and acquired its first trading business on 21 November 2011. 

Revenue

Revenue for the period amounted to $123.1m, all of which was derived from domestic sales at an average price of $55-60/bbl.  Consistent with other contractors in the Kurdistan Region, no cash has been received from the Iraqi Government for export sales made in the period and consequently no revenue has been recognised in relation to these. Export sales were stopped in April 2012 because of this non-payment.

Operating costs

Cost of sales, which included the costs for export production for which no revenue has been recognised, amounted to $86.5m. This is comprised of depletion and depreciation charges of $67.6m and production costs of $18.9m.  

Other operating costs amounted to $18.8m for the period and include start-up or non-recurring costs of some $5m relating to the establishment of the Group and prior year listing costs. The total of $18.8m consists of $0.4m of pre-license exploration costs relating to our new African operations, listing, start-up and M&A activity of $9.3m and General and other costs of $8.6m. Other operating costs in H1 2011 amounted to $5.9m and related almost entirely to the formation of the new group.

Finance income

Interest income of $4.5m includes interest received and receivable on its average cash balance of $1.9bn reflecting an average rate slightly under 50 basis points. At the end of July in order to reduce counterparty credit risk, the Group transferred the majority of its cash into US Treasury bills which return a lower yield. Finance income in the same period last year amounted to $0.2m.

Taxation

Consistent with last year, no gross up of revenue to reflect taxation paid on behalf of the Company by the KRG has been presented because the quantum of taxation paid is not known. There is no unaccrued cash out flow expected in relation to tax.

Capital expenditure

Capital expenditure in the period amounted to $77.0m, including $30.6m on oil and gas assets and $45.5m on exploration and evaluation assets. More than half of the total spend was at the Taq Taq block. No capital expenditure was incurred in the same period for the prior year.

Share capital and retained earnings

On 20 January 2012, the founders of the Company exercised their right to exchange their non-controlling interest shares in a subsidiary of the Group for shares in the parent company. This has resulted in a reduction of $23m in non-controlling interest, an increase of $253m in share capital and premium and a decrease in retained earnings by the balance of $230m.

Cash flow and net cash

Total cash outflow for the period to 30 June 2012 was $83.2m consisting of a cash inflow from operations of $82.4m and outflows in respect of capital expenditure of $77.0m and acquisition of businesses and license interests of $88.6m. Total cash flow in the prior period was $2,038m primarily as a result of net inflows from the initial public offering.

At 30 June 2012, the Group's net cash was $1,829.7m. The Group's operations in the Kurdistan Region will continue to be run on a largely cash neutral basis.

Dividend

Group strategy is to deploy cash reserves to acquire, explore and develop assets and consequently no interim dividend will be paid or is expected to be paid in the near future.

Cash / counterparty risk management

The Group monitors its cash position, cash forecasts and liquidity on a regular basis. At 30 June 2012 cash was held in time deposits with banks with a minimum credit rating of AA-. Some $1bn of these balances were moved to US treasury bills in late July 2012 following a decision to further reduce the Group's cash management risk profile.

Going Concern

The Directors have assessed that the cash balance held provides the Group with adequate headroom over forecast operational and potential acquisition expenditure for the 12 months following the signing of the half year financial statements for the period ended 30 June 2012 for the Group to be considered a going concern.

Principal risks and uncertainties

The Group is exposed to a variety of principal risks and uncertainties: commercial risks, political risks, HSSE risks and legal and regulatory risks.

The half year financial report does not include details of the principal risks and uncertainties required in the annual financial statements; the half year financial report should be read in conjunction with the Group's annual financial statements for the period ended 31 December 2011. A detailed explanation of the principal risks and uncertainties can be found on pages 42 and 43 of the Annual Report for the period ended 31 December 2011. There have been no significant changes in any of the principal risks and uncertainties since year end.

