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Today’s Oil & Gas Update – Genel Energy


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Non-Independent Research; Marketing & Sales Commentary – MiFID II exempt information – see disclaimer below



Market Update: Tuesday 19 January 2021

Genel Energy (LON:GENL): Comprehensive trading update, active work programme slated for 2021

PetroTal (AIM:PTAL): Successful agreement reached with Petroperu


Energy Prices         

Brent Oil US$55.4/bbl vs US$54.7/bbl yesterday

WTI Oil US$52.6/bbl vs US$52.1/bbl yesterday

Natural Gas US$2.64/mmbtu vs US$2.61/mmbtu yesterday


Oil Price News 

Whilst most oil prices are up in early trading today, it was a choppy performance in yesterday’s session as a stronger US dollar and many countries still battling rising daily COVID-19 cases weighed on market sentiment

The lockdowns in Europe and the fairly slow start to vaccination programs in many countries outweighed early on Monday good economic data out of China, which beat analyst estimates to post 6.5% GDP growth in its economy in the fourth quarter, compared to 6.1% growth expected by economists in a Reuters poll

China is also the only major economy to have posted economic growth last year, of 2.3%

All other major economies in the world are expected to have contracted in 2020, hit by the pandemic

Still, China’s economic data wasn’t enough to wipe out a cautious approach to the oil market at the start of this week, as participants are still concerned that the spreading of the virus and the lockdowns will significantly weigh on oil demand in the first quarter

At the same time, vaccination programs are likely to take months before allowing a critical mass of economically active people to contribute to global economic recovery

Elsewhere, following Saudi’s decision to unilaterally cut 1MMBopd below its latest OPEC+ quota originally set last month, Iran announced last week that the National Iranian Oil Company (NIOC) has signed US$1.2Bn-worth of contracts for eight new projects designed to significantly increase its crude oil production

Although these projects will be broadly managed by Iranian companies, they are part of a patchwork of projects that were formulated in tandem with the 25-year deal made with China in 2019, which will heavily feature Chinese companies working on a ‘contract-only’ basis, albeit lots of contracts across all business sectors across all fields


Gas Price News

With winter temperatures below seasonal norms in the northern hemisphere, there has been a rally in natural gas prices from Asia to Europe 

The spot liquefied natural gas (LNG) prices in north Asia jumped to record highs last week, while the key price marker in Europe, the Dutch Title Transfer Facility (TTF), rallied to the highest in more than two years

The natural gas markets at the start of 2021 look completely different from the beginning of last year, when milder weather and the pandemic hit to demand had dragged natural gas prices down to historic lows

This winter season, a rebound in Asian natural gas demand, supply issues at major LNG exporters, logistics issues at the Panama Channel, soaring tanker rates, and last but not least, the cold snap from Madrid to Tokyo, are pushing gas prices higher



Company News

Genel Energy (LON:GENL): Comprehensive trading update, active work programme slated for 2021

Share price: 172p, Market Cap: £478m

GENL has provided a trading update covering its performance in 2020 and outlining its operational outlook for this year.

The Company has confirmed that US$173m of cash proceeds were received in 2020 (2019: US$317m).

CAPEX of US$109m (2019: US$161m), with spending reduced appropriately to reflect the external environment, yet ensuring continuing growth.

Free cash outflow of US$5m in 2020, pre dividend payment (2019: US$99m free cash inflow), comparison impacted by:

Lower oil price (US$42/bbl in 2020, compared to US$64/bbl in 2019)

Non-payment of US$121m relating to oil sales from November 2019 to February 2020

Suspension of override payments with a cashflow impact totalling US$38m in 2020

The low-production cost per barrel of US$2.8/bbl in 2020 helped deliver asset level cash generation of US$74m in the year

Dividends of US$55m were paid in 2020, of which US$14m relates to the 2019 interim dividend paid in January 2020.

The Company remains in a strong cash position of US$354m at 31 December 2020 (US$377m at 31 December 2019), and net cash of US$10m.

Following the call of the outstanding bond with a maturity date in December 2022, settled on 8 January 2021, GENL had cash of US$273m and debt of US$267m, a net cash position of US$6m.

The Company currently retains US$20m of the 2025 bond, to reduce interest cost and increase future optionality.

From an operational standpoint, net production averaged 31,980bopd in 2020, with net production in Q4 averaging 31,510bopd (Q3 2020: 32,210bopd).

Gross production at the Tawke PSC averaged 110,280bopd in 2020, of which Peshkabir contributed 52,710bopd.

