REG - Energean PLC - Results for Half Year Ended 30 June 2023
07/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230907:nRSG6350La&default-theme=true
RNS Number : 6350L Energean PLC 07 September 2023
Energean plc
("Energean" or the "Company")
Results for Half Year Ended 30 June 2023
Strong financial results; Karish production steady at ~6 bcm/yr equivalent
London, 7 September 2023 - Energean plc (LSE: ENOG TASE: אנאג) is pleased
to announce its half-year results for the six months ended 30 June 2023 ("H1
2023").
Operational Highlights:
· Production for the period was 105.9 kboed, near triple that of H1
2022
· Karish production currently steady at ~6 bcm/yr equivalent
o Completion of commissioning under the gas sales agreements ("GSAs")
achieved in April, with Practical Completion under the EPCIC with Technip
achieved in June
o Optimisation activities on the FPSO and subsea systems have progressed
well, and the Energean Power FPSO achieved 97% uptime in August. Efficiency
levels have followed a similarly positive trajectory and production is
currently steady, averaging around 570 mmscfd (~6 bcm/yr equivalent) over the
last three weeks
· Key growth projects on track
o Energean Power FPSO capacity increase to 8 bcm/yr on track for delivery by
year-end 2023
o Positive results achieved at the second and third NEA/NI (Egypt)
development wells, reinforcing Energean's view that the results from NEA#6
would have no read-across to the remainder of the field; NEA#5 came onstream
in July 2023 and is producing in line with pre-drill expectations, whilst PY#1
testing has delivered results in line with expectations. Remaining two wells
expected onstream in 2023
o Cassiopea, Italy (Energean 40%), development progressing in line with
expectations: pipelaying complete and subsea installation activities
progressing well
o Final investment decision ("FID") on Katlan (Israel) 1 (#_ftn1) expected
in late 2023
o Orion 1X exploration well, Egypt, drilling expected to commence in Q4 2023
· Guidance
o 2023 production guidance revised to 120 - 130 kboed (from 125 - 140
kboed), reflecting start-up issues that have now been substantially overcome
o On track to deliver near-term targets of 200 kboed, $2.5 billion revenues,
$1.75 billion EBITDAX and leverage c.1.5x in H2 2024
Financial Highlights:
· Delivered strong financial results, underpinned by the
contribution of Karish and despite the softer commodity price environment
o Revenues of $587.6 million, a 73% increase (H1 2022: $339.0 million) 2
(#_ftn2)
o Adjusted EBITDAX of $345.2 million, a 74% increase (H1 2022: $198.2
million)
o Cash Cost of Production of $12.1/boe, a 37% decrease (H1 2022: $19.2/boe)
o Group cash as of 30 June 2023 was $357.9 million, including restricted
amounts of $11.5 million, and total liquidity was $897.4 million.
o In July 2023, Energean's subsidiary, Energean Israel Finance Limited
("Energean Israel"), issued a $750 million bond, the primary purpose of which
was to repay Energean Israel's March 2024 bond 3 (#_ftn3) . The newly issued
bond matures in 2033, and extends Energean's weighted average debt maturity
from just over five to over six years
o Group leverage (Net debt/annualised Adjusted EBITDAX 4 (#_ftn4) ) reduced
to 3.9x (FY 2022: 6.0x)
Corporate Highlights:
· Q2 2023 dividend of 30 US$ cents/share declared today, in line
with Energean's dividend policy, scheduled to be paid on 29 September 2023
o Following this payment, cumulative dividends of $266 million (150 US$
cents/share) will have been returned to shareholders
· Scope 1 and 2 emissions intensity of approximately 11.0
kgCO2e/boe, a 36% reduction versus H1 2022
Financial Summary
H1 2023 H1 2022 Increase / (Decrease)
$m $m %
Average working interest production (kboed) 105.9 (82% gas) 35.4 (73% gas) 199%
Sales and other revenues 587.6 339.0 73%
Cash Cost of Production 5 (#_ftn5) (, 6 (#_ftn6) ) 231.1 123.3 87%
Cash Cost of Production per boe (6 ) ($/boe) 12.1 19.2 (37%)
Cash G&A(6) 17.9 15.1 19%
Adjusted EBITDAX(6) 345.2 198.2 74%
Operating cash flow 233.0 146.6 59%
Development capital expenditure 272.5 345.7 (21%)
Exploration capital expenditure 19.0 37.0 (49%)
Decommissioning expenditure 3.8 1.5 153%
H1 2023 FY 2022 Increase / (Decrease)
$m $m %
Net Debt (including restricted cash)(6) 2,715.3 2,518.2 8%
Leverage (Net Debt / annualised Adjusted EBITDAX(6)(, 7 (#_ftn7) )) 3.9 6.0 (35%)
Mathios Rigas, Chief Executive of Energean, commented:
"Energean is now a major energy producer in the Eastern Mediterranean, almost
tripling our production in H1 2023 compared to H1 2022. We have also
significantly increased our revenue and EBITDAX by 73% and 74% compared to H1
2022, successfully refinanced our 2024 Energean Israel bond, and paid four
consecutive dividends to our shareholders, with the fifth declared today.
"On Karish, the Energean FPSO achieved 97% uptime in August and, although
ramp-up and commissioning was slower than originally expected, Karish is now
producing at around 6 bcm/yr. We are pleased with the positive demand in the
market for our gas and will continue to focus on optimising production
efficiency.
"On our growth projects, which target to increase production to 200 kboed by
H2 2024, Karish North and the FPSO capacity increase projects (Israel), NEA/NI
(Egypt) and Cassiopea (Italy) are all progressing well. We remain focused on
delivering our near-term targets of 200 kboed, $2.5 billion of revenues, $1.75
billion of EBITDAX and leverage of c.1.5x."
"We are also preparing for FID on Katlan 8 (#_ftn8) later in the year. Given
the export potential from the Katlan licence 9 (#_ftn9) , we plan to engage
with local and international buyers to market our gas. Elsewhere, we look
forward to the spudding of the Orion-1X exploration well next quarter,
offshore Egypt, with our partner Eni. Finally, in line with our stated net
zero policy target, our emissions intensity further reduced by 36% to 11.0
kgCO2e/boe versus H1 2022.
"We continue to be disciplined and focused on stable predictable cashflows,
which underpin Energean's goals of consistent returns to shareholders, low
leverage and growth through responsibly produced energy."
Enquiries
For capital markets: ir@energean.com (mailto:ir@energean.com)
Kate Sloan, Head of IR and M&A
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/xp4p3wc6
(https://edge.media-server.com/mmc/p/xp4p3wc6)
Conference call registration link:
https://register.vevent.com/register/BIa53503b917dd422ab1e53557f7594c49
(https://register.vevent.com/register/BIa53503b917dd422ab1e53557f7594c49)
After completing your conference call registration you will receive dial-in
details on screen and via email. Please note that the dial-in pin number is
unique and cannot be shared.
The presentation slides will be made available on the website shortly
www.energean.com (http://www.energean.com/) .
Energean Operational Review
Production
H1 2023 average working interest production was 105.9 kboed (82% gas), up 199%
year-on-year primarily due to the ramp-up of production from Karish in Israel.
In Israel, commercial sales under the GSAs began in April 2023. Slower than
anticipated commissioning and ramp-up led to slightly lower than expected
production from Karish in the first half of the year. Optimisation activities
on the FPSO and subsea systems have progressed well, and the Energean Power
FPSO achieved 97% uptime in August. Efficiency levels have followed a
similarly positive trajectory and production is currently steady, averaging
around 570 mmscfd (~6 bcm/yr equivalent) over the last three weeks.
Moving into 2024, production will benefit from the start-up of the Karish
growth projects, which will see an increase in capacity of the infrastructure
from 6.5 bcm/yr to 8.0 bcm/yr.
In Egypt, production in July averaged 26.5 kboed following the start-up of
NEA#5 in July. Production from NEA#5 has performed in line with expectations
at 25 mmscfd (4.3 kboed).
FY 2023 guidance is revised to 120 - 130 kboed (from 125 - 140 kboed),
reflecting Karish start-up issues that have now been substantially overcome.
Energean's FY 2023 guidance for Israel is second half weighted due to: (1) six
months of commercial sales under the GSAs in H2 versus three months in H1 and
(2) higher production uptime and efficiency versus H1.
FY 2023 guidance H1 2023 H1 2022 H1 %
Kboed Kboed Kboed change
Israel 87 - 94 70.1 - -
Egypt 23 - 25 24.8 24.8 0%
Rest of portfolio 10 - 11 11.0 10.6 4%
Total production 120 - 130 105.9 35.4 199%
Development
Israel - Karish Growth Projects
Completion of the three projects, which will increase the FPSO's gas
processing capacity to 8 bcm/yr (at 100% efficiency), remains on track for the
end of the year.
1. Second gas export riser
The second gas export riser was installed in March 2023. Pre-commissioning
activities are ongoing.
2. Karish North
On Karish North, the majority of infrastructure has been installed ahead of
commissioning activities; the manifold was installed in April 2023 and the
umbilical and production spool were installed in August 2023. The KN-01
production well was drilled in 2022 as part of the wider drilling campaign.
3. Second oil train
The module is scheduled to be installed on the FPSO in Q4 2023.
Israel - Katlan
The field development plan for Katlan, which covers the Katlan licence
(formerly Block 12) and parts of the Tanin lease, was submitted to the Israeli
Government in August 2023 for approval. In August 2023, Energean signed a
Letter of Award on FEED with Technip UK Limited. FID continues to be expected
before year-end 2023.
Egypt
The NEA/NI development reached first gas in March 2023. Two wells are
currently onstream, NEA#5 and NEA#6, the former which was brought online in
July 2023. NEA#5 is producing in line with pre-drill expectations of around 25
mmscfd. Of the remaining two wells, which are expected to come onstream later
this year, PY#1 was completed and tested at 20 mmscfd, in line with prognosis,
in August 2023, and NI#1 is expected to spud in September 2023.
At 30 June 2023, net receivables (after provision for bad and doubtful debts)
in Egypt were $143.1 million (31 Dec 2022: $116.5 million), of which $107.8
million (31 Dec 2022: $40.9 million) was classified as overdue.
Rest of Portfolio
In Italy, first gas remains on track for Cassiopea for 2024. Pipelaying was
completed in July and subsea installation activities are on track.
Exploration and Appraisal
The Orion-1X (Energean, 30%), located on the North East Hap'y Concession,
offshore Egypt, is expected to spud in Q4 2023. Energean is finalising the
farm out of 11% of its working interest (new ownership expected to be 19%).
The Izabela-9 well (Energean, 70%) located offshore Croatia, is expected to
spud in Q4 2023.
In Greece, drill or drop decisions on the Ioannina licence (Energean, 100%)
and Block 2 (Energean, 75%) are expected to be made in 2024.
Energean Corporate Review
ESG and Climate Change
Energean is committed to net zero emissions by 2050 and industry-leading
disclosure of its energy transition intentions.
