Half Yearly Report

RNS Number : 2264O

Genel Energy PLC

05 August 2014

 



    5 August 2014

Genel Energy plc (GENL)

Unaudited results for the six months to 30 June 2014

Genel Energy plc ("Genel" or the "Company"), the London listed exploration and production company and largest independent oil producer in the Kurdistan Region of Iraq, announces its unaudited half year results to 30 June 2014.

Results summary

	H1 2014	H1 2013	FY 2013
Revenue ($million)	192.1	160.6	347.9
EBITDAX1	138.0	130.3	274.8
Profit before tax ($million)	70.7	109.1	186.5
Cash flow from operating activities ($million)	115.0	181.3	311.3
Free cash flow2 ($million)	(195.7)	(88.8)	(252.6)
Net cash ($million)	483.1	867.1	699.7
EPS (cents per share)	25.23	38.93	66.24
Production (kboepd, working interest)	63.0	41.5	44.0

¹ EBITDAX is profit before interest, tax, depreciation, amortisation and exploration expense

² Free cash flow is cash flow from operating activities less capital expenditure

Highlights

§	Genel's operations in the Kurdistan Region of Iraq (KRI) remain safe and secure
§	Significant volume growth in H1 2014, average net working interest production of 63,000 boepd represents c.50% uplift on H1 2013
§	Progress towards sustainable KRI pipeline exports - first cargo lifted from Ceyhan in May and proceeds from first sale received in a Turkish bank account controlled by the Kurdistan Regional Government (KRG)
§	First gas from Summail development delivered to Dohuk Power Station in May
§	H1 2014 revenues of $192 million, up 20% on H1 2013, excludes $40 million of export revenue owed but not recognised
§	H1 2014 EBITDAX of $138 million, up 6% on H1 2013 principally as a result of higher revenue
§	Cash balances at end H1 2014 of $974 million following high-yield bond issue; net cash of $483 million at period end

Exploration update

§	Material Dilolo prospect offshore Angola spudded in June, drilling operations scheduled to take up to 5 months to complete
§	Nour prospect on Sidi Moussa licence offshore Morocco spudded in late July and is expected to take two to three months to complete

Outlook

§	2014 production (60-70,000 boepd), revenue ($500-600 million) and capex guidance ($550-600 million) unchanged
§	Good progress negotiating a gas sales offtake agreement (GSOA) for Miran and Bina Bawi; expected to conclude by year-end 2014

Commenting today Tony Hayward, chief executive, said:

"Operational momentum in the KRI is increasing, with the opening of the KRI-Turkey pipeline resulting in a significant rise in our production. Whilst we continue to monitor the situation closely, our operations in Kurdistan have been unaffected by events elsewhere in Iraq. The KRG has successfully sold oil exported through Ceyhan at international prices, and we expect our production to increase further in the second half of the year as sales become regular and payments predictable.

The signing of the gas sales offtake agreement for Miran and Bina Bawi will be transformational for our gas business, and will provide a clear path to monetisation of this world-class resource. With the GSOA expected to be signed before the end of the year, and drilling underway on high-impact prospects offshore Angola and Morocco, the Company is set to make material progress in the second half of 2014."

Enquiries:

Genel Energy Julian Metherell, Chief Financial Officer Phil Corbett, Head of Investor Relations Andrew Benbow, Head of Public Relations

[phone]

Vigo Communications Patrick d'Ancona   Chris McMahon

[phone]

There will be a conference call for analysts and investors today at 0930 BST, with an associated presentation available on the company's website, www.genelenergy.com. The call will be recorded and made available on the website shortly after it finishes.

Operating review

PRODUCTION

Net working interest production in H1 2014 averaged 63,000 boepd, an increase of c.50% on H1 2013. The year on year increase was driven by first exports from the KRG through the KRI-Turkey pipeline, a full period of trucked Taq Taq exports via Turkey, robust domestic demand and the ramp up of deliveries from the Summail gas field into the Dohuk power station. Production was particularly strong in May and June, with net working interest production averaging 82,000 boepd over these two months.

The Company's 2014 production guidance of 60-70,000 boepd is unchanged.

KRI OIL ASSETS

Taq Taq (44% working interest, joint operator)

The Taq Taq field produced an average of 92,000 bopd in H1 2014, an 18% increase compared to 78,000 bopd produced in H1 2013. The field has produced consistently in excess of 100,000 bopd since May 2014. Around 60% of production in the first half was sold in the domestic KRI market, with the remainder trucked through Turkey for export or supplied into the KRI-Turkey pipeline.

Progress continues to be made on the construction of the second Central Processing Facility. However, changes to the scope of the works and shortfalls in project management by the contractor mean that construction and commissioning is now expected to be complete by the end of the first quarter of 2015.

The 2014 development drilling programme commenced in the second quarter with the spud of the Taq Taq-27 vertical well. The first deviated well on the field, Taq Taq-23, spudded in June and is expected to take around three months to complete. A further vertical well (Taq Taq-28) and a horizontal well (Taq Taq-24) are planned to spud in Q3 and Q4 2014 respectively.

