Genel Energy (LSE:GENL) — Full Year Results

0:01 Good morning, and welcome to the GENEL ENERGY PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to make the following poll. And I'd now like to hand you over to Bill Hicks, CEO. Good morning.

0:31 Good morning, everybody, and welcome to our 2021 results presentation, and thank you for joining us this morning. I know some of you may have seen the presentation we gave on Tuesday, and this follows a very similar format. So we'll we'll run through it, but then open up to questions at the end, and I look forward to to answering those questions for you as we as we get towards the end of the of the presentation. Before we begin, we clearly recognize that we're we're making this presentation in... With the backdrop of the horrible events in Ukraine and the impact that that's had on on oil price in the short term. And like like everybody else, we we hope for a swift resolution to those... That type of horrible situation, but that may not be quite as as as simple as we thought.

1:20 The... So we move on and, obviously, stop on the disclaimer for a second just to just to make sure you have an opportunity to to read that. And then... So with GENEL ENERGY, who... Who's GENEL ENERGY? We are an oil and gas exploration company with our production predominantly within the Kurdistan region of Iraq, and we have a highly cash generative business. We focus on generating cash from these low cost, low carbon oil production, which enables us to implement a very simple strategy. Our our strategy is quite simply is to generate cash, invest in growth, and return excess cash to shareholders, and that will become the the theme of the conversation as we as we talk over the the next few slides.

2:09 It's just making sure that we can give a clear line of sight to the investors on on how we plan to return excess cash to shareholders and how that... Those returns will be delivered through a progressive and sustainable dividend. It's important year for us in 2022. We have a very strong balance sheet today, and we're forecast to generate significantly more free cash flow as the year go... Goes on. And so I think it's a very important for us to put our balance sheet to work in 2022 so we can create that line of sight on the future. If we take a look at our portfolio, we have a balanced portfolio. We have the most diverse production portfolio of any of the KRI operators with about just over 30,000 barrels a day of production coming from three licenses in the Kurdistan region, which are highlighted in in green on the on the map on the right hand side.

3:11 And we have the bulk of our production coming out of the Tulki and Peshkabir fields, which is operated by DNO, where we have a lot of activity planned for for the coming year. We'll talk a little bit about that later. Growing production from from SATA. And and I think the key thing here on this slide is to look at the 100,000,000 barrels of of two p reserves. So it's how do we how do we monetize most efficiently those two p reserves. But also, as you can see in the two c resources, we have more more than a 100,000,000 barrels of two c resources. So the question becomes is how do we efficiently convert those resources to reserves to production so that... To give us this long... Longer view and long time horizon on our on our asset production and cash generation.

4:02 We're also... Should make a a note of the fact we have two assets in Africa, one in Morocco and Somaliland, and we were really pleased at the end of last year to to be joined by CPC, the Taiwanese national oil company, to join us in in our Somaliland exploration act... Activity where they've taken a 49% interest. More on that a little bit later.

4:30 This... Our strategy is supported by what is now a very well well established business model. It's a it's a business model where we we focus very hard on making sure that we're resilient to everything that... All the uncertainties that... Before this this particular sector. So it's it's resilient in times of low oil price, and we thrive in times of high oil price. So it's based around financial discipline. We keep our cost to as low level as we can. We have a rigorous downside mitigation as part of the structure of our thinking, and that enables us to focus on high capital velocity, which is the speed at which we can move from production to cash to reinvestment as being part of the way that generates this engine that supports our strategy of generate cash, invest in growth, and return excess cash to to shareholders.

5:32 You can... I think the the best example of this was the fact that we actually retained our material dividend in 2020 while many around us were reducing or canceling their dividend program. Clearly, as we've seen in the first half of twenty twenty one, we... As the environment improved, we increased our dividend. And again, we'll talk more about our proposal to the AGM coming up in a in a second.

6:01 ESG is a cornerstone of the way we think. It has to be part of of how any management team thinks with response... With a a social response to being in the resources sector. It is fundamental to the way that the management team applies our thinking to the business. And and it and it has been an essential part of the the business model underpinning this idea that as well as generating cash from from from low cost barrels and making sure that those low cost barrels are are also low in carbon and have a low carbon footprint. That's where we have a best in class view of that. But thirdly, and very importantly for for me and the rest of the team, is is the the third third branch of what we call our our business strategy and business model, which is that those barrels are produced in in societies and communities where they can have the mo... A material effect and benefit.

7:05 And so we're very, very pleased of the... With the the efforts that we make in supporting the communities and businesses in in in which we operate. And this year is a milestone year for GENEL. We've been operating in the Kurdistan region of Iraq for twenty years. And so we're we're we're set to commemorate that through our GENEL 20 program, which will... We'll be investing some further activities in the two social activities really through through the year that is... That are linked to the UN sustainable development goals as a as a way of acknowledging acknowledging that very strong relationship we've had with the region for for over two decades.

