3 Numbers That Don’t Lie About Genel Energy PLC’s Results

oilShares in Genel Energy (LSE: GENL) have opened lower this morning, following the publication of the firm’s half-year results, which are something of a mixed bag, in my view.

In this article, I’ve highlighted three key figures for investors from today’s report.

1. 63,000

Whatever problems Genel might have, getting oil and gas out of the ground isn’t one of them.

The company’s average net working interest production rose to 63,000 barrels of oil equivalent per day (boepd) during the first half, a 50% increase on the same period last year.

In addition to rising oil output, Genel’s gas sales are growing, which I see as good news, because the customers — Kurdish power stations, and, soon, the Turkish government — should not cause the kind of payment delays being experienced with exported Kurdish oil.

2. 60%

While Genel says that its operations have not yet been affected by events in Iraq, its cash flow is being affected by the cash-strapped Kurdistan government’s inability to pay its bills.

In 2013, Genel’s operating cash flow (actual cash received) was around 90% of its revenue (booked sales). In other words, Genel’s customers were paying their bills.

So far in 2014, that percentage has fallen to about 60%: the problem is that the Kurdistan government is having problems finding buyers for its exported oil, and even when it does find a buyer, it can’t get hold of the cash, which is currently stuck in a Turkish bank account.

3. $973m

Luckily, Genel has plenty of cash to tide it over. The firm’s current cash balance is $973m, including $500m of recently-issued debt.

This means that even if payments dry up for oil exports, Genel should be able to fund the remainder of this year’s $600m capital expenditure budget, and remain in the black.

However, there’s no disguising the fact that the stakes are rising for Genel investors, and it would be foolish not to expect further share price weakness over the remainder of the year.

Is Genel still a buy?

Genel is one of the best-funded operators in Kurdistan, with great assets, and close links to both Kurdish and Turkish authorities. It also has exciting exploration prospects in Morocco and Angola.

I believe the firm’s shares remain a strong hold, if not a buy, and would certainly rate Genel a clear buy if the share price falls much further — below 900p, for instance.

However, when investing in high-risk countries like Kurdistan and Iraq, it's best not to put all of your eggs in one basket.

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Roland Head has no position in any shares mentioned.