Genel Energy Annual Report 2019

FY2019 Annual Report · Genel Energy
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9

A business fit for 
a low oil price 
environment

A N N U A L   R E P O R T   2 0 1 9

A socially responsible contributor 
to the global energy mix

 
 
 
 
 
 
 
C O N T E N T S

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  Risk management
24  Principal risks and uncertainties
27  Viability statement
28  Sustainability
36   Stakeholder engagement

Governance
38  Chairman’s statement  

on corporate governance

40  Board of Directors
43  Executive Committee
44  Corporate governance
50  Audit Committee
53  Nomination Committee
55  HSSE Committee
57  Reserves Committee
59  Directors’ remuneration report
80  Other statutory and  

regulatory information

83  Statement of Directors’  

responsibilities

Financial statements
84  Independent Auditors’ Report 
90  Financial statements and notes

Other information
111  Report on payments to governments
112  Glossary of technical terms
IBC Shareholder information

W H O   W E   A R E

Genel Energy is a socially 
responsible oil producer  
with an asset portfolio that 
positions us well for a future 
of fewer and better natural 
resources projects.

Our producing assets are  
low-cost and low-carbon, 
providing financial resilience 
that allows investment in 
growth and the payment of 
a material and sustainable 
dividend, even at a low oil price.

O U R   S T R AT E G I C   A M B I T I O N
To become a world-class 
independent E&P creator 
of shareholder value.

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93

41

H I G H L I G H T S

N E T   P R O D U C T I O N

N E T   C A S H 1

36,000bopd

$93million

2019

2018

2017

XX
36,000

34,000
XX

XX

35,000

2019

2018

2017

37

(135)

L O S T   T I M E   I N C I D E N T S

D I V I D E N D S   A N N O U N C E D

$41million

2019

2018

0

2017

0

2 0 2 0   D I V I D E N D   
Y I E L D

over20%
152MMbbls

2 C   O I L   R E S O U R C E S

0

2019

0

2018

0

2017

0

A N N U A L   F R E E   C A S H   F L O W   Y I E L D 2

c.15%

2 P   O I L   R E S E R V E S

124 MMbbls

P R O D U C T I O N   
C O S T   I N   2 0 1 9 3

$2.9/bbl

A S S E T   L E V E L   B R E A K E V E N   B R E N T   
O I L   P R I C E 4

$30/bbl

1   Refer to ﬁnancial review page 21
2   Estimated annual free cash ﬂow yield is annual FCF divided by Company share price for the same period
3   Production cost is production cost reported in the income statement divided by working interest production
4   Asset level breakeven is the oil price for 2019 at which the Company’s operational activity and spend, excluding corporate costs, would breakeven

Annual Report and Accounts 2019  |  Genel Energy 

1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C H A I R M A N ’ S   S T A T E M E N T

A strong portfolio with  
an attractive mix of assets

D AV I D   M C M A N U S 
C H A I R M A N

I have no 
doubt about the 
ambition and 
growth potential 
of Genel Energy.

2  

Genel Energy  |  Annual Report and Accounts 2019

I am pleased to welcome you to Genel Energy’s ninth annual report, 
and my ﬁrst as Chairman. 

The recent oil price fall, and the as yet unquantiﬁable impact of the 
COVID-19 virus, provide signiﬁcant headwinds, but I am conﬁdent 
that we have the right mix of low-cost assets, ﬂexible expenditure, 
and ﬁnancial strength to help us navigate challenges and thrive as 
the environment improves.

Viewed externally, it was clear to me that Genel has a strong 
portfolio with an attractive mix of assets at complementary 
stages of their life cycle. High-margin producing ﬁelds provide the 
capital to rapidly develop assets with material potential, which 
in turn will generate more cash to be quickly recycled into the 
next phase of growth. It is a rare opportunity to join a company 
with such a balanced and advantageous portfolio that is able to 
generate cashﬂow that creates its own suite of opportunities. It is 
a testament to my predecessor, Stephen Whyte, that the business 
is in such good shape, and I would like to thank him on behalf of the 
Company for his hard work in helping transform Genel’s prospects.

Having now had the chance to get to know the people at Genel, I 
have been impressed by the ﬁrst-class management team, and I 
have no doubt about the ambition and the growth potential of the 
business. The quality of assets and people provide a compelling 
mix, we are a full cycle oil and gas company with expertise across 
the value chain above and beyond what you would typically see 
at a similar sized business, and I look forward to working with 
management as the Board seeks to oversee a period of signiﬁcant 
growth, and the creation of material value for shareholders.

Clear strategy
Our focus is ﬁrmly on ensuring our ongoing resilience, 
enhancing cash ﬂows, and creating optionality. Growing high-
margin production, investing in growth, and returning cash to 
shareholders through a material and progressive dividend is a 
simple and appealing strategy, with the goal of creating long-term 
shareholder value.

Genel delivered on this strategy in 2019, with almost $100 million 
of free cash ﬂow generated, even while boosting investment in 
new growth assets. The Company paid its ﬁrst dividend in the year, 
and we hope to grow the total distribution in 2020. We continue 
to focus on delivery, and Sarta is set to enter production in the 
coming months, further diversifying our producing asset base. 
Investment in growth assets is set to continue. Qara Dagh offers 
exciting potential, and we look forward to drilling the QD-2 well as 
soon as the situation with COVID-19 improves. 

With success and a positive operating environment, our organic 
portfolio has the potential to double our oil production in the 
coming years, and we also continue to seek cash-generative growth 
through acquisitions. Given the potential in our existing portfolio 
though, we are not compelled to make acquisitions, and will only do 
so should we ﬁnd an opportunity that fulﬁls our strict criteria.

Overseeing growth
Genel has a strong and experienced Board, with a deep 
understanding of the oil and gas business, and a highly detailed 
working knowledge of the Kurdistan Region of Iraq and surrounding 
areas that allows us the best possible opportunity to understand 
and mitigate risk.

As you would expect, managing risk is a key focus for the Board. 
The ﬁrst priority is of course the safety of our employees and 
contractors, and we will continue to support management as we 
strive to continue our excellent performance in this area. As well 
as safety, employee wellbeing is also important, as a content 
workforce is a motivated one. The recent introduction of the Genel 
values emphasises the importance we place not just on the work 
that we do, but on the way that we do it.

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A key issue that natural resources companies must address relates 
to our role in a world facing the threat posed by a changing climate. 
Reducing emissions across the industry through the reduction of 
ﬂaring and increased efﬁciency is a must, while still providing the 
power to fuel rising living standards. Genel has an important role 
to play in the forthcoming energy transition and as well as being 
the right thing to do, positioning Genel appropriately will boost our 
attractiveness to potential employees and shareholders, and is 
something that the Board will increasingly focus on going forward.

Sustainability
As someone who has spent several decades working in the energy 
industry, it is obvious to me that we are in a period of signiﬁcant and 
necessary change, and Genel can and should be at the forefront of 
that process. When I joined the oil and gas business forty years ago 
it was an exciting world technically, commercially, and politically. 
The industry has always been a leader of technological innovation, 
and the energy that it provides through the production of oil and 
gas remains vital in order to reduce energy poverty and drive global 
development - not least by increasing the living standards of people 
in the developing world. 

Given the forward-thinking nature of people in the business, and 
its history of rapid evolution and innovation with the highest 
regard to HSE standards, the industry is well placed to evolve and 
support the delivery of the world’s power needs during the energy 
transition. Sustainability is certainly at the forefront of the minds of 
the management of Genel, and ESG metrics are now incorporated 
into the remuneration evaluations of senior management for 2020. 
We recognise our need to provide the world with high-margin, 
low-carbon barrels that ﬁt into a world of fewer and more efﬁcient 
natural resources projects, as we continue to build on our aim 
of creating shareholder value over the long-term as a socially 
responsible contributor to the global energy mix.

  R E A D   M O R E   P 1 0

Annual Report and Accounts 2019  |  Genel Energy 

3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
G E N E L   A T   A   G L A N C E

W H O   W E   A R E
Genel is an independent 
oil and gas exploration 
and production company, 
and one of the largest 
London-listed independent 
oil producers

W H A T   W E   D O
Genel is a socially 
responsible energy company, 
with cash-generative oil 
production that funds 
growth and the payment  
of a material dividend

O U R   V A L U E S

Integrity

Respect

Accountability

Collaboration

Ingenuity

A T   A   G L A N C E

N E T   2 P   O I L   R E S E R V E S  
( M M b b l s )

N E T   2 C   O I L   R E S O U R C E S  
( M M b b l s )

TAWKE

PESHKABIR

TAQ TAQ

SARTA

TOTAL

65

29

20

10

124

SARTA

BINA BAWI

TAWKE

QARA DAGH

MIRAN

TOTAL

79

17

18

19

18

151

W O R K I N G   I N T E R E S T   P R O D U C T I O N  
( b o p d )

A S S E T   L E V E L   S U R P L U S   2 0 1 9 1  
( $   M I L L I O N )

TAWKE

17,190

PESHKABIR

13,800

TAQ TAQ

TOTAL

5,260

36,250

TAWKE

PESHKABIR

TAQ TAQ

TOTAL

115

92

11

218

1    Asset level surplus is revenue less production cost less capital 

expenditure on producing assets

4 

Genel Energy  |  Annual Report and Accounts 2019

  
 
  
 
  
 
W H E R E   W E   O P E R A T E

S O M A L I L A N D

M O R O C C O

Odewayne
50% working  
interest, operator

SL10B13
100% working 
interest, operator 

Y E M E N

G U L F O F A D E N

DJIBOUTI

E T H I O P I A

K U R D I S T A N   R E G I O N   O F   I R A Q

T U R K E Y

S Y R I A

I R AQ

K E Y

D E V E L O P M E N T   A S S E T S

O I L   P R O D U C T I O N

E X P L O R A T I O N   A N D   A P P R A I S A L   A S S E T S

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Lagzira (formerly Sidi Moussa)
75% working interest, operator

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M O R O C C O

A LG E R I A

Tawke
25% working interest

Sarta
30% working interest 

Bina Bawi
100% working 
interest, operator

Taq Taq
44% working  
interest, joint  
operator 

Miran
100% working 
interest, operator  

Qara Dagh
40% working  
interest, operator

I R A N

Annual Report and Accounts 2019  |  Genel Energy 

5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C H I E F   E X E C U T I V E   O F F I C E R ’ S   S T A T E M E N T

Advantageously positioned  
in a low oil price environment

B I L L   H I G G S
C H I E F   E X E C U T I V E 
O F F I C E R

Genel is a low-
cost business, 
with the right 
assets, in the 
right location, 
with the 
right footprint. 

6  

Genel Energy  |  Annual Report and Accounts 2019

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H I G H L I G H T S
ASSET LEVEL BREAKEVEN 
OIL PRICE

$30/bbl

OPERATING COSTS

$3/bbl

CASH AT 
END 2019 

$391million

A business ﬁt for the future
An approach combining thorough risk assessment and 
management, best in class operational execution and a hard-wired 
awareness of our ESG responsibilities, is of paramount importance 
at a time when the world is facing unprecedented challenges 
in balancing the provision of energy where it is needed with a 
changing climate. As we transition to a future of fewer and more 
efﬁcient natural resources projects there will be winners and losers 
in the energy sector. This provides an exciting opportunity to 
position Genel as a winner in meeting the challenges that mankind 
faces in relation to energy.

Natural resources companies that have a role to play during the 
energy transition, those that will be seen as the winners, are the 
ones that can provide low-cost, low-carbon energy, in the right 
locations – jurisdictions where the economic development of 
their resources provides a clear and compelling beneﬁt to the 
communities in which the resources are found and produced. 
Some regions also need the economic boost from power generation 
in order to fund basic development, and need the power itself to 
keep the lights on in hospitals and schools. People need energy, and 
we are proud to provide it in a socially responsible way.

Delivering on our strategy
Genel remains focused on delivery, in the ﬁrm belief that ongoing 
delivery of our strategy will see the Company grow and prosper, 
and in turn provide a compelling offering to investors that will 
deliver signiﬁcant shareholder value. External factors are currently 
providing a very challenging backdrop, but we have a strategy ﬁt for 
this environment, as we have long been focused on reducing costs, 
retaining a strong balance sheet, and maximising our ﬂexibility 
to use this balance sheet in whichever ways can create most 
shareholder value. 

In 2019 we delivered on our promises. Production of 36,250 bopd 
represents a year-on-year increase of 8%, and once again was in 
line with our guidance. This production, coupled with our focus on 
cost and cash generation, delivered just under $100 million of free 
cash ﬂow, even after a notable increase in investment that sets us 
up to deliver further growth going forward. The level of our cash 
generation also allowed us to initiate a material and sustainable 
dividend, a dividend that our resilience allows us to maintain at the 
same level at the prevailing oil price. Given the external conditions, 
we have deferred an increase in the dividend until our interim 
distribution, pending an improvement in the external environment.

As well as this organic success, in Sarta and Qara Dagh we added 
high-quality assets with near-term cash ﬂow. We are already the 
only multi-licence producer in the Kurdistan Region of Iraq, and 
production at Sarta will further diversify our producing base when  
it comes onstream this summer. Sarta has the potential to be one  
of the biggest ﬁelds in the KRI and is at exactly the stage in the 
asset life cycle that complements our existing portfolio.

We now have a portfolio with mature and low-cost production, a 
ﬁeld set to start producing that beneﬁts from a large pool of past 
costs, and appraisal of another high-impact opportunity at Qara 
Dagh. Progress on Bina Bawi has been frustrating, as despite 
positive progress in discussions leading to an understanding on 
commercial terms being reached last year, we have not yet received 
drafts of the legal agreements that will allow us to progress the 
development of this asset.

Genel has geared up for the increased activity ahead, adding 
strength in depth to our team in 2019. This has boosted internal 
capabilities in order to have the workforce in place to continue to 
deliver operational excellence, and this readiness to work to the 
very highest international standards positions us well to grow as  
the only multi-licence producing operator in the KRI.

A business ﬁt for a low oil price environment
Genel’s portfolio is advantageously positioned in a low oil price 
environment. Our cost of producing a barrel of oil in 2020 is 
expected to be around $3, which is amongst the lowest in the world. 
We have a net cash position of almost $100 million and ﬂexibility 
on capital expenditure, allowing us to spend appropriately to the 
external environment and balance the maximisation of our cash 
ﬂows with investment in growth. Of course, this investment in the 
KRI can only continue with conﬁdence in regular payments, which 
the KRG understands. Should payments continue, despite the low 
oil price, given our cost base and ﬁnancial ﬁrepower, there are 
opportunities out there that Genel is well positioned to capitalise on.  

As Genel grows, we will not lose sight of our focus on acting in 
the right way as a responsible natural resources company that 
is committed to ensuring that our actions have a wider beneﬁt. 
We recently formalised the Genel values, and it is my ﬁrm belief that 
acting according to our values will create a virtuous circle, seeing us 
deliver our strategy and in turn value for our stakeholders.

Workers at Taq Taq

Annual Report and Accounts 2019  |  Genel Energy 

7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C H I E F   E X E C U T I V E   O F F I C E R ’ S   S T A T E M E N T   C O N T I N U E D

Genel has a low-cost and highly 
cash-generative oil business, 
with the potential for material 
organic growth.

The onshore nature of our operations helps reduce our carbon 
footprint, something that we are focused on at each ﬁeld we 
participate in. Following the completion of the enhanced oil 
recovery project at the Tawke licence in the ﬁrst half of this year, 
for which currently ﬂared gas at Peshkabir will instead be reinjected 
to increase long-term recovery rates at Tawke, CO2 equivalent 
emissions from our producing assets will fall to c.7 kilograms per 
barrel. While this ﬁgure will increase as Sarta enters production, 
plans are already in place to mitigate and eventually eliminate the 
routine ﬂaring that will initially occur at this ﬁeld as production 
expands in the coming years.

We are also proud of the signiﬁcant social impact that our 
operations have had and continue to have in the KRI and the 
prosperity that has been created through direct employment 
and the building of a wide-reaching supply chain. Extensive social 
projects throughout the years, from the building of infrastructure, 
libraries, and schools, to ongoing community work, including the 
successful engagement of our local communities in our recycling 
programme, has also had a direct impact and will be continued 
going forward.  

8  

Genel Energy  |  Annual Report and Accounts 2019

Material organic growth potential
Genel has a low-cost and highly cash-generative oil business, with 
the potential for material organic growth. The engine room of 
our cash generation in 2020 remains our oil production, which 
generates asset level free cash ﬂow even at an oil price of $30/bbl. 
The bulk of our investment this year is expected to again be on our 
producing assets, as the speed of returns is compelling, and allows 
us to rapidly recycle capital into our growth opportunities.

Sarta is the ﬁrst cab off the rank in terms of new cash-generative 
production, and the addition of production from the ﬁeld is 
expected in the summer of 2020. Our near-term focus is on 
delivering this production, but it is hard not to get excited by 
the opportunity of converting over 250 MMbbls of the gross 2C 
resources into reserves as we progress work on the ﬁeld and meet 
the contingent milestones. Given the production potential of the 
ﬁeld, our oil business has the possibility of doubling production in 
coming years.

Prior to the impact of COVID-19 being felt in the KRI, the drilling of 
the Qara Dagh-2 well was on track to begin in Q2, and was set to 
appraise the licence c.10 km north of the QD-1 well. This well, drilled 
by a previous operator, ﬂowed light oil despite being drilled in a sub-
optimal way, and without the beneﬁt of the sub-surface work that 
has subsequently been done by Chevron and ourselves. We look 
forward to drilling this well as soon as practicable, as a positive 
well result that demonstrates commercial ﬂow rates would provide 
another growth vehicle for Genel, with production that could be 
expedited, and once again funded from operational cash ﬂow 
should the oil price improve.

Such is the cash ﬂow that our oil business is set to generate in 
the long-term, providing payments are regular and the oil price 
improves, should a commercial agreement on Bina Bawi be reached 

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Work getting underway 
at Sarta

we would be able to fund the upstream development in full and 
work on developing the gas project while still retaining surplus 
cash to grow our dividend. Genel has sought to progress to such an 
agreement in good faith and as quickly as possible. Genel continues 
to wait to receive the promised draft legal agreements reﬂecting 
the commercial understanding reached last year, which appear 
to be delayed due to ongoing transition in the Ministry of Natural 
Resources (‘MNR’).

Outlook and catalysts
Our focus in 2020 is again on delivery, and providing catalysts for 
the creation of shareholder value. We will continue to mitigate the 
headwinds that we are facing, investing ﬂexibly in the business in 
line with the external environment, bringing Sarta to production on 
time, and hopefully having the opportunity to spud Qara Dagh-2. 

Given the breadth of opportunities available within the organic 
portfolio we do not need to add assets through acquisition, but 
we would like to if the right opportunities of sufﬁcient standard 
arise – and this oil price may offer opportunities for a company in 
our robust ﬁnancial position. Genel is aiming to add assets that 
boost our cash generation and opportunity set, bringing in further 
catalysts for the creation of shareholder value as we look to build 
a bigger and better company, ﬁt for the future and a compelling 
investment proposition.

Genel is well set to navigate a low oil price environment, and ready 
to thrive as this environment improves. We are a low-cost business 
with the right assets, in the right area, with the right footprint to 
be a natural winner as headwinds recede, positioned to beneﬁt all 
stakeholders, and our shareholders speciﬁcally.

Making a positive 
contribution

It is important to everyone working at Genel 
that we are measured not just by what we 
achieve but also by the way in which we 
achieve it. Our purpose is to be a socially 
responsible contributor to the global 
energy mix. 

As such we have recently formalised a clear 
set of values – values that capture the spirit 
of the Company. It is by demonstrating and 
living by these values that each employee 
plays a part in making Genel the company 
we want it to be. 

As we adhere to these values, it is our belief 
that the strategic goals of the business will 
be delivered.

   R E A D   M O R E   O N   V A L U E S   P 2 9 

Annual Report and Accounts 2019  |  Genel Energy 

9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
O U R   B U S I N E S S   M O D E L   A N D   S T R A T E G Y

We create value for our 
shareholders and wider society

WHO WE ARE

WHAT WE DO

HOW WE DO IT

Key sources of value:

Our value life cycle

Key differentiators:

 — Cash-generative production

High-margin producing assets that 
generate more than sufﬁcient cash  
to meet our growth aspirations

 —  Balanced asset portfolio 

A balance of production and 
development assets with the ability  
to generate long-term cash ﬂow 

 — Successful M&A 

Adding new assets that do not dilute 
the quality of the existing portfolio  
and provide growth with 
mitigated downside

 — Strong stakeholder relationships
A social licence to operate and 
trusted partnerships help us deliver 
our strategy

 — Financial strength and discipline
We take a prudent approach to 
capital allocation, retaining our 
ﬁnancial strength and ability to target 
investment in key growth areas

 — Capital velocity and returns

Our assets provide speed of payback 
which is hard to match in the industry, 
with cash generation that allows 
the payment of a material and 
sustainable dividend

Underpinned by

Our goal of creating shareholder value 
is underpinned by a commitment to 
operating in a way that minimises 
possible downside and maximises 
wider beneﬁts

 —  Growing our resource base
Increasing reserves and  
resources through cost-
effective development, 
exploration and  
appraisal campaigns, and  
selective acquisitions

 —  Development and production
Safely and efﬁciently deliver 
development projects for the 
beneﬁt of both Genel and the 
communities in which  
we operate

 — Finance and portfolio  

management
Manage ﬁnancial and business 
assets to provide ﬂexibility  
in our capital structure in  
order to invest in growth 
and pay a material and 
progressive dividend

 —  Our experience

Our Board and management team have 
signiﬁcant experience in international 
oil and gas markets, with the technical 
and commercial experience to create 
value out of opportunities

 —  Our approach

We strive to be a socially responsible 
contributor to the global energy mix.  
We are committed to ESG issues,  
with clear values and commitments  
underpinning all business decisions  
and a low-cost, low-carbon portfolio  
of assets

 —   Our assets

We operate a signiﬁcant cash-
generative oil and gas portfolio 
throughout the KRI with growth 
opportunities in low-cost, high-
value assets that promise near-term 
production and signiﬁcant longer 
term upside

$

Risk  
management

Strong corporate  
governance practices

Genel brings the same rigour to 
organisational risk management  
processes as we do to health, safety  
and the environment 

Robust corporate governance is proven to 
provide beneﬁts to a business and value to 
shareholders, and Genel has a strong Board 
overseeing all key business aspects

  R E A D   M O R E   P 2 2

  R E A D   M O R E  P4 0

10 

Genel Energy  |  Annual Report and Accounts 2019

We create value by finding and monetising 
hydrocarbons, and generating cash flow. We strive to 
have the right people doing the right things. Our values 
– Integrity, Respect, Accountability, Collaboration and 
Ingenuity – are inherently linked to our business model 
and strategic success. If we deliver our values,  
we will deliver our ambition: To become a world-class 
independent E&P creator of shareholder value.

ENABLING US TO ACHIEVE OUR STRATEGY

THE VALUE WE CREATE

Genel has a clear strategy to become a 
world-class independent E&P creator of 
shareholder value.

The key components of our strategy are:

Direct and indirect impacts:

 — Dividend and share value

Through careful management of all inputs we create 
profits which benefit shareholders through substantial 
and progressive dividend payments

 —  Generate cash

Growing cash-generative production through  
rapid development and disciplined use of capital

 —  Investing in growth

Recycling capital into an expanding asset portfolio  
with the potential to deliver significant and sustained cash 
flow growth

 — Return excess cash to shareholders

Generating sufficient cash throughout the investment cycle  
to fund a material and progressive dividend

Socially responsible business 
practices (ESG)

Acting with integrity and respect to support 
and sustain the communities in which we 
operate has always been central to Genel’s 
success. Key values guide our actions and 
we are committed to having the people, 
delivering the right actions, in the right way

  R E A D   M O R E  P 2 8

£41m

dividends announced in 2019

 — Value for wider stakeholders (employees, suppliers 

and contractors, customers, the public) 
Our business activities generate income for employers 
and revenue for suppliers

241

local people employed by TTOPCO

 —  Contribution to local economy

We are a key contributor to the Kurdistan Region of Iraq

17local companies supporting operations at Taq Taq

 —   Direct community development programmes

Genel aims to ensure that activities directly benefit the 
local communities in which we operate

437local people received support from our medical team

Annual Report and Accounts 2019  |  Genel Energy 

11

$

Underpinned by

Strategic Report  |  Governance  |  Financial Statements  |  Other information 
K E Y   P E R F O R M A N C E   I N D I C A T O R S

Measuring our progress

NET 2P RESERVES

124MMbbls

TOTAL NET RESERVES  
AND UNRISKED RESOURCES

6.0BNboe

NET PRODUCTION

36,250bopd

2019

2018

2017

2016

2015

124

155

150

161

2019

2018

2017

2016

242

2015

6.0

2019

36,250

5.6

2018

34,000

5.5

2017

35,000

4.4

4.2

2016

2015

53,000

85,000

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.

Performance
The majority of the decline in 2P reserves 
relates to the Tawke ﬁeld. The decline 
in reserves does not impact short-term 
production expectations, with the majority 
of the decline being later ﬁeld life barrels.

Performance
Net reserves and resources grew by 0.2 
BNboe in 2019, boosted by the increased 
stake in our Somaliland acreage.

Performance
2019 net production averaged 36,250 
bopd, an increase of 8% on the prior year. 
This was driven by growth at Peshkabir, 
where production doubled year-on-year 
and more than offset declines at the 
Tawke ﬁeld. Production at Taq Taq was 
down slightly on the prior year, although 
the success of the TT-34 well added to 
production and meant that the ﬁeld exited 
2019 with production of c.13,750 bopd.

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.

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.

12  

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FREE CASH FLOW

LOST TIME INCIDENTS

SPILLS – LOSS OF PRIMARY CONTAINMENT

$99million

0Frequency

0Frequency

2019

2018

2017

2016

2015

-225

99

99

2019

0

164

2018

0

2017

0

2016

0

2015

-7

2019

0

2018

0

2017

2016

0.6

2015

1

1

2

Deﬁnition
Cash ﬂow from generated from operating 
activities, minus capital expenditure.

Deﬁnition
Lost time incident frequency measures the 
number of lost time incidents per millions 
work hours.

Performance
In line with Genel’s strategy, the Company 
generated sufﬁcient free cash ﬂow from its 
highly cash-generative producing assets to 
invest in growth assets and pay a material 
dividend. Free cash ﬂow of $99 million, 
pre-dividend payment of $27 million, was 
achieved even as capital expenditure 
increased to $158 million in 2019, up 
$63 million on the previous year, and 
despite the non-receipt of $54 million in 
payments from the KRG relating to export 
sales in August and September 2019.

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.

Performance
There were no lost time incidents in 2019, 
and it is now over four years and more than 
11 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. 
In 2019 there were 66 HSE management 
site visits conducted, 105 emergency 
response drills took place, and 320 safety 
observations were submitted, illustrating 
the focus on safety from the top down.

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.

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 2019, repeating 
the performance of 2018.

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 and Accounts 2019  |  Genel Energy 

13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
O P E R A T I N G   R E V I E W   –   P R O D U C T I O N

The only multi-licence producer  
in the Kurdistan Region of Iraq

PA U L   W E I R 
C H I E F   O P E R AT I N G 
O F F I C E R

Increasingly  
diverse,  
low-cost 
production.

14  

Genel Energy  |  Annual Report and Accounts 2019

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Reserves and resources development
Genel’s proven (1P) and proven plus probable (2P) net 
working interest reserves totalled 69 MMbbls (31 December 
2018: 99 MMbbls) and 124 MMbbls (31 December 2018:  
155 MMbbls) respectively at the end of 2019.

The majority of this decline related to the Tawke ﬁeld. The decline  
in reserves does not impact short-term production expectations, 
with the majority of the decline being later ﬁeld life barrels. 

Net contingent resources (2C) have more than doubled to 
152 MMbbls, following an external audit conducted by ERCE that 
estimated a mid-case total recoverable oil resource at Sarta of 
593 MMbbls, of which 264 MMbbls is classiﬁed as 2C resource.

Production
Working interest production in 2019 was 36,250 bopd 
(2018: 33,690 bopd), in line with guidance and an increase of 8% 
on the prior year. This increase was driven by the performance of 
Peshkabir, where gross production doubled to 55,190 bopd. In total, 
19 new wells added to production in 2019, with drilling split across 
the Tawke, Peshkabir and Taq Taq ﬁelds. 

These new wells have continued to diversify our producing well 
stock, and our production now comes from over 80 wells at 
three ﬁelds. The portfolio will be yet more diverse and reliable 
for production and cash ﬂow with the addition of production at 
Sarta later this year. While average production in 2020 to date is 
34,400 bopd, in line with guidance, the delayed expenditure at 
Tawke means that 2020 net production guidance of close to Q4 
2019 levels of 35,410 bopd is expected to be impacted. The reduced 
producing asset work programme, which could potentially save up 
to $50 million, will result in increasing cash ﬂow generation in 2020 
at the prevailing oil price, although lower exit rate production will 
impact 2021.

