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A strategy
paying dividends
A N N U A L R E P O R T 2 0 2 1
A socially responsible contributor
to the global energy mix
Who we are
Genel 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 strategy is to generate cash, invest in growth, and to return excess cash to
shareholders, as we strive to deliver on our ambition of being a world-class creator of
shareholder value, fulfilling our goal of being a socially responsible contributor to the
global energy mix.
Our values are fundamental to our behaviour, decision making, and the delivery both of our purpose and strategic objectives. Highlights
Contents
Net production
31,710 bopd
Dividends announced
$44 million
Production cost
$4 /bbl
Cash generated from producing assets
$239 million
Cash at end 2021
$314 million
Free cash flow
$86 million
2P oil reserves
104 MMbbls
Producing emissions
16 kgCO2e/bbl
Strategic report
1 Business highlights
2 Genel at a glance
4 Genel20
6 Chairman’s statement
8 Chief Executive Officer’s statement
10 Our business model and strategy
12 Key performance indicators
14 Financial review
18 Operating review
20 Sustainability
32 Principal risks and uncertainties
36 Viability statement
37 Stakeholder engagement
Governance
39 Chairman’s statement on corporate governance
40 Governance statements
46 HSSE Committee
48 International Relations Committee
50 Reserves Committee
52 Division of responsibilities
53 Composition, succession and evaluation
57 Board of Directors
60 Executive Committee
62 Nomination Committee report
64 Audit, risk and internal control
67 Audit Committee report
71 Directors’ remuneration report
89 Other statutory and regulatory information
93 Statement of Directors’ responsibilities
Financial statements
94 Independent Auditor’s report
100 Financial statements and notes
Other information
128 Report on payments to governments
130 Glossary of technical terms
131 Shareholder information
Genel Energy Annual Report 2021
1
Strategic reportGovernanceFinancial statementsOther information
Genel at a glance
What we do
Genel is a socially responsible energy company, with cash-generative oil
production that funds growth and the payment of a material dividend.
Why we do it
Genel aims to achieve our goals in accordance with values that 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.
As we do this, we aim to have a positive economic impact both by
growing the production of the hydrocarbons that fuel economies
and directly supporting the communities in which we operate
by improving infrastructure and providing employment and
development opportunities.
How we are doing
Net 2P oil reserves (MMbbls)
Net 2C oil resources (MMbbls)
Taq Taq
Tawke
Sarta
Tawke
Qara Dagh
Sarta
11
83
10
104
Working interest production (bopd)
Asset level cash generation ($ million)
Tawke
Taq Taq
Sarta
27,180
2,610
1,920
31,710
Tawke
Taq Taq
Sarta
Values that underpin all we do
18
19
79
116
166
10
10
186
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Genel Energy Annual Report 2021
Where we do it
Kurdistan Region of Iraq
Tawke
25% working interest
Sarta
30% working interest,
operator
Taq Taq
44% working interest,
joint operator
Qara Dagh
40% working interest,
operator
Production
Pre-production
Somaliland
Morocco
Odewayne
50% working interest,
operator
SL10B13
51% working interest,
operator
Pre-production
Lagzira
75% working interest,
operator
Pre-production
Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Making a
positive difference
since 2002
Genel signed its first PSC in
the Kurdistan Region of Iraq in
2002, the first company to do so.
Since this time Genel has been
integral in the development of
the oil industry in the region, and
has made a material social and
economic contribution.
We have invested c.$1 billion
in the Taq Taq field alone,
which has produced over
200 MMbbls and generated over
$9 billion in revenue for the
Kurdistan Regional Government.
Direct employment and the
building up of local supply
chains has also made a positive
impact on local communities,
while our social activities have
supported key community needs.
A full impact assessment will be
included in our Sustainability
Report, set to be issued in May.
We will be marking 20 years in
the KRI through an increase in
the scope of our social activities,
in line with UN Sustainable
Develop Goals, under the
Genel20 banner.
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Genel Energy Annual Report 2021
Genel Energy Annual Report 2021
5
267social projects completedin the KRI$60 millioninvested in social projects$21 billionin revenue for the KRG from Taq Taq and Tawke$3.7 billion invested in the KRI since 2002Strategic reportGovernanceFinancial statementsOther information
Chairman’s statement
A compelling mix of
growth and returns
“It is crucial for our actions to
not only deliver shareholder
value, but also have a positive
impact on the communities in
which we operate.”
A strategy that delivers
Such oil price strength does not impact our strategy, with
underlying principles that are as relevant in times of a high
oil price as they are in times of significant challenges. We aim
to increase our low-cost and low-carbon production, invest in
growth, and retain surplus cash to pay a material and sustainable
dividend, as we aim to provide investors with a compelling mix of
growth and returns.
The low-cost of our production in the Kurdistan Region of Iraq
means that it is cash generative at a low oil price, allowing us to
continue investing in growth and retain our material dividend.
At the prevailing oil price, it is high-margin and extremely
cash generative.
The cash that we generate provides us with a degree of freedom
to make prudent investment decisions, targeting expenditure
on those areas that promise to deliver greatest value to our
stakeholders. In 2021 Sarta was a key focus of our investment.
While initial production has not reached the levels that we hoped
it is a pilot project, and a profitable one, and we have made
substantial progress on the appraisal programme required to
understand the asset.
We remain rigorous in our management of capital expenditure.
Qara Dagh drilling did not lead to the result that we wanted, but it
is a measure of our discipline that the correct decision was made
to halt drilling at the appropriate time. We retain high-impact
exploration in the portfolio, and it is testament to the team that
a successful farm-out was completed on our Somaliland acreage.
This is a highly-prospective and underexplored region, and we
look forward to progressing this asset towards the drilling of an
exciting well with our new partner.
Material investment was made in growth assets in 2021, and
we still generated significant free cash flow, demonstrating the
efficacy of our business model and quality of our production.
This allowed us to fulfil our strategic aim of paying a progressive
dividend, with the interim dividend increased, and the final
dividend also lifted by 20%, given the cash generation that we
expect in 2022.
I am pleased to welcome you to Genel
Energy’s tenth annual report. Writing last
year, the world was still very much in the
middle of the COVID-19 pandemic, with
an uncertain economic environment and
fluctuating oil price illustrating how Genel’s
resilience stood us in good stead to thrive as
the environment improved.
The pandemic is still not over and it
continues to provide operational challenges,
but the economic recovery was well
underway. The world is now reacting to a
different crisis in Ukraine and, with no swift
resolution to this crisis in sight, the ongoing
impact to oil and gas supply and demand
dynamics is uncertain and the resulting oil
price spike (and volatility) has the potential to
be prolonged.
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Genel Energy Annual Report 2021
Making a positive difference
2022 marks 20 years of this relationship, with Genel having
signed the Taq Taq PSC back in 2002. In this time we have
invested c.$3.5 billion in our assets, generating over $21 billion
in revenue for the KRG while also providing employment
and opportunities for local communities. We have also spent
$60 million on social initiatives and completed over 250
community projects.
To mark twenty years in the KRI we will be increasing the
ambition of our social investments under the Genel20 banner in
alignment with UN Sustainable Development Goals. We continue
to believe that it is crucial for our actions to not only deliver
shareholder value, but also have a positive impact on the
communities in which we operate, with an environmental
footprint that is supportive of the goals of the energy transition.
The world still needs to utilise natural resources, and we have the
right assets, in the right locations, being delivered in the right
way, as we aim to be a socially responsible contributor to the
global energy mix.
David McManus
Chairman
Board changes
We continue to ensure that Genel has an appropriately
structured Board to support the delivery of our agreed strategy.
In 2021 George Rose, Martin Gudgeon, and Esa Ikaheimonen
left the Board, all having made valuable contributions. Esa was
a leader in solidifying our robust business model and he leaves
the Company well placed, with a strong balance sheet and the
financial flexibility to take advantage of the opportunities ahead
of us. The process for an appointment of Esa’s successor is at an
advanced stage. In the meantime, Luke Clements, our Head of
Finance and Planning, has been appointed as Interim CFO.
The appointment of Yetik Mert at the end of the year deepened
the regional experience of the Board, and we continue to work
with our shareholders in ensuring strategic alignment as we seek
to create value for all.
A key decision the Board took last year to protect shareholder
value related to the Bina Bawi and Miran assets, and it was
a decision that we had no practical alternative but to make.
Genel management had made every effort over a number of
years to engage with the Kurdistan Regional Government on
the development of these fields, but it became clear that the
KRG did not intend to permit their development in accordance
with the terms of the PSCs. As a consequence of the KRG’s
repudiatory breach of the PSCs, we elected to treat the PSCs as
terminated and claim compensation. Our claims for substantial
damages are being brought in a private London seated
international arbitration.
From our perspective it is business as usual in relation to our
other assets. We have been, and remain, a committed partner of
the KRG and our operations have been a tremendous boost for
the Kurdistan Region, and we intend this to continue for a long
time to come.
Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Chief Executive Officer’s statement
Mitigating risk,
increasing returns
Genel entered 2022 at an advantage,
with low-cost operations delivering
a high-margin and material cash
generation that opens up exciting
possibilities. We look forward with
confidence, and we never lose focus
on the key strength of our business
model, which is defined by resilience
and the mitigation of downside risk.
A resilient business model
As the COVID-19 pandemic decimated global economies and
reduced the demand for oil, our low-cost operations and the
flexibility of our capital allocation positioned us well for the
resulting low-oil price environment. It allowed us to progress
assets and retain our dividend, illustrating the financial
resilience that is our watchword.
In 2021 we demonstrated a different type of resilience, as
we faced an array of technical and operational challenges.
The pandemic continued to make life at our fields tough, and
I am proud of the way that our staff dealt with the ongoing
restrictions placed on them to keep so many work-fronts open
and progressing. Each month provided different challenges and
situations for us to overcome, and at Qara Dagh in particular
this led to the difficult but correct choice to suspend drilling
operations for technical reasons.
These challenges once again shone a light on our business model
and our character, and our success in managing uncertainty while
maximising cash generation is a testament to its strengths.
Sarta provided a real-world case study of the strength of our
model. Through minimising upfront investment and initiating
pilot production, we generate cash as we appraise to ensure that
development costs are appropriate. Our downside risk mitigation
therefore has practical upside.
8
Genel Energy Annual Report 2021
“Our key focus in 2022 is on cash
generation and accessing the
opportunities that this provides
for us.”
Despite its challenges, our Sarta production generated an
operating profit in 2021, contributing towards our appraisal
costs. As we continue our work to understand the field, we are
flexible with our approach, generating cash and developing
the asset appropriately – the conversion of the old Sarta-4
well to a water injector to help maximise production, being a
good example.
Taking this approach across our portfolio resulted in overall free
cash flow of $86 million and an increased dividend. We expect to
materially better this cash flow performance in 2022, while also
progressing our strategic plans.
Boosted operational capability
As we seek to deliver on our strategy, we have ramped up our
operational capability accordingly. In 2021 Genel drilled its
first sole operated wells since 2014, and given the multi-well
programme we had to hit the ground running. Three rigs were
mobilised and three wells were spud across Sarta and Qara
Dagh, and for an extended period of the year in simultaneous
operations. As well as drilling operations, 230,000 hours of
civil engineering work took place, as eight kilometres of flow
lines were laid to help enable early production from Sarta
appraisal wells.
There are routinely 300 people at our sites in the KRI, many of
them local as we continue to focus on providing opportunities
for the community, and we had no COVID-19 related downtime.
This is a testament to the efforts put in by our team.
Entering 2022, we have increased skills and expertise across the
Company, appropriate for the next stage of our journey, as we
look to grow our operated production.
Cash generation providing opportunity
Driven by our cash generation, this next stage brings with it
numerous opportunities. At the time of writing the Brent oil
price is substantially over $100/bbl, which if sustained would
lead to our cash generation in 2022 well exceeding a quarter of
a billion dollars. In line with our business model though, this will
not affect our focus on financial discipline. There are too many
examples of companies investing as if the high oil price will last
forever; at Genel we want to build a future-proofed portfolio that
minimises downside risk while providing investors with material
growth potential.
The focus of our investment therefore remains our producing
assets, and work in 2022 will tell us a lot more about the
investment that will be required to allow Sarta to fulfil its
potential. Somaliland offers great potential in the event of
drilling success, with one prospect alone able to target half a
billion barrels of recoverable oil, but exploration will take time.
Delivering growth and returns
Our organic portfolio is therefore exciting, and can contribute
significantly in providing us with the scale and potential that we
need as we aim to establish Genel as an investment prospect that
is difficult to ignore. We are committed to our material dividend,
and to illustrating to investors that it is sustainable in the long-
term. As such, we are keen to replace the cash generation that
will be lost once Tawke override payments end and add diverse
long-life cash generative production. We continue to consider
potential acquisitions that fit our business model and aims, and
will remain highly selective and opportunistic in this area.
Focus on ESG
Doing the right things, in the right way, with the right people, and
acting in alignment with our values remains key to our strategic
success, and we continue our focus on ESG. Management is
spending a significant amount of time on sustainability, with
our newly formed Strategy and Growth Execution Committee
meeting regularly to discuss ongoing efforts in this area.
Our standalone Sustainability Report provides greater detail on
our work, but our aims are simple.
We look to provide stakeholder returns through the production
of natural resources, while minimising our environmental
footprint, in communities where it can make a tangible difference
to people’s lives. As the energy transition gathers pace, we want
to fulfil our aim of being a socially responsible contributor to the
global energy mix, delivering the low-cost and low-carbon barrels
that are necessary as we transition to clean energy.
Somaliland has the potential to embody this aim, as the KRI has
done. Should exploration be successful, onshore production in
Somaliland can be low-cost, low-carbon, and deliver a material
and tangible benefit to local people and the host government in a
region that has real need for economic development.
Outlook
We look forward to progressing our activity in Somaliland
this year, but our key focus in 2022 is on cash generation and
taking advantage of the opportunities that this provides for us.
Robust Tawke production forms the bedrock of our plans, and
our understanding of Sarta’s ability to supplement this over the
long-term will be better understood this year.
We expect Sarta production to continue offsetting declines from
our other mature fields, and the high-margin of this production
means that we expect free cash flow of over $250 million in
2022, even after continuing growth expenditure at Sarta. I look
forward to updating our shareholders on our strategic progress.
Bill Higgs
Chief Executive Officer
Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Our business model and strategy
Our business model
and strategy
Our purpose
Our strategy
Genel aims to be a socially
responsible contributor to the global
energy mix, generating cash from
low-cost and low-carbon production
in order to be a world-class creator
of shareholder value, and a company
that has a positive impact by fueling
economic growth and directly
supporting the communities in
which we operate
Values that define us
Our values are fundamental
to our behaviour, decision making,
and integral to the delivery
of our purpose and
strategic objectives
10
Genel Energy Annual Report 2021
Underpinned by a resilient
business model
Benefitting all stakeholders
A commitment to operating in a way that minimises
Focused on delivering value to shareholders, making
possible downside and maximises wider benefits
a tangible impact on the regions and communities in
Financial discipline
Strict capital discipline and a robust balance sheet provide
We aim to provide a compelling mix of growth and
the financial strength to invest in those areas with the
returns, as we seek to increase our low-cost and high-
potential to generate the best possible returns, with a focus
margin production through disciplined investment,
on cost that helps boost our margin and optimises cash
generating material cash that supports a material and
generation, creating a virtuous circle that allows us to pay a
progressive dividend
which we operate
Shareholders
high-margin producing assets that generate the cash flow
economy from employment and supply chain development
material and progressive dividend
A balanced portfolio
Assets that are low-cost and provide resilience in tough
times, and thrive in good. We have a complementary mix
of production, development, and exploration assets, with
to invest in organic growth
Rigorous risk management
Host governments
We aim to have a positive economic impact by growing the
production of the hydrocarbons. $21 billion gross has been
directly generated for the KRG from operations at Taq
Taq and Tawke, with a further considerable boost to the
Local communities
We directly support the communities in which we operate
through maximising local employment and economic
development opportunities, as well as direct investment
in community projects and infrastructure surrounding
We bring the same rigour to organisational risk
management processes as we do to health, safety and
the environment
Focus on ESG and sustainability
We aim to be a socially responsible contributor to the global
our operations
Employees
energy mix, focused on ensuring that our company benefits
We aim to benefit our employees and contractors through
local communities, with an asset portfolio fit for a future of
responsible business practices, the promotion of a work
fewer and better natural resources projects
culture centred on safety and inclusion, fair remuneration,
and job development opportunities
GENERATECASHGenerating sufficient cash throughout the investment cycle to fund a material & progressive dividendRapidly recycling capital into assets with the potential to deliver significant & sustained cash flow growthLow-cost & high-margin production generating a material amount of cashRETURN EXCESS CASH TO SHAREHOLDERSINVEST INGROWTHOURSTRATEGY
Our purpose
Our strategy
Genel aims to be a socially
responsible contributor to the global
energy mix, generating cash from
low-cost and low-carbon production
in order to be a world-class creator
of shareholder value, and a company
that has a positive impact by fueling
economic growth and directly
supporting the communities in
which we operate
Values that define us
Our values are fundamental
to our behaviour, decision making,
and integral to the delivery
of our purpose and
strategic objectives
Our strategy aims to provide investors with a compelling mix of
growth and returns, as we strive to deliver on our ambition of
being a world-class creator of shareholder value, while materially
benefiting the communities in which we operate
Underpinned by a resilient
business model
Benefitting all stakeholders
A commitment to operating in a way that minimises
possible downside and maximises wider benefits
Focused on delivering value to shareholders, making
a tangible impact on the regions and communities in
which we operate
Financial discipline
Shareholders
Strict capital discipline and a robust balance sheet provide
the financial strength to invest in those areas with the
potential to generate the best possible returns, with a focus
on cost that helps boost our margin and optimises cash
generation, creating a virtuous circle that allows us to pay a
material and progressive dividend
A balanced portfolio
Assets that are low-cost and provide resilience in tough
times, and thrive in good. We have a complementary mix
of production, development, and exploration assets, with
high-margin producing assets that generate the cash flow
to invest in organic growth
Rigorous risk management
We bring the same rigour to organisational risk
management processes as we do to health, safety and
the environment
Focus on ESG and sustainability
We aim to be a socially responsible contributor to the global
energy mix, focused on ensuring that our company benefits
local communities, with an asset portfolio fit for a future of
fewer and better natural resources projects
We aim to provide a compelling mix of growth and
returns, as we seek to increase our low-cost and high-
margin production through disciplined investment,
generating material cash that supports a material and
progressive dividend
Host governments
We aim to have a positive economic impact by growing the
production of the hydrocarbons. $21 billion gross has been
directly generated for the KRG from operations at Taq
Taq and Tawke, with a further considerable boost to the
economy from employment and supply chain development
Local communities
We directly support the communities in which we operate
through maximising local employment and economic
development opportunities, as well as direct investment
in community projects and infrastructure surrounding
our operations
Employees
We aim to benefit our employees and contractors through
responsible business practices, the promotion of a work
culture centred on safety and inclusion, fair remuneration,
and job development opportunities
Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Key Performance Indicators
Measuring our progress
Net production
Free cash flow
Net 2P reserves
Dividends announced
Lost time incidents
Spills – loss of primary containment
31,710 bopd
$86 million
104 MMbbls
$44 million
0.29 frequency 0
2021
2020
2019
2018
2017
31,710
2021
86
31,980
2020
-4
36,250
2019
33,700
35,200
2018
2017
2021
2020
2019
164
2018
2017
99
99
104
117
124
155
150
Definition
Production is measured in barrels of oil
produced per day.
Definition
Cash flow generated from operating
activities, less net capital expenditure and
interest payments.
Definition
2P reserves are proven plus
probable reserves.
Definition
Definition
Definition
The combined total distribution of the final
Lost time incident frequency measures the
Loss of primary containment records any
and interim dividends announced in the
number of lost time incidents per million
tier 1 unplanned or uncontrolled release of
calendar year.
work hours.
Performance
Free cash flow (pre dividend payment) was
boosted by an increase in the oil price, with
Brent averaging $71/bbl in 2021, almost
$30/bbl more than the $42/bbl in 2020.
However, the increase in the oil price led to
the KRG reverting to standard payments
three months in arrears, and hence 10
entitlement payments were received in
2021. Receivable recovery payments of
$35 million were received in 2021, and the
resumption of Tawke override payments
contributed a further $72 million. With a full
year of payments and given the prevailing
oil price, Genel expects free cash flow of
over a quarter of a billion dollars.
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
2021 net production averaged just short
of 32,000 bopd, roughly in line with the
prior year. This was the result of robust
production at Peshkabir and the addition
of Sarta production largely outweighing
declines at the Tawke field, where limited
drilling activity took place, and Taq Taq.
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 and maximise cash
generation, with production maximised
over the life of the field.
12
Genel Energy Annual Report 2021
Performance
Production of 11.6 MMbbls formed the
material part of the fall in 2P reserves,
with a small downward technical revision
of reserves at Taq Taq being mitigated by
a small upward revision of reserves at the
Tawke licence. Sarta reserves stayed the
same, minus production of 2 MMbbls, with
appraisal results set to be be incorporated
into our assessment of the reserves of
Sarta at the appropriate time.
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
Relevance to strategy
Relevance to strategy
Genel’s strategy aims to increase low-
The safety of our workforce remains of
Part of our commitment to being a
cost production, invest in growth, and
paramount importance. Genel is committed
sustainable business is for the impact on
retain sufficient liquidity to pay a material,
to running safe and reliable operations
the environment around our operations
progressive, and sustainable dividend.
across our portfolio, aiming at zero
fatalities and no lost time incidents.
Dividend distributions are therefore
a signifier of the success of Genel’s
overall strategy.
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.
Performance
Performance
Performance
The resilience of our business model was
Following 14 million work hours since a
There were zero tier 1 incidents of losses of
illustrated in 2020 through the retention
lost time injury at Genel and TTOPCO
primary containment in 2021, and it is now
of our material dividend even following
operations, a member of the contractor
four years since our last incident.
material from a piece of equipment (such as
a pipe, vessel, or tank) used for containment
of potentially harmful or hazardous
substances and products.
the crash in the oil price. In 2021 the rise in
drilling team regrettably sustained a
the oil price boosted our cash generation,
foot injury during drilling operations at
and management’s confidence in future
Sarta-5. Action has been taken to prevent
prospects allowed us to fulfil our aim of
a recurrence of such an incident, as we
paying a progressive dividend, and the
strive to repeat the performance of the
interim payment increased 20% to 6¢ per
previous six years of LTI free operations.
share. Our robust financial position and
Our focus on safety in 2021 led to 102 HSE
continued positive outlook means the Board
management site visits being conducted,
is happy to recommend a final dividend of
59 emergency response drills taking place,
12¢ per share relating to 2021, an increase
1,194 production safety observations
of 20%.
being made, and 24,838 drilling safety
observations submitted.
Net production
Free cash flow
Net 2P reserves
Dividends announced
Lost time incidents
Spills – loss of primary containment
31,710 bopd
$86 million
104 MMbbls
$44 million
0.29 frequency 0
2021
2020
2019
2018
0
2017 0
44
2021
0.29
41
41
2020
0
2019
0
2018
0
2017 0
2021
0
2020
0
2019 0
2018
0
2017
1
Definition
Definition
Definition
Production is measured in barrels of oil
Cash flow generated from operating
2P reserves are proven plus
produced per day.
activities, less net capital expenditure and
probable reserves.
interest payments.
Definition
The combined total distribution of the final
and interim dividends announced in the
calendar year.
Definition
Lost time incident frequency measures the
number of lost time incidents per million
work hours.
Performance
Performance
Performance
2021 net production averaged just short
Free cash flow (pre dividend payment) was
Production of 11.6 MMbbls formed the
of 32,000 bopd, roughly in line with the
boosted by an increase in the oil price, with
material part of the fall in 2P reserves,
prior year. This was the result of robust
Brent averaging $71/bbl in 2021, almost
with a small downward technical revision
production at Peshkabir and the addition
$30/bbl more than the $42/bbl in 2020.
of reserves at Taq Taq being mitigated by
of Sarta production largely outweighing
However, the increase in the oil price led to
a small upward revision of reserves at the
declines at the Tawke field, where limited
the KRG reverting to standard payments
Tawke licence. Sarta reserves stayed the
drilling activity took place, and Taq Taq.
three months in arrears, and hence 10
same, minus production of 2 MMbbls, with
entitlement payments were received in
appraisal results set to be be incorporated
2021. Receivable recovery payments of
into our assessment of the reserves of
$35 million were received in 2021, and the
Sarta at the appropriate time.
resumption of Tawke override payments
contributed a further $72 million. With a full
year of payments and given the prevailing
oil price, Genel expects free cash flow of
over a quarter of a billion dollars.
Relevance to strategy
Relevance to strategy
Relevance to strategy
Production from our fields provides Genel’s
Production from operating activities forms
Our strategy is to enhance the value of
revenue generation, and is a key measure
Genel’s revenue generation. Net cash
our existing 2P reserves through active
of our operational performance. Our oil
illustrates the success of monetisation
reservoir management and cost-effective
production in the KRI is managed to ensure
of these activities, reflecting both
development. The Company also looks to
long-term value creation and maximise cash
money received and the minimisation of
replace 2P reserves through a combination
generation, with production maximised
operating costs.
over the life of the field.
of maturing contingent resource to
commerciality, exploration for new sources
of hydrocarbons, and M&A activity.
Performance
The resilience of our business model was
illustrated in 2020 through the retention
of our material dividend even following
the crash in the oil price. In 2021 the rise in
the oil price boosted our cash generation,
and management’s confidence in future
prospects allowed us to fulfil our aim of
paying a progressive dividend, and the
interim payment increased 20% to 6¢ per
share. Our robust financial position and
continued positive outlook means the Board
is happy to recommend a final dividend of
12¢ per share relating to 2021, an increase
of 20%.
Relevance to strategy
Genel’s strategy aims to increase low-
cost production, invest in growth, and
retain sufficient liquidity to pay a material,
progressive, and sustainable dividend.
Dividend distributions are therefore
a signifier of the success of Genel’s
overall strategy.
Performance
Following 14 million work hours since a
lost time injury at Genel and TTOPCO
operations, a member of the contractor
drilling team regrettably sustained a
foot injury during drilling operations at
Sarta-5. Action has been taken to prevent
a recurrence of such an incident, as we
strive to repeat the performance of the
previous six years of LTI free operations.
Our focus on safety in 2021 led to 102 HSE
management site visits being conducted,
59 emergency response drills taking place,
1,194 production safety observations
being made, and 24,838 drilling safety
observations submitted.
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
tier 1 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 tier 1 incidents of losses of
primary containment in 2021, and it is now
four years since our last incident.
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.
Genel Energy Annual Report 2021
13
Strategic reportGovernanceFinancial statementsOther information
Financial review
Using our financial strength
to create value for shareholders
The rapid recovery of the oil price in the
year brought about a tripling of net income
generated by our production business to
$239 million. We have been rewarded for
our activity in the second half of 2020,
when drilling resumed on the Tawke PSC
and Sarta first oil was delivered, despite
the challenging operating conditions and
uncertain oil price outlook at the time.
This material cash generation more than
funded our capital allocation priorities –
investment in derisking Sarta and
Qara Dagh and the payment of a
sustainable and progressive dividend.
The successful farm-out of our Somaliland SL10B-13 licence
supports the funding of the progression of this exciting play,
minimising our downside through reducing our capital at
risk. This is evidence of our financial discipline, as we allocate
appropriate levels of capital relevant to the risk and return of an
investment opportunity.
Overall our net cash increased by $38 million in the year.
14
Genel Energy Annual Report 2021
(all figures $ million)
Brent average oil price
Revenue
Production costs
Cost recovered production
asset capex
Production business net income
G&A (excl. non-cash)
Net cash interest2
Working capital
Payments for deferred receivables
Changes to payment days3
Free cash flow before investment
in growth
Pre-production capex
Working capital and other
Free cash flow
Dividend paid
Other
Net change in cash before
2020 refinancing
(Repayment) / new issuance of bonds
Net change in cash
Cash
Amounts owed for
deferred receivables1
FY2021
$71/bbl
334.9
(45.9)
FY2020
$42/bbl
159.7
(32.7)
(49.9)
(56.5)
239.1
(12.4)
(26.1)
(19.7)
35.1
(65.0)
151.0
70.5
(12.4)
(23.8)
(6.9)
-
21.8
49.2
(88.6)
(53.2)
23.5
85.9
(44.4)
(1.3)
40.2
(81.0)
(40.8)
313.7
(0.4)
(4.4)
(55.3)
(5.4)
(65.1)
28.9
(36.2)
354.5
114.6
158.6
1 Nominal value of deferred receivables is $76.8 million (FY 2020: $120.8 million) and
$37.8 million of invoiced override revenue where payment was suspended from March
2020 to December 2020 (see note 1)
2 Net cash interest is bond interest payable less bank interest income (see note 5)
3 In March 2020, KRG changed payments terms from three months in arrears to
one month in arrears. At year-end the KRG owed three months of sales, adversely
impacting free cash flow for the year by $65.0 million
Financial priorities of 2021
The table below summarises our progress against the 2021 financial priorities of the Company as set out at our 2020 results.
FY2021 financial priorities
Progress
— Maintain our financial strength and continue protecting
— Addition of Sarta licence to cash generation
the balance sheet
— Material recovery of deferred receivables and resumption of
override payments
— Reduction in debt and interest cost
— Net cash increased year-on-year
— Maximise NPV by prioritising highest value investment
— Focus of capital allocation on cash generative investment in the
in assets with ongoing or near-term cash and
value generation
Tawke PSC
— Investment in expansion of production from Sarta
— Deliver 2021 work programme on time and on budget
— Disappointment at delays on appraisal wells at Sarta and Qara Dagh
and suspension of QD-2 well without conclusive result
— Continue to focus on growing our income streams and
cash generation, bringing greater resilience and diversity
to the business and supporting our sustainable and
progressive dividend programme
— Rapid allocation of capital to Sarta and Qara Dagh appraisal
programmes to derisk these high potential opportunities
— Farm-out in Somaliland opens the way to drilling an exploration well
with an appropriate level of capital at risk
Dividend
The material improvement in oil price, resumption of the override, and commencement of payment of amounts owed for deferred
receivables provides the Company with a strong cash flow generation outlook.
The Company is committed to a sustainable and progressive dividend that is supported by resilient, diversified and predictable
production and a robust cash generation outlook.
At the half year results, the Board approved an increase in the interim dividend from 5¢ to 6¢, a rise of c.$3 million per annum, and
reaffirmed its commitment to the dividend being sustainable and progressive. Total dividends declared and paid in 2021 amounted to
$44 million (2020: $42 million), representing 16¢ per share (2020: 15¢ per share).
The Board has now approved an increase in the final dividend from 10¢ to 12¢, resulting in an overall 20% increase in dividends year-
on-year and total payments relating to 2021 of $50 million.
Genel Energy Annual Report 2021
15
Strategic reportGovernanceFinancial statementsOther information
Financial review
The payment timetable for the final dividend is below:
— Ex-dividend date: 14 April 2022
— Record date: 19 April 2022
— Annual General Meeting: 12 May 2022
— Payment date: 18 May 2022
Outlook and financial priorities for 2022
We carry significant liquidity and are net cash positive with
significant cash generation expected in 2022. We are well
positioned to continue the derisking and progression of our
existing portfolio, as well as add to it, in order to work towards
an outlook 2P production profile that continues to support our
sustainable and progressive dividend well into the future.
We continue to see a long-term oil price that is supportive to our
business, and coupled with our focus on the right barrels in the
right locations, means we are committed to our business model
and remaining resilient to volatility and the challenges faced by
the sector.
The focus of our business model remains unchanged:
— Progress value accretive growth projects while minimising
downside risk, with a focus on near-term cash generation and
barrels that are resilient to the external environment
— Diversification of cash generation risk away from the reliance
on the Tawke PSC
— Demonstrate material flexibility in capital allocation,
supporting the generation of free cash flow
— Pay a sustainable and progressive material dividend
For 2022, our financial priorities are the following:
— Maintain our financial strength and put that financial strength
to work through investing in growth opportunities
— Maximise NPV by prioritising highest value investment in
assets with ongoing or near-term cash and value generation
— Deliver 2022 work programme on time and on budget
— Continue to focus on growing our income streams and cash
generation, bringing greater resilience and diversity to the
business and supporting our sustainable and progressive
dividend programme
Financial results for the year
Income statement
(all figures $ million)
FY 2021
FY 2020
Production (bopd, working interest)
Profit oil
Cost oil
Override royalty
Revenue
Production costs
G&A
(excl. depreciation and amortisation)
EBITDAX
Depreciation and amortisation
Impairment / write-off
Reversal of impairment
Exploration expense
Net finance expense
Income tax expense
Loss
31,710
120.6
100.4
113.9
334.9
(45.9)
(13.9)
275.1
(172.8)
(403.2)
24.1
-
(31.0)
(0.2)
31,980
55.4
84.9
19.4
159.7
(32.7)
(12.4)
114.6
(153.7)
(323.2)
-
(2.2)
(52.2)
(0.2)
(308.0)
(416.9)
16
Genel Energy Annual Report 2021
Despite broadly unchanged production, revenue rose from
$160 million to $335 million, principally caused by the higher
Brent oil price and the resumption of the override from
January onwards.
