REG - Energean PLC - Energean Israel 3Q 2023 Accounts
16/11/2023 07:15
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RNS Number : 6172T Energean PLC 16 November 2023
ENERGEAN ISRAEL LIMITED
UNAUDITED INTERIM CONDENCED CONSOLIDATED FINANCIAL STATEMENTS
30 SEPTEMBER 2023
ENERGEAN ISRAEL LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF 30 SEPTEMBER 2023
INDEX
Page
Interim Condensed Consolidated Statement of Comprehensive Income 3
Interim Condensed Consolidated Statement of Financial Position 4
Interim Condensed Consolidated Statement of Changes in Equity 5
Interim Condensed Consolidated Statement of Cash Flows 6
Notes to the Interim Condensed Consolidated Financial Statements 7-20
- - - - - - - - - - - - - - - - - - - -
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED 30 SEPTEMBER 2023
30 September (Unaudited)
Notes 2023 2022
$'000 $'000
Revenue 3 646,585 -
Cost of sales 4 (313,374) -
Gross profit 333,211 -
Administrative expenses 4 (13,182) (7,218)
Exploration and evaluation expenses 4 (50) (1,277)
Other expenses 4 (170) (1,079)
Other income 4 2 53
Operating profit/(loss) 319,811 (9,521)
Financial income 5 9,133 5,757
Financial expenses 5 (120,379) (4,931)
Foreign exchange loss, net 5 (4,872) 1,405
Profit/(loss) for the period before tax 203,693 (7,290)
Taxation (expense)/income 6 (46,766) 2,663
Net profit (loss) for the period 156,927 (4,627)
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF 30 SEPTEMBER 2023
Notes 30 September 2023 31 December
(Unaudited) 2022
$'000 $'000
ASSETS:
NON-CURRENT ASSETS:
Property, plant and equipment 7 2,869,484 2,926,313
Intangible assets 8 160,410 143,554
Other receivables 10 507 108
Deferred tax asset 9 - 22,886
3,030,401 3,092,861
CURRENT ASSETS:
Trade and other receivables 10 121,412 82,611
Inventories 11 11,856 8,313
Restricted cash 24,500 71,778
Cash and cash equivalents 239,076 24,825
396,844 187,527
TOTAL ASSETS 3,427,245 3,280,388
EQUITY AND LIABILITIES:
EQUITY:
Share capital 1,708 1,708
Share premium 212,539 212,539
Retained earnings (losses) 86,399 (70,528)
TOTAL EQUITY 300,646 143,719
NON-CURRENT LIABILITIES:
Senior secured notes 12 2,587,848 2,471,030
Decommissioning provisions 73,602 84,299
Deferred tax liability 9 22,028 -
Trade and other payables 13 180,038 210,241
2,863,516 2,765,570
CURRENT LIABILITIES:
Trade and other payables 13 263,083 371,099
263,083 371,099
TOTAL LIABILITIES 3,126,599 3,136,669
TOTAL EQUITY AND LIABILITIES 3,427,245 3,280,388
15 November 2023
Panagiotis Benos Matthaios Rigas
Director Director
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
NINE MONTHS ENDED 30 SEPTEMBER 2023
Share capital Share Premium Retained earnings (losses) Total equity
$'000 $'000 $'000 $'000
Balance as of 1 January 2023 1,708 212,539 (70,528) 143,719
Profit for the period - - 156,927 156,927
Balance as of 30 September 2023 (unaudited) 1,708 212,539 86,399 300,646
Balance as of 1 January 2022 1,708 572,539 (35,946) 538,301
Transactions with shareholders
Share premium reduction (*) - (360,000) - (360,000)
Comprehensive loss
Loss for the period - - (4,627) (4,627)
Balance as of 30 September 2022 (unaudited) 1,708 212,539 (40,573) 173,674
(*) In April 2022 the Company reduced its share premium capital by US$360
million and credited US$346 million against the shareholder loan account plus
accrued interest.