Producing assets
Tawke PSC (25% working interest)
Gross production on the Tawke PSC, operated by DNO, averaged 
123,940 bopd, of which Peshkabir contributed 55,190 bopd. 

Peshkabir’s impressive performance was driven by the successful 
addition of production from all four wells completed in 2019. 
Ten wells are currently producing at the Peshkabir ﬁeld. At the 
Tawke ﬁeld, the existing well stock at the Tawke ﬁeld produced in 
line with expectations. Further development drilling activity helped 
to offset natural ﬁeld decline in the ﬁeld, and 12 wells came onto 
production in 2019. 

The Peshkabir-12 exploration well has been drilled and testing is 
ongoing, and a further four ﬁrm, and two contingent, producing 
wells had been scheduled for 2020. 13 ﬁrm and two contingent 
producers were planned to be drilled at the Tawke ﬁeld in 2020, 10 
in the Cretaceous and others in the Jeribe, as the Operator aimed 
to minimise decline rates. Given the fact that staff movements 
and rotations have been impacted by border closings, quarantines 
and other coronavirus travel restrictions, and the current delay 
in payments from the KRG, this investment has been scaled back. 
Of the four rigs at the Tawke site, one rig is set to be released 
following the completion of T-69, while two other rigs are set 
to complete the current wells at Peshkabir and Tawke and then 
remain on site, allowing for a prompt resumption of activity once 
the external environment allows. One rig will continue activity at 
Tawke, focused on workovers and well interventions. Given the 
performance of the underlying well stock in 2019, this deferred 
investment is expected to be cash ﬂow positive in 2020, although 
the increased decline will impact 2021. 

The operator expects the Peshkabir-to-Tawke gas gathering and 
reinjection project, designed to eliminate ﬂaring at Peshkabir as 
much as practicable while increasing oil recovery rates at Tawke,  
to be completed in April 2020.

Taq Taq (44% working interest, joint operator)
Production at Taq Taq was robust in the ﬁrst half of 2019, averaging 
13,150 bopd, as drilling on the ﬂanks continued to be successful. 
The TT-32 deviated well completed in January on the northern 
ﬂank of the ﬁeld, followed by the TT-20z well on the western ﬂank, 
and both added production of over 2,000 bopd. These wells then 
saw a decline in production and were choked back to control water 
production. Following the testing of water from the TT-33 well, on 
the southern ﬂank, production reduced in the second half of the 
year, and the overall average for 2019 was 11,960.

The potential of the southern ﬂank is under evaluation, and Genel 
has since refocused efforts on the northern ﬂank of the ﬁeld. 
The TT-19x well was successfully put on production in the second 
half of the year with a rate of 1,500 bopd, and has been on plateau 
for ﬁve months. The TT-34 horizontal well entered production in 
December at over 2,000 bopd, and ﬁeld production has increased 
to average 12,300 bopd in 2020 to date. The latest well on the 
northern ﬂank of the ﬁeld, TT-35, spud on 6 January and drilling 
is ongoing. Further activity at Taq Taq is focused on maximising 
cash generation. Given the current oil price environment and 
capital efﬁciency of the asset, Taq Taq is not a current capital 
allocation priority, although this will be reassessed as external 
conditions improve.

Remaining reserves (MMboe)

Resources (MMboe)

1P

Gross

379
(50)
–

–
–

(71)

258

Net

99
(13)
–

–
–

(17)

69

2P

Gross

574
(50)
–

–
–

(70)

455

Contingent

1C

2C

Prospective

Best

Net

155
(13)
–

–
–

(18)

124

Gross

1,274
–
–

–
–

19

1,294

Net

1,230
–
–

–
–

Gross

2,826
–
–

–
–

Net

2,761
–
–

–
–

Gross

4,267
–
–

–
–

Net

2,731
–
250

–
–

(58)

1,173

(234)

2,592

(447)

2,313

105

4,372

555

3,536

31 December 2018
Production
Acquisitions
Extensions and 
discoveries

New developments
Revision of previous 

estimates

31 December 2019

Annual Report and Accounts 2019  |  Genel Energy 

15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
O P E R A T I N G   R E V I E W   –   P R E - P R O D U C T I O N

The potential for  
material organic growth

M I K E   A D A M S 
T E C H N I C A L   D I R E C T O R

Conversion of 
resources into 
reserves is a  
key objective.

16  

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Pre-production assets
Sarta (30% working interest)
Following completion of the farm-in in February 2019, the ﬁeld 
partners have progressed the Phase 1A development towards ﬁrst 
oil, which is on track for the summer of 2020.

Civil construction work at the Sarta ﬁeld is continuing on schedule, 
and is now 60% complete, with ﬂowlines laid and buried and the oil 
storage tanks nearing completion. Following recompletion of the 
Sarta-2 well and commissioning of the facility, Sarta-2 and Sarta-3 
will be placed on production, both of which ﬂowed c.7,500 bopd 
on test.

Phase 1A represents a low-cost pilot development of the Mus-
Adaiyah reservoirs, designed to recover 2P gross reserves 
estimated by Genel at 34 MMbbls. 

Genel estimates gross resources at Sarta to be c.500 MMbbls. 
This potential has now been validated through an external 
audit conducted by ERCE, who have estimated a mid-case total 
recoverable oil resource of 593 MMbbls, of which 264 MMbbls is 
classiﬁed as 2C resource. 86 MMbbls of this 2C resource is assigned 
to the Mus-Adaiyah reservoir, giving a 2P/2C sum for the Mus-
Adaiyah of 120 MMbbls. 

ERCE’s summed prospective oil resource estimate across the four 
proven reservoir intervals at Sarta is 295 MMbbls. 133 MMbbls is 
assigned to the Butmah reservoir, directly underlying the Mus-
Adaiyah and the same zone as the oil resource at Bina Bawi, 
of which it is geologically on trend. Taken as a whole, the Mus-
Adaiyah-Butmah reservoirs at Sarta have a summed mid-case total 
recoverable resource estimate of 253 MMbbls. 

Conversion of these resources into reserves is a key objective of the 
three well campaign scheduled for 2021, and part of the phase 1A 
pilot development, with appraisal focused on the resource hosted in 
Jurassic reservoirs a secondary objective for the 2021 wells.

With ﬁrst oil at Sarta in sight, preparations are already underway 
for this campaign. Construction work on the new well pads is due 
to start in H2 2020 and the ﬁeld partners are investigating a range 
of options to fast-track oil production from these wells should they 
be successful.

Qara Dagh (40% working interest, operator)
Genel acquired 40% equity in the Qara Dagh appraisal licence 
in February 2019, and became the operator through a carry 
arrangement, covering activity for the QD-2 well. 

Qara Dagh offers an exciting appraisal opportunity. The QD-1 well, 
completed in 2011, tested light oil in two zones from the Shiranish 
formation. The QD-2 well location has been selected c.10 km to 
the northwest of QD-1, and will test a more crestal position on 
the structure with a high angle well to maximise contact with 
reservoir fractures. 

Civil construction works have made good progress in preparation 
for the upcoming drilling operations, and the well pad and camp 
have now been completed, and the QD-2 well was on track to spud 
in Q2. The well will test the crestal portion of the prospect which, 
based on a rigorous re-mapping exercise, has a mean prospective 
resource estimated by Genel at c.400 MMbbls. Genel estimates that 
the downdip segment tested by the QD-1 well deﬁnes a 2C resource 
of 47 MMbbls.

The impact of COVID-19 on the operating environment in the KRI 
means that it is now increasingly likely that the spudding of the 
QD-2 well will be delayed. It is hoped that this impact will be short 
lived and the well, which will take around six months to complete, 
will be drilled as soon as the outlook allows.

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 have continued to 
explore a commercial solution to allow the unlocking of the 
material resources.

Negotiations between Genel and the KRG regarding a staged gas 
and oil development at Bina Bawi resulted in an understanding 
on commercial terms being reached in September 2019. 
Genel continues to wait to receive the promised draft legal 
agreements reﬂecting this, and the development of Bina Bawi is 
now on hold until tangible progress is seen from the MNR. 

Under the existing PSCs for both Bina Bawi and Miran, effective 
from 30 April 2020 and 31 May 2020 respectively, the KRG has a 
right (not an obligation) to terminate the PSCs in the absence of 
new Gas Lifting Agreement(s) being in place. The KRG is required 
under the PSCs to give notice of its intention to terminate and there 
are various consequent provisions in the PSC that provide periods 
for remedy by Genel and/or delay to any purported termination  
by the KRG.

African exploration
Onshore Somaliland, a farm-out process relating to this highly 
prospective SL-10-B/13 block (Genel 100% working interest, 
operator) began in Q4 2019, with Stellar Energy Advisors appointed 
to run the process. A number of companies are assessing the 
opportunity, and Genel had been aiming to conclude the farm-out 
process in H1 2020. The subsurface potential of the acreage has 
been endorsed through the process to date, while the company 
continues to counsel prospective partners with respect to the 
operating and political landscape. 

Offshore Morocco (Genel 75% working interest, operator) the 
Company recently signed an agreement with ONHYM to extend 
the license period for the Sidi Moussa Block under a new title, the 
Lagzira Block. This will allow Genel to complete the processing and 
interpretation of the multi-azimuth broadband 3D seismic survey 
completed in late 2018 and conduct a farm-out process ahead of 
any future decision on whether to drill a well. The duration is for a 
minimum of 12 months with a further six month extension option.

Annual Report and Accounts 2019  |  Genel Energy 

17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F I N A N C I A L   R E V I E W

A cash-generative,  
resilient business

E S A   I K A H E I M O N E N 
C H I E F   F I N A N C I A L 
O F F I C E R

A compelling 
proposition of a 
material dividend 
yield and the 
value upside of  
a growth stock.

FY2019 ﬁnancial objectives
The table below summarises our progress against the 2019 the ﬁnancial priorities of the Company:

FY2019 FINANCIAL PRIORITIES

PROGRESS

 — Continued focus on capital allocation, with 

 — Capital expenditure was principally focused on Peshkabir and Tawke, 

prioritisation of highest value investment in assets 
with ongoing or near-term cash and value generation

providing rapid payback and thereafter liquidity, and providing incremental 
production beyond the ﬁnancial year of the spend

 — Investment in lower risk development opportunities 

 — Progression towards Sarta ﬁrst oil and Qara Dagh appraisal well, 

with high potential

submission of FDP for Bina Bawi

 — Continued focus on acquiring assets with the potential 
to add signiﬁcant value to the Company through near 
to mid-term cash generation 

 — The Company has performed detailed analysis on a similar number of 

external opportunities as 2018, which culminated in farm-ins to Sarta and 
Qara Dagh, with a watch list of preferred targets and a cycle of adding at 
least one new opportunity per month

 — Continued focus on the capital structure of the 

 — Dividends of $41 million (10¢ FY18 ﬁnal and 5¢ FY19 interim) were 

Company, committing to distributing a minimum of 
$40 million in dividends each year 

declared in the year, with a FY19 ﬁnal dividend retained at 10¢ per share. 
The Company remains committed to increasing the dividend

18  

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Results summary 
($ million unless stated)

Production (bopd, working interest)
Revenue 
EBITDAX1
  Depreciation and amortisation
  Exploration (expense)/credit
   Impairment of oil and gas assets
Operating proﬁt/(loss)
Underlying proﬁt2
Cash ﬂow from operating activities 
Capital expenditure
Free cash ﬂow3
Dividends declared
Cash4
Cash after dividend5
Total debt
Net cash6
Dividend (declared and proposed) per 
share (¢ per share)
Basic EPS (¢ per share)
Underlying EPS (¢ per share)2

2019

2018

36,250
377.2
321.8
(158.5)
(1.2)
(29.8)
132.3
134.9
272.9
158.1
99.0
40.8
390.7
377.1
300.0
92.8
15.0

37.8
49.0

33,700
355.1
304.1
(136.2)
1.5
(424)
(254.6)
138.9
299.2
95.5
172.7
–
334.3
334.3
300.0
37.0
–

(101.6)
49.8

1.  EBITDAX is operating proﬁt / (loss) adjusted for the add back of depreciation and 

amortisation ($158.5 million), exploration expense ($1.2 million) and impairment of 
property, plant and equipment ($29.8 million)

2.  Underlying proﬁt is reconciled on page 20
3.  Free cash ﬂow is reconciled below
4.  Cash reported at 31 December 2019 excludes $3.0 million of restricted cash
5.   Cash reported at 31 December 2019 less interim dividend paid ($13.6 million) on 

8 January 2020

6.   Reported cash less IFRS debt

The Company has delivered a third successive year of material 
cash generation, with $99 million of free cash ﬂow representing 
over half of our current market capitalisation. We have successfully 
maintained our rigorous ﬁnancial discipline – adding, derisking 
and developing assets using a low-cost, high capital ﬂexibility 
model that mitigates ﬁnancial risk, optimises cash generation and 
expedites capital return and payback. This discipline has positioned 
us well in the currently challenging environment.

Genel entered 2020 with a cash-generative, resilient business; a 
strong balance sheet; and a fully funded and balanced oil portfolio 
with material organic growth opportunities that offer upside from 
all pre-production phases of an asset lifecycle. Even with the recent 
fall in the oil price, Genel remains well positioned, with low-cost 

Brent average oil price  
(all ﬁgures $ million unless stated)

FY2019 
$64/bbl

FY2018 
$71/bbl

Revenue
Opex
G&A (excl. dep.&amor. of corp. assets)

EBITDAX
Maintenance capex
Net cash interest

Surplus before growth capex 
and dividend
Development capex
Exploration and appraisal capex

Surplus 
Working capital and other

Free cash ﬂow

Cash due in 2019 received post year-end

377.2
(37.7)
(17.7)

321.8
(115.1)
(23.4)

183.3

(22.1)
(20.9)

140.3
(41.3)

99.0

54.1

355.1
(28.7)
(22.3)

304.1
(70.4)
(25.6)

208.1

–
(25.1)

183.0
(10.3)

172.7

–

assets and the vast majority of our capital expenditure being 
discretionary, allowing us to make prudent investment choices and 
ensure that our expenditure matches the external environment.

In 2019, our conﬁdence in our business plan to replace and grow 
producing asset cash generation at value accretive cost was 
demonstrated by the commencement of a sustainable and material 
dividend, with $41 million distributed to shareholders. The ﬁnancial 
strength of our business and the ﬂexibility in our cost base has 
allowed us to reafﬁrm this dividend despite the current challenging 
macro conditions, and we remain committed to growing this 
dividend as the headwinds in the market recede.

Sustainable long-term dividend yield stock,  
with the value upside of a growth stock
The combination of a resilient business and a fully funded 
development portfolio offering material growth and cash 
generation replacement provides investors with a compelling 
proposition: the robust long-term dividend, currently yielding over 
20%, and associated management discipline of a yield stock with 
the value upside of a growth company. We will continue to maintain 
our discipline, balance and yield focus in our assessment of capital 
allocation to growth, both within our own portfolio and in relation 
to assets that we may look to acquire. We retain the ﬂexibility to 
control our pace of investment to permit allocation of capital to 
where it can be put to work most effectively at the time.

Resilient business with fast payback
Our business model is robust to challenges the sector may face in 
the future, where only the better projects will attract investment. 
The current market conditions provide an earlier test, and our 
business is ready for it. 

We focus on high-margin, low-cost projects with high capital 
velocity and rapid payback. In 2019, our production generated 
revenue of $29/bbl, with operating costs under $3/bbl. 
Our development assets that we will bring onto production have 
commercial terms and physical credentials that deliver attractive 
economics and returns and we look for new assets that will 
successfully compete with these assets for capital. This makes  
our business exceptionally resilient to a downside oil price, with  
a corporate breakeven in 2020 of $30/bbl, after dividend. 

Growth funded from existing cash ﬂows, 
cash available
In 2020, under appropriate external conditions, we expect capital 
expenditure on producing assets to be ﬂat and plan for capital 
investment in growth to double to circa $80 million, bringing Sarta 
onto production and drilling a high-impact exploration/appraisal 
well at Qara Dagh. To illustrate the resilience of our cash ﬂows, if 
$30/bbl extends for the remainder of the year and we executed 
this investment plan unchanged, the Company would end the year 
with a material net cash position after dividend, provided consistent 
payments from the KRG. The current conditions impact our pace 
of investment, but they do not change our preference for these 
assets – they were identiﬁed because they ﬁt into our resilient 
business model. This model and our ﬁnancial strength position the 
Company well to execute opportunistic asset acquisitions when 
other companies are more distressed.

Free cash ﬂow and cash
The material cash generation of the three core producing ﬁelds 
continued in 2019. Investment increased production and cash 
generation at Peshkabir year-on-year, resulting in a Company 
surplus before growth capital expenditure and dividend of 
$183 million, which is ﬂat year-on-year when adjusted for constant 
Brent oil price. Management is focused on growing surplus before 
growth capital expenditure and dividend. 

Annual Report and Accounts 2019  |  Genel Energy 

19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F I N A N C I A L   R E V I E W   C O N T I N U E D

After investment in growth the Company generated $99 million of 
free cash ﬂow (increasing to $153 million if adjusted for payments 
due in 2019 that were received in January). The 11% reduction from 
2018 free cash ﬂow of $173 million to $153 million is a result of the 
average Brent oil price being $7/bbl lower compared to the prior 
year and increased investment, primarily at Peshkabir.

At year-end, the Company reported cash of $391 million. The strong 
balance sheet and conﬁdence in the outlook for expansion of our 
producing asset portfolio supported the payment of a maiden 
dividend in 2019, with $41 million of dividends declared in year, 
equating to 15¢ per share – a dividend yield of around 6% based 
on average share price in H2 2019. The continuation of this robust 
position, and the durability of our cash ﬂows, now support the 
continuation of this dividend, and accordingly a dividend of 10¢ per 
share has today been announced. 

Cash at the end of 2019 increased to $93 million, illustrating the 
ﬁrepower that the Company has available for investment.

Flexible growth capital investment
As the Company has delivered free cash generation for the past 
three years, it has also assembled an attractive and high potential 
portfolio whilst retaining the ﬂexibility to control the pace of 
investment to react to the prevailing investment conditions and 
external environment.

Sarta and Qara Dagh were acquired in a combination deal; Sarta 
has large scale 2C oil resources and Qara Dagh represents high 
unrisked resource potential at an earlier stage in the cycle. We are 
working to unlock value from both through sanctioned drilling 
activity and in 2019, the Company invested $28 million, with both 
assets progressing in line with expectation through the year. 
At time of writing, Sarta is on track for ﬁrst oil in summer 2020. 
The appraisal well at Qara Dagh was set to spud in Q2 2020, but is 
now expected to be delayed due to COVID-19.

Bina Bawi has a large scale 2C gas resource with additional 2C oil 
resources, and we are working to reach commercial agreements 
that support investment in derisking and monetising the asset on  
a basis consistent with our ﬁnancial model.

Our growth plans remain dependent on ongoing payments from 
the KRG. The KRG advised us that the delay in 2019 payments 
was caused by external factors beyond the control of the KRG. 
We have been advised that delays in 2020 have been caused by a 
reorganisation of the payment process within the KRG. The KRG 
continues to state the importance of ongoing payments to the oil 
companies that drive their economy, and we expect them to deliver 
on this promise. We will ensure that our expenditure matches our 
conﬁdence in the receipt of ongoing payments, which in the past 
were sustained when the oil price fell below $30/bbl – and this was 
a time when they were not receiving money from Baghdad and their 
exports were considerably less than the nearly half a million barrels 
a day at present.

Outlook and ﬁnancial priorities for 2020
Our capital allocation philosophy remains the same, despite the 
recent fall in oil price – invest in those projects with the potential 
to create most shareholder value, targeting those assets that ﬁt 
the criteria set out previously. This applies both to allocation of 
capital to the existing portfolio and also to assets or opportunities 
that we acquire. In 2020 we will continue to invest in accordance 
with external conditions, striking the right balance between 
investing and retaining sufﬁcient liquidity to retain our strong 
balance sheet and advantaged ﬁnancial position that underpins 
our business model and allows us to capitalise on opportunities. 
Optimising production and developing Sarta, which has an ideal 
production proﬁle to beneﬁt as the external situation evolves, are 
key priorities, and we are committed to the dividend.

20  

Genel Energy  |  Annual Report and Accounts 2019

We will continue to be disciplined in our capital allocation and 
invest in areas where we can deliver most value. Rigorous cost 
management is maintained across all operations, while ensuring 
spend is sufﬁcient to take advantage of the growth opportunities in 
the portfolio, and to maximise (net present) value of the portfolio.

For 2020 the ﬁnancial priorities of the Company are the following:

 — Maintaining our ﬁnancial strength through existing 

market conditions

 — Continued focus on capital allocation, with prioritisation of 

highest value investment in assets with ongoing or near-term 
cash and value generation 

 — Delivery of a 2020 work programme on time and on budget, that 

is appropriate to the external environment

 — Continued focus on identifying additional assets that offer 

potential for signiﬁcant value to the Company with near to mid-
term cash generation, primarily to further 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

A summary of the ﬁnancial results for the year is provided below.

Financial results for the year
Income statement
Working interest production of 36,250 bopd was increased compared 
to last year (2018: 33,700 bopd), principally as a result of higher 
average production from Peshkabir offsetting decline at the Tawke ﬁeld.

Revenue increased from $355.1 million to $377.2 million. The year-
on-year increase was caused principally by increased cost oil and 
production, despite the Brent oil price decreasing by $7/bbl.

Production costs of $37.7 million increased from last year (2018: 
$28.7 million) primarily as a result of high production contribution 
from Peshkabir. Production cost per barrel increased from $2.3/bbl 
to $2.9/bbl, mostly due to trucking costs in Peshkabir.

General and administration costs were $19.1 million (2018: 
$24.0 million), of which cash costs were $14.1 million (2018: 
$17.4 million). The reduction from the prior period is a result of 
higher capitalisation as capital activity has increased, principally  
at Sarta and Qara Dagh. 

The increase in revenue resulted in EBITDAX of $321.8 million (2018: 
$304.1 million):

(all ﬁgures $ million)

Proﬁt oil
Cost oil
Override royalty

Revenue
Operating costs
G&A (excl. depreciation)

EBITDAX
Depreciation and amortisation
Net ﬁnance cost
Income tax expense

Underlying proﬁt

FY 2019

FY 2018

117.2
147.2
112.8

377.2
(37.7)
(17.7)

321.8
(158.5)
(27.7)
(0.7)

134.9

147.1
97.8
110.2

355.1
(28.7)
(22.3)

304.1
(136.2)
(28.8)
(0.2)

138.9

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. 
Underlying proﬁt is presented in order to understand the 

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proﬁtability of the recurring business, excluding the impact of 
items that tend to be one off in nature, such as impairment and 
exploration expenditure.

Depreciation of $88.8 million (2018: $72.4 million) and Tawke 
intangibles amortisation of $68.3 million (2018: $62.1 million) 
increased year-on-year as a result of a combination of an 8% 
increase in working interest production and higher estimated  
future costs on the Tawke PSC (depreciation/bbl: $6.1/bbl  
(2018: $5.2/bbl)), noting that these costs are fully recoverable. 

An impairment expense of $29.8 million was recorded in relation 
to Tawke and Taq Taq, which is explained further in note 1 (2018: 
$424.0 million relating to Miran).

Bond interest expense of $30.0 million was in line with prior 
year. Finance income of $6.6 million (2018: $4.4 million) was 
bank interest income. Other ﬁnance expense of $4.3 million 
(2018: $3.2 million) included a non-cash discount unwind expense 
on liabilities.

In relation to taxation, under the terms of the KRI production 
sharing contracts, 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 $0.7 million (2018: $0.2 million) was related to taxation of the 
service companies. 

Capital expenditure
Capital expenditure is the aggregation of spend on production 
assets ($115.1 million) and pre-production assets ($43.0 million) 
and is reported to provide investors with an understanding of 
the quantum and nature of investment that is being made in the 
business. Capital expenditure for the period was $158.1 million, 
predominantly focused on production assets and the Sarta PSC 
($22.1 million):

(all ﬁgures $ million)

FY 2019

FY 2018

Cost recovered production capex
Pre-production capex – oil
Pre-production capex – gas
Other exploration and appraisal capex

Capital expenditure

115.1
22.1
11.9
9.0

158.1

70.4
–
12.0
13.1

95.5

Cash ﬂow, cash, net cash and debt
Gross proceeds received was $317.4 million (2018: $335.1 million), 
of which $91.5 million (2018: $92.5 million) was received for the 
override royalty. 

(all ﬁgures $ million)

FY 2019

FY 2018

Operating cash ﬂow
Producing asset cost recovered capex
Development capex
Exploration and appraisal capex
Restricted cash release
Interest and other

Free cash ﬂow
Cash received post period end

272.9
(105.1)
(18.7)
(26.5)
7.0
(30.6)

99.0
54.1

299.2
(65.3)
–
(39.7)
8.5
(30.0)

172.7
–

(all ﬁgures $ million)

FY 2019

FY 2018

Free cash ﬂow
Dividend paid (incl. expenses)
Purchase of shares
Other

Net change in cash
Opening cash

Closing cash
Debt reported under IFRS

Net cash/(debt)

99.0
(29.0)
(13.5)
(0.1)

56.4
334.3

390.7
(297.9)

92.8

172.7
–
–
(0.4)

172.3
162.0

334.3
(297.3)

37.0

Closing cash of $390.7 million and net cash of $92.8 million 
(2018: $37.0 million) exclude restricted cash of $3.0 million (2018: 
$10.0 million). Net cash is reported in order for users of the ﬁnancial 
statements to understand how much cash remains if the Company 
paid its debt obligations from its available cash on the period end date.

Reported IFRS debt was $297.9 million (31 December 2018: 
$297.3 million), comprised of $300 million of bond debt less 
amortised costs. The bond pays a 10.0% coupon and matures in 
December 2022. A reconciliation of debt and cash is provided in 
note 15 to the ﬁnancial statements.

The bond has three ﬁnancial covenant maintenance tests:

Financial covenant

Test

YE 2019

Net debt / EBITDAX 
Equity ratio (Total equity/Total assets)
Minimum liquidity 

< 3.0
> 40%
> $30m

(0.3)
71%
$391m

Net assets 
Net assets at 31 December 2019 were $1,386.1 million (2018: 
$1,331.4 million) and consist primarily of oil and gas assets of 
$1,412.5 million (2018: $1,384.2 million), trade receivables of 
$150.2 million (2018: $94.8 million) and net cash of $92.8 million 
(2018: $37.0 million).

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. 

Dividend
Maiden dividend distribution of $27.4 million (2018: nil) paid to 
shareholders in June 2019. An interim dividend of 5¢ per share was  
then paid to shareholders in January 2020. Total dividends declared 
in 2019 were $40.8 million (2018: nil), representing 15¢ per share.

Given Genel’s robust ﬁnancial position and the positive outlook for 
the Company, the Board is recommending no change in the ﬁnal 
dividend of 10¢ per share (2019: 10¢ per share), a total distribution 
of circa $27.4 million. The payment timetable is below:

 — Annual General Meeting: 14 May 2020
 — Ex-dividend date: 28 May 2020
 — Record Date: 29 May 2020
 — Payment Date: 29 June 2020

Free cash ﬂow is presented in order to show the free cash 
generated that is available for the Board to invest in the business. 
The measure provides the reader a better understanding of the 
underlying business cash ﬂows. Free cash ﬂow before dividend was 
$99.0 million, with an overall increase in cash of $56.4 million in the 
year (2018: $172.3 million).

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 2019 and consequently that the Company is 
considered a going concern.

Annual Report and Accounts 2019  |  Genel Energy 

21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
R I S K   M A N A G E M E N T

Bringing new rigour to risk

We are bringing the same rigour 
to Genel’s organisational risk 
management processes as we 
do to health, safety and the 
environment.

Bowtie method
The bowtie method is widely used in the industry to improve 
the identiﬁcation, design and management of prevention and 
mitigation controls, and has been used by Genel in our HSE work for 
a number of years. This has now been adopted and implemented 
into our risk management through direct training and software. 
Departmental champions were identiﬁed to develop bowtie 
diagrams for the risks that they are managing. A deep dive is 
planned for high risks to review progress, share experience and 
embed this within the Company. 

Leading indicators 
Leading indicators are identiﬁed measures to test the robustness  
of controls. These were developed and implemented for selected 
critical controls to manage and measure risk proactively. The scope 
will be expanded for upcoming drilling projects and production 
operations and other principal risks as per the Company 
risk register.