Responsibility statement of the directors

The Directors confirm that these condensed half year consolidated financial statements have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union and that the half year management report includes a fair view of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·      an indication of important events that have occurred during the six months ended 30 June 2012 and their impact on the condensed half year consolidated financial statements, and a description of the principal risks and uncertainties for the remaining period of the financial year; and

·      material related-party transactions in the six months ended 30 June 2012 and any material changes in the related-party transactions described in the last annual report .

The Directors of Genel Energy plc are listed in the Genel Energy Annual Report and Accounts for 31 December 2011. A List of the current Directors is maintained on the Genel Energy plc website: www.genelenergy.com

By Order of the Board

Tony Hayward

CEO

23 August 2012

Forward looking statements

This announcement contains statements that are, or may be, forward-looking regarding the group's financial position and results, business strategy, plans and objectives. Such statements involve risk and uncertainty because they relate to future events and circumstances and there are accordingly a number of factors which might cause actual results and performance to differ materially from those expressed or implied by such statements. Forward-looking statements speak only as of the date they are made and no representation or warranty, whether expressed or implied, is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Other than in accordance with the Company's legal or regulatory obligations (including under the Listing Rules and the Disclosure and Transparency Rules), the Company does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. Information contained in this announcement relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance. Nothing in this announcement should be construed as a profit forecast.

Condensed consolidated statement of comprehensive income

	Notes	6 months to 30 June  2012	Period to 30 June 2011	Period to  31 December 2011
		$m	$m	$m
Revenue	4	123.1	-	24.0
Cost of sales		(86.5)	-	(21.4)
Gross profit		36.6	-	2.6
Other operating costs	5	(18.8)	(5.9)	(65.1)
Operating profit / (loss)		17.8	(5.9)	(62.5)
Finance income		4.5	0.2	4.8
Profit / (loss) before income tax		22.3	(5.7)	(57.7)
Income tax expense		-	-	-
Profit / (loss) for the period		22.3	(5.7)	(57.7)
Other comprehensive items		-	-	-
Total comprehensive income / (loss) for the period		22.3	(5.7)	(57.7)
Attributable to:
Equity holders of the company		22.3	(5.7)	(57.7)
		22.3	(5.7)	(57.7)
Earnings / (loss) per ordinary share attributable to the ordinary equity holders of the company
Basic earnings/ (loss) per share - cents per share	6	8.19	(48.30)	(72.34)
Diluted earnings / (loss) per share - cents per share	6	8.18	(48.30)	(72.34)

All amounts shown relate to continuing operations.

Condensed consolidated balance sheet

	Notes	At 30 June  2012	At 30 June 2011	At 31 December 2011
		$m	$m	$m
Assets
Non-current assets
Intangible assets	7	373.0	-	227.7
Property, plant and equipment	8	1,812.2	-	1,848.4
		2,185.2	-	2,076.1
Current assets
Inventories		0.1	-	0.1
Trade and other receivables		6.2	4.0	14.1
Cash and cash equivalents	9	1,829.7	2,038.0	1,912.9
		1,836.0	2,042.0	1,927.1
Total Assets		4,021.2	2,042.0	4,003.2
Liabilities
Non-current liabilities
Deferred income		(67.1)	-	(68.8)
Provisions		(10.6)	-	(9.4)
		(77.7)	-	(78.2)
Current liabilities
Trade and other payables		(71.9)	(14.6)	(77.8)
Deferred income		(5.4)	-	(5.4)
		(77.3)	(14.6)	(83.2)
Total liabilities		(155.0)	(14.6)	(161.4)
Net assets		3,866.2	2,027.4	3,841.8
Equity attributable to equity holders of the parent
Share capital	10	43.8	20.5	40.9
Share premium account		4,074.2	1,981.1	3,824.2
Retained earnings		(259.6)	(5.5)	(54.6)
Total shareholders' equity		3,858.4	1,996.1	3,810.5
Non-controlling interest		7.8	31.3	31.3
Total equity		3,866.2	2,027.4	3,841.8

