Malcy’s Blog: Oil price, Genel Energy, i3. And finally…

WTI (Apr)  $81.95 +$1.32, Brent (May) $86.75 +$1.32, Diff -$4.80 n/c.

USNG (Apr) $1.62 -4c, UKNG (Apr) 71.34p -1.02p, TTF (Apr) €27.74 -€0.71.

Oil price

Yesterday’s rise was down to Russia announcing that they were cutting production again in order to meet their Opec commitments, read and repeat…

Also around 150/- b/d is off the market as they still can’t use the export route through Sudan due to the Civil War there. Finally in the USA, retail gasoline averaged $3.523 which is up 7 cents on the week, 27.4c on the month and 10.2c y/y ahead of the Easter holiday. 

Genel Energy

Genel has announced its audited results for the year ended 31 December 2023.

Paul Weir, Chief Executive of Genel, said:

“We have continued the journey that we commenced in 2022 to, firstly, refocus the business on areas where it can be profitable and deliver shareholder value and, secondly, optimise the organisation to create a reshaped and resilient business with the potential for transformational value accretion through several catalysts.

We are a leaner, simplified company that retains clear objectives – generating resilient and sustainable cash flows, diversifying our income through the addition of new assets, and maintaining a strong balance sheet.

We have reduced our workforce and cut costs significantly, exited the Sarta and Qara Dagh licences, worked with our operating partner to develop a new income stream from local sales, and spent considerable time defending our contractual rights under the Bina Bawi and Miran PSCs, where we invested over $1.4 billion before their termination in December 2021.

These actions mean that we are now well positioned in 2024, with a reshaped and resilient business and a strong balance sheet. In the absence of value accretive M&A, we expect to maintain net cash of more than $100 million even if the suspension of exports continues to the end of the year.

Genel has established a sound platform from which to spring forward. The re-opening of the pipeline has the potential to more than double cash generation. We expect to recover the $107 million of overdue receivables, and we have the capacity and intent to acquire new assets. On the Miran and Bina Bawi oil and gas assets arbitration, having now completed the evidential hearing, our views on the merits of our case are unchanged since the arbitration was launched in December 2021.”

There is little one can add at the moment, the company is indeed a slimmer and more efficient beast at the moment and is selling pretty good volumes locally, albeit at lowish prices (by all accounts in the mid-to-low 30’s dollars p/b) and therefore covering G&A.

There is little to suggest that this crude is headed over the border and realising nearer 80 bucks, the company thinks this would be deterred by authorities who are already fighting a long hard fight with Baghdad and politically getting an agreement is more important. 

The company is still looking at potential, significant acquisitions, they need to be big enough to move the needle, ie somewhat over the $50m mark and whilst they are looking at plenty of deals anything of real value is few and far between. In the meantime they concentrate on their arbitration case and preparing for when the pipeline agreement finally happens and volumes and prices rise. Shareholders can rest assured that Genel is soundly financed and has very good long term potential.  


Results summary ($ million unless stated)

  2023 2022
Average Brent oil price ($/bbl) 82 101
Production (bopd, working interest)  12,410  30,150
Revenue  84.8  401.9
EBITDAX1  32.8  349.1
  Depreciation and amortisation  (44.0)  (134.3)
  Exploration expense  (0.1) (1.0)
  Net write-off / impairment of oil and gas assets 1.2 (75.8)
  Net (expected credit loss (‘ECL’)) / reversal of ECL of receivables (9.1) 8.6
Operating (loss) / profit (19.2) 146.6
Cash flow from operating activities 55.1 412.4
Capital expenditure 68.0 143.1
Free cash flow2 (71.0) 234.8
Cash 363.4 494.6
Total debt 248.0 274.0
Net cash3 119.7 228.0
Dividends declared during financial year (¢ per share) 12 18


  1. EBITDAX is operating profit / (loss) adjusted for the add back of depreciation and amortisation, net write-off/impairment of oil and gas assets and net ECL/reversal of ECL receivables
  2. Free cash flow is reconciled on page 11
  3. Reported cash less IFRS debt (page 11)


  • The Iraq-Türkiye pipeline (‘ITP’) has been suspended since March 2023, with talks ongoing but no clear timing on when exports will restart
  • Reshaped business resilient and well positioned to maximise upside
    • Local sales consistent since end of January, with the Tawke PSC currently generating sufficient funding to cover organisational spend
    • Increase to Tawke PSC 2P reserves replacing production in 2023 and retaining 2P reserves of 79 MMbbls net to Genel at the licence
    • Organisational spend outside the cash generative Tawke PSC reduced by 40% to around $3 million per month
    • Reduced workforce by 70% and cut costs significantly across all areas of the business
    • Sarta and Qara Dagh exited, resulting in a write off relating to Sarta of $19 million
    • Somaliland licence extended until 2026
  • Strong balance sheet provides opportunity to acquire and develop new assets
    • Net cash of $120 million at 31 December 2023 ($228 million at 31 December 2022)
    • Total debt of $248 million reduced by $26 million through repurchase of bonds at below 95 cents ($274 million at 31 December 2022)
    • Genel expects to maintain net cash well above $100 million throughout 2024
  • Ongoing focus on being a socially responsible contributor to the global energy mix
    • Zero lost time incidents in 2023, with over four million hours now worked since the last incident
    • Carbon intensity of 14 kgCO2e/bbl for Scope 1 and 2 emissions in 2023 (2022: 17.6 kgCO2e/bbl), below the global oil and gas industry average of 19 kgCO2e/boe
    • Genel continues to invest in the host communities in which we operate, aiming to invest in those areas in which we can make a material difference to society
  • The London-seated international arbitration two-week hearing which included Genel’s claim for substantial compensation from the Kurdistan Regional Government (‘KRG’) following the termination of the Miran and Bina Bawi PSCs finished as scheduled. Parties will make written closing submissions in April, subsequent to which written reply submissions will be made in May. The timing of the result is uncertain, but continues to be expected by the end of 2024

