Genel Energy Plc is an oil and gas company that is engaged in activities related to exploration and production. The company has interests in the Taq Taq and Tawke oil producing fields. Now the company is focused on Iraqi Kurdistan and is planned to pay its first dividend in the coming year in spite of a loss for the financial year ending 2018. The company has promised to pay a minimum of $40 million to stockholders yearly. They will be starting this dividend paying policy by the year 2020 with an intention for it to grow in years later on.
Genel Energy is one of several independent oil manufacturers to establish or bring back the dividend policies since the price of oil crashed in the international market in the year 2014. Tullow oil which is more focussed in African oil and gas fields is that other company that intended to pay a dividend in May since 2015.
The Genel Energy reported its before-tax loss of $283.4 million for the year ending 2018, as compared to a profit of $272 million a year earlier followed by an impairment of its undeveloped gas fields in the region of Kurdistan, named as Miran.
This dividend policy is an important step for the company. Its co-founders include former BP chief executive Mr Tony Hayward, had a long-term plan to build Genel energy into FTSE 100 company. Genel Energy came up against its problems in the mid of decade. The majority of issues include oil price crash and cut to its estimates of how much oil would it be able to produce from its Taq Taq field. Genel had a market value of more than £3 billion in the year 2014, and currently, its value had been reduced to approximately £600 million.
The current management team is headed by chief executive Murat Özgül. He has been patiently trying to raise Genel against uncertain expectations. Earlier this year Genel acquired stakes in projects led by US oil giant Chevron in the geographic region of Kurdistan in Iraq.
The Genel’s strong cash flow outlook and sureness in the future prospects had led the company to create its dividend policy, as per chief executive Murat Özgül. The company generated a free cash flow of $164 million in the year 2018 as compared to $99 million in 2017. The company expected a forecast of more than $100 million of free cash flow this year.
The dividend announcement made on Wednesday 20th March helped the company to overshadow the depreciated value of its Miran gas field as expected by the analysts. According to the analysts, Miran and Bina Bawi gas fields are the important game changers for Genel. The only problem is that the company has not been able to find out an external partner who would be interested in developing the projects at high costs.
In the previous year, Genel discovered light oil at Bina Bawi gas field. Its production could be used for funding the development of gas at the project. This has been in discussions with the KRG (Kurdistan Regional Government) about the revised plan for Bina Bawi and has been locked ever since. It had been very challenging for the company to reach on an agreement with the KRG. With the decreased value of Miran gas field the company shift its priority and is more focused on developing Bina Bawi gas field.