Genel Energy
Annual Report 2018

Plain-text annual report

G E N E L E N E R G Y A N N U A L R E P O R T 2 0 1 8 ANNUAL REPORT 20 18 Growing cash flow, a strengthened portfolio Our strategic ambition To become a world-class independent E&P creator of shareholder value. OUR PURPOSE Who we are Genel Energy is the largest holder of reserves and resources in the Kurdistan Region of Iraq, where we have been operating for over a decade. Material free cash flow generation from our oil assets provides the ability to execute our strategy for growth. ESSENTIAL READING CEO statement Our business model and strategy Our sustainable approach READ MORE P6 READ MORE P10 READ MORE P22 CONTENTS Strategic report 1 Business highlights 2 Chairman’s statement 4 Genel at a glance 6 Chief Executive Officer’s statement 10 Our business model and strategy 12 Key performance indicators 14 Operating review 18 Chief Financial Officer’s review 22 Our sustainable approach 24 Risk management 26 Principal risks and uncertainties 29 Viability statement Governance 30 Chairman’s statement on corporate governance 32 Board of Directors 34 Executive Committee 35 Corporate governance 40 Audit Committee 42 Nomination Committee 44 HSSE Committee 46 Reserves Committee 47 Directors’ remuneration report 66 Other statutory and regulatory information 69 Statement of Directors’ responsibilities Financial statements 70 Independent Auditors’ Report 76 Financial statements and notes Other information 101 Report on payments to governments 102 Glossary of technical terms IBC Shareholder information $ GENEL ENERGYSTRATEGIC REPORT HIGHLIGHTS Business highlights HIGHLIGHTS —— $335—million—of—cash—proceeds—were— received—in—2018—(2017:—$263—million)— —— Strong—cash—flow—generation,—with—free—— cash—flow—totalling—$164—million—in—2018— (2017:—$99—million),—an—increase—of—66% —— Financial—strength—continues—to—increase,— with—unrestricted—cash—balances—at—— 28—February—2019—of—$378—million,—— and—net—cash—at—$81—million— —— Addition—of—Sarta—and—Qara—Dagh—to—the— portfolio—in—2019—brings—further—near-term— production—and—material—growth—potential —— Increase—in—1P—and—2P—reserves—as—of—— 31—December—2018—to—99—MMbbls— (31—December—2017:—97—MMbbls)—and—— 155—MMbbls—(31—December—2017:— 150—MMbbls)—respectively,—including—Sarta —— Underlying—EPS—of—109¢—per—share,—which— excludes—the—$424—million—impairment— expense—relating—to—Miran—that—resulted— in—the—reported—loss,—reflects—the—ongoing— strength—of—the—business OUTLOOK —— Production—guidance—maintained—–—net— production—during—2019—is—expected—to—be— close—to—Q4—2018—levels—of—36,900—bopd,—— an—increase—of—c.10%—year-on-year —— Capital—expenditure—guidance—updated—— to—include—spend—on—Sarta—and—Qara—Dagh,— with—net—capital—expenditure—now—forecast— to—be—$150-170—million—(from—c.$115—million) —— Opex—and—G&A—guidance—unchanged—at— c.$30—million—and—c.$20—million—respectively —— Genel—expects—to—generate—material—free— cash—flow—of—over—$100—million—in—2019,— inclusive—of—investment—in—Sarta—and— Qara—Dagh— —— Given—the—strong—free—cash—flow—forecast— of—the—business,—even—after—investment—in— growth—opportunities,—Genel—is—initiating—— a—material—and—sustainable—dividend—policy —— The—Company—intends—to—pay—a—minimum— dividend—of—$40—million—per—annum—starting— in—2020,—with—the—intention—for—this—to—grow— —— The—Company—continues—to—actively—pursue— growth—and—appraise—opportunities—to—make— value-accretive—additions—to—the—portfolio CASH PROCEEDS ($ MILLION) 2P RESERVES (NET MMbbls) $ 207 263 335 NET CASH ($ MILLION) 2016 161 2017 150 2018 155 FREE CASH FLOW ($ MILLION) $ (7) 99 (241) 2016 2017 (135) 1 2016 2017 2018 2016 2017 37 2018 164 2018 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION2 CHAIRMAN’S STATEMENT A year of delivery I—am—pleased—— to—welcome—you—— to—Genel’s—eighth— annual—results— statement. Stephen Whyte Chairman GENEL ENERGYSTRATEGIC REPORTPolitical—stability—in—the—Kurdistan—Region—of— Iraq—and—a—recovery—in—the—oil—price—provided—a— positive—backdrop—for—our—operations—in—2018.— With—a—firm—focus—on—our—renewed—strategy,— Genel—delivered—across—all—key—areas—of—its— business,—with—the—economic—tailwinds—helping— to—deliver—material—free—cash—flow—and—to— create—significant—shareholder—value.—Highly— cash—generative—and—growing—production,— supplemented—by—recent—additions—to—the— portfolio,—and—our—financial—strength,—position— us—well—to—continue—this—performance—in— coming—years. Delivering on our strategy Our—strategic—bedrock—remains—our—highly— cash-generative—producing—assets.—The— success—of—Peshkabir,—where—production—grew— almost—five-fold—over—the—year—to—over—50,000— bopd,—ahead—of—schedule—and—under—budget,— provided—rapid—growth—on—the—Tawke—PSC.—The— increase—at—Peshkabir—was—supported—by—the— redeployment—of—Taq—Taq’s—early—processing— facility,—and—field—management—work—at— the—Taq—Taq—field—itself—helped—to—stabilise— production—and—provide—a—base—from—which— we—expect—to—now—add—growth—in—2019.—The— combination—of—the—two—led—to—Genel—slightly— outperforming—on—production—guidance—for— the—year.— Maximising—the—value—of—these—assets,—and— generating—material—free—cash—flow,—was—our— core—priority—and—positions—us—to—now—focus—on— progressing—the—material—opportunities—in—our— portfolio.—As—we—demonstrated—our—capability— to—grow—and—expand—operations,—we—moved— firmly—into—a—net—cash—position,—and—our—free— cash—flow—will—continue—to—more—than—fund—our— investment—programme—for—the—foreseeable— future.—Our—financial—strength—will—increase— further—even—as—we—ramp—up—our—disciplined— expenditure,—allowing—us—to—initiate—a—material— and—sustainable—dividend—policy.—Our— compelling—mix—of—operational—expertise—and— balance—sheet—strength—has—helped—us—to—join— up—with—major—partners—as—we—look—to—provide— a—long-term—increase—in—shareholder—value. Growth on all key metrics As—we—progress—through—2019—we—continue—— to—grow—on—all—key—metrics.—Our—cash—position— is—rising—on—a—monthly—basis,—our—production— is—forecast—to—increase—10%—year-on-year,—and— the—addition—of—Sarta—and—growth—at—Peshkabir— has—delivered—an—increase—in—our—2P—reserves.— Last—year—we—stated—that—Genel—aimed—to—— add—assets—that—build—on—the—strengths—of—the— current—portfolio,—prioritising—areas—of—low—to— moderate—political—risk—while—retaining—a—focus— on—cash—generation.—Given—the—successful— elections—and—ongoing—improvement—in—the— economic—situation,—we—now—see—the—KRI—as— such—an—area,—as—reflected—in—the—reduction— of—our—internal—discount—rate—and—reinforced— by—well—over—three—years—of—consecutive— payments—for—oil—exports. We—were—delighted—with—the—addition—of— stakes—in—Sarta—and—Qara—Dagh—to—the— Genel—portfolio,—which—are—a—key—step—as— we—continue—to—develop—opportunities—to— Genel has a balanced portfolio combining near-term cash generation and potentially transformational growth opportunities. 3 expand—our—portfolio—of—high-value—assets.— Being—chosen—as—a—partner—by—Chevron—was— a—strong—endorsement—of—Genel’s—technical— and—commercial—strengths,—and—the—projects— are—an—ideal—fit—for—our—strategy.—Qara—Dagh— has—a—proven—hydrocarbon—system—and— significant—resource—potential—estimated—by— Genel—at—c.200—MMbbls,—while—Sarta—offers— near-term—production.—With—unrisked—gross— P50—resources—estimated—at—c.500—MMbbls— Sarta—has—the—potential—to—scale—up—and—be— a—low-cost,—long-life,—cash-generative—asset.— Should—appraisal—work—prove—successful,—field— production—should—materially—increase—just—— as—payments—from—the—Receivable—Settlement— Agreement—tail—away,—ensuring—significant—— free—cash—flow—generation—for—years—to—come.— Generating cash, creating opportunity The—generation—of—free—cash—flow—is—a—key—focus— for—Genel,—and—a—core—tenet—of—our—strategy—for— value—creation.—It—is—our—aim—to—generate—cash— while—delivering—transformational—growth.—In— 2018—we—generated—$164—million—in—free—cash— flow—at—the—same—time—as—increasing—Peshkabir— production—and—progressing—the—development— of—our—asset—portfolio.—2019—will—see—this— strategy—ramp—up.—We—will—be—involved—in—the— drilling—of—around—20—wells—in—the—Kurdistan— Region—of—Iraq,—progressing—plans—for—Sarta— and—Qara—Dagh,—finalising—the—commercial— discussion—relating—to—Bina—Bawi,—and—still— expect—to—generate—free—cash—flow—of—well— over—$100—million.— We—are—a—Company—that—is—focused—on— providing—material—growth—and—are—investing— accordingly.—Ingrained—capital—discipline—and— a—focus—on—cash—flow—generation—provides—us— with—increased—confidence—over—our—long-term— cash—flows,—reaffirming—our—commitment—to— share—success—directly—with—our—shareholders— and—leading—us—to—initiate—a—material—and— sustainable—dividend.—As—we—look—to—provide— investors—with—a—compelling—proposition— combining—both—growth—and—a—material—annual— return,—we—are—set—to—approach—bondholders—to— request—a—waiver—of—the—dividend—restriction—so— we—might—facilitate—the—acceleration—of—a—first— dividend—distribution—into—2019. Long-term value creation Genel—has—a—balanced—portfolio—combining— near-term—cash—generation—and—potentially— transformational—growth—opportunities.—— We—do—not—see—the—additions—of—the—stakes—— in—Sarta—and—Qara—Dagh—as—being—the—end—of— our—ambitions—by—any—means,—and—we—continue— to—selectively—seek—further—additions—to—the— portfolio—that—match—our—strategic—focus. 2018—was—a—hugely—successful—year—that— also—sets—up—the—Company—for—material— growth—in—years—to—come.—I—would—like—to—take— this—opportunity—to—thank—our—supportive— shareholders,—whose—patience—is—now—being— rewarded,—and—reaffirm—our—commitment—to— becoming—a—world-class—independent—E&P— creator—of—shareholder—value. READ MORE P10 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION4 Genel at a glance NET 2P RESERVES BY FIELD (MMbbls)  Tawke – 91  Peshkabir – 32  Taq Taq – 22  Sarta – 10 2018 GROSS PRODUCTION (bopd)  Tawke – 85,360  Peshkabir – 27,660  Taq Tag – 12,350 CAPEX 2018 ($ million)  Peshkabir – 28  Tawke – 24  Taq Taq – 18  Africa – 13  Bina Bawi/Miran – 12 REVENUE BY FIELD ($ million)  Tawke – 211  Peshkabir – 94  Taq Taq – 50 NET PAYMENTS RECEIVED FROM THE KRG ($ MILLION) 335 2017: 263 30 25 20 15 10 5 0 7 4 1 4 1 8 6 1 8 4 1 8 6 1 8 6 1 7 2 1 9 7 1 8 6 1 9 7 1 9 7 1 1 1 0 2 6 6 5 5 4 3 4 4 4 5 4 5 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Taq Taq Tawke RSA payment GENEL ENERGYSTRATEGIC REPORTSOMALILAND MOROCCO YEMEN DJIBOUTI GULF OF ADEN PUNTLAND SOMALILAND S L-10 B—A N D—S L-13 5 SIDI—M O U S S A MOROCCO ALGERIA O D E W A Y N E KURDISTAN REGION OF IRAQ  Development assets  Exploration and appraisal assets  Oil production TURKEY SYRIA IRAQ KRI—EXPORT—PIPELINE P E S H K A BIR IRAN T A W K E S A R T A BIN A—B A WI T A Q—T A Q MIR A N Q A R A—D A G H ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION6 CHIEF EXECUTIVE OFFICER’S STATEMENT Material cash generation, and a stronger portfolio 2018—was—another— successful—year—— for—Genel.— Murat Özgül Chief Executive Officer GENEL ENERGYSTRATEGIC REPORTLeft: Operations at Taq Taq 7 Adding growth opportunities The—addition—of—stakes—in—Sarta—and—Qara— Dagh—was—a—huge—positive—for—Genel.—The—two— fields—provide—precisely—what—we—are—looking— for—as—we—take—steps—to—build—a—portfolio—of— high-value—assets—–—low-cost,—low-risk—entry— into—opportunities—that—promise—near-term— production,—with—material—growth—potential— and—significant—longer—term—upside.— Sarta—will—be—brought—on—to—production—in— 2020,—and—it—has—the—potential—for—production— to—ramp—up—to—transformational—levels.—In— the—success—case,—Sarta—perfectly—fits—into— Genel’s—production—profile,—with—the—potential— to—add—company-changing—cash—flows—after— the—override—payments—under—the—Receivable— Settlement—Agreement—end—in—H2—2022. Being—chosen—as—a—partner—by—Chevron—is—a— real—boost—for—Genel,—and—the—combination—of— the—two—companies—brings—together—Genel’s— experience—in—the—KRI—and—low-cost—operating— capability—on—the—ground—with—Chevron’s—oil— major—capabilities. Sarta will be brought on to production in 2020, and it has the potential for production to ramp up to transformational levels. Our—continued—focus—on—our—key—objectives— helped—us—to—deliver—our—strategic—goals,— growing—reserves,—production—and—cash—while— adding—material—growth—opportunities. While—looking—to—grow—the—business,—we— never—forget—that—our—first—priority—is—the— safety—and—security—of—our—workforce—and—the— communities—in—which—we—operate.—We—are— pleased—to—report—another—year—of—operations— without—a—lost—time—incident—and—there—has— now—been—no—such—incident—at—Genel—or— TTOPCO—operations—since—2015,—over—eight— million—working—hours.—In—2018—we—also—met— our—objective—of—zero—losses—of—primary— containment.—Genel—takes—great—pride—in—our— operations,—and—we—work—hard—to—continuously— improve—our—systems—and—make—sure—that— all—possible—precautions—are—in—place.—This— focus,—and—the—quality—of—our—workforce,—is—a— factor—that—is—attractive—to—potential—partners,— and—therefore—important—to—our—overall— strategic—goals. Material cash generation Our—primary—strategic—goal—in—2018—was—the— maximisation—of—free—cash—flow—from—our— producing—operations.—This—was—our—key— capital—allocation—priority,—and—the—majority— of—our—$95—million—of—capital—expenditure—was— invested—in—the—Tawke—and—Taq—Taq—PSCs.— As—previously—stated,—we—look—to—invest—our— capital—in—those—areas—that—promise—to—deliver— the—most—value—to—shareholders.—In—2018—the— priority—was—therefore—Peshkabir,—where— exceptional—well—performance—delivers—returns— of—over—$8—for—every—$1—invested,—with—cost— recovery—on—the—initial—investment—less—than— a—month—after—production—begins.—Few—assets— anywhere—offer—such—a—rapid—return. The—investment—in—the—well—programme— boosted—Peshkabir—production—from—12,000— bopd—at—the—start—of—2018—to—55,000—bopd— by—the—year-end.—Due—to—the—high—investment— returns—at—Peshkabir,—drilling—on—the—Tawke— field—was—limited—in—the—year,—and—the—field— therefore—naturally—declined.—As—Peshkabir— moves—from—appraisal—to—development,—the— focus—of—drilling—in—2019—will—move—back—to— Tawke.—Up—to—14—wells—are—set—to—be—drilled— on—the—main—Tawke—field,—with—the—operator— expecting—production—to—stabilise—at—c.75,000— bopd—as—a—result. Drilling—activity—at—Taq—Taq—was—also—limited— in—2018.—Work—in—H1—2018—focused—on— workovers—and—well—management,—and—so— the—performance—of—the—field—ahead—of—the— resumption—of—drilling—was—very—encouraging,— with—minimal—production—declines.—We—are—now— two—wells—into—a—five—well—drilling—programme,— focused—on—the—flanks—of—the—field.—Production— from—the—last—two—wells,—TT-29w—and—TT-32,— has—been—robust—–—and—illustrates—that—there— are—still—wells—to—be—drilled—at—Taq—Taq—that— are—attractive—economically.—The—positive— performance—has—significantly—increased—well— profitability,—making—wells—at—Taq—Taq—again—an— attractive—capital—allocation—option. This—focus—on—capital—allocation,—and—the— positive—drilling—results,—helped—boost—our—— free—cash—flow—to—$164—million.—We—expect—— to—continue—generating—material—free—cash— flow—in—2019—–—$44—million—was—generated—in— the—first—two—months—of—the—year—–—even—after— investing—in—the—tremendous—profitable—— growth—opportunities—within—our—portfolio.— ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION8 CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED Above: Board visit to Bina Bawi In 2019 we expect production to grow, material cash generation, and the progression of the opportunities in our portfolio. A—field—development—plan—was—also—submitted— for—Miran.—As—noted—in—our—trading—and— operations—update—in—January,—with—the—focus— on—Bina—Bawi,—we—have—reviewed—of—the—value— of—the—Miran—PSC—carried—in—the—Company— accounts.—The—decision—has—been—made—to— write—down—the—Miran—asset—by—$424—million,— pending—any—movement—on—field—development— discussions.—We—continue—to—believe—that— the—licence—holds—significant—potential,—and— development—can—follow—a—similar—plan—to—Bina— Bawi,—but—pending—clarity—on—a—development— timeline,—this—is—a—prudent—action—based—on— accounting—principles. Returning capital to shareholders Genel—has—a—balanced—portfolio,—with—material— production—and—cash—generation—and— transformational—growth—opportunities—in—the— pipeline.—These—opportunities—are—more—than— funded—out—of—our—current—cash—flow,—and—our— outlook—illustrates—that—our—cash—position—will— continue—to—grow—over—the—long-term—while— still—allowing—for—ongoing—portfolio—investment— and—more.—As—such,—now—is—the—right—time— for—us—to—initiate—a—material—and—sustainable— dividend—policy. We—look—forward—to—getting—started—both—at— Sarta—and—Qara—Dagh,—with—the—latter—most— likely—being—the—premier—remaining—appraisal— opportunity—in—the—KRI.—There—is—a—proven— hydrocarbon—system—on—the—block,—with—a— previous—well—drilled—off—structure—flowing— light—oil.—The—chance—to—therefore—drill—a—more— optimally—located—well—is—enormously—exciting.— Bina—Bawi—is—the—third—asset—in—our—portfolio— that—has—transformational—growth—potential.— With—light—oil—able—to—be—produced—within—six— months—of—the—agreement—of—commercial— terms—with—the—government—it—is—a—significant— opportunity,—although—progress—on—reaching— such—an—agreement—with—the—Kurdistan— Regional—Government—(‘KRG’)—has—been— challenging.—A—field—development—plan—(‘FDP’)— for—Bina—Bawi—relating—to—both—oil—and—gas— was—submitted—in—H2—2018—detailing—the—early— production—of—light—oil—and—taking—a—phased— development—approach—towards—the—gas,— which—would—reduce—initial—capital—expenditure— and—achieve—the—earliest—date—for—first—gas.— Talks—have—recently—focused—on—how—best— to—develop—the—oil—and—progress—the—gas— project.—The—deadline—to—meet—the—conditions— precedent—related—to—the—Bina—Bawi—gas—lifting— agreement—has—been—extended—until—30—April— 2019,—after—which—there—is—a—further—12—months— to—renegotiate—the—gas—lifting—agreement.— Constructive—talks—are—continuing,—and—can— do—so—after—April,—and—any—significant—further— investment—in—the—Bina—Bawi—licence—will—be— subject—to—an—appropriate—commercial—solution— agreed—with—the—KRG. GENEL ENERGYSTRATEGIC REPORT9 Outlook In—2019—we—expect—production—to—grow,— material—cash—generation,—and—the—progression— of—the—opportunities—in—our—portfolio.— Our—strategic—ambitions—remain—clear—–—we— will—focus—on—generating—cash,—investing— in—opportunities,—and—returning—capital—to— shareholders.—Our—ability—to—do—the—latter—is— the—next—step—in—delivering—on—our—strategy.— We—remain—committed—to—materially—growing— the—Company,—and—will—actively—appraise— opportunities—to—make—disciplined—additions—— to—the—portfolio—that—will—further—bolster—our— cash—generation—story. Top: Central processing facility at Peshkabir Below: Workers at Bina Bawi ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION10 OUR BUSINESS MODEL AND STRATEGY Our strategy for the creation of shareholder value Genel has a clear strategy to become a world-class independent E&P creator of shareholder value. Our—strategic—ambition—is—underpinned—by—our— core—strengths—–—a—robust—and—cash-generative— asset—portfolio,—technical—and—commercial— expertise,—and—our—ability—to—leverage—regional— relationships—and—manage—risk—in—complex— areas.—We—have—a—simple—strategy—to—create— material—shareholder—value—–—we—generate— cash,—we—invest—it—in—growth,—and—we—look—to— return—excess—cash—to—shareholders. As—we—deliver—on—our—strategy,—we—place— robust—corporate—governance,—excellence— in—HSE,—and—a—keen—awareness—of—our—place— in—the—community—at—the—heart—of—everything— that—we—do.—We—believe—that—the—way—we— conduct—ourselves—with—host—governments— and—local—people—is—crucial—to—our—success,—and— we—strive—to—deliver—in—a—manner—that—protects— the—health—and—safety—of—our—employees,— minimises—adverse—environmental—impact,— and—provides—benefits—to—local—communities.— Our—success—at—value—creation—is—judged—as— first-quartile—performance—in—total—shareholder— returns—amongst—our—peer—group. OUR DIFFERENTIATED BUSINESS MODEL HOW WE CREATE VALUE We—create—value—by—finding—and— monetising—hydrocarbons,—and—generating— cash—flow.—To—achieve—this—we—must— execute—exploration—and—appraisal— campaigns,—successful—M&A,—deliver— selective—development—projects,—maximise— production—and—free—cash—flow—over—the— life—of—field,—and—be—prepared—to—monetise— at—all—points—of—the—cycle.—As—we—do—this,—— we—leverage—our—following—key—strengths: —— The—ability—to—attract—a—world-class— Board—and—management—team,—ensuring— a—high—level—of—corporate—governance— and—ensuring—a—robust—approach—to—risk— management—and—strategic—planning —— Long-term—strategic—thinking,— allying—our—goals—with—those—of—host— governments—and—partners—to—build— deep—and—valuable—relationships,— helping—to—unlock—value—in—complex— commercial—situations —— Experience—in—managing—risk—in—complex— areas,—both—technical—and—geopolitical,— making—portfolio—decisions—based—on— a—holistic—assessment —— A—constant—focus—on—shareholder—value,— with—an—aim—of—providing—sector-leading— returns—through—organic—growth,— portfolio—events—and—through—the— building—of—an—asset—profile—capable—of— sustaining—a—long-term—dividend 1 GROWING THE RESOURCE BASE Increasing—reserves—and—resources—through— cost-effective—development,—exploration—and— appraisal—campaigns,—and—selective—acquisitions.— Maintaining—a—disciplined—approach—to—capital— allocation,—focused—on—value—creation—and—capital— efficiency,—investing—in—a—profitable—portfolio—that— is—balanced—on—the—risk–reward—spectrum. 2 Key focus Genel—continues—to—prioritise—near-term—spend—on— our—KRI—production—and—development—assets,—with— only—a—modest—percentage—of—cashflow—spent—on— exploration.—Our—exploration—strategy—targets—— low-risk,—low-cost—opportunities—and—partnerships— that—de-risk—higher-risk—exploration—opportunities—— in—the—existing—portfolio.— We—draw—on—our—Board—and—management’s— significant—M&A—experience,—with—a—Company—focus— on—value—accretive—acquisitions—targeting—near— term—cash—flow—with—low—to—moderate—political—risk. DEVELOPMENT AND PRODUCTION Safely—and—efficiently—deliver—development— projects—for—the—benefit—of—both—Genel—and— the—communities—in—which—we—operate.— The—key—aim—is—to—maximise—production—of— available—natural—resources—over—the—life—of— field—and—generate—maximum—free—cash—flow. Key focus Genel—is—concentrating—on—cash-generative—assets— in—the—KRI,—where—production—costs—are—amongst— the—lowest—in—the—world.—We—continue—to—look—for— further—additions—to—our—portfolio—in—order—to— accelerate—profitable—growth. 2018 activity Reserves—and—resources—were—added—both—through— successful—drilling—and—strategic—M&A—activity.—Success— at—Peshkabir—increased—gross—2P—reserves—from— 75—MMbbls—to—126—MMbbls,—and—offset—production— and—declines—at—the—Tawke—field.—The—addition—of— stakes—in—Sarta—and—Qara—Dagh—post-period—end—also— significantly—boosted—our—resources,—and—10—MMbbls—of— net—2P—reserves—were—added—relating—to—Sarta—phase—1A. 2018 activity Net—production—averaged—33,690—bopd,—as—growth— at—Peshkabir—offset—declines—at—the—Tawke—field.— Taq—Taq—performed—well—with—limited—drilling,—and— a—five—well—programme—is—now—underway—which—is— expected—to—increase—field—production.—Sarta—and— Qara—Dagh—provide—material—growth—opportunities,— and—work—will—be—done—in—2019—on—preparing—Sarta— for—production,—with—first—oil—expected—in—2020. READ MORE P15 READ MORE P16 $ GENEL ENERGYSTRATEGIC REPORT11 THE KEY COMPONENTS OF OUR STRATEGY ARE BELOW MAXIMISE THE VALUE OF OUR KRI ASSETS Generating material free cash flow from our KRI oil assets, systematically progressing our world-class gas resources. MAINTAIN A STRONG BALANCE SHEET Disciplined capital allocation, maximising financial flexibility to execute our strategy. Oil—production—from—the—Tawke,—Peshkabir— and—Taq—Taq—fields—generates—significant—free— cash—flow,—and—we—will—continue—to—maximise— this—through—efficient—reservoir—management— and—disciplined—capital—allocation.—Sarta,—Qara— Dagh,—Bina—Bawi—and—Miran—provide—material— upside—opportunities,—with—an—attractive—mix—— of—near-term—production—and—long-term— growth—potential.—As—we—continue—our— investment—in—the—KRI—as—a—committed—partner,— our—asset—potential—and—strong—relationships— with—key—regional—stakeholders—gives—us—a—solid— basis—for—increased—value—creation. A—highly—cash-generative—portfolio,—low— leverage—and—disciplined—and—value—driven— capital—allocation—provides—us—with—a—robust— financial—base—that—is—highly—resilient—to— changes—in—the—macro-economic—environment.— It—also—allows—us—the—optionality—to—benefit— from—growth—opportunities—and—make—value- accretive—additions—to—our—portfolio.—As—we— have—now—moved—into—a—net—cash—position,— with—free—cash—flow—more—than—matching— our—investment—in—growth,—it—paves—the—way— to—returning—capital—to—shareholders. READ MORE P19 READ MORE P15 BUILD A PORTFOLIO OF HIGH-VALUE ASSETS Developing a rich funnel of new opportunities, with prudent allocation of capital to the highest-return projects. Genel—systematically—seeks—opportunities— to—leverage—our—strengths—and—capabilities,— utilising—our—management—team—members’— track—record—in—successful—M&A—execution.—— We—aim—to—add—assets—that—build—on—the— strengths—of—the—current—portfolio,—prioritising— areas—with—low—to—moderate—political—risk— while—retaining—a—focus—on—significant—cash— generation.—Post-period—end,—Sarta—and— Qara—Dagh—fulfilled—these—criteria.—We—are— governed—by—clear—investment—criteria—and— our—commitment—to—value—creative—capital— allocation,—focused—on—assets—that—provide—— the—highest—returns—and—enhance—the—quality— of—our—existing—portfolio.— READ MORE P7 3 FINANCE AND PORTFOLIO MANAGEMENT Manage—financial—and—business—assets—to— provide—flexibility—in—our—capital—structure— in—order—to—pursue—strategic—objectives—and— underpin—future—value-add—growth.—Retaining— balance—sheet—discipline—appropriate—to—the— external—environment,—ensuring—the—ability—— to—take—advantage—of—opportunities—and—— be—ahead—of—the—curve—to—capitalise—on—— sector—opportunities. Key focus Disciplined—capital—allocation—in—areas—that—maximise— the—creation—of—shareholder—value.—We—re-invest—our— cash—smartly—and—allocate—capital—towards—those— areas—with—the—highest—returns,—making—sure—that— we—are—suitably—financed—through—a—mix—of—diverse— funding—options—and—portfolio—management,— providing—a—base—from—which—to—accelerate—the—— growth—of—our—portfolio. $ 2018 activity Genel—continues—to—invest—in—the—areas—in—which— optimum—shareholder—value—can—be—created,— and—capital—expenditure—again—focused—on—our— producing—assets,—with—the—majority—of—our— $95—million—expenditure—being—cost—recoverable.— Targeted—investment—and—a—focus—on—costs—helped— to—generate—material—free—cash—flow,—moving—— Genel—from—a—net—debt—position—of—$135—million—— at—the—end—of—2017—to—a—net—cash—one—of—$37—million— by—the—end—of—2018. READ MORE P19 A BALANCED PORTFOLIO Cash generative oil assets Oil—production—in—the—KRI—provides—material— cash—generation.—$335—million—was—received— in—2018—for—oil—sales,—of—which—c.50%—was— converted—into—free—cash—flow.—Our—reserves—are— being—produced—at—some—of—the—lowest—costs—in— the—industry,—with—the—Receivable—Settlement— Agreement—continuing—to—boost—cash—flow—from— the—Tawke—PSC.—Genel—will—apply—our—technical— and—commercial—experience—to—unlock—and—fast- track—further—oil—development—opportunities,— with—production—at—Sarta—expected—in—2020. READ MORE P16 Development assets Free—cash—flow—from—our—producing—assets—more— than—funds—the—development—of—other—potentially— transformational—portfolio—opportunities.— Sarta—offers—near-term—production—and— material—growth—potential,—and—Qara—Dagh—is—an— exciting—appraisal—opportunity.—Bina—Bawi—and— Miran—offer—long-term—potential—through—the— development—of—the—major—gas—resources. $ $ ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION12 KEY PERFORMANCE INDICATORS Measuring our progress NET 2P RESERVES TOTAL NET RESERVES AND UNRISKED RESOURCES NET PRODUCTION FREE CASH FLOW LOST TIME INCIDENTS SPILLS – LOSS OF PRIMARY CONTAINMENT (NET MMbbls) 155 2017: 150 (BNboe) 5.6 2017: 5.5 (bopd) 33,700 2017: 35,200 500 400 300 200 100 0 9 2 4 2 4 2 1 6 1 0 5 1 5 5 1 2014 2015 2016 2017 2018 6 5 4 3 2 1 0 5 5 . 6 5 . 8 4 . . 2 4 4 4 . 2014 2015 2016 2017 2018 100,000 80,000 60,000 40,000 20,000 0 0 0 0 5 8 , 0 0 0 9 6 , 0 0 0 3 5 , 0 0 0 5 3 , 0 0 0 4 3 , 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Definition 2P—reserves—are—proved—plus—probable—reserves. Definition Net—reserves—and—resources—include—3P— reserves,—2C—contingent—resources—and— prospective—resources. Definition Production—is—measured—in—barrels—of—oil— produced—per—day. Definition Definition Definition Free—cash—flow—is—net—cash—generated—from— Lost—time—incident—frequency—measures—the— Loss—of—primary—containment—records—any— operating—activities—less—cash—outflow—due—to— number—of—lost—time—incidents—per—million— unplanned—or—uncontrolled—release—of—material— purchase—of—intangible—assets,—purchase—of— work—hours. property,—plant—and—equipment,—and—interest—paid.— Previous—years—have—been—restated—to—include— from—a—piece—of—equipment—(such—as—a—pipe,—vessel— or—tank)—used—for—containment—of—potentially— harmful—or—hazardous—substances—and—products. Performance The—significant—increase—in—2P—reserves—at— Peshkabir,—with—a—gross—reserves—revision— upwards—of—61—MMbbls—to—126—MMbbls,—offset— production—and—declines—at—the—Tawke—field.— Taq—Taq—gross—2P—stood—at—51—MMbbls,—with—the— difference—being—production—in—the—intervening— period,—partly—offset—by—a—small—upward—technical— revision.—The—addition—of—Sarta—post-period—end— added—10—MMbbls—of—net—2P—reserves,—helping— to—lead—to—an—overall—increase—in—2P—reserves— of—5—Mmbbls. Relevance—to—strategy Our—strategy—is—to—enhance—the—value—of—our— existing—2P—reserves—through—active—reservoir— management—and—cost-effective—development.— The—Company—also—looks—to—replace—2P—reserves— through—a—combination—of—maturing—contingent— resource—to—commerciality,—exploration—for—new— sources—of—hydrocarbons—and—M&A—activity. Performance Net—reserves—and—resources—grew—by—0.1—BNboe— in—2018,—largely—due—to—the—addition—of—contingent— resources—at—Sarta—and—Qara—Dagh. Performance 2018—net—production—averaged—33,690—bopd,—as— growth—at—Peshkabir—offset—declines—at—the—Tawke— field.—With—limited—drilling,—production—at—Taq—Taq— was—largely—stable,—with—the—TT-29w—well—adding— to—production—later—in—the—year.—Coupled—with—the— growth—at—Peshkabir,—Q4—averaged—36,920—bopd. The—receipt—of—$335—million—in—payments—for— There—were—no—lost—time—incidents—in—2018,—and— There—were—zero—incidents—of—losses—of—primary— oil—exports,—and—an—ongoing—focus—on—costs,— it—is—now—over—three—years—and—more—than—eight— containment—in—2018.— Performance Performance led—to—another—year—of—positive—free—cash—flow— million—man—hours—worked—since—the—last—incident.— generation.—Capital—allocation—discipline—meant— Work—continues—across—our—assets—to—ensure—that— that—just—under—50%—of—the—money—received—— processes—and—procedures—remain—of—the—highest— was—converted—into—free—cash—flow. possible—standard,—with—improved—procedures— being—rolled—out—in—2018—and—65—HSE—focused— site—visits—taking—place—alongside—an—ongoing— dedicated—training—programme. Relevance—to—strategy Prospective—resources—are—those—quantities— of—hydrocarbons—estimated—to—be—potentially— recoverable—from—undiscovered—accumulations—by— application—of—future—development—projects,—and— have—the—potential—to—drive—long-term—growth. Relevance—to—strategy Production—from—our—fields—provides—Genel’s— revenue—generation,—and—is—a—key—measure—of—our— operational—performance.—Our—oil—production—in— the—KRI—is—managed—to—ensure—long-term—value— creation,—with—production—maximised—over—the—life— of—the—field.— Relevance—to—strategy Relevance—to—strategy Relevance—to—strategy Production—from—operating—activities—forms— The—safety—of—our—workforce—remains—of— Part—of—our—commitment—to—being—a—sustainable— Genel’s—revenue—generation.—Net—cash—illustrates— paramount—importance.—Genel—is—committed—to— business—is—for—the—impact—on—the—environment— the—success—of—monetisation—of—these—activities,— running—safe—and—reliable—operations—across—our— around—our—operations—to—be—minimised.—Asset— reflecting—both—money—received—and—the— portfolio,—aiming—at—zero—fatalities—and—no—lost— integrity—is—a—major—priority—for—Genel—and—we— minimisation—of—operating—costs.— time—incidents.— plan—and—execute—the—operations—of—our—business— and—our—engagement—of—subcontractors—so—as—— to—minimise—risk—and—mitigate—potential—impact.— 4 6 1 9 9 7 - 5 2 2 - Number of lost time injuries per million Incidents where there has been a loss work hours 2017: 0 of primary containment 2017: 1 (FREQUENCY) 0 2.0 1.5 1.0 0.5 0.0 0 . 1 6 . 0 6 . 0 0 0 7 8 7 6 5 4 3 2 1 0 0 0 1 1 0 2 ($ MILLION) 164 2017: 99 150 100 50 0 -100 -200 -300 -400 -500 -600 1 6 5 - interest—paid. Performance GENEL ENERGYSTRATEGIC REPORTNET 2P RESERVES NET PRODUCTION FREE CASH FLOW LOST TIME INCIDENTS ($ MILLION) 164 2017: 99 (FREQUENCY) 0 Number of lost time injuries per million work hours 2017: 0 KEY 13 Improvement—year-on-year Deterioration—year-on-year No—change—year-on-year SPILLS – LOSS OF PRIMARY CONTAINMENT 0 Incidents where there has been a loss of primary containment 2017: 1 150 100 50 0 -100 -200 -300 -400 -500 -600 4 6 1 9 9 7 - 5 2 2 - 1 6 5 - 2014 2015 2016 2017 2018 2.0 1.5 1.0 0.5 0.0 0 . 1 . 6 0 . 6 0 0 0 0 2014 2015 2016 2017 2018 8 7 6 5 4 3 2 1 0 7 2 1 1 0 2014 2015 2016 2017 2018 Definition Free—cash—flow—is—net—cash—generated—from— operating—activities—less—cash—outflow—due—to— purchase—of—intangible—assets,—purchase—of— property,—plant—and—equipment,—and—interest—paid.— Previous—years—have—been—restated—to—include— interest—paid. Performance The—receipt—of—$335—million—in—payments—for— oil—exports,—and—an—ongoing—focus—on—costs,— led—to—another—year—of—positive—free—cash—flow— generation.—Capital—allocation—discipline—meant— that—just—under—50%—of—the—money—received—— was—converted—into—free—cash—flow. Definition Lost—time—incident—frequency—measures—the— number—of—lost—time—incidents—per—million— work—hours. Performance There—were—no—lost—time—incidents—in—2018,—and— it—is—now—over—three—years—and—more—than—eight— million—man—hours—worked—since—the—last—incident.— Work—continues—across—our—assets—to—ensure—that— processes—and—procedures—remain—of—the—highest— possible—standard,—with—improved—procedures— being—rolled—out—in—2018—and—65—HSE—focused— site—visits—taking—place—alongside—an—ongoing— dedicated—training—programme. Definition Loss—of—primary—containment—records—any— unplanned—or—uncontrolled—release—of—material— from—a—piece—of—equipment—(such—as—a—pipe,—vessel— or—tank)—used—for—containment—of—potentially— harmful—or—hazardous—substances—and—products. Performance There—were—zero—incidents—of—losses—of—primary— containment—in—2018.— (NET MMbbls) 155 2017: 150 9 2 4 2 4 2 500 400 300 200 100 0 1 6 1 0 5 1 5 5 1 TOTAL NET RESERVES AND UNRISKED RESOURCES (BNboe) 5.6 2017: 5.5 5 . 5 6 . 5 8 . 4 2 . 4 4 . 4 6 5 4 3 2 1 0 (bopd) 33,700 2017: 35,200 0 0 0 , 5 8 0 0 0 , 9 6 100,000 80,000 60,000 40,000 20,000 0 0 0 0 , 3 5 0 0 0 , 5 3 0 0 0 , 4 3 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Definition Definition Definition 2P—reserves—are—proved—plus—probable—reserves. Net—reserves—and—resources—include—3P— Production—is—measured—in—barrels—of—oil— reserves,—2C—contingent—resources—and— produced—per—day. prospective—resources. Performance Performance Performance The—significant—increase—in—2P—reserves—at— Net—reserves—and—resources—grew—by—0.1—BNboe— 2018—net—production—averaged—33,690—bopd,—as— Peshkabir,—with—a—gross—reserves—revision— in—2018,—largely—due—to—the—addition—of—contingent— growth—at—Peshkabir—offset—declines—at—the—Tawke— upwards—of—61—MMbbls—to—126—MMbbls,—offset— resources—at—Sarta—and—Qara—Dagh. field.—With—limited—drilling,—production—at—Taq—Taq— was—largely—stable,—with—the—TT-29w—well—adding— to—production—later—in—the—year.—Coupled—with—the— growth—at—Peshkabir,—Q4—averaged—36,920—bopd. production—and—declines—at—the—Tawke—field.— Taq—Taq—gross—2P—stood—at—51—MMbbls,—with—the— difference—being—production—in—the—intervening— period,—partly—offset—by—a—small—upward—technical— revision.—The—addition—of—Sarta—post-period—end— added—10—MMbbls—of—net—2P—reserves,—helping— to—lead—to—an—overall—increase—in—2P—reserves— of—5—Mmbbls. Relevance—to—strategy Relevance—to—strategy Relevance—to—strategy Our—strategy—is—to—enhance—the—value—of—our— Prospective—resources—are—those—quantities— Production—from—our—fields—provides—Genel’s— existing—2P—reserves—through—active—reservoir— of—hydrocarbons—estimated—to—be—potentially— revenue—generation,—and—is—a—key—measure—of—our— management—and—cost-effective—development.— recoverable—from—undiscovered—accumulations—by— operational—performance.—Our—oil—production—in— The—Company—also—looks—to—replace—2P—reserves— application—of—future—development—projects,—and— the—KRI—is—managed—to—ensure—long-term—value— through—a—combination—of—maturing—contingent— have—the—potential—to—drive—long-term—growth. creation,—with—production—maximised—over—the—life— resource—to—commerciality,—exploration—for—new— sources—of—hydrocarbons—and—M&A—activity. of—the—field.— Relevance—to—strategy Production—from—operating—activities—forms— Genel’s—revenue—generation.—Net—cash—illustrates— the—success—of—monetisation—of—these—activities,— reflecting—both—money—received—and—the— minimisation—of—operating—costs.— Relevance—to—strategy The—safety—of—our—workforce—remains—of— paramount—importance.—Genel—is—committed—to— running—safe—and—reliable—operations—across—our— portfolio,—aiming—at—zero—fatalities—and—no—lost— time—incidents.— Relevance—to—strategy Part—of—our—commitment—to—being—a—sustainable— business—is—for—the—impact—on—the—environment— around—our—operations—to—be—minimised.—Asset— integrity—is—a—major—priority—for—Genel—and—we— plan—and—execute—the—operations—of—our—business— and—our—engagement—of—subcontractors—so—as—— to—minimise—risk—and—mitigate—potential—impact.— ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION14 OPERATING REVIEW Growing production, and a rich funnel of opportunities Successful—drilling— at—Peshkabir—saw— production—rise— through—2018,—and— Sarta—and—Qara— Dagh—offer—material— opportunities. Bill Higgs Chief Operating Officer GENEL ENERGYSTRATEGIC REPORT15 NET MONTHLY PRODUCTION CHART (kbopd) 40 35 30 25 20 15 10 5 0 4 4 2 4 4 2 4 3 2 4 2 2 4 2 2 4 2 2 6 1 2 9 2 2 8 0 2 2 1 2 1 9 1 9 1 3 1 0 2 6 6 5 5 6 6 5 5 5 5 5 5 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 TT Tawke Peshkabir Reserves and resources development Genel’s—proven—(1P)—and—proven—plus—probable— (2P)—net—working—interest—reserves—totalled— 99—MMbbls—and—155—MMbbls—respectively,—a— reserve—replacement—ratio—of—117%—and—141%. — This—increase—follows—successful—drilling— at—Peshkabir—helping—bolster—reserves— replacement—on—the—Tawke—PSC,—stability—at— Taq—Taq,—and—the—addition—of—reserves—at—Sarta— post-period—end.