During the period, testing operations were completed on the Taq Taq-22 ("Taq Taq Deep") well. A test programme was carried out over three separate zones in the Jurassic and Triassic beneath the main Cretaceous producing reservoirs in the field. The tests flowed minor non-commercial rates of oil and gas due to the tight nature of the formations. During the third quarter of 2014, the Taq Taq Deep well will be completed as a producer in the Cretaceous Shiranish reservoir.

Tawke (25% working interest)

The Tawke field produced an average of 84,000 bopd in H1 2014, a near threefold increase on the 29,000 bopd in H1 2013 as volumes ramped up to meet higher domestic demand and to supply the KRI-Turkey export pipeline. Around 70% of production in the period was sold in the domestic market, with the remainder supplied into the KRI-Turkey export pipeline.

Surface processing capacity is planned to increase from 100,000 bopd to 200,000 bopd by year-end 2014 through the utilisation of several early production facilities and completion of a new 24 inch pipeline.

During the period, the third and fourth horizontal development wells on the field (Tawke-21 and Tawke-22) were brought onstream at a combined rate of 37,000 bopd. Testing operations on the Tawke-24 and Tawke-26 appraisal/development wells were recently completed. The Tawke-26 well has been brought on production at 2,000 bopd. The Tawke-24 well result was inconclusive and has been suspended pending further evaluation. The Tawke-25 horizontal development well spudded during the second quarter. Two further horizontal wells are planned to spud in H2 2014, as are two wells targeting Tertiary reservoirs which sit above the main Cretaceous producing reservoirs in the field.

KRI GAS ASSETS

Together, the Miran and Bina Bawi discoveries hold independently audited gross mean contingent resources of 8.4Tcf. The Company continues to believe that this resource will be the anchor supplier for the Gas Sales Agreement the KRG signed with the Government of Turkey in November 2013. The GSA calls for an initial 4 bcma of gas exports from 2017, rising to 10 bcma by 2020 and the option of increasing to 20 bcma thereafter.

Miran (75% working interest, operator) and Bina Bawi (44% working interest)

On 23 February 2014, the KRG notified the Company of its intention to exercise its option to take a 25% interest in the Miran PSC, thereby reducing Genel Energy's interest from 100% to 75%.

During the first half of the year, the Company's efforts focused on negotiations with the KRG for a gas sales offtake agreement for both the Miran and Bina Bawi fields. Good progress has been made in recent months and the Company remains confident that these negotiations will be concluded by year-end. In parallel, good progress continues to be made on screening development concepts. Genel's primary focus is to ensure that the chosen development concept generates a return above the Company's hurdle rate and mitigates near-term capital exposure.

Drilling operations at the Miran West-5 appraisal well continue and results are expected in Q4 2014. A well-test is planned on completion.

Dohuk (40% working interest)

First gas from the Summail development on the Dohuk licence was delivered into the Dohuk Power Station in late May. Production from the Summail-1 and Summail-3 wells averaged 83 mmscfd in June 2014.

A third development well, Summail-2, is scheduled for completion during Q3 2014.

KRI EXPLORATION AND APPRAISAL

Chia Surkh (60% working interest and operator)

During the first half of 2014, 300km² of new 3D seismic was acquired over the Chia Surkh licence and is currently being evaluated. The Chia Surkh-12 appraisal well, scheduled to spud at the end of Q4 2014, will help refine the resource potential of the Chia Surkh licence. 

Ber Bahr (40% working interest and operator)

A 170km² 3D seismic survey is currently underway on the Ber Bahr licence. The results of the new seismic and the Ber Bahr-2 appraisal well, currently scheduled to spud in H1 2015, will help determine the resource potential and forward activity plan.

AFRICA EXPLORATION

Angola

In April 2014, the Company announced that together with White Rose Energy Ventures, it had agreed to acquire 15% working interests in Blocks 38 and 39 offshore Angola. Blocks 38 and 39 are situated in the Kwanza Basin and cover an area of c.14,000km² in water depths of 1,500-2,500m. Following the receipt of partner and Angola Government approvals, the acquisition completed in July 2014.

Block 38 and 39 provide Genel with a position in exploration licences that hold multi-billion barrel prospectivity and represent a relatively low risk, high-impact exploration opportunity.  The play has already been de-risked by exploration drilling in Angola and in the directly analogous Santos and Campos Basins offshore Brazil.  A working hydrocarbon system has already been established in the Kwanza Basin through the Cameia, Lontra, Mavinga, Bicuar, Orca, and Azul discoveries, which are located on licences directly adjacent to Blocks 38 and 39.

The Stena Carron drillship has been contracted for a drilling programme which commenced on Block 39 in June 2014. The first well is on the material Dilolo prospect, with drilling operations expected to take up to five months to complete. Following Dilolo-1, the current plan is to drill a first well in Block 38.

Morocco

In January 2014, the partners on the Juby Maritime licence (Genel 37.5% working interest) spudded the JM-1 exploration well, which had objectives in both Upper and Middle Jurassic carbonates. The well confirmed the presence of heavy oil over a gross interval of 110m in the Upper Jurassic, as originally tested in the 1968 MO-2 well, some 2km from the JM-1 location. The Middle Jurassic objective was encountered with limited primary porosity. Reservoir quality and the oil gravity in the Upper Jurassic across the Cap Juby structure is the subject of ongoing evaluation by the Juby Maritime partners.

