REG - Energean PLC - 2023 Full Year Results
21/03/2024 07:00
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RNS Number : 7119H Energean PLC 21 March 2024
Energean plc
("Energean" or the "Company")
2023 Full Year Results
London, 21 March 2024 - Energean plc (LSE: ENOG, TASE: אנאג) is pleased to
announce its audited full-year results for the year ended 31 December 2023
("FY 2023").
Mathios Rigas, Chief Executive Officer of Energean, commented:
"2023 was another transformational year for Energean. We grew production by
200% year-on-year, reached c. 150 kboed peak production and brought NEA/NI
online on time and on budget. Despite the challenging geopolitical
environment, all of our operations were managed without any impact from the
regional conflicts. Since the year-end, the start-up of Karish North and the
second gas export riser mean we are now able to utilise the FPSO's maximum gas
capacity and our production guidance illustrates the next step towards our
near-term target of 200 kboed.
"We also had a strong year financially, generating full-year revenues of
$1,420 million and adjusted EBITDAX of $931 million. As a result, we have
reduced our leverage ratio by 50% to 3x. These strong results coupled with our
long-term gas contracting strategy, which underpins our dividend policy, has
seen us return approximately $370 million 1 (210 US$ cents/share) to
shareholders since our inaugural payment in Q3 2022.
"We are looking beyond our near-term targets and this is reflected in our new
Morocco country entry project and in Italy, where we see a new era for the
industry following the annulment 2 of prohibitive laws, thereby releasing
previously restricted acreage. We also remain alert to opportunities that fit
our key business drivers (paying a reliable dividend, deleveraging, growth,
and our commitment to Net Zero 3 ) and can move quickly to take advantage when
they arise.
"On sustainability, we are contributing to Israel's transition away from coal
as well as its, and the wider region's, energy security - helping to meet the
growing demand for natural gas. We further reduced our emissions intensity and
have now delivered an 86% reduction from our original 2019 baseline. We are
also now rated AAA by MSCI 4 . Our Prinos Carbon Storage ("CS") project will
add another pillar and help decarbonise heavy industries in Southeast Europe,
in line with our commitment during COP28.
"Our ongoing success is due to the entire global team working together during
what has been a challenging period in the East Mediterranean. I am proud to
lead such a diverse and dedicated team and as we continue to grow, our
commitment to integrity, corporate sustainability and operational excellence
will remain."
Operational Highlights
· First major step-up in production achieved.
o FY23 production of 123 kboed (83% gas), up 200% year-on-year, primarily as
a result of a full-year of production from Karish (Israel).
o Day-to-day production in Israel continues to be unimpacted by the ongoing
geopolitical developments.
o FPSO uptime (excluding planned shutdowns) was 99% 5 in Q4 2023.
· Key growth projects complete.
o The NEA/NI development (Egypt) was completed in December 2023.
o Karish North and the second gas export riser were brought online in
February 2024.
· Confirmed year-end 2P reserves of 1,115 mmboe, stable
year-on-year before produced 2023 volumes and demonstrating material reserves
life of around 19 years 6 .
· New gas contract signed in Israel in February 2024.
o Adds circa $2 billion of revenues over the life of the contract and is in
line with the Group's strategy to secure long-term reliable cash flows.
· Morocco country entry through farm-in to Chariot Limited's Lixus
and Rissana licences, expected to complete imminently.
Financial Highlights
· Strong financial performance, underpinned by a full-year of
production from Karish.
o 2023 sales and other revenues of $1,420 million, representing a 93%
increase (2022: $737 million).
o 2023 adjusted EBITDAX of $931 million, representing a 121% increase (2022:
$422 million).
o 2023 profit after tax of $185 million was a significant improvement versus
the previous year (2022: $17 million). Profit after tax was negatively
impacted by $100 million of deferred tax charges.
o Group cash as of 31 December 2023 was $372 million (including restricted
amounts of $26 million) and total liquidity was $607 million.
o 50% reduction in Group leverage to 3x (FY 2022: 6x).
o No immediate debt maturities following Energean Israel's bond refinancing
in July 2023.
· Q4 2023 dividend of 30 US$cents/share declared on 22 February
2024 and scheduled to be paid on 29 March 2024 7 .
o A total of 210 US$cents/share (approximately $370 million), including the
Q4 2023 dividend(1), returned to shareholders since maiden payments began.
· 42% year-on-year reduction in carbon emissions intensity to 9.3
kgCO2e/boe and an 86% reduction since our original baseline year 8 (#_ftn8) ,
ahead of schedule with the Group's stated 2019-2025 target.
Outlook
· 2024 production guidance reiterated at 155 - 175 kboed
(production to end-February was 144 kboed; 82% gas), a significant step up
towards Energean's near-term targets.
Production is second-half weighted due to:
o Peak gas demand during the summer driving maximum gas output from the
Energean Power FPSO.
o Cassiopea (Italy) first gas expected in the summer of 2024.
· Focused on backfilling the Energean Power FPSO and meeting
growing gas demand in Israel and the region.
o The start of the Katlan (Israel) development will extend the gas
production plateau and has potential for exports.
· New areas of development underway to grow the current business
base:
o Morocco farm-in expected to complete imminently; appraisal well planned
for Q3 2024.
o In March 2024, a court ruling annulled the PITESAI plan and its associated
acts in Italy. This ruling 9 (#_ftn9) has unlocked previously restricted
acreage in addition to those already identified and highlighted by Energean.
· Quarterly dividend payments intended to be declared in line with
previously communicated dividend policy.
· Evaluating all opportunities, with continued capital discipline,
that are dividend accretive, meet Energean's deleveraging targets, achieve its
growth objectives and contribute to the Group's Net Zero target.
Financial Summary
FY 2023 FY 2022 % Change
Average working interest production Kboed 123 41 200%
Sales and other revenue $ million 1,420 737 93%
Cash Cost of Production $/boe 11 19 (42%)
Adjusted EBITDAX 10 $ million 931 422 121%
Profit after tax $ million 185 17 988%
Cash flow from operating activities $ million 656 272 141%
Development and production expenditure $ million 487 729 (33%)
Exploration expenditure $ million 57 140 (59%)
Decommissioning expenditure $ million 19 9 111%
31 December 2023 31 December 2022 % Change
Cash (including restricted amounts) $ million 372 503 (26%)
Net Debt $ million 2,849 2,518 13%
Leverage (Net Debt / Adjusted EBITDAX) $ million 3x 6x 50%
Conference Call
A webcast will be held today at 08:30 GMT / 10:30 Israel Time.
Webcast: https://brrmedia.news/ENOG_FY23 (https://brrmedia.news/ENOG_FY23)
Dial-In: +44 (0) 33 0551 0200
Dial-in (Israel only): +972 (0) 3 376 1321
Confirmation code (if prompted): Energean Results
The presentation slides will be made available on the website shortly at
www.energean.com (http://www.energean.com)
Enquiries
For capital markets: ir@energean.com (mailto:ir@energean.com)
Kyrah McKenzie, Investor Relations Manager
Tel: +44 7921 210
862
For media: pblewer@energean.com (mailto:pblewer@energean.com)
Paddy Blewer, Head of Corporate Communications
Tel: +44 7765 250 857
Operational Review
HSE
In 2023, Energean delivered another strong HSE record with zero serious
injuries recorded. The Loss Time Injury Frequency ("LTIF") Rate was 0.47
(2022: 0.47) and the Total Recordable Incident Rate ("TRIR") was 1.09 (2022:
1.18).
Reserves
Full year 2023 working interest 2P reserves were 1,115 mmboe, stable
year-on-year before produced 2023 volumes (47 mmboe) and demonstrating
material reserves life of around 19 years 11 .
2023 2P Reserves 2022 2P Reserves % Increase / (Decrease)
mmboe (% gas) mmboe (% gas)
Israel 926 (89%) 940 (89%) (1%)
Egypt 70 (88%) 99 (87%) (29%)
Rest of Portfolio 119 (37%) 122 (38%) (2%)
Total 1,115 (83%) 1,161 (84%) (4%)
Production and Operational Update
In 2023, total production was 123 kboed (83% gas), up 200% year-on-year
primarily due to the first full year of production from Karish (Israel).
2023 2022 % Increase / (Decrease)
kboed (% gas) kboed (% gas)
Israel 87 (89%) 5 (92%) 1640%
Egypt 25 (86%) 25 (87%) 0%
Rest of portfolio 11 (34%) 11 (40%) 0%
Total 123 (83%) 41 (75%) 200%
2024 is expected to be another significant year for Energean and a material
step towards its near-term targets. Group production in the first two-months
of 2024 was 144 kboed (82% gas). Energean reiterates the guidance range of 155
- 175 kboed that was communicated in its January trading update, which is
weighted towards the second half of the year owing to:
· Peak gas demand during summer in Israel driving maximum gas
output from the Energean Power FPSO.
· The start-up of Cassiopea (Italy), expected in the summer of
2024.
Israel
Production
In the 12-months to 31 December 2023, working interest production from Israel
averaged 87 kboed (89% gas). Commercial sales for the majority of Energean's
long-term gas sale and purchase agreements ("GSPAs") began in April 2023.
Slower than expected commissioning and ramp-up resulted in lower than expected
production from Karish in the first half of the year. This was overcome, with
production successfully increased in Q3 to the FPSO's initial capacity and
uptime increased in Q4 to 99% 12 (#_ftn12) . Peak gas demand from Energean's
GSPAs was seen during Q3. Day-to-day production was and continues to be
unimpacted as a result of the ongoing geopolitical developments.
Development
In February 2024, Energean brought Karish North and the second gas export
riser online, enabling utilisation of the FPSO's maximum gas capacity. The
Energean Power FPSO now has four production wells in operation, increasing
well stock redundancy and flexibility to meet the demand requirements of
Energean's gas buyers. The second oil train will be installed as soon as
feasible.
Energean intends to develop the Katlan/Tanin area in a phased development.
Phase 1 includes the Athena, Zeus, Hera and Apollo accumulations, for which
the field development plan was approved by the Israeli Government in December
2023. Energean expects to take FID upon finalisation of EPC terms, which are
currently under negotiation. Energean expects to be granted a 30-year
production licence for Katlan from the Israeli Government in the upcoming
weeks.
Technip
In February 2024, Energean signed an amendment to the terms of the deferred
payment agreement with Technip and reduced the amount to $210 million. This
remaining amount will be paid in twelve equal quarterly instalments starting
in March 2024. Deferred amounts do not incur any interest. Energean's 2024
capital expenditure guidance does not include this amount, as it was accrued
in 2022.
Eshkol Energies Generation LTD
Also in February 2024, Energean Israel Limited signed a new GSPA with Eshkol
Energies Generation LTD, majority owned by Dalia Energy Companies Ltd, for the
supply of an initial quantity of 0.6 bcm/yr 13 , rising to 1 bcm/yr from 2032
onwards. The GSPA is for a term of approximately 15 years, for a total
contract quantity of up to approximately 12 bcm and represents circa $2
billion in revenues over the life of the contract. The contract contains
provisions regarding floor and ceiling pricing, take or pay and price
indexation (not Brent-price linked). The GSPA has been signed at levels that
are in line with the other large, long-term contracts within Energean's
portfolio.
