REG - Energean PLC - Results for Half Year Ended 30 June 2022
08/09/2022 07:00
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RNS Number : 6996Y Energean PLC 08 September 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Energean plc
("Energean" or the "Company")
Results for Half Year Ended 30 June 2022
London, 8 September 2022 - Energean plc (LSE: ENOG TASE: אנאג) is pleased
to announce its half-year results for the six months ended 30 June 2022 ("H1
2022").
Mathios Rigas, Chief Executive of Energean, commented:
"During H1 2022, Energean delivered strong operational and financial results.
The ex-Edison assets have outperformed our expectations and our flagship
Karish project is on track to start production within weeks and will enhance
energy security in Israel and the region. In addition, our growth drilling and
development operations offshore Israel have enhanced our portfolio by
de-risking 58 bcm of natural gas, and we are evaluating multiple geographical
routes to monetisation through either increased Israeli domestic sales or key
regional export markets. The strong financial performance of our existing
assets, the current readiness status of our Karish project, and our strong
liquidity position have allowed us to, today, declare our maiden quarterly
dividend, in line with our previously announced dividend policy. We are
concurrently raising our medium-term targets to annual revenues of $2.5
billion and Adjusted EBITDAX of $1.75 billion, underpinned by production of
more than 200 kboed.
"In a year where global focus has shifted to security of energy supply and
affordability of energy for the consumers, we remain proud of our landmark ESG
commitments, which remain at the heart of our operations. From choosing to
focus on gas as the driver of energy transition; to a 74% reduction in
emissions intensity since 2019 1 (#_ftn1) ; to our commitment to be net zero
by 2050, and our ongoing positive engagement with the communities that host
our operations, we commit to being the best version of Energean possible.
"Finally, the global energy dynamic changed in February 2022. Russia's tragic
invasion of Ukraine revealed a major weakness in European energy security and,
by extension, European energy policy. Overreliance on a single supplier has -
and will continue to - fundamentally disrupt the European global energy
dynamic. We therefore call on governments and the broader international energy
stakeholder community to recognise the value of natural gas as the foundation
of, and catalyst for, a just transition. Policy must be adjusted to encourage
domestic upstream projects that will enhance security of energy supply as well
as international energy transportation projects that will interconnect Europe
with the East Med, which can be a stable and reliable supplier of energy for
the European consumer."
Highlights - Operational and Corporate
· Declared maiden quarterly dividend of 30 US$
cents/share
o Accelerated timetable due to strong cash flows from the ex-Edison
E&P assets, readiness of Karish project and strong liquidity position
o Aligned with commitment to:
§ Return an initial $50 million per quarter no later than the end of 2022
and at least $1 billion by the end of 2025
§ Provide a reliable and progressive dividend stream to shareholders,
expecting to reach a minimum of $100 million per quarter once medium-term
targets are achieved
· On track to deliver first gas from Karish within
weeks
· 58 bcm of resources de-risked across the Olympus
Area following successful results from the Athena exploration well in May
2022; Zeus elected for the fifth drilling slot with the aim of further
refining volumetrics and enabling faster progress to commercialisation
· Ongoing drilling operations on the Hermes
prospect, with results expected later this year
· New spot gas sales agreement signed with Israel
Electric Corporation ("IEC") in March 2022, enhancing ability to fill the
capacity of the Energean Power FPSO
· Improved gas sales prices confirmed in Egypt and
Israel
o Abu Qir Production Sharing Contract ("PSC") amendment increases gas
sales prices
o 13% increase in the Israeli Price Tariff ("PT") raises current
weighted average sales price to $4.3/mmBTU (approximately $4.6/mcf)
Highlights - Financial
· Strong half-year financial results underpinned by strong
commodity prices
o Revenues were $339.0 million, a 65% increase versus H1 2021 ($205.5
million)
o Adjusted EBITDAX was $198.2 million 2 (#_ftn2) , a 165% increase versus
H1 2021 ($74.7 million)
o Group cash as of 30 June 2022 was $812.1 million (including restricted
amounts of $138.4 million)
· H1 production was 35.4 kboed (73% gas), a 19.5% reduction
year-on-year, primarily due to anticipated natural decline at Abu Qir, which
is expected to be offset by production from NEA/NI, expected onstream by the
end of 2022
· One-off windfall tax in Italy totalling $29.3 million (40% paid
in H1 2022, with the remainder to be paid by end-November 2022). The Company
continues to advocate for domestic energy investment to support Italian energy
and socio-economic security
H1 2022 H1 2021 Increase / (Decrease)
$m $m %
Average working interest production (kboed) 35.4 44.0 (19.5)
Sales and other revenue 339.0 205.5 65.0
Cash Cost of Production 3 (#_ftn3) 123.3 122.4 0.7
Cash Cost of Production per boe 19.2 15.4 24.7
Cash S,G&A(6) 15.1 17.0 (11.4)
Adjusted EBITDAX 4 (#_ftn4) 198.2(3) 74.7 165.3
Operating cash flow 5 (#_ftn5) 146.6 53.1 176.0
Development capital expenditure 345.7 200.8 72.2
Exploration capital expenditure 37.0 29.2 26.7
Decommissioning expenditure 1.5 1.7 (11.8)
Net debt (including restricted cash) 2,174.6 1,692.6 28.5
Outlook
· Medium-term targets increased following confirmation of improved gas
prices in Israel and Egypt
o Annual revenues now expected to be $2.5 billion (up from $2.0 billion)
o Annual Adjusted EBITDAX(6) now expected to be $1.75 billion (up from $1.4
billion)
· First gas from Karish on track for delivery within weeks
· First gas from NEA/NI, Egypt is on track for year-end 2022
· Results from the Hermes and Zeus wells, expected later this year
· 2022 net debt guidance reduced to $2.4 - $2.5 billion (down from $2.6
- $2.8 billion)
· 2022 production guidance (ex-Israel) narrowed to 34 - 37 kboed (from
35 - 40 kboed)
o H2 production (ex-Israel) expected to benefit from the start-up of the Abu
Qir NAQ-PII#6 infill well and recommencement of production at fields in Italy
following planned maintenance in June 2022
o Israel production rate in Q4 2022 expected to average 60 - 100 kboed (15 -
25 kboed on a 2022 annualised basis)
· Per barrel financial and operational metrics expected to be
significantly enhanced following first gas from Karish
o Cash Cost of Production expected to reduce to $14 - 18/boe
o Emissions intensity expected to reduce to 7 - 8 kgCO2e/boe, approximately
half the current average for the global oil and gas industry
Enquiries
For capital markets: ir@energean.com (mailto:ir@energean.com)
Kate Sloan, Head of IR and ECM
Tel: +44 7917 608 645
For media: pblewer@energean.com (mailto:pblewer@energean.com)
Paddy Blewer, Head of Corporate
Communications
Tel: +44 7765 250 857
Conference call
A webcast will be held today at 08:30 BST / 10:30 Israel Time.
Webcast: https://edge.media-server.com/mmc/p/79ysvw5a
(https://edge.media-server.com/mmc/p/79ysvw5a)
Dial-In:
https://register.vevent.com/register/BIe2a07fbb3e0745b29986a53e01755548
(https://register.vevent.com/register/BIe2a07fbb3e0745b29986a53e01755548)
(Please note, once you register for the conference call line you will receive
a unique pin code and dial-in details.)
The presentation slides will be made available on the website shortly
www.energean.com (http://www.energean.com/) .
Maiden Dividend Declaration
Strong financial performance in H1 2022 has allowed Energean to accelerate
payment of its maiden quarterly dividend, and the Company has today declared a
dividend of 30 US$ cents per share. This represents Energean's first payment
under its commitment to pay average quarterly dividends of $50 million, rising
to $100 million once it achieves its medium-term targets. Energean remains
committed to sharing its success with shareholders and re-confirms its target
of returning at least $1 billion to shareholders by end-2025.
Energean Operational Review
Production
H1 2022 average working interest production was 35.4 kboed (73% gas), down
19.5% year-on-year due to natural decline in Egypt, maintenance activities at
Rospo Mare, Italy, and the shut-in of production at Prinos, Greece. Energean
is narrowing the full year guidance range (excluding Israel) to 34 - 37 kboed
(from 35 - 40 kboed). Karish is expected to commence production within weeks,
with Q4 2022 production contribution of 60 - 100 kboed (15 - 25 kboed
annualised).
Production during H2 2022 is expected to benefit from:
· Commencement of production from the Abu Qir NAQ-PII#6 infill well
· Resumption of production at Rospo Mare, Italy, following planned
maintenance in June 2022
· Commencement of production from Karish
H1 2022 FY 2022 guidance H1 2021
Kboed Kboed Kboed
Israel - 15.0 - 25.0 -
(including 0.7 - 1.2 bcm of gas)
Egypt 24.8 24.0 - 26.0 31.4
Italy 9.3 9.0 - 9.5 10.2
Greece, Croatia and UK 1.3 1.0 - 1.5 2.4
Total production (including Israel) 35.4 49.0 - 62.0 44.0
Total production (excluding Israel) 35.4 34.0 - 37.0 44.0
Israel
Karish Project
The Energean Power FPSO arrived in Israel on 5 June 2022, after which it was
moored to the seabed and connected to the risers as planned. Energean remains
on track to deliver first gas from the Karish development project within
weeks.
During H1 2022, Energean negotiated an amendment to the deferred payment to
TechnipFMC. Payment for a total of $250 million relating to capital
expenditure accrued due to 2022 activities will be deferred, with payment made
in eight equal quarterly instalments commencing nine months following
practical completion of the project. Deferred amounts do not incur any
interest. Energean's capital expenditure guidance of $560 - 610 million for
Israel includes the full $250 million that will be deferred. As part of the
amendment, the period from which liquidated damages due to Energean apply now
commences on 30 September 2022.
Growth Projects
The Karish North KN-01 development well was successfully drilled and completed
in early August 2022.
First gas from Karish North, as well as the completion and installation of the
second gas sales export riser and the second oil train, remains on track for
end-2023.
Drilling Campaign
1. Athena Gas Discovery
In May 2022, Energean announced a commercial discovery from the Athena
exploration well, which is estimated to contain recoverable gas volumes of 8
bcm (283 bcf / 51 mmboe) on a standalone basis. The discovery de-risked an
additional 50 bcm (1.8 tcf / 321 mmboe) of mean unrisked prospective resources
across Energean's Olympus Area (total 58 bcm / 372 mmboe including Athena).
Multiple commercialisation options continue to be under evaluation for a
standalone tie-back to the Energean Power FPSO or as part of a new Olympus
Area development.
2. Karish Main (KM-04)
In June 2022, Energean safely and successfully completed the KM-04 appraisal
well. The KM-04 appraisal well achieved the following:
· Gas and associated liquids were encountered in the previously
undrilled fault block between Karish Main and Karish North;
· Gas was encountered in the A-sands on the flanks of the Karish
Main structure, these sands were tested and fluid samples obtained; and
· An oil rim was confirmed in the central part of the field, with
thickness towards the lower end of the pre-drill expectation range (5-10
metres vs. 0-100 metres pre-drill). A sample of oil was obtained for testing.
Energean expects to be able to commercialise the oil volumes through the
existing well stock.
Additional analysis is being undertaken to further refine reserves volumes and
the liquids-to-gas ratio across the Karish lease.
3. Hermes Exploration Well
The Hermes exploration well spudded in August 2022. Drilling operations are
ongoing, with results expected later this year. Energean has an option to
drill a sixth well, which may be exercised, depending on the results from
Hermes.
4. Zeus Well
Energean has elected to drill the Zeus structure, Block 12 (Olympus Area)
using its fifth drilling rig slot and the well will spud following drilling of
the Hermes well. Zeus is estimated to contain 10 - 12 bcm of gross prospective
unrisked gas resources in the A/B/C sands and results will enable Energean to
gather additional data to further refine resource estimates across the entire
Olympus Area.
Gas and Liquids Contracts and Gas Pricing
In July 2022, Israel Electric Authority announced a 13% increase in the PT
from 27.6 to 31.4. This translates into a weighted average sales price under
Energean's Gas Sales and Purchase Agreements ("GSPAs") to $4.3/mmBTU
(approximately $4.6/mcf).
In March 2022, Energean signed a limited-term exclusivity agreement and term
sheet for the marketing of its Karish liquids with Vitol SA. A firm offtake
agreement is in the final stages of negotiation and is expected to be signed
before Karish first gas.
In May 2022, Energean signed a new GSPA, representing up to 0.8 bcm/yr, 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).
In July 2022, Energean Israel signed a new GSPA, representing 0.08 bcm/yr, to
supply gas to Shapir-G.E.S Concessionaire IPP Ltd for the Ashdod Desalination
Plant. The GSPA is for a term of 20 years starting from January 2024 and
includes take-or-pay provisions and floor pricing.
Energean has now signed a total of 20 GSPAs for the firm supply of 7.2 bcm/yr
of gas on plateau. The contract signed with IEC during March 2022 helps to
optimise Energean's gas sales portfolio and may enable Energean to fully
utilise the available capacity of its FPSO. Under the contract with IEC, the
gas price will be determined month ahead with volumes determined on a daily
basis. Starting upon commencement of first gas, the agreement is valid for an
initial one-year period with an option to extend, subject to ratification by
both parties.
Egypt
Production
Working interest production from the Abu Qir area averaged 24.8 kboed (86%
gas) during H1 2022 with full year production guidance narrowed to between 24
- 26 kboed.
NEA/NI
NEA/NI was 72% complete as of 31 July 2022. Subsea installation activities are
complete and the first well is expected to spud imminently. Remaining
activities include the finalisation of the Abu Qir platform modifications and
the tie-in and commissioning of the subsea production systems. First gas from
the first well is on track for end-2022.
Abu Qir
Commercial
During August 2022, Abu Qir Petroleum and EGPC agreed an amendment to the PSC,
resulting in improved gas sales pricing.
Drilling programme
Energean is completing the NAQ-PII#6 well to support production in the Abu Qir
concession. Four additional infill wells on the Abu Qir field are expected to
be drilled between 2023 and 2024.
Receivables
At 30 June 2022, net receivables (after provision for bad and doubtful debts)
in Egypt were $109.6 million (30 June 2021: $158.7 million), of which $64.2
million (30 June 2021: $94.0 million) was classified as overdue.
Italy
Working interest production from Italy averaged 9.3 kboed (43% gas) during H1
2022 with full year production expected to be between 9.0 and 9.5 kboed.
First gas from Cassiopea remains on track for H1 2024.
Windfall tax
During H1 2022, Italy introduced a windfall tax in the form of a law decree
which imposed a 25% one-off tax on profit between October 2021 and April 2022
compared to the same period in the prior year. At 30 June 2022, an advance
payment of 40%, or approximately $11.7 million, had been remitted to the
Italian Revenue Agency, with the remaining balance, $17.6 million, to be paid
by the end of November 2022.
