REG - Energean PLC - Energean Israel Half Year 2022 Accounts
08/09/2022 16:45
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RNS Number : 8328Y Energean PLC 08 September 2022
Energean Israel Limited
Unaudited interim condensed consolidated financial statements
30 June 2022
ENERGEAN ISRAEL LIMITED
Unaudited interim condensed consolidated financial statements
AS OF 30 JUNE 2022
INDEX
Page
Interim condensed consolidated statement of financial position 1
Interim condensed consolidated statement of comprehensive income 2
Interim condensed consolidated statement of changes in equity 3
Interim condensed consolidated statement of cash flows 4
Notes to the interim condensed consolidated financial statements 5-16
- - - - - - - - - - - - - - - - - - - -
ENERGEAN ISRAEL LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in thousands US Dollars, unless otherwise stated)
30 31 December 2021
June
2022
Unaudited Audited
Note
ASSETS:
NON-CURRENT ASSETS:
Property, plant and equipment 3(A) 2,584,894 2,245,267
Intangible assets 3(B) 54.527 20,141
Other accounts receivable 6(B) 82 6,463
Loan to related party 6(B) - 346,000
Restricted cash 3(D)(2) - 100,000
Deferred expenses 3(C) - 22,958
Deferred tax asset 5 14,458 11,575
2,653,961 2,752,404
CURRENT ASSETS:
Trade and other receivables 32,152 22,769
Deferred expenses 3(C) 22,958 -
Restricted cash 3(D)(2) 135,610 99,729
Cash and cash equivalents 218,711 349,827
409,431 472,325
TOTAL ASSETS 3,063,392 3,224,729
EQUITY AND LIABILITIES:
EQUITY:
Share capital 1,708 1,708
Share premium 6(B) 212,539 572,539
Accumulated losses (40,851) (35,946)
TOTAL EQUITY 173,396 538,301
NON-CURRENT LIABILITIES:
Senior secured notes 3(D) 2,467,251 2,463,524
Provisions for decommissioning 26,609 35,525
Trade and other payables 3(F) 160,587 113,264
2,654,447 2,612,313
CURRENT LIABILITIES:
Trade and other payables 3(F) 235,549 74,115
TOTAL LIABILITIES 2,889,996 2,686,428
TOTAL EQUITY AND LIABILITIES 3,063,392 3,224,729
September 7, 2022
Panagiotis Benos Matthaios Rigas
Director Director
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
ENERGEAN ISRAEL LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June 2022
(Amounts in thousands US Dollars, unless otherwise stated)
30 June (Unaudited)
2022 2021
Note
Administrative expenses 4(A) (5,453) (1,735)
Other expenses 4(A) (1,074) (28)
Other income 4(A) 53 -
Operating loss (6,474) (1,763)
Finance income 4(B) 4,504 1,808
Finance expenses 4(B) (4,671) (9,436)
Foreign exchange loss 4(B) (967) (727)
(1,134) (8,355)
Loss for the period before tax (7,608) (10,118)
Tax income 5 2,703 2,571
Net loss for the period (4,905) (7,547)
Other comprehensive income (loss):
Items that may be reclassified subsequently to profit or loss:
Gain (loss) on cash flow hedge for the period - 2,278
Reclassification adjustment for items included in loss on realisation - 4,641
Tax relating to items that may be reclassified subsequently to profit or loss -
(1,591)
Other comprehensive income for the period - 5,328
Total comprehensive loss for the period (4,905) (2,219)
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
ENERGEAN ISRAEL LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2022
(Amounts in thousands US Dollars, unless otherwise stated)
For the period of six months ended 30 June 2022 (Unaudited):
Share capital Share premium Accumulated losses Total equity
Balance as of 1 January 2022 1,708 572,539 (35,946) 538,301
Changes during period:
Transactions with shareholders
Share premium reduction, see note 6(B) - (360,000) - (360,000)
Comprehensive loss:
Loss for the period - - (4,905) (4,905)
Balance as of 30 June 2022 1,708 212,539 (40,851) 173,396
For the period of six months ended 30 June 2021 (Unaudited):
Share capital Share Premium Other reserves Accumulated losses Total equity
Balance as of 1 January 2021 1,708 572,539 (5,328) (25,114) 543,805
