REG - Energean PLC - Trading Statement & Operational Update

EnergeanAnnouncement

16/11/2023 07:00

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RNS Number : 6164T  Energean PLC  16 November 2023

 

 

 Energean plc

("Energean" or the "Company")

 

Trading Statement & Operational Update

London, 16 November 2023 - Energean plc (LSE: ENOG, TASE: אנאג) is pleased
to provide an update on recent operations and the Group's trading performance
in the nine months to 30 September 2023.

Mathios Rigas, Chief Executive Officer of Energean, commented:

"I am sincerely grateful to all our employees, who have shown remarkable
resilience, dedication and professionalism in the face of the challenging
environment. Their unwavering commitment to our business and our values has
been instrumental in delivering both operational excellence and growth. We are
proud of our diverse and talented team, and we will continue to invest in
their development and well-being.

"The ongoing security situation has not impacted our production. The
successful ramp-up of production from our flagship Karish gas field in Israel
has increased Group production to above 150 kboed in recent days. We have
delivered revenues of over $1 billion and adjusted EBITDAX of $623 million in
the nine months to 30 September 2023, reflecting our low-cost, high-margin
business model. We have also reduced our Group leverage ratio to 3.5x and
continued our dividend payments, demonstrating our commitment to delivering
shareholder value.

"We have made significant progress on our growth projects, which will support
our near-term targets of 200 kboed, $2.5 billion revenues, $1.75 billion
adjusted EBITDAX and deleveraging target of c.1.5x, the timing of which may be
impacted by the delay to the second oil train installation. We have commenced
drilling of the Orion 1x well in Egypt, where we have signed a farm-out
agreement 1  (#_ftn1) that will reduce our net exposure and enhance our
returns. This is in addition to an attractive portfolio of exploration assets
that have the potential to add significant value.

"Finally, we have made a major step forward at our Prinos carbon storage
project in Greece. It has been adopted by the European Commission as a Project
of Common Interest, and we have been committed EUR 150 million of grants from
the Greek Government to support its development. These actions set the
foundation for a transition of our mature Prinos oil field to an exciting
growth investment opportunity and demonstrates our commitment to our broader
energy transition strategy and being the best version of Energean we can be."

 

Operational Highlights

·      Production during the nine months to 30 September 2023 was 118.5
kboed (nine months 2022: 35.2 kboed); Q3 2023 production was 143 kboed

o  On track to deliver full year production in line with latest guidance of
120 - 130 kboed

o  No production impact from the ongoing security situation in Israel

·      Strong progress on our growth projects

o  Karish North and second gas export riser on track for completion by
end-2023

o  Second oil train to be installed as soon as the security situation in
Israel allows

o  Katlan FID on track for around year-end 2023

o  NEA/NI completion on track for year-end 2023; Cassiopea first gas on track
for 2024

o  Good progress towards the delivery of near-term targets of 200 kboed, $2.5
billion revenues, $1.75 billion adjusted EBITDAX and leverage c.1.5x

·      Attractive portfolio of exploration wells targeting additional
upside, including the Orion 1x exploration well in Egypt (Energean 19%,
previously 30%), which commenced drilling in October 2023; farm-out agreement
signed and expected to complete within the coming weeks, subject to government
approvals

 

Financial Highlights

·      Strong financial performance for the nine months to 30 September
2023, underpinned by a quarter of steady production from Karish

o  Revenues of $1,016 million, a 85% increase (nine months 2022: $550.2
million)

o  Adjusted EBITDAX of $623 million, a 79% increase (nine months 2022: $348.5
million)

·      Strong balance sheet maintained; ongoing deleveraging

o  Group leverage 2  (#_ftn2) continued reduction to 3.5x (H1 2023: 3.9x; FY
2022: 6.0x)

o  Group cash as of 30 September 2023 was $329.0 million, including
restricted amounts of $27.5 million, and total liquidity was $578.6 million

·      Energean Israel's $750 million 2033 bond was released from escrow
in September and was used to repay Energean Israel's $625 million 2024 bond
(redemption date on 30 September 2023).