Rest of producing portfolio
In the six-months to 30 June 2022, working interest production from the rest
of the portfolio averaged 1.3 kboed (30% gas). Full year production is
expected to be between 1.0 - 1.5 kboed.
Greece
First oil from the Epsilon development is expected in H1 2024.
In July 2022, the Greek government passed legislation setting out the legal
framework for Carbon Capture, Utilisation and Storage ("CCUS") licences.
Pre-FEED activities with Wood Group and the subsurface studies with Haliburton
have progressed well and are expected to complete before the end of this
month. This progresses Energean's plans to achieve net zero emissions by 2050.
Croatia
Energean is continuing FEED activities for the development of the Irena gas
field. The target for final investment decision remains Q4 2022.
United Kingdom
The Isabella appraisal well spudded in September 2022.
Energean Corporate Review
ESG
Net Zero
Energean's Scope 1 and 2 carbon emissions intensity in H1 2022 was estimated
to be approximately 17.3 kgCO2e/boe, a 5.5% reduction versus 2021 emissions
levels 6 (#_ftn6) ; and a 74% reduction versus the 2019 base measurement
year 7 (#_ftn7) . Post-first gas from Karish, emissions are expected to be
approximately 7-8 kgCO2e/boe, which is approximately half the current average
for the global oil and gas industry, and Energean expects to maintain or
reduce this lower level going forward.
The decrease between YE21 and H122 carbon emissions intensity was due to
energy use optimisation activities in Egypt and the prolonged shut-down of the
Prinos facilities in Greece.
Environmental, Social and Governance ("ESG") Reporting and Ratings
In April 2022, Energean was rated as AA by MSCI for a second year running.
In July 2022, Israeli's Maala Index updated its rating for Energean to
Platinum, up from Gold in the previous year. The Maala Index is an ESG rating
system and stock market index that rates the largest companies in Israel on an
annual basis. Also in July, Moody's published ESG Issuer Profiles, wherein
Energean ranked above average on all three categories compared to 89 E&P
peers.
In August 2022, Energean was confirmed as a constituent of the FTSE4Good Index
Series, following the FTSE4Good Index Series June 2022 review. The FTSE4Good
Index Series is designed to measure the performance of companies demonstrating
strong ESG practices.
Energean has also continued to comply with the Task Force on Climate Related
Financial Disclosure ("TCFD") recommendations, full disclosure of which is
provided in the 2021 Annual Report and Accounts as well as the 2021
Sustainability Report.
Corporate
In July 2022, Energean re-entered the Tel Aviv Stock Exchange 35 Index.
2022 guidance
FY 2022
Production
Israel (kboed) 15.0 - 25.0
(including 0.7 - 1.2 bcm of gas)
Egypt (kboed) 24.0 - 26.0
Italy (kboed) 9.0 - 9.5
Greece, Croatia & UK North Sea (kboed) 1.0 - 1.5
Total production, including Israel (kboed) 49.0 - 62.0
Total production, excluding Israel (kboed) 34.0 - 37.0
Financials
Consolidated net debt ($ million) 2,400 - 2,500
Cash Cost of Production (operating costs plus royalties)
Israel ($ million) 100 - 110
Egypt ($ million) 50
Italy ($ million) 170 including flux costs of 30
Greece, Croatia & UK North Sea ($ million) 50
Total Cash Cost of Production ($ million) 370 - 380
Cash S,G&A ($ million) 35 - 40
Development and production capital expenditure
Israel ($ million) 560 - 610
Egypt ($ million) 140
Italy ($ million) 60
Greece, Croatia & UK North Sea ($ million) 40
Total development & production capital expenditure ($ million) 800 - 850
Exploration expenditure
Israel ($ million) 150 - 180 (5 wells)
Egypt, Italy, Greece, Croatia & UK North Sea ($ million) 15
Total exploration expenditure ($ million) 165 - 195
Decommissioning
UK North Sea 5
Italy 10
Decommissioning expenditure ($ million) 15
Energean Financial Review
Financial results summary
H1 2022 H1 2021 Change
Average daily working interest production (kboed) 35.4 44.0 (19.5%)
Sales revenue ($m) 339.0 205.5 65.0%
Realised weighted average 87.5 47.3 85.0%
oil price ($/boe)
Realized weighted average gas price pre-hedging ($/mcf) 10.4 4.2 147.6%
Realized PSV gas (Italian gas) price pre-hedging ($/mcf) 30.9 7.3 323.3%
Cash cost of production 8 (#_ftn8) ($m) 123.3 122.4 0.74%
Cash cost of production per barrel ($/boe) 9 (#_ftn9) 19.2 15.4 24.7%
Cash SG&A 10 (#_ftn10) 15.1 17.0 (11.2%)
Adjusted EBITDAX 11 (#_ftn11) ($m) 198.2 74.7 165.3%
Profit/(Loss) after tax ($m) 118.7 (35.7) 432.5%
Cash flow from operating activities ($m) 146.6 53.1 176.0%
Capital expenditure ($m) 398.3 230.0 73.2%
H1 2022 FY 2021 Change
Total borrowings ($m) 2,986.8 2,947.1 1.4%
Cash and cash equivalents and restricted cash ($m) 812.1 930.6 (12.7%)
Net debt / (cash) ($m) (including restricted cash) 2,174.6 12 (#_ftn12) 2,016.6 7.8%
Revenue, production and commodity prices
Group working interest production averaged 35.4 kboed, a decrease of 19.5% for
the period (H1 2021: 44.0 kboed), with the Abu Qir field, offshore Egypt,
accounting for approximately 70% of total output. The production split was
73% gas (H1 2021: 72%) and 27 % oil (H1 2021: 28%). Production decreased due
to planned maintenance activities in Italy commenced in June 2022 and the
shut-down of Prinos. Egypt production expected to benefit in H2 2022 from the
start-up of the Abu Qir NAQ-PII#6 infill well and the re-start of production
at Prinos. The Company has narrowed its guidance for production (excluding
Israel) to 34 to 37 kboed for the full year (49.0 to 62.0 kboed for the full
year including Israel).
H1 2022 revenue was $339.0 million, a 65.0% increase for the period (H1 2021:
$205.5 million), primarily due to the higher commodity prices achieved:
· During H1 2022, the average Brent oil price was $104.9/bbl (H1
2021: $65.2/bbl) and the average PSV (Italian gas) price was €101.2/MWh
($32.4/mcf) (1H 2021: €21.2/MWh ($7.3/mcf))
· Commodity price strength underpinned 1H 2022 total revenues of
$339 million (H1 2021: $206 million). Gas sales were $211 million (H1 2021:
$106 million) with a post-hedge realised PSV price in Italy €82.6/MWh or
$26.6/mcf (H1 2021: €20.6/MWh or $4.7/mcf). Liquid sales, crude and
petroleum product, were $145 million (H1 2021: $99 million), with a realised
price of $87.5/boe (H1 2021: $47.3/boe).
Adjusted EBITDAX for the period was $198.2 million (H1 2021: $74.7 million),
the increase of 165% is predominantly a result of the higher revenue achieved
due to strong commodity prices.
Underlying cash production costs
Cash production costs for the period were $123.3 million (H1 2021: 122.4
million). Although production costs are relatively stable year on year, the
unit costs for the period were $19.2 /boe (H1 2021: $15.4 /boe), this increase
in unit production costs was primarily driven by decreased production in Italy
and Egypt, as applied to a primarily fixed cost base.
Additionally, production costs were also impacted by increased royalties in
Italy associated with the commodity price-drive higher revenues.
Depreciation, impairments and write-offs
Depreciation charges on production and development assets decreased by 7% to
$33.9 million (H1 2021: $36.3 million). On a per barrel of oil equivalent of
production basis, this represented a 15% increase, to $5.3/boe (H1 2021:
$4.6/boe).
During the current period and comparative prior period no impairment of cash
generating units (CGUs) was recognised. An impairment of intangible assets of
$0.4million was recognised in Italy, following relinquishment of an
exploration licence.
Other income and expenses
Other expenses of $8.8 million (H1 2021: $3.1 million) includes $3.5 million
of one-off restructuring costs incurred in Greece, $1.3 million write down of
inventory supplies, $1.1 million loss incurred from disposal of property,
plant and equipment and $1.4 million increase in legal provisions.
Other income of $1.6 million (H1 2021: $3.6 million) relates to reversal of
prior period provisions, that were reassessed in the current year based on the
latest facts and circumstances.
Finance income / costs
Net finance costs in H1 2022 were $35.9 million (H1 2021: $42.2 million).
Finance costs ($38.6 million (H1 2021: $44.9million)) are composed of $19.8
million (H1 2021: $17.0 million) of interest on borrowings excluding amounts
capitalised and other finance cost of $18.8 million (H1 2021: $27.9 million),
excluding amounts capitalised. Other finance costs include debt arrangement
fees and unwinding of the discount on the right of use assets, decommissioning
provisions, deferred consideration, convertible loan notes and contingent
consideration. Finance income was $2.7 million for the period (H1 2021: $2.7
million).
Commodity hedging
Energean undertakes hedging activities as part of the ongoing financial risk
management to protect against commodity price volatility and to ensure the
availability of cash flow for re-investment in capital programmes that are
driving business delivery. Commodity hedge contracts entered into in Italy
aim to mitigate the risk of changes to the selling price of natural gas.
Energean has commodity price hedges of $33 million outstanding as of 30 June
2022 (H1 2021 $nil). The hedges reflect 300,000 MWh hedged at an average price
of €39.60/MWh($12.7mcf).
Taxation
Energean recorded a net income tax recovery of $8.9 million in H1 2022 (H1
2021 taxation expense: $15.2 million), composed of corporation tax charges of
$67.1 million as offset by a deferred tax recovery of $76.0 million. The
deferred tax recovery is a result of the utilisation of carried forward tax
losses in the period and the recognition of previously unrecognised deferred
tax on carried forward losses, of which the largest is Italy ($66.5million),
to offset forecast taxable profits stemming from increased Brent and PSV price
expectations. Taxation charges in the period ended 30 June 2022 include $27.1
million relating to taxes (non-cash in nature) being deducted at source in
Egypt plus windfall tax payable in Italy of $29.3 million. During H1 2022,
Italy introduced a windfall tax in the form of a law decree which imposed a
25% one-off tax on profit between October 2021 and April 2022 compared to the
same period a year earlier. At 30 June 2022 an advance payment of 40%, or
approximately $11.7 million, had been remitted to the Italian Revenue Agency,
with remaining balance, $17.6million, to be paid by the end of November 2022.
Profit after tax
Profit after tax was $118.7 million (1H 2021: $35.7 million loss). This
increase is primarily due to the $134 million year-on-year increase in
revenue, relatively stable operating cost, $9 million decrease in foreign
exchange losses and $24 million increase in a net income tax recovery when
compared to H1 2021.
Earnings per share were $0.67 per share compared to a loss of $0.20 per share
for H1 2021. The increased earnings per share was driven by increased profit
after tax. The diluted earnings per share were $0.66 per share which consider
the impact of Long Term Incentive Plans (LTIPs), the Deferred Bonus Plans
(DBP) and the convertible loan notes.
Operating cash flow
In H1 2022, Energean recorded a cash inflow from operations before changes in
working capital of $159.1 million (1H 2021: $48.6 million). After working
capital movements and taxation received/(paid), the cash inflow in H1 2022 was
$146.6 million (H1 2021: $53.1 million). The year-on-year increase in
operating cash flow has been predominantly driven by the growth in revenues
delivered between the two periods. As discussed above, the increase in
revenues during the period is predominantly due the higher commodity price
environment.
Capital Expenditures
During the period, the Group incurred capital expenditure of $398.3 million
(H1 2021: $230 million). Capital expenditure mainly consisted of development
expenditure in relation to the Karish Main and Karish North Fields ($286.8
million) in Israel, the NEA/NI project in Egypt ($40.9 million), the Cassiopea
field in Italy ($9.9 million), the Scott field in the UK ($0.2 million) and
exploration and appraisal expenditure relating to Athena in Israel ($34.4
million) plus the Glengorm and Isabella discoveries in the UK ($1.4 million).
Net Debt
As at 30 June 2022, net debt of $2,174.6 million (FY21: $2,016.6 million)
consisted of $2,500 million of Energean Israel senior secured notes, $450
million of Energean plc senior secured notes, $50 million of convertible loan
notes (relating to the acquisition of the minority stake in Energean Israel),
$10 million of Greek Loan notes, $26 million draw down on the Greek Black
Sea Trade Development Bank loan, less deferred amortised fees, the equity
component of the convertible loan ($10.5 million) and cash balances of $812.1
million (including $138.4million of restricted cash).
The Senior Secured Notes (both at Energean Plc and Energean Israel) have fixed
interest rates, a blended average interest rate of approximately 5%, and have
decreased Energean's interest rate exposure and increased Energean's weighted
average debt maturity to approximately six years.
Shareholder Distributions
Strong financial performance in H1 2022 has allowed Energean to accelerate
payment of its maiden quarterly (Q2) dividend, and the Board is pleased to
declare a dividend of 30 US$ cents per ordinary share to be paid on 30
September 2022.
Non-IFRS measures
The Group uses certain measures of performance that are not specifically
defined under IFRS or other generally accepted accounting principles. These
non-IFRS measures include adjusted EBITDAX, underlying cash cost of production
and S,G&A, capital expenditure, net debt and gearing.
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business
performance. It is calculated as profit or loss for the period, adjusted for
discontinued operations, taxation, depreciation and amortisation, share-based
payment charge, impairment of property, plant and equipment, other income and
expenses, net finance costs and exploration and evaluation expenses. The Group
presents adjusted EBITDAX as it is used in assessing the Group's growth and
operational efficiencies as it illustrates the underlying performance of the
Group's business by excluding items not considered by management to reflect
the underlying operations of the Group.
H1 2022 H1 2021
$m $m
Adjusted EBITDAX 13 (#_ftn13) 198.2 74.7
Reconciliation to profit / (loss):
Depreciation and amortisation (33.9) (36.3)
Share-based payment charge (2.7) (2.3)
Exploration and evaluation expense (4.3) (1.0)
Other expenses (8.8) (3.1)
Other income 1.6 3.6
Finance income 2.7 2.7
Finance cost (38.6) (44.9)
Net foreign exchange loss (4.5) (13.9)
Taxation income / (expense) 8.9 (15.2)
Profit / (loss) from continuing operations 118.7 14 (#_ftn14) (35.7)
Cash Cost of Production
Cash Cost of Production is a non-IFRS measure that is used by the Group as a
useful indicator of the Group's underlying cash costs to produce hydrocarbons.