Governance
Different type of risks have been classiﬁed as strategic, external, 
operational and ﬁnancial, and allocated to the appropriate Board 
Committees (Reserves, Audit, HSSE, International Relations). 
The committees then review the annual risk signoff forms that 
were submitted by the risk owners. An internal audit plan was also 
prepared by using the risk register map.  

V K   G U P TA 
H E A D   O F   H S E   A N D   
R I S K   M A N A G E M E N T

Since joining Genel in 2014 as Head of HSE we have made 
signiﬁcant strides in enhancing our processes and procedures, 
and this has helped lead to the exceptional performance in this 
area, with zero lost time injuries since 2015, totalling over 11 million 
hours worked. Now as Head of HSE and Risk, I am working with the 
team to ensure we bring the same rigour to Genel’s organisational 
risk management processes as we do to health, safety and 
the environment. 

HSE issues are best addressed through working to prevent 
problems before they arise, and having the right controls and 
policies in place to mitigate as much as possible any potentially 
negative outcomes. This is the approach that we also take to risk.

The following enhancements have been made to our risk 
management and internal control systems, improving the 
effectiveness and consistency of its day-to-day implementation. 

Risk assessment
A qualitative risk assessment matrix (5x5) was developed and 
approved by the Board to align with industry best practices. 
Risk register workshops were held for all assets to identify, 
assess and control risks. These were attended by all department 
representatives and facilitated through brainstorming and 
guidewords. Current risks with existing controls were assessed 
and additional controls recommended to reduce the residual risk 
to As Low As Reasonably Practical (‘ALARP’).

22  

Genel Energy  |  Annual Report and Accounts 2019

B O A R D   A N D   C O M M I T T E E   S T R U C T U R E

BOARD

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 — Overall responsibility  
for risk oversight 
 — Overall responsibility  
for all principal risks

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AUDIT  
COMMITTEE

 READ MORE 

P50

REMUNERATION  
COMMITTEE

 READ MORE 

P59

NOMINATION  
COMMITTEE

 READ MORE 

P53

HSSE 
COMMITTEE

 READ MORE 

P55

RESERVES 
COMMITTEE

 READ MORE 

P57

INTERNATIONAL 
RELATIONS 
COMMITTEE

 — 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

 — Manage external 

risk

R E S P O N S I B I L I T I E S

B O A R D
 — 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 

  R E A D   M O R E   P 3 7

E X E C U T I V E   C O M M I T T E E
 — 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 

  R E A D   M O R E   P 3 4

R I S K   O W N E R S
 — 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

  R E A D   M O R E   P 2 4

STRATEGY

!

RISK ASSESSMENT AND  
REVIEW IDENTIFIED RISKS

BOARD SETS CONTROLS 
TO MITIGATE OR MANAGE RISKS

!

RISK REGISTER DOCUMENTS  
RISKS AND ALLOCATES EACH  
RISK TO A RISK OWNER

REPORTING AND ASSURANCE ON  
EFFECTIVENESS OF CONTROLS

RISK OWNER REPORTS 
ASSESSMENT OF RISKS  
TO THE BOARD

RISK OWNER DESIGNS,  
OPERATES, MONITORS AND 
REPORTS ON CONTROLS

Annual Report and Accounts 2019  |  Genel Energy 

23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
P R I N C I P A L   R I S K S   A N D   U N C E R T A I N T I E S

Principal risks  
and uncertainties

BOARD

Risk

Development 
and recovery 
of oil reserves 
Paul Weir, COO

   R E A D   M O R E   
P 1 6

Trend

Approach

Opportunities

Threats

Controls

Genel aims to realise 
the reserves value in 
its portfolio through 
deploying capital in 
line with the value 
creation expected 
from our Asset 
Development Plans.

 — Correctly 

 — Underestimation of 

 — Life of ﬁeld Asset 

characterising 
uncertainty in 
reserves outcomes

 — Cost-effective 

reservoir uncertainty 
and reservoir 
performance to 
the downside 

development of ﬁelds

 — Poor drilling 

execution performance

 — Poor operational 
performance 
reservoir performance 

Development Plans 
in place

 — Active and optimised 

performance 
drilling across all 
producing assets

 — Active 

reservoir management

 — HSSE, Asset Integrity 

and Operations 
Management Systems

Risk

Trend

Approach

Opportunities

Threats

Controls

Reserve  
replacement
Mike Adams, TD

   R E A D   M O R E   
P 1 5

Genel aims to grow 
through adding 
reserves and in 
turn long-term 
cash-generative 
production both 
from existing and 
new assets added to 
the portfolio.

 — Successful exploration 

 — Inability to progress 

 — Life of ﬁeld Asset 

assets in the portfolio 
and convert contingent 
resources to reserves

 — Failure to add inorganic 

opportunities to 
the portfolio

Development Plans 
in place

 — Active management of 

contingencies to convert 
contingent resources 
to reserves 

 — Activity has started at 
Sarta and Qara Dagh

 — Actively pursuing new 
business opportunities

and appraisal 
activity increase the 
Company resources

 — Moving projects and 
developments into 
execution increases 
company reserves

 — Successful addition 

of inorganic 
opportunities to 
the portfolio

 — Progress on Sarta, 

Bina Bawi, Qara Dagh, 
and Miran unlocks 
resource value

Risk

Trend

Approach

Opportunities

Threats

Controls

Commercialisation 
of KRI 
gas business
Bill Higgs, CEO

   R E A D   M O R E   
P 8

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.

 — Progress on the 

 — The gas project is 

gas business moves 
Bina Bawi and Miran 
towards commercial  
development 
and transformational 
monetisation 

reliant on certain key 
milestones some of 
which are beyond the 
control of the Company 

 — Expenditure maintained 
at an appropriate level 
for current probability 
of success

 — Ongoing dialogue with 

 — Slow progress in 

the MNR

negotiations with KRG

 — Preparedness to defend 
Genel’s rights in relation 
to the PSC

Risk

Trend

Approach

Opportunities

Threats

Controls

M&A activity
Esa Ikaheimonen, CFO

   R E A D   M O R E   
P 1 9

The pursuit of 
selective, value 
accretive M&A 
opportunities is part 
of the Company 
growth strategy.

 — Execution of a 

 — Execution of a 

 — Clearly deﬁned strategic 

transaction positively 
impacts the 
Company’s valuation, 
asset quality, and 
equity story, among 
other factors

transaction that 
adversely impacts the 
Company’s long-term 
liquidity, balance sheet, 
asset quality, and 
equity story, among 
other factors

 — Misalignment with 

major shareholders 
regarding targets

framework and 
characteristics for deals 
that Genel should pursue

 — Senior management 

review and assessment 
of resilience of 
investment to 
downside risks

 — An experienced Board 
oversees and signs 
off on all material 
M&A decisions

24  

Genel Energy  |  Annual Report and Accounts 2019

BOARD

Risk

KRI natural 
resources 
industry and 
regional risk 
Pars Kutay, Head of 
Government Affairs

   R E A D   M O R E   
P 7

K E Y

Increased

Unchanged

Decreased

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Trend

Approach

Opportunities

Threats

Controls

A strong relationship 
with the KRG 
facilitates the 
realisation of the 
value of Genel’s 
principal oil and 
gas assets.

 — Ongoing strong 

relationship with KRG 
facilitates further 
success in KRI

 — Stable environment 

for operations allows 
Genel to pursue 
strategic objectives

 — Regular dialogue with 
key decision makers in 
Turkey and the KRI

 — A change in situation 
of the KRG, Turkey or 
of Baghdad and the 
wider region adversely 
effects operating 
environment in the KRI, 
including payments 

 — In the past, the Iraqi 
Ministry of Oil has 
disputed the validity of 
PSCs entered into by 
the KRG. If the validity 
of the Company’s PSCs 
were successfully 
challenged, the 
Company could be 
required by the KRG 
to accept contractor 
entitlements that 
may be materially 
less favourable than 
the current PSCs. 
In addition export sales 
have not followed the 
PSC terms. 

 — The Iraqi Ministry of Oil 
has challenged (inter 
alia through SOMO) the 
ability of the KRG to 
independently sell oil 
produced in the KRI

Risk

Trend

Approach

Opportunities

Threats

Controls

Payment for KRI 
export sales
Bill Higgs, CEO

   R E A D   M O R E 
P 7

The Kurdistan 
Regional Government 
purchases all crude 
oil at the wellhead 
and arranges for 
payment to be 
made to Genel for 
ongoing exports.

 — Payments provide 
increased cashﬂow 
strengthening 
balance sheet and 
enabling growth

 — Regular payments 

improve 
market sentiment

 — Payments from the KRG 
delayed, reducing the 
Company’s ability to 
re-invest in line with its 
strategic priorities

 — Payments delayed 
at end of 2019 due 
to factors outside 
KRG control

 — Genel continues 

dialogue with KRG 

Risk

Trend

Approach

Opportunities

Threats

Controls

Corporate 
governance failure
Stephen Mitchell, GC

   R E A D   M O R E   
P 3 5

The Company’s 
strategy is to 
maintain the 
high standards  
of corporate  
governance.

 — Good corporate 

 — Corporate governance 

governance is proven 
to provide beneﬁts to 
business and value 
to shareholders

failure would likely have 
a negative impact on 
investor perception of 
the Company

 — Carrying out detailed 
Board Evaluation 
exercises (including 
externally facilitated 
reviews periodically) 
to monitor and assess 
performance of 
the Board 

 — Effective set of 

governance policies 
deployed across Genel 

Annual Report and Accounts 2019  |  Genel Energy 

25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
P R I N C I P A L   R I S K S   A N D   U N C E R T A I N T I E S   C O N T I N U E D

K E Y

Principal risks  
and uncertainties continued

Increased

Unchanged

Decreased

BOARD

Risk

Environmental, 
social & 
governance  
expectations
Bill Higgs, CEO

   R E A D   M O R E 
P 2 8

AUDIT COMMITTEE

Trend

Approach

Opportunities

Threats

Controls

Position the 
Company as a natural 
winner during the 
energy transition.

 — Develop a competitive 
advantage for Genel 
and distinguish it from 
its peers

 — Reduced access 

to capital

 — Negative 

stakeholder publicity

 — Introduction of punitive 
carbon or other taxation

 — ESG strategy in place 
and agreed by Board

 — ESG plan developed 

and implementation is 
ongoing, with increased 
public disclosure 

 — Leadership commitment 
and progress review 

 — ESG benchmarking 

against competitors and 
industry platforms

Risk

Trend

Approach

Opportunities

Threats

Controls

Capital structure 
and ﬁnancing 
Esa Ikaheimonen, CFO

   R E A D   M O R E   
P 2 0

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. 

 — Strong balance sheet 
protects the company 
against volatility in 
commodity prices 
and geopolitics

 — Strong and 

visible liquidity 
runway ensures 
debt repayment

 — Appropriate capital 

structure and 
discipline in allocating 
capital allows for 
the company to 
self-ﬁnance organic 
growth and to beneﬁt 
from in-organic  
opportunities

 — Failure of KRG to make 
payments for sales 
(as above)

 — A deterioration in the 

oil price 

 — Lack of access 

to capital due to 
macro developments

 — A failure in executing 

M&A strategy

 — Disciplined capital 
allocation, clear 
investment 
priorities and strong 
expenditure controls

 — Low cost of production, 
competitive onshore 
development costs

 — Strong balance sheet 
and ongoing free cash 
ﬂow even at distressed 
oil price

 — Clear M&A strategy 
and compliance with 
investment criteria 
and priorities

HSSE COMMITTEE

Risk

Trend

Approach

Opportunities

Threats

Controls

Local  
communities 
Pars Kutay, Head of 
Government Affairs

   R E A D   M O R E   
P 1 9

Supporting and 
sustaining the 
communities in 
which we operate 
is fundamental to 
Genel’s success.

 — Positive local 
relationships 
continue to facilitate 
Genel’s pursuit of 
strategic objectives

 — A loss of local 

 — Appropriate projects 

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

developed in 
accordance with the 
CSR policy, stakeholder 
management policies, 
commitment to local 
employment and 
local contractors

Risk

Trend

Approach

Opportunities

Threats

Controls

Health and 
safety risks
Vrijesh Kumar Gupta, 
Head of HSE and Risk

   R E A D   M O R E   
P 2 2 , P 3 4

Health, safety 
and environment 
management 
is a primary 
consideration across 
all Genel operations.

 — Continued strong HSE 
performance reduces 
business loss, boosts 
employee motivation 
and enhances 
company reputation

 — Failure of HSE 

procedures leads to 
injuries and/or fatalities, 
adverse environmental 
impact, and material 
reputational damage

 — Ongoing continuous 
improvement in 
processes, procedures 
and performance as we 
aim for HSE excellence

 — Regular HSE leadership 

site visits

26  

Genel Energy  |  Annual Report and Accounts 2019

P R I N C I P A L   R I S K S   A N D   U N C E R T A I N T I E S   C O N T I N U E D

Viability statement

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In accordance with provision 31 of the 2018 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 22 to 26 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 robust assessment of principal risks 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 2024.

Our 2019 Strategic Report from pages 1 to 37 has been reviewed 
and approved by the Board of Directors on 18 March 2020. 

Bill Higgs
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 override paid from the Tawke PSC as part of the RSA ends 

in 2022

 — The period captures when there is potential for material capital 

investment on a number of the Company’s pre-production assets

 — The Board 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 of our 

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 and Accounts 2019  |  Genel Energy 

27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S U S T A I N A B I L I T Y

A socially responsible contributor  
to the global energy mix

The social context is a foundation to the setting of our ESG 
expectations and bringing world-class operations to the Kurdistan 
Region of Iraq can have enormous beneﬁt. Utilising natural 
resources correctly helps reduce energy poverty, powering 
hospitals and schools and hugely improving the quality of life by 
delivering economic beneﬁts that can support a region’s growth 
and contribute to the building of a stable and secure economy. 

We take pride in the positive impact that our operations have 
on the Kurdistan Region of Iraq. Genel has focused on boosting 
local employment opportunities, building a supply chain with 
local companies, and making direct investment in projects, while 
simultaneously generating revenues from Taq Taq and Tawke that 
have formed the bedrock of the KRI’s economic growth. 

Revenue to the Kurdistan Region Government to date has funded 
the Peshmerga and helped build an economy for the Kurdistan 
Region of Iraq. 

Of course, this commitment to environmental and social 
sustainability begins with operational excellence – taking care of 
our workforce and ensuring minimal direct environmental impact 
across our operations. Health and safety is paramount for Genel, 
and we work hard to deliver a strong performance in this area. 
The rigour we apply to health and safety is replicated across all 
areas of our operations, and this focus from the bottom up helps  
us to run best-in-class operations. 

As work progresses at Sarta, Bina Bawi and Qara Dagh, we have the 
opportunity to further illustrate our ESG strategy, and will continue 
to focus direct investment initiatives on environmental beneﬁt, 
health, education, and economic empowerment. Genel will strive  
to ensure that the local community beneﬁts from the work we do  
in its proximity, demonstrating the beneﬁt that natural resources 
can deliver for a region.

These beneﬁts from our operations are a source of motivation for 
everyone at Genel. The coming pages provide more detail on how 
we deliver on our promise to be a socially responsible contributor  
to the global energy mix.

B I L L   H I G G S 
C H I E F   E X E C U T I V E 
O F F I C E R

Acting with integrity and respect to support and sustain the 
communities in which we operate has always been central to Genel 
Energy’s success as a business. I am determined for Genel to now 
further enhance and fully embed a culture of social responsibility 
throughout the organisation, based on clear corporate values, as 
a foundation to deliver results across all elements of the business. 
I am focused on deepening our commitment to positively impact 
local communities and align our company with wider ESG goals by 
implementing our long-term ESG strategy. 

Genel is a socially responsible contributor to the global energy 
mix, with a portfolio of assets that ﬁt into a future of fewer and 
better natural resource projects. Communities continue to need 
power and, as we transition to a greater use of renewable energy, 
responsibly sourced and extracted natural resources will play a 
key role in driving prosperity and powering regions as they each 
manage the pace of their own transition. The projects that retain 
value for all stakeholders will be those that are industry-leading in 
terms of cost, deliver societal beneﬁts, and minimise the impact of 
greenhouse gases into the atmosphere.

Our operations in the Kurdistan Region of Iraq embody all 
these elements in order to offer energy that is sourced in an 
environmentally responsible manner. Our assets are amongst 
the lowest cost in the industry and have a low carbon intensity. 
Furthermore, the elimination of routine ﬂaring from Peshkabir 
through reinjection is also set to economically reduce Scope 1 
emissions even further in the near future. This project leads the  
way for the reduction of ﬂaring in the KRI and is something that  
we will look to replicate going forward.

28  

Genel Energy  |  Annual Report and Accounts 2019

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Genel has defined a clear set of values 
that capture the spirit and of the 
Company, providing a creed in a way 
that each employee can work by and 
be proud of. Genel is a company that 
cares – about our employees, about 
the environment, about doing things 
in a better way and make a tangible 
difference to people’s lives in the  
areas in which we operate.

The values are practical and aligned 
with Genel’s goals – they are values that 
we live and work by on a daily basis 
that guide the direction in which Genel 
Energy is going. As we adhere to these 
values, it is our belief that the strategic 
goals of the business will be delivered.
We want people who share our values 
– the right people, delivering the right 
actions, in the right way.

O U R   V A L U E S

Integrity

Respect

Dealing with all stakeholders in an honest and 
transparent way is vital to having a positive 
corporate reputation, garnering trust and 
supporting our activities, providing the social 
licence to operate, and driving investor support

Accountability

A culture of accountability and responsibility in 
which people take pride in their commitments 
supports the safe delivery of objectives and drives 
the quality of our work

Ingenuity

Ingenuity is where Genel can set itself apart. 
A culture of a curious and open minded workforce, 
bold, inquisitive, and ready to challenge accepted 
ways of doing things can help open up new 
opportunities and drive proﬁtability

Respecting people, valuing employees of all 
cultures and developing an inclusive environment 
motivates people, and treating all partners and 
stakeholders in a way that builds relationships helps 
drive the delivery of common goals

Respecting the environment, minimising the impact 
of our operations and promoting biodiversity is also 
necessary to retaining the social licence to operate

Collaboration

Working with a collaborative mindset, both 
internally and externally, maximises synergies 
and increases the quality of outputs across the 
business, also boosting motivation and inclusivity 
in a way that drives production and a feeling of 
being valued

Annual Report and Accounts 2019  |  Genel Energy 

29

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S U S T A I N A B I L I T Y   C O N T I N U E D

Environment

Environment
Global demand for reliable and affordable energy continues to 
grow, as does society’s awareness of the adverse impacts of climate 
change. Genel sees it as essential to contribute to meeting this 
growing demand in a responsible way, demonstrating sustainability 
in a 2°C world, strengthening both our licence to operate and the 
Company’s attractiveness to investors. 

Genel is therefore committed to producing the low carbon intensity 
and high net margin barrels that will characterise industry leaders 
in a sustainable world. Our operations will continue to be managed 
in accordance with our aim of minimising emissions in order to 
mitigate potential adverse effects. This includes a focus on effective 
design, efﬁcient operation, and responsible energy use. Genel will 
also evaluate a ﬂaring policy and the resilience of its portfolio in 
order to ensure long-term shareholder value.

As part of our environmental responsibilities, we recognise that  
we operate in a water restricted region and that availability to fresh 
water is valuable. Therefore, it is a key priority of the Company to 
efﬁciently manage its water consumption and recycling practices 
as operations continue. Genel’s Board of Directors will also evaluate 
if, and when, carbon emissions and water reduction targets may be 
applicable as part of the Company’s long-term business strategy. 
Collectively, these efforts will support Genel’s aim to be a leading 
creator of shareholder value as a socially responsible producer of 
oil and gas. 

GHG Emissions
Genel reports annually on its greenhouse gas (‘GHG’) emissions in 
accordance with the requirements of the UK’s Companies Act 2006 
(Strategic Report and Directors’ Report Regulations 2013) and the 
standards outlined by the Greenhouse Gas Protocol. According to 
these methodologies, our total reportable scope 1 emissions in 
2019 were 816.16 tCO2e, which included the combustion of diesel 
and LPG. 

Our total reportable scope 2 emissions were 507.45 tCO2e, 
attributable to purchased electricity at our ofﬁces and ﬁeld 
operations. Our total reportable scope 1 and 2 emissions were 
therefore 1,323.61 tCO2e. Our 2019 emissions are signiﬁcantly 
lower than those reported in 2018 (14,150 tonnes CO2e) due to the 
completion of marine seismic activity off the coast of Morocco. 
These operations had accounted for 93% of our total 2018 GHG 
emissions. In 2020 Genel will report equity emissions from all 
operating and non-operating assets and publish our carbon 
intensity in relation to production accordingly. 

Note: 

Figures may not sum to total, because of rounding.

Scope 1: 

 Direct emissions from sources that are owned  
or controlled by the company.

Scope 2: 

 Indirect emissions from the generation  
of purchased energy.

7kg CO2/bbl

expected emissions from producing  
assets at end H1 2020

507.45tCO2e

total reportable scope 2 emissions  
were 507.45 tCO2e, attributable to  
purchased electricity at our ofﬁces  
and ﬁeld operations

30  

Genel Energy  |  Annual Report and Accounts 2019

Qara Dagh – 2 well site

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Qara Dagh

Qara Dagh is both an area of 
outstanding natural beauty, and also 
an ecologically sensitivity area. It is 
a Key Biodiversity Area, Important 
Bird Area, and Important Plant Area. 
Genel has prepared a Biodiversity 
Management Action Plan that provides 
a framework for the implementation 
of the Project’s biodiversity mitigation 
and management measures during 
all phases of operations, and this 
is followed carefully by Genel. 
For example, before civil work 
commenced, a comprehensive tree 
census was done that will allow Genel 
to rehabilitate and restore degraded 
habitats following the completion 
of work. We also work closely with 
Nature Iraq (the Country’s leading 
environmental conservation group 
who are accredited to the United 
Nations Environment Programme and 
afﬁliated to Bird Life International) 
to ensure the long-term protection 
and, where possible, enhancement 
of the ecosystem within the area of 
our operation.

Biodiversity
Genel is working in collaboration with partners to protect nature 
and achieve no net loss of biodiversity wherever we operate. 

Genel works hard to protect nature through the appropriate 
planning, design and operation of our assets. The Company 
integrates biodiversity considerations into our Environmental 
Management System, which is being developed in accordance  
to the ISO 14001 standard and ensures compliance with applicable 
biodiversity protection laws and regulations in areas we work. 
Our aim is to align development work to the International 
Finance Corporation Performance Standard 6, which represents 
international best practice for biodiversity management.

Genel has prepared a Biodiversity Management Plan (‘BMP’) 
that provides a framework for managing project risks and 
impacts speciﬁcally in relation to biodiversity and to identify and 
prioritise appropriate impact management actions. The BMP 
also provides a summary of all biodiversity actions planned for 
relevant projects and is seen to facilitate communication about 
our biodiversity risk management to external audiences such as 
regulators, local communities and other important stakeholders. 
We seek to enhance this communication and pass on our respect 
for the environment to the local community – concerted efforts 
are made to raise environmental awareness at local schools and 
universities and promote credible green initiatives that enhance 
greater sustainability.

Waste management
Genel places waste management as a priority activity when 
implementing improvements at existing sites or planning 
and designing new projects and developments. Effective and 
responsible waste handling and management are key elements of 
the Company’s HSE Management System which follows the cradle 
to grave philosophy to ensure projects consider waste minimisation 
throughout their lifecycle. Furthermore, we also ensure that waste 
management practices are tailored to the speciﬁc waste and 
characteristics of each site we operate. 

Clear objectives, targets and performance indicators are set 
for our waste management system. For example, at Taq Taq we 
have successfully surpassed our internal target of recycling over 
60% of all refuse. This ﬁgure surpasses the 2019 EU recycling 
average, and Genel is leading the way on recycling initiatives in the 
Kurdistan Region of Iraq. The success of our waste management 
strategy is a result of the training all employees receive on site 
and successful communication efforts with local contractors on 
waste management best practices. This illustrates how Genel ﬁnds 
opportunities to educate other companies on best environmental 
practices and incorporate sustainability efforts beyond the scope 
of our business. 

Annual Report and Accounts 2019  |  Genel Energy 

31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S U S T A I N A B I L I T Y   C O N T I N U E D

Social

Social
Natural resources, utilised in the right way, can be a huge beneﬁt to 
the quality of life in host countries. Genel aims to ensure that this is 
the case. We want to be known as a company that cares, that lives 
our values, listens to the communities affected by our activities 
and plays an appropriate role in meeting their developmental 
aspirations. Speciﬁcally, we want to be able to build local capacity 
and create local job opportunities, both with Genel and through 
creating a local supply chain with highly skilled opportunities. 
We partner with and invest in communities close to our operations 
to achieve mutual long-term beneﬁts, and help local people develop 
the skills to thrive and play a part as we work with them to unlock 
the potential of their natural resources.

In line with these efforts, Genel established a new CSR Policy based 
on the ISO26000 Guidance on Social Responsibility to help manage 
regional community expectations and the broader internationally 
accepted scope of CSR associated with labour practices, human 
rights and the environment. This policy assists Genel’s efforts 
to apply a systematic methodology to the implementation of the 
company’s CSR programmes in the future. 

The projects Genel sponsors in the KRI region are developed 
after intensive talks with local communities, authorities and the 
MNR. It is through community engagement that Genel identiﬁed 
the most urgent needs, and has accordingly made a commitment 
to concentrate on key areas including economic development, 
improved community health, and education. 

Health and education 
In partnership with TTOPCO, our medical teams periodically 
share their services with neighbouring villages by offering routine 
medical checks. In total, 2019 saw 47 medical visits made to 10 
villages surrounding Taq Taq and over 437 patients receiving 
medical support. 

In the Qara Dagh region, major projects carried out in 2019 
included provision of kerosene and heaters this past winter for 
36 local elementary and secondary schools attended by a total of 
1,754 students. Additional efforts were made to improve the local 
learning environment by donating toys and funding the carpeting  
of a local kindergarten, supplying sports equipment to a sports club, 
and purchasing a set of computers for the library. Each one of these 
activities offers much needed resources and services, and has an 
enduring impact on neighbouring communities. 

32  

Genel Energy  |  Annual Report and Accounts 2019

Genel employees 
participating in 
a community 
volunteering project

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Local nursery that 
receives support 
from Genel

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Hired locals 
receiving brieﬁng on 
upcoming work

Community development 
Genel’s community development efforts aim to help empower 
local community members and promote self-sustaining economic 
development. Initiatives highlight how oil and gas activity can have 
a positive direct impact on other economic sectors. Our training 
centre at Taq Taq is utilised by local community participants 
to receive valuable skills training to boost their employability. 
Yet perhaps the most meaningful contribution Genel made in 2019 
to community development was related to water. 

Local hiring 
The greatest demand we have from local people, and the most 
direct way we can improve their lives, is to provide employment. 
By employing and buying locally whenever possible, and requiring 
that our contractors do the same, we can make an immediate 
difference to local families. TTOPCO has provided jobs for 241 local 
people, more than two-thirds of the entire employee base, with 
many others employed by the contractors who work for us. We also 
continue to utilise local companies and suppliers wherever possible. 

Due to the lack of water access in the region, Genel embarked on  
a strategic project to fund the construction of a water pipeline from 
the Taq Taq river to ﬁve neighbouring villages. A local company 
has been awarded the business and upon completion in late 2020 
an approximate 1,100 residents will have direct access to clean 
water for drinking and domestic use, boosting the development 
of the area. Other community development initiatives for 2019 
included the provision of 100 tonnes of fertilizers for 1,500 farmers 
around Qara Dagh and gifting an electric crane to the electricity 
department so that power lines can be repaired more easily. 

Around Sarta, our partners Chevron have developed a dairy 
farming project that has proven successful in providing economic 
empowerment to local women, which mirrors Genel’s focus as was 
previously demonstrated at Chia Surkh and elsewhere. To date, 127 
families from ﬁve surrounding communities are earning income of 
between $300 to $500 per month and milk production has reached 
2,200 litres per day. As Genel takes control of operations, we will 
look to build upon such successes and contribute to similar social 
investment projects at and other assets. 

Genel Energy has put in place a Local Content Policy and 
Procedures (‘LCP’) to ensure that we beneﬁt the local community 
as much as possible. The aim is to give local contractors an 
opportunity to participate in our future operations. The LCP also 
ensures that our contractors prioritise appropriate local services 
and hire locally as much as possible. Moreover, we place emphasis 
on providing businesses to community centred companies, 17 of 
which are currently supporting our Taq Taq operations. 

In 2020 we will enhance our existing work on local hiring and 
local procurement, including better documentation ﬁgures on 
job creation and supply chain opportunities, improving internal 
alignment around local procurement, and expanding the small  
and medium-sized enterprise development programmes. 