Changes during period:
Comprehensive Income (Loss):
Loss for the period - - - (7,547) (7,547)
Other comprehensive income, net of tax - - 5,328 - 5,328
Balance as of 30 June 2021 1,708 572,539 - (32,661) 541,586
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
ENERGEAN ISRAEL LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended 30 June 2022
(Amounts in thousands US Dollars, unless otherwise stated)
30 June (Unaudited)
2022 2021
Cash flows from operating activities:
Loss for the period before tax (7,608) (10,118)
Adjustments for:
Depreciation and amortisation 110 50
Loss from disposal on property, plant and equipment 1,074 23
Decommissioning discount unwinding 343 343
Other expenses - 5
Finance income )4,504) (1,808)
Finance expenses 4,330 9,093
Net foreign exchange loss 967 727
(5,288) (1,685)
Changes in working capital:
Decrease (increase) in other receivables 871 (183)
Decrease in trade and other payables (310) (932)
560 (1,115)
Income taxes paid (558) -
Net cash used in operating activities (5,285) (2,800)
Cash flows from investing activities:
Payment for purchase of oil & gas leases - (10,850)
Payment for purchase of property, plant and equipment (130,118) (97,615)
Payment for purchase of intangible assets (10,034) (3,682)
Proceeds from disposals of property, plant and equipment 188 -
Amounts received from INGL related to the future transfer disposals of 17,371 -
property, plant and equipment
Movement in restricted cash 64,119 (266,241)
Interest received 1,544 123
Net cash used in investing activities (56,930) (378,265)
Cash flows from financing activities:
Senior secured notes issuance - 2,500,000
Transaction cost due to senior secured notes issuance - (37,218)
Interest paid due to senior secured notes (64,453) -
Drawdown of borrowings - 118,000
Repayment of borrowings - (1,268,000)
Loan to related party (*) - (175,884)
Repayment of loan from related parties - (16,000)
Finance cost paid (1,869) (41,861)
Finance costs paid for deferred license payments - (3,494)
Repayment of obligations under leases (499) (169)
Net cash generated (used) from financing activities (66,821) 1,075,374
Net increase (decrease) in cash and cash equivalents (129,036) 694,309
Cash and cash equivalents at the beginning of the period 349,827 37,421
Effect of exchange rate fluctuations on cash held (2,080) (146)
Cash and cash equivalents at the end of the period 218,711 731,584
(*) The loan to related party was repaid as part of the Share Premium Capital
reduction, see note 6(B).
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 1: GENERAL
A. Energean Israel Limited (the "Company") was incorporated in
Cyprus on 22 July 2014 as a private company with limited liability under the
Companies Law, Cap. 113. Its registered office is at Lefkonos 22, 1(st) Floor,
2064, Nicosia, Cyprus.
B. The Company and its subsidiaries (the "Group") was established
with the objective of exploration, production and commercialisation of natural
gas and crude oil. The Group's main activities are performed in Israel by the
Company's Israeli Branch.
C. The Group's core assets as of 30 June 2022 are composed of:
Country Asset Working interest Field phase
Israel Karish (including Karish North) 100% Development
Israel Tanin 100% Development
Israel Blocks 12, 21, 23, 31 100% Exploration
Israel Four licences Zone D (1) 80% Exploration
(1) The Company holds 80% interests in four licences, blocks 55, 56,
61 and 62 (together, "Zone D") in Israel's Exclusive Economic Zone ("EEZ").
Following Energean's submission of a formal notice of relinquishment to the
Ministry of Energy, the licences will expire on 27 October 2022, at the end of
their term. See note 7(A).
D. The Energean Power FPSO arrived on location in Israel on 5 June
2022 and is expected to deliver first gas within a few weeks.