The Group uses the measure to compare operational performance
period-to-period, to monitor cost and assess operational efficiency. Cash cost
of production is calculated as cost of sales, adjusted for depreciation and
hydrocarbon inventory movements.
H1 2022 H1 2021
$m $m
Cost of sales 158.0 147.6
Less:
Depreciation (32.3) (33.8)
Change in inventory (2.4) 8.6
Cost of production 123.3 122.4
Total production for the period (MMboe) 6.4 7.9
Cost of production per boe ($/boe) 19.2(15) 15.4
Cash Selling, General & Administrative Expense (SG&A)
Cash SG&A excludes certain non-cash accounting items from the Group's
reported SG&A. Cash SG&A is calculated as follows: Administrative and
Selling and distribution expenses, excluding depletion and amortisation of
assets and share-based payment charge that are included in SG&A.
H1 2022 H1 2021
$m $m
Administrative expenses 19.1 21.7
Selling and distribution expenses 0.3 0.1
Less:
Depreciation 1.5 2.5
Share-based payment charge included in SG&A 2.7 2.3
Cash SG&A 15.1 15 (#_ftn15) 17.0
Energean incurred Cash SG&A costs of $15.1 million in H1 2022. This
represents a 11.2% decrease versus the comparable period last year (1H 2021:
$17.0 million) and is due to cost efficiencies implemented across the Group.
Capital Expenditure
Capital Expenditure is defined as additions to property, plant and equipment
and intangible exploration and evaluation assets, cash lease payments made in
the period, less lease asset additions, asset additions due to decommissioning
provisions, capitalised share-based payment charge, capitalised borrowing
costs and certain other non-cash adjustments. Management believes that capital
expenditure is a useful indicator of the Group's organic expenditure on oil
and gas development assets, exploration and evaluation assets incurred during
a period because it eliminates certain accounting adjustments such as
capitalised borrowing costs and decommissioning asset additions.
H1 2022 H1 2021
$m $m
Additions to property, plant and equipment 404.5 317.8
Additions to intangible exploration and evaluation assets 37.0 30.3
Less:
Capitalised borrowing cost 60.1 114.0
Leased assets additions and modifications (0.2) 12.3
Lease payments related to capital activities (5.8) (5.8)
Capitalised share-based payment charge 0.1 0.2
Capitalised depreciation 0.4 0.1
Change in decommissioning provision (11.5) (2.5)
Total capital expenditures 398.3(16) 230.0
Movement in working capital (185.3) (60.0)
Cash capital expenditures per the cash flow statement 213.0(16) 170.0
The breakdown of capital expenditure during H1 2022 and H1 2021 was as
follows:
H1 2022 H1 2021
Capital expenditure Capital expenditure
$m $m
Development and Production
Israel 286.8 161.8
Egypt 40.9 17.5
Italy 9.9 11.4
Greece, Croatia, UK and Other 8.7 10.1
Total 346.3 200.8
Exploration and Appraisal
Israel 34.4 3.7
Egypt - 0.3
Italy - 2.0
Greece, Croatia, UK and Other 2.6 23.2
Total 37.0 29.2
Net Cash / Debt
Net debt is defined as the Group's total borrowings less cash and cash
equivalents and restricted cash held for loan repayments. Management believes
that net debt is a useful indicator of the Group's indebtedness, financial
flexibility and capital structure because it indicates the level of borrowings
after taking account of any cash and cash equivalents that could be used to
reduce borrowings.
Net debt reconciliation H1 2022 FY 2021
$m $m
Current borrowings - -
Non-current borrowings 2,986.8 2,947.1
Total borrowings 2,986.8 2,947.1
Less: Cash and cash equivalents (673.7) (730.8)
Restricted cash held for loan repayment (138.4) (199.7)
Net Debt 16 (#_ftn16) 2,174.6 17 (#_ftn17) 2,016.6(18)
Net Debt Excluding Israel(18) 61.7 102.6
Going Concern
The Directors assessed the Group's ability to continue as a going concern over
a going concern assessment period to 31 December 2023. As a result of this
assessment, the Directors are satisfied that the Group has sufficient
financial resources to continue in operation for the foreseeable future and
for this reason they continue to adopt the going concern basis in preparing
the consolidated financial statements. Detail of the Group's going concern
assessment for the period can be found within note 2.2 of the interim
condensed consolidated financial statements.
Subsequent Events
Zone D
On 27 July 2022 the Company sent a formal notice to the Ministry of Energy
asking the relinquishment of Zone D licenses and discontinue any work
regarding them. The licenses will expire at the end of their term, i.e., on 27
October 2022.
Principal Risks and Uncertainties
Effective risk management is fundamental to achieving Energean's strategic
objectives and protecting its personnel, assets, shareholder value and
reputation. The Board has overall responsibility for determining the nature
and extent of the risks it is willing to take in achieving the strategic
objectives of the Group and ensuring that such risks are managed effectively.
A key aspect of this is ensuring the maintenance of a sound system of internal
control and risk management. For all the known risks facing the business,
Energean attempts to minimise the likelihood and mitigate the impact. Energean
has a zero-tolerance approach to financial fraud or ethics non-compliance and
ensures that HSE risks are managed to levels that are as low as reasonably
practicable.
Overview of key risks and key changes since 31 December 2021
The Group's principal risks for the remaining 6 months of the year and key
changes since 31 December 2021 are set out below. For further information on
key risks, please refer to Energean's 2021 Annual Report and Accounts:
Strategic risks
#1 Progress key development project in Israel
Principal risk: Delay to first gas at Karish.
H1 2022 movement: ▬ The risk remained static in H1 2022. The Energean Power
FPSO arrival on location in Israel in June 2022 and is expected to deliver
first gas within weeks.
The closer to completion the project gets, the lower the risk of delays.
#2 Progress other key development projects
Principal risk: Delayed delivery of future development projects (including NEA
/ NI in Egypt, Cassiopea in Italy and Epsilon in Greece).
H1 2022 movement: ▲ The risk increased in H1 2022. Although Energean
continued to make progress on its growth projects, Joint Venture ("JV") and
contractor misalignment risks associated with the Cassiopea project in Italy
increase the exposure to potential cost and schedule overruns.
#3 Deliver exploration success and reserves addition
Principal risk: Lack of new commercial discoveries and reserves replacement
H1 2022 movement: ▼ The risk decreased in H1 2022. In May 2022, the Athena
exploration well discovered 8 bcm of recoverable gas volumes on a standalone
basis. This discovery is particularly significant as it de-risks an additional
50 bcm of mean unrisked prospective resources across Energean's Olympus Area
(total 58 bcm including Athena).
Multiple commercialisation options are under evaluation for a standalone
tie-back to the Energean Power FPSO or as part of a new Olympus Area
development.
#4 Market risk in Israel
Principal risk: The potential for Israeli gas market oversupply may result in
offtake being at the take-or-pay level of existing GSPAs and could result in
the failure to secure new GSPAs.
H1 2022 movement: ▬ The risk remained static in H1 2022.
#5 Maintaining liquidity and solvency
Principal risk: Insufficient liquidity and funding capacity
H1 2022 movement: ▬ The risk remained static in H1 2022.
#6 Organisational & HR risk
Principal risk: The potential risk of group level roles being overwhelmed by
the additional workload associated with the Company's growth.
H1 2022 movement: ▬ The risk remained static in 1H 2022.
#7 Misalignment with JV operators
Principal risk: Misalignment with JV operators.
H1 2022 movement: ▲ The risk increased in H1 2022. Non-operated positions
are held in the entire UK portfolio and a large component of the Italian
portfolio. Contractor misalignment risks associated with the Cassiopea project
in Italy increase the exposure to potential cost and schedule overruns.
Energean will continue to manage any risks associated with non-operator roles
by actively participating in operational and technical meetings to challenge,
apply influence and/or support partners to establish a cohesive JV view.
#8 Egypt receivables
Principal risk: Recoverability of revenues and receivables in Egypt.
H1 2022 movement: ▬ The risk remained static in H1 2022. At 30 June 2022,
net receivables (after provision for bad and doubtful debts) in Egypt were
$109.6 million (30 June 2021: $158.7 million), of which $64.2 million (30 June
2021: $94.0 million) was classified as overdue.
#9 Decommissioning liability
Principal risk: Higher than expected decommissioning costs and acceleration of
abandonment schedules.
H1 2022 movement: ▬ The risk remained static in H1 2022.
Organisational, Compliance and Regulatory Risks
#10 Cyber/Information Communication Technologies ("ICT") security
Principal risk: Major cyber-attack or information security incident.
H1 2022 movement: ▲ The risk increased in H1 2022. Information and
operations technology systems are being closely monitored as Energean grows
into a >200 kboed producer, following first gas from Karish and the
start-up of its other growth projects.
#11 Fraud, bribery and corruption
Principal risk: Major breach of values, business principles and 'Ethos'
H1 2022 movement: ▬ The risk remained static in H1 2022.
#12 Health Safety and Environment (HSE)
Principal risk: Lack of adherence to health, safety, environment and security
policies.
H1 2022 movement: ▬ The risk remained static in H1 2022.
Climate Change Risks
#13 Climate change - Transition
Principal risk: Failure to manage the risk of climate change and to adapt to
the energy transition.
H1 2022 movement: ▬ The risk remained static in H1 2022.
#14 Climate change - Physical
Principal risk: Disruption to operations and/or development projects due to
severe weather (both acute and chronic).
H1 2022 movement: ▬ This risk remained static in H1 2022.
External Risks
#15 External geopolitical, political and social risks
Principal risk: Political and fiscal uncertainties in the Eastern
Mediterranean.
H1 2022 movement: ▲ The risk increased in H1 2022. Energean continues to
monitor any risks associated with the ongoing dispute between Israel and
Lebanon over their maritime boundary. Following the arrival of the FPSO on
location in June 2022, the State of Israel restated that the Company's assets
are located in Israeli territory, several kilometres south from the area over
which negotiations are being conducted between the State of Israel and the
Republic of Lebanon, mediated by the United States, and that the State of
Israel prioritises the protection of its strategic assets.
#16 Global pandemic
Principal risk: Risk related to the spread of pandemics and epidemics and the
continuing impact of Covid-19, including the associated deterioration of
health response capacity, financial and business disruption, whilst
maintaining operability.
H1 2022 movement: ▼ The risk decreased in H1 2022. Global Covid-19-related
restrictions and security measures have been removed or reduced, which has
reduced the related risks to the business.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
1) The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted in the UK;
2) The interim management report contains a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year);
3) The interim management report includes a true and fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Mathios
Rigas
Panos Benos
Chief Executive Officer
Chief Financial Officer
7 September
2022
7 September 2022
Inside Information
Some of the information contained within this announcement is considered by
Energean to constitute inside information, as defined under the EU Market
Abuse Regulation, EU No.596/2014 (which forms part of domestic UK law pursuant
to the European Union (Withdrawal) Act 2018. By the publication of this
Announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain. The person responsible for
arranging for the release of this announcement on behalf of Energean is
Eleftheria Kotsana, Company Secretary.
Forward looking statements
This announcement contains statements that are, or are deemed to be,
forward-looking statements. In some instances, forward-looking statements can
be identified by the use of terms such as "projects", "forecasts", "on track",
"anticipates", "expects", "believes", "intends", "may", "will", or "should"
or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are subject to a number of known and
unknown risks and uncertainties that may cause actual results and events to
differ materially from those expressed in or implied by such forward-looking
statements, including, but not limited to: general economic and business
conditions; demand for the Company's products and services; competitive
factors in the industries in which the Company operates; exchange rate
fluctuations; legislative, fiscal and regulatory developments; political
risks; terrorism, acts of war and pandemics; changes in law and legal
interpretations; and the impact of technological change. Forward-looking
statements speak only as of the date of such statements and, except as
required by applicable law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. The information contained in this
announcement is subject to change without notice.