Production in Q4 2020 averaged 110,170bopd, of which Peshkabir contributed 56,320bopd.

There will be an active drilling campaign in 2021 on the Tawke licence, with up to eight new development wells set to be drilled and multiple workovers on existing producing wells to be undertaken in the drive to maintain production above 100,000bopd.

First oil production from Sarta began in November 2020, and the Sarta-3 well has produced at an average of c.5,500bopd so far in 2021.

Due to ongoing COVID-19 protocols, production from Sarta-2 is now expected in February.

A stable production level from both wells will be reached in Q1 2021.

The 2021 appraisal drilling campaign is targeting a material portion of the 250MMbbls of existing contingent resources, and prospective resources, in Jurassic formations.

The campaign will begin at the start of Q2. Sarta-5 and Sarta-6 will be drilled back to back, with results from the first well expected in Q3, and operations on both wells complete in Q4 2021.

Re-entry and deepening of the Sarta-1 (S-1D) well is expected around the middle of the year. Should S-1D be successful, a flowline will be constructed in order to enable the well to enter production around the end of 2021.

Gross production at Taq Taq averaged 9,670bopd in 2020, following the suspension of drilling activity in H1 2020

Q4 production at the field averaged 7,610bopd, with an exit rate of over 8,000bopd following the early implementation of part of the 2021 well intervention programme, which increased production from the TT-20z and TT-34y wells.

With activity at Taq Taq focused on optimising cash flow, no drilling is scheduled in 2021, with activity limited to workovers that will help manage field decline.

Our take: GENL successfully navigated a challenging year for all of the Kurdish producers in our view with its low-cost production effectively protecting its balance sheet. The Company expects to drill 12 wells across the portfolio this year. These wells have the potential to add incremental low-cost and cash generative production at the Tawke PSC, add and convert contingent resources to reserves and add production at Sarta, and open up a new field at Qara Dagh. With numerous catalysts in the year and a more promising external environment than 2020, it is no surprise to see GENL’s share price up 18% YTD alone.


PetroTal (PTAL LN): Successful agreement reached with Petroperu

Share Price: 16.8p, Market Cap: £137m

More positive news for PTAL as the Company confirms it has executed final agreements with Petroperu to complete the restructuring of the contingent liability and to extend the oil sales contract with Petroperu for an additional two years.

Oil sales to Petroperu under the Oil Sales Contract for deliveries through the Northern Oil Pipeline (ONP) have been extended for an additional two years to 23 December 2022.

At PTAL’s expense, Petroperu will place commodity price hedges on all oil sold through the ONP, after the oil is delivered by PetroTal to Pump Station # 1 at Saramuro, which will substantially limit PTAL’s exposure to the impact of oil price fluctuations in the period until Petroperu ultimately sells the oil from the Bayovar port.

The amount of the contingent liability at 30 November 2020 was US$16.6m. 

PetroTal will pay this amount to Petroperu over three years in equal monthly instalments, with interest at an annual rate of 6.12%. 

The amount can be prepaid at any time, without penalty and is expected to be prepaid following successful completion of the contemplated bond issue announced earlier this month.

Based on the current Brent oil price forward curve, when the physical oil sales are arranged by Petroperu, which is expected over the next six months, this will result in PTAL receiving payments from Petroperu totalling c.US$26.1m.

The Company continues to develop an alternative export route through to the Atlantic, based on the success of the first 106,000bbl pilot in December 2020, and PTAL has now arranged a second 200,000bbl pilot in February 2021, FOB Bretana.

Our take: A positive update from PTAL effectively dealing with the legacy contingent liability whilst protecting the Company against future oil price volatility through hedging arrangements.  In addition to the Company’s recently announced successful pilot oil export through Brazil, this agreement with Petroperu that ensures future oil sales into the ONP, along with settlement of the contingent liability, significantly enhances PTAL’s operations. The recent reopening of the Bretana oil field operations significantly enhances the Company’s cash flow position notwithstanding a much stronger oil price globally. Shareholders will also be encouraged that the Company has chosen to finance the next phase of its development without equity dilution in our view, and with near term drilling activity slated for Bretana during March 2021, there are a number of significant valuation catalysts ahead this year.

Research – Oil & Gas

Sam Wahab – 0203 470 0473 / 0784 385 5037



Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535 

Grant Barker – 020 3470 0471  


SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London



+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.


Sources of commodity prices


Oil Brent, WTI


Natural Gas




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Recommendations are based on a 12-month time horizon as follows:


Buy – Expected return >15%

Hold – Expected return range -15% to +15%

Sell – Expected return < 15%

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