Condensed consolidated Statement of Changes in Equity

	Share capital	Share premium	Retained earnings	Total attributable to equity holders	Non-controll- ing interest	Total equity
	$m	$m	$m	$m	$m	$m
At 1 April 2011	-	-	-	-	-	-
Comprehensive loss for the period	-	-	(5.7)	(5.7)	-	(5.7)
Transactions with shareholders:
Shares issued on Initial public offer	20.5	2,022.7		2,043.2	-	2,043.2
Costs associated with admission to the London Stock exchange2		(41.6)		(41.6)	-	(41.6)
Issue of founder shares					23.5	23.5
Issue of founder securities					7.8	7.8
Share based payment transactions			0.2	0.2	-	0.2
At 30 June 2011	20.5	1,981.1	(5.5)	1,996.1	31.3	2,027.4
At 1 April 2011	-	-	-	-	-	-
Comprehensive loss for the period	-	-	(57.7)	(57.7)	-	(57.7)
Transactions with shareholders:
Shares issued on Initial public offer	20.5	2,022.7	-	2,043.2	-	2,043.2
Shares issued on acquisition1	20.4	1,843.1	-	1,863.5	-	1,863.5
Costs associated with admission to the London Stock exchange2	-	(41.6)	-	(41.6)	-	(41.6)
Issue of founder shares	-	-	-	-	23.5	23.5
Issue of founder securities	-	-	-	-	7.8	7.8
Share based payment transactions	-	-	3.1	3.1	-	3.1
At 31 December 2011	40.9	3,824.2	(54.6)	3,810.5	31.3	3,841.8
At 1 January  2012	40.9	3,824.2	(54.6)	3,810.5	31.3	3,841.8
Comprehensive income for the period	-	-	22.3	22.3	-	22.3
Transactions with shareholders:
Issue of shares to founders on exercise of their rights	2.9	250.0	(229.4)	23.5	(23.5)	-
Issue of shares to directors under share matching award scheme	-	-	2.1	2.1	-	2.1
At 30 June 2012	43.8	4,074.2	(259.6)	3,858.4	7.8	3,866.2

¹Shares issued on the acquisition of Genel Energy International.

²Legal, banking, accounting costs associated with the initial share issue.

Condensed consolidated cash flow statement

	Notes	6 months to 30 June  2012	Period to 30 June 2011	Period to  31 December 2011
		$m	$m	$m
Cash flows from operating activities
Cash generated from operations	11	78.7	(9.7)	(27.9)
Interest received		3.7	0.2	4.5
Net cash from operating activities		82.4	(9.5)	(23.4)
Cash flows from investing activities
Purchase of property, plant and equipment		(31.4)	-	(6.1)
Purchase of intangible assets		(45.6)	-	(10.7)
Acquisition of businesses and licences	12	(88.6)	-	75.9
Net cash from investing activities		(165.6)	-	59.1
Cash flows from financing activities
Net proceeds from the issue of share capital		-	2,047.5	2,032.9
Repayment of acquired subsidiary loans		-	-	(155.7)
Net cash from financing activities		-	2,047.5	1,877.2
Net increase in cash and cash equivalents		(83.2)	2,038.0	1,912.9
Cash and cash equivalents at the beginning of the period		1,912.9	-	-
Cash and cash equivalents at period end		1,829.7	2,038.0	1,912.9

 

The company's acquisition of GEIL was funded by means of an issue of new ordinary shares valued at $1,863.5 million (130,632,522 shares at 912 pence per share) of Genel Energy plc

1. General Information

The company is a limited liability company incorporated and domiciled in Jersey with a listing on the London Stock Exchange.

The address of its registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT.

The condensed half year consolidated financial statements for the half year to 30 June 2012 were approved for issue on 23 August 2012.

These condensed half year consolidated financial statements do not comprise statutory accounts within the meaning of Article 105 of the Companies (Jersey) Law 1991. The annual financial statements for the period ended 31 December 2011 were approved by the board of directors on 3 April 2012. The report of the auditors was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under the Companies (Jersey) Law 1991

2. Basis of preparation

These condensed half year consolidated financial statements for the six months ended 30 June 2012 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' and as adopted by the European Union.