Energean's scope 1 and 2 emissions intensity in H1 2023 was estimated to be
approximately 11.0 kgCO2e/boe, a 36% reduction versus H1 2022. FY 2023
emissions intensity are expected between 9.5 - 10.5 kgCO2e/boe.
Environmental, Social and Governance ("ESG") Reporting and Ratings
Energean is pleased to provide an update on its ESG ratings and recognitions:
· Maala (Israel) - platinum rating re-iterated in July 2023
· FTSE4Good Index Series - confirmed as a constituent of the index
for the second year running following the June 2023 review
· MSCI - AA rating re-confirmed in July 2023 (third year running as
AA)
· Sustainalytics - Outperformer rating maintained in April 2023;
ranked 50 out of 299 oil and gas producers
Financing
In July 2023, Energean issued $750 million of senior secured notes, at its
subsidiary Energean Israel Finance Ltd ("Energean Israel"), maturing in 2033
with a coupon rate of 8.5% 10 (#_ftn10) . This extends Energean Israel's
weighted average life of debt to more than six years and increases its
weighted average interest rate to 6.13% (from 5.25%).
The funds were raised to repay Energean Israel's $625 million notes due in
March 2024 and pay fees and expenses associated with this refinancing,
contribute towards funding the interest payment reserve account, and
contribute towards the payment of the final deferred consideration to Kerogen.
2023 guidance
FY 2023
Production
Israel (kboed) 87 - 94
(including 4.4 - 4.7 bcm of gas)
Egypt (kboed) 23 - 25
Rest of Portfolio (kboed) 10 - 11
Total production (kboed) 120 - 130
Financials
Consolidated net debt ($ million) 2,700 - 2,900
Cash Cost of Production (operating costs plus royalties)
Israel ($ million) 275 - 300
Egypt ($ million) 40 - 50
Rest of Portfolio ($ million) 160 - 200
Total Cash Cost of Production ($ million) 475 - 550
Development and production capital expenditure
Israel ($ million) 170 - 200
Egypt ($ million) 140 - 150
Rest of Portfolio ($ million) 270 - 290
Total development & production capital expenditure ($ million) 580 - 640
Exploration expenditure ($ million) 50 - 60
Decommissioning expenditure ($ million) 20 - 30
Energean Financial Review
Financial results summary
H1 2023 H1 2022 Change
Average daily working interest production (kboed) 105.9 35.4 199.2%
Sales revenue ($m) 587.6 339.0 73.3%
Realised weighted average liquid price ($/boe) 64.6 87.5 (26.2%)
Realized weighted average gas price pre-hedging ($/mcf) 5.2 10.4 (50.0%)
Cash cost of production 11 (#_ftn11) ($m) 231.1 123.3 87.4%
Cash cost of production per barrel ($/boe) 12.1 19.2 (37.0%)
Cash G&A 12 (#_ftn12) 17.9 15.1 18.5%
Adjusted EBITDAX 13 (#_ftn13) ($m) 345.2 198.2 74.2%
Profit after tax ($m) 69.8 118.7 (41.2%)
Earnings per share (cents per share) $0.39 $0.67 (41.8%)
Cash flow from operating activities ($m) 233.0 146.6 58.9%
Capital expenditure ($m) 291.5 398.3 (26.8%)
H1 2023 FY 2022 Change
Total borrowings ($m) 3,073.2 3,020.9 1.7%
Cash and cash equivalents and restricted cash ($m) 357.9 502.7 (28.8%)
Net debt ($m) (including restricted cash) 2,715.3 14 (#_ftn14) 2,518.2 (14) 7.8%
Revenue, production and commodity prices
Group working interest production averaged 105.9 kboed, an increase from the
prior period as a result of commencement of production in Israel; accounting
for approximately 66% of total output. The production split was 82% gas (H1
2022: 73%) and 18% liquids (H1 2022: 27%). Production in Italy and Egypt was
in line with H1 2022 and H1 2023 included the re-start of production at
Prinos, Greece.
H1 2023 revenue was $587.6 million, a 73.3% increase from the prior period
primarily due to the sales from Israel which constitute 59% (H1 2022: 0%) of
the total revenue. The lower commodity prices realised in H1 2023 contributed
to the revenues achieved for the period. During H1 2023, the average Brent oil
price was $79.6/bbl (H1 2022: $104.9/bbl) and the average PSV (Italian gas)
price was $15.0/mcf (H1 2022: $32.4/mcf). Gas sales were $408.2 million (H1
2022: $211.2 million) with a realised weighted average price of $5.2/mcf (H1
2022: $10.4/mcf). Liquid, crude and petroleum product sales were $182.2
million (H1 2022: $145.3 million), with a realised weighted average price of
$64.6/boe (H1 2022: $87.5/boe).
Adjusted EBITDAX for the period was $345.2 million (H1 2022: $198.2 million),
the increase of 74.2% is predominantly a result of the higher revenue achieved
due to the commencement of Israel production.
Included within the June 2023 inventory balance is 426 kbbl of liquids in
Israel and 582 kbbl in Italy which were subsequently sold in July 2023 for a
total of $62.4 million. In line with Energean's accounting policy all oil
inventory is carried at the lower of cost and net realisable value. Therefore,
the above inventory is reflected at cost in the interim financial
statements.
Underlying cash production costs
Total cash production costs for the period were $231.1 million of which 47% is
related to new production in Israel, cash production costs for the rest of the
Group excluding Israel amounted to $123.1 million (H1 2022: $123.3 million).
The unit costs for the period were $12.1 /boe (H1 2022: $19.2 /boe), this
decrease is primarily driven by the increased production, as applied to a
primarily fixed cost base. As set out in note 5 of the financial statements, a
significant contributor to production costs is royalties (payable in Italy and
Israel). Excluding royalties, production costs would be $158.2 million (H1
2022: $111.7 million) and $8.3/boe (H1 2022: $17.4/boe).
Depreciation, impairments and write-offs
Depreciation charges on production and development assets increased to $116.0
million (H1 2022: $33.9 million), due to the commencement of production at
Karish. On a per barrel of oil equivalent of production basis, this
represented a 13.2% increase, to $6.0/boe (H1 2022: $5.3/boe). The increase is
due to Israel production commencing. During the current period and comparative
prior period no impairment of cash generating units (CGUs) was recognised. An
impairment reversal of $21.9 million was recognised due to the decrease in the
decommissioning provision estimate in Italy and UK (driven by the increased
discount rates applied).
Other income and expenses
Other expenses of $2.2 million (H1 2022: $8.8 million) includes a $1.3 million
expected credit loss adjustment on trade receivables.
Other income of $7.2 million (H1 2022: $1.6 million) relates predominantly 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 2023 were $106.4 million (H1 2022: $35.9 million).
Finance costs, after capitalisation of interest, comprise of $79.0 million (H1
2022: $19.8 million) of interest on borrowings and other finance costs of
$34.8 million (H1 2022: $18.7 million). 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. The increase in the net finance costs is a result of
the decrease in the amount of borrowing costs capitalised as a result of
production commencing in Israel ($7.7 million was capitalised in H1 2023
compared to $71.7 million in H1 2022). Finance income was $7.3 million for
the period (H1 2022: $2.7 million).
Taxation
Energean recorded a tax expense of $65.3 million in H1 2023 (H1 2022: net
income tax recovery of $8.9 million). The tax expense includes corporation tax
charges of $30.5 million and deferred tax charges of $34.8 million. The
increase in tax expense from the prior period is a result of the increase in
taxable profits and the movement in deferred tax, mainly due to the
utilisation of tax losses in Israel and Italy. In H1 2022 a deferred tax asset
was recognised on Italian tax losses which has partially been utilised in H1
2023. Taxation charges in the period ended 30 June 2023 included $25.8 million
(H1 2022: $27.1 million) relating to taxes (non-cash in nature) being deducted
at source in Egypt.
In November 2022, Italy introduced a new windfall tax that imposed a 50%
one-off tax, calculated on 2022 taxable profits that are 10% higher than the
average taxable profits between 2018-2021, with a ceiling equal to 25% of the
value of the net assets at end-2021. At 30 June this windfall tax is
recognised as a payable in the financial statements and subsequent to period
end, in July 2023, the windfall tax of $94.5 million (€87.0 million) was
paid.
Profit after tax
Profit after tax was $69.8 million (H1 2022: $118.7 million). The decrease
compared to the prior period is due to the increased tax expense (H1 2022 was
a tax income of $8.9 million), profit before tax increased by 23.0% to $135.0
million (H1 2022: $109.8 million).
Earnings per share
Earnings per share were $0.39 (H1 2022: $0.67). The diluted earnings per share
were $0.39 per share (H1 2022: $0.66 per share which consider the dilutive
impact of Long Term Incentive Plans (LTIPs), the Deferred Bonus Plans (DBP)
and the convertible loan notes.
Operating cash flow
In H1 2023, Energean recorded a cash inflow from operations before changes in
working capital of $322.4 million (H1 2022: $159.1 million). After working
capital movements and taxation paid, the cash inflow in H1 2023 was $233.0
million (H1 2022: $146.6 million). The year-on-year increase in operating cash
flow has been predominantly driven by the growth in revenues delivered between
the two periods.
Capital Expenditures
During the period, the Group incurred capital expenditure of $291.5 million
(H1 2022: $398.3 million). Capital expenditure mainly consisted of development
expenditure in relation to the Karish Main Field, Second Oil train and riser
and Karish North Fields ($115.5 million) in Israel, the NEA/NI project in
Egypt ($61.2 million) and the Cassiopea field in Italy ($65.9 million). The
exploration and appraisal expenditure is primarily for the Olympus development
in Israel ($13.3 million) and the North East Hapy and East Bir El-Nus
(Block-8) development in Egypt ($2.3 million).
Net Debt
As at 30 June 2023, net debt of $2,715.3 million (FY22: $2,518.2 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, $11 million of Greek Loan notes, $109 million in relation to 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
$357.9 million (including $11.5 million of restricted cash). The debt
incurred a weighted average interest rate of 5.4% for the period to 30 June
2023. The Senior Secured Notes (both at Energean Plc and Energean Israel) have
fixed interest rates.
Shareholder Distributions
In line with the Group's dividend policy, Energean returned US$0.60/share to
shareholders in H1 2023, representing two-quarters of dividend payments. No
dividends were declared in H1 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 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 2023 H1 2022
$m $m
Adjusted EBITDAX 345.2 198.2
Reconciliation to profit for the period:
Depreciation and amortisation (116.0) (33.9)
Share-based payment charge (3.3) (2.7)
Exploration and evaluation expense (2.1) (4.3)
Impairment reversal 21.9 -
Other income/(expense) 5.0 (7.1)
Finance income 7.3 2.7
Finance cost (113.7) (38.6)
Net foreign exchange loss (9.3) (4.5)
Taxation (expense)/income (65.3) 8.9
Profit for the period 69.8 15 (#_ftn15) 118.7(15)
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 and share based payment charges that are
included in cost of sales.