7:52 The... One of the the key things to to think about in that time is that over that twenty years, we've actually, through the production that we've had at Tauke and at Taq Taq, delivered more than $20,000,000,000 of of revenue to the Kurdistan Regional Government, which, obviously, which has a material benefit for the people of Kurdistan. This is very well explained in our in our sustainability reports, and I encourage you to to take a look at our our already issued reports. And we have an updated report which will come out of the... In in time with the AGM that will will also show some of these benefits that we've had over the lifetime we've been in Kurdistan.

8:42 So let's let's talk about cash generation from '21 to the '21 results. Think about this slide in terms of how do we generate cash and what do we do with it. So if we start with the low cost production, so we average just over under 32,000 barrels a day in line with 2020, so stable production, and we're forecasting the same for '22. The bulk of that production was in the the PLC. And if you look at the the the chart on the top right hand side, you can see that that's fairly simple simple maths, but our low cost operations, we generated $239,000,000 of net income, an OpEx cost of... Cost to produce of around $4 about.

9:35 And so with that, where we end up is a net margin of around $21 a barrel, which gives you that $239,000,000. So very healthy margins on the barrels we produce. And and then once you you you take out around $40,000,000 for corporate and interest costs and about $50,000,000 that we invested in growth. It's delivered a free cash flow of $86,000,000 for 2021 pre dividend payments. That would have been potentially $65,000,000 higher if it not been for the unilateral decision by the Kurdistan Regional Government to to move back from paying on a monthly basis to moving moving to a three monthly payment horizon. So essentially meaning that we got 10 payments in in the year of '21 rather than 12 payments.

10:36 If we take a look at the dividend... So so the the key thing here is what we've mentioned already that it's very important to us that we're able to to support this three pronged strategy of of fast cash generation, investment in growth, and returning money to shareholders through the dividend program. So the dividend has to therefore be predictable in our eyes. It has to be predictable and progressive. And we remain very committed to this material and progressive dividend. And you can see the chart on the right hand side shows the dividend returns since we implemented our dividend policy in 2018.

11:25 So we've... We... Again, you can see in 2020 that as oil price dip, we still maintain that dividend through 2020. And as we've moved into '21, we've increased that dividend such that we're making a recommendation to the AGM to increase the the final dividend for twenty twenty twenty one by another 20% increase. And we believe that that policy and that approach gives, again, gives us very clear line of sight to the investors so that you can place value on on our policy. And it's important that we can be ready to return further capital to the shareholders in an environment if if there is excess available beyond what we see as being important to deliver the growth that's required to make that dividend sustainable.

12:22 So if we take a look at the the the balance sheet, how the balance sheet will change in 2022. So this is the... It's the same story, really. You can see again on the chart on the right hand side, what we've tried to do is give you a few different margin scenarios dependent on oil price. Pick your own oil price, and and you can fairly easily work out what the revenue for the company is going to be because our our production will be... Remain solid and and quite flat. And so in the example we used is with the pre the Ukraine situation of $90 a barrel, you can see that in that world that we're we're generating on the order of $250,000,000 of free cash flow post our investments of around $50,000,000 in Sarta and and, again, managing the corporate costs and the, the interest payments.

13:27 So $250,000,000 of free cash flow, this year alone, obviously, is is is very close to half of our market cap. So the the company is in a in a very strong position, assuming those cash payments come through at those prices to use that capital to, again, you know, sort of provide this clear line of sight to to investors as to how we can deliver on a progressive and sustained dividend going forwards. If you roll that into the balance sheet, again, this story starts in 2018 where we where we took a look at the strategy and the business model for the company and set set the strategy and business model that we see today.

14:13 And I think, again, the chart on the right hand side is a very good indication of of that strategy at work. It's really... It's a cumulative investment in growth and dividends since 2018 and essentially shows that we've been investing about a $100,000,000 a year in both... In in growth and and returns to to shareholders over that period of time while continuing to to maintain our production and and and I think give this line of sight. We have a strong balance sheet today, so cash of 314,000,000, net cash of 44,000,000 at the end of twenty one with, as I mentioned, you know, the potential to have $250,000,000 of additional free cash flow added to the balance sheet before the end of this year.

15:08 So as I mentioned earlier, clearly, 2022 is a very important year for us to make sure that we put that balance sheet to work in the most efficient way possible to deliver the most returns, the highest returns for investors. That that is a significant amount of opportunity. The first priority, of course, is how do we most efficiently convert those 100,000,000 barrels of reserves to production and cash. And then secondly, it's investment in the the growth element of our organic portfolio, which is investing in SATA to convert as many of those barrels of contingent resources to reserves of production as we can. So that, again, that gives longevity to our production horizon and cash generation horizon.