Egypt
Production
In the 12-months to 31 December 2023, working interest production from Egypt
averaged 25 kboed (86% gas). The NEA/NI project achieved first gas from the
first well (NEA#6) in March 2023, followed by the second (NEA#5) in July 2023
and then the remaining two in December 2023 (PY#1 and NI#1). The latter three
wells are performing in line with expectations at 73 mmscfd (15 kboed). The
NEA#6 well ceased production in November 2023 owing to higher than expected
rates of decline. There is no read-across of this on the other wells. The
project was delivered in line with budget.
An infill well (NAQPII#2) on the Abu Qir field was brought online in January
2024 and is producing in line with expectations at 19 mmscfd (4 kboed).
Energean continues to evaluate other infill and exploration opportunities
around its Abu Qir hub.
Production Licences
Conversations are ongoing with the Egyptian authorities to merge Energean's
three production concessions (Abu Qir, NEA and NI) into a single concession.
The resultant single concession is expected to streamline the fiscal
conditions and extend the economic life of the fields.
Receivables
At 31 December 2023, net receivables (after provision for bad and doubtful
debts) in Egypt were $147 million (31 December 2022: $117 million), of which
$114 million (31 December 2022: $41 million) was classified as overdue.
Exploration
The Orion X1 exploration well (W.I. 19% 14 ) reached the target reservoir in
March 2024. Preliminary results indicate that the well contains no commercial
hydrocarbons. Further appraisal activity is contingent upon the completion of
post-drilling well analysis.
Rest of the Portfolio
In the 12-months to 31 December 2023, working interest production from the
rest of the portfolio averaged 11 kboed (34% gas).
Italy
First gas from Cassiopea (W.I. 40% non-operator) is expected in the summer of
2024. Pipelaying activities were completed in July 2023 and drilling
operations began in November 2023, with the first production well completed in
January 2024. The remaining offshore and onshore work is progressing well.
In March 2024, the administrative court of Lazio (Rome) ruled in favour on a
claim presented by Energean and several other operators, annulling the PITESAI
plan and its applicable acts 15 . The annulment of these restrictive laws
allows potential new activities either on exploration acreages or in existing
leases in addition to those highlighted by Energean in its January 2024
Trading and Operations Update. Energean welcomes this decision and looks
forward to progressing certain concessions.
Greece
Energean's Prinos CS project in Greece has been included by the European
Commission as a Project of Common Interest. Non-binding memoranda of
understandings have been signed for c.5 million tonnes per annum of storage
and EUR 150 million of grants have been committed. Energean is advancing the
conversion of its exploration licence into a storage permit.
Morocco Country Entry
As announced on 7 December 2023, Energean has agreed to farm-in to Chariot
Limited's ("Chariot", AIM:CHAR) Rissana (W.I. 37.5% operator) and Lixus (W.I.
45% operator) licences, the latter includes the 18 bcm (gross) 16 Anchois gas
development.
Completion of the Morocco farm-in is expected imminently, upon receipt of the
remaining approvals from the Moroccan Authorities.
Energean (Operator) and Chariot plan to drill an appraisal well on the Anchois
field in Q3 2024.
Financing
Energean ended 2023 with total available liquidity of $607 million (2022: $720
million), including undrawn amounts of $235 million under its Revolving Credit
Facilities.
In July 2023, Energean issued $750 million of senior secured notes via its
subsidiary Energean Israel Finance Ltd ("Energean Israel"), maturing in 2033
with a coupon of 8.5%. The funds were used primarily to repay Energean
Israel's $625 million notes due in March 2024. As a result of this
refinancing, Energean's weighted average life of debt has been extended to
more than six years and results in a weighted average interest rate of
6.13%.
In October 2023, the $350 million unsecured plc term loan facility was amended
and restated to a $120 million unsecured RCF.
Energean remains committed to its near-term target of reducing leverage, which
is defined as net debt / adjusted EBITDAX to around 1.5x.
Kerogen Investments No. 38 Limited
In 2023, the remaining two consideration items to Kerogen Investments No. 38
Limited ("Kerogen") as part of the 2020 acquisition of the 30% minority
interest in Energean Israel Limited were completed:
· In July 2023, the remaining deferred consideration ($150 million)
to Kerogen was paid.
· In December 2023, Kerogen exercised its option to convert its $50
million of convertible loan notes into shares. This resulted in the issuance
of 4,422,013 new ordinary shares ("New Ordinary Shares") at a conversion price
of GBP 8.3843 per New Ordinary Share. The New Ordinary Shares were admitted to
trading on the London and Tel Aviv Stock Exchanges on 20 December 2023.
ESG and Climate Change
Energean is committed to net zero scope 1 and 2 emissions by 2050 and
industry-leading disclosure of its energy transition intentions.
Emissions Reduction
The Group recorded full-year 2023 scope 1 and 2 emissions intensity of 9.3
kgCO2/boe, a 42% year-on-year reduction, and a 86% reduction versus its
original baseline year (2019), ahead of schedule for its stated 2019-2025
target. Energean expects to further reduce emissions intensity to 8.5 - 9.0
kgCO2/boe in 2024.
Energean maintains a rolling carbon intensity reduction plan and currently
targets to halve its emissions intensity to 4.0-6.0 kgCO2/boe by 2035.
Energean intends to reach this medium-term target through the advancement of
CCS, electrification and natural-based solution projects.
ESG Ratings and Affirmations
In 2023, Energean has continued to receive strong ESG ratings across the major
ESG rating agencies. This includes:
· Carbon Disclosure Project ("CDP") Climate Change rating
maintained at A- and aligned with all recommended pillars of the Task Force on
Climate Related Financial Disclosure ("TCFD").
· MSCI rating increased to AAA from AA, in the top 17% of our
sector.
· Sustainalytics ranked in the top 18% of our sector, up from the
top 30% in 2022.
· Maala Index rating maintained at platinum.
· Constituent of the FTSE4Good Index Series.
2024 Guidance
FY 2024
Production
Israel (kboed) 115-130
Egypt (kboed) 29-31
Rest of portfolio (kboed) 11-14
Total production (kboed) 155-175
Consolidated net debt ($ million) 2,800-2,900
Cash Cost of Production (operating costs plus royalties)
Israel ($ million) 350-380
Egypt ($ million) 30-40
Rest of portfolio ($ million) 190-210
Total Cash Cost of Production ($ million) 570-630
Development and production capital expenditure
Israel ($ million) 150-200
Egypt ($ million) 30-50
Rest of portfolio ($ million) 220-250 17
Total development & production capital expenditure ($ million) 400-500
Exploration expenditure ($ million) 130-170 18
Decommissioning expenditure ($ million) 40-50
Financial Review
Financial results summary
2023 2022 Change from 2022
Average working interest production (kboepd) 123 41 200%
Revenue ($m) 1,420 737 93%
Cash cost of production ($m) 475 284 67%
Cost of production ($/boe) 11 19 (42%)
Administrative & selling expenses ($m) 43 46 (7%)
Operating profit ($m) 598 232 158%
Adjusted EBITDAX ($m) 931 422 121%
Profit after tax ($m) 185 17 988%
Cash flow from operating activities ($m) 656 272 141%
Capital expenditure ($m) 544 870 (37%)
Cash capital expenditure ($m) 541 460 18%
Net debt ($m) 2,849 2,518 13%
Leverage Ratio (Net debt/ Adjusted EBITDAX) 3 6 (50%)
Revenue, production, and commodity prices
Revenue increased by $683 million to $1,420 million (2022: $737 million)
primarily as a result of the successful ramp-up of production from our
flagship Karish gas field, located offshore Northern Israel, to its initial
capacity. The Group's realised weighted average oil and gas price for the year
was $72/bbl (2022: $81/bbl) and $5/mcf (2022: $11/mcf), respectively.
Working interest production averaged 123 kboepd in 2023 (2022: 41 kboepd),
with the Karish gas field accounting for over 70% of total output.
Adjusted EBITDAX amounted to $931 million (2022: $422 million). The increase
from 2022 was due to higher revenue complimented by slightly lower operating
costs.
Cash cost of production
During the period, our cash unit production costs decreased to $11 per barrel
of oil equivalent (boe), compared to $19/boe in 2022. This reduction was
primarily due to the increased production for the year coming from the
successful ramp-up of production from the Karish gas field in Israel. In
addition, the Egyptian currency, has fallen sharply against the US dollar,
also leading to a reduction of the cost per bbl in Egypt. Excluding royalties
of $186 million (2022: $46 million), our cash production costs amounted to
$289 million in 2023, (2022: $238 million including only 2 months of
production in Israel). Consequently, the related cost per boe excluding
royalties decreased to $6.4 in 2023, down from $15.9 in 2022.
Depreciation, impairments and write-offs
Depreciation charges before impairment on production and development assets
increased to $306 million (2022: $83 million) with the related increase in the
depreciation unit expense to $6.8/boe (2022: $5.5/boe).
The Group's impairment assessment did not identify any cash generating units
for which a reasonably possible change in a key assumption would result in
impairment or impairment reversal.
Management has considered how the Group's identified climate risks and
opportunities (as discussed in the Strategic Report) may impact the estimation
of the recoverable amount of cash-generating units in the impairment
assessments. The anticipated extent and nature of the future impact of climate
on the Group's operations and future investment, and therefore estimation of
recoverable value, is not uniform across all cash-generating units. There is a
range of inherent uncertainties in the extent that responses to climate change
may impact the recoverable value of the Group's cash-generating units. These
include the impact of future changes in government policies, legislation and
regulation, societal responses to climate change, the future availability of
new technologies and changes in supply and demand dynamics.
The Group has incorporated carbon pricing when preparing discounted cash flow
valuations. Carbon prices are incorporated based on currently enacted
legislation (where relevant). Carbon costs are based on the forecast carbon
price per tonne/CO2e, multiplied by estimated Scope 1 and 2 emissions for the
relevant operation(s).
As part of the impairment assessment the Group has run sensitivity scenarios
based on the International Energey Agency's (IEA) 2023 World Energy Outlook
climate projections including Stated Policies Scenario (STEPS), Announced
Pledges Scenario (APS) and Net-Zero Emissions by 2050 Scenario (NZE). These
specific scenarios were not directly applied in the assets valuation for
financial reporting purposes. This is because no single scenario fully aligns
with the management consensus on the assumptions market participans may use in
appraising the Group's assets. The assessment revealed that the Group's CGUs
in Italy and Greece, particularly the Vega field, are significantly affected
by these scenarios due to their sensitivity to fluctuations in Brent oil
prices. Conversely, the Group's assets in Israel and Egypt are less influenced
by these scenarios, attributed to the localized approach to price definition.
Exploration and evaluation expenditure and new ventures
During the period the Group expensed $34 million (2022: $71 million) for
exploration and new ventures evaluation activities. This includes impairment
costs of $29 million (2022: $66 million) for projects that will not progress
to development, primarily Isabella in the UK.
In addition, new ventures evaluation expenditure amounted to $5 million (2022:
$5 million), mainly related to pre-licence assessment costs.
General and administrative (G&A) expenses
Energean incurred G&A costs of approximately $43 million in 2023 (2022:
$46 million). Cash SG&A was $31 million (2022: $36 million).
