Genel Energy : Half-Year Results

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3 August 2021

Genel Energy plc

Unaudited results for the period ended 30 June 2021

Genel Energy plc ('Genel' or 'the Company') announces its unaudited results for the six months ended 30 June 2021.

Bill Higgs, Chief Executive of Genel, said:

"Genel continues to deliver on its strategy and demonstrate the merits of its business model. Capital investment made last year, despite the low oil price and over $150 million of deferred payments, has meant this period has benefitted from the addition of oil from Sarta and increased production from Peshkabir, with production having increased in line with guidance. This high-margin production will generate sufficient cash flow in 2021 to more than cover investment in growth and the increased dividend, and we are set to end the year in a net cash position.

Our appraisal campaign at our exciting growth assets Sarta and Qara Dagh is now well underway, and we look forward to the results of three of these high-potential wells later this year. Given the cash generation of the business, our strong balance sheet, and the resilience of our business model, we are fulfilling our aim of paying a progressive dividend by increasing the interim payment."

Results summary ($ million unless stated)
	H1 2021	H1 2020	FY 2020
Average Brent oil price ($/bbl)	65	40	42
Production (bopd, working interest)	32,760	32,100	31,980
Revenue	151.5	88.4	159.7
EBITDAX1	123.1	65.1	114.6
Depreciation and amortisation	(81.8)	(82.6)	(153.7)
Exploration expense	-	(1.3)	(2.2)
Impairment of oil and gas assets	-	(286.3)	(286.3)
Impairment of receivables	-	(34.9)	(36.9)
Operating profit / (loss)	41.3	(340.0)	(364.5)
Cash flow from operating activities	91.1	85.5	129.4
Capital expenditure	58.2	58.5	109.7
Free cash flow2	22.2	6.5	(4.4)
Cash	266.4	355.3	354.5
Total debt	280.0	300.0	280.0
Net (debt) / cash3	(2.2)	57.2	6.2
Basic EPS (¢ per share)	9.3	(128.9)	(152.0)
Dividends declared for the period (¢ per share)	6	5	15

1. EBITDAX is operating profit / (loss) adjusted for the add back of depreciation and amortisation, exploration expense, impairment of property, plant and equipment, impairment of intangible assets and impairment of receivables
2. Free cash flow is reconciled on page 10
3. Reported cash less IFRS debt (page 11)

Highlights

• Strong cash generation from low-cost oil production:

1. Net production averaged 32,760 bopd in H1 2021, slightly above the average in the prior year and in line with guidance (H1 2020: 32,100 bopd)

1. Low production cost of $3.7/bbl, oil price increase, and restart of the override helped deliver

an overall margin from our production assets of $111 million

1. Free cash flow for the period was $22 million, despite the Kurdistan Regional Government

('KRG') changing its payment schedule from one to two months in arrears, moving c.$30 million that was due in H1 into July

1. $123 million of cash proceeds were received in H1 2021 (H1 2020: $110 million)

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• Investing in growth:

1. Our high-potential drilling campaign is well underway, with the QD-2 well at Qara Dagh having spud in April, and the Sarta-5 well in June

• 1. $58 million of capital expenditure in H1 2021, with activity accelerating in H2
• Financial strength to underpin a material and progressive dividend:
• 1. Cash of $266 million, with net debt of $2.2 million

• 1. Due to the rise in the oil price boosting expected cash generation, and Management's confidence in Genel's future prospects, interim dividend increased to 6¢ per share (H1 2020: 5¢ per share)
• A socially responsible contributor to the global energy mix:
• 1. Zero lost time injuries ('LTI') and zero tier one loss of primary containment ('LOPC') events at Genel and TTOPCO operations. Now no LTIs since 2015, with over 14 million work hours since the last incident, and no LOPCs since 2017

1. Second GRI compliant Sustainability Report issued today

Outlook

• Production guidance for 2021 of slightly above the 2020 average of 31,980 bopd maintained
• 2021 capital expenditure guidance maintained at $150 million to $200 million, with the expectation that expenditure will now be around the middle of this range, following delays in approvals from the KRG and ongoing challenges relating to COVID-19 causing some planned activity to move to Q1 2022
• High-impactappraisal results to come in 2021:

• 1. Results from the QD-2 and Sarta-5 wells are expected around the end of Q3 2021 o The Sarta-1D well is set to spud in coming days
     o Sarta-6 well is scheduled to get underway immediately following the completion of drilling at Sarta-5
• Genel expects to generate free cash flow in 2021 and end the year in a net cash position, despite material investment in growth

Enquiries:
Genel Energy	[phone]
Andrew Benbow, Head of Communications
Vigo Communications	[phone]
Patrick d'Ancona

There will be a presentation for analysts and investors today at 0900 BST, with an associated webcast available on the Company's website, www.genelenergy.com.