16:00 And then I think we need to we need to start looking at the opportunities to add additional income streams to the portfolio as we as we go through the next twelve to eighteen months as a way of diversifying and managing downside risk and as a way of, again, providing clear line of sight on how we can sustain our dividend and materially grow our dividend over the course of time.

16:28 So if we move on and take a look at the operations from a 2022 point of view, you know, again... Once again, it's a it's a focus on maximizing our low cost, high margin production and where there'll be significant increase in activity at the the Tauke Field. I'll let DNO as the operator describe the details of that activity, but, they expect, the production at the Tauquet Field will be circa a 105,000 barrels of oil a day again in 2022. So more than a 100,000 barrels a day again, I think, for the fourth, fifth year in a row. So that that the activity there has been...

17:13 Is is a real focus for this year to successfully deliver those those barrels. At TACTAG, we we continue to look to the opportunity to invest in an asset that can... Continues to make money, particularly at these oil prices, but it is about managing the decline in life of of that asset. And with a big focus on SATA, and we'll touch on SATA again in a second, but a big focus on SATA. Now that we have SATA 1D on production, we're producing around 7,000 barrels a day there today, and the opportunity to to clearly look at the results of the SATA appraisal program, SATA five and SATA six, which are important to replace the declines in the rest of the portfolio with high margin barrels.

18:05 So if we take a look at take a look at SATA because it is important for us. It's a very important year again because it defines this ability of SATA to act as a as a replacement of of declining production in the in the more mature assets. And the starting point is that it's clearly clearly, Sarta has not delivered in its first year of production everything that we may have expected or hoped for, but it certainly has done its job. It is a pilot program for for... Primarily to manage the uncertainty that we had in the reservoir performance. And remarkably, you know, in its first year, it's actually been a profitable pilot. You know, we we averaged 6,400 barrels a day in 2021, so 2,500,000 barrels produced and actually made $30,000,000 of net revenue and a $15,000,000 operating profit.

19:05 That, I can assure you, is a good outcome for a pilot program. And and we've learned a lot. We've learned a lot about these reservoirs. We've learned a lot about how to optimize the production from from the field, and we have much more to learn with the with the appraisal program. But we've added in the smart completion from one d. It's worth remembering that three and and two were both exploration wells, so they had very little, so we say sophistication in their controls, around the subsurface. So we've essentially... They've been... Think of them as being rather on and off. But with with SARTA one d, we've got a... The different reservoir intervals of which there are a number. Different reservoir intervals are isolated, and we can actually choose which intervals we we choose to produce at any one time.

20:01 So the,

20:04 what is also clear in the performance of of the field is that we have seen that some of these reservoirs are producing water, from from, first production of oil. And that is, again, quite typical of the reservoir, these fractured... Quite complex fractured carbonate reservoirs in in, Kurdistan, and it is, something that that is is expected over the the course of, of life for these assets. So what we've had to do is react to that, that react to that early water, and we've done that by establishing SARTA 4, which was another exploration well that was, in the field, and converting that to a water injection well. We'll have that water injection well up and running in the next... In the coming weeks, and that will provide us with the ability to increase the, throughput at the, the early production facility. So increase the amount of water that we can take, and therefore increase the amount of oil that we can put through the facility by

21:04 having that water disposal available to us. So, again, it demonstrates this ability to be very reactive and and agile to to deal with the circumstances that we have in front of us. So if we move away from the postage stamp of of one d to the bigger picture, and, again, I've already mentioned that how important it is to us that we get the results from the SARTA 5 and SARTA 6 result wells. As you can see from the map at the bottom, SARTA 5 is a step out towards the towards the East, about 15 kilometers away from the pilot area and Sarta 6, about eight kilometers to the west. So these are these are material step outs, and they have uncertainty associated with them.

21:57 Clearly, in the success case, both of these worlds would materially add to the reserves or the conversion of contingent resources to reserves as we only have reserves on our ledger today associated with the pilot area. But but we need to find out because we need to find out how much capital that, we need to invest in the development of SATA in '23 and '24. So these these two, wells are are material information points, data gathering points for us to be able to to demonstrate what the capacity of the field will be in the future...

22:45 In the coming future years for for GENEL. Sarta five world tests should be starting in in in April. So, hopefully, we'll have some results in May from that. And and Sarta six, we expect the results in the early part of q three. And that will enable us to be able to then forecast what what we can do with this field in the years to come.