Cash G&A excludes certain non-cash accounting items from the Group's
reported G&A. Management uses this alternative performance measure to
monitor the Group's performance, as it assists in making informed decisions
about capital allocation . Cash G&A is calculated as follows:
Administrative and Selling and distribution expenses, excluding depletion and
amortisation of assets and share-based payment charge that are included in
G&A.
2023 ($m) 2022 ($m)
Administrative expenses 43 46
Less:
Depreciation 5 4
Share-based payment charge included in G&A 7 6
Cash G&A 31 36
Net other expenses
Net other expenses of $2 million in 2023 (2022: $1 million income) includes
reversal of provision for legal claims of $3 million, expected credit loss
provisions of $4 million and other non-recurring items.
Unrealised loss on derivatives
The Group has recognised unrealised loss on derivative instruments of $7
million (2022: $5 million) related to the Cassiopea contingent consideration.
A contingent consideration of up to $100.0 million is payable and determined
based on future Italian gas prices recorded at the time of the commissioning
of the field, which is expected in the summer of 2024.
As at 31 December 2023, the two-year Italian gas (PSV) futures curve indicated
higher pricing than that at the date of acquisition, with a forward price in
excess of €20/Mwh. As a result, the fair value of the contingent
consideration as at 31 December 2023 was estimated to be $91 million based on
a Monte Carlo simulation (31 December 2022: $86 million).
Net financing costs
Financing costs before capitalisation for the period were $268 million (2022:
$237 million). Finance costs include: $193 million of interest expenses
incurred on Senior Secured notes (2022: $167 million), $6 million on debt
facilities (2022: $2 million), $7 million of interest expenses relating to
long-term payables (2022: $15 million), $51 million unwinding of discount on
deferred consideration, contingent consideration, long-term payables,
convertible loan notes and decommissioning provisions (2022: $37 million); $11
million commissions for guarantees and other bank charges of (2022: $16
million).
Net finance costs include foreign exchange losses of $17 million (2022:
$22 million) and finance income of $19 million (2022: $10 million), including
Interest income from time deposits.
Taxation
In 2023, Energean recorded tax charges totalling $159 million, compared to $90
million in 2022. This comprised a current year tax expense of $59 million
(down from $200 million in 2022) and a deferred tax expense of $100 million
(compared to a credit of $110 million in 2022), resulting in an effective tax
rate of 46% (down from 84% in 2022).
The decrease in current tax from 2022 was primarily due to a one-off windfall
tax of $119 million charged in Italy in 2022. Additionally, the current tax
expense for Italy and Egypt decreased by $13 million and $10 million
respectively compared to the previous year.
Regarding deferred tax movement, both Italy and Israel realised previously
recognised deferred tax assets due to the utilisation of tax losses, amounting
to $15 million and $47 million respectively. Furthermore, Italy reassessed its
deferred tax asset recognised on decommissioning provision, resulting in a
reduction of $20 million.
Operating cash flow
Cash from operations before tax and movements in working capital was $874
million (2022: $373 million). After adjusting for tax and working capital
movements, cash from operations was $656 million (2022: $272 million).
Capital Expenditure
During the year, the Group incurred capital expenditure of $544 million (2022:
$870 million). Capital expenditure mainly comprise development expenditure in
relation to the Karish Main and Karish North Fields in Israel ($148 million),
NEA/NI project in Egypt ($123 million), Cassiopea field in Italy ($161
million), and exploration expenditures in Katlan, Athena, Zeus, Hermes and
Hercules in Israel ($25 million) and in North East Happy and East Bir El Nus
in Egypt ($26 million).
Net Debt
As at 31 December 2023, net debt of $2,849 million (2022: $2,518 million)
consisted of $2,500 million Israeli senior secured notes, $450 million of
corporate senior secured notes and $64 million draw down of the Greek loans,
less deferred amortised fees and cash, bank deposits and restricted cash
balances of $372 million. On 11 July 2023 Energean priced the offering of $750
million aggregate principal amount of senior secured notes. Net debt excluding
Israel is $569 million (2022: $144 million).
In accessing the debt capital markets, Energean is only exposed to floating
interest rates for the Greek loan and Revolving Credit Facility ('RCF').
Credit ratings
Energean maintains corporate credit ratings with Standard and Poor's (S&P)
and Fitch Ratings (Fitch). In November 2023:
· S&P affirmed 'B+' ratings on Energean and its senior secured
notes maturing in 2027 however the Outlook was revised to Negative from
Stable. The negative outlook reflects the escalated geopolitical and security
risk in Israel. The ratings were affirmed at B+ as Energean's assets remain
fully operational, cash flows have not been affected and the conflict is
expected to have limited impact on Energean's operations in Israel.
· Fitch upgraded Energean plc's corporate credit rating to 'BB-'
from 'B+' with Stable Outlook. Energean's senior secured notes maturing in
2027 were also upgraded to 'BB' from 'B+'. Key drivers for the upgrade were:
production performance, driven by the successful ramp-up of the Karish field,
Energean's clear path to deleveraging, defined Dividend Policy, low
re-contracting risk and improving cost of production.
Risk Management
Principal Risks
Energean has long identified geopolitical risks as one of the principal risks
facing the Group. Considering the events since October 2023, the Group has
introduced a new principal risk specifically relating to the increased
regional and domestic geopolitical and security risks in Israel. Day-to-day
production and payments from domestic gas offtakers have been unimpacted by
the geopolitical developments. Energean continues to monitor the situation and
has mitigations in place, including an insurance package for certain risks as
a result of damage to the assets. There is also a potential compensation
mechanism by the Israeli government under the Property Tax and Compensation
Fund Law. A full description of the Group's mitigations in relation to this
risk can be found in the 2023 Annual Report & Accounts.
The remainder of the principal risks are unchanged from those disclosed in the
2023 Interim Results. A full description of Energean's principal risks is
disclosed in the 2023 Annual Report & Accounts.
Liquidity risk management and going concern
The Group carefully manages the risk of a shortage of funds by closely
monitoring its funding position and its liquidity risk. The going concern
assessment covers the period from the date of approval of the Group Financial
Statements on 21 March 2024 to 30 June 2025 'the Assessment Period'.
As of 31 December 2023, the Group's available liquidity was approximately $607
million. This available liquidity figure includes: (i) c. $115 million
available under the $300 million Revolving Credit Facility ('RCF') signed by
the Group in September 2022 and as amended in May 2023 (with the remainder
being utilized to issue Letters of Credit for the Group's operations) and (ii)
c. $120 million under the $120 million Revolving Credit Facility signed up by
the Group in October 2023.
The going concern assessment is founded on a cashflow forecast prepared by
management, which is based on a number of assumptions, most notably the
Group's latest life of field production forecasts, budgeted expenditure
forecasts, estimated of future commodity prices (based on recent published
forward curves) and available headroom under the Group's debt facilities. The
going concern assessment contains a 'Base Case' and a 'Reasonable Worst Case'
('RWC') scenario.
The Base Case scenario assumes Brent at $80/bbl in 2024 and $75/bbl in 2025
and PSV (Italian gas price) at €30/MWH in 2024 and 2025. A reasonable
ramp-up of production from the Karish Field is assumed throughout the going
concern assessment period, with prices for gas sold assumed at contractually
agreed prices. Under the Base Case, sufficient liquidity is maintained
throughout the going concern period.
The Group also routinely performs sensitivity tests of its liquidity position
to evaluate adverse impacts that may result from changes to the macro-economic
environment, such as a reduction in commodity prices. These downsides are
considered in the RWC going concern assessment scenario. The Group is not
materially exposed to floating interest rate risk since the majority of its
borrowings are fixed-rate. The
Group also looks at the impact of changes or deferral of key projects and
downside scenarios to budgeted production forecasts in the RWC.
The two primary downside sensitivities considered in the RWC are: (i) reduced
commodity prices; (ii) reduced production - these downsides are applied to
assess the robustness of the Group's liquidity position over the Assessment
Period. In a RWC downside case, there are appropriate and timely mitigation
strategies, within the Group's control, to manage the risk of funding
shortfalls and to ensure the Group's ability to continue as a going concern.
Mitigation strategies, within management's control, modelled in the RWC
include deferral of capital expenditure on operated assets and/or management
of operating expenses to improve the liquidity.
Under the RWC scenario, after considering mitigation strategies, liquidity is
maintained throughout the going concern period.
Reverse stress testing was also performed to determine what commodity price or
production shortfall would need to occur for liquidity headroom to be
eliminated. The conditions necessary for liquidity headroom to be eliminated
are judged to have a remote possibility of occurring, given the diversified
nature of the Group's portfolio and the 'natural hedge' provided by virtue of
the Group's fixed-price gas contracts in Israel and Egypt. In the event a
remote downside scenario occurred, prudent mitigating strategies, consistent
with those described above, could also be executed in the necessary timeframe
to preserve liquidity. There is no material impact of climate change within
the Assessment Period and therefore it does not form part of the reverse
stress testing performed by management.
In forming its assessment of the Group's ability to continue as a going
concern, including its review of the forecasted cashflow of the Group over the
Forecast Period, the Board has made judgements about:
• Reasonable sensitivities appropriate for the current status of the
business and the wider macro environment; and
• the Group's ability to implement the mitigating actions within the Group's
control, in the event these actions were required.
After careful consideration, the Directors are satisfied that the Group has
sufficient financial resources to continue in operation for the foreseeable
future, for the Assessment Period from the date of approval of the Group
Financial Statements on 21 March 2024 to 30 June 2025. For this reason, they
continue to adopt the going concern basis in preparing the group financial
statements.
Post balance sheet events
On 21 February 2024 Energean approved its 4Q dividend of US$30 cents per
share, to be paid on 29 March 2024.
On 22 February 2024 Karish North first gas was achieved and the second gas
export riser was completed.
The Orion X1 exploration well reached the target reservoir in March 2024.
Preliminary results indicate that well contains no commercial hydrocarbons.
Further appraisal activity is contingent upon the completion of post-drilling
well analysis. The carrying value of the related capitalised exploration and
evaluation expenses as of 31 December 2023 was $23.3 million. There has been
no impairment recognized related to this investment.
Non-IFRS measures
The Group uses certain measures of performance that are not specifically
defined under IFRS or other generally accepted accounting principles. These
non-IFRS measures include Adjusted EBITDAX, cost of production, capital
expenditure, cash capital expenditure, net debt and gearing ratio and are
explained below.
Cash cost of production
Cash cost of production is a non-IFRS measure that is used by the Group as a
useful indicator of the Group's underlying cash costs to produce hydrocarbons.
The Group uses the measure to compare operational performance period to
period, to monitor costs and to assess operational efficiency. Cash cost of
production is calculated as cost of sales, adjusted for depreciation and
hydrocarbon inventory movements.
($m) 2023 2022
Cost of sales 760 359
Less:
Depreciation 301 79
Change in inventory (16) (4)
Cost of production(1) 475 284
Total production for the period (kboe) 44,731 15,038
Cash cost of production per boe ($/boe) 11 19
(1Numbers may not sum due to rounding)
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business
performance. It is calculated as profit or loss for the period, adjusted for
discontinued operations, taxation, depreciation and amortisation, other income
and expenses (including the impact of derivative financial instruments and
foreign exchange), net finance costs and exploration costs. The Group presents
Adjusted EBITDAX as it is used in assessing the Group's growth and operational
efficiencies, because it illustrates the underlying performance of the Group's
business by excluding items not considered by management to reflect the
underlying operations of the Group.
