REG - Energean PLC - Energean Israel Full Year 2025 Accounts
19/03/2026 07:02
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RNS Number : 2944X Energean PLC 19 March 2026
ENERGEAN ISRAEL LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2025
ENERGEAN ISRAEL LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
AS OF 31 DECEMBER 2025
INDEX
Page
Independent Auditor's Report 2-4
Consolidated Statement of Comprehensive Income 5
Consolidated Statement of Financial Position 6
Consolidated Statement of Changes in Equity 7
Consolidated Statement of Cash Flows 8
Notes to the Consolidated Financial Statements 9-48
- - - - - - - - - - - - - - - - - - - -
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road, Building A, ey.com
Tel-Aviv 6492102, Israel
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Energean Israel Limited
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of Energean Israel
Limited (the Company) and its subsidiaries (together, the Group), which
comprise the consolidated statement of financial position as at 31 December
2025, and the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for
the years then ended, and notes to the consolidated financial statements,
including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Group as at 31 December 2025, and its consolidated financial performance and
its consolidated cash flows for the year ended 31 December 2025 in accordance
with International Financial Reporting Standards (IFRS) as adopted by the
European Union.
Basis for opinion
We conducted our audits in accordance with International Standards on Auditing
(ISAs). Our responsibilities under those standards are further described in
the Auditor's responsibilities for the audit of the consolidated financial
statements section of our report. We are independent of the Group in
accordance with the International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code), and we have
fulfilled our other ethical responsibilities in accordance with the IESBA
Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in the audit of the financial statements of the current
period. These matters were addressed in the context of the audit of the
financial statements as a whole, and in forming the auditor's opinion thereon,
and we do not provide a separate opinion on these matters. For the matter
below, our description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the Auditor's
responsibilities for the audit of the financial statements section of our
report, including in relation to this matter. Accordingly, our audit included
the performance of procedures designed to respond to our assessment of the
risks of material misstatement of the financial statements. The results of our
audit procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying financial
statements.
Estimation of oil and gas reserves
Key audit matter description
The estimation and measurement of oil and gas reserves is considered to be a
significant risk as it impacts many material elements of the consolidated
financial statements including decommissioning, recoverability and
depreciation, depletion and amortisation (DD&A) of oil and gas assets.
Reserve estimation is complex, requiring technical input based on geological
and engineering data. Management's reserves estimates are provided by external
specialists (D&M).
The Company's reserve portfolio as at 31 December 2025 included proven and
probable reserves (2P) reserves of 818 Mmboe.
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road, Building A, ey.com
Tel-Aviv 6492102, Israel
Our response to the risk
· We confirmed our understanding of the Company's oil and gas reserve
estimation process and the control environment implemented by management
including both the transfer of source data to the management's reserves
specialists and subsequently the input of reserves information from the
specialist reports into the accounting system;
· We obtained and reviewed the most recent third-party reserves and
resources reports prepared by these specialists and compared these for
consistency between other areas of the audit including the Company's reserves
models, DD&A and the calculation of the decommissioning provision;
· We assessed the qualifications of management's specialists;
· We examined that the updated oil and gas reserve estimates were
properly included in the accounting treatment for determining the depletion
rate of oil and gas assets;
· We examined the adequacy of the calculations and the disclosures in
the Company's consolidated financial statements.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with IFRS as adopted by the
European Union, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible
for assessing the Group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's
financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional skepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Group's internal control.
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road, Building A, ey.com
Tel-Aviv 6492102, Israel
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
· Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor's report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The partner in charge of the audit resulting in this independent auditor's
report is Ran Shir-Az.
Tel-Aviv, Israel KOST FORER GABBAY & KASIERER
18 March, 2026 A Member of Ernst & Young Global
ENERGEAN ISRAEL LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2025
Notes 2025 2024
$'000 $'000
Revenue 5 1,165,213 1,239,111
Cost of sales 6 (610,932) (598,858)
Gross profit 554,281 640,253
Administrative expenses 6 (20,564) (16,668)
Exploration expenses written off 6 (1,994) -
Other expenses 6 (9) (1,048)
Other income 6 9,794 269
Operating profit 541,508 622,806
Finance income 8 5,390 8,502
Finance costs 8 (163,622) (179,779)
Net foreign exchange losses 8 (18,713) (938)
Profit for the year before tax 364,563 450,591
Taxation expense 9 (85,171) (103,873)
Net profit for the year 279,392 346,718
Other comprehensive income (loss):
Items that may be reclassified subsequently to profit or loss: 23(G)
Cashflow hedges gains (losses) recognised in OCI 36,816 345))
Taxes on cash flow hedges (8,469) 79
Other comprehensive income (loss) for the year 28,347 (266)
Total comprehensive income for the year 307,739 346,452
The accompanying notes are an integral part of these consolidated financial
statements.
ENERGEAN ISRAEL LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF 31 DECEMBER 2025
Notes 2025 2024
$'000 $'000
ASSETS:
NON-CURRENT ASSETS:
Property, plant and equipment 10 3,077,029 2,917,275
Intangible assets 11 147,477 96,103
Derivative financial instruments 23(G) 3,931 -
Other receivables 13 12,282 9,848
3,240,719 3,023,226
CURRENT ASSETS:
Trade and other receivables 13 145,902 121,280
Derivative financial instruments 15 17,976 - 23(G) 21,705 -
Inventories 14 20,991 16,714
Restricted cash 16(A) 97,647 82,427
118,819
Cash and cash equivalents 15 118,819 157,728
405,064 378,149
TOTAL ASSETS 3,645,783 3,401,375
EQUITY AND LIABILITIES:
EQUITY:
Share capital 19(A) 1,708 1,708
Share Premium 212,539 212,539
Hedges Reserve 23 19,740 (266)
Retained earnings 177,841 27,499
TOTAL EQUITY 411,828 241,480
NON-CURRENT LIABILITIES:
Borrowings 16(A) 2,744,085 2,594,213
Decommissioning provision 17 89,999 85,357
Deferred tax liabilities 12 75,995 69,046
Trade and other payables 18 4,417 67,044
2,914,496 2,815,660
CURRENT LIABILITIES:
Trade and other payables 18 311,134 262,924
Income tax liability 9 8,325 80,966
Derivative financial instruments 23 - 345
319,459 344,235
TOTAL LIABILITIES 3,233,955 3,159,895
TOTAL EQUITY AND LIABILITIES 3,645,783 3,401,375
23(G)
21,705
-
Inventories
14
20,991
16,714
Restricted cash
16(A)
97,647
118,819
82,427
Cash and cash equivalents
15
118,819
157,728
405,064
378,149
TOTAL ASSETS
3,645,783
3,401,375
EQUITY AND LIABILITIES:
EQUITY:
Share capital
19(A)
1,708
1,708
Share Premium
212,539
212,539
Hedges Reserve
23
19,740
(266)
Retained earnings
177,841
27,499
TOTAL EQUITY
411,828
241,480
NON-CURRENT LIABILITIES:
Borrowings
16(A)
2,744,085
2,594,213
Decommissioning provision
17
89,999
85,357
Deferred tax liabilities
12
75,995
69,046
Trade and other payables
18
4,417
67,044
2,914,496
2,815,660
CURRENT LIABILITIES:
Trade and other payables
18
311,134
262,924
Income tax liability
9
8,325
80,966
Derivative financial instruments
23
-
345
319,459
344,235
TOTAL LIABILITIES
3,233,955
3,159,895
TOTAL EQUITY AND LIABILITIES
3,645,783
3,401,375
18 March 2026
Date of approval of the consolidated financial statements Panagiotis Benos Matthaios Rigas
Director Director
The accompanying notes are an integral part of these consolidated financial
statements.
ENERGEAN ISRAEL LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2025
Share capital Share Premium Hedges Retained earnings Total equity
$'000 $'000 Reserve $'000 $'000
$'000
Balance as of 1 January 2024 1,708 212,539 - 74,781 289,028
Transactions with shareholders:
Dividend, see note 19(c) - - - (394,000) (394,000)
Comprehensive Income:
Profit for the year - - - 346,718 346,718
Other comprehensive loss - - (266) - (266)
Total comprehensive income - - (266) 346,718 346,452
At 1 January 2025 1,708 212,539 (266) 27,499 241,480
Transactions with shareholders:
Dividend, see note 19(c) - - - (129,050) (129,050)
Comprehensive Income:
Profit for the year - - - 279,392 279,392
Other comprehensive income - - 28,347 - 28,347
Total comprehensive income - - 28,347 279,392 307,739
Cashflow hedges -basis adjustment transferred to PPE - - (10,833) - (10,833)
Cashflow hedge -deferred tax related to basis adjustment - - 2,492 - 2,492
Balance as of 31 December 2025 1,708 212,539 19,740 177,841 411,828
The accompanying notes are an integral part of these consolidated financial
statements.
ENERGEAN ISRAEL LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2025
Notes 2025 2024
$'000 $'000
Operating activities
Profit for the year before tax 364,563 450,591
Adjustments to reconcile profit before taxation to net cash provided by:
operating activities:
Depreciation, depletion and amortization ( ) 6 278,128 278,128 264,206
Loss from sale on property, plant and equipment ( ) 6 - 448
Impairment of exploration and evaluation asset ( ) 6 1,994 -
Other income ( ) 6 (294) -
Finance Income ( ) 8 (5,390) (8,502)
Finance expenses ( ) 8 163,622 179,779
Net foreign exchange losses ( ) 8 18,713 938
Cash flow from operations before working capital 821,336 887,460
(Increase)/decrease in trade and other receivables (20,261) 3,224
Increase in inventories (4,277) (9,573)
Increase in trade and other payables 43,227 10,261
Cash flow from operations 840,025 891,372
Income tax paid (157,912) (2,384)
Net cash inflows from operating activities 682,113 888,988
Investing activities
Payment for purchase of property, plant and equipment (PP&E) 10(C) (475,531) (260,013)
Payment for exploration and evaluation, and other intangible assets 11(B) (53,212) (127,407)
Amounts received from INGL related to transfer of PP&E 13(1) - 1,801
Loan granted to Related Party ((1)) (28,000) -
Movement in restricted cash, net 16(A) (15,220) (59,945)
Income on derivatives 23(G) 233 -
Interest received 5,222 8,750
Net cash outflow used in investing activities (566,508) (436,814)
Financing activities
Transaction costs in relation to debt issuance 16(A) (33,136) (33,136) (81)
Drawdown of borrowings 16(A) 783,199 -
Senior secured notes repayment 16(A) (625,000) -
Borrowings - interest paid 16(A) (170,011) (178,592)
Dividends paid ((1)) 19(C) (101,050) (394,000)
Other finance cost paid (5,370) (1,342)
Finance costs paid for deferred license payments - (4,000)
Repayment of obligations under leases 13 (6,139) (5,691)
Net cash outflow used in financing activities (157,507) (583,706)
Net decrease in cash and cash equivalents (41,902) (131,532)
Cash and cash equivalents at beginning of year 157,728 286,625
Effect of exchange differences on cash and cash equivalents 2,993 2,635
Cash and cash equivalents at end of year 15 118,819 157,728
((1)) An interim dividend of US$28.25 million was declared in May 2025 and was
settled through the offset of a loan to the parent company, including accrued
interest.