23:14 If we take a quick look at Somaliland, as mentioned earlier, we're very pleased to to farm out Somaliland. This is... In many ways, you know, we've always seen this asset as a bit of a, you know, as a bit of a potential crown jewel in the portfolio or lost

23:36 sort of gem in many ways. We've been in Somaliland for ten years. We talk about being in in Kurdistan for for twenty years. We've been in Somaliland for ten years. We... And we've we've stuck at it because it's a very exciting... Has a lot of potential. We're talking about basins that are analogous to the prolific Yemen basins, which are just across the way on the other side of the Gulf Bay. And and they are underexplored basins. So when we move ahead to drill our exploration well and the spot exploration well in the latter part of towards the end of twenty twenty three. This will be the first exploration drill... Well drilled in Smalinand for over thirty years. The the good news is is that the the indications are that there is a basin and and an interesting basin to be explored in and around our block SLB 1013.

24:34 And, also, the fact actually that that license encompasses the whole of the basin. So in a success case, we have all of the prospectivity within the, within the license. Very pleased to have, CPC join us in that, in that license. And and I think importantly, you know, when we started out on the journey with with Somaliland and certainly over the last four or five years, we've always said that that we wouldn't take on the risk of drilling a wild can exploration in Somaliland by ourselves. And we've been through this transaction with bringing

25:13 in the partner, being able to move to a place where essentially our first well on the license will be paid for through the through the deal of bringing CPC into into the business. So exciting to see that happen. It's a good time for Somaliland. I mean, we had the management tree... Management team trip there a few weeks ago, and I was incredibly impressed with the work going on at Burborough Port, where there's about $430,000,000 of investment going in with DP World as the primary investor to develop that port, which is a deep water port.

25:51 Clearly, one of the differences from from Kurdistan. But there are many parallels as well. This very much fits our model of those three things, which is that in a success case, these will be low cost barrels. In a success case, these will be low carbon barrels. And in a success case, these barrels will clearly have a material impact on the on the communities and the society in which they're produced. So it very much fits our our portfolio thinking. So finishing up, wrapping up and and taking a look at the the outlook for for 2022. Again, just to reemphasize this, it's clearly about a significant amount of free cash flow generation depending on your view of oil price. And and as we've indicated in the chart here, for about every $10 of of of increase in in oil price, we generate about $50,000,000 of incremental free cash flow.

26:55 So it's it's taking our balance sheet, putting our balance sheet to work with the first priority of being to convert our reserves to production to cash and leveraging that reserves ledger as effectively as possible. Then it's about demonstrating what our... What can our organic portfolio deliver, what can SATA do, converting SATA contingent resources to reserves to to give line of sight on the sustainability of our our production within KRI.

27:30 And I think it's then about looking at diversifying, using our balance sheet and our balance sheet strengths to diversify our cash flow to give us a lower risk profile, but also to give a line of sight on the fact that we can truly deliver on promise to pay a material and progressive dividend for years to come. So with that, I think I'll wrap up there, and we'll go back and start the Q and A. Bill, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on top right corner of your screen. But just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

28:23 Andrew, as you can see, we've received a number of questions and thank you to all the investors for submitting those. Could I just hand over to you to run through the q and a and then I'll pick up from you at the end?

28:44 Andrew, I think you might be on mute. I have this little worry that we may have just lost him. Here, I can probably probably pick up on a couple of the questions. I'll start with a couple of questions that were submitted earlier, and then we'll... Hopefully, we'll get Andrew back, and we'll take a look at the the other questions that's submitted. So there's sort of one question that was submitted earlier, which was, why are we not paying off all debt given the interest costs and the lack of, meaningful plan around the use of cash on the books? Some clarity required on planned use of cash on the books.

29:31 So, obviously, you know, debt, debt actually provides, optionality in itself. And, one has to remember that if you go back to, 2020 when oil prices was trading at around... Guess, it was probably around $40.45 dollars a barrel when we refinanced the bond. And one of the reasons we did that was to be able to to provide line of sight that we... That the balance sheet was gonna remain strong through this period of time in 2021 and 2022 where we were gonna be making a material investment in Sarta and Caridad to know what that was going to do. Obviously, in a situation where oil prices has performed substantially above maybe many of our... And all of our expectations, that that gives us additional optionality and and the ability to to look at our capital allocation priorities.

30:26 But I think it's worth saying that, you know, we we still see that the the best way that we can deliver returns to shareholders is by by being able to invest in high high high returning cash flows and and then being able to to deliver those cash flows through through the process of of being able to demonstrate that we've got a progressive and material dividend program. Now we continue to look at... We'll continue to look at the options to optimize the cost of debt, obviously, through the through the program. But also, it's worthwhile remembering that that, you know, again, good example last year is the the Kurdistan Regional Government's decision to delay delay their payments from one month to to

31:20 three months actually resulted in $65,000,000 not appearing on our balance sheet when we were forecasting it to be. So there's a... There is a need to maintain a a minimum liquidity level within this company to to manage the... Some of these external risks.

