Malcy’s Blog – Oil price, Genel, Lamprell & finally

WTI $57.81 -42c, Brent $64.00 -49c, Diff -$6.19 -7c, NG $2.12 -7c

By Malcolm Graham-Wood

Oil price

With all the reports out this week it was never going to be an easy ride for oil but so far it has avoided disaster. Even the EIA inventory stats haunted, a substantial draw of 2.5m was offset by even bigger builds in gasoline and distillates.

Genel Energy

Genel had its trading and operations update this morning, the details of which were in their report on Tuesday and in the blog then. The key highlights show that 2019 net production averaged 36,250 boed (33,690) in line with guidance and up 8% on 2018. Net production in 2020 is expected to be close to Q4 2019 levels of 35,410 bopd with an exit rate higher than this due to expected addition of production from Sarta.

So, 2019 pro-forma FCF was $153m (164) or $0.55 per share and Genel expects to generate around $100m in 2020, pre dividend payments, and considers the regularity of payments from the KRG to be enough to reaffirm commitment to growing the dividend this year. Elsewhere discussions are taking place on Bina Bawi, the farm-out of Somaliland is expected to conclude in H1 2020 and the process for Sidi Moussa is expected to commence in 2Q 2020.

The theme for 2019 was very much that of a year of delivery whilst 2020 is certainly building on those investments made with the growing free cash flow. These new assets are growing apace such as Sarta, those of us who saw the sight as recently as last October are amazed at the progress by now and proof of the determination by all concerned to hit production targets, in this case this summer.

Going forward there is even more being added to the portfolio such as the ongoing discussions with regard to commercial terms at the very substantial potential development at Bina Bawi with the Kurdistan Regional Government resulting in an understanding on commercial terms for a staged and integrated oil and gas development being reached.

To add to the growth in the portfolio shareholders are being given a ‘substantial’ and growing dividend which strengthens the appeal to a number of investing classes. These payments and this confidence by the board are more than made possible by the security of the Kurdistan region of Iraq which, during a recent visit to the area was clearly business as usual. Genel is very well set towards building a substantial company based on solid and growing free cash flow, major upcoming developments and a decent mix in hydrocarbon production going forward, what’s not to like?


A pre-close trading update from Lamprell this morning where the situation is normal and as expected. The Moray East project is progressing well within budget, benefiting from the incremental investment in the yard and upending of jackets has commenced and delivery is expected to start at the end of Q1 2020.

The service business including rig refurbishments continues to provide strong revenue in a ‘challenging’ market and 2019 revenues of c.$276m is at the bottom end of guidance and with net cash of $41.5m. With a backlog of $466m from a potential bid pipeline of some $6bn there are few signs that things are looking up yet and accordingly the outlook, at least on the domestic front looks at best uninspiring.

The reason for that is the debt whilst having been rolled over again is still awaiting a new facility being negotiated and that can’t come too soon given the demands on the balance sheet in the next few years. Overheads always seem to have to be reduced and surprise surprise another 20% of overhead reductions have been identified for 2020, for a world class bunch of yards, apart from labour issues this comes as quite a surprise. With 2020 revenues guided to $350-400m Lamprell is running quite hard to stand still but at least there is still jam tomorrow.

And finally…

All those Cardiff fans who will still be travelling back home as I write will be doing so with hope in their hearts after beating Carlisle 3-4 in last night’s replay. The Red Devils cruised to a 1-0 win against Wolves…

And the 3rd test of 4 against South Africa started this morning, England won the toss and are 117-2 at tea.

By Malcolm Graham-Wood

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