H1 2023 H1 2022
$m $m
Cost of sales 338.3 158.0
Adjusted for:
Depreciation (113.4) (32.3)
Change in inventory 6.5 (2.4)
Share based payment charge (0.4) -
Cost of production 231.1(15) 123.3(15)
Total production for the period (MMboe) 19,172.7 6.4
Cost of production per boe ($/boe) 12.1 19.2
Cash General & Administrative Expense (G&A)
Cash G&A excludes certain non-cash accounting items from the Group's
reported G&A. Cash G&A is calculated as follows: Administrative and
distribution expenses, excluding depletion and amortisation of assets and
share-based payment charge that are included in G&A.
H1 2023 H1 2022
$m $m
Administrative expenses 23.4 19.3
Less:
Depreciation (2.5) (1.5)
Share-based payment charge included in G&A (2.9) (2.7)
Cash G&A 17.9 16 (#_ftn16) 15.1(16)
Energean incurred Cash G&A costs of $17.9 million in H1 2023. This
represents a 18.5% increase compared to the prior period. The increase is
predominantly due to the cessation of the capitalisation of payroll costs
following the start of production in Israel.
Capital Expenditure
Capital Expenditure is defined as additions to property, plant and equipment
and intangible exploration and evaluation assets and cash lease payments made
in the period, less: lease asset additions, increases/decreases in the asset
due to changes in decommissioning provision estimates, capitalised share-based
payment charges, 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 2023 H1 2022
$m $m
Additions to property, plant and equipment 274.0 404.5
Additions to intangible exploration and evaluation assets 19.0 37.0
Less:
Capitalised borrowing costs 3.5 60.1
Leased assets additions and modifications 40.7 (0.2)
Lease payments related to capital activities (7.8) (5.8)
Capitalised share-based payment charge - 0.1
Capitalised depreciation - 0.4
Change in decommissioning provision (34.9) (11.5)
Total capital expenditures 291.5(1)(6) 398.3(16)
Movement in working capital (7.9) (185.3)
Cash capital expenditures per the cash flow statement 283.6(16) 213.0(16)
Net 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 2023 FY 2022
$m $m
Current borrowings 669.9 45.6
Non-current borrowings 2,403.2 2,975.3
Total borrowings 3,073.1 3,020.9
Less: Cash and cash equivalents (346.4) (427.9)
Restricted cash held for loan repayment (11.5) (74.8)
Net Debt 17 (#_ftn17) 2,715.2 18 (#_ftn18) 2,518.2(18)
Net Debt Excluding Israel(18) 313.5 143.8
Going Concern
The Directors assessed the Group's ability to continue as a going concern over
a going concern assessment period to 31 December 2024. 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 condensed consolidated interim financial statements. Detail of the Group's
going concern assessment for the period can be found within note 2.2 of the
condensed consolidated interim financial statements.
Subsequent Events
Pricing of an offering of US$750,000,000 senior secured notes
Subsequent period end, Energean priced the offering of US$750 million
aggregate principal amount of senior secured notes due 30 September 2033, with
a fixed annual interest rate of 8.5%. The interest on the Notes will be paid
semi-annually, on March 30 and September 30 of each year, beginning on March
30, 2024. The issuance of the Notes was completed on 11 July 2023, subject to
satisfaction of customary conditions. The Notes are expected to be listed for
trading on the TASE-UP of the Tel Aviv Stock Exchange Ltd., subject to the
approval of the TASE.
The proceeds from the Offering, upon release from escrow are expected to be
used to repay the $625 million March 2024 notes, pay fees and expenses
associated with this refinancing, contribute towards funding the interest
payment reserve account, and contribute towards the payment of the final
deferred consideration to Kerogen.
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.
Energean has closely monitored its risks and uncertainties throughout the
year. The principal risks and uncertainties facing the Group at half year
remain unchanged from those disclosed in the 2022 Annual Report as listed
below.
Overview of key risks and principal uncertainties since 31 December 2022
#1 Operational risk - Delayed delivery of future development projects
(including NEA/NI in Egypt, Cassiopea in Italy and Epsilon in Greece)
H1 2023 movement: ▬ The risk remained static in H1 2023.
#2 Strategic risk - Lack of new commercial discoveries and reserves
replacement
H1 2023 movement: ▬ The risk remained static in H1 2023.
#3 Operational risk - Production uptime reliability and operating efficiency
(including asset integrity)
H1 2023 movement: ▬ The risk remained static in H1 2023.
#4 Financial risk - Maintaining liquidity and solvency
H1 2023 movement: ▬ The risk remained static in H1 2023. In July 2023,
Energean's subsidiary, Energean Israel, issued a $750 million bond, the
primary purpose of which was to repay Energean Israel's March 2024 bond
maturity . The newly issued bond has a maturity date of 2033, which has
extended Energean's weighted average debt maturity.
#5 Macro-economic risk (including inflation, interest rates and commodity
price fluctuations)
H1 2023 movement: ▬ The risk remained static in H1 2023.
#6 Organisational & HR risk - Failure to attract, retain and develop staff
H1 2023 movement: ▬ The risk remained static in H1 2023.
#7 Deterioration or misalignment of JV relationships
H1 2023 movement: ▬ The risk remained static in H1 2023.
#8 Recoverability of production cost and receivables in Egypt
H1 2023 movement: ▬ The risk remained static in H1 2023. Although the
receivables position grew in the first half of the year, Energean does not
perceive this as being a bad debt issue. The Group has a number of agreements
in place to accelerate the recovery of overdue receivables.
#9 Significant cyber risk, including a security breach of internal systems or
a cyber attack
H1 2023 movement: ▬ The risk remained static in H1 2023.
#10 Ethics and Business Conduct. Fraud, Bribery and corruption risk
H1 2023 movement: ▬ The risk remained static in H1 2023.
#11 Health Safety and Environment (HSE)
H1 2023 movement: ▬ The risk remained static in H1 2023.
#12 Failure to manage the risk of climate change and to adapt to the energy
transition
H1 2023 movement: ▬ The risk remained static in H1 2023.
#13 Climate Change - Physical risks
H1 2023 movement: ▬ The risk remained static in H1 2023.
#14 Strategic - Regional / Geopolitical conflicts in areas of operation
affecting production and distribution (including fiscal uncertainties)
H1 2023 movement: ▬ The risk remained static in H1 2023.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
1) The condensed consolidated interim financial statements have 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
6 September
2023
6 September 2023
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 2023 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 28 . 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 2023 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
6 September 2023
Interim Condensed Consolidated Income Statement
Six months ended 30 June 2023
30 June (Unaudited)
2023 2022
$'000 $'000
Note
Revenue 4 587,642 338,955
Cost of Sales 5(a) (338,318) (158,043)
Gross profit 249,324 180,912
Administrative expenses 5(b) (23,364) (19,349)
Impairment reversal 21 21,930 -
Exploration and evaluation expenses 5(c) (2,148) (4,254)
Other expenses 5(d) (2,150) (8,826)
Other income 5(e) 7,187 1,630
Operating profit 250,779 150,113
Finance Income 6 7,316 2,701
Finance Costs 6 (113,707) (38,551)
Net foreign exchange loss 6 (9,344) (4,473)
Profit before tax 135,044 109,790
Taxation (expense)/ income 8 (65,286) 8,944
Profit for the period 69,758 118,734
Attributable to:
Owners of the parent 69,758 118,734
69,758 118,734
Basic and diluted earnings per share (cents per share)
Basic 9 $0.39 $0.67
Diluted 9 $0.39 $0.66
Interim Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2023
30 June (Unaudited)
2023 2022
$'000 $'000
Profit for the period 69,758 118,734
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Cash Flow hedges
Gain/(loss) arising in the period - (22,945)
Income tax relating to items that may be reclassified to profit or loss - 5,507
Exchange difference on the translation of foreign operations, net of tax 489 (8,234)
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit plan (107) 65
Income taxes on items that will not be reclassified to profit and loss 26 (16)
Other comprehensive profit/ (loss) after tax 408 (25,623)
Total comprehensive profit for the period 70,166 93,111
Total comprehensive profit attributable to:
Owners of the parent 70,166 93,111
70,166 93,111
Interim Condensed Consolidated Statement of Financial Position
As at 30 June 2023
30 June 2023 (Unaudited) 31 December 2022
Note $'000 $'000
ASSETS
Non-current assets
Property, plant and equipment 10 4,288,548 4,231,904
Intangible assets 11 317,015 296,378
Equity-accounted investments 4 4
Other receivables 16 36,527 26,940
Deferred tax asset 12 232,533 242,226
Restricted cash 14 3,055 2,998
4,877,682 4,800,450
Current assets
Inventories 15 97,783 93,347
Trade and other receivables 16 341,052 337,964
Restricted cash 14 8,481 71,778
Cash and cash equivalents 13 346,369 427,888
793,685 930,977
Total assets 5,671,367 5,731,427
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 17 2,393 2,380
Share premium 17 415,388 415,388
Merger reserve 139,903 139,903
Other reserves 16,476 16,557
Foreign currency translation reserve (5,338) (5,827)
Share-based payment reserve 28,870 25,589
Retained earnings 19,303 56,208
Total equity 616,995 650,198
Non-current liabilities
Borrowings 19 2,403,237 2,975,346
Deferred tax liabilities 12 76,173 56,114
Retirement benefit liability 20 1,736 1,675
Provisions 21 780,863 809,727
Other payables 22 334,124 318,058
3,596,133 4,160,920
Current liabilities
Trade and other payables 22 670,922 756,874
Current portion of borrowings 19 669,930 45,550
Current Tax Liability 108,853 109,509
Provisions 21 8,534 8,376
1,458,239 920,309
Total liabilities 5,054,372 5,081,229
Total equity and liabilities 5,671,367 5,731,427
30 June 2023 (Unaudited)
31 December 2022
Note
$'000
$'000
ASSETS
Non-current assets
Property, plant and equipment
10
4,288,548
4,231,904
Intangible assets
11
317,015
296,378
Equity-accounted investments
4
4
Other receivables
16
36,527
26,940
Deferred tax asset
12
232,533
242,226
Restricted cash
14
3,055
2,998
4,877,682
4,800,450
Current assets
Inventories
15
97,783
93,347
Trade and other receivables
16
341,052
337,964
Restricted cash
14
8,481
71,778
Cash and cash equivalents
13
346,369
427,888
793,685
930,977
Total assets
5,671,367
5,731,427
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
17
2,393
2,380
Share premium
17
415,388
415,388
Merger reserve
139,903
139,903
Other reserves
16,476
16,557
Foreign currency translation reserve
(5,338)
(5,827)
Share-based payment reserve
28,870
25,589
Retained earnings
19,303
56,208
Total equity
616,995
650,198
Non-current liabilities
Borrowings
19
2,403,237
2,975,346
Deferred tax liabilities
12
76,173
56,114
Retirement benefit liability
20
1,736
1,675
Provisions
21
780,863
809,727
Other payables
22
334,124
318,058
3,596,133
4,160,920
Current liabilities
Trade and other payables
22
670,922
756,874
Current portion of borrowings
19
669,930
45,550
Current Tax Liability
108,853
109,509
Provisions
21
8,534
8,376
1,458,239
920,309
Total liabilities
5,054,372
5,081,229
Total equity and liabilities
5,671,367
5,731,427
Interim Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2023
Share Capital Share Premium(19) Defined Benefit Pension Plan(20) Equity Share based payment reserve (22) Translation Reserve(23) Retained earnings Merger reserve Total
component
of convertible
bonds(21)
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2023 2,380 415,388 6,098 10,459 25,589 (5,827) 56,208 139,903 650,198
Profit for the period - - - - - - 69,758 - 69,758
Remeasurement of defined benefit pension plan, net of tax - - (81) - - - - - (81)
Exchange difference on the translation of foreign operations - - - - - 489 - - 489
Total comprehensive income - - (81) - - 489 69,758 - 70,166
Transactions with owners of the company
Share based payment charges (note 23) - - - 3,294 - - 3,294
- -
Exercise of employment share options 13 - - - (13) - - - -
Dividends (note 18) - - - - - - (106,663) - (106,663)
At 30 June 2023 (Unaudited) 2,393 415,388 6,017 10,459 28,870 (5,338) 19,303 139,903 616,995
(19) 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.