— Production Production—in—2018—was—33,700—bopd,—with— the—success—at—Peshkabir—and—stability—at—Taq— Taq—helping—to—offset—the—natural—field—declines— at—Tawke.—Drilling—in—2018—was—concentrated— on—the—successful—appraisal—campaign—at— Peshkabir,—with—only—limited—activity—at—the— Tawke—field—and—Taq—Taq.—2019—will—see—more— development—work—at—Peshkabir,—while—10— wells—are—set—to—be—drilled—at—Tawke—and—four— at—Taq—Taq.—Through—stabilising—production— at—Tawke,—Genel—expects—production—in—2019— to—be—roughly—in—line—with—that—of—Q4—2018,— 36,900—bopd,—an—increase—of—approximately— 10%—year-on-year. Work—over—the—last—two—years—has—significantly— diversified—our—producing—well—stock.—At—the— start—of—2017—production—came—from—46—wells—at— two—fields.—The—number—of—producing—wells—had— increased—by—50%—by—January—2019,—and—our— production—now—comes—from—69—wells—at—three— fields,—making—the—portfolio—more—diverse—and— reliable—for—production—and—cash—flow.— Average—production—in—2019—to—date—is—37,200— bopd,—in—line—with—guidance. KRI assets Tawke PSC (25% working interest) Production—on—the—Tawke—PSC,—operated—by— DNO,—averaged—113,020—bopd—in—2018,—with— production—from—Peshkabir—contributing— 27,660—bopd—to—this—figure.—With—drilling— activity—on—the—Tawke—PSC—concentrating— on—Peshkabir,—production—at—the—Tawke—field— declined—to—75,000—bopd—by—the—end—of—2018.— Work—in—2019—will—be—focused—on—stabilising— production,—and—10—wells—have—been—included— in—Genel’s—firm—activity—plan—for—the—year,—with— the—operator—planning—to—drill—up—to—14.— Activity—in—H1—2018—included—ongoing—workovers— of—existing—wells,—and—limited—drilling—resumed—in— H2.—One—deep—Cretaceous—well—and—two—shallow— Jeribe—wells—were—brought—onstream,—and— these—zones—will—continue—to—be—targeted—for— production—in—2019. Peshkabir Ongoing—drilling—success—at—Peshkabir—resulted— in—production—increasing—from—12,000—bopd—in— January—to—over—55,000—bopd—at—the—end—of— 2018,—ahead—of—schedule—and—under—budget.— Wells—were—drilled—across—the—structure,—and— each—successfully—added—to—production.— Ahead—of—the—commissioning—of—a—50,000— bopd—central—processing—facility—(‘CPF’)—each— well—produced—via—test—spreads,—a—cost- effective—way—of—maximising—cash—generation— while—appraising—the—field.—This—is—a—model— that—we—will—look—to—replicate—at—Sarta—and— Qara—Dagh. Remaining—reserves—(MMboe) Resources—(MMboe) 1P Gross 371 (46) – – 44 369 10 379 Net 97 (12) – – 11 96 3 99 2P Gross 559 (46) – – 27 540 34 574 Contingent 1C 2C Gross 1,306 – – – (32) 1,274 Net 1,239 – – – Gross 3,022 – – – (9) (197) 1,230 2,826 Net 2,813 – – – (52) 2,761 Prospective Best Gross 3,682 – Net 2,549 – – – (15) – – (7) 3,667 2,542 – – – – 600 189 Net 150 (12) – – 7 145 10 155 1,274 1,230 2,826 2,761 4,267 2,731 31—December—2017 Production Extensions—and— discoveries New—developments Revision—of—previous— estimates 31—December—2018 Post-period— acquisition Updated—reserves— and—resources ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION16 OPERATING REVIEW CONTINUED Ongoing drilling success at Peshkabir resulted in production increasing from 12,000 bopd in January to over 50,000 bopd at the end of 2018, ahead of schedule and under budget. Below: Rig at Sarta In—2018—the—focus—at—the—field—was—on—drilling— and—appraising,—and—six—wells—were—drilled—in— the—year.—Another—two—are—scheduled—in—our— firm—budget—for—2019,—when—field—development— work—will—come—to—the—fore.—As—well—as—the— ongoing—commissioning—of—a—50,000—bopd— CPF,—a—60,000—bopd—capacity—pipeline—is— under—construction—and—work—will—begin—later— in—the—year—on—building—the—gas—gathering—and— processing—facilities—to—enable—reinjection—of— the—associated—gas—produced—at—the—field—into— the—Tawke—field,—both—reducing—flaring—and— increasing—recoverability—at—the—latter.—The—gas— gathering—and—injection—system—is—forecast—to— be—operational—in—early—2020. The—first—well—in—the—2019—programme,— Peshkabir-9,—has—now—been—completed—as—a— producing—well.—The—well—was—drilled—on—the— eastern—flank—of—the—structure,—two—kilometres— from—the—Peshkabir-3—well,—and—therefore— confirms—production—across—the—entirety— of—the—Peshkabir—structure.—Production—at— Peshkabir—is—currently—c.55,000—bopd. Taq Taq PSC (44% working interest, joint operator) Taq—Taq—performed—well—in—2018,—with— production—stabilising—in—the—second— half—of—the—year—through—successful—field— management—operations—and—workovers.— Drilling—on—the—field—has—restarted—in—earnest,— with—successful—progress—being—made—on—our— five—well—programme—targeting—the—flanks—of— the—field.—Two—wells—in—the—programme—have— now—been—completed.— The—TT-32—well—on—the—northern—flank—followed— the—success—of—TT-29w,—and—it—is—currently— contributing—c.3,000—bopd—to—overall—field— production.—The—rig—has—now—moved—to— drill—the—TT-20—well,—with—a—further—three— wells—scheduled—to—be—drilled—at—Taq—Taq— in—2019.—We—will—continue—with—the—current— well—programme,—with—the—aim—of—adding—to— overall—field—production. Sarta (30% working interest) Having—completed—the—transaction—in—February— 2019,—the—field—partners—are—now—progressing— with—the—development—of—the—asset,—which—will— be—done—in—phases.— Phase—1A—begins—with—the—recompletion—of—the— Sarta-2—well—and—the—placing—of—the—Sarta-3— well—on—production,—both—of—which—flowed— c.7,500—bopd—on—test,—and—the—construction— of—a—central—processing—facility—with—a—20,000— bopd—capacity.—The—processing—facility—will—be— installed—on—a—lease—operate—maintain—basis.— First—oil—is—expected—in—the—middle—of—2020,— with—a—total—cost—to—Genel—of—$60—million—to—the— end—of—2020.—Initial—production—will—be—trucked. Following—the—completion—of—the—initial—wells— in—2020,—it—is—expected—that—the—rig—will—move— to—drill—back—to—back—development—wells—as—we— rapidly—appraise—the—field.—Further—production— capacity—will—then—be—added—as—required—as—the— field—is—developed—and—production—ramps—up,— with—test—spreads—being—used—in—a—similar—way— as—they—were—in—the—development—of—Peshkabir.— The—use—of—an—appraise—while—producing— strategy—akin—to—Peshkabir—will—allow—for—the— optimal—evaluation—of—the—gross—resources— with—further—production—capacity—being—added— as—the—field—is—appraised. Qara Dagh (40% working interest, operator) Genel—acquired—40%—equity—in—the—Qara—Dagh— appraisal—licence—and—became—the—operator— through—a—carry—arrangement,—covering— activity—for—the—QD-2—well.—This—well—is—estimated— to—cost—c.$40—million—and—is—set—to—be—drilled—in— H1—2020. Qara—Dagh—offers—an—exciting—appraisal— opportunity.—The—QD-1—well,—completed— in—2011,—tested—light—oil—in—two—zones—from— the—Shiranish—formation.—This—is—despite— it—being—drilled—on—a—location—based—on—an— incorrect—structural—model,—which—has—since— been—re-evaluated—through—the—subsequent— reprocessing—of—2D—seismic,—further—2D— seismic—acquisition,—and—the—integration—— of—learnings—from—the—QD-1—well. The—QD-2—well—is—designed—to—test—a—more— crestal—position—on—the—structure—with—a—high- angle—well—to—maximise—contact—with—reservoir— fractures.—Work—is—underway—on—assessing—the— optimal—location—for—the—well. Bina Bawi and Miran (100% working interest, operator) Bina—Bawi—and—Miran—are—assets—that—have—the— potential—to—generate—significant—shareholder— value,—and—efforts—in—2018—continued—to— explore—a—commercial—solution—to—allow—the— unlocking—of—the—material—resources. GENEL ENERGYSTRATEGIC REPORT17 Left: Seismic acquisition, Somaliland Below: Operations in the KRI Work—is—focused—on—Bina—Bawi,—where—the— potential—for—the—development—of—light—oil— provides—the—opportunity—for—near-term— revenues—that—in—turn—can—be—used—to—expedite— the—development—of—the—8.2—Tcf—of—gas— resources.—The—field—is—also—preferentially— situated,—being—only—30—km—from—Taq—Taq’s— central—processing—facility—and—export—route. The—FDP—for—oil—at—Bina—Bawi—detailed—the— production—of—15—MMbbls—of—light—oil—during— the—first—phase,—with—first—oil—production—being— possible—around—six—months—following—final— investment—decision,—which—is—predicated—on— approval—by—the—KRG. The—FDP—for—gas—at—Bina—Bawi—detailed—a— gas—project—with—an—initial—raw—gas—capacity— of—250-300—MMscfd,—adopting—a—modular— development—strategy—that—would—utilise— incremental—increases—as—facilities—are— replicated.—This—reduces—the—capital— expenditure—requirement—to—first—gas—while— retaining—material—future—upside.—Operational— progress—at—Bina—Bawi—is—dependent—on—an— agreement—on—commercial—terms,—and—Genel— will—step—up—efforts—to—bring—in—a—partner—once— the—project—is—more—clearly—defined.—Any— progress—at—Miran—would—be—subsequent—to— Bina—Bawi. Genel expects production in 2019 to be roughly in line with that of Q4 2018, 36,900 bopd, an increase of approximately 10% year-on-year. Exploration and appraisal Africa Onshore—Somaliland,—seismic—processing— completed—on—the—SL-10-B/13—block—(Genel— 75%—working—interest,—operator)—in—Q4—2018,— and—analysis—and—interpretation—is—underway.— Initial—indications—confirm—the—Company—view— that—the—block—has—hydrocarbon—potential.— Genel—continues—to—develop—a—prospect— inventory—and—assess—next—steps—ahead—of—a— farm-out—process—and—potentially—spudding— a—well—with—a—partner—in—2020.—On—the— Odewayne—block—further—seismic—processing— is—to—be—undertaken—in—order—to—complete— the—Company’s—understanding—of—the— prospectivity—of—the—block. On—the—Sidi—Moussa—block—offshore—Morocco— (Genel—75%—working—interest,—operator),—the— acquisition—of—a—c.3,500—km2—multi-azimuth— broadband—3D—seismic—survey—completed— in—November.—PSTM—and—PSDM—processing— will—continue—through—2019.—Genel—has—no— additional—work—commitments—relating—to— the—licence.—The—Company—will—undertake—a— farm-out—campaign—once—processing—and— interpretation—has—progressed—sufficiently,— ahead—of—a—decision—on—whether—to—drill—a—well— in—the—future. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION18 CHIEF FINANCIAL OFFICER’S REVIEW Strong financial performance Throughout—2018,— the—Company—has— maintained—capital— allocation—discipline,— while—investing—in—its— producing—assets—to— maximise—revenues. Esa Ikaheimonen Chief Financial Officer GENEL ENERGYSTRATEGIC REPORT19 Overview The—Company—has—maintained—its—disciplined— and—value—focused—capital—allocation— philosophy,—investing—primarily—in—its— producing—assets—in—2018.—The—result—is— significant—free—cash—flow—generation—of—$164— million,—an—increase—of—66%—on—the—previous— year,—and—a—transformed—balance—sheet,—with— net—cash—of—$37—million—reported—at—year-end,— a—figure—that—increased—to—$81—million—by—the— end—of—February—2019. Proceeds—of—$335—million—were—significantly— higher—than—the—previous—year—(2017:—$263— million),—as—a—result—of—a—full—year—of—benefit— from—the—RSA,—which—was—effective—from— August—2017,—and—an—improved—average—oil— price—average—of—$71/bbl—(2017:—$54/bbl).— EBITDAX—of—$304—million—was—an—increase—— of—67%—on—last—year,—if—the—one-off—gain—— arising—from—the—RSA—is—excluded.— The—Company’s—capital—allocation—priority— remains—unchanged:—investing—in—the—growth— of—the—business,—both—on—existing—assets—and— also—adding—new—assets.—With—an—enhanced— long-term—portfolio,—continuous—focus—on— value—and—increased—cash—generation,—we—are— confident—in—delivering—on—our—objective—to— become—the—industry—leading—generator—of— shareholder—value. The—financial—strength—of—the—business,— its—strong—future—cash—generation—and—its— resilience—to—downside—scenarios—has—led—us—t— o—initiate—a—material—and—sustainable—dividend— policy.—We—intend—to—pay—a—minimum—dividend— of—$40—million—per—annum,—with—the—intention— of—growing—this—as—our—liquidity—increases.— Due—to—our—resilience,—this—minimum—is—payable— at—an—oil—price—of—$55/bbl,—but—below—that—we— will—of—course—ensure—that—the—payment—made— is—appropriate.— We—will—pay—a—dividend—in—2020—relating—to—the— 2019—financial—year,—with—the—intention—that— this—will—be—split—between—an—interim—and—final— dividend,—to—be—paid—one-third/two-thirds.— Although—we—have—been—strengthening—our— credit—continuously,—and—will—continue—to— do—the—same,—the—non-cash—impairment—of— the—Miran—gas—asset—means—that—we—need—to— seek—a—waiver—from—our—bondholders—for—a— dividend—in—2019.—Subject—to—acceptable—waiver— discussions—with—our—bondholders,—we—intend— to—accelerate—the—distribution—and—pay—— a—dividend—in—2019.— Our—dividend—policy—provides—a—meaningful— and—competitive—return—to—shareholders,— appropriately—commensurate—with—the— underlying—value—of—the—business,—without—in— any—way—compromising—our—ability—to—invest— in—growth—through—progression—of—value— realisation—from—our—existing—portfolio—and—— the—acquisition—of—appropriate—new—assets. Successful focus on financial objectives For—2018,—the—financial—priorities—of—the— Company—were—the—following: —— Continued—focus—on—capital—allocation,— with—prioritisation—of—highest—value— investment—in—assets—with—ongoing—— or—near-term—cash—generation —— Continued—focus—on—cost—optimisation—— and—performance—management —— Maintenance—of—a—strong—balance—sheet— and—management—of—liquidity—runway— throughout—the—development—of—the—— Bina—Bawi—and—Miran—fields —— Selective—investment—in—value—accretive— opportunities—that—provide—visible—cash— generation—and—debt—capacity— Cost—recoverable—investment—in—producing— assets—led—to—positive—results.—At—Peshkabir,— a—high-performance—ramp—up—was—achieved,— increasing—production—from—c.15,000—bopd— to—c.55,000—bopd.—At—Taq—Taq,—wells—drilled— successfully—increased—production—at—the—— end—of—the—year,—and—TT-32—suggests—there—— is—potential—for—additional—upside—production— that—can—be—unlocked—from—further—drilling— work.—Towards—the—end—of—the—year,—work—on— Tawke—included—workovers—and—the—drilling— Results summary ($ million unless stated) Production—(bopd,—working—interest) Revenue— EBITDAX1— Depreciation—and—amortisation Exploration—credit—/—(expense) Impairment—of—property,—plant—and—equipment Impairment—of—intangible—assets Operating—(loss)—/—profit Cash—flow—from—operating—activities— Capital—expenditure Free—cash—flow2 Cash3— Total—debt Net—cash—/—(debt)4 Basic—EPS—(¢—per—share) Underlying—EPS—(¢—per—share)5 2018 2017 33,700 355.1 304.1 (136.2) 1.5 – (424.0) (254.6) 299.2 95.5 164.2 334.3 300.0 37.0 (101.6) 109.0 35,200 228.9 475.5 (117.4) (1.9) (58.2) – 298.0 221.0 94.1 99.1 162.0 300.0 (134.8) 97.1 65.1 1.— EBITDAX—is—operating—profit—/—(loss)—adjusted—for—the—add—back—of—depreciation—and—amortisation—($136.2—million),— exploration—credit—($1.5—million)—and—impairment—of—intangible—assets—($424.0—million) 2.— Free—cash—flow—is—net—cash—generated—from—operating—activities—less—cash—outflow—due—to—purchase—of—intangible— assets—($39.7—million),—purchase—of—property,—plant—and—equipment—($65.3—million)—and—interest—paid—($30.0—million) 3.— Cash—reported—at—31—December—2018—excludes—$10.0—million—of—restricted—cash 4.— Reported—cash—less—($334.3—million)—less—reported—balance—sheet—debt—($297.3—million) 5.— EBITDAX—less—net—gain—arising—from—the—Receivable—Settlement—Agreement—(‘RSA’)—divided—by—the—weighted— average—number—of—ordinary—shares of—additional—wells.—We—expect—to—realise— the—benefits—of—these—wells—next—year—when,— together—with—further—wells—planned—in—2019,— the—incremental—production—is—planned—to— stabilise—production—at—this—mature—field. Operating—expenditure—at—our—producing— assets—was—already—one—of—the—lowest—in—the— world—at—c.$2.5/bbl—–—in—2018—the—average— operating—expense—per—barrel—remained—— at—around—the—same—level. At—Bina—Bawi,—commercial—discussions—have— been—ongoing—with—capital—investment—delayed— until—an—appropriate—commercial—structure— with—an—appropriate—de-risked—cash—flow— profile—can—be—agreed.—We—continue—to—look—— at—the—best—way—to—develop—the—asset—and— minimise—spend—while—maximising—the— potential—for—value—creation.—We—will—continue— this—approach—in—2019.—At—Miran,—any—progress— would—be—subsequent—to—Bina—Bawi,—with—Miran— effectively—held—on—a—care—and—maintenance— basis—in—the—meantime.—The—clear—separation— of—the—two—assets—and—the—prioritisation—of— Bina—Bawi—have—resulted—in—a—significant— impairment—to—the—carrying—value—of—the—— Miran—PSC.—Detail—is—provided—in—note—1—to—— the—financial—statements. Through—the—year,—the—Company—has—assessed— potential—asset—acquisition—opportunities—with— a—priority—on—low-cost—entry—and—near-term— cash—generation.—This—has—resulted—in—the— completion—of—the—acquisition—of—interests—in— the—Sarta—and—Qara—Dagh—licences—in—early— 2019,—which—represent—significant—growth— potential—for—the—Company.—We—will—pursue— further—acquisition—activity—in—the—future. For—2019—the—financial—priorities—of—the— Company—are—the—following: —— Continued—focus—on—capital—allocation,—with— prioritisation—of—highest—value—investment—in— assets—with—ongoing—or—near-term—cash—and— value—generation —— Investment—in—lower—risk—development—of— opportunities—with—high—potential,—currently— these—are—targeting—first—oil—in—2020—at— Sarta—and—drilling—an—exploration—well— on—a—discovered—resource—at—Qara—Dagh.— Investment—at—Bina—Bawi—will—be—added— should—appropriate—commercial—terms—— and—conditions—be—reached —— Continued—focus—on—identifying—assets—to— add—to—the—portfolio—that—offer—potential—for— adding—significant—value—to—the—Company— with—near—to—mid-term—cash—generation,— primarily—to—build—the—Company’s—cash— generation—options—when—the—override— royalty—agreement—ends—in—Q3—2022— and—provide—the—basis—for—increasing—the— dividend—in—the—future —— Continued—focus—on—the—capital—structure—— of—the—Company ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION20 CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED The financial strength of the business, its strong future cash generation and its resilience to downside scenarios has now provided the appropriate platform for the Company to return cash to shareholders. A—summary—of—the—financial—results—for—the— year—is—provided—below. Financial results for the year Income statement Working—interest—production—of—33,700—bopd— was—slightly—reduced—compared—to—last—year— (2017:—35,200—bopd),—principally—as—a—result— of—decline—in—Tawke—which—was—mostly—offset— by—Peshkabir.— Revenue—increased—from—$228.9—million—to— $355.1—million.—The—year-on-year—increase—was— caused—principally—by—improved—oil—price—of— average—$71/bbl—(2017—average:—$54/bbl)—and— a—full—year—of—the—RSA,—which—was—effective— from—August—2017. Production—costs—of—$28.7—million—slightly— increased—from—last—year—(2017:—$27.5— million)—primarily—as—a—result—of—production— contribution—from—Peshkabir. The—increase—in—revenue—resulted—in—EBITDAX— of—$304.1—million—is—lower—than—last—year—— (2017:—$475.5—million),—which—included—the— one-off—gain—on—RSA—of—$293.8—million.— Excluding—the—one-off—gain—last—year,—EBITDAX— improved—by—67%. Depreciation—of—$72.4—million—(2017:—$83.3— million)—reduced—year-on-year—as—a—result—of— lower—production.—Amortisation—of—Tawke— intangibles—increased—to—$62.1—million—due—— to—a—full—year—of—the—RSA—(2017:—$32.8—million).— Exploration—expense—resulted—in—a—credit—balance— of—$1.5—million,—principally—$1.3—million—release— of—accruals—for—the—already—relinquished—Cote— d’Ivoire—licence—(2017:—$1.9—million—expense).— An—impairment—expense—of—$424.0—million— (2017:—$58.2—million)—was—recorded—in—relation— to—the—Miran—PSC,—which—is—explained—further— in—note—1—to—the—financial—statements. Cash—general—and—administrative—costs—of— $17.4—million—were—largely—unchanged—(2017:— $16.9—million).— Finance—income—of—$4.4—million—(2017:—$4.9— million)—was—bank—interest—income—(2017:— $2.2—million).—Other—finance—expense—of—$3.2— million—(2017:—$28.0—million)—was—comprised— of—non-cash—discount—unwind—expense—on— liabilities—(2017:—$8.3—million)—whereas—last— year—there—was—$3.7—million—premium—paid—and— $16.0—million—accelerated—discount—unwind—on— redemption—of—the—bonds. There—is—no—taxation—on—operational—profits:— under—the—terms—of—KRI—PSCs’,—corporate— income—tax—due—is—paid—on—behalf—of—the— Company—by—the—KRG—from—the—KRG’s—own— share—of—revenues,—resulting—in—no—corporate— income—tax—payment—required—or—expected—to— be—made—by—the—Company.—Tax—presented—in— the—income—statement—of—$0.2—million—(2017:— $1.0—million)—was—related—to—taxation—of—the— Turkish—and—UK—service—companies.— GENEL ENERGYSTRATEGIC REPORT21 Dividend No—dividend—(2017:—nil)—has—been—declared— for—the—year—ended—31—December—2018.—Note— that—the—Companies—(Jersey)—Law—1991—does— not—define—the—expression—“dividend”—but— refers—instead—to—“distributions”.—Distributions— may—be—debited—to—any—account—or—reserve— of—the—Company—(including—share—premium— account),—save—for—nominal—capital—account— or—capital—redemption—reserve.—In—all—cases,— the—Company—is—only—permitted—to—make—a— distribution—if—the—Directors—authorising—it— have—made—a—prior—solvency—statement.—The— Directors—will—decide—which—account—to—debit— in—relation—to—each—specific—distribution. Going concern The—Directors—have—assessed—that—the— Company’s—forecast—liquidity—provides— adequate—headroom—over—forecast—expenditure— for—the—12—months—following—the—signing—of— the—annual—report—for—the—period—ended— 31—December—2018—and—consequently—that—— the—Company—is—considered—a—going—concern. Capital expenditure Capital—expenditure—in—the—year—was—$95.5— million—(2017:—$94.1—million).—Cost—recovered— spend—on—producing—assets—in—the—KRI—was— $70.4—million—(2017:—$59.5—million)—with— spend—on—exploration—and—appraisal—assets— amounting—to—$25.1—million—(2017:—$34.6— million),—principally—incurred—on—the—Miran,— Bina—Bawi—and—Somaliland—PSCs. Cash flow and cash Net—cash—flow—from—operations—was—$299.2— million—(2017:—$221.0—million).—This—was— positively—impacted—by—$92.5—million—(2017:— $86.5)—of—proceeds—being—received—for—the— RSA,—and—$242.6—million—(2017:—$176.8—million)— received—for—current—sales.— Free—cash—flow—before—interest—was—$194.2— million—(2017:—$141.8—million)—and—free—cash— flow—after—interest—was—$164.2—million—(2017:— $99.1—million).— $10.0—million—(2017:—$18.5—million)—of—cash— was—restricted—and—therefore—excluded—from— reported—cash—of—$334.3—million—(2017:—$162.0— million).—Overall,—there—was—a—net—increase—in— cash—of—$172.7—million—compared—to—a—decrease— of—$245.1—million—last—year. Debt Total—debt—was—at—$297.3—million—(2017:—$296.8— million)—and—resulted—in—net—cash—of—$37.0— million—(2017:—$134.8—million—net—debt).— The—bond—has—three—financial—covenant— maintenance—tests: Financial—covenant Test YE2018 Net—debt—/—EBITDAX— Equity—ratio—(Total— equity/Total—assets) Minimum—liquidity— <—3.0 (0.1) >—40% 73% >—$30m $334m Net assets Net—assets—at—31—December—2018—were— $1,331.4—million—(2017:—$1,609.8—million)—and— consist—primarily—of—oil—and—gas—assets—of— $1,384.2—million—(2017:—$1,847.9—million),—trade— receivables—of—$94.8—million—(2017:—$73.3— million)—and—net—cash—of—$37.0—million—(2017:— $134.8—million—net—debt). Liquidity / cash counterparty risk management The—Company—monitors—its—cash—position,—cash— forecasts—and—liquidity—on—a—regular—basis.— The—Company—holds—surplus—cash—in—treasury— bills—or—on—time—deposits—with—a—number—of— major—financial—institutions.—Suitability—of— banks—is—assessed—using—a—combination—of— sovereign—risk,—credit—default—swap—pricing— and—credit—rating.— ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONand—marine—gas—oil.—Our—total—reportable—scope— 2—emissions—were—257—tCO2e,—attributable—to— purchased—electricity—at—our—offices—and—field— operations.—Our—total—reportable—scope—1—and— 2—emissions—were—therefore—14,150—tCO2e,— normalised—to—145.9—tCO2e—per—employee— (based—on—the—2018—monthly—average—number— of—employees). The—GHG—emissions—from—facilities—we—operate— were—14,150—tCO2e—in—2018,—which—is—higher— than—those—reported—(1,028—tonnes—tCO2e)—in— 2017.—Our—2018—scope—1—emissions—have—seen— a—significant—increase—over—2017—due—to—the— addition—of—marine—seismic—operations—on—the— Sidi—Moussa—permit—off—the—coast—of—Morocco.— These—operations,—which—were—conducted— between—July—and—November—2018,—involved— the—combustion—of—marine—fuel—oils,—resulted— in—emissions—of—13,227—tCO2e,—and—account—for— 93%—of—our—total—2018—emissions. Waste—collection—work—continues—in—the— villages—surrounding—Taq—Taq.—A—local— company—is—employed—to—remove—waste—from— nine—villages—on—a—daily—basis,—transporting—the— waste—to—specific—landfill—sites. 22 OUR SUSTAINABLE APPROACH Supporting and sustaining the communities in which we operate is fundamental to Genel Energy’s success. Natural resources should be a boon to a region, and it is imperative that local people share the benefits of the resources found in their area. As well as providing economic benefits for a region, we strive to support local communities directly through providing opportunities, while leaving the environment untarnished for future generations. HEALTH AND SAFETY A—safe—workplace—remains—a—top—priority— for—Genel,—and—we—are—proud—that—we—have— once—again—achieved—our—target—of—zero—lost— time—incidents—across—TTOPCO—and—Genel— operations.—There—has—not—been—an—LTI—at— Genel/TTOPCO—operations—since—2015,— constituting—over—eight—million—working—hours. This—is—a—performance—that—we—are—proud—of,— and—we—continue—to—enhance—our—procedures— and—working—practices—in—order—to—achieve— best—in—class—results.—HSE—forms—a—core—focus— of—our—operations,—and—is—kept—front—of—mind— through—regular—training—sessions—and—site— visits,—which—demonstrate—clear—leadership— and—reaffirm—our—focus.—The—Chairman—of—the— HSSE—Committee—made—a—site—visit—to—Taq—Taq— and—Bina—Bawi,—and—65—HSE—visits—were—made— in—2018—to—Taq—Taq—and—Genel-operated—sites— in—total.— External—audits—also—work—to—identify—any— possible—areas—of—improvement,—and—validate— the—veracity—of—our—HSE—work.—In—2018— TTOPCO—achieved—a—five—star—grading—from— the—Five—Star—Occupational—Health—and—Safety— Audit,—which—was—conducted—by—the—British— Safety—Council,—and—has—been—recommended— for—continued—BS—OHSAS18001:2007— certification.—TTOPCO—underwent—a—detailed,— quantified—and—objective—evaluation—of— occupational—health—and—safety—management— system—in—December—2018.—The—audit— measured—our—performance—against—a—number— of—key—safety—management—indicators—and— achieved—the—highest—rating. The—attentiveness—to—the—safe—running—of— our—operations—helped—us—to—also—achieve— our—target—relating—to—losses—of—primary— containment,—as—there—were—none—in—2018.— Genel—will—continue—to—work—diligently—at— putting—in—place—the—best—possible—processes—to— help—repeat—the—positive—performance—of—2018. PEOPLE Our—talented,—experienced—and—motivated— staff—are—key—to—the—success—of—our—Company. As—of—31—December—2018,—Genel—employed—114— people.—Of—these,—63—are—based—in—Ankara,—19— in—London,—15—in—the—Kurdistan—Region—of—Iraq,— and—17—in—our—African—operations.—TTOPCO— employed—334—people,—of—which—250—are— local—employees. — Our—commitment—to—employing—a—diverse—and— balanced—workforce—enables—us—to—build—an— effective—and—talented—workforce—at—all—levels— of—the—organisation,—including—the—Board. The—value—we—place—on—equal—opportunities— and—diversity—of—ideas,—skills,—knowledge,— experience,—culture,—ethnicity—and—gender— is—evident—in—our—daily—operations—as—well—as— formalised—in—our—policies—and—procedures. Our—recruitment—policy—is—to—appoint— individuals—based—solely—on—their—skills,— experience—and—suitability—to—the—role.—32%— (37—employees)—of—our—workforce—are—women.— Of—those,—20%—(8—employees)—hold—senior— management—positions. ENVIRONMENT Our—operations—are—managed—in—accordance— with—our—policy—of—minimising—environmental— impacts—and—potential—adverse—effects.—This— includes—a—focus—on—effective—design,—efficient— operation—and—responsible—energy—use.— We—continue—to—report—our—greenhouse— gas—(‘GHG’)—emissions—in—accordance—with— the—requirements—of—the—UK’s—Companies— Act—2006—(Strategic—Report—and—Directors’— Reports)—Regulations—2013,—for—all—Genel— operated—assets—or—facilities.—To—determine— responsibility—for—our—activities—we—applied— the—‘operational—control—approach’—to—setting— organisational—boundaries—as—defined—by— the—WRI/WBCSD—GHG—Protocol—Corporate— Accounting—and—Reporting—Standard—(the— GHG—Protocol). The—majority—of—energy—and—fuel—data— collected—has—been—based—on—actual,— measured—consumption.—0.01%—of—emissions— (1.77—tonnes—of—CO2—equivalent—(tCO2e))— has—been—extrapolated—from—actual—or— historic—consumption—figures.—Emissions—are— calculated—using—appropriate—conversion— factors—sourced—from:—the—Defra/DECC—UK— Government—Conversion—Factors—for—Company— Reporting—2018—and—the—IEA—CO2—Emissions— from—Fuel—Combustion—Highlights—2018—Edition. According—to—the—methodologies—outlined— above,—our—total—reportable—scope—1—emissions— in—2018—were—13,893—tCO2e,—which—included— the—combustion—of—diesel,—LPG,—heavy—fuel—oil— GENEL ENERGYSTRATEGIC REPORTIn—2019,—TTOPCO—is—set—to—undertake—a—major— infrastructure—project—to—provide—access—to— clean—water—for—nearby—villages.—As—operations— ramp—up—across—our—other—assets—so—will— our—social—programme,—and—we—will—strive—to— ensure—that—the—local—community—directly— benefits—from—Genel’s—operations.— 23 COMMUNITY DEVELOPMENT We—partner—with—and—invest—in—communities— close—to—our—operations—to—achieve—mutual— long-term—benefits,—and—we—see—it—as—our— responsibility—to—help—local—people—develop— the—skills—to—thrive—and—play—a—part—as—we— work—with—them—to—unlock—the—potential—of— our—host—countries’—natural—resources.—Over— three—quarters—of—TTOPCO—employees—are— from—the—local—community,—with—such—direct— employment—making—a—tangible—difference—to— local—areas. Education—and—health—remain—key—priorities—for— Genel’s—community—work.—Both—through—our— operations—and—through—training—programmes— we—seek—to—maximise—opportunities—for—people— of—all—ages.—Our—training—centre—at—Taq—Taq— was—utilised—for—local—community—participants— to—receive—valuable—skills—training,—boosting— employability.—Our—medical—teams—continue— to—take—their—expertise—to—local—villages,— supporting—the—community—and—carrying—out— routine—medical—checks.—During—2018,—47—visits— were—made—to—10—villages—and—437—patients— received—medical—support. Above: Quarto school Left: Skills training, near Taq Taq Right: Refugee support, KRI ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION24 RISK MANAGEMENT BOARD AND COMMITTEE STRUCTURE BOARD —— Overall—responsibility—— for—risk—oversight— —— Overall—responsibility—— for—all—principal—risks AUDIT COMMITTEE REMUNERATION COMMITTEE NOMINATION COMMITTEE HSSE COMMITTEE RESERVES COMMITTEE READ MORE P40 READ MORE P47 READ MORE P42 READ MORE P44 READ MORE P46 —— Risk—management—— and—internal—control— systems —— Financial—controls —— Compensation—— and—reward— —— Board—composition —— Health—and—safety—risks— —— Security—risks— —— Environmental—risks —— Review—reserves— and—resources GENEL ENERGYSTRATEGIC REPORTRESPONSIBILITIES Board 25 STRATEGY ! RISK ASSESSMENT AND REVIEW IDENTIFIED RISKS BOARD SETS CONTROLS TO MITIGATE OR MANAGE RISKS —— Identifies—and—assesses—the—potential— impact,—likelihood—and—sensitivity—of— the—principal—risks—of—the—business— —— Identifies—new—risks—or—changes— in—the—nature,—probability—or—impact— of—existing—risks— —— Makes—effective,—appropriate—and—timely— decisions—on—how—principal—risks—are— managed—or—accepted— —— Ensures—that—decisions—taken—are— appropriately—executed—throughout—the— business—through—appropriate—delegation— of—authorities—and—policies— —— —Where—appropriate,—approves—policies— on—key—risks—and—provides—direction— on—risk—management—and—appropriate— risk—mitigation— —— Monitors—the—effectiveness—of—controls— in—place—through—reporting,—assurance—and— detailed—reviews—in—order—to—assess—where— action—is—required— —— Identifies—where—controls—are—not— appropriate—or—not—operating—effectively— READ MORE P37 Executive Committee ! RISK REGISTER DOCUMENTS RISKS AND ALLOCATES EACH RISK TO A RISK OWNER —— Leads—the—identification,—understanding— and—assessment—of—risks—to—the—business— for—review—and—discussion—by—the—Board— —— Assigns—risks—to—relevant—Executive— Committee—members—as—risk—owners— READ MORE P34 REPORTING AND ASSURANCE ON EFFECTIVENESS OF CONTROLS RISK OWNER REPORTS ASSESSMENT OF RISKS TO THE BOARD Risk owners RISK OWNER DESIGNS, OPERATES, MONITORS AND REPORTS ON CONTROLS —— Put—in—place—processes—and—procedures—that— execute—the—decision—taken—by—the—Board— as—to—what—is—the—appropriate—management— or—mitigation—of—each—principal—risk— —— Assess—and—report—risk—and—monitor— the—design—and—operating—effectiveness— of—any—mitigating—controls—and—procedures— —— Provide—oversight—of—the—daily—operations— of—the—key—areas—of—the—business READ MORE P26 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION26 PRINCIPAL RISKS AND UNCERTAINTIES Principal risks and uncertainties Board RISK: DEVELOPMENT AND RECOVERY OF OIL RESERVES Bill—Higgs,—COO READ MORE P16 APPROACH: Genel—aims—to—realise—the—value—in—its—portfolio—through—a—focused—drilling—programme—to—explore,— appraise—and—develop—our—assets. OPPORTUNITIES: —— Successful—exploration—and—appraisal—activity— THREATS: —— Poor—reservoir—performance— MITIGATING ACTIONS: —— Active—drilling—across—all—producing—assets increases—the—Company—reserves —— Good—reservoir—management—increases— recoverable—volumes RISK: RESERVE REPLACEMENT Murat—Özgül,—CEO READ MORE P15 APPROACH: Genel—aims—to—grow—through—adding—reserves—and—in—turn—long-term—cash—generative—production OPPORTUNITIES: —— Progress—on—Sarta,—Bina—Bawi,—Qara—Dagh—— THREATS: —— Inability—to—progress—Bina—Bawi—and—Miran—— and—Miran—unlocks—resource—value —— Successful—M&A—adds—reserves and—convert—resources—to—reserves —— Failure—to—carry—out—successful—M&A MITIGATING ACTIONS: —— Activity—is—set—to—begin—at—Sarta—and—Qara—Dagh —— Work—continues—to—progress—Bina—Bawi —— Actively—pursuing—M&A—opportunities RISK: COMMERCIALISATION OF KRI GAS BUSINESS Murat—Özgül,—CEO READ MORE P8 APPROACH: The—development—and—commercialisation—of—Genel’s—existing—gas—assets—in—the—KRI—is—a—key—focus—— for—the—Company.—There—is—potential—to—generate—material—and—stable—cash—flows—from—these—assets— once—onstream OPPORTUNITIES: —— Progress—on—the—gas—business—moves—Bina—Bawi— and—Miran—towards—commercial—development— and—transformational—monetisation— THREATS: —— The—gas—project—is—reliant—on—certain—key— milestones,—some—of—which—are—beyond—the— control—of—the—Company —— Slow—progress—in—negotiations—with—the—KRG —— Current—focus—is—on—Bina—Bawi,—with—limited— visibility—of—Miran—development—timing MITIGATING ACTIONS: —— Level—of—expenditure—maintained—at—an— appropriate—level —— Extension—to—conditions—precedent—agreed —— Ongoing—discussions—with—the—KRG GENEL ENERGYSTRATEGIC REPORTKey — — — Increased Unchanged Decreased 27 Board RISK: M&A ACTIVITY Esa—Ikaheimonen,—CFO READ MORE P19 APPROACH: The—pursuit—of—selective,—value—accretive—M&A—opportunities—is—part—of—the—Company—strategy. OPPORTUNITIES: —— Execution—of—a—transaction—positively—impacts— the—Company’s—valuation,—asset—quality—and— equity—story,—among—other—factors THREATS: —— Execution—of—a—transaction—adversely—impacts— MITIGATING ACTIONS: —— An—experienced—Board—oversees—and—signs—off— the—Company’s—liquidity,—balance—sheet,— valuation,—asset—quality,—and—equity—story,— among—other—factors on—all—M&A—decisions RISK: KRI NATURAL RESOURCES INDUSTRY AND REGIONAL RISK Pars—Kutay,—Head—of—Government—— &—Public—Affairs READ MORE P7 APPROACH: A—strong—relationship—with—the—KRG—facilitates—the—realisation—of—the—value—of—Genel’s—principal—oil—— and—gas—assets. OPPORTUNITIES: —— Ongoing—strong—relationship—with—KRG— facilitates—further—success—in—KRI —— Stable—environment—for—operations—allows—— Genel—to—pursue—strategic—objectives THREATS: —— A—change—in—situation—of—the—KRG—or—the—— MITIGATING ACTIONS: —— The—Company—has—a—long—history—of—— wider—region—adversely—effects—operating— environment—in—the—KRI,—including—payments—— and—contract—sanctity cooperation—with—the—KRG,—and—managing— political—risk RISK: PAYMENT FOR KRI EXPORT SALES Murat—Özgül,—CEO READ MORE P7 APPROACH: Genel—is—paid—by—the—KRG—for—ongoing—exports. OPPORTUNITIES: —— Ongoing—payments—under—the—RSA—provide— THREATS: —— Payments—from—the—KRG—stall,—reducing—the— MITIGATING ACTIONS: —— Payments—received—flawlessly—since— significant—increase—in—cashflow Company’s—ability—to—manage—debt—and—carry—— out—its—strategic—priorities September—2015 —— Risk—mitigated—to—an—acceptable—level RISK: CORPORATE GOVERNANCE FAILURE Murat—Özgül,—CEO READ MORE P35 APPROACH: The—Company’s—strategy—is—to—maintain—the—highest—standards—of—corporate—governance. OPPORTUNITIES: —— Good—corporate—governance—is—proven—— to—provide—benefits—to—business—and—value—— to—shareholders THREATS: —— Corporate—governance—failure—would—likely— negatively—impact—investor—perception—of— the—Company MITIGATING ACTIONS: —— An—external—Board—evaluation—in—January—— 2019—confirmed—healthy—dynamics—and—— strong—processes ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION28 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Key — — — Increased Unchanged Decreased Audit Committee RISK: CAPITAL STRUCTURE AND FINANCING Esa—Ikaheimonen,—CFO APPROACH: The—Company—aims—to—retain—a—strong—balance—sheet—and—flexibility—in—our—capital—structure—in—order—— to—pursue—its—strategic—objectives—and—underpin—future—growth.— READ MORE P19 OPPORTUNITIES: —— Ongoing—payments—under—the—RSA—lead—to— THREATS: —— Failure—of—KRG—to—make—payments—for—export— MITIGATING ACTIONS: —— Another—year—of—material—free—cash—flow—means— increased—cash—receipts—and—increased—liquidity sales—(as—above) —— A—deterioration—in—the—oil—price— Genel—is—now—in—a—net—cash—position —— Prudent—capital—expenditure HSSE Committee RISK: LOCAL COMMUNITIES Pars—Kutay,—Head—of—Government—— &—Public—Affairs READ MORE P23 APPROACH: Supporting—and—sustaining—the—communities—in—which—we—operate—is—fundamental—to—Genel’s—success. OPPORTUNITIES: —— Positive—local—relationships—continue—to—— facilitate—Genel’s—pursuit—of—strategic—objectives THREATS: —— A—loss—of—local—community—support—could—give— rise—to—disruption—to—projects—or—operations,—or— cause—material—reputational—damage,—which— could—in—turn—affect—the—Company’s—revenues,— operations,—and—cash—flows MITIGATING ACTIONS: —— An—ongoing—and—appropriate—community— investment—and—education—programme,—and— commitment—to—providing—local—employment RISK: HEALTH AND SAFETY RISKS Bill—Higgs,—COO READ MORE P22 APPROACH: The—safety—of—employees—is—a—primary—consideration—across—all—Genel—operations. OPPORTUNITIES: —— Continued—strong—performance—enhances—the— THREATS: —— Failure—of—safety—procedures—leads—to—injuries— Company’s—reputation and/or—fatalities,—adverse—environmental—impact— and—material—reputational—damage MITIGATING ACTIONS: —— Ongoing—improvement—in—processes—and— procedures—as—we—aim—to—be—best—in—class —— Regular—HSE—site—visits GENEL ENERGYSTRATEGIC REPORT29 Viability statement In—accordance—with—provision—C.2.2.