The condensed half year consolidated financial statements should be read in conjunction with the annual financial statements for the nine months ended 31 December 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.  The comparative period is for the three months ended 30 June 2011, from 1 April 2011, being the date of formation of the company.

The Directors have, at the time of approving the condensed half year consolidated financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, the Group continues to adopt the going concern basis of accounting in preparing the condensed half year consolidated financial statements.

The interim information for the six month period to 30 June 2012 and three months to 30 June 2011 is unaudited. The information for the nine months to 31 December 2011 has been extracted from the audited accounts.

3. Accounting Policies

The accounting policies adopted are consistent with those of the annual financial statements for the period ended 31 December 2011, as described in those financial statements.

The preparation of the condensed half year consolidated financial information for the half-year ended 30 June 2012 requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of the statement. If in the future such estimates and assumptions, which are based on management's best judgement at the date of the statement, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.

Significant seasonal or cyclical variations in the group's total revenues are not experienced during the financial year.

There were no significant changes in the nature and amount of estimates and contingent assets and liabilities reported since the published Annual Report and Accounts.

There are no new standards and amendments to standards as adopted by the European Union at 30 June 2012 which are mandatory for the first time for the financial year beginning 1 January 2012 and which have a significant impact on the group.

Estimates

The preparation of condensed half year consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from the estimates.

In preparing these condensed half year consolidated financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as these that applied to the consolidated financial statements for the period ended 31 December 2011.

Financial risk factors

The group's activities expose it to a variety of financial risks: credit risk, currency risk, interest risk and liquidity risk. The condensed half year consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the group's annual financial statements as at 31 December 2011. There have been no significant changes in any risk management policies since year end.

4. Segmental information

The Group has one reportable business segment which is its oil and gas exploration and production business in the Kurdistan Region. Capital expenditure decisions for the segment are considered in the context of the cash flows expected to be made from the production and sale of crude oil. Activities such as administration and finance income are not considered part of the business segment and form part of the reconciliation to the reported numbers.

6 months ended 30 June 2012

	Kurdistan	Other	Total Reported
	$m	$m	$m
Revenue	123.1	-	123.1
Cost of sales	(86.5)	-	(86.5)
Gross profit	36.6	-	36.6
Other operating costs	-	(18.8)	(18.8)
Operating profit	36.6	(18.8)	17.8
Finance income	-	4.5	4.5
Profit before tax	36.6	(14.3)	22.3
Capital expenditure	76.1	0.9	77.0
Total assets	2,246.2	1,775.0	4,021.2
Total liabilities	(144.0)	(11.0)	(155.0)
Revenue from export sales			-
Revenue from domestic sales			121.2
Other income			1.9
			123.1

Period ended 30 June 2011

	Kurdistan	Other	Total Reported
	$m	$m	$m
Revenue	-	-	-
Cost of sales	-	-	-
Gross profit	-	-	-
Other operating costs	-	(5.9)	-
Operating loss	-	(5.9)	-
Finance income	-	0.2	-
Loss before tax	-	(5.7)	-
Capital expenditure	-	-	-
Total assets	-	2,042.0	-
Total liabilities	-	(14.6)	-
Revenue from export sales			-
Revenue from domestic sales			-
			-

4. Segmental information (continued)

Period ended 31 December 2011

	Kurdistan	Other	Total Reported
	$m	$m	$m
Revenue	24.0	-	24.0
Cost of sales	(21.4)	-	(21.4)
Gross profit	2.6	-	2.6
Other operating costs	-	(65.1)	(65.1)
Operating profit	2.6	(65.1)	(62.5)
Finance income	-	4.8	4.8
Profit before tax	2.6	(60.3)	(57.7)
Capital expenditure	14.9	1.9	16.8
Total assets	2,154.3	1,848.9	4,003.2
Total liabilities	(127.2)	(34.2)	(161.4)
Revenue from export sales			-
Revenue from domestic sales			24.0
			24.0

Export sales of crude oil are made through the national Iraqi marketing company, SOMO, an entity owned and controlled by the Iraqi Government of Iraq. SOMO is responsible for the marketing and sales of all export crude volumes in Iraq. SOMO remits funds to the KRG on a periodic basis for payment to contractors. Payments received from the KRG for export sales are recognised on a cash receipts basis.