(20) The reserve is used to recognise remeasurement gain or loss on cash flow
hedges (in 2022 only) 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' within the caption other
reserves.
(21) 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.
(22) 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.
(23) 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.
Interim Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2022
Share Capital Share Premium(19) Hedge and Defined Benefit Pension Plan(20) Equity Share based payment reserve(22) Translation Reserve(23) Retained earnings Merger reserve Total
component
of convertible
bonds(21)
$'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
Profit for the period - - - - - - 118,734 - 118,734
Remeasurement of defined benefit pension plan, net of tax - - 49 - - - - - 49
Hedges, net of tax - - (17,438) - - - - - (17,438)
Exchange difference on the translation of foreign operations - - - - - (8,234) - - (8,234)
Total comprehensive income - - (17,389) - - (8,234) 118,734 - 93,111
Transactions with owners of the company
Share based payment charges (note 23) - - - 2,826 - - 2,826
- -
Exercise of employment share options 6 - - - (6) - - - -
Share premium reduction(24) - (500,000) - - - - 500,000 - -
At 30 June 2022 (unaudited) 2,380 415,388 (20,360) 10,459 22,172 (21,057) 264,175 139,903 813,060
(24)( ) 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 Cash Flows
Six months ended 30 June 2023
30 June (Unaudited)
2023 2022
Note $'000 $'000
Operating activities
Profit before taxation 135,044 109,790
Adjustments to reconcile profit before taxation to net cash provided by
operating activities:
Depreciation, depletion and amortisation 10, 11 115,953 33,885
Impairment loss on intangible assets - 362
Impairment reversal 21 (21,930) -
Loss from the sale of property, plant and equipment - 1,074
Defined benefit expense/(gain) 20 72 (676)
Movement in provisions (2,425) (1,581)
ECL on trade receivables 1,281 342
Compensation to gas buyers 16 4,928 -
Utilisation of decommissioning provision 21 (3,782) -
Finance income 6 (7,316) (2,701)
Finance 6 113,707 38,551
costs
Non-cash revenues from Egypt(25) (25,763) (27,177)
Share-based payment charge 23 3,294 2,717
Net foreign exchange loss 6 9,344 4,473
Cash flow from operations before working capital adjustments 322,407 159,059
(Increase) /Decrease in inventories (3,471) 2,748
(Increase)/Decrease in trade and other receivables (22,255) 14,309
(Decrease) in trade and other payables (58,749) (17,282)
Cash inflow from operations 237,932 158,834
Income tax paid (4,918) (12,267)
Net cash inflow from operating activities 233,014 146,567
Investing activities
Payment for purchase of property, plant and equipment 10 (198,355) (194,491)
Payment for exploration and evaluation, and other intangible assets 11 (85,255) (18,513)
Proceeds from disposal of property, plant and equipment - 1,996
Movement in restricted cash 14 63,297 61,320
Amounts received from INGL related to the transfer of property, plant and 56,906 17,371
equipment
Interest received 7,777 2,911
Net cash outflow for investing activities (155,630) (129,406)
Financing activities
Drawdown of borrowings 19 44,265 35,835
Transaction costs related to Senior secured notes paid (1,214) -
Dividend Paid 18 (106,663) -
Repayment of obligations under leases 19 (7,793) (5,785)
Finance costs paid (89,925) (87,341)
Net cash outflow from financing activities (161,330) (57,291)
Net decrease in cash and cash equivalents (83,946) (40,130)
Cash and cash equivalents at beginning of the period 427,888 730,839
Effect of exchange rate fluctuations on cash held 2,427 (17,001)
Cash and cash equivalents at end of the period 13 346,369 673,708
(25) 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.
(
)
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 2023, are presented in
notes 27 and 28 respectively.
2. Basis of preparation
2.1 Basis of preparation
The unaudited condensed consolidated interim financial statements for the six
months ended 30 June 2023 included in this interim report have been prepared
in accordance with UK-adopted International Accounting Standard 34 'Interim
Financial Reporting' ('IAS 34'), 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 2022.
The unaudited condensed consolidated interim 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 and Energean Italy
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
2022, which were prepared UK-adopted International Accounting Standards
('UK-adopted IAS'). 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 2024 '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 Brent at $80/bbl for the remainder of
2023 and $75/bbl in 2024, prices for gas sold in Israel are assumed at
contractually agreed prices and PSV (Italian gas price) is assumed at an
average of €37/MWh for the remainder of 2023 and €35/MWh in 2024.
The Group also prepares sensitivity analyses 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 or to the business
performance such as a reduction or deferral of production. The group applied
combined downside sensitivities of key assumptions in a 'reasonable worst
case' ('RWC') scenario. Such downside sensitivities included inter alia
downside price and lower production performance versus the base case over the
forecast period. Under the RWC scenario, after considering mitigation
strategies under the Group's control, the Group is forecasted to have
sufficient financial headroom throughout the forecast period.
As part of the going concern assessment, reverse stress testing was performed
to determine the level of decline in prices and/or production that would need
to occur in or for the liquidity headroom to be eliminated, prior to the
implementation of any mitigating actions; the likelihood of such conditions
occurring was concluded to be remote. The portfolio can withstand a material
drop in commodity prices 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 the postponement of discretionary exploration
and development expenditures. Energean is the Operator of the majority of its
assets, therefore most of the key development projects are 100% within its
control.
As of 30 June 2023, the Group's available liquidity was $897.4 million ($357.9
million cash and $539.5 million available under undrawn debt facilities).
In July 2023 Energean issued $750 million of new bonds at its Israel
subsidiary level, proceeds of which will primarily be used to repay the $625
million bonds due in March 2024. As with the original bond issuance in 2021,
proceeds are held in escrow until the Petroleum Commissioner 'PC' approves the
security package. PC approval is expected in the coming months, the likelihood
of approval not being received/funds not being released from escrow is
considered remote.
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 under the Group's control, in the event this were to be
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 2024. For this reason, they
continue to adopt the going concern basis in preparing the interim condensed
consolidated financial statements.
2.3 New and amended accounting standards and interpretations
The following amendments became effective as at 1 January 2023:
· IFRS 17 Insurance Contracts
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2)
· Definition of Accounting Estimates (Amendments to IAS 8)
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
· International Tax Reform - Pillar Two Model Rules (Amendments to IAS
12)
None of the above amendments had a significant impact on the Group's condensed
consolidated interim financial statements. The amendments on International Tax
Reform - Pillar Two Model Rules introduce a mandatory exception in IAS 12
'Income Taxes' to recognising and disclosing information about deferred tax
assets and liabilities related to Pillar Two income taxes.
2.4 Approval of condensed consolidated interim financial statements by
Directors
These unaudited condensed consolidated interim financial statements were
approved by the Board of Directors on 6 September 2023.