Production costs of $46 million increased from the prior year
(2020: $33 million), with cost per barrel of $4/bbl (2020: $2.8/
bbl). Both increases have been caused by the addition of Sarta,
which commenced production in December 2020. We expect
that the overall operating cost per barrel at the Sarta field will
reduce to c.$5/bbl once production has increased to around the
facility capacity – the Sarta plant is currently operating at less
than 50% capacity. This compares favourably to revenue per
barrel of $42/bbl.
General and administration costs were $14 million (2020:
$13 million), of which corporate cash costs were $12 million
(2020: $10 million).
The increase in revenue resulted in a similar increase to
EBITDAX, which was $275 million (2020: $115 million). EBITDAX is
presented in order to illustrate the cash profitability of the
Company, and 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,
impairments and write-offs.
Depreciation of $115 million (2020: $99 million) and Tawke
intangibles amortisation of $58 million (2020: $55 million)
increased in total as a result of change in depreciation per
barrel inputs in the second half of 2020 and increase in
Sarta production.
The Company has reported an expense of $403 million relating
to the accounting derecognition of the assets and liabilities
associated with the Bina Bawi and Miran licences. An impairment
reversal of $24 million has been recognised relating to deferred
trade receivables, which have been reassessed based on the
current payment mechanism and outlook oil price. These are
both explained in note 1.
Bond interest expense of $26 million (2020: $32 million)
decreased due to lower debt, a lower coupon rate, and a
reduction in the principal amount owed.
In relation to taxation, under the terms of 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 was related to taxation of the service
companies (2021: $0.2 million, 2020: $0.2 million).
Capital expenditure
Capital expenditure is the aggregation of spend on production
assets ($105 million) and pre-production assets ($58 million) and
is reported to provide investors with an understanding of the
quantum and nature of capital investment. Capital expenditure
for the period was $164 million, predominantly focused on
production assets and Sarta ($55 million) and Qara Dagh
($51 million):
(all figures $ million)
FY 2021
FY 2020
Cost recovered production capex
Pre-production capex – oil
Pre-production capex – gas
Other exploration and
appraisal capex
Capital expenditure
49.9
55.4
5.0
53.4
56.5
30.0
10.0
13.2
163.7
109.7
Cash flow, cash, net cash and debt
Net assets
Gross proceeds received totalled $281 million (2020:
$173 million), of which $72 million (2020: $23 million)
was received for the override royalty and $35 million for
receivable recovery.
(all figures $ million)
Brent average oil price
EBITDAX
Working capital
Operating cash flow
Producing asset cost
recovered capex
Development capex
Exploration and appraisal capex
Restricted cash release
Interest and other
Free cash flow
FY2021
$71/bbl
275.1
(47.0)
228.1
FY2020
$42/bbl
114.6
14.8
129.4
(46.9)
(60.2)
(41.6)
(24.1)
-
(29.6)
85.9
(25.3)
(24.2)
3.0
(27.1)
(4.4)
Free cash flow is presented in order to illustrate the free cash
generated for equity. Free cash flow was $86 million (2020:
$4 million outflow) with an overall increase mainly as a result of
higher Brent and resumption of the override.
(all figures $ million)
FY 2021
FY 2020
Free cash flow
Dividend paid
Purchase of own shares
Bond refinancing
Other
Net change in cash
Opening cash
Closing cash
85.9
(44.4)
(1.3)
(81.0)
-
(40.8)
354.5
313.7
(4.4)
(55.3)
(3.4)
28.9
(2.0)
(36.2)
390.7
354.5
Net assets at 31 December 2021 were $581 million (31 December
2020: $930 million) which reduced as a result of write-off of
intangible assets and derecognition of other payables, accruals
and provisions following Genel’s termination of Miran and
Bina Bawi PSCs, and consist primarily of oil and gas assets
of $539 million (31 December 2020: $1,095 million), trade
receivables of $158 million (31 December 2020: $94 million) and
net cash of $44 million (31 December 2020: $6 million net cash).
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.
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 2021 and consequently that
the Company is considered a going concern. In assessing going
concern, the Directors have assessed that prolonged prevalence
of COVID-19 may have a further negative impact on the oil
price and in turn revenues, operational activity and receipt of
amounts owed.
The majority Iraq Federal Supreme Court judgment handed down
on 15 February 2022 has had no impact on our operations and
does not impact our assessment of Genel’s going concern status.
The Company’s low run rate costs, flexible capital programme,
and strong cash position provide appropriate mitigation of the
reduction of cash inflows that COVID-19 may cause for the going
concern basis to remain appropriate. Further explanation is
provided in note 1 to the financial statements.
Debt reported under IFRS
(269.8)
(348.3)
Net cash
43.9
6.2
The bonds maturing in 2025 have two financial covenant
maintenance tests:
Esa Ikaheimonen
Chief Financial Officer
Financial covenant
Test
YE 2021
Equity ratio
(Total equity/Total assets)
> 40%
57%
Minimum liquidity
> $30m
$314m
Genel Energy Annual Report 2021
17
Strategic reportGovernanceFinancial statementsOther information
Operating review
Robust production and
reserve replacement potential
Reserves and resources development
Genel’s proven (1P) and proven plus probable (2P) net
working interest reserves totalled 63 MMbbls (31 December
2020: 69 MMbbls) and 104 MMbbls (31 December 2020: 117 MMbbls)
respectively at the end of 2021.
The appraisal results of Sarta-5 and Sarta-6 will be
incorporated into our assessment of the reserves of Sarta at the
appropriate time.
Production
Production averaged 31,710 bopd in 2021, in line with the previous
year, as the addition of production from Sarta offset ongoing
declines at the mature Taq Taq field, where no drilling took place.
Tawke continues to form the bedrock of our production and cash
generation, and production was robust in 2021.
Producing assets
Tawke PSC (25% working interest)
Gross production at the Tawke licence averaged 108,700 bopd in
2021, of which the Peshkabir field contributed 61,800 bopd, and the
Tawke field 46,900 bopd.
Paul Weir
Chief Operating Officer
Drilling at the Tawke field resumed in Q3 2021 after an 18 month
pause caused by the low oil price environment, during which
time production decline was partially offset by gas injection
and workovers.
DNO expects the ramp up in drilling activities to maintain Tawke
licence gross production at around 105,000 bopd during 2022.
Gas management is ongoing, and a total of 7.6 billion cubic feet
(461,500 tonnes of CO2) of otherwise flared Peshkabir gas was
captured and injected into the Tawke field in 2021.
Sarta (30% working interest, operator)
Gross production averaged 6,400 bopd in 2021, with just over
2.5 million barrels having been produced from start up in late
November 2020 to year end 2021, as the results of this early pilot
production from the asset continues to help shape the view of full
field development.
Oil has been delivered through more than 10,000 tanker journeys,
without any lost time incidents or downtime due to COVID-19.
Drilling and completion operations at Sarta-1D concluded in
November 2021, with successful testing carried out in Q1 2022.
During testing, production was achieved from multiple zones
and fluid samples were acquired successfully. The upper zones
produced dry oil while the lower zones produced a mixture of oil
and water, in line with expectations. The well entered production
on 8 March 2022, initially at a rate of c.2,500 bopd from the
upper zones only, to allow dry oil production while monitoring
interference effects with the nearby Sarta-2 and Sarta-3 wells.
Using the experience of other fields in the KRI, we are focused on
producing and developing Sarta in the most appropriate and cost-
effective way possible using our produce, appraise, and develop
philosophy. Oil production from Sarta-1D was fast tracked, with a
short c.2 km flowline installed in Q4 2021 removing any lag time
between well testing results and monetisation of the resource
through the adjacent early production facility.
Remaining reserves (MMboe)
Resources (MMboe)
Contingent
Prospective
1P
2P
1C
2C
Best
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
31 December 2020
Production
Acquisitions and disposals
Extensions and discoveries
New developments
Revision of previous estimates
31 December 2021
262
(44)
-
-
-
20
238
69
(12)
-
-
-
5
63
437
(44)
-
-
-
(2)
391
117
(12)
-
-
-
(1)
104
1,259
1,164
2,554
2,303
5,706
4,467
-
-
-
-
-
-
(1,122)
(1,122)
(2,192)
(2,192)
(263)
(1,193)
2
-
23
163
1
-
6
49
8
-
30
400
3
-
7
-
-
-
-
-
-
122
5,443
3,274
18
Genel Energy Annual Report 2021
Pre-production assets
Qara Dagh (40% working interest, operator)
Drilling operations on the QD-2 well at Qara Dagh (40%
working interest and operator) were suspended in December.
This followed a challenging operation, with the well having
initially been side-tracked in response to encountering more
complex geology above the target reservoir than expected.
Following this, two further side-tracks were initiated, but the
licence partners concluded that it was impractical to continue
the drilling operations from this wellbore in an attempt to
reach the primary objective because of insurmountable
technical problems.
A thorough evaluation of the QD-2 well and its results is
now being undertaken to inform next steps on the licence.
The geological case for Qara Dagh remains intact and attractive,
although a drilling decision will be made dependent on the
ability of a new well to fit in with our business model, which will
balance the significant upside with our focus on prudent capital
allocation and the minimisation of downside risk.
African exploration
In December, Genel signed a farm-out agreement relating to
the SL10B13 block (Genel 51%, operator), Somaliland, with OPIC
Somaliland Corporation (‘OSC’), with all its share of future
capital investment coming from CPC Corporation, Taiwan,
the state-owned enterprise of Taiwan. Under the agreement,
OSC received a 49% working interest in the block for a cash
consideration of 49% of all Genel’s historic back costs, plus a
cash premium.
Somaliland has significant underexplored potential, with geology
analogous to Yemen. The SL10B13 block is highly prospective,
with multiple stacked prospects with over five billion barrels
of prospective resources identified from the interpretation of
the 2D seismic data acquisition completed in January 2018.
One prospect alone could target over half a billion barrels across
multiple stacked reservoirs. The prospective SL10B13 area is
c.150 kilometres from the port at Berbera, offering a route to
international markets.
The field partners are now working together to plan exploration
drilling in this block, with an aim of drilling a well in 2023. It is
currently estimated that a well can be drilled for a gross cost of
c.$40 million.
Management recently undertook a visit to Somaliland as
planning work intensifies, and as we move closer to the start of
drilling operations our social activities will ramp up accordingly.
A farm-out campaign continues to be planned relating to
the Lagzira block offshore Morocco (75% working interest
and operator), with the aim of bringing in a partner prior to
considering further commitments.
Genel Energy Annual Report 2021
19
Mike Adams
Technical Director
Following the initial results of production from the Sarta-2 and
Sarta-3 wells, the Viking I-21 Rig moved from the Sarta-1D site
to Sarta-4 to workover the legacy exploration well for use as a
produced water disposal well, which will help optimise production.
Once complete, Sarta-4 will allow production from the lower
zones of Sarta-1D, with the added the water disposal also allowing
the managing and maximisation of production from Sarta-2 and
Sarta-3.
The Sarta-5 and Sarta-6 step out wells, designed to appraise the
field away from the pilot production facility, are key in resolving
the current uncertainty over the size and shape of the Sarta field.
Drilling and completion operations concluded at Sarta-5 at the end
of 2021, with well testing set to begin shortly, and the Sarta-6 well
has now spud.
In 2021, in line with our focus on reducing emissions, Genel initiated
engineering studies on Gas and Emissions Management at Sarta
including the potential use of renewable sources to help power our
operations. The work will be matured in 2022 allowing for concept
selection, informed by the results of Sarta-5 and Sarta-6.
As we took over operatorship on 1 January 2022, we will be
increasing our social footprint in the region as a key part of our
Genel20 activities.
Taq Taq (44% working interest, joint operator)
Gross production at Taq Taq averaged 5,940 bopd in 2021,
following the ongoing suspension of drilling activity as we
continue to focus on optimising cash flow. We are working
with the MNR and our partner with a view to the resumption of
drilling in H2 2022.
Strategic reportGovernanceFinancial statementsOther information
Sustainability
A socially responsible contributor
to the global energy mix
reflected in an improved CDP score from D in 2020 to C in
2021. More detail on these initiatives, in addition to our TCFD
reporting, will be included in our standalone 2021 Sustainability
Report, which will be issued on the day of our AGM.
Our sustainability efforts are the direct result of adherence to
our corporate values. Our values were chosen as they are the
key components that drive the way that we do business and the
way we treat all stakeholders. We continue to deeply embed
these values across the organisation, and our Code of Conduct
directly flows from them. I remain committed to all employees
embracing our ethos, and in so doing being a proud part of a
company that is known for acting in the right way, for the benefit
of all.
Living and working according to our values on a daily basis
drives our alignment with international commitments, notably
the UN Sustainable Development Goals (‘SDGs’) and UN Global
Compact’s 10 Principles on human rights, labour standards,
environment and anti-corruption. Adherence to these, and our
membership of Transparency International UK and Trace, flows
from these values, as we aim to have high ethical standards
driving our business practices and supporting our management
of environmental and social concerns. An important step was
made this year as we undertook an independent human rights
assessment, which not only helped identify the areas of focus
but also provided a roadmap of actions going forward.
As our operations in the KRI continue to develop, we embrace
the opportunities for further significant contributions to society.
More broadly, 2022 sees us mark 20 years since signing our first
PSC with the Kurdistan Regional Government, and throughout
the year we will be celebrating the positive impact we have had,
and also increasing the scope of our social activities in the KRI,
under our Genel20 banner. We will also increase the scope of our
work in Somaliland, as we work towards drilling a well in 2023.
As we increase our activities we remain focused on those areas
that best support local community needs, and our chosen
areas align with UN SDGs Good Health and Well-Being, Quality
Education, Decent Work and Economic Growth, and Life on Land.
I look forward to updating you on these actions in next year’s
report, and throughout the year ahead.
Bill Higgs
Chief Executive Officer
In the 20 years since signing our first PSC in the KRI, Genel has
focused attention on making a positive difference and supporting
the communities in which we operate, and in 2021 our efforts
on this front were once again ramped-up following the gradual
easing of COVID-19 restrictions. Community engagement is
important to us, as we not only want to have a portfolio of assets
that aligns with a future of fewer and better natural resources
projects, but we are also focused on directly benefitting society
by providing local employment and fostering wider economic
opportunities. This combination of future-fit assets and
continued social investment is key to our success as a business,
as we strive to be a socially responsible contributor to the global
energy mix.
We continued to navigate through the challenges of the
COVID-19 pandemic in 2021 by continuous revision of controls
and protocols directed to ensuring the safety and wellbeing of
our workforce and local communities. I am proud of the work
that has been done this past year, in particular avoiding any
production downtime and continuing to progress our assets
which was, in part, on account of the support provided to our
employees to enable a 97% vaccine uptake in the KRI. Our strong
governance structure enabled us to respond promptly and
provide essential resources to staff in the field, enabling safe
and uninterrupted operations, despite the many challenges.
Working together as a business to continue delivering on our
goals during this difficult time has clearly demonstrated how our
corporate values are embedded in our daily practices.
In a year when Glasgow hosted the UN Climate Change
Conference, COP26, the attention of the world was focused
on the low-carbon shift that is critical for our sustainable
future. As we collectively confront the challenges posed by the
necessary global energy transition, we see our low-carbon and
low-cost asset strategy as being the right one for this phase of
that transition and I am pleased that Genel continues to address
these challenges. 2021 saw a full year of no routine flaring at
Peshkabir, progress on Sarta gas management initiatives, our
implementation of a GHG emissions management standard, and
commencement of a feasibility study into renewable options
for our Sarta operations; the combined efforts of which were
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Genel Energy Annual Report 2021
Sarta: an asset
fit for the future
On 1 January 2022 Genel took on the operatorship
at Sarta, an asset that fits in with our commitment
to low-cost and low-carbon operations. We place the
management of GHG emissions at the forefront of our
business, with each asset being actively managed to
minimise life of field emissions in order to fit in with
our GHG Emissions Management Standard. In this way,
we see our assets as having the correct emissions
profile during the energy transition – this is what we
mean by assets fit for the future. At Sarta, planning is
already underway, and efforts to assess opportunities
to minimise future emissions from this asset
are progressing.
We aim to eliminate routine flaring as the asset
develops, and we are currently in the process of
evaluating possible solutions to achieve this. We also
embarked on a feasibility study in 2021 to determine
the viability of renewable energy options for operations
at the field, with this study also investigating ways
in which we could realise efficiencies in our fuel and
energy consumption.
Both these initiatives represent an important step
for Genel as we continuously strive to address the
challenges of the energy transition and realise our
ambitions of operating low-carbon assets.
2021
highlights
34 local companies
supported by
Genel activities
11 social investment &
community projects funded
& delivered
92% of waste
from Sarta is recycled
Genel Energy Annual Report 2021
21
225 employees from the KRI working for Genel in the regionStrategic reportGovernanceFinancial statementsOther information
Sustainability Community engagement
Community engagement
At Sarta, in 2021 Genel planted 500 trees along a road in
order to enhance the space and improve air quality, while our
continuing focus on education led us to make donations for the
provision of computers and printers to three local schools in the
area. We look forward to stepping up our activities and beginning
our long-term investment initiatives in 2022, having taken on
operatorship of the field at the start of this year.
In the areas surrounding our Taq Taq operations, Genel was
pleased to continue our well-established community waste
collection programme which collects household waste on a daily
basis from nine villages surrounding the Taq Taq field, and in
2021 collected 615 tons of domestic waste. Furthermore, Genel
continued to support local communities through the provision
of fuel to Elinjagh hospital. Away from these ongoing initiatives
at Taq Taq, 2021 also saw Genel provide support in the repair
of local roads and water pipes through the provision of plant
machinery, in addition to providing some critical sewage system
upkeep for local residents.
Economic development and local employment
Having our projects supported by a community workforce is an
essential component of our strategy. By making the community
workforce stakeholders in the process and adding value to the
local economy through their participation in our operations, it
empowers these individuals to take ownership of the overall well-
being of the area.
Genel encourages our contractors to hire locally from the
communities in which we operate if the skills and requirements
are found within, and we support training if these skills
are absent. We were pleased to roll out an apprenticeship
programme in 2021 which provided five students from Erbil
Petroleum Technical Institution an online summer training
course covering a broad range of modules for which Genel was
able to share knowledge and expertise; namely civil engineering,
operations management, process safety, Human Resource
Management and Health, Safety and Environment.
Supported by our initiatives, we have been pleased to see an
increase in the number of opportunities given to the local
community in aspects of job opportunities, machinery hire, or
employee development and training. In 2021, 16 local companies
provided services across Sarta and Qara Dagh, and a further
18 for our operations at Taq Taq, all of which provided a direct
positive impact on economic development and growth within
the community.
As we approach twenty years of investment in the KRI,
our activities in 2021 reinforced a central pillar of Genel’s
sustainability strategy - supporting local communities.
Genel recognises and embraces its responsibility and obligation
to our host societies and communities and accordingly,
implementation of our CSR programme continues to provide
local social capital and improve community and stakeholder
relationships through sharing the benefits of our work.
In doing so we aim to not only address community needs but
also promote the well-being of local communities and develop
economic opportunities.
Our formal company outreach CSR policy, first introduced in
2019 based on ISO26000 Guidance on Social Responsibility,
remains in place to provide formal guidance to our CSR
strategy. This policy helps Genel govern regional community
expectations and the broader internationally accepted scope of
CSR associated with sustainable development, human rights,
and the environment. This policy promotes sustainability and
expands Genel’s efforts to create more strategic plans and
apply a systematic methodology to the implementation of our
CSR programmes.
Social investments in community, environment
and education
In 2021 Genel delivered a diverse range of social projects across
the KRI. Our CSR team successfully delivered ten community
investment projects valued at over $317,000, which focused on
increasing economic opportunity and development, improving
community health, and on supporting local education.
With education remaining a key priority for Genel’s community
investments, we were pleased to continue our partnership with
Goshan primary school in Qara Dagh by providing educational
supplies and equipment. Other 2021 projects in the vicinity of
Qara Dagh included the completion of a football pitch in Qara
Dagh town, which aims to help promote recreational activities
and provide young athletes with a safe modern facility to
regularly meet and play. In recognition of the necessity of
basic utilities, Genel was pleased to finalise the installation of
a 250 kVA power generator at Jaferan village, and to complete
a project which supplied water to Sarko village and Sewsenan
villages. The collective impact of these initiatives helped
members of these communities to an improved quality of life.
Perhaps our most notable contribution of 2021 in the Qara
Dagh region was the commencement of construction of a
youth development center. It is intended that this will provide
a permanent venue for training and skills development for
local residents from 83 surrounding villages, with the aim
of empowering local children and young adults to improve
their competency skills and enhance their capabilities and
earnings potential.
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Genel Energy Annual Report 2021
Meeting community needs
Genel values the guidance provided by the UN SDGs and we see our alignment with these as a means of making a tangible
difference to the lives of people in communities in which we operate. Further distilling these goals to those considered
most relevant to our host communities has enabled us to concentrate our efforts on delivering in the most targeted and
impactful way possible. From the building of a library in Koya, to the provision of clothes to school children in Miran, and
vocational training at Taq Taq, education has long been a priority for our social investment and a key need for the local
community. We have been a longstanding supporter of the Hiwa Cancer Centre, and our operations also aim to maximise
community employment and build local supply chains. As a natural resources company, we are also keenly aware of our
environmental footprint, and supporting biodiversity is core to our thinking as we develop our sites. The below four UN
SDG’s are therefore the ones on which our Genel20 social investments will be focused.
Genel Energy Annual Report 2021
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Sustainability People and diversity
People and diversity
Employee management
The success of our business is reliant on the talent, experience,
diversity, and commitment of our world-class workforce;
collectively united by our corporate values which enables us
to deliver our strategy. Accordingly, Genel aims to retain and
attract talent through fostering a rewarding work environment
based on equal opportunity for all current and future employees.
We promote positive employee relationships that enable all
individuals to make use of their skills, free from discrimination or
harassment, with all decisions based on merit, as outlined in our
Diversity and Equal Opportunities Policy.
We also commit to providing a competitive compensation
package that enables the Company to attract and retain highly
skilled and talented employees for all positions. We utilise
a salary structure to ensure equitable pay levels among all
titles, and the Human Resources Department collects market
data from reliable third parties to analyse and compare each
position’s level and pay. Our talent management process enables
employees to capitalise on their skillset and maximise their value
and impact on Genel and its work.
Employee wellbeing
The uncertainty resulting from COVID-19 continued to present
challenges from a people management perspective which
necessitated innovative ways to address staff welfare, which has
remained a priority throughout this period. As a response to this,
we designed and implemented a hybrid working model for all
office-based staff during 2021.
At the start of 2021 Genel conducted our third all-staff survey,
which not only gauged employee feedback in relation to these
challenges but also assessed the effectiveness of action items
that had been implemented previously. Regular townhall
meetings were held in order to provide updates to all employees,
and Genel also introduced Genel Wellness via the Wellbees App
platform in June of 2021, an initiative to promote physical and
mental wellbeing throughout the organisation, with the aim of
supporting staff in the workplace and beyond.
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Genel Energy Annual Report 2021
Diversity
Genel champions diversity throughout our operations, be it
through ideas, skills, knowledge, experience, culture, ethnicity or
through gender diversity. Each of these elements is formalised
in our policies and procedures, and Genel’s commitment to
inclusivity is evident in its diverse employee profile.
On average for 2021, we employed 128 people across four
regional offices, with 51 employees in Turkey, 33 in London, 28
in the Kurdistan Region of Iraq, and 16 in our African operations.
In a reflection of our global operational footprint, our talented
and diverse employees represent 13 different nationalities.
Genel is proud of its continuous promotion of women into
leadership positions across all levels of the Company, with
women representing 34% of our total workforce and making
up 22% of Board of Director positions, 12.5% of the Executive
Committee and 20% of management.
We are particularly proud of this gender diversity given that the
industry average representation of women in the global oil and
gas workforce was just 22% in 2020 and at Genel in 2021 women
accounted for 34% of the workforce. Moreover, we were proud
to contract our first female drill operator in KRI this year, in the
role of MPD QA/QC Advisor.
Grievance policy
Genel encourages a culture of openness and accountability
in all our operations and in a further demonstration of the
importance of this, our Whistleblowing Policy was revised in 2021
to reinforce our commitment to this process by incorporating a
Grievance Policy. This was in context of the public commitment
we have given to observe the requirements of the United
Nations Global Compact, one aspect of which requires Genel
to establish a grievance mechanism under which third parties
can raise grievances with the Company, including in the human
rights context.
The updated Whistleblowing and Grievance Policy applies to all
individuals working at all levels within the Company, including
directors, officers, employees, and to contractors, and third
parties. These policies are communicated to Genel employees
through internal training and are available for all stakeholders
on Genel’s publicly available web portal. Genel operates a
whistleblowing hotline which enables employees and third
parties to report concerns on a range of matters including
human rights violations such as slavery and trafficking and
is available in a number of languages. Every incident of
whistleblowing is reported to our Board of Directors and
investigated fully.
Human rights assessment
Central to our ESG management is an ongoing commitment
to conducting our business in a manner that respects human
rights across all areas of operation. We are committed to
acting ethically and with integrity in our business dealings,
implementing and enforcing effective systems that mitigate the
risk of modern slavery within all elements of our business.
As part of this ongoing commitment, in 2021 Genel
commissioned an independent human rights compliance
assessment of our performance against the UN Guiding
Principles on Business and Human Rights (‘UNGPs’).
The assessment provided a roadmap and recommendations for
future planning, which we look forward to implementing as part
of our ESG strategy.
As human rights trends evolve within the areas in which Genel
is operating, we place significant importance on this topic and
our assessment has allowed us to develop concrete proposals
to enhance internal policies, processes, and standards, and
in doing so further strengthen human rights compliance with
international standards, such as the UNGPs.
Moreover, where we have the ability to do so, we require
the same high standards from all our contractors, suppliers
and other business partners. As part of our contracting
processes, Company policy requires that we include specific
prohibitions against the use of forced, compulsory or
trafficked labour, or anyone held in slavery or servitude.
Further information is available under our Modern Slavery Act
2015 disclosure obligations.
Genel Energy Annual Report 2021
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Emergency preparedness and training
Genel implemented a robust emergency preparedness plan
throughout 2021 to ensure employees are trained and competent
in our field operations, as we step up our operated activities.
These trainings also involved senior managers who are
responsible for crisis management, business support and in-
country incident management teams.
We trained the dedicated emergency response teams at Sarta
and recruited additional members to the team. Regular drills
and no notice simulation exercises were also held. We purchased
dedicated response equipment, a fire response vehicle and an
array of rescue equipment to enhance our capabilities to protect
lives in case of a fire or rescue incident.
Trucking and spill mitigation
In recognition of one of our key risks, the trucking of crude oil
from the Sarta facility to the offloading station 100 km away,
we continue to enhance our spill response capabilities and
in 2021 we signed a Tier 2 and Tier 3 spill response contract
to further bolster Genel’s response capabilities to enable a
prompt response in the unlikely event of any future Tier 2 or
Tier 3 spill incidents. Driver competency training packages
continue to be utilised for all new drivers recruited for the
project. These included additional elements covering hazard
identification, working in operational facilities, and spill
response. Under a Restrata training scheme initiated by Genel,
10 local drivers received intensive training for driving safety and
procedures in different conditions and terrain. The success of
our initiatives has resulted in more than 10,000 tanker journeys
having been completed without incident.
We continue to provide spill response training to Genel personnel
involved in spill response as well as the crude oil trucking
contractors. The trucking contractor has mechanical response
equipment situated at key points along the trucking routes with
local area contractors. Tactical spill response plans are in place
to organise content and focus on specific actions and priorities
to bring speed and clarity to any response.
Sustainability Health and safety
Health and safety
COVID-19 response
The health and safety of our workforce has always been a top
priority at Genel and the measures we implemented to protect
our people continued to evolve with the ever-changing dynamic
presented by the COVID-19 pandemic. Processes and plans
were constantly reviewed and enacted by our HSE management
team as necessary in order to minimise any risk to staff, and to
continue safe operations.
Leadership and direction were provided on a weekly basis by
the steering committee, led by the CEO, and continuous reviews
were carried out on COVID-19 protocols to ensure correct control
measures were implemented according to the most current
information available through International SOS, the World
Health Organization, and local legislation. Acknowledging the
critical role vaccine uptake was to play in combatting the
COVID-19 risk, Genel moved swiftly in 2021 to support our field
teams in obtaining a COVID-19 vaccine through the roll out of our
vaccine programme in KRI, which also requires all Genel Energy
expatriate employees to be fully vaccinated before working in the
KRI. By the end of 2021, Genel achieved a fully vaccinated status
for KRI employees of 97%.
We worked effectively within the KRI to deliver a revised work
plan and establish safe practices at both our production and pre-
production assets. The HSE and operational teams re-examined
personnel requirements to keep work site numbers at a minimum
and establish measures at operational sites that improved
employee hygiene, segregation, and social distancing to reduce
the risk from COVID-19.
For employees operating in the KRI, Genel established travel
and crew change arrangements consistent with regulatory
requirements, and implemented new working arrangements
at operational sites to minimise the potential for transmission.
Furthermore, in order to adhere to the government guidance
in the various geographies in which we operate, and to provide
a safe working environment to our office-based employees, we
implemented a dynamic hybrid working model throughout 2021
to allow working from home where required, but also allowing
working from our offices where permitted.
Dissemination of the latest up-to-date COVID-19 information was
provided to all staff and was communicated at site level through
site-specific induction safety training. All persons, whether
a company employee or contractor, were subject to Genel
COVID-19 procedures. Strict quarantine measures were taken
to ensure all persons working at production and drilling sites
were COVID-19 free. These measures were also implemented
contractually with Genel vendors, to ensure transparency with
the Genel procedures on COVID-19. Due to these measures, there
was no production downtime as a result of COVID-19.
26
Genel Energy Annual Report 2021
Operational safety
Management system standards and procedures continue to
be developed to meet industry best practices. Robust training
and emergency preparedness planning has been implemented
across the workforce. In 2021 102 HSE management site visits
were conducted, 59 emergency response drills took place,
1,194 production safety observations and 24,838 drilling safety
observations were submitted, illustrating the continuous focus on
safety despite COVID-19 restrictions.
Genel strives for safe operations with zero lost time injuries and
zero Tier 1 loss of primary containment events across all operations.
Regrettably, following 14 million work hours since a lost time injury
at Genel and TTOPCO operations, a member of the contractor
drilling team sustained a foot injury during drilling operations at
Sarta-5. The resulting LTI frequency was 0.29 per million work
hours and action has been taken to prevent a recurrence of such an
incident. 1.2 million work hours have been subsequently completed
across our operations without an LTI.
Lifting is acknowledged as a high-risk activity for Genel, and in
order to mitigate this risk we have retained the service of an
independent company to inspect and certify all lifting equipment,
including those provided and used by all contractors, as an
additional assurance on top of the equipment certification.
This strategy has led to no lifting-related incidents occurring as a
result of a failure of equipment. Genel has further supplemented
this with the inclusion of mechanical handling equipment involved in
construction activities.
Hydrogen sulphide (‘H2S’) level 2 training is mandatory for all
personnel working at Genel operations and is delivered by a
competent H2S support contractor. HSE training programmes are
established and a training matrix is in place for personnel employed
at Genel operations.
Process safety and asset integrity
Process safety and asset integrity are an integral part of our
approach to managing major accident hazard related risks
and achieving safe and reliable operations. An Asset Integrity
Management Plan is in place to conduct risk-based inspections
periodically, and process safety risks are assessed through a
variety of process hazard assessments such as Hazop (Hazard
and Operability) studies, QRA (Quantitative Risk Assessment),
and risk assessments. Identifying potential hazards and risks and
then working to eliminate or mitigate these is a key focus as we
strive to protect the public, safeguard the health and well-being
of employees and contractors, minimise potential risks to the
environment, and protect assets from damage or loss.
As part of our risk management process, comprehensive
inspection and maintenance programs are carried out on
Safety Critical Elements. Other key elements of process
safety management are the management of change process,
operational readiness reviews, pre-start-up reviews, and the
continuous monitoring of process safety performance with a
robust set of process safety performance indicators.