31:40 Thank you, Bill. I think I think my microphone is now back and working. It it is. Yeah. Can't can't beat some good technical problems. I I think... Thank you for that answer. I think in in relation to others, one of the question actually that's come in on the side that's quite worth taking at the same time, and that is about, do you have a view on the amount of cash you'd look to leave on your balance sheet? Is there a minimum liquidity position that you would have? Yeah. There is. We do have a minimum liquidity. We we talk about, you know... And it's and it's a very, again, very interesting and topical question at the moment because our minimum liquidity that we've looked at historically has been around a $100,150,000,000 dollars. But one can make an argument, obviously, clearly in a situation where oil price is is high and assuming that we continue to move on with our our oil production and that we continue to get paid, that actually the minimum liquidity level for the business could be could be reduced.

32:34 And we're thinking about that in the context of of of the use of capital, and, you know, I think it's... The situation today, one of the ways... The the way I think about the business today is that we clearly are gonna generate a lot of cash over the coming year.

32:55 But we have this remaining uncertainty about what what SATA is going to require in terms of capital allocation. The results of the appraisal program will tell us a lot about the capital allocation from SATA. But in a world when we talk about getting towards the half year results, which is something we alluded to in our announcement, When we talk about getting to the half year results, I think we'll have more certainty on what the capital allocation requirements are for SATA, a little bit more certainty on the on

33:26 how much cash we've we've added to the portfolio. And then I and I think an outlook on on what we're doing with the, you know, with the capital allocation priorities going forward so we can take a look at take a look at the possibility of returning more cash to to shareholders. And our preferred way of doing that would be through through a dividend program. But if we do, we want to make that dividend something that is value... You know, can be easily valued by the... By market and investors. We don't have a strong... We we don't particularly like special dividends that come without a a set of criteria that show when those special dividends might be delivered again in the future so that so that everybody can take a position on that value.

34:16 And then continuing on with that question, I think there's... Someone has asked if there's a risk if we would do a large acquisition where the net debt of GENEL will significantly increase. I think to add a second part to that question, where would you be looking at acquisitions? Would you look to expand outside of the Kurdistan region of Iraq?

34:32 Yeah. Clearly, you know, I've made a made a point at the beginning of this presentation that one of the things that we pride ourselves on in our business model is that we we spend a lot of time thinking about downside risk and mitigating downside risk. And that it... That will be no different in our approach to to looking at

34:53 new opportunities. And and a a good example of that in many ways is actually SATA. You know, we have to think back to 2018. In 2018, we, as a management team, were already looking at the fact that the overriding royalty payments would be ending in 2022, and that that would have an impact on the on the cash generation of the business. And that was one of the reasons why we we generated the... Or took the SATA opportunity forwards and was successful with that with that opportunity. And SATA is a is a great great example of what you can do to manage downside risk and generate upside potential in in higher oil price because we didn't invest... We didn't spend any money to get into that asset.

35:39 The pilot, although, you know, underperforming compared to our expected outcome, is profitable at the oil prices that we had in 2021. And incremental barrels are highly profitable. And so in fact, actually, once we get up to around 15,000 barrels a day of of production of Sarta,

36:00 that the the net margin is actually more than equivalent to a net margin at today, barrel net margin at even with the on top. So it provides that replacement. So that's the way that we think. And I think, you know, so from a downside mitigation point of view, we will not we will not do anything that puts the balance sheet at risk because we clearly recognize that at the moment, this is a high priced environment, and and therefore, we've got to be able to protect ourselves if if the circumstances are different. In terms of diversification, again, I I come back to the three... The point... The the the the three points I keep making, which is that we focus on assets that are low cost, are low in carbon, and and can have a material impact on the societies and and communities in which they're produced as being our sort of screening criteria for what we look at. So that tells you a lot about the types of assets

36:59 that we would we would look at to diversify the risk of of our cash generation, which is which is an option. But it does not mean that we are solely focused on on outside of KRI either. We still see that there's a lot of opportunity in in KRI. So so it's about actually... As much as anything, it's about making sure that we can demonstrate through m and a that we have... We've given that clear line of sight on this progressive dividend and the growth that the investors should be able to see. And then speaking of the Cairo, I've had a couple of questions as you'd expect on the politics, something that we get a lot from investors all the time. A couple of points. First is about payments and the payments becoming increasingly delayed. And then what's your view of payments going forward? Then there's been other questions as well about how do you view security at the moment in our bill, especially following the recent rockets that landed from Iran.

37:54 Yeah. So payments is is clearly one of the, you know, one of the challenges for for all of us who particularly those of us who are public companies, and we we have to tell the world whether... When we've been paid or not. And and it's it's an area of frustration for myself and and and

38:16 other, you know, CEOs of other companies, IOCs invested in Kurdistan is the... Is really to understand why we're unable to be paid sort of uniformly and within a short period of time. That... There is... There was... We expected to to have some increased delays to payments associated with the recovery of the economy because that's what the Kurdistan Regional Government had indicated back in 2020 when we... When they established the the receivable for nonpayment for the end of nineteen and and the first two months of twenty twenty. They they promised to pay us within a month, and then with an expectation as things recovered, we would get those delays.