The accompanying notes are an integral part of these 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. As of 1 January 2024, the Company is tax resident in
the UK by virtue of having transferred its management and control from Cyprus
to the UK, with its registered address being at Accurist House, 44 Baker
Street, London, W1U 7AL. Subsequent to the reporting date, the Company changed
its registered address to One Great Cumberland Place, London, W1H 7AL.
b. The Company and its subsidiaries (the "Group") has been established
with the objective of exploration, production and commercialisation of natural
gas and hydrocarbon liquids. The Group's main activities are performed in
Israel by its Israeli Branch.
c. As of 31 December 2025, the Company had investments in the following
subsidiaries:
Name of subsidiary Country of incorporation / registered office Principal activities Shareholding
At 31 December 2025 and 2024
(%)
Energean Israel Transmission LTD 121, Menachem Begin St. Gas transportation license holder 100
Azrieli Sarona Tower, POB 24,
Tel Aviv 6701203 Israel
Energean Israel Finance LTD Financing activities 100
d. The Group's core assets as of 31 December 2025 were comprised of:
Country Asset Working interest Field phase
Israel Karish including Karish North ((1)) 100% Production
Israel Tanin ((1)) 100% Development
Israel Katlan (Block 12) ((2)) 100% Development
Israel Block 23 ((3)) 100% Exploration
Israel Block 31 ((3)) 100% Exploration
((1)) The concession agreement expires in 2044.
((2)) Katlan Final Investment Decision was taken in July 2024, and the
concession agreement received in the same month
expires in 2054.
((3)) Refer to Note 11.
NOTE 2: - Basis of preparation and presentation of financial information
The following accounting policies have been applied consistently in the
consolidated financial statements for all periods presented, unless otherwise
stated.
a. Basis of presentation of the financial statements:
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union (EU).
These consolidated financial statements have not been prepared in accordance
with the requirements of the Cyprus Companies Law, Cap.113 and are not
intended for statutory filing in Cyprus.
The consolidated financial statements have been prepared on the historical
cost basis.
The consolidated financial statements have been prepared on a going concern
basis. The principal accounting policies adopted by the Group are set out
below.
b. The financial statements are presented in U.S. Dollars and all
values are rounded to the nearest thousand
dollars except where otherwise indicated.
NOTE 2: - Basis of preparation and presentation of financial
information (Cont.)
c. 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 18 March 2026 to 30 June 2027 (the 'Assessment Period').
On 28 February 2026, the Ministry of Energy and Infrastructure ordered the
temporary suspension of production and all activities of the Energean Power
FPSO, following geopolitical escalation in the region. As at the date of
approval of these consolidated financial statements, production remains
suspended. The Group continues to monitor the situation closely and maintains
active dialogue with the Ministry of Energy and Infrastructure and other
relevant stakeholders to facilitate the safe resumption of production as soon
as possible.
Given that the Karish and Karish North fields, processed through the Energean
Power FPSO, represent all of the Group's revenue and operating cash
generation, the Directors has given particular and careful consideration to
the impact of this suspension on the Group's going concern assessment. The
going concern assessment has been prepared taking full account of the
suspension and reflects all information available to the Directors as at the
date of approval.
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 and estimated future commodity prices (based on recent published
forward curves). The going concern assessment contains a 'Base Case' and a
'Reasonable Worst Case' (RWC') scenario and Reverse stress testing.
The base case scenario assumes that production resumes in the near term,
consistent with the temporary and government-directed nature of previous
suspensions, including the suspension in June 2025 which lasted 12 days.
Under the base case and applying a Brent oil price assumption of US$65/bbl
with gas revenues recognised at contractually agreed prices under the Group's
long-term GSPAs, the Group maintains adequate liquidity and significant
covenant headroom throughout the Assessment Period.
The Directors has also modelled a reasonable worst-case scenario in which the
current suspension extends for a materially longer period. In assessing the
Group's resilience under this scenario, the Directors have identified a range
of mitigating actions that are within management's control, including the
deferral of dividends, deferral and/or reduction of non-committed development
capital expenditure, reduction of discretionary operating costs, and
management of working capital. These mitigating actions do not require
third-party consent and can be implemented promptly should the suspension be
prolonged. Under the reasonable worst-case scenario, and after applying these
mitigating actions, the Group is able to maintain adequate liquidity during
the Assessment period.
The Directors has further performed reverse stress testing to determine the
conditions under which liquidity headroom would be eliminated. The conditions
necessary for the reverse stress test scenario to crystallise are judged to be
remote and are not considered a realistic basis for the going concern
assessment.
The Directors' assessment is based on the temporary and government-directed
nature of the suspension, which reflects geopolitical conditions rather than
any operational, commercial or financial deficiency of the Group; the Group's
track record of resuming operations promptly following previous
government-ordered shutdowns; and the strategic importance of the Karish and
Karish North fields to Israel's domestic energy security. The Directors are
satisfied that appropriate support mechanisms are available to the Group
should extreme and remote circumstances require it.
After careful consideration of the above, including the post-period suspension
and its potential impact on the Group's cash flows and liquidity position, the
Directors are satisfied that the Group has sufficient financial resources to
continue in operation throughout the Assessment Period. Accordingly, the
Directors continue to adopt the going concern basis in preparing these
consolidated financial statements. No material uncertainty exists in relation
to going concern.
NOTE 2: - Basis of preparation and presentation of financial
information (Cont.)
Israel geopolitical environment - Energean highlights the following as
important in relation to its principal risks. Since 7 October 2023, the
magnitude of regional geopolitical risk has remained elevated. Concerns of
escalation in the Middle East have intensified the security risk in the
region, as essential infrastructure systems (such as the Energean
Power FPSO offshore Israel) may be targets for missile fire and sabotage
operations. Any event that impacts production from the Karish and Karish North
fields could have a material adverse impact on the business, results of
operations, cash flows, financial condition and prospects of the Group.
In 2025, following geopolitical escalation in the region, the Ministry of
Energy and Infrastructure ordered a temporary suspension of production and
activities if the Energean Power FPSO between 13 June 2025 and 25 June 2025;
otherwise, 2025 production was not disrupted due to geopolitical situation.
Post-period end, regional geopolitical risk remained elevated. On 28 February
2026, the Ministry of Energy and Infrastructure ordered the temporary
suspension of production and activities of the Energean Power FPSO following
further geopolitical escalation in the region. Energean maintains close
dialogue with the Ministry of Energy and Infrastructure and other relevant
stakeholders to facilitate the safe resumption of production as soon as
possible.
In 2025 and following the reporting period, Energean has ensured that all
measures are in place to continue business operations (subject to Governmental
instructions), maintain the mobility of its people and security of its
information.
d. New and amended accounting standards and interpretations:
The following amendments became effective as at 1 January 2025 and have been
applied in the preparation of these consolidated financial statements:
· Amendments to IAS 21- Lack of exchangeability;
In August 2023, the IASB issued Amendments to IAS 21: Lack of Exchangeability
("the Amendments") to clarify how an entity should assess whether a currency
is exchangeable and how it should measure and determine a spot exchange rate
when exchangeability is lacking. The adoption of the above standard and
interpretations did not lead to any material changes to the Group's accounting
policies and did not have any other material impact on the financial position
or performance of the Group.
The following amendments and interpretations have been issued but were not
effective for the 2025 reporting period:
· Amendments to IFRS 9 and IFRS 7: "Financial Instruments:
Disclosures";
On May 30, 2024, the IASB issued "Amendments to the Classification and
Measurement of Financial Instruments Amendments to IFRS 9 and IFRS 7" ("the
Amendments"). The Amendments clarify certain aspects of the classification and
measurement of financial instruments.
· Annual improvements to IFRS accounting standards: Volume 11;
· Amendments to IFRS 9 and IFRS 7: Contracts referencing
nature-dependent electricity;
· IFRS 18: Presentation and Disclosure in Financial Statements;
In April 2024, the International Accounting Standards Board ("the IASB")
issued IFRS 18, "Presentation and Disclosure in Financial Statements" ("IFRS
18") which replaces IAS 1, "Presentation of Financial Statements".
IFRS 18 is aimed at improving comparability and transparency of communication
in financial statements.
· IFRS 18 retains certain existing requirements of IAS 1 and
introduces new requirements on presentation within the statement of profit or
loss, including specified totals and subtotals. It also requires disclosure of
management-defined performance measures and includes new requirements for
aggregation and disaggregation of financial information.
· IFRS 19: Subsidiaries without Public Accountability: Disclosures.
NOTE 3: - Material accounting policies
The Company is evaluating the implications of the adoption of the Amendments
on its consolidated financial statements.
e. Basis of consolidation:
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) as
detailed in Note 1 above.
Accounting Policies:
The principal accounting policies and measurement bases used in the
preparation of the consolidated financial statements are set out below. These
policies have been consistently applied to all periods presented in the
consolidated financial statements unless otherwise stated.
a) Functional and presentation currency and foreign currency:
1. Functional and presentation currency:
Items included in the financial statements of the Group are measured using the
currency of the primary economic
environment in which the Group operates (''the functional currency'').
The functional currency of the Company is U.S. Dollars (US$). The U.S. Dollar
is the currency that influences future
sales prices, revenue estimates and also highly affect the Group's operations.
The presentation currency of the Group's consolidated financial statements is
U.S. Dollar.
2. Transactions and balances:
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from monetary assets and liabilities
denominated in foreign currencies are recognised in the profit or loss. Such
monetary assets and liabilities are translated using the functional currency
exchange rates at the reporting date. Non-monetary items that are measured in
terms of historical cost denominated in a foreign currency are translated at
the exchange rates prevailing at the date of the transaction and are not
subsequently remeasured.
b) Intangible assets - Exploration and evaluation expenditures:
The Group adopts the successful efforts method of accounting for exploration
and evaluation costs. Pre-licence costs are expensed in the period in which
they are incurred. All licence acquisition, exploration and evaluation costs
and directly attributable administration costs are initially capitalised as
intangible assets by field or exploration area, as appropriate. All such
capitalised costs are subject to technical, commercial and management review,
as well as review for indicators of impairment at least once a year. This is
to confirm the continued intent to develop or otherwise extract value from the
discovery. When this is no longer the case, the costs are written off through
the statement of comprehensive income (loss). When proved reserves of oil and
gas are identified and development is sanctioned by management, the relevant
capitalised expenditure is first assessed for impairment and (if required) any
impairment loss is recognised, then the remaining balance is transferred to
oil and gas properties.
c) Commercial reserves:
Commercial reserves are proven and probable oil and gas reserves, which are
defined as the estimated quantities of crude oil, natural gas and natural gas
liquids which geological, geophysical and engineering data demonstrate with a
specified degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible. There should be a
50 per cent statistical probability that the actual quantity of recoverable
reserves will be more than the amount estimated as proven and probable
reserves and a 50 per cent statistical probability that it will be less.
NOTE 3: - Material accounting policies
d) Oil and gas properties - assets in development:
Expenditure is transferred from 'Exploration and evaluation assets' to 'Assets
in development' which is a subcategory of 'Oil and gas properties' once the
work completed to date supports the future development of the asset and such
development receives appropriate approvals. After transfer of the exploration
and evaluation assets, all subsequent
expenditure on the construction, installation or completion of infrastructure
facilities such as platforms, pipelines and the drilling of development wells,
including unsuccessful development or delineation wells, is capitalised within
'Assets in development'.
condition necessary for it to be capable of operating in the manner intended
by management (such as samples produced when testing whether the asset is
functioning properly) has been recognised in profit or loss in accordance with
IFRS 15 Revenue Recognition. The Group measures the cost of those items
applying the measurement requirements of IAS 2 Inventories. When a development
project moves into the production stage, all assets included in 'Assets in
development' are then transferred to 'Producing assets' which is also a
sub-category of 'Oil and gas properties. The capitalisation of certain
construction/development costs ceases, and costs are either regarded as part
of the cost of inventory or expensed, except for costs which qualify for
capitalisation relating to 'Oil and gas properties' asset additions,
improvements or new developments.
e) Depletion and amortisation:
All expenditure carried within each field will be amortised from the
commencement of production on a unit of production basis, which is the ratio
of oil and gas production in the period to the estimated quantities of
commercial reserves at the end of the period plus the production in the
period, generally on a field-by-field basis or by a group of fields which are
reliant on common infrastructure. Costs included in the unit of production
calculation comprise the net book value of capitalised costs plus the
estimated future field development costs required to recover the commercial
reserves remaining. Changes in the estimates of commercial reserves or future
field development costs are dealt with prospectively.
f) Impairments of oil & gas properties:
Where there is evidence of economic interdependency between fields, such as
common infrastructure, the fields are grouped as a single CGU for impairment
purposes. A CGU's recoverable amount is the higher of its fair value less
costs of disposal and its value in use. Where the carrying amount of a CGU
exceeds its recoverable amount, the CGU is considered impaired and is written
down to its recoverable amount.