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 ('other'). 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 and New Ventures 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 2023 (unaudited)
Revenue from Gas sales 65,194 271,399 71,563 - 408,156
Revenue from other liquid sales 28 81,272 14,728 - 96,028
Revenue from crude oil sales 78,371 - - - 78,371
Revenue from LPG sales 250 - 7,534 - 7,784
Other 3,740 (4,928) - (1,509) (2,697)
Total revenue 147,583 347,743 93,825 (1,509) 587,642
Adjusted EBITDAX(26) 36,186 235,303 73,047 671 345,207
Reconciliation to profit before tax:
Depreciation and amortisation expenses (15,441) (80,049) (19,870) (593) (115,953)
Share-based payment charge (454) (312) (89) (2,439) (3,294)
Exploration and evaluation expenses (1,747) (50) (845) 494 (2,148)
Impairment reversal 21,930 - - - 21,930
Other expense (857) - (657) (636) (2,150)
Other income 3,221 - 3,120 846 7,187
Finance income 3,136 1,044 851 2,285 7,316
Finance costs (20,456) (67,569) (498) (25,184) (113,707)
Net foreign exchange (loss)/gain (4,436) (5,578) (2,313) 2,983 (9,344)
Profit/(loss) before income tax 21,082 82,789 52,746 (21,573) 135,044
Taxation expense (19,290) (20,215) (25,763) (18) (65,286)
Profit/(loss) for the period 1,792 62,574 26,983 (21,591) 69,758
Six months ended 30 June 2022 (unaudited)
Revenue from Gas 137,717 - 73,511 - 211,228
Revenue from crude oil sales 111,007 - - - 111,007
Revenue from other liquid sales 1,288 - 19,950 - 21,238
Revenue from LPG sales - - 13,090 - 13,090
(Loss)/gain on forward transactions (18,233) - - - (18,233)
Other 4,008 - - (3,383) 625
Total revenue 235,787 - 106,551 (3,383) 338,955
Adjusted EBITDAX(26) 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 for the period 146,256 (5,618) 29,026 (50,930) 118,734
(26)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 2023 and 31 December 2022,
respectively:
Europe Israel Egypt Other & inter-segment transactions Total
$'000 $'000 $'000 $'000 $'000
Six months ended 30 June 2023 (unaudited)
Oil & Gas properties 587,746 3,194,082 454,250 (16,805) 4,219,273
Other fixed assets 32,191 16,251 21,089 (256) 69,275
Intangible assets 61,984 232,489 22,879 (337) 317,015
Trade and other receivables 111,335 97,381 149,552 (17,216) 341,052
Deferred tax asset 232,533 - - - 232,533
Other assets 916,331 22,030 91,614 (537,756) 492,219
Total assets 1,942,120 3,562,233 739,384 (572,370) 5,671,367
Trade and Other Payables 255,741 414,825 80,540 89,685 840,791
Borrowings 106,854 2,474,910 - 491,403 3,073,167
Decommissioning Provision 694,715 87,400 - - 782,115
Current Tax Payable 108,799 - - 54 108,853
Deferred tax liability - 76,173 - - 76,173
Other Liabilities 137,662 36,001 22,536 (22,926) 173,273
Total liabilities 1,303,771 3,089,309 103,076 558,216 5,054,372
Other segment information
Capital Expenditure:
- Property, plant and equipment 93,331 115,948 64,730 (1,529) 272,480
- Intangible, exploration and evaluation assets 3,043 13,306 2,260 379 18,988
Year ended 31 December 2022
Oil & Gas properties 536,874 3,264,364 409,732 (14,440) 4,196,530
Other fixed assets 13,365 4,750 17,325 (65) 35,375
Intangible assets 48,249 219,354 20,639 8,136 296,378
Trade and other receivables 141,509 82,611 131,453 (17,609) 337,964
Deferred tax asset 244,394 - - (2,168) 242,226
Other assets 883,576 24,933 96,942 (382,497) 622,954
Total assets 1,867,967 3,596,012 676,091 (408,643) 5,731,427
Trade and other payables 220,706 540,459 50,563 114,505 926,233
Borrowings 61,437 2,471,030 - 488,429 3,020,896
Decommissioning provision 724,457 84,299 - - 808,756
Current tax payable 109,468 - - 41 109,509
Other liabilities 124,201 40,882 18,498 32,254 215,835
Total liabilities 1,240,270 3,136,670 69,061 635,229 5,081,229
Other segment information
Capital Expenditure:
- Property, plant and equipment 85,840 537,527 105,792 (368) 728,791
- Intangible, exploration and evaluation assets 12,143 124,718 193 3,970 141,024
Segment Cash flows
Europe Israel Egypt Other & inter-segment transactions Total
$'000 $'000 $'000 $'000 $'000
Six months ended 30 June 2023 (unaudited)
Net cash from / (used in) operating activities 56,014 172,217 19,987 (15,204) 233,014
Net cash (used in) investing activities (79,573) (62,694) (17,324) 3,961 (155,630)
Net cash from financing activities 43,680 (68,823) (1,465) (134,722) (161,330)
Net increase/(decrease) in cash and cash equivalents, and restricted cash 20,121 40,700 1,198 (145,965) (83,946)
Cash and cash equivalents at beginning of the period 58,229 24,825 26,825 318,009 427,888
Effect of exchange rate fluctuations on cash held 853 (837) (2,238) 4,649 2,427
Cash and cash equivalents at the end of the period 79,203 64,688 25,785 176,693 346,369
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 (21,098) (129,037) 20,927 89,078 (40,130)
At beginning of the year 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 end of the period 45,676 218,711 39,262 370,059 673,708
4. Revenue
30 June (Unaudited)
2023 2022
$'000 $'000
Gas sales 408,156 211,228
Other liquids sales 96,028 19,950
Crude oil sales 78,371 111,007
LPG sales 7,784 13,162
Loss on forward transactions - (18,233)
Compensation to gas buyers (4,928) -
Other revenue 2,231 1,840
Total revenue 587,642 338,955
Sales volumes for the six months to 30 June (kboe)
30 June (Unaudited)
2023 2022
kboe kboe
Egypt (net entitlement) 1,903 2,418
Gas 1,646 2,116
LPG 107 135
Condensate 150 167
Italy 1,598 1,678
Oil 944 968
Gas 654 710
Israel 12,488 -
Gas 11,322 -
Hydrocarbon liquids 1,166 -
UK 149 294
Gas 15 53
Oil 134 241
Croatia 14 20
Gas 14 20
Greece 196 -
Oil 196 -
Total sales volumes 16,348 4,410
5. Operating profit before taxation
30 June (Unaudited)
2023 2022
$'000 $'000
(a) Cost of sales
Staff costs 28,935 27,895
Energy cost 11,295 5,716
Flux costs 18,372 17,391
Royalty payable 73,254 11,678
Other operating costs 99,575 60,661
Depreciation and amortisation 113,407 32,345
Oil stock movement (6,286) (5,463)
Stock (underlift)/overlift movement (234) 7,820
Total cost of sales 338,318 158,043
(b) Administrative expenses
Staff costs 12,191 9,765
Other General & administration expenses 4,891 4,377
Share-based payment charge included in administrative expenses 2,940 2,717
Depreciation and amortisation 2,516 1,539
Auditor fees 826 951
Total administrative expenses 23,364 19,349
(c) Exploration and evaluation expenses
Staff costs for Exploration and evaluation activities 1,532 2,118
Exploration costs written off - 362
Other exploration and evaluation expenses 616 1,774
Total exploration and evaluation expenses 2,148 4,254
30 June (unaudited)
2023 2022
$'000 $'000
(d) Other expenses
Restructuring costs(27) 202 3,481
Provision for litigation and claims - 1,443
Loss from disposal of Property plant & Equipment - 1,074
Write down of inventory - 1,335
Expected credit losses 1,281 342
Other expenses 667 1,151
2,150 8,826
(e) Other income
Reversal of prior period accruals 4,317 1,630
Receipt of tax claim from Edison 666 -
Reversal of litigation claim provision 2,204 -
7,187 1,630
(27)Non-recurring restructuring costs incurred in Greece.
6. Net finance cost
30 June (Unaudited)
2023 2022
$'000 $'000
Interest on bank borrowings 2,664 307
Interest on Senior Secured Notes 82,326 83,630
Interest expense on long term payables 1,554 4,734
Less amounts included in the cost of qualifying assets (7,592) (68,866)
78,952 19,805
Finance and arrangement fees 6,831 2,262
Commission charges for bank guarantees 1,085 1,741
Other finance costs and bank charges 332 593
Unwinding of discount on right of use asset 711 694
Unwinding of discount on long-term trade payables 2,060 -
Unwinding of discount on provision for decommissioning 14,540 5,261
Unwinding of discount on deferred consideration 5,674 7,912
Unwinding of discount on convertible loan 2,155 1,963
Unwinding of discount on contingent consideration 1,455 1,322
Less amounts included in the cost of qualifying assets (88) (3,002)
Total finance costs 113,707 38,551
Interest income from time deposits (7,316) (2,701)
Total finance revenue (7,316) (2,701)
Foreign exchange losses 9,344 4,473
Net financing costs 115,735 40,323
7. Fair value measurements
Set out below is 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. The amount of the Cassiopea contingent payment varies between nil and
$100 million, depending on future gas prices in Italy at the point at which
first gas production is delivered from the field. The consideration is
contingent on the basis of future gas prices (PSV) recorded at the time of the
first gas, 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, with a range of outcomes between $0 million and $100
million if the average price is between €10/MWh and €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.
As at 30 June 2023, the forward curve of PSV prices indicate an average price
in excess of €20/MWh. Therefore, the Group's estimate at 30 June 2023 of the
fair value of the contingent consideration payable in 2024 is $87.8 million,
based on a Monte Carlo simulation (31 December 2022: $86.3 million).
The fair value of the consideration payable has been recognized at level 3 in
the fair value hierarchy.
Contingent consideration reconciliation
Contingent consideration 2023
1 January 2023 86,320
Fair value adjustment 1,455
30 June 2023 87,775
Management believes there are no reasonably possible change to any key
assumptions that would materially impact the contingent consideration
valuation.
Fair values of financial instruments
The Group held a financial instrument at fair value at 30 June 2023 related to
the contingent consideration for Cassiopea. 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. The Group has not entered into any hedges during
the 2023 period to 30 June 2023.
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 2023 (Unaudited)
Level 1 Level 2 Level 3 Total
$'000
$'000
$'000
$'000
Financial assets
Trade and other receivables (note 16) - 329,468 - 329,468
Cash and cash equivalents (note 13) 346,369 - - 346,369
Restricted cash (note 14) 11,536 - - 11,536
Total 357,905 329,468 - 687,373
Financial liabilities
Financial liabilities held at amortised cost:
Trade and other payables - 633,282 - 633,282
Senior Secured Notes (note 19) 2,721,825 - - 2,721,825
Borrowings (note 19) - 154,558 - 154,558
Deferred consideration for acquisition of minority - 150,000 - 150,000
Net obligations under finance leases (note 22) - 66,303 - 66,303
Deferred licence payments (note 22) - 40,550 - 40,550
Financial liabilities held at FVTPL:
Contingent consideration - - 87,775 87,775
Total 2,721,825 1,044,693 87,775 3,854,293
Fair value hierarchy as at 31 December 2022
Level 1 Level 2 Level 3 Total
$'000
$'000
$'000
$'000
Financial assets
Trade and other receivables - 329,224 - 329,224
Cash and cash equivalents 427,888 - - 427,888
Restricted Cash 74,776 - - 74,776
Total 502,664 329,224 - 831,888
Financial liabilities
Financial liabilities held at amortised cost:
Trade and other payables - 560,431 - 560,431
Senior Secured Notes 2,716,625 - 2,716,625
Borrowings - 106,986 - 106,986
Deferred consideration for acquisition of minority - 144,326 - 144,326
Net obligations under finance leases - 32,271 - 32,271
Deferred licence payments - 51,833 - 51,883
Financial liabilities held at FVTPL: -
Contingent consideration - - 86,320 86,320
Total 2,716,625 895,847 86,320 3,698,792
8. Taxation
30 June (Unaudited)
2023 2022
$'000 $'000
Corporation tax - current period (28,888) (67,069)
Corporation tax - prior years (1,600) -
Deferred tax (Note 12) (34,798) 76,013
Total taxation (expense)/income (65,286) 8,944
(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 of
Greece (25%), Cyprus (12.5%) Israel (23%), Italy (24%), United Kingdom
(23.5%/40%/75%) and Egypt (40.55%), weighted according to the profit before
tax earned in each jurisdiction where deferred tax is recognised.
The effective tax rate for the period is 48% (30 June 2022: -8%). The tax
(charge)/ credit of the period can be reconciled to the profit per the
consolidated income statement as follows:
30 June (Unaudited)
2023 2022
$'000 $'000
Profit before tax 135,044 109,790
Tax calculated at 28.3% weighted average rate (2022: 29.5%)(28) (38,163) (32,197)
Impact of different tax rates(29) 1,621 1,920
Utilisation of unrecognised deferred tax/ (non-recognition of deferred tax) (25,937) 89,417
Permanent differences(30) (2,616) (12,758)
Foreign taxes - (5,171)
Windfall tax - (29,274)
Tax effect of non-taxable income and allowances 1,187 (3,304)
Other adjustments 222 311
Prior year tax (1,600) -
Taxation (expense)/income (65,286) 8,944
(28)For the reconciliation of the tax rate, the weighted average rate of the
statutory tax rates in Greece (25%), Cyprus (12.5%) Israel (23%), Italy (24%),
United Kingdom (23.5%/40%/75%) and Egypt (40.55%) was used weighted according
to the profit before tax earned by the Group in each jurisdiction, excluding
fair value uplifts profits.
