Genel Board Overhaul as Founders Quit

Troubled Iraqi Kurdistan-focused oil and gas producer Genel saw the departure of chairman Tony Hayward and director Nathaniel Rothschild this week.

Its shareholder meeting June 6 saw a non-executive director Tolga Bilgin, CEO of shareholder Bilgin Enerji of Turkey, fail to secure the necessary 50% of the votes to secure his appointment.

For Hayward, former CEO of UK major BP and Glencore's current non-executive chairman, the AGM was a natural point at which to leave, his departure having first been trailed since May 2016; for Rothschild it was personal reasons, a company spokesman told NGW June 7. He retains his shareholding.

Departing Genel chairman Tony Hayward (Photo credit: Glencore)

The company has struggled, as its oil reserves have been determined at a much lower level than originally thought; and the government, while now roughly up to date with its payments – it last paid in February – still owes $500mn for output before September 2015. If it paid, that would have a material impact on the market capitalisation, which is now languishing at £248mn ($320mn), compared with its peak of £3.1bn.

However, apart from damaging the economy of the country, the struggle with Isis/Daesh has not impacted oil production at the company's sites, the spokesperson told NGW: "Production is 'strong and stable' and the biggest problem is the geology."

Another material impact could come from the development of the Miran gas assets, for whom a partner is sought. An obvious choice, the spokesman told NGW June 7, would be state-owned Turkish Energy Company, which is to buy all the gas. But Genel is talking to other companies too. Gas production could begin at 4bn m³/yr and rise to 10bn m³/yr, within three years of the final investment decision. The company hopes to secure an agreement with a partner this year.

Hayward told the Financial Times in an interview that the gas project could be worth $2bn-2.5bn, a figure the company did not entirely disagree with, telling NGW that the gas would bring "an enormous benefit," but qualifying it with assumptions made about farm-outs, discounted cash flow and other unknowns.

Oil analyst Malcolm Graham-Wood commented in his blog that after the AGM: "The board will show significant changes as the current members are dropping like flies. There is little doubt that the new chairman Stephen Whyte will have his work cut out, but it is a good appointment and it is not all finished at Genel yet. Production at Tawke is ok, at Taq Taq it is still pretty grim, but just the faintest signs of the fall being arrested. The development of the gas assets continues and real progress has been made here in recent months, it could still be the pot of gold so many have predicted."

William Powell