5. Other operating costs

 

 

	6 months to 30 June  2012	Period to 30 June 2011	Period to  31 December 2011
	$m	$m	$m
Pre License exploration costs	0.4	-	-
Listing costs, M & A activity and start-up costs	9.3	5.6	59.3
General and other costs	8.6	0.3	5.5
Foreign exchange	0.5	-	0.3
	18.8	5.9	65.1

 

 

6. Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of shares in issue during the period.

	6 months to 30 June  2012	Period to 30 June 2011	Period to  31 December 2011
Profit / (loss) for the period attributable to equity holders of the  company - $ million	22.3	(5.7)	(57.7)
Weighted average number of ordinary shares - number	272,131,122	11,875,686	79,830,987
Basic earnings per share - cents per share	8.19	(48.30)	(72.34)

Diluted

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to include all potential dilutive ordinary shares. The group has five types of potential dilutive ordinary shares:

-  shares issued to directors under the share matching award

-  share options granted to employees under the group's Share Option Plan, where the exercise price is less than the average market price of the company's ordinary shares during the period

-  deferred shares issued to employees under the group's Restricted Share Plan

-  performance shares issued to executive directors under the group's Performance Share Plan

-  shares and securities issued to the founders of the company

	6 months to 30 June  2012	Period to 30 June 2011	Period to  31 December 2011
Profit / (loss) for the period attributable to equity holders of the company - $ million	22.3	(5.7)	(57.7)
Weighted average number of ordinary shares - number	272,131,122	11,875,686	79,830,987
Adjustment for share matching awards, deferred shares, share options, performance shares and founder shares and securities1 - number	352,157	-	-
Weighted average number of ordinary shares for diluted earnings per share - number	272,483,279	11,875,686	79,830,987
Diluted earnings per share - cents per share	8.18	(48.30)	(72.34)

¹ potential issue of shares under restricted share plan, share option plan, share matching award and founder shares and securities are not dilutive in 2011 as the group reported a loss

7. Intangible assets

	Exploration                   and        evaluation             assets	Other          assets	Total
	$m	$m	$m
Cost
At 1 April 2011	-	-	-
At 30 June 2011	-	-	-
At 1 April 2011	-	-	-
Acquisitions	216.9	-	216.9
Additions	10.7	0.1	10.8
Balance at 31 December 2011	227.6	0.1	227.7
At 1 January 2012	227.6	0.1	227.7
Acquisitions	99.7	-	99.7
Additions	45.5	0.1	45.6
Balance at 30 June 2012	372.8	0.2	373.0
Net book value
At 1 April 2011	-	-	-
At 30 June 2011	-	-	-
At 31 December 2011	227.6	0.1	227.7
At 30 June 2012	372.8	0.2	373.0

Exploration and evaluation assets are comprised principally of the Group's interests in exploration assets, in the Kurdistan Region. Exploration and Evaluation assets are not amortised as they are not available for use but are assessed for impairment indicators under IFRS6. Any impairment loss is recognised within exploration expenses in the income statement. Once assets have been appraised as commercially viable they are transferred into property, plant and equipment as oil and gas assets.

The net book value of $0.2 million of other assets is principally comprised of software development costs.