NOTE 2: ACCOUNTING POLICIES AND BASIS OF PREPARATION
These unaudited interim condensed consolidated financial statements for the
six months ended 30 June 2022 have been prepared in accordance with the
International Financial Reporting Standards ("IFRS") as adopted by United
Kingdom (UK). The unaudited interim condensed consolidated financial
statements do not include all the information and disclosures that are
required for the annual financial statements and must be read in conjunction
with the Group's annual consolidated financial statements for the year ended
31 December 2021.
These unaudited interim financial statements have been prepared on a going
concern basis.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 3: FINANCIAL POSITION
A. Property, Plant and Equipment:
1) Composition:
Oil & gas properties Leased assets Furniture, fixtures and equipment Total
Cost:
At 1 January 2021 1,812,758 604 635 1,813,997
Additions (*) 243,346 3,405 194 246,945
Disposals (23) - - (23)
Capitalised borrowing cost (**) 188,889 - - 188,889
Capitalised depreciation 362 - - 362
Change in decommissioning provision (3,549) - - (3,549)
Total cost at 31 December 2021 2,241,783 4,009 829 2,246,621
Additions (*) 286,844 198 1,922 288,964
Disposals (900) - - (900)
Capitalised borrowing cost (**) 60,749 - - 60,749
Capitalised depreciation 357 - - 357
Change in decommissioning provision (9,259) - - (9,259)
Total cost at 30 June 2022 2,579,574 4,207 2,751 2,586,532
Depreciation:
At 1 January 2021 - 331 143 474
Charge for the year - - 85 85
Capitalised to petroleum and gas assets - 362 - 362
Write down of the assets 433 - - 433
Total Depreciation at 31 December 2021 433 693 228 1,354
Expensed for the period - - 110 110
Disposals (433) - - (433)
Write down of the assets 250 - - 250
Capitalised to petroleum and gas assets - 357 - 357
Total Depreciation at 30 June 2022 250 1,050 338 1,638
Net property, plant and equipment at 31 December 2021 2,241,350 3,316 601 2,245,267
Net property, plant and equipment at 30 June 2022 2,579,324 3,157 2,413 2,584,894
(*) The additions to oil & gas properties are primarily due to development
costs for the Karish field, incurred under the EPCIC contract. Works relate
primarily to the FPSO, subsea and onshore construction.
(**) Capitalised borrowing costs relate primarily to the secured senior notes.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 3: FINANCIAL POSITION (Cont.)
2) Cash flow statement reconciliations:
30 June (Unaudited)
2022 2021
Additions to property, plant and equipment 339,911 280,576
Associated cash flows
Payment for additions to property, plant and equipment (*) (130,118) (108,465)
Non-cash movements/presented in other cash flow lines
Capitalised borrowing costs (60,749) (122,175)
Right-of-use asset additions (198) (57)
Capitalised share-based payment charge (109) (65)
Capitalised depreciation (357) (106)
Change in decommissioning provision 9,259 4,034
Movement in working capital (157,639) (53,742)
(*) This amount includes US$10.85 million which was paid to the sellers of the
Karish and Tanin leases during 2021.
B. Intangible Assets:
1) Composition:
Exploration and evaluation assets Software license Total
Cost:
At 1 January 2021 13,799 255 14,054
Additions 6,342 - 6,342
At 31 December 2021 20,141 255 20,396
Additions (*) 34,386 - 34,386
At 31 June 2022 54,527 255 54,782
Amortisation:
At 1 January 2021 - 247 247
Charge for the year - 8 8
Total Amortisation at 31 December 2021 - 255 255
Expensed for the period - - -
Total Amortisation at 30 June 2022 - 255 255
Net intangible assets at 31 December 2021 20,141 - 20,141
Net intangible assets at 30 June 2022 54,527 - 54,527
(*) Additions to exploration and evaluation assets are primarily due to
geological surveys, seismic acquisition and processing and drilling activities
undertaken in Block 12, offshore Israel. See also notes 6(E), 6(F).
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 3: FINANCIAL POSITION (Cont.)
2) Cash flow statement reconciliations:
30 June (Unaudited)
2022 2021
Additions to intangible assets 34,386 3,738
Associated cash flows
Payment for additions to intangible assets (10,034) (3,682)
Non-cash movements/presented in other cash flow lines
Movement in working capital (24,352) (56)
C. Deferred expenses
Deferred expenses relate to compensation of US$22.9 million that was accrued
in 2021 following delays to the supply of gas from the Karish project. It is
presented on the balance sheet as a current asset as it will be treated as
variable consideration under IFRS 15, offsetting gas sales once gas delivery
commences. First gas from the Karish project is expected within the next few
weeks.
D. Senior secured notes:
1) Issuance of US$2,500,000,000 senior secured notes:
On 24 March 2021 (the "Issue Date"), Energean Israel Finance Ltd (a 100%
subsidiary of the Company) issued US$2,500,000,000 of senior secured notes.
