Resilience Growth Returns ANNUAL REPORT 2020
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GENEL ENERGY ANNUAL REPORT 2020 REPORT ANNUAL GENEL ENERGY Resilience Growth Returns ANNUAL REPORT 2020 A socially responsible contributor to the global energy mix Genel is a socially responsible oil producer with an asset portfolio that positions us well for a future of fewer and better natural resources projects. Our strategy is to generate cash, invest in growth, and to return excess cash to shareholders, as we strive to deliver on our ambition of being a world-class creator of shareholder value, fulfi lling our goal of being a socially responsible contributor to the global energy mix. Our values Integrity Respect Accountability Dealing with all stakeholders Respecting people, valuing A culture of accountability and in an honest and transparent employees of all cultures responsibility in which people way is vital to having a positive and developing an inclusive take pride in their commitments corporate reputation, garnering environment motivates people, supports the safe delivery of trust and supporting our and treating all partners and objectives and drives the quality activities, providing the social stakeholders in a way that of our work licence to operate, and driving builds relationships helps drive investor support the delivery of common goals. Respecting the environment, minimising the impact of our operations and promoting biodiversity is also necessary to retaining the social licence to operate Collaboration Ingenuity These values are fundamental to our behaviour, decision making, and the delivery both of our Working with a collaborative Ingenuity is where Genel can set mindset, both internally and itself apart. A culture of a curious purpose and strategic objectives. externally, maximises synergies and open minded workforce, bold, and increases the quality of inquisitive, and ready to challenge outputs across the business, also accepted ways of doing things can boosting motivation and inclusivity help open up new opportunities in a way that drives production and drive profi tability and a feeling of being valued Front cover image: Road on Qara Dagh licence This page: Pipeline at Peshkabir (photo courtesy of DNO) StrategicHighlights report Contents NET PRODUCTION Strategic report 1 Business highlights report Strategic 31,980bopd 2 Genel at a glance 4 Chairman’s statement DIVIDENDS DECLARED 6 Chief Executive Offi cer’s statement 10 Our business model and strategy $41million 13 Key performance indicators 14 Financial review 20 Operating review LOST TIME INCIDENTS Governance Financial statements Other information 24 Sustainability 34 Principal risks and uncertainties 0 38 Viability statement since 2015 39 Stakeholder engagement PRODUCTION COST Governance 41 Chairman’s statement on corporate governance 42 Governance statements $2.8/bbl 48 HSSE Committee 50 International Relations Committee CASH GENERATED FROM PRODUCING ASSETS* 52 Reserves Committee 54 Division of responsibilities $85million 59 Board of Directors 63 Executive Committee CASH AT END 2020 (POST BOND SETTLEMENT)* 64 Nomination Committee report 66 Audit, risk and internal control $274 million 69 Audit Committee report 73 Directors’ remuneration report FREE CASH OUTFLOW* 91 Other statutory and regulatory information 95 Statement of Directors’ responsibilities $4 million Financial statements 96 Independent Auditors’ report 2P OIL RESERVES 102 Financial statements and notes 117MMbbls Other information 125 Report on payments to governments 2C OIL RESOURCES 126 Glossary of technical terms 127 Shareholder information 143MMbbls PRODUCING EMISSIONS 13kgCO2e/bbl * Free cash fl ow, cash generated from producing assets, and cash at year end 2020 are non GAAP measures and are explained and reconciled in the fi nancial review section on page 14. Genel Energy Annual Report 2020 1 Genel at a glance What we do Genel’s low-cost production is cash generative even at a low oil price. Generate cash $358million in cash generated since 2017 This cash generation provides the funds to invest in growth, focused on material assets with near-term Invest in growth cash generation. $41million capital expenditure on Sarta and Qara Dagh in 2020 Our fi nancial strength and positive outlook allows Return excess cash us to return material cash to our shareholders. $41million to shareholders dividends declared in 2020 Why we do it Genel aims to be a socially responsible contributor to As we deliver on our goals, we aim to have a positive economic the global energy mix, creating value for shareholders impact on the Kurdistan Region of Iraq both by growing the production through a resilient business model focused on low-cost of the hydrocarbons that fuel the economy and directly supporting and low-carbon oil production that is rapidly recycled the communities in which we operate by improving infrastructure into growth opportunities, with suffi cient cash and providing employment and development opportunities. remaining to pay a material and sustainable dividend. We strive to have the right people doing the right things. Our values – Integrity, Respect, Accountability, Collaboration and Ingenuity – are inherently linked to our business model and strategic success. If we deliver our values, we will deliver our ambition: to become a world-class independent E&P creator of shareholder value. 