—of—the—2016— revision—of—the—UK—Corporate—Governance—Code— (the—‘Code’),—the—Directors—have—assessed—the— prospects—and—viability—of—the—Company—over—a— longer—period—than—the—12—months—required—by—the— ‘Going—Concern’—provision. Consideration of principal risks The—principal—assumptions—underlying—the— forecasts—above—were—reviewed—in—the—context— of—the—risks—and—mitigating—actions—set—out— in—the—Principal—Risks—on—pages—26—to—28,— including—in—particular—those—that—specifically— relate—to—the—company’s—viability—including: —— Payment—for—KRI—sales —— Development—and—recovery—of—reserves— and—resources —— KRI—natural—resources—industry Viability assessment Based—on—their—review—of—these—assumptions— and—sensitivities—in—the—context—of—the—funding— options—and—risks—referred—to—above,—the— Directors—found—that—there—was—a—reasonable— expectation—that—the—company—will—be—able— to—continue—in—operation—and—manage—its— liabilities—as—they—fall—due—over—the—five—year— period—to—December—2023. Our—2018—strategic—report,—from—pages—1—to— 29—has—been—reviewed—and—approved—by—the— Board—of—Directors—on—19—March—2019. Murat Özgül Chief Executive Officer Choice of assessment period The—Directors—retain—their—assessment—of— five—years—as—the—appropriate—period—for—their— viability—statement.—Although—inevitably— introducing—cash—flow—uncertainty—given— the—inherent—volatility—in—long-term—oil—price,— cost—and—production—forecasting,—five—years— was—felt—to—be—an—appropriate—period—for—the— following—reasons: —— The—production—assumptions—are—supported— by—recent—external—reserve—reports—on—all— existing—producing—assets —— The—period—captures—the—maturity—of—the— Company’s—$300—million—unsecured—bonds,— maturing—December—2022 —— The—Company—runs—a—five-year—plan,— beyond—which—there—is—considered—to—be— limited—visibility Review of financial forecasts In—reviewing—the—expected—evolution—of—the— company’s—business,—cash—flows—and—capital— structure—over—the—review—period—the—Directors— took—into—account: —— The—Company’s—five-year—plan,—which— incorporates—the—Company’s—latest—life— of—field—cash—flow—projections—for—the—oil— producing—assets —— The—various—capital—allocation—scenarios—that— may—evolve—and—the—Company’s—potential— asset—portfolio—investment—decisions —— The—Company’s—$300—million—bond—and— compliance—with—its—financial—covenants —— The—availability—of—debt—capital—markets—and— other—sources—of—finance,—together—with—the— debt—capacity—of—the—business —— The—oil—price—forecast—set—out—in—the—notes—— to—the—financial—statements A—range—of—sensitivities—were—run—on—the— assumptions—set—out—above—to—reflect—different— scenarios—including,—but—not—limited—to,— changes—to—production—profiles,—commodity— price—assumptions,—capital—allocation— and—payments.— ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION30 CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE Continued commitment to high standards of corporate governance I am pleased to present my second Corporate Governance Report to shareholders as your Chairman. we are pleased to announce our dividend policy, please see pages 18 to 21 for further details. Designated Independent Non-Executive Director for workforce engagement thereby providing the Board with additional insight into the workforce. At the conclusion of our AGM in May 2018 Mehmet Ög˘ütçü retired as a Director of the Company. This led to a review of our Committee structures, and accordingly Tim Bushell was appointed Chairman of the HSSE Committee, with Martin Gudgeon taking up the role of Chairman of the Remuneration Committee. Tim Bushell, Martin Gudgeon and I completed visits to both operated and non-operated assets in the KRI, as part of the ongoing Director development programme. As part of the site visits to Taq Taq, Bina Bawi, Tawke and Peshkabir Tim Bushell as Chairman of the HSSE Committee was able to view and experience first-hand the HSE procedures and protocol followed at each site. Further details on health and safety can be found on page 22. Having completed a strategic review in early 2018, the Board worked with management on the successful execution of the agreed strategy. A key part of the strategy was the development of a rich funnel of new opportunities, with successful M&A execution fundamental to this. Over the course of the year numerous opportunities were analysed through a strict criteria, and then in February 2019 the acquisition of stakes in the Sarta and Qara Dagh blocks in the Kurdistan Region of Iraq was announced. We see these as a perfect strategic fit, offering significant long-term upside potential without changing our strong free cash flow profile. Further information on the Sarta and Qara Dagh blocks can be found in the Operating Review on pages 14 to 17. In line with our strategy to return capital to shareholders, Throughout the year the Company continued to engage with our shareholders and stakeholders on the current position of the business and its future strategy. Further information on our investor engagement can be found on page 38. Genel remains committed to operating to high standards of corporate governance, and we will continue to comply with the UK Corporate Governance Code as is appropriate to our Company. Our 2018 governance report illustrates how the Board and its Committees have supported business activities while maintaining a strong governance culture. The Board, assisted by the Audit Committee continues to keep under review the Company’s risk management and internal controls framework. You can find more details on the Company’s risk management processes and principal risks on page 24 to 28. 2018 marks the first full year that the Reserves Committee has been operating since it was adopted as a formal Board Committee. Further details on the Reserves Committee’s activities during 2018 can be found on page 46. The Board keeps the governance framework under review and following the publication of the revised 2018 UK Corporate Governance Code an analysis of our governance processes was undertaken. In light of this and the revised Code, the matters reserved for the Board and each Committee’ s terms of reference were amended as necessary in order to prepare for compliance during the year ahead. In December 2018 the Board appointed Martin Gudgeon as its In accordance with the Company’s commitment to comply with the UK Corporate Governance Code the Board undertook an internal evaluation of its own performance and that of its Committees and each individual Director. The internal evaluation found that the Board and each of its Committees were operating effectively to support the Company’s long-term strategic objectives. Further details of the Board evaluation can be found on page 39. Stephen Whyte Chairman BOARD TIME SPENT (%)  Business strategy – 40%  Finance – 25%  Corporate governance – 10%  Projects – 25% GENEL ENERGYGOVERNANCE31 THE BOARD Our Committee structure BOARD OF DIRECTORS AUDIT COMMITTEE Ensuring integrity and objectivity of published financial information CHAIRMAN George Rose MEMBER Martin Gudgeon REMUNERATION COMMITTEE Ensuring an appropriate approach to remuneration that supports delivery of the business strategy CHAIRMAN Martin Gudgeon MEMBER George Rose NOMINATION COMMITTEE Ensuring the continuation of a high-calibre Board CHAIRMAN Stephen Whyte MEMBERS Tim Bushell George Rose HSSE COMMITTEE Ensuring a responsible and credible approach to HSSE CHAIRMAN Tim Bushell MEMBER Stephen Whyte MEETINGS IN 2018 3 scheduled MEETINGS IN 2018 3 scheduled MEETINGS IN 2018 2 scheduled MEETINGS IN 2018 3 scheduled RESERVES COMMITTEE Ensuring a robust reserves review process CHAIRMAN Tim Bushell MEMBER Stephen Whyte MEETINGS IN 2018 3 scheduled 2 ad hoc READ MORE P40 READ MORE P47 READ MORE P42 READ MORE P44 READ MORE P46 BOARD COMPOSITION INTERNATIONAL DIVERSITY Number of Directors 1 Swiss 4 1 British Turkish Independent Directors 66% (4 Directors) Non-Independent Directors 17% (1 Director) Executive Director 17% (1 Director) SKILLS AND EXPERIENCE OF THE BOARD Number of Directors Oil and gas Managing and leading Governance Financial/ capital markets HSSE Remuneration Foreign affairs 3 6 3 2 2 3 3 TOTAL NUMBER OF DIRECTORS 6 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 32 BOARD OF DIRECTORS A strong Board with demonstrable skills and experience in international oil and gas markets STEPHEN WHYTE (53) Chairman MURAT ÖZGÜL (46) Chief Executive Officer Appointed: as an Executive Director and Chief Executive Officer on 12 July 2015. Key skills and experience: Murat Özgül joined Genel in 2008 as Chief Commercial Officer and was responsible for leading its merger with Vallares PLC in 2011. From his roles within Genel Murat brings his experience within the industry, leadership, and foreign affairs to the Board. Previous relevant experience: Prior to joining the Company, Murat was the CEO of INTA Spaceturk, an imaging satellite operating company, and held engineering and managerial positions at Roketsan and INTA Defense. Appointed: as an Independent Non- Executive Director on 24 April 2017 and as Chairman of the Board on 6 June 2017. Committee memberships: Chairman of the Nomination Committee, and member of the HSSE and Reserves Committee. Key skills and experience: Stephen Whyte has extensive knowledge in the oil and gas industry through his 30 year career within the industry. A significant part of his career has been spent at Royal Dutch Shell, where he held a variety of technical and commercial roles gaining extensive leadership experience. He also spent six years with UK Independent Clyde Petroleum, as Exploration Leader and then Commercial Director. Current external appointments: Stephen is currently a Non-Executive Director of Echo Energy plc and an Independent Non-Executive Director of KazMunaiGas. Previous relevant experience: Stephen was the SVP, Europe and Central Asia, Commercial, for BG Group and the Head of Exploration and Production at Galp Energia, Portugal’s largest listed company, where he also served on the Board. Between July 2016 and January 2018 he served as the Non-Executive Chairman of Sound Energy plc. GEORGE ROSE (67) Senior Independent Non-Executive Director Appointed: 2 June 2011. Committee memberships: Chairman of the Audit Committee and, member of the Remuneration and Nomination Committee. Key skills and experience: George brings with him recent and relevant financial experience. Until March 2011 George served as the Group Financial Director and member of the Board of BAE Systems plc, a position he held for 13 years. George is also a Fellow of the Chartered Institute of Management Accountants and has a wealth of experience in governance to draw on from his former appointment as Non-Executive Chairman of the Audit Committee of National Grid plc amongst other appointments. Current external appointments: George is the Senior Independent Non-Executive Director of Experian plc and a Non-Executive Director of EXPO 2020 LLC. Previous relevant experience: George retired from the Board of National Grid plc in July 2013, where he served as a Non-Executive Director and was Chairman of the Audit Committee. Other past Non-Executive Directorships include Orange plc and Saab AB. He was previously a member of the UK’s Financial Reporting Review Panel and the Industrial Development Advisory Board. George’s earlier career consisted of several financial management positions in the automotive sector, at Ford Motor Company, Leyland Vehicles Ltd and the Rover Group. GENEL ENERGYGOVERNANCE33 TIM BUSHELL (59) Independent Non-Executive Director MARTIN GUDGEON (52) Independent Non-Executive Director NAZLI K. WILLIAMS (41) Non-Executive Director Appointed: 11 September 2017. Appointed: 11 September 2017. Appointed: 21 November 2011. Committee memberships: Chairman of the Remuneration Committee and member of the Audit Committee. Key skills and experience: Martin Gudgeon has significant financial and corporate experience, and is a Partner at PJT Partners. Prior to joining PJT Partners he worked at Blackstone for eight years, serving as a Senior Managing Director, and was the Chief Executive at Close Brothers Corporate Finance. Before that, he was at Hill Samuel, including two years on secondment to Macquarie Bank in Sydney, Australia. Current external appointments: None. Key skills and experience: Nazli has experience in managing and leading large corporations. Between 2004 and August 2014 Nazli worked at Digiturk, a leading satellite broadcasting network. She was Chief Content Officer between 2007 and August 2014, with primary responsibility for overseeing all content acquisitions, production and creative services and overall content strategy. Previous relevant experience: Until 2013 Nazli was also a board member of Turkcell lleti¸sim Hizmetleri A.¸S., a leading GSM operator in Turkey. Turkcell’s shares trade on the Istanbul (IMKB) and New York Stock Exchanges (NYSE). Committee memberships: Chairman of the HSSE and Reserves Committees and, member of the Nomination Committee. Key skills and experience: Tim Bushell is a qualified geologist with over 35 years’ experience working in the oil and gas sector. He has worked at British Gas, Ultramar, LASMO, and Paladin Resources. Most recently Tim spent a decade as Chief Executive Officer at Falkland Oil and Gas Limited, and was co-founder of Core Energy AS. Current external appointments: Tim is a Non-Executive Director at Wentworth Resources, Petro Matad and Rockhopper Exploration. Previous relevant experience: Tim retired as a Non-Executive Director from the Board of Point Resources in December 2018. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION34 EXECUTIVE COMMITTEE Experienced in the industry and the KRI ESA IKAHEIMONEN Chief Financial Officer BILL HIGGS Chief Operating Officer Esa Ikaheimonen joined Genel Energy as CFO in July 2017. He has over 25 years of oil and gas industry experience, most recently as CFO of publicly listed offshore drilling companies Transocean and Seadrill. Prior to that, he had a c.20 year career at Royal Dutch Shell, culminating in the role of Vice President Finance for Shell Africa E&P. Esa is currently a Non-Executive Director and the Chairman of the Audit Committee at Independent Oil & Gas, and was formerly a Non- Executive Director and Chairman of the Audit Committee at Vantage Drilling. He holds a Masters Degree in Law from the University of Turku, specialising in tax law and tax planning. Dr. William (Bill) Higgs joined Genel in November 2017. Bill has nearly 30 years of global exploration, development and operations experience, including over five years in executive roles for independent E&P companies. He is a qualified geologist with extensive expertise in all engineering and other technical and commercial aspects of hydrocarbon development and production. Most recently, as Chief Operating Officer for Ophir Energy plc, he was responsible for managing the global asset portfolio. Prior to joining Ophir he was CEO of Mediterranean Oil and Gas, overseeing the successful sale of the company in 2014. Bill previously spent 23 years at Chevron across a number of global roles, including responsibility for reservoir management of the giant Tengiz oil and sour gas field in Kazakhstan. Bill currently, serves as an Independent Non-Executive Director at San Leon Energy. PARS KUTAY Head of Government & Public Affairs STEPHEN MITCHELL General Counsel GOZDE TUTANC Head of Human Resources Pars Kutay joined Genel in December 2010. Pars is responsible for developing, co-ordinating and implementing policies on government and public affairs as regards countries where we operate. Pars was a partner at AB Consultancy and Investment Services from 1995 to 2010. Between 1984 and 1995 he served in Turkey’s Undersecretariat of Treasury and Foreign Trade. He is a graduate of Law from Ankara University and holds degrees in International Finance and Environmental Law from Ankara University. Stephen Mitchell has practised as a lawyer for over 34 years. Prior to joining the Company he was Vice President – Group Legal with BHP Billiton plc and prior to that he was Group General Counsel and Head of Risk Management at Reuters Group plc, in which he advised on a broad range of matters including mergers and acquisitions, joint ventures, corporate governance and compliance. Stephen was a partner in Freehills in Australia for six years prior to joining Reuters and holds a BEc and LLB from Monash University in Australia. Gozde has over 20 years’ experience in the telecom, consultancy, FMCG and media sectors. She joined Genel Energy in 2014 as Head of Human Resources for Turkey and the Kurdistan Region of Iraq. Prior to joining the Company, Gozde worked in different HR management roles at Turkcell, the leading Turkish telecoms company, and held HR positions at DDI-Development Dimensions International and Coca-Cola. She started her career in Turkish Radio and Television in 1992 as a News Reader. Gozde holds a BSc in Psychology from the Middle East Technical University in Ankara, and an Executive-MBA certification from the Koc University in Istanbul. GENEL ENERGYGOVERNANCE35 Corporate governance Our objective remains to create long- term value for shareholders through the exploration, development and production of oil and gas resources. We have low-cost oil producing assets and large-scale gas development assets that are important to the growth of the KRI. Further information on our business model can be found on pages 10 and 11. We operate to a high level of governance within a culture that values ethical standards, personal and corporate integrity and respect for others. The Board governs the Company consistent with our business strategy and commitment to a transparent and high- quality governance system. Our view is that governance is not just a matter for the Board and that a strong governance culture must be fostered throughout the organisation. Our expectations of our employees and of those with whom we conduct business are set out in our code of conduct, which is summarised below and is available on our website at www.genelenergy.com. This report aims to provide shareholders with a comprehensive summary of our governance arrangements and an explanation of how the Company has approached the main principles of the UK Corporate Governance Code (the ‘Code’) during 2018. Genel Energy plc is a Jersey incorporated, UK tax domiciled Company with a standard listing on the London Stock Exchange. Notwithstanding our standard listing, we are committed to complying with the regulatory requirements in both Jersey and the UK. We are in full compliance with the provisions of the Code. A copy of the Code can be found at www.frc.org.uk/corporate/ukcgcode.cfm. As corporate governance principles continue to evolve, we will continue to adopt best practice guidelines as appropriate to our business. Market Abuse Regulation The Board is responsible for taking all proper and reasonable steps to ensure full compliance with the Market Abuse Regulation, including ensuring that staff are fully trained and understand their obligations under the regime. Code of conduct Our code of conduct defines what we stand for as a Company and sets out the principles that guide all of our business activities. All staff have received training on how to represent Genel in accordance with the principles of the code of conduct. We strive for operational excellence and aim to conduct our business in a responsible, ethical and safe manner with high standards of financial reporting, corporate governance, and compliance with applicable laws. The code of conduct sets guidelines by which we conduct our business and how we expect our Board, employees, suppliers, partners and others to behave. SpeakUp All employees are encouraged to raise any concerns they may have and to report any suspected or known violations of the code of conduct without fear of retaliation. We operate an independently run and confidential ‘SpeakUp’ hotline. All issues raised via this route are investigated and reported to the Audit Committee. As required under the 2018 Code all future issues raised through the SpeakUp hotline will be reported to the full Board of Directors. Business conduct We conduct our business in an open, honest and ethical manner. We do not tolerate any form of bribery. We aim to ensure that all financial and non-financial information we create is complete and accurate, and we strive to provide accurate and timely information to external stakeholders, including governments, in the locations in which we operate. We take steps to protect against inappropriate use of confidential and privileged information and we aim to protect and use our business assets appropriately. Our policy is not to make political donations and we have not done so in the period under review (2017: nil). Conflicts of interest We seek to avoid conflicts of interest wherever possible. We believe it is important that the decision making process is not impaired by an individual being conflicted by either an actual or a potential conflict. However, we recognise that from time to time situations may arise which could result in actual or potential conflicts and, accordingly, we have a formal system in place enabling Directors and members of senior management to declare any such conflicts and for those conflicts to be reviewed and, if appropriate, authorised by the Board. A register of conflicts is maintained by the Company Secretary. The Audit Committee and the Board have applied the principles and processes set out above during 2018 and confirm that they have operated effectively. Third parties We maintain high standards of business conduct in our dealings with all third parties in order to promote mutually beneficial relationships and protect our reputation. We do not seek to win or maintain business by acting illegally or contrary to our contractual agreements. Our relationships with third parties are conducted on a fair and honest basis. We expect our third parties to maintain the same standards of business conduct as we adhere to. Communities and environment Protecting and sustaining the communities and environment in which we operate is fundamental to maintaining our operating licences and to creating a long- term sustainable business. We strive to maintain high standards of environmental protection and we do not compromise our environmental values for profit or production. We seek to maintain proactive and constructive engagement with the local communities affected by our operations and assets, and invest to help them develop in a sustainable manner. We contribute to socio-economic development and provide transparency in respect of our contributions and their impact. Further information on how we engage with communities can be found in the community engagement and investment section of this report on pages 22 and 23. The role of the Board The Board’s role is to provide leadership in delivering on the long-term success of the Company within a framework of prudent and effective controls. It is responsible for approving the Company’s strategy and business plan and keeping under review the financial and operational resources of the Company. It monitors the performance of the business and management against those strategic objectives with the overall objective of creating and delivering value to shareholders. The performance of the Board and the contributions of Directors to the Board’s decision making processes are essential to fulfilling this role. The Directors may exercise all the powers of the Company subject to the provisions of relevant law, the Company’s articles and any special resolution of the Company in the furtherance of their role. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION36 CORPORATE GOVERNANCE CONTINUED BOARD ATTENDANCE Date Scheduled/Ad-hoc Stephen Whyte Murat Özgül Tim Bushell Martin Gudgeon Mehmet Ög˘ütçü1 George Rose Nazli K. Williams January March May August September September December Scheduled Scheduled Scheduled Scheduled Ad-hoc Scheduled Scheduled ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü n/a ü ü ü ü ü ü n/a ü ü ü ü ü ü n/a ü ü ü ü ü ü n/a ü ü ü ü ü ü n/a ü ü Attendance2 scheduled 100% 100% 100% 100% 100% 100% 100% 1. Mehmet Ög˘ütçü retired from the Board on 17 May 2018 2. Denotes the attendance percentage at scheduled Board meetings by each Director The Board has reserved certain matters for its own consideration and decision making. Authorities have been delegated to Board Committees and these are set out clearly in each Committee’s terms of reference which are reviewed regularly to ensure that they remain appropriate and relevant. Copies of the terms of reference are available on our website. Specific matters reserved for the Board include setting the Company’s purpose, objectives and business strategy and its overall supervision. Significant acquisitions, divestments and other strategic decisions will all be considered and determined by the Board in accordance with the Company’s delegated authorities. The Board reviews the matters reserved for its decision annually, subject to the limitations imposed by the Company’s constitutional documents and applicable law. The Board and its Committees have access to the advice and services of the General Counsel and Company Secretary and may seek advice from independent experts at the expense of the Company as appropriate. Individual Directors may also seek independent legal advice at the expense of the Company, in accordance with the Board’s agreed procedure. In addition, the Board has extensive access to members of senior management, who attend Board meetings by invitation, and present regularly to the Board on various aspects of the business. Board composition There are six Directors on the Board, of whom one is Executive and five (including the Chairman) Non-Executive. Four are independent under the Code (including the Chairman who was independent on appointment) and two are not considered independent. Skills, knowledge, experience and attributes of Directors The Board considers that a diversity of skills, background, knowledge, experience, perspective and gender is required in order to govern the business effectively. The Board and its Committees work actively to ensure that the Executive and Non-Executive Directors continue to have the right balance of skills, experience, independence and group knowledge necessary to discharge their responsibilities in accordance with the highest standards of governance. to the Board by Focus Investments Limited in accordance with the Relationship Agreement between the Company and Focus, and is not considered to be independent. The Board considers that, following the changes to the Board composition that took place during the year, there is an appropriate balance between Executive and Non- Executive, Independent and Non-Independent Directors, with a view to promoting shareholder interests and governing the business effectively. The Non-Executive Directors bring with them international and operational experience gained both in the sectors in which we operate and in other areas of business and public life. Murat Özgül brings additional perspectives to the Board’s work through a deep understanding of the business and the region within which it operates. Together they oversee the strategy of the Group and monitor the pursuit of the corporate objective. All Directors are required to devote sufficient time and demonstrate commitment to their role. Further details of the Directors’ skills and experience are set out on pages 32 and 33 of this Annual Report. Independence of the Board The Independent Non-Executive Directors (Tim Bushell, Martin Gudgeon and George Rose) make up exactly half the Board and are responsible for ensuring appropriate challenge of management and the decisions of the Board. Stephen Whyte (as Chairman) was considered independent at the time of his appointment. In order to ensure strong governance the Independent Directors (plus the Chairman) have a voting majority. Meetings of the Board The Board meets approximately six times each year and schedules other meetings as necessary to fulfil its role. During the year the Board held seven meetings in total in various locations, one of which was in addition to those scheduled. There are detailed agendas for each Board meeting which are developed by the Chairman and the Company Secretary. The Board also has an annual rolling agenda that sets out the key topics for consideration at each meeting. In addition to the scheduled meetings of the Board, Directors receive updates from management between meetings on the performance of the business against the agreed strategy and on its operations. Operation of the Board The Chairman is responsible for ensuring that the Board operates effectively. The Board has an open style of communication and debates issues openly and constructively within an environment that encourages healthy debate and challenge both inside and outside the boardroom. The Independent Directors and the Chairman meet regularly in private after Board meetings and on other occasions. Nazli K. Williams has been nominated for appointment The Directors receive board papers and other relevant information in a timely manner ahead of meetings. Board papers are delivered through an electronic GENEL ENERGYGOVERNANCE37 portal that enables Directors to access them wherever they are in the world. The timely provision of relevant information to Directors is vital in ensuring they are able to fulfil their role of effective oversight and challenge and for enabling the Board to make effective decisions. Directors’ induction and ongoing development In order to govern the Group effectively, Non-Executive Directors must have a clear understanding of the overall strategy, together with a sound knowledge of the business and the industry within which it operates. The Chairman, together with the Company Secretary, is responsible for ensuring that all new Directors receive a full, formal and tailored induction upon appointment to the Board. This includes a detailed overview of the Company and its governance practices and meetings with key personnel from across the Group in order to develop a full understanding of the business, its strategy and business priorities in each area. Ongoing development and refreshment training is also provided as and when particular topics are identified. Upon his appointment as Remuneration Committee Chairman, Martin Gudgeon received a full and tailored handover programme. Risk monitoring and reporting The Group keeps under review the major risks to which its operations in all regions are exposed by leveraging its local expertise, industry knowledge and strategic relationships. In particular, the Group continues to have a regular dialogue with its key stakeholders in the Kurdistan Region of Iraq, such as the KRG, the Turkish government and other regional public bodies. We maintain similar relationships in Somaliland and Morocco to ensure the risks across the organisation as a whole are fully understood and mitigated appropriately and within the Group’s tolerance for risk. Our risk management procedures facilitate the identification of the key risks and key risk indicators, the controls by which these are managed and mitigated, and how these controls are monitored. Senior management review and update the risk management process and keep under constant review the risks identified. The Board undertakes a robust assessment of the principal risks facing the Company at least annually. It focuses its assessment on those risks that could impact our business model, solvency, liquidity or future performance. The Board also reviews and monitors the risk management and internal control systems and each such review covers all material controls, including financial, operational and compliance controls. Further details of the principal risks and uncertainties to which the Group’s operations are exposed, and the framework within which these risks are managed, are set out on pages 24 to 28. Roles and responsibilities It is important to ensure that there is a clear division of roles between the Chairman, Chief Executive Officer and Senior Independent Director of the Company. STEPHEN WHYTE Chairman MURAT ÖZGÜL Chief Executive Officer Stephen Whyte is the Chairman. The Chairman reports to the Board and is responsible for the leadership and overall effectiveness of the Board, overseeing the strategy of the Company and for setting the Board’s agenda. Specific responsibilities of the Chairman include ensuring the effective running of the Board, ensuring that the Board agenda is forward-looking with an emphasis on strategic issues and ensuring the performance of the Board and its Committees is effective and in line with best practice. A culture of openness and debate is encouraged by the Chairman through ensuring constructive relations between Executive and Non-Executive Directors and ensuring effective communication between the Company and its shareholders. The Chairman’s other significant commitments are included in his biography on page 32. Murat Özgül is the Chief Executive Officer. The Chief Executive Officer is responsible for all executive management matters of the Group. He reports to the Chairman and to the Board directly. Specific responsibilities include the day- to-day management of the Group within delegated authority limits, identifying and executing strategic opportunities, managing the risk profile and ensuring appropriate internal controls are in place, maintaining a dialogue with the Chairman and the Board on important and strategic issues, ensuring the proper development of senior management and succession planning for executive positions. GEORGE ROSE Senior Independent Non-Executive Director George Rose is the Senior Independent Director. The Senior Independent Director is available to shareholders who have concerns that cannot be addressed through the normal channels of the Chairman or the Chief Executive Officer. He chairs the Nomination Committee when it is considering succession to the role of Chairman and acts as a sounding board for the Chairman and an intermediary for other Directors if and when necessary. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION2018 Investor relations activity Q1 — 1 conference in Oslo — 1 roadshow in London Q2 — 2 conferences in London — Roadshows in London and Edinburgh — Investor dinner in Istanbul Q3 — 1 conference in Oslo — Roadshows in USA and London Q4 — 3 conferences in London — Ongoing investor meetings 38 CORPORATE GOVERNANCE CONTINUED Internal controls The Board is responsible for maintaining and reviewing the effectiveness of the Group’s system of internal control. This system is designed to identify, evaluate and manage the significant risks to which the Group is exposed. The Board has established processes to meet the obligations placed on listed companies and the expectations of the UK Corporate Governance Code to publish a long-term viability statement and to continually monitor systems of risk management and internal control. These processes include having clear lines of responsibility, documented levels of delegated authority and appropriate operating procedures. We recognise that the system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against misstatement or loss. Our long-term viability statement can be found on page 29. The Audit Committee supports the Board in the performance of its responsibilities by reviewing those procedures that relate to risk management and internal control. The Audit Committee considers the reports of the internal audit function and the external auditor and reports to the Board on such matters as it feels should be brought to the Board’s attention. Further information on the actions taken by the Audit Committee during the year can be found on pages 40 and 41. A detailed budget and work programme is produced annually in accordance with our processes and reviewed and approved by the Board. Operational reports are provided to the Executive Committee on a monthly basis and performance against the budget kept under regular review in accordance with the Group’s financial procedures manual. The CEO reports to the Board on performance and key issues as they arise. The assessment of controls and risk management processes provides a reasonable basis for the Board to make proper judgements on an ongoing basis as to the financial position and prospects of the Group. The Board has conducted a review of the effectiveness of the system of internal control for the year ended 31 December 2018 and up to the date of the signing of the financial statements, and is satisfied that it remains appropriate to the business. Communication with stakeholders Part of the Group’s code of conduct sets a framework for how it partners with, and invests in, communities (local, regional and global) to achieve mutual long-term benefits. The Group contributes to socio-economic development through taxes, royalties and other local payments and donations. Further details of our community programmes can be found on page 23. During the year, the Board continued to monitor the Company’s key stakeholders, their impact on key strategic objectives and how the Company is engaging with each stakeholder. 