INDEPENDENT REVIEW REPORT TO ENERGEAN PLC
Conclusion
We have been engaged by Energean plc (the Company) to review the condensed set
of financial statements in the half-yearly financial report for the six months
ended 30 June 2022 which comprises the interim condensed consolidated income
statement, the interim condensed consolidated statement of comprehensive
income, the interim condensed consolidated statement of financial position,
the interim condensed consolidated statement of changes in equity, the interim
condensed consolidated statement of cash flows and the related explanatory
notes 1 to 27. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company'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 the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
8 September 2022
Interim Condensed Consolidated Income Statement
Six months ended 30 June 2022
30 June (Unaudited)
2022 2021
$'000 $'000
Notes
Revenue 4 338,955 205,466
Cost of Sales 5(a) (158,043) (147,640)
Gross profit 180,912 57,826
Administrative and selling expenses 5(b)/(c) (19,349) (21,770)
Exploration and evaluation expenses 5(d) (4,254) (1,041)
Other expenses 5(e) (8,826) (3,071)
Other income 5(f) 1,630 3,571
Operating profit 150,113 35,515
Finance Income 6 2,701 2,700
Finance Costs 6 (38,551) (44,912)
Net foreign exchange loss 6 (4,473) (13,787)
Profit/ (Loss) before tax 109,790 (20,484)
Taxation income / (expense) 8 8,944 (15,174)
Profit/ (Loss) from continuing operations 118,734 (35,658)
Attributable to:
Owners of the parent 118,734 (35,550)
Non-controlling Interests - (108)
118,734 (35,658)
Basic and diluted total loss per share (cents per share)
Basic 9 $0.67 ($0.20)
Diluted 9 $0.66 ($0.20)
Interim Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2022
30 June (Unaudited)
2022 2021
$'000 $'000
Profit/ (Loss) for the period 118,734 (35,658)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Cash Flow hedges
Gain/(loss) arising in the period (22,945) 2,278
Reclassification to profit and loss upon repayment of related borrowings - 4,641
Income tax relating to items that may be reclassified to profit or loss 5,507 (1,591)
Exchange difference on the translation of foreign operations, net of tax (8,234) (6,576)
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit plan 65 -
Income taxes on items that will not be reclassified to profit and loss (16) -
Other comprehensive loss after tax (25,623) (1,248)
Total comprehensive profit/ (loss) for the period 93,111 (36,906)
Total comprehensive loss attributable to:
Owners of the parent 93,111 (36,800)
Non-controlling Interests - (106)
93,111 (36,906)
Interim Condensed Consolidated Statement of Financial Position
As at 30 June 2022
30 June 2022 (Unaudited) 31 December 2021
Notes $'000 $'000
ASSETS
Non-current assets
Property, plant and equipment 10 3,822,664 3,499,473
Intangible assets 11 256,788 228,141
Equity-accounted investments 4 4
Other receivables 16 26,694 52,639
Deferred tax asset 12 216,182 154,798
Restricted cash 14 2,799 100,000
4,325,131 4,035,055
Current assets
Inventories 15 80,307 87,203
Trade and other receivables 16 326,037 288,526
Restricted cash 14 135,610 99,729
Cash and cash equivalents 13 673,708 730,839
1,215,662 1,206,297
Total assets 5,540,793 5,241,352
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 17 2,380 2,374
Share premium 17 415,388 915,388
Merger reserve 139,903 139,903
Other reserves (9,901) 7,488
Foreign currency translation reserve (21,057) (12,823)
Share-based payment reserve 22,172 19,352
Retained earnings 264,175 (354,559)
Equity attributable to equity holders of the parent 813,060 717,123
Non-controlling interests - -
Total equity 813,060 717,123
Non-current liabilities
Borrowings 18 2,986,757 2,947,126
Deferred tax liabilities 12 64,542 67,425
Retirement benefit liability 19 1,957 2,767
Provisions 20 724,374 801,026
Other payables 21 265,664 225,987
4,043,294 4,044,331
Current liabilities
Trade and other payables 21 607,853 449,707
Current Tax Liability 31,148 5,279
Derivative financial instruments 7 33,305 12,546
Provisions 20 12,133 12,366
684,439 479,898
Total liabilities 4,727,733 4,524,229
Total equity and liabilities 5,540,793 5,241,352
30 June 2022 (Unaudited)
31 December 2021
Notes
$'000
$'000
ASSETS
Non-current assets
Property, plant and equipment
10
3,822,664
3,499,473
Intangible assets
11
256,788
228,141
Equity-accounted investments
4
4
Other receivables
16
26,694
52,639
Deferred tax asset
12
216,182
154,798
Restricted cash
14
2,799
100,000
4,325,131
4,035,055
Current assets
Inventories
15
80,307
87,203
Trade and other receivables
16
326,037
288,526
Restricted cash
14
135,610
99,729
Cash and cash equivalents
13
673,708
730,839
1,215,662
1,206,297
Total assets
5,540,793
5,241,352
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
17
2,380
2,374
Share premium
17
415,388
915,388
Merger reserve
139,903
139,903
Other reserves
(9,901)
7,488
Foreign currency translation reserve
(21,057)
(12,823)
Share-based payment reserve
22,172
19,352
Retained earnings
264,175
(354,559)
Equity attributable to equity holders of the parent
813,060
717,123
Non-controlling interests
-
-
Total equity
813,060
717,123
Non-current liabilities
Borrowings
18
2,986,757
2,947,126
Deferred tax liabilities
12
64,542
67,425
Retirement benefit liability
19
1,957
2,767
Provisions
20
724,374
801,026
Other payables
21
265,664
225,987
4,043,294
4,044,331
Current liabilities
Trade and other payables
21
607,853
449,707
Current Tax Liability
31,148
5,279
Derivative financial instruments
7
33,305
12,546
Provisions
20
12,133
12,366
684,439
479,898
Total liabilities
4,727,733
4,524,229
Total equity and liabilities
5,540,793
5,241,352
Interim Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2022
Share Capital Share Premium(1) Hedge and Defined Benefit Pension Plan(2) Equity Share based payment reserve (4) Translation Reserve(5) Retained earnings Merger reserve Total Non -Controlling Interests Total
component
of convertible
bonds(3)
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2022 2,374 915,388 (2,971) 10,459 19,352 (12,823) (354,559) 139,903 717,123 - 717,123
Profit for the period - - - - - - 118,734 - 118,734 - 118,734
Remeasurement of defined benefit pension plan, net of tax - - 49 - - - - - 49 - 49
Hedges, net of tax - - (17,438) - - - - - (17,438) - (17,438)
Exchange difference on the translation of foreign operations - - - - - (8,234) - - (8,234) - (8,234)
Total comprehensive income - - (17,389) - - (8,234) 118,734 - 93,111 - 93,111
Transactions with owners of the company
Share based payment charges (note 22) - - - 2,826 - - 2,826 - 2,826
- -
Exercise of employment share options 6 - - - (6) - - - - - -
Share premium reduction(6) - (500,000) - - - - 500,000 - - - -
At 30 June 2022 2,380 415,388 (20,360) 10,459 22,172 (21,057) 264,175 139,903 813,060 - 813,060
(1) The share premium account represents the total net proceeds on issue of
the Company's shares in excess of their nominal value of £0.01 per share less
amounts transferred to any other reserves.
(2) The reserve is used to recognise remeasurement gain or loss on cash flow
hedges and actuarial gain or loss from the defined retirement benefit plan. In
the Statement of Financial Position this reserve is combined with the 'Equity
component of convertible bonds' reserve.
(3 ) Refers to the Equity component of $50 million of convertible loan
notes, which were issued in February 2021 and have a maturity date of 29
December 2023
(4) The share-based payments reserve is used to recognise the value of
equity-settled share-based payments granted to parties including employees and
key management personnel, as part of their remuneration.
(5) The foreign currency translation reserve is used to record unrealised
exchange differences arising from the translation of the financial statements
of entities within the Group that have a functional currency other than US
dollar.
(6 ) Energean plc by special resolution reduced its share premium account,
as confirmed by an Order of the High Court of Justice on the 14 June 2022.
Interim Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2022
Share Capital Share Premium(1) Hedge and Defined Benefit Pension Plan(2) Equity Share based payment reserve(4) Translation Reserve(5) Retained earnings Merger reserve Total Non- Controlling Interests Total
component
of convertible
bonds(3)
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2021 2,367 915,388 1,792 - 13,419 (42) (144,734) 139,903 928,093 266,299 1,194,392
Loss for the period - - - - - - (35,550) - (35,550) (108) (35,658)
Hedges, net of tax - - 5,326 - - - - - 5,326 2 5,328
Exchange difference on the translation of foreign operations - - - - - (6,576) - - (6,576) - (6,576)
Total comprehensive income - - 5,326 - - (6,576) (35,550) - (36,800) (106) (36,906)
Transactions with owners of the company
Employee share schemes (note 22) 1 - - - 2,474 - - - 2,475 2,475
Acquisition of non-controlling - - - 10,459 - - (113,779) - (103,320) (266,193) (369,513)
Interests
At 30 June 2021 2,368 915,388 7,118 10,459 15,893 (6,618) (294,063) 139,903 790,448 - 790,448
Interim Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 2022
30 June (Unaudited)
2022 2021
Note $'000 $'000
Operating activities
Profit/ (Loss) before taxation 109,790 (20,484)
Adjustments to reconcile profit/(loss) before taxation to net cash provided by
operating activities:
Depreciation, depletion and amortisation 10, 11 33,885 36,343
Impairment loss on intangible assets 11 362 -
Loss from the sale of property, plant and equipment 1,074 36
Defined benefit (gain)/expense 19 (676) (1,120)
Finance income 6 (2,701) (2,700)
Finance 6 38,551 44,912
costs
Non-cash revenues from Egypt(1) (27,177) (21,577)
Movement in provisions 20 (1,239) 483
Other income 5 - (3,602)
Share-based payment charge 22 2,717 2,474
Net foreign exchange gain/(loss) 6 4,473 13,787
Cash flow from/(used in) operations before working capital adjustments 159,059 48,552
Decrease/ (Increase) in inventories 2,748 (5,185)
Increase in trade and other receivables 14,309 42,392
(Decrease) in trade and other payables (17,282) (33,082)
Cash inflow from operations 158,834 52,677
Income tax paid (12,267) 388
Net cash inflow from operating activities 146,567 53,065
Investing activities
Payment for purchase of property, plant and equipment (194,491) (141,182)
Payment for exploration and evaluation, and other intangible assets (18,513) (28,818)
Acquisition of a subsidiary - (3,335)
Proceeds from disposal of property, plant and equipment 1,996 -
Movement in restricted cash 14 61,320 (266,241)
Amounts received from INGL related to the future transfer of property, plant 17,371 -
and equipment
Interest received 2,911 861
Net cash outflow for investing activities (129,406) (438,715)
Financing activities
Drawdown of borrowings 18 35,835 293,000
Repayment of borrowings 18 - (1,452,509)
Senior secured notes Issuance 18 - 2,500,000
Transaction costs related to Senior secured notes paid - (37,218)
Acquisition of non-controlling interests 18 - (175,000)
Transaction costs related to acquisition of non-controlling interest - (1,677)
Repayment of obligations under leases (5,785) (5,875)
Finance cost paid for deferred license payments - (3,494)
Finance costs paid (87,341) (55,641)
Net cash inflow from financing activities (57,291) 1,061,586
Net increase / (decrease) in cash and cash equivalents (40,130) 675,936
Cash and cash equivalents at beginning of the period 730,839 202,939
Effect of exchange rate fluctuations on cash held (17,001) 1,142
Cash and cash equivalents at end of the period 13 673,708 880,017
(1) Non-cash revenues from Egypt arise due to taxes being deducted at source
from invoices as such revenue and tax charges are grossed up to reflect this
deduction but no cash inflow or outflow results.
(
)
Notes to the Interim Condensed Consolidated Financial Statements (continued)
1. Corporate Information
Energean plc (the 'Company') was incorporated in England & Wales on 8 May
2017 as a public company with limited liability, under the Companies Act 2006.
Its registered office is at 44 Baker Street, London W1U 7AL, United Kingdom.
The Company and all subsidiaries controlled by the Company, are together
referred to as 'the Group'.
The Group has been established with the objective of exploration, production
and commercialisation of crude oil and natural gas in Greece, Israel, Italy,
North Africa and the wider Eastern Mediterranean.
The Group's subsidiaries and core assets, as of 30 June 2022, are presented in
notes 26 and 27 respectively.
2. Basis of preparation
2.1 Basis of preparation
The unaudited interim condensed consolidated financial statements for the six
months ended 30 June 2022 included in this interim report have been prepared
in accordance with UK-adopted International Accounting Standard 34 'Interim
Financial Reporting', and unless otherwise disclosed have been prepared on the
basis of the same accounting policies and methods of computation as applied in
the Group's Annual Report for the year ended 31 December 2021.
The interim condensed consolidated financial statements have been prepared on
a historical cost basis and are presented in US Dollars, which is also the
Company's functional currency, rounded to the nearest thousand dollars ($'000)
except as otherwise indicated. The US dollar is the currency that mainly
influences sales prices and revenue estimates, and also highly affects the
Group's operations. The functional currencies of the Group's main subsidiaries
are as follows: for Energean Oil & Gas S.A, Energean Montenegro, Energean
Italy Spa and Energean International E&P Spa the functional currency is
Euro, for Energean E&P Holdings Ltd, Energean International Limited,
Energean Capital Ltd, Energean Egypt Ltd and Energean Israel Limited the
functional currency is US$.
The interim financial statements do not constitute statutory accounts of the
Group within the meaning of Section 435 of the Companies Act 2006 and do not
include all the information and disclosures required in the annual financial
statements. The interim financial statements should be read in conjunction
with the Group's Annual Report and Accounts for the year ended 31 December
2021, which were prepared UK-adopted International Accounting Standards
('UK-adopted IAS') and also in accordance with International Financial
Reporting Standards ('IFRS') as issued by the International Accounting
Standards Board (IASB) as applied to financial periods beginning on or after 1
January 2021. The auditor's report on those financial statements was
unqualified with no reference to matters to which the auditor drew attention
by way of emphasis and no statement under s498(2) or s498(3) of the Companies
Act 2006.
2.2 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 up to 31 December 2023 'the Forecast Period'.
Cash forecasts are regularly produced based on, inter alia, the Group's latest
life of field production, budgeted expenditure forecasts, management's best
estimate of future commodity prices (based on recent published forward curves)
and headroom under its debt facilities. The Base Case cash flow model used
for the going concern assessment assumes first gas from Karish in October
2022, Brent at $100/bbl for the YTG (Year to Go) 2022 and $90/bbl in 2023 and
PSV (Italian gas price) at EUR200/MWh for the YTG 2022 and EUR150/MWh in 2023.
In addition, on a regular basis, the Group performs sensitivity analysis of
its liquidity position to evaluate adverse impacts that may result from
changes to the macro-economic environment such as a reduction in commodity
prices and reduction in the Group production (due to deferral of key projects)
throughout the going concern period. In this combined downside scenario
applied to the base case forecast, the Group is forecasted to have sufficient
financial headroom throughout the Forecast Period.
Reverse stress testing was performed to determine what levels of prices and/or
production would need to occur for the liquidity headroom to be eliminated,
prior to any mitigating actions; the likelihood of such conditions occurring
was concluded to be remote. The portfolio can withstand a material drop in
commodity price and average production largely because most of the revenue is
generated from fixed gas price contracts. In the event an extreme downside
scenario occurred, prudent mitigating actions could be executed in the
necessary timeframe such as postponement of discretionary exploration and
development expenditures. Energean is predominantly Operator of its assets,
therefore the majority of the key development projects are 100% within its
control. There is no material impact of climate change within the Forecast
Period therefore it does not form part of the reverse stress testing performed
by management.
As of 30 June 2022, the Group's available liquidity was $880 million ($674
million unrestricted cash, $138 million restricted cash and $68 million
available under Greek State-Backed Loan).
In forming its assessment of the Group's ability to continue as a going
concern, including its review of the forecasted cashflow of the Group over the
Forecast Period, the Board has made judgements about:
• Reasonable sensitivities appropriate for the current status of the
business and the wider macro environment; and
• the Group's ability to implement the mitigating actions, such as
deferral of Capex expenditure in the Group's control, in the event this were
required.
After careful consideration, the Directors are satisfied that the Group has
sufficient financial resources to continue in operation for the foreseeable
future, for the Forecast Period to 31 December 2023. For this reason, they
continue to adopt the going concern basis in preparing the consolidated
financial statements.
2.3 New and amended accounting standards and interpretations
The accounting policies adopted in the preparation of the unaudited interim
condensed consolidated financial statements are the same as those followed in
the preparation of the Group's annual consolidated financial statements for
the year ended 31 December 2021, except for the adoption of the new standards
and interpretations effective as of 1 January 2022 listed below:
· Annual improvements to IFRS 2018-2020
· Property, Plant and Equipment: Proceeds before intended use
(Amendments to IAS 16)
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS
37)
· Reference to the Conceptual Framework (Amendments to IFRS 3)
· AIP IFRS 9 Financial Instruments - Fees in the '10 per cent' test for
derecognition of financial liabilities
None of the above amendments had a significant impact on the Group's interim
condensed consolidated financial statements.
2.4 Approval of interim condensed consolidated financial statements by
Directors
These unaudited interim condensed consolidated financial statements were
approved by the Board of Directors on 7 September 2022.