Genel is pleased to announce the appointment of Jefferies as Joint Corporate Broker to the Company, effective immediately. Jefferies will work alongside J.P. Morgan Cazenove, Genel's current Joint Corporate Broker.

This announcement includes inside information.

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. The information contained herein has not been audited and may be subject to further review.

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CEO STATEMENT

We have a business model that is designed to be resilient in tough times, and to thrive when times are good. 2020 was a challenging year, but our resilience allowed us to continue strategic execution that paved the way for an exciting year in 2021. While the increase in the oil price has therefore been very welcome, boosting our revenues and cash generation, it does not change our strategy. This remains simple - increase low-cost production, invest in growth, and pay a material and progressive dividend. We continue to deliver on this strategy.

Executing our strategy

In line with guidance, our production has increased slightly year-on-year. This has been driven by the addition of a fourth producing field at Sarta, as we further strengthen our position as the most diversified producer in the Kurdistan Region of Iraq ('KRI'). Production at the Tawke PSC also remains robust, with Peshkabir in particular continuing to perform very well.

Our commitment to rigorously controlling our costs, coupled with the material recovery in the oil price, helped us to generate free cash flow of over $20 million in the first half of 2021. Our low-cost production is highly cash-generative, providing the financial strength to then invest in exciting growth areas, as we seek to fulfil our goal of creating material shareholder value.

Our strong financial performance would have been stronger still without the KRG changing its payment schedule in May, which resulted in only five monthly payments being received. While this amendment, and the change to the receivable recovery payment method, is frustrating, it marks a deferral of payment rather than a removal, and we are in discussions with the KRG regarding the pace of Genel's receivable recovery payments. At present, the KRG sees the IOC debts as interest free, and we are working to determine if there is a more equitable solution. In May, the KRG committed to reviewing the payment mechanism, and we look forward to hearing from them in this regard.

We are also attempting to work with the KRG to drive forward the development of Bina Bawi. This remains a potentially valuable project to Genel, and of national significance to the KRI, where we want to develop our existing licence to the benefit of local and national stakeholders. The resources in place are such that its development is of strategic importance, and we continue to attempt to drive forward this project, and explore all avenues to create shareholder value.

Investing in growth

Sarta and Qara Dagh have the potential to create significant value and are priority projects for Genel. The strength of our balance sheet and confidence in consistent payments mean that we are able to invest significantly in these projects this year.

At Sarta, while pilot production has not reached the levels that we had hoped in H1, it is providing valuable information regarding the future development of the field while generating meaningful cash to support the funding of the appraisal campaign. The three well programme is a key focus this year, and we look forward to the results of the campaign, which is now underway following the spudding of Sarta-5. The wells will help give us an understanding of the potential of the field, as we work with Chevron to ascertain the optimal field development plan.

Good progress is also being made with the QD-2 well, which has been drilling since April, and we eagerly await results in around two months' time.

A socially responsible contributor to the global energy mix

COVID-19 has, in many ways, heightened our sustainability ambitions, and as we expand our operations we continue to support the communities in which we operate through investment in social projects, providing direct local employment and fostering wider economic opportunities for companies in the KRI. 28 local companies are currently providing services to our operations.

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Our 2020 equity-based carbon intensity figure of 13 kg CO2e/bbl was well below the industry average of c.20 kg CO2e/bbl, and while new production at Sarta will increase this in 2021, our focus on an asset life-cycle approach helps us deliver a carbon footprint that aligns with the Paris Agreement 1.5 degree pathway and leads to net zero by 2050. The reinjection of gas from Peshkabir into the Tawke field has already materially reduced our emissions, and Ministerial approval has been granted for the Sarta field development plan including dispensation for flaring during early development, with plans in place to invest in a longer-term GHG emission reduction project at the field.

We strongly believe that fulfilling our purpose requires that Genel not only be measured by what we achieve, but also by the way in which we achieve it. As part of our efforts to further strengthen our ESG performance, Genel continues its commitment to the UN Sustainable Development Goals and UN Global Compact's 10 Principles on human rights, labour standards, the environment, and anti- corruption. More about all aspects of our ESG performance can be read in our comprehensive 2020 Sustainability Report, which has been issued today and is available on our website.

Outlook and dividend

Given the level of activity expected in H2, with increased drilling also expected at the Tawke field pending approval from the MNR, capital expenditure is heavily biased towards the second half of the year. Despite this increase in spending and the ongoing expansion of our operating capability, and with the one month deferral in payments meaning we expect 11 monthly payments this year, we are forecasting ending the year in a net cash position at the expected forward oil price. The strength of this financial platform remains central to our strategy.