Fair value less costs of disposal is the price that would be received to sell
the asset in an orderly transaction between market participants and does not
reflect the effects of factors that may be specific to the Group and not
applicable to entities in general.
For discount of the future cash flows the Group calculates CGU-specific
discount rate. The discount rate is based on an assessment of a relevant peer
group's pre-tax Weighted Average Cost of Capital (WACC). The Group then adds
any exploration risk premium which is implicit within a peer group's WACC and
subsequently applies additional country risk premium for Israel.
g) Impairment of non-financial assets:
At each reporting date, the Group reviews the carrying amounts of its
depreciable property, plant and equipment and intangible assets to determine
whether there is any indication that those assets have suffered an impairment
loss. Impairment is assessed at the level of cash-generating units (CGUs)
which, in accordance with IAS 36 'Impairment of Assets', are identified as the
smallest identifiable group of assets that generates cash inflows, which are
largely independent of the cash inflows from other assets. This is usually at
the individual royalty, stream, oil and gas or working interest level for each
property from which cash inflows are generated.
An impairment loss is recognised for the amount by which the asset's carrying
value exceeds its recoverable amount, which is the higher of fair value less
costs of disposal (FVLCD) and value-in-use (VIU). The future cash flow
expected is
NOTE 3: - Material accounting policies (Cont.)
derived using estimates of proven and probable reserves, a portion of
resources that is expected to be converted into reserves and information
regarding the mineral, stream and oil & gas properties, respectively, that
could affect the future recoverability of the Group's interests. Discount
factors are determined individually for each asset and reflect their
respective risk profiles.
In addition, exploration and evaluation assets are assessed for impairment
upon their reclassification to producing assets (oil and gas interest in
property, plant and equipment).
In assessing the impairment of exploration and evaluation assets, the carrying
value of the asset would be compared to the estimated recoverable amount and
any impairment loss is recognised immediately in profit or loss.
h) Leases:
The Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
The determination of whether an arrangement is, or contains, a lease is based
on the substance of the arrangement at the date of inception. The arrangement
is assessed to determine whether fulfilment is dependent on the use of a
specific asset (or assets) and the arrangement conveys a right to use the
asset (or assets), even if that asset is (or those assets
are) not explicitly specified in an arrangement. The Group is not a lessor in
any transactions, it is only a lessee.
The Group applies a single recognition and measurement approach for all
leases, except for short-term leases and leases of low-value assets. The Group
recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
i) Right-of-use assets:
The Group recognises right-of-use assets at the commencement date of the lease
(i.e., the date the underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the assets, as follows:
- Property leases 2 to 5 years
- Motor vehicles and other equipment 1 to 3 years
- Fiber Optic 14 years
- Vessel- 3 years
Lease liabilities:
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised by the Group and payments
of penalties for terminating the lease, if the lease term reflects the Group
exercising the option to terminate.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date if the interest rate
implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
NOTE 3: - Material accounting policies (Cont.)
Other leases outside the scope of IFRS 16:
Leases to explore for or use minerals, oil, natural gas and similar
non-regenerative resources are outside the scope of IFRS 16 and are recognised
as exploration and evaluation costs or as oil and gas assets, as appropriate.
Please refer to notes c and e above.
j) Financial instruments - initial recognition and subsequent
measurement:
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
1. Financial assets:
Initial recognition and measurement:
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost, fair value through other comprehensive income
(OCI), or fair value through profit or loss. The classification of financial
assets at initial recognition depends on the financial asset's contractual
cash flow characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a significant
financing component or for which the Group has applied the practical
expedient, the Group initially measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do not contain a significant
financing component or for which the Group has applied the practical expedient
are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised
cost, it needs to give rise to cash flows
that are 'solely payments of principal and interest (SPPI)' on the principal
amount outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order
to generate cash flows. The business model determines whether cash flows will
result from collecting contractual cash flows, selling the financial assets,
or both.
Subsequent measurement-
For purposes of subsequent measurement, financial assets are classified in two
categories:
· Financial assets at amortised cost (debt instruments)
· Financial assets at fair value through profit or loss
Financial assets at amortised cost:
The Group measures financial assets at amortised cost if both of the following
conditions are met:
- The financial asset is held within a business model with
the objective to hold financial assets in order to collect contractual cash
flows; and
- The contractual terms of the financial asset give rise
on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment under the
expected credit loss model. Gains and losses are recognised in profit or loss
when the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost includes trade receivables.
Financial assets at fair value through profit or loss
The Group's financial assets at fair value through profit or loss include
financial assets designated upon initial recognition at fair value through
profit or loss, or financial assets mandatorily required to be measured at
fair value.
Financial assets at fair value through profit or loss are carried in the
statement of financial position at fair value with net changes in fair value
recognised in the statement of profit or loss.
NOTE 3: - Material accounting policies (Cont.)
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is primarily derecognised (i.e.,
removed from the Group's consolidated statement of financial position) when
the rights to receive cash flows from the asset have expired or are
transferred.
Impairment of financial assets:
The Group recognises an allowance for expected credit losses (ECLs) for all
debt instruments not held at fair value through profit or loss. ECLs are based
on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has
not been a significant increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified
approach in calculating allowance for
expected credit losses (ECLs). Therefore, the Group does not track changes in
credit risk, but instead recognises
a loss allowance based on lifetime ECLs at each reporting date.
Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, specifically forward
foreign currency contracts, to hedge exposure to exchange rate risks. Such
derivative financial instruments are initially recognised at fair value on the
date on which the derivative contract is entered into and are subsequently
re‑measured at fair value. Derivatives are presented as financial assets
when their fair value is positive and as financial liabilities when their fair
value is negative.
For the purpose of hedge accounting, hedges are classified as:
· Fair value hedges when hedging the exposure to changes in the
fair value of a recognised asset or liability or an unrecognised firm
commitment
· Cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast transaction or the
foreign currency risk in an unrecognised firm commitment
At the inception of a hedge relationship, the Group formally designates and
documents the hedging instrument and the hedged item to which it wishes to
apply hedge accounting and the risk management objective and strategy for
undertaking the hedge.
A hedging relationship qualifies for hedge accounting if it meets all of the
following effectiveness requirements:
· There is 'an economic relationship' between the hedged item and
the hedging instrument.
· The effect of credit risk does not 'dominate the value changes'
that result from that economic relationship.
· The hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to
hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are
accounted for, as described below:
NOTE 3: - Material accounting policies (Cont.)
Cash flow hedges:
The effective portion of the gain or loss on the hedging instrument is
recognised in OCI in the cash flow hedge reserve, while any ineffective
portion is recognised immediately in the statement of profit or loss. The cash
flow hedge reserve is adjusted to the lower of the cumulative gain or loss on
the hedging instrument and the cumulative change in fair value of the hedged
item attributable to the hedged risk.
From time to time, the Group may use forward commodity contracts for its
exposure to volatility in the foreign exchange rates. The ineffective portion
relating to forward commodity contracts is recognised in revenue or
cost of sales. The Group designates only the spot element of forward contracts
as a hedging instrument. The forward element is recognised in OCI and
accumulated in a separate component of equity.
The amount accumulated in the cash flow hedge reserve in OCI is reclassified
to profit or loss as a reclassification adjustment in the same period or
periods during which the hedged cash flows affect profit or loss. Where the
hedged item is a forecast purchase of goods or services that is subsequently
recognised in profit or loss, the reclassification is recorded in the same
line of the statement of profit or loss as the hedged item.
When the hedged forecast transaction results in the recognition of a
non-financial asset, including the construction or acquisition of property,
plant and equipment or intangible assets, the cumulative effective portion of
the gain or loss deferred in the cash flow hedge reserve, together with any
related cost of hedging amount, is removed from equity and included as a basis
adjustment to the initial carrying amount of the related asset at the point
that asset is first recognised. This basis adjustment is made once, at the
point of initial recognition of the asset, and is not subsequently reversed
through profit or loss. Following the basis adjustment, the adjusted carrying
amount of the asset forms the basis for depreciation or amortisation over the
useful life of the asset.If cash flow hedge accounting is discontinued, the
amount that has been accumulated in OCI must remain in accumulated OCI if the
hedged future cash flows are still expected to occur. Otherwise, the amount
will be immediately reclassified to profit or loss or to the carrying amount
of the related asset as a reclassification adjustment. After discontinuation,
once the hedged cash flow occurs, any amount remaining in accumulated OCI must
be accounted for depending on the nature of the underlying transaction.
2. Financial liabilities:
Initial recognition and measurement:
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly attributable
transaction costs.
The Group's financial liabilities include trade and other payables, loans and
borrowings and derivative financial instruments.
Subsequent measurement:
The measurement of financial liabilities depends on their classification, as
described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred
for the purpose of repurchasing in the near term. This category also includes
derivative financial instruments entered into by the Group that are not
designated as hedging instruments in hedge relationships as defined by IFRS 9
Financial Instruments. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging instruments.
NOTE 3: - Material accounting policies (Cont.)
Gains or losses on financial liabilities recognised at fair value through
profit and loss are recognised in the statement of profit or loss. The Group
discloses the unwinding of the discount separately, in finance costs, from the
mark to market gain or loss.
Loans and borrowings:
After initial recognition, interest-bearing liabilities such as senior secured
notes and bank loans are subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in profit or loss when the liabilities
are derecognised, modified and through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss.
Derecognition:
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the statement of profit or loss.
3. Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net amount is
reported in the consolidated statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
Equity, reserves and dividend payments:
Share capital represents the nominal (par) value of shares that have been
issued. Share premium
includes any premiums received on issue of share capital. Any transaction
costs associated with the
issuing of shares are deducted from share premium, net of any related income
tax benefits.
Dividend distributions payable to equity shareholders are included in other
liabilities when the dividends have been approved in a general meeting prior
to the balance sheet date.
k) Share-based payments:
Employees of the Group receive remuneration in the form of share-based
payments under equity incentive plans operated by Energean plc, the ultimate
parent company. Under the terms of the intercompany recharge agreement between
the Group and Energean plc, the Group has a legally binding obligation to
reimburse Energean plc in cash for the cost of shares delivered to Group
employees upon vesting. Accordingly, the awards are classified as cash-settled
share-based payment transactions in accordance with IFRS 2.A liability is
recognised over the vesting period with a corresponding charge to employee
benefits expense. In accordance with IFRS 2, the liability is remeasured to
fair value at each reporting date based on the current market price of
Energean plc ordinary shares, adjusted for the probability of vesting by
reference to expected satisfaction of service and non-market performance
conditions. Any change in the fair value of the liability between reporting
dates is recognised in profit or loss in the period in which it arises. The
liability is derecognised upon settlement in cash with Energean plc.