Annual Report and Accounts 2019  |  Genel Energy 

33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S U S T A I N A B I L I T Y   C O N T I N U E D

People and diversity 
In line with our core values, Genel is proud to employ a diverse 
and balanced workforce, and is committed to providing equality 
of opportunity for all employees and job applicants. We aim to 
create a working environment in which all individuals can make best 
use of their skills, free from discrimination or harassment, and in 
which all decisions are based on merit. 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. For more 
information, our Diversity & Equal Opportunities Policy is available 
on our website.

Genel’s commitment to inclusivity is evident in its employee proﬁle. 
As of 31 December 2019, we employed 130 people across four 
regional ofﬁces, with 60 employees in Ankara, 29 in London, 24 
in the Kurdistan Region of Iraq, and 17 in our African operations. 
Beyond these geographies, our employees represent 15 different 
nationalities across six continents, as we aim to attract the best 
talent from across the globe. Genel is proud to provide a working 
environment where career growth is evident for its employees. 
This element is well represented in our employee retention 
statistics. To date more than 70% of our workforce have been with 
Genel for over ﬁve years, and 17% for a decade or more. Finally, 
while our recruitment policy is to appoint individuals based solely 
on their skills experience and suitability to the role, Genel has 
strong female representation across all levels of the company. 
Currently 31% of our total workforce are women, a ﬁgure that is 
more than double the 2017 global industry average. Furthermore, 
women in Genel currently hold 14% of executive committee 
positions and 25% of management level positions. 

70%

of our workforce have been  
with Genel for over ﬁve years

31%

of our total workforce  
are women

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 
injuries (‘LTI’) across TTOPCO and Genel operations. Genel has 
continued this track record since 2015, now representing over 
11 million working hours without a single LTI. 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. 
For example, during this year Genel installed driving monitoring 
systems for all ﬁeld security vehicles and developed HSE readiness 
and assurance plans for all high risk contracts. We have also 
recently implemented a medical ﬁtness to work program for our 
employees. These initiatives, among others, helped us achieve a 
successful annual audit for OHSAS 18001:2007 certiﬁcation and 
British Safety Council 5 star rating. 

The successful track record highlights how HSE forms a core 
focus of Genel’s operations and is kept front of mind through 
regular training sessions and site visits, which demonstrate clear 
leadership and reafﬁrm our focus. In 2019 alone, we conducted 66 
HSE management site visits, 105 emergency response drills and 
two crisis simulations exercises. Furthermore, the attentiveness to 
the safe running of our operations helped us to also achieve our 
target of zero loss of primary containment events, now for two 
consecutive years. As Genel expands operations, we will continue 
to work diligently at putting in place the best possible processes to 
help continue this positive performance. 

Human rights and modern slavery
Respect is one of Genel’s core values, and we seek to conduct its 
business in a manner that respects human rights and the dignity 
of people. This is also ﬁrmly embedded in our Code of Conduct and 
human rights policy. 

Genel is also committed to acting ethically and with integrity in all 
our business dealings and relationships and to implementing and 
enforcing effective systems and controls to ensure modern slavery 
is not tolerated in our own business or in any of our supply chains. 
We are committed to ensuring transparency in our approach to 
tackling modern slavery, consistent with our disclosure obligations 
under the Modern Slavery Act 2015. 

We expect the same high standards from all our contractors, 
suppliers and other business partners. As part of our contracting 
processes, we include speciﬁc prohibitions against the use of 
forced, compulsory or trafﬁcked labour, or anyone held in slavery 
or servitude. 

34  

Genel Energy  |  Annual Report and Accounts 2019

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Governance

Governance
At Genel we recognise that climate change is increasingly a core 
issue for our stakeholders and are committed to understanding 
how a transition to a low-carbon economy poses both risks and 
opportunities for the Company. Accordingly, the governance 
structure of the Company ensures that the management of 
climate change, along with other environmental and social 
risks, is integrated across all levels of the business and is 
periodically reassessed. 

ESG risks are managed under the guidance and expertise of the 
HSSE Committee, which is briefed on a quarterly basis by the 
Head of HSE & Risk Management, who reports directly to the CEO. 
Genel has now built a team responsible for evaluating climate 
change related risks, supporting the business in developing GHG 
management strategies and overseeing the implementation 
programme. These levels of engagement provide the necessary 
attention that ESG risk assessment and mitigation deserves to 
ensure that Genel is a climate resilient company moving forward. 

ESG risk and remuneration 
Genel’s commitment to further embedding ESG into the Company 
was reafﬁrmed in 2019 when it was agreed that ESG metrics 
would be incorporated into the remuneration evaluations of 
senior management for the upcoming year. As of 2020, 10% 
of remuneration will be based upon the meeting of established 
ESG goals and objectives. The Board will discuss climate change 
and consider how it may be incorporated into the Company’s 
strategy. Initial steps have already taken place through a 2019 ESG 
benchmarking analysis scoring Genel against its peers, the ﬁndings 
and recommendations of which will be incorporated into the risk 
management of the Company. 

ESG disclosure 
In 2019 Genel submitted a trial CDP questionnaire. The exercise 
provided valuable insight into how Genel compares to its peers 
and recommendations on key focus areas for senior management. 
In 2020, Genel will continue to participate in CDP disclosure 
with the goal of improving our score. Genel will also review the 
recommendations of the Taskforce on Climate-related Financial 
Disclosures and work towards publishing the relevant information 
investors seek to ensure that Genel is a climate resilient company. 
Finally, Genel will produce a wider, more comprehensive 
sustainability report that will adopt GRI reporting standards. 

Anti-corruption and bribery
Genel does not tolerate bribery in any form and is committed to 
complying with all applicable laws and preventing, detecting, and 
deterring corruption in all its business dealings. Our Anti-Bribery 
Compliance Programme is grounded in a robust process comprising 
six essential elements, leadership and top-level commitment, clear 
policies and procedures, risk assessment, due diligence, training 
and communication, and ﬁrm oversight. More information, and our 
Anti-Bribery Policy and Anti-Bribery Procedures documents, are 
available on the Genel website. 

VK Gupta (Head of HSE 
and Risk Management) 
at Taq Taq

Annual Report and Accounts 2019  |  Genel Energy 

35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S T A K E H O L D E R   E N G A G E M E N T

Working in the interest  
of all stakeholders

Statement by the Directors in performance of 
their statutory duties in accordance with s172(1) 
Companies Act 2006

As a Jersey registered company, Genel Energy plc is not required 
to prepare a s172 statement in accordance with UK legislation, 
however, it remains the policy of the Company to comply with high 
standards of corporate governance and so we have voluntarily 
chosen to report how we take our stakeholders into consideration  
in running the business.

It is recognised that Genel Energy has a variety of different 
stakeholders, the most important of which are identiﬁed on page 
37. The Board of Directors of Genel Energy plc consider, both 
individually and collectively, that they have acted in the way they 
consider, in good faith, would be most likely to promote the success 
of the Company for the beneﬁt of its members as a whole (having 
regard to the stakeholders and matters set out in s172(1) ((a-f) of 
the Act) in the decisions taken during the year ended 31 December 
2019 (see Corporate Governance report). In particular the Board 
considered this to be the case, by reference to the approval of our 
strategy and business model supported by our viability statement 
on page 27: 

(a) The likely consequences of any decision in the long term,
Genel Energy has a balanced portfolio, with material highly cash- 
generative production and transformational growth opportunities 
in the pipeline. These opportunities are funded from our current 
cash ﬂow, and our outlook illustrates that our cash position has the 
potential to grow over the long-term while still allowing for ongoing 
portfolio investment and more. As such, in 2019 we initiated a 
material and sustainable dividend policy with shareholders being 
requested to approve the payment of our 2018 ﬁnal dividend at the 
2019 AGM. See CEO and CFO reports for more information.

(b) the interests of the Company’s employees,
Our talented, experienced and motivated staff are key to the 
success of our Company. Our commitment to employing a diverse 
and balanced team 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. 
The Board has recently approved the formalisation of Genel’s 
values, which conﬁrm to our employees that it is not just the 
business that we do, but how we do it and how it can beneﬁt others, 
that drives our success. Further information can be found in the 
sustainability report on pages 28 to 35.

The Board has also appointed a Designated Independent Non-
Executive Director who is responsible for workforce engagement 
and is able to provide insight into our employees perspectives 
on the business to the Board. Further information on workforce 
engagement can be found on page 48 of our Corporate 
Governance report. 

36  

Genel Energy  |  Annual Report and Accounts 2019

(c) the need to foster the Company’s business relationships 
with suppliers, customers and others,
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 helps 
Genel to fulﬁl its strategy. Further information can be found in the 
Strategic Report.

(d) the impact of the Company’s operations on the 
community and the environment,
Supporting and sustaining the communities in which we operate 
is fundamental to Genel’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 preserved for future generations. 
The local community projects Genel sponsors are developed after 
intensive talks with local communities and focus on key areas of 
economic development, improved community health and education. 
Genel also works hard to protect nature through the appropriate 
planning, design and operation of our assets an example of this 
can found on page 31 in relation to our activities at Qara Dagh. 
Further information can be found in the sustainability report on 
pages 28 to 35.

(e) the desirability of the Company maintaining a reputation 
for high standards of business conduct,
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. Genel Energy remains committed to operating to 
high standards of corporate governance. Our 2019 Corporate 
Governance report illustrates how the Board and its Committees 
have supported business activities while maintaining a strong 
governance culture. Further information can be found in the 
Corporate Governance report.

(f) the need to act fairly as between members of the company.
The Board of Directors’ ambition is to behave responsibly toward 
our shareholders and treat them fairly and equally, so they too may 
beneﬁt from the successful delivery of our plan. The Chairman and 
Independent Non-Executive Directors meet regularly as part of the 
Board responsibility to ensure all shareholders are treated equally. 
More information on our relationship with shareholders can be 
found in the Corporate Governance report.

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I N V E S

Annual Report and Accounts 2019  |  Genel Energy 

37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C H A I R M A N ’ S   S T A T E M E N T   O N   C O R P O R A T E   G O V E R N A N C E

Continued commitment to high 
standards of corporate governance

D AV I D   M C M A N U S 
C H A I R M A N

I am pleased to present my 
ﬁrst Corporate Governance 
Report to shareholders as 
your Chairman.

During 2019 and continuing into the ﬁrst part of 2020, there 
have been signiﬁcant changes in the composition of the Board. 
As indicated at the 2019 AGM, Chairman Stephen Whyte reported 
that he would not be seeking re-election in 2020 and accordingly 
stepped down on 3 December 2019. On behalf of the Board I would 
like to acknowledge and thank Stephen for his strong contribution 
to the success of the Company during his tenure, as he successfully 
led the Company through signiﬁcant change and set it up for long-
term growth. I would also like to thank George Rose for stepping  
up as interim Chairman on Stephen Whyte’s departure. 

In April 2019 Murat Özgül stepped down as CEO and accordingly 
Bill Higgs, who joined the Company as COO in November 2017, was 
appointed as his successor. Murat took up a transitional role as 
Special Advisor to the Board, focusing on a number of key strategic 
objectives. Esa Ikaheimonen, CFO, was appointed to the Board in 
April 2019. 

On 5 February 2020 the Board appointed Sir Michael Fallon as 
Senior Independent Non-Executive Director and Deputy Chairman. 
Tolga Bilgin and Hassan Gozal were also appointed as Non-
Executive Directors. Tolga Bilgin is CEO of Bilgin Energy and Hassan 
Gozal is Chairman of Daax Corporation. Both Bilgin Energy and 
Daax Corporation are major shareholders of Genel.

38 

Genel Energy  |  Annual Report and Accounts 2019

Following the appointments, the Board recognises that the majority 
of the Board (excluding the Chairman) is not independent. It is the 
intention of the Board to appoint one further independent Director 
and return the Board to an equal balance of independent and non-
independent Directors as soon as reasonably practicable.

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 2019 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 principle 
risks on pages 22 to 26.

The Board continues to keep the governance framework under 
review and in February 2020 the Board established an International 
Relations Committee, chaired by Sir Michael Fallon. The purpose of 
this committee is to provide oversight to external developments  
and risks that may impact Genel’s activities. 

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 Committees 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 Designated Independent Non-Executive 
Director for workforce engagement, thereby providing the Board 
with additional insight into the workforce. I would like to thank all  
of our employees for their hard work and commitment throughout 
the year. Further information on workforce engagement can be 
found on 48.

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 
stakeholder engagement can be found on page 36.

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, each of its Committees and each Director were operating 
effectively to support the Company’s long-term strategic objectives. 
Further details of the Board evaluation can be found on page 49.

On a personal note I look forward to the exciting year ahead and 
working with the Board as we continue to deliver against the 
Company’s strategy. 

David McManus
Chairman

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T H E   B O A R D
O u r   C o m m i t t e e   s t r u c t u r e

BOARD OF DIRECTORS

AUDIT  
COMMITTEE

Ensuring integrity 
and objectivity of 
published financial 
information

REMUNERATION  
COMMITTEE

Ensuring an 
appropriate 
approach to 
remuneration that 
supports delivery of 
the business 
strategy

NOMINATION  
COMMITTEE

Ensuring the 
continuation of a 
high calibre Board

HSSE 
COMMITTEE

Ensuring a 
responsible and 
credible approach  
to HSSE

RESERVES 
COMMITTEE

Ensuring a robust 
reserves review 
process

INTERNATIONAL 
RELATIONS 
COMMITTEE

Monitoring external 
developments 

CHAIRMAN
George Rose

CHAIRMAN
Martin Gudgeon

CHAIRMAN
David McManus 

CHAIRMAN
Tim Bushell

CHAIRMAN
Tim Bushell

CHAIRMAN
Sir Michael Fallon

MEMBER
Martin Gudgeon

MEMBER
Sir Michael Fallon
George Rose

MEMBERS
George Rose
Tim Bushell
Sir Michael Fallon

MEMBER
David McManus

MEMBER
Bill Higgs
David McManus

MEMBER
Ümit Tolga Bilgin 
Hassan Gozal 
David McManus
George Rose

MEETINGS IN 2019
3 scheduled 

MEETINGS IN 2019
3 scheduled 
3 ad hoc 

MEETINGS IN 2019
2 scheduled 
1 ad hoc

MEETINGS IN 2019
3 scheduled 

MEETINGS IN 2019
3 scheduled 

 READ MORE P50

 READ MORE P59

 READ MORE P53

 READ MORE P55

 READ MORE P57

T O T A L   N U M B E R 
O F   D I R E C T O R s

10

I N T E R N A T I O N A L   D I V E R S I T Y
N u m b e r   o f   D i r e c t o r s

British

6

Finnish

1

Swiss

1

Turkish

1

Azerbaijani

1

B O A R D 
C O M P O S I T I O N
I n d e p e n d e n t 
d i r e c t o r s   ( 5 )

50%

N o n - I n d e p e n d e n t 
D i r e c t o r s   ( 3 )

30%

E x e c u t i v e 
D i r e c t o r   ( 2 )

20%

S K I L L S   A N D   E X P E R I E N C E 
O F   T H E   B O A R D
N u m b e r   o f   d i r e c t o r s

5

10

7

Oil and gas

Managing 
and leading

Governance

4

Financial 
capital 
markets

4

6

HSSE

Remuneration

5

Foreign 
affairs

B O A R D   T I M E   S P E N T   %

Business strategy 

Finance, budgets and risk 

Corporate governance and 
risk management 

Projects 

30%

30%

20%

20%

Annual Report and Accounts 2019  |  Genel Energy 

39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
B O A R D   O F   D I R E C T O R S
B O A R D   O F   D I R E C T O R S

A strong Board with 
demonstrable skills and 
experience in international 
oil and gas markets

1.

3.

5.

2.

4.

6.

40 

Genel Energy  |  Annual Report and Accounts 2019

1. David McManus (66)
Chairman

Appointed: 5 February 2020.

Committee memberships: Chairman of 
the Nomination Committee and member 
of the HSSE, Reserves and International 
Relations Committees.

Key skills and experience: David has vast 
experience as an international business 
leader in the energy sector with strong 
technical and commercial skills. He has over 
40 years in technical, commercial, business 
development, general management and 
executive roles across all aspects of the oil 
& gas and energy business, spanning most 
regions of the world.

Current external appointments: David 
is currently serving as a Non-Executive 
Director for a number of listed companies 
including Hess Corporation, a large, 
integrated US oil and gas company; 
FlexLNG, a Norwegian-listed LNG 
shipping company, and Costain plc, one 
of the UK’s leading smart infrastructure 
solutions providers.

Previous relevant experience: David 
retired as a Non-Executive Director from 
the Board of Rockhopper Exploration plc 
in May 2019, where he served as Chairman 
from 2016 to 2019. Other past Directorships 
include Caza Oil & Gas Inc and Cape plc, 
where he served as Chairman from 2006 to 
2008. David’s earlier career consisted of a 
number of executive positions including at 
Pioneer Natural Resources, where he was 
executive vice president for international 
operations, BG Group, Atlantic Richﬁeld 
Company (ARCO), LASMO plc, and Shell UK.

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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.

6. Martin Gudgeon (53)
Independent Non-Executive Director

Appointed: 11 September 2017.

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.

2. Bill Higgs (55)
Chief Executive Ofﬁcer

Appointed: As an Executive Director and 
Chief Executive Ofﬁcer on 7 April 2019.

Committee memberships: Member of the 
Reserves Committee. 

Key skills and experience: Bill Higgs 
joined Genel in November 2017 as Chief 
Operating Ofﬁcer and 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. Between August 2014 and July 
2019 Bill was a Director and Chief Operating 
Ofﬁcer for Ophir Energy plc where he 
was responsible for managing a global 
asset portfolio. 

Current external appointments: 
Independent Non-Executive Director of  
San Leon Energy plc.

Previous relevant experience: 
Between 2012 and 2014 Bill was CEO of 
Mediterranean Oil and Gas and oversaw 
the successful sale of the company in 2014. 
Bill previously spent 23 years at Chevron 
across a number of global roles.

3. Esa Ikaheimonen (56)
Chief Financial Ofﬁcer

Appointed: As Chief Financial Ofﬁcer on 
3 July 2017 and as an Executive Director  
on 7 April 2019.

Key skills and experience: 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. Esa holds a Masters 
Degree in Law from the University of Turku, 
specialising in tax law and tax planning.

Current external appointments: Senior 
Independent Director and Chairman of 
the Audit Committee of International Oil 
and Gas plc. Esa is also the Non-Executive 
Chairman of Lamor Corporation, a leading 
environmental service company. 

Previous relevant experience: Between 
February 2016 and August 2018 Esa was a 
director of Vantage Drilling International, 
he was Chairman of Transocean Partners 
plc from April 2014 to June 2015, and Non-
Executive Director of Ahlstrom plc from 
April 2011 to April 2015.

4. Rt Hon Sir Michael Fallon KCB 
(67)
Senior Independent Non-Executive 
Director and Deputy Chairman

Appointed: 5 February 2020.

Committee memberships: Chairman of 
the International Relations Committee and 
member of the Remuneration Committee 
and Nomination Committee. 

Key skills and experience: Sir Michael 
is a former UK Defence Secretary with 
30 years of senior political and business 
experience, serving in four British Cabinets, 
and as a Non-Executive Director on City and 
commercial boards. 

Current external appointments: Sir 
Michael is currently a member of the 
International Advisory Board of Investcorp, 
an alternative investment management 
company; Chairman of Avanton Ltd, a 
property development ﬁrm; and a member 
of the Advisory Board of HIN Global 
(cyber security). 

Previous relevant experience: Sir Michael 
was Energy Minister in the UK Government 
from 2013-2014: responsible for oil, gas, 
electricity, nuclear and renewables.

5. George Rose (68)
Independent Non-Executive Director 

Appointed: 2 June 2011.

Committee memberships: Chairman 
of the Audit Committee and member 
of the Remuneration Committee 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 Laing O’Rourke plc amongst 
other appointments.

Current external appointments: George 
is the Senior Independent Non-Executive 
Director of Experian plc and on 16 February 
2016 George was appointed as a Non-
Executive Director of EXPO 2020 LLC.

Annual Report and Accounts 2019  |  Genel Energy 

41

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
B O A R D   O F   D I R E C T O R S   C O N T I N U E D
B O A R D   O F   D I R E C T O R S   C O N T I N U E D

7

8.

9.

10.

7. Tim Bushell (60)
Independent Non-Executive Director

9. Ümit Tolga Bilgin (45)
Non-Executive Director

Appointed: 11 September 2017.

Appointed: 5 February 2020.

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 and Deputy 
Chairman at Wentworth Resources, and 
Non-Executive Director at Petro Matad, Sval 
Energi AS, and Rockhopper Exploration plc.

8. Hassan Gozal (49)
Non-Executive Director

Appointed: 5 February 2020.

Committee memberships: Member of the 
International Relations Committee.

Key skills and experience: Hassan Gozal 
has signiﬁcant international business 
experience in the energy, oil & gas, 
construction and property development 
sectors as well as with public private 
partnership (PPP) projects in the healthcare 
sector. Hassan is the sole owner and 
Chairman of Daax Corporation FZE. 
Through his current roles and previous 
positions, Hassan brings regional 
knowledge and an understanding of 
business development to the Board. 

Current external appointments: Hassan 
is currently the owner and Chairman of 
Santevita Hospital Management BV, a 
company recently set up to develop new 
health initiatives in Iraq and the Middle East; 
Kuraz Enerji A.S., an energy production 
business in Iraq; Daax Construction MMC,  
a construction company; and Ocean Energy 
FZE, an oil trading company.

Committee memberships: Member of the 
International Relations Committee. 

Key skills and experience: Tolga Bilgin has 
current experience within the energy sector 
as CEO and Deputy Chairman of Bilgin 
Enerji Yatirim Holding A.S. and has held this 
position since 2014. Bilgin Energy is one of 
the largest companies within the Turkish 
energy sector. Through his current role 
and various positions held at Bilgin Energy 
managing the development, ﬁnancing 
and execution of wind, hydro and thermal 
energy projects, Tolga brings experience in 
management, leadership, M&A and project 
ﬁnancing to the Board.

Current external appointments: 
Since 2006 Tolga has been serving as 
the Chairman of the Wind Power and 
Hydropower Plants Businessmen’s 
Association and was also appointed as 
Deputy Chairman of Turkish Electricity 
Producers Association in 2018.

10. Nazli K Williams (42)
Non-Executive Director

Appointed: 21 November 2011.

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 (including 
on-air promotion and print TV guides) 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).

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E X E C U T I V E   C O M M I T T E E
E X E C U T I V E   C O M M I T T E E

1.

2.

3.

4.

5.

6.

1. Mike Adams
Technical Director

4. Pars Kutay
Head of Government & Public Affairs

Formerly Head of Exploration and New 
Business, Mike was appointed as Technical 
Director on 1 June 2019, with responsibility 
for all pre-production activities relating to 
exploration, appraisal, and new business, 
as well as the subsurface department. 
Mike has 28 years of experience in the 
oil and gas industry in a wide variety 
of exploration, exploitation and global 
business development roles. Prior to joining 
Genel in 2012, Mike worked in a series 
of technical and leadership positions for 
companies including British Gas, Amerada 
Hess, Gulf Keystone Petroleum and Sterling 
Energy. Mike holds a MSc in Petroleum 
Geology from Imperial College London and 
is a Fellow of the Geological Society.

2. Paul Weir
Chief Operating Ofﬁcer

Paul joined Genel as Chief Operating Ofﬁcer 
in January 2020. Paul has over 30 years of 
global experience in oil and gas operations. 
Prior to Tullow Oil, he previously spent 
13 years at Talisman, where he was 
VP Production & Exploration, leading 
operations at block PM3 at the Malaysia/
Vietnam maritime border, Talisman’s 
largest operated asset. He previously 
worked at Nippon Oil and Total Fina Elf.

3. Stephen Mitchell
General Counsel

Stephen Mitchell has practiced as a lawyer 
for over 35 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.

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.

5. VK Gupta
Head of HSE and Risk Management

Previously Genel’s Head of HSE, VK 
was appointed Head of HSE and Risk 
Management on 1 June 2019. VK has 30 
years of experience in oil and gas industry. 
Immediately prior to joining Genel, he was 
Vice President for HSSE for BG Group, UK. 
At the beginning of his career he worked 
with ONGC and Enron Oil & Gas at offshore 
oil and gas platforms in operational 
roles across projects, maintenance and 
production for twelve years and became 
an offshore installation manager. Then he 
moved to HSSE management and worked in 
India, UK, North Africa and South America 
for BG Group delivering transformational 
performance improvement. VK holds a 
B.Tech Honours in Electrical Engineering 
and an MBA from Indian Institute 
of Technology.

6. Gozde Tutanc
Head of Human Resources

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.

Annual Report and Accounts 2019  |  Genel Energy 

43

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O R P O R A T E   G O V E R N A N C E   C O N T I N U E D

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 to 11.

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 for all staff. All issues raised 
via this route are investigated and reported to the full Board.

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 year under review (2018: 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 2019 and 
conﬁrm that they have operated effectively.

During 2019, the Company enhanced its processes to manage 
conﬂicts of interest through the inclusion of signiﬁcant 
shareholders. The Company Secretary wrote to each of the 
signiﬁcant shareholders requesting their co-operation to identify 
conﬂicts of interest and will continue to engage with them to 
identify any actual or potential conﬂict of interest that may arise 
on an ongoing basis. The Company’s Conﬂict of Interest Policy also 
requires our employees to declare any actual or potential conﬂicts 
of interest. 

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.

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 2019.

Genel Energy plc is a Jersey incorporated 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 with the exception of Provision 11 
as since 3 December 2019 the majority of the Board (excluding the 
Chairman) is not independent. The Board recognises that in June 
2020 one of our Independent Non-Executive Directors, George 
Rose will have completed his nine-year term of ofﬁce, however the 
Board considers that he remains independent and his continued 
membership is in the best interests of the Company, helping to 
preserve corporate memory and avoid undue disruption. 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 are being trained over the course of 2020 on how to 
represent Genel in accordance with the principles of our newly 
refreshed 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.

44 

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B O A R D   A T T E N D A N C E

GEORGE 
ROSE1

BILL HIGGS2

Scheduled
6/6

Ad-hoc
8/8

Scheduled
4/4

Ad-hoc
4/4

ESA 
IKAHEIMONEN3

Scheduled
4/4

TIM BUSHELL

MARTIN 
GUDGEON

NAZLI K. 
WILLIAMS

STEPHEN 
WHYTE4

MURAT 
OZGUL5

Ad-hoc
4/4

Scheduled
6/6

Ad-hoc
7/8

Scheduled
6/6

Ad-hoc
8/8

Scheduled
6/6

Ad-hoc
8/8

Scheduled
5/5

Ad-hoc
7/7

Scheduled
2/2

Ad-hoc
4/4

Attendance 
scheduled6
100%

Attendance 
scheduled6
100%

Attendance 
scheduled6
100%

Attendance 
scheduled6
93%

Attendance 
scheduled6
100%

Attendance 
scheduled6
100%

Attendance 
scheduled6
100%

Attendance 
scheduled6
100%

1.  George Rose was appointed as Interim Chairman on 4 December 2019
2.  Bill Higgs was appointed as a Director and CEO on 7 April 2019
3.  Esa Ikaheimonen was appointed as a Director on 7 April 2019
4.  Stephen Whyte resigned as a Director on 3 December 2019
5.  Murat Ozgul resigned as a Director on 7 April 2019
6.  Denotes the attendance percentage at scheduled and ad-hoc Board Meetings by 

each Director

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 
sustainability section of this report on pages 28 to 35.

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.

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 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, values, objectives, business and ESG 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 ten directors on the Board, of whom two are 
Executives and eight (including the Chairman) Non-Executive. 
Five are independent under the Code (including the Chairman 
who was independent on appointment) and three are not 
considered independent.

Annual Report and Accounts 2019  |  Genel Energy 

45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MONTH

HIGHLIGHTS OF BOARD ACTIVITY

January

 — Approved the trading and operations 

update

 — Board effectiveness review face-to-face 

meetings held

 — Approved the acquisition of interests in 

the Sarta and Qara Dagh PSC’s

 — Reviewed and approved the 2018 

Annual Report and Accounts

 — Reviewed and approved the dividend 

policy

 — Approved the revised 2019 budget

 — Discussed the Company’s talent and 
performance management culture

 — Approved the appointment of Bill Higgs 

as an Executive Director and CEO 
and Esa Ikaheimonen as an Executive 
Director

 — Approved the maiden dividend

May

 — AGM

June

July

 — Received feedback from workforce 

engagement activities 

 — Approved the commencement of a 

share buyback programme

 — Reviewed and approved the half-year 

results statements 

 — Reviewed operations readiness status

 — Discussed Board composition  

and Chairman succession

 — Reviewed stakeholder engagement 

activities

September

 — Reviewed and approved business 
strategy (including ESG strategy)

 — Reviewed the ﬁve-year business plan

 — Monitored Bina Bawi commercial 

negotiations

October

 — Approved the trading and operations 

update

December

 — Approved the 2020 work programme 

and budget

 — Monitored Bina Bawi commercial 

negotiations

C O R P O R A T E   G O V E R N A N C E   C O N T I N U E D

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 high standards 
of governance.