3. Segmental Reporting
The information reported to the Group's Chief Executive Officer and Chief
Financial Officer (together the Chief Operating Decision Makers) for the
purposes of resource allocation and assessment of segment performance is
focused on four operating segments: Europe, (including Greece, Italy, UK,
Croatia), Israel, Egypt and New Ventures (Montenegro and Malta).
The Group's reportable segments under IFRS 8 Operating Segments are Europe,
Israel and Egypt. Segments that do not exceed the quantitative thresholds for
reporting information about operating segments have been included in Other.
Segment revenues, results and reconciliation to profit before tax
The following is an analysis of the Group's revenue, results and
reconciliation to profit/ (loss) before tax by reportable segment:
Europe Israel Egypt Other & inter-segment transactions Total
$'000 $'000 $'000 $'000 $'000
Six months ended 30 June 2022 (unaudited)
Revenue from Oil 111,007 - - - 111,007
Revenue from Gas 137,717 - 73,511 - 211,228
Petroleum product sales 1,288 - 33,040 - 34,328
Rendering of services 4,008 - - (3,383) 625
Loss on forward transactions (18,233) - - - (18,233)
Total revenue 235,787 - 106,551 (3,383) 338,955
Adjusted EBITDAX(1) 122,423 (5,343) 79,914 1,171 198,165
Reconciliation to profit before tax:
Depreciation and amortisation expenses (11,303) (110) (22,258) (214) (33,885)
Share-based payment charge (2,501) (88) (30) (98) (2,717)
Exploration and evaluation expenses (2,499) - (1,482) (273) (4,254)
Other expense (6,263) (1,074) (342) (1,147) (8,826)
Other income 1,391 53 552 (366) 1,630
Finance income 1,467 4,504 521 (3,791) 2,701
Finance costs (10,436) (4,671) (453) (22,991) (38,551)
Net foreign exchange gain/(loss) 20,548 (1,778) (219) (23,024) (4,473)
Profit/(loss) before income tax 112,827 (8,507) 56,203 (50,733) 109,790
Taxation income / (expense) 33,429 2,889 (27,177) (197) 8,944
Profit/(loss) from continuing operations 146,256 (5,618) 29,026 (50,930) 118,734
Six months ended 30 June 2021 (unaudited)
Revenue from Oil 70,736 - 27,431 - 98,167
Revenue from Gas 34,765 - 70,929 - 105,694
Petroleum products sales 492 - - - 492
Rendering of services 5,228 - - (4,115) 1,113
Total revenue 111,221 - 98,360 (4,115) 205,466
Adjusted EBITDAX(1) 9,685 (1,563) 69,113 (2,584) 74,651
Reconciliation to profit before tax: -
Depreciation and amortisation expenses (21,586) (50) (14,256) (451) (36,343)
Share-based payment charge (431) (122) - (1,699) (2,252)
Exploration and evaluation expenses (630) - - (411) (1,041)
Other expense (1,458) (28) (88) (1,497) (3,071)
Other income 2,887 - 641 43 3,571
Finance income 1,667 1,808 676 (1,451) 2,700
Finance costs (10,797) (9,436) (624) (24,055) (44,912)
Net foreign exchange gain/(loss) 2,879 (727) (1,055) (14,884) (13,787)
Profit before income tax (17,784) (10,118) 54,407 (46,989) (20,484)
Taxation income / (expense) 3,342 2,571 (21,535) 448 (15,174)
Profit from continuing operations (14,442) (7,547) 32,872 (46,541) (35,658)
(1)Adjusted EBITDAX is a non-IFRS measure used by the Group to measure
business performance. It is calculated as profit or loss for the period,
adjusted for discontinued operations, taxation, depreciation and amortisation,
share-based payment charge, impairment of property, plant and equipment, other
income and expenses (including the impact of derivative financial instruments
and foreign exchange), net finance costs and exploration and evaluation
expenses.
The following table presents assets and liabilities information for the
Group's operating segments as at 30 June 2022 and 31 December 2021,
respectively:
Europe Israel Egypt Other & inter-segment transactions Total
$'000 $'000 $'000 $'000 $'000
Six months ended 30 June 2022 (unaudited)
Oil & Gas properties 505,690 2,922,369 366,077 (10,326) 3,783,810
Other fixed assets 14,723 5,570 19,786 (1,225) 38,854
Intangible assets 69,043 130,327 20,484 36,934 256,788
Trade and other receivables 159,459 55,110 123,702 (12,234) 326,037
Deferred tax asset 218,349 (1,210) - (957) 216,182
Other assets 761,556 218,793 109,471 (170,698) 919,122
Total assets 1,728,820 3,330,959 639,520 (158,506) 5,540,793
Trade and other payables 169,045 156,395 53,187 229,226 607,853
Borrowings 33,528 2,467,251 - 485,978 2,986,757
Decommissioning provision 700,088 26,609 - - 726,697
Other current liabilities 64,418 - - 34 64,452
Other non-current liabilities 125,510 225,129 21,872 (30,537) 341,974
Total liabilities 1,092,589 2,875,384 75,059 684,701 4,727,733
Other segment information
Capital Expenditure:
- Property, plant and equipment 21,753 288,964 41,132 4,551 356,400
- Intangible, exploration and evaluation assets 1,496 34,386 - 1,076 36,958
Year ended 31 December 2021
Oil & Gas properties 537,600 2,584,828 342,528 (9,694) 3,455,262
Other fixed assets 16,578 3,917 24,076 (360) 44,211
Intangible assets 74,868 95,941 20,484 36,848 228,141
Trade and other receivables 164,131 22,769 102, 605 (979) 288,526
Deferred tax asset 154,798 - - - 154,798
Other assets 674,157 379,248 98,720 (81,711) 1,070,414
Total assets 1,622,132 3,086,703 588,413 (55,896) 5,241,352
Trade and other payables 202,797 74,115 25,511 152,563 454,986
Borrowings - 2,463,524 - 483,602 2,947,126
Decommissioning provision 766,573 35,525 - - 802,098
Other current liabilities (20,395) - - 32,941 12,546
Other non-current liabilities 134,203 180,689 24,663 (32,082) 307,473
Total liabilities 1,083,178 2,753,853 50,174 637,024 4,524,229
Other segment information
Capital Expenditure:
- Property, plant and equipment 72,782 247,463 52,085 (14,330) 358,000
- Intangible, exploration and evaluation assets 40,523 6,342 215 3,329 50,409
Segment Cash flows
Europe Israel Egypt Other & inter-segment transactions Total
$'000 $'000 $'000 $'000 $'000
Six months ended 30 June 2022 (unaudited)
Net cash from / (used in) operating activities 87,922 (5,286) 64,578 (647) 146,567
Net cash (used in) investing activities (23,560) (56,932) (43,931) (4,983) (129,406)
Net cash from financing activities (85,460) (66,819) 280 94,708 (57,291)
Net increase/(decrease) in cash and cash equivalents, and restricted cash (21,098) (129,037) 20,927 89,078 (40,130)
Cash and cash equivalents at beginning of the period 71,316 349,828 19,254 290,441 730,839
Effect of exchange rate fluctuations on cash held (4,542) (2,080) (919) (9,460) (17,001)
Cash and cash equivalents at the end of the period 45,676 218,711 39,262 370,059 673,708
Six months ended 30 June 2021 (unaudited)
Net cash from / (used in) operating activities 22,329 (2,802) 52,958 (19,420) 53,065
Net cash (used in) investing activities (41,614) (378,265) (15,695) (3,141) (438,715)
Net cash from financing activities 22,447 1,075,374 (87,054) 50,819 1,061,586
Net increase/(decrease) in cash and cash equivalents 3,162 694,307 (49,791) 28,258 675,936
At beginning of the year 13,609 37,421 76,240 75,669 202,939
Effect of exchange rate fluctuations on cash held 409 (146) (1) 880 1,142
Cash and cash equivalents at end of the period 17,180 731,582 26,448 104,807 880,017
4. Revenue
30 June (Unaudited)
2022 2021
$'000 $'000
Revenue from crude oil sales 111,007 70,736
Revenue from gas sales 211,228 105,694
Gain/ (Loss) on forward transactions (18,233) -
Petroleum products sales 34,328 27,923
Rendering of services 625 1,113
Total revenue 338,955 205,466
5. Operating profit/(loss) before taxation
30 June (Unaudited)
2022 2021
$'000 $'000
(a) Cost of sales
Staff costs 27,895 32,626
Flux costs 17,391 6,957
Energy cost 5,716 3,475
Royalty payable 11,678 5,814
Other operating costs 60,661 73,546
Depreciation and amortisation 32,345 33,845
Stock overlift/(underlift) movement 2,357 (8,623)
Total cost of sales 158,043 147,640
(b) Administrative expenses
Staff costs 9,765 7,329
Other General & administration expenses 4,103 8,815
Share-based payment charge included in administrative expenses 2,717 2,247
Depreciation and amortisation 1,539 2,498
Auditor fees 951 779
Total administrative expenses 19,075 21,668
(c) Selling and distribution expense
Staff costs 116 29
Other Selling and distribution expense 158 73
Total selling and distribution expense 274 102
(b) + (c) Total Administrative and Selling Expenses 19,349 21,770
(d) Exploration and evaluation expenses
Staff costs for Exploration and evaluation activities 2,118 355
Exploration costs written off 362 -
Other exploration and evaluation expenses 1,774 686
Total exploration and evaluation expenses 4,254 1,041
5. Operating profit/(loss) before taxation (continued)
30 June (unaudited)
2022 2021
$'000 $'000
(e) Other expenses
Transaction costs in relation to Edison E&P acquisition - 1,470
Restructuring costs(1) 3,481
Provision for litigation and claims 1,443 -
Loss from disposal of Property plant & Equipment 1,074 36
Write down of inventory 1,335 -
Expected credit losses 342 279
Other expenses 1,151 1,286
8,826 3,071
(f) Other income
Reversal of prior period accruals 1,630 3,496
Other income - 75
1,630 3,571
(1)One-off restructuring costs incurred in Greece
6. Net finance cost
30 June (Unaudited)
2022 2021
$'000 $'000
Interest on bank borrowings 307 55,710
Interest on Senior Secured Notes 83,630 33,791
Interest expense on long term payables 4,734 467
Interest expense on short term liabilities - 28
Less amounts included in the cost of qualifying assets (68,866) (72,969)
19,805 17,027
Finance and arrangement fees 4,003 11,869
Unamortised financing costs related to the repayment of the Karish project - 36,200
finance(2)
Other finance costs and bank charges 593 2,172
Loss on interest rate hedges - 6,988
Unwinding of discount on right of use asset 694 837
Unwinding of discount on provision for decommissioning 5,261 4,946
Unwinding of discount on deferred consideration 7,912 5,124
Unwinding of discount on convertible loan 1,963 -
Unwinding of discount on contingent consideration 1,322 744
Less amounts included in the cost of qualifying assets (3,002) (40,995)
Total finance costs 38,551 44,912
Interest income from time deposits (2,701) (1,534)
Gain from revised estimated loan cash flow - (1,166)
Total finance revenue (2,701) (2,700)
Foreign exchange losses/(gain) 4,473 13,787
Net financing costs 40,323 55,999
(2) On 29 April 2021, the Group fully repaid the Israel Project Finance
Facility before the maturity date of 31 December 2021 and, as such, the
unamortised financing costs have been expensed in the period.
7. 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
of the Group's finance lease obligations is estimated using discounted cash
flow analysis based on the group's current incremental borrowing rates for
similar types and maturities of borrowing and are consequently categorized in
level 2 of the fair value hierarchy.
Contingent consideration
The share purchase agreement (the "SPA") dated 4 July 2019 between Energean
and Edison Spa provides for a contingent consideration of up to $100.0 million
subject to the commissioning of the Cassiopea development gas project in
Italy. The consideration was determined to be contingent on the basis of
future gas prices (PSV) recorded at the time of the commissioning of the
field, which is expected in 2024. No payment will be due if the arithmetic
average of the year one (i.e., the first year after first gas production) and
year two (i.e., the second year after first gas production) Italian PSV
Natural Gas Futures prices is less than €10/MWh when first gas production is
delivered from the field. US$100 million is payable if that average price
exceeds €20/MWh. The fair value of the contingent consideration is estimated
by reference to the terms of the SPA and the simulated PSV pricing by
reference to the forecasted PSV pricing, historical volatility and a log
normal distribution, discounted at a cost of debt.
The contingent consideration to be payable in 2024 is estimated at acquisition
date to amount to $61.7 million, which discounted at the acquisition date
resulted in a present value of $55.2 million.
As at 30 June 2022, the two year future curve of PSV prices indicate an
average price in excess of €20/MWh. Therefore, the Group's estimate as at 30
June 2022 of the fair value of the contingent consideration payable in 2024 is
$79.8 million, based on a Monte Carlo simulation (31 December 2021: $78.5
million).
The fair value of the consideration payable has been recognized at level 3 in
the fair value hierarchy.
Contingent consideration reconciliation
Contingent consideration 2022
1 January 2022 78,450
Fair value adjustment 1,322
30 June 2022 79,772
Management believes there are no reasonably possible change to any key
assumptions that would impact the contingent consideration valuation.
Fair values of derivative financial instruments
The Group held financial instruments at fair value at 30 June 2022 related to
commodity derivatives. All derivatives are recognised at fair value on the
balance sheet with valuation changes recognised immediately in the income
statement, unless the derivatives have been designated as a cash flow hedge.
Fair value is the amount for which the asset or liability could be exchanged
in an arm's length transaction at the relevant date. Where available, fair
values are determined using quoted prices in active markets. To the extent
that market prices are not available, fair values are estimated by reference
to market-based transactions or using standard valuation techniques for the
applicable instruments and commodities involved. Values recorded are as at the
balance sheet date and will not necessarily be realised.
The Group undertakes hedging activities as part of the ongoing financial risk
management to protect against commodity price volatility and to ensure the
availability of cash flow for re-investment in capital programmes that are
driving business delivery. Commodity hedge contracts entered into in Italy
aim to mitigate the risk of changes to the selling price of natural gas.
Hedged Quantity (MWs) Contract Month Cargo Month Gas Sales Size Fixed Price EUR
50,000 July 2022 July 2022 222,110 39.13
50,000 August 2022 August 2022 222,679 39.13
50,000 September 2022 September 2022 216,103 39.13
50,000 October 2022 October 2022 215,290 40.07
50,000 November 2022 November 2022 200,205 40.07
50,000 December 2022 December 2022 206,640 40.07
The Group's commodity derivatives are level 2. There were no transfers between
fair value levels during the period.