On the Sidi Moussa licence (Genel 60% working interest), the Noble Paul Romano semi-submersible drilling rig has recently spudded  the Nour-1 exploration well. The Nour prospect has objectives in both Upper and Middle Jurassic carbonates, with estimated pre-drill gross unrisked prospective resources of 300mmbbls. The well is expected to take two to three months to complete drilling operations.

Following the re-negotiation of the Noble Paul Romano rig contract, the planned well on the Mir Left exploration licence (Genel 75% working interest) is now scheduled to be drilled in 2015.

Malta

The Noble Paul Romano rig spudded the Hagar Qim-1 exploration well on the Area 4 licence (Genel 75% and operator) offshore Malta in May 2014. The well was drilled to the Eocene and plugged and abandoned with no indication of hydrocarbons. The Government of Malta has granted a six month extension to the First Exploration Phase, which will now expire in January 2015, to enable further analysis of data from the well.

Somaliland

Genel's position onshore Somaliland comprises material stakes in two licences, Odewayne and SL-10B/SL-13. Operations were suspended in September 2013 due to a deteriorating security environment. Discussions continue with the Somaliland Government in order to facilitate a resumption of activity.

Ethiopia

Government approval for the acquisition of a 40% working interest in the onshore Adigala licence was received in February 2014 and the acquisition completed in March 2014. A 2D seismic survey commenced in the second quarter of 2014 and is around 50% complete.

Côte d'Ivoire

Further seismic interpretation, geological and geophysical studies are planned during 2014 on the CI-508 licence. A prospect is to be matured during 2014 ahead of drilling an exploration well.

Finance review

Results summary

	H1 2014	H1 2013	FY 2013
Revenue ($million)	192.1	160.6	347.9
EBITDAX1 ($million)	138.0	130.3	274.8
Profit before tax ($million)	70.7	109.1	186.5
EPS (cents)	25.23	38.93	66.24
Cash flow from operating activities ($million)	115.0	181.3	311.3
Capex ($million)	310.7	270.1	563.9
Free cash flow2 ($million)	(195.7)	(88.8)	(252.6)
Net cash ($million)	483.1	867.1	699.7
Net assets ($million)	4,161.6	4,029.0	4,104.2

¹ EBITDAX is profit before interest, tax, depreciation, amortisation and exploration expense

² Free cash flow is cash flow from operating activities less capital expenditure

Results for the period

For the six months ended 30 June 2014, the Group reported revenue of $192.1 million (2013: $160.6 million), a profit before tax of $70.7 million (2013: $107.0 million) and earnings per share of 25.23 cents (2013: 38.93 cents). Free cash flow for the period was an outflow of $195.7 million (2013: outflow of $88.8 million).

Revenue

Revenue at $192.1 million (2013: $160.6 million) has increased from the comparable period as a result of higher production volumes and is comprised principally of domestic petroleum sales in the Kurdistan Region of Iraq, which realised $60-70/bbl, together with some trucked export revenue realising around $80/bbl.

Revenue from domestic sales is recognised on an accruals basis with export sales on a cash receipts basis. This has resulted in circa $40 million of export sales for the period being owed but not recognised and, as a consequence, revenue has not increased in line with production.  The revenue recognition policy of pipe exports, for which no revenue has been recognised in the period, will be re-evaluated once the process is better established.

Operating costs

Cost of sales of $97.6 million (2013: $61.8 million) includes depreciation charges of $63.1 million (2013: $45.5 million) and production costs of $34.5 million (2013: $16.3 million). Depreciation increased broadly in line with production levels whilst production costs were impacted adversely by additional maintenance programmes and higher transportation and handling costs at Taq Taq together with additional consumables expensed at the Tawke field.

Exploration credits totalling $1.1 million represent the reversal of an over provision made in 2013.

Other operating costs amounted to $19.6 million (2013: $14.0 million) for the period and included $4.2 million (2013: $2.8 million) of costs relating to acquisitions and pre-licence activity. The remaining $15.4 million (2013: $11.2 million) represented general and administration costs with 2013 benefitting from a one-off credit of $6 million.

Finance expense

Finance expense of $5.3 million (2013: $2.1 million income) represent primarily interest and issue costs on the $500 million bond issued in late May 2014.

Taxation

All corporation tax due has been paid on behalf of the Company by the KRG from the KRG's own share of revenues and there is no tax payment required or expected to be made by the Company. 

Dividend

No interim dividend will be paid (2013: nil) or is expected to be paid in the near future.  

Capital expenditure

Capital expenditure in the first half amounted to $310.7 million (2013: $270.1 million). Exploration spend in the KRI amounted to $79.6 million (2013: $162.8 million) with a further $101.1 million (2013: $59.3 million) incurred on the development of existing producing assets in the KRI. Capital expenditure on our African licences was $128.3 million (2013: $45.2 million) with the majority of this spent on Malta and Morocco.

Capital expenditure forecast for 2014 remains at $550-$600 million.