Potential catalysts for significant shareholder value creation in 2024

  • Reopening of the ITP has the potential to materially increase cash generation
  • $107 million overdue from the KRG for oil sales from October 2022 to March 2023 inclusive
  • The Company continues to seek to acquire new assets to increase and diversify our income streams


i3 Energy

i3 Energy today announces that its Notice of General Meeting was posted to Shareholders yesterday. The Circular contains details of a proposed reduction of capital, being undertaken to ensure there are sufficient distributable reserves to facilitate dividend payments in the long term. This Capital Reduction process is not required to facilitate the payment of the next quarterly dividend.

i3 Energy yesterday announced the successful establishment of a reserve-based lending facility. The new Credit Facility marks a significant step in transitioning i3’s capital structure, enhancing the Company’s financial flexibility through improved liquidity and enabling acceleration of its growth and income-based business plan.


  • New Credit Facility: A new CAD 75 million reserve-based senior secured credit facility with a Canadian chartered bank, comprised of a CAD 55 million revolving facility and a CAD 20 million operating loan facility.
  • Settlement of Existing Loan Facility: Repayment of approximately CAD 57 million, representing the outstanding balance of i3 Energy’s existing CAD 75 million loan facility (the “Loan”) with Trafigura Canada Ltd., a subsidiary of Trafigura Pte Ltd (“Trafigura”).
  • Removal of Amortisation Schedule: The new Credit Facility, unlike the Loan, is non-amortising and releases CAD 25 million per annum, which the Company will deploy in its production growth initiatives.
  • Pro Forma Positioning: An estimated year-end 2023 net debt of approximately USD 23 million (CAD 30.5 million) (unaudited), together with forecast cash flow, positions the Company with significant liquidity to contribute to its growth and income strategies.

Majid Shafiq, CEO of i3 Energy plc, commented:

“We are very pleased to have re-financed our existing Loan with a traditional reserve-based lending facility provided by a major Canadian chartered bank with a long history of financing the country’s oil and gas industry. The non-amortising structure of the facility has an immediate benefit in increasing liquidity, which we can deploy in high return growth initiatives. This is a very positive validation of the strength of our underlying portfolio, and we look forward to building our new financial relationship in a mutually beneficial manner as we expand and grow our Canadian operations.

We maintain an extremely positive working relationship with Trafigura, and the expansion of our commercial dealings with a range of sophisticated debt capital market investors attests to the quality of our portfolio, staff, and the success of our development operations in Canada over the last several years.”

 Announcements from i3 have been like London buses, you wait and then three come along. Overall we know that today’s RNS means that the dividend is possible…

The establishment of a CAD 75 million senior secured revolving credit facility with a Canadian chartered bank was utilized to settle the Company’s existing CAD 75 million Loan facility with Trafigura, without prepayment penalty, of which approximately CAD 57 million was outstanding at the time of the repayment. Secured against substantially all the assets and shares of i3 Energy Canada Ltd., the new Credit Facility, comprised of a CAD 55 million revolving facility and a CAD 20 million operating loan facility, has been established for i3 Energy’s wholly owned subsidiary, i3 Energy Canada Ltd. The two-year term of the new Credit Facility is expected to be extended on an annual basis, subject to lender approval.

The Company has initially drawn down approximately CAD 27 million on the new Credit Facility, which was used, along with cash on hand, to repay the Trafigura Loan. The interest rate on the outstanding portion of the revolving facility depends on certain ratios and at inception will be Canadian Prime Rate plus 2.00%, with the option to change to Canadian Overnight Repo Rate plus 3.00% should it be more favourable to do so. The balance of undrawn credit will be available for general corporate purposes, including working capital requirements, acceleration of organic growth from i3’s proven portfolio of development drilling locations, and to fund accretive acquisition opportunities.

The refinanced capital structure provides greater financial flexibility by unlocking the Company’s significant working capital surplus and enhances its free cash flow profile through the elimination of the previously managed three-year, CAD 25 million per annum, straight-line amortization schedule. With this refinancing, the Company now has the ability to accelerate development of its extensive inventory of development locations to enhance shareholder value.