Tier 1 and 2 Process Safety Events (‘PSE’) provide baseline
performance and are measured each year for consistent
overview of Genel’s process safety performance. Any loss of
primary containment occurring is reported, communicated to
relevant parties, and investigated to determine how to improve
equipment reliability and related operating integrity practices,
and furthermore, to identify barriers aimed at managing and
mitigating major accident hazards. In 2021, we had zero Tier
1 or Tier 2 PSE. In addition, we monitor Tier 3 PSE for better
assessment of the critical barriers.
Genel Energy Annual Report 2021
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Sustainability Climate risk mitigation
Climate risk mitigation
GHG management and forecasting
A key element of our commitment to producing future-fit, low-
carbon intensity and high-margin barrels is our management
and forecasting of GHG emissions across our entire business.
A robust understanding of our GHG footprint is essential
to target the relevant areas of operations that will allow us
to minimise these emissions. In this regard, a notable and
significant addition to our 2020 Sustainability Report was
the inclusion of Scope 3 emissions in our greenhouse gas
emissions reporting, which provided a crucial milestone for
Genel in understanding our carbon footprint. Moreover, our
monthly emissions accounting and annual disclosure - which in
2021 included Scope 3 emissions - allow our operations to be
managed in accordance with our aim of minimising emissions
and mitigating potential adverse effects.
GHG emissions profile
Following the success of measures taken in 2020 to enhance
GHG emissions reporting by shifting to an equity-shared
approach for Scope 1 and 2 emissions, which was adopted
in a move towards best practice and to provide a more
comprehensive overview of our GHG impact, this approach has
been replicated in this year’s reporting. Moreover, given that
Genel reported Scope 3 emissions in our 2020 Sustainability
Report, we have taken steps to include our 2021 Scope 3
footprint in this report. This illustrates our ongoing aim of
making incremental improvements to our sustainability
reporting and practices.
Genel reports Global GHG emissions and intensity ratio in
accordance with the requirements of the UK’s Companies Act
2006, and The Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations
2018. In addition, Genel is reporting last year’s GHG emissions
data, its underlying energy consumption for 2021 and 2020, the
contribution of UK operations to global energy consumption
and GHG emissions, and information relating to energy
efficiency action, in alignment with the additional requirements
implemented as part of the 2018 Regulations for Streamlined
Energy and Carbon Reporting (SECR). The methodology used for
reporting follows guidance provided in the 2015 GHG Protocol
Corporate Accounting and Reporting Standard.
Non-operated assets GHG emissions data are provided by
our joint venture partners. Genel’s Scope 1 and 2 emissions
are verified each year by an accredited third-party assurance
provider, albeit figures for 2021 provided below are undergoing
this process at the time of reporting.
We are pleased to report the continued success of our low
carbon strategy with a carbon intensity of 16 kgCO2e/bbl,
and while representing an increase from 2020, this had been
anticipated on account of our growth of activity in 2021,
both related to production at Sarta and drilling operations at
Qara Dagh.
Emission reduction efforts
We focus on effective design, efficient operations and
responsible energy use to reduce emissions to as low as
reasonably possible, in order to provide assurance to our
investors that Genel’s asset development plans are sustainable
from both an economic and a climate perspective. Our emissions
reduction, energy efficiency and flaring management practices
have been formalised in a corporate-wide GHG Emissions
Management Standard that emphasises an asset life-cycle
approach to emission mitigation. The standard applies to all
operating and non-operating assets including legacy assets and
future acquisitions across the entire life-cycle phases of the
asset and provides a systematic framework to identify an asset’s
carbon budget that aligns with carbon reduction targets.
One of the biggest factors influencing our GHG emissions profile
is flaring. With our joint venture partner and operator of the
Tawke PSC, DNO, we continue to carry out the first gas injection
project in the KRI and eliminated routine flaring throughout
2021, with the potential for enhanced oil recovery that will
make the project a cost benefit. Moving forward with our Sarta
operations, we aim to eliminate routine flaring as the asset
develops, and we are currently in the process of evaluating
possible solutions to achieve this.
Some of Genel’s other actions taken in 2021 to reduce emissions
from our operations are detailed on the following page.
2021 GHG and energy figures on an equity share control basis
Year
Geography
Scope 1 emissions (tCO2e)
Scope 2 emissions (tCO2e)
Scope 3 emissions (tCO2e)
Associated energy use (kWh)
Intensity ratio (kgCO2e/bbl)
2021
2020
Global
190,277
277
356,847
296,963
16
UK
-
3.21
-
13,776
-
Global
148,318
263
31,748
125,258,811
13
UK
-
8.43
-
36,162
-
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Genel Energy Annual Report 2021
Leak detection and repair
In line with Genel’s commitment to limit fugitive methane
emissions from our operated asset portfolio, an independent
third-party Leak Detection and Repair (‘LDAR’) campaign
was conducted at Sarta in August 2021. The LDAR campaign
assessed over 9,000 connections across the processing
facilities, flowlines and wellheads using the best available
technologies to detect even the smallest leaks, through the
use of a flame ionisation detector and optical gas imaging.
Measurements onsite have provided encouraging results as only
a small number of leaks were encountered, equivalent to 2.4
tCO2e of emissions each year.
Genel was able to repair all six identified leak sources and is
committed to continue performing annual LDAR campaigns to
identify possible leaks for repair, and to continue the reduction
of unintended emissions.
Climate disclosures
Genel is committed to communicating its climate strategy
and resilience to the investor community in order to illustrate
the efforts we are taking to reduce our carbon footprint.
Following our first ever disclosure to CDP in 2021, Genel was
pleased to have been awarded a C score, an improvement from
our previous score of D. This progression not only shows our
commitment to climate-related disclosures but also indicates
the progress that is being made in our data collection and
reporting capabilities.
Genel Energy Annual Report 2021
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Sustainability Environmental stewardship
Environmental stewardship
Continuous air quality monitoring
As Sarta operations develop we continue our efforts to monitor
and mitigate any adverse impacts associated with these
operations. In reflection of these efforts, we have implemented
continuous air monitoring from three air quality monitoring units
in the vicinity of the site. Following establishment of a baseline
the previous year, this ongoing programme will provide an
understanding of local air quality conditions as Sarta operations
evolve and allow constant monitoring of our operations in
order to prevent adverse impact to the health of neighbouring
communities. In 2021 the air quality data was compared against
the more stringent draft 2020 KRI regulations (as opposed to
the 2011 regulations used in our baseline year) and even against
these more stringent guidelines, no exceedances were recorded.
Biodiversity and land management
Genel places considerable significance on preservation of
biodiversity and we continue to work in collaboration with
partners to protect nature and to achieve no net loss of
biodiversity wherever we operate. We acknowledge the
importance of conserving biodiversity as an integral part of
sustainable development and we are committed to protecting
the flora and fauna in the proximity of our assets throughout the
project cycle.
Development of a biodiversity management plan (‘BMP’)
provides a framework for managing project risks and impacts
specifically related to biodiversity and to identify and prioritise
appropriate impact management actions relating to our assets.
In specific acknowledgement of the sensitive environmental
setting of our operations in the region of Qara Dagh, we are
working in partnership with local stakeholders and will continue
to monitor the measures laid out in the existing BMP which may
include the implementation of additional conservation measures
that will achieve a net positive impact in biodiversity values for
habitat temporarily affected during these operations.
As operations progress in Somaliland we will carry out similarly
rigorous studies in order to assess and mitigate any potential
impact on biodiversity in the areas surrounding our operations.
Environment management system
At Genel we are focused on reducing our emissions, managing
waste, reducing resource and water use, and protecting
biodiversity throughout our operations. As such we continue to
design our policies, procedures and plans to align with ISO 14001
requirements and we are making progress towards accreditation.
In line with the International Finance Corporation Performance
Standard 6 on Biodiversity, we are in the process of developing
an offset programme at Qara Dagh in collaboration with
local stakeholders.
Environmental, social and health impact
assessment (‘ESHIA’)
Identifying and managing any potential impact from our
operations forms an essential part of our project planning
and, as such, we develop ESHIA reports and seek regulatory
approvals for all field development activities which includes
developing an environmental and social management plan to
monitor and respond to potential impacts and grievances that
may arise with local communities and the environment.
Water management
As part of our environmental responsibilities, we recognise that
we operate in a water-restricted region and that availability of
fresh water is valuable. Therefore, it remains a key priority of
the Company to efficiently manage its water consumption and
continually strive for incremental improvements in recycling
practices as operations continue. Throughout 2021 Genel’s
HSE team recorded water use, its source and its disposal at all
of our sites across the KRI. We continue to focus on reducing
freshwater consumption by increasing the quantity of water
for recycling, such as effluent recycling through our high-
grade sewage treatment unit at Sarta or treated production
wastewater for drilling mud make-up.
Waste management
Genel continues to build upon its excellent waste management
reputation in the KRI. At Sarta, a rigorous waste segregation
programme is in place and site personnel and contractors
continue to follow the principles and hierarchy of waste
management. We have issued contracts for waste removal,
recycling and treatment for local communities as part of our
ongoing support for capacity building for local enterprises in
waste management. Our staff maintain close relations with our
waste contractors, introducing them to new recycling initiatives
and mentoring the workforce in effective and safe waste
handling and management practices. In further evidence of
continued improvements in waste management practices, for our
waste streams from Sarta, zero waste was sent to landfill, just
over 8% was incinerated, and over 92% of waste was recycled.
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Genel Energy Annual Report 2021
Sustainability ESG management and responsible business practices
ESG management and
responsible business practices
ESG management remains a primary consideration for Genel.
In 2021 Genel established the Strategy and Growth Execution
council, which provides a regular platform for discussion of
key strategic considerations for Genel, of which ESG is a vital
component, between Genel’s leadership team and cements ESG
considerations in our broader business strategy.
These meetings complemented the regular HSSE Board
committee meetings to further foster a culture of ESG
integration and effective governance, with ESG actions also
being discussed at employee Town Hall meetings. Placing greater
emphasis on our commitments, 2021 built on the previous year,
where a portion of annual remuneration for all Genel employees
was linked to the realisation of annual corporate ESG related
goals, with ESG metrics also now incorporated in annual and
long-term incentive plans. The inclusion of ESG criteria in Genel
remuneration packages has again been approved for 2022.
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Risk management
Risk Management
Principal risks and uncertainties
The impact of COVID-19 was swift and constantly changing,
and we continued to assess it on a bi-weekly basis through
the COVID-19 steering committee led by the CEO, ensuring
a continuous flow of information from all our sites. In line
with our governance procedures, the risk was allocated to
the HSSE Committee, who received a recent update on the
Genel vaccination policy on 8 December 2021 prior to formal
communication to all staff and contractors. Given the impact of
COVID-19 it was a tremendous performance to safely continue
operations at all fields, with no downtime in drilling at Sarta and
Qara Dagh or production operations at Sarta and Taq Taq.
We continue to use the bowtie method to support the
identification, design and management of prevention and
mitigation controls, as we take a proactive approach to
risk mitigation.
VK Gupta
Head of HSE and Risk Management
Introduction
Mitigating downside risk is a key component of our business
model. The benefits of this approach, and the resilience that
it provides, was demonstrated once again in 2021, as Genel
retained a robust financial position and continued to deliver on its
operational strategy despite the challenges posed by COVID-19.
As well as being a core part of our overall approach to running
the business, we also have a diligent approach to individual
risks, bringing the same rigour to Genel’s organisational
risk management processes as we do to health, safety and
the environment.
Uninterrupted production and drilling operations
during COVID-19
Our approach to COVID-19 illustrates the robust risk
management policies and procedures that we have in place, how
we identify risks and then take a proactive approach to design
and implement operational controls to manage these. We view
risk through the same lens as we view HSE, proactively looking
to prevent problems before they arise, having the right controls
and assurances in place to mitigate as much as possible any
potentially negative outcomes.
We continued to monitor the evolution of COVID-19 and
modified controls and protocols regularly to keep people safe
and continue uninterrupted production and drilling operations.
Field quarantine duration was reduced from 14 days to 7 days
with 2 PCR tests, and mandatory use of face masks and social
distancing continued. Vaccination were mandated for all staff
and we reached 97% fully vaccinated status by the end of 2021.
32
Genel Energy Annual Report 2021
Risk management Principal risks and uncertainties
Principal risks
and uncertainties
Trends Key
Risk Improved
Risk Unchanged
Risk Deteriorated
KRI natural resources industry and regional risk
Sefa Sadık Aytekin, Head of Government Affairs
Payment for KRI export sales
Bill Higgs, CEO
Board
Trends
Read more p7
Board
Trends
Read more p17
Approach
A strong relationship with the KRG facilitates the realisation of the value
of Genel’s principal assets.
Approach
The Kurdistan Regional Government purchases all crude oil at
the wellhead and arranges for payment to be made to Genel for
ongoing exports.
Opportunities
— Strong relationship with the KRG facilitates further success in KRI
— Stable environment for operations allows Genel to pursue
strategic objectives
Threats
— A change in situation of the KRG, Turkey or of Baghdad and the
wider region adversely effects operating environment in the KRI,
including payments
— Attempts by the Federal Government of Iraq to enforce the recent
majority decision by the Federal Supreme Court in Baghdad could
impact Genel
— Russia targeted sanctions that could impact the supply chain and
movement and trading of KRG oil
Controls
— Regular dialogue with key decision makers in the KRI,
including meetings with the Prime Minister of the Kurdistan
Regional Government
— Stakeholder management plan
— Close monitoring of rapidly moving sanctions developments
Opportunities
— Payments provide increased cashflow strengthening balance sheet and
enabling growth
— Regular payments improve market sentiment
Threats
— Payments from the KRG delayed, reducing the Company’s ability to
re-invest in line with its strategic priorities
— Attempts by the Federal Government of Iraq to enforce the recent
majority decision by the Federal Supreme Court in Baghdad could
impact Genel
Controls
— KRG payments ongoing
— Payment recovery ongoing for overdue entitlements from November
2019 to February 2020
Development and recovery of oil reserves
Paul Weir, COO
Reserve replacement
Mike Adams, TD
Board
Trends
Read more p18
Board
Trends
Read more p18
Approach
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.
Approach
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.
Opportunities
— Correctly characterising uncertainty in reserves outcomes
— Cost effective development of fields
Threats
— Underestimation of reservoir uncertainty and reservoir performance
to the downside
— Poor drilling execution performance
— Poor reservoir performance
Controls
— Life of field asset development plans in place
— Active and optimised performance drilling across all producing assets
— Active reservoir management
— HSE, Asset Integrity and Operations Management Systems
Opportunities
— Successful exploration and appraisal activity increase resources
— Moving projects and developments into execution increases reserves
— Successful addition of inorganic opportunities to the portfolio
— Progress on current assets (Sarta, Somaliland, and Qara Dagh) unlocks
resource value
Threats
— Inability to progress assets in the portfolio and convert contingent
resources to reserves
— Failure to add inorganic opportunities to the portfolio
Controls
— Life of field asset development plans in place
— Active management of contingencies to convert contingent resources
to reserves
— Appraisal and production ongoing at Sarta
— Successful Somaliland farm-in leading to possible drill in 2023
Genel Energy Annual Report 2021
33
Strategic reportGovernanceFinancial statementsOther information
Risk management Principal risks and uncertainties
M&A activity
Esa Ikaheimonen, CFO
Corporate governance failure
Jamie Dykes, GC
Board
Trends
Read more p16
Board
Trends
Read more p39
Approach
The pursuit of selective, value accretive M&A opportunities is part of
Genel’s growth strategy.
Approach
The Company’s strategy is to maintain high standards of
corporate governance.
Opportunities
— Execution of a transaction positively impacts the Company’s valuation,
Opportunities
— Good corporate governance is proven to provide benefits to business
asset quality, and equity story, among other factors
and value to shareholders
Threats
— Execution of a transaction that adversely impacts the Company’s long-
term liquidity, balance sheet, asset quality, and equity story, among
other factors
— Misalignment with major shareholders
Controls
— Clearly defined strategic 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
Threats
— Corporate governance failure would have a negative impact on
investor perception of the Company
Controls
— 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
Environmental, social & governance expectations
Bill Higgs, CEO
Capital structure and financing
Esa Ikaheimonen, CFO
Board
Trends
Read more p20
Audit Committee
Trends
Read more p17
Approach
Position the Company for the energy transition; supporting and
sustaining the communities where we operate.
Opportunities
— Develop a competitive advantage for Genel and distinguish it from
its peers
— Position Genel as a socially responsible contributor to the global
energy mix, widening the pool of potential investors
Threats
— Reduced access to capital
— Negative stakeholder publicity
— Introduction of punitive carbon or other taxation
— Loss of local community support gives rise to disruption to
field operations
Controls
— ESG strategy in place and agreed by Board including long-term
CSR strategy
— ESG scorecard included in annual targets
— Commitment to local employment and local contractors
— GRI compliant Sustainability Report issued annually (in English
and Kurdish)
— CDP score improved to C
— Proactive engagement with ESG rating agencies
— Board and senior management commitment
34
Genel Energy Annual Report 2021
Approach
The Company aims to retain a strong balance sheet and flexibility in our
capital structure in order to pursue its strategic objectives and underpin
future growth.
Opportunities
— 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
Threats
— Failure of the KRG to make payments for sales (as above)
— Material deterioration in the oil price
— Lack of access to capital due to macro developments
— A failure to replace reserves
Controls
— Disciplined capital allocation, clear investment priorities and strong
expenditure controls
— Low cost of production, competitive onshore development costs
— Strong balance sheet and material free cash flow expected in 2022
— No debt maturity until 2025
Trends Key
Risk Improved
Risk Unchanged
Risk Deteriorated
Health and safety risks
Vrijesh Kumar Gupta, Head of HSE and Risk
COVID-19
Vrijesh Kumar Gupta, Head of HSE and Risk
HSSE Committee
Trends
Read more p27
HSSE Committee
Trends
Read more p26
Approach
Health, safety and environment management is a primary consideration
across all Genel operations.
Opportunities
— Continued strong HSE performance reduces business loss, boosts
employee motivation and enhances Company reputation
— Positive HSE reputation enables timely approvals of environmental
permits and development plans
Approach
Proactive assessment of the latest scientific and medical advice to design
fit for purpose and flexible COVID-19 controls with a learning mindset for
all business operations through risk assessments.
Opportunities
— Prevent COVID-19 infection and keep people safe and healthy
— Ensure fully vaccinated staff
— Continue drilling and production operations without interruptions
Threats
— Failure of HSE procedures and controls leads to injuries/illnesses
and/or adverse environmental impact, asset damage, process safety
accidents and material reputational damage
— Poor HSE performance can have license to operate risks
Threats
— Evolution of pandemic and variants
— Not fully vaccinated staff
— Inadequate design and implementation of COVID-19 controls
— Government restrictions that adversely impact or delay business travel
Controls
— Ongoing continuous improvement in HSE management system
processes, procedures and trainings as we aim for incident-
free operations
— HSE and process safety risk assessments
— Assurance inspections and audits
— Management site visits
— Site HSE supervision and coaching
or operations
Controls
— COVID-19 controls and protocols
— Mandatory vaccination policy
— Expert medical advice, education and awareness
— COVID-19 steering committee and all staff townhalls
— Hybrid office model
Genel Energy Annual Report 2021
35
Strategic reportGovernanceFinancial statementsOther information
Principal risks and uncertainties
Viability statement &
going concern assessment
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 in the Annual Report 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
— Capital structure and financing
Viability assessment
Based on their review of these assumptions and sensitivities in
the context of the funding options and risks referred to above,
the Directors found that there was a reasonable expectation
that the Company will be able to continue in operation and
manage its liabilities as they fall due over the five-year period to
December 2026.
Our 2021 Strategic Report from pages 1 to 38 has been reviewed
and approved by the Board of Directors on 14 March 2022.
Bill Higgs
Chief Executive Officer
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.
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 assessed 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 bonds,
maturing October 2025
— 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 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 bond and compliance with its 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.
36
Genel Energy Annual Report 2021
Stakeholder engagement
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.
We recognise the Company has a range of stakeholders
including but not limited to our investors, the local government
and communities in the regions in which we operate, our joint
venture partners, employees, and suppliers. When making
business decisions the Board of Directors of Genel considers, both
individually and collectively, that they have acted in good faith
in a way that 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 2021 (see
Corporate Governance report). In particular the Board considers
this to be the case, by reference to the approval of our strategy and
business model supported by our viability statement on page 36:
(a) The likely consequences of any decision in the long-term
Genel has a portfolio of assets, with material high-margin
production and the potential for future growth. The growth of our
business continues to be funded from cash generated from our
producing assets, and our outlook illustrates that our financial
strength allows for ongoing portfolio investment and the payment
of a material and progressive dividend. The Company continues to
maintain its strong balance sheet, and its liquidity runway and
debt maturity profile continue to be proactively managed.
(b) The interests of the Company’s employees
Our talented, experienced, and motivated staff are key to the
success of our Company. Throughout 2021 precautions continued to
be taken to protect our staff from the global pandemic. Health and
safety measures were kept in place for our field-based staff which
enabled production operations to continue without any downtime,
and office-based staff continued to work from home. Towards the
end of the year, the Company introduced a hybrid working model
for our office-based staff, with employees having contributed to
the design of this model via surveys and meetings. In 2021, the
Genel Wellness Programme was launched to promote our focus
on wellbeing and is accessible to all staff. The Board has appointed
Canan Edibog˘lu as the 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 45 of our Corporate Governance report.
Genel continues to be committed to employing a diverse and
balanced team, enabling 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.
In 2021 Genel launched a bespoke in-house leadership evolution and
development programme aimed to develop, motivate and retain
high potential employees who will support the future growth of our
business. Further information on employee management can be
found on page 24.
(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 business partners to build deep and valuable
relationships, helping to unlock value in complex commercial
situations helps Genel to fulfil its strategy. In 2021, the Company
continued to engage with host governments at all levels in order
to drive forward our business strategy.
(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. In 2021 we continued to
support community investment initiatives that demonstrate our
commitment to being a socially responsible contributor to the
global energy mix. This helps us maintain and strengthen relations
with the local communities near our operations. In addition
we continued to promote local employment and contracting
so that the economic benefits generated from our operations
are shared within the region. Genel takes significant steps to
minimise environmental impacts by reducing resource use,
mitigating emissions, managing waste, and preventing pollution.
More information on our positive social and economic impacts
and our environmental management practices can be found in the
sustainability section of this report on pages 20 to 31.
(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 applicable regulatory requirements in both
Jersey and the UK. Our Code of Conduct defines the values
that capture the heart of the Company’s spirit and ensure the
Company maintains a strong reputation for high standards
of business conduct. Our 2021 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 towards 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 in order to deliver on this responsibility.
More information on our relationship with shareholders can be
found in the Corporate Governance report.
Genel Energy Annual Report 2021
37
Strategic reportGovernanceFinancial statementsOther information
38
Genel Energy Annual Report 2021
Chairman’s statement on corporate governance
Continued commitment to high standards of
corporate governance
2021 saw the departure of George Rose, Martin Gudgeon,
and Esa Ikaheimonen as members of our Board of Directors.
I would like to take this opportunity to thank each of them for
their contributions to the Company during their tenure on the
Board. Following their departures the Board recognised that
the majority of the Board (excluding the Chairman) was not
independent and in line with our commitment to maintain an
equal balance of independent and non independent Directors
a search process to appoint a new Independent Non Executive
Director was launched. Following an analysis performed by
the Nomination Committee to determine which skills and
experiences were required around the boardroom, Russell
Reynolds were appointed to lead the search process, and in
December 2021 Yetik K. Mert was appointed as an Independent
Non-Executive Director.
Following his appointment to the Board, Yetik K. Mert received
a comprehensive induction programme which due to the
ongoing global pandemic was delivered remotely. The induction
programme included meeting with key departmental heads and
relevant external advisors.
Following the results of our 2021 AGM and in line with the
UK Corporate Governance Code, the Company engaged with
major shareholders to understand their views on each of the
resolutions that received less than 80% of votes in favour.
Noting that proxy agencies were all in favour of each resolution
that was put forward at the meeting, and following discussions
with shareholders, the Board’s view is that the votes cast against
the resolutions primarily reflected differing opinions held by
the Company’s major shareholders in relation to a number of
matters. As a consequence, the Board does not believe it is
necessary or appropriate to take any additional action and is
united in working towards delivering our strategy and creating
shareholder value.
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 56.
David McManus
Chairman
Genel Energy Annual Report 2021
39
Dear Shareholder,
I am pleased to present my third Corporate
Governance Report to shareholders as your
Chairman. Our 2021 Governance Report
illustrates how the Board and its Committees
have supported business activities while
maintaining a strong governance culture.
As the global pandemic continued to drive an uncertain external
environment during 2021 the Company’s corporate governance
framework continued to support decision making by the Board
of Directors. The Company continued to make investments in our
producing assets in line with our strategy, generating material
free cash flow of $86 million even after making substantial
investment in growth, positioning us well for continuing
material cash generation that in turn supports our progressive
dividend policy.
A key decision the Board took last year to protect shareholder
value related to the Bina Bawi and Miran assets, and it was
a decision that we had no practical alternative but to make.
Genel’s management had made every effort over a number of
years to engage with the Kurdistan Regional Government on the
development of these fields, but it became clear that the KRG did
not intend to permit their development in accordance with the
terms of the PSCs. As a consequence of the KRG’s repudiatory
breach of the PSCs, we elected to treat the PSCs as terminated
and claim compensation. Genel has consequently taken steps
to bring a claim for substantial compensation from the KRG at a
private London seated international arbitration.
Strategic reportGovernanceFinancial statementsOther information
Governance statements
Governance statements
Genel Energy plc is a Jersey incorporated company with a standard listing on the London
Stock Exchange. We are committed to complying with the regulatory requirements in both
Jersey and the UK.
The Board continues to be committed to complying with the
UK Corporate Governance Code and with the Remuneration
Regulations. 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 available on our website at
genelenergy.com.
Fair, balanced and understandable
The Annual Report and Accounts taken as a whole are fair,
balanced and understandable and provide the information
necessary for shareholders to assess the Group’s position,
performance, business model and strategy. See the Audit
Committee report on pages 67 to 70 for further information on
how this conclusion was reached.
Section 172(1)
A Section 172(1) statement is made on page 37. It provides
cross-references to the required detail set out throughout this
Annual Report.
Compliance statement
The Board is committed to high standards of corporate
governance and has decided to manage Genel’s operations in
accordance with the UK Corporate Governance Code 2018. A full
version of the Code can be found on the Financial Reporting
Council’s (‘FRC’) website at frc.org.uk. During 2021 the Company
complied with the principles of the Code and on pages 41 to 42
explanations as to how we have complied with our obligations
under the Code are provided. We are in full compliance with
the provisions of the Code with the exception of provision 11,
as between 6 May 2021 and 22 December 2021 at least half
the Board (excluding the Chairman) were not independent, and
provision 32 as since 22 November 2021 David McManus has
been appointed as Interim Chair of the Remuneration Committee.
Going concern
The going concern statement is made on page 36.
Viability
The viability statement is made on page 36. Further details of the
Board’s assessment of the viability of the Company are set out in
the Audit, risk and internal control section on pages 64 to 66.
Robust assessment of principal risks
The Board has undertaken a robust assessment of the Group’s
emerging and principal risks, including those that would threaten
its business model, future performance, solvency, liquidity and
reputation. Our Annual Report identifies principal risks and
uncertainties on pages 32 to 35 and the procedures followed to
identify these risks on pages 64 to 66.
Review of risk management and internal control
A continuous process for identifying, evaluating and
managing the risks the Company faces has been established.
The effectiveness of the internal control systems are reviewed by
the Audit Committee. Further details are set out in the Audit, risk
and internal control section on pages 64 to 66.
40
Genel Energy Annual Report 2021
Application of UK corporate
governance code principles
The Code has placed increased emphasis on “apply and explain” with regard to the Principles of the Code. Our explanations about how we
have applied application of the main principles of the Code can be found as follows:
Board leadership and company purpose
Principle A. A successful company is led by an effective and entrepreneurial board, whose
Strategic report pages 1-38
role is to promote the long-term sustainable success of the company, generating value for
Governance report pages 39-93
shareholders and contributing to wider society.
Directors’ Remuneration report pages 71-88
Principle B. The board should establish the company’s purpose, values and strategy, and
Strategic report pages 1-38
satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by
Company purpose, values and strategy pages
example and promote the desired culture.
10-11
Division of responsibilities pages 52-54
Directors’ Remuneration report pages 71-88
Principle C. The board should ensure that the necessary resources are in place for the
Sustainability pages 20-31
company to meet its objectives and measure performance against them. The board should
Principal risks and uncertainties pages 32-35
also establish a framework of prudent and effective controls, which enable risk to be assessed
Section 172 statement page 37
and managed.
Audit, risk and internal control pages 64-66
Audit Committee report pages 67-70
Principle D. In order for the company to meet its responsibilities to shareholders and
Sustainability pages 20-31
stakeholders, the board should ensure effective engagement with, and encourage
Section 172 statement page 37
participation from, these parties.
Communication with investors page 45
Principle E. The board should ensure that workforce policies and practices are consistent with
Sustainability pages 20-31
the company’s values and support its long-term sustainable success. The workforce should be
Section 172 statement page 37
able to raise any matters of concern.
Division of responsibilities
Directors’ Remuneration report pages 71-88
Principle F. The chair leads the board and is responsible for its overall effectiveness in
Division of responsibilities pages 52-54
directing the company. They should demonstrate objective judgement throughout their
tenure and promote a culture of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all non-executive directors, and
ensures that directors receive accurate, timely and clear information.
Principle G. The board should include an appropriate combination of executive and non-
Division of responsibilities pages 52-54
executive (and, in particular, independent non-executive) directors, such that no one individual
Board biographies pages 57-59
or small group of individuals dominates the board’s decision-making. There should be a clear
division of responsibilities between the leadership of the board and the executive leadership
of the company’s business.
Principle H. Non-executive directors should have sufficient time to meet their board
Division of responsibilities pages 52-54
responsibilities. They should provide constructive challenge, strategic guidance, offer
specialist advice and hold management to account.
Principle I. The board, supported by the company secretary, should ensure that it has the
Sustainability pages 20-31
policies, processes, information, time and resources it needs in order to function effectively
Division of responsibilities pages 52-54
and efficiently.
Audit, risk and internal control pages 64-66
Genel Energy Annual Report 2021
41
Strategic reportGovernanceFinancial statementsOther information
Governance statements Application of UK corporate governance code principles
Composition, succession and evaluation
Principle J. Appointments to the board should be subject to a formal, rigorous and
Nomination Committee report pages 62-63
transparent procedure, and an effective succession plan should be maintained for board and
senior management. Both appointments and succession plans should be based on merit
and objective criteria and, within this context, should promote diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths.
Principle K. The board and its committees should have a combination of skills, experience and
Board biographies pages 57-59
knowledge. Consideration should be given to the length of service of the board as a whole
and membership regularly refreshed.
Principle L. Annual evaluation of the board should consider its composition, diversity and
Nomination Committee report pages 62-63
how effectively members work together to achieve objectives. Individual evaluation should
Board effectiveness page 56
demonstrate whether each director continues to contribute effectively.
Audit, risk and internal control
Principle M. The board should establish formal and transparent policies and procedures to
Audit, risk and internal control pages 64-66
ensure the independence and effectiveness of internal and external audit functions and
Audit Committee report pages 67-70
satisfy itself on the integrity of financial and narrative statements.
Principle N. The board should present a fair, balanced and understandable assessment of the
Strategic report pages 1-38
company’s position and prospects.
Audit, risk and internal control pages 64-66
Audit Committee report pages 67-70
Financial Statements pages 100-126
Principle O. The board should establish procedures to manage risk, oversee the internal
Principal risks and uncertainties pages 32-35
control framework, and determine the nature and extent of the principal risks the company is
Viability statement page 36
willing to take in order to achieve its long-term strategic objectives.
Audit, risk and internal control pages 64-66
Audit Committee report pages 67-70
Remuneration
Principle P. Remuneration policies and practices should be designed to support strategy
Company purpose, values and strategy pages
and promote long-term sustainable success. Executive remuneration should be aligned
10-11
to company purpose and values, and be clearly linked to the successful delivery of the
Directors’ Remuneration report pages 71-88
company’s long-term strategy.
A formal and transparent procedure for developing policy on executive remuneration and
Directors’ Remuneration report pages 71-88
determining director and senior management remuneration should be established. No
director should be involved in deciding their own remuneration outcome.
Principle R. Directors should exercise independent judgement and discretion when
Directors’ Remuneration report pages 71-88
authorising remuneration outcomes, taking account of company and individual performance,
and wider circumstances.
42
Genel Energy Annual Report 2021
Board leadership and
company purpose
Our objective remains to create long-term value for shareholders through the exploration,
development and production of natural resources. We have low-cost producing assets that are
important to the growth of the KRI. Further information on our business model can be found
on pages 10 to 11.