Cash flow

Operating cash flow for the period at $115.0 million (2013: $181.3 million) was $66.3 million lower than the comparative period last year, which benefited from a decrease in receivables and an increase in payables. After capex of $310.7 million (2013: $270.1 million), free cash flow was $195.7 million outflow (2013: $88.8 million outflow) which together with $490.6 million of net proceeds from the issue of our $500 million bond partly offset by the purchase of ESOP shares of $16.7 million (2013: $2.4 million) and acquisition of licences $4.0 million (2013: $43.0 million) produced a cash flow of $274.2 million leaving the Group with gross cash at 30 June 3014 of $973.9 million. Net cash at the period end was $483.1 million (2013: $867.1 million)

Net cash

At 30 June 2014, the group had a net cash balance of $483.1 million (2013: $867.1 million). Cash at 31 December 2013 was $699.7 million. The gross cash available at 30 June 2014 was $973.9 million.

Acquisitions

The Group spent $4.0 million on the acquisition of a 40% interest in the Adigala block in Ethiopia. Acquisition spend in 2013 amounted to $43.0 million.

Net assets

Net assets at 30 June 2014 amounted to $4,161.6 million (2013: $4,029.0 million)

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 at least 12 months following the signing of the half year financial statements for the period ended 30 June 2014 for the Group to be considered a going concern.

Principal risks and uncertainties

The Group is exposed to a variety of risks and uncertainties, principal amongst them being 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 2013. A detailed explanation of the principal risks and uncertainties can be found on pages 42 to 44 of the annual report for the period ended 31 December 2013. 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 2014 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 2014 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 for 31 December 2013. 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

4 August 2014

Disclaimer

This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil & gas exploration and production business. Whilst the Company believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy. Accordingly no reliance may be placed on the figures contained in such forward looking statements.

Condensed consolidated statement of comprehensive income

	Notes	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
		$m	$m	$m
Revenue	3	192.1	160.6	347.9
Cost of sales	4	(97.6)	(61.8)	(140.7)
Gross profit		94.5	98.8	207.2
Exploration credit	5	1.1	22.2	3.1
Other operating costs	6	(19.6)	(14.0)	(26.8)
Operating profit		76.0	107.0	183.5
Finance (expense) / income	7	(5.3)	2.1	3.0
Profit before income tax		70.7	109.1	186.5
Income tax expense	8	-	-	(0.9)
Profit for the period		70.7	109.1	185.6
Other comprehensive items		-	-	-
Total comprehensive income for the period		70.7	109.1	185.6
Attributable to:
Equity holders of the Company		70.7	109.1	185.6
		70.7	109.1	185.6
Earnings per ordinary share attributable to the ordinary equity holders of the Company
Basic earnings per share - cents per share	9	25.23	38.93	66.24
Diluted earnings per share - cents per share	9	25.00	38.71	65.70

Condensed consolidated balance sheet

	Notes	At 30 June 2014	At 30 June 2013	At 31 December 2013
		$m	$m	$m
Assets
Non-current assets
Intangible assets	10	1,805.1	1,447.7	1,633.9
Property, plant and equipment	11	2,082.1	1,946.7	2,003.2
		3,887.2	3,394.4	3,637.1
Current assets
Inventories	12	-	0.1	-
Trade and other receivables	13	44.8	14.5	15.8
Cash and cash equivalents	14	973.9	867.1	699.7
		1,018.7	881.7	715.5
Total assets		4,905.9	4,276.1	4,352.6
Liabilities
Non-current liabilities
Trade and other payables	15	(5.0)	-	(5.0)
Deferred income	16	(48.6)	(58.0)	(53.5)
Provisions	17	(18.4)	(15.3)	(16.9)
Bank and other long-term borrowings	18	(490.8)	-	-
		(562.8)	(73.3)	(75.4)
Current liabilities
Trade and other payables	15	(170.9)	(166.5)	(164.3)
Deferred income	16	(10.6)	(7.3)	(8.7)
		(181.5)	(173.8)	(173.0)
Total liabilities		(744.3)	(247.1)	(248.4)
Net assets		4,161.6	4,029.0	4,104.2
Owners of the parent
Share capital	19	43.8	43.8	43.8
Share premium account		4,074.2	4,074.2	4,074.2
Retained earnings		35.8	(96.8)	(21.6)
Total shareholders' equity		4,153.8	4,021.2	4,096.4
Non-controlling interest		7.8	7.8	7.8
Total equity		4,161.6	4,029.0	4,104.2

Condensed consolidated statement of changes in equity

	Share capital	Share premium	Retained earnings	Total attributable to equity holders	Non-controlling interest	Total equity
	$m	$m	$m	$m	$m	$m
At 1 January  2014	43.8	4,074.2	(21.6)	4,096.4	7.8	4,104.2
Comprehensive income for the period	-	-	70.7	70.7	-	70.7
Transactions with shareholders:
Share-based payment transactions	-	-	3.4	3.4	-	3.4
Purchase of own shares for ESOP1	-	-	(16.7)	(16.7)	-	(16.7)
At 30 June 2014	43.8	4,074.2	35.8	4,153.8	7.8	4,161.6
At 1 January  2013	43.8	4,074.2	(205.7)	3,912.3	7.8	3,920.1
Comprehensive income for the period	-	-	109.1	109.1	-	109.1
Transactions with shareholders:
Share-based payment transactions	-	-	2.2	2.2	-	2.2
Purchase of own shares for ESOP1	-	-	(2.4)	(2.4)	-	(2.4)
At 30 June 2013	43.8	4,074.2	(96.8)	4,021.2	7.8	4,029.0
At 1 January 2013	43.8	4,074.2	(205.7)	3,912.3	7.8	3,920.1
Comprehensive income for the period	-	-	185.6	185.6	-	185.6
Transactions with shareholders:
Share-based payment transactions	-	-	4.5	4.5	-	4.5
Purchase of own shares for ESOP1	-	-	(6.0)	(6.0)	-	(6.0)
At 31 December 2013	43.8	4,074.2	(21.6)	4,096.4	7.8	4,104.2

