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.

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 production Net production Gross production Net production 
(bopd) 
              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.

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-2 well produced c.6,400 bopd, and the Sarta-3 well 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 Q1 2022. In a success case, Sarta-6 will be bought onto production in short order via a flowline back to the facility, while Sarta-5 will be produced via a standalone temporary facility given its distance from the existing facility.

Taq Taq (44% working interest, joint operator)

Production at Taq Taq averaged 6,490 bopd in H1, in line with expectations. Activity at Taq Taq is focused on maximising cash generation and no further work is scheduled at the field prior to 2022.

PRE-PRODUCTION ASSETS

Qara Dagh (40% working interest, operator)

Genel's high-potential drilling campaign began with the spud of the QD-2 well in April 2021. This well is appraising the crest of a 50 km long structure at Qara Dagh, around 10 km from the location of the QD-1 well, which flowed light oil in 2011. The well is currently at a depth of c.2,300 metres. Results are anticipated around the end of Q3 2021.

Our social investment programme is continuing, working with local companies to deliver projects that respond to the requirements of local communities. To date a local primary school has been renovated and secondary school refurbished, a football pitch constructed, a road restored, and clean water provided to local villages. There are also over 300 local people employed at Qara Dagh, and contracts awarded to 24 local companies.

Bina Bawi and Miran (100% working interest, operator)

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August 03, 2021 02:00 ET (06:00 GMT)