13th Jul 2015 12:58
LONDON (Alliance News) - Genel Energy PLC Monday said Chairman Rodney Chase has resigned from the company and said production in the first-half of the year rose by around 41% year-on-year as it reiterated its full-year production guidance but slashed its capital expenditure budget.
Tony Hayward has been appointed chairman in his stead, with the former president of the company's Turkish and Iraqi operations, Murat Özgül, appointed as chief executive of Genel, replacing Hayward.
"In his role as chairman, Tony will oversee the strategy of the company and the effective running of the board, with Murat focusing on the day-to-day management of Genel, including operational performance and the delivery of Genel's growth projects in the Kurdistan Region of Iraq," said Genel.
Hayward's appointment as chairman, having previously been chief executive, may be considered a bending of London's corporate governance rules. In the London Stock Exchange's corporate governance guidelines, it is advised that the chairman of a company should not previously have been chief executive, though this is not explicitly banned. The rules do acknowledge exceptions to this rule, however, and says that in instances where this move is made, a "strong pool" of independent non-executive directors should populate the company's board.
But Özgül's appointment may also raise some eyebrows, given the fine he was handed back in 2010 for insider trading by the Financial Services Authority. In February of that year, Özgül was fined GBP105,240 by the FSA, the former City regulator, for "engaging in market abuse" after he made a GBP35,240 profit from selling and purchasing shares in Heritage Oil PLC after discovering and discussing positive drilling results before the news was released to the market.
In March 2009, Heritage Oil said it had encountered oil shows during drilling operations in an exploration well at the Miran license in Iraq and said it was to test the well. Days later, Genel purchased a 25% stake in the Miran license from Heritage before the results of those tests were revealed.
At the time of that 25% stake purchase, Özgül was the chief commercial officer of Genel Enrji AS, a Turkish subsidiary of Genel Energy. He took up that role back in 2008. As Genel had purchased a stake in the prospect, Özgül was classed as an "insider" of information regarding the licence.
Before the results of the tests were revealed to the market, Özgül discussed the test results with colleagues and on May 5 he purchased 50,000 shares in Heritage at GBP3.94 per share totalling GBP197,485 which at the time was 1.4 times his annual salary from Genel, according to the FSA.
The FSA ruled Özgül did "not have sufficient liquid funds available to meet the full cost of that purchase". "In the event, you were able to persuade your broker to offset settlement of the sale and purchase transactions," said the FSA report back in 2010.
The following day, on May 6, Özgül then sold the 50,000 shares after Heritage announced the positive results of the tests at the Miran license, for 25% more than he purchased them for to make a tidy profit on the shares purchased within one day.
The FSA concluded that although Özgül had broken trading rules, that he did not intend to conduct market abuse and Özgül agreed to settle the fine early to avoid a larger penalty being imposed.
Özgül's fine was levied prior to Hayward's involvement in the company. Hayward, the former chief executive of BP PLC, who was at the helm of the oil giant at the time of the Gulf of Mexico oil spill in 2010, led a reverse takeover of Genel in 2011 via the Vallares investment vehicle, set up by him, financier Nat Rothschild and banker Julian Metherell.
In a separate statement, Genel said production in the first half of the year is up around 41% year-on-year in an operational update ahead of the company's first-half results which will be released on August 6.
Revenue is estimated to total USD200 million for the first-half of the year and the company reiterated its full-year guidance of USD350 to USD400 million.
"Production has grown rapidly in the first half of the year, increasing 41% year on year, with operational delivery driving record volumes above 100,000 barrels of oil per day net to Genel on peak days," said Hayward.
Net working interest production in the first-half averaged 88,800 barrels of oil per day. In May and June, average net interest working production to Genel reached 95,600 barrels of oil per day and Genel reiterated its full-year production guidance of 90,000 to 100,000 barrels of oil per day.
However, despite the increase in production average oil prices fell 42% year-on-year to USD42 per barrel.
"This (production) increase has been integral in helping the Kurdistan regional government achieve its export goals, and the Kurdistan regional government is firmly committed to ensuring companies are paid in full for their production," he added.
Capital expenditure in the first-half totalled USD90 million, mainly on the Taq Taq and Tawke developments in Iraq. However, Genel slashed its capital expenditure budget for the rest of the year, with full-year capital expenditure to come in at USD150 to USD200 million compared to its previous guidance of USD200 to USD250 million.
Genel said it slashed the budget due to the exiting of exploration commitments and capital discipline on its Iraqi operations, it said.
Genel shares were down 2% to 466.50 pence per share on Monday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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