 

Corporate Highlights

·      Q3 2023 dividend of 30 US$ cents/share declared today, in line
with Energean's dividend policy, scheduled to be paid on 29 December 2023

·      Scope 1 and 2 emissions intensity of approximately 9.7
kgCO2e/boe, a 12% reduction versus H1 2023

 

Strategic Highlights

·      Energy transition plan progressing well

o  Prinos Carbon and Storage ("CS") project in Greece adopted by the European
Commission as a Project of Common Interest

o  EUR 150 million of grants committed from the Greek Recovery &
Resilience Facility

 

                                                                 Nine months 2023  Nine months 2022  Increase / (Decrease)

                                                                 $m                $m                %
 Average working interest production (kboed)                     118.5 (84% gas)   35.2 (73% gas)    236%
 Sales and other revenues                                        1,016.3           550.2             85%
 Cash Cost of Production 3  (#_ftn3)                             360.7             181.4             99%
 Cash Cost of Production per boe( ) ($/boe)                      11.2              18.9              (41)%
 Cash G&A                                                        26.4              21.1              25%
 Adjusted EBITDAX                                                623.3             348.5             79%
 Development and production expenditure                          423.2             494.4             (14)%
 Exploration capital expenditure                                 24.7              71.4              (65)%
 Decommissioning expenditure                                     3.1               3.8               (18)%
                                                                 Nine months 2023  H1 2023           Increase / (Decrease)

                                                                 $m                $m                %
 Net Debt (including restricted cash)                            2,926.3           2,715.3           8%
 Leverage (Net Debt / annualised Adjusted EBITDAX 4  (#_ftn4) )  3.5               3.9               (10%)

 

 

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

 

Energean Operational & Financial Review

Production

In the nine months to 30 September 2023, average working interest production
was 118.5 (84% gas). Q3 2023 production averaged 143.0 kboed (85% gas), up 22%
versus Q2 2023 due to the ramp-up of production at Karish to its initial
capacity.

In Israel, production has remained at a steady state over the past two months,
averaging around 570 mmscfd (~6 bcm/yr equivalent). Day-to-day production has
not been impacted as a result of the security situation in Israel, but it has
impacted the timing of the installation of the second oil train, which will be
installed once the security situation allows.

In Egypt, NEA#5 has continued to produce at a steady state of 27 mmscfd (~5
kboed). The NEA#6 well is expected to shut-in by year-end, in line with
previous communication.

 

                    Nine months to 30 September 2023  Nine months to 30 September 2022  % change  FY 2023 guidance

                    Kboed                             Kboed                                       Kboed
 Israel             82.6                              -                                 -         87 - 94

                    (including 3.1 bcm of gas)                                                    (including 4.4-4.7 bcm of gas)
 Egypt              25.2                              24.5                              3%        23 - 25
 Rest of portfolio  10.6                              10.7                              (1%)      10 - 11
 Total production   118.5 5  (#_ftn5)                 35.2                              237%      120 - 130

 

Development

Israel - Karish Growth Projects

Karish North and the second gas export riser remain on track for completion
for the end of the year. All infrastructure associated with these projects is
in place ahead of final commissioning planned for early December.

Construction of the second oil train has been completed and the module was
scheduled to leave Dubai in early October. However, because of the security
situation in Israel, it has impacted the timing of the installation of the
second oil train, which will be installed once the security situation allows.

 

Israel - Katlan

In October 2023, Energean signed a FEED contract with Technip UK Limited. FID
is expected around year-end 2023.