8. Property, plant and equipment

	Oil and gas assets	Other assets	Total
	$m	$m	$m
Cost
At 1 April 2011	-	-	-
At 30 June 2011	-	-	-
At 1 April 2011	-	-	-
Acquisitions	1,855.1	5.5	1,860.6
Additions	4.2	2.2	6.4
At 31 December 2011	1,859.3	7.7	1,867.0
At 1 January 2012	1,859.3	7.7	1,867.0
Transfer	5.5	(5.5)	-
Additions	30.6	0.8	31.4
At 30 June 2012	1,895.4	3.0	1,898.4
Depreciation and impairment
At 1 April 2011	-	-	-
At 30 June 2011	-	-	-
At 1 April 2011	-	-	-
Depreciation charge for the period	18.3	0.3	18.6
At 31 December 2011	18.3	0.3	18.6
At 1 January 2012	18.3	0.3	18.6
Depreciation charge for the period	67.4	0.2	67.6
At 30 June 2012	85.7	0.5	86.2
Net book value
At 1 April 2011	-	-	-
At 30 June 2011	-	-	-
At 31 December 2011	1,841.0	7.4	1,848.4
At 30 June 2012	1,809.7	2.5	1,812.2

Oil and gas assets comprise principally the group's share of interests in the Taq Taq and Tawke producing fields in the Kurdistan Region.  Other assets include lease hold improvements, motor vehicles and a drilling rig.  

9. Cash and cash equivalents

	At 30 June  2012	At 30 June 2011	At 31 December 2011
	$m	$m	$m
Cash and cash equivalents	1,829.7	2,038.0	1,912.9
	1,829.7	2,038.0	1,912.9

10. Share capital

	Suspended Voting  Ordinary shares	Voting Ordinary shares	Total  Ordinary Shares
Issue of shares on incorporation of parent	-	2	2
Initial public offer	-	133,090,000	133,090,000
Shares cancelled	-	(2,457,480)	(2,457,480)
On issue at 30 June 2011 - fully paid	-	130,632,522	130,632,522
Issue of shares on incorporation of parent	-	2	2
Initial public offer	-	133,090,000	133,090,000
Shares cancelled	-	(2,457,480)	(2,457,480)
Issue of shares on acquisition of Genel Energy International Limited	74,647,156	55,985,366	130,632,522
On issue at 31 December 2011- fully paid	74,647,156	186,617,888	261,265,044
At 1 January 2012	74,647,156	186,617,888	261,265,044
Issue of 18,713,154 voting ordinary shares to founders on exercise of option on 20 January 2012	(8,019,923)	26,733,077	18,713,154
Issue of 90,000 voting ordinary shares to directors under share matching award scheme on 2 April 2012	(38,572)	128,572	90,000
Issue of 180,000 voting ordinary shares to directors under share matching award scheme on 22 June 2012	(77,142)	257,142	180,000
On issue at 30 June 2012 - fully paid	66,511,519	213,736,679	280,248,198

On 1 April 2011, two ordinary shares of £0.10 each were subscribed for at par value. On 28 June 2011, a written resolution of the sole member of the Company authorised the issue of 133,090,000 ordinary £0.10 shares at a price of £10 per share. On 28 June 2011, pursuant to the terms of a Repurchase Option, the Company repurchased 2,457,480 ordinary shares of £0.10 each in the Company at a price of £10 per ordinary share.

Following the repurchase and the related cancellation of the ordinary shares, the Company's issued ordinary share capital consisted of 130,632,522 ordinary shares. There were no shares held in treasury, therefore the total number of shares with voting rights in the Company was 130,632,522 ordinary shares of £0.10 with each share holding one voting right.

On 21 November the company issued 130,632,522 shares in consideration for the acquisition of Genel Energy International Limited.

On 20 January 2012 the company issued 18,713,154 shares when the founders of the company exercised their right to exchange their founder shares for ordinary shares in the company. At the same time the company converted 8,018,923 Suspended Voting Ordinary Shares to Voting Ordinary Shares in accordance with the terms of the Suspended Voting Ordinary Shares. The transaction resulted in the removal of the non-controlling interest associated with the founder shares and the difference in value has been taken direct to reserves.

