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Genel Energy sees threats abate

Two big worries – domestic conflict and reservoir declines – have dissipated for the Kurdistan-focused driller
March 23, 2018

A stake in Genel Energy (GENL) is nothing if not exciting. From a shareholder perspective, the last year can be considered very successful, notwithstanding a sharp decline in the Taq Taq field, and the small matter of a major conflagration between Iraq and the Kurdistan Regional Government (KRG), following the latter’s independence referendum in October.

IC TIP: Hold at 162p

Both threats appear to have abated. Taq Taq – where the rate of oil production halved over the course of a few months – eventually troughed at 14,035 barrels of oil per day (bopd) in the fourth quarter of 2017. Now, alongside Genel’s product sharing contract in the Tawke field, 2018 output is expected to remain just below the 32,800bopd average at the end of last year. This could step up with the enticing prospect of additional high-margin barrels from the Peshkabir field.

Meanwhile, the Iraqi-Kurdish conflict may have caused a material reduction in oil exports, but hasn’t stopped the KRG from making monthly payments. Consistency on this front, which dates to September 2015, has allowed Genel to continue to invest. On average, analysts are forecasting full-year adjusted pre-tax profits of $32.7m and EPS of 12.8¢, up from $28.2m and 6.5¢ in 2017.

GENEL ENERGY (GENL)  
ORD PRICE:162pMARKET VALUE:£ 452m
TOUCH:162-164p12-MONTH HIGH:167pLOW: 55p
DIVIDEND YIELD:NILPE RATIO:2
NET ASSET VALUE:577¢*NET DEBT:8%
Year to 31 DecTurnover ($m)   Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
20133480.1966.2nil
2014520-0.31-113nil
2015344-1.16-417nil
2016191-1.25-449nil
20172290.2797.1nil
% change+20---
Ex-div:n/a   
Payment:n/a   
£1=$1.41. *Includes intangible assets of $1.3bn, or 460¢ a share.