NOTE 3: - Material accounting policies (Cont.)
l) Fair value measurement:
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities, for which fair value is measured or disclosed in
the financial statements, are categorised within the fair value hierarchy,
described as follows, based on the lowest-level input that is significant to
the fair value measurement as a whole:
- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
- Level 2 - Valuation techniques for which the lowest-level input
that is significant to the fair value measurement is directly or indirectly
observable.
- Level 3 - Valuation techniques for which the lowest-level input
that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation (based on the
lowest-level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
m) Cash and cash equivalents and restricted cash:
Cash and cash equivalents comprise of cash in hand and time deposits, with a
maturity of three months or less, that are subject to an insignificant risk of
changes in their fair value.
Restricted cash comprises balances retained in respect of the Group's
Borrowings and cash collateral provided under a letter of credit facility for
issuing bank guarantees for Group's activities in Israel (see Note 16A). The
nature of the restrictions on these balances mean that they do not qualify for
classification as cash equivalents.
n) Inventories:
Inventories comprise hydrocarbon liquids and natural gas, consumables and
other spare parts. Inventories are stated at the lower of cost and net
realisable value. Cost is determined using the weighted average cost method.
The cost of finished goods and work in progress comprises raw materials,
direct labour, other direct costs and related production overheads. It does
not include borrowing costs. Net realisable value is the estimated selling
price in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale. Spare parts consumed within a
year are carried as inventory and recognised in profit or loss when consumed.
The Group assesses the net realisable value of the inventories at the end of
each year and recognises in the consolidated statement of profit or loss the
appropriate valuation adjustment if the inventories are overstated.
o) Decommissioning provision:
Provision for decommissioning is recognised in full when the related
facilities are installed. A corresponding amount equivalent to the provision
is also recognised as part of the cost of the related property, plant and
equipment. The amount recognised is the estimated cost of decommissioning,
discounted to its net present value at a risk-free discount
rate, and is reassessed each year in accordance with relevant conditions and
requirements. Changes in the estimated timing of decommissioning or
decommissioning cost estimates are dealt with prospectively by recording an
adjustment to the provision, and a corresponding adjustment to property, plant
and equipment. The unwinding of the discount on the decommissioning provision
is included as a finance cost.
p) Revenue
Revenue from contracts with customers is recognised when control of the gas/
hydrocarbon liquids are transferred to the customer at an amount that reflects
the consideration to which the Group expects to be entitled in exchange for
those goods or services. The Group has concluded that it is the principal in
its revenue arrangements because it typically
NOTE 3: - Material accounting policies (Cont.)
controls the goods or services before transferring them to the customer.
In Israel royalties are levied by the government. The government can request
that these royalty payments be made in cash or in kind. In the current year
and in prior years the government has requested cash payments be made and
therefore the Group has not made any royalty payments in kind. As such the
Group obtains control of all the underlying reserves once extracted, sells the
production to its customers and then remits the proceeds to the royalty holder
and is therefore considered to be acting as the Principal. In addition, the
Group is also subject to royalty arrangements with third parties, which
operate in the same manner as the government royalties, whereby the Group
obtains control of the full production and subsequently transfers the relevant
share of proceeds to the third‑party royalty holders.
Sale of natural gas and hydrocarbon liquids
Sales revenue represents the sales value, net of VAT, of actual sales volumes
to customers in the year.
The Group's accounting policy under IFRS 15 is that revenue is recognised when
the Group satisfies a performance obligation by transferring hydrocarbon
liquids or gas to its customer. The title to hydrocarbon liquids and gas
typically transfers to a customer at the same time as the customer takes
physical possession of the hydrocarbon liquids or gas. Typically, at this
point in time, the performance obligations of the Group are fully satisfied.
The revenue is recorded when the hydrocarbon liquids or gas has been
physically delivered to a vessel or pipeline.
q) Retirement benefit costs regarding the employees by the directly
owned Branch in Israel:
The Israeli Branch has defined contribution plans pursuant to section 14 to
the Severance Pay in Israel Law under which the Israeli Branch pays fixed
contributions and will have no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient amounts to pay all employee
benefits relating to employee service in the current and prior periods.
Contributions to the defined contribution plan in respect of severance or
retirement pay are recognised as an expense when contributed concurrently with
performance of the employee's services.
r) Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of
those assets, until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
Excluded from the above capitalisation policy are any qualifying assets that
are inventories that are produced in large quantities on a repetitive basis.
and any Exploration and Evaluation assets which have not resulted in the
classification of commercial reserves. Borrowing costs consist of interest and
other costs that the Group incurs in connection with the borrowing of funds.
s) Tax:
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the financial statements because it
excludes items of income or expense that are taxable or deductible in other
years and it
further excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the reporting date.
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, based on
tax rates that have been enacted or substantively enacted by the reporting
date. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable
profits will be available against which deductible temporary differences can
be utilised.
The Group recognises tax provision liabilities for anticipated tax issues
based on if it is probable, defined as more likely than not, that additional
taxes will be due. This assessment is based on all available evidence and,
where appropriate, in
NOTE 3: - Material accounting policies (Cont.)
the light of external advice. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will
impact the income tax liability in the period in which such determination is
made.
Current and deferred tax assets and corresponding liabilities are offset when
there is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied by the
same taxation authority and the Group intends to settle its tax assets and
liabilities on a net basis
t) Levies:
Levies imposed on the Company by government entities through legislation, are
accounted for pursuant to IFRIC 21 according to which the liability for the
levy is recognized only when the activity that triggers payment occurs.
u) Statement of cash flows:
Under IAS 7, the Group classifies interest paid as a financing cash flow.
NOTE 4: - Critical accounting estimates and judgments
The preparation of these consolidated financial statements in conformity with
IFRS requires the use of accounting estimates and assumptions, and also
requires management to exercise its judgement, in the process of applying the
Group's accounting policies.
Estimates, assumptions and judgement applied are continually evaluated and are
based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Although these estimates, assumptions and judgement are based on management's
best knowledge of current events and actions, actual results may ultimately
differ.
1. Critical judgements in applying the Group's accounting
policies:
The following are significant management judgements in applying the accounting
policies of the Group that have the most significant effect on the financial
statements:
Carrying value of intangible exploration and evaluation assets:
Amounts carried under intangible exploration and evaluation assets represent
active exploration projects. Capitalised costs will be written off to the
income statement as exploration costs unless commercial reserves are
established, or
the determination process is not completed and there are no indications of
impairment in accordance with the Group's accounting policy. The process of
determining whether there is an indicator for impairment or calculating the
impairment requires critical judgement. The key areas in which management has
applied judgement are as follows: the Group's intention to proceed with a
future work programme; the likelihood of licence renewal or extension; the
assessment of whether sufficient data exists to indicate that, although a
development in the specific area is likely to proceed, the carrying amount of
the exploration and evaluation asset is unlikely to be recovered in full from
successful development or by sale; and the success of a well result or
geological or geophysical survey.
Identification of cash generating units (note 10):
In considering the carrying value of property, plant and equipment the Group
has to make a critical judgement in relation to the identification of the
smallest cash generating unit to which those assets are allocated.
The Israel development is one CGU, all the production from both the Karish
Main and Karish North fields and future production from Tanin and Katlan is
processed through the FPSO and flows through one pipeline onto gas buyers and
therefor there are no separate cash inflows.
2. Estimation uncertainty:
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities, are
discussed below:
NOTE 4: - Critical accounting estimates and judgments (Cont.)
Carrying value of property, plant and equipment (note 10):
The Group assesses impairment at each reporting date by evaluating conditions
specific to the Group that may lead to impairment of assets. Where an
indicator of impairment exists, the recoverable amount (which is the higher of
fair value less costs to sell and value in use) of the cash-generating unit to
which the assets belong is then estimated based on the present value of future
discounted cash flows.
For oil and gas assets, the expected future cash flow estimation is based on a
number of factors, variables and assumptions, the most important of which are
estimates of reserves, future production profiles, oil prices and costs. In
most cases, the present value of future cash flows is most sensitive to
estimates of future oil and gas price, estimates of reserves, estimates of
development costs and discount rates.
A change in the assumptions could materially change the recoverable amount. In
the event that future circumstances vary from these assumptions, the
recoverable amount of the Group's development and production assets could
change materially and result in impairment losses or the reversal of previous
impairment losses.
Hydrocarbon reserve and resource estimates (Note 10, 11, 12 and 17):
The Company's oil and gas development and production properties are
depreciated on a unit of production basis at a rate calculated by reference to
developed and undeveloped proved and probable commercial reserves (2P
developed and undeveloped) which are estimated to be recoverable with existing
and future developed facilities using current operating methods, determined in
accordance with the Petroleum Resources Management System published by the
Society of Petroleum Engineers, the World Petroleum Congress and the American
Association of Petroleum Geologists.
Commercial reserves are determined using estimates of oil and gas in place,
recovery factors and future oil prices. The level of estimated commercial
reserves is also a key determinant in assessing whether the carrying value of
any of the Company's oil and gas properties has been impaired. As the economic
assumptions used may change and as additional geological information is
produced during the operation of a field, estimates of recoverable reserves
may change.
Such changes may impact the Company's reported financial position and results
which include:
• Depreciation and amortisation charges in profit or loss may
change where such charges are determined using the units of production method,
or where the useful life of the related assets change.
• Impairment charges in the income statement
• Provisions for decommissioning may change - where changes to the
reserve estimates affect expectations about when such activities will occur
and the associated cost of these activities.
• The recognition and carrying value of deferred tax assets may
change due to changes in the judgements regarding the existence of such assets
and in estimates of the likely recovery of such assets.
Decommissioning provision (Note 17):
There is uncertainty around the cost of decommissioning as cost estimates can
vary in response to many factors, including from changes to market rates for
goods and services, to the relevant legal requirements, the emergence of new
technology or experience at other assets. The expected timing, work scope,
amount of expenditure, discount and inflation rates may also require
estimation. Therefore, significant estimates and assumptions are made in
determining
the provision for decommissioning. The discount rate applied to determine the
carrying amount of provisions provides a source of estimation uncertainty as
referred to in IAS 1
The estimated decommissioning costs are reviewed annually by management and
the results of this review are then assessed alongside estimates from
operators. Provision for environmental cleanup and remediation costs is based
on current legal and contractual requirements, technology and price levels.
Discount rate applied is reviewed regularly and adjusted following the changes
in market rates.
The Group considers the impact of climate change on environmental restoration
and decommissioning provisions, specifically the timing of future cash flows,
and has concluded that it does not currently represent a key source of
estimation uncertainty. Changes to legislation, including in relation to
climate change, are factored into the provisions when the legislation becomes
enacted.
NOTE 5: - Revenues
2025 2024
$'000 $'000
Revenue from gas sales ((1)) 848,887 838,881
Revenue from hydrocarbon liquids sales ((2)) 316,326 400,230
Total revenue 1,165,213 1,239,111
((1) Sales gas for 2025 totaled approximately 5.6 bcm (billion cubic metres)
and for 2024 totaled approximately 5.5 bcm.
((2)) Sales from hydrocarbon liquids for 2025 totaled approximately 5,065 kbbl
(kilo barrel) and for 2024 totaled approximately 5,351 kbbl.