15 217 14 28 villages near Taq Taq Kurdish workers social projects funded local companies receiving medical visits employed by Genel in the KRI in 2020 supported by and TTOPCO Genel assets 2 Genel Energy Annual Report 2020 Genel at a glance How we are doing NET 2P OIL NET 2C OIL WORKING INTEREST ASSET LEVEL RESERVES RESOURCES PRODUCTION CASH GENERATION report Strategic (MMbbls) (MMbbls) (bopd) ($ million) 117 143 31,980 85 Governance Financial statements Other information TAWKE 61 SARTA 79 TAWKE 14,390 TAWKE 40 PESHKABIR 31 BINA BAWI 17 PESHKABIR 13,180 PESHKABIR 37 TAQ TAQ 15 TAWKE 10 TAQ TAQ 4,250 TAQ TAQ 8 SARTA 10 QARA DAGH 19 Sarta 160 MIRAN 18 Where we do it Kurdistan Region of Iraq Development assets KURDISTAN Oil production TURKEY Exploration and appraisal analysis TAWKE 25% working interest MOROCCO IRAN SARTA 30% working interest BINA BAWI 100% working interest, operator TAQ TAQ 44% working interest, joint operator IRAQ MIRAN 100% working interest, operator QARA DAGH 40% working interest, operator Morocco LAGZIRA 75% working interest, operator Somaliland SOMALILAND ODEWAYNE 50% working interest, operator SL10B13 100% working interest, operator Genel Energy Annual Report 2020 3 StrategicChairman’s report Headingstatement Text Genel is confident that“ we can continue delivering on our strategy and create material value for our stakeholders. DAVID MCMANUS CHAIRMAN ” 4 Genel Energy Annual Report 2020 Chairman’s statement Delivering value to our shareholders I am pleased to welcome you to Genel Energy’s ninth annual report. 2020 report Strategic was a difficult year for everybody, with COVID-19 impacting the global business environment in a way that was unexpected and unforeseeable. The challenges that it presented were unique, but the low-oil price environment that it created was a powerful reminder of the need to have a business model that is both robust and adaptable to rapidly changing external conditions. Governance Financial statements Other information Genel has worked to put in place a business model that is appropriate It is this financial strength and focus on the balance sheet, together for fluctuating market conditions, allowing the Company to continue with a positive business outlook, that underpins our confidence in strategic delivery when times are tough and lay the foundations to the sustainability of our dividend, which we are once again pleased thrive in better times ahead. 2020 was a strong indicator that our to maintain in 2021. strategy is the right one as we not merely survived but had the With the worst of the pandemic hopefully now behind us and a financial strength to invest in our key growth projects, and maintain recovery in the oil price further boosting our finances as we enter our material dividend, delivering on our promises to investors with a year of exciting investment in the portfolio, Genel is confident a reliability for which we are striving to be well known. that we can continue delivering on our strategy and create material Focusing on key areas value for our stakeholders. The ramp up of work at Sarta promises to increase our low-cost As the impact of COVID-19 became clear and the oil price collapsed production in 2021, with the possibility for much more to come in the first quarter of the year, the flexibility and elasticity of our in 2022 and the years ahead. Work at Qara Dagh also offers the business model was demonstrated. Swift decisions were made to potential to unlock value from a fifth field in the KRI, and we will focus on key areas and fit our investment programme to the external of course remain prudent in our expenditure as we aim to provide environment. We reshaped our capital expenditure programme to a compelling mix of growth and returns. live within our means, removing c.$80 million from our original guidance, while still investing in growth and maintaining the dividend. A socially responsible contributor The low oil price helped to reinforce our capital investment Last year I discussed the period of significant and necessary priorities, which as you would expect support our strategic change into which the energy industry is entering. Despite the priorities. Investment at Tawke was delayed appropriately by the pressures and challenges of 2020, we retained our focus on operator DNO, with whom we are closely aligned, and the decision ensuring that Genel is at the forefront of this process. was made to continue investing in the delivery of first oil at Sarta. This was achieved in November, only 21 months after completing As we grow, we continue to focus on our social and environmental the acquisition of the stake in the field. This rapid delivery, despite responsibilities as we look to live up to our mantra of having the the challenges of COVID-19, was an exceptional achievement and right assets, in the right location, with the right emissions, in the a testimony to our workforce and field partners.