($m) 2023 2022
Adjusted EBITDAX 931 422
Reconciliation to profit/(loss):
Depreciation and amortisation (306) (83)
Share-based payment (7) (6)
Exploration and evaluation expense (34) (71)
Change in decommissioning cost 17 (28)
Other expense (10) (4)
Other income 8 3
Finance expenses (250) (107)
Finance income 19 10
Unrealised loss on derivatives (7) (5)
Net foreign exchange (17) (22)
Taxation income/(expense) (159) (90)
Profit/ (Loss) for the year 185 17
Capital expenditure
Capital expenditure is a useful indicator of the Group's organic expenditure
on oil and gas assets and exploration and appraisal assets incurred during a
period. Capital expenditure is defined as additions to property, plant and
equipment and intangible exploration and evaluation assets less
decommissioning asset additions, right-of-use asset additions, capitalised
share-based payment charge and capitalised borrowing costs:
($m) 2023 2022
Additions to property, plant and equipment 533 878
Additions to intangible exploration and evaluation assets 57 141
Less:
Capitalised borrowing cost 18 109
Impairment of property, plant and equipment - 28
Leased assets additions and modifications 47 2
Lease payments related to capital activities (16) (13)
Capitalised depreciation - 1
Change in decommissioning provision (3) 22
Total capital expenditure 544 870
Movement in working capital (3) (410)
Cash capital expenditure per the cash flow statement 541 460
Cash Capital Expenditure
($m) 2023 2022
Payment for purchase of property, plant and equipment 436 396
Payment for exploration and evaluation, 105 64
and other intangible assets
Total Cash Capital Expenditure 541 460
Net debt/(cash) and leverage ratio
Net debt is defined as the Group's total borrowings less cash and cash
equivalents. Management believes that net debt serves as a valuable indicator
of the Group's indebtedness, financial flexibility, and capital structure
because it reflects the level of borrowings after accounting for any cash and
cash equivalents that could be utilised to reduce borrowings.
The management closely monitors the leverage ratio, as it provides a
comprehensive picture of the Group's financial leverage by comparing net debt
to EBITDAX. This monitoring is crucial for making informed decisions regarding
dividend distributions, ensuring that such payments are made from a position
of financial strength. It maintains the balance between rewarding shareholders
and sustaining the Group's long-term financial stability.
($m) 2023 2022
Current borrowings 80 46
Non-current borrowings 3,141 2,975
Total borrowings 3,221 3,021
Less: Cash and cash equivalents and bank deposits (347) (428)
Restricted cash (25) (75)
Net Debt 2,849 2,518
Adjusted EBITDAX 931 422
Leverage Ratio (Net debt/ Adjusted EBITDAX) 3 6
Forward Looking Statements
This announcement contains statements that are, or are deemed to be,
forward-looking statements. In some instances, forward-looking statements can
be identified by the use of terms such as "projects", "forecasts", "on track",
"anticipates", "expects", "believes", "intends", "may", "will", or "should"
or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are subject to a number of known and
unknown risks and uncertainties that may cause actual results and events to
differ materially from those expressed in or implied by such forward-looking
statements, including, but not limited to: general economic and business
conditions; demand for the Company's products and services; competitive
factors in the industries in which the Company operates; exchange rate
fluctuations; legislative, fiscal and regulatory developments; political
risks; terrorism, acts of war and pandemics; changes in law and legal
interpretations; and the impact of technological change. Forward-looking
statements speak only as of the date of such statements and, except as
required by applicable law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. The information contained in this
announcement is subject to change without notice.
Group Income Statement
Year ended 31 December 2023
($'000) Notes 2023 2022
Revenue 4 1,419,633 737,081
Cost of sales 5a (759,546) (358,930)
Gross profit 660,087 378,151
Administrative expenses 5b (43,073) (45,942)
Exploration and evaluation expenses 5c (34,088) (71,395)
Change in decommissioning provision 15 16,996 (27,628)
Expected credit (loss)/ reversal 5d (4,375) 7,927
Other expenses 5e (5,274) (12,118)
Other income 5f 7,980 3,163
Operating profit 598,253 232,158
Finance income 6 19,501 9,572
Finance costs 6 (250,395) (107,315)
Unrealised loss on derivatives 17 (6,610) (5,203)
Net foreign exchange losses 6 (16,584) (22,207)
Profit before tax 344,165 107,005
Taxation expense 7 (159,230) (89,734)
Profit for the year 184,935 17,271
Basic and diluted earnings per share 2023 2022
(cents per share)
Basic 2 $1.04 $0.10
Diluted 2 $1.05 $0.12
Group Statement of Comprehensive Income
Year ended 31 December 2023
($'000) 2023 2022
Profit for the year 184,935 17,271
Other comprehensive profit/(loss):
Items that may be reclassified subsequently to profit or loss
Cash Flow hedges
Gain/(loss) arising in the period - 11,665
Income tax relating to items that may be reclassified to - (2,799)
profit or loss
Exchange difference on the translation of foreign operations 7,463 6,996
7,463 15,862
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit pension plan (161) 267
Income taxes on items that will not be reclassified to profit or loss 38 (64)
(123) 203
Other comprehensive profit after tax 7,340 16,065
Total comprehensive profit for the year 192,275 33,336
Group Statement of Financial Position
As at 31 December 2023
($'000) Notes 2023 2022
Assets
Non-current assets
Property, plant and equipment 8 4,371,325 4,231,904
Intangible assets 9 325,389 296,378
Equity-accounted investments 4 4
Other receivables 13 33,682 26,940
Deferred tax asset 10 217,504 242,226
Restricted cash 12 3,124 2,998
4,951,028 4,800,450
Current assets
Inventories 110,126 93,347
Trade and other receivables 13 353,257 337,964
Restricted cash 12 22,482 71,778
Cash and cash equivalents 11 346,772 427,888
832,637 930,977
Total assets 5,783,665 5,731,427
Equity and Liabilities
Equity attributable to owners of the parent
Share capital 2,449 2,380
Share premium 465,331 415,388
Merger reserve 139,903 139,903
Other reserves 5,975 16,557
Foreign currency translation reserve 1,636 (5,827)
Share-based payment reserve 32,917 25,589
Retained earnings 37,904 56,208
Total equity 686,115 650,198
Non-current liabilities
Borrowings 14 3,141,197 2,975,346
Deferred tax liabilities 10 122,785 56,114
(file:///C%3A/Users/slena/AppData/Local/Microsoft/Windows/INetCache/Content.MSO/F70342DD.xlsx#RANGE!A1)
Retirement benefit liability 1,595 1,675
Provisions 15 786,362 809,727
Trade and other payables 16 166,923 318,058
4,218,862 4,160,920
Current liabilities
Trade and other payables 16 737,603 756,874
Current portion of borrowings 14 80,000 45,550
Current tax liability 9,261 109,509
Provisions 15 51,824 8,376
878,688 920,309
Total liabilities 5,097,550 5,081,229
Total equity and liabilities 5,783,665 5,731,427
Group Statement of Changes in Equity
Year ended 31 December 2023
($'000) Share capital Share premium Hedges and Defined Benefit Plans reserve 19 Equity component of convertible bonds 20 Share based payment reserve 21 Translation reserve 22 Retained earnings Merger reserves Total
At 1 January 2022 2,374 915,388 (2,971) 10,459 19,352 (12,823) (354,559) 139,903 717,123
Profit for the period - - - - - - 17,271 - 17,271
Remeasurement of defined benefit pension plan, net of tax - - 203 - - - - - 203
Hedges, net of tax - - 8,866 - - - - - 8,866
Exchange difference on the translation of foreign operations - - - - - 6,996 - - 6,996
Total comprehensive income - - 9,069 - - 6,996 17,271 - 33,336
Transactions with owners of the company
Share based payment charges - - - - 6,243 - - - 6,243
Exercise of Employee Share Options 6 - - - (6) - - - -
Share premium reduction - (500,000) - - - - 500,000 - -
Dividends (Note 18) - - - - - - (106,504) - (106,504)
At 1 January 2023 2,380 415,388 6,098 10,459 25,589 (5,827) 56,208 139,903 650,198
Profit for the period - - - - - - 184,935 - 184,935
Remeasurement of defined benefit pension plan, net of tax (123) (123)
Exchange difference on the translation of foreign operations 7,463 7,463
Total comprehensive income - - (123) - - 7,463 184,935 - 192,275
Transactions with owners of the company
Conversion of the loan note 57 49,943 - (10,459) - - 10,459 - 50,000
Exercise of Employee Share Options 12 - - - (12) - - - -
Share based payment charges - - - - 7,340 - - - 7,340
Dividends (note 18) - - - - - - (213,698) - (213,698)
At 31 December 2023 2,449 465,331 5,975 - 32,917 1,636 37,904 139,903 686,115
Group Statement of Cash Flows
Year ended 31 December 2023
($'000) Note 2023 2022
Operating activities
Profit before taxation 344,165 107,005
Adjustments to reconcile profit before taxation to net cash provided by
operating activities:
Depreciation, depletion and amortisation 8, 9 306,144 83,360
Impairment loss on property, plant and equipment 8 342 -
Loss from the sale of property, plant and equipment 5e 190 1,102
Impairment loss on exploration and evaluation assets 9 28,758 65,550
Defined benefit (gain)/ loss 45 (351)
Movement in provisions 15 (11,098) (4,742)
Compensation to gas buyers 4 4,929 18,029
Change in decommissioning provision estimates 15 (16,996) 27,628
Finance income 6 (19,501) (9,572)
Finance costs 6 250,395 107,315
Unrealised loss on derivatives 17 6,610 5,203
ECL on trade receivables 5d 4,375 565
Non-cash revenues from Egypt(( 23 )) (48,254) (57,766)
Impairment loss on inventory 5e - 1,207
Share-based payment charge 7,340 6,044
Net foreign exchange loss 6 16,584 22,207
Cash flow from operations before working capital adjustments 874,028 372,784
Increase in inventories (14,923) (10,278)
Increase in trade and other receivables (45,178) (74,454)
Increase/(Decrease) in trade and other payables (44,913) 23,405
Cash flow from operations 769,014 311,457
Income tax paid (112,827) (39,304)
Net cash inflow from operating activities 656,187 272,153
Investing activities
Payment for purchase of property, plant and equipment 8 (436,043) (395,753)
Payment for exploration and evaluation, and other intangible assets 9 (105,024) (64,414)
Movement in restricted cash 12 49,226 124,953
Proceeds from disposal of property, plant and equipment 2 227
Amounts received from INGL related to the transfer of property, plant & 16 56,906 17,371
equipment
Other investing activities (522) -
Interest received 18,997 9,675
Net cash outflow for investing activities (416,458) (307,941)
Financing activities
Drawdown of borrowings 14 905,038 63,463
Repayment of borrowings 14 (655,000) -
Repayment of deferred consideration liability 14 (150,000) (30,000)
Debt issue costs 14 (17,633) -
Repayment of obligations under leases 14 (18,732) (14,023)
Finance cost paid for deferred license payments (2,496) (1,501)
Finance costs paid (174,833) (178,914)
Dividend Paid (213,698) (106,504)
Net cash outflow from financing activities (327,354) (267,479)
Net decrease in cash and cash equivalents (87,625) (303,267)
Cash and cash equivalents at beginning of the period 427,888 730,839
Effect of exchange rate fluctuations on cash held 6,509 316
Cash and cash equivalents at end of the period 11 346,772 427,888
1. Basis of preparation and presentation of financial information
Whilst the financial information in this preliminary announcement has been
prepared in accordance with UK-adopted International Accounting Standards
(UK-adopted IAS) and with the requirements of the United Kingdom Listing
Authority (UKLA) Listing Rules, this announcement does not contain sufficient
information to comply with IFRS. The Group will publish full financial
statements that comply with IFRS in April 2024. The financial information for
the year ended 31 December 2023 does not constitute statutory accounts as
defined in sections 435 (1) and (2) of the Companies Act 2006. The group and
parent company financial statements for the year ended 31 December 2022 have
been delivered to the Registrar of Companies; the auditor's report on these
accounts was unqualified, did not include a reference to any matters by way of
emphasis and did not contain a statement under Section 498 (2) or Section 498
(3) of the UK Companies Act 2006.