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2023
30 September (Unaudited)
Notes 2023 2022
$'000 $'000
Operating activities
Profit (Loss) for the period before tax 203,693 (7,290)
Adjustments to reconcile loss before taxation to net cash provided by
operating activities:
Depreciation, depletion and amortisation ( ) 4 132,527 232
Loss from sale on equipment ( ) 4 170 1,079
Exploration and evaluation expenses ( ) 8 - 1,277
Compensation to gas buyers, payment made in advance ( ) 3 4,929 -
Finance Income ( ) 5 (9,133) (5,757)
Finance expenses ( ) 5 120,379 4,932
Net foreign exchange loss (gains) ( ) 5 4,872 (1,405)
Cash flow from operations before working capital 457,437 (6,932)
(Increase)/decrease in trade and other receivables (56,590) 906
Increase in inventories (3,543) -
Decrease in trade and other payables (20,930) (665)
Cash from operations 376,374 (6,691)
Income taxes paid (397) (572)
Net cash inflows from/(used in) operating activities 375,977 (7,263)
819
Investing activities
Payment for exploration and evaluation, and other intangible assets 8(B) (92,634) (18,823)
Payment for purchase of property, plant and equipment 7(C) (164,913) (232,037)
Proceeds from disposals of property, plant and equipment 2 188
Amounts received from INGL related to transfer of property, plant and 10 56,906 17,371
equipment
Movement in restricted cash, net 47,278 127,945
Interest received 9,921 2,863
Net cash outflows used in investing activities (143,440) (102,493)
Financing activities
Senior secured notes - interest paid 12 (128,906) (128,906)
Senior secured notes issuance 12 750,000 -
Senior secured notes repayment 12 (625,000) -
Other distribution (4,386) -
Other finance cost paid (335) (2,359)
Finance costs paid for deferred licence payments (2,496) (1,501)
Transaction cost related to senior secured notes issuance 16 (3,690) -
Repayment of obligations under leases 13 (1,942) (683)
Net cash outflow used in financing activities (16,755) (133,449)
Net increase/(decrease) in cash and cash equivalents 215,782 (243,205)
Cash and cash equivalents at beginning of the period 24,825 349,827
Effect of exchange differences on cash and cash equivalents (1,531) (2,656)
Cash and cash equivalents at end of the period 239,076 103,966
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
NOTE 1: - GENERAL
a. Energean Israel Limited (the "Company") was incorporated in Cyprus on
22 July 2014 as a private company with limited liability under the Companies
Law, Cap. 113. Its registered office is at Lefkonos 22, 1(st) Floor,
Strovolos, 2064 Nicosia, Cyprus.
b. The Company and its subsidiaries (the "Group") has been established
with the objective of exploration, production and commercialisation of natural
gas and crude oil. The Group's main activities are performed in Israel by its
Israeli Branch.
c. As of 30 September 2023, the Company had investments in the following
subsidiaries:
Name of subsidiary Country of incorporation / registered office Principal activities Shareholding Shareholding
At 30 September
At 31 December 2022
(%)
2023
(%)
Energean Israel Transmission LTD 121, Menachem Begin St. Gas transportation license holder 100 100
Azrieli Sarona Tower, POB 24,
Tel Aviv 67012039 Israel
Energean Israel Finance LTD 121, Menachem Begin St. Financing activities 100 100
Azrieli Sarona Tower, POB 24,
Tel Aviv 67012039 Israel
d. The Group's core assets as of 30 September 2023 are comprised of:
Country Asset Field Working interest Field phase
Israel Karish Karish Main 100% Production
Israel Karish Karish North 100% Development
Israel Tanin Tanin 100% Development
Israel Block 12, Katlan 100% Appraisal
Israel Blocks 21, 23, 31 Hercules and Hermes 100% Exploration
NOTE 2: - Accounting policies and basis of preparation
The interim financial information included in this report has been prepared in
accordance with IAS 34 "Interim Financial Reporting" . The results for the
interim period are unaudited and, in the opinion of management, include all
adjustments necessary for a fair presentation of the results for the period
ended 30 September 2023. All such adjustments are of a normal recurring
nature. The unaudited interim condensed consolidated financial statements do
not include all the information and disclosures that are required for the
annual financial statements and must be read in conjunction with the Group's
annual consolidated financial statements for the year ended 31 December 2022.