Additional information on revenues:
2025 2024
$'000 $'000
Revenues from major customers which each accounts for 10% or more of total
revenues reported in the financial statements:
Customer A ((1)) 316,326 400,230
Customer B ((2)) NA 135,872
(()(1)()) As of December 31, 2025, and December 31, 2024, Customer A had no outstanding balance
((2)) As of December 31, 2024, the Customer's B total outstanding balance was
US$27.4 million. As of December 31, 2025, transactions conducted with Customer
B fell below the 10% threshold
NOTE 6: - Operating profit before taxation
2025 2024
$'000 $'000
(a) Cost of sales
Staff costs (Note 7) 17,431 16,469
Energy cost 2,367 2,109
Royalty payable 206,196 219,273
Depreciation (Note 10) 276,248 262,074
Other operating costs ((1)) 105,909 100,780
Oil stock movement 2,781 (1,847)
Total cost of sales 610,932 598,858
(b) General & administration expenses
Staff costs (Note 7) 5,687 4,542
Share-based payment charge (note 7, 20) 1,354 1,207
Depreciation and amortisation (Note 10, 11) 1,880 2,132
Auditor fees ((2)) 344 313
Other general & administration expenses ((3)) 11,299 8,474
Total administrative expenses 20,564 16,668
(c) Exploration expenses written off
Exploration expenses written off ((4)) 1,994 -
Total exploration and evaluation expenses 1,994 -
(d) Other expenses
Loss from disposal of property, plant and equipment - 448
Other expenses((5)) 9 600
Total other expenses 9 1,048
(e) Other income
Insurance compensation due to remedial work on auxiliary piping systems 9,500 -
Other income 294 269
Total other income 9,794 269
((1)) Other operating costs comprise of planned maintenance and insurance.
((2)) In addition to the services outlined in the preceding table, the
Company's auditor also rendered services related to the refinance of US$0.06
million in 2024. These services were capitalised as transaction costs.
((3)) The Other general & administration expenses mainly consists of legal
expenses, intercompany management fees and external advisors fees.
((4)) The licence for Block 21 expired on 13 January 2025. Capitalized costs
associated with Block 21 were written off. (Refer to Note 11).
((5)) Legal claim settlement in 2024.
NOTE 7: - Staff costs
The average monthly number of employees employed by the Group was:
2025 2024
Average number of employees 147 119
2025 2024
$'000 $'000
Salaries and social security costs ((1)) 22,096 19,456
Pension contribution 3,316 2,993
Share-based payments 1,354 1,207
Total staff costs 26,766 23,656
Payroll Cost capitalised in oil & gas assets (2,294) (838)
Staff cost expensed 24,472 22,218
Included in:
Total payroll cost in cost of sales 17,431 16,469
Total payroll cost in administration expenses 7,041 5,749
24,472 22,218
NOTE 8: - Net finance costs
2025 2024
$'000 $'000
Interest on borrowing (Note 16) 184,267 170,035
Interest expense on long terms payables - 1,245
Less amounts included in the cost of qualifying assets (Note 10(a), 11(a)) (40,724) (14,626)
143,543 156,654
Costs related to parent company guarantees 2,121 2,898
Other finance costs and bank charges 4,849 1,768
Unwinding of discount on trade payable (Note 18(2)) 8,969 14,417
Unwinding of discount on provision for decommissioning (Note 17) 4,095 3,951
Unwinding of discount on right of use asset 518 813
(1)
Less amounts included in the cost of qualifying assets (Note 10(a)) (473) (722)
20,079 23,125
Total finance costs 163,622 179,779
Interest income from time deposits (4,918) (8,894)
Interest income from related parties (224) -
Loss (Income) from hedging operations (233) 392
Other interest income (15) -
Total finance income (5,390) (8,502)
Net foreign exchange losses 18,713 938
Net finance costs 176,945 172,215
NOTE 9: - Taxation
1. Corporate Tax rates applicable to the Company:
Israel:
The Israeli corporate tax rate is 23% in 2025 and 2024.
United Kingdom:
Starting from 1 January 2024, the company's control and management was
transferred from the Republic of Cyprus to the United Kingdom ("UK") and as
such the company's tax residency migrated from Cyprus to UK from the first day
of the accounting period. The applicable tax rate in the UK is 25%.
The Group's taxable profits arise in Israel through the Israeli branch and are
taxed at the Israeli statutory tax rate of 23%. No material taxable income was
generated at the UK parent entity level.
Under s.18A of the UK CTA 2009, the Company made an election for the branch of
Energean Israel Limited (and any other branches that may open from time to
time) to be exempt from UK corporation tax from its first accounting period
commencing on 1 January 2024 and all subsequent accounting period.
2. The Income and Natural Resources Taxation Law, 5771-2011 -
Israel- the main provisions of the law are as follows:
In April 2011, the Knesset passed the Income and Natural Resources Tax Law,
5771-2011 ("the Law"), introducing an oil and gas profits levy at a rate
calculated as described. The rate of the levy will be calculated according to
a proposed R factor mechanism, according to the ratio between the net accrued
revenues from the project and the cumulative investments as defined in the
law. A minimum levy of 20% will be levied at the stage where the R factor
ratio reaches 1.5, and when the ratio increases, the levy will increase
gradually until the maximum rate of 50% until the ratio reaches 2.3. In
addition, it was determined that the rate of the levy as stated will be
reduced starting in 2017 by multiplying 0.64 by the difference between the
corporate tax rate prescribed in section 126 of the Income Tax Ordinance for
each tax year and the tax rate of 18%. In accordance with the corporate tax
rate from 2018 onwards, the maximum rate will be 46.8%.
In addition, additional provisions were prescribed regarding the levy, inter
alia, the levy will be recognised as an expense for the purpose of calculating
income tax; The limits of the levy shall not include export facilities; The
levy will be calculated and imposed for each reservoir separately (Ring
Fencing); Payment by the owner of an oil right calculated as
a percentage of the oil produced, the recipient of the payment will be liable
to pay a levy according to the amount of the
payment received, and this amount will be subtracted from the amount of the
levy owed by the holder of the oil right. The law also sets rules for the
unification or separation or consolidation of oil projects for the purposes of
the Law. In accordance with the provisions of the Law, the Group is not yet
required to pay any payment in respect of the said levy, and therefore no
liability has been recognised in the financial statements in respect of this
payment.
3. Taxation charge:
2025 2024
$'000 $'000
Current income tax charge (84,199) (81,703)
Prior years income tax - (30)
Deferred tax relating to origination and reversal of temporary differences (972) (22,140)
(Note 12)
Total taxation expense (85,171) (103,873)
NOTE 9: - Taxation (Cont.)
4. Reconciliation of the total tax charge:
The reconciliation between the tax expense, assuming that all the income,
expenses, gains and losses in profit or loss were taxed at the statutory tax
rate of Israel and the taxes on income recorded in profit or loss is as
follows:
2025 2024
$'000 $'000
Profit before tax 364,563 450,591
Tax credit at the applicable tax rates of 23% ((1)) (83,849) (103,636)
Effect of unrecognised deferred tax assets((2)) (1,092) (12)
Permanent differences - non deductible ((3)) (272) 20
Prior year tax - (30)
Other adjustments 42 (215)
Taxation expenses (85,171) (103,873)
Effective tax rate 23% 23%
(1) ) For the reconciliation of the effective tax rate, the statutory
tax rate of the Israeli Branch of 23% has been used.
(2) ) Temporary differences primarily comprise unused tax losses of
Energean Israel Finance Ltd, including losses generated during the year, for
which no deferred tax asset has been recognised.
(3) ) Permanent differences consisted of non-deductible expenses with
the majority derived from the Israeli Branch and, inter alia, related to
refreshments, accommodation, donations and travelling.
The Group is within the scope of the Pillar Two Model Rules starting from 1
January 2025. Legislation implementing these rules has been enacted or
substantively enacted in a number of jurisdictions in which the Group
operates. The Group has applied the mandatory temporary exception under IAS
12 from recognising and disclosing deferred taxes related to Pillar Two income
taxes.
The Group has performed an assessment of its potential exposure to Pillar Two
top-up taxes. Based on the analysis performed using information currently
available, including consideration of transitional safe harbour provisions
where applicable, the Group does not expect material exposure to arise.
Accordingly, no amount has been recognised in the consolidated financial
statements for the year.
The Group will continue to monitor developments in legislation, guidance and
the geographic mix of earnings, which may impact future periods.
NOTE 10: - 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 2024 2,979,038 16,986 2,390 2,998,414
Additions ((1)) 172,421 1,363 351 174,135
Transfer from Intangible Assets ((2)) 205,324 - - 205,324
Disposals (448) - - (448)
Capitalised borrowing cost 15,348 - - 15,348
Change in decommissioning provision (11,207) - - (11,207)
Total cost at 31 December 2024 3,360,476 18,349 2,741 3,381,566
Additions ((1)) 390,756 8,988 937 400,681
Lease disposal ((3)) - (11,250) - (11,250)
Capitalised borrowing cost 40,144 - - 40,144
Change in decommissioning provision 547 - - 547
Total cost at 31 December 2025 3,791,923 16,087 3,678 3,811,688
Depreciation:
At 1 January 2024 195,124 4,425 1,034 200,583
Charge for the year 258,328 4,962 418 263,708
Total Depreciation at 31 December 2024 453,452 9,387 1,452 464,291
Charge for the year 271,276 5,755 527 277,558
Lease disposal ((3)) - (7,190) - (7,190)
Total Depreciation at 31 December 2025 724,728 7,952 1,979 734,659
At 31 December 2024 2,907,024 8,962 1,289 2,917,275
At 31 December 2025 3,067,195 8,135 1,699 3,077,029
((1)) The additions to oil & gas assets in 2025 and 2024 are primarily due
to development costs for Katlan and the second oil train.
Second oil train lift safely and successfully performed in Q4 2024. The
commencement of operation is expected to take place in Q2 2026, which will
result in an increase in liquids' production capacity.
((2)) The Final Investment Decision for Katlan was made in July 2024, and the
concession agreement granted in the same month expires in 2054. Refer to note
11 for further details.
((3)) The lease disposal pertains to the termination of vessel lease in May
2025.
Borrowing costs capitalised for qualifying assets during the year are
calculated by applying a weighted average interest rate of 7.02% for the year
ended 31 December 2025 (for the year ended 31 December 2024: 3.93%).
NOTE 10: - Property, Plant and Equipment (Cont.)
b. Depreciation expense for the year has been recognised as follows:
2025 2024
$'000 $'000
Cost of sales 276,248 262,074
Administration expenses 1,310 1,634
Total 277,558 263,708
c. Cash flow statement reconciliations:
2025 2024
$'000 $'000
Additions and disposals to property, plant and equipment 400,681 174,135
Associated cash flows
Payments for additions to property, plant and equipment (475,531) (260,013)
Non-cash movements/presented in other cash flow lines
Right-of-use asset additions (8,988) (1,363)
Repayment of lease liabilities 6,139 5,691
Movement in working capital 77,699 81,550
d. Details of the Group's rights in petroleum and gas assets are presented
in note 1.
NOTE 11: - Intangible Assets
a. Composition:
Exploration and evaluation assets Other Intangible assets ((1)) Total
$'000 $'000 $'000
Cost:
At 1 January 2024 166,466 2,330 168,796
Additions 133,224 536 133,760
Transfer to Property Plant and Equipment ((2)) (205,324) - (205,324)
At 1 January 2025 94,366 2,866 97,232
Additions 1,860 51,498 53,358
Capitalized borrowing cost - 580 580
At 31 December 2025 96,226 54,944 151,169
Amortisation:
At 1 January 2024 - 631 631
Charge for the year - 498 498
Total Amortisation at 31 December 2024 - 1,129 1,129
Charge for the year - 570 570
Impairment of exploration and evaluation assets 1,994 - 1,994
Total Amortisation at 31 December 2025 1,994 1,699 3,692
At 31 December 2024 94,366 1,737 96,103
At 31 December 2025 94,232 53,245 147,477
The additions to exploration and evaluation assets in 2025 are mainly related
to Nitzana pipeline, see note (1) below. In 2024, additions mainly related to
pre-FID costs for Block 12 "Katlan".