The accounting policies applied are consistent with those adopted and
disclosed in the Group's financial statements for the year ended 31 December
2023. There have been a number of amendments to accounting standards and new
interpretations issued by the International Accounting Standards Board which
were applicable from 1 January 2023, however these have not any impact on the
accounting policies, methods of computation or presentation applied by the
Group. Further details on new International Financial Reporting Standards
adopted will be disclosed in the 2023 Annual Report and Accounts.
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2023 reporting periods and have not been
early adopted by the Group. These standards are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
2. Earnings per share
Basic earnings per ordinary share amounts are calculated by dividing net
income for the year attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during the year.
Diluted income per ordinary share is calculated by dividing net income for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued if dilutive
employee share options were converted into ordinary shares.
($'000) 2023 2022
Total profit attributable to equity shareholders 184,935 17,271
Effect of dilutive potential ordinary shares 24 4,450 4,054
189,385 21,325
2023 2022
Basic weighted average number of shares 178,447,141 177,931,019
Dilutive potential ordinary shares 2,041,193 6,714,731
Diluted weighted average number of shares 180,488,334 184,645,750
Basic earnings per share $1.04/share $0.10/share
Diluted earnings per share $1.05/share $0.12/share
3. Segmental reporting
The information reported to the Group's Chief Executive Officer and Chief
Financial Officer (together the Chief Operating Decision Makers) for the
purposes of resource allocation and assessment of segment performance is
focused on four operating segments: Europe (including Greece, Italy, UK,
Croatia), Israel, Egypt and New Ventures.
The Group's reportable segments under IFRS 8 Operating Segments are Europe,
Israel and Egypt. Segments that do not exceed the quantitative thresholds for
reporting information about operating segments have been included in Other.
Segment revenues, results and reconciliation to profit before tax
The following is an analysis of the Group's revenue, results and
reconciliation to profit/(loss) before tax by reportable segment:
($'000) Europe Israel Egypt Other & inter-segment transactions Total
Year ended 31 December 2023
Revenue from gas sales 109,949 674,481 138,237 - 922,667
Revenue from hydrocarbon liquids sales - 265,355 32,487 - 297,842
Revenue from crude oil sales 180,704 - - - 180,704
Revenue from LPG sales - - 14,376 - 14,376
Other - - - 4,044 4,044
Total revenue 290,653 939,836 185,100 4,044 1,419,633
Adjusted EBITDAX 25 113,498 669,894 153,790 (6,684) 930,498
Reconciliation to profit before tax:
Depreciation and amortisation expenses (36,702) (201,882) (65,922) (1,638) (306,144)
Share-based payment charge (6,610) (730) (89) 89 (7,340)
Exploration and evaluation expenses (30,148) (50) - (3,890) (34,088)
Change in decommissioning expenses 16,996 - - - 16,996
Expected credit loss - - (4,375) - (4,375)
Other expense (4,665) (190) (412) (7) (5,274)
Other income 5,155 37 3,354 (566) 7,980
Finance income 10,498 11,319 1,348 (3,664) 19,501
Finance costs (44,264) (169,467) (972) (35,692) (250,395)
Unrealised loss on derivatives (6,610) - - - (6,610)
Net foreign exchange gain/(loss) (8,928) (9,084) (3,282) 4,710 (16,584)
Profit/(loss) before income tax 8,220 299,847 83,440 (47,342) 344,165
Taxation income / (expense) (42,376) (68,600) (48,254) - (159,230)
Profit/(loss) from operations (34,156) 231,247 35,186 (47,342) 184,935
Year ended 31 December 2022
Revenue from gas sales 328,506 45,153 156,264 - 529,923
Revenue from crude oil sales 206,959 - - - 206,959
Other (31,298) (18,031) 57,131 (7,603) 199
Total revenue 504,167 27,122 213,395 (7,603) 737,081
Adjusted EBITDAX6 262,655 (4,498) 164,581 (1,125) 421,613
Reconciliation to profit before tax:
Depreciation and amortisation expenses (27,199) (12,112) (43,266) (783) (83,360)
Share-based payment charge (1,423) (214) (89) (4,318) (6,044)
Exploration and evaluation expenses (61,071) (1,819) - (8,505) (71,395)
Impairment loss on property, plant and equipment (27,628) - - - (27,628)
Expected credit loss (3,043) - 10,970 - 7,927
Other expense (2,699) (1,102) - (8,317) (12,118)
Other income 1,284 54 1,097 728 3,163
Finance income 3,777 6,379 1,705 (2,289) 9,572
Finance costs (32,395) (29,811) (858) (44,251) (107,315)
Unrealised loss on derivatives (5,203) - - - (5,203)
Net foreign exchange gain/(loss) 4,065 (3,085) (7,498) (15,689) (22,207)
Profit/(Loss) before income tax 111,120 (46,208) 126,642 (84,549) 107,005
Taxation income / (expense) (42,283) 10,951 (57,766) (636) (89,734)
Profit/(Loss) from continuing operations 68,837 (35,257) 68,876 (85,185) 17,271
The following table presents assets and liabilities information for the
Group's operating segments as at 31 December 2023 and 31 December 2022,
respectively:
Year ended 31 December 2023 ($'000) Europe Israel Egypt Other & inter-segment transactions Total
Oil & Gas properties 734,265 2,783,914 473,628 311,295 4,303,102
Other fixed assets 35,110 13,918 19,996 (801) 68,223
Intangible assets 20,303 243,965 46,846 14,275 325,389
Trade and other receivables 88,729 130,135 154,095 (19,702) 353,257
Deferred tax asset 217,504 - - - 217,504
Other assets 849,649 573,855 47,601 (954,915) 516,190
Total assets 1,945,560 3,745,787 742,166 (649,848) 5,783,665
Trade and other payables 375,390 391,379 74,893 62,864 904,526
Borrowings 108,392 2,588,491 - 524,314 3,221,197
Decommissioning provision 738,063 92,613 - 6,819 837,495
Current tax payable 7,597 - - 1,664 9,261
Deferred tax liability - 122,785 - - 122,785
Other liabilities 7,502 - 1,601 (6,817) 2,286
Total liabilities 1,236,944 3,195,268 76,494 588,844 5,097,550
Other segment information
Capital Expenditure 26 :
Property, plant and equipment 220,461 138,490 130,099 (1,630) 487,420
Intangible, exploration 4,152 24,959 26,253 1,288 56,652
and evaluation assets
Year ended 31 December 2022 ($'000) Europe Israel Egypt Other & inter-segment transactions Total
Oil & Gas properties 536,874 3,264,364 409,732 (14,440) 4,196,530
Other fixed assets 13,365 4,750 17,325 (66) 35,374
Intangible assets 48,249 219,354 20,639 8,136 296,378
Trade and other receivables 141,509 82,611 131,453 (17,609) 337,964
Deferred tax asset 244,394 - - (2,168) 242,226
Other assets 883,576 24,933 96,942 (382,496) 622,955
Total assets 1,867,967 3,596,012 676,091 (408,643) 5,731,427
Trade and other payables 220,706 540,459 50,563 114,506 926,234
Borrowings 61,437 2,471,030 - 488,429 3,020,896
Decommissioning provision 724,458 84,299 - - 808,757
Current tax payable 109,468 - - 41 109,509
Other liabilities 124,201 40,882 18,498 32,252 215,833
Total liabilities 1,240,270 3,136,670 69,061 635,228 5,081,229
Other segment information
Capital Expenditure:
Property, plant and equipment 85,840 537,527 105,792 (368) 728,791
Intangible, exploration 12,143 124,718 193 3,970 141,024
and evaluation assets
Segment cash flows
Year ended 31 December 2023 ($'000) Europe Israel Egypt Other & inter-segment transactions Total
Net cash from / (used in) operating activities 25,737 586,570 52,032 (8,152) 656,187
Cash outflow for investing activities (134,681) (194,833) (91,238) 4,294 (416,458)
Net cash from financing activities 65,012 (129,801) 26,896 (289,461) (327,354)
Net increase/(decrease) in cash and cash equivalents (43,932) 261,936 (12,310) (293,319) (87,625)
Cash and cash equivalents at beginning of the period 58,340 24,825 26,825 317,898 427,888
Effect of exchange rate fluctuations on cash held 775 (136) (3,281) 9,151 6,509
Cash and cash equivalents at end of the period 15,183 286,625 11,234 33,730 346,772
Year ended 31 December 2022 ($'000) Europe Israel Egypt Other & inter-segment transactions Total
Net cash from / (used in) operating activities 225,780 (7,850) 66,946 (12,723) 272,153
Cash outflow from investing activities (287,490) (180,040) (54,229) 213,818 (307,941)
Net cash from financing activities 54,977 (133,953) (2,528) (185,975) (267,479)
Net increase/(decrease) in cash and cash equivalents (6,733) (321,843) 10,189 15,120 (303,267)
Cash and cash equivalents at beginning of the period 71,312 349,827 19,254 290,446 730,839
Effect of exchange rate fluctuations on cash held (6,451) (3,159) (2,617) 12,543 316
Cash and cash equivalents at end of the period 58,128 24,825 26,826 318,109 427,888
4. Revenue
($'000) 2023 2022
Revenue from crude oil sales 180,704 206,959
Revenue from hydrocarbon liquids sales 297,842 35,384
Revenue from gas sales 927,596 529,923
Revenue from LPG sales 14,376 21,747
Compensation to gas buyers (4,929) (18,031)
Gain/(Loss) on forward transactions - (55,189)
Petroleum product sales 4,044 2,697
Rendering of services - 1,001
Revenue from contracts with customers 1,419,633 724,491
Other operating income-lost production insurance proceeds - 12,590
Total Revenue 1,419,633 737,081
Since August 2021 in accordance with the GSPAs signed with a group of gas
buyers, the Group have paid compensation to these counterparties due to the
fact the gas supply date is taking place beyond a certain date as defined in
the GSPAs (being 30 June 2021). The compensation is accounted as variable
purchase consideration and deducted from revenue as gas is delivered to the
offtakers.
In 2022 proceeds were received in relation to lost production under the
business interruption insurance policy of $12.6million. No such proceeds were
received in the current year.
100% of the gas produced at Abu Qir & North Idku and North El Amriya
(Egypt) is sold to EGPC and EGAS respectively under a Brent-linked gas price.