The financial information presented herein has been prepared in accordance
with the accounting policies expected to be used in preparing the Group's
annual consolidated financial statements for the year ended 31 December 2023
which are the same as those used in preparing the annual consolidated
financial statements for the year ended 31 December 2022.
The directors consider it appropriate to adopt the going concern basis of
accounting in preparing these interim financial statements.
NOTE 3: - Revenues
30 September (Unaudited)
2023 2022
$'000 $'000
Revenue from gas sales ((1)) 484,238 -
Revenue from hydrocarbon liquids sales ((2)) 167,275 -
Compensation to customers ((3)) (4,928) -
Total revenue 646,585 -
((1)) Sales gas for nine months ended 30 September 2023 totaled approximately
3.1 bcm (the Company started production on 26 October 2022).
((2)) Sales from hydrocarbon liquids for nine months ended 30 September 2023
totaled approximately 2.22 mmbbl (the Company did not sell hydrocarbon liquids
during 2022).
((3)) During 2021 and in accordance with the GSPAs signed with a group of gas
buyers, the Company paid compensation to these counterparties following delays
to the supply of gas from the Karish project. The compensation is deducted
from revenue, as variable consideration, as the gas is delivered to the gas
buyers, in accordance with IFRS 15 Revenue Recognition
NOTE 4: - Operating profit (loss) before taxation
30 September (Unaudited)
2023 2022
$'000 $'000
(a) Cost of sales
Staff costs 6,566 -
Energy cost 2,869 -
Royalty payable 117,266 -
Other operating costs 57,061 -
Depreciation and amortisation (Note 7) 131,262 -
Hydrocarbon liquids inventory movement (Note 11) (1,650) -
Total cost of sales 313,374 -
(b) General & administration expenses (c)
Staff costs 2,544 1,115
Share-based payment charge 517 128
Depreciation and amortisation (Note 7, 8) 1,265 352
Auditor fees 135 200
Other general & administration expenses 8,721 5,423
Total administrative expenses 13,182 7,218
(c) Exploration and evaluation expenses
Other exploration and evaluation expenses 50 1,277
Total exploration and evaluation expenses 50 1,277
(d) Other expenses
Loss from disposal of inventory property, plant and equipment 170 1,079
Total other expenses 170 1,079
(e) Other income (f)
Other income 2 53
Total other income 2 53
NOTE 5: - Net finance income/(expenses)
30 September (Unaudited)
2023 2022
$'000 $'000
Interest on senior secured notes ((1)) 119,322 102,505
Interest expense on long terms payables ((2)) 2,485 8,716
Less amounts included in the cost of qualifying assets ((3)) (11,813) (107,177)
109,994 4,044
Finance and arrangement fees 1,757 3,681
Other finance costs and bank charges 497 319
Unwinding of discount on trade payable 5,407 -
Unwinding of discount on provision for decommissioning 2,513 568
Unwinding of discount on right of use asset 391 238
(1)
Less amounts included in the cost of qualifying assets ((3)) (180) (3,919)
10,385 887
Total finance costs 120,379 4,931
Interest income from time deposits (9,133) (2,543)
Interest income from loans to related parties - (3,214)
Total finance income (9,133) (5,757)
Net foreign exchange (gains) losses 4,872 (1,405)
Net finance expense (income) 116,118 (2,231)
(1) Refer also to Note 12.
(2) Refer also to Note 13.
(3) Refer also to Note 7(A).