((1)) Nitzana transmission agreement- In October 2025, the company signed a
transmission agreement with Israel Natural Gas Lines Ltd. ("INGL") for
capacity in the Nitzana pipeline. The agreed terms in the transmission
agreement are for the supply of up to 1 bcm/year up to 6 bcm total contracted
supply for a 15-year period, with provisions for extensions and early
termination. The terms also include rights, during the construction phase, to
access available capacity in the Jordan-North pipeline. Nitzana is expected to
be operational no later than 36 months from end of October 2025.
The Company's 16.4% share of the construction costs for the pipeline and
compression station is expected to be approximately US$100 million (excludes
contingency amounts, which may add up to an additional 12%, as per the
transmission agreement) and will primarily be funded via the Unsecured Term
Loan. Refer to note 16 below. During the fourth quarter of 2025, approximately
US$50 million was paid, representing approximately 50% of the total expected
investment. The remaining investment will be made in accordance with the
milestones set out in the agreement with INGL. As the Group does not obtain
ownership of, or control over, the physical pipeline asset, but instead
acquires a contractual right to access defined transportation capacity for a
period of 15 years, the arrangement has been recognised as an intangible asset
in accordance with IAS 38. The asset will be amortised on a straight-line
basis over the 15-year access period from the date the pipeline becomes
operational.
NOTE 11: - Intangible Assets (Cont.)
((2)) Katlan Final Investment Decision- In July 2024, the Ministry of Energy
and Infrastructure granted the Company a 30-year concession for the Katlan
area including a 20-year extension option. Following this, Energean announced
in July 2024 that it had taken Final Investment Decision ("FID") for the
Katlan development project in Israel. The Katlan area will be developed in a
phased approach through a subsea tieback to the existing Energean Power FPSO.
First gas is planned for H1 2027. The EPCI (Engineering, Procurement,
Construction and Installation) contract for the subsea scope was awarded to
Technip FMC and includes four-well-slot tieback capacity to a single large ~30
kilometer production line, which can be used by future Katlan area phases.
b. Cash flow statement reconciliations:
2025 2024
$'000 $'000
Additions to intangible assets 53,358 133,760
Associated cash flows
Payment for additions to intangible assets (53,212) (127,407)
Non-cash movements/presented in other cash flow lines
Movement in working capital (145) (6,353)
c. Details on the Group's rights in the intangible assets:
Right Type of right Valid date of the right Group's interest as at 31 December 2025
Block 23 Licence 13 January 2027 100%
Block 31 Licence 13 January 2027 100%
As of 31 December 2025, the Group holds two licences to explore for gas and
oil in Block 23 and Block 31, which are located in the economic waters of the
State of Israel.
NOTE 12: - 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 depends on the purchase date and
the nature of asset. The general capital 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.
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 Derivative liability Total
liabilities
$'000 IFRS 16 $'000 $'000 $'000
$'000 $'000
$'000
$'000
At 1 January 2024 (61,050) (2,888) 8,983 4,082 337 3,551 - (46,985)
Increase/(decrease)for the year through:
Profit or loss (12,040) 860 (8,983) (1,373) (45) (559) - (22,140)
Other comprehensive income - - - - - - 79 79
At 31 December 2024 (73,090) (2,028) - 2,709 292 2,992 79 (69,046)
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 Derivative liability/ asset Total
liabilities
$'000 IFRS 16 $'000 $'000 $'000
$'000 $'000
$'000
$'000
At 1 January 2025 (73,090) (2,028) - 2,709 292 2,992 79 (69,046)
Increase/(decrease) for the year through:
Profit or loss (679) 190 - (546) 5 59 - (972)
Other comprehensive income - - - - - - (8,469) (8,469)
Cashflow hedge related to basis adjustment - - - - - - 2,492 2,492
At 31 December 2025 (73,769) (1,838) - 2,163 297 3,050 (5,898) (75,995)
2025 2024
$'000 $'000
Deferred tax liabilities (81,505) (75,118)
Deferred tax assets 5,510 6,072
(75,995) (69,046)
NOTE 13: - Trade and other receivables
2025 2024
$'000 $'000
Current
Financial items
Trade receivables
Trade receivables 121,006 108,085
Receivables from related parties 6 330
Other receivables ((1)) 5,737 5,038
Accrued interest income 968 1,048
127,717 114,501
Non-financial items
Prepayments and prepaid expenses 10,231 6,779
Refundable excise 7,954 -
18,185 6,779
Total current trade and other receivables 145,902 121,280
Non-current
Non-financial items
Prepayments and prepaid expenses 12,282 9,848
Total non-current trade and other receivables 12,282 9,848
((1)) The balance mainly relates to the agreement with 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
and the final amount of approximately US$5 million is expected to be received
in 2026.
The table below summarises the maturity profile of the Group receivables:
31 December 2025 ($'000) Carrying amounts Contractual cash flows 3 months or less 3-12 months
Trade receivables 121,006 121,006 121,006 -
Short term other receivables 6,711 6,711 977 5,734
Total 127,717 127,717 121,983 5,734
31 December 2024($'000) Carrying amounts Contractual cash flows 3 months or less 3-12 months
Trade receivables 108,085 108,085 108,085 -
Short term other receivables 6,416 6,416 1,387 5,029
Total 114,501 114,501 109,472 5,029
NOTE 14: - Inventories
2025 2024
$'000 $'000
Hydrocarbon liquids 1,031 3,581
Natural gas 506 502
Raw materials and supplies 19,454 12,631
Total 20,991 16,714
NOTE 15: - Cash and cash equivalents
2025 2024
$'000 $'000
Cash and cash equivalents 118,819 157,728
Total 118,819 157,728
Cash and cash equivalents comprise short-term deposit accounts that are
readily convertible into known amounts of cash. The effective interest rate on
short‑term bank deposits was 4.87% for the year ended 31 December 2025 (year
ended 31 December 2024: 4.835%).
NOTE 16: - Borrowings
US$2,000 Million Senior secured notes (the "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 prepay in full the Project Finance
Facility.
On 11 July 2023, Energean Israel Finance Ltd completed the offering of US$750
million aggregate principal amount of the Notes bearing a fixed annual
interest rate of 8.500%. The proceeds were used mainly to repay the US$625
million Notes series due in March 2024. On 21 September 2025, Energean Israel
Finance Ltd redeemed in full the US$625 million Notes series due
in March 2026, See below disclosure regarding the US$750 Million Secured Term
Loan. As of 31 December 2025, the group has three Senior secured notes series
of the total amount of US$2,000 Million.
US$750 Million Secured Term Loan:
In February 2025 Energean Israel Finance Ltd signed a 10-year, senior-secured
term loan with banking corporation in Israel as the facility agent and
arranger for US$750 million (the "Term Loan" and the "Term Loan Agent",
respectively). The purpose of Term Loan was to refinance its 2026 senior
secured notes and provide additional liquidity for the Katlan development. Up
to US$475 million is in US dollars and up to US$275 million is in New Israeli
Shekel. The Term Loan bears a floating interest rate of SOFR plus a margin on
the USD component and the Bank of Israel (BOI) rate plus a margin on the ILS
component. The Term Loan is secured on the assets of the Group (including the
Company's shares), pari passu with the senior secured Notes, non-recourse to
Energean plc and has a bullet repayment in 2035 (refer to note 12(d) for
related collaterals).
As of 31 December 2025, Energean Israel Finance Ltd drew down the full US$750
million amount of the Term Loan.
US$70 Million Unsecured Term Loan:
In October 2025, the Company signed an unsecured term loan facility agreement
with a banking corporation in Israel for US$70 million ("Unsecured Term
Loan"), to fund the development of the Nitzana pipeline (see note 11(1)). The
Unsecured Term Loan bears a floating interest rate of SOFR plus a margin and
non-utilization fee.
During October 2025, the Company drew US$33.2 million from the above facility
loan and US$36.2 million was drawn as a letter of credit in favor of INGL (see
note 21(b)).
NOTE 16: - Borrowings (Cont.)
Composition:
Series Type Maturity Annual fixed Interest rate 31 December 2025 31 December 2024
Carrying value $'000 Carrying value $'000
US$ 625 million Senior secured notes 30 March 2026 4.875% - 622,102
US$ 625 million Senior secured notes 30 March 2028 5.375% 621,144 619,602
US$ 625 million Senior secured notes 30 March 2031 5.875% 618,673 617,689
US$ 750 million Senior secured notes 30 September 2033 8.5% 735,990 734,820
US$ 275 million Secured term Loan 26 February 2035 3.1%+ BOI 279,850 -
US$ 475 million Secured term Loan 26 February 2035 4.25%+ SOFR 456,580 -
US$ 33.2 million Unsecured term Loan 30 September 2034 3.9%+ SOFR 31,848 -
2,744,085 2,594,213
The interest on each series of the Notes and loans is paid semi-annually, on
30 March and on 30 September of each year.
The Notes are listed on the TACT Institutional 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"), no indenture
default or indenture event of default has occurred and is continuing.
Collateral:
The Company has provided the following collateral in favor of HSBC BANK USA,
N.A, which serves as the "Collateral Agent" under both the Notes and the Term
Loan:
1) 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 sales purchase agreements ("GSPAs"),
several bank accounts, operating permits, insurance policies, the Company's
exploration licences and the INGL Agreement.
2) Floating charge over all of the present and future assets of
Energean Israel Limited and Energean Israel Finance Ltd (except specifically
excluded assets).
3) 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.
a. Restricted cash:
As of 31 December 2025, the Company had short-term restricted cash of US$97.65
million (31 December 2024: US$82.43 million), which will be used for the March
2026 interest payment. For details regarding the interest rate, see Note 15
NOTE 16: - Borrowings (Cont.)
b. Reconciliation of liabilities arising from financing activities:
1 January Cash outflows Cash inflows Additions Borrowing costs Foreign exchange impact Reclassification 31 December
including amortisation
of arrangement fee
2025 ($'000) 2,604,276 (834,896) 783,199 8,988 184,785 19,239 (8,142) 2,753,095
Borrowings 2,594,213 (828,757) 783,199 - 184,267 19,305 (8,142) 2,744,085
Lease liabilities 10,063 (6,139) - 8,988 518 (66) - 9,010
2024 ($'000) 2,648,244 (231,683) - 1,349 172,094 (6) 14,278 2,604,276
Borrowings 2,588,492 (178,592) - - 170,035 - 14,278 2,594,213
Lease liabilities 13,598 (5,691) - 1,349 813 (6) - 10,063
Deferred license payments ((1)) 46,154 (47,400) - - 1,246 - - -
( )
((1)) Cash outflows relate to finance costs paid for deferred license payments
of approximately US$4,000 thousand in 2024 and payment for purchase of oil
& gas leases of US$43,400 thousand in 2024, which are included in the cash
flows from financing and investing activities respectively, in the
Consolidated Statement of Cash Flows.
NOTE 17: - Decommissioning provision
2025 2024
$'000 $'000
At 1 January 85,357 92,613
New provisions - -
Changes in estimates 547 (11,207)
Unwinding of discount 4,095 3,951
At 31 December 89,999 85,357
Current provisions - -
Non-current provisions 89,999 85,357
As of 31 December 2025, the decommissioning provision represents the present
value of decommissioning costs relating to the four wells for Karish, Karish
North and subsea infrastructure. 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. These provisions have been
created based on the Group's internal estimates. Assumptions based on the
current economic environment have been made, which management believes form a
reasonable basis upon which to estimate the future liability. These estimates
are reviewed regularly 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, which are inherently uncertain.