The gas price is determined based on Brent prices trading within a certain
range, as set out in the agreement, and contains both a floor price and a cap;
limiting volatility and exposure to commodity price fluctuations.
Sales for the year ended 31 December (Kboe) 2023 2022
Egypt (net entitlement)
Gas 4,533 5,059
LPG 287 333
Condensate 436 390
Italy
Oil 2,190 2,440
Gas 1,270 1,406
Israel
Gas 28,416 1,781
Oil 3,492 -
UK
Gas 23 73
Oil 228 245
Croatia
Gas 28 38
Greece
Oil 367 -
Total 41,270 11,765
5. Operating profit/(loss)
($'000) 2023 2022
(a) Cost of sales
Staff costs 47,650 52,904
Energy cost 22,166 15,947
Flux Cost 33,998 36,970
Royalty payable 185,622 45,770
Other operating costs 27 185,018 132,688
Depreciation and amortisation (note 8) 300,876 79,362
Oil stock movement (15,554) (1,707)
Stock (underlift)/overlift movement (230) (3,004)
759,546 358,930
(b) Administration expenses
Staff costs 21,416 17,977
Other General & Administration expenses 6,648 16,592
Share-based payment charge included in administrative expenses (note 8) 7,340 6,044
Depreciation and amortisation (note 8 & 9) 5,268 3,257
Auditor fees 2,401 2,072
43,073 45,942
(c) Exploration and evaluation expenses
Staff costs for Exploration and evaluation activities 3,171 3,012
Exploration costs written off (note 9) 28,758 65,550
Other exploration and evaluation expenses 2,159 2,833
34,088 71,395
(d) Expected credit loss
Expected credit loss expense 4,375 3,043
Reversal of expected credit loss allowance - (10,970)
4,375 (7,927)
(e) Other expenses
Intra-group merger costs 80 3,212
Loss from disposal of Property plant & Equipment 190 1,102
Write-down of inventory - 1,207
Write-down of property, plant and equipment costs (note 8) 342 -
Provision for litigation and claims - 1,198
Other expenses 4,662 5,399
5,274 12,118
(f) Other income
Profit from sale of inventory 339 1,643
Reversal of provision for legal claims 2,743 -
Other income 4,898 1,520
7,980 3,163
6. Net finance cost
($'000) 2023 2022
Interest on bank borrowings 6,104 1,527
Interest on Senior Secured Notes 193,009 167,372
Interest expense on long term payables 7,158 14,660
Interest expense on short term liabilities - 54
Less amounts included in the cost of qualifying assets (17,416) (123,635)
188,855 59,978
Finance and arrangement fees 8,985 11,334
Commission charges for bank guarantees 2,274 2,118
Other finance costs and bank charges (229) 2,136
Unwinding of discount on right of use asset 2,476 2,159
Unwinding of discount on long term trade payables 8,753 -
Unwinding of discount on provision for decommissioning 31,255 21,495
Unwinding of discount on deferred consideration 5,674 7,098
Unwinding of discount on convertible loan 4,450 4,054
Unwinding of discount on contingent consideration (1,855) 2,667
Less amounts included in the cost of qualifying assets (243) (5,724)
Total finance costs 250,395 107,315
Interest income from time deposits (19,501) (9,572)
Total finance income (19,501) (9,572)
Foreign exchange losses 16,584 22,207
Net financing costs 247,478 119,950
7. Taxation
(a) Taxation charge
($'000) 2023 2022
Current income tax charge (57,800) (199,563)
Adjustments in respect of current income tax of previous year(s) (1,598) (583)
Total current tax charge (59,398) (200,146)
Deferred tax relating to origination and reversal of temporary differences (99,832) 110,412
(note 10)
Income tax expense reported in the Income statement (159,230) (89,734)
(b) Reconciliation of the total tax charge
The Group calculates its income tax expense by applying a weighted average tax
rate calculated based on the statutory tax rates of each country weighted
according to the profit or loss before tax earned by the Group in each
jurisdiction where deferred tax is recognised or material current tax charge
arises.
The effective tax rate for the period is 46% (2022: 84%).
The tax (charge) for the period can be reconciled to the accounting profit per
the Group Income statement as follows:
($'000) 2023 2022
Profit before tax 344,165 107,005
Tax calculated at 18.2% weighted average rate (2022: 27.5%) 28 (62,752) (29,453)
Impact of different tax rates 29 (15,482) (9,960)
Non recognition of deferred tax on current year tax losses and other temporary (42,086) (50,905)
differences
Recognition of previously unrecognised deferred tax/ Derecognition of (27,107) 134,642
previously recognised deferred tax 30
Permanent differences 31 (12,623) (16,341)
Foreign taxes (29) (54)
Windfall tax 32 - (119,425)
Tax effect of non-taxable income & allowances 2,556 2,217
Other adjustments (109) 128
Prior year tax (1,598) (583)
Taxation expense (159,230) (89,734)
There are no income tax consequences attached to the payment of dividends in
either 2023 or 2022 by the Group to its shareholders.
Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates. However, this legislation does not
currently apply to the Group as its consolidated revenue has not exceeded the
threshold of €750 million in at least two of the four preceding fiscal years
prior to the enactment of the legislation. Therefore, the consolidated
financial statements do not include information required by paragraphs 88A-88D
of IAS 12.
8. Property, plant & equipment
($'000) Oil and gas assets 33 Leased assets 34 Other property, plant and equipment Total
Property, Plant & Equipment at Cost:
At 1 January 2022 3,897,787 57,245 59,046 4,014,078
Additions 742,665 1,195 1,534 745,394
Lease modification - 831 - 831
Disposal of assets (900) - (900)
Capitalised borrowing cost 109,184 - - 109,184
Capitalised depreciation 632 - - 632
Change in decommissioning provision 21,685 - - 21,685
Other movements (241) 37 (74) (278)
Foreign exchange impact (31,388) (596) (388) (32,372)
At 31 December 2022 4,739,424 58,712 60,118 4,858,254
Additions 469,023 38,278 2,203 509,504
Lease modification - 8,706 - 8,706
Disposal of assets (111,448) - (111,448)
Capitalised borrowing cost 17,658 - - 17,658
Change in decommissioning provision (2,504) - - (2,504)
Other movements (313) - (307) (620)
Foreign exchange impact 89,811 2,582 2,090 94,483
At 31 December 2023 5,201,651 108,278 64,104 5,374,033
Accumulated Depreciation and Impairment:
At 1 January 2022 442,522 19,102 52,981 514,605
Charge for the period 71,464 10,091 1,171 82,726
Impairments 27,878 - - 27,878
Foreign exchange impact 1,030 105 6 1,141
At 31 December 2022 542,894 29,298 54,158 626,350
Charge for the period 287,926 15,432 1,808 305,166
Impairment 342 - - 342
Foreign exchange impact 67,387 1,607 1,856 70,850
At 31 December 2023 898,549 46,337 57,822 1,002,708
Net carrying amount:
At 31 December 2022 4,196,530 29,414 5,960 4,231,904
At 31 December 2023 4,303,102 61,941 6,282 4,371,325
Borrowing costs capitalised for qualifying assets during the year are
calculated by applying a weighted average interest rate of 5.52% for the year
ended 31 December 2023 (for the year ended 31 December 2022: 5.16%).
The additions to Oil & Gas properties for the year ended 31 December 2023
are mainly due to development costs for the FPSO, Karish North field and
second oil train at the amount of $148 million, development cost for Cassiopea
project in Italy at the amount of $161 million and NEA/NI project in Egypt at
the amount of $123 million.
In 2023 the Group entered in new vessel lease agreements for offshore
concessions in Italy.
The impairment of $27.9 million recognised in 2022 was a result of a change to
the decommissioning estimate on certain fields in Italy and the UK where the
recoverable amount was lower than the carrying value, subsequent to
recognising the change in estimate. The remaining 2022 change in
decommissioning provision of $21.7 million was in relation to fields across
the group whereby the recoverable amount exceeded the carrying value.
9. Intangible assets
($'000) Exploration and evaluation assets Goodwill Other Intangible assets Total
Intangible assets at Cost:
At 1 January 2022 205,333 101,146 9,707 316,186
Additions 139,911 - 1,113 141,024
Other movements - - 280 280
Exchange differences (6,890) - (125) (7,015)
31 December 2022 338,354 101,146 10,975 450,475
Additions 56,379 - 273 56,652
Other movements 313 - 307 620
Exchange differences 2,670 - (12) 2,658
At 31 December 2023 397,716 101,146 11,543 510,405
Accumulated amortisation and impairments:
At 1 January 2022 83,279 - 4,766 88,045
Charge for the period 39 - 595 634
Impairment 47,240 18,310 - 65,550
Exchange differences (110) - (22) (132)
31 December 2022 130,448 18,310 5,339 154,097
Charge for the period 46 - 932 978
Impairment 26,583 2,175 - 28,758
Exchange differences 1,197 - (14) 1,183
31 December 2023 158,274 20,485 6,257 185,016
Net carrying amount
At 31 December 2022 207,906 82,836 5,636 296,378
At 31 December 2023 239,442 80,661 5,286 325,389
Goodwill arises principally because of the requirement to recognise deferred
tax assets and liabilities for the difference between the assigned values and
the tax bases of assets acquired and liabilities assumed in a business
combination. Total impairment of $28.8 million was recognised in the period
for projects that will not progress to development. The Group exited Isabella
licence in December 2023 and as a result the related exploration asset ($26.6
million) and goodwill ($2.2 million) were impaired.
The remaining goodwill balance is in relation to the Israel CGU ($75.8
million), and UK ($4.8 million). We have performed the annual goodwill
impairment test and note that no reasonably possible change would result in
impairment.
10. Net deferred tax (liability)/asset
Deferred tax (liabilities)/assets ($'000) Property, plant and equipment Right of use asset IFRS 16 Decom-missioning Prepaid expenses and other receivables Inventory Tax losses Deferred expenses for tax Retirement benefit liability Accrued expenses and other short‑term liabilities Total
At 1 January 2022 (140,553) (990) 89,440 (1,571) 183 120,180 11,030 266 9,388 87,373
Increase / (decrease) for the period through:
Profit or loss (Note 7) (11,836) (103) 41,688 1,642 265 83,814 (4,822) (22) (214) 110,412
Other comprehensive income (64) (2,799) (2,863)
Exchange difference 3,466 15 (4,882) 115 (8) (6,986) (15) (515) (8,810)
31 December 2022 (148,923) (1,078) 126,246 186 440 197,008 6,208 165 5,860 186,112
Increase / (decrease) for the period through:
Profit or loss (Note 7) (13,874) (2,644) (26,955) (2,225) (440) (57,185) (630) 163 3,958 (99,832)
Other comprehensive income - - - - - - - 38 - 38
Exchange difference (1,197) (15) 4,269 (12) 6 5,043 3 304 8,401
31 December 2023 (163,994) (3,737) 103,560 (2,051) 6 144,866 5,578 369 10,122 94,719
($'000) 2023 2022
Deferred tax liabilities (122,785) (56,114)
Deferred tax assets 217,504 242,226
94,719 186,112
At 31 December 2023 the Group had gross unused tax losses of $907.4 million
(as of 31 December 2022: $1,093.8 million) available to offset against future
profits and other temporary differences. A deferred tax asset of $144.9
million (2022: $197.0 million) has been recognised on tax losses of $571.5
million, based on the forecasted profits. The Group did not recognise deferred
tax on tax losses and other differences of total amount of $655.1 million.