 

Egypt

The PY#1 well finished drilling in September 2023 and has been suspended ahead
of first gas. The NI#1 well spudded in September 2023 and is expected to
complete in December 2023; results to date are in line with the pre-drill
prognosis. Both wells are expected onstream by year-end 2023, marking the
completion of the NEA/NI development project. Following the completion of the
NEA/NI wells, the El Qaher-1 rig will move to drill an infill well (NAQ-PII#2)
on the Abu Qir licence.

At 30 September 2023, net receivables (after provision for bad and doubtful
debts) in Egypt were $161.9 million (30 June 2023: $143.1 million), of which
$118.5 million (30 June 2023: $107.8 million) was classified as overdue. In
October 2023, a $23 million collection was made, which has reduced the
receivables position, as of 31 October 2023, to $151.2 million.

 

Italy

At Cassiopea, drilling is expected to commence in early December 2023. First
gas remains on track for 2024.

 

Greece

Energean's Prinos Carbon and Storage ("CS") project in Greece has been adopted
by the European Commission as a Project of Common Interest. Non-binding
memorandum of understandings have been signed for ~5 million tonnes per annum
of storage and EUR 150 million of grants have been committed. Energean is
advancing the conversion of its exploration licence into a storage permit.

 

Exploration and Appraisal

The Orion-1X exploration well located on the North East Hap'y Concession,
offshore Egypt, started drilling in October 2023. The gross unrisked P50 GIIP
is 283 bcm (9,996 bcf / 1.8 bnboe). Energean has signed farm-out agreements to
reduce its working interest in the licence to 19% (from 30%) and this is
expected to complete within the coming weeks, subject to government approvals.

 

Net Zero progress

 

Energean's scope 1 and 2 emissions intensity in the nine months to 30
September 2023 was estimated to be approximately 9.7 kgCO2e/boe, a 12%
reduction versus H1 2023 (11.0 kgCO2e/boe). FY 2023 emissions intensity are
expected between 9.5 - 10.5 kgCO2e/boe.

 

Financing

In July 2023, Energean issued $750 million of senior secured notes via its
subsidiary Energean Israel Finance Ltd ("Energean Israel"). The funds were
released from escrow in September 2023 and were used 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 in relation to Energean's previous
acquisition in 2021 of the remaining 30% minority interest in Energean Israel.

 

In October 2023, the $350 million unsecured term loan facility was amended and
restated to $120 million.

 

Corporate

As previously communicated, in November 2022, Italy introduced a new windfall
tax, which totalled EUR 87.0 million ($94.5 million). This amount was paid in
July 2023.

 

Also in July 2023, the deferred consideration ($150 million) due to Kerogen,
as part of the 2021 acquisition of Kerogen's 30% minority interest in Energean
Israel Ltd, was paid.

 

In November 2023, Energean Israel reached a settlement with NewMed Energy for
the remaining deferred consideration under the original purchase agreement of
the Karish and Tanin leases of approximately $47.4 million, which includes the
agreed annual interest. This will be paid in 2024 in two instalments. This
agreement is final and unappealable.

 

Guidance

 

                                                                     FY 2023

                                                                     Guidance
 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

 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)                                                  200 - 220 (revised from 170 - 200)
 Egypt ($ million)                                                   120 - 130 (reduced from 140 - 150)
 Rest of portfolio ($ million)                                       230 - 250 (reduced from 270 - 290)
 Total development & production capital expenditure ($ million)      550 - 600 (reduced from 580 - 640)

 Exploration expenditure ($ million)                                 50 - 60

 Decommissioning expenditure ($ million)                             10 - 20 (reduced from 20 - 30)

 

 

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.

 1  (#_ftnref1) Subject to government approvals

 2  (#_ftnref2) Net debt / annualised adjusted EBITDAX

(( 3  (#_ftnref3) )) Includes flux costs of $25.3 million in nine months 2023
and $26.8 million in nine months 2022

(( 4  (#_ftnref4) )) Nine months 2023 leverage based upon nine months 2023
annualised Adjusted EBITDAX

 5  (#_ftnref5) Numbers may not sum due to rounding

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