Following the establishment of the new Credit Facility, the Company plans to release its 2024 capital budget in mid-April. The Company will remain disciplined with its conservative approach to debt management, as it looks to balance stable, predictable, growth, along with its ongoing dividend program.

Year-End 2023 and 2024 Quarterly Financial Reporting

As the Company’s Canadian shareholding has now increased beyond 10%, i3 is no longer a designated foreign issuer and therefore is no longer eligible for TSX continuous disclosure exemptions previously granted through National Instrument 71-102. As such, the Company will commence issuing TSX required quarterly financial reports for Q1 2024, including a Management Discussion and Analysis (MD&A). Additionally, as i3 transitions to this reporting schedule, an Annual Information Form (AIF) will be included as part of the Company’s 2023 year-end financial statements which will be issued in mid-April.

i3 also yesterday announced the results of its 2023 year-end reserve report, for its subsidiary i3 Energy Canada Ltd.

i3’s independent reserve report (the “GLJ report”) was prepared by GLJ Ltd. (“GLJ”) in accordance with standards contained in the Canadian Oil and Gas Handbook (COGEH) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”), with an effective date of 31 December 2023. All cash figures presented below are expressed in USD unless otherwise stated.


Successful Execution of 2023 Capital Programme and Strong Performance of the Company’s Production Base Maintained Reserve Volumes Across Key Categories Despite Limited Capital Expenditures Due to Declining Commodity Prices

  • Total Company Interest Total Proved (“1P”) reserves and Total Proved plus Probable (“2P”) reserves were effectively maintained year-over-year at 92.9 million barrels of oil equivalent (“boe”) and 179.9 million boe, respectively.
  • Proved Developed Producing (“PDP”), 1P and 2P reserve volumes all experienced strong positive technical revisions, despite the dramatic reduction in forecasted natural gas and natural gas liquids pricing which impacts approximately 76% of the Company’s produced commodities.

Established Reserves Highlights Strong Underlying Corporate Value

  • The Before-tax Net Present Value (“NPV”) of cash flows attributable to the Company’s reserves, discounted at 10%, has been determined to be USD 303.1 million (CAD 400.9 million), USD 501.3 million (CAD 663.1 million), and USD 1,026.4 million (CAD 1,357.5 million) for its PDP, 1P and 2P reserves, respectively, being indicative of the Company’s robust portfolio of economic development opportunities.
  • Reserves values per share, after adjusting for year-end net debt of approximately USD 23 million, of £0.18 per share (CAD 0.31) (PDP), £0.31 per share (CAD 0.53) (1P) and £0.67 per share (CAD 1.10) (2P), represent significant premiums to the Company’s current share price.

Long Reserve Life and Low Decline Rate Reinforce the Sustainability of the Company’s Total Return Model

  • PDP, 1P and 2P reserve life index of 7.1 years, 12.6 years, and 23.0 years, respectively, show increased reserve life across each of the categories.
  • Following the 2023 capital programme, i3’s top-tier corporate decline rate for 2024 of approximately 15%(10), allied with an extensive portfolio of diversified booked drilling locations, underpins the Company’s growth and income strategy.

Strong Finding, Development and Acquisition (“FD&A”) Metrics and Recycle Ratios

  • Very strong economics demonstrated by low cost and high return projects.
  • Efficient FD&A of $5.67/boe (PDP), $2.32/boe (1P) and $1.76/boe (2P), after including changes in FDC, translate to strong recycle ratios of 2.17x (PDP), 5.31x (1P) and 6.97x (2P).

Large Inventory of Booked Development Locations with Significant Inventory of Future Unbooked Locations

  • Total gross booked locations of 391 (254.4 net) across the Company’s four core areas, for a total Company inventory (booked and unbooked) of greater than 950 gross (550 net) undeveloped locations.
  • Total undeveloped inventory represents greater than 50 years of development drilling based on the Company’s 2023 capital programme.

Majid Shafiq, CEO of i3 Energy plc, commented:

“We are extremely pleased with the results of our 2023 year-end reserves audit which once again confirms the high-quality nature of our assets and speaks to the tenacity and diligence of our employees in Canada, both in the head office and at field level. In 2023 we limited our capital expenditures due to the low commodity price environment and despite that, we have managed to maintain our reserves volumes essentially flat. This is a testament to the quality of our base assets and also our drilling inventory. This quality is characterised by a low decline rate, the substantial scale of our operations and the diversity of the fields and reservoirs we produce from, which allows us to add reserves with good oil field management in addition to drilling operations. Our 2P reserves are valued at over USD 1.0 billion or £0.67 per share, demonstrating the value potential of this portfolio, and the scope for many years of growth from a total shareholder return perspective.”

 This was a good year-end audit of reserves and leaves i3 in a strong position going forward. The share price is still pretty poor and with the new flexibility afforded by the other announcement, investment in Canada should rise. 

And finally…

It’s a big night  for Wales who are playing Poland at Cardiff tonight in the play-off eliminator for the European football cup in the summer.

England play Belgium at Wembley in a ‘friendly’.

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