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.

March

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 40 and 42 of this Annual Report.

April

Independence of the Board
The Independent Non-Executive Directors Tim Bushell, Sir 
Michael Fallon, Martin Gudgeon and George Rose are responsible 
for ensuring an appropriate challenge of management and 
the decisions of the Board. David McManus (as Chairman) 
was considered independent at the time of his appointment. 
The Independent Directors and the Chairman meet regularly  
in a private session after Board meetings and on other occasions. 

The Non-Executive Directors who are not considered independent 
are Ümit Tolga Bilgin and Hassan Gozal who were both appointed 
on 5 February 2020 and Nazli K. Williams who has been nominated 
for appointment to the Board by Focus Investments Limited in 
accordance with the relationship agreement between the Company 
and Focus.

The Board recognises that the majority of the Board (excluding the 
Chairman) is not independent. It is the intention of the Board to 
return to an equal balance of independent and non-independent 
directors as soon as practicably possible. 

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 fourteen meetings in total, eight of which were in 
addition to those scheduled.

There are detailed agendas for each Board meeting which are 
developed by the Chairman, the CEO 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 in-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 Directors receive board papers and other relevant information 
in a timely manner ahead of meetings. Board papers are delivered 
through an electronic 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.

46 

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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.

David McManus
Chairman

David McManus 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 40.

Bill Higgs 
Chief Executive Ofﬁcer

Bill Higgs 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.

Sir Michael Fallon 
Senior Independent Non-
Executive Director

Sir Michael Fallon 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 acts as a sounding board for the 
Chairman and an intermediary for 
other Directors if and when necessary.

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. Following their appointment to the 
Board, David McManus, Sir Michael Fallon, Ümit Tolga Bilgin and 
Hassan Gozal have received a full and comprehensive induction 
to the operations, processes, policies and procedures across the 
business. The induction included a comprehensive schedule of 
meetings during February 2020 in London and will continue with 
visits to Ankara and KRI later during the year. Ongoing development 
and refresher training is also provided as and when particular topics 
are identiﬁed. 

As part of each of the Director’s ongoing development a programme 
of refresher training on speciﬁc topics began at the end of 2019 and 
will continue throughout 2020. 

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 22 to 26.

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 27.

Annual Report and Accounts 2019  |  Genel Energy 

47

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O R P O R A T E   G O V E R N A N C E   C O N T I N U E D

In September 2019 the Directors held a Board meeting at the 
Ankara ofﬁce and, as part of the schedule, selected employees from 
the Ankara and London ofﬁce were invited to attend a dinner with 
Board and Executive Committee members. In addition throughout 
the year, where appropriate, the Executive Committee and their 
direct reports were provided the opportunity to present various 
topics to the Board or relevant Board Committee for discussion. 

Communication with investors
We communicate on a regular basis with our investors 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. In 2019, as part of a drive to increase communication with our 
investors a monthly Q&A section on our website was introduced, 
providing investors the opportunity to submit their questions on the 
business to the Company. 

During the year the Chairman and Independent Non-Executive 
Directors held meetings with shareholders in order to discuss the 
current position of the business and its future strategy. 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 all our 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

2020 AGM
The 2020 AGM will be held on Thursday 14 May 2020 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

Board committees
The Board has established six committees: the Audit Committee, 
the Remuneration Committee, the Nomination Committee, the 
Health, Safety, Security and Environment Committee, the Reserves 
Committee and the International Relations 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. The Audit, Remuneration and Nomination 
Committees consists of only Independent Non-Executive Directors. 

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 50 to 52.

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 2019  
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
During the year, the Board continued to monitor the Company’s key 
stakeholders, their impact on key strategic objectives and how the 
Company was engaging with each stakeholder. Further information 
on stakeholder engagement and how the Board has complied with 
its duties under s172 of the UK Companies Act 2006 can be found 
on page 36.

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 in our sustainability report on pages 
28 to 35.

Workforce Engagement
The Board recognises the importance of our workforce as a 
key component in the Company’s ability to delivery its strategy. 
In 2019, the Board workforce engagement activity was enhanced 
including through Martin Gudgeon’s appointment as Designated 
Independent Non-Executive Director (‘DINED’) for workforce 
engagement. Speciﬁc activity undertaken by Martin Gudgeon in his 
role as DINED included attending Town Hall meetings at the London 
ofﬁce, attending a team building exercise in Turkey with all Ankara 
based employees and meeting with various employees one on one. 
Martin Gudgeon also participated in a 5 hour/day-long workshop 
organised by management to assist with the creation of our values 
where employees across all business functions and locations were 
also present and were provided with the opportunity to speak and 
work with him to deﬁne the spirit of the Company. Through these 
activities Martin has been able to increase visibility of the Board 
with employees as well as gain insight into our employees’ 
perspectives on the Company.

48 

Genel Energy  |  Annual Report and Accounts 2019

2 0 1 9   I N V E S T O R   R E L A T I O N S   A C T I V I T Y

100+

Over 100 institutional meetings held

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London 
Edinburgh

New York 
Chicago

Hong Kong

Site visit to KRI

Board effectiveness
In 2019, we conducted an internal review of the effectiveness of the Board, each of its Committees and each Director building on the ﬁndings 
of the external and internal reviews. The 2019 review was facilitated by the Chairman. In accordance with best practice it is our intention to 
commission an external review in 2020.

Actions from the 2018 effectiveness review

Progress made against the actions

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.

During the year the Board approved the acquisition of interests in the Sarta and Qara 
Dagh PSC’s and drove forward preparation for drilling activity at both assets during 
2020. The Board continues to focus on monetising value from Bina Bawi and Miran.

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.

During 2019 the Nomination Committee recommended the appointment of Bill Higgs 
as CEO and Executive Director and Esa Ikaheimonen as an Executive Director. 

The Nomination Committee also undertook the search for the Chairman and an 
Independent Non-Executive Director, recommending David McManus and Sir Michael 
Fallon to join the Board in February 2020. 

Ümit Tolga Bilgin and Hassan Gozal were also recommended to be appointed as Non-
Executive Directors in February 2020. 

Actions arising from the 2019 effectiveness review 

Effectiveness 

Risk

Strategy

Following changes to Board composition, the Board intends to more closely monitor its 
effectiveness during the year to ensure the new Board operates effectively and drives 
forward the Company’s strategy

Whilst the Company has an effective risk management process in place, the Board will 
schedule a number of deep dive sessions into speciﬁc risks

It was recognised that the business has a clear strategy and the Board should continue 
to focus on monetisation of Bina Bawi, continue to review value enhancing M&A 
opportunities, and further develop its ESG strategy

The independent review of the performance of each of the Directors was undertaken by George Rose as Interim Chairman and the Senior 
Independent Director led the review of the Interim Chairman’s performance. Following these performance reviews, the Board considers 
that each of the Directors continue 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 and Accounts 2019  |  Genel Energy 

49

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A U D I T   C O M M I T T E E

Ensuring integrity and clarity of 
published ﬁnancial information

G E O R G E   R O S E
C H A I R M A N

M A R T I N   G U D G E O N
M E M B E R

3   S C H E D U L E D
M E E T I N G S   I N   2 0 1 9

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

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

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, including acquisition accounting for the Company’s 30% interest in the Sarta PSC

Kept under review the risk register and retained oversight of the Group risk framework and by doing 
so support the Board on assessing the Company’s tolerance for risk

Kept key accounting policies and practices under review to ensure that they remain appropriate

To assist the Board in ensuring the effectiveness 
of the internal accounting and ﬁnancial controls of 
the Company 

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 anti-bribery 
and trade sanctions 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

Held private meetings with the external auditors without the presence of management

To review the performance of the Company’s 
internal and external auditing arrangements

Monitored the effectiveness and independence of the external auditor and compliance with the non-
audit services policy

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

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

50 

Genel Energy  |  Annual Report and Accounts 2019

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March

July

December

Scheduled/Ad-hoc

Scheduled

Scheduled

Scheduled

George Rose

Martin Gudgeon

1.  Denotes the attendance percentage at scheduled Committee meetings by each Director

Attendance1 
scheduled

100%

100%

AUDIT COMMITTEE  TIME SP EN T

MONTH

HIGHLIGHTS OF AUDIT 
COMMITTEE ACTIVITY

Governance
and audit 

40%

March

Risk management
and internal control  25%

Reserves and
resources 

5%

Financial reporting
(including impairment) 25%

Financing 

5%

July

 — Reviewed the 2018 Annual Report 

 — Reviewed signiﬁcant estimates and 
judgements in relation to the 2018 
accounts

 — Received a report from the external 
auditor regarding the 2018 ﬁnancial 
statements

 — Reviewed internal control and risk 

management 

 — Approved the 2019 internal audit plan 

 — Received an update on the legal 

compliance programme

 — Held a private meeting with the 

external auditor

 — Reviewed the half year results 
statements and disclosures

 — Received a report from internal audit 

 — Endorsed enhancements to risk 

management processes

 — Received an update on the legal 

compliance programme

December

 — Reviewed the external audit plan for 

2019 year end 

 — Received a report from internal audit

 — Received updates on the legal 

compliance programme

 — Reviewed the effectiveness of internal 

and external audit functions

 — Reviewed the risk register

 — Reviewed the Committee terms 

of reference 

Annual Report and Accounts 2019  |  Genel Energy 

51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A U D I T   C O M M I T T E E   C O N T I N U E D

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 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. 

Risk Management 
As part of the Company’s control framework the Committee 
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 22 to 26. During the course of the 
year, enhancements were made to improve the effectiveness 
and consistency of day to day implementation of risk 
management processes.

The signiﬁcant issues considered by the Committee in relation  
to the 2019 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 considered the 
process for review, key inputs and judgements made along with  
the supporting evidence when completing the assessment of the 
recoverable values of assets and the sensitivities applied. The  
value of both the Tawke and Taq Taq PSCs carried in the Company 
accounts has been reviewed and has resulted in an impairment 
charge of $21 million and $9 million respectively, as a result of  
a combination of reduction in oil price outlook and near 
term production.

Internal audit
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 engaged a secondee from EY to manage the Internal 
Audit function. Each year the Committee approves an internal audit 
plan for the year ahead, which is 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.

In December 2019, the Committee reviewed the outcome of the 
internal audit work that had been performed in accordance with the 
2019 internal audit plan and the effectiveness of the internal audit 
arrangements the Company had put in place. The Head of Internal 
Audit reported that management had been co-operative, for each 
audit performed and provided an overview of each of their ﬁndings 
and recommendations made to management including a timescale 
for implementation.

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.

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 2019, the ratio of non-audit to audit fee paid to PwC was 2:7, 
the non-audit fee paid was $0. 2 million, further details of which 
can be found on page 103 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 
eight 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 2019 the Committee reviewed the effectiveness of the 
external audit process. It reviewed papers from both management 
and the external auditors, including 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 that basis their reappointment will be proposed 
and recommended at the forthcoming AGM.

The Committee reviewed its own effectiveness for the year 
ending 31 December 2019 as part of the wider Board Effectiveness 
Review process. 

The Committee has also reviewed its terms of reference and these 
can be found on our website at www.genelenergy.com

52 

Genel Energy  |  Annual Report and Accounts 2019

N O M I N A T I O N   C O M M I T T E E

Ensuring a high calibre Board

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D A V I D   M C M A N U S
C H A I R M A N

T I M   B U S H E L L 
R T   H O N   S I R   M I C H A E L   F A L L O N
G E O R G E   R O S E
M E M B E R S

2   S C H E D U L E D
1   A D - H O C
M E E T I N G S   I N   2 0 1 9

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, CFO 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-election/election of each Director at the 2020 AGM

Keeping under review succession 
arrangements for Directors and other 
senior executives

During the course of the year Bill Higgs was appointed as CEO and following Stephen 
Whyte’s decision to step down as Chairman the Committee led the search for 
his replacement

Nomination Committee

March

August

December

Scheduled/Ad-hoc

Stephen Whyte1

Tim Bushell 

George Rose

Scheduled

Ad-hoc

Scheduled

N/A

N/A

Attendance2 
scheduled

100%

100%

100%

1.  Stephen Whyte resigned as a Director on 3 December 2019 and did not participate in the August 2019 meeting as the purpose of the meeting was primarily to discuss 

Chairman succession

2.  Denotes the attendance percentage at scheduled Committee meetings by each Director

Annual Report and Accounts 2019  |  Genel Energy 

53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O M I N A T I O N   C O N T I N U E D

NOMINATION COMMITT EE  T IM E   SPEN T

Succession 

Effectiveness 

Governance 

65%

15%

20%

MONTH

March

HIGHLIGHTS OF NOMINATION 
COMMITTEE ACTIVITY

 — Discussed Board succession planning; 
including the key skills and experience 
around the Board

 — Reviewed Directors independence and 
made recommendations on proposals 
for Director re-election/election

August

December

 — Discussed Chairman succession

 — Discussed Board and senior 

management succession planning

 — Reviewed talent management below the 

Executive Committee

 — Approved the Company’s amended 

Diversity and Equal Opportunities policy

 — Reviewed the Committee’s terms of 

reference

All the members of the Nomination Committee are Independent 
Non-Executive Directors. The Nomination Committee has been 
active in 2019 overseeing several changes to the Board and 
monitoring corporate governance developments as they affect 
the Company.

Succession planning as a topic is continuously discussed by the 
Committee and a key focus area in 2019 was senior leadership 
succession. In April 2019 Murat Özgül stepped down as CEO 
and took up a transitional role as Special Advisor to the Board. 
Following a recommendation from the Nomination Committee the 
Board approved the appointment of Bill Higgs as CEO. Views were 
also sought from major shareholders on the process and outcome. 
Esa Ikaheimonen who was appointed to the role of Chief Financial 
Ofﬁcer in July 2017 was also recommended by the Committee to 
join the Board of Directors at the same time. 

In May 2019 Stephen Whyte announced that he would be stepping 
down from the Board once a successor had been found and 
resigned as Chairman in December 2019 as the process to ﬁnd his 
successor was well underway. The Committee engaged Russell 
Reynolds, an independent executive search agency to undertake  
a comprehensive search process and then made a recommendation 
to the Board. The Committee as a whole was closely involved in 
identifying and agreeing a shortlist of candidates. Following initial 
interviews with the Committee the candidates met with other 
members of the Board. Board members provided feedback to 
the Committee and the relative merits of the candidates were 
discussed in further detail by the Committee. The Board approved 
the recommendation of the Committee that David McManus be 
appointed as Chairman with effect from 5 February 2020.

54 

Genel Energy  |  Annual Report and Accounts 2019

As part of its remit the Nomination Committee has also kept 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.

The Committee spent time considering whether 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 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. In February 2020 
taking into consideration the needs of the business and skill and 
knowledge around the Boardroom the Board also appointed Sir 
Michael Fallon as Senior Independent Non-Executive Director and 
Deputy Chairman, and Ümit Tolga Bilgin and Hassan Gozal, both 
major shareholders, as Non-Executive Directors.

George Rose will have been appointed as both a member of the 
Board and as chair of the Audit Committee for nine years in 
June 2020. George Rose has made a material contribution to the 
Company and his knowledge and experience is considered to be 
invaluable. The Committee has recommended George’s term as an 
Independent Non- Executive Director be extended and he be put 
forward for re-election at the Company’s 2020 AGM. The Board has 
conﬁrmed that he remains independent in character and judgement 
and the Board believes that taking this approach is in the best 
interests of the Company, helping to preserve corporate memory 
and avoid disruption. 

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. In the year ahead, the Nomination 
Committee will be undertaking a search for a new Independent Non-
Executive Director in order to keep the Company’s commitment 
to return the Board to an equal balance of independent versus 
non-independent directors. The Committee will keep under review 
the composition and balance of the Board to ensure the appropriate 
experience and skills to deliver the Company’s strategy.

In line with the Company’s ESG strategy the Committee also 
reviewed and approved an amended Diversity and Equal 
Opportunities policy, a copy of which can be found on our website. 
The Board and the Company are committed to employing a diverse 
and balanced workforce. We recognise 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 importance of this 
is highlighted in our Code of Conduct and underpinned by our 
recruitment practises and dealings with our partners and suppliers. 
Further information on diversity within the Company can be found 
on page 34. 

During the year the Committee also received a report from 
management on activity being undertaken to manage and develop 
talent within the business, below the Executive Committee.

The Committee reviewed its own effectiveness for 2019 as part 
of the wider Board Effectiveness Review process. The Committee 
has also reviewed its terms of reference which can be found on our 
website at www.genelenergy.com

H S S E   C O M M I T T E E

Ensuring a focused  
approach to HSSE

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C H A I R M A N

D A V I D   M C M A N U S
M E M B E R

3   S C H E D U L E D
M E E T I N G S   I N   2 0 1 9

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 operational perspective 

Monitored the collaboration of 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

To assist the Company in maintaining 
its relationships with local communities 
in which it operates, including through 
social investment and sustainable 
development activities

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

The environmental and social impact arising from our operations is reviewed regularly 
including any areas of concern 

CSR activity in 2019 and planned activity during 2020 was reviewed

Risks allocated to the Committee under the risk management system were 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 

Reviewed and monitored the GHG emissions output and disclosures made in the Annual 
Report on health and safety, environment, and community development

To assist the Company in developing the 
HSSE culture

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 2019 annual bonus performance targets

HSSE Committee

March

July

December

Scheduled/Ad-hoc

Scheduled

Scheduled

Scheduled

Tim Bushell 

Stephen Whyte1

1.  Stephen Whyte resigned as a Director on 3 December 2019
2.  Denotes the attendance percentage at scheduled Committee meetings by each Director

Attendance2 
scheduled

100%

100%

Annual Report and Accounts 2019  |  Genel Energy 

55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
H S S E   C O M M I T T E E   C O N T I N U E D

HSSE CO MMIT TEE  T IME  SP E NT

Planning and
monitoring 

Culture 

Security 

Risk monitoring
and mitigation 

45%

30%

15%

10%

MONTH

March

July

December

HIGHLIGHTS OF HSSE 
COMMITTEE ACTIVITY

 — Monitored progress made against the 

2019 HSE improvement plan

 — Reviewed performance against the 2018 

corporate KPIs in relation to HSE

 — Approved the 2019 corporate KPIs in 

relation to HSE

 — Reviewed disclosures made in the 2018 

Annual Report in relation to HSSE

 — Reviewed key risks in relation to HSSE

 — Monitored progress made against the 

2019 HSE improvement plan

 — Discussed the Company’s ESG strategy

 — Reviewed progress made against the 

Company’s localisation agenda

 — Received an update on security in 

the KRI

 — Monitored progress made against  
the 2019 HSE improvement plan

 — Discussed HSE priorities for 2020 
including relevant corporate KPIs

 — Received an update on TTOPCO HSE 

performance and culture

 — Reviewed the 2020 CSR plan and 

budget

 — Received an update on security in 

the KRI

 — Reviewed the Committee’s terms 

of reference

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 2019 the HSE plan contained actions in the following areas: 
leadership, culture and capability, risk, contractor management, 
crisis management, 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 
demonstrating visible HSE leadership and emergency response 
and crisis management simulation exercises involving the 
Board of Directors. Environmental, social and health impact 
assessments were produced and regulatory approvals received in 
preparation for drilling activity at Taq Taq, Sarta and Qara Dagh. 
Operations activities also included involvement in the preparation 
to drill the QD-2 exploration well at Qara Dagh in H2 2020 and 
providing HSE support as Genel prepares to take over operatorship 
of Sarta production facility. Ongoing health and safety campaigns 
were run throughout the year on various topics including permit to 
work, working at height and H2S safety. During 2019 the Company 
also introduced a ﬁtness to work procedure ‘Medﬁt and e-Medﬁt’ 
whereby all employees, contractors and Directors are required 
to be issued with a ﬁtness to work certiﬁcate by an independent 
third party. 

In line with the UK Companies Act 2006 (Strategic Report and 
Directors’ Reports) Regulations 2013 the Company prepares and 
reports our greenhouse gas emissions which can be found on 
page 30. The Committee reviewed the greenhouse gas emissions 
occurring from operations in 2019 and notes a reduction from 2018 
of 91% although, the Committee notes that 93% of the Company’s 
total greenhouse gas emissions in 2018 were attributable to the 
acquisition of seismic data on the Sidi Moussa licence off the coast 
of Morocco. Further information on how the Company is a socially 
responsible contributor to the global energy mix can be found on 
pages 28 to 35.

In recognition of the importance of HSE to our business the 2019 
annual bonus objectives contain an element speciﬁcally allocated 
to HSE. The Committee reviewed progress against the 2019 HSE 
objectives and made recommendations to the Remuneration 
Committee on these elements, the details of which may be found 
on page 74 of the Annual Report on Remuneration.

The HSSE Committee reviewed its own effectiveness for the 
year ending 31 December 2019 as part of the wider Board 
Effectiveness Review. 

The Committee 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.

56 

Genel Energy  |  Annual Report and Accounts 2019

R E S E R V E S   C O M M I T T E E

Ensuring a robust reserves  
and resources process

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C H A I R M A N

D A V I D   M C M A N U S
B I L L   H I G G S
M E M B E R

3   S C H E D U L E D
M E E T I N G S   I N   2 0 1 9

Objective

Action

To increase shareholder conﬁdence by 
ensuring a robust reserves and resources 
review process

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

Reviewed the reserves and resources assessment procedure 

Review asset development plans for each of the operated and non operated assets

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 evaluators

Reserves Committee

February

March

September 

Scheduled/Ad-hoc

Scheduled

Scheduled

Scheduled 

Tim Bushell 

Stephen Whyte1

1.  Stephen Whyte resigned as a Director on 3 December 2019
2.  Denotes the attendance percentage at scheduled Committee meetings by each Director

Attendance2 
scheduled

100%

100%

Annual Report and Accounts 2019  |  Genel Energy 

57

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
R E S E R V E S   C O M M I T T E E   C O N T I N U E D

MONTH

February

HIGHLIGHTS OF RESERVES 
COMMITTEE ACTIVITY

 — Reviewed the reserves and resources 

for each of the Company’s assets

March

 — Approved the 2018 reserves and 

resources statement

 — Reviewed disclosures made in the 

Annual Report in relation to reserves 
and resources

The objective of the Reserves Committee is to provide oversight 
to the assessment of the Company’s reserves and resources. 
The Committee relies on information and support from 
management and the external independent reserves evaluators to 
carry out its duties and responsibilities. In addition, the Committee 
invites experts and professionals to its meetings as appropriate.

The Committee received and considered reports from management, 
McDaniels, D&M and ERCE in relation to the 2019 annual reserves 
and resources statement.

September

 — Reviewed asset development plans for 

each asset

 — Reviewed each Independent Qualiﬁed 

Reserves Evaluator

In order to enhance the Committee’s oversight on each of the 
Company’s assets during the September Reserves Committee 
meeting asset development plans for each asset were presented to 
and discussed by the Committee. 

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.

During 2019 each of the members of the Reserves Committee were 
Independent Non-Executive Directors and had relevant technical 
and industry experience.

58 

Genel Energy  |  Annual Report and Accounts 2019

D I R E C T O R S ’   R E M U N E R A T I O N   R E P O R T

Remuneration Committee 
Chairman’s statement

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M A R T I N   G U D G E O N
C H A I R M A N

G E O R G E   R O S E
R T   H O N   S I R   M I C H A E L   F A L L O N
M E M B E R S

3   S C H E D U L E D
M E E T I N G S   I N   2 0 1 9

On behalf of the Remuneration Committee, and in my position 
of Chairman of the Committee, I am pleased to present 
Genel’s Directors’ Remuneration Report for the year ended 
31 December 2019.

As a Jersey registered company we are not required to prepare a 
remuneration report in accordance with UK legislation, however, 
it remains the policy of Genel to comply with high standards of 
corporate governance and so 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). 

Remuneration Policy
As we have chosen to comply with UK remuneration reporting 
regulations, we sought shareholder approval at our 2017 AGM  
for our Remuneration Policy. The Policy, therefore, is reaching  
the end of its three year term and so has been reviewed during  
2019 to ensure it is aligned with the Company strategy of  
delivering shareholder value through maximising the value  
of our asset portfolio.

2019 has been a transitional year for Genel as we increasingly 
become an operator of assets; with a new CEO; new corporate 
values; and clear strategic ambitions. Accordingly, the Committee 
is proposing this year to renew the 2017 Policy, subject to a small 
number of changes being made to bring it in line with developing 
practice and investor expectations, pending a fuller review of 
our Policy. This fuller review will take place during 2020, taking 
into consideration the full aspects of Genel’s transition, and 
it is intended that our revised Policy will be brought back to 
shareholders in 2021. The Policy is set out on pages 61 to 71. 

Our Remuneration Policy is designed to attract, retain and motivate 
the high quality of talent required to develop and implement our 
strategy and drive performance to deliver shareholder value. 
The same incentive structure for Executive remuneration, including 
the cash bonus and long-term incentive plans, applies throughout 
the workforce, ensuring both a focus on short-term delivery and 
aligning all individual interests with the long-term success of 
the Company. 

Remuneration for 2019
Full details of the Remuneration Committee’s decisions for 2019 are 
set out in the Annual Report on Remuneration on pages 59 to 79.

In 2019, once again, our high safety and environmental record 
was excellent, and all targets in this area were achieved. We are 
pleased to see another year of strong ﬁnancial performance with 
payment of our inaugural dividend and a share buyback. Progress in 
discussions regarding Bina Bawi and Miran were not as successful 
as hoped, reﬂected in the company scorecard seen on page 74.

We continue to look for progress on the execution of our strategy 
which has entailed constant surveillance of the market for 
appropriate projects to add to the Genel portfolio. Therefore, 
of the maximum potential annual bonus, 60% has been achieved. 
Further details of the 2019 annual bonus performance objectives 
and how they were assessed can be found on page 74.

Approach to remuneration in 2020
Details of how we intend to apply our Policy over the coming year 
are set out on pages 77 to 78. 

The Committee has approved an increase in base salary for 2020 
for Bill Higgs at a rate of 2% which is in line with the wider UK 
workforce. Esa Ikaheimonen will not receive a salary increase in 
2020, reﬂecting the fact that he received a 6.5% salary increase in 
August 2019 following an increase in his functional responsibilities.

In 2020, the annual bonus of the Executive Directors, will be 
based on a combination of achievement against the Company 
scorecard metrics at 80% and 20% of the bonus reﬂecting 
personal performance. 

For 2020 and beyond the company scorecard for cash bonuses will 
be more focused on the delivery of the work plan and budget and 
annual performance. The measurements set out in the Company 
scorecard have been adjusted accordingly (as set out on page 
78), with delivery in culture, dividend, production and activity 
driving the performance of our Executives and wider workforce. 
The Committee considers that these targets are appropriately 
stretching and that maximum vesting would represent signiﬁcant 
value creation. 

Annual Report and Accounts 2019  |  Genel Energy 

59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
D I R E C T O R S ’   R E M U N E R A T I O N   R E P O R T   C O N T I N U E D

Strategic milestones will be incentivised via the longer term PSP 
programme. The introduction of speciﬁc awards aligned to strategic 
milestones are designed to meet the aim of the Committee to 
incentivise the delivery of projects that will lead to sustained 
shareholder value creation over the long term. 

The Committee has assessed the appropriateness of TSR metrics 
going forward and has determined that, for 2020, absolute TSR 
targets for PSP awards will be removed and replaced with the 
achievement of strategic milestones. PSP awards will continue  
to be assessed 50% on relative TSR against our peer group. 

2020 AGM
At the AGM in 2020, our shareholders will be asked to approve this 
Annual Report on Remuneration as well as the Remuneration Policy 
for 2020 and I encourage you to vote in favour. I will be available, 
along with my Committee members, to answer any questions 
regarding our Policy on executive remuneration and the activities 
of the Committee. 

Activities of the Remuneration Committee
The Committee held three scheduled and three ad hoc meetings during the year. Details of the attendance of Committee members 
at meetings during 2019 and the activities carried out is set out below. All of the members of the Committee are Independent 
Non-Executive Directors.

