Genel Energy (LON:GENL) reported that production suspensions at its Tawke operations weighed heavily on first-half performance, while management highlighted its proposed acquisition of Capricorn Energy as a potential step toward greater production scale and geographic diversification.
Chief Executive Officer Paul Weir said Tawke production was suspended from the end of February through the end of June following regional hostilities near the company’s operating footprint. The disruption covered four months of the six-month reporting period.
Genel ended the period with $199 million in cash and a net cash position of $108 million. Free cash outflow for the half-year was $25 million. After the period end, the company tapped its existing bond for an additional $35 million nominal, at an implied interest cost of about 9.7%, bringing total debt to $127 million against a facility capacity of up to $200 million. Cash at the end of July stood at $240 million, Weir said.
Capricorn transaction targets larger regional platform
On July 2, Genel announced a recommended all-cash offer for Capricorn Energy. At the time of the announcement, Genel had received irrevocable undertakings representing about 39% of Capricorn’s issued share capital. A shareholder vote on the scheme was expected on August 18.
Weir said the proposed deal would provide Genel with an immediate position in Egypt, a country the company had evaluated as a potential investment destination for some time. He cited efforts by Egyptian authorities to support regular payments to oil and gas investors and encourage additional investment.
According to the company’s pro forma figures, the acquisition would broadly double Genel’s business, increasing 2P reserves to 117 million barrels of oil equivalent and lifting working-interest production to about 30,000 barrels of oil equivalent per day. The combined company would have two geographically diversified production hubs rather than a single asset in one geography.
“Genel sees this as the start of a long-term relationship with Egypt, not a financial trade or a short-term investment,” Weir said. He added that the company had begun engagement with Egyptian General Petroleum Corp. and the relevant ministry, describing discussions as constructive.
Because Genel was in an offer period, Weir said the company could not provide detail beyond the published transaction announcement and scheme document.
Tawke operations resume after four-month suspension
Before production was halted, gross output at Tawke had been running at about 80,000 barrels per day through the end of February, supported by two newly drilled wells. Development operations resumed on April 9, while production restarted on June 28.
Since the restart, two additional wells have been spudded at the Peshmerga field as the investment program resumes following a nearly three-year gap. Weir said activity levels would need to be managed in line with the prevailing security situation.
First-half average gross production was 26,400 barrels per day, while the net figure attributable to Genel was 6,600 barrels per day. Domestic realized prices averaged $31 per barrel before the production suspension, and had risen to around $37 per barrel since operations restarted, according to Weir.
The company continues to monitor arrangements for potential international exports from Kurdistan. Weir said Genel’s condition for resuming exports is that exporters are paid in a manner consistent with their production-sharing contracts.
He said initial fees had been paid in line with the budget law and that an appointed independent assessor had completed technical work and submitted a report to the federal government. Based on Genel’s understanding of the process, exporters would next need to receive a top-up payment that would bring payments into line with the relevant contracts.
Oman and Somaliland remain longer-term exploration catalysts
In Oman, Genel is continuing preparatory work for its first exploration well on Block 54, which is planned for 2027. Current activities include integrating data from the Batha West-1 well re-entry, basin modeling, reprocessing existing three-dimensional seismic data, and acquiring and reprocessing additional seismic.
The remaining work commitment for the first exploration period, which runs through May 2028, includes 300 square kilometers of 3D seismic and two exploration wells. Weir said the company is targeting reservoirs proven in adjacent blocks and views the program as a modest-capital, data-led organic opportunity.
In Somaliland, Genel continues to target drilling of the Toosan-1 well in 2027. The prospect has a best-estimate prospective resource of 650 million barrels across multiple stacked reservoir targets, according to Weir, with six further high-graded prospects identified behind it.
The company said most civil engineering work is complete and about 80% of long-lead items are already in inventory. Toosan-1 is approaching the Select-to-Define stage gate, which Weir said could be reached within weeks. That would enable completion of long-lead procurement and the start of tendering for drilling-related goods and services.
The subsequent Define-to-Execute stage gate, scheduled for early next year, would represent the principal commitment to fund drilling. Weir said the company must continue to assess operational, commercial and geopolitical considerations, including potential supply-chain risks associated with activity near the Red Sea.
Weir concluded that Genel’s priorities remain maintaining a strong balance sheet, maximizing cash generation from existing assets and adding value-accretive income streams. Completion of the Capricorn transaction, he said, is the company’s most important near-term objective.
About Genel Energy (LON:GENL)
Genel Energy is a socially responsible oil producer with a low-cost and low-carbon production asset in the Kurdistan Region of Iraq and exploration assets in Oman, Morocco and Somaliland and listed on the main market of the London Stock Exchange (LSE: GENL, LEI: 549300IVCJDWC3LR8F94). Genel’s strategy is designed to build a business with resilient and diversified cash flows that delivers sustainable value to shareholders, and with the aim of restarting the payment of a regular dividend.