The fair value hierarchy of financial assets and financial liabilities that
are not measured at fair value (but for which disclosure of fair value is
required) is as follows:
Fair value hierarchy as of 30 June 2022 (Unaudited)
Level 1 Level 2 Level 3 Total
$'000
$'000
$'000
$'000
Financial assets
Trade and other receivables (note 16) - 292,896 - 292,896
Cash and cash equivalents (note 13) 673,708 - - 673,708
Restricted cash (note 14) 138,409 - - 138,409
Total 812,117 292,896 - 1,105,013
Financial liabilities
Financial liabilities held at amortised cost:
Trade and other payables - current - 270,096 - 270,096
Trade and other payables- non-current - 122,579 - 122,579
Senior Secured Notes (note 18) 2,591,675 - - 2,591,675
Borrowings (note 18) - 76,824 - 76,824
Deferred consideration for acquisition of minority - 175,140 - 175,140
Net obligations under finance leases (note 21) - 35,412 - 35,412
Deferred licence payments (note 21) - 60,098 - 60,098
Financial liabilities held at fair value through OCI:
Derivative - 33,305 - 33,305
Financial liabilities held at FVTPL:
Contingent consideration (note 7) - - 79,772 79,772
Total 2,591,675 773,454 79,772 3,444,901
Fair value hierarchy as at 31 December 2021
Level 1 Level 2 Level 3 Total
$'000
$'000
$'000
$'000
Financial assets
Trade and other receivables - 284,692 - 284,692
Cash and cash equivalents 730,839 - - 730,839
Restricted Cash 199,729 199,729
Total 930,568 284,692 - 1,215,260
Financial liabilities
Financial liabilities held at amortised cost:
Trade and other payables -current - 173,319 - 173,319
Senior Secured Notes 2,931,950 - 2,931,950
Borrowings - 41,495 - 41,495
Deferred consideration for acquisition of minority - 167,228 - 167,228
Net obligations under finance leases - 44,425 - 44,425
Deferred licence payments - 57,230 - 57,230
Financial liabilities held at FVTPL: -
Interest rate derivatives - 12,546 - 12,546
Contingent consideration - - 78,450 78,450
Total 2,931,950 496,243 78,450 3,506,643
8. Taxation
30 June (Unaudited)
2022 2021
$'000 $'000
Corporation tax - current period (67,069) (21,565)
Corporation tax - prior years - 448
Deferred tax (Note 12) 76,013 5,943
Total taxation income / (expense) 8,944 (15,174)
(b) Reconciliation of the total tax charge
The Group calculates its income tax expense as per IAS 34 by applying a
weighted average tax rate calculated based on the statutory tax rates in
Greece (25%), Israel (23%), Italy (24%), Cyprus (12.5%), Egypt (40.55%) and
United Kingdom (40%) weighted according to the profit or loss before tax
earned by the Group in each jurisdiction where deferred tax is recognised, or
material current tax charge arises. The effective tax rate for the period is
-8% (30 June 2021: -74%).
The tax (charge)/ credit of the period can be reconciled to the loss per the
consolidated income statement as follows:
30 June (Unaudited)
2022 2021
$'000 $'000
Profit/(loss) before tax 109,790 (20,484)
Tax calculated at 29.5% weighted average rate (2021: 19.7%) (32,197) 4,035
Impact of different tax rates 1,920 13
Utilisation of unrecognised deferred tax/ (non-recognition of deferred tax) 89,417 (4,834)
Permanent differences(1) (12,758) (1,912)
Foreign taxes (5,171) (21,535)
Windfall tax(2) (29,274) -
Tax effect of non-taxable income and allowances (3,304) 10,985
Other adjustments 311 (2,374)
Prior year tax - 448
Taxation income/(expense) 8,944 (15,174)
( )
(1) Permanent differences mainly consisted of non-deductible expenses,
consolidation differences, intercompany dividends and foreign exchange
differences.
(2) During H1 2022, Italy introduced a windfall tax in the form of a law
decree which imposed a 25% one-off tax on profit margins that rose by more
than 5 million euros between October 2021 and April 2022 compared to the same
period a year earlier. The amount of the windfall tax to be paid by Energean
Italy is estimated to be $29.3mil with an advance payment of 40% or
c$11.7million remitted to the Italian Revenue Agency at the end of June 2022,
while the remaining balance shall be paid by the end of November 2022. The
windfall tax has been determined to be an income tax as defined by IAS 12.
9. Earnings per share
Basic earnings per ordinary share amounts are calculated by dividing net
income for the year attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during the year.
Diluted income per ordinary share amounts is calculated by dividing net income
for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year plus
the weighted average number of ordinary shares that would be issued if
dilutive employee share options were converted into ordinary shares.
30 June (Unaudited)
2022 2021
$'000 $'000
Total profit/(loss) attributable to equity shareholders 118,734 (35,550)
Effect of dilutive potential ordinary shares 1,963 -
120,697 (35,550)
Number of shares
Basic weighted average number of shares 177,821,533 177,117,612
Dilutive potential ordinary shares 6,362,834 -
Diluted weighted average number of shares 184,184,367 177,117,612
Basic earnings/ (loss) per share $0.67/share ($0.20)/share
Diluted earnings/ (loss) per share $0.66/share ($0.20)/share
10. Property, plant and equipment
Oil and gas properties Leased assets Other property, plant and equipment Total
Property, plant and equipment at Cost $'000 $'000 $'000 $'000
At 1 January 2021 3,430,329 50,841 60,237 3,541,407
Additions 345,180 6,428 1,623 353,231
Lease modification - 2,261 - 2,261
Disposal of assets (23) - (34) (57)
Capitalized borrowing cost 178,891 - - 178,891
Capitalized depreciation 227 - - 227
Change in decommissioning provision (13,174) - - (13,174)
Transfer from Intangible assets 14,317 - 26 14,343
Foreign exchange impact (57,960) (2,285) (2,806) (63,051)
At 31 December 2021 3,897,787 57,245 59,046 4,014,078
Additions 353,374 746 2,280 356,400
Lease modifications - (897) - (897)
Disposal of assets (900) - - (900)
Capitalized borrowing cost 60,131 - - 60,131
Capitalised depreciation 357 - - 357
Change in environmental rehabilitation provision (11,469) - - (11,469)
Foreign exchange impact (52,051) (1,088) (1,308) (54,447)
At 30 June 2022 4,247,229 56,006 60,018 4,363,253
Accumulated Depreciation
At 1 January 2021 376,643 6,979 50,513 434,135
Charge for the period
Expensed 81,234 12,274 1,998 95,506
Impairments 774 774
Disposal of assets - - 21 21
Foreign exchange impact (16,129) (151) 449 (15,831)
At 31 December 2021 442,522 19,102 52,981 514,605
Charge for the period expensed 29,130 4,661 354 34,145
Write down on disposal of assets 250 - - 250
Disposal of assets (433) - - (433)
Foreign exchange impact (8,050) 393 (321) (7,978)
At 30 June 2022 463,419 24,156 53,014 540,589
Net carrying amount
At 31 December 2021 3,455,265 38,143 6,065 3,499,473
At 30 June 2022 3,783,810 31,850 7,004 3,822,664
Included in the carrying amount of leased assets at 30 June 2022 are right of
use assets related to oil and gas properties and other property, plant and
equipment of $30.3 million and $1.6 million respectively. The depreciation
charged on these classes for the six-month ending 30 June 2022 were $4.4
million and $0.2 million respectively
The additions to oil & gas properties for the period of six months ended
30 June 2022 are mainly due to development costs of Karish field related to
the EPCIC contract (FPSO, Sub Sea and On-shore construction cost) at the
amount of $286.8 million and NEA/NI project in Egypt at the amount of $44.2
million.
Borrowing costs capitalised for qualifying assets, included in oil & gas
properties, for the six months ended 30 June 2022 amounted to $70.6 million.
The average interest rates used was 5.16% for the six months ended 30 June
2022.
There were no impairment indicators identified at 30 June 2022.
11. Intangible assets
Exploration and evaluation assets Goodwill Other Intangible assets Total
$'000 $'000 $'000 $'000
Intangibles at Cost
At 1 January 2021 158,213 101,146 22,355 281,714
Additions 47,995 - 2,413 50,408
Capitalized borrowing costs 2,202 - - 2,202
Change in decommissioning provision 2,141 2,141
Transfers to property, plant and equipment (265) - (14,078) (14,343)
Exchange differences (4,953) - (983) (5,936)
At 31 December 2021 205,333 101,146 9,707 316,186
Additions 36,045 - 914 36,959
Capitalized borrowing costs - - - -
Exchange differences (8,434) - (138) (8,572)
At 30 June 2022 232,944 101,146 10,483 344,573
Accumulated amortisation and impairments
At 1 January 2021 3,004 - 2,894 5,898
Charge for the period - - 1,946 1,946
Impairment 82,125 - - 82,125
Exchange differences (1,850) - (74) (1,924)
At 31 December 2021 83,279 - 4,766 88,045
Charge for the period - 96 96
Impairment 362 - - 362
Exchange differences (603) - (115) (718)
At 30 June 2022 83,038 - 4,747 87,785
Net Carrying Amount
At 31 December 2021 122,054 101,146 4,941 228,141
At 30 June 2022 149,906 101,146 5,736 256,788
12. Net deferred tax (liability)/ asset
Deferred tax (liabilities)/assets Property, plant and equipment Right of use asset IFRS 16 Decom-missioning Prepaid expenses and other receivables Inventory Tax losses Deferred expenses for tax Retirement benefit liability Accrued expenses and other short‑term liabilities Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2021 (123,543) (292) 8,877 (4,651) 695 165,841 - 1,050 9,470 57,447
Increase / (decrease) for the period through:
Profit or loss (Note 8) 9,848 (718) 50,808 890 (254) (32,501) (932) 6,996 39,157
5,020
Other comprehensive income 1,586 1,586
Reclassifications in the current period(1) (28,442) 33,644 2,025 (233) (4,903) 200 (8,301) -
6, 010
Exchange difference 1,584 20 (3,889) 165 (25) (8,257) (52) (363) (10,817)
At 31 December 2021 (140,553) (990) 89,440 (1,571) 183 120,180 11,030 266 9,388 87,373
Increase / (decrease) for the period through:
Profit or loss (Note 8) (7,216) 34 242 2,601 250 85,902 (4,687) (61) (1,052) 76,013
Other comprehensive income - - - - - - - - 5,507 5,507
Exchange difference 4,565 20 (7,148) - (28) (13,510) - (10) (1,142) (17,253)
At 30 June 2022 (Unaudited) (143,204) (936) 82,534 1,030 405 192,572 6,343 195 12,701 151,640
30 June 2022 31 December 2021
$'000 $'000
Deferred tax liabilities (64,542) (67,425)
Deferred tax assets 216,182 154,798
Net deferred tax assets 151,640 87,373
At 30 June 2022 the Group had gross unused tax losses of $988.2 million (as of
31 December 2021: $1,123.8 million) available to offset against future profits
and other temporary differences. A deferred tax asset of $192.6 million (2021:
$120.2 million) has been recognised on tax losses of $758.5 million, based on
the forecasted profits. The Group did not recognise deferred tax on tax losses
and other differences totalling $629.4 million.
In Greece, Italy and the UK, the net DTA for carried forward losses recognised
in excess of the other net taxable temporary differences was $60.7 million,
$63.0 million and $12.2 million (2021: $59.3 million, $0.19 million and $13.8
million) respectively. An additional DTA of $80.3 million (2021: $81.4
million) arose primarily in respect of deductible temporary differences
related to property, plant and equipment, decommissioning provisions and
accrued expenses, resulting in a total DTA of $216.2 million (2021: $154.8
million). During the period, Italy recognised a DTA of $63.0 million on tax
losses of $262.7 million in accordance with its latest tax loss utilisation
forecast which was revised given the high forecast PSV and Brent prices.
Greek tax losses (Prinos area) can be carried forward without limitation up
until the relevant concession agreement expires (by 2039), whereas the tax
losses in Israel, Italy and the United Kingdom can be carried forward
indefinitely. Based on the Prinos area forecasts (including the Epsilon
development), the deferred tax asset is fully utilised by 2029. In Italy, a
deferred tax asset of $62.3 million is recognised on decommissioning costs
scheduled to be incurred up to 2030. Finally, in the UK, decommissioning spend
is expected to be tax relieved up until 2027, and the deferred tax asset
recognised on UK tax losses is fully offset against deferred tax liabilities
on temporary differences.
On 3 March 2021 it was announced in the UK budget that the UK non-ring fence
corporation tax rate will increase from 19% to 25% with effect from 2023. The
Group does not currently recognise any deferred tax assets in respect of UK
non-ring fence tax losses and therefore this rate change did not impact the
tax disclosures.
13. Cash and cash equivalents
30 June 31 December
2022 (Unaudited) 2021
$'000 $'000
Cash at bank 673,708 729,390
Deposits in escrow - 1,449
673,708 730,839
Bank demand deposits comprise deposits and other short-term money market
deposit accounts that are readily convertible into known amounts of cash. The
annual effective interest rate on short‑term bank deposits was 0.854% for
the six months period ended 30 June 2022 (year ended 31 December 2021:
0.386%).
14. Restricted Cash
Restricted cash comprises cash retained under the Israel Senior Secured Notes
and the Greek State Loan requirement as follows:
Current
- $35.6 million -Interest Payment Account for the accrued interest (less
coupons actually paid) for the period to September 2022 and
- $100 million Debt Payment Fund which will be used partly for the September
2022 coupon payment and the remainder released in June 2023, upon achieving
six months production at an annualized rate of 3.8 bcm/year from the Karish
asset in Israel.
Non-Current
- $2.8million- $2.1million required to be restricted in Interest Service
Reserve Account ('ISRA') in relation to the Greek Loan Notes and $0.6million
for Prinos Guarantee.
15. Inventories
30 June 2022 31 December 2021
(Unaudited)
$'000 $'000
Crude oil 35,297 32,832
Raw materials and supplies 45,010 54,371
Total inventories 80,307 87,203
16. Trade and other receivables
( )
30 June 31 December
2022 (Unaudited) 2021
$'000 $'000
Trade and other receivables-Current
Financial items:
Trade receivables 166,130 178,804
Receivables from partners under JOA 8,534 5,138
Other receivables(1) 26,749 38,683
Government subsidies(2) 2,946 3,212
Receivable Vat 73,742 42,376
Receivables from related parties (note 23) - 1
278,101 268,214
Non-financial items:
Deposits and prepayments(3) 19,392 17,139
Deferred issuance expenses 4,940 2,095
Other deferred expenses(4) 22,958 -
Accrued interest income 646 1,078
47,936 20,312
326,037 288,526
Trade and other receivables-Non Current
Financial items:
Other tax recoverable 14,795 16,478
14,795 16,478
Non-financial items:
Deposits and prepayments 11,398 12,337
Other deferred expenses(4) - 22,958
Other non-current assets 501 866
11,899 36,161
26,694 52,639
( )
(1) Included in other receivables is $26 million (31 December 2021:
$29.4million) cash on account in relation to the hedges in Italy
(2) Government subsidies mainly relate to grants from Greek Public Body for
Employment and Social Inclusion (OAED) to financially support the Kavala Oil
S.A. labour cost from manufacturing under the action plan for promoting
sustainable employment in underdeveloped or deprived districts of Greece.