Martin Gudgeon
Chairman of the Remuneration Committee

Remuneration Committee

March

March

April

July

October

December

Scheduled/Ad-hoc

Scheduled

Ad-hoc

Ad-hoc

Scheduled

Ad-hoc

Scheduled

Martin Gudgeon

George Rose

1.  Denotes the attendance percentage at scheduled Committee meetings by each Director

Objective

Action

Attendance1 
scheduled

100%

100%

To implement the Remuneration Policy 
for the Chairman, Executive Directors and 
members of the Executive Committee

Applied the Remuneration Policy principles in discussion and implementation of 
remuneration for Executive Directors and Executive Committee members

Dealt with Murat Özgül stepping down to a below Board role

Determined and implemented the promotion of Bill Higgs to CEO

Managed the promotion of Esa Ikaheimonen as an Executive Director

Reviewed the Chairman’s fee for 2020

To review and have regard to remuneration 
practices across the Company

Considered remuneration practices across the Company including management 
recommendations for salary increases, bonus payments and share awards

In respect of performance related elements 
of the Remuneration Policy formulate 
suitable performance related criteria and 
monitor their operation

To review all aspects of any equity incentive 
plans operated or to be established by 
the Company

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

Reviewed the executive base salary level and beneﬁts allowance in the context of pay  
for the wider workforce and the external market

Completed a mid-year review of performance against bonus targets 

Review of performance objectives of the Executive Directors and Executive Committee 
in order to determine the level of bonus earned in respect of the 2019 ﬁnancial year

The Committee set targets for 2019 PSP awards and reviewed the relative TSR peer 
group for 2020 awards

Reviewed the metrics for the PSP award for 2020 and removed the absolute 
TSR measure

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

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

Reviewed the Annual Report on Remuneration for 2019 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

Revised the Remuneration Policy for 2020

60 

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Remuneration Policy
This part of the report sets out our proposed Directors’ 
Remuneration Policy (the “Policy”). This Policy will be put forward 
for shareholder approval at the 2020 AGM, and it will take effect 
from the date on which it is approved by shareholder vote.

The Policy includes a number of changes from that which was 
approved by shareholders in 2017. These changes have been made 
in line with developing practice and investor expectations:

 — For any newly appointed Executive Director, that part of the 
beneﬁts allowance which relates to pension will be limited to 
the rate for the Company’s wider workforce in the jurisdiction 
in which the Executive Director is employed or resides.
 — The Committee’s discretionary powers over annual bonus 

outcomes and PSP vestings have been clariﬁed.

 — ‘Corporate failure’ has been included as a circumstance in 

which malus and/or clawback could apply.

As outlined in the Remuneration Committee Chairman’s statement, 
it is the Committee’s intention to continue to review the Company’s 
remuneration arrangements during 2020 to ensure that they are 
aligned with the Company’s strategy of delivering shareholder value 
through maximising the value of our asset portfolio. Therefore the 
Committee will consult with shareholders during 2020 and will 
revert with a further revised policy at the 2021 AGM.

The Company is incorporated in Jersey. 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. Consistent with the Company’s commitment to adhere  
to UK legislation, the Company commits to only making payments 
to Directors in accordance with this policy. 

In order to avoid any conﬂicts of interest the Company’s executives 
can only attend meetings of the Remuneration Committee at the 
invitation of the Remuneration Committee Chairman and will not  
be involved in determining their own pay. 

Remuneration Policy table
Fixed remuneration

Element

Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

Salary

 — To provide ﬁxed 

 — The Committee takes 

 — While there is no 

None

remuneration which 
is balanced, taking 
into account the 
complexity of the 
role and the skills 
and experience of 
the individual
 — Salary is set at a 

level to attract and 
retain individuals 
with the requisite 
level of experience/
background 
necessary to 
deliver the 
Company’s strategy

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

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

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61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
R E M U N E R A T I O N   P O L I C Y   C O N T I N U E D

Remuneration policy table continued
Fixed remuneration

Element

Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

Beneﬁts

 — To provide a simple 
and broadly market 
competitive beneﬁt 
cash allowance

 — A cash supplement 

 — Cash supplement is 

None

is 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 
20% 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

 — For any newly 

appointed Executive 
Director, that part of 
the beneﬁts allowance 
which relates to 
pension will be limited 
to the rate for the 
Company’s wider 
workforce in the 
jurisdiction in which the 
Executive Director is 
employed or resides

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Variable remuneration

Element

Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

 — 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

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 strategy

 — 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

 — The Committee has 
overall discretion to 
adjust the extent to 
which bonuses are 
paid including reducing 
payment to nil where the 
Committee determines 
that the outcomes 
would not reﬂect 
underlying performance

 — 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. 
The Committee retains 
the ﬂexibility over the 
deferral period but 
would usually apply a 
two year deferral period

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R E M U N E R A T I O N   P O L I C Y   C O N T I N U E D

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 
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 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

 — The Committee has 
overall discretion to 
adjust the extent to 
which PSP awards vest 
including where the 
Committee determines 
that the outcomes 
would not reﬂect 
underlying performance 
 — 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

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Element

Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

Restricted 
share plan 
(‘RSP’)

 — Normally used to 
buy out awards 
forfeited by new 
Executive Directors 
on recruitment who 
are of sufﬁcient 
calibre to deliver the 
Company’s strategy

 — May also be used 
as a vehicle for 
bonus deferral

 — Awards will only be 
made to Executive 
Directors in 
recruitment scenarios, 
save for bonus deferral 

 — The Committee may 
attach performance 
conditions to awards 
if appropriate

 — The Committee will, 

 — 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

where possible, make 
buy-out awards on a like-
for-like basis as set out in 
the recruitment policy
 — Awards can be reduced 
or cancelled in certain 
circumstances as 
set out below, this 
includes in exceptional 
circumstances where the 
Committee determines 
that the outcomes 
would not reﬂect 
underlying performance

 — 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

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 contained in this report comes 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/or 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 relative TSR and project-based milestones 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 including to nil 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 
corporate failure, 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.

Under the annual bonus scheme (including deferred bonus payments), the Committee may cancel or reduce including to nil the payment of 
the annual bonus in circumstances where the Committee considers it to be appropriate. Such circumstances may include corporate failure, 
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.

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Clawback provisions
Clawback provisions apply to any or all of the annual bonus (including deferred bonus), PSP and RSP awards where it is considered 
appropriate. Such circumstances may include corporate failure, 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 (including deferred bonus) 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 uses the annual bonus and share incentive schemes to reward its employees and create alignment with the 
Company’s culture.

In the UK, employee remuneration packages consist of the same four elements as Executive Directors’ remuneration packages: base salary, 
beneﬁts, annual bonus and share awards. In all other jurisdictions in which the business operates we aim to replicate this structure  
to the extent that it is possible but take local considerations into account.

Genel is committed to strengthening and widening employee share ownership by the use of share incentives granted under our share plans. 
As a result currently approximately 60% 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.

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Chairman and Non-Executive Directors

Element

Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

Chairman fees

 — To provide an 

appropriate reward 
to attract and 
retain a high-
calibre individual 
with the relevant 
skills, knowledge 
and experience 
to lead the Board 
of Directors

 — The fee for the Chairman 
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

 — Whilst there is no 

 — None

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 Company’s 
incentive plans

Non-Executive 
Director 
(NED) fees

 — To provide an 
appropriate 
reward to attract 
and retain high-
calibre individuals 
with the relevant 
skills, knowledge 
and experience

 — The fees for the 

 — Whilst there is no 

 — None

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
 — The Committee has 
the ﬂexibility to pay 
an additional fee for 
the roles of Senior 
Independent Director and 
Deputy Chairman

 — Although no additional fee 
is currently paid for the 
role of 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.

Annual Report and Accounts 2019  |  Genel Energy 

67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
R E M U N E R A T I O N   P O L I C Y   C O N T I N U E D

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, additional allowances would normally be provided under a 
standard expatriate package in respect 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.

Buy-outs
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.

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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 Directors, as stipulated in their service contracts which are not of 
any ﬁxed term, are set out below. 

Element

Policy

Notice period

 — 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. There are speciﬁc 
provisions requiring a reduction in any phased PILON payments in the event that the Executive Director 
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

Executive Director services contracts and Non-Executive Director letters of appointment are available for inspection at the Company’s 
registered ofﬁce address. 

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. Payments for loss of 
ofﬁce may only be made within the terms of the Remuneration Policy.

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 an Executive Director’s employment is terminated by the Company, the Executive Director may receive a time pro-rated bonus, subject 
to Remuneration Committee discretion. The Company’s Share Retention Policy continues to apply once an Executive Director leaves ofﬁce, 
subject to Remuneration Committee discretion where the Remuneration Committee considers there are exceptional circumstances or 
on death. 

Payments for loss of ofﬁce can be made where an amendment to the Remuneration Policy authorising the Company to make the payment 
has been approved by the shareholders.

Annual Report and Accounts 2019  |  Genel Energy 

69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
R E M U N E R A T I O N   P O L I C Y   C O N T I N U E D

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

Leaver reasons where awards  
may continue to vest

Vesting  
arrangements

Treatment for any  
other leaver reason

 — 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 

 — Awards lapse 

in full

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 and not accelerated, 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

 — Under ordinary circumstances the 
Company’s Share Retention Policy 
will continue to apply, unless the 
Committee determines otherwise

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 loss of ofﬁce

Illustration of the remuneration policy
Genel’s remuneration arrangements have been designed to ensure that a signiﬁcant proportion of pay is dependent on the delivery of 
stretching short-term and long-term performance targets, aligned with the creation of sustainable shareholder value. The Committee 
considers the level of remuneration that may be received under different performance outcomes to ensure that this is appropriate in the 
context of the performance delivered and the value added for shareholders. 

70 

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The charts that follow provide illustrative values of the remuneration package for Executive Directors under four assumed performance 
scenarios. These charts are for illustrative purposes only and actual outcomes may differ from that shown. 

C H I E F   E X E C U T I V E   O F F I C E R
Bill Higgs

Minimum

Target

Maximum

Maximum
+50% SP Growth

100%   £648,720

52% 

29% 

19% 

 £1,254,192

32% 

27% 

27% 

22% 

41% 

 £2,000,220

51% 

 £2,405,670

C H I E F   F I N A N C I A L   O F F I C E R
Esa Ikaheimonen

Minimum

100%   £540,000

Target

52% 

29% 

19% 

 £1,044,000

Maximum

32% 

27% 

41% 

 £1,665,000

Maximum
+50% SP Growth

27% 

22% 

51% 

 £2,002,500

Assumed performance

Assumptions used

All performance scenarios

 — Consists of total ﬁxed pay, consisting of base salary and cash supplement in lieu of beneﬁts 

and pension

 — Base salary – salary effective as at 1 January 2020
 — Beneﬁts – 20% of base salary

Minimum performance

 — No pay-out under the annual bonus
 — No vesting under the PSP

Performance in line 
with expectations

Maximum performance

Maximum performance 
(including 50% share 
price growth)

 — Two thirds of the maximum pay-out under the planned operation of the annual bonus for 2020. 

This represents 67% of base salary for both executive directors

 — 30% vesting under the PSP 
 — Value of awards under the PSP based on 2020 award levels of 150% of salary 

 — 100% of the maximum pay-out under the planned operation of the annual bonus for 2020. 
This represents 100% of base salary for both executive directors. This is lower than the 
maximum limit set out in the Policy

 — 100% vesting under the PSP
 — Value of awards under the PSP based on 2020 award levels of 150% of salary

 — 100% of the maximum pay-out under the planned operation of the annual bonus for 2020. 
This represents 100% of base salary for both executive directors. This is lower than the 
maximum limit set out in the Policy 100% vesting under the Performance Share Plan, and 
assuming 50% share price growth between grant and vesting

 — Value of awards under PSP based on 2020 award levels of 150% of salary
 — The basis of the calculation of the share price appreciation is that the share price embedded 
in the calculation for the ‘maximum’ bar chart is assumed to increase by 50% across the 
performance period

Unless otherwise stated, PSP awards have been shown at face value, with no share price growth or dividend accrual assumptions. 

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 and Accounts 2019  |  Genel Energy 

71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A N N U A L   R E P O R T   O N   R E M U N E R A T I O N

Advisers to the Committee
Once again, the Committee has appointed Deloitte LLP (‘Deloitte’) 
to provide independent advice on remuneration matters under 
consideration by the Committee. The Committee chose to continue 
with the appointment of Deloitte as it was felt they had the most 
relevant experience and expertise on remuneration related matters 
to effectively advise the Committee.

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. In 2019, Deloitte also provided the Company 
with risk advisory services, and advice in respect of the operation 
of the Company’s share plans. 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 £38,700 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 former 
Chairman, Stephen Whyte, CEOs (Bill Higgs and 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. 

REMUNERATION COMMITTEE TIME SPENT

Executive Director
remuneration 

All employee
remuneration 

Long term incentive
plans for all
employees 

Governance 

35%

20%

15%

30%

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 2019 and discusses how the Policy has been 
implemented in the 2019 ﬁnancial year. Details of the Policy can be 
found on pages 61 to 71.

Shareholder voting
At the AGM held on 16 May 2019, votes cast by proxy and at the meeting in respect of the Annual Report on Remuneration for the year 
ended 31 December 2018 were as follows:

To approve the Annual Report on Remuneration 
for the year ended 31 December 2018

Number of 
votes cast

For

Against

Abstentions

190,994,352

190,325,656

668,696

13,118

99.65%

0.35%

To approve the Directors’ Remuneration Policy at the 2017 AGM

208,954,335

144,818,609

64,135,726

4,000

69.31%

30.69%

Audited information
The following tables set out the total remuneration for the Executive Directors and Non-Executive Directors for the period in ofﬁce for the 
year ended 31 December 2019, and comparison ﬁgures for 2018.

Salary/
fees4
£’000

Beneﬁts4 
£’000

Bonus4 
£’000

LTIP5
£’000

Total
 £’000

Name

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Executive Director

Bill Higgs1

Esa lkaheimonen2

Murat Özgül3

390

323

139

–

–

515

78

65

35

–

–

129

254

207

125

–

–

560

3906

2257

–

–

–

678

1,112

820

299

–

–

1,882

1.   Bill Higgs was appointed as CEO on 7 April 2019
2.   Esa Ikaheimonen was appointed as Executive Director on 7 April 2019
3.   Murat Özgül stepped down as CEO and from the Board on 7 April 2019 but remained an employee of the Company. For the period of his employment he will remain on the same 

salary and beneﬁts as when he was CEO. For 2019 only he participated in the company bonus scheme on the same basis as when he was CEO. For the period of his employment after 
ceasing to be a director, he is eligible for a further bonus opportunity which is contingent on the achievement of deﬁned outcomes and fulﬁlling certain responsibilities and is at the 
discretion of the Remuneration Committee. On stepping down from the Board, he ceased to be eligible for further awards under the RSP or PSP

4.   Salary, beneﬁts and bonus payments are all pro-rated according to the dates above
5.  LTIP includes shares under the Company’s PSP and RSP 
6.   The RSP award granted to Bill Higgs in 2019 was agreed prior to his appointment as CEO and was made in respect of work carried out in his previous role
7.   The RSP award granted to Esa Ikaheimonen in 2019 was part of his promotion as an Executive Director

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Salary/
fees
£’000

Beneﬁts 
£’000

Bonus 
£’000

LTIP
£’000

Total 
 £’000

Name

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Non-Executive Directors

Stephen Whyte1

204

220

George Rose2

Tim Bushell

Martin Gudgeon

Mehmet Ö˘gütçü3

Nazli K. Williams

93

91

81

–

56

88

87

77

30

56

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

204

220

93

91

81

–

56

88

87

77

30

56

1.   Stephen Whyte resigned as Chairman and from the Board on 3 December 2019
2.   George Rose was appointed Interim Chairman on 3 December 2019 for which an interim fee was set at £200,000
3.   Mehmet Ögütçü retired from the Board on 17 May 2018

Additional disclosures in respect of the single total ﬁgure table
Base salary
The table below shows base salaries which were effective during 2019. 

Bill Higgs1

Esa lkaheimonen2

Murat Özgül3

Base salary on 
1 January 2018

–

–

Base  
salary on  
1 Jan 2019 

Base  
salary on  

Base  
salary on  

date of appointment

1 August 2019

–

–

£530,000

£422,300

–

£530,000

£450,0004

–

£515,000

£527,875

1.   Bill Higgs was appointed as CEO on 7 April 2019
2.   Esa Ikaheimonen was appointed as Executive Director on 7 April 2019
3.   Murat Özgül stepped down as CEO and from the Board on 7 April 2019 but remained as an employee on his existing salary
4.   Esa Ikaheimonen’s base salary was increased to £450,000 on 1 August 2019 to reﬂect increased functional responsibilities

Salary information for 2020 is provided on page 77.

Beneﬁts
In line with the Committee’s aim to provide a simple, transparent package, the Executive Directors receive a cash supplement of a 
percentage 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 Executive Directors 
participate 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. This percentage was adjusted for the incoming CEO and Executive Director in April from 25%  
of base salary to 20% to better align with the wider workforce.

Annual bonus
The 2019 annual bonus scorecard was approved based on the Company’s performance against key business objectives with a weighting 
of 100% against Company metrics for Murat Özgül, and a combination of 20% personal and 80% company metrics for both Bill Higgs and 
Esa Ikaheimonen. The personal score for Esa of 80% reﬂects a year of continued strong ﬁnancial performance and Bill’s score at 85% 
demonstrates his personal success against operational readiness and leadership objectives. 

The Executive Directors will be invited to voluntarily defer up to 100% of their 2019 annual bonus into Company shares. Any bonus that is 
deferred will vest after a two year period, and will be subject to malus provisions during this period. The proportion of 2019 bonuses that are 
deferred will be reported at the time deferral is made and in the 2020 Annual Report.

Company metrics included safety and environmental targets (15%), operational targets (20%), ﬁnancial targets (20%), targets for Bina 
Bawi and Miran value creation (20%) and strategy execution targets (25%). Once again, the Company delivered strong performance 
against safety and environment and ﬁnancial performance targets. Limited progress was made on the execution of our strategy and with 
discussions on Bina Bawi and Miran. Further details are set out on page 74.

Bill Higgs

Esa lkaheimonen

Murat Özgül 

1.   Pro-rated according to period holding Executive Directorship

2019
bonus1

£254,000

£207,000

£125,000

As % of maximum

65%

64%

60%

Annual Report and Accounts 2019  |  Genel Energy 

73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A N N U A L   R E P O R T   O N   R E M U N E R A T I O N   C O N T I N U E D

2019 – Annual bonus, Remuneration Committee assessment of performance against targets
The 2019 bonus was assessed by the Committee, based upon the achievement of performance targets. The overall 2019 bonus outcome was 
60% of the maximum opportunity.

Bonus performance  
measure

Weighting

Performance  
target

Assessment of performance  
against metrics

Safety and  
Environment

15%

 — Implement leading indicators for the 
critical controls in place to manage 
signiﬁcant risks

 — Zero performance rate on LTIs 
maintained and no serious 
incidents reported

 — Continue implementation of 

 — Leading indicators in place and ready 

Performance  
assessment

15%

Management System, with a focus on 
leadership and culture

for reporting in 2020

 —  Leadership visits and training 
throughout 2019 continued to 
embed Management System and 
Culture globally

Operational

20%

 — Manage net working 

 — 2019 actual production within 2% of 

12.5%

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

production guidance

 — New wells did not deliver required 

production contribution

Financial

20%

 — Deliver material free cash ﬂow after 

 — All 2019 critical activity completed, 

20%

interest payment

 — Maintain strong balance sheet
 — Maintain strong expenditure control 
and deliver 2019 programme within 
approved capex and opex budgets

with spend below budget

 — Strong free cash ﬂow performance
 — Company in net cash position
 — Firm activity delivered within budget

Bina Bawi 
and Miran

20%

 — Progress on value creation of Bina  

Bawi and Miran 

 — Bina Bawi FDP submitted, but 
commercial framework for 
progression of asset development not 
in place

0%

Strategy  
Execution

25%

 — Develop and deliver material 

strategic growth opportunities

 — Organic portfolio of assets and well 
diversity of production enhanced

12.5%

Share plan awards made in 2019
At the time awards were granted in 2019, the Committee believed that both relative and absolute TSR were important measures of long-
term performance. Therefore, PSP awards from 2017 to 2019 were granted based on 50% relative TSR against our peer group, and 50% 
against absolute TSR targets as considered appropriate at the time. The peer group for the 2019 PSP awards is below.

Africa Oil

Aker BP

Cairn Energy

DNO

Energean Oil and Gas

Enquest

Gulf Keystone

Hurricane

Kosmos

Lundin

Seplat Petroleum

SOCO International

Nostrum Oil & Gas

Tullow Oil

Premier Oil

Ophir Energy was delisted in May 2019 and removed from this peer group.

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%

74 

Genel Energy  |  Annual Report and Accounts 2019

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

Proportion of element vesting

0%

30%

Straight–line basis

100%

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The following table provides details of the awards made under the PSP and RSP during 2019. Performance for these awards is measured 
over the three years from the date of grant.

Bill Higgs

Esa Ikaheimonen

Type of award

Face value 
(£)

Face value 
(% of salary)

Threshold vesting 
(% of face value)

Maximum vesting  
(% of face value)

End of  
performance  

period/Vesting

PSP1

RSP

PSP1

RSP3

£795,000

£389,500

£633,450

£225,000

150%

100%2

150%

50%

30%

100%

07/05/2022

30%

100%

07/05/2022

07/05/2022

27/08/2022

1.  Face value has been calculated using the average share price, ten dealing days prior to the date of grant, of 223.10 pence
2.   Award based on face value of salary under role held prior to CEO appointment 
3.   Face value has been calculated using the average share price, ten dealing days prior to the date of grant, of 180.3 pence

Share awards
The following table provides a summary of all share awards as at 31 December 2019. Further details of the Company’s share plans are set out 
on pages 108 and 109.

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Exercise 
price 
(pence)

At  
1 January 
2019

Granted 
during 
the year

Dividend 

Vested 
during 
the year

Released 
during 
the year

Exercised 
during 
the year 

Lapsed 
during 
the year

At 
31 December 
2019

Performance 
period end

Expiry date/
Vesting

Scheme

Grant date

Bill Higgs1

PSP

PSP

PSP

RSP

RSP

22/12/2017

11/04/2018

07/05/2019

22/12/2017

07/05/2019

Esa Ikaheimonen1

PSP

PSP

PSP

RSP

RSP

Murat Özgül2

25/08/2017

11/04/2018

07/05/2019

25/08/2017

27/08/2019

60,000

285,219

–

–

3,773

17,939

–

356,342

22,413

–

–

–

140,000

–

6,603

38,300

–

174,585

10,981

477,061

356,812

–

–

30,006

22,442

–

283,930

17,858

–

–

–

–

437,397

–

18,246

118,472

–

124,792

2,589

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

63,773

22/12/2020

22/12/2027

303,158

11/04/2021

11/04/2028

378,755

07/05/2022

07/05/2029

146,603

185,566

22/12/2027

07/05/2029

507,067

25/08/2020

25/08/2027

379,254

11/04/2021

11/04/2028

301,788

07/05/2022

07/05/2029

455,643

127,381

25/08/2027

27/08/2029

31,764

1,135,171

–

–

–

–

–

19/12/2014

07/10/2019

31/12/2018

07/05/2026

1,236,313

09/05/2020

10/05/2027

22,008

24/08/2020

25/08/2027

632,093

11/04/2021

12/04/2028

–

–

–

–

–

–

SOP

PSP

PSP

PSP

PSP

19/12/2011 787.58

31,764

07/05/2016

10/05/2017

25/08/2017

Nil

Nil

Nil

1,135,171

1,163,151

20,706

11/04/2018

Nil 594,688

–

–

–

–

–

73,162

1,302

37,405

1.  Awards made to Bill Higgs and Esa Ikaheimonen prior to 7 April 2019 were made to them before they held Executive Directorships
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 December 2019, Stephen Whyte stepped down as Chairman and was awarded pay in lieu of notice of £55,000 in line with his Letter of 
Appointment and the Remuneration Policy.

Payments for loss of ofﬁce 
In April 2019, Murat Özgül stepped down as CEO but continued his employment with the Company on the package described above. 
He received no payment for loss of ofﬁce as a Director. Should he cease employment before the vesting of his PSP awards he will be treated 
as a good leaver such that the performance targets will be measured at the normal time but there will be no pro-rating for time. His future 
remuneration will no longer be disclosed as this relates to his ongoing below Board role.

Annual Report and Accounts 2019  |  Genel Energy 

75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A N N U A L   R E P O R T   O N   R E M U N E R A T I O N   C O N T I N U E D

Statement of Directors’ shareholding and share interests
The beneﬁcial interests of the Directors in the Company’s shares as at 31 December 2019 are shown in the table below. 

The Company does not currently operate a formal shareholding guideline as Executive Directors must normally hold any vested shares 
under the PSP for two years following vesting for share awards. Executive Directors are expected to build up their holding over time.

Ordinary  
shares as at  
31 December 2018 
or date of leaving

Ordinary  
shares as at  

31 December 2019
or date of leaving

Interest in share 
options granted 
under the Company 
share plans as at  
31 December 2019 
or at date of leaving

Director

Bill Higgs

Tim Bushell

Martin Gudgeon

Esa Ikaheimonen

Murat Özgül1

George Rose

Stephen Whyte2

Nazli K. Williams

–

–

37,829

1,077,855

–

100,000

100,000

–

673,152

90,000

24,504

–

–

673,152

90,000

24,504

–

–

–

1,771,133

1,890,414

–

–

–

1.  Murat Özgül stepped down from the Board on 7 April 2019
2.  Stephen Whyte resigned as Chairman and from the Board on 3 December 2019

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

31/12/2019

(cid:122) Genel Energy
(cid:122) FTSE 350 Oil & Gas Producers

76 

Genel Energy  |  Annual Report and Accounts 2019

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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 2019 ﬁnancial year.

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)

2011

2012

2013

2014

2015

2015

2016

2017

2018

2019

2019

139

1,691

1,779

2,521

468

531

1,519

1,765

Tony
Hayward

Murat
Özgül

1,882

Murat
Özgül2

299

Bill
Higgs2

1,112

n/a

90%

95%

90%

0% 36.25% 71.4% 82.14% 72.5%

60%

65%

n/a

n/a

n/a

82.5%

0%

0%1

0%

0%

0%

0%

n/a

1.  The Committee exercised its discretion to reduce the vesting under the 2013 PSP awards from 30% to 0%
2.   Pro-rated according to period holding Executive Directorship

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 2018 and 31 December 2019 compared to the average for permanent employees of the Company.

Chief Executive Ofﬁcer

All employees

% change in 
base salary 
2018/2019

% change in
beneﬁts 
2018/2019

% change in 
annual bonus 
2018/2019

2.8%

2.6%

(12.4%)

(32.36)%

6.4%

7.3%

The percentage change in annual bonus for the CEO compares 2018 outcomes against 2019.

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. 2019 saw the maiden dividend payment to shareholders (as set out on 
pages 80 to 81) as well as a share buy-back programme. The cost to the Company of share buy-back and dividends paid to shareholders in 
2019 was $32.7m.

Remuneration paid to all employees

2018

2019

$m

18.1

20.2

Remuneration paid to all employees represents total staff costs from continuing operations. 

Implementation of Remuneration Policy in 2020
This section provides an overview of how the Committee is proposing to implement our Remuneration Policy in 2020.

In determining Executive Director salary increases for 2020, the Committee once again 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 decided to increase Bill Higgs’s base salary by 2% with effect from 1 January 2020, in line with the wider UK workforce. 
Esa Ikaheimonen’s salary remains unchanged. The table below shows the base salaries for Executive Directors in 2020.

Base salary from 1 Jan 2020

Bill Higgs

Esa Ikaheimonen

£540,600

£450,000

Annual Report and Accounts 2019  |  Genel Energy 

77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A N N U A L   R E P O R T   O N   R E M U N E R A T I O N   C O N T I N U E D

Beneﬁts
As outlined above, the Executive Directors receive 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 2020, the cash supplement is set at 20% of base salary. This is in line with Company ambition to align Executive remuneration with the 
wider workforce, and is in line with our Executive Committee members.

2020 beneﬁts allowance

Bill Higgs

Esa Ikaheimonen

£108,120

£90,000

2020 – Annual bonus targets
The target bonuses for the Executive Directors for 2020 will be at a maximum of 100% of base salary. For 2020, the performance of the 
Executive Directors will be measured 20% against personal performance metrics and 80% against Company metrics.

For 2020, the focus for the cash bonus will be on short-term delivery over the year. In order to reﬂect this, the Company scorecard structure 
has been reviewed and measures retitled to give greater focus to the performance required to deliver share price growth. We continue to 
maintain the focus on high performance in safety and environment including a clear target for our ESG planning, and 55% of the bonus will 
rely on the delivery of production and activity.