The Notes were issued in four equal tranches as follows:
30 31 December 2021
June
2022
Series Maturity Annual fixed Interest rate Carrying value Carrying value
US$ 625 million 30 March 2024 4.500% 618,741 617,060
US$ 625 million 30 March 2026 4.875% 616,930 615,966
US$ 625 million 30 March 2028 5.375% 616,107 615,451
US$ 625 million 30 March 2031 5.875% 615,473 615,047
US$2,500 million 2,467,251 2,463,524
The interest on each series of the Notes is paid semi-annually, on 30 March
and on 30 September of each year.
The Notes are listed on the 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.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 3: FINANCIAL POSITION (Cont.)
2) Restricted cash:
As of 30 June 2022, the restricted cash of the Company includes:
o Short term restricted cash of US$100 million debt payment fund that will
be released upon achieving three quarters of production of 3.8 bcm/year on an
annualised basis
o Short term restricted cash of US$35.6 million to cover the interest
reserve account for the accrued interest of the senior secured notes till 30
June 2022.
3) Credit rating:
The senior secured notes have been assigned a Ba3 rating by Moody's and a BB-
rating by S&P Global.
E. Fair value measurements:
The information set out below provides information about how the Group
determines the fair values of various financial assets and liabilities.
The fair values of the Group's non-current liabilities measured at amortised
cost are considered to approximate their carrying amounts at the reporting
date.
The carrying value less any estimated credit adjustments for financial assets
and financial liabilities with a maturity of less than one year are assumed to
approximate their fair values due to their short term-nature.
The fair value hierarchy of financial assets and financial liabilities that
are not measured at fair value (but fair value disclosure is required) is as
follows:
Fair value hierarchy as of 30 June 2022
Unaudited
Level 1 Level 2 Total
Financial assets
Short term restricted cash 135,610 - 135,610
Short term trade and other receivables - 31,741 31,741
Cash and cash equivalents 218,711 - 218,711
Total 354,321 31,741 386,062
Financial liabilities
Senior secured notes (*) 2,189,375 - 2,189,375
Trade and other payables - long term - 160,587 160,587
Trade and other payables - short term - 127,907 127,907
Total 2,189,375 288,494 2,477,869
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 3: FINANCIAL POSITION (Cont.)
Fair value hierarchy as of 31 December 2021
Audited
Level 1 Level 2 Total
Financial assets
Long term trade and other receivables - 6,402 6,402
Loan to related party - 346,000 346,000
Long term restricted cash 100,000 - 100,000
Short term restricted cash 99,729 - 99,729
Short term trade and other receivables - 22,176 22,176
Cash and cash equivalents 349,827 - 349,827
Total 549,556 374,578 924,134
Financial liabilities
Senior secured notes (*) 2,483,750 - 2,483,750
Trade and other payables - long term - 59,727 59,727
Trade and other payables - short term - 35,918 35,918
Total 2,483,750 100,039 2,583,789
(*) The senior secured notes are measured at amortised cost in the Company's
financial statements. The notes are listed for trading on the TACT
Institutional of the Tel Aviv Stock Exchange Ltd. (the "TASE")". The carrying
amount as of 30 June 2022 was US$2,467 million and as of 31 December 2021 was
US$2,463 million.
F. Trade and other payables:
30 June 31 December
2022 2021
Unaudited Audited
Current
Financial items
Trade accounts payable (1) 90,436 32,611
Payables to related parties 12,057 1,079
Deferred license payments (2) 24,466 -
Value added tax payable - 1,217
Current lease liabilities 948 1,011
127,907 35,918
Non-Financial items
Accrued expenses (1) 20,348 5,611
Interest payable 32,227 32,227
Sales consideration received in advance (4) 54,690 -
Social insurance and other taxes 377 132
Income taxes - 227
107,642 38,197
235,549 74,115
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 3: FINANCIAL POSITION (Cont.)
30 June 31 December
2022 2021
Unaudited Audited
Non-current
Financial items
Accrued expenses to related parties 199 294
Long term lease liabilities 2,177 2,203
Trade and other payables (3) 122,579 -
Deferred license payments (2) 35,632 57,230
160,587 59,727
Non-Financial items
Sales consideration received in advance (4) - 53,537
160,587 113,264
(1) Trade payables and accrued expenses relate primarily to development
expenditure on the Karish project, with the main contributors being FPSO and
subsea construction costs. Trade payables are non-interest bearing.