(3) Mainly relates to prepayments for goods and services under the GSP
Engineering, Procurement, Construction and Installation Contract (EPCIC) for
the Epsilon project.
(4) In accordance with the Gas Sale and Purchase Arrangements (GSPAs) signed
with a group of gas buyers, the Company has agreed to pay compensation due to
the fact the first gas supply date is taking place beyond the 30 June 2021.
The compensation, amounting to $23million, was fully paid in H2 2021 and
presented as a current asset as it will be accounted for as variable
consideration in line with IFRS 15 against the first gas sale once production
commences and gas is delivered to the offtakers, which is expected within the
next 12 months.
( )
17. Share capital
The below tables outline the share capital of the Company.
Equity share capital allotted and fully paid Share capital Share premium
Number $'000 $'000
Issued and authorized
At 1 January 2021 177,089,406 2,367 915,388
Issued during the year
- New shares - - -
- Share based payment 513,154 7 -
At 31 December 2021 177,602,560 2,374 915,388
Issued during the period
- Share based payment 437,945 6 -
Share Premium Reduction(1) (500,000)
At 30 June 2022 (Unaudited) 178,040,505 2,380 415,388
(1) Energean plc by special resolution reduced its share premium account, as
confirmed by an Order of the High Court of Justice on the 14 June 2022.
18. Borrowings
30 June 2022 (Unaudited) 31 December
2021
$'000 $'000
Non-current
Bank borrowings - after two years but within five years
4.5% Senior Secured notes due 2024 ($625 million) 618,741 617,060
4.875% Senior Secured notes due 2026 ($625 million) 616,930 615,966
Convertible loan notes ($50 million) 43,458 41,495
Bank borrowings - more than five years
6.5% Senior Secured notes due 2027 ($450 million) 442,682 442,107
5.375% Senior Secured notes due 2028 ($625 million) 616,107 615,451
5.875% Senior Secured notes due 2031 ($625 million) 615,473 615,047
BSTDB Loan and Greek State Loan Notes 33,366 -
Carrying value of non-current borrowings 2,986,757 2,947,126
Current
Carrying value of current borrowings - -
Carrying value of total borrowings 2,986,757 2,947,126
The Group has provided security in respect of certain borrowings in the form
of share pledges, as well as fixed and floating charges over certain assets of
the Group.
US$2,500,000,000 senior secured notes:
On 24 March 2021, the Group completed the issuance of US$2.5 billion aggregate
principal amount of senior secured notes. The Notes were issued in four series
as follows:
1. Notes in an aggregate principal amount of US$625 million, maturing
on 30 March 2024, with a fixed annual interest rate of 4.500%.
2. Notes in an aggregate principal amount of US$625 million, maturing
on 30 March 2026, with a fixed annual interest rate of 4.875%.
3. Notes in an aggregate principal amount of US$625 million, maturing
on 30 March 2028, with a fixed annual interest rate of 5.375%.
4. Notes in an aggregate principal amount of US$625 million, maturing
on 30 March 2031, with a fixed annual interest rate of 5.875%.
The interest on each series of the Notes is be paid semi-annually, on 30 March
and on 30 September of each year.
The Notes are listed for trading on the TACT Institutional of the Tel Aviv
Stock Exchange Ltd. (the "TASE").
The Company has provided the following collateral in favour of the Trustee:
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 (once issued), Insurance policies, the Company
exploration licenses and the INGL Agreement.
2. Floating charge over all of the present and future assets of Energean
Israel Limited and Energean Israel Finance Ltd.
3. Energean Power FPSO (subject to using commercially reasonable efforts,
including obtaining Israel Petroleum Commissioner approval and any other
applicable governmental authority).
Kerogen Convertible Loan
On 25 February 2021, the Group completed the acquisition of the remaining 30%
minority interest in Energean Israel Ltd from Kerogen Investments No.38
Limited, Energean now owns 100% of Energean Israel Limited.
This resulted in a reduction of the Group's reported non-controlling interest
balance to $nil at 31 December 2021.
The total consideration includes:
· An up-front payment of $175 million paid at completion of the
transaction
· Deferred cash consideration amounts totalling $180 million,
which are expected to be funded from future cash flows and optimisation of the
group capital structure, post-first gas from the Karish project. The deferred
consideration is discounted at the selected unsecured liability rate of 9.77%.
· $50 million of convertible loan notes (the "Convertible loan
notes"), which have a maturity date of 29 December 2023, a strike price of
£9.50 and a zero-coupon rate
$450,000,000 senior secured notes:
On 18 November 2021, the Group completed the issuance of $450 million of
senior secured notes, maturing on 30 April 2027 and carrying a fixed annual
interest rate of 6.5%.
The interest on the notes is paid semi-annually on 30 April and 30 October of
each year.
The notes are listed for trading on the Official List of the International
Stock Exchange ("TISE").
The issuer is Energean plc and the Guarantors are Energean E&P Holdings,
Energean Capital Ltd, Energean Egypt Ltd, and Energean Egypt Services JSC.
The company undertook to provide the following collateral in favour of the
Security Trustee:
1. Share pledge of Energean Capital Ltd, Energean Egypt Ltd, Energean
Italy Ltd and Energean Egypt Services JSC
2. Fixed charges over the material bank accounts of the Company and
the Guarantors (other than Energean Egypt Services JSC)
3. Floating charge over the assets of Energean plc (other than the
shares of Energean E&P Holdings)
Energean Oil and Gas SA ('EOGSA') loan for Epsilon/Prinos Development:
On 27 December 2021 EOGSA entered into a loan agreement with Black Sea Trade
and Development Bank for €90.5 million to fund the development of Epsilon
Oil Field. The loan is subject to an interest rate of EURIBOR plus a margin
of 2% on 90% of the loan (guaranteed portion) and 4.9% margin on 10% of the
loan (unguaranteed portion). The loan has a final maturity date 7 years and 11
months after first disbursement.
On 27 December 2021 EOGSA entered into an agreement with Greek State to issue
€9.5 million of notes maturing in 8 years with fixed rate -0.31% plus margin
as outlined in the table below:
Year Margin
1 3.0%
2 3.5%
3 3.5%
4 4.5%
5 4.5%
6 4.5%
7 5.5%
8 6.5%
Capital management
The Group defines capital as the total equity and net debt of the Group.
Capital is managed in order to provide returns for shareholders and benefits
to stakeholders and to safeguard the Group's ability to continue as a going
concern.
Energean is not subject to any externally imposed capital requirements. To
maintain or adjust the capital structure, the Group may put in place new debt
facilities, issue new shares for cash, repay debt, engage in active portfolio
management, adjust the dividend payment to shareholders, or undertake other
such restructuring activities as appropriate.
30 June 2022 (Unaudited) 31 December 2021
$'000 $'000
Net Debt
Current borrowings - -
Non-current borrowings 2,986,757 2,947,126
Total borrowings 2,986,757 2,947,126
Less: Cash and cash equivalents (673,708) (730,839)
Restricted cash (138,409) (199,729)
Net Debt (1) 2,174,640 2,016,558
Total equity (2) 813,060 717,123
Gearing Ratio (1/2): 267.46% 281.2%
Reconciliation of liabilities arising from financing activities
1 January 2022 Cash inflows Cash outflows Reclassification Additions Lease modification Borrowing costs including amortisation of arrangement fees Foreign exchange impact 30 June 2022
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
2022 3,294,459 35,835 (85,970) (365) 746 (897) 97,229 (3,858) 3,337,179
Secured Senior Notes 2,905,631 - (77,763) - - - 82,065 - 2,909,933
Convertible loan notes 41,495 - - - - - 1,963 - 43,458
Long -term borrowings - 35,835 (2,422) (365) - - 365 (47) 33,366
Lease liabilities 44,425 - (5,785) - 746 (897) 734 (3,811) 35,412
Deferred licence payments 57,230 - - - - - 2,868 - 60,098
Contingent consideration 78,450 - - - - - 1,322 - 79,772
Deferred consideration for acquisition of minority 167,228 - - - - - 7,912 - 175,140
19. Retirement benefit liability
19.1 Provision for retirement benefits
30 June 2022 (Unaudited) 31 December 2021
$'000 $'000
Defined benefit obligation 1,957 2,767
Provision for retirement benefits recognised 1,957 2,767
Allocated as:
Non-current portion 1,957 2,767
19.2 Defined benefit obligation
30 June 2022 (Unaudited) 31 December 2021
$'000 $'000
At 1 January 2,767 7,839
Change in estimate - (3,463)
Current service cost 52 191
Interest cost 21 13
Extra payments or expenses 2,934 775
Actuarial losses - from changes in financial assumptions (48) 162
Benefits paid (3,574) (2,314)
Transfer in/(out) - (34)
Exchange differences (195) (402)
At 30 June / 31 December 1,957 2,767
20. Provisions
Decommissioning provision Litigation and other provisions Total
$'000 $'000 $'000
At 1 January 2022 802,098 11,294 813,392
New provisions 1,443 1,443
Change in estimates (11,469) - (11,469)
Recognised in property, plant and equipment (11,469) - (11,469)
Recognised in Intangible assets - - -
Recognised in profit& loss - - -
Payments (1,474) (1,474)
Unwinding of discount 5,261 5,261
Currency translation adjustment (67,719) (2,927) (70,646)
At 30 June 2022 (Unaudited) 726,697 9,810 736,507
Current provisions 12,133 - 12,133
Non-current provisions 714,564 9,810 724,374
Decommissioning provision
The decommissioning provision represents the present value of decommissioning
costs relating to oil and gas properties, which are expected to be incurred up
to 2040, when the producing oil and gas properties are expected to cease
operations.
The key assumptions underpinning the estimated decommissioning provision are
as follows:
Inflation Discount rate Cessation of 30 June 31 December 2021
assumption assumption production 2022 $'000
30 June 2022 30 June 2022 assumption $'000
Greece 0.8%- 2.4% 2.87% 2034 13,610 17,058
Italy 1.1% - 1.4% 1.23% 2022-2040 485,560 527,801
UK 2.5% 1.49% 2023-2031 183,878 203,246
Israel(1) 2.0%-5.3%(1) 3.43%(1) 2041 26,609 35,525
Croatia 1.8% 1.25% 2022 17,040 18,467
Total 726,697 802,097
(1)US inflation rate and US Bond rates have been used.
Litigation and other claims provisions
Litigation and other claim provision relates to litigation actions currently
open in Italy with the Termoli Port Authority in respect of the fees payable
under the marine concession regarding FSO Alba Marina serving the Rospo Mare
field. Energean Italy Spa has appealed these cases to the Campobasso Court
of Appeal. None of the other cases has yet had a decision on the substantive
issue. The Group provided $7.5 million (€7.2 million) against an adverse
outcome of these court cases.
Energean Italy SpA has currently open litigations with three municipalities in
Italy related to the imposition of real estate municipality taxes (IMU/TASI),
interest and related penalties concerning the periods 2016 to 2019. For the
years before 2019, Edison SpA bears uncapped liability for any amount assessed
according to the sale and purchase agreement (SPA) signed between the
companies while Energean is liable for any tax liability related to tax year
2019. For all three cases, Energean Italy SpA (together with Edison SpA, as
appropriate) filed appeals presenting strong legal and technical arguments for
reducing the assessed taxes as well as cancelling the assessed penalties.
Based on legal advice received, the Group strongly believes that the outcome
of the court decisions will be in its favour with no material exposure
expected in excess of the provision of $2.2 million (€2.1million)
recognised.
It is not currently possible to accurately predict the timing of the
settlement of these claims and therefore the expected timing of the cash flows
have been disclosed as non-current based timings of the next court hearing
dates.
21. Trade and other payables
30 June 2022 (Unaudited) 31 December 2021
$'000 $'000
Trade and other payables-Current
Financial items:
Trade accounts payable 154,181 109,525
Payables to partners under JOA(1) 41,607 43,499
Deferred licence payments due within one year(2) 24,466 -
Deferred consideration for acquisition of minority 175,140 167,228
Other creditors 19,618 12,043
Short term lease liability 8,394 8,253
423,406 340,548
Non-financial items:
Contract Liability(3) 54,690 -
Accrued Expenses(4) 87,848 64,823
Other finance costs accrued 37,581 36,693
Social insurance and other taxes 4,328 7,643
184,447 109,159
607,853 449,707
Trade and other payables-Non Current
Financial items:
Trade and other payables(5) 122,579 -
Deferred licence payments(2) 35,632 57,230
Contingent consideration (note 7) 79,772 78,450
Long term lease liability 27,018 36,172
265,001 171,852
Non-financial items:
Contract Liability(3) - 53,537
Social insurance 663 598
663 54,135
265,664 225,987
( )
(1) Payables related to operated Joint operations primarily in Italy
(2) In December 2016, Energean Israel acquired the Karish and Tanin offshore
gas fields for a $40.0 million closing payment with an obligation to pay
additional consideration of $108.5 million plus interest at an annual rate of
4.6% in ten equal annual payments. As at 30 June 2022 the total discounted
deferred consideration liability remaining was $60 million (31 December 2021:
$57 million). 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. 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) In June 2019, Energean signed an agreement with Israel Natural Gas Lines
("INGL") for the transfer of title (the "hand over") of the nearshore and
onshore part of the infrastructure that will deliver gas from the Karish and
Tanin FPSO into the Israeli national gas transmission grid. As consideration,
INGL will pay Energean 369 million Israeli new shekel (ILS) (c. $115 million)
for the infrastructure being built by Energean which will be paid in
accordance with milestones detailed in the agreement. The agreement covers the
onshore section of the Karish and Tanin infrastructure and the nearshore
section of pipeline extending to approximately 10km offshore. 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 expected within weeks.
Following Hand Over, INGL will be responsible for the operation and
maintenance of this part of the infrastructure.
(4) Included in trade payables and accrued expenses in HY22 and FY21 are
mainly Karish field-related development expenditures (mainly FPSO and sub-sea
construction cost) and the NEA/NI project in Egypt.
(5) The amount represents an amount payable to Technip in respect of costs
incurred starting 1 April 2022 until completion, in terms of the EPCIC
contract. The amount is payable in eight equal quarterly deferred payments due
after practical completion date and therefore has been discounted at 5.831%.
p.a.