Bonus performance measures

Speciﬁc targets

Culture Delivery

Dividend Delivery

Production Delivery

Activity Delivery

 — Safety
 — ESG implementation plan complete
 — Strong compliance culture 

 — Firm budget free cash ﬂow in excess of $100m benchmarked at $60/bbl
 — Derisk impact of bond covenants on dividend payments

 — New wells drilled to deliver in excess of 1.4mmbbls net to Genel
 — Exit rate production in excess of 40,000 bopd

 — 2020 activity programme delivered within Capex and Opex budget
 — Delivery of Sarta ﬁrst oil
 — Progress farm-out of Somaliland within commercial objectives

Percentage

25%

20%

20%

35%

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 ultimate goal of our strategy is to provide long-term sustainable returns to shareholders. During the year, the Committee reviewed 
whether our current performance measures remained aligned with this objective. It concluded that, whilst the relative TSR measure 
should be retained, the absolute TSR measure should be replaced with strategic measures aligned to our critical long-term strategic goals. 
Whilst details of the strategic goals and measures remain commercially sensitive (and therefore will only be disclosed retrospectively 
following vesting) the measures will be focused on strategic milestones, will have hard targets and will be connected to the development  
of our organic FID pipeline to deliver high margin production.

The 2020 award for the Executive Directors will continue to be based on a face value of 150% of base salary. 

The peer group for the measurement of the relative TSR element of the 2020 award, representing 50% of the award, will continue to be:

Africa Oil

Aker BP

Cairn Energy

DNO

Energean Oil & Gas

Enquest

Gulf Keystone

Hurricane

Kosmos

Lundin

Nostrum Oil & Gas

Premier Oil

Seplat Petroleum

SOCO International

Tullow Oil

The relative TSR vesting schedule will remain the same as for awards made in 2019, as outlined on page 74.

78 

Genel Energy  |  Annual Report and Accounts 2019

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Chairman and Non-Executive Director remuneration
Non-Executive Director fees were reviewed in 2019 against benchmark data for companies with a similar market cap, and also against 
comparable E&P companies. The fees for all apart from the Chairman remain unchanged for 2020, and fees were set for Senior 
Independent Director and Deputy Chairman.

In order to support the ability of the company in the current market to attract the best candidate, the fee for the Chairman was increased. 

Role

Non–Executive Chairman

Deputy Chairman

Senior Independent Director

Non–Executive Director

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

International Relations Committee

Fee

£230,000

£10,000

£10,000

£56,000

£14,000

Fee

£14,000

£14,000

£10,500

£10,500

No additional fee

£10,000

The Committee is responsible for determining the Remuneration Policy for the Executive Directors and the Chairman of the Board. The  
Chairman of the Board together with the Executive Directors determine the fees and overall remuneration for the Non-Executive Directors. 

Martin Gudgeon
Chairman of the Remuneration Committee 

18 March 2020

Annual Report and Accounts 2019  |  Genel Energy 

79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
O T H E R   S T A T U T O R Y   A N D   R E G U L A T O R Y   I N F O R M A T I O N

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.

Genel Energy plc is a Jersey incorporated 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 

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 in the Edwardian I Room 
at the Taj Hotel, St James Court, 54 Buckingham Gate, London 
SW1E 6AF, UK on Thursday, 14 May 2020 at 11.00am.

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.

Employee share schemes
Details of the Company’s employee share schemes are set out in 
note 20 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 articles 
of association. Accordingly, the memorandum of association of  
a Jersey company does not contain an objects clause.

Employee Beneﬁt Trust (‘EBT’)
Equiniti Jersey Limited was appointed as trustee of Genel Energy’s 
EBT in 2012. The voting rights relating to the shares held by 
the employee beneﬁt trust are exercisable by the trustees in 
accordance with their ﬁduciary duties.

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 Investments.

Further details regarding the EBT and of shares issued pursuant  
to Genel Energy’s various employee share plans during the year,  
are set out in note 20 to the ﬁnancial statements.

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 30.

Political donations
No political donations were made, nor was any political expenditure 
incurred, by any Group company in the year ending 31 December 
2019 (2018: nil). 

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 40 to 42. Details of Directors’ service agreements and 
letters of appointment are set out on pages 69 and 70.

Results and dividends
Ordinary activities after taxation of the Group for the period 
1 January 2019 to 31 December 2019 amounted to a proﬁt of 
$103.9m.

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 76.

Details of Directors submitting themselves for re-election and 
election at the AGM are set out in the Notice of Meeting.

80 

Genel Energy  |  Annual Report and Accounts 2019

In 2019 the Company paid a ﬁnal dividend of $27.4 million,  
or 10 cents per ordinary share. The rate used to covert US dollars 
into pound sterling on 24 May 2019 was £0.7859 and hence  
a dividend of 7.859 pence per share was paid on 24 June 2019. 
This dividend was approved by shareholders at the 2019 AGM.

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In addition, the Directors paid an interim dividend of 5 cents per 
ordinary share on 8 January 2020. The rate used to covert US 
dollars into pound sterling on 13 December 2019 was £0.7506 
and hence a dividend of 3.753 pence per share was paid on 
8 January 2020. 

No dividend was paid in 2018.

Subsequent events
Please see note 23 to the ﬁnancial statements on page 110 of this 
Annual Report for details of subsequent events.

Share Capital 
As at 18 March 2020, 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. These consist of 
277,670,478 voting ordinary shares and 2,577,720 shares held as 
treasury shares. 

Share Buy-back Programme
In June 2019 the Company announced a share buy-back 
programme which was executed on behalf of the Company by 
Canaccord Genuity Wealth Limited. The Company bought back 
2,267,851 shares representing 0.81% of the total issued share 
capital at an average price of 188.05 pence per share. 

These shares were bought back in accordance with Resolution 14 
approved at the 2019 AGM and have been held as treasury shares 
since. Genel believed that its shares were materially undervalued 
and that utilising its balance sheet to repurchase shares represented 
a value accretive use of its signiﬁcant cash resources. A list of the 
trades is available on the Company’s website. 

Resolutions in relation to share capital
At the AGM of the Company held on 16 May 2019, the shareholders 
granted the Company authority to make market purchases of up 
to 27,924,235 ordinary shares (representing approximately 10% 
of the aggregate issued ordinary share capital of the Company 
at 9 April 2019) and hold as treasury shares any ordinary shares 
so purchased. Following the share buy-back programme detailed 
above, the Company can make market purchases of a further 
25,656,384 ordinary shares under this authority, which expires  
on the earlier of the 2020 AGM or 16 November 2020. 

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 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.

Related party transactions
Details of transactions with Directors and Ofﬁcers are set out in 
note 22 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) in 
effect at the time.

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;

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O T H E R   S T A T U T O R Y   A N D   R E G U L A T O R Y   I N F O R M A T I O N   C O N T I N U E D

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;

Substantial shareholdings
As at 31 December 2019, 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.

v. ensure that the business and affairs of the Company are 

conducted in accordance with its articles of association; and

Name

Focus Investments Limited1

Bilgin Grup Dogˇal Gaz A.S˛

Daax Corporation FZE

NR Holdings Limited

Number of  

ordinary shares

58,419,883

61,103,966

46,018,622

21,214,583

1.  Between the 31 December 2019 and 18 March 2020 the Company has received 

a notiﬁcation from Türkiye Is Bankası (“Is Bank”) that, pursuant to a security 
interest agreement entered into between Focus Investments Limited and Is Bank in 
November 2012, Is Bank had acquired voting rights over 19,000,000 (6.84%) shares 
in the Company. A subsequent notiﬁcation was received from Focus Investments 
Limited that the total number of shares in the Company they controlled voting rights 
over was 39,419,883 shares. 

Other Disclosures
Other information that is relevant to this report and which is also 
included by reference including information in accordance with 
Listing Rule 9.8.4R can be found as follows:

9.8.4(4)

Long term incentive plans

Code

Going concern and 
viability statement

Pages

108 to 109

27

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.

By order of the Board

Bill Higgs
Chief Executive Ofﬁcer

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

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).

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Genel Energy  |  Annual Report and Accounts 2019

S T A T E M E N T   O F   D I R E C T O R S ’   R E S P O N S I B I L I T I E S

Statement of Directors’ 
responsibilities

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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 
Group ﬁnancial statements comply with the Companies (Jersey) 
Law 1991 and the Directors’ Remuneration Report comply with 
the Companies Act 2006 given the parent company voluntarily 
prepares a Directors’ Remuneration Report in accordance with  
the provisions of the United Kingdom Companies Act 2006.

The Directors are responsible for the maintenance and integrity  
of the parent company’s website. Legislation in the United Kingdom 
and Jersey governing the preparation and dissemination of ﬁnancial 
statements may differ from legislation in other jurisdictions.

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 Annual 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

Bill Higgs
Chief Executive Ofﬁcer

Annual Report and Accounts 2019  |  Genel Energy 

83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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G E N E L   E N E R G Y   P L C

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 2019 and of its proﬁt 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 2019, 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.

Our audit approach
Context
The group’s cash ﬂow generating assets continue to be its interests in the Tawke and Taq Taq producing oil ﬁelds in the Kurdistan Regional 
of Iraq (‘KRI’). During the year the group acquired interests in two licences, also in the KRI, being the Sarta and Qara Dagh exploration 
assets. In addition, discussions with the Kurdistan Region Government (‘KRG’) on the development of the potential gas and oil projects on 
the Bina Bawi and Miran Production Sharing Contracts (‘PSC’) also continued but had not concluded by the date of this report. 

Overview

Materiality

Audit
scope

Key audit 
matters

 — Overall group materiality: $8 million (2018: £18 million), based on 2.5% of EBITDAX (2018: Based on 1% 

of total assets)

 — We identiﬁed two signiﬁcant components out of the group’s 23 reporting entities

 — Speciﬁc ﬁnancial statement line items were in scope for an additional 11 entities

 — Overall, our scoping strategy resulted in a minimum of 87% of each ﬁnancial statement line item being 

in scope for testing

 — Group Key Audit Matter (i): Impairment review of oil producing assets 

 — Group Key Audit Matter (ii): Review of impairment indicators on exploration assets

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.

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. 

84 

Genel Energy  |  Annual Report and Accounts 2019

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Key audit matter

How our audit addressed the key audit matter

(i) Impairment review of 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.

Management concluded that 
impairment indicators exist for both 
Tawke and Taq Taq, primarily due to 
the production performance during 
the year of both assets, the reserves 
reduction at Tawke and downward 
revisions to forecast oil prices.

As a result, management performed full 
impairment assessments of the Tawke 
and Taq Taq CGUs as at 31 December 
2019. This resulted in an impairment 
charge of $21m and $9m for Tawke and 
Taq Taq, respectively.

(ii) Review of impairment indicators 
on exploration assets
Refer to Notes 1 and 8 for 
further information
During the year, discussions with the 
KRG have continued regarding the 
development of the gas and oil projects 
at Bina Bawi and Miran.

New commercial terms for Bina Bawi 
were discussed and informally agreed 
between management and the KRG 
in September 2019 to replace the now 
lapsed Bina Bawi Gas Lifting Agreement 
(‘GLA’). The assumption is that a new 
GLA and amended PSC will be signed 
before 30 April 2020, which is the 
date on which the KRG has a right of 
termination for the Bina Bawi PSC. 
A new GLA and amended PSC for 
Miran is then expected to be signed 
subsequent to that, but prior to 31 May 
2020 which is the date on which the 
KRG has a right of termination for the 
Miran PSC.

Under IFRS 6, management is 
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.

As part of their review of indicators, 
management considered the following 
key areas for both CGUs: resources, 
timing of project, oil price forecast, cost 
and discount rate.

Following their assessment, 
management have not identiﬁed any 
impairment indicators for the Bina Bawi 
and Miran CGUs.

In order to challenge management’s assessment of the recoverable amount of each CGU,  
we considered the reasonableness of management’s key assumptions as follows:

Reserves, production and cost proﬁle – we compared management’s reserves, production 
and cost assumptions with those of management’s experts in the Competent Person’s Report 
(‘CPR’s), and the operators as relevant. We also held discussions with management’s experts, 
and discussed production performance and future drilling plans with operational management. 
We compared forecasts with actual ﬁeld performance and agreed drilling plans and costs to 
approved asset development plans. We did not identify any issues from this exercise.

Oil price forecast – we benchmarked management’s oil price forecast against independent 
brokers and consultant estimates. We found management’s assumptions to be in the upper 
quartile of our sample range.

Discount rate – we benchmarked management’s discount rate against an independently 
determined range calculated by our valuations experts. Management’s discount rate was within, 
but below the midpoint of our independently calculated range.

We also performed sensitivity analysis over management’s key assumptions used in their 
impairment assessments taking into account the CPRs and our own view of future oil prices and 
discount rate.

Taking into account the work set out above, including the sensitivity analysis, we found 
management’s assessment of the recoverable values of the Tawke and Taq Taq CGUs to be 
reasonable, and the calculations of the related impairment charges appropriate. We also 
considered management’s disclosure of the impairment testing to be in accordance with IAS 36.

Our work focused on two key judgements:

 — Whether the lack of a formal agreement with the KRG as at the date of our audit report, 

combined with the KRG’s right to terminate the PSCs if new GLAs are not signed by 30 April/ 
31 May 2020 (as relevant) resulted in a signiﬁcant uncertainty as to the carrying value of the 
Bina Bawi and Miran exploration assets

 — Whether, on the assumption that agreements in accordance with the informally agreed terms 

were signed, management’s assessment of impairment indicators was appropriate.

We held meetings with key management to understand the status of formalising the draft 
commercial terms with the KRG. We reviewed email correspondence with the KRG including 
the draft commercial terms informally agreed between management and the KRG, and the 
correspondences between both parties.

In order to conﬁrm our resulting understanding of the facts, we also had a telephone call with 
the Company’s lawyers who had been involved in the drafting of agreements based on the 
agreed terms, and who had been present in meetings with the KRG.

In respect of the KRG’s right to terminate the PSCs in certain circumstances, we discussed the 
process and Genel’s rights and potential mitigations with the company’s in-house counsel and 
external legal advisers and reviewed the relevant clauses of the PSCs.

Based on these enquiries, we did not identify any evidence that indicates the KRG intend to 
terminate the licences for Bina Bawi and Miran, up to the date of our report. We also reviewed 
the related disclosures in the Annual Report in order to ensure that they were appropriate in the 
circumstances and we obtained representations from the Directors in this regard.

In respect of the impairment indicators, our audit work focused on assessing the 
reasonableness of management’s key assumptions by comparison with last year’s as to whether 
there is any indicator of impairment. We have:

 — agreed the key terms outlined in the draft GLA and the Field Development Plans (‘FDP’) to the 

underlying discounted cash ﬂow models;

 — benchmarked resources and cost against those of the CPR experts;

 — assessed management’s discount rate which is within the range of the discount rates 

calculated by our internal valuations experts;

 — reviewed management’s oil price forecast and benchmarked it against independent 

market views;

 — sensitised the timing of the Bina Bawi project by testing the impact of potential delay to the 

model; and

 — considered whether or not the resulting headroom indicates a risk of impairment.

We concurred with management’s assessment that no impairment indicators exist for both Bina 
Bawi and Miran CGUs.

Annual Report and Accounts 2019  |  Genel Energy 

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I N D E P E N D E N T   A U D I T O R S ’   R E P O R T   T O   T H E   M E M B E R S   O F   
G E N E L   E N E R G Y   P L C   C O N T I N U E D

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 two reporting segments being the type of assets it operates: Producing assets and Pre-producing assets. 
The group 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, we have 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 87% 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

$8 million (2018: £18 million).

How we determined it

2.5% of EBITDAX (2018: 1% of total assets)

Rationale for 
benchmark applied

For the current year, we chose to use a proﬁt based measure (a departure from prior years where we used an 
asset based benchmark) as the benchmark for materiality as the focus of the investors changes to the proﬁts 
and cash earnings from the Group’s producing assets, especially in light of management’s commitment to a 
regular dividend distribution policy. Earnings before interest, tax, depreciation, depletion, amortisation, and 
exploration expense (‘EBITDAX’) is considered the most appropriate proﬁt based measure given it is most 
commonly assessed by management and reported to members.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. 
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 $0.4 million  
(2018: $1 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

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 of the 
United Kingdom’s withdrawal from the European Union 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. 

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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.

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’ 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 23 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 27 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’ 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 83, 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 page 50 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 and Accounts 2019  |  Genel Energy 

87

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
I N D E P E N D E N T   A U D I T O R S ’   R E P O R T   T O   T H E   M E M B E R S   O F   
G E N E L   E N E R G Y   P L C   C O N T I N U E D

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 83, 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.

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 113A 
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; or

 — proper accounting records have not been kept by the company, or proper returns adequate for our audit have not been received from 

branches not visited by us; or

 — the company ﬁnancial statements are not in agreement with the accounting records and returns. 

We have no exceptions to report arising from this responsibility. 

88 

Genel Energy  |  Annual Report and Accounts 2019

Other voluntary reporting
Review of certain provisions of the UK Corporate Governance Code under the Listing Rules as though the company were a premium 
listed company
The directors have prepared a corporate governance statement and requested that we review it as though the company were a premium 
listed company. We have nothing to report in respect of the requirement for the auditors of premium listed companies to report when the 
directors’ statement relating to the company’s compliance with the Code does not properly disclose a departure from a relevant provision 
of the Code speciﬁed, under the Listing Rules, for review by the auditors.

The directors have requested that we review the statement on page 27 in relation to going concern as if the company were a premium listed 
company. We have nothing to report having performed our review.

The directors have requested that we perform a review of the directors’ statements on pages 22 and 27 that they have carried out a 
robust assessment of the principal risks facing the group and in relation to the longer-term viability of the group, as if the company were a 
premium listed company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering 
the directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; 
and considering whether the statements are consistent with the knowledge and understanding of the group its environment obtained in the 
course of the audit. We have nothing to report having performed this review.

Directors’ remuneration (United Kingdom Companies Act 2006) 
The parent company voluntarily prepares a Directors’ Remuneration Report in accordance with the provisions of the United Kingdom 
Companies Act 2006. The directors requested that we audit the part of the Directors’ Remuneration Report speciﬁed by the United 
Kingdom Companies Act 2006 to be audited as if the parent company were a UK quoted company.

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the United 
Kingdom Companies Act 2006.

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Michael Timar 
for and on behalf of PricewaterhouseCoopers LLP 
Chartered Accountants and Recognized Auditor

London 
19 March 2020

Annual Report and Accounts 2019  |  Genel Energy 

89

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note

2

3
3

3
3-8
3-9
3

3
3
3-8
3-9

5
5
5

6

7
7

2019 
$m

377.2

(37.7)
(157.1)

182.4

(1.2)
–
(29.8)
(19.1)

132.3

321.8
(158.5)
(1.2)
–
(29.8)

6.6
(30.0)
(4.3)

104.6
(0.7)

103.9

103.9

103.9

¢
37.8
37.0
49.0

2018 
$m

355.1

(28.7)
(134.5)

191.9

1.5
(424.0)
–
(24.0)

(254.6)

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)
49.8

C O N S O L I D AT E D   S TAT E M E N T   O F   C O M P R E H E N S I V E   I N C O M E
F O R   T H E   Y E A R   E N D E D   3 1   D E C E M B E R   2 0 1 9

Revenue

Production costs
Depreciation and amortisation of oil assets

Gross profit

Exploration (expense)/credit
Impairment of intangible assets 
Impairment of property, plant and equipment
General and administrative costs

Operating profit/(loss)

Operating profit/(loss) is comprised of:
EBITDAX
Depreciation and amortisation
Exploration (expense)/credit
Impairment of intangible assets
Impairment of property, plant and equipment

Finance income
Bond interest expense
Other finance expense

Profit/(Loss) before income tax
Income tax expense

Profit/(Loss) and total comprehensive income / (expense) 

Attributable to:
Shareholders’ equity

Profit/(Loss) per ordinary share
Basic
Diluted
Underlying

90 

Genel Energy  |  Annual Report and Accounts 2019

C O N S O L I D AT E D   B A L A N C E   S H E E T
AT   3 1   D E C E M B E R   2 0 1 9

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

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2019 
$m

2018 
$m

8
9

10
11
11

12
13
14
15

12
13

17

775.6
636.9

818.4
565.8

1,412.5

1,384.2

157.4
3.0
390.7

551.1

99.4
10.0
334.3

443.7

1,963.6

1,827.9

(118.8)
(26.7)
(37.4)
(297.9)

(76.8)
(31.9)
(32.9)
(297.3)

(480.8)

(438.9)

(91.7)
(5.0)

(96.7)

(52.6)
(5.0)

(57.6)

(577.5)

(496.5)

1,386.1

1,331.4

43.8
4,033.4
(2,691.1)

43.8
4,074.2
(2,786.6)

1,386.1

1,331.4

These consolidated ﬁnancial statements on pages 90 to 110 were authorised for issue by the Board of Directors on 18 March 2020 and were 
signed on its behalf by:

Bill Higgs  
Chief Executive Ofﬁcer 

Esa Ikaheimonen
Chief Financial Ofﬁcer

Annual Report and Accounts 2019  |  Genel Energy 

91

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D AT E D   S TAT E M E N T   O F   C H A N G E S   I N   E Q U I T Y
F O R   T H E   Y E A R   E N D E D   3 1   D E C E M B E R   2 0 1 9

At 1 January 2018

Loss and total comprehensive expense 
Share-based payments

Share  
capital  
$m

Share 
premium  
$m

Accumulated 
losses  
$m

Total  
equity  
$m

Note

43.8

4,074.2

(2,508.2)

1,609.8

–
–

–
–

(283.6)
5.2

(283.6)
5.2

At 31 December 2018 and 1 January 2019

43.8

4,074.2

(2,786.6)

1,331.4

Profit and total comprehensive income 
Share-based payments
Purchase of shares to satisfy share awards
Purchase of treasury shares 
Dividends provided for or paid1

20

18

–
–
–
–
–

–
–
–
–
(40.8)

103.9
5.1
(8.2)
(5.3)
–

103.9
5.1
(8.2)
(5.3)
(40.8)

At 31 December 2019

43.8

4,033.4

(2,691.1)

1,386.1

1.  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).

92 

Genel Energy  |  Annual Report and Accounts 2019

C O N S O L I D AT E D   C A S H   F L O W   S TAT E M E N T
F O R   T H E   Y E A R   E N D E D   3 1   D E C E M B E R   2 0 1 9

Cash flows from operating activities
Profit/(Loss) and total comprehensive income / (expense)
Adjustments for:
Finance income
Bond interest expense
Other finance expense
Taxation
Depreciation and amortisation
Exploration expense/(credit)
Impairment of intangible assets
Impairment of property, plant and equipment 
Other non-cash items

Changes in working capital:

Increase 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
Dividends paid to company’s shareholders, including expenses
Purchase of shares for employee share trust
Purchase of treasury shares
Lease payments
Interest paid

Net cash used in financing activities

Net increase in cash and cash equivalents
Foreign exchange loss on cash and cash equivalents
Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

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2019 
$m

2018
 $m

103.9

(283.6)

5
5
5
6
3
3
3
3
3

5

11

18

19

11

11

(6.6)
30.0
4.3
0.7
158.5
1.2
–
29.8
(2.4)

(55.4)
(0.2)
3.3

267.1
6.6
(0.8)

272.9

(26.5)
(123.8)
7.0

(143.3)

(29.0)
(8.2)
(5.3)
(0.6)
(30.0)

(73.1)

56.5
(0.1)
334.3

390.7

(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

Annual Report and Accounts 2019  |  Genel Energy 

93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1 Basis of preparation
Genel Energy Plc – registration number: 107897 (the Company) is a public limited company incorporated and domiciled in Jersey with  
a listing on the London Stock Exchange. The address of its registered ofﬁce is 12 Castle Street, St Helier, Jersey, JE2 3RT.

The consolidated ﬁnancial statements of 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 95 and 96.

There have been no changes in related parties since last year and no related party transactions that had a material effect on ﬁnancial 
position or performance in the year. There are not signiﬁcant seasonal or cyclical variations in the Company’s total revenues. 

Going concern
The Company regularly evaluates its ﬁnancial position, cash ﬂow forecasts and its covenants by sensitising with a range of scenarios which 
incorporate changes 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 2019 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.

94 

Genel Energy  |  Annual Report and Accounts 2019

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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
Apart from those involving estimations (which are dealt with separately below), there is no signiﬁcant judgements 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.

Signiﬁcant estimates
The following are the critical estimates 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.

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, 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 and amortisation of oil and gas assets and testing 
for impairment.

Hydrocarbons that are not assessed as reserves are considered to be resources and are classiﬁed as exploration and evaluation assets. 
These assets are expenditures incurred before technical feasibility and commercial viability is 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 and Accounts 2019  |  Genel Energy 

95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S   C O N T I N U E D

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 nominal 
discount rate of 12.5% is used when assessing the impairment testing of the Company’s oil assets. Risking factors are also used alongside 
the discount rate when the Company is assessing exploration and appraisal assets.

In addition, estimation of the recoverable amounts of the Bina Bawi and Miran CGUs, which are classiﬁed under IFRS as exploration and 
evaluation intangible assets and consequently carry 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 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 materially lower asset value. Under the existing PSCs for both Bina Bawi and Miran, effective 
from 30 April 2020 and 31 May 2020 respectively, the KRG has a right (not an obligation) to terminate the PSCs in the absence of new Gas 
Lifting Agreement(s) being in place. The KRG is required under the PSCs to give notice of its intention to terminate and there are various 
consequent provisions in the PSC that provide periods for remedy by Genel and/or delay to any purported termination by the KRG, which 
consequently would take some time.

Change in accounting estimate – Tawke carrying value
Management has assessed Tawke production and its updated oil price forecast as indicators of impairment. Management has performed  
its impairment assessment, with a reduction in oil price and production forecast resulting in an impairment of $21 million.

Change in accounting estimate – Taq Taq carrying value
Management has assessed Taq Taq production and its updated oil price forecast as indicators of impairment. Management has performed 
its impairment assessment, with a reduction in oil price and production forecast resulting in an impairment of $9 million.

Change in accounting estimate – Tawke depreciation
Management assessment of depreciation has resulted in an increase in depreciation rate per barrel, principally as a result of an increased 
estimate of future costs, which are cost recoverable and do not materially impact NPV as explained in the sensitivity to capital expenditure 
disclosure in note 9. This resulted in a depreciation expense that was $11 million higher compared to the expense based on prior depreciation 
rate per bbl.

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 and intangible assets. 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

2020

65
66

2021

67
68

2022

68
71

2023

72
72

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 on 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. 

Acquisitions of Sarta and Qara Dagh PSCs
On 28 February 2019 the Company completed the acquisition of a 30% interest in the Sarta PSC, with an economic date of 1 January 2019. 
Shortly after acquisition date, ﬁnal investment decision (“FID”) was taken on phase 1A development, resulting in the recognition of gross 
2P reserves at the asset level of 34mmbbls, of which the Company’s share was 10mmbbls. The interest has been accounted for as an asset 
acquisition under IAS 16, with the result being the recognition of a development asset, reﬂecting the acquired 2P reserves. Consideration of 
$49.4 million (note 8 and 12) for the asset is a combination of cost recoverable carry and a milestone success payment and has been 
assessed based on the 2P reserves that have been recognised. On the same date, the Company also completed the acquisition of a 40% 
interest in the Qara Dagh PSC. Consideration on the asset is cost recoverable carry arrangement on one well. Both assets are treated as 
Joint Operations under IFRS 11.

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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 2018, adjusted for transitional requirements where necessary, further explained under 
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 estimates and judgements. 

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.

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.

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 3 and 5 years 
from the date that they are available for use.

Property, plant and equipment
Producing and Development assets
Oil and gas assets classiﬁed as producing and 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.

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1.3 ACCOUNTING POLICIES continued
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 assets are classiﬁed under producing assets following the commercial 
production commencement. 

Development expenditure is accounted for in accordance with IAS 16 – Property, plant and equipment. Producing 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 barrels to provide a $/barrel unit depreciation cost. Changes to depreciation 
rates as a result of changes in forecast production 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.

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 cash generating unit. A cash generating unit 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.

Financial assets and liabilities
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. 

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. 

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 has been established, and consequently three months has been assessed as the established operating 
cycle under IAS 1. The Company’s assessment of impairment model based on expected credit loss is explained below under Financial assets.

The Company’s assessment of impairment model based on expected credit loss is explained below.

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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.

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1.3 ACCOUNTING POLICIES continued
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 cash 
generating unit 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 (cash generating unit).

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
Impairment of ﬁnancial assets is assessed under IFRS 9 with a forward-looking impairment model based on expected credit losses (ECLs). 
The standard requires the Company to book an allowance for ECLs for its ﬁnancial assets. The Company has assessed its trade receivables 
as at 31 December 2019, which are expected to be collected in 2020 under the normal operating cycle, for ECLs. 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 under IFRS is a $0.5 million adjustment.