(29)Impact of different tax rates consisted of the Italian regional taxes
(IRAP) and other differences in the tax rates.
(30)Permanent differences mainly consisted of non-deductible expenses ($0.2
million), consolidation differences (-$0.6 million) and foreign exchange
differences (-$2.2 million).
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, plus the
weighted average number of shares that would be issued on conversion of the
convertible loan notes (refer to note 19).
30 June (Unaudited)
2023 2022
$'000 $'000
Total profit attributable to equity shareholders 69,758 118,734
Effect of dilutive potential ordinary shares 2,155 1,963
71,913 120,697
Number of shares
Basic weighted average number of shares 178,454,765 177,821,533
Dilutive potential ordinary shares 5,815,646 6,362,834
Diluted weighted average number of shares 184,270,411 184,184,367
Basic earnings per share $0.39 $0.67
Diluted earnings per share $0.39 $0.66
10. Property, plant and equipment
Oil and gas properties Leased assets Other property, plant and equipment Total
Property, plant and equipment $'000 $'000 $'000 $'000
Cost
At 1 January 2022 3,897,787 57,245 59,046 4,014,078
Additions 742,665 1,195 1,534 745,394
Lease modification - 831 - 831
Disposal of assets (900) - - (900)
Capitalized borrowing cost 109,184 - - 109,184
Capitalized depreciation 632 - - 632
Change in decommissioning provision 21,685 - - 21,685
Other movements (241) 37 (74) (278)
Foreign exchange impact (31,388) (596) (388)) (32,372)
At 31 December 2022 4,739,424 58,712 60,118 4,858,254
Additions 263,981 35,775 707 300,463
Lease modifications - 4,915 - 4,915
Disposal of assets(31) (111,448) (1,234) (635) (113,317)
Capitalized borrowing cost 3,537 - - 3,537
Change in decommissioning provision (34,917) - - (34,917)
Other movements (306) - (32) (338)
Foreign exchange impact 44,666 794 1,067 46,527
At 30 June 2023 (Unaudited) 4,904,937 98,962 61,225 5,065,124
Accumulated Depreciation
At 1 January 2022 442,522 19,102 52,981 514,605
Charge for the period
Expensed 71,464 10,091 1,171 82,726
Impairment 27,878 - - 27,878
Foreign exchange impact 1,030 105 6 1,141
At 31 December 2022 542,894 29,298 54,158 626,350
Charge for the period expensed 108,272 6,624 609 115,505
Disposal of assets - (926) (460) (1,386)
Foreign exchange impact 34,498 656 953 36,107
At 30 June 2023 (Unaudited) 685,664 35,652 55,260 776,576
Net carrying amount
At 31 December 2022 4,196,530 29,414 5,960 4,231,904
At 30 June 2023 (Unaudited) 4,219,273 63,310 5,965 4,288,548
(31)The material disposal of Oil & Gas Properties is a result of the
handover to INGL. Please refer to note 22 for further details.
Included in the carrying amount of leased assets at 30 June 2023 are right of
use assets related to oil and gas properties and other property, plant and
equipment of $62.5 million and $0.9 million respectively. The depreciation
charged on these classes for the six-month ending 30 June 2023 were $6.3
million and $0.3 million respectively. The additions to oil & gas
properties for the period of six months ended 30 June 2023 are mainly due to
development costs of the FPSO, Karish North field and second oil train at the
amount of $115.3 million, the Cassiopea project in Italy at the amount of
$70.9 and the NEA/NI project in Egypt at the amount of $63.1 million.
Borrowing costs capitalised for qualifying assets, included in oil & gas
properties, for the six months ended 30 June 2023 amounted to $3.5 million.
The weighted average interest rates used was 5.42% for the six months ended 30
June 2023. There were no impairment indicators identified at 30 June 2023.
11. Intangible assets
Exploration and evaluation assets Goodwill Other Intangible assets Total
$'000 $'000 $'000 $'000
Intangibles at Cost
At 1 January 2022 205,333 101,146 9,707 316,186
Additions 139,911 - 1,113 141,024
Other movements - - 280 280
Exchange differences (6,890) - (125) (7,015)
At 31 December 2022 338,354 101,146 10,975 450,475
Additions 18,438 - 550 18,988
Other movements 308 - 33 341
Exchange differences 7,486 - 201 7,687
At 30 June 2023 (Unaudited) 364,586 101,146 11,759 477,491
Accumulated amortisation and impairments
At 1 January 2022 83,279 - 4,766 88,045
Charge for the period 39 - 595 634
Impairment 47,240 18,310 - 65,550
Exchange differences (110) - (22) (132)
At 31 December 2022 130,448 18,310 5,339 154,097
Charge for the period 62 - 386 448
Exchange differences 5,765 - 166 5,931
At 30 June 2023 (Unaudited) 136,275 18,310 5,891 160,476
Net Carrying Amount
At 31 December 2022 207,906 82,836 5,636 296,378
At 30 June 2023 (Unaudited) 228,311 82,836 5,868 317,015
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 2022
(140,553) (990) 89,440 (1,571) 183 120,180 11,030 266 9,388 87,373
Increase / (decrease) for the period through:
Profit or loss (Note 8)
(11,836) (103) 41,688 1,642 265 83,814 (22) (214) 110,412
(4,822)
Other comprehensive income - - - - - - (64) (2,799) (2,863)
-
Exchange difference 3,466 15 (4,882) 115 (8) (6,986) - (15) (515) (8,810)
At 31 December 2022
(148,923) (1,078) 126,246 186 440 197,008 6,208 165 5,860 186,112
Increase / (decrease) for the period through:
Profit or loss (Note 8) (16,666) (2,511) (11,705) (459) (28) (5,346) (314) 63 2,168 (34,798)
Other comprehensive income - - - - - - - 26 - 26
Exchange difference (896) (2) 2,799 1 8 3,027 - 2 81 5,020
At 30 June 2023 (Unaudited) (166,485) (3,591) 117,340 (272) 420 194,689 5,894 256 8,109 156,360
30 June 2023 (Unaudited) 31 December 2022
$'000 $'000
Deferred tax liabilities (76,173) (56,114)
Deferred tax assets 232,533 242,226
Net deferred tax assets 156,360 186,112
At 30 June 2023 the Group had gross unused tax losses of $1,087.6 million (31
December 2022: $$1,093.8 million) available to offset against future profits
and other temporary differences. A deferred tax asset (DTA) of $194.7 million
(2022: $197.0 million) has been recognised on tax losses of $781.7 million (31
December 2022: $799.2 million), based on probable forecasted future profits.
The Group did not recognise deferred tax on tax losses and other differences
of $543.7 million (31 December 2022 $546.3million).
In Greece, Italy and the UK, the net DTA for carried forward losses recognised
in excess of the other net taxable temporary differences was $73.8 million,
$28.5 million and $12.9 million (2022: $69.2 million, $33.4 million and $15.1
million) respectively. An additional DTA of $117.3 million (2022: $124.6
million) arose primarily in respect of deductible temporary differences
related to property, plant and equipment, decommissioning provisions and
accrued expenses, resulting in a total DTA of $232.5 million (2022: $242.2
million). During the period, Italy recognised a DTA of $28.5 million on tax
losses of $118.8 million in accordance with its latest tax losses utilisation
forecast.
Greek tax losses (Prinos area) can be carried forward without limitation up
until the relevant concession agreement expires (by 2039), whereas the tax
losses in Israel, Italy and the United Kingdom can be carried forward
indefinitely. Based on the Prinos area forecasts (including the Epsilon
development), the deferred tax asset is fully utilised by 2030. In Italy, a
DTA of $102.3 million is recognised on decommissioning costs scheduled up
until the year the Italian assets are estimated to enter into a declining
phase; assuming there are available profits from Cassiopea and other long
lived assets . In the UK, decommissioning losses are expected to benefit from
tax relief up until 2027 in accordance with the latest taxable profits
forecasts.
The Group has applied the temporary exception to recognising and disclosing
information about deferred tax assets and liabilities related to Pillar Two
income taxes in accordance with the Amendments to IAS 12 International Tax
Reform: Pillar Two Model Rules, issued by the IASB in May 2023.
13. Cash and cash equivalents
30 June 31 December
2023 (Unaudited) 2022
$'000 $'000
Cash and bank deposits 346,369 427,888
346,369 427,888
Bank deposits comprise deposits and other short-term money market deposit
accounts that are readily convertible into known amounts of cash. The annual
average interest rate on short‑term bank deposits was 4.274% for the six
months period ended 30 June 2023 (year ended 31 December 2022: 1.716%).
14. Restricted Cash
Restricted cash comprises cash retained under the Israel Senior Secured Notes
($8.4 million) (31 December 2022: $71.8 million) and the Greek State Loan
($3.1million) (31 December 2022: $3.0 million requirements.
15. Inventories
30 June 2023 31 December 2022
(Unaudited)
$'000 $'000
Crude oil 43,708 38,048
Gas 457 383
Raw materials and supplies 53,618 54,916
Total inventories 97,783 93,347
16. Trade and other receivables
( )
30 June 31 December
2023 (Unaudited) 2022
$'000 $'000
Trade and other receivables-Current
Financial items:
Trade receivables 257,170 215,215
Receivables from partners under JOA 3,633 4,539
Other receivables 5,802 2,344
Government subsidies(32) 172 3,025
Refundable VAT 47,214 89,400
313,991 314,523
Non-financial items:
Deposits and prepayments(33) 26,323 15,084
Deferred issuance expenses 646 1,983
Other deferred expenses(34) - 4,929
Accrued interest income 92 1,445
27,061 23,441
341,052 337,964
Trade and other receivables-Non Current
Financial items:
Other tax recoverable 15,477 14,701
15,477 14,701
Non-financial items:
Deposits and prepayments 11,836 11,726
Deferred borrowing fees(35) 3,449 -
Other non-current assets 5,765 513
21,050 12,239
36,527 26,940
( )
(32)Government subsidies relate to grants from Greek Public Body for
Employment and Social Inclusion (OAED) to financially support the Kavala Oil
S.A. labour cost from manufacturing under the action plan for promoting
sustainable employment in underdeveloped or deprived districts of Greece, such
as the area of Kavala. In September 2020, the Greek Government issued a law
and a subsequent ministerial decision whereby any legal person who has
launched legal proceedings in relation to the aforementioned employment costs,
may set off such receivables against tax liabilities provided the judicial
proceedings already commenced are abandoned. Energean investigated the process
and potential benefits of this approach decided to apply for the set off which
has been approved. The first offset was in H1 2023, decreasing the receivable.
(33) Included in deposits and prepayments, are mainly prepayments for goods
and services under the GSP Engineering, Procurement, Construction and
Installation Contract (EPCIC) for Epsilon project.
(34) In accordance with the GSPAs signed with a group of gas buyers, the
Company agreed to pay compensation to these counterparties due to the fact the
gas supply date took place beyond a certain date being (30 June 2021), as
defined in the GSPAs. The compensation, amounting to $23 million was fully
paid in 2021. The compensation was presented as a non-current asset (under the
caption 'other deferred expenses') and accounted for as variable consideration
and deducted from revenue as gas is delivered to the offtakers.