In Greece, Italy and the UK, the net DTA for carried forward losses recognised
in excess of the other net taxable temporary differences was $77.8 million,
$19.6 million and $10.8 million (2022: $69.2 million, $33.4 million and $15.1
million) respectively. An additional DTA of $109.3 million (2022: $124.6
million) arose primarily in respect of deductible temporary differences
related to property, plant and equipment, decommissioning provisions and
accrued expenses, resulting in a total DTA of $217.5 million (2022: $242.2
million). During the period, Italy recognised a DTA of $19.6m on tax losses of
$81.6m in accordance with its latest tax losses utilisation forecast.
Greek tax losses (Prinos area) can be carried forward without limitation up
until the relevant concession agreement expires (by 2039), whereas the tax
losses in Israel, Italy and the United Kingdom can be carried forward
indefinitely. Based on the Prinos area forecasts (including the Epsilon
development), the deferred tax asset is fully utilised by 2032. In Italy,
deferred tax asset of $94.6 million recognised on decommissioning costs
scheduled up to the year the Italian assets expect to enter into a declining
phase assuming that there still be available profits from Cassiopea asset and
other long-lived assets. Finally, in the UK, decommissioning losses is
expected to be tax relieved up until 2028 in accordance with the latest
taxable profits forecasts.
11. Cash and cash equivalents
($'000) 2023 2022
Cash and bank deposits 346,772 427,888
346,772 427,888
Bank demand deposits comprise deposits and other short-term money market
deposit accounts that are readily convertible into known amounts of cash. The
effective interest rate on short‑term bank deposits was 4.371% for the year
ended 31 December 2023 (2022: 1.716%).
12. Restricted cash
Restricted cash comprises cash retained under the Israel Senior Secured Notes
and the Greek State Loan requirement as follows:
Current
The current portion of restricted cash at 31 December 2023 was $22.48 million.
It mainly relates to the March 2024 coupon payment on Senior Secured Notes.
In 2022 it was $71.8 million comprising $3 million for bank guarantees and
$68.8 million for debt repayment fund.
Non-Current
The cash restricted for more than 12 months after the reporting date was $3.1
million (2022: $3.0 million) mainly comprising $2.3 million (2022: $2.3
million) held on the Interest Service Reserve Account ('ISRA') in relation to
the Greek Loan Notes and $0.8 million (2022: $0.7million) for Prinos
Guarantee.
13. Trade and other receivables
($'000) 2023 2022
Trade and other receivables - Current
Financial items:
Trade receivables 297,305 215,215
Receivables from partners under JOA 1,996 4,539
Other receivables 35 9,479 2,344
Government subsidies(( 36 )) 82 3,025
Refundable VAT 19,273 89,400
Accrued interest income 1,016 1,445
329,151 315,968
Non-financial items:
Deposits and prepayments(( 37 )) 19,174 15,084
Other deferred expense 4,932 6,912
24,106 21,996
353,257 337,964
Trade and other receivables - Non-Current
Financial items:
Other tax recoverable 15,544 14,701
15,544 14,701
Non-financial items:
Deposits and prepayments 17,612 11,726
Other non-current assets 526 513
18,138 12,239
33,682 26,940
14. Borrowings
($'000) 2023 2022
Non-current
Bank borrowings - after one year but within five years
4.5% Senior Secured notes due 2024 ($625 million) - 620,461
4.875% Senior Secured notes due 2026 ($625 million) 619,932 617,912
Bank borrowings - more than five years
6.5% Senior Secured notes due 2027 ($450 million) 444,313 442,879
5.375% Senior Secured notes due 2028 ($625 million) 618,145 616,767
5.875% Senior Secured notes due 2031 ($625 million) 616,762 615,890
8.50% Senior Secured notes due 2033 ($750 million) 733,653 -
BSTDB Loan and Greek State Loan Notes 108,392 61,437
Carrying value of non-current borrowings 3,141,197 2,975,346
Current
Revolving credit facility 80,000 -
Convertible loan notes ($50 million) - 45,550
Carrying value of current borrowings 80,000 45,550
Carrying value of total borrowings 3,221,197 3,020,896
The Group has provided security in respect of certain borrowings in the form
of share pledges, as well as fixed and floating charges over certain assets of
the Group.
$2,500,000,000 senior secured notes:
On 24 March 2021, the Group completed the issuance of $2.5 billion aggregate
principal amount of senior secured notes.
The Notes have been issued in four series as follows:
· Notes in an aggregate principal amount of $625 million, maturing on
30 March 2024, with a fixed annual interest rate of 4.500%.
· Notes in an aggregate principal amount of $625 million, maturing on
30 March 2026, with a fixed annual interest rate of 4.875%.
· Notes in an aggregate principal amount of $625 million, maturing on
30 March 2028, with a fixed annual interest rate of 5.375%.
· Notes in an aggregate principal amount of $625 million, maturing on
30 March 2031, with a fixed annual interest rate of 5.875%.
The Notes are listed for trading on the TACT Institutional of the Tel Aviv
Stock Exchange Ltd. (the "TASE").
The March 2024 notes of $625 million were repaid on 30 September 2023.
$750,000,000 senior secured notes:
On the 11 July 2023 Energean priced the offering of $750 million aggregate
principal amount of senior secured notes due 30 September 2033, with a fixed
annual interest rate of 8.5%. The interest on the Notes will be paid
semi-annually, on March 30 and September 30 of each year, beginning on March
30, 2024.
The Notes are listed for trading on the TASE-UP of the Tel Aviv Stock Exchange
Ltd.
The funds were mainly used to repay Energean Israel's $625 million notes due
in March 2024.
Kerogen Convertible Loan:
On 20 December 2023, the loan was converted into equity, resulting in the
issuance of 4,422,013 ordinary shares at a conversion price of £8.3843 per
share (equivalent to $10.60).
$450,000,000 senior secured notes:
On 18th November 2021, the Group completed the issuance of $450 million of
senior secured notes, maturing on 30 April 2027 and carrying a fixed annual
interest rate of 6.5%.
The interest on the notes is paid semi-annually on 30 April and 30 October of
each year, beginning on 30 April 2022.
The notes are listed for trading on the Official List of the International
Stock Exchange ("TISE").
The issuer is Energean plc and the Guarantors are Energean E&P Holdings,
Energean Capital Ltd and Energean Egypt Ltd
Energean Oil and Gas SA ('EOGSA') loan for Epsilon/ Prinos Development:
On 27 December 2021 EOGSA entered into a loan agreement with Black Sea Trade
and Development Bank for €90.5 million to fund the development of Epsilon
Oil Field. The loan is subject to an interest rate of EURIBOR plus a margin of
2% on 90% of the loan (guaranteed portion) and 4.9% margin on 10% of the loan
(unguaranteed portion). The loan has a final maturity date 7 years and 11
months after first disbursement.
On 27 December 2021 EOGSA entered into an agreement with Greek State to issue
€9.5 million of notes maturing in 8 years with fixed rate -0.31% plus
margin. The margin commences at 3.0% in year 1 with annual increases, reaching
6.5% in year 8.
At 31 December 2023 the loan was fully drawn.
Revolving Credit Facility ('RCF'):
On 8 September 2022, Energean signed a three-year $275 million RCF with a
consortium of banks, led by ING Bank N.V. In May 2023, this facility's limit
was increased to $300 million. The RCF is designed to provide additional
liquidity for general corporate needs as necessary. The interest rate applied
to any amounts drawn as loans is set at 5% plus the SOFR rate.
Throughout 2023, the Company utilized $80 million from this facility at an
average interest rate of 10.3%. Of this amount, $40 million has been repaid
subsequent to the reporting date.
15. Provisions
($'000) Decommissioning Provision for litigation and other claims Total
At 1 January 2022 802,098 11,294 813,392
New provisions - 1,619 1,619
Change in estimates 49,313 (551) 48,762
Spend (8,898) (344) (9,242)
Reclassification - (1,568) (1,568)
Unwinding of discount 21,495 - 21,495
Currency translation adjustment (55,251) (1,104) (56,355)
At 31 December 2022 808,757 9,346 818,103
Current provisions 8,376 - 8,376
Non-current provisions 800,381 9,346 809,727
At 1 January 2023 808,757 9,346 818,103
New provisions 4,913 - 4,913
Change in estimates (24,413) (2,076) (26,489)
Spend (18,697) - (18,697)
Reclassification (1,023) - (1,023)
Unwinding of discount 31,255 - 31,255
Currency translation adjustment 29,884 240 30,124
At 31 December 2023 830,676 7,510 838,186
Current provisions 51,824 - 51,824
Non-current provisions 778,852 7,510 786,362
Decommissioning provision
The decommissioning provision represents the present value of decommissioning
costs relating to oil and gas properties, which are expected to be incurred up
to 2044 when the producing oil and gas properties are expected to cease
operations. The future costs are based on a combination of estimates from an
external study completed in previous years and internal estimates. These
estimates are reviewed annually to take into account any material changes to
the assumptions. However, actual decommissioning costs will ultimately depend
upon future market prices for the necessary decommissioning works required
that will reflect market conditions at the relevant time. Furthermore, the
timing of decommissioning is likely to depend on when the fields cease to
produce at economically viable rates. This, in turn, will depend upon future
oil and gas prices and the impact of energy transition and the pace at which
it progresses which are inherently uncertain. The decommissioning provision
represents the present value of decommissioning costs relating to assets in
Italy, Greece, UK, Israel and Croatia. No provision is recognised for Egypt as
there is no legal or constructive obligation as at 31 December 2023.
The principal assumptions used in determining decommissioning obligations for
the Group are shown below:
Inflation assumption Discount rate assumption Cessation of production assumption Spend in 2023 2023 ($'000) 2022 ($'000)
Greece 1.8%- 2.7% 3.08% 2034 - 19,359 13,036
Italy 3.0%- 2.0% 4.17% 2023-2039 8,831 497,827 519,749
UK 2.34% 3.31% 2023-2030 9,866 202,874 176,063
Israel 3.0%- 1.6% 4.18% 2044 - 92,613 84,299
Croatia 3.0%- 2.0% 4.17% 2036 - 18,003 15,610
Total 18,697 830,676 808,757
16. Trade and other payables
($'000) 2023 2022
Trade and other payables-Current
Financial items:
Trade accounts payable 225,451 298,091
Payables to partners under JOA 38 170,470 58,336
Deferred licence payments due within one year 46,154 13,345
Deferred consideration for acquisition of minority - 144,326
Other payables 39 53,756 34,644
Contingent consideration (note 17) 91,075 -
Short term lease liability 16,498 9,208
Deferred income 548
VAT payable 20
603,972 557,950
Non-financial items:
Accrued expenses 40 65,033 98,650
Contract Liability 41 - 56,230
Other finance costs accrued (note 6) 63,893 39,672
Social insurance and other taxes 4,705 4,372
133,631 198,924
737,603 756,874
Trade and other payables-Non-Current
Financial items:
Trade and other payables 42 117,796 169,360
Deferred licence payments 43 - 38,488
Contingent consideration (note 17) - 86,320
Long term lease liability 48,598 23,063
166,394 317,231
Non-financial items:
Social insurance 529 827
529 827
166,923 318,058
17. Contingent consideration
The share purchase agreement (the "SPA") dated 4 July 2019 between Energean
and Edison SpA provides for a contingent consideration of up to $100.0 million
subject to the commissioning of the Cassiopea development gas project in
Italy. The consideration was determined to be contingent on the basis of
future gas prices (PSV) recorded at the time of the at the time of first gas
production at the Cassiopea field, which is expected in 2024. No payment will
be due if the arithmetic average of the year one (i.e., the first year after
first gas production) and year two (i.e., the second year after first gas
production) Italian PSV Natural Gas Futures prices is less than €10/Mwh when
first gas production is delivered from the field. $100 million is payable if
that average price exceeds €20/Mwh. The fair value of the contingent
consideration is estimated by reference to the terms of the SPA and the
simulated PSV pricing by reference to the forecasted PSV pricing, historical
volatility and a log normal distribution, discounted at an estimated cost of
debt
The contingent consideration to be payable on 1 October 2024 was estimated at
acquisition date to amount to $61.7 million, which discounted at the selected
cost of debt resulted in a present value of $55.2 million as at the
acquisition date.