As of 31 December 2025, the inflation assumption applied ranges from 2.19% to
2.7%. (31 December 2024: 2.15% to 2.7%). The discount rate applied is 4.71%
(31 December 2024: 4.86%). Depreciation is based on the depletion method
upon commercial reserves.
NOTE 18: - Trade and other payables
2025 2024
$'000 $'000
Current
Financial items
Trade accounts payable ((2)) 159,638 140,840
Payables to related parties (Note 22) 14,812 11,021
Other creditors ((1)) 36,803 35,468
Short term lease liabilities 5,002 5,296
216,255 192,625
Non-financial items
Accrued expenses 29,457 24,480
Other finance costs accrued 49,275 41,133
Social insurance and other taxes 940 504
Deferred revenues 5,530 -
VAT payable 9,677 4,182
94,879 70,299
Total current trade and other payables 311,134 262,924
Non-current
Financial items
Trade and other payables ((2)) - 61,758
Long term lease liabilities 4,008 4,767
4,008 66,525
Non-financial items
Accrued expenses to related parties 409 519
409 519
Total non-current trade and other payables 4,417 67,044
((1) ) The amount mainly comprises of royalties payables to the
Israel government and third parties with regards to the Karish Lease,
including US$13.1 million (2024: US$12.9 million) of royalties payable to
third parties. Contractual royalties are payable to NewMed (previously Delek
Drilling) and third-party holders at a total rate of 7.5%, increasing to 8.25%
after the date at which the lease in question starts to pay the oil and gas
profits levy. The royalty payable to NewMed under the SPA is calculated on the
value of the total amount of natural gas and condensate produced at the
wellhead without any deduction (except for natural gas and Petroleum (as
defined under the Petroleum Law) used in the production process). No
contractual royalties under the SPA will be payable on future discoveries that
were not part of the original acquisition of the Karish and Tanin leases.
((2) ) The amount represents a long-term amount payable in terms of
the EPCIC (Engineering, Procurement, Construction, Installation and
Commissioning) 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 has been reduced to US$210 million. The
amount is payable in twelve equal quarterly deferred payments starting in
March 2024 and therefore has been discounted at 8.668% per annum (being the
yield rate of the senior secured loan notes, maturing in 2026, as at the date
of agreeing the payment terms). As of 31 December 2025, 8 installments have
been paid and the remaining outstanding payable amounted to US$67.1 million.
NOTE 19: - Equity
a. Share capital:
31 December 2025 31 December 2024
Number of shares Number of shares
US$ US$
Authorised, issued and fully paid
Ordinary A shares of US$1 each 1,708,415 1,708,415 1,708,415 1,708,415
b. Shares rights:
An ordinary share gives the shareholder the right to vote on matters put
before all of the shareholders of the Company. One share equals one vote. An
ordinary share also provides the shareholder with the right to receive a share
of the Company's profits by way of dividends.
c. Dividends:
Dividends of US$129million were declared and paid during 2025 and US$394
million were declared and paid during 2024.
e. Share Premium:
The share premium of US$212,539 thousand is presented net of transaction costs
amounting to US$53 thousand, which were capitalised the past.
NOTE 20: - Share-based payment
Analysis of share-based payment charge:
2025 2024
$'000 $'000
Energean Long Term Incentive Plan 949 891
Energean Deferred Share Bonus Plan 405 316
Total share-based payment charge 1,354 1,207
Expensed as administration expenses 1,354 1,207
Total share-based payment charge 1,354 1,207
Energean plc's Long Term Incentive Plan (LTIP)
Under the Energean plc's LTIP rules, senior executives may be granted
conditional awards of shares or nil cost options. Awards are subject to
performance conditions, including Total Shareholder Return (TSR) normally
measured over a period of three years. Vesting of awards is generally subject
to an individual remaining in employment except in certain circumstances such
as good leaver and change of control. Awards may be subject to a holding
period following vesting. No dividends are paid over the vesting period;
however, Energean plc's Board may decide at any time prior to the issue or
transfer of the shares in respect of which an award is released that the
participant will receive an amount (in cash and/or additional Shares) equal in
value to any dividends that would have been paid on those shares on such terms
and over such as the Energean plc Board may determine. This amount may assume
the reinvestment of dividends (on such basis as the Board may determine) and
may exclude or include special dividends.
The weighted average remaining contractual life for LTIP awards outstanding at
31 December 2025 was 1.58 years, (31 December 2024: 1.29 years).
All amounts related to share-based payments are recognised as liabilities,
because Energean plc charges the Group, using the share price at grant date,
for the shares issued upon vesting.
NOTE 20: - Share-based payment (Cont.)
Deferred Share Bonus Plan (DSBP)
Under the DSBP, a portion of any annual bonus of a senior executive may be
deferred into shares.
Deferred awards are usually granted in the form of conditional share awards.
Deferred awards usually vest two years after award although they may vest
early on leaving employment or on a change of control.
The weighted average remaining contractual life for DSBP awards outstanding at
31 December 2025 was 0.80 year, (31 December 2024 was 0.61 year).
All amounts related to share-based payments are recognised as a liability
since Energean plc charges the Group, using the share price at grant date, for
the shares issued upon vesting.
NOTE 21: - Material engagements, commitments and contingencies
a. Material engagements:
a) New Gas Sales Purchase Agreements ("GSPAs") in the period:
1) During April 2025 the Company signed a Gas Sale and Purchase
Agreement ("GSPA") with Kesem Energy Ltd ("Kesem"). The contract is for the
supply of gas to Kesem's new power plant, which is estimated to be operational
before the end of the current decade. The contracted supply is approx. 1
bcm/year from around the middle of the 2030s with limited quantities of gas
supplied intermittently before then. The contract represents over US$2 billion
in revenues and approx.12.5 bcm in contracted supply over the approx. 17-year
period. The contract contains provisions regarding floor pricing, take or pay
and price indexation (not Brent-price linked). The terms of GSPA are in line
with the other material, long-term contracts within the Company portfolio.
2) During November 2025 the Company signed a GSPA with Dalia Energy
Companies Ltd representing over US$2 billion in contracted revenues. The
contract is for approximately 0.5 bcm/year from around January 2030 and then
approximately 1.2 bcm/year from June 2035 onwards and excludes supply in the
summer months (June to September) between 2030-2034. The contract contains
provisions regarding floor pricing, take or pay and price indexation (not
Brent-price linked). The terms of GSPA are in line with the other material,
long-term contracts within the Company portfolio.
b. Performance guarantees:
2025 2024
$'000 $'000
Performance guarantees 87,276 50,629
1. Performance guarantees use -US$48.1 million (31 December 2024:
US$48.6 million) of the balance above is related to performance bank
guarantees the Company provided to the Ministry of Energy in Israel due to the
requirement under its oil and gas licenses and leases. The remaining amount is
due to the Company's ongoing operations in Israel.
2. INGL Nitzana- The Company provided INGL a parent company guarantee
("PCG") from its ultimate parent company, Energean PLC at the amount of ILS
82.5 million (approx. US$ 25.9 million). As of February 2026, the PCG amount
decreased to NIS 49.5 million. In addition, the Company provided INGL with a
letter of credit issued by a local bank in Israel, which amounted to ILS 115.5
million (approx. US$ 36.2 million) to secure future milestone obligations.
Pursuant to the contractual mechanism, future milestone payments will be
applied first to reduce the PCG and subsequently to decrease the bank
guarantee.
In addition, according to the gas transmission agreement, a Bank Guarantee,
provided by a local bank in Israel for the capacity fee in total of ILS 1.5
million, (approx. US$0.5 million), was provided to INGL.
NOTE 22: - Related parties
a. As of 31 December 2025, the Group's ordinary shares are owned 100% by
Energean E&P Holdings Limited, incorporated in Cyprus.
b. Details of related parties:
Name Country of incorporation / registered office Principal activities Relationship as of 31 December 2025 Relationship as of 31 December 2024
Energean plc 44 Baker Street, London W1U 7AL, United Kingdom Holding company Ultimate Parent company Ultimate Parent company
Energean E&P Holdings Ltd 22 Lefkonos Street, 2064 Nicosia, Cyprus Holding Company Parent company Parent company
Energean Oil & Gas S.A. 32 Kifissias Ave. 151 25 Marousi Athens, Greece Oil and gas exploration, development and production Sister company Sister company
Energean Egypt Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production Sister company Sister company
Energean International Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production Sister company Sister company
Energean Italy S.p.a. 31 Foro Buonaparte, 20121 Milano, Italy Oil and gas exploration, development and production Sister company Sister company
Energean Capital Ltd 22 Lefkonos Street, 2064 Strovolos, Nicosia, Cyprus Holding of investments and management services Sister company Sister company
Energean Group Services Limited 44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration, development and production Sister company Sister company
Energean Morocco Limited- 56 Bd Moulay Youssef, 20070, Casablanca, Morocco Oil and gas exploration, development and production n/a Sister company
((1)) Energean Morocco Limited-Morocco Branch was sold in May 2025.
NOTE 22: - Related parties (Cont.)
c. Balances with related parties:
Nature of balance 2025 2024
$'000 $'000
In current assets:
Receivable to related parties - Note 13:
Energean Morocco Limited-Morocco Branch Receivable - 324
Energean Capital Limited Receivable 5 5
Energean International Limited Receivable 1 1
6 330
In current liabilities:
Payables to related parties - Note 18:
Energean plc Trading (5,928) (4,310)
Energean Oil & Gas S.A Trading (4,320) (4,707)
Energean Group Services Trading (4,397) (1,645)
Energean E&P Holdings Limited Trading (114) (23)
Energean International Limited Trading (45) (168)
Energean Capital Limited Trading (1,000) (839)
Energean Italy SPA Trading (1,389) (256)
Energean plc Share based payments (2,076) (1,384)
)19,269( (13,332)
In non-current liabilities:
Accrued expenses to related parties - Note 18:
Energean plc Share based payments (409) (519)
NOTE 22: - Related parties (Cont.)
d. Transactions with related parties:
2025 2024
$'000 $'000
Service received in connection with the oil and gas assets:
Related companies 4,929 2,692
Ultimate and parent company 7,578 5,931
12,507 8,623
Service received in connection with the intangible assets:
Related companies 1,428 1,436
Ultimate and parent company 137 179
1,565 1,615
Service received in connection with refinance / issuance senior secure notes:
Ultimate and parent company 12,187 963
12,187 963
Service received in connection with finance expenses:
Related companies 91 -
Ultimate and parent company 3,369 3,030
3,460 3,030
Service received in connection with cost of sales:
Related companies 7,347 5,032
Ultimate and parent company 1 9
7,348 5,041
In administrative expenses:
Related companies 1,995 2,174
Ultimate and parent company 5,931 4,561
7,926 6,735
In other expenses:
Related companies - 448
- 448
In other income:
Related companies - (263)
- (263)
e. Additional information:
1. All related party transactions were conducted on terms equivalent
to those prevailing in arm's length transactions.
2. The Group and related companies entered into an agreement for the
provision of consulting services related to administrative, technical, finance
and commercial matters. The consideration for the said services and the
respective balances presented above at Note 22 (c) and 22 (d).
NOTE 22: - Related parties (Cont.)
f. Parent Company Guarantees:
1. Under the Karish EPCIC Energean plc provided a PCG dated 27 July
2018, guaranteeing the deferred payment obligations of the Company under the
contract which amounted to US$210 million. Refer to Note 18(4).