With the oil price currently remaining robust, and our confidence in our portfolio and ability to grow the company, we have increased the interim dividend by 1¢ to 6¢ per share.

OPERATING REVIEW

The first half of 2021 has seen Genel operations in the KRI expand significantly. Genel has a long history of working in the KRI, although the QD-2 well is the first sole operated well that Genel has undertaken. With Genel also transitioning to the operatorship at Sarta, there has been a step-change in our operational capability on the ground. It is a testament to the team in place, and the positive working culture that has been created, that we have continued to work efficiently and without any lost time injuries or Tier 1 containment losses in the period.

Production

Production in H1 2021 has increased by 2% on the prior year period, in line with guidance, following the addition of production at Sarta and the robust performance of Peshkabir.

	Gross	Net	Gross	Net
(bopd)	production	production	production	production
	H1 2021	H1 2021	H1 2020	H1 2020
Tawke	48,970	12,240	59,790	14,950
Peshkabir	62,170	15,540	48,790	12,200
Taq Taq	6,490	2,860	11,260	4,950
Sarta	7,080	2,120	-	-
Total	124,710	32,760	119,840	32,100

PRODUCING ASSETS

Tawke PSC (25% working interest)

Gross operated Tawke licence production averaged 110,300 bopd in Q2 2021, of which the Peshkabir field contributed 63,000 bopd and the Tawke field 47,300 bopd.

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Five new wells are scheduled at Peshkabir in 2021. The first is in production, two more are being completed and are expected in service soon and two more will be drilled in the remainder of the year, contributing to the field's 2021 production.

With no new wells having come on production at the Tawke field in more than a year, the natural production decline has been partially offset by pressure support from reinjection of over 20 million cubic feet of gas per day from the Peshkabir field in addition to workovers and interventions of existing wells.

Subject to final contract approval from the Ministry of Natural Resources, Genel expects five Tawke wells, three of which will be side tracks, to be drilled before year end.

Sarta (30% working interest)

The Sarta licence has significant potential, and work done in 2021 will help us understand the extent of this potential. Our estimation of reserves and resources at year-end 2021 will be updated following the assessment of three key inputs - ongoing analysis of existing data, pilot production, and the three high-impact appraisal wells being drilled.

A detailed re-evaluation of the seismic depth conversion and associated reinterpretation by Chevron, adopted by the joint venture for well planning purposes, has resulted in a significant upwards revision to the gross rock volume associated with the field. This will form the basis for future reserves and resources audit work.

Production from the Sarta pilot project continues to provide invaluable dynamic data from which we can plan future activities, and averaged over 7,000 bopd in H1 2021. June saw the highest average monthly production in the year to date, 8,400 bopd, following the maximisation of uptime in the month. Of this production, the Sarta-2well produced c.6,400 bopd, and the Sarta-3well c.2,000 bopd, with the latter having been partially plugged back to manage water ingress from the Adaiyah production stream, the origin of which is yet to be determined. With production temporarily limited to the thinner, less volumetrically significant Mus reservoir, a fall in pressure in June across both wells resulted in Genel and the operator, Chevron, reassessing the optimal way to produce these wells ahead of the addition of production from Sarta-1D, a well set to access production from the entire Adaiyah reservoir section for the first time and via a smart completion. Reservoir surveillance work at the start of the year had already proved strong communication between the Mus reservoir in Sarta-2 and the Mus reservoir in Sarta 3 over a short distance of c.3 km, together representing a portion of the container more limited than our expected extent of the Mus reservoir.

In order to analyse Mus pressure data and provide valuable learnings for longer-term field production, the Sarta-3 well was taken off line at the end of June for data gathering purposes. Since then, Mus pressure decline at the Sarta-2 well has in response slowed considerably, potentially indicative of secondary pressure support and associated oil influx.

To prudently manage the reservoir and associated production from the Pilot facility until Sarta-1D comes online around the end of the year, the joint venture partners plan to continue to manage the offtake from the Mus. This period offers multiple invaluable pilot data gathering opportunities to inform the longer term Sarta development plans.

The 2021 appraisal drilling campaign, which is targeting a material portion of the 250 MMbbls of contingent resources in the Jurassic, is now underway and is not impacted by the early results from the pilot production.

Preparations for Sarta-1D and the construction of a flowline linking it to the facility are well underway. The Viking Rig is mobilising to the location ahead of spud in the coming days, and clearing for the flowline is nearing completion. The Sarta-5 well spud in June, with results expected in late Q3/early Q4. This will be followed immediately by Sarta-6 with the same rig, with results now expected by late