Activity highlights
January
Approved the trading and
operations update
Reviewed the outcome of the
2020 external Board effectiveness review
March
Reviewed and approved the
2020 Annual Report
Approved the appointment of
BDO as the Company’s auditor
Approved the declaration of a
2021 final dividend payment
May
AGM
July
Reviewed and approved the
half-year results statements
September
Discussed the Company’s
business strategy
Discussed the farm-out of
SL1013B licence in Somaliland
November
Approved the trading and
operations update
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. As part of its role
the Board considers and discusses trends across the industry,
the implications of these trends for the business including areas
of potential opportunities and risks that could impact the future
success of the business. Further information on our purpose,
business model and strategy can be found on pages 10 to 11.
As part of the Company’s governance processes the Board
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. 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 matters reserved for the Board.
December
Approved the 2022 work programme
and budget
Performed a risk deep dive
Approved the appointment of Yetik K. Mert
to the Board of Directors
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.
The Board of Directors has delegated day-to-day management of
the business to the CEO who operates within delegated authority
limits. The Board reviews the matters reserved for its decision
and the authorities it has delegated 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.
Genel Energy Annual Report 2021
43
Strategic reportGovernanceFinancial statementsOther information
Board leadership and company purpose
Code of Conduct
Our Code of Conduct defines what we stand for as a Company,
sets out the principles that guide all of our business activities
and how we expect our Board, employees, suppliers, partners,
and others to behave. The Board has adopted a Code of
Conduct, a full copy is available on our website. 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.
Culture
The Board of Directors review and approve key policies including
the Company’s values and Code of Conduct in order to establish
a tone from the top and ensure they support the long-term
sustainable success of the business. The Board recognises the
importance of monitoring culture throughout the business, in
order to ensure practices and behaviours are aligned with the
Company’s purpose, values, and strategy. In order to monitor
organisational culture throughout the year the Board and
its Committees receive reports on various topics including
organisational effectiveness, the understanding of culture and
values throughout the business, health and safety, compliance
matters, workforce remuneration, and talent development.
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 or company policies without fear of retaliation.
We operate an independently run and confidential ‘SpeakUp’
whistleblowing hotline for all staff. During the year all staff
members were reminded of the ‘SpeakUp’ facility available
to them. All issues raised via this route are investigated and
reported to the full Board.
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.
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 (2020: 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 Company’s conflict of interest policy also requires our
employees to declare any actual or potential conflicts of interest.
The Audit Committee and the Board have applied the principles
and processes set out above during 2021 and confirm that they
have operated effectively.
In addition, on an annual basis the Company Secretary writes
to each of our significant shareholders requesting their co-
operation to identify conflicts of interest and continues to
engage with them to identify any actual or potential conflict of
interest that may arise on an ongoing basis.
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.
Engagement 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. As well
as ad hoc updates from management, three discussions on
engagement activity with the Company’s key stakeholders
are scheduled in the Board calendar thoughout the year.
Further information on stakeholder engagement and how the
Board has complied with s172(1) of the UK Companies Act 2006
can be found on page 37.
The Group’s Code of Conduct also 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
section on pages 20 to 31.
44
Genel Energy Annual Report 2021
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. Further information on how we engage with
communities can be found in the sustainability section of this
report on pages 20 to 31.
Workforce engagement
The Board recognises the importance of our workforce as a
key component in the Company’s ability to deliver its strategy.
Until May 2021 Martin Gudgeon served as the Board appointed
Designated Independent Director (‘DINED’) for workforce
engagement. Following his resignation from the Board of
Directors in June 2021, Canan Edibog˘lu was appointed as
the DINED for workforce engagement. Whilst face-to-face
opportunities for Canan Edibog˘lu to meet and interact with our
employees continued to be curtailed by the global pandemic,
Canan Edibog˘lu played an integral part in the communications
to our Turkish employees regarding the office re-location from
Ankara to Istanbul. 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. In early
December 2021, as part of our employee engagement activity,
some UK based employees attended a dinner with David
McManus, Tim Bushell, and Bill Higgs.
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 response to the ongoing COVID-19 pandemic
in 2021 an engagement strategy that provided investors with
regular access to management via virtual communication was
implemented, this included all roadshows being carried out
virtually. The Company also held video conferences with analysts
on the morning of key updates to the business being made to
the market.
In 2021, the Chairman and Independent Non-Executive Directors
held meetings with major 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 via our website at
genelenergy.com
2022 AGM
The 2022 AGM will be held on Thursday, 12 May 2022 at
Linklaters LLP, One Silk Street, London, EC2Y 8HQ UK at
11.00am.
The Notice of AGM accompanies this Annual Report and sets out
the business to be considered at the meeting.
Both this Annual Report and the Notice of AGM are available on
our website at genelenergy.com
2021 investor activity
Genel Energy Annual Report 2021
45
Investor conferencePost trading update call with analystsTwo investor conferencesFull-year results roadshowCEO interview with Proactive Investors CEO investor interview with JP MorganOne virtual conferenceAGM with investor Q&AHalf-year results roadshowSustainability Report issuedTwo investor conferences Strategic reportGovernanceFinancial statementsOther information
HSSE Committee
Ensuring a focused approach
to HSSE
Dear Shareholder,
I am pleased to present this report from the
HSSE Committee. The health, safety and
security of our workforce has always been
central to the culture of Genel, and never
more so than in 2021 as we continued to
navigate through the global pandemic. Genel’s
HSE policy continues to reflect international
best practice including, but not limited to,
the IFC Performance Standards and IOGP
Standards.
Throughout 2021 the Committee continued to be provided with
regular updates by management on security in the region and
the progress made against the HSE plan which the Committee
approved at the beginning of the year. In addition, the Committee
was regularly kept abreast of protocols established to ensure the
safety of our workforce and enable business activity to continue
in the face of the ongoing global pandemic.
In 2021 the health and safety plan contained actions in
the following areas: leadership and culture, training and
competency, management systems, risk management, health
and COVID-19, process safety, operational safety, contractor
management, emergency preparedness, learning from
incidents, assurance and safe delivery of the asset development
plans. During the course of the year progress was made
against each of these areas. COVID-19 protocols were revised
regularly and a mandatory vaccination project was executed to
ensure operations in the KRI could continue as the pandemic
progressed. HSE focus areas included Sarta oil production and
trucking operations, drilling operations, safe construction and
projects due diligence. Environmental, social and health impact
assessments were completed, and regulatory approvals received
in preparation for the 2021 drilling campaign at Sarta. The HSE
team also completed preparatory work and provided site
supervision for the drilling of the QD-2 exploration well at Qara
Dagh in 2021. Ongoing health and safety training was provided
for all new field based employees.
Meetings held in 2021
Four meetings (three scheduled, one ad hoc)
Chairman:
Tim Bushell
Member:
David McManus
HSSE Committee time spent
Highlights of HSSE Committee activity
— Monitored progress made against the 2021 HSE plan
— Received updates on COVID-19 protocols
— Approved the 2021 corporate KPI’s in relation to HSE
— Reviewed disclosures made in the 2020 Annual Report in
relation to HSSE
— Reviewed key risks in relation to HSE
— Received security updates
— Performed a deep dive into science based targets and
carbon budgets
— Reviewed ESG activity
— Reviewed progress made against the localisation agenda
46
Genel Energy Annual Report 2021
ESG 39%Planning and monitoring 36%Risk monitoring and mitigation 14%Security 11% HSSE Committee
Actions
More information on
decisions and outcomes
Objective: To ensure that the Company maintains a responsible and credible approach to HSSE matters
See pages 26-27
(including asset integrity and major hazard risk management), in line with international best practices and
emerging legal requirements
— Received regular updates on health and safety from an operational perspective
— Received regular updates on actions being taken against the annual ESG work plan
— Performed a deep dive into science based targets and carbon budgets
— Continued to monitor the approach taken to ensure the safety of the workforce and operations in
response to the global pandemic
— Received regular updates on security within the KRI
Objective: To assist the Company in maintaining its relationships with local communities in areas in which it
See pages 22-25
operates, including through social investment and sustainable development activities
— The environmental and social impact arising from our operations is reviewed regularly and any
areas of concern are reviewed by the Committee
— Reviewed the Company’s localisation strategy for the KRI
— Reviewed CSR activity in 2021 and plan for 2022
Objective: To assist the Board and other committees in assessing HSSE risks and their effective
See page 35
management in determining, implementing and reviewing the Company’s HSSE strategy and
processes
— Risks allocated to the Committee under the risk management system are reviewed in detail and
a report provided to the Audit Committee on the effectiveness of the HSSE controls and risk
mitigation processes
Objective: To ensure the quality of the Company’s reporting and disclosure (both internally and to
See pages 13 and 28
shareholders) in relation to HSSE matters
— Monitored performance against the HSE KPI and no serious injuries or fatalities targets
— Reviewed and monitored the GHG emissions output and disclosure made in the Annual Report within
the sustainability section
Objective: To assist the Company in developing the HSE culture
See pages 20-30 and 75
— 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 2021
annual bonus performance targets
The Company strives for safe operations with zero LTIs and
zero tier one loss of primary containment events at all our
sites. In 2021 the first LTI in over five years was reported
when a contractor sustained a foot injury at the S-5 drilling
operations site, following the injury the third-party contractor
provided medical and financial support to the injured contractor.
Following the incident, the Committee was informed and a
review of the incident investigation report was undertaken.
The Committee endorsed the enhancements implemented as a
result of the incident.
During the year the Committee monitored progress against
the Company’s environmental, social and governance
implementation plan. In August 2021 the Company published its
second Sustainability Report, which continues to be prepared
in accordance with the Global Reporting Initiative (‘GRI’)
Standards core option and aligns with the recommendations
issued by the Task Force on Climate-Related Disclosure (‘TCFD’).
The Company’s CDP score improved from D in 2020 to C in 2021.
During the year the HSSE Committee also performed a deep dive
into the carbon budgets for each of the Company’s assets and
the use of science based targets to manage emissions.
In line with the Company’s commitment to developing local
capability in the countries in which it operates the Committee
reviewed the progress made in 2021 against our localisation
agenda. Further information on activities undertaken by the
Company as a socially responsible contributor to the global
energy mix can be found on pages 20 to 31.
In recognition of the importance of HSE to our business the 2021
annual bonus objectives contain elements specifically allocated
to health and safety and ESG. The Committee reviewed progress
against the 2021 HSE objectives and made recommendations to
the Remuneration Committee on these elements, the details of
which may be found on page 75.
The HSSE Committee effectiveness for the year ending
31 December 2021 was reviewed as part of the wider Board
effectiveness review, and details of the Board effectiveness
review can be found on page 56. The Committee also reviews its
terms of reference annually, which can be viewed at genelenergy.
com.
In line with the UK’s Streamlined Energy and Carbon reporting
requirements our greenhouse gas emissions in 2021 continue to
be reported using an equity share approach. Further information
can be found on page 28.
Tim Bushell
Chair, HSSE Committee
Genel Energy Annual Report 2021
47
Strategic reportGovernanceFinancial statementsOther information
International
Relations
Committee
Monitoring external
developments
Dear Shareholder,
I am pleased to present this report from
the International Relations Committee. The
purpose of the Committee is to provide
oversight on external developments and risks
that may impact Genel’s activities.
Genel operates in an area of perceived high political risk, and
the ongoing success of the Company is interlinked with a clear
understanding of the political environment for the natural
resources industry in both the KRI and other jurisdictions.
The Board has members with significant regional, international,
and political experience, and this provides the International
Relations Committee with a breadth of knowledge that can
be brought to bear on the latest political developments in
the regions in which Genel operates. In turn, this supports
the delivery of a successful strategy. In September 2021, the
Committee was pleased to welcome Sefa Aytekin as the Head of
Government Affairs, Sefa’s experience in the region and energy
sector will support the Committee’s work.
The Committee held four meetings during the year and received
regular reports between meetings on developments within
the KRI and Federal Iraq and the possible implications for
the business.
During the year, the Committee continued to monitor the
operating environment in the KRI including the revenue sharing
agreement reached with the Federal Iraqi Government and
the receipt of monthly payments for exports. The Committee
also received updates on the results of the Federal Iraqi
parliamentary elections that took place in October 2021.
The Committee considered the key external stakeholders in the
region and discussed with management actions being taken to
engage with them in order to progress the Company’s strategic
objectives. As Genel moves into the next phase of exploration
in Somaliland the Committee also reviewed and considered an
above ground risk assessment of Somaliland.
Meetings held in 2021
Four meetings (three scheduled, one ad hoc)
Chairman:
RT HON Sir Michael Fallon
Members:
Tolga Bilgin
Canan Edibog˘lu
Hassan Gozal
David McManus
Yetik K. Mert1
George Rose2
1 Yetik K. Mert was appointed to the Committee on 22 December 2021
2 George Rose stood down from the Committee on 6 May 2021
International Relations Committee
time spent
Highlights of International Relations Committee
activity
— Reviewed and monitored political developments within
the regions in which the Company operates
— Reviewed key risks including prevention and mitigation
controls relevant to international relations
— Discussed external stakeholder engagement
— Considered implications of the new US Administration on
US foreign policy, trade policy and climate change agenda
48
Genel Energy Annual Report 2021
Macro environment 53%External risk 27%Governance 20%
International Relations Committee
Actions
More information on
decisions and outcomes
Objective: To monitor and review political developments in the regions in which the Company operates
— Received regular reports on political developments within Iraq, the Middle East and the USA
— Performed a detailed review of Somaliland above ground risk
Objective: To provide an independent assessment of the external environment in respect of international
relations as it affects the Company and decision making by the Board
— Received reports and discussed potential implications of external political events on the Company
and the industry within which it operates
Objective: To review the quality of the Company’s reporting in relation to political risk and controls
See pages 32-35
— Reviewed disclosures contained with the Annual Report
— Reviewed risks allocated to the Committee under the risk management system and provided a
report to the Audit Committee on the effectiveness of controls and risk mitigation put in place
As part of its remit, the Committee reviewed each of the risks
allocated to it under the Company’s risk management system,
including the effectiveness of the controls and mitigations
in place.
In 2022, the Committee will continue to draw on the extensive
international experience of Genel’s Board members to provide an
independent assessment of the external environment in respect
of international relations as they affect the business and impact
decision making by the Board.
The International Relations Committee also completed an
annual review of its terms of reference, which can be viewed at
genelenergy.com. As part of the Company’s governance practices,
an effectiveness review for the year ending 31 December 2021 was
completed as part of the wider Board effectiveness review, further
details of this can be found on page 56.
Rt HON Sir Michael Fallon
Chair, International Relations Committee
Genel Energy Annual Report 2021
49
Strategic reportGovernanceFinancial statementsOther information
Reserves
Committee
Ensuring a robust reserves
and resources process
Dear Shareholder,
I am pleased to present this report from the
Reserves Committee. As part of the Company’s
governance processes the Reserves
Committee provides oversight over the
processes undertaken to assess the Company’s
reserves and resource and approves the
reserves and resources statement.
In order for the Committee to discharge its responsibilities it
receives and considers reports from management and external
independent reserves evaluators ahead of approving the annual
reserves and resources statement.
The Committee examined an assessment from DeGolyer
and MacNaughton on the Tawke licence at which Genel has
a 25% working interest. The outcome of this assessment is
that at the 2021 year-end 2P reserves at the Tawke PSC stood
at 357 MMbbls (2020: 394 MMbbls). 2P reserves have been
adjusted for 2021 production of 40 MMbbls and an upwards
technical revision of 3 MMbbls. The Committee also agreed that
pending further analysis of the performance of the Enhanced Oil
Recovery project at Tawke, Genel will continue to hold 23 MMbbls
of those 2P gross reserves in 2C resources.
The Committee assessed an independent assessment of the
Taq Taq licence at which Genel has a 44% working interest an
assessment performed by McDaniel & Associates. The outcome
of this assessment resulted in a downward technical revision of
5 MMbbls and production of 2 MMbbls, 2P gross reserves for the
year ending 31 December 2021 stood at 26 MMbbls (33 MMbbls at
31 December 2020).
The Committee also reviewed reserves at Sarta, at which
Genel has a 30% working interest and obtained operatorship
on 1 January 2022 and determined that the gross 2P reserve
estimate relating to Phase 1A of the Sarta development remained
unchanged, less production, at year-end 2021 at 32 MMbbls
(2020: 34 MMbbls), following production of 2 MMbbls in 2021.
Meetings held in 2021
Four meetings
Chairman:
Tim Bushell
Members:
Bill Higgs
David McManus
Reserves Committee time spent
Highlights of Reserves Committee activity
— Reviewed the reserves and resources for each of the
Company’s assets
— Approved the 2020 reserves and resources statement
— Review of disclosures made in the Annual Report in
relation to reserves and resources
— Reviewed asset development plans for each asset
— Reviewed each Independent Qualified Reserves Evaluator
50
Genel Energy Annual Report 2021
Asset development plans 55%Reserves and resources 41%Governance 4% Reserves Committee
Actions
More information on
decisions and outcomes
Objective: To increase shareholder confidence by ensuring a robust reserves and resources review process
See page 18
— Reviewed the reserves and resources assessment procedure
— Reviewed asset development plans for each of the operated and non operated assets
Objective: To review the Company’s statement of reserves, independent reserves evaluators reports and
See pages 18 and 50
any material changes in reserves volumes
— Approved the Company’s annual statement of reserves and resources
— Reviewed the independent reserves evaluator reports
Objective: To review the qualification and independence of the independent qualified reserves
See page 50
evaluator
— Endorsed the appointment of each of the assets reserves evaluator
Further information on our reserves and resources can be found
on page 18.
In addition, the Reserves Committee holds an annual meeting in
September during which asset development plans are presented
to the Committee by each of the Asset Managers. The asset level
strategy, opportunities and risks are reviewed by the Committee
for each of the Company’s assets. The annual review of each
asset development plan enables the Committee to continue
to scrutinise the way forward to monetise value from each of
our assets.
The Reserves Committee has detailed terms of reference which
can be viewed at genelenergy.com and as part of the Company’s
governance practices an effectiveness review of the Committee
for the year ending 31 December 2021 was completed as part of
the wider Board effectiveness review.
Tim Bushell
Chair, Reserves Committee
Genel Energy Annual Report 2021
51
Strategic reportGovernanceFinancial statementsOther information
Division of responsibilities
Independence of the Board
The Independent Non-Executive Directors Tim Bushell, Canan
Edibog˘lu, Sir Michael Fallon, and Yetik K. Mert 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.
Following the appointment of Yetik K. Mert in December 2021 the
Board has returned to an equal balance of Independent and Non
Independent Directors (excluding the Chairman). 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 Tolga Bilgin,
Hassan Gozal, and Nazli K. Williams.
The Board considers that there is an appropriate balance between
Executive and Non-Executive, Independent and Non-Independent
Directors, with a view to promoting shareholder interests and
governing the business effectively.
Roles and responsibilities
We believe that 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.
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
Deputy Chairman and
Senior Independent
Non-Executive Director
Sir Michael Fallon is the Deputy
Chairman and Senior Independent
Director. Sir Michael Fallon 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.
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 58.
52
Genel Energy Annual Report 2021
Composition, succession and evaluation
Our committee structure
Board of Directors
Audit
Committee
Ensuring
integrity and
objectivity of
published
financial
information
Remuneration
Committee
Nomination
Committee
Ensuring the
continuation of a
high calibre
Board
Ensuring an
appropriate
approach to
remuneration that
supports delivery
of the business
strategy
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
Canan Edibog˘lu
Chairman
David McManus
Chairman
David McManus
Chairman
Tim Bushell
Chairman
Tim Bushell
Chairman
Sir Michael Fallon
Members
Tim Bushell
Yetik K. Mert
Members
Sir Michael Fallon
Yetik K. Mert
Members
Tim Bushell
Canan Edibog˘lu
Sir Michael Fallon
Yetik K. Mert
Members
David McManus
Members
Bill Higgs
David McManus
Meetings in
2021
3 Scheduled
1 ad hoc
Meetings in
2021
3 Scheduled
1 ad hoc
Meetings in
2021
2 Scheduled
2 ad hoc
Meetings in
2021
3 Scheduled
1 ad hoc
Meetings in
2021
3 Scheduled
Board attendance
Main Board
Audit
Remuneration Nomination
HSSE
Reserves
Members
Tolga Bilgin
Canan Edibog˘lu
Hassan Gozal
David McManus
Yetik K. Mert
Meetings in
2021
3 Scheduled
1 ad hoc
International
Relations
David McManus1
Sir Michael Fallon
Bill Higgs
Tolga Bilgin
Tim Bushell2
Canan Edibog˘lu2
Hassan Gozal
Yetik K. Mert4
Nazli K. Williams
Esa Ikaheimonen2
Martin Gudgeon2
George Rose2
denotes scheduled meeting attended
denotes scheduled meeting not attended
1 David McManus was appointed as Interim Chair of the Remuneration Committee on 22 November 2021
2 Martin Gudgeon, Esa Ikaheimonen, and George Rose stood down from the Board at the AGM on 6 May 2021
3 Canan Edibog˘lu was appointed as Chair of the Audit Committee and Tim Bushell as a member of the Audit Committee on 24 July 2021
4 Yetik K. Mert was appointed on 22 December 2021, no Board or Committee meetings were held in 2021 following his appointment.
denotes ad hoc meeting attended
denotes ad hoc meeting not attended
Genel Energy Annual Report 2021
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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, copies of which are available at
genelenergy.com. The Audit Committee, Remuneration Committee
and Nomination Committee consists only of Independent
Non-Executive Directors save that David McManus, who was
independent upon his appointment as Chairman, chairs the
Nomination Committee and in 2021 was appointed Interim Chair of
the Remuneration Committee.
Composition, succession and evaluation
Meetings of the Board
During the year the Board held 11 meetings in total of which five
were in addition to those scheduled. Due to the ongoing global
COVID-19 pandemic and restrictions placed on gatherings of groups
of individuals throughout the year, face-to-face meetings of the
Board of Directors were only held in September and November
2021, with a hybrid meeting being held in December 2021. All other
meetings were held virtually.
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 Non-Executive Directors provide scrutiny and
oversight to hold account the performance of management and
Executive Directors. The Board operates within 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.
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Genel Energy Annual Report 2021
A strong Board with demonstrable skills
and experience in international oil and gas
markets
Board composition
There are nine directors on the Board, one of whom is Executive
and eight (including the Chairman) are Non-Executive. Four
(excluding the Chairman) are independent under the Code.
In addition the Chairman who was independent on appointment
and three Shareholder representative Directors are not
considered independent.
Skills, knowledge, experience and attributes
of Directors
The Board considers that a diversity of skills, background,
knowledge, experience, perspective and gender is required in order
to govern the business effectively. The Board and its Committees
work actively to ensure that the Executive and Non-Executive
Directors continue to have the right balance of skills, experience,
independence and group knowledge necessary to discharge
their responsibilities.
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.
Board composition, international diversity, skills
and experience of the Board
Board composition
Total number of Directors
Independent Directors
Non-Independent Directors
Executive Directors
International diversity
British
Swiss
Turkish
Azerbaijani
Skills and experience of the Board
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 57 to 59 of this Annual Report.
Natural resources
Managing and leading
Governance
Financial capital markets
HSSE
Remuneration
Foreign affairs
Genel Energy Annual Report 2021
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Composition, succession and evaluation
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 his appointment to the
Board Yetik K. Mert received a full and comprehensive induction
to the operations, processes, policies and procedures across the
business. In addition, the induction included a comprehensive
schedule of meetings with senior management during
January 2022.
As part of the ongoing training and development programme
throughout the year training on specific topics including a session
on directors duties in relation to ESG matters was held. It is
intended that this programme will continue throughout 2022.
Board effectiveness
In 2020, independent advisers, Russell Reynolds were
commissioned to facilitate an evaluation of the Board, its
Committees and each of the Directors, including the Chairman.
In 2021, we have conducted an internal review of the effectiveness
of the Board, each of its Committees and each Director building on
the findings of the 2020 review. The 2021 review was facilitated by
the Chairman.
As part of the Board evaluation an electronic survey among Board
members and one-to-one virtual meetings were held between each
Board Director and the Chairman.
Actions taken following the 2020 effectiveness review
Board dynamics
To ensure adequate communication among Board Directors.
The Board of Genel appointed five new Directors in 2020 including
the Chairman and to an extent the Board is still forming as a team.
The pandemic has further complicated the Board’s ability to meet
in person.
Long-term strategy
To create further alignment on long-term strategy and
risk appetite, especially on the way the growth strategy
is implemented.
Talent management and succession
To review succession plans to ensure they are appropriate and
support the development of a diverse pipeline of executives.
Actions arising from the 2021 effectiveness review
Strategy
Board development
Due to the ongoing global pandemic and travel restrictions the
majority of Board meetings in 2021 continued to be held virtually.
However, at times of the year when face-to-face meetings were
possible these were held.
There was also increased communication between the Board
Directors outside of scheduled Board meetings. The Chairman
and Independent Non-Executive Directors continued to hold
regular meetings.
The Board continued to make progress on creating alignment
on the Company’s long-term strategy. Key topics of focus during
the year continued to be around the development of Sarta and
exploration at Qara Dagh, progressing the farm-out of the SL10B13
licence in Somaliland as we move towards preparing to drill an
exploration well in country and making progress against our
ESG strategy.
During 2021 the Nomination Committee considered succession
planning and the Board as a whole supported the launch of the
Genel Leadership, Evolution and Development programme which
is aimed at developing high potential employees to support a
pipeline of diverse potential executives.
The Board recognise that progress was made in 2021 on
progressing the Company’s strategy and intends to continue to
work on advancing the strategy in 2022.
The Directors agreed that additional training concerning the
business would be beneficial. This will be scheduled in the Board
calendar throughout the year as appropriate.
Overall, the 2021 Board effectiveness review concluded that the Board functions well and each of its Committees were effective with strong
leadership and engagement, allowing adequate time to discuss areas within their remit.
Following these performance reviews, the Board considers that each of the Directors continues to make an effective and valuable
contribution and demonstrates their commitment to the role. Accordingly, the Board recommends the election/re-election of each
Director at the Company’s forthcoming AGM. It is the Board’s intention to continue to review its performance annually including that of its
Committees and individual Directors.
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Genel Energy Annual Report 2021
Board of Directors
2.
5.
8.
3.
6.
9.
1.
4.
7.
10.
Genel Energy Annual Report 2021
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Board of Directors
1. David McManus (68)
Chairman
Appointed: 5 February 2020.
Committee memberships: Chair of the
Nomination Committee, Interim Chair of
the Remuneration 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
and FlexLNG a Norwegian-listed LNG
shipping company.
Previous relevant experience: In February
2020 David retired from Costain plc, one
of the UK’s leading smart infrastructure
solutions providers. He was also a Non-
Executive Director on the Board of
Rockhopper Exploration plc until 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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Genel Energy Annual Report 2021
2. Bill Higgs (57)
Chief Executive Officer
Appointed: Executive Director and Chief
Executive Officer on 7 April 2019.
Committee memberships: Member of the
Reserves Committee.
Key skills and experience: Bill has more
than 30 years of global exploration,
development and operations experience,
including over ten 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. Bill has been
with Genel since October 2017, initially as
COO and CEO since April 2019. Prior to
joining Genel, he was Chief Operating
Officer for Ophir Energy plc, where he was
responsible for managing the global asset
portfolio. Prior to joining Ophir he was CEO
of Mediterranean Oil and Gas, overseeing
the successful sale of the company in 2014.
Bill previously spent 23 years at Chevron
across a number of global roles.
Current external appointments: None.
Previous relevant experience: Between
August 2014 and July 2017 Bill was a
director of Ophir Energy plc, and an
Independent Non-Executive Director of San
Leon Energy from 2018 to 2020.
3. Rt Hon Sir Michael Fallon
KCB (69)
Senior Independent Non-Executive
Director and Deputy Chairman
Appointed: 5 February 2020.
Committee memberships: Chair 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: In
May 2021 Sir Michael was appointed as
Chairman of Aberdeen Standard Investcorp
Infrastructure Partners, an alternative
investment management company which
he joined in 2018 as a member of the
advisory board. Sir Michael is also Chairman
of Avanton Ltd, a property development
firm; a member of the Advisory Board of
HIN Global (cyber security); and Deputy
Chairman of Nova Innovation, a tidal
energy company.
4. Canan Edibog˘lu (66)
Independent Non-Executive Director
Appointed: 21 June 2020.
Committee memberships: Chair of the
Audit Committee, and member of the
International Relations Committee and the
Nomination Committee.
Key skills and experience: Canan has
significant financial, corporate and
industry experience. She had almost 30
years’ experience at Royal Dutch Shell,
culminating in her role as the country chair
and CEO of Shell Turkey between 2001
and 2009. Prior to this she was the CFO
of Shell Turkey, preceded by a series of
positions at the company across numerous
aspects of the business, notably marketing,
treasury and planning. Since leaving Shell,
Canan has advised a number of companies
including Accenture, Maersk and APM
Terminals in developing their businesses
in Turkey.
Current external appointments: Canan
is a Non-Executive Director of ING Bank
and Tupras¸ in Turkey, since 2010 and
2017 respectively.
Previous relevant experience: Between
2011 and 2017 Canan was a Non-Executive
Directorship of Aygaz, a Turkish LPG
marketing and distribution company, and
between 2013 and 2019 a Non-Executive
Director of Prysmian Turkey. Canan is
the former President of PETDER (Turkish
Association of Petroleum Industrialists)
and Chair of the Oil Industry Council
Turkish Union of Chambers and Commodity
Exchanges and board member of WWF.
She is also an active member of various
NGOs, and is a board member of the Turkish
Autism Society, the Global Relations Forum,
and Embarq where she was previously
Chairperson for five years – the Centre for
Sustainable Transport.
5. Tim Bushell (62)
Independent Non-Executive Director
Appointed: 11 September 2017.
Committee memberships: Chair of
the HSSE and Reserves Committees,
and member of the Audit and
Nomination Committees.
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, Paladin Resources, and
Sval Energi A.S. Most recently Tim spent
a decade as Chief Executive Officer at
Falkland Oil and Gas Limited, and was co-
founder of Core Energy AS.
Previous relevant experience: Sir Michael
was Energy Minister in the UK Government
from 2013-2014: responsible for oil, gas,
electricity, nuclear and renewables.
Current external appointments: Tim is a
Non-Executive Director and Chairman at
Wentworth Resources and Non-Executive
Director at Petro Matad.
6. Yetik K. Mert (62)
Independent Non-Executive Director
8. Hassan Gozal (51)
Non-Executive Director
Appointed: 22 December 2021.
Appointed: 5 February 2020.
10. Stephen Mitchell
Company Sectary
Appointed: 6 June 2017.
Stephen Mitchell was appointed as the
General Counsel of Genel Energy plc in 2011,
a role he carried out until 2021. Since 2017
he has been the Company Secretary of
Genel Energy plc. Stephen Mitchell has
practiced as a lawyer for over 35 years and
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.
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.
9. Nazli K Williams (44)
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
lletis¸im Hizmetleri A. ¸S a leading GSM
operator in Turkey. Turkcell’s shares trade
on the Istanbul (IMKB) and New York Stock
Exchanges (NYSE).
Committee memberships: Member of the
Audit, International Relations, Nomination
and Remuneration Committees.
Key skills and experience: Yetik has almost
40 years’ technical, commercial, business
development, and general management
experience, including holding executive and
non-executive Directorship roles across
the energy utility and industrial sectors in
MENA, CEE and the USA.
Current external appointments:
Yetik is currently serving as a Non-
Executive Director and Chairman of
the Remuneration, Governance and
Nomination Committees on the Boards
of Turkish companies Cimsa Cimento
Sanayi ve Ticaret AS and Afyon Cimento
Sanayi Turk AS (Sabancı Holding Group
Companies), which operate in the industrial
construction sector.
Previous relevant experience: Between
1982 and 2004 Yetik undertook a number
of engineering, strategic planning and
business development roles across various
industries including the manufacturing and
construction sectors. In 2004, he became
CEO of the Energy division at Sabancı
Holding A.S., rising to become CEO of the
Enerjisa Group (Integrated Energy Utility)
in 2011. In 2016, he became CEO of STFA
Group Holding Company and Chairman of
the operational companies within the same
group, tasked with the total restructuring of
the Group.
7. Ümit Tolga Bilgin (47)
Non-Executive Director
Appointed: 5 February 2020.
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.
Genel Energy Annual Report 2021
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Executive Committee
Executive Committee
2.
4.
6.
1.
3.
5.
7.