(2) In December 2016, the Company acquired the Karish and Tanin leases for
US$40 million of up front consideration plus contingent consideration of
US$108.5 million (paid over 10 equal instalments) bearing interest at an
annual rate of 4.6%. As at 30 June 2022, the total discounted deferred
consideration was US$60 million (31 December 2021: US$57million).
The Sale and Purchase Agreement ("SPA") includes provisions in the event of
Force Majeure that prevents or delays the implementation of the development
plan as approved under one lease for a period of more than ninety (90) days in
any year following the final investment decision ("FID") date. In the event of
Force Majeure, the applicable annual payment of the remaining consideration
will be postponed by an equivalent period of time, and no interest will be
accrued in that period of time as well.
Due to the effects of the COVID-19 pandemic which
constitute a Force Majeure event, the deferred payment due in March 2022 was
postponed accordingly.
(3) Amount payable to Technip in respect of the EPCIC contract. The amount
is payable in eight equal instalments commencing nine-months following
practical completion of the project and therefore has been discounted at
5.831% per annum.
(4) The sales consideration received in advance relates to the agreement
with Israel Natural Gas Lines ("INGL") for the transfer of title (the "Hand
Over") of the near shore and onshore part of the infrastructure that will
deliver gas from the Energean Power FPSO into the Israeli national gas
transmission grid. It is intended that the hand over to INGL will become
effective at least 90 days after the delivery of first gas from the Karish
field, which is expected in the next few weeks. Following Hand Over, INGL will
be responsible for the operation and maintenance of this part of the
infrastructure.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 4: COMPREHENSIVE INCOME
30 June (Unaudited)
2022 2021
General & administration expenses
Payroll costs 935 665
Share-based payment charge included in administrative expenses 80 54
Depreciation and amortisation (Notes 3(A) and 3(B)) 110 50
Auditor fees 88 118
Other general & administration expenses 4,240 848
Total administrative expenses 5,453 1,735
Other expenses
Reversal of prior period provision - 5
Loss from property, plant and equipment disposal 1,074 23
Total other expenses 824 28
Other income
Gain from disposal (53) -
Total other income (53) -
A. Operating loss:
.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 4: COMPREHENSIVE INCOME (Cont.)
B. Net finance income (expenses):
30 June )Unaudited)
2022 2021
Interest on bank borrowings - 76,890
Interest on senior secured notes (1) 68,179 33,791
Interest expense on long terms payables 4,731 458
Interest on shareholders loan - 9
Less amounts included in the cost of qualifying assets (2) (68,866) (106,823)
4,044 4,325
Finance and arrangement fees 2,842 13,074
Other finance costs and bank charges 284 29
Interest expenses from Hedging - 6,988
Unwinding of discount on decommissioning liabilities 343 343
Interest on obligations for leases 160 29
Less amounts included in the cost of qualifying assets (2) (3,002) (15,352)
627 5,111
Total finance costs 4,671 9,436
Interest income from time deposits (1,290) (818)
Interest income from loans to related parties (3,214) (990)
Total finance income (4,504) (1,808)
Net foreign exchange loss 967 727
Net finance loss 1,134 8,355
(1) See also Note 3(D)(1).
(2) See also Note 3(A).
NOTE 5: TAXATION
A. Tax income:
30 June (Unaudited)
2022 2021
Corporation tax - current year (180) (30)
Deferred tax income 2,883 2,601
Total taxation income 2,703 2,571
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 5: TAXATION (Cont.)
B. Deferred tax:
Deferred taxes, driven by the activity in Israel by the Israeli Branch of the
Company, are computed at an average tax rate of 23%, based on the tax rates
that are expected to apply upon reversal. The deferred taxes are presented in
the statement of financial position as non-current assets. Below are the items
for which deferred taxes were recognised:
Property, plant and equipment & intangible asset 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 Provisions for decommissioning Total
liabilities
IFRS 16
At 1 January 2021 (12,140) (62) 9,325 - 63 293 1,591 8,769 7,839
Increase (decrease) for the year through:
Profit or loss (492) (700) 1,436 5,020 31 630 - (598) 5,327
Reclassification for the current year - - (6,011) 6,011 - - - - -
Other comprehensive income - - - - - - (1,591) - (1,591)
At 31 December 2021 (12,632) (762) 4,750 11,031 94 923 - 8,171 11,575
Increase (decrease) for the period through:
Profit or loss (5,740) (159) 15,461 (4,687) 43 16 - (2,051) 2,883
At 30 June 2022 (18,372) (921) 20,211 6,344 137 939 - 6,120 14,458
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 6: SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD
A. Gas supply agreement with the Israel Electric Company
In March 2022, Energean signed a gas supply agreement with the Israel Electric
Company.
