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13 November 2014 Genel Energy plc Trading update and capital markets day preview Genel Energy plc (“Genel” or “the Company”) issues the following trading update and preview ahead of a capital markets day presentation for analysts and investors in London commencing at 14:00 GMT. The presentation materials will be published at 12:00 GMT on www.genelenergy.com with the event broadcast live on the website, and available for download shortly afterwards. HIGHLIGHTS Genel and the Ministry of Natural Resources (“MNR”) of the Kurdistan Regional Government (“KRG”) have signed an agreement governing the development of the Miran and Bina Bawi gas fields, materially de-risking the gas business and unlocking significant value A total of c.23 million barrels of KRI pipeline crude have been exported from Ceyhan in 30 liftings, with a three month track record of predictable sales seeing 24 of these tankers sold and five en route to customers The KRG has given a firm commitment to paying contractors in full, with an initial payment to be made in November 2014 and further payments to follow on a regular basis. A normalised payment mechanism is expected in Q1 2015 as increasing pipeline exports deliver budget equilibrium for the KRG 2014 production and revenue guidance is unchanged at 60,000-70,000 boepd and revenue of $500-600 million 2015 production guidance is set at 90,000-100,000 boepd and revenue guidance at $500-600 million, based on a Brent price of $80/bbl Genel's operations in the Kurdistan Region of Iraq (“KRI”) remain safe and secure PRODUCTION AND REVENUE Net working interest production for the nine months ending September 2014 averaged 66,000 boepd, an increase of 47% on the nine months ending September 2013 Net working interest production for the third quarter of 2014 averaged 72,000 boepd, an increase of 36% on Q3 2013 In the third quarter of 2014, exports via truck and pipeline comprised 56% of sales, with the remaining volumes being monetised in the domestic market In October, Taq Taq set a record for gross daily production of 126,000 bopd and in November set a record for gross daily liftings of 136,000 bopd Domestic sales realisations for Q3 2014 were $66/bbl for Taq Taq and $55/bbl for Tawke 2014 production and revenue guidance unchanged at 60,000-70,000 boepd and revenue of $500-600 million 2015 production guidance set at 90,000-100,000 boepd and revenue guidance at $500-600 million, based on an oil price of $80/bbl A combination of low development and operating costs and Production Sharing Contract (“PSC”) structure creates a robust and resilient KRI business with low oil price sensitivity INFRASTRUCTURE AND POLITICS Genel's operations in the KRI remain safe and secure KRG crude export sales through Ceyhan are currently at c.300,000 bopd, rising to 400,000 bopd by year-end and 500,000 bopd in Q1 2015 A total of c.23 million barrels of KRI pipeline crude have been exported from Ceyhan in 30 liftings, with a three month track record of predictable sales seeing 24 of these cargoes sold and five en route to customers The KRG has given a firm commitment to paying contractors in full, with an initial payment to be made in November 2014 and further payments to follow on a regular basis. A normalised payment mechanism is expected in Q1 2015 as increasing pipeline exports deliver budget equilibrium for the KRG KRI GAS BUSINESS Genel and the MNR have signed an agreement governing the development of the Miran and Bina Bawi gas fields, materially de-risking the gas business and unlocking significant value Final PSC amendments are expected to be completed by year-end, with a final investment decision planned for H1 2015 Genel also announces that it has agreed key terms with OMV to acquire OMV’s 36% operated interest in the Bina Bawi field. The total consideration will be $150 million, of which $20 million is payable on completion of the deal and the remaining $130 million in two instalments following first gas production Full details of the MNR agreement and the Bina Bawi acquisition are announced separately this morning DEVELOPMENT AND APPRAISAL At the Taq Taq (Genel 44% working interest) field, the construction of the second central processing facility is progressing. A temporary reduction in activity during the recent instability on the borders of the KRI means completion is now expected in Q3 2015, when surface processing capacity will reach 200,000 bopd. To mitigate against the impact of this delay, a temporary production facility is being mobilised to the field which will lift surface processing capacity to 150,000 bopd by Q1 2015 At Tawke (Genel 25% working interest), the new 24 inch pipeline from the field to the Fishkhabour export tie-in is scheduled for completion by year-end. Works to increase the production capacity of the field to 200,000 bopd are now expected to be complete in Q1 2015 Production at the Summail gas field on the Dohuk licence (Genel 40% working interest) has declined sharply in recent months due to decreasing reservoir pressure and water production in the two producing wells. The field is currently producing at rates significantly below those envisaged in the original field development plan. Work continues to fully understand the reasons behind the drop in reservoir pressure and water production. However, Genel anticipates that gross mean recoverable reserves and deliverability from the field will be below previously disclosed levels EXPLORATION The SM-1 well on the Sidi Moussa permit (Genel 60% working interest) offshore Morocco is being plugged and abandoned. The well was drilled to a total depth of 2,825 metres sub-sea and encountered oil in fractured and brecciated cavernous Upper Jurassic carbonates. In the course of well control operations 26 degree API oil was produced to surface. A subsequent testing program over the same interval failed to produce oil at sustainable rates, potentially as a consequence of the reservoir damage suffered during drilling and well control operations. Further evaluation of the well results and other subsurface information is required before any definitive conclusions can be drawn. The Noble Paul Romano semi-submersible rig will now be released The exploration well on the Jacare prospect on Block 38 offshore Angola spudded in midSeptember. Results are expected within the next few weeks FINANCE 2014 capital expenditure guidance is increased to $650 million from $550-600 million as a result of higher spending on the Sidi Moussa-1 well offshore Morocco 2015 capital expenditure guidance is set at $300-350 million Cash balances at 30 September 2014 stood at c.$660 million, with net cash of c.$170 million Genel is transitioning from a business predominantly based on cash receipts in advance for domestic oil revenues to an export business where receivables are the norm. The net receivable with the KRG stood at c.$150 million as at 30 September 2014. With increasing KRG pipeline exports expected to deliver budget equilibrium in early 2015, Genel is confident that payments in respect of contractual entitlements will normalise Tony Hayward, chief executive of Genel Energy, said: “The third quarter of the year has been a watershed for the KRI oil industry. The region remains safe and secure, boosted by support from the international community. Liftings of KRI crude from Ceyhan have become regular and sales predictable, with money flowing back to the KRG. Exports will continue to rise and the KRG’s firm commitment to ensure contractors receive full entitlements will see a normalised payment process for this production early in 2015.” -endsFor further information, please contact: Genel Energy Julian Metherell, Chief Financial Officer Phil Corbett, Head of Investor Relations Andrew Benbow, Head of Public Relations +44 20 7659 5100 Vigo Communications Patrick d’Ancona +44 20 7016 9573 Notes to editors: Genel Energy is an independent oil and gas exploration and production company listed on the main market of the London Stock Exchange (LSE: GENL). The company, with headquarters in London and additional offices in Ankara and Erbil, is the largest independent oil producer in the Kurdistan Region of Iraq and, through value-accretive acquisitions, is building a high-impact exploration portfolio within the Middle East and Africa. For further information, please refer to www.genelenergy.com. 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.
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