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Genel Energy Annual Report 2021
1. Mike Adams
Technical Director
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 over 30 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, with responsibility for all
production assets and functional leadership
of the operational disciplines. Paul has
worked for more than 30 years in upstream
E&P having spent time in the North Sea,
South East Asia and Africa with experience
of onshore and offshore Oil and Gas
Operations. Before joining Genel, Paul was
Group Head of Operations and Safety at
Tullow Oil. Prior to that Paul spent 13 years
at Talisman, where he was VP Production &
Exploration, leading Operations in Malaysia.
Before that Paul worked in a variety of
Operational roles for Nippon Oil, Elf,
Occidental and Total. Paul holds an MBA in
Oil & Gas Management from Robert Gordon
University in Aberdeen.
3. Jamie Dykes
General Counsel
5. Berna Özkoç Öztınaz
Chief HR Officer
7. Esa Ikaheimonen
Chief Financial Officer
Esa Ikaheimonen joined Genel Energy as
CFO in July 2017, he will be leaving the
Company on 16 March 2022. He has over
25 years of oil and gas industry experience,
most recently as CFO of publicly listed
offshore drilling companies Transocean and
Seadrill. Prior to that, he had a c.20 year
career at Royal Dutch Shell, culminating
in the role of Vice President Finance for
Shell Africa E&P. Esa is currently a Non-
Executive Director and the Chairman of
the Audit Committee at Independent Oil
& Gas and Non-Executive Chairman of
Lamor Corporation. He was formerly a
Non-Executive Director and Chairman of
the Audit Committee at Vantage Drilling.
He holds a Masters Degree in Law from the
University of Turku, specialising in tax law
and tax planning.
Jamie has practised as a lawyer for nearly
25 years exclusively in the energy and
natural resources sector. Prior to joining
Genel he worked at ExxonMobil and was
latterly General Counsel of BHP Billiton
Petroleum in Houston, Texas. He advises
on a wide range of upstream oil and gas
related issues including PSCs, JOA’s, Farm
in Agreements negotiations and also has
particular experience in advising companies
in emerging markets on anti-bribery and
legal compliance issues. Jamie trained
at Norton Rose in the City of London
and holds an MA from the University
of Cambridge.
4. 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.
Berna joined Genel in June 2020, and has
over 20 years of HR experience. Her most
recent role was Chief Human Resources
Officer at DeFacto. She has been Chairman
and Executive Board Member of PERYON
(People Management Association of
Turkey) and Board Member of European
Association of People Management since
2019. Prior to DeFacto, she worked at
STFA Holding for 3 years as Strategy and
Human Resources Chief Officer. She spent
11 years at ENERJISA, where she held
number of leading HR roles and was the
Board Member of AYEDAS and BASKENT
Electricity Distribution Companies.
She previously worked at KORDSA
and TURSAB.
6. Sefa Aytekin
Head of Government & Public Affairs
Sefa joined Genel in September 2021, and
will be based in Genel’s Istanbul office.
Sefa has over 25 years of experience
in regional politics, including extensive
work in Turkish governmental position,
including Foreign Trade Expert and
Advisor to the Minister of State, and Head
of Foreign Relations for the Ministry of
Energy and Natural Resources. From 2010
to 2017 he was Deputy Undersecretary
for Oil & Gas, Ministry of Energy and
Natural Resources, a role that involved
extensive work with the Kurdistan Regional
Government. More recently, Sefa was
Secretary General, Turkish Machine
Manufacturers Associations.
Genel Energy Annual Report 2021
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Nomination
Committee
report
Ensuring a high calibre Board
Dear Shareholder,
I am pleased to present this report from the
Nomination Committee. The purpose of the
Committee is to help the Board discharge its
responsibilities by leading the process for
appointments, ensuring plans are in place
for orderly succession to both the Board
and senior management positions, and
overseeing the development of a diverse
pipeline for succession.
In discharging its duties, the Committee keeps in mind 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. As part of its work, the Committee assists the
Board in ensuring that it consists of high calibre individuals whose
background, skills, experience and personal characteristics will
augment the present Board and meet its future needs.
Following the retirement of George Rose and resignation of Martin
Gudgeon and Esa Ikaheimonen from the Board of Directors on the
6 May 2021 and in line with the Company’s commitment to maintain
an equal balance of independent versus non-independent directors,
the Committee spent time considering which additional skills and
experience were required around the boardroom in order to ensure
the Board as a whole contained the appropriate experience and
skills to deliver the Company’s strategy. The Company’s strategic
priorities, main trends and factors affecting the long-term success
and future viability of the Company were taken into consideration.
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. In December 2021, the Board
approved the recommendation of the Committee that Yetik K.
Mert be appointed as an Independent Non-Executive Director.
Meetings held in 2021
Four meetings (two scheduled, two ad hoc)
Chairman:
David McManus
Members:
Tim Bushell
Canan Edibog˘lu
Michael Fallon
Yetik K. Mert1
George Rose2
1 Yetik K. Mert was appointed to the Committee on 22 December 2021
2 George Rose stepped down from the Nomination Committee on 6 May
2021
Nomination Committee time spent
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
— Conducted a search for a new Independent Non-Executive
Director and made a recommendation to the Board
— Discussed Board succession planning
— Considered talent management across the business
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Genel Energy Annual Report 2021
Succession 85%Effectiveness 10%Governance 5% Nomination Committee report
Actions
More information on
decisions and outcomes
Objective: Review the structure, size and composition of the Board, having due regard to the Company’s
See pages 62-63
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
Objective: Annually reviewing the time required from Non-Executive Directors and making
See pages 55-56
recommendations as to their reappointment at the AGM
— As part of the external Board effectiveness review performance of all Directors was undertaken.
— Recommended the re-election/election of each Director at the 2021 AGM
Objective: Keeping under review succession arrangements for Directors and other senior executives
— During the course of the year recommended the appointment of Yetik K. Mert to the Board of
See pages 62-63
Directors
— Undertook a review of talent management across the Company
When conducting the search for a new Board Director we consider
candidates based on merit and against objective criteria giving due
regard to the benefits of diversity on the Board. Although the Board
does not have specific Board diversity targets, the Company’s
Diversity and Equal Opportunities policy remains unchanged, a
copy of which can be found on our website. We are committed to
employing a diverse and balanced workforce, including our Board
of Directors. 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 practices and dealings with our partners and suppliers.
Further information on diversity within the Company can be found
on page 25.
The Committee reviewed the output of the 2021 talent management
process which is used throughout the Company to identify
current and future talent potential, learning and development
needs, and succession planning gaps. As part of this review the
Committee considered the diversity of generation, gender and
type of employee (full time or contractors) across the Company.
The Nomination Committee also took into consideration the impact
of the move of the Company’s global service centre from Ankara
to Istanbul in relation to retaining and securing new talent within
the business. As part of its work the Committee discussed actions
that have been implemented to develop employees over the past
12 months. The Nomination Committee went on to perform a
detailed review of pipeline of talent available within the Company
and how the Company’s Leadership, Evolution and Development
programme was being utilised.
The Nomination Committee has detailed terms of reference which
can be viewed at genelenergy.com and as part of the Company’s
governance practices an effectiveness review of the Committee for
the year ending 31 December 2021 was completed as part of the
wider Board Effectiveness Review. Further information can be found
on page 56.
David McManus
Chair, Nomination Committee
Genel Energy Annual Report 2021
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Audit, risk and internal control
Audit, risk and
internal control
Risk monitoring and reporting
The Company keeps under continuous review the major risks,
both current and emerging, to which its operations in all regions
are exposed by leveraging its local expertise, industry knowledge
and strategic relationships. In particular, the Company continues
to have a regular dialogue with its key stakeholders in the
Kurdistan Region of Iraq, such as the KRG 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
Company’s tolerance for risk.
Our risk management procedures facilitate the identification of
the key risks and indicators, the assessment and management of
risks by designing and implementing prevention and mitigation
controls, and monitoring of these controls. Senior management
review and update the risk management process and keep
the risk register under regular review. The Board conducts a
robust assessment of the principal risks facing the Company at
least annually with a focus on those risks that could impact our
business model, strategy, solvency, liquidity, future performance
and reputation. 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 is set out on pages 32 to 35.
Risk management
The Company has put in place robust risk management
policies and procedures in order to manage day-to-day risks.
The Company takes a proactive approach to risk management to
design and implement appropriate controls to mitigate as much
as possible any potentially negative outcomes.
Overall responsibility for risk management remains with the
Board of Directors in order to ensure that appropriate oversight
is provided. Risks have been classified as strategic, external,
operational and financial, and allocated to the appropriate
Board Committee or the Board. As part of the Company’s risk
management process relevant Committees and the Board
review the annual risk sign-off forms that are submitted by the
risk owners.
64
Genel Energy Annual Report 2021
Risk management process
A qualitative risk assessment matrix (5x5) that is aligned to
industry best practices is used to aid with risk assessment
processes. Management hold regular risk register workshops
for all asset operations and projects to identify and assess risks,
review current controls and design additional controls where
needed to reduce the residual risk to As Low As Reasonably
Practical (‘ALARP’). The outcomes of these workshops are
reported back to senior management, the relevant Board
Committee, and Board as a whole.
Bowtie method
The Company uses the bowtie method of risk management
which is widely used in the industry to improve the identification,
design and management of prevention and mitigation controls.
Departmental champions are identified to develop and
maintain bowtie diagrams for the risks that they are managing.
An example of a bowtie is shown below.
Cause
Prevention
control/s
Mitigation
control/s
Consequence
Cause
Prevention
control/s
Mitigation
control/s
Consequence
Escalation
factor
Escalation
factor
Leading
indicator
Escalation
factor
Escalation
factor
The left-hand side of the diagram is constructed from fault tree
(causal) analysis and involves those causes (threats) associated
with the hazard, the prevention controls (barriers) associated
with each cause and any escalation factor control (that have the
potential to increase the likelihood).
The right-hand side of the diagram is constructed from the event
tree (consequence) analysis and involves mitigation controls
(recovery measures for detection, control, mitigation and
emergency response) and escalation factor control (that have
the potential to increase the consequence).
The centre of the bowtie is referred to as the ‘risk event’ or ‘top
event’, the undesired event at the end of the fault tree and at the
beginning of the event tree.
Leading indicators
Leading indicators are identified measures to test the robustness
of controls. These are developed and implemented for selected
controls to manage and measure risk proactively including for
drilling projects and production operations and other principal
risks as per the Company risk register, as part of our risk
management process.
Internal controls
The Board is responsible for maintaining and reviewing the
effectiveness of the Company’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
also 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 and going concern statement can be
found on page 36.
Audit
The Audit Committee supports the Board in the performance
of its responsibilities by reviewing those procedures that relate
to risk management and internal control. A risk-based multi-
year internal audit program which is aligned with Company risk
register has been adopted. 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 67 to 70.
A detailed budget and work programme for the Company
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 2021
and up to the date of the signing of the financial statements, and
is satisfied that it remains appropriate to the business.
Genel Energy Annual Report 2021
65
Strategic reportGovernanceFinancial statementsOther information
Audit, risk and internal control
Company risk management process and structure
Responsibilities
Board
— Identifies and assesses the potential impact, likelihood and sensitivity of
Strategy
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
— 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
Risk assessment
and review
Board sets controls to
mitigate or manage risks
Audit Committee
— Oversees risk management systems and makes recommendation to the
Board
Audit Committee oversees risk management
and internal controls
Executive Committee
— 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
Risk register identifies, assesses
and documents risks
Risk owners
— Put in place processes and procedures that execute the decision taken
by the Board for the appropriate management or mitigation of each
principal risk
— Assess and report risks and monitor the design and operating
effectiveness of any prevention and mitigation controls and related
policies and procedures
— Provide oversight of the daily operations of the key areas of the business
Risk owner
Reports on
effectiveness
of controls and
assurance
Risk owner
reports
assessment of
risks to the board/
committee
Risk owner designs,
operates, monitors
and reports on controls
Board and Committees
The Board is supported by its Committees, which apply their expertise to the assessment and management of allocated risks. The Committees
report findings and/or recommendations to the Board.
Board and Committees
Responsibility
Board
Audit Committee
HSSE Committee
Reserves Committee
— Overall responsibility for risk oversight
— Overall responsibility for all principal risks
— Risk management and internal control systems
— Financial controls
— Health, safety and environmental risks
— Security and community risks
— Review reserves and resources
— Review asset development plans
International Relations Committee
— Manage external risks
Renumeration Committee
— Compensation and reward
Nomination Committee
— Board composition
66
Genel Energy Annual Report 2021
Audit Committee
report
Ensuring a high calibre Board
Dear Shareholder,
I am pleased to present my first report
from the Audit Committee describing the
Committee’s activities during the year.
The remit of the Committee includes:
— Monitoring the integrity of the financial statements and
formal announcements relating to the Company’s financial
performance, and reviewing significant financial reporting
judgements contained in them
— Advising the Board on whether the Annual Report
and Accounts, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy
— Reviewing the Company’s internal financial controls and
internal control and risk management systems
— Ensuring the external auditor is independent and making
recommendations to the Board regarding the appointment of
the external auditor
— Monitoring and reviewing the effectiveness of the internal
audit function
The Committee’s terms of reference are available on our website
at genelenergy.com
Genel Energy Annual Report 2021
67
Meetings held in 2021
Four meetings (three scheduled, one ad hoc)
Chairman:
Canan Edibog˘lu1
Members:
Tim Bushell2
Yetik K. Mert3
Martin Gudgeon4
George Rose5
1 Canan Edibog˘lu was appointed Chair of the Audit Committee on
24 July 2021
2 Tim Bushell was appointed a member of the Audit Committee on
24 July 2021
3 Yetik Mert was appointed a member of the Audit Committee on
22 December 2021
4 Martin Gudgeon stepped down from the Audit Committee on 6 May 2021
5 George Rose stepped down from the Audit Committee on 6 May 2021
Audit Committee time spent
Highlights of Audit Committee activity
— Reviewed the 2020 Annual Report and Accounts and 2021
half-year results
— Reviewed significant estimates and judgements in relation to
the 2020 full-year accounts and 2021 half-year accounts
— Received reports from the external auditors
— Reviewed internal controls and risks
— Approved the 2021 internal audit plan and received reports
from Internal Audit
— Received updates on the legal compliance programme
— Reviewed risk management processes and the risk register
— Completed a full audit tender process leading to the
appointment of BDO LLP as the Company’s external auditors
Governance and audit 56%Risk management and internal control 25%Financial reporting 16%Reserves and resources 3%Strategic reportGovernanceFinancial statementsOther information
Audit Committee report
Actions
Objective: 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
— 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
More information on
decisions and outcomes
See pages 18-19
See pages 69 -70
Objective: To advise the Board on whether the Annual Report taken as a whole is fair, balanced and
See pages 67-70
understandable, and provides the information necessary for shareholders to assess the Company’s
performance, business model and strategy
— 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
Objective: To assist the Board in meeting its financial reporting, risk management and internal control
See pages 64-66
responsibilities
See note 1, pages 105-112
— Monitored compliance with financial reporting standards and relevant financial and governance
requirements
— Kept under review the risk register and retained oversight of the Group risk framework and by doing
so 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
Objective: To assist the Board in ensuring the effectiveness of the internal accounting and financial
See pages 64-66 and 69
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
Objective: To monitor the Company’s treasury and financing arrangements
See page 17
— 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
Objective: To strengthen the independent position of the Company’s external auditors by providing
See page 70
channels of communication between them and the Non-Executive Directors
— Held private meetings with the external auditors without the presence of management
Objective: To review the performance of the Company’s internal and external auditing arrangements
See pages 69-70
— Recommended the appointment of BDO LLP (‘BDO’) as the Company’s external auditors following
the completion of a tender process
— Monitored the effectiveness and independence of the external auditor and compliance with the non-
audit services policy
— Received reports from the Company’s internal auditor on audits performance in the period and
monitored their performance and effectiveness
Objective: To assist the Board in monitoring and addressing potential conflicts of interest between
See page 44
members of the Group and the Directors and/or senior managers of the Company
— Continued to assist the Board in reviewing conflicts of interests of Directors and senior managers
68
Genel Energy Annual Report 2021
Membership
In July 2021, Canan Edibog˘lu was appointed Chair of the Audit
Committee and Tim Bushell was appointed as a member of the
Committee. Following his appointment to the Board of Directors
in December 2021 Yetik K. Mert has also been appointed as a
member of the Audit Committee. During 2021 all members of
the Audit Committee were Independent Non-Executive Directors
and Canan Edibog˘lu is considered by the Board to have recent
and relevant financial experience. The Committee as a whole is
considered to be competent in the oil and gas sector.
In order to discharge its duties and responsibilities effectively
during the year the Committee relied on information and support
from management and invited the CEO (Bill Higgs), CFO (Esa
Ikaheimonen), Head of HSE and Risk Management (VK Gupta),
General Counsel and Company Secretary (Stephen Mitchell),
Head of Legal (Jamie Dykes), and Head of Finance and Planning
(Luke Clements) to regularly attend its meetings.
Significant issues and judgements
The significant issues considered by the Committee in relation to
the 2021 accounts and how these were addressed were:
— Oil price forecast – following a material improvement in
Brent oil price during 2021 the Committee reviewed the
Company’s oil price forecast at the half-year and full-year.
When considering the Company’s oil price at the half-year a
long-term oil price of $65/bbl in line with market consensus
was adopted. For the year ended 31 December 2021 the oil
price forecast was updated to reflect the continued increase
in Brent oil price in the second half of 2021 and longer term oil
price outlook. This resulted in an increase in oil price outlook
relative to the half-year.
— Discount rate – the Committee assessed the Company discount
rate and agreed that it should be maintained at 13%.
— Impairment of production oil assets – when considering
potential indicators of impairment, the Audit Committee
considered the matters outlined above, together with the
production performance of the assets, activity schedules,
costs and payments. At the full-year the Committee also
considered the output of the Reserves Committee process,
there were no impairment indicators.
— Impairment of exploration assets – following the suspension
of the QD-2 well, the Qara Dagh PSC was assessed in order
to determine whether impairment indicators existed. The
Committee considered the learnings from the QD-2 well and
concluded that no impairment indicators existed. In relation
to the Bina Bawi and Miran PSCs, following the conclusion
reached by the Board, the assets and liabilities associated
with the two PSCs have been derecognised from the Group’s
financial statements.
— Reversal of impairment on deferred receivables – at the 2020
half-year the Company impaired the deferred receivables
for sales made in the four months from November 2019 to
February 2020. The Committee considered the establishment
of a payment mechanism by the KRG, receipt of regular
payments and increase in Brent oil price when determining
that a reversal of the impairment would be applied.
— ORRI – in 2020 the KRG suspended payment under the ORRI
for a period of nine months, as a result no revenue has been
recognised in relation to that period by the Company. The
Committee reviewed the approach and accounting treatment
of the ORRI at the half-year, this was reconsidered at the full-
year, and it was determined that there should be no change in
revenue recognition position.
— Going concern – the key inputs and sensitivities applied to the
Company’s viability statement and going concern assessment
were reviewed by the Committee. The Committee concluded
that the Company remains a going concern and is expected to
remain viable over the next five year period.
Risk management
As part of the Company’s control framework the Committee
assisted 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 64 to 66 and 32 to 35.
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.
Following a competitive tender process in 2017, Ernst & Young
LLP (‘EY’) was appointed as the Group’s internal auditor.
In December 2021 the Committee approved an internal audit plan
which is aligned to the Group’s risk profile to be executed during
2022. Ahead of approving the 2022 plan the Audit Committee
took into consideration recent internal audits that have been
performed as well as an indicative multi-year plan ensuring the
Internal Audit function provides assurance across a range of
focus areas. Audit fieldwork planning, review and follow up is
delivered by EY. 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 2021, the Committee reviewed the outcome of
the internal audit work that had been performed in accordance
with the 2021 internal audit plan. 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. Annually, the Committee also reviews the
effectiveness of the internal audit arrangements.
During the year the Audit Committee held private meetings with
the Internal Auditors 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.
Genel Energy Annual Report 2021
69
Strategic reportGovernanceFinancial statementsOther information
Audit Committee report
External audit
Following a tender process in 2020, BDO was appointed as
the Company’s external auditor at our 2021 AGM and Anne
Sayers has been appointed as the Senior Statutory Auditor to
the Company.
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. In September 2021 BDO presented to the Committee their
proposed plan of work which was designed to ensure that there
are no material misstatements in the financial statements for the
year ended 31 December 2021. At the year-end the Committee
received and discussed a detailed report from BDO regarding
the work performed as part of the audit including the scope,
materiality thresholds and risks.
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 the half-year
interim review) and require preauthorisation by the Committee
under the terms of the policy.
In 2021, the ratio of non-audit to audit and audit related fees
paid to BDO was 1:5, the non-audit fee paid was $70,200, further
details of which can be found on page 115 of the notes to the
financial statements. These fees reflect the interim review under
the provisions of ISRE 2410 completed by BDO in respect of the
half year report for the period ended 30 June 2021.
During the year, the FRC’s Audit Quality Review (‘AQR’) team
reviewed PwC’s audit of the Group’s 2020 Annual Report.
The AQR team indentified that there were some areas of good
practice and only limited improvement areas, and these have
been discussed with our current auditors BDO to ensure they are
addressed going forward.
Effectiveness
As part of the Company’s governance practices, an effectiveness
review of the Committee for the year ending 31 December 2021
was completed as part of the wider Board Effectiveness Review,
further information can be found on page 56.
Canan Edibog˘lu
Chair, Audit Committee
70
Genel Energy Annual Report 2021
Directors’
remuneration
report
Remuneration Committee
Chairman’s statement
Meetings held in 2021
Four meetings (three scheduled, one ad-hoc)
Interim Chairman:
David McManus
Members:
Michael Fallon
Yetik K. Mert1
Martin Gudgeon2
George Rose2
1 Yetik K. Mert was appointed to the Committee on 22 December 2021
2 Martin Gudgeon and George Rose stood down from the Board at the
AGM on 6 May 2021
Remuneration Committee time spent
Highlights of Remuneration Committee activity
— The Committee held three scheduled and one ad-hoc
meetings during the year. Details of the key activities
carried out are set out on page 72. All of the members of
the Committee are Independent Non-Executive Directors.
On behalf of the Remuneration Committee,
I am pleased to present Genel’s Directors’
Remuneration Report for the year ended 31
December 2021, my first report as Interim
Remuneration Committee Chairman for Genel.
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
In 2021, we refreshed the 2020 Policy with a small number of minor
administrative changes aligned to the new share plans and this
revised Policy was brought to shareholders in 2021. The Committee
has reflected upon the outcome of the votes for the Remuneration
Policy at the AGM in May. Please see page 39 for details on the
Board’s views on these outcomes.
Short-term incentives are based on an operational performance
scorecard and long term incentives are based on a combination of
relative and absolute TSR. The Policy can be seen in full detail on
pages 81 to 88.
Our Remuneration Policy is designed to attract, motivate and retain
the high quality of talent required to develop and implement our
strategy, thereby driving performance to deliver shareholder value.
The incentive elements which are used for Executive remuneration,
including cash bonuses and long-term incentive plans, also apply
to the rest of the workforce. This approach ensures a focus on
delivery and aligns the interests of all employees with the long-term
interests of the Company.
Genel Energy Annual Report 2021
71
All employee remuneration 36%Executive Director remuneration 34%Long term incentive plans for all employees 15%Governance 15%Strategic reportGovernanceFinancial statementsOther information
Directors’ remuneration report Remuneration Committee Chairman’s statement
Remuneration for 2021
Full details of the Remuneration Committee’s decisions for 2021 are
set out in the Annual Report on Remuneration on pages 73 to 80.
In 2021, the Committee considered performance against the targets
set in the scorecard on page 75. Once again, delivery of culture was
a strong feature of performance particularly in compliance, high
performance culture and ESG. Financial performance resulted in a
strong balance sheet which demonstrated the cost-based discipline
required throughout the year. The progress at Sarta and Somaliland
was good, however, our assessment of the delivery of planned
activity is that operational and process challenges hindered
some progress.
The company scorecard was assessed by the Committee, based
upon the achievement of these performance targets, which resulted
in a corporate scorecard outcome of 73.75% of maximum.
Approach to remuneration in 2022
Details of how we intend to apply our Policy over the coming year
are set out on pages 78 to 79.
The Committee approved an increase in the base salary for
2022 for Bill Higgs at a rate of 3.5%, and this is in line with the
wider UK workforce. The 2022 annual bonus for Bill will again be
based on a combination of achievement against the Company
scorecard metrics at 80% and 20% of the bonus reflecting
personal performance.
The company scorecard for 2022 (as seen on page 79) will focus
on delivery of culture, dividend, production business and pre-
production, measuring delivery of the work plan and budget and
annual performance. The Committee has adjusted the weightings
of the targets set out in the 2022 scorecard in order to drive the
performance in our key strategic areas for 2022. The Committee
considers that these targets are appropriately stretching and that
maximum vesting would represent significant value creation.
2022 AGM
At the AGM in 2022, our shareholders will be asked to approve
this Annual Report on Remuneration and I encourage you to vote
in favour. I will be available, along with my Committee members,
to answer any questions regarding our Policy on executive
remuneration and the activities of the Committee.
David McManus
Interim Chairman of the Remuneration Committee
Key activities of the Remuneration Committee
Objective
Action
To implement the Remuneration Policy for the Chairman,
Executive Directors and members of the Executive Committee
— Continued to apply the Remuneration Policy principles in discussion and
implementation of remuneration for Executive Directors and Executive
Committee members
To review and have regard to remuneration practices across the
Company
In respect of performance related elements of the Remuneration
Policy formulate suitable performance related criteria and
monitor their operation
— Considered remuneration practices across the Company including management
recommendations for salary increases, bonus payments and share awards
— 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
— Reviewed performance objectives of the Executive Directors and Executive
Committee in order to determine the level of bonus earned in respect of the 2021
financial year
To review all aspects of any equity incentive plans operated or to
be established by the Company
— The Committee set targets for 2021 PSP awards and reviewed the relative TSR
peer group for 2021 awards
To have regard in the performance of its duties to any published
guidelines or recommendations regarding the remuneration of
directors of listed companies and formation and operation of
share schemes
— 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 2020 prior to submission to
shareholders for a Non-Binding vote at the AGM
— Reviewed the Remuneration Policy ahead of a binding vote at the 2021 AGM
— Considered the remuneration-related elements of the 2018 UK Corporate
Governance Code
72
Genel Energy Annual Report 2021
Directors’ remuneration report Annual report on remuneration
Advisers to the Committee
Once again, the Committee has appointed Deloitte LLP (‘Deloitte’)
to provide independent advice on those remuneration matters
under consideration by the Committee. The Committee has chosen
to continue with the appointment of Deloitte as it was felt they
have 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. Deloitte’s fees in respect of advice to the
Committee in the year under review were £34,650 and were
charged on the basis of their standard terms of business for the
advice provided. The Committee is satisfied that the advice they
have received has been objective and independent.
The Committee also consulted during the year with the Chairman,
(David McManus), CEO (Bill Higgs), the General Counsel and
Company Secretary (Stephen Mitchell) and the Chief Human
Resources Officer (Berna Öztınaz).
No member of the Committee nor any party from whom
advice was sought participated in discussions regarding their
own remuneration.
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 2021 and discusses how the Policy
has been implemented in the 2021 financial year. Details of the
Policy can be found on pages 81 to 88.
UK Corporate Governance Code: Provision 40
The following table sets out how the Committee has addressed the factors set out in Provision 40 of the UK Corporate Governance Code in
setting and operating the Directors’ Remuneration Policy.
Clarity
— The Policy is designed to support the financial and strategic objectives of the Company, taking into account UK corporate
governance expectations
— The Committee is committed to providing open and transparent disclosure of our approach to pay with our shareholders
Simplicity
— The remuneration structure is simple, comprising three main elements: fixed pay (base salary and benefits allowance), annual
bonus, and PSP awards
— The Committee took great care to ensure that the remuneration framework throughout the Company is easy to understand for
both participants and shareholders
Risk
— The Committee is mindful of ensuring that incentive arrangements do not encourage excessive risk taking. The Committee
follows a robust process when setting performance targets to ensure that targets are sufficiently stretching and balanced
— The use of deferral of annual bonus awards and holding periods on PSP awards ensure that executive Directors are exposed to
the long-term performance of the Company. Variable pay awards are also subject to malus and clawback
Predictability
— The Policy sets out the maximum opportunity levels for different elements of pay
Proportionality
— Payment of the annual bonus and awards under the PSP are subject to the achievement of stretching performance targets.
The targets are considered annually and take account of expectations and strategic priorities at the time
— The Committee also retains the right to apply discretion where these outcomes do not accurately reflect the performance of the
Company and/or the individual
Alignment
to culture
— The Remuneration Policy has been developed in order to align the interests of the Executive Directors with the Company’s KPIs
and the interests of shareholders
Shareholder voting
Votes cast by proxy and at the meeting in respect of the Annual Report on Remuneration for the year ended 31 December 2020, at the AGM
held on 6 May 2021, were as follows:
To approve the Annual Report on Remuneration
for the year ended 31 December 2020
Number of votes cast
For
Against
Abstentions
211,315,207
129,041,748
82,247,207
26,252
61.07%
38.93%
To approve the Directors’ Remuneration Policy
211,315,207
111,404,413
80,873,006
19,037,788
57.94%
42.06%
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 2021, and comparison figures for 2020.
Salary/fees
Benefits
Total Fixed Pay
Bonus
LTIP3
Total Variable Pay
Total
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
Name
Executive Director
Bill Higgs
Esa lkaheimonen1
546
157
540
450
109
31
108
90
655
188
648
540
418
120
422
351
369
462
2112
8062
787
582
633
1,442
1,281
1,157
770
1,697
1 2021 data relates to the period to 6 May 2021 that Esa Ikaheimonen held an Executive Director position
2 The 2020 LTIP value has been restated due to an error in this table in the 2020 report
3 LTIP includes share awards under the Company’s PSP and RSP which vested in the relevant year, based on the share price on the date of vesting
Genel Energy Annual Report 2021
73
Strategic reportGovernanceFinancial statementsOther information
Directors’ remuneration report Annual report on remuneration
Name
Non-Executive Directors
David McManus 1
Sir Michael Fallon 1
Tolga Bilgin 1
Tim Bushell
Canan Edibog˘lu 2
Hassan Gozal
Martin Gudgeon3
Yetik K. Mert4
George Rose3
Nazli K. Williams
Salary/fees
Benefits
Bonus
LTIP
Total
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
230
100
56
91
76
56
29
2
29
56
208
90
51
91
37
51
84
-
96
56
-
-
-
-
-
-
-
-
-
-
–
-
-
-
–
-
–
–
–
–
-
-
-
-
-
-
-
-
-
-
–
-
-
-
–
–
–
–
–
–
-
-
-
-
-
-
-
-
-
-
–
-
-
-
–
–
–
–
–
–
230
100
56
91
76
56
29
2
29
56
208
90
51
91
37
51
84
–
96
56
1 Appointed to the Board on 5 February 2020
2 Canan Edibog˘lu was apppointd to the Board on 21 June 2020 and joined the Audit Committee on 24 July 2021
3 Stood down from the Board on 6 May 2021
4 Yetik K. Mert joined the Board on 22 December 2021
Additional disclosures in respect of the single total figure table
Base salary
The table below shows base salaries which were effective during 2021.
Bill Higgs
Esa lkaheimonen1
£540,600
£450,000
£546,006
£454,500
£546,006
£454,500
Base salary on 1 Jan 2020
Base Salary at 1 Jan 2021
Base Salary on 6 May 2021
1 Esa Ikaheimonen stood down as a Director of the Board on 6 May 2021 but remained as CFO
Salary information for 2022 is provided on page 78.
Benefits
In line with the Committee’s aim to provide a simple, transparent package, 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 to all employees, the cash supplement will be reduced by the amount contributed
by the Company into the Mandatory Pension Plan. The pension offering for Executive Directors is therefore considered to be aligned to the
wider workforce.
Annual bonus
The 2021 annual bonus scorecard was approved based on the Company’s performance against key business objectives with a combination
of 20% personal and 80% company metrics.
Bill’s continued strong management of the Company was rewarded by the Committee with a personal score of 88%, and this outcome
reflects the leadership and attributes he brought to the table in another year of challenging circumstances. Esa achieved a personal
performance score of 87%, reflecting his stewardship of the Company’s strong financial position and continued disciplined approach,
enabling the capex and opex required for the delivery of activity. His support during the planning for the strategic move to Istanbul
was recognised.
Bill Higgs chose to defer £105,417 of his 2020 bonus into Company shares, and Esa Ikaheimonen elected to defer £87,750. Bill Higgs will
again be invited to voluntarily defer up to 100% of his 2021 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 portion of 2021 bonuses that are deferred will be reported in
the 2022 Annual Report.