The gas price will be determined in each period, with volumes determined on a
daily basis.
Starting upon the commencement of first gas production from Karish, the
agreement will
be valid for an initial one-year period with an option to extend subject to
ratification by
both parties
B. Share Premium Capital reduction:
In April 2022 the Company reduced its share premium capital by US$360 million
and credited US$346 million against the shareholder loan account plus accrued
interest.
C. Termination of contract with Gas Buyer
In May 2022, further to the claims raised by the parties in the related
arbitration proceedings with Dalia Power Energies LTD ("Dalia") (including the
counterclaim filed by the Company seeking a declaration that Company is
entitled to terminate the GSPA), Dalia and the Company agreed to end all
claims and disputes between the parties. Both sides agreed that the Dalia GSPA
(which represents up to 0.8 bcm/year was lawfully terminated, that the
arbitration proceedings were terminated, and that neither party owes or will
be liable to the other for any payment in connection with and due to the Dalia
GSPA, the arbitration proceedings and the facts subject thereof. This was
agreed to be final and unappealable.
D. Contract signed with East Hagit Power Plant
In May 2022, the Company signed a new GSPA, representing up to 0.8 bcm/year,
to supply gas to the East Hagit Power Plant Limited Partnership ("EH
Partnership"), a partnership between the Edeltech Group and Shikun & Binui
Energy.
The GSPA is for a term of approximately 15 years, for a total contract
quantity of up to 12 bcm. The contract contains provisions regarding floor
pricing, offtake exclusivity and a price indexation mechanism (not Brent price
linked).
E. Commencement of growth drilling campaign:
The Company started its 2022 drilling campaign during March 2022, which
originally included three firm wells. In June 2022, the Company exercised its
contractual option to drill two further wells, the drilling locations for
which were selected as the Hermes and Zeus prospects.
F. Athena Gas Discovery
A commercial discovery was made by the Athena exploration well, located in
Block 12, in the A, B and C sands. Preliminary analysis indicated that the
Athena discovery contained recoverable gas volumes of 8 bcm on a standalone
basis.
The discovery de-risked an additional 50 bcm of gross mean unrisked
prospective resources across Company's Olympus Area (total 58 bcm including
Athena). The Olympus Area is the Company's newly defined area which includes
Athena, plus the undrilled prospects on Block 12 and the adjacent Tanin Lease.
ENERGEAN ISRAEL LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands US Dollars, unless otherwise stated)
NOTE 6: SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD
(Cont.)
G. Claim submitted under the Karish-Tanin SPA
On 31 May 2022, NewMed Energy LP (previously Delek Drilling LP)
("NewMed") filed a lawsuit against the Company before the Tel Aviv District
Court. NewMed Energy LP claimed that the remaining US$65.1 million of
outstanding contingent consideration due under the SPA for the Karish and
Tanin leases (see Note 3(E)(2)) plus interest and indexation, should be
accelerated. The residual remedy requested is US$10.85 million plus interest
and indexation, reflecting the annual payment for the year 2021. The claim is
purportedly based on a payment acceleration mechanism set in the SPA, combined
with NewMed's rejection of the Company's Force Majeure claim. The claim is
being assessed by the Company together with its legal advisors. A statement of
defense will be filed mid-September.
H. The FPSO sailed away from Singapore and arrived on location in
Israel on 5 June 2022.
J. Bank Guarantee Facility:
On 8 June, 2022 the Company's guarantee facility was extended and amended to a
total of NIS355 million instead of NIS250 million. The facility is secured by
Energean PLC parent company guarantee of US$112 million. This facility is
valid until April 30, 2023.
NOTE 7: SIGNIFICANTS EVENTS AND TRANSACTIONS AFTER THE REPORTING PERIOD
A. Zone D:
On 27 July, 2022, the Company sent a formal notice to the Ministry of Energy
notifing the relinquishment of Zone D and discontinuation of related work. As
such, the licences are expected to expire on October 27, 2022.
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