Genel Energy PLC (GENL.LN), a Middle East and
Africa-focused oil company, could return the bulk of its $1 billion
balance sheet to shareholders if it doesn't buy exploration assets in
its target regions this year and if the price it receives for its oil
remains strong, its chief financial officer said Thursday.
"This is a company that doesn't want for production and
cashflow," Julian Metherell told Dow Jones Newswires in an interview,
citing Genel's $250 million to $350 million capital expenditure plan
funded from production in the Kurdistan region of Iraq, split between development and exploration.
Mr. Metherell said if the company doesn't make any material
acquisitions this year, its development plans are on track and it
receives a good price for its oil in 2013 then it will consider
returning cash to shareholders.
The Kurdistan plans are expected to push the company's
year-end production to 45,000 to 55,000 barrels of oil a day, which it
anticipates would generate revenue of $300 million to $400 million,
depending on the level of any higher-value export sales. Production in
2012 averaged 44,500 barrels of oil a day and generated $333.4 million.
As well as Kurdistan, Genel also plans to spend another $150
million exploring its various assets in Africa. "We're happy to use our
balance sheet to fund Africa in the event of a year of prolonged
domestic spells in Kurdistan," the director said, referring to domestic
oil prices, which are usually lower than export prices.
Mr. Metherell said, however, that Genel gets a good price for
its oil in the local market. "We're seeing prices as high as $76 in the
domestic market," he said, adding that the business will generate
meaningful revenue this year in the domestic market, given the strength
of the pricing.
"We are in a very strong position with $1 billion of cash on
the balance sheet that we can fund this kind of aggressive exploration
portfolio, without having to do what I suppose many of our smaller peers
need to do, which is diminish their working interest and potential
upside by having to farm-down [sell a stake in their assets]."
In spite of its expanding production and exploration profile,
the company wants to further extend its exploration portfolio as Mr.
Metherell said it is unlikely to be able to create value by vying with
national and international oil companies to buy oil production.
"We have a very interesting portfolio of exploration in the
next three years, but we need to continue to be looking to lengthening
that exploration tail," he said.
Genel is looking for world-class opportunities that are very
value accretive. "That's a pretty high bar so we have to screen a lot of
opportunities and we dismiss most of them," Mr. Metherell said.
If Genel doesn't make any acquisitions this year, it may return funds to shareholders.
"You can point to the end of this year and there is a scenario
where we haven't found material acquisitions, where we have ramped up
Tawke and Taq Taq [oil fields], where the export market is open and this
business would look over capitalized for the opportunities it enjoys
and management has never been shy of saying in that scenario, it would
actively consider a return of capital," he said. "The good news is,
however we choose to do it, investors would get money in their pocket."