Bill Higgs
Esa lkaheimonen
1 Pro-rated according to period holding Executive Directorship
2021 bonus
£418,241
£119,8681
As % of maximum
77%
76%
74
Genel Energy Annual Report 2021
2021 – Annual bonus, Remuneration Committee assessment of performance against targets
For 2021, the Committee approved company metrics focused on the delivery of culture, balance sheet, production and activity.
Company culture continues to be a strong element of delivery across all measurables, however, some HSE targets were missed (please
see page 13 for details). Balance sheet strength was maintained, benefiting from continued focus on the cost base of the business,
resumption of the override and payments received for deferred receivables. Activity delivery was mixed, with some overspend and some
activity not delivered as a result of operational and process challenges, however, the Committee was pleased to see the progress at Sarta
and Somaliland.
The company scorecard was assessed by the Committee, based upon the achievement of these performance targets, which resulted in a
corporate scorecard outcome of 73.75% of maximum.
Bonus
performance
measure
Culture
delivery
Balance sheet
delivery
Production
delivery
Activity
delivery
Weighting Performance target
Assessment of performance against metrics
Performance
assessment
20%
— Health and Safety
— Strong performance in compliance
18%
— ESG implementation
— Strong compliance culture
— High performance culture
— Implementation of initiatives in ESG and high
performance culture all delivered on time and
within budget
— Some HSE targets missed
30%
— Maintain strong balance sheet
— Excellent performance with a robust financial
30%
— Significant reduction in unpaid receivable
outcome for the year
— Free cash flow of $86m
— Net production of 31,710 bpod
10%
— Production delivered within budget
— Production outcome for the year fell
outside target
40%
— 2021 activity programme delivered within Capex
— Production targets met
3.25%
22.5%
and Opex budget
— Drilling campaign within budget
— Progress to operatorship at Sarta
— Overbudget in some areas
— Sarta Operatorship target met
Share plan awards made in 2021
During 2021 the Committee assessed the appropriateness of TSR metrics. Following a thorough review of a range of alternative long-term
incentive plans the Committee concluded that the plan that best meets shareholders’ objectives is an equal combination of relative and
absolute TSR measures as has been successfully implemented in prior years.
PSP awards continued to be assessed 50% on relative TSR against our peer group. The peer group for the 2021 PSP awards is below.
Africa Oil
Aker BP
Capricorn Energy
DNO
Energean Oil and Gas
Enquest
Gulf Keystone
Harbour
Kosmos
Lundin
Pharos Energy
Savannah
Shamaran
Tethys
Tullow Oil
Cairn Energy was renamed Capricorn on 13 December 2021 and, under the terms of the performance conditions, Lundin was subsequently
removed from the 2021 peer group following their merger with Aker BP.
Awards will vest according to the following schedule:
Relative TSR ranking of the Company
Proportion of award vesting
Below median
Median
Between median and upper quartile
Upper quartile
0%
30%
Straight–line basis
100%
The following table provides details of the awards made under the PSP and Deferred Bonus Plan (DBP) during 2021. Performance for the
PSP awards is measured over the three years from the date of grant.
Type of award
Face value
(£)
Basis of awards
Threshold vesting
(% of face value)
Maximum vesting
(% of face value)
End of
performance
period/Vesting
Bill Higgs
Esa Ikaheimonen
PSP1
DBP2
PSP1
DBP2
£819,009
150% of salary
£105,417
voluntary election
£681,750
150% of salary
£87,750
voluntary election
30%
30%
100%
05/04/2024
05/04/2023
100%
05/04/2024
05/04/2023
1 The face value of the PSP is calculated as a percentage of base salary as at 1 January 2021
2 The Executive Directors were invited to defer a percentage of their 2020 bonus into Company shares under the DBP. The face value (£) is calculated using
the average share price ten dealing days prior to the date of grant of 175.7 pence
Genel Energy Annual Report 2021
75
Strategic reportGovernanceFinancial statementsOther information
Directors’ remuneration report Annual report on remuneration
Share awards
The following table provides a summary of all share awards as at 31 December 2021, or as at the date the Director stepped down from the
Board, as applicable. Further details of the Company’s share plans are set out on pages 124 and 125.
Exercise
price
(pence)
As at
1 Jan
2021
Granted
during
the year
Dividend
during
the year
Vested
during
the year
Exercised
during the
year
Lapsed
during
the year
As at
31 Dec
2021
Performance
period end Expiry date
Scheme
Grant date
Bill Higgs1
PSP
PSP
PSP
PSP
RSP
RSP
DBP
PSP
DBP
22/12/2017
11/04/2018
07/05/2019
22/06/2020
22/12/2017
07/05/2019
22/06/2020
06/04/2021
06/04/2021
Esa Ikaheimonen1
RSP
PSP
PSP
PSP
RSP
PSP
DBP
PSP
DBP
25/08/2017
25/08/2017
11/04/2018
07/05/2019
27/08/2019
22/06/2020
22/06/2020
06/04/2021
06/04/2021
-
-
-
-
-
35,183
154,184
-
-
220,142
220,142
114,373
0
0
0
22/12/2020
22/12/2027
22/12/2020
22/12/2027
11/04/2021
11/04/2028
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,183
154,184
334,515
417,932
661,935
199,961
65,402
-
-
-
-
-
-
-
33,476
53,022
-
-
-
-
8,008
53,588
99,979
5,238
-
-
466,201
37,344
60,006
4,806
471,816
357,204
418,482
333,003
139,500
551,000
158,680
-
-
–
-
-
-
-
-
-
388,069
49,949
-
-
-
-
-
-
-
-
-
-
-
-
-
-
275,401
–
-
–
–
-
-
-
-
-
-
-
-
–
-
–
–
-
-
-
-
-
-
-
-
-
-
451,408
07/05/2022
07/05/2029
714,957
03/04/2023
22/06/2030
107,990
07/05/2022
07/05/2029
70,640
22/06/2022
22/06/2030
503,545
06/04/2024
06/04/2031
64,812
06/04/2023
06/04/2031
471,816
25/08/2020
25/08/2027
357,204
25/08/2020
25/08/2027
143,081
275,401
11/04/2021
11/04/2028
–
–
–
–
-
-
333,003
07/05/2022
07/05/2029
139,500
21/08/2022
27/08/2029
551,000
03/04/2023
22/06/2030
158,680
22/06/2022
22/06/2030
388,069
06/04/2024
06/04/2031
49,949
06/04/2023
06/04/2031
Performance against targets for 2018 PSP awards
2. Absolute TSR vesting schedule (accounting for 50% of the assessment)
Targets
1. Relative TSR vesting schedule and comparator group (accounting for 50% of
the assessment)
The Absolute TSR Performance Target means the compound annual growth rates
(CAGR) in the TSR of the company.
The Relative TSR element of the Award vested in accordance with the following schedule:
The Absolute TSR element of the Award vested in accordance with 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%
Relative TSR ranking of the Company
Below 15% p.a
15% p.a
Between 15% p.a. and 35% p.a.
35% p.a. or more
Proportion of Award Vesting
0%
30%
Straight line basis
100%
The Award was subject to the Company’s ranked TSR performance against the following
Comparator Group:
Performance
Relative TSR peer group
BP
Cairn Energy
DNO
EnQuest
Gulf Keystone
Harbour Energy
Nostrum Oil & Gas
Royal Dutch Shell
Seplat Petroleum
Pharos Energy
Tullow Oil
— Based on the Company’s TSR performance over the performance period, the
Company was ranked 2nd against the comparator group and achieved vesting of
100% of this element.
— Absolute TSR performance: The Company’s absolute TSR performance over the
three year performance period was 12.79% p.a., resulting in vesting of 31.62% of
this element.
— Cumulative performance outcome: The cumulative impact of the above
performance for the relative and absolute TSR elements resulted in 65.81% of
April 2018 awards vesting.
1 Awards made to Bill Higgs and Esa Ikaheimonen prior to 7 April 2019 were made to them before they held Executive Directorships
2 No element of the 2021 LTIP value shown for Bill Higgs on page 73 is due to share price growth between grant and vesting of the 11 April 2018 PSP or the
7 May 2019 RSP (excluding dividend equivalents)
3 No element of the 2021 LTIP value shown for Esa Ikaheimonen on page 73 is due to share price growth between the grant and vesting of the 11 April 2018
PSP award (excluding dividend equivalents)
Payments to past Directors
In 2021, there were no payments made to past Directors. Esa Ikaheimonen stepped down as a member of the Board on 6 May 2021 but
continued employment with the Company in his role as CFO which does not include any Board responsibilities. Any remuneration received
after 6 May 2021 was in respect of this new role. As disclosed in the 2019 Annual Report and the 2020 Annual Report, Murat Özgül stepped
down as CEO in April 2019 but continued employment with the Company in a different role which does not include any Board responsibilities.
Any remuneration received during 2021 was in respect of this new role.
Payments for loss of office
In 2021, there were no payments made to Directors for loss of office.
76
Genel Energy Annual Report 2021
Statement of Directors’ shareholding and share interests
The beneficial interests of the Directors in the Company’s shares as at 31 December 2021 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.
Director
David McManus
Sir Michael Fallon
Bill Higgs
Tolga Bilgin1
Tim Bushell
Canan Edibog˘lu
Hassan Gozal2
Nazli K. Williams3
Esa Ikaheimonen4
Martin Gudgeon5
George Rose6
Ordinary shares
as at 31 Dec 2020
Ordinary shares
as at 31 Dec 2021
or at date of leaving
Interest in share options granted
under the Company share plans as at 31
Dec 21 or at date of leaving
-
9,000
37,829
-
-
-
46,338,622
-
-
150,000
90,000
-
9.000
307,256
-
-
-
46,338,622
17,209,941.5
-
150,000
90,000
-
-
1,913,352
-
-
-
-
-
1,673,820
-
-
1 Bilgin Grup Dog˘al Gaz A.Ş, of which Tolga Bilgin is the CEO, holds 62,523,017 shares in the Company as at 31 December 2021
2 These shares are held by Daax Corporation FZE, of which Hassan Gozal is the sole owner
3 Nazli K. Williams is a 50% beneficial owner of shares in the Company held by Focus Investments Limited
4 Esa Ikaheimonen stood down from the Board at the 2021 AGM, held on 6 May 2021
5 Martin Gudgeon stood down from the Board at the 2021 AGM, held on 6 May 2021.
6 George Rose retired from the Board at the 2021 AGM, held on 6 May 2021
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
180
160
140
120
100
80
60
40
20
0
31/12/2011
31/12/2012
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2022
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 2021 financial year.
Genel Energy
FTSE350 oil & gas producers
2012
2013
2014
2015
2015
2016
2017
2018
2019
2019
2020
2021
Chief Executive Officer
Tony
Hayward
Tony
Hayward
Tony
Hayward
Tony
Hayward2
Murat
Özgül2
Murat
Özgül
Murat
Özgül
Murat
Özgül
Murat
Özgül2
Bill
Higgs2
Bill
Higgs
Bill
Higgs
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)
1,691
1,779
2,521
468
531
1,519
1,765
1,882
299
1,112
1,281
1,539
90%
95%
90%
0% 36.2%
71.4%
82.1%
72.5%
60%
65%
78%
77%
n/a
n/a
82.5%
0%
0%1
0%
0%
0%
0%
n/a
50%3
65.8%
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
3 This vesting is in relation to the December 2017 PSP award granted to Bill Higgs prior to his appointment as CEO
Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Directors’ remuneration report Annual report on remuneration
Percentage change in remuneration of the Executive Directors
The table below shows the percentage change in the Executive Directors’ salary, benefits and annual bonus between the financial years
ended 31 December 2020 and 31 December 2021 compared to the average for permanent employees of the Company.
The percentage change in base salary, benefits and annual bonus for the Executive Directors compares outcomes of the period spent
holding the Executive Directorships in 2019 against 2020, and 2020 against 2021. The figures below include pro-rated calculations for Esa’s
mid-year dates.
% change in
base salary
2019/2020
% change in
base salary
2020/2021
% change in
benefits
2019/2020
% change in
benefits
2020/2021
% change in
annual bonus
2019/2020
% change in
annual bonus
2020/2021
Bill Higgs1
Esa Ikaheimonen2 3
All employees
38.4%
39.4%
10.4%
3.5%
(65.1%)
9.4%
38.4%
39.4%
6.8%
3.5%
(65.1%)
19.8%
66.1%
69.9%
9.7%
(0.9%)
(65.9%)
(7.4%)
1 Bill Higgs was appointed as CEO on 7 April 2019
2 Esa Ikaheimonen was appointed as Executive Director on 7 April 2019 with a subsequent salary increase in August 2019
3 Esa Ikaheimonen stood down from the Board on 6 May 2021
Percentage change in remuneration of the Non Executive Directors
Non-executive Directors received only a fee in 2021 and did not receive benefits or an annual bonus.
David McManus
Sir Michael Fallon
Tim Bushell
Canan Edibog˘lu 1
Martin Gudgeon
Yetik K. Mert
George Rose
Nazli K. Williams
% change in
annual fee
2019/2020
% change in
annual fee
2020/2021
-
-
0%
-
3.7%
-
3.2%
0%
0%
0%
0%
8.8%
0%
0%
0%
0%
1
Canan Edibog˘lu was appointed Chair of the Audit Committee on 24 July 2021
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. The cost to the Company of dividends paid to shareholders in 2021 was
$44 million.
Remuneration paid to all employees
2020
2021
$m
23.9
24.44
Remuneration paid to all employees represents total staff costs from continuing operations.
Implementation of Remuneration Policy in 2022
This section provides an overview of how the Committee is proposing to implement our Remuneration Policy in 2022.
In determining the salary increase for Bill Higgs for 2022, 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 the base salary of Bill Higgs by 3.5% with effect from 1 January 2022, in line with the wider UK
workforce. The table below shows the base salary for 2022.
Base salary from 1 Jan 2022
Bill Higgs
£565,116
78
Genel Energy Annual Report 2021
Benefits
As outlined above, Bill Higgs receives a cash supplement in lieu of all benefits, including pension, private health insurance, life assurance and
company car provision. The cash supplement is not included in calculating bonus and long-term incentive quantum.
For 2022, the cash supplement remains 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.
2022 benefits allowance
Bill Higgs
£113,023
2022 – Annual bonus targets
The target bonus for the Chief Executive Officer for 2022 will be at a maximum of 100% of base salary, and his performance will be
measured 20% against personal performance metrics and 80% against Company metrics.
The Committee has once again set a clear focus on short-term delivery for the 2022 cash bonus, and believes that this will drive the
maximum value for shareholders. Financial targets for production and budgets are set out and will be assessed over the course of the year.
Continued success of the delivery in culture is expected as we pursue this via strong targets in safety, in compliance, in high performance
and of the delivery of our ESG plan. We have shifted the focus on the weighting on delivery from activity to production, reflecting the
current phase in which the Company finds itself in the KRI and building upon the achievements that were required from 2021.
Bonus performance measures
Specific targets
Culture Delivery
— Health and Safety
— ESG implementation
— Strong compliance culture
— High performance culture
Production Business Delivery
— Production delivered on budget
— Production activity delivers in line with expectation
Pre-Production Delivery
— Activity programme delivered within budget
— Progress at Sarta and Somaliland delivered on time
Dividend Delivery
— Free cash flow target to be met
Percentage
25%
35%
22.5%
17.5%
Performance share plan
PSP awards are normally granted as nil-cost options. The number of awards granted are normally determined by reference to a percentage
of base salary.
The 2022 award for Bill Higgs 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 2022 award, representing 50% of the award, has been reviewed
and revised to reflect the latest market developments as shown below. The Committee determined that Jadestone was an appropriate
addition to the group.
Africa Oil
Aker BP
Capricorn Energy
DNO
Energean Oil and Gas
Enquest
Gulf Keystone
Harbour
Jadestone
Kosmos
Pharos Energy
Savannah
Lundin was removed from the group during 2021 due to the merger with Aker BP.
Shamaran
Tethys
Tullow Oil
The relative TSR vesting schedule will remain the same as for awards made in 2021, as outlined on page 75.
Absolute TSR
Absolute TSR of the Company
Below 10% p.a.
10% p.a.
Between 10% p.a. and 15% p.a.
15% p.a. or more
Proportion of element vesting
0%
30%
Straight–line basis
100%
Genel Energy Annual Report 2021
79
Strategic reportGovernanceFinancial statementsOther information
Directors’ remuneration report Annual report on remuneration
Chairman and Non-Executive Director remuneration
Non-Executive Director fees were reviewed in 2021 against benchmark data for companies with a similar market cap, and also against
comparable E&P companies. The fees remain unchanged for 2022.
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 1
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
1
David McManus, as Chairman, receives an all-inclusive fee therefore does not receive any additional payment for his position as the Interim Remuneration
Committee chair.
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.
David McManus
Interim Chairman of the Remuneration Committee
14 March 2022
80
Genel Energy Annual Report 2021
Directors’ remuneration report Remuneration Policy
Remuneration Policy
This part of the report sets out our proposed Directors’ Remuneration Policy. As outlined
above in the letter from the Chairman of the Remuneration Committee, this Policy was
put forward for binding shareholder approval at the 2021 AGM and the Policy replaced the
previous Remuneration Policy approved at the 2020 AGM. The effective date of the Policy
is the date on which the Policy is approved by shareholders – 6 May 2021. Further details
regarding the operation of the Policy can be found on pages 73 to 80.
The Committee will keep the Policy under review to ensure that it
continues to promote the attraction, retention and motivation of
the high-performing executive talent required to deliver the
business strategy. It is the Committees intention that the Policy
be put to shareholders for approval every three years. Should any
changes be required before the end of the three-year period, the
amended Policy will be put to shareholders, following shareholder
consultation as appropriate.
This part of the report sets out a summary of the Directors’
remuneration policy as determined by the Remuneration
Committee (‘the Committee’) and approved by shareholders
at the 2021 Annual General Meeting. A copy of the shareholder
approved Policy is available at genelenergy.com in the Investor
Relations section.
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
Salary
Purpose and link to strategy
Operation
— To provide fixed 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
— The Committee takes into account a number of factors when setting salaries, including:
— scope and complexity of the role
— the skills and experience of the individual
— salary levels for similar roles within the international industry
— pay elsewhere in the Group
Maximum opportunity
— Salaries are reviewed, but not necessarily increased, annually with any increase usually taking effect in January
— While there is no defined maximum opportunity, salary increases are normally made with reference to the average
increase for the Company’s wider employee population
— The Committee retains discretion to make higher increases in certain circumstances, for example, following an increase in
the scope and/or responsibility of the role or the development of the individual in the role
Performance measures
None
Benefits
Purpose and link to strategy
— To provide a simple and broadly market competitive benefit cash allowance
Operation
— A cash supplement is provided in lieu of benefits (including pension)
Maximum opportunity
— Cash supplement is set as a percentage of base salary and paid in lieu of all benefits (including pension)
— The cash supplement is not included in calculating bonus and long-term incentive quantum
— 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
Performance measures
None
Genel Energy Annual Report 2021
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Variable remuneration
Annual bonus
Purpose and link to strategy
— To incentivise and reward the achievement of annual financial, operational and individual objectives which are key to the
delivery of the Company’s strategy
Operation
— 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
— A minimum of 25% of the bonus will normally be subject to deferral, although the Committee retains the flexibility to
set a higher or lower level of deferral (including zero) where appropriate. Deferral can be in cash or shares. Deferral into
shares will be in the form of awards under the DBP. DBP awards may be conditional share awards or nil-cost options.
DBP awards that vest may benefit from the value of dividends (if any) which would have been paid during the period
between award and exercise and may assume reinvestment in the Company’s shares. The Committee retains the
flexibility over the deferral period but would usually apply a two year deferral period. Any vested options must be
exercised within ten years of the date of grant
Maximum opportunity
— Maximum award opportunity for Executive Directors is 150% of base salary for each financial year
Performance measures
— 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
Performance share plan (‘PSP’)
Purpose and link to strategy
— To incentivise and reward the creation of long-term shareholder value
— To align the interests of the Executive Directors with those of shareholders
Operation
— 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 other than in the case of Buy-Out
Awards - see below
— 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 exercise and may assume reinvestment in the Company’s shares
— Shares that vest are normally subject to a holding period of two years from the vesting date although the Committee
retains the discretion to apply a different holding period, or no holding period
— Any vested options must be exercised within ten years of the date of grant
— The PSP can also be used to buy out share plans awards forfeited by new Executive Directors on recruitment who
are of sufficient calibre to deliver the Company’s strategy (‘Buy-Out Awards’). Such Buy-Out Awards, as set out in the
recruitment policy below, need not be made subject to the achievement of performance conditions.
Maximum opportunity
— 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, such as recruitment scenarios, awards of up to
300% of base salary may be made
Performance measures
— Other than Buy-Out Awards, the 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
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.
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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 and absolute TSR is the most appropriate measure to
assess the underlying financial performance of the business while
creating maximum alignment with shareholders and encouraging
long-term value creation.
Malus and clawback provisions
Malus provisions allow that the Committee may cancel or reduce
(including to nil) any annual bonus payment or DBP award prior to
payment/grant, or cancel or reduce including to nil the number of
shares awarded under the PSP prior to vesting.
Clawback provisions apply to any or all of the annual bonus
(including DBP) and PSP awards where it is considered appropriate
by the Committee. Clawback may be applied up to one year after
payment for bonus awards (or the vesting of the DBP awards) and
two years after vesting for PSP awards.
The circumstances in which the above provisions apply may
include fraud, misconduct or misbehaviour by the participant, the
information used or the calculation of an award or performance
condition is found to be materially incorrect, a material
misstatement of the Company’s audited financial results for which
the participant has significant responsibility or which led to an
award vesting to a greater extent than would otherwise have been
the case, a significant downturn in financial performance that the
Participant’s actions significantly contributed towards, a material
breach of health and safety regulations, or any other similar
circumstances as determined by the Committee.
Plan rules
The PSP and DBP 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 80% 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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Directors’ remuneration report Remuneration Policy
Chairman and Non-Executive Directors
Chairman fees
Purpose and link to strategy
— 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
Operation
— 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
Maximum opportunity
— Whilst there is no 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
Performance measures
None
Non-Executive Director (NED) fees
Purpose and link to strategy
— To provide an appropriate reward to attract and retain high calibre individuals with the relevant skills, knowledge
and experience
Operation
— The fees for the 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
Maximum opportunity
— Whilst there is no 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
Performance measures
None
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.
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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. Any such awards may be made under the terms of the
PSP or as permitted under the Listing Rules.
The Committee is at all times conscious of the need to pay no more
than is necessary, particularly when determining any possible buy-
out arrangements.
Recruitment policy
In determining remuneration for new appointments to the Board,
the Committee will consider all relevant factors including, but
not limited to, the calibre of the individual and their existing
package, the external market and the existing arrangements for
the Company’s current Executive Directors, with a view that any
arrangements offered are in the best interests of the Company and
shareholders and without paying any more than is necessary.
Where the new appointment is replacing a previous Executive
Director, salaries and total remuneration opportunity may be higher
or lower than the previous incumbent. If the appointee is expected
to develop into the role, the Committee may decide to appoint the
new Executive Director to the Board at a lower than typical salary.
Larger increases (above those of the wider employee population)
may be awarded over a period of time to move closer to market
level as their experience develops.
Benefits will normally be limited to those outlined in the
remuneration policy table above. However, additional benefits
may be provided by the Company where the Committee considers
it reasonable and necessary to do so. Such circumstances may
include where an Executive Director is required to relocate in
order to fulfil their duties. In such cases, 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.
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Directors’ remuneration report Remuneration Policy
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
— Participation in all incentive schemes, including the annual bonus, the DBP and the PSP, is non-contractual
benefits
— 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.
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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.
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.
PSP
Leaver reasons where
— Death
awards
may continue to vest
— Redundancy, 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)
Vesting
arrangements
— Awards will vest to the extent determined by the Committee taking into account the achievement of any
performance conditions at the relevant vesting date and, unless the Committee determines otherwise, the
period of time which has elapsed between grant and cessation of employment
— The vesting date for such awards will normally be the original vesting date 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
Treatment for any
— Awards lapse in full
other leaver reason
DBP
Leaver reasons where
— Death
awards
may continue to vest
Vesting
arrangements
— Any other scenaro
— 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
Treatment for any
— Summary dismissal – awards lapse in full
the Committee
other leaver reason
— If there is an ongoing investigation unless otherwise determined by the Committee, awards will only vest,
become exercisable or settled after the conclusion of the investigation
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Directors’ remuneration report Remuneration Policy
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
Policy
Period
— 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
— The Chairman and Non-Executive Directors are entitled to payment in lieu of notice in line with their letter
of appointment
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.
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Other statutory and regulatory information
Other statutory and
regulatory information
Management report
The Directors’ Report, together with the Strategic Report set out on pages 1 to 38, form the Management Report in alignment with
the purposes of Disclosure Guidance and Transparency Rule (DTR) 4.1.5R.
Statutory information contained elsewhere in the Annual Report
Information required to be part of a Directors’ Report can be found elsewhere in the Annual Report as indicated in the table below
and is incorporated into this report by reference.
Information
Results and dividends
Likely future developments in the business of the Company or its subsidiaries
Subsequent events
Corporate social responsibility
Greenhouse gas emissions
Section 172 statement and stakeholder engagement
Colleagues (employment of disabled persons, workforce engagement and policies)
Engagement with suppliers, customers and others in a business relationship
Corporate Governance Statement
Directors’ details (including changes made during the year)
Related party transactions
Diversity
Share capital
Viability statement
Going concern and Fair, balanced and understandable statements
Location in annual report
Pages 100 to 126
Pages 18 to 19
Page 125
Pages 20 to 31
Page 28
Page 37
Pages 24 to 25
Page 37
Pages 41 to 42
Pages 57 to 59
Note 22 on page 125
Page 25
Note 17 on page 122
Page 36
Pages 36 and 40
Employee share schemes (including long-term incentive schemes)
Note 20 on pages 124 to 125
Financial instruments: information on the Group’s financial instruments and risk management
Notes 15 and 16 on pages 121
objectives and policies, including our policy for hedging
Statements of responsibilities
to 122
Page 93
Disclosure table pursuant to Listing Rule (LR) 9.8.4C
The following table provides references to where the information required by Listing Rule 9.8.4C is disclosed:
Listing Rule and requirement 1
9.8.4(4) Long-term incentive schemes (LR 9.4.3R)
Disclosure
Note 20 on pages 124 to 125
1 Each of the other disclosures required under Listing Rule 9.8.4c are not applicable to Genel Energy plc
Principal activities
The Company is the holding company for the Group. The Group is principally engaged in the business of the exploration, development and
production of natural resources.
Genel Energy plc is a Jersey incorporated company with a standard listing on the London Stock Exchange. 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 between 6 May 2021 and 22 December 2021 at least half the Board (excluding the Chairman) were not independent and
provision 32 since 22 November 2021 when David McManus was appointed the Interim Chair of the Remuneration Committee. A copy of the
Code can be found at frc.org.uk/corporate/ukcgcode.cfm.
Genel Energy Annual Report 2021
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Other statutory and regulatory information
AGM
Your attention is drawn to the Notice of AGM enclosed with this
report, which sets out the resolutions to be proposed at the
forthcoming AGM. The meeting will be held at Linklaters, One Silk
Street, London EC2Y 8HQ on Thursday, 12 May 2022 at 11.00am.
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.
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.
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 57 to 59. Details of Directors’ service agreements
and letters of appointment are set out on pages 86 to 88.
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 77.
Details of Directors submitting themselves for re-election and
election at the AGM are set out in the Notice of Meeting.
Service contracts and letters of appointment for all Directors are
available for inspection at the registered office of the Company and
will be available for inspection at the AGM.
Subject to applicable law and the articles of association and to any
directions given by special resolution, the business of the Company
will be managed by the Board, which may exercise all the powers of
the Company.
Directors’ indemnities
As at the date of this Annual Report, indemnities granted by the
Company to the Directors are in force to the extent permitted under
Jersey law. The Company also maintains directors’ and officers’
liability insurance cover, the level of which is reviewed annually.
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.
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.
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.
Political donations
No political donations were made, nor was any political expenditure
incurred, by any Group company in the year ending 31 December
2021 (2020: nil).
Share capital
As at 14 March 2022, the Company had allotted and fully paid up
share capital of 280,248,198 ordinary shares of 10 pence each with
an aggregate nominal value of £28,024,819.80. These consist of
278,302,114 voting ordinary shares and 1,946,084 shares held as
treasury shares.
Resolutions in relation to share capital
At the AGM of the Company held on 6 May 2021, the shareholders
granted the Company authority to make market purchases of up
to 27,767,047 ordinary shares (representing approximately 10%
of the aggregate issued ordinary share capital of the Company at
1 April 2021) and hold as treasury shares any ordinary shares so
purchased. During 2021, no shares were purchased by the Company
under this authority.
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 Agreement1. 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.
1 Following the transfer of a certain number of shares in the Company from Focus Investments to Türkiye I˛s Bankası A.S˛. the Company entered into a
separate agreement with Türkiye I˛s Bankası A.S˛. which provides the Company with a right of first refusal over its shares in the Company on substantially
the same terms as those contained in the Merger Agreement.
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Genel Energy Annual Report 2021
Substantial shareholdings
As at 31 December 2021, the Company had been notified of the
following significant holdings (being 5% or more of the voting rights
in the Company) in the Company’s ordinary share capital.
Name
Bilgin Grup Dogˇal Gaz A.S˛.
Daax Corporation FZE
Focus Investments Limited
NR Holdings Limited
Türkiye Iş Bankası A.S˛.
Auditors
Number of
ordinary shares
62,523,017
46,338,622
34,419,883
21,214,583
19,000,000
A resolution to reappoint BDO LLP as the Company’s auditor will be
proposed at the 2022 AGM.
By order of the Board
Bill Higgs
Chief Executive Officer
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 to regulate 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.
In December 2021, the Company was notified that Focus
Investments was no longer controlled by Mehmet Emin
Karamehmet. Accordingly, certain rights of Focus Investments
under the Relationship Agreement ceased to have effect, including
the right to nominate a representative to the Genel Board.
The Director nominated by Focus Investments pursuant to its
previous right under the Relationship Agreement is Nazli K. Williams
(Non- Executive Director). The Board intends to put forward Nazli
K. Williams for re-election as a Non Executive Director at our
upcoming AGM on Thursday, 12 May 2022 in light of the valuable
contributions she provides to Board discussions.
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.
Genel Energy Annual Report 2021
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Genel Energy Annual Report 2021
Statement of Directors’ responsibilities
Statement of Directors’
responsibilities
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with International Reporting
Standards (IFRSs) as adopted by the European Union and the
Companies (Jersey) Law 1991 and applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with IFRSs as
adopted by the European Union. Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Group
for that period.
Website publication
The Directors are responsible for ensuring the Annual Report
and the financial statements are made available on a website.
Financial statements are published on the Company’s website in
accordance with legislation in the United Kingdom and Jersey
governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
In preparing these financial statements, the Directors are
required to:
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
— Select suitable accounting policies and then apply
— The Group financial statements 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 profit and loss of the Group.
— The Annual Report includes a fair review of the development
and performance of the business and the financial position of
the Group, together with a description of the principal risks
and uncertainties that they face.
By order of the Board.
Bill Higgs
Chief Executive Officer
them consistently;
— Make judgements and accounting estimates that are
reasonable and prudent;
— State whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial
statements; and
— Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
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 IFRSs as adopted
by the European Union and the Companies (Jersey) Law 1991 and
the Directors’ Remuneration Report complies with the Companies
Act 2006, given the Company voluntarily prepares a Directors’
Remuneration Report in accordance with the provisions of the
United Kingdom Companies Act 2006.
They 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.
Genel Energy Annual Report 2021
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Independent auditor’s report
Independent auditor’s report to the
members of Genel Energy Plc
Opinion on the financial statements
In our opinion the financial statements:
— give a true and fair view of the state of the Group’s affairs as at
31 December 2021 and of its loss 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
Companies (Jersey) Law 1991.
We have audited the financial statements of Genel Energy Plc (the
‘Company’) and its subsidiaries (together the ‘Group’) for the year
ended 31 December 2021 which comprise the consolidated statement
of comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, and the consolidated
cash flow statement and notes to the financial statements, including
a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and IFRS as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the Auditor’s 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. Our audit opinion is consistent
with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we were
appointed by the Board of Directors on 15 March 2021 to audit the
financial statements for the year ended 31 December 2021 and
subsequent financial periods. The period of total uninterrupted
engagement is one year, covering the year ended 31 December
2021. We are independent of the Group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that standard
were not provided to the Group.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s
ability to continue to adopt the going concern basis of
accounting included:
— Obtaining and evaluating the Board papers assessing going
concern for the forecast period, the assessment of risks
and uncertainties and the supporting cash flow forecasts.