39:01 But it's also it's also it's also a a source of frustration that payments are now actually being distributed over quite long time periods. And

39:13 I think it's worth saying at this point is it's clear from clear from the history of Kurdistan, and it's clear from the recent behavior of the Kurdistan Regional Government that they clearly are motivated to pay the IOCs. That that is without doubt. They've been very, very good at paying us. It it feels more like a process thing. So, you know, in in any one month one month, you could be the first to be paid, or the next month, you could be the last to be paid. We, GENEL, have five invoices that we submit because of our fields and and the the the overriding royalty and receivable. And as it happens, we were... This last month, one of our invoices was the first to be paid, and the and the fifth of the invoices was the last to be paid. So we we...

40:04 Was... Anyway, so we announced our payments last. But in fact, actually, over that period, we were getting getting all the payments. So we continue to talk to the government about the need for greater transparency over the payment process and and giving us a clear line of sight on on making that more efficient. So... But they are committed to paying. That's clear. In terms of in terms of security, obviously,

40:28 the recent incident, you know, is is very disappointing, really, I suppose, and and shocking to to see and hear about. It was clearly rockets that were directed from Iran, And they... And it it was the anniversary of the death of Soleimani, who'd been killed in in Iraq on on... It was the anniversary of his death. So so I think it was very political in his motivation. And there was no... Nobody injured or or killed in the in the rocket attack. So it feels like it was quite orchestrated from from that point of view. We see from a from a security

41:17 risk risk perspective that our operations today are as as safe as they as they have been in many ways that we continue to to work to to deliver deliver our production and and feel very, you know, very much... I feel as if we're getting a lot of support from the Kurdistan Regional Government on the security of our operations. It's probably worth mentioning just in terms of security of our operations, we never had a single day of downtime even during the ISIS crisis in Iraqi Kurdistan. That was clearly a more present threat than Iranian rockets, which are very targeted on individual areas. So we don't see any reason for investors to be concerned about the security of our assets at this time. Yeah. Yeah. Another question people have had while sticking on the Kurdistan theme and politics is about the recent Iraqi Supreme Court judgment on February 15. Should investors be concerned about that at all?

42:13 Yeah. And so if you look at the supreme court judgment, it was a it was a majority judgment of the supreme court. Unsurprisingly, the the folk that voted against it on the Supreme Court were they... Were Kurdish representatives, and and it's clearly politically motivated. It is a... It was it was motivated by

42:41 the... To try to disrupt the formation of government in Baghdad. And... But I would... What I would say is even though it was clearly clearly motivated politically and related to Baghdad, What it has done is probably got some unintended consequences. And the the real unintended consequences, of course, is that that judgment sits there, and it requires the government to the government to do something about it. Now the Kurdistan regional government's reaction was fantastic. You know, they came out within twenty four hours and basically

43:14 restated their position that as far as they're concerned, the the production and export of crude from from Kherson region of Iraq is constitutional and meets the constitution. Therefore, they fully support their investors on the IOCs that are producing and the contracts remain in full force. So that is exactly what we'd expect to see from Kurdistan Regional Government. It's business as usual. We've been paid by them since that judgment. And and... But what it... I think, hopefully, you know, the the glass half full perspective is that with the formation of the government in Baghdad, I think what it will require is it will require Baghdad and Erbil to get together and and resolve once and for all this legality in the eyes of in the eyes of Baghdad. And and hopefully, we can get that resolved in line with our expectations, which is that there's nobody in Baghdad that particularly wants to change the situation.

44:20 There's nobody in Baghdad that wants to to think about taking on Kurdistan Regional Government's debt. And so that our our contracts will be will be... Continue to be honored as we move forward. It is so I think that is the that is the real opportunity, but we do see it as unfortunate noise in the backdrop of of what is... Has been a strong and and as as I mentioned, you know, strong and endearing relationship that we've had with the Kurdistan region for twenty years now. You, Bill. Changing tag back on to the geology, which is always dangerous when you have a geologist answering questions, so I'll ask you to keep it short. In terms of SARTA 1D, how effective is the smart completion going to be in terms of keeping water out

45:04 of the production stream? Will there still be a need for water disposal at Sarta? There will be. So the smart... What the smart completions enable us to do is to be able to isolate zones that are behaving differently from each other. And the the way to to think about it is at the moment, what we've done is we've opened up a zone that is essentially a 100% oil, and we're flowing that at the moment

45:30 while we get... While we finish off the preparation for the water injection at. But but managing water is a big part of the oil and gas business that, you know, with with oil comes water. Obviously, with the bigger... Biggest reservoirs, that that water tends to come later. And with smaller smaller fractured reservoirs like the ones that we're dealing with in Kurdistan, some of that sometimes that water even come quickly as we know all too well the... With the story on tactic. But it does... It is about managing fluid, and it's about managing water. Once we have that system in place to to, you know, manage the water in terms of the surface system of processing and disposal, then it enables us to bring more intervals on production and and therefore increase the production rates in the pilot.