NOTE 6: - Taxation
1. Taxation charge:
30 September (Unaudited)
2023 2022
$'000 $'000
Tax - current period (1,853) (291)
Deferred tax (44,913) 2,954
Total taxation income (expense) yyyyyuuuu( (46,766) 2,663
NOTE 7: - Property, Plant and Equipment
a. Composition:
Oil and gas Assets Leased assets Furniture, fixtures and equipment Total
$'000 $'000 $'000 $'000
Cost:
At 1 January 2022 2,241,783 4,009 829 2,246,621
Additions ((1)) 514,373 731 1,165 516,269
Disposals (900) - - (900)
Capitalised borrowing cost 129,357 - - 129,357
Capitalised depreciation 632 - - 632
Change in decommissioning provision 47,544 - - 47,544
Total cost at 31 December 2022 2,932,789 4,740 1,994 2,939,523
Additions ((1)) 175,598 12,197 311 188,106
Handover to INGL((2)) (111,448) - - (111,448)
Capitalised borrowing cost 11,993 - - 11,993
Change in decommissioning provision (13,211) - - (13,211)
Total cost at 30 September 2023 (unaudited) 2,995,721 16,937 2,305 3,014,963
Depreciation:
At 1 January 2022 433 693 228 1,354
Charge for the year 10,976 134 297 11,407
Capitalised to oil and gas assets - 632 - 632
Disposals (433) - - (433)
Write down of the assets 250 - - 250
Total Depreciation at 31 December 2022 11,226 1,459 525 13,210
Charge for the period 130,211 1,400 659 132,270
Total Depreciation at 30 September 2023 (unaudited) 141,436 2,859 1,184 145,479
At 31 December 2022 2,921,563 3,281 1,469 2,926,313
At 30 September 2023 (unaudited) 2,854,285 14,078 1,121 2,869,484
((1)) The additions to oil & gas assets in nine month period 2023 are
primarily due to development costs for the FPSO, Karish North and 2(nd) Oil
Train. The additions in 2022 are primarily due to development costs for the
Karish field, incurred under the EPCIC contract, FPSO, subsea and onshore
construction.
((2)) Handover to INGL took place on 22 March 2023, please refer to note 13
NOTE 7: - Property, Plant and Equipment (Cont.)
b. Depreciation expense for the period has been recognised as
follows:
30 September (Unaudited)
2023 2022
$'000 $'000
Cost of sales 131,262 -
Administration expenses 1,008 110
Capitalised depreciation in oil & gas assets - 357
Total 132,270 467
c. Cash flow statement reconciliations:
30 September (Unaudited)
2023 2022
$'000 $'000
Additions to property, plant and equipment 188,106 392,377
Less:
Right-of-use asset additions 12,197 198
Capitalised depreciation - 656
Capitalised share-based payment charge - 174
Add:
Lease payments related to capital activities 1,942 -
Capital expenditures 177,851 391,349
Movement in working capital (12,938) (159,312)
Payment for additions to property, plant and equipment as per the cash flow 164,913 232,037
statement
NOTE 8: - Intangible Assets
a. Composition:
Exploration and evaluation assets Software licences Total
$'000 $'000 $'000
Cost:
At 1 January 2022 20,141 255 20,396
Additions ((1)) 123,005 1,713 124,718
Write off of exploration and evaluation costs ((2)) (1,277) - (1,277)
At 31 December 2022 141,869 1,968 143,837
Additions ((1)) 17,113 - 17,113
At 30 September 2023 (unaudited) 158,982 1,968 160,950
Amortisation:
At 1 January 2022 - 255 255
Charge for the year - 28 28
Total Amortisation at 31 December 2022 - 283 283
Charge for the period - 257 257
Total Amortisation at 30 September 2023 (unaudited) - 540 540
At 31 December 2022 141,869 1,685 143,554
At 30 September 2023 (unaudited) 158,982 1,428 160,410
((1)) Additions to exploration and evaluation assets are primarily related to
the 2022 growth drilling programme undertaken offshore Israel.