We formed our own assessment of risks and uncertainties
based on our understanding of the business and the oil and gas
sector and compared this to the Board’s assessment;
— Discussing the going concern assessment with the Chief
Executive Officer, the Chief Operating Officer, the Technical
Director, General Counsel and In-House Legal, and the Chief
Financial Officer to understand their views on the ability of the
Group to continue as a going concern;
— Performing a detailed review of the cash flow forecasts
prepared by Management and assessing the appropriateness
of the period over which going concern is being assessed;
— Assessing Management’s base case cash flow forecast and
the underlying key assumptions which have been approved
by the Board and the clerical accuracy of such. In doing so,
we considered factors such as historical operating costs,
production, actual performance in 2021, forecast oil prices and
capital expenditure approved by the Board;
— Agreeing the 31 December 2021 cash position to bank
confirmations, and the latest available cash position to
bank statements;
— Verifying that covenants have not been breached during
the current period and are not expected to be breached in
the forecast period through reperformance of calculations
where appropriate;
— Reviewing the profile of proceeds to be received from the
Kurdistan Regional Governmental of Iraq (KRG) in the cash
flow forecasts against the established payment mechanism for
the overdue receivables and the recent payment trends for the
current receivables;
— Reviewing the various PSCs, licences and work programmes
and comparing the commitments to the forecasts;
— Considering the impact of COVID-19 and the implications on
the Group;
— Obtaining and reviewing Management’s sensitivity analysis
reflecting a worst-case scenario by applying a lower than
forecast brent oil price or experiencing significant delays in the
receipt of payments from the KRG;
— Reviewing post year end press releases, RNS announcements
and board minutes for any indicators of obligations or significant
adverse issues, including the matter set out in note 1; and
— Reviewing and evaluating the adequacy and completeness
of disclosures in the financial statements in respect of
going concern.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s ability to continue as a going concern for a period of
at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections
of this report.
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Genel Energy Annual Report 2021
Overview
Coverage
100% of Group losses before tax
100% of Group revenue
99.8% of Group total assets
Key audit matters
Carrying value of exploration assets
Carrying value of oil producing and development assets
Recoverability of overdue KRG receivables
Materiality
2021
Group financial statements as a whole
Group materiality was determined based on 1% of total assets as
at year-end which has been calculated at $10.1m.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of
the Group and its environment, including the Group’s system of
internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of
management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may
have represented a risk of material misstatement.
The Group’s key producing and exploration assets are almost
entirely based in the Kurdistan Region of Iraq (KRI), with
exploration assets in Somaliland and activities in Morocco.
Our Group audit scope focused on the Group’s producing
and exploration assets to gain sufficient coverage over the
Group’s total assets, total revenue and losses before tax while
considering the audit risks identified.
As a result, we determined three significant components
which were subjected to a full scope audit, two of which hold
the producing assets namely: (1) Genel Energy International
Limited which holds the Kurdistan producing assets of Taq
Taq and Tawke, and (2) Genel Energy Sarta Limited which
holds the oil producing Sarta asset in Kurdistan. One further
exploration entity, Genel Energy Miran Bina Bawi Limited, which
held the Miran and Bina Bawi assets before the termination on
10 December 2021 of both Production Sharing Contracts (PSCs)
pre-year end was also considered a significant component.
Non-significant components that require statutory audits in the
UK and Jersey were also subjected to a full scope audit which
contributed to the above-mentioned audit coverage.
The financial information of the remaining non-significant
components, where there is no statutory audit requirement,
were principally subjected to analytical review procedures, with
specified audit procedures performed on certain elements of
their trial balances where there were material balances identified
such as in respect of operating costs, finance expenses, cash and
interest-bearing loans.
The accounting functions of the Group are largely performed
from its Ankara office in Turkey. As a result of travel restrictions
due to the COVID-19 pandemic, we were unable to visit the
Ankara office and undertake site visits to the Group’s principal
assets in the KRG. The BDO International member firm in Turkey
provided assistance on specific testing where local verification
of source documents was required in Turkish. The audit was
primarily performed remotely in the UK using BDO cloud-based
audit tools and through teleconferencing. Except for the limited
specific testing performed by the BDO International member firm
in Turkey, at the request of the Group engagement team, all of
the audit work was conducted by the Group engagement team.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our 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) that we identified, 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 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.
Key audit matter
Carrying value of exploration assets
(see notes 1.2 and 8)
The exploration assets form a significant part of the Group’s
statement of financial position. Management is required to
consider if there are any facts or circumstances (potential
impairment triggers) that would suggest that the exploration
costs would be impaired in accordance with IFRS 6 Exploration
for and Evaluation of Mineral Resources. If an indication of
impairment exists, Management is required to perform a full
impairment assessment in accordance with IAS 36 Impairment in
order to ensure that the exploration assets are carried at no more
than their recoverable amount.
The impairment indicator assessment under IFRS 6 requires
judgement, and consideration of all relevant information in terms
of the licences, status of PSCs, discussions with local government,
the local political and economic environment, strategic plans,
status of the funding requirements and the results of activity in
the year.
Following the termination by Genel of the PSCs, Management
have determined that the Bina Bawi and Miran assets were fully
written-off as at 31 December 2021.
Management concluded that there were no indicators of
potential impairment present in the year on the remaining
exploration assets including the Qara Dagh asset where drilling
operations were suspended towards the end of the year due to
complex geology.
Due to the significance of the carrying value of these exploration
assets and the level of judgement being exercised in the
impairment assessment, we consider the above to be a key
audit matter.
How the scope of our audit addressed the key audit matter
Our specific audit testing in this regard included:
— Evaluating the status of licences and PSCs through our
review of government correspondence, PSCs and assessing
whether commitments and terms under the PSCs have been
adhered to.
— We also held discussions with senior Management to
understand the rationale for the termination of the Bina
Bawi and Miran PSCs. We corroborated Management’s
representation and assessed the appropriateness of
Management’s view with the Group’s external litigation
legal counsel.
— Holding discussions with Management, including the
Technical Director, the Chief Operating Officer, and the
Chief Financial Officer to understand the impact of the
drilling suspension on the Qara Dagh asset in regard to the
impairment assessment of the field. We have assessed the
suspension against the requirements of IFRS 6.
— Obtaining the Group’s budget and strategic plans for future
exploration and development and checked that expenditure
has been planned to maintain these licences and has been
budgeted for further expenditure or development in these
licence areas.
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Independent auditor’s report
— Reviewing the available resource statements and
— Assessing the experts used by Management in compiling
technical reports to determine if there is any evidence of
impairment and assessing the underlying valuations of the
relevant licence areas. Our audit included assessing the
independence ,competence, capabilities and objectivity of
Management’s expert involved in the preparation of these
resource statements and technical reports. We also made
enquiries of members of the operations team to understand
any issues or impairment triggers identified on these assets.
— Evaluating the impact of Covid-19 on the projects such as
identifying potential significant delays or the suspension of
exploration activities due to Covid-19 restrictions imposed.
— Reviewing public announcements, board minutes, press
releases and results of activities carried out in the year on
the licence areas for evidence of indicators of impairment.
the underlying Competent Person Reports on the reserves,
particularly focused on the competency of the expert and
the scope of their work to ensure they have been prepared
under the required guidelines and are appropriate for their
intended purpose. We engaged an auditor’s expert to assist
with our review in this area; and
— Evaluating the impact of climate change on the impairment
of the Group’s producing assets taking into consideration the
Group’s initiatives specifically in regard to gas flaring.
Key observations:
Based on the procedures performed we found the Group’s
assessments that there were no indicators of impairment at
31 December 2021 and that no previously recognised impairment
should be reversed in the year, to be appropriate.
We also assessed the adequacy of the disclosures in the
financial statements.
Key audit matter
Key observations:
Based on the procedures performed we consider that
Management’s decision to fully write-off the Bina Bawi and
Miran assets is appropriate and in accordance with the
accounting standards.
For the remaining assets which are not impaired we found the
carrying amounts of these assets were supportable.
Key audit matter
Carrying value of oil producing and development assets (see
notes 1.2 and 9)
The producing and development assets form a significant part
of the Group’s statement of financial position. Management is
required to consider if there are any facts or circumstances
(potential impairment triggers) that would suggest that the
oil producing and development assets would be impaired
in accordance with IAS 36 Impairment. Where indicators of
impairment are identified, impairment testing is required to
ensure that the Group’s assets are carried at no more than their
recoverable amount. Management is also required to assess
impaired assets for any potential reversals of impairment.
Following their assessment, Management have not identified any
impairment indicators on its oil producing assets nor any reversal
of previously recognised impairment losses on the Taq Taq and
Tawke Cash Generating Units (CGUs).
Given the materiality of the assets in the context of the Group’s
statement of financial position and the judgements involved in
making this assessment we consider this to be a key audit matter.
How the scope of our audit addressed the key audit matter
Our specific audit testing in this regard included:
— Reviewing and assessing Management’s allocation of assets
to CGUs for the purpose of the impairment assessment, and
Management’s assessment of impairment indicators against
the requirements of the applicable accounting standards;
— Assessing performance against budgets/plans in FY 2021
for the Taq Taq, Tawke and Sarta operating fields in order to
identify indicators of impairment or indicators of a reversal
of previously recognised impairments;
— Performing a high-level review of the key impairment model
assumptions, challenging the appropriateness of estimates
with reference to historical data and external evidence
where available (e.g. consistency of oil price assumptions
with oil price forecasts);
— Confirming the consistency of the reserves and resources in
the models with the latest Competent Person Reports;
— Verifying the reasonableness of the discount rate used
by Management with the assistance of our internal
valuation experts;
— Holding discussions with Management and Operations
to gain an understanding of the performance of these
producing assets;
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Genel Energy Annual Report 2021
Recoverability of overdue KRG receivables
(see notes 1.2 and 10)
As at 31 December 2021, the Group has overdue nominal
receivables of $76.8m (31 December 2020: $120.8m) due from
the KRG.
Management are required to make an assessment of the expected
credit loss (ECL) provisions relating to the overdue receivable,
considering both the likelihood of receiving payment and the
timing of recoverability.
Following this assessment, the Group concluded that an expected
credit loss of $10.8m was appropriate at 31 December 2021,
leading to a reversal of $24.1m of the previously recognised ECL.
The amounts relating to his area are material to the Group and
significant judgements and estimation are involved in reaching
a conclusion on the appropriate ECL at year end. We therefore
consider this to be a key audit matter.
How the scope of our audit addressed the key audit matter
Our specific audit testing in this regard included:
— Challenging Management’s assessment of the recoverability
of the balance under the relevant accounting standard
including the appropriateness of the different scenarios
considering the level, nature and timing of receipts.
The sensitivity analysis applied by Management include
scenarios where brent prices range from $65/bbl to $85/bbl;
— Reviewing the correspondence with the KRG confirming
the validity of the amounts due and the details of the
recovery mechanisms;
— Holding discussions with Management to understand the
status of discussions and negotiations for an improved
recovery mechanism with the KRG;
— Verifying receipts for the year to supporting evidence such
as bank statements and comparing to the agreed payment
mechanism to confirm that the payment mechanism is
working as intended;
— Obtaining and reviewing the expected credit loss
calculation prepared by Management. We have assessed
the appropriateness of the methodology adopted and
confirmed this is in line with the requirements of IFRS 9
Financial Instruments;
— Reviewing and considering the appropriateness of the inputs
in the ECL model, specifically running our internal recovery
scenarios on oil prices and involving our independent
valuation expert in testing the discount rate applied; and
— Checking the consistency of the model mechanics against
the payment mechanism and its mathematical accuracy.
Key observations:
Based on the work performed we consider the Group’s
assessment in regard to the recoverability of the overdue KRG
receivables to be appropriate. We consider the ECL provision and
release in the year to be appropriately accounted for.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that
any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing
needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account
of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole, performance materiality
and a lower testing threshold as follows:
Other information
The directors are responsible for the other information. The other
information comprises the information included in the Annual
Report other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. 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 course of the audit,
or otherwise appears to be materially misstated. If we identify
such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. 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 in this regard.
Corporate governance statement
As the Group has voluntarily adopted the UK Corporate Governance
Code 2018, we are required to review the Directors’ statement
in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the Group’s
compliance with the provisions of the UK Corporate Governance
Statement specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit.
Going concern
and longer-
term viability
Other
Code
provisions
— The Directors’ statement with regards
to the appropriateness of adopting the
going concern basis of accounting and any
material uncertainties identified as set out
on page 36; and
— The Directors’ explanation as to their
assessment of the Group’s prospects, the
period this assessment covers and why the
period is appropriate as set out on page 36.
— Directors’ statement on fair, balanced and
understandable as set out on page 40;
— Board’s confirmation that it has carried out
a robust assessment of the emerging and
principal risks as set out on page 40;
— The section of the annual report that
describes the review of effectiveness of risk
management and internal control systems
as set out on pages 64-66; and
— The section describing the work of the audit
committee as set out on page 67.
Group financial statements
2021
Materiality
$10.1m
Basis for
determining materiality
Rationale for the
benchmark applied
1% of Total Assets
Given the asset-based focus of the
Group with its significant producing
and exploration asset base, historic
track record of variable profits and
the key risk areas being balance
sheet-related, we consider it
appropriate to adopt a total assets-
based measure of materiality.
Performance materiality
70%
Basis for determining
performance materiality
Statement of
comprehensive income
testing threshold
Performance materiality was set at
70% due to this being our first-year
as auditors and that the Group
have a number of accounts subject
to high degrees of estimation
and judgement.
We applied a lower testing threshold
of $7.1m based on 7% of loss before
impairment, interest and tax to
the testing of the statement of
comprehensive income to ensure
appropriate coverage of costs
incurred in the year.
Component materiality
We set materiality for each component of the Group based on a
percentage of 90% and 70% of Group materiality dependent on
the size and our assessment of the risk of material misstatement
of that component. For components requiring a statutory audit
in the UK or Jersey, a lower materiality was used to comply with
the statutory audit requirement. Component materiality ranged
from $9.0m to $0.1m. In the audit of each component, we further
applied performance materiality levels of 70% of the component
materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of $0.2m. We also agreed to
report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
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Strategic reportGovernanceFinancial statementsOther information
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is
detailed below. Our procedures included:
— Enquiring of management, and the Audit Committee,
including obtaining and reviewing supporting documentation,
concerning the Group’s policies and procedures relating to:
— Identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances
of non-compliance;
— Detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged
fraud, and
— Obtaining an understanding of the internal controls
established to mitigate risks related to fraud or non-
compliance with laws and regulations.
— Holding discussions with the audit engagement team as to how
and where fraud might occur in the financial statements and
where any potential indicators of fraud may arise in the Group
in order to consider how our audit strategy should reflect our
considerations; and
— Obtaining an understanding of the legal and regulatory
frameworks that the Group operates in, focusing on those
laws and regulations that had a direct effect on the financial
statements or that had a fundamental effect on the operations
of the Group. The key laws and regulations we considered
in this context included the Company law in the countries in
which the Group operates. For example, our considerations
covered laws and regulations in the Kurdistani Region of Iraq,
Somaliland and Morocco, IFRS as adopted by the European
Union, the Companies (Jersey) Law 1991, the LSE Listing Rules,
Bribery Act, Oil and Gas Industry regulation, environmental
compliance, labour regulations, health and safety regulations
and local and international tax legislation.
— We also assessed the susceptibility of the financial statements
to material misstatement, including fraud and considered the
fraud risk areas to be management override of controls and
revenue recognition.
Independent auditor’s report
Other Companies (Jersey) Law 1991 reporting
We have nothing to report in respect of the following matters where
the Companies (Jersey) Law 1991 requires us to report to you if, in
our opinion:
— proper accounting records have not been kept, or proper
returns adequate for our audit have not been received from
branches not visited by us; or
— the financial statements are not in agreement with the
accounting records and returns; or
— we have not received all the information and explanations we
require for our audit.
Other voluntary reporting
Directors’ remuneration (United Kingdom Companies Act 2006)
The 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 Group were a
quoted company.
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with the
requirements of the United Kingdom Companies Act 2006 that
would have applied had the Company been a quoted company
under the provisions of that Act.
Responsibilities of Directors
As explained more fully in the Statement of Directors’
responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the Directors
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.
Auditor’s 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
auditor’s 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.
98
Genel Energy Annual Report 2021
In addition to the above, our procedures to respond to risks
identified included the following:
— Reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with relevant
laws and regulations noted above;
— Enquiring of Management, the Audit Committee, Internal and
External legal counsels of known or suspected instances of
fraud, potential litigation and claims;
— Reading minutes of meetings of those charged with
governance, and reviewing correspondence with local tax and
regulatory authorities;
— Testing the design and implementation of relevant controls
surrounding the financial reporting close process such as
controls over the posting of journals and the consolidation
process and obtained an understanding of the segregation of
duties in these processes;
— Addressing the risk of fraud through management override of
controls by testing the appropriateness of a sample of journal
entries where we considered there to be a higher risk of
potential fraud and other adjustments, assessing whether the
judgements made in making accounting estimates specifically
those in the Key Audit Matters section of the report are
indicative of a potential bias, and evaluating the business
rationale of any significant transactions that are unusual or
outside the normal course of business;
— Testing all the oil sales in the 12-month period to supporting
documentation from delivery through to cash received.
In addition, we performed cut-off testing by verifying the
sales volume to the statement approved by the operators and
officials of the KRG;
— Assessing Management’s judgement on the continued non-
recognition of the override royalty revenue interest (‘ORRI’).
This involved considering the facts and circumstances related
to the recoverability of the balance and timing of cashflows,
whilst being alert to any indication of management bias;
— Applying professional scepticism in our audit procedures
and performing randomised procedures to include a level of
unpredictability; and
— Performing an assessment of the Group’s IT and the wider
control environment and as part of this work we tested the
design and implementation of IT access controls.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk
of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the
less likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions we
have formed.
BDO LLP
Anne Sayers
For and on behalf of BDO LLP
Chartered Accountants
London, UK
14 March 2022
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
Genel Energy Annual Report 2021
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Consolidated statement
of comprehensive income
For the year ended 31 December 2021
Revenue
Production costs
Depreciation and amortisation of oil assets
Gross profit / (loss)
Exploration expense
Impairment / write-off of intangible assets
Impairment of property, plant and equipment
Reversal of impairment / (impairment) of receivables
General and administrative costs
Operating loss
Operating loss is comprised of:
EBITDAX
Depreciation and amortisation
Exploration expense
Impairment / write-off of intangible assets
Impairment of property, plant and equipment
Reversal of impairment / (impairment) of receivables
Finance income
Bond interest expense
Other finance expense
Loss before income tax
Income tax expense
Loss and total comprehensive (expense) / income
Attributable to:
Owners of the parent
(Loss) / earnings per ordinary share
Basic
Diluted
Underlying1
Note
2021
$m
2020
$m
2
3
3
3
334.9
159.7
(45.9)
(172.7)
116.3
(32.7)
(153.3)
(26.3)
-
(2.2)
1,3,8
(403.2)
(44.3)
3,9
3,10
3
3
3
3,8
3,9
3,10
5
5
5
6
7
7
-
(242.0)
24.1
(14.0)
(36.9)
(12.8)
(276.8)
(364.5)
275.1
114.6
(172.8)
(153.7)
-
(2.2)
(403.2)
(44.3)
-
(242.0)
24.1
(36.9)
0.2
(26.3)
(4.9)
2.0
(31.5)
(22.7)
(307.8)
(416.7)
(0.2)
(0.2)
(308.0)
(416.9)
(308.0)
(308.0)
(416.9)
(416.9)
¢
(111.4)
(111.4)
25.8
¢
(152.0)
(152.0)
(34.2)
1 Underlying EPS / (LPS) is loss and total comprehensive income / (expense) adjusted for the add back of impairment / write-off of intangible assets,
impairment of property, plant and equipment and reversal of impairment / (impairment) of receivables divided by weighted average number of
ordinary shares.
100 Genel Energy Annual Report 2021
Consolidated balance sheet
At 31 December 2021
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Trade and other payables
Deferred income
Provisions
Interest bearing loans
Current liabilities
Trade and other payables
Deferred income
Interest bearing loans
Total liabilities
Net assets
Owners of the parent
Share capital
Share premium account
Accumulated losses
Total equity
Note
2021
$m
2020
$m
8
9,19
10
10
11
186.8
352.5
18.4
557.7
145.0
313.7
458.7
699.4
395.7
52.1
1,147.2
48.9
354.5
403.4
1,016.4
1,550.6
12,19
(4.9)
(100.4)
13
14
15
12,19
13
15
(14.0)
(42.6)
(19.7)
(45.9)
(269.8)
(267.7)
(331.3)
(433.7)
(97.5)
(6.5)
-
(104.0)
(99.0)
(7.5)
(80.6)
(187.1)
(435.3)
(620.8)
581.1
929.8
17
43.8
43.8
3,947.5
3,991.9
(3,410.2)
(3,105.9)
581.1
929.8
These consolidated financial statements on pages 100 to 126 were authorised for issue by the Board of Directors on 14 March 2022 and were
signed on its behalf by:
Bill Higgs
Chief Executive Officer
Esa Ikaheimonen
Chief Financial Officer
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Consolidated statement
of changes in equity
For the year ended 31 December 2021
At 1 January 2020
Share
capital
Share
premium
Accumulated
losses
Total
equity
Note
$m
43.8
$m
$m
$m
4,033.4
(2,691.1)
1,386.1
Loss and total comprehensive (expense) / income
-
-
(416.9)
(416.9)
Contributions by and distributions to owners
Share-based payments
Purchase of shares for employee share awards
Dividends provided for or paid1
At 31 December 2020 and 1 January 2021
Loss and total comprehensive (expense) / income
Contributions by and distributions to owners
Share-based payments
Purchase of shares for employee share awards
Dividends provided for or paid1
20
18
20
18
-
-
-
-
-
5.5
(3.4)
5.5
(3.4)
(41.5)
-
(41.5)
43.8
3,991.9
(3,105.9)
929.8
-
-
(308.0)
(308.0)
-
-
-
-
-
5.0
(1.3)
5.0
(1.3)
(44.4)
-
(44.4)
At 31 December 2021
43.8
3,947.5
(3,410.2)
581.1
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).
102 Genel Energy Annual Report 2021
Consolidated cash
flow statement
For the year ended 31 December 2021
Cash flows from operating activities
Loss for the year
Adjustments for:
Net finance expense
Taxation
Depreciation and amortisation
Exploration expense
Impairments, write-off and reversals
Other non-cash items
Changes in working capital:
(Increase) / Decrease in trade receivables
(Increase) / Decrease in other receivables
(Decrease) / 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
Net payments of intangible assets
Net payments of property, plant and equipment
Movement in restricted cash
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to company’s shareholders
Purchase of own shares
Bond refinancing: part-settlement and new issuance
Other
Interest paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Note
2021
$m
2020
$m
5
6
3
3
3
5
18
15
(308.0)
(416.9)
31.0
0.2
52.2
0.2
175.3
153.7
-
379.1
(5.4)
(42.4)
(0.4)
(1.4)
2.2
323.2
(3.7)
15.8
0.6
0.4
228.0
127.7
0.2
(0.1)
2.0
(0.3)
228.1
129.4
(24.1)
(88.5)
-
(24.2)
(85.5)
3.0
(112.6)
(106.7)
(44.4)
(55.3)
(1.3)
(81.0)
(3.3)
(26.3)
(156.3)
(3.4)
28.9
(3.3)
(25.8)
(58.9)
(40.8)
(36.2)
11
11
354.5
313.7
390.7
354.5
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104 Genel Energy Annual Report 2021
Notes to the consolidated
financial statements
1. Summary of significant accounting policies
1.1 Basis of preparation
Genel Energy Plc – registration number: 107897 (the Company) is a public limited company incorporated and domiciled in Jersey with a
listing on the London Stock Exchange. The address of its registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT.
The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards
as adopted by the European Union and interpretations issued by the IFRS Interpretations Committee (together ’IFRS’); are prepared under
the historical cost convention except as where stated; and comply with Company (Jersey) Law 1991. The significant accounting policies are
set out below and have been applied consistently throughout the period.
The Company prepares its financial statements on a historical cost basis, unless accounting standards require an alternate measurement
basis. Where there are assets and liabilities calculated on a different basis, this fact is disclosed either in the relevant accounting policy or in
the notes to the financial statements.
Items included in the financial information of each of the Company’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars to the
nearest million ($ million) 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 106 and 108.
Going concern
The Company regularly evaluates its financial position, cash flow forecasts and its compliance with financial covenants by considering
multiple combinations of oil price, discount rates, production volumes, payments, capital and operational spend scenarios.
The Company has reported cash of $313.7 million, with no debt maturing until the second half of 2025 and significant headroom on both the
equity ratio and minimum liquidity financial covenants. The strength of the balance sheet is expected to be enhanced through 2022.
The Company’s low-cost assets and flexibility on commitment of capital mean that it is resilient to low oil prices, with the only customer, the
KRG, demonstrating its ability to pay consistently in times of financial stress. In addition, specifically for the purposes of the going concern,
management have modelled a downside scenario, recognising the impact of the COVID-19 pandemic, which includes a significant reduction
in oil price from current levels combined with a reduction in production. Even with these downsides there is considered to be sufficient cash
in the business and still more room for flexibility if needed given the nature of the discretionary capex planned.
Longer term, our low-cost, low-carbon assets, located in a region where oil revenues provide a material proportion of funding to the
government and its people means that we are well positioned to address the appropriate challenges and demands that climate change
initiatives are bringing to the sector. Given the footprint and the benefit to society generated, we see our portfolio as being well-positioned
for a future of fewer and better natural resources projects, while the global energy mix continues to require hydrocarbons.
The majority Iraq Federal Supreme Court judgment handed down on 15 February 2022 has had no impact on our operations and does not
impact our assessment of Genel’s going concern status.
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 2021 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.
Consolidation
The consolidated financial statements consolidate the Company and its subsidiaries. These accounting policies have been adopted by
all companies.
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Strategic reportGovernanceFinancial statementsOther information
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 and associates
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.
Farm-in/farm-out
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. Any cash payment or proceeds are presented as an increase or reduction to additions respectively. Net additions to exploration and
appraisal assets include farm out proceeds relating to SL10B13.
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.
Significant judgements
The following are the significant judgements that the directors have made in the process of applying the Company’s accounting policies
and that have the most significant effect on the amounts recognised in the financial statements. The significant judgements also include
recognition of revenue generated by the override royalty which is explained in the context of the significant estimates below.
Bina Bawi / Miran
The Company has recognised an accounting expense of $403 million relating to the required derecognition of the intangible assets
of $489 million and liabilities of $86 million relating to the Bina Bawi and Miran PSCs following Genel’s termination of the PSCs on
10 December 2021. The Bina Bawi and Miran assets and liabilities were part of the pre-production segment as disclosed in note 2.
The impairment expense of $403 million represents the write off of 100% of the asset balances relating to the PSCs. The liabilities which
remain largely reflect the demobilisation.
Write-off of intangible assets
Derecognition of other payables, accruals and provisions
Note
$m
8
(489.3)
12,14
86.1
(403.2)
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
have 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.
Proved 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 having 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 under IAS 36.
106 Genel Energy Annual Report 2021
Notes to the consolidated financial statements Hydrocarbons that are not assessed as reserves are considered to be resources and the related assets 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
Where the Company has updated its estimated reserves and resources any required disclosure of the impact on the financial statements is
provided in the following sections.
Estimation of oil and gas asset values (note 8 and 9)
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 post tax
nominal discount rate of 13% derived from the Company’s weighted average cost of capital (WACC) is used when assessing the impairment
testing of the Company’s oil assets at year-end. Risking factors are also used alongside the discount rate when the Company is assessing
exploration and appraisal assets.
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 ECL, 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 2026 price then inflated at 2% per annum.
$/bbl
Actual / Forecast
HY2021 forecast
Prior year forecast
2021
2022
2023
2024
2025
71
65
55
75
65
55
75
65
60
70
65
60
70
65
60
The 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 Brent oil price average less transportation costs, handling costs and quality adjustments. 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.
Estimation of the recoverable value of deferred receivables (note 10)
At the end of March 2020, in line with other International Oil Companies (IOCs) in Kurdistan, the KRG informed the Company that
payments owed for sales made in the four months from November 2019 to February 2020 would be deferred. For Genel this amounted to
$120.8 million.
For the period ended 30 June 2020, the Company estimated recovery of these deferred amounts, which resulted in an impairment of
$34.9 million.
In December 2020, the KRG announced a reconciliation model for payment of the receivable relating to the unpaid invoices, whereby
for each dollar above a monthly dated Brent average of $50/bbl, 50 cents per paying interest barrel would be paid towards monies
owed. In May 2021, the KRG amended this reconciliation model so that it paid 20 cents per paying interest barrel would be paid towards
monies owed.
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Given the KRG has established a reconciliation model for payments, in order to assess the recoverable amount of deferred receivables at
31 December 2021, the Company has compared the carrying value of deferred receivables with the present value of the estimated future
cash flows based on the KRG’s communications, and using estimations of future oil prices and production scenarios. Under IFRS9, the
Company has used a forward-looking impairment model based on a lifetime expected credit loss (ECL) assessment. The model calculates
the net present value of deferred receivables using the effective interest rate for the period in which the revenue was recognised, which
was 13%. The expected credit loss is the weighted average of these scenarios and is recognised in the income statement. The result of the
Company’s assessment was a reversal of previously recognised impairment in the amount of $24.1 million, principally as an output of clarity
on the mechanism and increase in oil price. The Company has provided the detailed disclosures required by IFRS 9 ECL assessment in
note 10.
Recognition of revenue generated by the override royalty, arising from the RSA
Since 2017 when the RSA was signed, the Company has received override revenue from Tawke sales. At the end of March 2020, the KRG
informed the Company that this override income was suspended for a minimum period up to December 2020. Because management did not
have visibility on how or when this contractual right would be received, it assessed that the criteria for revenue recognition under IFRS15,
specifically on payment terms and collectability, have not been met. The total amount of override revenue for the period between 1 March
2020 to 31 December 2020 that has not been recognised is $37.8 million.
The KRG has now communicated that override income owed will be paid by the reconciliation model explained above. Final position on an
acceptable resolution on this has not yet been reached and with receipt of cash still dependent on oil price and production no revenue will
be recognised until the Company has appropriate confidence in timing of receipt of payment.
Change in estimated cost of the financial commitment made on acquisition of Sarta PSC (note 12)
The estimated cost of the financial commitment made on acquisition of the Sarta PSC has been updated to reflect the estimated cost of
fulfilling that commitment and the success demonstrated in FY2021 of producing and receiving cash flows for the reserves of the licence.
This resulted a $19.7 million decrease in other payables.
Decommissioning provision (note 14)
Decommissioning provision is calculated from a number of inputs such as costs to be incurred in removing production facilities and site
restoration at the end of the producing life of each field and that require varying degrees of estimation. These inputs are 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% (2020: 2%) and
discounted at 4% (2020: 4%). The cash flows relating to the decommissioning and abandonment provisions are expected to occur between
2028 and 2043.
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.
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 2020, adjusted for transitional requirements where necessary, further explained under
revenue and changes in accounting policies headings.
Revenue
Revenue from contracts with customers is earned based on the entitlement mechanism under the terms of the relevant PSC and overriding
royalty income (‘ORRI’), which is earned on 4.5% of gross field revenue from the Tawke licence until July 2022.
Under IFRS 15, entitlement revenue and ORRI 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.
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 entitlement earned on the Sarta and Taq Taq licences, which become 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.
On the Tawke licence, the Company also receives override revenue (‘ORRI’), which is calculated as 4.5% of Tawke PSC field revenue.
The override began in August 2017 and is due to end in July 2022.
The Company’s oil sales are made to the KRG and are valued at a netback price which is explained further in significant accounting
estimates and judgements.
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 has not been able to assess where revenue
should be reported gross of implied income tax paid.
108 Genel Energy Annual Report 2021
Notes to the consolidated financial statements The Company’s revenue from other sources includes a non-cash royalty income which is recognised in the statement of comprehensive
income in a manner consistent with entitlement mechanism.
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.
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.
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Right of use assets / Lease liabilities
The Company recognises 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 uses the following judgements 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 balance sheet
date as short-term leases, and using hindsight in determining the lease term where the contract contains options to extend or terminate
the lease.
Right-of-use assets are depreciated over the lifetime of the related lease contract.
Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing
rate and included within trade and other payables.
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.
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.
The Company’s assessment of impairment model based on expected credit loss is explained below under financial assets.
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.
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.
110
Genel Energy Annual Report 2021
Notes to the consolidated financial statements 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 and
capitalised as part of the cost of the assets.