¹ Purchase of shares in the market to be used to satisfy the Company's commitments under various employee share plans

Condensed consolidated cash flow statement

	Notes	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
		$m	$m	$m
Cash flows from operating activities
Cash generated from operations	20	115.0	175.7	305.4
Interest received		0.2	5.6	6.6
Taxation paid		(0.2)	-	(0.7)
Net cash from operating activities		115.0	181.3	311.3
Cash flows from investing activities
Purchase of property, plant and equipment		(102.0)	(59.9)	(130.8)
Purchase of intangible assets		(208.7)	(210.2)	(433.1)
Acquisition of businesses and licences	21	(4.0)	(43.0)	(43.0)
Net cash from investing activities		(314.7)	(313.1)	(606.9)
Cash flows from financing activities
Purchase of ESOP shares		(16.7)	(2.4)	(6.0)
Issue of $500 million bond		500.0	-	-
Associated bond issue costs		(9.4)	-	-
Net cash from financing activities		473.9	(2.4)	(6.0)
Net increase in cash and cash equivalents		274.2	(134.2)	(301.6)
Cash and cash equivalents at the beginning of the period		699.7	1,001.3	1,001.3
Cash and cash equivalents at period end	14	973.9	867.1	699.7

 

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

The Company is a public limited 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 half year condensed consolidated financial statements for the six months ended 30 June 2014 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union and were approved for issue on 5 August 2014. They do not comprise statutory accounts within the meaning of Article 105 of the Companies (Jersey) Law 1991.

The half year condensed consolidated financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRS as adopted by the European Union. The annual financial statements for the period ended 31 December 2013 were approved by the board of directors on 5 March 2014. 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.

The directors have, at the time of approving the half year condensed 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 half year condensed consolidated financial statements.

The interim financial information for the six months to 30 June 2014 and six months to 30 June 2013 is unaudited. The financial information for the year to 31 December 2013 has been extracted from the audited accounts.

2. Accounting policies

The accounting policies adopted in preparation of the condensed half year consolidated financial statements are consistent with those used in preparation of the annual financial statements for the year ended 31 December 2013.

The preparation of the half year condensed consolidated financial information for the half-year ended 30 June 2014 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.

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 consistent with those applied to the consolidated financial statements for the period ended 31 December 2013.

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

There are no new standards and amendments to standards as adopted by the European Union at 30 June 2014 which are mandatory for the first time for the financial year beginning 1 January 2014 and which have a significant impact on the Group. A number of new standards, amendments to standards and interpretations will be effective for annual periods beginning after 1 July 2014. None of these standards have been early adopted. The new standards are not expected to have a significant effect on the consolidated financial statements of the Group.

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 2013. There have been no significant changes in any risk management policies since year end.

3. Segmental information

The Group has two reportable business segments, which are its oil and gas exploration and production business in the KRI and its oil and gas exploration business in Africa. Capital expenditure decisions for the Kurdistan segment are considered in the context of the cash flows expected from the production and sale of crude oil. Capital expenditure for the Africa segment is considered in the context of the available cash of the Group.

 
Finance income is not considered part of a business segment and forms part of the reconciliation to the reported numbers.

6 Months to 30 June 2014

	Kurdistan	Africa	Other	Total Reported
	$m	$m	$m	$m
Revenue	192.1	-	-	192.1
Cost of sales	(97.6)	-	-	(97.6)
Gross profit	94.5	-	-	94.5
Exploration credit / expense	-	1.1	-	1.1
Other operating costs	0.3	-	(19.9)	(19.6)
Operating profit	94.8	1.1	(19.9)	76.0
Finance expense				(5.3)
Profit before tax				70.7
Capital expenditure	180.7	128.3	1.7	310.7
Total assets	3,722.7	283.1	900.1	4,905.9
Total liabilities	(185.7)	(56.5)	(502.1)	(744.3)

6 Months to 30 June 2013

	Kurdistan	Africa	Other	Total Reported
	$m	$m	$m	$m
Revenue	160.6	-	-	160.6
Cost of sales	(61.8)	-	-	(61.8)
Gross profit	98.8	-	-	98.8
Exploration expense	22.2	-	-	22.2
Other operating costs	(1.0)	-	(13.0)	(14.0)
Operating profit	120.0	-	(13.0)	107.0
Finance income				2.1
Profit before tax				109.1
Capital expenditure	222.1	45.2	2.8	270.1
Total assets	3,385.9	117.1	773.1	4,276.1
Total liabilities	(226.2)	(14.9)	(6.0)	(247.1)