((2)) Zone D: On 27 July 2022, the Company sent a formal notice to the
Ministry of Energy notifying the relinquishment of Zone D and discontinuation
of related work. As such, the licences subsequently expired on 27 October
2022.
b. Cash flow statement reconciliations:
30 September (Unaudited)
2023 2022
$'000 $'000
Additions to intangible assets 17,113 66,219
Associated cash flows
Movement in working capital 75,521 (47,396)
Payment for additions to intangible assets 92,634 18,823
NOTE 9: - Deferred taxes
The Group is subject to corporation tax on its taxable profits in Israel at
the rate of 23%. The capital gain tax rates depend on the purchase date and
the nature of the asset. The general capital gains tax rate for a corporation
is the standard corporate tax rate.
Tax losses can be utilised for an unlimited period, and tax losses may not be
carried back.
According to Income Tax (Deductions from Income of Oil Rights Holders)
Regulations, 5716-1956, the exploration and evaluation expenses of oil and gas
assets are deductible in the year in which they are incurred.
The Group expects that there will be sufficient taxable profits in the
following years and that deferred tax assets, recognised in the interim
condensed consolidated financial statements of the Group, will be recovered.
NOTE 9: - Deferred taxes (Cont.)
Below are the items for which deferred taxes were recognised:
Property, plant and equipment & intangible assets Right of use asset Tax losses Deferred expenses for tax Staff leaving indemnities Accrued expenses and other short‑term liabilities and other long‑term Decommissioning provision Total
liabilities
$'000 IFRS 16 $'000 $'000 $'000
$'000 $'000
$'000
$'000
At 1 January 2022 (12,632) (762) 4,750 11,031 94 923 8,171 11,575
Increase/(decrease) for the year through:
Profit or loss (27,712) 8 51,665 (4,822) 73 270 (8,171) 11,311
At 1 January 2023 (40,344) (754) 56,415 6,209 167 1,193 - 22,886
Increase/(decrease) for the period through:
Profit or loss (16,269) (2,393) (28,382) (472) 50 2,552 - (44,914)
At 30 September 2023 (56,613) (3,147) 28,033 5,737 217 3,745 - (22,028)
30 September 2023 31 December
(Unaudited) 2022
$'000 $'000
Deferred tax liabilities (59,760) (41,099)
Deferred tax assets 37,732 63,985
(22,028) 22,886
NOTE 10: - Trade and other receivables
30 September 2023 31 December
(Unaudited) 2022
$'000 $'000
Current
Financial items
Trade receivables
Trade receivables 112,955 37,491
Other receivables ((1)) 6,646 999
Refundable VAT - 37,131
Accrued interest income 101 888
119,702 76,509
Non-financial items
Prepayments 544 159
Deferred expenses ((2)) - 4,929
Prepaid expenses and other receivable 1,166 1,014
1,710 6,102
Total current trade and other receivables 121,412 82,611
Non-current
Financial items
Deposits and prepayments 507 108
507 108
Total non-current trade and other receivables 507 108
((1)) The increase from 2022 is due to the recognition of a receivable from
INGL, please refer to Note 13(4) for further details.
((2)) Deferred expenses relate to compensation to gas buyers following delays
to the supply of gas from the Karish project. This compensation is treated as
variable consideration under IFRS 15 Revenue Recognition and therefore,
reduced from gas sales following commencement of production, please refer
also Note 3.
NOTE 11: - Inventory
30 September 2023 31 December
(Unaudited) 2022
$'000 $'000
Raw materials and supplies 7,379 5,563
Hydrocarbon liquids 3,987 2,367
Natural gas 490 383
Total 11,856 8,313
NOTE 12: - Borrowings and secured notes
a. Issuance of US$2,500,000,000 senior secured notes:
On 24 March 2021 (the "Issue Date"), Energean Israel Finance Ltd (a 100%
subsidiary of the Company) issued US$2,500 million of senior secured notes.
The proceeds were primarily used to repay in full the project finance
facility.