46:21 Thank you, Bill. And moving on to Caridad. I think in relation to Caridad, I'd urge everyone to have a look at our annual results presentation given a couple of days ago where Mike Adams, our technical director, gave a quite detailed explanation as to what happened with the drill. But one of the questions we've had is when are you expecting to decide on the next steps for Qara Dagh? Yeah. Yes. And and Andrew is probably right. So it's it's what makes it even worse is when you have a CEO. So there's a structural geologist, and I can get into moving hands and drawing the diagrams, which you don't want me to do. So I'll avoid that other than to to replay back the... Obviously, it's extremely disappointing not to be able to get to our reservoir objectives on Karadakh to... I'll replay back the the analogy that we've used quite often now, which is that next time that you're in a a warm sandy beach, go to the go to the where the sand is dry and and try and dig a hole, and you'll see that the sand will fall in on you. And that was essentially what's happening to us at the at the crest of this structure way above where the reservoir was, but a very complex situation where we were unable to to be able to move forwards with the the drilling of that well with that trajectory. So we needed to abandon it. Clearly, having not got to the target, it means that the opportunity is maintained. And we have a... We have the ability within the contract to seek two one year extensions.

47:42 And the first of those one year extensions is essentially to prepare ourselves and our and our partner, Chevron, to be able to make a decision on on on how and where and when we will be ready to go go ahead and drill another Caradag well. So by by the time we get towards the end of this year, we need to be in a position to have decided on a strategy forwards for

48:11 that so that we can then execute that strategy within the... You know, towards the end of the following year. So I think that's how it will play out. And and there's work to be done because we obviously... We've learned something from from the well, and we need to we need to be able to drill with confidence if we drill again to to be able to know that we can get to the reservoir and test it. We've had a question about potential sanctions and the impact of those. The the question as worded is the Cheyhan pipeline is owned by Rosneft. Is this an issue regarding sanctions going forward? I'd just like to make one slight clarification there. The pipeline as soon as it gets the Turkish border to Chehane is run by Botash. Now Rosneft has a... They have a stake in the pipeline on the Kurdish side of the border only. So just with that little clarification given, Bill, do you... Are you concerned about potential sanctions on Rosneft?

49:01 Yes. So we made made a comment in in... I think we had a comment in the results statement. We certainly got a comment coming out in the annual report around the fact that, clearly, we're we're paying attention to how the sanctions landscape is unfolding. And there are probably... Yeah. There are two areas that really... That we're we're looking at. Those two areas are the transportation of crude oil because... For two reasons. One is the, as Andrew said, the ownership of the Kurdistan part of the pipeline, but also the potential for crude to be sold to Russian entities in JHAM. So that's that's sort of both of those need to be... We need to pay attention to. In terms of the pipeline, that... There's actually an easy an easy

49:51 route around that from a... From an operations point of view, which is to actually take take the crude to fishable and by truck and actually put it into the line directly. So that can be managed, but I suspect also that there are... There may be other things that the Kurdistan Regional Government are thinking about in terms of how to remove that potential risk. So we think that's going to be manageable. The other area is supply chain. And, we we, you know, we continue to to focus on supply chain as being, you know, one of the one of the crystal areas for making sure that we're... There are no breaches of of any sanctions. There is... There are bits of equipment that some of the operators do pick up from from Russia, so it's an area of focus.

50:42 I would just like to say to people, if they have any more questions, then please do fire away because we'll... We have time to take a couple more. We have six people, Bill, effectively asking the same question in different ways, and that's asking in relation to Bina Bawi, Miran, and the arbitration that is set set to be ongoing. It might just be worth you judging from the questions that people are asking in terms of do you know who might develop it?

51:01 Are they dead in the water? Do you think that will use another company? I think it might just be worth you clarifying the status of Binnabawi and Miron in relation to GENEL and what the board decision was last December. There's very, very little that we can say, I'm afraid, in in relation to an ongoing legal issue. But it's worth, I think, Bill, just clarifying what the current status of the PSCs is and and what the arbitration and and why the arbitration was launched. Yeah. Yeah. Obviously, you know, it was a very tough decision at the end of last year for the board to make,

51:33 but it it become very clear since 2019 that, you know, if you go back to 2019, we'd we'd reached agreement with the Kurdistan Regional Government on on how we and they were agreed on how we were gonna progress in the Bawi and Mirat. And but following that from that point, it became very clear that the Kurdistan Regional Government did not want to continue with those agreements and certainly clearly wanted its gas assets back and wanted to terminate the the the twenty seventeen PSCs. Now, obviously, it's for them to to tell tell us all and to tell you why why they why they wanted that, but it's clear that that's what what they wanted. So they were not performing their obligations under those contracts, and and, ultimately, it led to the point where we had to make the call that they were in repudiation of those contracts, and we put them into reputatory breach. The act of doing that under English law start...

