Genel Energy PLC: Trading and operations update

15 January 2019

Genel Energy plc

Trading and operations update

Genel Energy plc ('Genel' or 'the Company') issues the following trading and operations update in advance of the Company's full-year 2018 results, which are scheduled for release on 20 March 2019. The information contained herein has not been audited and may be subject to further review.

Murat Özgül, Chief Executive of Genel, said:

"2018 was a very positive year for Genel, which saw us generate material free cash flow and further transform the balance sheet. An expected year-on-year increase in production means we are set to continue this performance in 2019, with low-cost assets forecast to generate over $100 million in free cash flow even if the oil price averages $45/bbl.

As we generate cash we will continue to invest in the business to maximise the value of our existing portfolio. We are also working hard to bring in new assets that are complementary to our cash generation story. We are focused on building a stronger company with sustainable and material cash flow and multiple growth opportunities from which to create significant shareholder value."

FINANCIAL PERFORMANCE

• $335 million of cash proceeds were received in 2018 ($263 million in 2017), an increase of 27%, of which $98 million was received in Q4
• Free cash flow totalled $164 million in 2018 ($99 million in 2017), an increase of 66%, representing a free cash flow yield of 27% on the year-end share price
• Unrestricted cash balances at 31 December 2018 were $334 million ($162 million at 31 December 2017), with net cash at $37 million ($135 million net debt at 31 December 2017)
• Capital expenditure for 2018 totalled $95 million, of which $70 million was cost recoverable spend on producing assets

2018 OPERATING PERFORMANCE AND 2019 ACTIVITY OUTLOOK

• 2018 net production averaged 33,690 bopd, with Q4 averaging 36,920 bopd. Production and sales by asset during 2018 was as follows:

Note: Difference between production and sales relates to inventory movements

• Tawke PSC (Genel 25% working interest)
  • Tawke PSC production averaged 113,020 bopd in 2018, with production from Peshkabir contributing 27,660 bopd to this figure
  • Production in Q4 2018 averaged 127,220 bopd, of which Peshkabir contributed 50,130 bopd
  • The Peshkabir-8 well completed in December 2018, and is currently producing just under 10,000 bopd. Results of the Peshkabir-9 well are expected shortly
  • While further production wells are set to be drilled in 2019, Peshkabir activity in 2019 will focus on field management facilities and the utilisation of associated gas to enhance oil recovery at the Tawke field

• Taq Taq PSC (Genel 44% working interest and joint operator)
  • Taq Taq field production averaged 12,350 bopd in 2018
  • Production in Q4 2018 averaged 11,640 bopd
  • Drilling operations on the TT-32 well have now been completed, and test production is underway. The well is currently flowing at a rate of over 3,000 bopd, and still cleaning up, with further zones to be tested ahead of an expected stabilised production rate of c.2,000 bopd
  • The rig has now moved to drill the horizontal sidetrack TT-20z well, which will drill the Shiranish in the western flank of the field with an aim to increasing productivity
  • Three further wells are scheduled to be drilled in 2019, as Genel continues to target the flanks of the field with the aim of delivering a year-on-year production increase

• Bina Bawi and Miran (Genel 100% and operator)
  • Field development plans for both Bina Bawi and Miran oil and gas are under discussion with the KRG, and may entail a phased development approach in order to reduce initial capital expenditure and achieve the earliest date for first gas. An extension to the conditions precedent is expected to be granted shortly
  • Genel is reviewing the value of the Miran PSC carried in the Company accounts, and will update this as part of the year-end results process

• African exploration update
  • Onshore Somaliland, seismic processing has now completed on the SL-10-B/13 block (Genel 75% working interest, operator) and analysis and interpretation is underway. Initial indications confirm the Company view that the block has hydrocarbon potential. Genel continues to develop a prospect inventory and assess next steps ahead of a farm-out process and potentially spudding a well in 2020. On the Odewayne block further seismic processing is being considered in order to complete the Company's understanding of the prospectivity of the block
  • On the Sidi Moussa block offshore Morocco (Genel 75% working interest, operator), the acquisition of a c.3,500 km2 multi-azimuth broadband 3D seismic survey completed in November. PSTM and PSDM processing will continue through 2019. Genel has no additional work commitments relating to the licence. A decision will be made on whether to drill a well, and the appropriate equity level, once processing has progressed sufficiently

2019 GUIDANCE

• Genel expects to generate material free cash flow in 2019
  • Genel generates positive free cash flow at and above an oil price of $20/bbl
• In light of the Company's balance sheet strength and ongoing material cash generation, management is appraising the most effective model for balanced capital allocation in order to take advantage of growth opportunities, make value accretive additions to the portfolio, and pave the way to returning capital to shareholders at the appropriate time
• Combined net production from the Tawke and Taq Taq PSCs during 2019 is expected to be close to Q4 2018 levels
• Capital expenditure net to Genel is forecast to be c.$115 million, with the majority being cost-recoverable spend on current producing assets. Capex includes:
  • Tawke and Taq Taq net to Genel of c.$100 million
  • Bina Bawi and Miran maintenance capex of c.$10 million, with the potential for this figure to be updated should there be positive developments on Bina Bawi commercial discussions
  • African exploration cost of under $5 million, largely comprising processing costs relating to Moroccan seismic
• Opex: c.$30 million
• G&A: c.$20 million
• The Company continues to actively pursue growth and appraise opportunities to make value-accretive additions to the portfolio

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For further information, please contact:

This announcement includes inside information.

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, LEI: 549300IVCJDWC3LR8F94). The Company, with headquarters in London and offices in Ankara and Erbil, is one of the largest London-listed independent oil producers, and is the largest holder of reserves and resources in the Kurdistan Region of Iraq. Through its Bina Bawi and Miran fields, the Company is positioned to be a cornerstone provider of KRI gas to Turkey under the KRI-Turkey Gas Sales Agreement. Genel also continues to pursue further growth opportunities. 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.