On 11 July 2023, Energean Israel Finance Ltd. Ltd completed the offering of
US$750 million aggregate principal amount of senior secured notes with a fixed
annual interest rate of 8.500%. 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 "TASE"). The proceed from the Offering, was released
from escrow in September 2023 and was used to a) refinance the $625 million
notes due in 2024 (redemption date on 30 September 2023), b) pay fees and
expenses associated with this refinancing, c) contribute towards funding the
interest payment reserve account, and d) contribute towards the payment of the
final deferred consideration to Kerogen.
The Notes were issued in five tranches as follows:
30 September 2023 31 December
(Unaudited) 2022
Series Maturity Annual fixed Interest rate Carrying value $'000 Carrying value $'000
US$ 625 million 30 March 2024 4.500% - 620,461
US$ 625 million 30 March 2026 4.875% 619,462 617,912
US$ 625 million 30 March 2028 5.375% 617,852 616,767
US$ 625 million 30 March 2031 5.875% 616,628 615,890
US$ 750 million 30 September 2031 8.500% 733,906 -
US$2,625 million 2,587,848 2,471,030
The interest on each series of the Notes is paid semi-annually, on 30 March
and on 30 September of each year.
The Notes are listed on the TASE-UP of the Tel Aviv Stock Exchange Ltd (the
"TASE").
With regards to the indenture document, signed on 24 March 2021 with HSBC BANK
USA, N.A (the "Trustee"), as amended and supplemented, no indenture default or
indenture event of default has occurred and is continuing.
Collateral:
The Company has provided/undertakes to provide the following collateral in
favor of the Trustee:
a. First rank fixed charges over the shares of Energean Israel
Limited, Energean Israel
Finance Ltd and Energean Israel Transmission Ltd, the Karish & Tanin
Leases, the gas sale and purchase agreements ("GSPAs"), several bank accounts,
operating permits, insurance policies, the Company's exploration licences and
the INGL Agreement.
b. Floating charge over all of the present and future assets of
Energean Israel Limited and Energean Israel Finance Ltd.
c. The Energean Power FPSO.
Credit rating:
The senior secured notes have been assigned a Ba3 rating by Moody's and a BB-
rating by S&P Global.
NOTE 13: - Trade and other payables
30 September 2023 31 December
(Unaudited) 2022
$'000 $'000
Current
Financial items
Trade accounts payable ((1)) 144,990 209,853
Payables to related parties 14,103 21,028
VAT payable 5,105 -
Deferred licence payments due within one year ((2)) 12,852 13,345
Other creditors 21,843 6,712
Current lease liabilities 7,870 1,792
206,763 252,730
Non-financial items
Accrued expenses ((1)) 39,897 29,404
Other finance costs accrued 14,147 32,227
Contract liability ((4)) - 56,230
Social insurance and other taxes 759 502
Income taxes 1,517 6
56,320 118,369
Total current trade and other payables 263,083 371,099
Non-current
financial items
Trade and other payables ((3)) 144,092 169,360
Deferred licence payments ((2)) 28,629 38,488
Long term lease liabilities 6,786 2,214
179,507 210,062
Non-financial items
Accrued expenses to related parties 531 179
531 179
Total non-current trade and other payables 180,038 210,241
((1) ) Trade payables and accrued expenses relate primarily to
development expenditure on the Karish project, with the main contributors
being FPSO and subsea construction costs and for drilling activities performed
offshore Israel. Trade payables are non-interest bearing.
((2) ) In December 2016, the Company acquired the Karish and Tanin
leases for US$40 million of upfront consideration plus contingent
consideration of US$108.5 million (paid over 10 equal instalments) bearing
interest at an annual rate of 4.6%. On 30 September 2023, the total discounted
deferred consideration was US$41 million (31 December 2022: US$52million).
Refer to Note 16.