(35) Fees incurred in relation to the $750 million senior secured note
offering. For further details on the offering refer to note 26.
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 2022 177,602,560 2,374 915,388
Issued during the year
- Share based payment 437,945 6 -
Share Premium Reduction(36) (500,000)
At 31 December 2022 178,040,505 2,380 415,388
Issued during the period
- Share based payment 1,018,441 13 -
At 30 June 2023 (Unaudited) 179,058,946 2,393 415,388
(36) 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. Dividends
In line with the Group's dividend policy, Energean returned US$0.60/share to
shareholders in H1 2023, representing two-quarters of dividend payments. No
dividends were declared in H1 2022.
US$ cents per share $' 000
Dividends announced and paid in cash 2023 2022 2023 2022
February 30 - 53,332 -
May 30 - 53,332 -
60 - 106,663(37) -
(37) Amounts may not cast due to rounding.
19. Borrowings
30 June 31 December
2023 2022
$'000 $'000
Non-current
Bank borrowings - after two years but within five years
4.5% Senior Secured notes due 2024 ($625 million) - 620,461
4.875% Senior Secured notes due 2026 ($625 million) 618,919 617,912
Bank borrowings - more than five years
6.5% Senior Secured notes due 2027 ($450 million) 443,697 442,879
5.375% Senior Secured notes due 2028 ($625 million) 617,447 616,767
5.875% Senior Secured notes due 2031 ($625 million) 616,320 615,890
BSTDB Loan and Greek State Loan Notes 106,854 61,437
Carrying value of non-current borrowings 2,403,237 2,975,346
Current
4.5% Senior Secured notes due 2024 ($625 million) 622,225 -
Convertible loan notes ($50 million) 47,705 45,550
Carrying value of current borrowings 669,930 45,550
Carrying value of total borrowings 3,073,167 3,020,896
The Group has provided security in respect of certain borrowings in the form
of share pledges, as well as fixed and floating charges over certain assets of
the Group.
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 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).
Subsequent to 30 June 2023, the notes maturing on 30 March 2024 were
refinanced. Please refer to note 26 for more details.
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 included:
· An up-front payment of $175 million paid at completion of the
transaction.
· Deferred cash consideration totalling $180 million, which was
paid in December 2022 ($30 million) and July 2023 ($150 million) from future
cash flows and optimisation of the group capital structure, post-first gas
from the Karish project.
· $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, adjusted for dividend payment up to maturity date, 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 and Energean Egypt Ltd.
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
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. The margin commences at 3.0% in year 1 with annual increases, reaching
6.5% in year 8.
At 30 June 2023 the loan has been fully drawn.
Revolving Credit Facility ('RCF')
On 8 September 2022, Energean signed a three-year $275 million RCF with a
consortium of banks, led by ING Bank N.V. The RCF facility size was
subsequently increased on 19 May 2023 to $300million. As at 30 June 2023,
Energean have utilised $110.5 million of the facility to provide letters of
credit required for certain assets in the UK, Italy and Greece. At 30 June
2023 no amount had been drawn down by way of loans. The interest rate, if
drawn by way of loans, is 5% + SOFR.
Term Loan
On the 17 March 2023 Energean signed an unsecured $350 million two year term
loan facility, which offers additional financial flexibility for the Group.
The loan is currently undrawn. On completion of the refinancing of the March
2024 loan notes in Israel, based on the current terms of the loan agreement,
the $350 million will be cancelled. For further details on the refinancing
please refer to Note 26.
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 2023 (Unaudited) 31 December 2022
$'000 $'000
Net Debt
Current borrowings 669,930 45,550
Non-current borrowings 2,403,237 2,975,346
Total borrowings 3,073,167 3,020,896
Less: Cash and cash equivalents (346,369) (427,888)
Restricted cash (11,536) (74,776)
Net Debt (1) 2,715,262 2,518,232
Total equity (2) 616,995 650,198
Gearing Ratio (1/2): 440.1% 387.3%
Reconciliation of liabilities arising from financing activities
1 January 2023 Cash inflows Cash outflows Reclassification Additions Lease modification Borrowing costs including amortisation of arrangement fees Foreign exchange impact 30 June 2023 (Unaudited)
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
2023 3,335,646 44,265 (102,530) (877) 35,775 4,915 98,902 1,699 3,417,795
Secured Senior Notes 2,913,909 - (79,485) (622,225) - - 84,184 - 2,296,383
Current portion of secured senior notes - - - 622,225 - - - - 622,225
Convertible loan notes 45,550 - - - - - 2,155 - 47,705
Long -term borrowings 61,437 44,265 (1,908) (1,071) - - 2,661 1,470 106,854
Lease liabilities 32,272 - (7,793) 194 35,775 4,915 711 229 66,303
Deferred licence payments 51,832 - (13,344) - - - 2,062 - 40,550
Contingent consideration 86,320 - - - - - 1,455 - 87,775
Deferred consideration for acquisition of minority 144,326 - - - - - 5,674 - 150,000
20. Retirement benefit liability
20.1 Provision for retirement benefits
30 June 2023 (Unaudited) 31 December 2022
$'000 $'000
Defined benefit obligation 1,736 1,675
Provision for retirement benefits recognised 1,736 1,675
Allocated as:
Non-current portion 1,736 1,675
20.2 Defined benefit obligation
30 June 2023 (Unaudited) 31 December 2022
$'000 $'000
At 1 January 1,675 2,766
Current service cost 42 163
Interest cost 30 52
Extra payments or expenses - 3,233
Actuarial gains/(losses) - from changes in financial assumptions 107 (267)
Benefits paid (136) (4,100)
Exchange differences 18 (172)
At 30 June / 31 December 1,736 1,675
21. Provisions
Decommissioning provision Litigation and other provisions Total
$'000 $'000 $'000
At 1 January 2023 808,757 9,346 818,103
Change in estimates (56,847) (2,204) (59,051)
Recognised in property, plant and equipment (34,917) - (34,917)
Recognised in operating profit (21,930) (2,204) (24,134)
Payments (3,782) (3,782)
Unwinding of discount 14,540 14,540
Currency translation adjustment 19,447 140 19,587
At 30 June 2023 (Unaudited) 782,115 7,282 789,397
Current provisions 8,534 - 8,534
Non-current provisions 773,581 7,282 780,863
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 2042, when the producing oil and gas properties are expected to cease
operations. The decrease in the estimate is predominantly driven by the change
in the discount rate assumption at 30 June 2023.
The key assumptions underpinning the estimated decommissioning provision are
as follows:
Inflation Discount rate Cessation of Spend in 2023 30 June 31 December 2022
assumption assumption production 2023 (Unaudited) $'000
30 June 2023 30 June 2023 assumption $'000
Greece 1.6%- 2.2% 3.70% 2034 - 14,964 13,036
Italy 4.5% - 2.0% 4.30% 2023-2042 3,470 486,273 519,749
UK 3.10% 4.58% 2023-2031 312 178,921 176,063
Israel(38) 3.05%-1.59%(1) 3.92%(1) 2042 - 87,400 84,299
Croatia 4.5% -2.0% 4.30% 2032 - 14,557 15,610
Total 3,782 782,115 808,757
(38)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 in Italy. 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 €3.6 million (c$4.0 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 to the lowest possible level as well as cancelling
entirely the imposed penalties. The Group strongly believes based on legal
advice received that the outcome of the court decisions will be in its favour
with no material exposure expected in excess of the provision of $2.1 million
recognised.
The remaining balance in other provisions pertains to a potential claim in
Egypt.
It is not currently possible to accurately predict the timing of the
settlement of these claims and any resultant cash outflows. The provisions
have been classified as non-current liabilities based on the timing of the
next expected court hearing dates for each matter being beyond 12 months from
30 June 2023.
22. Trade and other payables
30 June 2023 (Unaudited) 31 December 2022
$'000 $'000
Trade and other payables-Current
Financial items:
Trade accounts payable 171,519 298,091
Payables to partners under JOA(39) 103,741 58,336
Deferred licence payments due within one year(40) 12,852 13,345
Deferred consideration for acquisition of minority(41) 150,000 144,326
Other creditors 35,746 34,644
Short term lease liability 18,116 9,208
Vat payable 2,407 -
494,381 557,950
Non-financial items:
Contract Liability(42) - 56,230
Accrued Expenses(43) 131,280 98,650
Other finance costs accrued 40,512 39,672
Social insurance and other taxes 4,749 4,372
176,541 198,924
670,922 756,874
Trade and other payables-Non Current
Financial items:
Trade and other payables(44) 169,869 169,360
Deferred licence payments(40) 27,698 38,488
Contingent consideration (note 7) 87,775 86,320
Long term lease liability 48,187 23,063
333,529 317,231
Non-financial items:
Social insurance 595 827
595 827
334,124 318,058
( )
(39) Payables related to operated Joint operations primarily in Italy.
(40) 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 2023 the total discounted
deferred consideration liability remaining was $40.6 million (31 December
2022: $51.8 million).
(41) The deferred consideration was paid subsequent to period end, in July
2023.
(42)In June 2019, Energean signed an agreement with Israel Natural Gas Lines
("INGL") for the transfer of title (the "Handover") 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 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. The Handover was completed
at the end of March 2023. Following Handover, INGL is responsible for the
operation and maintenance of this part of the infrastructure and the related
asset (refer to note 10) and the contract liability was derecognised. The
final consideration ($7.3 million) is receivable after Handover and recognised
within other receivables.
(43) Included in trade payables and accrued expenses are mainly Karish
field-related development expenditures, development expenditure for the
Cassiopea project in Italy and the NEA/NI project in Egypt.
(44) 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. (being the yield rate of the senior secured loan notes, maturing in 2024,
at the date of entering into the settlement agreement).
23. Share based payments
Analysis of share-based payment charge
30 June (Unaudited)
2023 2022
$'000 $'000
Energean Deferred Bonus Plan (DSBP) 905 609
Energean Long Term Incentive Plans (LTIP) 2,389 2,217
Total share-based payment charge 3,294 2,826
Capitalised to intangible and tangible assets - 109
Expensed as cost of sales 354 -
Expensed as administration expenses 2,940 2,717
Total share-based payment charge 3,294 2,826
Energean Long Term Incentive Plan (LTIP)
Under the Energean plc's 2018 LTIP rules, senior executives may be granted
conditional awards of shares or nil cost options. Nil cost options are
normally exercisable from three to ten years following grant provided an
individual remains in employment. Awards are subject to performance conditions
(including Total Shareholder Return (TSR) normally measured over a period of
three years. Vesting of awards or exercise of nil cost options is generally
subject to an individual remaining in employment except in certain
circumstances such as good leaver and change of control. Awards may be subject
to a holding period following vesting. No dividends are paid over the vesting
period; however, Energean'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 2023 was 1.6 years, number of shares outstanding 1,752,354 and
weighted average price of £10.46.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, a portion of any annual bonus of a Senior Executive nominated
by the Remuneration & Talent Committee, may be 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 2023 was 1.3 years, number of shares outstanding 266,801 and weighted
average price of £11.50.