As at 31 December 2023, the two-year future curve of PSV prices increased from
the date of acquisition and indicate an average price in excess of €20/Mwh
(the threshold for payment of $100 million), we estimate the fair value of the
contingent consideration as at 31 December 2023 to be $91.1 million based on
a Monte Carlo simulation (31 December 2022: $86.3 million).
The fair value of the consideration payable has been recognised at level 3 of
the fair value hierarchy.
Contingent consideration 2023
1 January 86,320
Fair value adjustment including 4,755
Discount unwinding (1,855)
Unrealised loss on derivates 6,610
31 December 91,075
18. Dividends
In line with Energean's dividend policy, Energean returned US$1.2/share to
shareholders in 2023, representing four quarters of dividend payments.
US$0.60/share was returned to shareholders in 2022, representing two quarters
of dividend payments (maiden dividend was declared in September 2022).
US$ cents per share $' 000
2023 2022 2023 2022
Dividends announced and paid in cash
Ordinary shares
March 30 - 53,252 -
June 30 - 53,411 -
September 30 30 53,518 53,252
December 30 30 53,517 53,252
Total 120 60 213,698 106,504
1 Amounts shown after payment of Q4 2023 dividend, scheduled for 29 March
2024, which is the date upon which payment is to be initiated by Energean.
2 Unless successfully appealed by the Ministry.
3 Net Zero by 2050 commitment is for scope 1 and 2 emissions.
4 Morgan Stanley Capital International.
5 Uptime is defined as the number of hours that the Energean Power FPSO was
operating; the Q4 2023 figure excludes the scheduled 6-day shutdown that
occurred in December.
6 Based upon mid-point of 155-175 kboed 2024 production guidance.
7 Payment date is stated as the date upon which payment is to be initiated
by Energean.
8 Original baseline year was 2019. In 2023, this was revised to 2022.
9 Unless successfully appealed by the Ministry.
10 Adjusted EBITDAX is calculated as profit or loss for the period, adjusted
for discontinued operations, taxation, depreciation and amortisation,
share-based payment charge, impairment of property, plant and equipment, other
income and expenses, net finance costs and exploration and evaluation
expenses.
11 Based upon mid-point of 155-175 kboed 2024 production guidance
12 Uptime is defined as the number of hours that the Energean Power FPSO was
operating; the Q4 2023 figure excludes the scheduled 6-day shutdown that
occurred in December.
13 From 3 June 2024 to 31 December 2031.
14 Working interest shown as of the date of this report.
15 Unless successfully appealed by the Ministry.
16 As per Chariot's latest competent person's report covering the Anchois
Field that has certified gross 2C contingent resources of 18 bcm in the
discovered gas sands.
17 Includes $20-25 million of expenditure on the Prinos Carbon Storage
project in Greece, which is expected to be covered by EU grants.
18 Includes the Anchois appraisal well in Morocco.
19 Reserve is used to recognise
remeasurement gain or loss on cash flow hedges and actuarial gain or loss from
the defined benefit pension plan. In 2022 in the Statement of Financial
Position this reserve was combined with the 'Equity component of convertible
bonds' reserve.
20 Refers to the Equity component of
$50million of convertible loan notes, which were issued in February 2021 and
converted into equity at maturity in December 2023.
21 Share-based payments reserve is
used to recognise the value of equity-settled share-based payments granted to
parties including employees and key management personnel, as part of
their remuneration.
22 Reserve is used to record
unrealised exchange differences arising from the translation of the financial
statements of entities within the Group that have a functional currency other
than US dollar.
23 Non-cash revenues from Egypt arise due to taxes
being deducted at source from invoices as such revenue and tax charges are
grossed up to reflect this deduction but no cash inflow or outflow results.
24 In 2023 $4.5 million (2022: $4.1million) is the unwinding of the
discount on the convertible loan notes (as disclosed in note 6). The notes
were converted to ordinary shares on 20 December 2023. Refer to note 14 for
further detail.
25 Adjusted EBITDAX is a non-IFRS
measure used by the Group to measure business performance. It is calculated as
profit or loss for the period, adjusted for taxation, depreciation and
amortisation, share-based payment charge, impairment of property, plant and
equipment, other income and expenses (including the impact of derivative
financial instruments and foreign exchange), net finance costs and exploration
and evaluation expenses.
26 Capital expenditure is defined as additions to property, plant
and equipment and intangible exploration and evaluation assets less
decommissioning asset additions, right-of-use asset additions, capitalised
share-based payment charge and capitalised borrowing costs.
27 Other operating costs comprise of
insurance costs, gas transportation and treatment fees concession fees and
planned maintenance costs.
28 For the reconciliation of the tax
rate, the weighted average rate of the statutory tax rates in Greece (25%),
Cyprus (12.5%) Israel (23%), Italy (24%), United Kingdom (23.5%/75%) and Egypt
(40.55%) were weighted according to the profit or loss before tax earned by
the Group in each jurisdiction, excluding fair value uplifts profits.
29 "Impact of different tax rates" mainly refer to the Italian regional
taxes (IRAP).
30 Change in estimate of decommissioning provision in 2023 resulted in
$27.1 million of DTA recognised during the period. In 2022 the Group
recognised $134.6 million of DTA mainly due to the change in decommissioning
provision and reassessment of utilisation of tax losses carried forward in
Italy.
31 Permanent differences mainly consisted of non-deductible expenses
($13.2m), goodwill impairment ($0.4m) and foreign exchange income ($1.0m). In
2022, non-deductible tax expenses primarily relate to financial instruments
associated with the acquisition of 30% of Energean Israel from Kerogen
Capital, which was finalised during the year.
32 In 2022, Italy introduced:
1) a windfall tax in the form of a law decree which imposed a 25% one-off tax
on profit margins that rose by more than $5.26 million (€5.0 million)
between October 2021 and April 2022 compared to the same period a year
earlier. The amount of the windfall tax paid by Energean Italy was $29.3
million; and
2) a new windfall tax that imposed a 50% one-off tax, calculated on 2022
taxable profits that are 10% higher than the average taxable profits between
2018-2021. This amount has a ceiling equal to 25% of the value of the net
assets at end-2021. The exposure has been provided for accordingly in 2022.
Consequently, the Group paid a one-off windfall tax of $94.7 million (€87.0
million) in June -July 2023.
In addition, the Energy (Oil and Gas) Profits Levy (EPL) was announced by the
UK Government on 26 May 2022 and legislated for in July 2022. This was a new,
temporary 25% (to be increased to 35% from 1st January 2023) levy on ring
fence profits of oil and gas companies. This was in addition to Ring Fence
Corporation Tax which is charged at 30% and the Supplementary Charge which is
charged at 10%. The Group's exposure to the EPL is de minimis.
33 Included within the carrying amount
of Oil & Gas assets are development costs of the Karish field related to
the Sub Sea and On-shore construction. In line with the agreement with Israel
Natural Gas Lines ("INGL"), the transfer of title ("hand over") of these
assets to INGL was completed at the end of March 2023. Following Handover,
INGL is responsible for the operation and maintenance of this part of the
infrastructure and the related asset.
34 Included in the carrying amount of
leased assets at 31 December 2023 are right of use assets related to Oil and
gas properties and Other property, plant and equipment of $58.0 million and
$3.9 million respectively (2022: $21.3 million and $8.1 million). The
depreciation charged on these classes for the year ending 31 December 2023 was
$13.4 million and $2.0 million respectively (2022: $7.9 million and $2.1
million).
35 Other receivables mainly comprise the consideration receivable
from INGL as discussed in note 16.
36 Government subsidies relate to
grants from Greek Public Body for Employment and Social Inclusion (OAED) to
financially support the Kavala Oil S.A. labour cost from manufacturing under
the action plan for promoting sustainable employment in underdeveloped or
deprived districts of Greece, such as the area of Kavala. In September 2020,
the Greek Government issued a law and a subsequent ministerial decision
whereby any legal person who has launched legal proceedings in relation to the
aforementioned employment costs, may set off such receivables against tax
liabilities provided the judicial proceedings already commenced are abandoned.
Energean investigated the process and potential benefits of this
approach decided to apply for the set off which has been approved and the
first offset was in January 2023 decreasing the receivable.
37 Included in deposits and
prepayments, are mainly prepayments for goods and services under the GSP
Engineering, Procurement, Construction and Installation Contract (EPCIC) for
Epsilon project.
38 Payables to partners under JOA include payables and working
capital estimates provided by the operators.. Increase in 2023 is due to
Cassiopea development, In Italy
39 Other payables mainly comprise royalties accrued in Israel (2023:
$32 million, 2022: $6.7 million) and Italy (2023: $18 million, 2022: $27.3
million).
40 Included in trade payables and
accrued expenses are mainly development expenditures incurred in Israel
(mainly FPSO, Karish North, Second oil train), development expenditure for
Cassiopea project in Italy and NEA/NI project in Egypt.
41 The contract liability relates to
the agreement with Israel Natural Gas Lines ("INGL") for the transfer of title
(the "Hand Over") of the near shore and onshore segments of the infrastructure
that delivers gas from the Energean Power FPSO into the Israeli national gas
transmission grid. The Hand Over became effective in March 2023. Following the
Hand Over, INGL is responsible for the operations and maintenance of this part
of the infrastructure and the related asset and contract liability was
derecognised. The final consideration ($7.3 million) became receivable after
Handover and was recognised within other receivables.
42 The amount represents a long-term amount payable in terms of the
EPCIC contract. Following the amendment to the terms of the deferred payment
agreement with Technip signed in February 2024 the remaining amount payable
under the EPCIC contract reduced to $210 million. The amount is payable in
twelve equal quarterly deferred payments starting in March and therefore has
been discounted at 8.668%. p.a. (being the yield rate of the senior secured
loan notes, maturing in 2026, at the date of agreeing the payment terms).
43 A settlement agreement was signed
on 2(nd) November 2023 in relation to remaining deferred consideration for
Karish and Tanin licences whereby it was agreed that the final amount owing
would be paid in two instalments in March ($30.0 million) and May 2024 ($17.4
million). As at 31 December 2023 the total discounted deferred consideration
was $46.2 million (as at 31 December 2022: $51.8 million).
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