((3) ) This represents the amount payable to Technip in respect of
the EPCIC contract. Under this contract, US$250 million becomes payable nine
months following the practical completion date (June 18, 2023), and is payable
in eight equal quarterly instalments, bearing no interest. A discount rate
of 5.831% has been applied (being the yield rate of the senior secured loan
notes, maturing in 2024, at the date of entering into the settlement
agreement). The amounts payable to Technip up to 30 September 2024 under this
contract are presented as part of trade accounts payable - current.
((4) ) 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 (refer to Note 7) and contract liability
was derecognised. The final $5million consideration is receivable within 12
months of handover and is recognised within other receivable (refer to Note
10).
NOTE 14: - Financial Instruments
Fair Values:
The fair values of the Group's non-current liabilities measured at amortised
cost are considered to approximate their carrying amounts at the reporting
date.
The carrying value less any estimated credit adjustments for financial assets
and financial liabilities with a maturity of less than one year are assumed to
approximate their fair values due to their short-term nature. The fair value
of the Group's finance lease obligations is estimated using discounted cash
flow analysis based on the Group's current incremental borrowing rates for
similar types and maturities of borrowing and are consequently categorized in
level 2 of the fair value hierarchy.
There were no transfers between fair value levels during the period.
The fair value hierarchy of financial assets and financial liabilities that
are not measured at fair value (but fair value disclosure is required) is as
follows:
Fair value hierarchy as at 30 September 2023 (unaudited)
Level 1 Level 2 Total
$'000 $'000 $'000
Financial assets
Short term restricted cash 24,500 - 24,500
Short term trade and other receivables - 119,702 119,702
Cash and cash equivalents 239,076 - 239,076
Total 263,576 119,702 383,278
Financial liabilities
Senior secured notes ((1)) 2,439,500 - 2,439,500
Trade and other payables - long term - 179,507 179,507
Trade and other payables - short term - 206,763 206,763
Total 2,439,500 386,270 2,825,770
Fair value hierarchy as at 31 December 2022
Level 1 Level 2 Total
$'000 $'000 $'000
Financial assets
Short term restricted cash 71,778 - 71,778
Short term trade and other receivables - 76,509 76,509
Cash and cash equivalents 24,825 - 24,825
Total 96,603 76,509 173,112
Financial liabilities
Senior secured notes ((1)) 2,298,125 - 2,298,125
Trade and other payables - long term - 210,062 210,062
Trade and other payables - short term - 252,730 252,730
Total 2,298,125 462,792 2,760,917
((1)) The senior secured notes are measured at amortised cost in the Group's
financial statements. The notes are listed for trading on the TACT
Institutional of the Tel Aviv Stock Exchange Ltd (the "TASE"). The carrying
amount as of 30 September 2023 was US$2,588 million and as of 31 December 2022
was US$2,471 million.
NOTE 15: - Significant events and transaction during the reporting period
(a) Gas Sales Agreements - Energean signed spot gas sale and purchase
agreement with three Israeli gas buyers. The gas price will be determined in
each period, with purchased amounts determined on a daily basis. The agreement
will be valid for an initial one-year period with an option to extend subject
to ratification by both parties.
(b) INGL Hand-Over completion - 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.
(c) Completion of offering of US$750,000,000 senior secured notes - see
Note 12.
NOTE 16: - Significant events and transaction after the reporting period
(a) Interim dividend - An interim dividend of US$78 million was declared and
paid on the 18 October, as part of the process to make the final deferred
consideration to Kerogen.
(b) Israel-Hamas conflict (Swords of Iron War) - as of 7 October 2023,
following an unprecedented attack against Israel by Hamas, Israel has been
declared in a state of war. While the situation has not impacted the Company's
production from the FPSO, it is not possible to predict whether the conflict
will have a material adverse effect on our future earnings, cash flows and
financial conditions.
(c) Karish and Tanin purchase agreement - In November 2023, Energean
Israel reached a settlement with NewMed Energy for the remaining deferred
consideration under the original purchase agreement of the Karish and Tanin
leases of approximately $47.4 million, which includes the agreed annual
interest. This will be paid in 2024 in two instalments. This agreement is
final and unappealable.
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