22. Share based payments
Analysis of share-based payment charge
30 June (Unaudited)
2022 2021
$'000 $'000
Energean Deferred Bonus Plan (DSBP) 609 530
Energean Long Term Incentive Plans (LTIP) 2,217 1,944
Total share-based payment charge 2,826 2,474
Capitalised to intangible and tangible assets 109 207
Expensed as cost of sales - 5
Expensed as administration expenses 2,717 2,247
Expensed to exploration and evaluation expenses - 14
Expensed as other expenses - 1
Total share-based payment charge 2,826 2,474
Energean Long Term Incentive Plan (LTIP)
Under the LTIP, Senior Management can be granted nil exercise price options,
normally exercisable from three to ten years following grant provided an
individual remains in employment. The size of awards depends on both annual
performance measures and Total Shareholder Return (TSR) over a period of up to
three years. There are no post-grant performance conditions. No dividends are
paid over the vesting period; however, Energean'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 period (ending no later than the
Release Date) as the 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
30 June 2022 was 1.6 years, number of shares outstanding 2,103,849 and
weighted average price at grant date £8.49.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, the portion of any annual bonus above 30 per cent of the base
salary of a Senior Executive nominated by the Remuneration Committee was
deferred into shares.
Deferred awards are usually granted in the form of conditional share awards or
nil-cost options (or, exceptionally, as cash-settled equivalents). Deferred
awards usually vest two years after award although may vest early on leaving
employment or on a change of control.
The weighted average remaining contractual life for DSBP awards outstanding at
30 June 2022 was 1.3 years, number of shares outstanding 230,707 and price at
grant date £10.05.
23. Related parties
23a. Related party relationships
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
The Directors of Energean Plc are considered to be the only key management
personnel as defined by IAS 24. The following information is provided in
relation to the related party transaction disclosures provided in note 23b
below:
Adobelero Holdings Co Ltd. is a beneficially owned holding company controlled
by Panos Benos, the CFO of the Group.
Growthy Holdings Co Ltd is a beneficially owned holding company controlled by
Matthaios Rigas, the CEO of the Group.
Oil Co Investments Limited is beneficially owned and controlled by Efstathios
Topouzoglou, a Non-Executive Director of the Group.
Seven Maritime Company (Seven Marine) is a related party company controlled by
one the Company's shareholders Mr Efstathios Topouzoglou. Seven Marine owns
the offshore supply ship Energean Wave which support the Group's operation in
northern Greece.
Capital Earth: During the period ended 30 June 2022 the Group received
consultancy services from Capital Earth Limited, a consulting company
controlled by the spouse of one of Energean's executive directors, for the
provision of Group Corporate Social Responsibility Consultancy and Project
Management Services.
Prime Marine Energy Inc: Following a competitive tender process, the Group
entered into an agreement to purchase a Field Support Vessel ("FSV") from
Prime Marine Energy Inc., a company controlled by director and shareholder at
Energean plc, for $33.3 million. The FSV is being constructed to meet the
Group's specifications and will provide significant in-country capability to
support the Karish project, including FPSO re-supply, crew changes, holdback
operations for tanker offloading, emergency subsea intervention, drilling
support and emergency response. The purchase of this multi-purpose vessel will
enhance operational efficiencies and economics when compared to the leasing of
multiple different vessels for the various activities.
23b. Related party transactions
Purchases of goods and services
30 June (Unaudited)
2022 2021
$'000 $'000
Nature of transactions
Other related party "Seven Marine" Vessel leasing 1,079 993
Other related party "Prime Marine Energy Inc" Construction of field support vessel 1,556 3,300
Other related party "Capital Earth Ltd" Consulting services 48 46
2,683 4,339
23c. Related party balances
Payables
30 June 2022 (Unaudited) 31 December 2021
$'000 $'000
Nature of balance
Seven Marine Vessel leasing 232 417
232 417
24. Commitments and contingencies
In acquiring its oil and gas interests, the Group has pledged that various
work programmes will be undertaken on each permit/interest. The exploration
commitments in the following table are an estimate of the net cost to the
Group of performing these work programmes:
30 June 2022 (Unaudited) 31 December 2021
$'000 $'000
Capital Commitments:
Due within one year 35,866 20,575
Due later than one year but within two years 38,658 51,180
Due later two years but within five years 2,035 1,497
76,559 73,252
Contingent liabilities:
Performance guarantees*:
Greece 2,540 1,176
Israel 101,100 89,683
UK 83,320 99,570
Italy 13,551 21,292
Egypt 2,000 -
Montenegro - 566
202,511 212,287
* Performance guarantees are in respect of abandonment obligations, committed
work programmes and certain financial obligations
Issued guarantees:
Karish and Tanin Leases ($25 million) - As part of the requirements of the
Karish and Tanin Lease deeds, the Group provided the Ministry of National
Infrastructures, Energy and Water with bank guarantees for each lease. The
bank guarantees expire 29 June 2023.
Blocks 12, 21, 22, 23 and 31 ($21.1 million)- As part of the requirements of
the exploration and appraisal licences which granted to the Group during the
Israeli offshore bid in December 2017, the Group provided the Ministry of
National Infrastructures, Energy and Water in January 2018 with bank
guarantees for all 5 blocks mentioned above. The bank guarantees are in force
until 13 January 2023. Additionally, a bank guarantee related Block 12
drilling was issued in November 2021 and is in force until 17 December 2022.
Blocks 55, 56, 61 and 62, also known as "ZONE D" ($3.2million)- As part of the
requirements of the exploration and appraisal licences which granted to the
Group during the Israeli 2nd offshore bid in July 2019, the Group provided the
Ministry of National Infrastructures, Energy and Water in January 2018 with
bank guarantees for all 4 blocks mentioned above. The bank guarantees are in
force until 28 September 2022.
Israeli Natural Gas Lines ("INGL") ($47.3million) - As part of the agreement
signed with INGL on June 2019 the Group provided INGL bank guarantee in order
to secure the milestone payments from INGL. These bank guarantees are in force
until 30 November 2022 ($42.1million) and June 2023 ($5.2million).
Israel Other ($4.4million) - As part of ongoing operations in Israel, the
Group has provided various bank guarantees to third parties in Israel.
United Kingdom: Following the Edison E&P acquisition, the Group issued
letters of credit amounting to $83.3 million for United Kingdom
decommissioning obligations and other obligations under the United Kingdom
licenses.
Italy: Following the Edison E&P acquisition, the Group issued letters of
credit amounting to $13.5 million for decommissioning obligations and other
obligations under the Italian licenses.
Legal cases and contingent liabilities
The Group had no material contingent liabilities as of 30 June 2022 and 31
December 2021.
25. Subsequent events
Zone D
On 27 July 2022 the Company sent a formal notice to the Ministry of Energy
asking the relinquishment of Zone D licenses and discontinue any work
regarding them. The licenses will expire at the end of their term, i.e., on
October 27, 2022.
26. Subsidiary undertakings
At 30 June 2022, the Group had investments in the following subsidiaries:
Name of subsidiary Country of incorporation / registered office Principal activities Shareholding Shareholding
At 30 June 2022
At 31 December 2021
(%)
(%)
Energean E&P Holdings Ltd 22 Lefkonos Street, 2064 Nicosia, Cyprus Holding Company 100 100
Energean Capital Ltd 22 Lefkonos Street, 2064 Nicosia, Cyprus Holding Company 100 100
Energean MED Limited 44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration, development and production 100 100
Energean Oil & Gas S.A. 32 Kifissias Ave. 151 25 Marousi Athens, Greece Oil and gas exploration, development and production 100 100
Energean International Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production 100 100
Energean Israel Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production 100 100
Energean Montenegro Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production 100 100
Energean Israel Finance SARL 560A rue de Neudorf, L-2220, Luxembourg Financing activities 100 100
Energean Israel Transmission LTD Andre Sakharov 9, Haifa, Israel Gas transportation license holder 100 100
Energean Israel Finance LTD Andre Sakharov 9, Haifa, Israel Financing activities 100 100
Energean Egypt Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production 100 100
Energean Hellas Limited 22 Lefkonos Street, 2064 Nicosia, Cyprus Oil and gas exploration, development and production 100 100
Energean Italy S.p.a. Piazza Sigmund Freud 1 Oil and gas exploration, development and production 100 100
20154 Milan,Italy
Energean International E&P S.p.a. Piazza Sigmund Freud 1 Oil and gas exploration, development and production 100 100
20154 Milan,Italy
Energean Sicilia Srl Via Salvatore Quasimodo 2 - 97100 Ragusa (Ragusa) Oil and gas exploration, development and production 100 100
Energean Exploration Limited 44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration, development and production 100 100
Energean UK Ltd 44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration, development and production 100 100
Energean Egypt Energy Services JSC Building 11, 273 Palestine Street Oil and gas exploration, development and production 100 100
New Maadi , Cairo
EGYPT
27. Exploration, Development and production interests
Country Fields Fiscal Regime Group's working interest Field Phase Joint Operation Operator
Israel
Karish Concession 100% Development No NA
Tanin Concession 100% Development No NA
Blocks 12, 21, 22, 23, 31 Concession 100% Exploration No NA
Four licenses Zone D Concession 80% Exploration Yes Energean
Egypt
Abu Qir PSC 100% Production No NA
Abu Qir North PSC 100% Production No NA
Abu Qir West PSC 100% Production No NA
Yazzi PSC 100% Development No NA
Python PSC 100% Development No NA
Field A (NI-1X) PSC 100% Exploration No NA
Field B (NI-3X) PSC 100% Exploration No NA
NI-2X PSC 100% Exploration No NA
North East Hap'y PSC 30% Exploration Yes ENI
Viper (NI-4X) PSC 100% Exploration No NA
Greece
Prinos Concession 100% Production No NA
Epsilon Concession 100% Development No NA
Prinos exploration area Concession 100% Exploration No NA
South Kavala Concession 100% Production No NA
Katakolo Concession 100% Undeveloped No NA
Ioannina Concession 40% Exploration Yes Repsol
West Patraikos Concession 50% Exploration Yes HELPE
Block-2 Concession 75% Exploration Yes Energean
Italy
Vega A Concession 100% Production Yes Energean
Vega B Concession 100% Production Yes Energean
Rospo Mare Concession 100% Production Yes Energean
Verdicchio Concession 100% Production No NA
Vongola Mare Concession 95% Production Yes Energean
Gianna Concession 49% Development Yes ENI
Accettura Concession 50% Production Yes Energean
Anemone Concession 19% Production Yes ENI
Appia Concession 50% Production Yes Energean
Argo-Cassiopea Concession 40% Development Yes ENI
Azalea Concession 16% Production Yes ENI
Calipso Concession 49% Production Yes ENI
Candela Dolce Concession 40% Production Yes ENI
Candela Povero Concession 40% Production Yes ENI
Carlo Concession 49% Production Yes ENI
Cassiano Concession 50% Production Yes Energean
Castellaro Concession 50% Production Yes Energean
Cecilia Concession 49% Production Yes ENI
Clara East Concession 49% Production Yes ENI
Clara North Concession 49% Production Yes ENI
Clara Northwest Concession 49% Production Yes ENI
Clara West Concession 49% Production Yes ENI
Comiso Concession 100% Production No NA
Cozza Concession 85% Production Yes Energean
Daria Concession 49% Production Yes ENI
Didone Concession 49% Production Yes ENI
Emma West Concession 49% Production Yes ENI
Fauzia Concession 40% Production Yes ENI
Giovanna Concession 49% Production Yes ENI
Leoni Concession 50% Production Yes Gas Plus
Monte Urano-San Lorenzo Concession 40% Production Yes Energean
Naide Concession 49% Production Yes ENI
Portocannone Concession 62% Production Yes Energean
Quarto Concession 33% Production Yes Padana Energia
Ramona Concession 49% Production Yes ENI
Regina Concession 25% Production Yes ENI
Salacaro Concession 50% Production Yes Energean
San Giorgio Mare Concession 95% Production Yes Energean
San Marco Concession 100% Production No NA
Santa Maria Mare Concession 96% Production Yes Energean
Santo Stefano Concession 95% Production Yes Energean
Sarago Mare Concession 85% Production Yes Energean
Sinarca Concession 40% Production Yes Gas Plus
Talamonti Concession 50% Production Yes Energean
Tresauro Concession 25% Production Yes Enimed
UK
Garrow Concession 68% Production Yes Alpha Petroleum
Kilmar Concession 68% Production Yes Alpha Petroleum
Scott Concession 10% Production Yes CNOOC
Telford Concession 16% Production Yes CNOOC
Wenlock Concession 80% Production Yes Alpha Petroleum
Glengorm Concession 25% Exploration Yes CNOOC
Isabella Concession 10% Exploration Yes Total Energies E&P North Sea UK Limited
Montenegro
Block 26, 30 Concession 100% Exploration No NA
Croatia
Irena PSC 70% Exploration No NA
Izabela PSC 70% Production No NA
Malta
Blocks 1, 2 and 3 of Area 3 Concession 100% Exploration No NA
1 (#_ftnref1) When considering H1 2022 data versus 2019 Energean standalone
(pre-Edison acquisition)
2 (#_ftnref2) Adjusted H1 2022 EBITDAX includes losses on forward
transactions of $18.2 million (H1 2021: $nil) reported in Revenue (Note 5 in
the interim financial statements). Adjusted EBITDAX excluding these hedges
would be $216.4 million
3 (#_ftnref3) Cash Cost of Production is defined in the Financial Review
section. Includes $17.4 million of flux costs.
4 (#_ftnref4) Cash S,G&A and Adjusted EBITDAX are defined in the
Financial Review section
5 (#_ftnref5) After working capital movements
6 (#_ftnref6) On an equity share basis
7 (#_ftnref7) 2019 data is Energean standalone (pre-Edison acquisition)
8 (#_ftnref8) Cash cost of production is defined later in the financial
review
9 (#_ftnref9) Inclusive of flux costs
10 (#_ftnref10) Cash SG&A is defined later in the financial review
11 (#_ftnref11) Adjusted EBITDAX is defined later in the financial review.
Energean uses Adjusted EBITDAX as a core business KPI.
12 (#_ftnref12) Numbers may not sum due to rounding
13 (#_ftnref13) Adjusted EBITDAX includes losses on forward transactions of
$18.2million (H1 2021: $0million) reported in Revenue (Note 4 in the interim
financial statements). Adjusted EBITDAX excluding these hedges would be
$216.4million
14 (#_ftnref14) Numbers may not sum due to rounding
15 (#_ftnref15) Numbers may not sum due to rounding
16 (#_ftnref16) Inclusive of restricted cash
17 (#_ftnref17) Numbers may not sum due to rounding
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