2019 AGM The 2019 AGM will be held on Thursday, 16 May 2019 at the Taj Hotel, St. James’ Court, 54 Buckingham Gate, London SW1E 6AF UK at 11.00am. The Notice of AGM accompanies this Annual Report and sets out the business to be considered at the meeting. The AGM will provide an opportunity for shareholders to meet with the Directors and senior management. Both this Annual Report and the Notice of AGM are available on our website at www.genelenergy.com. Communication with investors We communicate on a regular basis with our shareholders via presentations and calls as part of our annual investor calendar. We also liaise with them on an ad-hoc basis as and when questions arise. During the year the Chairman and Independent Non-Executive Directors held meetings with shareholders where the current position of the business and its future strategy was discussed. Our major shareholders are encouraged to meet with the Chairman to discuss any matters that they would like to raise outside the formal investor calendar. We welcome an open dialogue with our investors and in 2018 90 face to face meetings were held with over 100 investors. The Board receives regular investor relations updates covering key investor meetings and activities, as well as shareholder and investor feedback. We also engage with our shareholders at our AGM and via our website at www.genelenergy.com. GENEL ENERGYGOVERNANCE39 Board Committees The Board has established five Committees: the Audit Committee, the Remuneration Committee, the Nomination Committee, the Health, Safety, Security and Environment Committee and the Reserves Committee. Each Committee has adopted terms of reference under which authority is delegated by the Board and copies of which are available on our website. Each Committee consists only of Independent Non-Executive Directors with the exception of the Nomination Committee, HSSE Committee and the Reserves Committee. Stephen Whyte was independent upon his appointment as Chairman, chairs the Nomination Committee and is a member of the HSSE Committee and the Reserves Committee. Board effectiveness In 2017, independent advisers, Spencer Stuart were commissioned to facilitate an evaluation of the Board, its Committees and each of the Directors, including the Chairman. In 2018, we have conducted an internal review of the effectiveness of the Board, each of its Committees and each Director building on the findings of the 2017 review. The 2018 review was facilitated by the Chairman. Actions from the 2017 effectiveness review Progress made against the actions Board effectiveness The addition of a meeting to the annual calendar to review the Company’s strategy. Cyber security; performance culture; developing talent and succession planning were identified as topics to be added to the Board’s agendas. Strengthening the linkage between the Reserves Committee and Audit Committee. Shareholder and regional relationships The Chairman will continue to work closely with the Chief Executive Officer to further develop shareholder and regional stakeholder relationships and to report regularly to the Board. The Chairman and SID will further strengthen the regular cycle of shareholder discussions on an annual basis. Board development Longer-term Board succession planning and the future composition of the Board will be reconsidered by the Nomination Committee in consultation with the full Board taking into consideration the future strategic direction of the Company. Actions arising from the 2018 effectiveness review During 2018, an additional meeting was held to specifically review and discuss the Company’s strategy. The Board continued to have regular discussions on the Company’s strategy throughout the year. Each of the topics identified for discussion in the 2017 Board effectiveness review were added to the 2018 rolling agenda and considered by the Directors. Following the elevation of the Reserves Committee to a full Board Committee the terms of reference were revised in order to strengthen ties to the Audit Committee. During the course of the year several meetings with shareholders and regional stakeholders were held in order to develop the Company’s relationship with them. The Board received two formal updates on stakeholder management activities and other updates were provided as and when engagement activty occurred. The Nomination Committee has kept the composition of the Board under review to ensure it remains appropriate for the business as part of these discussions Board sucession planning and future composition were taken into consideration. Please see pages 42 and 43 for further details. Strategy The Board has set a clear strategy for the Company and will continue to focus on delivering value to shareholders through its execution and monetising value from the Group’s existing portfolio of assets. Board composition and succession planning The Nomination Committee will continue to keep Board composition and size under review taking succession planning and business strategy into consideration. A review of the performance of each of the Directors has been undertaken by the Chairman and the Senior Independent Director led the review of the Chairman’s performance. Following these performance reviews, the Board considers that each of the Directors continues to make an effective and valuable contribution and demonstrate their commitment to the role. It is the Board’s intention to continue to review its performance annually including that of its Committees and individual Directors. Accordingly, the Board recommends the re-election of each Director at the Company’s forthcoming AGM. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION40 AUDIT COMMITTEE Ensuring integrity and clarity of published financial information AUDIT COMMITTEE Chairman Member Meetings in 2018 George Rose Martin Gudgeon 3 scheduled Objective Action To increase shareholder confidence by ensuring the integrity and objectivity of published financial information Scrutinised areas involving significant judgement, estimation or uncertainty in particular impairments and the change to the Company’s discount rate Monitored changes to reserves and resources To advise the Board on whether the Annual Report taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy To assist the Board in meeting its financial reporting, risk management and internal control responsibilities To assist the Board in ensuring the effectiveness of the internal accounting and financial controls of the Company Reviewed and received reports from the external auditors on the annual financial statements and interim results statement Ensured compliance with financial reporting standards and relevant financial and governance requirements Considered the quality and appropriateness of the accounting policies and practices and financial reporting disclosures and changes thereto Considered the Annual Report as a whole including the basis for the going concern assumption, the viability statement and underlying assumptions. Assessed the Annual Report in the context of whether, taken as a whole, it is fair, balanced and understandable Monitored compliance with financial reporting standards and relevant financial and governance requirements Kept under review the risk register and retained oversight of the Group risk framework and by doing so supports the Board on assessing the Company’s tolerance for risk Kept key accounting policies and practices under review to ensure that they remain appropriate Kept under review the effectiveness of the systems of internal control, including the adherence to Company policies, internal audit outputs and the compliance programme including the ‘SpeakUp’ arrangements and the anti-bribery and corruption and trade sanction processes and procedures To monitor the Company’s treasury and financing arrangements Monitored the cash position of the Company and kept the treasury policy under review to ensure it remains appropriate and aligned with the Company’s cash position To strengthen the independent position of the Company’s external auditors by providing channels of communication between them and the Non-Executive Directors To review the performance of the Company’s internal and external auditing arrangements To assist the Board in monitoring and addressing potential conflicts of interest between members of the Group and the Directors and/or senior managers of the Company Held private meetings with the external auditors without the presence of management Monitored the effectiveness and independence of the external auditor and compliance with the non-audit services policy Received reports from the Company’s internal auditor on audits performance in the period and monitored their performance and effectiveness Continued to assist the Board in reviewing conflicts of interests of Directors and senior managers GENEL ENERGYGOVERNANCEAUDIT COMMITTEE ATTENDANCE Date Scheduled/Ad-hoc George Rose Martin Gudgeon Mehmet Ög˘ütçü1 41 March Scheduled July Scheduled December Scheduled ü ü ü ü ü n/a ü ü n/a Attendance2 scheduled 100% 100% 100% 1. Mehmet Ög˘ütçü retired from the Board on 17 May 2018 2. Denotes the attendance percentage at scheduled Committee meetings by each Director AUDIT COMMITTEE TIME SPENT (%)  Governance and audit – 30%  Risk management and internal control – 25%  Reserves and resources – 10%  Financial reporting – 30%  Financing – 5% All the members of the Committee are Independent Non-Executive Directors. George Rose and Martin Gudgeon have recent and relevant financial experience and the Committee as a whole is considered to be competent in the oil and gas sector. The Chairman of the Board attended a number of Audit Committee meetings throughout the year as an observer. The Committee relies on information and support from management to enable it to carry out its duties and responsibilities effectively. The Audit Committee has detailed terms of reference which set out its areas of responsibility. The Company also operates an independent ‘SpeakUp’ hotline for all staff and the Committee reviews annually matters reported and the outcome of any investigations. The significant issues considered by the Committee in relation to the 2018 accounts and how these were addressed were: Reserves and resources – the Committee considered the underlying processes and judgements made, including the output from the Reserves Committee process, when considering the assessment of reserves and resources for the purposes of the financial statements. Impairment of oil and gas assets – the Committee focused on the key inputs and judgements made along with the supporting evidence. As noted in our trading and operations update in January 2019, with the focus on Bina Bawi, the value of the Miran PSC carried in the Company accounts has been reviewed. A prudent decision taken based on accounting principles has resulted in an impairment charge of $424 million being taken in respect of the carrying value of the Miran PSC. Internal audit and control framework The Board recognises that an effective Internal Audit function, responsible for providing independent and objective assurance on internal control, governance and risk management, is an important part of delivering a strong governance culture. In December 2017, the Company appointed a secondee from EY as its Head of Internal Audit. Each year the Audit Committee approves the internal audit plan for the year ahead, which is derived from an independent risk assessment performed by the Head of Internal Audit, aligned to the Group’s risk profile. Audit fieldwork planning, review and follow up is co-sourced with EY, with execution of the fieldwork performed by a combination of internal resource, EY and/or subject matter experts, depending on the particular requirements or location of the audits. The Head of Internal Audit has a direct reporting line to the Audit Committee and provides regular updates throughout the year on the findings identified in the audits and opportunities to improve the design and operating effectiveness of internal controls together with updates on the status of management’s implementation of agreed actions. During the year the Audit Committee held private meetings with the Head of Internal Audit without the presence of management. The external auditors also met separately with the Head of Internal Audit to discuss internal audit findings and areas of common focus. As part of the Company’s control framework the Committee also assists the Board in monitoring and reviewing risk management procedures, risk reporting and the full risk register. An overview of the Company’s risk management procedures and principal risks can be found on pages 24 to 28. During the course of the year, the risk register was amended to reflect the changes in the challenges facing the business. Additionally, existing policies, procedures and processes were enhanced for reserves assessment, oversight of non-operated assets, stakeholder management and business development. External audit The effectiveness and the independence of the external auditor are key to ensuring the integrity of the Group’s published financial information. Prior to the commencement of the audit, the Committee reviews and approves the external auditor’s audit plan. PwC present to the Committee their proposed plan of work which is designed to ensure that there are no material misstatements in the financial statements. The Committee monitors and approves the provision of non-audit services by the Company’s external auditors in accordance with the policy on non-audit services. The provision of non-audit services is generally limited to services that are closely connected to the external audit or to projects that require a detailed understanding of the Group (for example taxation advice) which require pre-authorisation by the Committee under the terms of the policy. In 2018, the ratio of non-audit to audit fee paid to PwC was 3:4, the non-audit fee paid was $0. 3 million, further details of which can be found on page 91 of the notes to the financial statements. These fees reflect the services and advice provided by PwC in respect of tax and accounting advice received during the year. PwC have been appointed as the Company’s auditors for the past seven years following a tendering process in 2011. In 2016, the Audit Partner was rotated and Michael Timar was appointed as the Senior Statutory Auditor to the Company. When considering the re-appointment of the Company’s external auditors, the Committee reviews the external auditor’s independence and objectivity. In December 2018 the Committee reviewed the effectiveness of the external audit process. It reviewed papers from both management and the external auditors, including on the planning and execution of the audit process. Following this review, the Committee was satisfied that the external auditor remains both effective and fully independent and on this basis their reappointment will be proposed and recommended at the forthcoming AGM. The Committee reviewed its own effectiveness during the year as part of the internally facilitated Board effectiveness review. Following the publication of the 2018 UK Corporate Governance Code the Committees terms of reference were updated to ensure they were aligned to the new Code and best practice. The Committee terms of reference can be found on our website at www.genelenergy.com. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION42 NOMINATION COMMITTEE Ensuring a high calibre Board NOMINATION COMMITTEE Chairman Members Stephen Whyte Tim Bushell George Rose Meetings in 2018 2 scheduled Objective Action Review the structure, size and composition of the Board, having due regard to the Company’s strategic, operational and commercial requirements and overall diversity of Board members Reviewed the size and composition of the Board taking into consideration the future strategic direction of the Company and overall diversity of Board members Annually reviewing the time required from Non-Executive Directors and making recommendations as to their reappointment at the AGM As part of the internal Board effectiveness review performance of the CEO and each of the Non-Executive Directors was undertaken. A review of the Chairman’s performance was carried out by the Senior Independent Director Recommended the re-appointment of each Director at the 2019 AGM Keeping under review succession arrangements for Directors and other senior executives During the course of the year succession planning and the composition of the Board continued to be discussed Review Board Committee membership NOMINATION COMMITTEE ATTENDANCE Date Scheduled/Ad-hoc Stephen Whyte Tim Bushell George Rose A review of Committee composition was undertaken following the retirement of Mehmet Ög˘ütçü Recommended the appointment of a Designated Independent Non- Executive Director for workforce engagement March Scheduled December Scheduled ü ü ü ü ü ü Attendance1 scheduled 100% 100% 100% 1. Denotes the attendance percentage at scheduled Committee meetings by each Director GENEL ENERGYGOVERNANCE43 Following the publication of the 2018 UK Corporate Governance Code the Committee considered the various approaches for gathering the views of the workforce suggested within the Code and recommended the appointment of Martin Gudgeon as the Designated Independent Non-Executive Director for workforce engagement. The Committee reviewed its own effectiveness as part of the internally facilitated Board effectiveness review process. The Committee has also reviewed its terms of reference. The Committee’s terms of reference can be found on our website at www.genelenergy.com. NOMINATION COMMITTEE TIME SPENT (%)  Succession – 50%  Effectiveness – 20%  Governance – 30% All the members of the Nomination Committee are Independent Non-Executive Directors. The Chairman of the Board chairs the Nomination Committee except when the Committee considers the appointment of the Chairman. As part of its remit the Nomination Committee keeps under review the composition and balance of the Board. The Committee is aware of the need to align the Board’s composition with the Company’s strategy and to ensure the Board has the necessary skills to ensure the Company’s long-term success. It assists the Board in ensuring that the Board consists of high- calibre individuals whose background, skills, experience and personal characteristics will augment the present Board and meet its future needs. Following the retirement of Mehmet Ög˘ütçü the Committee spent time considering whether any additional Directors needed to be appointed to the Board. As part of the review process, the skills and experience around the boardroom were reviewed in order to identify whether any knowledge or skill gaps were required to be filled. The Company’s strategic priorities, main trends and factors affecting the long-term success and future viability of the Company were taken into consideration. Currently there is one female Director on the Board and, when the opportunity arises we consider candidates based on merit and against objective criteria and with due regard for the benefits of diversity on the Board. When considering candidates for Board appointments the Committee undertakes a comprehensive search process with the assistance of an external search agency. In the year ahead, the Nomination Committee will continue to keep the composition and balance of the Board under review to ensure the appropriate experience and skills to deliver the Company’s strategy. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION44 HSSE COMMITTEE Ensuring a focused approach to HSSE HSSE COMMITTEE Chairman Member Meetings in 2018 Tim Bushell Stephen Whyte 3 scheduled Objective Action To ensure that the Company maintains a responsible and credible approach to HSSE matters (including asset integrity and major hazard risk management), in line with international best practices and emerging legal requirements Received updates on developments both from a regulatory and an operational perspective Monitored the collaboration of the operators in the region to develop a common approach to mitigating and managing the risks associated with oil field operations and received updates on engagement with government authorities Reviewed the Company’s localisation strategy in the KRI and approved an updated CSR policy To assist the Company in maintaining its relationships with local communities in which it operates, including through social investment and sustainable development activities The environmental and social impact arising from our operations is reviewed regularly and any areas of concern are reviewed by the Committee To assist the Board and other Committees in assessing HSSE risks and their effective management in determining, implementing and reviewing the Company’s HSSE strategy and processes Risks allocated to the Committee under the risk management system are reviewed in detail and a report provided to the Audit Committee on the effectiveness of the HSSE controls and risk mitigation processes To ensure the quality of the Company’s reporting and disclosure (both internally and to shareholders) in relation to HSSE matters Monitored performance against the HSE KPI targets and LTI targets To assist the Company in developing the HSSE culture Reviewed and monitored the GHG emissions output and disclosure made in the Annual Report on health and safety, environment, and community development Received regular updates on the approach to safety culture and security across the organisation Provided feedback to the Remuneration Committee on the HSE performance elements of the 2018 annual bonus performance targets GENEL ENERGYGOVERNANCE45 HSSE COMMITTEE ATTENDANCE Date Scheduled/Ad-hoc Tim Bushell1 Stephen Whyte2 Mehmet Ög˘ütçü3 March July Scheduled Scheduled December Scheduled ü n/a ü ü ü n/a ü ü n/a Attendance4 scheduled 100% 100% 100% 1. Tim Bushell was appointed as Chairman of the HSSE Committee on 17 May 2018 2. Stephen Whyte was appointed as a member of the HSSE Committee on 17 May 2018 3. Mehmet Ög˘ütçü retired from the Board on 17 May 2018 4. Denotes the attendance percentage at scheduled Committee meetings by each Director HSSE COMMITTEE TIME SPENT (%) Genel’s HSSE policy reflects international best practice including but not limited to the IFC Performance Standards and ICMM Sustainable Development Framework. At each meeting of the Committee, an update is received from management on security in the region and the progress made against the HSE strategic plan which it approves at the beginning of each year. In recognition of the importance of HSE to our business the 2018 annual bonus objectives contain an element specifically allocated to HSE. The Committee reviewed progress against the 2018 HSE objectives and made recommendations to the Remuneration Committee on these elements the details of which may be found on page 51 and 52 of the Annual Report on Remuneration.  Planning and monitoring – 55%  Culture – 20%  Security – 15%  Risk monitoring and mitigation – 10% The HSSE Committee reviewed its own effectiveness during the 2018. The Committee also reviews its terms of reference annually, which can be viewed at www.genelenergy.com. All the members of the Committee throughout the year have been Independent Non-Executive Directors. In 2018 the HSE plan contained actions in the following areas: leadership and culture, management system, health, environment and operations. During the course of the year progress was made against each of these areas. Activities undertaken included site visits by management and Board members demonstrating visible HSE leadership, providing a briefing on crisis and emergency management to the Board and performing simulation exercises. Across the organisation nine HSE training and knowledge sharing sessions were held on topics including but not limited to the HSE management system, international traveller medical advice and office HSE awareness. Operations activities included providing HSE support for the offshore 3D seismic acquisition project at Sidi Moussa field and HSE management for Miran and Bina Bawi. In line with the UK Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 the Company prepares and reports our greenhouse gas emissions which can be found in our corporate responsibility section on pages 22 to 23. The Committee reviewed the greenhouse gas emission occurring from operations in 2018 and noted that like-for-like greenhouse gas emissions were similar to 2017 however, there was an overall increase of 93%, which is attributable to the acquisition of seismic data on the Sidi Moussa licence off the coast of Morocco. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION46 RESERVES COMMITTEE Ensuring a robust reserves and resources process RESERVES COMMITTEE Chairman Member Meetings in 2018 Tim Bushell Stephen Whyte 3 scheduled 2 ad-hoc Objective Progress To increase shareholder confidence by ensuring a robust reserves and resources review process Reviewed the reserves and resources assessment procedure To review the Company’s statement of reserves, independent reserves evaluators reports and any material changes in reserves volumes To review the qualification and independence of the independent qualified reserves evaluator RESERVES COMMITTEE ATTENDANCE Endorsed the Genel Reserves and Resources Management System Approved the Company’s annual statement of reserves and resources Reviewed the independent reserves evaluator reports Endorsed the appointment of each of the assets reserves evaluator Date Scheduled/Ad-hoc Tim Bushell Stephen Whyte January Ad-hoc ü ü February Scheduled ü ü March Scheduled ü ü March Ad-hoc ü ü December Scheduled ü ü Attendance1 scheduled 100% 100% 1. Denotes the attendance percentage at scheduled Committee meetings by each Director The objective of the Reserves Committee is to provide oversight of the assessment of the Company’s reserves and resources. The Committee relies on information and support from management and the external independent reserves evaluator to carry out its duties and responsibilities. In addition, the Committee invites experts and professionals to its meetings as appropriate. During the year the Committee reviewed and endorsed the Genel Reserves and Resources Management System in order to support a robust annual reserves and resources assessment process and improve governance. The Committee received and considered reports from management, McDaniels, DeGolyer and MacNaughton and ERCE in relation to the 2018 annual reserves and resources statement. The Reserves Committee has detailed terms of reference which can be viewed at www.genelenergy.com. Following the publication of the 2018 UK Corporate Governance Code a full review of the terms of reference was undertaken. All the members of the Reserves Committee are Independent Non-Executive Directors and have relevant technical and industry experience. GENEL ENERGYGOVERNANCEDIRECTORS’ REMUNERATION REPORT 47 Remuneration Committee Chairman’s statement REMUNERATION COMMITTEE Chairman Members Martin Gudgeon George Rose Mehmet Ö˘gütçü Meetings in 2018 3 scheduled On behalf of the Remuneration Committee, I am pleased to present Genel’s Directors’ Remuneration Report for the year ended 31 December 2018, my first Report as Remuneration Committee Chairman for Genel. We have once again prepared our Directors’ Remuneration Policy Report and Annual Report on Remuneration in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). As a Jersey registered company we are not required to prepare a remuneration report in accordance with UK legislation. However, as in previous years it remains the policy of Genel to comply with high standards of corporate governance. Remuneration Policy As we have chosen to comply with UK remuneration reporting regulations, at our 2017 AGM we sought shareholder approval for our Remuneration Policy (the ‘Policy’). The Policy was approved in 2017 and applied a responsible approach to executive remuneration, aligning with the Company’s strategy in the challenging energy business environment. The Committee’s intention is to continue to operate within the Policy for the three-year period following its approval. The Policy is set out on pages 58 to 65. We believe that the remuneration structure set out in the current Policy remains clear, transparent, and simple and aligned with our strategic priorities while also promoting behaviours which are in the best interests of our shareholders. Remuneration for 2018 Full details of the Remuneration Committee’s decisions for 2018 are set out in the Annual Report on Remuneration on pages 50 to 57. We are delighted to report another very successful year financially. Building on previous years, 2018 has seen a continued focus on capital discipline and provided a strong financial position for the Company to build on into 2019. Once again, our high safety and environmental record was excellent, and all operational targets were achieved. The acquisition of stakes in Sarta and Qara Dagh represent progress on the execution of our strategy. We continue to work on carefully selected projects to build on our existing portfolio. Work on Bina Bawi and Miran is in progress, with the continued aim of monetising these assets for our shareholders. Commercial discussions are ongoing relating to Bina Bawi, and further investment is reliant on their successful outcome. Therefore, of the maximum potential annual bonus, 72.5% has been achieved. Further details of the 2018 annual bonus performance objectives and how they were assessed can be found on pages 51 and 52. The performance period for PSP awards granted in 2016 ended on 31 December 2017. These awards will lapse as Genel’s relative TSR ranking was below median of the peer group. Approach to remuneration in 2019 Details of how we intend to apply our Policy over the coming year are set out on pages 55 to 57. The Committee has determined that Murat Özgül’s base salary will be increased for 2019 at a rate of 2.5%. For 2019, the CEO’s annual bonus will continue to be based solely on the achievement against the Company scorecard metrics. Given our strong financial performance, our scorecard has shifted to focus on more strategic ambitions. Accordingly, the mix of incentive criteria has changed with financial performance weighting decreased to 20% from 30% and strategy execution increased to 25% from 15%. Safety and environment performance continues to be weighted at 15%, operational performance at 20% and progress in our gas assets also at 20%. PSP awards for 2019 will again be assessed 50% on relative TSR against our peer group, and 50% against absolute TSR targets. During 2018, the Committee has reviewed the relative TSR group for 2018 awards and has made a number of changes to make sure it is a robust and relevant group. Details of the targets are set out on pages 56 and 57. The Committee considers that these targets are appropriately stretching and that maximum vesting would represent significant value creation. During 2019, the Committee will continue to consider the updated UK Corporate Governance Code. We have already taken a number of steps, including expanding the Committee’s remit over senior management pay and reviewing wider employee pay practices and policies. We will continue to consider whether further changes are needed throughout 2019. 2019 AGM At the AGM in 2019, our shareholders will be asked to approve this Annual Report on Remuneration and I encourage you to vote in favour. I will be available, along with my Committee member, to answer any questions regarding our Policy on executive remuneration and the activities of the Committee. Martin Gudgeon Chairman of the Remuneration Committee ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION48 DIRECTORS’ REMUNERATION REPORT CONTINUED REMUNERATION COMMITTEE ATTENDANCE Date Scheduled/Ad-hoc Martin Gudgeon1 George Rose2 Mehmet Ög˘ütçü3 March July Scheduled Scheduled December Scheduled      n/a   n/a Attendance4 scheduled 100% 100% 100% 1. Martin Gudgeon was appointed as Chairman of Remuneration Committee on 17 May 2018 2. George Rose stepped down as Chairman of the Remuneration Committee on 17 May 2018 3. Mehmet Ög˘ütçü retired from the Board on 17 May 2018 4. Denotes the attendance percentage at scheduled Committee meetings by each Director Objective Progress To implement the Remuneration Policy for the Chairman, CEO and members of the Executive Committee To review and have regard to remuneration practices across the Company In respect of performance related elements of the Remuneration Policy formulate suitable performance related criteria and monitor their operation Applied the Remuneration Policy principles in discussion and implementation of remuneration for CEO and Executive Committee members Considered remuneration practices across the Company including management recommendations for salary increases, bonus payments and share awards Completed a mid-year review of performance against bonus targets Reviewed the 2016 PSP performance against relative TSR of a comparator group which resulted in no shares vesting under the award To review all aspects of any equity incentive plans operated or to be established by the Company The Committee set targets for 2018 PSP awards and reviewed the relative TSR peer group for 2019 awards To have regard in the performance of its duties to any published guidelines or recommendations regarding the remuneration of directors of listed companies and formation and operation of share schemes To ensure that provisions regarding the disclosure of information, including pensions, as set out in The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations and the UK Corporate Governance Code, are fulfilled As part of its deliberations during the year, governance updates were received from both Deloitte and the Company Secretary to ensure that any decisions taken and recommendations made were done so in the context of the wider remuneration landscape whilst remaining appropriate for the specific challenges facing the Company Reviewed the Annual Report on Remuneration for 2018 prior to submission to shareholders for a non-binding vote at the AGM Considered the remuneration-related elements of the 2018 UK Corporate Governance Code GENEL ENERGYGOVERNANCEANNUAL REPORT ON REMUNERATION 49 advice to the Company including in respect of the operation of the Company’s share plans during the year. The Committee is satisfied that the advice they have received has been objective and independent. Deloitte’s fees in respect of advice to the Committee in the year under review were £27,150 and were charged on the basis of their standard terms of business for the advice provided. The Committee also consulted during the year with the Chairman (Stephen Whyte), CEO (Murat Özgül), the Company Secretary (Stephen Mitchell) and the Head of Human Resources (Gozde Tutanc). No member of the Committee nor any party from whom advice was sought participated in discussions regarding their own remuneration. Shareholder voting At the AGM held on 17 May 2018, votes cast by proxy and at the meeting in respect of the Annual Report on Remuneration for the year ended 31 December 2017 were as follows: Activities of the Remuneration Committee The Committee held three scheduled meetings during the year. Details of the attendance of Committee members at meetings during 2018 is set out on page 48 of this Annual Report. All of the members of the Committee are Independent Non-Executive Directors. Key activities during the year included the following: — Preparation and approval of the Directors’ Remuneration Report — Review and update of the TSR peer Group for 2019 — Review of the executive base salary level in the context of pay for the wider workforce and the external market — Review of performance objectives of the CEO and Executive Committee in order to determine the level of bonus earned in respect of the 2018 financial year — Review of the TSR performance outcomes in respect of the 2015 PSP award — Approval of the annual bonus plan framework for 2019 — Consideration of the remuneration arrangements of the CEO and members of the Executive Committee for 2019 — Consideration and determination of the performance criteria for the 2018 PSP awards — Review of the performance measures applied to the 2019 PSP awards — Approval of share plan awards, including to those below Board level — Consideration of corporate governance and market practice developments REMUNERATION COMMITTEE TIME SPENT (%)  Executive Director remuneration – 35%  Long-term incentive plans for all employees – 30%  Governance – 20%  All employee remuneration – 15% Advisers to the Committee The Committee has again appointed Deloitte LLP (‘Deloitte’) to provide independent advice on remuneration matters under consideration by the Committee. The continued appointment of Deloitte was approved by the Committee as it was felt they had the most relevant experience and expertise to advise the Committee on remuneration related matters. Deloitte is a leading remuneration adviser and a member of the Remuneration Consultants Group and as such voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK. Deloitte also provided support and To approve the Annual Report on Remuneration for the year ended 31 December 2017 Number of votes cast For Against Abstentions 197,600,742 197,592,544 100% 8,198 0% 16,942 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION50 ANNUAL REPORT ON REMUNERATION CONTINUED Annual Report on Remuneration This part of the Annual Report provides details of the implementation of the Directors’ Remuneration Policy (the ‘Policy’) for the year ended 31 December 2018 and discusses how the Policy will be implemented in the 2019 financial year. Details of the Policy can be found on pages 58 to 65. Audited information Single total figure table showing remuneration for each Director The following table sets out the total remuneration for the Executive Director and Non-Executive Directors for the period in office for the year ended 31 December 2018, and comparison figures for 2017. Name 2018 2017 2018 2017 2018 Salary/fees £’000 Benefits £’000 Bonus £’000 2017 2018 LTIP1 £’000 2017 Total £’000 2017 2018 Executive Director Murat Özgül 515 573 129 143 560 706 678 343 1,882 1,765 1. LTIP includes shares under the Company’s PSP. The 2016 awards under the PSP will lapse following the announcement of the Company’s results in 2019 which are based on performance to 31 December 2018 Name 2018 2017 2018 2017 2018 Salary/fees £’000 Benefits £’000 Bonus £’000 2017 2018 LTIP1 £’000 2017 Total £’000 2017 2018 Non-Executive Directors Stephen Whyte 220 152 George Rose Tim Bushell Martin Gudgeon Mehmet Ö˘gütçü1 Nazli K. Williams Tony Hayward2 Ümit Tolga Bilgin3 Simon Lockett4 Nathaniel Rothschild4 Chakib Sbiti5 88 87 77 30 56 – – – – – 87 24 22 76 56 78 13 34 24 35 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 220 152 88 87 77 30 56 – – – – – 87 24 22 76 56 78 13 34 24 35 1. Mehmet Ög˘ütçü retired from the Board on 17 May 2018 2. Tony Hayward retired from the Board on 6 June 2017 3. Ümit Tolga Bilgin was not elected as a Director at the Company’s AGM on 6 June 2017 4. Simon Lockett and Nathaniel Rothschild resigned from the Board on 3 June 2017 5. Chakib Sbiti retired from the Board on 6 June 2017 GENEL ENERGYGOVERNANCE51 Additional disclosures in respect of the single total figure table Base salary The table below shows base salaries which were effective during 2018. Murat Özgül 1. The base salary was reduced by 20% in August 2017 Salary information for 2019 is provided on page 55. Base salary on 1 January 2017 Base salary on 1 August 20171 Base salary on 1 Jan 2018 £625,000 £500,000 £515,000 Benefits In line with the Committee’s aim to provide a simple, transparent package, the CEO receives a cash supplement of 25% of base salary in lieu of all benefits, including pension, private health insurance, life assurance and company car provision. The cash supplement is not used in the calculation of bonus and long-term incentive quantum. In the event that the CEO participates in the Mandatory Pension Plan offered by the Company the cash supplement will be reduced by the amount contributed by the Company into the Mandatory Pension Plan. Annual bonus The 2018 annual bonus scorecard was approved based on the Company’s performance against key business objectives with a weighting of 100% against Company metrics. These included strategy execution (15%), progress on value creation of Bina Bawi and Miran (20%), financial targets (30%), operational targets (20%) and health and safety performance (15%). Once again, the Company delivered strong performance against safety and environment and financial performance targets, and 2018 saw a strong operational performance. Progress was made on the execution of our strategy and continues to be made on our gas assets. Further details are set out below. Murat Özgül 2018 bonus £560,000 As % of maximum 72.5% 2018 – Annual bonus, Remuneration Committee assessment of performance against targets The 2018 bonus was assessed by the Committee, based upon the achievement of performance targets. The overall 2018 bonus outcome was £560,000, being 72.5% of the maximum opportunity. Bonus performance measure Safety and Environment Weighting 15% Performance assessment 15% Performance target Assessment of performance against metrics Zero performance rate on LTIs was maintained with no serious incidents reported. HSE Management System and Culture were further developed and training and leadership visits helped to entrench these principles throughout the Company. — Maintain existing zero performance rate on LTIs and no serious incident track record — Develop a leading indicator system that tests the robustness of controls we implement to mitigate the most significant risks in our business — Continue to embed HSE culture ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION52 ANNUAL REPORT ON REMUNERATION CONTINUED Bonus performance measure Weighting Performance target Assessment of performance against metrics 2018 net production exceeded guidance, and targets sets for gross production from gross drilling capex investment were surpassed. Performance assessment 20% Operational 20% Financial 30% — Manage the Company net working interest production close to guidance — Achieve appropriate incremental gross production from each $1 million gross drilling capex investment programme in 2018 — Manage Company to a cash flow positive position after interest payment — Maintain strong capital discipline and deliver 2018 programme within approved capex budget Total proceeds exceeded budget. Good control of capital spend resulted in capex being below budget, and the year ending in a cash positive position. Timing and value of capex spend was carefully monitored, which led to lower capex than budgeted. 