2. A new Guarantees Facility with a banking corporation in Israel in
an amount of US$70 million was signed and commenced during 2025. According to
this agreement Energean PLC provided a PCG in the amount of US$35 million.
3. As part of a GSPA the Company signed, Energean E&P Holdings
Limited, the parent company, granted a corporate guarantee to certain gas
buyers amounting to as of 31 December 2025 and 2024 for US$7.5 million.
4. INGL Nitzana- See Note 21(b).
NOTE 23: - Financial Instruments
Financial risk management objectives
The Group is exposed to market price risk which comprises: foreign currency
risk, credit risk, liquidity risk and capital risk management arising from the
financial instruments it holds. The risk management policies employed by the
Group to manage these risks are discussed below:
a. Foreign exchange risk:
The Group is exposed to foreign exchange risk as it undertakes operations in
various foreign currencies. The key sources of the risk are attributed to the
fact that the Group has certain financial assets (mainly other receivables and
cash and cash equivalents) and financial liabilities (mainly trade and other
payable) with different currencies than the functional currency of the Group,
mainly Israeli Shekel (ILS) United Kingdom Pound Sterling (GBP) and Euro.
The Group's exposure to foreign currency risk at each reporting date is shown
in the table below. The amounts shown are the US$ equivalent of the foreign
currency amounts.
Liabilities Assets
2025 2024 2025 2024
$'000 $'000 $'000 $'000
Israeli New Shekel (ILS) 315,422 4,324 38,673 31,058
United Kingdom Pound (GBP) 38,160 32,371 341 11,829
Euro 10,258 19,700 586 268
Norwegian kroner (NOK) 4,204 1,265 1,910 458
Total 368,044 57,660 41,510 43,613
The following table reflects the sensitivity analysis for profit and loss
result for the year and the equity, taking into consideration for the periods
presented foreign exchange variation by +/- 10%.
ILS GBP EURO NOK
Variation Variation Variation Variation
10% -10% 10% -10% 10% -10% 10% -10%
31 December 2025 ($'000)
Profit (loss) before tax (27,675) 25,159 (3,782) 3,438 (967) 879 (229) 209
Equity 6,365 (5,787) 870 (791) 222 (202) 53 (48)
31 December 2024 ($'000)
Profit (loss) before tax 2,673 (2,430) (2,054) 1,867 (1,943) 1,767 (81) 73
Equity 2,059 (1,871) (1,582) 1,438 (1,496) 1,360 19 (17)
NOTE 23: - Financial Instruments (Cont.)
b. Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
At 31 December 2025, the Group is exposed to changes in market interest
rates through bank borrowings at variable interest rates.
The following table illustrates the sensitivity of profit to a reasonably
possible change in interest rates of +/- 0.5%.
These changes are reasonably possible based on observation of current market
conditions. The sensitivity analysis is applied solely to the variable
component of the interest rate (the floating benchmark rate), excluding the
fixed credit spread, calculations are based on a change in the average market
interest rate for each period, and the financial
instruments held at each reporting date that are sensitive to changes in
interest rates. All other variables are held
constant.
Variable rate instruments 2025 2024
$'000 $'000
Borrowings 768,278 -
Interest rate sensitivity
BOI rate SOFR rate
Impact on finance costs 2025 2024 2025 2024
$'000 $'000 $'000 $'000
+ 50 basis points 323 - 813 -
- 50 basis points (1,410) - (635) -
c. Credit risk:
Credit risk arises when a failure by counterparties to discharge their
obligations could reduce the amount of future cash inflows from financial
assets on hand at the reporting date. The Group has policies in place to
ensure that all of its transactions giving rise to credit risk are made with
parties having an appropriate credit history and monitors on a continuous
basis the ageing profile of its receivables.
The Group's principal exposure to credit risk arises from trade receivables,
which relate almost entirely to gas and liquids sales under long-term
contracts with counterparties that are either state-owned entities or large,
investment-grade private sector companies operating in Israel's energy sector.
Given the nature and credit quality of these counterparties, and the Group's
track record of collection under these contracts, the Group considers the
expected credit loss on its trade receivables to be immaterial. No loss
allowance has accordingly been recognised at the reporting date (2024: nil).
The carrying amount of trade and other receivables, which totaled $127.7
million (2024: $114.5 million), represents the maximum exposure to credit risk
at the reporting date, net of any loss allowances.
NOTE 23: - Financial Instruments (Cont.)
Credit quality of cash equivalents and bank deposits:
The credit quality of the banks in which the Group keeps its cash and
restricted cash is assessed by reference to the credit rating of these banks.
Moody's long-term credit ratings of the corresponding banks in which the Group
keeps its deposits are as follows:
2025 2024
$'000 $'000
Restricted cash 97,647 82,427
Cash and cash equivalents and bank deposits 118,819 157,728
216,466 240,155
2025 2024
$'000 $'000
A1 - 30
Aa2 13 -
Ba1 5 -
Baa1 216,448 240,119
Baa2 - 6
Total 216,466 240,155
The Company has assessed the recoverability of all cash balances and believes
they are carried within the Consolidated Statement of Financial Position at
amounts not materially different to their fair value.
d. Liquidity risk:
Liquidity risk is the risk that the Group will encounter difficulty in meeting
obligations associated with financial liabilities that are settled by
delivering cash or another financial asset.
The Group has procedures with the object of minimizing this risk such as
maintaining sufficient cash and other highly liquid current assets and by
having available an adequate amount of committed credit facilities.
The following tables detail the Group's remaining contractual maturity for its
financial liabilities. The tables have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest date on which the
Group can be required to pay. The table includes both interest and principal
cash flows.
The Group manages its liquidity risk by ongoing monitoring of its cash flows.
Group management prepares budgets and regular cash flow forecasts and takes
appropriately actions to ensure available cash balances.
NOTE 23: - Financial Instruments (Cont.)
Carrying amounts Contractual cash flows 3 months or less 3-12 months 1-2 years 2-5 years More than 5 years
31 December 2025 ($'000)
Borrowings 2,744,085 4,155,082 98,319 98,183 191,112 1,125,839 2,641,629
Lease liabilities 9,010 10,013 2,343 3,103 1,306 2,256 1,005
Trade and other payables - short term 211,253 214,584 162,084 52,500 - - -
31 December 2024 ($'000) 2,857,545 3,879,257 228,755 139,124 847,484 977,846 1,686,049
Borrowings 2,594,213 3,600,703 82,266 82,266 774,296 976,797 1,685,079
Lease liabilities 10,063 11,018 1,453 4,358 3,188 1,049 970
Trade and other payables - long term 61,758 70,000 - - 70,000 - -
Trade and other payables - short term 187,329 193,354 140,854 52,500 - - -
The Group's ability to meet these obligations in the event of a prolonged
suspension is addressed in Note 2(c).
e. Capital risk management:
Capital includes equity shares and share premium. The Group manages its
capital structure and makes adjustments to it in light of changes in economic
conditions, in order to ensure that it will be able to continue as a going
concern while maximising the return to shareholders through the optimisation
of the debt and equity balance. To maintain or adjust the capital structure,
the Group may adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares. The Group's overall objectives, policies and
processes remained unchanged from last year.
f. Fair Values of other financial instruments
The following financial instruments are measured at amortised cost and are
considered to have fair values different to their book values.
2025 2024
Book Value $'000 Fair value $'000 Book Value $'000 Fair value $'000
Senior Secured Notes (Note 16) 1,975,807 2,026,375 2,594,213 2,485,589
The fair value of the Senior Secured Notes is within level 1 of the fair value
hierarchy and has been estimated by discounting future cash flows by the
relevant market yield curve at the balance sheet date. The Bank loans bears
floating interest rates reset periodically to current market rates and its
carrying amount is therefore considered to approximate its fair value. The
fair values of other financial instruments not measured at fair value
including cash and short-term deposits, trade receivables and trade and other
payables equate approximately to their carrying amounts.
g. Cash Flow Hedging
In February 2024, the Group entered into a forward transaction to hedge
against foreign currency volatility risk associated with its deferred payment
to EPCIC contractor. In addition, in January 2025 the Group entered into the
forward contracts with a bank in Israel to manage the foreign currency risk
related to EUR, NOK and GBP payments to suppliers under the Katlan EPCI
contract. The forward contracts are subject to different maturity dates and
are designed to match the Katlan Subsea development milestones completion
payments under the host contract. Multi-currency instruments are effective
from April 2025 to August 2027. The hedge relationship was deemed effective at
inception, and in accordance with the Group's accounting policy, the
transaction was subject to cash flow hedge accounting.
NOTE 23: - Financial Instruments (Cont.)
Less than 1 month 1 to 3 months 3 to 6 months 6 to 9 months 12 to 9 months 24 to 13 months 3 to 5 years
Foreign exchange forward contracts highly probable forecast purchases:
- Notional amount (in $'000) 8,783 35,008 42,224 85,657 79,989 47,468 -
- Average forward rate (USD/EUR) 1.064 1.069 1.072 1.077 1.082 1.087 -
- Average forward rate (USD/GBP) 1.237 1.245 1.237 1.237 1.237 1.237 -
- Average forward rate (USD/NOK) - - - 11.192 11.179 - -
The impact of hedging instruments on the consolidated statement of financial
position is, as follows:
Notional amount Carrying amount Line item in the statement of financial position Change in fair value used for measuring ineffectiveness for the period
31 December 2025 ($'000)
Foreign exchange forward contracts 47,468 3,931 Derivative financial instruments- long term -
Foreign exchange forward contracts 251,661 21,705 Derivative financial instruments- short term -
31 December 2024 ($'000)
Foreign exchange forward contracts 9,313 (345) Derivative financial instruments- short term -
The impact of hedged items on the statement of financial position is, as
follows:
Hedged Item Change in fair value used for measuring ineffectiveness for the period Cash flow hedge reserve
($'000)
31 December 2025 ($'000)
Highly probable forecast purchases - 19,740
31 December 2024 ($'000)
Highly probable forecast purchases - (266)
The effect of the cash flow hedge in the consolidated statement of profit or
loss and other comprehensive income is, as follows:
Hedged Item Total hedging gain/(loss) recognised in OCI Ineffectiveness recognised in profit or (loss) Line item in the statement of profit or (loss) Amount reclassified from OCI to profit or (loss) Line item in the statement of profit or (loss)
31 December 2025 ($'000)
Highly probable forecast purchases 36,220 - Cash Flow Hedge (OCI) - -
Highly probable forecast purchases 596 - Cash Flow Hedge (OCI) 233 Finance income
36,816 233
31 December 2024 ($'000)
Highly probable forecast purchases (345) - - (392) Finance costs
NOTE 23: - Financial Instruments (Cont.)
The hedging loss recognised in OCI before tax is equal to the change in fair
value used for measuring effectiveness. There is no ineffectiveness recognised
in profit or loss.
Set out below is the reconciliation of equity and the analysis of other
comprehensive income:
($'000) Cashflow hedge reserve
As at 1 January 2025 (266)
Effective portion of changes in fair value arising from:
Foreign exchange forward contracts - forecast purchases 37,049
Amount reclassified to profit or loss (233)
Basis adjustment to property, plant and equipment (10,833)
Tax effect (5,977)
As at 31 December 2025 19,740
NOTE 24: - Subsequent events
a) An interim dividend of US$39 million was declared and paid in January
2026.
b) On 28 February 2026, the Ministry of Energy and Infrastructure
ordered the temporary suspension of production and activities of the Energean
Power FPSO following further geopolitical escalation in the region. For more
details see Note 2(c).
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