Impairment
Exploration and evaluation assets
Spend on exploration and evaluation assets is capitalised in accordance with IFRS 6. The carrying amounts of the Company’s exploration
and evaluation assets are reviewed at each reporting date to determine whether there is any indication of impairment under IFRS 6.
Impairment assessment of exploration and evaluation assets is considered in the context of each cash generating unit, which is generally
represented by relevant the licence.
Producing and Development assets
The carrying amounts of the Company’s producing and development 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 2021 for ECLs. Further explanation is provided in significant accounting judgements and estimates.
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.
Equity
Share capital
Amounts subscribed for share capital at nominal value. Ordinary shares are classified as equity.
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is
net of any tax effects and is recognised as a deduction in equity. Repurchased shares are classified as treasury shares and are presented as
a deduction from total equity. When treasury shares are subsequently sold or reissued, the amount received is recognised as an increase in
equity and the resulting surplus or deficit of the transaction is transferred to/from retained earnings.
Share premium
Amounts subscribed for share capital in excess of nominal value.
Accumulated loss
Cumulative net losses recognised in the statement of comprehensive income net of amounts recognised directly in equity.
Dividend
Liability to pay a dividend is recognised based on the declared timetable. A corresponding amount is recognised directly in equity.
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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 equity-settled share-based compensation plans. The expense required in accordance with IFRS2 is recognised in the
statement of comprehensive income over the vesting period of the award. The expense is determined by reference to option pricing models,
principally Monte Carlo and adjusted Black-Scholes models.
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.
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 the KRI PSCs, the Company is not required to pay any cash corporate income taxes as explained in significant accounting
judgements and estimates. Current tax expense is incurred on profits of service 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 2021.
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS19, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform – Phase 2, Amendments to IFRS 16 Leases: Covid-19-related rent concessions beyond 30 June 2021. These standards
are not expected to have a material impact on the Company’s results or financials statement disclosures in the current or future
reporting periods.
The following new accounting standards, amendments to existing standards and interpretations have been issued but are not yet effective:
IFRS 17 Insurance contracts (effective 1 Jan 2023), Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities
as Current or Non-current (1 Jan 2023), Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37
Provisions, Contingent Liabilities and Contingent Assets; Annual Improvements 2018-2020 (1 Jan 2022), Amendments to IAS 1 Presentation
of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (1 Jan 2023), Amendments to IAS 8 Accounting
policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (1 Jan 2023), Amendments to IAS 12 Income Taxes:
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (1 Jan 2023). Nothing has been early adopted, and these
standards are not expected to have a material impact on the Company’s results or financials statement disclosures in the periods they
become effective.
112
Genel Energy Annual Report 2021
Notes to the consolidated financial statements 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), the Taq Taq PSC (Taq Taq) and the Sarta PSC (Sarta) 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 Qara Dagh PSC, the Bina Bawi PSC (derecognised in the year) and the Miran PSC (derecognised in the year), 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.
For the year ended 31 December 2021
Revenue from contracts with customers
Revenue from other sources
Cost of sales
Gross profit
Write-off of intangible asset
Reversal of impairment on receivables
General and administrative costs
Operating profit / (loss)
Operating profit / (loss) is comprised of
EBITDAX
Depreciation and amortisation
Write-off of intangible assets
Reversal of impairment of receivables
Finance income
Bond interest expense
Other finance expense
Profit / (Loss) before income tax
Capital expenditure
Total assets
Total liabilities
Production
Pre-
production
$m
322.9
12.0
(218.6)
116.3
$m
-
-
-
-
-
(403.2)
24.1
-
-
-
Other
$m
-
-
-
-
-
-
Total
$m
322.9
12.0
(218.6)
116.3
(403.2)
24.1
(14.0)
(14.0)
140.4
(403.2)
(14.0)
(276.8)
289.0
(172.7)
-
-
(13.9)
275.1
(0.1)
(172.8)
-
(403.2)
-
(403.2)
24.1
-
-
24.1
-
-
-
-
0.2
0.2
(26.3)
(26.3)
(2.1)
(0.2)
(2.6)
(4.9)
138.3
(403.4)
(42.7)
(307.8)
105.3
644.0
58.4
88.3
-
163.7
284.1
1,016.4
(118.2)
(22.4)
(294.7)
(435.3)
Revenue from contracts with customers includes $101.9 million (2020: $14.7 million) arising from the ORRI, which is explained further in note
1. The ORRI was suspended from March 2020 to December 2020 and consequently no revenue has been recognised relating to this period
as further explained in note 1.
Total assets and liabilities in the other segment are predominantly cash and debt balances.
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Strategic reportGovernanceFinancial statementsOther information
For the year ended 31 December 2020
Revenue from contracts with customers
Revenue from other sources
Cost of sales
Gross loss
Exploration expense
Impairment of intangible asset
Impairment of property, plant and equipment
Impairment of receivables
General and administrative costs
Operating loss
Operating loss is comprised of
EBITDAX
Depreciation and amortisation
Exploration expense
Impairment of intangible assets
Impairment of property, plant and equipment
Impairment of receivables
Finance income
Bond interest expense
Other finance expense
Loss before income tax
Capital expenditure
Total assets
Total liabilities
Pre-
production
$m
Other
$m
Production
$m
155.0
4.7
(186.0)
(26.3)
-
-
-
-
-
(2.2)
(44.3)
(242.0)
(34.9)
-
-
-
-
-
(2.0)
(36.9)
(12.8)
(12.8)
(347.5)
(2.2)
(14.8)
(364.5)
Total
$m
155.0
4.7
(186.0)
(26.3)
(2.2)
(44.3)
(242.0)
114.6
(153.7)
(2.2)
(44.3)
(242.0)
-
-
-
-
-
-
-
-
-
-
(2.0)
(36.9)
2.0
(31.5)
(20.8)
2.0
(31.5)
(22.7)
(65.1)
(416.7)
127.0
(153.3)
-
-
(12.4)
(0.4)
-
(2.2)
(44.3)
(242.0)
(34.9)
-
-
(1.6)
(349.1)
-
-
-
-
-
(0.3)
(2.5)
56.5
672.5
(146.3)
53.2
-
109.7
539.0
339.1
1,550.6
(98.2)
(376.3)
(620.8)
Total assets and liabilities in the other segment are predominantly cash and debt balances.
114
Genel Energy Annual Report 2021
Notes to the consolidated financial statements 3. Operating loss
Operating costs
Trucking costs
Production cost
Depreciation of oil and gas property, plant and equipment
Amortisation of oil and gas intangible assets
Cost of sales
Exploration expense
Impairment / write-off of intangible assets (note 1,8)
Impairment of property, plant and equipment (note 9)
Reversal of impairment / (impairment) of receivables (note 10)
Corporate cash costs
Other operating expenses
Corporate share-based payment expense
Depreciation and amortisation of corporate assets
General and administrative expenses
Trucking costs are not cost-recoverable and relate to the Sarta licence only, where production is in its early stages.
Audit of the Group’s consolidated financial statements
Audit of the Group’s subsidiaries pursuant to legislation
Total audit services
Tax and advisory services
Interim review
Total audit related and non-audit services
All fees paid to the auditor were charged to operating loss in both years.
4. Staff costs and headcount
Wages and salaries
Contractors costs
Social security costs
Share based payments
Average headcount was:
Turkey
KRI
UK
Somaliland
Contractors
2021
$m
2020
$m
(45.5)
(32.6)
(0.4)
(45.9)
(115.1)
(57.6)
(0.1)
(32.7)
(98.7)
(54.6)
(218.6)
(186.0)
-
(403.2)
(2.2)
(44.3)
-
(242.0)
24.1
(36.9)
(12.2)
(0.2)
(1.5)
(0.1)
(14.0)
2021
$m
(0.3)
(0.1)
(0.4)
-
(0.1)
(0.5)
2021
$m
(23.3)
(21.2)
(3.2)
(5.5)
(53.2)
(9.6)
(1.8)
(1.0)
(0.4)
(12.8)
2020
$m
(0.3)
(0.2)
(0.5)
(0.6)
(0.1)
(1.2)
2020
$m
(21.9)
(7.7)
(2.0)
(5.8)
(37.4)
2021
2020
number
number
51
28
33
16
110
238
56
21
33
17
38
165
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5. Finance expense and income
Bond interest
Accelerated cost of bond settlement (note 15)
Other finance expense (non-cash)
Finance expense
Bank interest income
Finance income
Net finance expense
2021
$m
(26.3)
-
(4.9)
(31.2)
0.2
0.2
2020
$m
(31.5)
(19.4)
(3.3)
(54.2)
2.0
2.0
(31.0)
(52.2)
Bond interest payable is the cash interest cost of the Company bond debt. Other finance expense (non-cash) primarily relates to the
discount unwind on the bond and the asset retirement obligation provision.
6. Income tax expense
Current tax expense is incurred on profits of service companies. Under the terms of the KRI PSCs, the Company is not required to pay any
cash corporate income taxes as explained in note 1.
7. Loss per share
Basic
Basic loss per share is calculated by dividing the loss attributable to owners of the parent by the weighted average number of shares in issue
during the period.
Loss attributable to owners of the parent ($m)
Weighted average number of ordinary shares – number 1
Basic loss per share – cents per share
1 Excluding shares held as treasury shares
Diluted
2021
(308.0)
2020
(416.9)
276,408,652
274,202,853
(111.4)
(152.0)
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. Because the Company reported a loss
for the year ended 31 December 2021 and 31 December 2020, the performance shares, restricted shares and share options are anti-dilutive
and therefore diluted LPS is the same as basic LPS:
Loss attributable to owners of the parent ($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 loss per share – cents per share
1 Excluding shares held as treasury shares
2021
(308.0)
2020
(416.9)
276,408,652
274,202,853
-
-
276,408,652
274,202,853
(111.4)
(152.0)
116
Genel Energy Annual Report 2021
Notes to the consolidated financial statements 8. Intangible assets
Cost
At 1 January 2020
Additions
Other
At 31 December 2020 and 1 January 2021
Net additions
Other
Derecognition of accumulated costs (note 1)
Write-off in the year (note 1)
At 31 December 2021
Accumulated amortisation and impairment
At 1 January 2020
Amortisation charge for the year
Impairment
At 31 December 2020 and 1 January 2021
Exploration
and evaluation
assets
$m
Tawke
RSA
$m
Other
assets
$m
1,518.5
425.1
23.2
(0.2)
-
-
1,541.5
425.1
7.3
0.1
-
7.4
0.1
-
-
-
-
-
-
-
425.1
7.5
Total
$m
1,950.9
23.3
(0.2)
1,974.0
33.3
1.3
(1,005.3)
(489.3)
514.0
(163.2)
(54.6)
(44.3)
(262.1)
(6.8)
(0.4)
-
(7.2)
(1,175.3)
(55.0)
(44.3)
(1,274.6)
33.2
1.3
(1,005.3)
(489.3)
81.4
(1,005.3)
-
-
(1,005.3)
Amortisation charge for the year
-
(57.6)
(0.3)
(57.9)
Derecognition of accumulated impairment (note 1)
1,005.3
-
-
1,005.3
At 31 December 2021
Net book value
At 1 January 2020
At 31 December 2020
At 31 December 2021
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
-
(319.7)
(7.5)
(327.2)
513.2
536.2
81.4
261.9
163.0
105.4
Discovered gas and oil, appraisal
Discovered gas and oil, appraisal
Exploration
Exploration / Appraisal
0.5
0.2
-
2021
$m
-
-
10.6
70.8
81.4
27.5
77.9
105.4
775.6
699.4
186.8
2020
$m
360.5
123.2
34.7
17.8
536.2
73.3
89.7
163.0
Genel Energy Annual Report 2021
117
Strategic reportGovernanceFinancial statementsOther information
9. Property, plant and equipment
Cost
At 1 January 2020
Additions
Right-of-use assets (note 19)
Net change in payable
Other1
Transfer to producing assets
At 31 December 2020 and 1 January 2021
Net additions
Right-of-use assets (note 19)
Transfer of right-of-use assets
Other1
At 31 December 2021
Accumulated depreciation and impairment
At 1 January 2020
Depreciation charge for the year
Impairment
At 31 December 2020 and 1 January 2021
Depreciation charge for the year
Transfer
At 31 December 2021
Net book value
At 1 January 2020
At 31 December 2020
At 31 December 2021
Producing
assets
Development
assets
Other
assets
$m
$m
$m
Total
$m
2,876.1
56.5
-
-
2.3
101.4
3,036.3
69.3
-
7.4
4.2
3,117.2
(2,310.7)
(98.7)
(242.0)
(2,651.4)
(115.1)
(2.7)
(2,769.2)
68.0
30.0
-
(5.4)
8.8
(101.4)
-
-
-
-
-
-
-
-
-
-
13.5
2,957.6
1.0
8.1
-
-
-
87.5
8.1
(5.4)
11.1
-
22.6
3,058.9
0.4
1.5
(7.4)
-
69.7
1.5
-
4.2
17.1
3,134.3
(10.0)
(2,320.7)
(1.8)
(100.5)
-
(242.0)
(11.8)
(2,663.2)
-
(3.5)
(118.6)
-
-
2.7
-
(12.6)
(2,781.8)
565.4
384.9
348.0
68.0
-
-
3.5
10.8
4.5
636.9
395.7
352.5
1 Other line includes non-cash asset retirement obligation provision, share-based payment costs and production bonuses.
Sarta asset was transferred from development assets to producing assets following the commencement of production from the field at
December 2020.
Book value
Tawke PSC
Taq Taq PSC
Sarta PSC
Producing assets
Oil production
Oil production
Oil production/development
2021
$m
196.4
37.2
114.4
348.0
2020
$m
228.2
56.2
100.5
384.9
An impairment trigger assessment review was conducted by Management and the Board which concluded that there were no impairment
triggers noted.
118
Genel Energy Annual Report 2021
Notes to the consolidated financial statements 10. Trade and other receivables
Trade receivables – current
Trade receivables – non-current
Other receivables and prepayments
2021
$m
139.7
18.4
5.3
163.4
2020
$m
41.9
52.1
7.0
101.0
From February 2016, payments were received consistently three months in arrears, which was assessed as the operating cycle under
IAS1. From March 2020, payments were received one month in arrears, which was consequently used to assess receivables that were not
due at 31 December 2020. At 31 December 2021, the Company is currently owed three months of payments, but there is no established
operating cycle.
31 December 2020
31 December 2021
Movement on trade receivables in the period
Carrying value at 1 January
Revenue from contracts with customers
Cash proceeds
Offset of payables due to the KRG
Expected credit loss reversal / (provision)
Capacity building payments
Carrying value at 31 December
Of which non-current
Period when sale made
Deferred receivables
Oct-Dec
2021
$m
-
2020
$m
69.0
92.1
55.4
2019
$m
59.9
21.4
Total
nominal
ECL
provision
Trade
receivables
$m
128.9
168.9
$m
(34.9)
(10.8)
2021
$m
94.0
322.9
$m
94.0
158.1
2020
$m
150.2
155.0
(281.3)
(173.4)
(2.9)
24.1
1.3
158.1
18.4
(5.5)
(34.9)
2.6
94.0
52.1
Recovery of the carrying value of the deferred receivables
At the end of March 2020, in line with other International Oil Companies (IOCs) in Kurdistan, the KRG informed the Company that
payments owed for sales made in the four months from November 2019 to February 2020 would be deferred. For Genel this amounted to
$120.8 million. In 2021, the balance owed has reduced by $44.0 million from the opening balance of $120.8 to $76.8 million. This reduction
is the result of nine payments being received in the period (the first two under the initial mechanism announced in December 2020 and
the rest made under the revised mechanism announced in May 2021) and offset of payables due to KRG. The Company expects to recover
the full nominal value of $76.8 million receivables owed from the KRG. Explanation of the assumptions and estimates in assessing the net
present value of the deferred receivables are provided in note 1. Neither the nominal value nor the net present value includes $38 million
owed to the Company for override revenue earned but not received for the period March 2020 to December 2020, which was not
recognised as revenue for the reasons explained in note 1.
Nominal value of deferred receivables
Book value of deferred receivables
Sensitivities
2021
$m
76.8
66.0
The table below shows the sensitivity of the net present value of the deferred receivables to oil price, assuming flat production and payment
is received in line with the mechanism proposed by the KRG in May 2021, which is explained in note 1.
Genel Energy Annual Report 2021
119
Strategic reportGovernanceFinancial statementsOther information
Deferred receivables
($m)
t
n
e
r
B
$65/bbl
$70/bbl
$75/bbl
$80/bbl
$85/bbl
Timing of repayment
2022
35.0
46.7
58.4
70.1
76.8
2023
35.0
30.1
18.4
6.7
-
2024
6.8
-
-
-
-
Total nominal
NPV13.0
76.8
76.8
76.8
76.8
76.8
63.1
64.9
66.0
67.3
68.0
11. Cash and cash equivalents
Cash and cash equivalents
Cash is primarily held on time deposit with major international financial institutions or in US Treasury bills.
12. Trade and other payables
Trade payables
Other payables
Accruals
Non-current
Current
2021
$m
313.7
313.7
2020
$m
354.5
354.5
2021
$m
19.5
14.3
68.6
102.4
4.9
97.5
102.4
2020
$m
16.7
128.1
54.6
199.4
100.4
99.0
199.4
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. Following the Bina Bawi PSC termination, other payables of
$73.7 million related to Bina Bawi PSC have been derecognised which is further explained in note 1. Lease liabilities are included in other
payables, further explanation is provided in note 19.
13. Deferred income
Non-current
Current
14. Provisions
Balance at 1 January
Interest unwind
Additions
Reversals
Balance at 31 December
2021
$m
14.0
6.5
20.5
2021
$m
45.9
1.8
2.2
(7.3)
42.6
2020
$m
19.7
7.5
27.2
2020
$m
37.4
1.5
7.0
-
45.9
Provisions cover expected decommissioning and abandonment costs arising from the Company’s assets which are further explained in note
1. Reversals are related to the termination of the Miran and Bina Bawi PSCs.
120 Genel Energy Annual Report 2021
Notes to the consolidated financial statements 15. Interest bearing loans and net cash
2022 Bond 10.0% (current)
2025 Bond 9.25% (non-current)
Cash
Net cash
1 Jan 2021
Discount
unwind
Buyback
Dividend
paid
Net other
changes
31 Dec 2021
$m
(80.6)
(267.7)
354.5
6.2
$m
(0.4)
(2.1)
-
(2.5)
$m
81.0
-
(81.0)
-
$m
-
-
(44.4)
(44.4)
$m
-
-
84.6
84.6
$m
-
(269.8)
313.7
43.9
At 31 December 2021, the fair value of the $280 million of bonds held by third parties is $287.8 million (2020: $274.4 million).
The bonds maturing in 2025 have two financial covenant maintenance tests:
Financial covenant
Equity ratio (Total equity/Total assets)
Minimum liquidity
Test
> 40%
> $30m
YE 2021
YE 2020
57%
60%
$313.7m
$354.5m
2022 Bond 10.0% (current)
2025 Bond 9.25% (non-current)
Cash
Net cash
1 Jan 2020
Discount
unwind
Buyback /
(Issuance)
Purchase of
own bonds
Net other
changes
31 Dec 2020
$m
(297.9)
-
390.7
92.8
$m
(0.5)
(0.3)
-
(0.8)
$m
221.7
(286.8)
28.9
(36.2)
$m
-
19.4
-
19.4
$m
(3.9)
-
(65.1)
(69.0)
$m
(80.6)
(267.7)
354.5
6.2
In October 2020, the Company issued a new $300 million senior unsecured bond with maturity in October 2025. The new bond has a fixed
coupon of 9.25% per annum. In connection with the issue, the Company repurchased $222.9 million of its existing $300.0 million senior
unsecured bond issue with maturity date in December 2022 at a price of 107 per cent. On 22 December 2020, the Company wrote to the
Trustees confirming that they were exercising the right to call the remaining $77.1 million of the 2022 bond at the call price of 105 per cent.
This settlement completed on 8 January 2021.
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
2021
$m
160.8
313.7
474.5
2020
$m
98.3
354.5
452.8
All trade receivables are owed by the KRG. 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 2021 the Company had
cash and cash equivalents of $313.7 million (2020: $273.5 million, adjusted for settlement of bond debt post-year end).
Oil price risk
The Company’s revenues are calculated from netback price as further explained in note 1, and a $5/bbl change in average Dated Brent would
result in a (loss) / profit before tax change of circa $25 million.
Currency risk
Other than head office costs, substantially all of the Company’s transactions are denominated and/or reported in US dollars. The exposure
to currency risk is therefore immaterial and accordingly no sensitivity analysis has been presented.
Genel Energy Annual Report 2021
121
Strategic reportGovernanceFinancial statementsOther information
Interest rate risk
The Company reported borrowings of $269.8 million (2020: $348.3 million) in the form of a bond maturing in October 2025, with fixed
coupon interest payable of 9.25% on the nominal value of $280.0 million. Although interest is fixed on existing debts, 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 debts of the Company would result in an additional cost of circa $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
$313.7 million (2020: $354.5 million).
Financial instruments
All financial assets and liabilities are measured at amortised cost. Due to their short-term nature, the carrying value of these financial
instruments approximates their fair value. Their carrying values are as follows:
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
Interest bearing loans
17. Share capital
At 1 January 2020 – fully paid1
At 31 December 2020, 1 January 2021 and 31 December 2021 – fully paid1
2021
$m
160.8
313.7
474.5
92.4
269.8
362.2
2020
$m
98.3
354.5
452.8
188.7
348.3
537.0
Total
Ordinary
Shares
280,248,198
280,248,198
1 Ordinary shares include 1,946,084 (2020: 2,577,720) treasury shares. Share capital includes 559,216 (2020: 3,236,109) of trust shares.
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 of 10¢ per share
Interim dividend of (2021: 6¢ per share, 2020: 5¢ per share)
Total dividends provided for or paid
Paid in cash
Movement in payable
Foreign exchange expense on dividend paid
Total dividends provided for or paid
122 Genel Energy Annual Report 2021
2021
$m
27.9
16.5
44.4
44.4
-
-
44.4
2020
$m
28.0
13.5
41.5
55.3
(13.2)
(0.6)
41.5
Notes to the consolidated financial statements 19. Right-of-use assets / Lease liabilities
The Company’s right-of-use assets are related to the Sarta early production facility, offices and car leases are included within property,
plant and equipment.
Cost
At 1 January 2020
Additions
Disposals due to terminations
At 31 December 2020 and 1 January 2021
Additions
At 31 December 2021
Accumulated depreciation
At 1 January 2020
Depreciation charge for the period
At 31 December 2020 and 1 January 2021
Depreciation charge for the period
At 31 December 2021
Net book value
At 1 January 2020
At 31 December 2020
At 31 December 2021
Book value
Offices
Cars
Production facility
Right-of-use assets
Right-of-use
assets
$m
3.6
8.4
(0.3)
11.7
1.5
13.2
(0.9)
(1.3)
(2.2)
(2.9)
(5.1)
2.7
9.5
8.1
2021
2020
$m
3.2
0.2
4.7
8.1
$m
2.4
-
7.1
9.5
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities except Sarta early production facility was 2.5%.
4% was applied for the facility. The lease terms vary from one to five years.
At 1 January
Additions
Disposals due to terminations
Payments of lease liabilities
Interest expense on lease liabilities
At 31 December (note 12)
2021
2020
$m
(9.8)
(1.4)
-
3.3
(0.4)
(8.3)
$m
(3.0)
(8.4)
0.4
1.3
(0.1)
(9.8)
Included within lease liabilities of $8.3 million (2020: $9.8 million) are non-current lease liabilities of $4.9 million (2020: $6.8 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. The contractual maturities of the Company’s lease liabilities are as follows:
31 December 2020
31 December 2021
Less than
1 year
Between
1 -2 years
Between
2 - 5 years
$m
(3.3)
(3.6)
$m
(3.4)
(3.5)
$m
(4.0)
(1.9)
Total
contractual
cash flow
$m
(10.7)
(9.0)
Carrying
Amount
$m
(9.8)
(8.3)
Genel Energy Annual Report 2021
123
Strategic reportGovernanceFinancial statementsOther information
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.
Vesting period
Awards granted from 2017 are
based on relative and absolute
total shareholder return (‘TSR’)
measured against a group of
industry peers over a three
year period.
Awards will vest when the
Remuneration Committee
determine whether the
performance conditions
have been met at the end
of the performance period.
Performance conditions may
or may not apply. For awards
granted to date, there are no
performance conditions.
Performance conditions may
or may not apply. For awards
granted to date, there are no
performance conditions.
Awards typically vest over
three years.
Awards typically vest after three
years. Options are exercisable
until the 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 2021, 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 2021 are set out below;
Outstanding at 1 January 2020
Granted during the year
Dividend equivalents
Forfeited during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 Dec 2020 and 1 Jan 2021
Granted during the year
Dividend equivalents
Forfeited during the year
Lapsed during the year
Exercised during the year
PSP
options
(nil cost)
RSP
options
(nil cost)
Share
option
plan
SOP
weighted
avg.
exercise
price
9,990,853
1,723,544
119,588
810p
4,041,711
598,039
641,752
121,214
(1,569,870)
-
-
-
-
-
-
-
(279,283)
(2,194)
(31,764)
788p
(2,778,121)
(280,347)
-
10,047,042
2,160,256
87,824
-
817p
2,982,524
369,108
872,036
109,992
(601,831)
(20,528)
(1,284,140)
(37,123)
(2,783,799)
(1,136,871)
-
-
-
-
-
-
-
-
-
-
Outstanding at 31 December 2021
9,231,832 1,444,834
87,824
817p
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.
124 Genel Energy Annual Report 2021
Notes to the consolidated financial statements The inputs into the fair value calculation for RSP and PSP awards granted in 2021 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 2021
RSP
06/04/2021
PSP
06/04/2021
RSP
07/09/2021
PSP
07/09/2021
173p
-
173p
1-3
-
173p
-
110p
1-3
-
122p
-
122p
1-3
-
122p
-
64p
1-3
-
0.126%
0.126%
0.182%
0.182%
48.19%
48.19% 45.63% 45.63%
130p
-25%
130p
-25%
130p
7%
130p
7%
The weighted average fair value for RSP awards granted in 2021 is 169p and for PSP awards granted in 2021 is 109p.
The inputs into the fair value calculation for RSP and PSP awards granted in 2020 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 2020
RSP
22/06/2020
PSP
22/06/2020
119p
-
119p
1-3
-
119p
-
107p
3-6
-
0.04%
0.04%
64.50% 64.50%
144p
21%
144p
21%
The weighted average fair value for RSP awards granted in 2020 is 119p and for PSP awards granted in 2020 is 107p.
Total share-based payment charge for the year was $5.5 million (2020: $5.8 million).
21. Capital commitments
Under the terms of its production sharing contracts (‘PSC’s) and joint operating agreements (‘JOA’s), 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
2021
$m
1.0
7.9
7.4
16.3
2020
$m
1.0
7.6
2.5
11.1
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.
23. Events occurring after the reporting period
On 24 February 2022 Russia invaded Ukraine. The Company is monitoring the rapidly evolving sanctions situation particularly with regard
to the supply chain and the movement and trading of KRG oil.
The Company notes the majority Federal Iraq Supreme Court decision handed down on 15 February 2022 which has had no impact on
our operations.
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24. Subsidiaries and joint arrangements
The Company has four joint arrangements in relation to its producing assets Taq Taq, Tawke, Sarta and pre-production asset 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 2021 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 Finance 2 Limited (dissolved 15 February 2022)4
Genel Energy Finance 4 plc3
Genel Energy Gas Company Limited4
Genel Energy Holding Company Limited4
Genel Energy International Limited5
Genel Energy Miran Bina Bawi Limited3
Genel Energy Morocco 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.6
Taq Taq Drilling Company Limited7
Taq Taq Operating Company Limited8
Country of
Incorporation
Cote d'Ivoire
Isle of Man
UK
Jersey
UK
Jersey
Jersey
Anguilla
UK
UK
UK
UK
UK
UK
UK
UK
Turkey
BVI
BVI
Ownership %
(ordinary
shares)
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 12 Castle Street, St Helier, JE2 3RT, Jersey
5 Registered office is PO Box 1338, Maico Building, The Valley, Anguilla
6 Registered office is Gaziosmanpasa Mahallesi Bogaz Sokak No:10 D.21 Cankaya/Ankara Turkey
7 Registered office is PO Box 146, Road Town, Tortola, British Virgin Islands
8 Registered office is 3rd Floor, Geneva Place, Waterfront Drive, PO Box 3175, Road Town, Tortola, Virgin Islands, British
Genel Energy Finance plc was liquidated during the year.
25. Annual report
Copies of the 2021 annual report will be despatched to shareholders in April 2022 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.
126 Genel Energy Annual Report 2021
Notes to the consolidated financial statements Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Report on payments to
governments for the year 2021
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 2021 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 have been made to the Ministry of Natural Resources of the
Kurdistan Regional Government.
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 – 2021
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
1,234,564.87
1,234,564.87
216,930.95
216,930.95
1,451,495.82
1,451,495.82
78.52
13.74
1.25
93.51
78.52
13.74
1.25
93.51
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
128 Genel Energy Annual Report 2021
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Strategic reportGovernanceFinancial statementsOther information
Glossary of technical terms
annual general meeting
BDO LLP
Cash Generating Unit
Companies Act 2006, as amended
Genel Energy plc
Elysion Energy Holding B.V.
environmental, social and governance
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
the Genel Energy group of companies
health, safety and environment
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
lost time incident
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
Task Force on Climate-related Financial Disclosures
total shareholder return
Taq Taq Operating Company Limited
proved reserves
proved plus probable reserves
proved plus probable plus possible reserves
contingent resources
barrel
billion cubic metres per annum
barrels of oil per day
kilometres
thousand cubic feet
millions of barrels
million barrels of oil equivalent
tonnes of CO2 equivalent
‘AGM’
‘BDO’
‘CGU’
‘Companies Act 2006’
‘Company’
‘Elysion’
‘ESG’
‘Focus Investments’
‘FRC’
‘FSMA’
‘FTSE’
‘Genel’
‘GHG’
‘Group’
‘HSE’
‘IFC Performance Standard’
‘IOC’
‘Jersey Companies Law’
‘KRG’
‘KRI’
‘Listing Rules’
‘LTI’
‘NGO’
‘Ordinary Shares’
‘PRM’
‘PSC’
‘PSP’
‘PwC’
‘RSA’
‘RSP’
‘SOP’
‘Standard Listing’
‘TCFD’
‘TSR’
‘TTOPCO’
Certain resources and reserves terms
‘1P’
‘2P’
‘3P’
‘2C’
Units of measurement
‘bbl’
‘bcma’
‘bopd’
‘km’
‘mcf’
‘MMbbls’
‘MMboe’
‘tCO2e’
130 Genel Energy Annual Report 2021
Shareholder information
ShareGift
If you hold a small number of shares and find it uneconomical to sell them, you
may wish to donate your shares to charity free of charge through ShareGift.
ShareGift collects donations of unwanted shares, sells them and donates the
proceeds to UK charities. Further details are available at www.sharegift.org or
by calling +44 (0) 20 7930 3737.
AGM
This year’s AGM will be held at Linklaters, One Silk Street, London EC2Y 8HQ, on
Thursday, 12 May 2022 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 2020 final dividend was paid on 14 June 2021 and an interim
dividend on 10 December 2021. Further information can be found on page 15.
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.
Contacts and Auditors
Registrar
Equiniti (Jersey) Limited
C/O Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Independent auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Registered office
12 Castle Street
St Helier
Jersey
JE2 3RT
London office
Fifth Floor
36 Broadway
Victoria
London
SW1H 0BH
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).
Jersey Company Registration
Number: 107897
Registrars
Our registrars are Equiniti Registrars.
All enquiries relating to the administration of shareholdings should be directed
to Equiniti Registrars, Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA.
Telephone: 0371 384 2893 lines are open Monday – Friday excluding UK Bank
Holidays, 8.30am – 5.30pm (from outside the UK: +44 121 415 7593).
Share price information
The current price of the Company’s shares is available on the Company’s
website at genelenergy.com.
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Image credits
All asset images in this annual report were taken by Genel Energy employees:
Abdulwahed Salih
Andrew Freear
Brian MacLellan
Jangeen Abdulkareem
Mohammed Gohdar
Shalaw Ahmmad Ali
Valentin Voinea
Printed by Park Communications on FSC® certified paper.
Park works to the EMAS standard and its Environmental Management System is certified to ISO 14001.
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Designed and produced by Anna Mackee Design
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Registered Office
12 Castle Street
St Helier
Jersey
JE2 3RT
London Office
Fifth Floor
36 Broadway
Victoria
London
SW1H 0BH
Erbil Office
Empire Business Complex, C3,
Third Floor
Erbil
Iraq
genelenergy.com
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