3. Segmental information (continued)

Year to 31 December 2013

	Kurdistan	Africa	Other	Total Reported
	$m	$m	$m	$m
Revenue	347.9	-	-	347.9
Cost of sales	(140.7)	-	-	(140.7)
Gross profit	207.2	-	-	207.2
Exploration expense	22.2	(19.1)	-	3.1
Other operating costs	0.2	-	(27.0)	(26.8)
Operating profit	229.6	(19.1)	(27.0)	183.5
Finance income				3.0
Profit before tax				186.5
Capital expenditure	476.5	82.1	5.3	563.9
Total assets	3,586.6	149.4	616.6	4,352.6
Total liabilities	(209.2)	(27.5)	(11.7)	(248.4)

4. Cost of sales

	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
	$m	$m	$m
Depreciation and amortisation of oil and gas assets	63.1	45.5	94.4
Production costs	34.5	16.3	46.3
	97.6	61.8	140.7

5. Exploration credit

	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
	$m	$m	$m
Provision for impairment of Ber Bahr licence	-	(22.2)	(22.2)
Exploration costs	(1.1)	-	19.1
	(1.1)	(22.2)	(3.1)

6. Other operating costs

	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
	$m	$m	$m
Acquisition activity and pre licence exploration costs	4.2	2.8	6.2
General and other costs	15.4	11.2	20.6
	19.6	14.0	26.8

7. Finance (expense) / income 

	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
	$m	$m	$m
Interest received on bank deposits	0.2	0.3	3.5
Interest received on other loans	-	2.1	-
Interest payable on bond	(5.1)	-	-
Interest unwind on provisions	(0.4)	(0.3)	(0.5)
	(5.3)	2.1	3.0

8. Taxation

A taxation charge of $ nil million (H1 2013: nil, FY 2013: $0.9 million) was made in the Turkish and UK services companies.  All other corporation tax due has been paid on behalf of the Group by the government from the government's share of revenues and there is no tax payment required or expected to be made by the Group.

9. 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 2014	6 months to 30 June 2013	Year to 31 December 2013
Profit for the period attributable to equity holders of the Company - $ million	70.7	109.1	185.6
Weighted average number of Ordinary Shares - number	280,248,198	280,248,198	280,248,198
Basic earnings per share - cents per share	25.23	38.93	66.24

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 four types of potential dilutive ordinary shares:

-  Shares granted to directors and employees under the performance share plan, to the extent that performance conditions have been met at the period end

-  Share options granted to employees under the share option plan, where the exercise price is less than the market price of the Company's ordinary shares at the period end

- Shares issued to employees under the restricted share plan

- Shares and securities issued to the founders of the Company, to the extent that performance conditions have been met at the period end.

	6 months to 30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
Profit for the period attributable to equity holders of the Company - $ million	70.7	109.1	185.6
Weighted average number of ordinary shares - number	280,248,198	280,248,198	280,248,198
Adjustment for performance shares, restricted shares, share options and founder shares and securities - number	2,614,036	1,556,391	2,328,856
Weighted average number of ordinary shares for diluted earnings per share - number	282,862,234	281,804,589	282,577,054
Diluted earnings per share - cents per share	25.00	38.71	65.70

 

10. Intangible assets

	Exploration and evaluation assets	Miran Acquisition	Other assets	Total
	$m	$m	$m	$m
Cost
At 1 January 2014	1,630.9	-	4.5	1,635.4
Acquisitions	4.0	-	-	4.0
Transfer to property, plant and equipment (note 11)	(40.8)	-	-	(40.8)
Additions	207.9	-	0.8	208.7
Balance at 30 June 2014	1,802.0	-	5.3	1,807.3
At 1 January 2013	720.8	472.6	1.9	1,195.3
Acquisitions	43.0	-	-	43.0
Transfer	472.6	(472.6)	-	-
Additions	208.1	-	2.1	210.2
Balance at 30 June 2013	1,444.5	-	4.0	1,448.5
At 1 January 2013	720.8	472.6	1.9	1,195.3
Acquisitions	43.0	-	-	43.0
Transfer	472.6	(472.6)	-	-
Transfer to property, plant and equipment (note 11)	(36.0)	-	-	(36.0)
Additions	430.5	-	2.6	433.1
Balance at 31 December 2013	1,630.9	-	4.5	1,635.4
Depreciation and impairment
At 1 January 2014	-	-	1.5	1.5
Depreciation charge for the period	-	-	0.7	0.7
At 30 June 2014	-	-	2.2	2.2
At 1 January 2013	22.2	-	0.4	22.6
Depreciation charge for the period	-	-	0.4	0.4
Provision for write-off of exploration costs	(22.2)	-	-	(22.2)
At 30 June 2013	-	-	0.8	0.8
At 1 January 2013	22.2	-	0.4	22.6
Depreciation charge for the period	-	-	1.1	1.1
Provision for write-off of exploration costs (note 5)	(22.2)	-	-	(22.2)
At 31 December 2013	-	-	1.5	1.5
Net book value
At 30 June 2014	1,802.0	-	3.1	1,805.1
At 30 June 2013	1,444.5	-	3.2	1,447.7
At 31 December 2013	1,630.9	-	3.0	1,633.9
At 31 December 2012	698.6	472.6	1.5	1,172.7

Exploration and evaluation assets are comprised of the Company's exploration assets in the Kurdistan Region of Iraq and Africa. Exploration and evaluation assets are not amortised but are assessed for impairment indicators under IFRS 6.