On 2 April 2012 the company issued 90,000 shares to non-executive directors under the share matching award scheme and a further 180,000 on the 22 June 2012. On the same dates, the company converted 38,572 and 77,142Suspended Voting Ordinary Shares to Voting Ordinary Shares in accordance with the terms of the Suspended Voting Ordinary Shares.

There have been no changes to the authorised share capital since it was determined to be 10,000,000,000 ordinary shares of £0.10 per share.

11. Cash generated from operating activities

	6 months to 30 June  2012	Period to 30 June 2011	Period to  31 December 2011
	$m	$m	$m
Profit / (loss) for the period	22.3	(5.7)	(57.7)
Adjustments for :
Finance income	(4.5)	(0.2)	(4.8)
Depletion and amortisation	67.6	-	18.6
Share based payments	2.1	0.2	3.1
Changes in working capital:
Trade and other receivables	8.0	(4.0)	(12.1)
Trade and other payables and provisions	(16.8)	-	25.0
Cash generated from operating activities	78.7	(9.7)	(27.9)

12. Acquisitions

The Group completed two acquisitions in the period. On 1 May 2012, the Company increased its interest in Chia Surkh block in the Kurdistan Region from 20% to 60% for total consideration of $68m.

On 14 May 2012, the Company acquired Barrus Petroleum Limited, an exploration company with assets in Morocco and Cote d'Ivoire for a total consideration of $27.7m with $5m of this deferred and contingent on the successful acquisition of further assets.`

In addition adjustments to the provisional fair value allocations were made in respect of the Genel Energy International business acquired in late 2011.

	Chia Surkh Licence 2012	Barrus 2012	GEIL Fair Value 2012	Total 2012
	$m	$m	$m	$m
Exploration assets	68.0	25.5	6.2	99.7
Trade and other debtors	-	0.1	-	0.1
Trade and other payables			(6.2)	(6.2)
Cash acquired	-	2.1	-	2.1
Total consideration	68.0	27.7	-	95.7
Less:
Deferred to future periods	-	5.0	-	5.0
Cash acquired	-	2.1	-	2.1
Cash flow	68.0	20.6	-	88.6

13. Subsequent events

On 3 August 2012, the Company completed the acquisition of a 23% stake in the Bina Bawi block in the Kurdistan Region of Iraq through the acquisition of all of the share capital of A&T Petroleum Company Ltd (a subsidiary of Petoil Petroleum and Petroleum Products International Exploration and Production Inc.), the holder of the stake. The total consideration was $174.5m. On 20 August, the Company completed the acquisition of a  further 21% in the Bina Bawi block from Hawler Energy Ltd for $240m. Following these acquisitions, the Company's total interest in Bina Bawi is 44%.

On 21 August 2012, the Company announced the acquisition of an additional 26% interest in the Miran exploration block in the Kurdistan Region from Heritage Energy Middle East Limited ("HEME"), a wholly owned subsidiary of Heritage Oil Plc ("Heritage") for $156m. In addition, the Company will provide a bilateral loan of $294m to Heritage, secured on Heritage's shares in HEME as well as HEME's remaining working interest in the Miran block. Either party to the loan can elect, subject to approval from Heritage's shareholders, the loan is repaid through the transfer to Genel Energy plc Heritage's entire holding of shares in HEME rather than in cash.

Independent review report to Genel Energy plc

Introduction

We have been engaged by the Company to review the condensed consolidated financial statements in the half year financial report for the six months ended 30 June 2012, which comprises the condensed Consolidated Statement of Comprehensive Income, condensed Consolidated Balance Sheet, condensed Consolidated Statement of Changes in Equity, condensed Consolidated Statement of Cash Flows and related notes. We have read the other information contained in the half year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated financial statements.

Directors' responsibilities

The half year financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half year Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated financial statements included in this Half Year Report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial statements in the half year financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of the interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements in the half year financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

1 Embankment Place

London

WC2N 6RH

23 August 2012

 

END

 

 

IR LFFVLTFIFFIF