24. Related parties
24a. 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 24b
below:
Seven Maritime Company (Seven Marine) was 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 operations in
northern Greece. From March 2022, Mr Efstathios Topouzoglou no longer
controlled Seven Maritime neither indirectly (through Oilco) nor directly.
Capital Earth: During 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. No services were
received in 2023.
Prime Marine Energy Inc: During 2020 Energean Israel, purchased from Prime
Marine Energy Inc, a company controlled by a non-executive director and
shareholder of Energean plc, a Field Support Vessel ("FSV"). The FSV 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. The agreement with Prime Marine Energy Inc
was terminated on 19 October 2022. In December 2022 the FSV was towed to
Greece for completion of the works under Energean's supervision. The FSV
arrived in Israel subsequent to period end, in August 2023.
24b. Related party transactions
Purchases of goods and services
30 June (Unaudited)
2023 2022
$'000 $'000
Nature of transactions
Other related party "Seven Marine" Vessel leasing - 1,079
Other related party "Prime Marine Energy Inc" Construction of field support vessel - 1,556
Other related party "Capital Earth Ltd" Consulting services - 48
- 2,683
24c. Related party balances
Payables
30 June 2023 (Unaudited) 31 December 2022
$'000 $'000
Nature of balance
Seven Marine Vessel leasing - 702
- 702
25. 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 2023 (Unaudited) 31 December 2022
$'000 $'000
Capital Commitments:
Due within one year 37,895 16,607
Due later than one year but within two years 51,700 57,639
Due later two years but within five years 2,598 1,658
92,193 75,904
Contingent liabilities:
Performance guarantees:
Greece 4,248 4,170
Israel 53,371 97,572
Egypt - 2,000
UK 95,330 83,976
Italy 11,676 11,461
164,625 199,179
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, 23 and 31 ($21 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 2024.
Israeli Natural Gas Lines ("INGL") ($2.6 million) - 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 January 2024.
Israel Other ($4.4 million) - 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 $95.3 million for United Kingdom
decommissioning obligations and other obligations under the United Kingdom
licenses.
Italy: The Group issued letters of credit amounting to $11.7 million for
decommissioning obligations and other obligations under the Italian licenses.
Greece ($4 million): The Group issued letters of credit amounting for
obligations under the Block 2.
Legal cases and contingent liabilities
The Group had no material contingent liabilities as of 30 June 2023 and 31
December 2022.
26. Subsequent events
Pricing of an offering of US$750,000,000 senior secured notes
Subsequent period end, Energean priced the offering of $750 million aggregate
principal amount of senior secured notes due 30 September 2033, with a fixed
annual interest rate of 8.5%. The interest on the Notes will be paid
semi-annually, on March 30 and September 30 of each year, beginning on March
30, 2024. The issuance of the Notes was completed on 11 July 2023, subject to
satisfaction of customary conditions. The Notes are expected to be listed for
trading on the TASE-UP of the Tel Aviv Stock Exchange Ltd., subject to the
approval of the TASE.
The proceeds from the Offering, upon release from escrow are expected to be
used to repay the $625 million March 2024 notes, pay fees and expenses
associated with this refinancing, contribute towards funding the interest
payment reserve account, and contribute towards the payment of the final
deferred consideration to Kerogen.
27. Subsidiary undertakings
At 30 June 2023, the Group had investments in the following subsidiaries:
Name of subsidiary Country of incorporation / registered office Principal activities Shareholding Shareholding
At 30 June 2023
At 31 December 2022
(%)
(%)
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
Hydrogean Ltd 22 Lefkonos Street, 2064 Nicosia, Cyprus Holding Company 100 N/A
Energean Group Services 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 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
28. Exploration, Development and production interests
Development and Production
Country Licence /Unit area Fields Fiscal Regime Group's working interest Joint Operation Operator
Israel
Karish Karish, Karish Main Concession 100% No NA
Tanin Tanin Concession 100% No NA
Egypt
Abu Qir Abu Qir, Abu Qir North, Abu Qir West, Yazzi (32.75%) PSC 100% No NA
NEA Yazzi (67.25%) PSC 100% No NA
Python PSC 100% No NA
NI Field A (NI-1X), Field B (NI-3X), NI-2X, Viper (NI-4X) PSC 100% No NA
Greece
Prinos Prinos, Epsilon Concession 100% No NA
South Kavala Concession 100% No NA
Katakolo Katakolo (undeveloped) Concession 100% No NA
Italy
C.C6.EO Vega A (Vega B, undeveloped) Concession 100% Yes Energean
B.C8.LF Rospo Mare Concession 100% Yes Energean
Fiume tenna Verdicchio Concession 100% No NA
B.C7.LF Sarago, cozza, vongola Concession 95% Yes Energean
B.C11.AS GIANNA Gianna (undeveloped) Concession 49% Yes ENI
Garaguso Accettura Concession 50% Yes Energean
A.c14.AS Rosanna and Gaia Concession 50% Yes ENI
A.C15.AX Valentina, Raffaella, Emanuela, Melania Concession 10% Yes ENI
A.c16.AG Delia, Demetra, Sara, Dacia, Nicoletta Concession 30% Yes ENI
A.C8.ME Anemone and Azelea Concession 19% Yes ENI
Masseria Monaco Appia and Salacaro (undeveloped) Concession 50% Yes Energean
G.C1.AG Cassiopea , Gemini, Centauro Concession 40% Yes ENI
B.C14.AS Calipso and Clara West Concession 49% Yes ENI
B.C20.AS Carlo, Clotilde e Didone (undeveloped) Concession 49% Yes ENI
Montignano Cassiano and Castellaro Concession 50% Yes Energean
B.C13.AS Clara Est, Clara Nord, Clara NW, (Cecilia undeveloped) Concession 49% Yes ENI
Comiso (EIS) Comiso Concession 100% No NA
A.c13.AS Daria, ( Manuela ,Arabella, Ramona undeveloped) Concession 49% Yes ENI
B.C10.AS Emma West and Giovanna Concession 49% Yes ENI
A.C36.AG Fauzia Concession 40% Yes ENI
Torrente menocchia Grottammare (undeveloped) Concession 88% Yes Petrorep
Montegranaro Leoni Concession 50% Yes Gas Plus
Lucera Lucera Concession 4.8% Yes GPI
Monte Urano San Lorenzo Concession 40% Yes Energean
A.C21.AG Naide Concession 49% Yes ENI
Colle di lauro Portocannone Concession 62% Yes Energean
Porto civitanova Porto civitanova Concession 40% Yes GPI
Quarto Quarto Concession 33% Yes Padana Energia
A.C17.AG Regina Concession 25% Yes ENI
S. Andrea Concession 50% Yes Canoel
B.C2.LF San Giorgio Mare Concession 95% Yes Energean
San Marco San Marco Concession 100% No NA
B.C1.LF Santo Stefano Concession 96% Yes Energean
Mafalda Sinarca Concession 40% Yes Gas Plus
B.C9.AS Squalo Centrale Concession 33% Yes ENI
Massignano Talamonti Concession 50% Yes Energean
Masseria Grottavecchia Traetta Concession 14% Yes Canoel
S. Anna (EIS) Tresauro Concession 25% Yes Enimed
Torrente Celone Vigna Nocelli (Masseria Conca undeveloped) Concession 50% Yes Rockhopper Italia
UK
Tors Garrow, Kilmar Concession 68% Yes Alpha Petroleum
Markham Concession 3% Yes Spirit Energy
Scott Concession 10% Yes CNOOC
Telford Concession 16% Yes CNOOC
Wenlock Concession 80% Yes Alpha Petroleum
Croatia
Izabela PSC 70% No NA
Exploration
Country Concession Fields Fiscal Regime Group's working interest Joint Operation Operator
Israel
Blocks 12, 21, 23, 31 Athena, Zeus, Hera, Hermes and Hercules Concession 100% No NA
Egypt
North East Hap'y PSC 30% Yes ENI
Greece
Ioannina Concession 100% No N/Al
Block-2 Concession 75% Yes Energean
Italy
A.R.78.RC Concession 10% Yes ENI
G.R13.AG Lince prospect Concession 40% Yes ENI
G.R.14.AG Panda, Vela prospect Concession 40% Yes ENI
UK
Glengorm Concession 25% Yes CNOOC
Isabella Concession 10% Yes Total Energies E&P North Sea UK Limited
Montenegro
Block 26, 30 Concession 100% No NA
Croatia
Irena PSC 70% No NA
1 (#_ftnref1) Katlan covers gas fields on the Katlan licence (formerly Block
12) and parts of the Tanin licence
(( 2 (#_ftnref2) )) Subsequent to 30 June 2023, additional cargoes were sold
in Israel and Italy of revenues which totalled $62.4 million. These liquids
were included in the inventory balance as at 30 June 2023.
3 (#_ftnref3) The cash is currently in escrow pending government approvals,
which are expected shortly
(( 4 (#_ftnref4) )) H1 2023 leverage based upon H1 2023 annualised Adjusted
EBITDAX
(( 5 (#_ftnref5) )) Includes flux costs of $18.4 million in H1 2023 and $17.4
million in H1 2022
6 (#_ftnref6) Cash cost of production, Adjusted EBITDAX, Capital
Expenditure, Net Debt are non-IFRS measures that are defined in the Financial
Review section
(( 7 (#_ftnref7) )) H1 2023 leverage based upon H1 2023 annualised Adjusted
EBITDAX
8 (#_ftnref8) Katlan covers gas fields on the Katlan licence (formerly Block
12) and parts of the Tanin licence
9 (#_ftnref9) Subject to the issuance of an export permit by the Petroleum
Commissioner and compliance with the Export Policy, no export limitations
exists for Katlan
10 (#_ftnref10) Currently in escrow pending government approvals
11 (#_ftnref11) Cash cost of production is defined later in the financial
review.
12 (#_ftnref12) Cash G&A is defined later in the financial review.
13 (#_ftnref13) Adjusted EBITDAX is defined later in the financial review.
Energean uses Adjusted EBITDAX as a core business KPI.
14 (#_ftnref14) Numbers may not sum due to rounding.
15 (#_ftnref15) Numbers may not sum due to rounding.
16 (#_ftnref16) Numbers may not sum due to rounding.
17 (#_ftnref17) Inclusive of restricted cash
18 (#_ftnref18) Numbers may not sum due to rounding
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR NKABDCBKDBCKRecent news on Energean
See all newsREG - Energean PLC - Director/PDMR Shareholding
AnnouncementREG - Energean PLC - Annual Financial Report and Notice of AGM
AnnouncementREG - Energean PLC - New GSPA Signed
AnnouncementREG - Energean PLC - Director/PDMR Shareholding
AnnouncementREG - Energean PLC - Holding(s) in Company
Announcement