As announced on 3 July 2014, the Hagar Qim-1 well in Malta well has been plugged and abandoned. $50.0 million of exploration expenditure in respect of this well continues to be held on the balance sheet at 30 June 2014 pending further analysis of the results which are expected in the second half of the year.

The net book value of $ 3.1 million (H1 2013: $3.2 million, FY 2013: $3.0 million) of other assets is principally comprised of capitalised software.

11. Property, plant and equipment

	Oil and gas assets	Other assets	Total
	$m	$m	$m
Cost
At 1 January 2014	2,279.5	7.8	2,287.3
Additions	101.1	0.9	102.0
Transfer from intangible assets (note 10)	40.8	-	40.8
At 30 June 2014	2,421.4	8.7	2,430.1
At 1 January 2013	2,115.4	5.1	2,120.5
Additions	59.3	0.6	59.9
At 30 June 2013	2,174.7	5.7	2,180.4
At 1 January 2013	2,115.4	5.1	2,120.5
Additions	128.1	2.7	130.8
Transfer from intangible assets (note 10)	36.0	-	36.0
At 31 December 2013	2,279.5	7.8	2,287.3
Depreciation and impairment
At 1 January 2014	281.1	3.0	284.1
Depreciation charge for the period	63.1	0.8	63.9
At 30 June 2014	344.2	3.8	348.0
At 1 January 2013	186.7	1.0	187.7
Depreciation charge for the period	45.5	0.5	46.0
At 30 June 2013	232.2	1.5	233.7
At 1 January 2013	186.7	1.0	187.7
Depreciation charge for the period	94.4	2.0	96.4
At 31 December 2013	281.1	3.0	284.1
Net book value
At 30 June 2014	2,077.2	4.9	2,082.1
At 30 June 2013	1,942.5	4.2	1,946.7
At 31 December 2013	1,998.4	4.8	2,003.2
At 31 December 2012	1,928.7	4.1	1,932.8

Oil and gas assets comprise principally the Group's share of interests in the Taq Taq and Tawke producing oil fields in the Kurdistan Region of Iraq. Other assets include leasehold improvements, office furniture and motor vehicles.  

12. Inventories

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
Crude oil inventory	-	0.1	-
	-	0.1	-

 

13. Trade and other receivables

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
Trade receivables	10.9	0.3	0.4
Other receivables	22.8	4.9	4.0
Prepayments	11.1	9.3	11.4
	44.8	14.5	15.8

 

The fair value of financial assets approximate their carrying value.

 

14. Cash and cash equivalents

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
Cash and cash equivalents	973.9	867.1	699.7
	973.9	867.1	699.7

Cash includes the Company's share of cash held in its joint operations and $190m of restricted cash used as cash collateral on letters of credit and performance guarantees.

15. Trade and other payables

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
Trade payables	41.3	33.6	45.0
Deferred consideration	5.0	5.0	5.0
Other payables	26.2	24.1	17.3
Taxation	-	-	0.2
Accruals	103.4	103.8	101.8
	175.9	166.5	169.3
Non-current	5.0	-	5.0
Current	170.9	166.5	164.3
	175.9	166.5	169.3

 

The fair value of financial liabilities approximate their carrying value.

16. Deferred income

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
Non-current	48.6	58.0	53.5
Current	10.6	7.3	8.7
	59.2	65.3	62.2

Deferred income is royalty income received in advance from the Group's partner for the Taq Taq PSC. The deferred income is recognised in the statement of comprehensive income in a manner consistent with how the royalty income becomes due. Once the deferred income has been fully recognised, the joint operating partner will recommence cash payment for the royalty as it becomes due.

17. Provisions

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
Opening balance	16.9	13.2	13.2
Interest unwind	0.4	0.3	0.5
Additions	1.1	1.8	3.2
Closing balance	18.4	15.3	16.9
Non-current	18.4	15.3	16.9
Current	-	-	-
	18.4	15.3	16.9

Non-current provisions cover expected decommissioning and abandonment costs resulting from the net ownership interests in petroleum and natural gas assets, including well sites and gathering systems. The fair value of a liability for a decommissioning and abandonment provisions is recognised in the period in which it is incurred.

The cash flows relating to the decommissioning and abandonment provisions are expected to occur between 2031 and 2039. The provision is the discounted present value of the cost, using existing technology at current prices of decommissioning of blocks in the Kurdistan Region of Iraq.

18. Other long-term borrowings

	At 30 June 2014	At 30 June 2013	At 31 December 2013
	$m	$m	$m
$500 million 7.5% bond due May 2019	490.8	-	-
	490.8	-	-

The $500 million bond is unsecured with a coupon rate of 7.5% payable on a biannual basis and is shown net after unamortised issue costs. The fair value of the bond is not significantly different from the book value.   