30% Bina Bawi and Miran 20% — Progress on value creation of Bina Bawi and Miran Bina Bawi oil and gas FDPs have been delivered to the KRG, GLA CP deadline extensions were secured, and negotiations are ongoing relating to Bina Bawi. 0% Strategy Execution 15% — Make material progress into executing the strategy Following Board approval of the new strategy at the start of the year, multiple opportunities were identified and pursued. This work led to the agreement to acquire stakes in Chevron operated blocks in the KRI. 7.5% Performance share plan awards made in 2018 PSP awards are granted in the form of a nil-cost conditional share award over shares in the Company with the number of conditional awards granted determined by reference to a percentage of base salary. The Committee continues to believe that, while the relative TSR is an important measure of long-term performance, the current focus of the Company is on absolute long-term value creation through maximising the generation of free cash from existing oil assets, crystallising value from Bina Bawi and Miran, and creating shareholder value through prudent additions to the portfolio. Therefore, PSP awards since 2017 have been granted based on 50% relative TSR against our peer group, and 50% against absolute TSR targets. The peer group for the 2018 PSP awards is below. BP Cairn Energy DNO Enquest Gulf Keystone Ophir Energy Premier Oil Seplat Petroleum SOCO International Nostrum Oil & Gas Royal Dutch Shell Tullow Oil Awards will vest according to the following schedule: Relative TSR ranking of the Company Below median Median Between median and upper quartile Upper quartile Proportion of award vesting 0% 30% Straight-line basis 100% GENEL ENERGYGOVERNANCEAbsolute TSR of the Company Below 12.5% p.a. 12.5% p.a. Between 12.5% p.a. and 25% p.a. 25% p.a. or more 53 Proportion of element vesting 0% 30% Straight-line basis 100% The following table provides details of the awards made under the PSP during 2018. Performance for these awards is measured over the three years from the date of grant. Murat Özgül Type of award Conditional share award Face value (£) Face value (% of salary) Threshold vesting (% of face value) Maximum vesting (% of face value) 1,030,0001 200% 30% (median) 100% (upper quartile) End of performance period 11/04/2021 1. Face value has been calculated using the average share price, ten dealing days prior to the date of grant, of 173.20 pence Share awards The following table provides a summary of all share awards as at 31 December 2018. Further details of the Company’s share plans are set out on pages 97 and 98. Scheme Grant date Murat Özgül2 Exercise price (pence) At 1 January 2018 Granted during the year Vested during the year Released during the year Exercised during the year Lapsed during the year At 31 December 2018 Performance period end Expiry date SOP PSP RSP CEO award PSP PSP PSP PSP 19/12/2011 787.58 31,764 15/04/2015 15/04/2015 21/08/2015 07/05/20161 10/05/2017 28/08/2017 11/04/2018 Nil Nil Nil Nil Nil Nil Nil 112,757 130,106 187,500 1,135,171 1,163,151 20,706 – – – – – – – – – – – – – – – – – 130,106 – – – – – – – – 187,500 – – – – – 31,764 19/12/2014 19/12/2021 112,757 – – – – – – – – 31/12/2017 15/03/2025 n/a 15/04/2025 n/a 21/08/2025 1,135,171 31/12/2018 07/05/2026 1,163,151 09/05/2020 10/05/2027 20,706 27/08/2020 28/08/2027 – 594,688 11/04/2021 12/04/2028 – 594,688 1. The 2016 awards under the PSP will lapse following the announcement of the Company’s results in 2018 2. Awards made to Murat Özgül prior to 12 July 2015 were made to him in his capacity as President, KRI and Turkey Payments to past Directors In 2018, there were no payments made to past Directors. Payments for loss of office In 2018, there were no payments to Directors for loss of office. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION54 ANNUAL REPORT ON REMUNERATION CONTINUED Statement of Directors’ shareholding and share interests The beneficial interests of the Directors in the Company’s shares as at 31 December 2018 are shown in the table below. There have been no changes in the Directors’ shareholdings and interests since 31 December 2018. The Company does not currently operate a formal shareholding guideline as Executive Directors must normally hold any vested shares under the PSP for three years following vesting for share awards up to and including 2016 and for two years for awards made in 2017 and beyond. Executive Directors are expected to build up their holding over time. Director Murat Özgül Stephen Whyte Tim Bushell Martin Gudgeon Mehmet Ö˘gütçü George Rose Nazli K. Williams Ordinary shares as at 31 December 2017 or date of leaving Ordinary shares as at 31 December 2018 or date of leaving Interest in share options granted under the Company share plans as at 31 December 2018 355,546 673,152 2,945,480 15,740 24,504 – – – – 100,000 – 90,000 90,000 – – – – – – – – This represents the end of the audited section of the report. Historical TSR performance and CEO remuneration outcomes The following graph shows the Company’s TSR since trading of Genel Energy plc’s shares began on the London Stock Exchange on 21 November 2011 against the FTSE 350 Oil & Gas Producers Index. The Committee believes that the FTSE 350 Oil & Gas Producers Index remains the most appropriate Index as these companies are Genel’s direct UK listed comparators. TOTAL SHAREHOLDER RETURN 200 180 160 140 120 100 80 60 40 20 0 21/11/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 31/12/2018  Genel Energy  FTSE 350 Oil & Gas Producers GENEL ENERGYGOVERNANCE55 The table below summarises the CEO single figure for total remuneration, annual bonus pay-outs and LTIP vesting levels as a percentage of maximum opportunity over the period since listing to the end of the 2018 financial year. 2011 2012 2013 2014 2015 2015 2016 2017 2018 Chief Executive Officer CEO single figure remuneration (£’000) Annual bonus pay-out (as a % of maximum opportunity) Long-term incentive vesting out-turn (as a % of maximum opportunity) 139 1,691 1,779 2,521 468 531 1,519 1,765 1,882 Tony Hayward Murat Özgül n/a 90% 95% 90% 0% 36.25% 71.4% 82.14% 72.5% n/a n/a n/a 82.5% 0% 0%1 0% 0% 0% 1. The Committee exercised its discretion to reduce the vesting under the 2013 PSP awards from 30% to 0% Percentage change in remuneration of the Chief Executive Officer The table below shows the percentage change in the Chief Executive Officer’s salary, benefits and annual bonus between the financial years ended 31 December 2017 and 31 December 2018 compared to the average for permanent employees of the Company. Chief Executive Officer All employees 1. This year-on-year decrease reflects the impact of the 20% salary reduction made in some areas in August 2017 The percentage change in annual bonus for the CEO compares 2017 outcomes against 2018. % change in base salary 2018/2017 % change in benefits 2018/2017 % change in annual bonus 2018/2017 (10.11)% (10.11)% (20.66)% (9.1)%1 (2.4)%1 (8.1)%1 Relative importance of the spend on pay The table below illustrates the current year and prior year overall expenditure on pay. The regulations require that we report distributions received by shareholders through dividends and share buy-backs. We did not buy back shares during 2018 nor were any dividends distributed. Remuneration paid to all employees 2017 2018 $m 21.6 18.1 Remuneration paid to all employees represents total staff costs from continuing operations. Implementation of Remuneration Policy in 2019 This section provides an overview of how the Committee is proposing to implement our Remuneration Policy in 2019. Base salary In determining Executive Director salary increases for 2019, the Committee took into consideration a number of factors including: — The individual’s skills and experience — Business performance — Salary levels for similar roles within the industry — Pay and conditions elsewhere in the Company The Committee has decided to increase Murat Özgül’s base salary by 2.5% with effect from 1 January 2019. The table below shows the base salary for 2019. Base salary from 1 Jan 2019 Murat Özgül £527,875 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION56 ANNUAL REPORT ON REMUNERATION CONTINUED Benefits As outlined above, Murat Özgül receives a cash supplement in lieu of all benefits, including pension, private health insurance, life assurance and company car provision. The cash supplement is not included in calculating bonus and long-term incentive quantum. For 2019, the cash supplement remains set at 25% of base salary. 2019 benefits allowance Murat Özgül £131,969 2019 – Annual bonus targets The target bonus for Murat Özgül for 2019 remains at 100% of base salary, with a maximum bonus of 150% of base salary. For 2019, the performance of the Executive Director will again be measured 100% against Company metrics. In 2019, Genel continues to highlight the importance of the growth strategy for the Company by assigning 25% of the bonus to strategy execution, and 20% will be committed to Miran and Bina Bawi value creation. Once again, it has been decided that 15% of the bonus performance measures will be committed to maintaining the focus on high performance in safety and environment, with a total of 40% relating to operational and financial performance. Bonus performance measures Specific targets Percentage Safety and Environment — Implement leading indicators for the critical controls in place to manage significant risks — Continue implementation of Management System, with a focus on leadership and culture Operational Financial — Manage net working interest production close to production guidance — Achieve appropriate bbls incremental gross production from each $1million gross drilling capex investment programme in 2019 — Demonstrate strong compliance culture and leadership — Deliver material free cash flow after interest payment — Maintain strong balance sheet — Maintain strong expenditure control and deliver 2019 programme within approved capex and opex budgets Bina Bawi and Miran Strategy Execution — Progress on value creation of Bina Bawi and Miran — Develop and deliver material strategic growth opportunities 15% 20% 20% 20% 25% Performance share plan PSP awards are granted in the form of nil-cost conditional share award over shares in the Company with the number of awards granted normally determined by reference to a percentage of base salary. The Committee reviewed the most appropriate measure to create maximum alignment with shareholders and encourage long-term value creation. PSP performance will continue to be measured based on 50% relative TSR and 50% absolute TSR. The 2019 award for the CEO will continue to be based on a face value of 200% of base salary at the time of the award. The Committee reviewed the existing TSR peer group during 2018. Following discussion, the Remuneration Committee agreed that companies with both exploration and production should be considered, and that the cost of capital and market capitalisation of each Company should also be taken into account. Accordingly, the peer group for the measurement of the relative TSR element of the 2019 award will be: Africa Oil Aker BP Cairn Energy DNO Energean Oil & Gas Enquest Gulf Keystone Hurricane Kosmos Lundin Nostrum Oil & Gas Ophir Energy Premier Oil Seplat Petroleum SOCO International Tullow Oil The relative TSR vesting schedule will remain the same as for awards made in 2018, as outlined on page 52. GENEL ENERGYGOVERNANCEThe absolute TSR targets will be measured on compound annual growth rates (CAGR) as follows: Absolute TSR of the Company Below 12.5% p.a. 12.5% p.a. Between 12.5% p.a. and 25% p.a. 25% p.a. or more 57 Proportion of element vesting 0% 30% Straight-line basis 100% The Committee is comfortable that these targets are appropriately stretching. The threshold targets have been reviewed and updated after consideration of financial developments in 2018. The threshold target is set in line with Genel’s cost of capital to ensure that this element vests only when shareholders make a return. Chairman and Non-Executive Director remuneration Non-Executive Director fees were reviewed in 2018 against benchmark data for companies with a similar market cap, and also against comparable E&P companies. The fees remain unchanged for 2019. Role Non-Executive Chairman Senior Independent Director additional fee Non-Executive Director fee Additional fee for membership of two or more Board Committees Additional fee for Committee chairmanship: Role Audit Committee Remuneration Committee HSSE Committee Reserves Committee Nomination Committee Fee £220,000 No additional fee £56,000 £14,000 Fee £14,000 £10,500 £10,500 £10,500 No additional fee The Committee is responsible for determining the Remuneration Policy for the Executive Director and the Chairman of the Board. The Chairman of the Board together with the Executive Director determine the fees and overall remuneration for the Non-Executive Directors. Martin Gudgeon Chairman of the Remuneration Committee 19 March 2019 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION58 REMUNERATION POLICY REPORT Remuneration policy report This part of the report sets out our Directors’ Remuneration Policy (the ‘Policy’). As outlined above in the letter from the Chairman of the Remuneration Committee, this Policy was put forward for binding shareholder approval at the 2017 AGM and the Policy replaced the previous Remuneration Policy approved at the 2014 AGM. The effective date of the Policy is the date on which the Policy is approved by shareholders – 6 June 2017. Further details regarding the operation of the Policy can be found on pages 57 to 59. As already seen from the actions taken after the 2017 AGM, the Committee will keep the Policy under review to ensure that it continues to promote the attraction, retention and motivation of the high-performing executive talent required to deliver the business strategy. It is the Committee’s intention that the Policy be put to shareholders for approval every three years. Should any changes be required before the end of the three-year period, the amended Policy will be put to shareholders, following shareholder consultation as appropriate. Remuneration policy table Fixed remuneration This part of the report sets out a summary of the Directors’ remuneration policy as determined by the Remuneration Committee (“the Committee”) and approved by shareholders at the 2017 Annual General Meeting. A copy of the shareholder approved Policy is available at www.genelenergy.com in the Investors Relations section. Purpose and link to strategy Operation Maximum opportunity Performance measures Element Salary — To provide fixed remuneration which is balanced, taking into account the complexity of the role and the skills and experience of the individual Benefits — To provide a simple and broadly market competitive benefit cash allowance None — The Committee takes into account a number of factors when setting salaries, including: — scope and complexity of the role — the skills and experience of the individual — salary levels for similar roles within the international industry — pay elsewhere in the Group — Salaries are reviewed, but not necessarily increased, annually with any increase usually taking effect in January — While there is no defined maximum opportunity, salary increases are normally made with reference to the average increase for the Company’s wider employee population — The Committee retains discretion to make higher increases in certain circumstances, for example, following an increase in the scope and/ or responsibility of the role or the development of the individual in the role — A cash supplement is — Cash supplement is None provided in lieu of benefits (including pension) — The cash supplement is not included in calculating bonus and long-term incentive quantum set as a percentage of base salary and paid in lieu of all benefits (including pension) — While there is no defined maximum opportunity, the cash supplement is currently 25% of base salary — Should an individual participate in the Mandatory Pension Scheme provided by the Company to all UK based employees the cash supplement will be reduced in line with the Company contribution made — The Committee keeps the benefit policy and level of cash supplement under review. The Committee may adjust cash supplement levels in line with market movements GENEL ENERGYGOVERNANCE59 The Company is incorporated in Jersey rather than the UK. Accordingly, the Company does not have the benefit of the statutory protections afforded by the UK Companies Act 2006 in the event that there were to be any inconsistency between this Policy and any contractual entitlement or other rights of a Director. Therefore, in the event that there were to be any payment which was inconsistent with this Policy, the Company would not have the statutory right, under section 226E of the UK Companies Act 2006 to recover such payments from its Directors. Remuneration policy table continued Variable remuneration Element Purpose and link to strategy Operation Maximum opportunity Performance measures Annual bonus — To incentivise and reward the achievement of annual financial, operational and individual objectives which are key to the delivery of the Company’s short-term strategy — Maximum award opportunity for Executive Directors is 150% of base salary for each financial year — At least 70% of the award will be assessed against Group metrics including financial, operational, safety and environment, and CSR performance. Any remainder of the award will be based on performance against individual objectives — A sliding scale of between 0% and 100% of the maximum award is paid dependent on the level of performance — Awards are based on objectives set by the Committee over a combination of goals which may include financial, operational and individual goals measured over one financial year — Objectives and the mix of goals are set annually to ensure that they remain targeted and focused on the delivery of the Company’s short-term goals — The Committee sets targets which require appropriate levels of performance, taking into account internal and external expectations of performance — As soon as practicable after the year-end, the Committee meets to review performance against objectives and determines payout levels — Bonus payments are made in cash, although there is the flexibility to pay in shares — No part of the bonus is currently subject to deferral, although the Committee retains the flexibility to apply deferral to all or part of the bonus (in cash or shares) in the future should it be considered appropriate ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION60 REMUNERATION POLICY REPORT CONTINUED Element Purpose and link to strategy Operation Maximum opportunity Performance measures Performance share plan (‘PSP’) — To incentivise and reward the creation of long-term shareholder value — To align the interests of the Executive Directors with those of shareholders — The usual maximum award opportunity in respect of a financial year is 200% of base salary — However, in circumstances that the Committee deems to be exceptional, awards of up to 300% of base salary may be made — Vesting of awards is dependent on financial, operational and/or share price measures, as set by the Committee, which are aligned with long-term strategic objectives of the Company. No less than half of an award will be based on share price measures. The remainder will be based on either financial, operational or share price measures — At the minimum level of acceptable performance, no more than 30% of the award will vest rising to 100% for maximum performance — Awards granted under the PSP (normally in the form of conditional share awards or nil-cost options) vest subject to achievement of performance conditions measured over a period of at least three years — Awards can be reduced or cancelled in certain circumstances as set out below — Any shares that vest may benefit from the value of dividends (if any) which would have been paid during the period between award and vesting and may assume reinvestment in the Company’s shares — Shares that vest are normally subject to a holding period of two years .from the vesting date although the Committee retains the discretion to apply a different holding period, or no holding period — Any vested options must be exercised within ten years of the date of grant — The plan rules allow for a maximum award of 300% of base salary in respect of a financial year. Only in circumstances that the Committee deems to be exceptional will awards be made at this level — Awards will only be made to Executive Directors in recruitment scenarios — The Committee may attach performance conditions to awards if appropriate Restricted share plan (‘RSP’) — Normally used to buy out awards forfeited by new Executive Directors on recruitment — Murat Özgül will not — The Committee will where possible make buy-out awards on a like-for-like basis as set out in the recruitment policy receive grants under this scheme following his appointment as CEO — Awards can be reduced or cancelled in certain circumstances as set out below — Awards will vest on a date determined by the Committee at grant, subject to the individual’s continued employment and, if the Committee considers appropriate, performance conditions — Any shares that vest may benefit from the value of dividends paid (if any) during the period between award and vesting which may assume reinvestment in the Company’s shares GENEL ENERGYGOVERNANCE61 Notes to the Policy table The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the payment were agreed (i) before the 2014 AGM (the date the Company’s first shareholder-approved Directors’ Remuneration Policy came into effect); (ii) before the Policy set out above came into effect, provided that the terms of the payment were consistent with the shareholder-approved Directors’ Remuneration Policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are ‘agreed’ at the time the award is granted. Performance measures and targets Annual bonus The annual bonus performance measures are designed to provide an appropriate balance between incentivising Executive Directors to meet financial targets for the year and to deliver a combination of specific strategic, operational and personal goals. This balance allows the Committee to review the Company’s performance in the round against the key elements of our strategy and appropriately incentivise and reward Executive Directors. Bonus targets are set by the Committee each year to ensure that Executive Directors are focused on the key objectives for the next 12 months. In doing so, the Committee takes into account a number of internal and external reference points, including the Company’s business plan. PSP The ultimate goal of our strategy is to provide long-term sustainable returns to shareholders. The Committee currently considers that a mix of absolute and relative TSR is the most appropriate measure to assess the underlying financial performance of the business while creating maximum alignment with shareholders and encouraging long-term value creation. Malus provisions Under the PSP and RSP, prior to vesting, the Committee may cancel or reduce the number of shares awarded or impose additional conditions on an award in circumstances where the Committee considers it to be appropriate. Such circumstances may include a material misstatement of the Company’s audited financial results, a material breach of health and safety regulations, a material failure of risk management or serious reputational damage to the Company. The Committee has considered malus provisions in the context of the annual bonus and is satisfied that malus is appropriately taken into account at the time the Committee approves a bonus payment. Clawback provisions Clawback provisions apply to the annual bonus, PSP and RSP awards where it is considered appropriate. Such circumstances may include a material misstatement of the Company’s audited results, misconduct of the individual and any error in the calculation of any performance condition. Clawback may be applied up to one year after payment for bonus awards and two years after vesting for PSP and RSP awards. Plan rules The PSP and RSP shall be operated in accordance with the rules of the plans as approved by shareholders and amended from time to time in accordance with those rules. In particular: — The plan rules provide for adjustments in certain circumstances, for example, awards may be adjusted in the event of variation of the Company’s share capital, demerger, special dividend, re-organisation or similar event — In the event of a change of control of the Company, existing share awards will vest in line with the plan rules to the extent the Committee determines, taking into account the extent to which any performance conditions (where applicable) have been satisfied and, unless the Committee determines otherwise, the time elapsed since that time. The Committee may, in the event of a winding-up of the Company, demerger, delisting, special dividend or other event which the Committee considers may affect the price of shares, allow awards to vest on the same basis — The performance conditions may be replaced or varied if an event occurs or circumstances arise which cause the Committee, acting fairly and reasonably, to determine that a substituted or amended performance condition would be more appropriate (taking into account the interests of the shareholders of the Company) provided that the amended performance condition would not be materially less difficult to satisfy — The Committee may elect, prior to vesting or exercise in the case of options, to deliver the value of vested awards as cash Remuneration arrangements throughout the Company The Remuneration Policy for Executive Directors is designed in line with the remuneration principles that underpin remuneration across the Company. When making decisions in respect of Executive Director remuneration arrangements, the Committee takes into consideration the pay and conditions for employees throughout the Company, including the local inflationary impact for the countries in which we operate. As stated in the Policy table, salary increases are normally made with reference to the average increase for the wider employee population. The Company places a significant focus on variable remuneration, ensuring that a meaningful proportion of remuneration across all employees is based on performance, through its operation of the annual bonus plan throughout the Company and participation in share incentive plans. Genel is committed to strengthening and widening employee share ownership by the use of share incentives granted under our share plans. As a result approximately 90% of employees participate in our share plans. The Committee does not directly consult with our employees as part of the process of determining executive pay. However, there is wide employee participation in our share plans. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION62 REMUNERATION POLICY REPORT CONTINUED Chairman and Non-Executive Directors Element Purpose and link to strategy Operation Maximum opportunity Performance measures Chairman fees — To provide an appropriate — The fee for the Chairman — Whilst there is no None Non-Executive Director (NED) fees reward to attract and retain a high-calibre individual with the relevant skills, knowledge and experience is normally reviewed annually but not necessarily increased — The remuneration of the Chairman is set by the Committee — The Chairman receives a set fee for the role; no additional fees are payable for other Committee memberships — The fee is payable in cash, although the Committee retains the right to make payment in shares maximum level, fees are set considering: — market practice for comparative roles — the time commitment and duties involved — the requirement to attract and retain the quality of individuals required by the Company — Expenses reasonably and wholly incurred in the performance of the role of Chairman of the Company may be reimbursed or paid for directly by the Company, as appropriate, and may include any tax due on the expense — The Chairman does not participate in any of the Group’s incentive plans — To provide an appropriate — The fees for the — Whilst there is no None reward to attract and retain high-calibre individuals with the relevant skills, knowledge and experience maximum level, fees are set considering: — market practice for comparative roles — the time commitment and duties involved — the requirement to attract and retain the quality of individuals required by the Company — Expenses reasonably and wholly incurred in the performance of the role of Non-Executive Director of the Company may be reimbursed or paid for directly by the Company, as appropriate, and may include any tax due on the expense — The Non-Executive Directors do not participate in any of the Group’s incentive plans Non-Executive Directors are normally reviewed annually but not necessarily increased — The remuneration of the Non-Executive Directors is a matter for the Chairman and the Executive Directors — Non-Executive Directors receive a standard basic fee. Where applicable, they also receive additional fees for Committee chairmanship and for the membership of two or more Committees — Although no additional fee is currently paid for the role of the Senior Independent Director or the Chairman of the Nomination Committee, the Company retains the flexibility to pay such a fee if appropriate — The fee is payable in cash, although the Committee retains the right to make payment in shares Non-Executive Directors may receive professional advice in respect of their duties with the Company which will be paid for by the Company. Non-Executive Directors are also covered by the Company’s directors’ and officers’ insurance policy and provided with an indemnity. GENEL ENERGYGOVERNANCE63 Buyouts In order to facilitate recruitment, the Committee may make a one-off award to ‘buy out’ incentive awards and any other compensation arrangements that a new hire has had to forfeit on leaving their previous employer. In doing so, the Committee will take into account all relevant factors including any performance conditions attached to the forfeited awards, the likelihood of those conditions being met, the proportion of the vesting/performance period remaining and the form of the award (e.g. cash or shares). Where possible, the forfeited awards will normally be bought out on an estimated like-for-like basis. The Committee is at all times conscious of the need to pay no more than is necessary, particularly when determining any possible buy-out arrangements. Recruitment policy In determining remuneration for new appointments to the Board, the Committee will consider all relevant factors including, but not limited to, the calibre of the individual and their existing package, the external market and the existing arrangements for the Company’s current Executive Directors, with a view that any arrangements offered are in the best interests of the Company and shareholders and without paying any more than is necessary. Where the new appointment is replacing a previous Executive Director, salaries and total remuneration opportunity may be higher or lower than the previous incumbent. If the appointee is expected to develop into the role, the Committee may decide to appoint the new Executive Director to the Board at a lower than typical salary. Larger increases (above those of the wider employee population) may be awarded over a period of time to move closer to market level as their experience develops. Benefits will normally be limited to those outlined in the remuneration policy table above. However, additional benefits may be provided by the Company where the Committee considers it reasonable and necessary to do so. Such circumstances may include where an Executive Director is required to relocate in order to fulfil their duties. In such cases, a cash payment higher than the 25% of salary that is ordinarily paid would normally be provided under the Company’s standard expatriate policy in lieu of certain benefits, which may include the provision of a housing allowance, education support, health insurance, tax advice, a relocation or repatriation allowance and a home leave allowance. It is expected that the structure and quantum of the variable pay elements would reflect those set out in the policy table above. However, the Committee recognises that, as an independent oil and gas company, it is competing with global firms for its talent. As a result, the Committee considers it important that the recruitment policy has sufficient flexibility in order to attract the calibre of individual that the Company requires. Therefore: — Under the annual bonus, the Committee reserves the right to provide either a one-off or ongoing maximum bonus opportunity of up to 200% of salary if this is required to secure an external appointment — The Committee would also retain the discretion to flex the balance between annual and long-term incentives and the measures used to assess performance for these elements, whilst maintaining the intention that a significant portion of variable pay would be delivered in shares — Variable pay could, in exceptional circumstances, be delivered via alternative structures, again with the intention that a significant portion would be share-based, but in all circumstances subject to an ongoing over-riding cap of 600% of salary. This cap excludes any awards made to compensate the Director for incentive awards or any other remuneration arrangements forfeited from their previous employer (see below) The above flexibility will only be used if the Committee believes such action is absolutely necessary to recruit and motivate a candidate from the global market. The Committee commits to explain to shareholders the rationale for the relevant arrangements following any appointment. Where an Executive Director is appointed from within the Group, the normal policy of the Company is that any legacy arrangements would be honoured in line with the original terms and conditions. Similarly, if an Executive Director is appointed following an acquisition of or merger with another company, legacy terms and conditions would be honoured. The Committee retains the discretion to make appropriate remuneration decisions outside the standard policy to meet the individual circumstances of the recruitment, when an interim appointment to fill an Executive Director role is made on a short-term basis or a Non-Executive Director or the Chairman takes on an executive function on a short-term basis. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION64 REMUNERATION POLICY REPORT CONTINUED Recruitment of Chairman and Non-Executive Directors In the event of the appointment of a new Chairman and/or Non-Executive Director, remuneration arrangements will normally be in line with those detailed in the relevant table above. Executive Director service contract The key employment terms and other conditions of the current Executive Director, as stipulated in his service contract, are set out below. Element Notice period Policy — 12 months’ notice by either the Company or the Executive Director. This is also the policy for new recruits Termination payment — It is the Company’s policy for new service contracts that it may terminate employment by making a payment in lieu of notice (‘PILON’) equivalent to (i) 12 months’ base salary and (ii) the Executive Director’s annual benefit allowance — Upon termination by the Company, an Executive Director has a duty to mitigate, and use reasonable endeavours to secure alternative employment as soon as reasonably practicable. In Murat Özgül’s service contract, there are specific provisions requiring a reduction in any phased PILON payments in the event that he finds alternative employment Remuneration and benefits — Participation in all incentive schemes, including the annual bonus and the PSP, is non-contractual — Outstanding awards will be treated in accordance with the relevant plan rules The service contract of an Executive Director may also be terminated immediately and with no liability to make payment in certain circumstances, such as the Executive Director bringing the Group into disrepute or committing a fundamental breach of their employment obligations. Unless otherwise approved, an Executive Director may accept only one position as a Non-Executive Director (but not as a Non-Executive Chairman) of a FTSE 100 company that is not a competitor of the Company, subject to prior notification to the Chairman of the Company and the approval of the Board or duly authorised Committee thereof. Policy on payment for loss of office In the event that the employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract between the Company and the employee, as well as the rules of any incentive plans. The Company considers a variety of factors when considering leaving arrangements for an Executive Director, including individual and business performance, the obligation for the Director to mitigate loss (for example by gaining new employment) and other relevant circumstances (e.g. ill health). The Committee may make other payments in connection with a Director’s cessation of office or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of any claim arising in connection with the cessation of a Director’s office or employment. Any such payments may include but are not limited to paying any fees for outplacement assistance and/or the Director’s legal and/or professional advice fees in connection with his cessation of office or employment. If the Executive Director’s employment is terminated by the Company, the Executive Director may receive a time pro-rated bonus, subject to Remuneration Committee discretion. GENEL ENERGYGOVERNANCE65 The treatment of outstanding share awards is governed by the relevant share plan rules. The following table summarises the leaver provisions of share plans under which Executive Directors may currently hold awards. Plan PSP and RSP Treatment for any other leaver reason — Awards lapse in full Leaver reasons where awards may continue to vest Vesting arrangements — Death — Injury, ill health or disability — Retirement — Sale of the Company or business by which the participant is employed outside the Group — Any other scenario in which the Committee determines good leaver treatment is justified (other than summary dismissal) — Awards will vest to the extent determined by the Committee taking into account the achievement of any performance conditions at the relevant vesting date and, unless the Committee determines otherwise, the period of time which has elapsed between grant and cessation of employment — The vesting date for such awards will normally be the original vesting date, although the Committee has the flexibility to determine that awards can vest upon cessation of employment — In the event of death, all unvested awards will normally vest at that time to the extent determined by the Committee taking into account the achievement of any relevant performance conditions as at the date of death and, unless the Committee determines otherwise, the period of time that has elapsed since grant Chairman and Non-Executive Director letters of appointment The Chairman and Non-Executive Directors have letters of appointment which set out their duties and responsibilities. They do not have service contracts with either the Company or any of its subsidiaries. The key terms of the appointments are set out in the table below. Provision Period Policy — In line with the UK Corporate Governance Code, the Chairman and all Non-Executive Directors are subject to annual re-election by shareholders at each AGM — After the initial three-year term, the Chairman and the Non-Executive Directors are typically expected to serve a further three-year term Termination — The appointment of the Chairman and Non-Executive Directors is terminable by either the Company or the Director by giving three months’ notice — The Chairman and Non-Executive Directors are not entitled to any compensation upon leaving office Consideration of shareholder views The Committee continues to be mindful of shareholder views when evaluating and setting ongoing remuneration strategy and we commit to consulting with shareholders prior to any significant changes to our Remuneration Policy. It is the Committee’s policy to correspond with shareholders that have engaged on remuneration matters during the year, which it has done and the Committee has considered their views at its meetings. Minor changes The Committee may make minor amendments to the Policy set out above for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation without obtaining shareholder approval for that amendment. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION66 OTHER STATUTORY AND REGULATORY INFORMATION Other statutory and regulatory information Principal activities The Company is the holding company for the Group. The Group is principally engaged in the business of oil and gas exploration and production. result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. Results and dividends Ordinary activities after taxation of the Group for the period 1 January 2018 to 31 December 2018 amounted to a loss of $284 million. No interim dividend was paid and the Directors are not recommending a final dividend for the period ended 31 December 2018. Subsequent events Please see note 21 to the financial statements on page 99 of this Annual Report for details of subsequent events. Employee share schemes Details of the Company’s employee share schemes are set out in note 18 to the financial statements of this Annual Report. Articles of association of the Company Under the Jersey Companies Law, the capacity of a Jersey company is not limited by anything contained in its memorandum or what is articles of association. Accordingly, the memorandum of association of a Jersey company does not contain an objects clause. Share capital As at 19 March 2019, the Company had allotted and fully paid up share capital of 280,248,198 ordinary shares of 10 pence each with an aggregate nominal value of £28,024,819.80. 1,005,839 shares are held as treasury shares. Certain provisions have been incorporated into the articles of association to enshrine rights that are not conferred by the Jersey Companies Law, but which the Company believes shareholders would expect to see in a company listed on the London Stock Exchange. Provisions in the articles of association also require shareholders to make disclosures pursuant to chapter 5 of the Disclosure and Transparency Rules, and require the Directors to comply with chapter 3 of the Disclosure and Transparency Rules and themselves to require any persons discharging managerial responsibilities (within the meaning ascribed in the Disclosure and Transparency Rules) in relation to the Company who are not Directors to do so, and to use reasonable endeavours to procure that their own and such persons’ connected persons do so. The articles of association may be amended by a special resolution of the shareholders. Appointment and replacement of Directors The rules for the appointment and replacement of Directors are set out in the articles of association. Certain additional provisions relating to the appointment of Directors are included in the Relationship Agreement between the Company and Focus. Directors The biographical details of the Directors of the Company who were in office during the year and as at the date of this Annual Report are set out on pages 32 and 33. Details of Directors’ service agreements and letters of appointment are set out on pages 64 and 65. Resolutions in relation to share capital At the AGM of the Company held on 17 May 2018, the shareholders granted the Company authority to make market purchases of up to 27,901,372 ordinary shares (representing approximately 10% of the aggregate issued ordinary share capital of the Company at 12 April 2018) and hold as treasury shares any ordinary shares so purchased. Shareholders will be asked to renew this authority at the forthcoming AGM. Full details are included in the Notice of AGM. Rights attaching to the ordinary shares Holders of ordinary shares are entitled to attend, speak and vote at general meetings of the Company and may receive a dividend and, on a winding-up, may share in the assets of the Company. As of 24 February 2016 the Company no longer has any suspended voting ordinary shares in issue. Restrictions on transfer of shares There are no specific restrictions on the transfer of shares in the Company other than (i) as set out in the articles of association, (ii) pursuant to the Company’s share dealing policy, (iii) as imposed from time to time by law and regulation and (iv) as set out in the Merger Agreement. Save as set out in the Merger Agreement and the Relationship Agreement, the Company is not aware of any arrangements or agreements between holders of the Company’s shares that may GENEL ENERGYGOVERNANCE67 Details of the Directors’ interests in the ordinary shares of the Company and in the Group’s long-term incentive schemes are set out in the Annual Report on Remuneration on page 54. Details of Directors submitting themselves for re-election at the AGM are set out in the Notice of Meeting. Service contracts and letters of appointment for all Directors are available for inspection at the registered office of the Company and will be available for inspection at the AGM. Subject to applicable law and the articles of association and to any directions given by special resolution, the business of the Company will be managed by the Board, which may exercise all the powers of the Company. Directors’ indemnities As at the date of this Annual Report, indemnities granted by the Company to the Directors are in force to the extent permitted under Jersey law. The Company also maintains directors’ and officers’ liability insurance cover, the level of which is reviewed annually. Related party transactions Details of transactions with Directors and Officers are set out in note 20 to the financial statements. There were no other related party transactions to which the Company was a party during the period. Shareholder agreements Merger Agreement On 7 September 2011, the Company, Elysion Energy Holding B.V. (formerly Genel Energy Holdings B.V.), Focus Investments and PRM entered into a merger agreement (the ‘Merger Agreement’) pursuant to which the Company agreed to purchase, and the Sellers agreed to sell, the entire issued ordinary share capital of Genel Energy International Limited in consideration for the issue of 130,632,522 ordinary shares (the ‘Consideration Shares’). The Merger Agreement was amended by a deed of amendment entered into on 29 October 2011. Relationship Agreement On 7 September 2011, the Company, Elysion and Focus Investments entered into a relationship agreement which regulates the ongoing relationship between Elysion, Focus Investments and the Company (the ‘Relationship Agreement’). On 14 October 2015 Mehmet Sepil retired as President and on 18 November 2015 Mehmet Sepil’s holding in the Company fell to below 10% of the voting rights in the Company. Accordingly, certain rights of Elysion under the Relationship Agreement ceased to have effect including the right to nominate a representative to the Genel Board. The principal purpose of the Relationship Agreement is to ensure that the Company is capable at all times of carrying on its business independently of Focus Investments (and their Associates) and that all transactions and relationships between the Company and Focus Investments are at arm’s length and on a normal commercial basis. For the purposes of the Relationship Agreement, the term ‘Associate’ includes, in the case of Focus Investments, Mehmet Emin Karamehmet. On 12 February 2015 the Relationship Agreement was amended to reflect changes to the Listing Rules that apply to controlling shareholders. Whilst the Relationship Agreement reflected the majority of the requirements the Company felt it prudent to amend it to align it to the specific obligations under Listing Rule 6.1.4(d). The Relationship Agreement will terminate upon the earlier of (i) the Company ceasing to have any of its ordinary shares listed on the Official List and admitted to trading on the London Stock Exchange’s main market for listed securities, and (ii) Elysion and Focus Investments together with their respective Associates ceasing between them to be entitled to exercise, or control the exercise of, in aggregate 10% or more of the Voting Rights. Pursuant to the terms of the Relationship Agreement, it has been agreed that, among other things: a) For so long as Focus Investments and its respective Associates are entitled to exercise or control the exercise of, in aggregate, 10% or more of the Voting Rights, Focus Investments will, and will procure so far as it is reasonably able to do so, that each of its Associates will: i. not take any action which precludes or inhibits any member of the Group from carrying on its business independently of Focus Investments and its respective Associates; ii. not exercise any of its Voting Rights to procure any amendment to the articles of association of the Company which would be inconsistent with or breach any provision of the Relationship Agreement; iii. if and for so long as paragraph 11.1.7R(3) of the Listing Rules applies to the Company, abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a ‘related party transaction’ (as defined in paragraph 11.1.5R of the Listing Rules) involving Focus Investments or any of its Associates as the related party; iv. comply with all provisions of the Listing Rules, the Disclosure and Transparency Rules, the requirements of the London Stock Exchange and the FSMA that apply to it in connection with the Company; v. ensure that the business and affairs of the Company are conducted in accordance with its articles of association; and vi. exercise all of its Voting Rights in a manner consistent with the intention that at all times at least half of the Directors (excluding the Chairman) are Independent Non-Executives and that certain committees of the Board shall comply with the UK Corporate Governance Code; b) For so long as Focus Investments and its respective Associates are, between them, entitled to exercise or control the exercise of, in aggregate, 10% or more of the Voting Rights, Focus Investments will, and will procure that each of its Associates will: i. conduct all transactions and arrangements with any member of the Group on arm’s length and on normal commercial terms; ii. not take any action that would have the effect of preventing the Company from complying with its obligations under the Listing Rules; and iii. not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules; c) Provided that Focus Investments and its Associates are entitled to exercise or control the exercise of 10% or more of the Voting Rights, Focus Investments shall be entitled to nominate for appointment to the Board one Director by giving notice to the Company; and ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONAuditors and disclosure of relevant audit information So far as each Director is aware, there is no relevant information of which the Company’s auditor is unaware. Each Director has taken all steps that ought to have been taken as a Director to make him or herself aware of any relevant audit information and to establish that PwC are aware of that information. Following a review of the independence and effectiveness of the auditor, a resolution to reappoint PricewaterhouseCoopers LLP as the Company’s auditor will be proposed at the AGM. AGM Your attention is drawn to the Notice of AGM enclosed with this report, which sets out the resolutions to be proposed at the forthcoming AGM. The meeting will be held at the Taj Hotel, St. James’ Court, 54 Buckingham Gate, London SW1E 6AF, UK on Thursday, 16 May 2019 at 11.00am. By order of the Board Murat Özgül Chief Executive Officer 68 OTHER STATUTORY AND REGULATORY INFORMATION CONTINUED Appropriate training will be arranged, including retraining for alternative work for those who become disabled, to promote their career development within the Group. Diversity policy The Board and the Company are committed to employing a diverse and balanced workforce. Diversity of ideas, skills, knowledge, experience, culture, ethnicity and gender are important when building an effective and talented workforce at all levels of the organisation, including the Board. The Company has not formally adopted a Diversity Policy although we continue to believe diversity, equality and non-discrimination are essential for our success as a business. The importance of this is highlighted in our Code of Conduct and underpinned by our recruitment practises and dealings with our partners and suppliers. Substantial shareholdings As at 31 December 2018, the Company had been notified of the following significant holdings (being 5% or more of the voting rights in the Company) in the Company’s ordinary share capital. Name Number of ordinary shares Focus Investments Limited 64,589,351 Daax Corporation FZE 41,828,175 Bilgin Grup Dogˇal Gaz A.S˛ . 41,567,813 NR Holdings Limited 22,119,970 Majedie Asset Management Limited 12,744,963 Between the 31 December 2018 and 19 March 2019 the Company has recevied a notification from Majedie Asset Management Limited that its holding in the Company has reduced to less than 5% of ordinary shares. The Company also received a notification from Bilgin Grup Dogˇal Gaz A.S˛ . that its holding in the Company has increased to 42,093,273 ordinary shares. Political donations No political donations were made, nor was any political expenditure incurred, by any Group company in the year ending 31 December 2018 (2017: nil). d) For so long as Focus Investments together with their Associates are entitled to exercise or to control the exercise of, in aggregate, 10% or more of the Voting Rights, subject to compliance by the Company with its legal and regulatory obligations, the Company shall procure that Focus Investments is provided with financial and other information as is necessary or reasonably required by them for the purposes of their accounting or financial control requirements or to comply with their legal or tax obligations as a shareholder of the Company. The rights described at (b)–(d) above will terminate and cease to be of any effect in the event that Focus Investments (or any Affiliate (as defined in the Merger Agreement) of Focus Investments that holds any ordinary shares) ceases to be controlled by Mehmet Emin Karamehmet. The Director nominated by Focus Investments pursuant to the Relationship Agreement is Nazli K. Williams (Non-Executive Director). Information in strategic report Particulars of the Group’s use of financial instruments, an indication of the Group’s financial risk management objectives and policies, including its policy for hedging each major type of forecasted transaction for which hedge accounting is used and details of the exposure of the Group to price risk, credit risk, liquidity risk and cash flow risk are set out in note 16 to the financial statements and in the Strategic Report in this Annual Report. Particulars of important events affecting the Group which have occurred since the last financial year and indications of likely future developments in the business of the Group are set out in the Strategic Report in this Annual Report. Details of our approach to greenhouse gas emissions are set out on page 22. Employment policies We are an equal opportunities employer and base all decisions on individual ability regardless of race, religion, gender, sexual orientation, age or disability. Applications for employment by disabled persons will always be considered, having regard to their particular aptitudes and abilities. Should any employee become disabled, every practical effort is made to provide continued employment. Depending on their skills and abilities, they will enjoy the same career prospects and scope for realising their potential as other employees. GENEL ENERGYGOVERNANCESTATEMENT OF DIRECTORS’ RESPONSIBILITIES 69 Directors’ confirmations The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Each of the Directors, whose names and functions are listed in Statement of Directors’ Responsibilities confirm that, to the best of their knowledge: — the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and — the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces. In the case of each Director in office at the date the Directors’ Report is approved: — so far as the Director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and — they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. By order of the Board Murat Özgül Chief Executive Officer The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the Group financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing the financial statements, the Directors are required to: — select suitable accounting policies and then apply them consistently; — state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; — make judgements and accounting estimates that are reasonable and prudent; and — prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. The Directors are responsible for the maintenance and integrity of the parent company’s website. Legislation in Jersey or the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION70 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GENEL ENERGY PLC REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion In our opinion, Genel Energy plc’s group financial statements (the “financial statements”): — give a true and fair view of the state of the group’s affairs as at 31 December 2018 and of its loss and cash flows for the year then ended; — have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and — have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991. We have audited the financial statements, included within the Annual Report, which comprise: the consolidated balance sheet as at 31 December 2018; the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. — Overall group materiality: $18 million (2017: $20 million), based on 1% of total assets. — We identified two significant components out of the group’s 21 reporting entities. — Specific financial statement line items were in scope for an additional nine entities. — Overall, our scoping strategy resulted in a minimum of 80% of each financial statement line item being in scope for testing. — Review of impairment indicators on oil producing assets. — Impairment review of Miran and Bina Bawi assets. Our audit approach Overview Materiality Group scoping Key audit matters Context The context for our audit is set by Genel’s major activities in 2018, including the drilling campaign in the year and the improving world oil prices. The group’s cash flow generating assets continue to be its interests in the Tawke and Taq Taq producing oil fields in the Kurdistan Region of Iraq (‘KRI’). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. GENEL ENERGYFINANCIAL STATEMENTS71 Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Key audit matter How our audit addressed the key audit matter Review of impairment indicators on oil producing assets Refer to Notes 1 and 9 for further information. Under IAS 36, management are required to consider whether there are indicators of impairment on a Cash Generating Unit (‘CGU’) basis and if any are identified, to carry out a full impairment assessment of the relevant assets. As part of their review of indicators, management considered forward- looking information in each of the following key areas for both CGUs: reserves, production, costs, oil price and discount rate. Following their assessment, management have not identified any impairment indicators for the Taq Taq and Tawke CGUs during the period. Our audit work focused on the reasonableness of management’s key assumptions, by comparison with last year, as to whether there is any indicator of impairment. We compared management’s reserves, production and cost assumptions with those of management’s experts in the Competent Person’s Reports (‘CPR’s), and the operators as relevant. We also held discussions with management’s experts, and discussed production performance and future drilling plans with management. We benchmarked management’s oil price forecast against independent broker and consultant estimates. We have assessed management’s discount rate against an independent discount rate range from our valuation experts. Impairment review of Miran and Bina Bawi assets Refer to Notes 1 and 8 for further information. Due to developments in commercial negotiations, as it is clear that the developments will now be progressed independently, management believe it is appropriate to separate Miran and Bina Bawi into individual CGUs for impairment testing purposes. Under IFRS 6, management are required to consider whether there are indicators of impairment and if any are identified, to carry out a full impairment assessment of the relevant assets under IAS 36. For Miran, management concluded that impairment indicators exist, primarily because Miran’s development is now expected to be delayed until after Bina Bawi. See Note 1 for further details. As a result, management performed an impairment assessment of the Miran CGU as at 31 December 2018. This resulted in an impairment charge of $424m. For the Bina Bawi CGU, management have assessed that there are no indicators as the current discussions with the KRG are focused on this asset, and management’s range of valuations are above the carrying value of the CGU. We then compared each of these assumptions with those of the prior year to assess for impairment indicators. There were no issues arising from this work. We held meetings with key management to understand the status of commercial negotiations with the KRG, and the expected development approach for the assets. Based on our enquiries, the planned approach will now result in independent cash flows and we therefore agree that the Miran and Bina Bawi CGUs should be tested separately for impairment purposes. In order to challenge management’s assessment of the recoverable amount of each CGU, we developed an independent range of estimates using discounted cash flow models on a fair value less costs of disposal (FVLCD) basis. We considered the key inputs and assumptions as follows: — Resources and expenditure – based on the most recent CPRs and technical studies issued by management’s experts for each asset. — Oil price – based on management’s forecasts, which we compared to range developed from a sample of brokers and independent consultants as at 31 December 2018. We found management’s assumptions to be in the middle of our independent range. — Gas price – based on the signed Gas Lifting Agreements agreed with the KRG. — Discount rate – based on the mid-point of an independent range calculated by our valuation experts. We also performed sensitivity analysis to consider a reasonable range. — Timing of first oil / gas – based on our enquiries and we also performed sensitivity analysis to consider a reasonable range. Taking into account the impairment charge, we found that management’s assessment of the recoverable value of the Miran CGU fell within our independently determined range, and we consider management’s disclosures of impairment testing to be appropriate. We found that there remains headroom above the carrying value of Bina Bawi CGU based on our independently determined range and therefore concur with management that the carrying value at 31 December 2018 remains appropriate. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION72 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GENEL ENERGY PLC CONTINUED How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, and the industry in which it operates. The group is structured along three reporting segments being the type of assets it operates: Oil producing assets, Miran and Bina Bawi assets and Exploration assets. The financial statements are a consolidation comprising the group’s operating businesses in these reporting segments as well as centralised functions. While the group’s key assets are almost entirely based in the Kurdistan Region of Iraq, accounting functions are largely performed in the company’s office in Ankara. Our group scoping was based on total assets, consistent with our approach to materiality, and identified two financially significant components comprising a high proportion of total group assets, which required an audit of their complete financial information. These two significant components are (a) the trading entity for the Kurdistan oil producing assets Taq Taq and Tawke and (b) the entity that holds the Miran and Bina Bawi assets. We also performed specific procedures on certain financial statement line items within nine other components in the group including: operating expenses, finance expenses and income, cash and cash equivalents and borrowings. Overall, our scoping strategy resulted in a minimum of 80% of each financial statement line item being in scope for testing. The PwC UK group engagement team performed all of our audit work, both in the UK and at the group’s operations in Ankara. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall group materiality $18 million (2017: $20 million). How we determined it 1% of total assets. Rationale for benchmark applied We considered whether this measure continues to be appropriate. In concluding that it is, we considered the activities of the group and also materiality levels used by auditors of other similar upstream oil and gas companies. As a significant portion of the group’s net assets is represented by exploration assets, we believe an asset measure is the most relevant. Consistent with prior years, we used a lower specific materiality for certain income statement financial statement line items. In 2018, we used 5% of EBITDAX (defined in Note 1) ($15 million) (2017: $6 million) for revenue, production costs, and general and administrative costs. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between $7 million and $17 million. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $1 million (2017: $1 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. GENEL ENERGYFINANCIAL STATEMENTS73 Going concern In accordance with ISAs (UK) we report as follows: Reporting obligation Outcome We are required to report if we have anything material to add or draw attention to in respect of the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors’ identification of any material uncertainties to the group’s ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. We have nothing material to add or to draw attention to. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union, which is currently due to occur on 29 March 2019, are not clear, and it is difficult to evaluate all of the potential implications on the group’s trade, customers, suppliers and the wider economy. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated). The directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency or liquidity of the group As a result of the directors’ voluntary reporting on how they have applied the UK Corporate Governance Code (the “Code”), we are required to report to you if we have anything material to add or draw attention to regarding: — The directors’ confirmation on page 25 of the Annual Report that they have carried out a robust assessment of the principal risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity. — The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated. — The directors’ explanation on page 29 of the Annual Report as to how they have assessed the prospects of the group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We have nothing to report in respect of this responsibility. Other Code Provisions As a result of the directors’ voluntary reporting on how they have applied the Code, we are required to report to you if, in our opinion: — The statement given by the directors, on page 69, that they consider the Annual Report taken as a whole to be fair, balanced and understandable, and provides the information necessary for the members to assess the group’s position and performance, business model and strategy is materially inconsistent with our knowledge of the group obtained in the course of performing our audit. — The section of the Annual Report on pages 40 and 41 describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. We have nothing to report in respect of this responsibility. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION74 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GENEL ENERGY PLC CONTINUED Opinion on additional disclosures Strategic Report and Directors’ Report and Governance In our opinion, the information given in the Strategic Report and the ‘Directors’ Report and Governance’ for the financial year for which the financial statements are prepared is consistent with the financial statements. Directors’ Remuneration Report The company voluntarily prepares a Directors’ Remuneration Report in accordance with the provisions of the UK Companies Act 2006. The directors have requested that we audit the part of the Directors’ Remuneration Report specified by the Companies Act 2006 to be audited as if the parent company were a UK Registered listed company. In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Corporate governance statement The company voluntarily prepares a corporate governance statement that includes the information with respect to internal control and risk management systems and about share capital structures required by the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority. The directors have requested that we report on the consistency of that information with the financial statements. In our opinion the information given in the Corporate Governance Statement set out pages 37 and 38 with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements. Matter on which we have agreed to report by exception Corporate governance statement The company’s voluntary Corporate Governance Statement includes details of the company’s compliance with the UK Corporate Governance Code. The directors have requested that we review the parts of the Corporate Governance Statement relating to the company’s compliance with relevant provisions of the UK Corporate Governance Code specified for auditor review by the Listing Rules of the Financial Conduct Authority as if the company were a UK Registered premium listed company. We have nothing to report having performed our review. Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Statement of Directors’ Responsibilities set out on page 69, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. GENEL ENERGYFINANCIAL STATEMENTS 75 Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Article 11A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. OTHER REQUIRED REPORTING Companies (Jersey) Law 1991 exception reporting Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility. Michael Timar for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Recognised Auditors London 19 March 2019 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION76 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 Revenue Production costs Depreciation and amortisation of oil assets Gross profit Exploration credit / (expense) Impairment of property, plant and equipment Impairment of intangible assets General and administrative costs Net gain arising from the RSA Operating (loss) / profit Operating (loss) / profit is comprised of: EBITDAX Depreciation and amortisation Exploration credit / (expense) Impairment of property, plant and equipment Impairment of intangible assets Gain arising from bond buyback Finance income Bond interest expense Other finance expense (Loss) / Profit before income tax Income tax expense (Loss) / Profit and total comprehensive (expense) / income Attributable to: Shareholders’ equity (Loss) / Profit per ordinary share Basic Diluted Note 2 3 3 3 3 3 3 10 3 3 3 3 15 5 5 5 6 7 7 2018 $m 355.1 (28.7) (134.5) 191.9 1.5 – (424.0) (24.0) – 2017 $m 228.9 (27.5) (116.1) 85.3 (1.9) (58.2) – (21.0) 293.8 (254.6) 298.0 304.1 (136.2) 1.5 – (424.0) – 4.4 (30.0) (3.2) (283.4) (0.2) (283.6) (283.6) (283.6) ¢ (101.6) (101.6) 475.5 (117.4) (1.9) (58.2) – 32.6 4.9 (35.5) (28.0) 272.0 (1.0) 271.0 271.0 271.0 ¢ 97.1 96.7 GENEL ENERGYFINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2018 77 Assets Non-current assets Intangible assets Property, plant and equipment Current assets Trade and other receivables Restricted cash Cash and cash equivalents Total assets Liabilities Non-current liabilities Trade and other payables Deferred income Provisions Borrowings Current liabilities Trade and other payables Deferred income Total liabilities Net assets Owners of the parent Share capital Share premium account Accumulated losses Total equity Note 2018 $m 2017 $m 8 9 10 11 11 12 13 14 15 12 13 818.4 565.8 1,384.2 99.4 10.0 334.3 443.7 1,282.9 565.0 1,847.9 78.5 18.5 162.0 259.0 1,827.9 2,106.9 (76.8) (31.9) (32.9) (297.3) (438.9) (52.6) (5.0) (57.6) (70.7) (36.1) (29.3) (296.8) (432.9) (59.4) (4.8) (64.2) (496.5) (497.1) 1,331.4 1,609.8 17 43.8 4,074.2 (2,786.6) 43.8 4,074.2 (2,508.2) 1,331.4 1,609.8 These consolidated financial statements on pages 76 to 100 were authorised for issue by the Board of Directors on 19 March 2019 and were signed on its behalf by: Murat Özgül Chief Executive Officer Esa Ikaheimonen Chief Financial Officer ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 78 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 At 1 January 2017 Profit and total comprehensive income Share-based payments Share capital $m Share premium $m Accumulated losses $m Total equity $m 43.8 4,074.2 (2,784.6) 1,333.4 – – – – 271.0 5.4 271.0 5.4 At 31 December 2017 and 1 January 2018 43.8 4,074.2 (2,508.2) 1,609.8 (Loss) and total comprehensive (expense) Share-based payments – – – – (283.6) 5.2 (283.6) 5.2 At 31 December 2018 43.8 4,074.2 (2,786.6) 1,331.4 GENEL ENERGYFINANCIAL STATEMENTSCONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 Cash flows from operating activities (Loss) / Profit and total comprehensive (expense) / income Adjustments for: Gain on bond buyback Finance income Bond interest expense Other finance expense Taxation Depreciation and amortisation Exploration (credit) / expense Impairment of property, plant and equipment Impairment of intangible assets Net gain arising from the RSA Other non-cash items Changes in working capital: (Increase) / decrease in trade receivables (Increase) in other receivables Increase in trade and other payables Cash generated from operations Interest received Taxation paid Net cash generated from operating activities Cash flows from investing activities Purchase of intangible assets Purchase of property, plant and equipment Restricted cash Net cash used in investing activities Cash flows from financing activities Repurchase of Company bonds Bond refinancing Interest paid Net cash used in financing activities Net increase / (decrease) in cash and cash equivalents Foreign exchange (loss) / income on cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December 79 Note 2018 $m 2017 $m (283.6) 271.0 15 5 5 5 6 3 3 3 3 10 3 5 11 15 15 11 11 – (4.4) 30.0 3.2 0.2 136.2 (1.5) – 424.0 – 4.9 (21.5) (1.1) 9.2 295.6 4.4 (0.8) 299.2 (39.7) (65.3) 8.5 (96.5) – – (30.0) (30.0) 172.7 (0.4) 162.0 334.3 (32.6) (4.9) 35.5 28.0 1.0 117.4 1.9 58.2 – (293.8) 2.8 38.3 (4.3) 0.6 219.1 2.2 (0.3) 221.0 (26.8) (52.4) 1.0 (78.2) (216.7) (128.5) (42.7) (387.9) (245.1) 0.1 407.0 162.0 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of significant accounting policies 1.1 Basis of preparation The consolidated financial statements of Genel Energy plc – registration number: 107897 (the ‘Company’) have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and interpretations issued by the IFRS Interpretations Committee (together ’IFRS’); are prepared under the historical cost convention except as where stated; and comply with Company (Jersey) Law 1991. The significant accounting policies are set out below and have been applied consistently throughout the period. The Company prepares its financial statements on a historical cost basis, unless accounting standards require an alternate measurement basis. Where there are assets and liabilities calculated on a different basis, this fact is disclosed either in the relevant accounting policy or in the notes to the financial statements. Items included in the financial information of each of the Company‘s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars to the nearest million ($m) rounded to one decimal place, except where otherwise indicated. For explanation of the key judgements and estimates made by the Company in applying the Company’s accounting policies, refer to significant accounting judgements and estimates on pages 81 to 83. The Company provides non-Gaap measures to provide greater understanding of its financial performance and financial position. EBITDAX is presented in order for the users of the financial statements to understand the cash profitability of the Company, which excludes the impact of costs attributable to exploration activity, which tend to be one-off in nature, and the non-cash costs relating to depreciation, amortisation and impairments. EBITDAX is used as the basis for underlying earnings per share, for the reasons provided above. Free cash flow is presented in order to show the free cash flow generated that is available for the Board to invest in the business. Net debt is reported in order for users of the financial statements to understand how much debt remains unpaid if the Company paid its debt obligations from its available cash. There have been no changes in related parties since last year. Going concern The Company regularly evaluates its financial position, cash flow forecasts and its covenants by sensitizing with a range of scenarios which incorporates change in oil prices, discount rates, production volumes as well as capital and operational spend. As a result, the Directors have assessed that the Company’s forecast liquidity provides adequate headroom over its forecast expenditure for the 12 months following the signing of the annual report for the period ended 31 December 2018 and consequently that the Company is considered a going concern. Foreign currency Foreign currency transactions are translated into the functional currency of the relevant entity using the exchange rates prevailing at the dates of the transactions or at the balance sheet date where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income within finance income or finance costs. Consolidation The consolidated financial statements consolidate the Company and its subsidiaries. These accounting policies have been adopted by all companies. Subsidiaries Subsidiaries are all entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Transactions, balances and unrealised gains on transactions between companies are eliminated. Joint arrangements Arrangements under which the Company has contractually agreed to share control with another party, or parties, are joint ventures where the parties have rights to the net assets of the arrangement, or joint operations where the parties have rights to the assets and obligations for the liabilities relating to the arrangement. Investments in entities over which the Company has the right to exercise significant influence but has neither control nor joint control are classified as associates and accounted for under the equity method. The Company recognises its assets and liabilities relating to its interests in joint operations, including its share of assets held jointly and liabilities incurred jointly with other partners. Acquisitions The Company uses the acquisition method of accounting to account for business combinations. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date. The Company recognises any non-controlling interest in the acquiree at fair value at time of recognition or at the non-controlling interest‘s proportionate share of net assets. Acquisition related costs are expensed as incurred. GENEL ENERGYFINANCIAL STATEMENTS81 Farm–in/farm–out Farm-out transactions relate to the relinquishment of an interest in oil and gas assets in return for services rendered by a third party or where a third party agrees to pay a portion of the Company’s share of the development costs (cost carry). Farm-in transactions relate to the acquisition by the Company of an interest in oil and gas assets in return for services rendered or cost-carry provided by the Company. Farm-in/farm-out transactions undertaken in the development or production phase of an oil and gas asset are accounted for as an acquisition or disposal of oil and gas assets. The consideration given is measured as the fair value of the services rendered or cost-carry provided and any gain or loss arising on the farm-in/farm-out is recognised in the statement of comprehensive income. A profit is recognised for any consideration received in the form of cash to the extent that the cash receipt exceeds the carrying value of the associated asset. Farm-in/farm-out transactions undertaken in the exploration phase of an oil and gas asset are accounted for on a no gain/no loss basis due to inherent uncertainties in the exploration phase and associated difficulties in determining fair values reliably prior to the determination of commercially recoverable proved reserves. The resulting exploration and evaluation asset is then assessed for impairment indicators under IFRS 6. 1.2 Significant accounting judgements and estimates The preparation of the financial statements in accordance with IFRS requires the Company to make judgements and estimates that affect the reported results, assets and liabilities. Where judgements and estimates are made, there is a risk that the actual outcome could differ from the judgement or estimate made. The Company has assessed the following as being areas where changes in judgements or estimates could have a significant impact on the financial statements. Significant judgements The following is the critical judgement, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Company’s accounting policies and that has the most significant effect on the amounts recognised in the financial statements. Tawke CGU Tawke RSA intangible asset (which is explained below) cash flows had the same risk profile as revenue generated from the Tawke PSC; oil price, production profile, reserves and discount rate were estimated using the same methodology as used for the impairment testing of the Tawke PSC property, plant and equipment, as a result, both assets are combined as a single cash generating unit for impairment testing. Significant estimates Estimation of hydrocarbon reserves and resources and associated production profiles and costs Estimates of hydrocarbon reserves and resources are inherently imprecise and are subject to future revision. The Company’s estimation of the quantum of oil and gas reserves and resources and the timing of its production, cost and monetisation impact the Company’s financial statements in a number of ways, including: testing recoverable values for impairment; the calculation of depreciation and amortisation and assessing the cost and likely timing of decommissioning activity and associated costs. This estimation also impacts the assessment of going concern and the viability statement. Proven and probable reserves are estimates of the amount of hydrocarbons that can be economically extracted from the Company’s assets. The Company estimates its reserves using standard recognised evaluation techniques. Assets assessed as proven and probable reserves are generally classified as property, plant and equipment as development or producing assets and depreciated using the units of production methodology. The Company considers its best estimate for future production and quantity of oil within an asset based on a combination of internal and external evaluations and uses this as the basis of calculating depreciation, amortisation of oil and gas assets and testing for impairment. Hydrocarbons that are not assessed as 2P are considered to be resources and are classified as exploration and evaluation assets. These assets are expenditures incurred before technical feasibility and commercial viability are demonstrable. Estimates of resources for undeveloped or partially developed fields are subject to greater uncertainty over their future life than estimates of reserves for fields that are substantially developed and being depleted and are likely to contain estimates and judgements with a wide range of possibilities. These assets are considered for impairment under IFRS 6. Once a field commences production, the amount of proved reserves will be subject to future revision once additional information becomes available through, for example, the drilling of additional wells or the observation of long-term reservoir performance under producing conditions. As those fields are further developed, new information may lead to revisions. Assessment of reserves and resources are determined using estimates of oil and gas in place, recovery factors and future commodity prices, the latter having an impact on the total amount of recoverable reserves. Change in accounting estimate The Company has updated its estimated reserves and resources with the accounting impact summarised below under Estimation of oil and gas asset values. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION82 1.2 Significant accounting judgements and estimates continued Estimation of oil and gas asset values Estimation of the asset value of oil and gas assets is calculated from a number of inputs that require varying degrees of estimation. Principally oil and gas assets are valued by estimating the future cash flows based on a combination of reserves and resources, costs of appraisal, development and production, production profile and future sales price and discounting those cash flows at an appropriate discount rate. Future costs of appraisal, development and production are estimated taking into account the level of development required to produce those reserves and are based on past costs, experience and data from similar assets in the region, future petroleum prices and the planned development of the asset. However, actual costs may be different from those estimated. Discount rate is assessed by the Company using various inputs from market data, external advisers and internal calculations. A discount rate of 12.5% was used for impairment testing of the oil assets of the Company. In addition, the estimation of the recoverable amount of the both the Miran and Bina Bawi CGUs, which are classified under IFRS as an exploration and evaluation intangible asset and consequently carries the inherent uncertainty explained above, include the key assessment that the projects will progress, which is outside of the control of management and is dependent on the progress of government to government discussions regarding supply of gas and sanctioning of development of both of the midstream for gas and the upstream for oil. Lack of progress could result in significant delays in value realisation and consequently a lower asset value. Change in accounting estimate – Discount rate for assessing recoverable amount of producing assets Following the significant change in the macro geo-political, economic and industry environment, the Company has updated the discount rate used for assessing the recoverable amount of its producing assets from 15% to 12.5%. This has had no impact on the financial statements, although it has a positive impact on the recoverable amount of both the Tawke CGU and the Taq Taq CGU. At the end of last year, the Company disclosed that a 2.5% change in discount rate would have a $70 million impact on the recoverable amount of the Tawke CGU and a $5 million impact on the Taq Taq CGU. The disclosures for the year-end are provided in note 9. Change in accounting estimate and judgement – Miran PSC (intangible assets) As a result of the development of negotiations through 2018, management assess the Bina Bawi and Miran PSCs as separate cash generating units, whereas last year they were assessed as one cash generating unit. Whereas previously a large scale combined processing facility serving both assets was considered, with delivery of required gas volumes contributed from either licence, discussions are now focused on commencing with a smaller scale development of the Bina Bawi asset that would then be scaled up in phases, with development of the Miran PSC deprioritised. Management assesses the deprioritisation of the Miran PSC, with discussions on Bina Bawi active and detailed, as an impairment indicator and consequently have tested its carrying value for impairment. Principal changes to past estimates relating to the fair value less costs of disposal valuation of Miran relate to timing, cost estimates and risking. Because of the uncertainties existing around these items, as well as approach and commercial terms for the development of the asset, the assessment of valuation carries inherent uncertainty and for this reason, in addition to the estimates made, the Board has included contingencies for costs and timing and additionally an overall reduction in valuation to reflect risking of the project. The risking has been applied at 50% of the calculated value, which was assessed using a discount rate of 15%. This has resulted in an estimate of the recoverable value of Miran as $113 million, which results in an impairment charge of $424 million. Tawke RSA intangible asset On 23 August 2017 the Company signed documentation confirming an agreement had been reached with the KRG to put in place a definitive mechanisms for the payment to the Company of trade receivables built up from overdue amounts with nominal value of $469 million owed for sales since mid-2014 (‘overdue KRG receivable’) together with nominal value of circa $300 million amounts owed for export sales marketed by SOMO made before 2014 for which the Company has never recognised revenue (‘overdue pre-2014 receivable’). Until the RSA, the Company reported the overdue KRG receivable in the balance sheet at its amortised cost. Key inputs to the assessment of amortised cost were: oil price, production forecast and mechanism for payment. Estimates of oil price and production forecast were based on the inputs used for testing of property, plant and equipment for impairment. When estimating the payment mechanism, although the Company expected either an increase in payments, or an alternative structure to be agreed to accelerate payments, it was assessed that there was not sufficient evidence to support the use of anything other than the existing payment mechanism, which was 5% of the asset level revenue for the Tawke and Taq Taq licences. At the year-ended 31 December 2016, this resulted in the amortised cost being lower than carrying value and consequently the overdue KRG receivable was impaired to its reported book value of $207 million compared to its nominal value of $469 million. In 2017, the RSA resulted in the overdue KRG receivable balance being waived and in return the Company received: (1) a 4.5% royalty interest on gross Tawke PSC revenue lasting for 5 years (“the ORRI); (2) the waiver of capacity building payments due on all profit oil received under the Tawke PSC; and (3) the waiver of $4.6 million of amounts due to the KRG. As the RSA occurred at arm’s length, the fair value of the consideration received from the KRG described above, which was recognised as an intangible asset ‘Tawke RSA’, was considered to be equal to the fair value of the receivables. The Tawke RSA exceeded the carrying amount of receivables at the time of settlement resulting in a gain of $293.8 million being recognised in the profit or loss. Assessing the fair value of both items required the estimation of future oil price, production profile and reserves and the appropriate discount rate. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 83 Estimation of future oil price and netback price The estimation of future oil price has a significant impact throughout the financial statements, primarily in relation to the estimation of the recoverable value of property, plant and equipment, intangible assets and net gain arising from the RSA for the year ended 31 December 2017. It is also relevant to the assessment of going concern and the viability statement. The Company’s forecast of average Brent oil price for future years is based on a range of publicly available market estimates and is summarised in the table below, with the 2023 price then inflated at 2% per annum. $/bbl Forecast Prior year forecast 2019 65 63 2020 66 66 2021 68 72 2022 71 74 2023 72 n/a Netback price is used to value the Company’s revenue, trade receivables and its forecast cash flows used for impairment testing and viability. It is the aggregation of realised price less transportation and handling costs. The Company does not have direct visibility on the components of the netback price realised for its oil because sales are managed by the KRG, but invoices are currently raised for payments on account using a netback price agreed with the KRG. The trade receivable is recognised when the control of oil is transferred to the customer at the metering point, as this is the time the consideration becomes unconditional. The trade receivable reflects the Company’s entitlement based on the netback price and oil transferred. Change in accounting estimate – Netback price The Company has increased the estimated netback price adjustment by $1/bbl using the methodology agreed with the KRG for raising invoices for all sales of oil, effective from 1 August 2017. Netback adjustments to Brent are now estimated as a $13/bbl discount for the Tawke PSC (2017: $12/bbl) and a $6/bbl discount for the Taq Taq PSC (2017: $5/bbl). This has resulted in a decrease of $3.6 million to H1 2018 revenue, of which $2.2 million relates to 2017. At the end of last year, the Company disclosed that a $5/bbl change in long-term Brent would impact the Tawke CGU by $23 million and the Taq Taq CGU by $2 million, so a $1/bbl change in netback adjustment has an impact of around $5 million in total across the two CGUs. The netback adjustment price agreed with the KRG may change in the future. A $1/bbl difference in netback price would impact current year revenue by circa $5 million and trade receivables by circa $1 million with disclosures on the sensitivities of the recoverable amount of producing assets provided in note 9. 1.3 Accounting policies The accounting policies adopted in preparation of these financial statements are consistent with those used in preparation of the annual financial statements for the year ended 31 December 2017, adjusted for transitional requirements where necessary, further explained under the revenue and changes in accounting policies headings. Revenue Revenue for oil sales is recognised when the control of the product is deemed to have passed to the customer, in exchange for the consideration amount determined by the terms of the contract. For exports the control passes to the customer when the oil enters the export pipe; for domestic sales this is when oil is collected by truck by the customer. Revenue is oil sales. Revenue is earned based on the entitlement mechanism under the terms of the relevant PSC; ORRI, which is earned on 4.5% of gross field revenue from the Tawke licence until July 2022; and royalty income. Entitlement has two components: cost oil, which is the mechanism by which the Company recovers its costs incurred on an asset; and profit oil, which is the mechanism through which profits are shared between the Company, its partners and the KRG. The Company pays capacity building payments on profit oil from Taq Taq licence, which becomes due for payment once the Company has received the relevant proceeds. Profit oil revenue is always reported net of any capacity building payments that will become due. Capacity building payments due on Tawke profit oil receipts were waived from August 2017 onwards as part of the RSA. ORRI is calculated as 4.5% of Tawke PSC field revenue. Royalty income was received in advance and is recognised in line with production. The Company’s oil sales are made to the KRG which is the counterparty of the PSCs and are valued at a netback price, which is calculated from the estimated realised sales price for each barrel of oil sold, less selling, transportation and handling costs and estimates to cover additional costs. A netback adjustment is used to estimate the price per barrel that is used in the calculation of entitlement and is explained further in significant accounting judgements and estimates. The payment terms for the Company’s sales are typically due within 30 days but under the normal operating cycle, payments are received on 75 days average. The Company does not expect to have any contracts where the period between the transfer of oil to the customer and the payment exceeds one year. Therefore, the transaction price is not adjusted for the time value of money. The Company is not able to measure the tax that has been paid on its behalf and consequently revenue is not reported gross of income tax paid. The Company adopted IFRS 15 Revenue from Contracts with Customers for the year commencing 1 January 2018. IFRS 15 addresses the way that revenue derived from contracts with customers is recognised in the financial statements and replaces IAS 18 Revenue. The transition from IAS 18 to IFRS 15 does not have an impact on revenue recognised in the financial statements. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION84 1.3 Accounting policies continued For the year ended 31 December 2018, in accordance with IFRS 15, the Company has identified its contracts with its single customer (the KRG) as each oil sale contract (PSC) for each field licence. The Company’s single performance obligation within these contracts is the delivery of oil and the transaction price within these contracts is dated Brent adjusted for the netback amount. The performance obligation is satisfied and the Company recognises revenue when control of the oil is transferred to the customer at the metering point. For the prior year ended 31 December 2017, under IAS 18, the Company also recognised revenue when the oil was transferred to the customer at the metering point as this was when the significant risks and rewards of ownership were deemed to have passed to the customer, it could be measured reliably and it was assessed as probable that economic benefit would flow to the Company. Therefore, there has been no significant change in the Company’s revenue recognition on transition to the new standard IFRS 15. In applying IFRS 15 as set out above, there are no significant judgements made in determining the timing of the satisfaction of the performance obligation, the transaction price or the amounts allocated to performance obligations. The Company has adopted IFRS 15 using the modified retrospective approach, under this approach the prior year’s financial statements are not restated and the impact of adoption is recognised in the opening reserves at 1 January 2018. As the impact of adoption on the Company is not material, no adjustment has been recognised in opening reserves. Intangible assets Exploration and evaluation assets Oil and gas assets classified as exploration and evaluation assets are explained under Oil and Gas assets below. Tawke RSA Intangible assets include the Receivable Settlement Agreement (‘RSA’) effective from 1 August 2017, which was entered into in exchange for trade receivables due from KRG for Taq Taq and Tawke past sales. The RSA was recognised at cost and is amortised on a units of production basis in line with the economic lives of the rights acquired, as further explained in note 8. Other intangible assets Other intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and less accumulated impairment losses. Amortisation is expensed on a straight-line basis over the estimated useful lives of the assets of between three and five years from the date that they are available for use. Property, plant and equipment Development assets Oil and gas assets classified as development assets are explained under Oil and gas assets below. Other property, plant and equipment Other property, plant and equipment are principally the Company’s leasehold improvements and other assets and are carried at cost, less any accumulated depreciation and accumulated impairment losses. Costs include purchase price and construction cost. Depreciation of these assets is expensed on a straight-line basis over their estimated useful lives of between 3 and 5 years from the date they are available for use. Oil and gas assets Costs incurred prior to obtaining legal rights to explore are expensed to the statement of comprehensive income. Exploration, appraisal and development expenditure is accounted for under the successful efforts method. Under the successful efforts method only costs that relate directly to the discovery and development of specific oil and gas reserves are capitalised as exploration and evaluation assets within intangible assets so long as the activity is assessed to be de-risking the asset and the Company expects continued activity on the asset into the foreseeable future. Costs of activity that do not identify oil and gas reserves are expensed. All licence acquisition costs, geological and geophysical costs and other direct costs of exploration, evaluation and development are capitalised as intangible assets or property, plant and equipment according to their nature. Intangible assets comprise costs relating to the exploration and evaluation of properties which the Directors consider to be unevaluated until assessed as being 2P reserves and commercially viable. Once assessed as being 2P reserves they are tested for impairment and transferred to property, plant and equipment as development assets. Where properties are appraised to have no commercial value, the associated costs are expensed as an impairment loss in the period in which the determination is made. Development expenditure is accounted for in accordance with IAS 16 – Property, plant and equipment. Assets are depreciated once they are available for use and are depleted on a field-by-field basis using the unit of production method. The sum of carrying value and the estimated future development costs are divided by total forecast 2P production to provide a $/barrel unit depreciation cost. Changes to depreciation rates as a result of changes in reserve quantities and estimates of future development expenditure are reflected prospectively. The estimated useful lives of property, plant and equipment and their residual values are reviewed on an annual basis and changes in useful lives are accounted for prospectively. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income for the relevant period. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED85 Where exploration licences are relinquished or exited for no consideration or costs incurred are neither de-risking nor adding value to the asset, the associated costs are expensed to the income statement. Impairment testing of oil and gas assets is considered in the context of each CGU. A CGU is generally a licence, with the discounted value of the future cash flows of the CGU compared to the book value of the relevant assets and liabilities. As an example, the Tawke CGU is comprised of the Tawke RSA intangible asset, property, plant and equipment (relating to both the Tawke field and the Peshkabir field) and the associated decommissioning provision. Subsequent costs The cost of replacing part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The net book value of the replaced part is expensed. The costs of the day-to-day servicing and maintenance of property, plant and equipment are recognised in the statement of comprehensive income. Business combinations The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Company makes judgements and estimates in relation to the fair value allocation of the purchase price. The fair value exercise is performed at the date of acquisition. Owing to the nature of fair value assessments in the oil and gas industry, the purchase price allocation exercise and acquisition date fair value determinations require subjective judgements based on a wide range of complex variables at a point in time. The Company uses all available information to make the fair value determinations. In determining fair value for acquisitions, the Company utilises valuation methodologies including discounted cash flow analysis. The assumptions made in performing these valuations include assumptions as to discount rates, foreign exchange rates, commodity prices, the timing of development, capital costs, and future operating costs. Any significant change in key assumptions may cause the acquisition accounting to be revised. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are expensed to the statement of comprehensive income on a straight-line basis over the period of the lease. Financial assets and liabilities The Company adopted IFRS 9 Financial Instruments, for the year commencing 1 January 2018. IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement. The transition from IAS 39 to IFRS 9 does not have a significant impact on the financial statements and no adjustment has been recognised in the opening reserves at 1 January 2018. Changes in the Company’s accounting policies resulting from the adoption of IFRS 9 are set out under the subheadings below. Classification The Company assesses the classification of its financial assets on initial recognition at amortised cost, fair value through other comprehensive income or fair value through profit and loss. The Company assesses the classification of its financial liabilities on initial recognition at either fair value through profit and loss or amortised cost. Recognition and measurement Regular purchases and sales of financial assets are recognised at fair value on the trade-date – the date on which the Company commits to purchase or sell the asset. Trade and other receivables, trade and other payables, borrowings and deferred contingent consideration are subsequently carried at amortised cost using the effective interest method. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION86 1.3 Accounting policies continued The impact of adoption of IFRS 9 on financial instrument classification and measurement is shown in the table below. Financial instrument category Note Cash and cash equivalents Restricted cash Trade and other receivables Trade and other payables Borrowings Deferred contingent consideration 11 11 10 12 15 12 Classification under IAS 39 Loans and receivables Loans and receivables Loans and receivables Other financial liabilities Other financial liabilities Other financial liabilities Measurement under IAS 39 Classification and measurement under IFRS9 2018 $m Amortised cost Amortised cost 334.3 2017 $m 162.0 Amortised cost Amortised cost 10.0 18.5 Amortised cost Amortised cost 97.0 76.8 Amortised cost Amortised cost (60.9) (69.7) Amortised cost Amortised cost (297.3) (296.8) Amortised cost Amortised cost (68.5) (60.4) Trade and other receivables Trade receivables are amounts due from crude oil sales, sales of gas or services performed in the ordinary course of business. If payment is expected within one year or less, trade receivables are classified as current assets otherwise they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The Company’s assessment of impairment model based on expected credit loss is explained below. Cash and cash equivalents In the consolidated balance sheet and consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held on call with banks, other short-term highly liquid investments and includes the Company’s share of cash held in joint operations. Interest–bearing borrowings Borrowings are recognised initially at fair value, net of any discount in issuance and transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are presented as long or short-term based on the maturity of the respective borrowings in accordance with the loan or other agreement. Borrowings with maturities of less than twelve months are classified as short-term. Amounts are classified as long-term where maturity is greater than twelve months. Where no objective evidence of maturity exists, related amounts are classified as short-term. Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation. Provisions are measured at the Company’s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. The unwinding of any discount is recognised as finance costs in the statement of comprehensive income. Decommissioning Provision is made for the cost of decommissioning assets at the time when the obligation to decommission arises. Such provision represents the estimated discounted liability for costs which are expected to be incurred in removing production facilities and site restoration at the end of the producing life of each field. A corresponding cost is capitalised to property, plant and equipment and subsequently depreciated as part of the capital costs of the production facilities. Any change in the present value of the estimated expenditure attributable to changes in the estimates of the cash flow or the current estimate of the discount rate used are reflected as an adjustment to the provision. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED87 Impairment Oil and gas assets The carrying amounts of the Company’s oil and gas assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. For value in use, the estimated future cash flows arising from the Company’s future plans for the asset are discounted to their present value using a nominal post tax discount rate that reflects market assessments of the time value of money and the risks specific to the asset. For fair value less costs of disposal, an estimation is made of the fair value of consideration that would be received to sell an asset less associated selling costs (which are assumed to be immaterial). Assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGU). The estimated recoverable amount is then compared to the carrying value of the asset. Where the estimated recoverable amount is materially lower than the carrying value of the asset an impairment loss is recognised. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Property, plant and equipment and intangible assets Impairment testing of oil and gas assets is explained above. When impairment indicators exist for other non-financial assets, impairment testing is performed based on the higher of value in use and fair value less costs of disposal. The Company assets’ recoverable amount is determined by fair value less costs of disposal. Financial assets IFRS 9 introduces a forward-looking impairment model based on expected credit losses (‘ECLs’) of financial assets. The standard requires the Company to book an allowance for ECLs for its financial assets. The Company has assessed the impact of the new requirement on its trade receivables as at 31 December 2018, which are expected to be collected in 2019 under the normal operating cycle. For the contracts under IFRS 15 with no significant financing component, allowance is provided for lifetime ECLs of the financial asset. The model calculates net present value of outstanding receivables discounted by the discount rate, for a range of possible scenarios including short and mid-term delays and no payment with a probability assigned to each, and determines the ECL as the weighted average of these scenarios. The Company uses both past track record of receivables, information available until the reporting date and future expected performance. The result of the Company’s assessment is that the effect of the ECL on the financial statements is not determined to be material and no amount is recorded in the accounts. For the year ended 31 December 2017, no bad debt provision was recorded against trade receivables and therefore the changes from the incurred credit loss model under IAS 39 to the expected credit loss model under IFRS 9 has no significant impact to the Company’s financial statements. A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimate of future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. All impairment losses are recognised as an expense in the statement of comprehensive income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Share capital Ordinary shares are classified as equity. Employee benefits Short–term benefits Short-term employee benefit obligations are expensed to the statement of comprehensive income as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Share–based payments The Company operates a number of equity-settled, share-based compensation plans. The economic cost of awarding shares and share options to employees is recognised as an expense in the statement of comprehensive income equivalent to the fair value of the benefit awarded. The fair value is determined by reference to option pricing models, principally Monte Carlo and adjusted Black-Scholes models. The charge is recognised in the statement of comprehensive income over the vesting period of the award. At each balance sheet date, the Company revises its estimate of the number of options that are expected to become exercisable. Any revision to the original estimates is reflected in the statement of comprehensive income with a corresponding adjustment to equity immediately to the extent it relates to past service and the remainder over the rest of the vesting period. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION88 1.3 Accounting policies continued Finance income and finance costs Finance income comprises interest income on cash invested, foreign currency gains and the unwind of discount on any assets held at amortised cost. Interest income is recognised as it accrues, using the effective interest method. Finance expense comprises interest expense on borrowings, foreign currency losses and discount unwind on any liabilities held at amortised cost. Borrowing costs directly attributable to the acquisition of a qualifying asset as part of the cost of that asset are capitalised over the respective assets. Taxation Under the terms of KRI PSC’s, corporate income tax due is paid on behalf of the Company by the KRG from the KRG’s own share of revenues, resulting in no corporate income tax payment required or expected to be made by the Company. It is not known at what rate tax is paid, but it is estimated that the current tax rate would be between 15% and 40. If this was known it would result in a gross up of revenue with a corresponding debit entry to taxation expense with no net impact on the income statement or on cash. In addition, it would be necessary to assess whether any deferred tax asset or liability was required to be recognised. Current tax expense is incurred on the profits of the Turkish and UK services companies. Segmental reporting IFRS 8 requires the Company to disclose information about its business segments and the geographic areas in which it operates. It requires identification of business segments on the basis of internal reports that are regularly reviewed by the CEO, the chief operating decision maker, in order to allocate resources to the segment and assess its performance. Related parties Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the party in making financial or operational decisions. Parties are also related if they are subject to common control. Transactions between related parties are transfers of resources, services or obligations, regardless of whether a price is charged and are disclosed separately within the notes to the consolidated financial information. New standards The new accounting standards and amendments to existing standards have been adopted by the Company effective 1 January 2018: IFRS 15 – Revenue from Contracts with Customers, IFRS 9 – Financial Instruments, Amendments to IFRS 2, Amendments to IAS 40 and IFRIC 22 Foreign Currency Transactions and Advance Consideration. The adoption of IFRS 15 and IFRS 9 are further explained under the changes in accounting policies heading. Amendments to IFRS 2, Amendments to IAS 40 and IFRIC 22 Foreign Currency Transactions and Advance Consideration have no impact to the financial statements as at 31 December 2018. IFRS 16 – Leases, which becomes effective by 1 January 2019, requires the lessee to recognise the right to use the asset and the liability, depreciate the associated asset, re-measure and reduce the liability through lease payments; unless the underlying leased asset is of low value and/or short term in nature. The Company is not considering early application of the Standard. The Company’s leases are mostly low value or short term in nature. Had the Company early adopted the standard, it is estimated that the assets and liabilities would increase by $2m and income statement would be debited net by $0.1m as at 31 December 2018. The following new accounting standards, amendments to existing standards and interpretations have been issued and endorsed by the EU but are not yet effective: Amendments to IFRS 9 Financial Instruments (effective 1 January 2019), Amendments to IAS 28 – Investments in Associates and Joint Ventures (effective 1 January 2019) and IFRIC 23 – Uncertainty over Income Tax Treatments (effective 1 January 2019). None of these standards have been early adopted. The following new accounting standards, amendments to existing standards and interpretations have been issued but are not yet effective and have not yet been endorsed by the EU: Annual Improvements to IFRS Standards 2015–2017 (effective 1 January 2019), Amendments to IAS 19 – Plan Amendment, Curtailment or Settlement (effective 1 January 2019)and Amendment to IFRS 3 Business Combinations (effective 1 January 2020). None of these standards have been early adopted. Changes in accounting policies Revenue recognition under IFRS 15 – Revenue from Contracts with Customers – requires a 5 step approach which is defined as the identification of the contract with the customer, performance obligations, transaction price, allocation of price into performance obligations and revenue recognition when the conditions are met. The Company’s performance obligation in its contract with the single customer is the delivery of crude oil at a netback adjustment to dated Brent and the control is transferred to the buyer at the metering point when the revenue is recognised. Transition to IFRS 15 resulted in no adjustment to the measurement of the Company’s previous year revenue in its financial statements. Transition to IFRS 9 – Financial Instruments – introduced two significant changes that may have effect on the Company financial statements which are derecognition of financial liabilities and the change from incurred credit loss model to the expected credit loss model for financial assets. The Company’s accounting treatment of the bond buyback for the year ended 31 December 2017 was in line with the requirements of IFRS 9 hence no transitional adjustments were made. In applying IFRS 9 on trade receivables as set out above, the expected credit loss under the new standard is not determined to be material. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 89 2. SEGMENTAL INFORMATION The Company has three reportable business segments: Oil, Miran/Bina Bawi (‘MBB’) and Exploration (‘Expl.’). Capital allocation decisions for the oil segment are considered in the context of the cash flows expected from the production and sale of crude oil. The Oil segment is comprised of the producing fields on the Tawke PSC and the Taq Taq PSC, which are located in the KRI and make sales predominantly to the KRG. The Miran/ Bina Bawi segment is comprised of the oil and gas upstream and midstream activity on the Miran PSC and the Bina Bawi PSC, which are both in the KRI – this was previously labelled as the ‘Gas’ segment. The Exploration segment is comprised of exploration activity, principally located in Somaliland and Morocco. ‘Other’ includes corporate assets, liabilities and costs, elimination of intercompany receivables and intercompany payables, which are non-segment items. For the period ended 31 December 2018 Revenue from contracts with customers Revenue from other sources Cost of sales Gross profit Exploration (expense) / credit Impairment of intangible assets General and administrative costs Operating profit / (loss) Operating profit / (loss) is comprised of EBITDAX Depreciation and amortisation Exploration (expense) / credit Impairment of intangible assets Finance income Bond interest expense Other finance expense Profit / (Loss) before income tax Capital expenditure Total assets Total liabilities MBB $m Expl. $m Other $m Oil $m 350.3 4.8 (163.2) 191.9 – – – – – – – (0.4) (424.0) – 191.9 (424.4) 326.4 (134.5) – – – – (0.4) (424.0) – – (1.7) – – (0.2) Total $m 350.3 4.8 (163.2) 191.9 1.5 – – – – – – (24.0) (424.0) (24.0) (24.0) (254.6) (22.3) (1.7) – – 4.4 (30.0) (1.3) 304.1 (136.2) 1.5 (424.0) 4.4 (30.0) (3.2) – – – – 1.9 – – 1.9 – – 1.9 – – – – 190.2 (424.6) 1.9 (50.9) (283.4) 70.4 1,015.4 (89.1) 12.0 457.7 (84.4) 13.1 35.5 (16.1) – 319.3 (306.9) 95.5 1,827.9 (496.5) Revenue from contracts with customers includes $105.4 million (2017: $33.9 million) arising from the ORRI. The ORRI will expire at the end of July 2022 and is explained further under significant accounting judgements and estimates under the Tawke RSA intangible asset. Total assets and liabilities in the other segment are predominantly cash and debt balances. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION90 2. SEGMENTAL INFORMATION continued For the period ended 31 December 2017 Revenue from contracts with customers Revenue from other sources Cost of sales Gross profit Exploration (expense) / credit Impairment of property, plant and equipment Net gain arising from the RSA General and administrative costs Operating profit / (loss) Operating profit / (loss) is comprised of EBITDAX Depreciation and amortisation Exploration (expense) / credit Impairment of property, plant and equipment Gain arising from bond buyback Finance income Bond interest expense Other finance expense Profit / (Loss) before income tax Capital expenditure Total assets Total liabilities Oil $m 224.4 4.5 (143.6) 85.3 – (58.2) 293.8 – 320.9 495.2 (116.1) – (58.2) – 2.7 – (1.1) 322.5 59.5 1,057.9 (84.3) Total assets and liabilities in the other segment are predominantly cash and debt balances. 3. OPERATING COSTS Production costs Depreciation of oil and gas property, plant and equipment Amortisation of oil and gas intangible assets Cost of sales Exploration (credit)/expense Impairment of property, plant and equipment (note 9) Impairment of intangible assets (note 8) Corporate cash costs Corporate share based payment expense Depreciation and amortisation of corporate assets General and administrative expenses MBB $m Expl. $m Other $m – – – – (4.6) – – – (4.6) – – (4.6) – – – – (0.1) (4.7) 15.5 860.8 (75.3) – – – – 2.7 – – – 2.7 – – 2.7 – – – – – 2.7 19.1 34.0 (32.4) – – – – – – – (21.0) (21.0) (19.7) (1.3) – – 32.6 2.2 (35.5) (26.8) (48.5) – 154.2 (305.1) 2018 $m 28.7 72.4 62.1 163.2 Total $m 224.4 4.5 (143.6) 85.3 (1.9) (58.2) 293.8 (21.0) 298.0 475.5 (117.4) (1.9) (58.2) 32.6 4.9 (35.5) (28.0) 272.0 94.1 2,106.9 (497.1) 2017 $m 27.5 83.3 32.8 143.6 (1.5) 1.9 – 58.2 424.0 17.4 4.9 1.7 24.0 – 16.9 2.8 1.3 21.0 Exploration expense relates to accruals for costs or obligations relating to licences where there is ongoing activity or that have been, or are in the process of being, relinquished. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFees payable to the Company’s auditors: Audit of consolidated and subsidiary financial statements Tax and advisory services Total fees 4. STAFF COSTS AND HEADCOUNT Wages and salaries Social security costs Share-based payments Average headcount was: Turkey KRI UK Somaliland 5. FINANCE EXPENSE AND INCOME Bond interest payable Unwind of discount on liabilities / premium paid on bond buyback Finance expense Bank interest income Unwind of discount on trade receivables Finance income 91 2018 $m 0.4 0.3 0.7 2018 $m 17.1 1.0 6.3 24.4 2017 $m 0.6 0.1 0.7 2017 $m 20.6 1.0 5.4 27.0 2018 number 2017 number 64 15 17 17 113 2018 $m (30.0) (3.2) (33.2) 4.4 – 4.4 65 15 17 24 121 2017 $m (35.5) (28.0) (63.5) 2.2 2.7 4.9 Bond interest payable is the cash interest cost of Company bond debt. In 2018, unwind of discount on liabilities primarily relates to the discount unwind on the bond (note 15) and on the asset retirement obligation (‘ARO’) provision (note 14). In 2017, the Company extended the maturity of $300.0 million of its bonds and redeemed bonds with a nominal value of $121.8 million. This resulted in the derecognition of the existing debt balance and recognition of an expense of $19.7 million, comprised of $3.7 million relating to the premium paid and $16.0 million accelerated discount unwind. 6. INCOME TAX EXPENSE Current tax expense is incurred on the profits of the Turkish and UK services companies. Under the terms of the KRI PSCs, the Company is not required to pay any cash corporate income taxes as explained in note 1. 7. EARNINGS PER SHARE Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue during the period. 2018 2017 (Loss) / Profit attributable to equity holders of the Company ($m) Weighted average number of ordinary shares – number1 Basic (loss) / earnings per share – cents per share 1. Excluding shares held as treasury shares (283.6) 271.0 279,065,717 (101.6) 279,013,724 97.1 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION92 7. EARNINGS PER SHARE continued Diluted The Company purchases shares in the market to satisfy share plan requirements so diluted earnings per share is only adjusted for restricted shares not included in the calculation of basic earnings per share: 2018 2017 (Loss) / Profit attributable to equity holders of the Company ($m) Weighted average number of ordinary shares – number1 Adjustment for performance shares, restricted shares and share options Total number of shares Diluted (loss) / earnings per share – cents per share 1. Excluding shares held as treasury shares 8. INTANGIBLE ASSETS Cost At 1 January 2017 Additions Non–cash additions for ARO Additions (Tawke RSA) Discount unwind of contingent consideration Transfer to property, plant and equipment Previously accrued exploration expense At 31 December 2017 and 1 January 2018 Additions Discount unwind of contingent consideration Non–cash additions for ARO/IFRS2 Previously accrued exploration expense At 31 December 2018 Accumulated amortisation and impairment At 1 January 2017 Amortisation charge for the period At 31 December 2017 and 1 January 2018 Amortisation charge for the period Impairment At 31 December 2018 Net book value At 31 December 2017 At 31 December 2018 (283.6) 271.0 279,065,717 1,182,481 280,248,198 (101.6) 279,013,724 1,234,474 280,248,198 96.7 Exploration and evaluation assets $m 1,497.4 34.6 2.5 – (22.3) (22.8) (17.7) 1,471.7 25.1 8.1 0.8 (12.5) Tawke RSA $m – – – 425.1 – – – 425.1 – – – – 1,493.2 425.1 (581.3) – (581.3) – (424.0) – (32.8) (32.8) (62.1) – Other assets $m Total $m 6.3 0.2 – – – – – 6.5 0.3 – – – 6.8 (5.7) (0.6) (6.3) (0.2) – 1,503.7 34.8 2.5 425.1 (22.3) (22.8) (17.7) 1,903.3 25.4 8.1 0.8 (12.5) 1,925.1 (587.0) (33.4) (620.4) (62.3) (424.0) (1,005.3) (94.9) (6.5) (1,106.7) 890.4 487.9 392.3 330.2 0.2 0.3 1,282.9 818.4 Exploration and evaluation assets are principally the Company’s PSC interests in exploration and appraisal assets in the KRI, comprised of the Miran (book value: $116.2 million, 2017: $535.3 million) and Bina Bawi (book value: $338.7 million, 2017: $323.1 million) gas assets. The remaining balance is comprised of Somaliland asset (book value: $33.0 million 2017: $32.0 million). The Miran PSC has been impaired by $424.0 million – further explanation is provided in note 1. Tawke RSA assets are comprised of the ORRI (book value: $217.5 million 2017: $269.8 million) and capacity building payments waiver (book value: $112.7 million 2017: $122.5 million), details of which are provided in note 1. The sensitivities below provide an indicative impact on net asset value of a change in long term Brent, discount rate or production and reserves, assuming no change to any other inputs. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Sensitivities Long term Brent +/– $5/bbl Discount rate +/– 2.5% Production and reserves +/– 10% 9. PROPERTY, PLANT AND EQUIPMENT Cost At 1 January 2017 Additions Non–cash additions for ARO Transfer from intangible assets Other At 31 December 2017 and 1 January 2018 Additions Non–cash additions for ARO/IFRS2 At 31 December 2018 Accumulated depreciation and impairment At 1 January 2017 Depreciation charge for the period Impairment At 31 December 2017 and 1 January 2018 Depreciation charge for the period Impairment At 31 December 2018 Net book value At 31 December 2017 At 31 December 2018 93 Bina Bawi $m +/– 12 +/– 99 +/– 30 Development assets $m Other assets $m Total $m 2,599.2 59.5 3.6 22.8 (1.2) 2,683.9 70.4 2.9 2,757.2 (1,978.2) (83.3) (58.2) (2,119.7) (72.4) – 8.9 0.5 – – – 9.4 0.2 – 9.6 2,608.1 60.0 3.6 22.8 (1.2) 2,693.3 70.6 2.9 2,766.8 (7.9) (0.7) – (8.6) (0.3) – (1,986.1) (84.0) (58.2) (2,128.3) (72.7) – (2,192.1) (8.9) (2,201.0) 564.2 565.1 0.8 0.7 565.0 565.8 Development assets are the Company’s investments in the Tawke PSC (book value: $478.2 million, 2017: $477.8 million) and the Taq Taq PSC (book value: $86.9 million, 2017: $86.4 million) in the KRI, further explanation on oil and gas assets is provided in the significant accounting judgements, estimates and assumptions in note 1. The sensitivities below provide an indicative impact on net asset value of a change in long term Brent, discount rate or production and reserves, assuming no change to any other inputs. Sensitivities Long term Brent +/– $5/bbl Discount rate +/– 2.5% Production and reserves +/– 10% Taq Taq CGU $m +/– 3 +/– 5 +/– 10 Tawke CGU $m +/– 26 +/– 58 +/– 76 ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION94 10. TRADE AND OTHER RECEIVABLES Trade receivables Other receivables and prepayments 2018 $m 94.8 4.6 99.4 2017 $m 73.3 5.2 78.5 Trade receivables are amounts owed for the revenue from contracts with customers. The Company reports trade receivables net of any capacity building payments (2018: $1.9 million 2017: $1.5 million). Ageing of trade receivables Under the Tawke and Taq Taq PSCs, payment for entitlement is due within 30 days. Since February 2016, a track record of payments being received three months after invoicing, which has been assessed as the established operating cycle under IAS1. The fair value of trade receivables is broadly in line with the carrying value. Period ended 31 December 2018 Trade receivables at 31 December 2018 Period ended 31 December 2017 Trade receivables at 31 December 2017 Movement on trade receivables in the period Carrying value at 1 January Revenue from contracts with customers Net proceeds Discount unwind Net gain arising from the RSA Write–off of overdue KRG receivable in exchange for intangible assets Other Carrying value at 31 December 11. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents Restricted cash Not due 94.8 Not due $m 73.3 2018 $m 73.3 350.3 (328.8) – – – – 94.8 2018 $m 334.3 10.0 344.3 Total $m 94.8 Total $m 73.3 2017 $m 253.5 224.4 (262.7) 2.7 293.8 (425.1) (13.3) 73.3 2017 $m 162.0 18.5 180.5 Cash is primarily held on time deposit with major financial institutions or in US Treasury. Restricted cash of $10.0 million relates principally to exploration activities in Morocco. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 12. TRADE AND OTHER PAYABLES Trade payables Other payables Accruals Contingent consideration Non–current Current 95 2018 $m 10.7 7.8 37.4 73.5 129.4 76.8 52.6 129.4 2017 $m 7.5 17.2 39.9 65.5 130.1 70.7 59.4 130.1 Payables are predominantly short-term in nature or are repayable on demand and, as such, for these payables there is minimal difference between contractual cash flows related to the financial liabilities and their carrying amount. Contingent consideration includes a balance of $68.5 million (2017: $60.5 million) recognised at its discounted fair value using the effective interest rate, which has been added to the book value of the Bina Bawi intangible asset. The nominal value of this balance is $145.0 million and its payment is contingent on gas production at the Bina Bawi and Miran assets meeting a certain volume threshold. The unwind of the discount is capitalised against the relevant intangible assets. Refer to note 10 for the details of the offset of the capacity building payments with trade receivables. 13. DEFERRED INCOME Non–current Current 14. PROVISIONS Balance at 1 January Interest unwind Additions Reversal Balance at 31 December 2018 $m 31.9 5.0 36.9 2018 $m 29.3 1.2 2.5 (0.1) 32.9 2017 $m 36.1 4.8 40.9 2017 $m 23.0 0.9 6.1 (0.7) 29.3 Provisions cover expected decommissioning and abandonment costs arising from the Company’s assets. The decommissioning and abandonment provision is based on the Company’s best estimate of the expenditure required to settle the present obligation at the end of the period discounted at 4%. The cash flows relating to the decommissioning and abandonment provisions are expected to occur between 2031 and 2038. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION96 15. BORROWINGS AND NET DEBT / (NET CASH) 2022 Bond 10.0% Cash Net debt / (Net cash) The fair value of the bonds is $308.3million (2017:$293.6 million). 2019 Bond 7.5% 2022 Bond 10.0% Cash Net debt / (Net cash) 1 Jan 2018 $m 296.8 (162.0) 134.8 Discount unwind $m Net other changes in cash $m 31 Dec 2018 $m 0.5 – 0.5 – (172.3) 297.3 (334.3) (172.3) (37.0) 1 Jan 2017 $m 648.2 – (407.0) 241.2 Discount unwind $m 22.9 – – 22.9 Buyback $m Refinance $m (249.3) – 216.7 (32.6) (421.8) 296.8 128.5 3.5 Net other changes in cash $m – – (100.2) (100.2) 31 Dec 2017 $m – 296.8 (162.0) 134.8 In March 2017, the Company repurchased $252.8 million nominal value of its own bonds for net cash of $216.7 million – the purchased bonds had a book value of $249.3 million resulting in Company net debt reducing by $32.6 million. In June 2017, the Company cancelled these bonds, together with the $55.4 million nominal value of bonds repurchased in March 2016, resulting in a reduction in total outstanding debt from $730 million to $421.8 million. In December 2017, the Company completed its refinancing of the bonds by reducing the outstanding bond debt from $421.8 million to $300 million by way of an early redemption of $121.8 million for cash of $125.5 million. The maturity of the $300 million nominal value of remaining bonds was extended to December 2022, with some other changes in terms. The refinancing has been accounted for under IFRS 9 as an extinguishment and consequently has resulted in a net finance expense of $19.7 million, representing the acceleration of the recognition of the associated discount unwind expense and the premium paid for the early redemption of the bonds. 16. FINANCIAL RISK MANAGEMENT Credit risk Credit risk arises from cash and cash equivalents, trade and other receivables and other assets. The carrying amount of financial assets represents the maximum credit exposure. The maximum credit exposure to credit risk at 31 December was: Trade and other receivables Cash and cash equivalents 2018 $m 97.0 334.3 431.3 2017 $m 76.8 162.0 238.8 Credit risk for trade receivables is explained in note 1 and relates to there being a single customer. There are no receivables overdue at the period end and no allowance is made under the expected credit loss model as explained at note 1. Cash is deposited in US Treasury bills or term deposits with banks that are assessed as appropriate based on, among other things, sovereign risk, CDS pricing and credit rating. Credit risk is managed on Company basis. Liquidity risk The Company is committed to ensuring it has sufficient liquidity to meet its payables as they fall due. At 31 December 2018, the Company had cash and cash equivalents of $334.3 million (2017: $162.0 million). Oil price risk The Company’s revenues are calculated from Dated Brent oil price, and a $5/bbl change in average Dated Brent would result in a profit before tax change of c.$24 million. Sensitivity of the carrying value of its assets to oil price risk is provided in notes 8 and 9. Currency risk As substantially all of the Company’s transactions are measured and denominated in US dollars, the exposure to currency risk is not material and therefore no sensitivity analysis has been presented. Interest rate risk The Company reported borrowings of $297.3 million (2017: $296.8 million) in the form of a bond maturing in December 2022, with fixed coupon interest payable of 10% on the nominal value of $300 million. Although interest is fixed on existing debt, whenever the Company wishes to borrow new debt or refinance existing debt, it will be exposed to interest rate risk. A 1% increase in interest rate payable on a balance similar to the existing debt of the Company would result in an additional cost of $3 million per annum. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED97 Capital management The Company manages its capital to ensure that it remains sufficiently funded to support its business strategy and maximise shareholder value. The Company’s short-term funding needs are met principally from the cash flows generated from its operations and available cash of $334.3 million (2017: $162.0 million). 17. SHARE CAPITAL At 1 January 2017 – fully paid1 At 31 December 2017, 1 January 2018 and 31 December 2018 – fully paid1 1. Ordinary shares includes 1,005,839 (2017: 1,234,474) treasury shares Total ordinary shares 280,248,198 280,248,198 There have been no changes to the authorised share capital since it was determined to be 10,000,000,000 ordinary shares of £0.10 per share. 18. SHARE-BASED PAYMENTS The Company has three share-based payment plans: a performance share plan, a restricted share plan and a share option plan. The main features of these share plans are set out below. Key features PSP RSP SOP Form of awards Performance shares. Restricted shares. Market value options. The intention is to deliver the full value of vested shares at no cost to the participant (e.g. as conditional shares or nil–cost options). The intention is to deliver the full value of vested shares at no cost to the participant (e.g. as conditional shares or nil–cost options). Exercise price is set equal to the average share price over a period of up to 30 days to grant. Performance conditions Vesting period Dividend equivalents Performance conditions will apply. For awards granted up to and including 2016, these are based on relative TSR measured against a Group of industry peers over a three-`year period. Awards granted from 2017 are based on relative and absolute TSR measured against a group of industry peers over a three-year period. Awards will vest when the Remuneration Committee determines whether the performance conditions have been met at the end of the performance period. Performance conditions may or may not apply. For awards granted to date, there are no performance conditions. Performance conditions may or may not apply. For awards granted to date, there are no performance conditions. Awards typically vest over three years. Awards typically vest after three years. Options are exercisable until the tenth anniversary of the grant date. Provision of additional cash/shares to reflect dividends over the vesting period may or may not apply. For awards granted to date, dividend equivalents do not apply. Provision of additional cash/shares to reflect dividends over the vesting period may or may not apply. For awards granted to date, dividend equivalents do not apply. Provision of additional cash/shares to reflect dividends over the vesting period may or may not apply. For awards granted to date, dividend equivalents do not apply. ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION98 18. SHARE BASED PAYMENTS continued In 2018, awards were made under the performance share plan and restricted share plan, no awards were made under the share option plan, the numbers of outstanding shares under the PSP, RSP and SOP as at 31 December 2018 are set out below. Outstanding at the beginning of the year Granted during the year Forfeited during the year Lapsed during the year Exercised during the year Outstanding at the end of the year PSP options (nil cost) RSP options (nil cost) Share option plan SOP weighted avg. exercise price 8,174,364 2,693,000 (565,010) (153,803) – 2,171,696 137,168 – (113,328) (684,238) 140,452 – – (8,118) – 10,148,551 1,511,298 132,334 808p – – 897p – 803p CEO award (nil cost) 187,500 – – – (187,500) – The range of exercise prices for share options outstanding at the end of the period is 621.15p to 1,046.00p. The weighted average remaining contractual life of the outstanding share options is two years. Fair value of options granted has been measured either by use of the Black-Scholes pricing model or by use of a formula based on past calculations. The model takes into account assumptions regarding expected volatility, expected dividends and expected time to exercise. In the absence of sufficient historical volatility for the Company, expected volatility was estimated by analysing the historical volatility of FTSE-listed oil and gas producers over the three years prior to the date of grant. The expected dividend assumption was set at 0%. The risk-free interest rate incorporated into the model is based on the term structure of UK Government zero coupon bonds. The inputs into the fair value calculation for RSP and PSP awards granted in 2018 and fair values per share using the model were as follows: Share price at grant date Exercise price Fair value on measurement date Expected life (years) Expected dividends Share price at balance sheet date Change in share price between grant date and 31 December 2018 RSP 11/4/18 RSP 19/10/18 PSP 11/4/18 PSP 19/10/18 179p – 179p 1–3 – 177p (1%) 227p – 227p 1–3 – 177p (22%) 179p – 138p 3–6 – 177p (1%) 227p – 133p 3–6 – 177p (22%) The weighted average fair value for PSP awards granted in the period is 137p and for RSP awards granted in the period is 180p. Total share-based payment charge for the year was $6.3 million (2017: $5.4 million). 19. CAPITAL COMMITMENTS AND OPERATING LEASE COMMITMENTS The Company had no material outstanding commitments for future minimum lease payments under non-cancellable operating leases. Under the terms of its PSCs and JOAs, the Company has certain commitments that are generally defined by activity rather than spend. The Company’s capital programme for the next few years is explained in the operating review and is in excess of the activity required by its PSCs and JOAs. The Company leases office facilities under operating leases. During the period ended 31 December 2018 $1.4 million (2017: $1.2 million) was expensed to the statement of comprehensive income in respect of these operating leases. Drill rig contracts are service contracts where contractors provide the rig together with the services and the contracted personnel on a day-rate basis for the purpose of drilling exploration or development wells. The Company has no right of use of the rigs itself. The aggregate payments under drilling contracts are determined by the number of days required to drill each well and are capitalised as exploration or development assets as appropriate. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED99 20. RELATED PARTIES The Directors have identified related parties of the Company under IAS24 as being: the shareholders; members of the Board; and members of the Executive Committee, together with the families and companies, associates, investments and associates controlled by or affiliated with each of them. The compensation of key management personnel including the Directors of the Company is as follows: Board remuneration Key management emoluments and short–term benefits Share–related awards There are no other significant related party transactions. 2018 $m 0.7 6.0 1.4 8.1 2017 $m 0.8 6.5 0.6 7.9 21. EVENTS OCCURING AFTER THE REPORTING PERIOD The Company has reached agreement to acquire 30% equity of the Sarta PSC and 40% equity of the Qara Dagh PSC, both of which are located in the KRI and are exploration and appraisal assets. 22. SUBSIDIARIES AND JOINT ARRANGEMENTS The Company has two joint arrangements in relation to its producing assets Taq Taq and Tawke. The Company holds 44% working interest in Taq Taq PSC and owns 55% of Taq Taq Operating Company Limited. The Company holds 25% working interest in Tawke PSC which is operated by DNO ASA. For the period ended 31 December 2018 the principal subsidiaries of the Company were the following: Entity name Genel Energy Holding Company Limited1 Genel Energy Finance Plc2 Genel Energy Finance 2 Plc1 Genel Energy Netherlands Holding 1 Cooperatief B.A.3 Genel Energy Netherlands Holding 2 B.V.3 Genel Energy International Ltd4 Taq Taq Operating Company Limited5 Genel Energy Miran Bina Bawi Limited2 A&T Petroleum Company Limited6 Genel Energy Africa Exploration Limited2 Genel Energy Africa Limited2 Genel Energy Exploration 2 Limited2 Genel Energy Limited2 Genel Energy Somaliland Limited2 Genel Energy Gas Company Limited1 Genel Energy UK Services Limited2 Genel Energy Yonetim Hizmetleri Anonim Sirketi7 Genel Energy Petroleum Services Limited2 Barrus Petroleum Limited8 Barrus Petroleum Cote d’Ivoire Sarl9 Taq Taq Drilling Company Limited10 Genel Energy Sarta Limited11 Genel Energy Qara Dagh Limited11 Country of Incorporation Ownership % (ordinary shares) Jersey UK Jersey Netherlands Netherlands Anguilla BVI UK Cayman Islands UK UK UK UK UK UK UK Turkey UK Isle of Man Cote d’Ivoire BVI UK UK 100 100 100 100 100 100 55 100 100 100 100 100 100 100 100 100 100 100 100 100 55 100 100 1. Registered office is 12 Castle Street, St Helier, Jersey JE2 3RT 2. Registered office is Fifth floor, 36 Broadway, London SW1H 0DB 3. Registered office is Prins Bernhardplein 200, 1097 JB, Amsterdam, Netherlands 4. Registered office is PO Box 1338. Maico Building, The Valley, Anguilla 5. 3rd Floor, Geneva Place, Waterfront Drive, PO Box 3175, Road Twon, Tortola, BVI and is a joint operation service company through which the Company jointly operates the Taq Taq PSC with its partner 6. Registered office is PO box 309 Ugland House, Grand Cayman, KY1–1104, Cayman Islands 7. Registered office is Next Level Is Merkezi, Eskisehir Yolu, Dumlupınar Bulvarı, No:3A–101, Sögütözü, Ankara, 06500, Turkey 8. Registered office is 6 Hope Street, Castletown, IM9 1AS, Isle of Man 9. Registered office is 7 Boulevard Latrille Cocody, 25 B.P. 945 Abidjan 25, Cote d’Ivoire 10. Registered office is PO Box 146, Road Town, Tortola, BVI 11. Registered office is Fifth floor, 36 Broadway, London SW1H 0BH ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION100 23. ANNUAL REPORT Copies of the 2018 annual report will be despatched to shareholders in April 2019 and will also be available from the Company’s registered office at 12 Castle Street, St Helier, Jersey JE2 3RT and at the Company’s website – www.genelenergy.com. GENEL ENERGYFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDREPORT ON PAYMENTS TO GOVERNMENTS FOR THE YEAR 2018 101 Introduction and basis for preparation This report sets out details of the payments made to governments by Genel Energy plc and its subsidiary undertakings (“Genel”) for the year ended 31 December 2018 as required under the Disclosure and Transparency Rules of the UK Financial Conduct Authority (the ‘DTRs’) and in accordance with our interpretation of the Industry Guidance issued for the UK’s Reports on Payments to Governments Regulations 2014, as amended in December 2015 (‘the Regulations’). The DTRs require companies in the UK and operating in the extractives sector to publically disclose payments made to governments in the countries where they undertake exploration, prospection, development and extraction of oil and natural gas deposits or other materials. This report is available to download at www.genelenergy.com/investor-relations/results-reports-presentations. Governments All of the payments made in relation to licences in the Kurdistan Region of Iraq (‘KRI’) have been made to the Ministry of Natural Resources of the Kurdistan Regional Government (‘KRG’). All other payments have been made to the national government of the relevant country where the licence is based. Production entitlements Production entitlements are the host government’s share of production during the reporting period from projects operated by Genel. Production entitlements from projects that are not operated by Genel are not covered by this report. The figures reported have been produced on an entitlement basis rather than on a liftings basis. Production entitlements are paid in-kind and the monetary value disclosed is derived from management’s calculation of revenue from the field. Royalties Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the Royalties are described within our Production Sharing Contracts and can vary from project to project. Royalties have been calculated on the same barrels of oil equivalent basis as production entitlements. Materiality threshold Total payments below £86,000 made to a government are excluded from this report as permitted under the Regulations. PAYMENTS TO GOVERNMENTS – 2018 Country/Licence Production entitlement (bbls) Royalties in kind (bbls) Total (bbls) Value of production entitlements ($million) Value of royalties ($million) Capacity building payments ($million)3 Licence fee ($million) Total ($million) KRI Total1 Taq Taq2 Somaliland SL 10B/13 Odeweyne 2,598,593.83 451,116.66 2,598,593.83 451,116.66 3,049,710.49 3,049,710.49 169.90 29.32 6.29 – 205.51 169.90 29.32 6.29 – 205.51 – – – – – – 0.13 0.13 – – – – – – 0.05 0.05 – – – – – – 0.08 0.08 1. Under the lifting arrangements implemented by the KRG, the KRG takes title to crude at the wellhead and then transports it to Ceyhan in Turkey by pipeline. The crude is then sold by the KRG into the international market. All proceeds of sale are received by or on behalf of the KRG, out of which the KRG then makes payment for cost and profit oil in accordance with the PSC to Genel, in exchange for the crude delivered to the KRG. Under these arrangements, payments are in fact made by or on behalf of the KRG to Genel, rather than by Genel to the KRG. For the purposes of the reporting requirements under the Regulations, however, we are required to characterise the value of the KRG’s entitlement under the PSC (for which they receive payment directly from the market) as a payment made to the KRG. Therefore, estimated value in $millions is not paid to the KRG, and is calculated to meeting the reporting requirements under the Regulations 2. The amount reported for Taq Taq, is the gross payment made to the KRI by the operating company (TTOPCO). Genel’s share of these payments is equal to 55% (with the exception of capacity building payments) 3. Capacity building payments reported are payments made by Genel directly to the KRI in cash as required by the PSC ANNUAL REPORT 2018STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION102 GLOSSARY OF TECHNICAL TERMS ‘AGM’ ‘CGU’ ‘CPF’ ‘CP’ ‘CPR’ ‘Companies Act 2006’ ‘Company’ ‘Elysion’ ‘Focus Investments’ ‘FRC’ ‘FSMA’ ‘FTSE’ ‘GHG’ ‘GLA’ ‘Group’ ‘HSE’ ‘ICMM Sustainable Development Framework’ ‘IFC Performance Standard’ ‘IOC’ ‘Jersey Companies Law’ ‘KRG’ ‘KRI’ ‘Listing Rules’ ‘LoPC’ ‘LTI’ ‘LTIF’ ‘NGO’ ‘Ordinary Shares’ ‘PRM’ ‘PSC’ ‘PSP’ ‘PwC’ ‘RSA’ ‘RSP’ ‘SOP’ ‘Standard Listing’ ‘TSR’ ‘TTOPCO’ ‘UKLA’ annual general meeting Cash Generating Unit Central Processing Facility Conditions Precedent competent person’s report Companies Act 2006, as amended Genel Energy plc Elysion Energy Holding B.V. Focus Investments Limited UK Financial Reporting Council the Financial Services and Markets Act 2000 of the UK, as amended FTSE International Limited greenhouse gases gas lifting agreement the Genel Energy group of companies health, safety and environment the sustainable development framework set out by the International Council on Mining and Metals the performance standards set out by the International Finance Corporation International Oil Company Companies (Jersey) Law 1991 (as amended) the Kurdistan Regional Government the Kurdistan Region of Iraq the Listing Rules of the UK Listing Authority loss of primary containment lost time incident lost time incident frequency: the number of lost time incidents per million work hours non-governmental organisation the voting ordinary shares and/or the suspended voting ordinary shares as the context requires Petroleum Resources Management N.V. production sharing contract performance share plan PricewaterhouseCoopers LLP receivable settlement agreement restricted share plan share option plan a standard listing under Chapter 14 of the Listing Rules total shareholder return Taq Taq Operating Company Limited UK Listing Authority Certain resources and reserves terms ‘1P’ ‘2P’ ‘3P’ ‘2C’ proved reserves proved plus probable reserves proved plus probable plus possible reserves contingent resources Units of measurement ‘bbl’ ‘bcma’ ‘Bboe’ ‘bopd’ ‘boepd’ ‘km’ ‘mcf’ ‘MMbbls’ ‘MMboe’ ‘tcf’ ‘tCO2e’ barrel billion cubic metres per annum billion barrel oil equivalent barrels of oil per day barrels of oil equivalent per day kilometres thousand cubic feet millions of barrels million barrels of oil equivalent trillion cubic feet tonnes of CO2 equivalent GENEL ENERGYOTHER INFORMATIONSHAREHOLDER INFORMATION ShareGift If you hold a small number of shares and find it uneconomical to sell them, you may wish to donate your shares to charity free of charge through ShareGift. ShareGift collects donations of unwanted shares, sells them and donates the proceeds to UK charities. Further details are available at www.sharegift.org or by calling +44 (0) 20 7930 3737. AGM This year’s AGM will be held at the Taj Hotel, St. James’ Court, 54 Buckingham Gate, London SW1E 6AF, UK on Thursday, 16 May 2019 at 11.00am. Details of the business to be considered at the AGM are set out in the accompanying Notice of Meeting. Dividend and dividend history We have not paid any dividends to shareholders to date and no final dividend is proposed in respect of the year ended 31 December 2018. Registrars Our registrars are Equiniti Registrars. All enquiries relating to the administration of shareholdings should be directed to Equiniti Registrars, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA. Telephone: 0371 384 2893 lines are open Monday – Friday excluding UK Bank Holidays, 8.30am – 5.30pm (from outside the UK: +44 121 415 7593). Share price information The current price of the Company’s shares is available on the Company’s website at www.genelenergy.com. Contacts and Auditors Registrar Equiniti (Jersey) Limited c/o Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA Independent Auditors PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Registered Office 12 Castle Street St Helier Jersey JE2 3RT London Office Fifth Floor 36 Broadway Victoria London SW1H 0BH Ankara Office Next Level Is¸ Merkezi Eskis¸ehir Yolu Dumlupınar Bulvarı No: 3A-101 Sö˘gütözü 06500 Ankara, Turkey Registered Office 12 Castle Street St Helier Jersey JE2 3RT London Office Fifth Floor 36 Broadway Victoria London SW1H 0BH Ankara Office Next Level Is Merkezi Eskisehir Yolu Dumlupınar Bulvarı No:3A-101 Sögütözü 06500 Ankara, Turkey www.genelenergy.com G E N E L E N E R G Y A N N U A L R E P O R T 2 0 1 8 

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