Genel Energy (LON:GENL) used its January trading update and investor presentation to outline year-end positioning, discuss operational performance at its Tawke PSC asset, and provide high-level guidance on spending priorities and strategic direction for the year ahead. Chief Executive Officer Paul Weir and Chief Financial Officer Luke Clements emphasized balance sheet strength, continued focus on business efficiency, and efforts to diversify cash generation through organic projects and acquisitions.
Balance sheet focus and cash position
Management said the company ended 2025 with net cash of $134 million and available cash of $224 million. Weir stated Genel has more than $200 million of cash to hand and described the balance sheet as a core element of the firm’s “strong and resilient platform.”
Tawke operational update and drilling plans
Weir described 2025 performance at Tawke as “exceptional,” despite operational disruption. The company pointed to a mid-year drone attack that caused a short outage in the third quarter. Excluding that quarter, Weir said production would have been on track to outperform 2024 levels even though no new wells were drilled during the year, crediting “a very effective well management program.”
Genel said gross production rates are now back to around 80,000 barrels per day. Weir also praised the operator’s efforts to reconfigure and repair the processing plant after the drone incident, saying the team reacted quickly and innovatively to safely reestablish optimal production.
Looking ahead, the company said investment has resumed on the drilling front. Weir noted plans to drill a series of wells in 2026 to bolster production and potentially add reserves. He emphasized that the “lion’s share” of investment is supported through the PSC cost recovery mechanism, enabling a quick return on capital.
In the Q&A, management addressed whether increased drilling could require balance sheet funding if exports do not resume. Weir said it was possible in principle, but Clements explained the Tawke PSC has recovered past costs and that new investment is effectively repaid “virtually immediate[ly]”—described as around a month—through cost recovery, with activity funded by cash generation from the asset.
Exports: monitoring interim arrangements before joining
A key theme in the Q&A was the status of oil exports via the pipeline to Turkey and why Genel has not joined interim export arrangements. Weir said the company is not part of the current arrangement and is not privy to all details, relying largely on public disclosures from participants. However, he said “things have started well,” citing disclosed initial payments and stating early indications appear in line with what Genel understood from negotiated outcomes discussed mid-year.
Clements added that, based on disclosures by another operator, the current payments appear to include an allocation component and a “top-up” payment. He said the allocation payment—described as $16 per barrel—appeared to result in about the same price as domestic market sales. Clements said Genel’s internal math suggested that, if it were exporting under the current cash flow quantum, the proceeds would be about the same as domestic sales, though paid in arrears rather than upfront.
Management said the deciding factor for Genel is seeing the “top-up” element executed as intended. Weir said the company wants to see the full agreement “playing out in full” before reconsidering its decision to sell locally. He also said DNO is “extremely important” to Genel’s position on exports because it is the operating partner leading engagement with authorities, and that Genel has made a deliberate decision to remain in “lockstep” with DNO.
On a question about whether a third-party cost assessment being conducted for the export arrangement would include Tawke, Weir said it would not, because Genel is not part of that arrangement.
Portfolio actions, free cash flow drivers, and diversification efforts
Weir said the company’s core business now generates double-digit underlying free cash flow even at local sales pricing of “just over $30 a barrel,” with the potential for cash generation to increase significantly if international exports resume and pricing exposure improves. Clements noted that free cash flow was lower than the prior year due to the absence of certain working capital benefits that helped 2024, particularly offsetting mechanisms related to the Kurdistan Regional Government (KRG).
Weir detailed portfolio rationalization steps taken since late 2022, including the exit from non-core or non-productive positions. He listed:
- Exits from the Sarta-Qara Dagh licenses in the KRI
- Exit from the offshore Lagzira license in Morocco
- Exit from the Odewayne license in Somaliland
- Divestment of the legacy Taq Taq asset
Weir said these changes were completed in 2025 and were achieved “at no incremental cost” and without retaining future liability exposure.
On receivables, Weir said there had been no recent movement on agreeing a payment plan with the KRG, citing political distractions including elections, but emphasized the company continues to pursue the matter. Clements said the company has reduced exposure through offsetting, noting that while the “gross” agreed number was $88 million, about $40 million has been received mostly in 2024 via offsetting, reducing the net figure to around $48 million. He added the company does not expect cash to flow out related to the $40 million offset balance.
For 2026 spending priorities outside Tawke, Weir said the company expects domestic sales income to again more than cover organizational costs and that Genel may spend up to about $20 million on its projects in Oman Block 54 and Somaliland, with some potentially funded from the balance sheet.
In Oman, Weir said work on the legacy Batha West-1 well was completed safely, ahead of time, and under budget in late 2025. Data gathered will be analyzed to inform a forward program that includes 3D seismic and two more wells over the next two and a half years.
In Somaliland, Weir said progress continued toward drilling the Toosan-1 (also referred to in the Q&A as Tucan-1) well, describing it as an exploration prospect defined by modern seismic and analogous to nearby basins. He said the prospect targets prospective resources of around 650 million barrels and noted commercial terms described as “first-mover advantage,” with potential monetization supported by proximity to Berbera Deep Water Port and the Gulf of Aden. In the Q&A, he said the project remains active, with ongoing engineering and procurement, but reiterated that multiple operational, commercial, and geopolitical factors must align before spudding.
On M&A, Weir said 2025 was busy despite suitable opportunities being hard to find, with Genel originating, screening, and bidding on opportunities in a competitive environment. He said the company will maintain discipline and not overpay. In response to questions about geographic scope, Weir said the company is open to new countries, has a natural inclination toward the MENA region due to familiarity, but has also bid on opportunities outside MENA. Clements addressed share-based acquisitions, saying Genel’s focus is value accretion for shareholders and noting that, given the company’s view that its stock is undervalued versus underlying metrics, share deals would need to be clearly accretive to make sense.
About Genel Energy (LON:GENL)
Genel Energy is a socially responsible oil producer with a low-cost and low-carbon production asset in the Kurdistan Region of Iraq and exploration assets in Oman, Morocco and Somaliland and listed on the main market of the London Stock Exchange (LSE: GENL, LEI: 549300IVCJDWC3LR8F94). Genel’s strategy is designed to build a business with resilient and diversified cash flows that delivers sustainable value to shareholders, and with the aim of restarting the payment of a regular dividend.
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