52:38 Started an arbitration process, but also the act of doing that under English law meant that we had handed the assets back to the Kurdistan Regional Government. And it's for them to decide how... And what they do with those assets going forward. It's not for us.

52:56 The arbitration process will be what it will be. As Andrew said, we can't say very much about about that other than to to, of course, mention again that the fact that we had already invested $1,400,000,000 in those assets in good faith and on the expectation that we'd be able to progress them is clearly forms part of our our view of of needing to protect shareholder interests in a circumstance where they were not willing to perform their obligations under those contracts. I think in the broader scheme, you'd have to look at the bigger picture. Clearly, the situation in Ukraine and and the the desire of of Europe to stop using hydrocarbons from from Russia opens up the opportunity for Northern Iraq gas and and other gas sources around the, you know, around the European arena to to

53:58 to be developed and and produced and and exported to to Europe. So we'll see we'll see what happens on the way forward. I think before I pass on the last question, Bill, I'd just like to say these have been a very good questions submitted, submitted, but do please feel free to reach out directly to us as a company if you ever do have any of these questions. I think that, you know, I'd I'd much rather people contact the company rather than speculate on certain things. You can find my email address and my phone number are both available on our website. I'm very happy to answer any questions that you may have. Our smallest shareholder is as important as our largest to me, and you will get the same responses, and you will get the same response time as well. So please do feel free to send us these questions at any time. So the final question that we have, it's going back to the acquisitions point. People have been asking for a bit of a clarification, and I think it's a valuable one to give, which is how actively are you looking for acquisitions? Could you give us a feel about how big they could be? And also, there's been a question about how you would look to fund them.

54:52 Yeah. So we were... We're always looking and... Which I think is is part of the job, really. We we should... The way we think about it, again, coming back to the business model, we talk about financial discipline and downside risk mitigation. And the way that the way that you manage finance financial discipline and downside risk mitigation in the world of acquisitions is to be able to look for what's the discontinuity that that that you are convicted about, that means that you can you can make a a good return on the investment in the range of environments and the cycles that we see within the the oil and gas business. And it is looking for those discontinuities.

55:40 And those discontinuities can take on different forms at different times through the cycle.

55:48 And so we're... And they can be different geographically as well. So so so we're always looking for for that angle, for that discontinuity, for that that little something that that gives us the opportunity to to create superior returns to to shareholders. That in in the current world... I mean, in many ways, one of the biggest discontinuities that sits today is that it is clear that in in the current world that oil and gas companies are materially discounted to to the future value of Brent. And we can debate why that is, but it... But broadly, you know, some of the reasons why it

56:35 could be is that you've got uncertainty. You know, only the near term cash flows are being valued. Those near term cash flows are being valued because of concerns about the energy transition, concerns about carbon pricing, concerns about windfall profit taxes coming into the sector, and just concerns about overall economic development and the possibility of actually having a downturn in oil prices in the future. So... But that could create a discontinuity for for the use of equity as a a trading currency. So we try to look at keeping all of our options open, whether that be cash directly, obviously, with a strong cash balance sheet we have. But in the current current price environment, you you can't buy as well as you could have done a year or so ago with... Directly with cash. We look at equity as being a possible currency to use, and we look at debt as being a currency to use. But in the balance, it has to fit within one, those those three those three criteria principles, low cost, low carbon, and making a difference.

57:42 And then and then secondly, it has to be able to to meet our criteria of being able to manage the downside risk and and meet our financial requirements. But, ultimately, again, I think it's important, and we'll we'll wrap up, but it's important that it... It's about generating line of sight to investors of the fact that this company can go to the canal can deliver a material and sustainable dividend going forward. So one that you can place value on. Thank you very much, Bill. There are no further questions unless you have any closing remarks. And then Great. Thanks everybody for making the time to listen today. In many ways, I'm much... I still would much prefer to be doing this in a in a room and and having a chat and seeing faces and and being able to talk to you all. But but do... Again, I appreciate the time that that you put into listening to to us tell tell you about GENEL today.

58:35 And and, you know, again, it is about, for us, a a material... A year of material cash generation and the opportunity for using that cash to continue our journey of delivering returns to shareholders, but more importantly, developing the portfolio so that you can see that we can do that for many years to come. Bill, Andrew, thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few minutes to complete, I'm sure you'll be greatly valued by the company. On behalf of the management team of GENEL ENERGY PLC, we'd like to thank you for attending today's presentation. Good morning to you all.