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.

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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 following new accounting standards, amendments to existing standards and interpretations are effective on 1 January 2019. 
Amendments to IFRS 9 – Prepayment Features with Negative Compensation, Amendments to IAS 28 – Long-term Interests in Associates and 
Joint Ventures, Amendments to IAS 19 – Plan Amendment, Curtailment or Settlement, IFRIC 23 – Uncertainty over Income Tax Treatments, 
Annual Improvements to IFRS Standards 2015–2017 Cycle. The adoption of these standards and amendments has had no impact on the 
Company’s results or ﬁnancial statement disclosures.

IFRS 16 – Leases is effective on 1 January 2019 and the impact on the Company’s ﬁnancial statements is explained below.

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: Amendments to References to the Conceptual Framework in IFRS Standards (effective 1 Jan 
2020), Amendment to IFRS 3 Business Combinations (effective 1 Jan 2020), Amendments to IAS 1 and IAS 8: Deﬁnition of Material (effective 
1 Jan 2020), Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (effective 1 Jan 2020), IFRS 17 Insurance contracts 
(effective 1 Jan 2021). 

Changes in accounting policies
IFRS 16 – Leases, which became effective by 1 January 2019, requires the lessee to recognise a right to use asset and lease 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 has adopted IFRS 16 from 1 January 2019 with the modiﬁed retrospective approach, and 
has not restated comparatives. The reclassiﬁcations and the adjustments arising from the new leasing rules are therefore recognised in the 
opening balance sheet on 1 January 2019 and further explained in Note 19. 

In applying IFRS 16 for the ﬁrst time, the Company has used the following practical expedients permitted by the standard:

 — applying a single discount rate to a portfolio of leases with reasonably similar characteristics;

 — accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases, and

 — using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

On adoption of IFRS 16, the Company recognised lease liabilities in relation to leases which had previously been classiﬁed as ‘operating 
leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, 
discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate 
applied to the lease liabilities on 1 January 2019 was 2.5%.

2. SEGMENTAL INFORMATION
The Company has two reportable business segments: Production and Pre-production. Capital allocation decisions for the production 
segment are considered in the context of the cash ﬂows expected from the production and sale of crude oil. The production segment is 
comprised of the producing ﬁelds on the Tawke PSC (Tawke and Peshkabir) and the Taq Taq PSC (Taq Taq), which are located in the KRI 
and make sales predominantly to the KRG. The pre-production segment is comprised of discovered resource held under the Sarta PSC, the 
Qara Dagh PSC, the Bina Bawi PSC and the Miran PSC (all in the KRI) and 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.

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2. SEGMENTAL INFORMATION continued
For the period ended 31 December 2019

Production
$m

Pre-
production
$m

Revenue from contracts with customers
Revenue from other sources 
Cost of sales

Gross profit

Exploration expense
Impairment of property, plant and equipment
General and administrative costs

Operating profit/(loss)

Operating profit/(loss) is comprised of
EBITDAX
Depreciation and amortisation
Exploration expense
Impairment of property, plant and equipment

Finance income
Bond interest expense
Other finance expense

Profit/(Loss) before income tax

Capital expenditure
Total assets
Total liabilities

368.7
8.5
(194.8)

182.4

–
(29.8)
–

152.6

339.5
(157.1)
–
(29.8)

–
–
(1.8)

150.8

115.1
998.1
(99.4)

Other
$m

–
–
–

–

–
–
(19.1)

(19.1)

(17.7)
(1.4)
–
–

6.6
(30.0)
(2.2)

(44.7)

Total 
$m

368.7
8.5
(194.8)

182.4

(1.2)
(29.8)
(19.1)

132.3

321.8
(158.5)
(1.2)
(29.8)

6.6
(30.0)
(4.3)

104.6

–
–
–

–

(1.2)
–
–

(1.2)

–
–
(1.2)
–

–
–
(0.3)

(1.5)

43.0
595.2
(149.9)

–
370.3
(328.2)

158.1
1,963.6
(577.5)

Revenue from contracts with customers includes $104.3 million (2018: $105.4 million) arising from the 4.5% royalty interest on gross Tawke 
PSC revenue ending at the end of July 2022 (“the ORRI”). Total assets and liabilities in the other segment are predominantly cash and 
debt balances. 

For the period ended 31 December 2018
The Company has updated its segmental reporting 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.

Revenue from contracts with customers
Revenue from other sources 
Cost of sales

Gross profit

Exploration credit
Impairment of intangible assets
General and administrative costs

Operating profit/(loss)

Operating profit/(loss) is comprised of
EBITDAX
Depreciation and amortisation
Exploration credit
Impairment of intangible assets

Finance income
Bond interest expense
Other finance expense

Profit/(Loss) before income tax

Capital expenditure
Total assets
Total liabilities

Total assets and liabilities in the other segment are predominantly cash and debt balances. 

102 

Genel Energy  |  Annual Report and Accounts 2019

Production
$m

Pre-
production
$m

350.3
4.8
(163.2)

191.9

–
–
–

191.9

326.4
(134.5)
–
–

–
–
(1.7)

–
–
–

–

1.5
(424.0)
–

(422.5)

–
–
1.5
(424.0)

–
–
(0.2)

190.2

(422.7)

Other
$m

–
–
–

–

–
–
(24.0)

(24.0)

(22.3)
(1.7)
–
–

4.4
(30.0)
(1.3)

(50.9)

70.4
1,015.4
(89.1)

25.1
493.2
(100.5)

–
319.3
(306.9)

Total 
$m

350.3
4.8
(163.2)

191.9

1.5
(424.0)
(24.0)

(254.6)

304.1
(136.2)
1.5
(424.0)

4.4
(30.0)
(3.2)

(283.4)

95.5
1,827.9
(496.5)

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 (expense)/credit

Impairment of intangible assets (note 8)

Impairment of property, plant and equipment (note 9)

Corporate cash costs
Corporate share-based payment expense
Depreciation and amortisation of corporate assets

General and administrative expenses

2019 
$m

(37.7)
(88.8)
(68.3)

2018
$m

(28.7)
(72.4)
(62.1)

(194.8)

(163.2)

(1.2)

1.5

–

(424.0)

(29.8)

–

(14.1)
(3.6)
(1.4)

(19.1)

(17.4)
(4.9)
(1.7)

24.0

Exploration expense relates to spend and 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.

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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
Other finance expense

Finance expense

Bank interest income

Finance income

2019 
$m

(0.7)
(0.2)

(0.9)

2019 
$m

(18.6)
(1.6)
(5.8)

2018
$m

(0.4)
(0.3)

(0.7)

2018 
$m

(17.1)
(1.0)
(6.3)

(26.0)

(24.4)

2019 
number

2018 
 number

62
18
24
17

121

2019 
$m

(30.0)
(4.3)

(34.3)

6.6

6.6

64
15
17
17

113

2018
$m

(30.0)
(3.2)

(33.2)

4.4

4.4

Bond interest payable is the cash interest cost of Company bond debt. Other ﬁnance expense primarily relates to the discount unwind on the 
bond and the asset retirement obligation provision.

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.

Annual Report and Accounts 2019  |  Genel Energy 

103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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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.

Profit/(Loss) attributable to equity holders of the Company ($m)

Weighted average number of ordinary shares – number1
Basic earnings/(loss) per share – cents per share

1.  Excluding shares held as treasury shares 

2019

103.9

2018

(283.6)

275,197,007
37.8

279,065,717
(101.6)

Diluted
The Company purchases shares in the market to satisfy share plan requirements so diluted earnings per share is adjusted for performance 
shares, restricted shares and share options not included in the calculation of basic earnings per share:

Profit/(Loss) attributable to equity holders of the Company ($m)

Weighted average number of ordinary shares – number1
Adjustment for performance shares, restricted shares and share options 
Weighted average number of ordinary shares and potential ordinary shares

Diluted earnings / (loss) per share – cents per share

2019

103.9

2018

(283.6)

275,197,007
5,859,457
281,056,464

279,065,717
1,182,481
280,248,198

37.0

(101.6)

1.  Excluding shares held as treasury shares

8. INTANGIBLE ASSETS

Cost
At 1 January 2018
Additions
Discount unwind of contingent consideration
Other

At 31 December 2018 and 1 January 2019

Additions
Discount unwind of contingent consideration
Other

At 31 December 2019

Accumulated amortisation and impairment
At 1 January 2018
Amortisation charge for the period
Impairment

At 31 December 2018 and 1 January 2019

Amortisation charge for the period

At 31 December 2019

Net book value
At 31 December 2018
At 31 December 2019

Book value

Bina Bawi PSC
Miran PSC
Somaliland PSC
Qara Dagh PSC

Exploration and evaluation assets

Tawke overriding royalty
Tawke capacity building payment waiver

Tawke RSA assets

Exploration and 
evaluation 
assets 
$m

1,471.7
25.1
8.1
(11.7)

1,493.2

20.9
5.2
(0.8)

Tawke
 RSA 
$m

425.1
–
–
–

425.1

–
–
–

1,518.5

425.1

(581.3)
–
(424.0)

(1,005.3)

–

(1,005.3)

(32.8)
(62.1)
–

(94.9)

(68.3)

(163.2)

487.9
513.2

330.2
261.9

Discovered gas and oil, appraisal
Discovered gas and oil, appraisal
Exploration
Exploration / Appraisal

Other  
assets
$m

6.5
0.3
–
–

6.8

0.5
–
–

7.3

(6.3)
(0.2)
–

(6.5)

(0.3)

(6.8)

0.3
0.5

2019 
$m

352.9 
120.3 
33.8 
6.2 

513.2 

160.2 
101.7 

261.9 

Total
$m

1,903.3
25.4
8.1
(11.7)

1,925.1

21.4
5.2
(0.8)

1,950.9

(620.4)
(62.3)
(424.0)

(1,106.7)

(68.6)

(1,175.3)

818.4
775.6

2018
$m

338.7 
116.2 
33.0 
–

487.9 

217.5 
112.7 

330.2 

104 

Genel Energy  |  Annual Report and Accounts 2019

 
9. PROPERTY, PLANT AND EQUIPMENT

Cost
At 1 January 2018
Additions
Non-cash additions for ARO/share-based payments

At 31 December 2018 and 1 January 2019

Asset acquisitions
Additions
Right-of-use assets (note 19)
Net change in payable
Non-cash additions for ARO/share-based payments

At 31 December 2019

Accumulated depreciation and impairment
At 1 January 2018
Depreciation charge for the period 

At 31 December 2018 and 1 January 2019

Depreciation charge for the period
Impairment

At 31 December 2019

Net book value
At 31 December 2018
At 31 December 2019

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Producing 
assets 
$m

Development 
assets 
$m

Other  
assets
$m

2,683.9
70.4
2.9

2,757.2

–
115.1
–
–
3.8

2,876.1

(2,119.7)
(72.4)

(2,192.1)

(88.8)
(29.8)

(2,310.7)

–
–
–

–

49.4
22.1
–
(3.6)
0.1

68.0

–
–

–

–
–

–

Total
$m

2,693.3
70.6
2.9

2,766.8

49.4
137.5
3.6
(3.6)
3.9

9.4
0.2
–

9.6

–
0.3
3.6
–
–

13.5

2,957.6

(8.6)
(0.3)

(8.9)

(1.1)
–

(2,128.3)
(72.7)

(2,201.0)

(89.9)
(29.8)

(10.0)

(2,320.7)

565.1
565.4

–
68.0

0.7
3.5

565.8
636.9

Asset acquisitions of $49.4 million relates to the Sarta PSC. Further explanation on oil and gas assets is provided in the signiﬁcant 
accounting judgements and estimates in note 1.

CGU carrying value

Tawke PSC
Taq Taq PSC

Producing assets

Sarta PSC

Oil production
Oil production

Oil development

2019 
$m

474.9 
90.5 

565.4

2018
$m

478.2 
86.9 

565.1

68.0 

–

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.

Taq Taq  
CGU
$m 

Tawke
CGU
$m 

Long term Brent +/- $5/bbl
Discount rate +/- 2.5%
Production and reserves +/- 10%

10. TRADE AND OTHER RECEIVABLES

Trade receivables
Other receivables and prepayments

+/– 3
+/–6
+/–8

+/– 18
+/– 48
+/– 62

2019 
$m

150.2
7.2

157.4

2018
$m

94.8
4.6

99.4

At 31 December 2019, $54.1 million relating to invoices due in November and December was overdue. Payment for these invoices was 
received January and February 2020. The fair value of trade receivables is broadly in line with the carrying value.

Movement on trade receivables in the period

Carrying value at 1 January
Revenue from contracts with customers
Cash proceeds
Loss allowance
Capacity building payments

Carrying value at 31 December

2019 
$m

94.8
368.7
(317.4)
(0.5)
4.6

150.2

2018 
$m 

73.3
350.3
(335.1)
–
6.3

94.8

$0.5 million of loss allowance is made under the expected credit loss model as explained at note 1. 

Annual Report and Accounts 2019  |  Genel Energy 

105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S   C O N T I N U E D

11. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents 
Restricted cash

2019 
$m

390.7
3.0

393.7

2018 
$m

334.3
10.0

344.3

Cash is primarily held on time deposit with major ﬁnancial institutions or in US Treasury bills. Restricted cash of $3.0 million relates 
principally to exploration activities in Morocco.

12. TRADE AND OTHER PAYABLES

Trade payables
Other payables
Accruals

Non-current 
Current

2019 
$m

10.3
144.4
55.8

210.5

118.8
91.7

210.5

2018
 $m

10.7
81.3
37.4

129.4

76.8
52.6

129.4

Current 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. For non-current payables, liabilities 
are recognised at discounted fair value using the effective interest rate, with the unwind either expensed as ﬁnance cost or capitalised 
against the relevant asset. Other payables include a balance of $73.7 million (2018: $68.5 million) recognised at its discounted fair 
value using the effective interest rate, which has been added to the book value of 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. Additionally, other payables include contingent 
consideration relating to the acquisition of the Sarta asset, explained in note 1. It has been recognised at its discounted fair value using the 
effective interest rate, which has been added to the book value of the Sarta asset.

13. DEFERRED INCOME

Non–current
Current

14. PROVISIONS

Balance at 1 January 
Interest unwind
Additions
Reversal

Balance at 31 December 

2019 
$m

26.7
5.0

31.7

2019
$m

32.9
1.3
3.2
–

37.4

2018 
$m

31.9
5.0

36.9

2018
$m

29.3
1.2
2.5
(0.1)

32.9

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 inﬂated at 2% (2018: 2%) and discounted at 4% (2018: 4%). The cash ﬂows relating to the decommissioning and abandonment 
provisions are expected to occur between 2028 and 2038.

15. BORROWINGS AND NET CASH

2022 Bond 10.0%
Cash

Net Cash

The fair value of the bonds is $316.5 million (2018: $308.3 million).

2022 Bond 10.0%
Cash

Net Cash

106 

Genel Energy  |  Annual Report and Accounts 2019

1 Jan 2019 
$m

(297.3)
334.3

37.0

Discount 
unwind 
$m

Dividend paid 
$m

Net change 
in cash 
$m

31 Dec 2019 
$m

(0.6)
–

(0.6)

–
(27.4)

(27.4)

–
83.8

83.8

(297.9)
390.7

92.8

1 Jan 2018
$m

(296.8)
162.0

(134.8)

Discount 
unwind 
$m

Net change 
in cash
$m

(0.5)
–

(0.5)

–
172.3

172.3

31 Dec  
2018
$m

(297.3)
334.3

37.0

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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

2019 
$m

155.3
390.7

546.0

2018  
$m

97.0
334.3

431.3

All trade receivables are owed by the KRG with $54.1 million overdue year-end. This was received post year-end, with $64.5 million overdue 
at the signing date. Cash is deposited with the US treasury or term deposits with banks that are assessed as appropriate based on, among 
other things, sovereign risk, CDS pricing and credit rating.

Liquidity risk
The Company is committed to ensuring it has sufﬁcient liquidity to meet its payables as they fall due. At 31 December 2019 the Company had 
cash and cash equivalents of $390.7 million (2018: $334.3 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 circa $25 million. Sensitivity of the carrying value of its assets to oil price risk is provided in notes 8 and 9.

Currency risk
As other than head ofﬁce costs, substantially all of the Company’s transactions are measured and denominated in US dollars, therefore the 
exposure to currency risk is not material and no sensitivity analysis has been presented.

Interest rate risk 
The Company reported borrowings of $297.9 million (2018: $297.3 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. 

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 $390.7 million (2018: $334.3 million).

17. SHARE CAPITAL

At 1 January 2018 – fully paid1

At 31 December 2018, 1 January 2019 and 31 December 2019 – fully paid1

1.   Ordinary shares include 2,577,720 (2018: 1,005,839) treasury shares. Share capital includes 4,303,249 (2018: 1,324,150) of trust 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. DIVIDENDS

Ordinary shares
Final dividend for the year ended 31 December 2018 of 10¢ per share
Interim dividend for the year ended 31 December 2019 of 5¢ per share

Total dividends provided for or paid

Paid in cash
Recognised as payable (paid on 8 January 2020)
Foreign exchange income on dividend paid

2019
$m

27.6
13.2

40.8

2019
$m

27.4
13.2
0.2

40.8

2018
$m

–
–

–

2018
$m

–
–
–

–

Annual Report and Accounts 2019  |  Genel Energy 

107

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S   C O N T I N U E D

19. RIGHT-OF-USE ASSETS/LEASE LIABILITIES
The Company’s right-of-use assets are related to ofﬁce, car and warehouse rents. The Company has elected to apply the transition 
exemptions for short-term and low-value leases. These leases are expensed when they incur. 

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. 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.

Cost
At 1 January 2019
Additions

At 31 December 2019 (note 9)

Accumulated depreciation
At 1 January 2019
Depreciation charge for the period 

At 31 December 2019

Net book value
At 31 December 2018

At 31 December 2019

Right-of-use 
assets
$m

1.9
1.7

3.6

–
(0.9)

(0.9)

1.9

2.7

On adoption of IFRS 16, the Company recognised lease liabilities in relation to leases which had previously been classiﬁed as ‘operating 
leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, 
discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing 
rate applied to the lease liabilities on 1 January 2019 was 2.5%. Right-of-use assets are depreciated over the lifetime of the related lease 
contract. The lease terms vary from one to ﬁve years.

At 1 January 2019
Additions
Payments of lease liabilities

At 31 December 2019 (note 12)

Lease 
liabilities
$m

(1.9)
(1.7)
0.6

(3.0)

Included within lease liabilities of $3.0 million are non-current lease liabilities of $2.2 million. The identiﬁed leases have no signiﬁcant 
impact on the Company`s ﬁnancing, bond covenants or dividend policy. The Company does not have any residual value guarantees. 
Extension options are included in the lease liability when it, based on the management’s judgement, is reasonably certain that an extension 
will be exercised. As at 31 December 2019, the contractual maturities of the Company’s lease liabilities are as follows:

Lease liabilities

Less than
1 year
$m

Between
1 -2 years
$m

Between
2 – 5 years
$m

Total 
contractual 
cash flow
$m

Carrying
Amount
$m

(1.0)

(0.8)

(1.4)

(3.2)

(3.0)

20. SHARE-BASED PAYMENTS
The Company has three share-based payment plans: a performance share plan, 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. 
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). 

Restricted shares. 
The intention is to deliver 
the full value of shares 
at no cost to the participant  
(e.g. as conditional shares 
or nil-cost options).

Market value options. 
Exercise price is set equal to the 
average share price over a period of 
up to 30 days to grant. 

Performance 
conditions

Performance conditions will apply. 
Awards granted from 2017 are based 
on relative and absolute TSR measured 
against a group of industry peers over 
a three year 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.

108  Genel Energy  |  Annual Report and Accounts 2019

 
 
 
 
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Vesting period

Awards will vest when the 
Remuneration Committee determine 
whether the performance conditions 
have been met at the end 
of the performance period.

Awards typically vest over three years. Awards typically vest after three years. 

Options are exercisable until the 10th 
anniversary of the grant date.

Dividend 
equivalents

Provision of additional cash/shares 
to reflect dividends over the vesting 
period may or may not apply.

Provision of additional cash/shares 
to reflect dividends over the vesting 
period may or may not apply.

Provision of additional cash/shares 
to reflect dividends over the vesting 
period may or may not apply. 

In 2019, 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 2019 are set out below: 

Outstanding at the beginning of the year
Granted during the year
Dividend equivalents
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

10,148,551
1,930,702
592,675
(2,439,495)
(241,580)
–

1,511,298
850,408
84,657
–
(18,251)
(704,568)

132,334
–
–
–
(12,746)
–

9,990,853 1,723,544

119,588

803p
–
–
–
742p
–

810p

The range of exercise prices for share options outstanding at the end of the period is 742.00p to 1,046.00p.

Fair value of awards granted during the year has been measured by use of the Monte-Carlo pricing model. The model takes into account 
assumptions regarding expected volatility, expected dividends and expected time to exercise. Expected volatility was also analysed with 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 2019 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
Risk-free interest rate
Expected volatility
Share price at balance sheet date
Change in share price between grant date and 31 December 2019

RSP
7/5/19 

211p
–
211p
1–3
–
0.83%
57.37%
189p
(10%)

RSP 
21/8/19 

183p
–
183p
1–3 
–
0.42%
55.26%
189p
3%

PSP
7/5/19 

211p
–
130p
3–6 
–
0.83%
57.37%
189p
(10%)

PSP 
21/8/19 

183p
–
109p
3–6 
–
0.42%
55.26%
189p
3%

The weighted average fair value for PSP awards granted in the period is 129p and for RSP awards granted in the period is 206p. 

Total share-based payment charge for the year was $5.8 million (2018: $6.3 million).

21. CAPITAL COMMITMENTS
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. 

22. RELATED PARTIES
The directors have identiﬁed related parties of the Company under IAS 24 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. 

2019  
$m

0.7
5.6
0.6

6.9

2018  
$m 

0.7
6.0
1.4

8.1

Annual Report and Accounts 2019  |  Genel Energy 

109

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S   C O N T I N U E D

23. EVENTS OCCURING AFTER THE REPORTING PERIOD
After the balance sheet date, there has been a signiﬁcant fall in oil price as a result of a number of macro events and the Company’s 
operations have been impacted by COVID-19. Under IFRS these are non-adjusting events in respect of the year-end 31 December 2019. 
Although the full extent and timing of the impact of these events is not yet known, the Company expects to experience delays in operations 
as a result of COVID-19 and the lower oil price is impacting the cash generation of the business. Consequently, the ﬁnancial reporting impact 
will need to be considered in 2020 and could impact areas such as the carrying value of our oil and gas assets.

24. SUBSIDIARIES AND JOINT ARRANGEMENTS
The Company has four joint arrangements in relation to its producing assets Taq Taq, Tawke and pre-production assets Sarta and Qara 
Dagh. 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. The Company holds 30% working interest in Sarta PSC which  
is operated by Chevron. The Company holds 40% working interest in Qara Dagh PSC which is operated by the Company.

For the period ended 31 December 2019 the principal subsidiaries of the Company were the following:

Entity name

Barrus Petroleum Cote D'Ivoire Sarl1
Barrus Petroleum Limited2
Genel Energy Africa Exploration Limited3
Genel Energy Africa Limited (in liquidation)4
Genel Energy Exploration 2 Limited (in liquidation)4
Genel Energy Finance 2 Limited5
Genel Energy Finance plc (in liquidation)4
Genel Energy Gas Company Limited5
Genel Energy Holding Company Limited5
Genel Energy International Limited6
Genel Energy Miran Bina Bawi Limited3
Genel Energy Morocco Limited3
Genel Energy No. 5 Limited3
Genel Energy No. 6 Limited3
Genel Energy Petroleum Services Limited3
Genel Energy Qara Dagh Limited3
Genel Energy Sarta Limited3
Genel Energy Somaliland Limited3
Genel Energy UK Services Limited3
Genel Energy Yonetim Hizmetleri A.S.7 
Taq Taq Drilling Company Limited8 
Taq Taq Operating Company Limited9

Country of 
Incorporation

Ownership %  
(ordinary 
shares)

Cote d'Ivoire
Isle of Man
UK
UK
UK
Jersey
UK
Jersey
Jersey
Anguilla
UK
UK
UK
UK
UK
UK
UK
UK
UK
Turkey
BVI
BVI

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
55
55

1.   Registered ofﬁce is 7 Boulevard Latrille Cocody, 25 B.P. 945 Abidjan 25, Cote d’Ivoire

2.   Registered ofﬁce is 6 Hope Street, Castletown, IM9 1AS, Isle of Man

3.   Registered ofﬁce is Fifth Floor, 36 Broadway, Victoria, London, SW1H 0BH, United Kingdom

4.   Registered ofﬁce is 3 Field Court, London, WC1R 5EF

5.   Registered ofﬁce is 12 Castle Street, St Helier, JE2 3RT, Jersey

6.  Registered ofﬁce is PO Box 1338, Maico Building, The Valley, Anguilla

7.   Registered ofﬁce is Next Level Is Merkezi, Eskisehir Yolu, Dumlupınar Bulvarı, No:3A-101, Sögütözü, Ankara, 06500, Turkey

8.  Registered ofﬁce is PO Box 146, Road Town, Tortola, British Virgin Islands

9.  Registered ofﬁce is 3rd Floor, Geneva Place, Waterfront Drive, PO Box 3175, Road Town, Tortola, Virgin Islands, British

25. ANNUAL REPORT
Copies of the 2019 annual report will be despatched to shareholders in April 2020 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.

26. STATUTORY FINANCIAL STATEMENTS
The ﬁnancial information for the year ended 31 December 2019 contained in this preliminary announcement has been audited and was 
approved by the board on 18 March 2020. The ﬁnancial information in this statement does not constitute the Company’s statutory ﬁnancial 
statements for the years ended 31 December 2019 or 2018. The ﬁnancial information for 2019 and 2018 is derived from the statutory 
ﬁnancial statements for 2018, which have been delivered to the Registrar of Companies, and 2019, which will be delivered to the Registrar 
of Companies and issued to shareholders in April 2020. The auditors have reported on the 2019 and 2018 ﬁnancial statements; their report 
was unqualiﬁed and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying 
their report. The statutory ﬁnancial statements for 2019 are prepared in accordance with International Financial Reporting Standards (IFRS) 
as adopted for use in the European Union. The accounting policies (that comply with IFRS) used by Genel Energy plc are consistent with 
those set out in the 2018 annual report. 

110 

Genel Energy  |  Annual Report and Accounts 2019

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R E P O R T   O N   P AY M E N T S   T O   G O V E R N M E N T S   F O R   T H E   Y E A R   2 0 1 9

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 2019 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 Report 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’).

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 – 2019

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

Total ($million)

KRI Total1

Taq Taq2

2,158,407.69
435,881.47

2,158,407.69
435,881.47

2,594,289.16

2,594,289.16

128.43
25.80
4.63

158.86

128.43
25.80
4.63

158.86

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 and Accounts 2019  |  Genel Energy 

111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
G L O S S A R Y   O F   T E C H N I C A L   T E R M S

‘AGM’
‘CGU’
‘CPF’
‘CP’
‘CPR’
‘Companies Act 2006’
‘Company’
‘Elysion’
‘Focus Investments’
‘FRC’
‘FSMA’
‘FTSE’
‘Genel’

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
May refer to Genel Energy plc and/or one of its subsidiaries and/or one or more employees 
as the case may be. It is used for convenience only and is in no way indicative of how the 
Genel group, or any entity within it, is structured, managed or controlled.
greenhouse gases
gas lifting agreement
the Genel Energy group of companies
health, safety and environment

‘GHG’
‘GLA’
‘Group’
‘HSE’
‘ICMM Sustainable Development Framework’ the sustainable development framework set out by the International Council  

‘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’ 

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

112 

Genel Energy  |  Annual Report and Accounts 2019

S H A R E H O L D E R   I N F O R M AT I O N

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, 14 May 2020 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
The Company’s first dividend was paid on 24 June 2019 and an interim dividend on  
8 January 2020. Further information can be found on page 80.

Payment of dividends to UK resident shareholders
Shareholders whose dividends are currently sent to their registered address should 
consider having their dividends paid directly into their personal bank or building society 
account. This has a number of advantages, including the crediting of cleared funds 
on the actual dividend payment date. If you would prefer to have future dividends 
paid in this way, please contact the Registrar for a bank mandate form. Under this 
arrangement, dividend confirmations are still sent to your registered address.

Ordinary shares 
The Company’s ordinary shares of nominal value 10p each are traded on the main 
market for listed securities on the London Stock Exchange (LON: GENL).

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 Buy-back Programme
Information on the share buy-back programme can be found on page 81.

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

Jersey Company Registration 

Number: 107897

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