19. Share capital

	Suspended Voting  Ordinary shares	Voting Ordinary shares	Total  Ordinary Shares
In issue at 1 January 2014	47,166,873	233,081,325	280,248,198
Sale of 3,250,000 ordinary shares by affiliated shareholders to third parties on 27 January 2014 and 21 February 2014	(4,642,857)	4,642,857	-
Sale of 2,170,000 ordinary shares by affiliated shareholders to third parties on 10 March 2014	(3,100,000)	3,100,000	-
In issue at 30 June 2014 - fully paid	39,424,016	240,824,182	280,248,198
In issue at 1 January 2013	66,511,519	213,736,679	280,248,198
Sale of 1,500,000 ordinary shares by an affiliated shareholder to a third party on 15 May 2013	(2,142,858)	2,142,858	-
Sale of 1,300,000 ordinary shares by an affiliated shareholder to a third party on 21 May 2013	(1,857,142)	1,857,142	-
In issue at 30 June 2013 - fully paid	62,511,519	217,736,679	280,248,198
At 1 January 2013	66,511,519	213,736,679	280,248,198
Sale of 1,500,000 ordinary shares by an affiliated shareholder to a third party on 15 May 2013	(2,142,858)	2,142,858	-
Sale of 1,300,000 ordinary shares by an affiliated shareholder to a third party on 21 May 2013	(1,857,142)	1,857,142	-
Sale of 5,425,001 ordinary shares by affiliated shareholders to third parties on 5 July 2013	(7,750,002)	7,750,002	-
Sale of 3,076,251 and 1,430,000 ordinary shares by affiliated shareholders to third parties on 26 September 2013 and 18 October 2013 respectively	(6,437,501)	6,437,501	-
Sale of 810,000 ordinary shares by an affiliated shareholder to a third party on 22 November 2013	(1,157,143)	1,157,143	-
On issue at 31 December 2013  - fully paid	47,166,873	233,081,325	280,248,198

On 15 May 2013, 1,500,000 suspended voting ordinary shares were transferred from an affiliated shareholder to a third party, converted to voting ordinary shares and on the same day converted a further 642,858 suspended voting ordinary shares to voting ordinary shares in accordance with the terms of the suspended voting ordinary shares.

On 21 May 2013, 1,300,000 suspended  voting ordinary shares were transferred from an affiliated shareholder to a third party, converted to voting ordinary shares and on the same day converted a further 557,142 suspended voting ordinary shares to voting ordinary shares in accordance with the terms of the suspended voting ordinary shares.

On 5 July 2013, 5,425,001 suspended voting ordinary shares were transferred from affiliated shareholders to third parties, converted to voting ordinary shares and on the same day converted a further 2,325,001 suspended voting ordinary shares to voting ordinary shares in accordance with the terms of the suspended voting ordinary shares.

On 26 September 2013 and 18 October 2013 3,076,251 and 1,430,000 voting ordinary shares were transferred from affiliated shareholders to third parties. On 31 October 2013 a further 6,437,501 suspended voting ordinary shares were converted to voting ordinary shares in accordance with the terms of the suspended voting ordinary shares.

On 22 November 2013, 810,000 suspended voting ordinary shares were transferred from an affiliated shareholder to third parties, converted to voting ordinary shares and on the same day converted a further 347,143 suspended voting ordinary shares to voting ordinary shares in accordance with the terms of the suspended voting ordinary shares.

On 27 January 2014 2,250,000 voting ordinary shares were transferred from affiliated shareholders to third parties. On 21 February 2014 a further 1,000,000 voting ordinary shares were transferred from affiliated shareholders to third parties. On 7 March 2014 4,642,857 suspended voting ordinary shares were converted to voting ordinary shares in accordance with the terms of the suspended voting ordinary shares.

19. Share capital (continued)

On 10 March 2014 2,170,000 voting ordinary shares were transferred from affiliated shareholders to third parties and on the 11 March 2014 3,100,000 suspended voting ordinary shares were converted 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.

20. Cash generated from operating activities

	6 months to  30 June 2014	6 months to 30 June 2013	Year to 31 December 2013
	$m	$m	$m
Profit for the period	70.7	109.1	185.6
Adjustments for :
Finance income	5.3	(2.1)	(3.0)
Taxation	-	-	0.9
Depletion, depreciation and amortisation	64.7	46.4	97.5
Provision for write-off of exploration costs	-	(22.2)	(22.2)
Share based payments	3.4	2.2	4.5
Changes in working capital:
Trade and other receivables	(29.0)	34.5	33.5
Trade and other payables and provisions	(0.1)	7.8	8.6
Cash generated from operating activities	115.0	175.7	305.4

21. Acquisitions

On 6 March 2014, the Group acquired a 40% interest in the Adigala block in Ethiopia for $4.0 million.

	Ethiopia	Total
	$m	$m
Exploration assets	4.0	4.0
Total consideration and cash flow	4.0	4.0

22. Commitments

Under the terms of its PSCs and JOAs, the group has certain commitments that are defined by activity rather than spend. The Group's capital programme for the next few years is explained in the 2013 annual report and is in excess of the activity required by its PSCs and JOAs. There are no material commitments outside these.

23. Post balance sheet event

On 16 July 2014, the Group completed the acquisition of a 7.5% working interests in Blocks 38 and 39 offshore Angola. The total cash flowed on this date was $60.1 million.

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 2014, 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 Conduct Authority.

As disclosed in note 1, 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 Conduct 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 2014 are 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 Conduct Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

1 Embankment Place

London

WC2N 6RH

4 August 2014

 

END

 

 

IR LLFIDTFISIIS