TIDMENOG
RNS Number : 5096Z
Energean PLC
24 May 2021
Energean plc
("Energean" or the "Company")
Operational Update
London, 24 May 2021 - Energean plc (LSE: ENOG, TASE: ) is
pleased to provide an update on recent operations and the Group's
trading performance in the 3-months to 31 March 2021.
Highlights
-- Production in the four-months to 30 April 2021 was 44.2 kboepd (72% gas)
o 15% ahead of the mid-point of full year guidance
o Guidance increased to 38 - 42 kboepd (from 36 - 41 kboepd)
-- First production from Karish now expected in mid-2022
following the re-introduction of enhanced COVID-19-related
restrictions in Singapore
o Core focus on optimising the revised timetable with
approximately 30 improvements being considered for implementation
and not reflected in the schedule
-- Final Investment Decision ("FID") taken on two growth projects, offshore Israel:
o $70 million second oil train that will enable increased
production of approximately 5 million barrels of hydrocarbon
liquids per year at minimal incremental operating costs
o $40 million second gas sales riser, which will enable gas
production at the full 8 Bcm/yr capacity of the FPSO
-- Rig contract award for the 2022/2023 five-well growth
drilling programme, offshore Israel, is expected to be signed
shortly
o Targeting more than 1 billion barrels of oil equivalent of
prospective resources
o Athena well on Block 12 expected to spud in 1Q 2022
-- FID taken on the revised Epsilon project, offshore Greece:
o Tieback to existing Prinos infrastructure with first oil
expected around year-end 2022
-- Greek parliamentary approval has been granted for the Prinos
area funding package. Investment targets:
o Unlevered IRRs in excess of 30%
o Peak production rates in excess of 10 kboepd
o Extending the life of the fields as a pre-cursor to the
implementation of carbon capture and underground storage
("CCUS")
-- $122 million of receivables collection in Egypt December 2020
- April 2021 (inclusive), following closing of the acquisition of
Edison E&P in December 2020
-- At 30 April 2021, following the refinancing of Energean
Israel Limited's project finance facility and term loan on 29 April
2021, Energean had cash resources of $1.1 billion, providing
financial flexibility and ensuring that all planned activities are
fully-funded
-- 2021 year-end net debt guidance reduced to between $1.9
billion and $2.0 billion (from $2.0 billion to $2.2 billion)
Mathios Rigas, Chief Executive of Energean commented:
" Although COVID-19 continues to present challenges, we continue
to deliver upon all of our promises that are within our control.
Our production is 15% ahead of guidance, we have taken Final
Investment Decision on three low-cost, high-return organic projects
and have $1.1 billion of cash on our balance sheet, providing
financial flexibility and ensuring that we are fully-funded for all
of our planned investments.
Due to the ongoing impact of COVID-19 in Singapore, we are
prudently updating our guidance for Karish first gas to reflect
revised forecasts from our EPCiC contractor, TechnipFMC; but we
continue to work together to improve the timetable. Although
unfortunate, the revised timetable should not have a material
impact on the 15+ year secured revenue stream of our Israeli gas
business.
In the near-term, we expect to sign a rig contract for our
Israel-growth programme, commencing 2022, and with the potential to
double the size of our resource base. We have also recently
received Greek parliamentary approval of the Prinos area funding
package, which will enable us to extend the productive life of the
area as a precursor to the implementation of our carbon capture and
eco-hydrogen plans."
Enquiries
Kate Sloan, Head of IR, ECM & Communications Tel: +44 (0)7917 608 645
Operational Review
Production
Production in the four-months to 30 April 2021 was 44.2 kboepd
(72% gas), approximately 15% ahead of the mid-point of full year
guidance of 38 - 42 kboepd. Production is ahead of the guidance
range across all countries following robust operational performance
since the start of the year. Following this performance, Energean
has increased its full year guidance range to 38 - 42 kboepd (from
36 - 41 kboepd).
Four-months to Full year guidance Performance versus
30 April 2021 range mid-point of guidance
kboepd kboepd kboepd
Egypt 31.7 27 - 30 13%
--------------- ------------------- -----------------------
Italy 10.1 9 - 10 19%
--------------- ------------------- -----------------------
Greece & Croatia 1.7 1.5 13%
--------------- ------------------- -----------------------
UK North Sea 0.6 0.5 20%
--------------- ------------------- -----------------------
Total[1] 44.2 38 - 42 15%
--------------- ------------------- -----------------------
Israel
Karish project
The Karish project was 90.6% complete at the end of April
2021.
Subsea and onshore works in Israel and its economic waters have
not been significantly affected by the pandemic and remain on
schedule. Under Energean's EPCIC contract with TechnipFMC, the
subsea works are 82.3% complete and the onshore works are 97.7%
complete.
The FPSO was 95.6% complete as of 30 April 2021 and remains the
critical path item to delivering first gas from the Karish
development. Singapore has recently tightened its legal
restrictions, including on movement of people, in response to an
increased domestic COVID-19 case load and regional proliferation of
new virus variants. The Admiralty Yard is facing renewed
difficulties in mobilising workforce numbers and the appropriate
balance of trades required to maintain the previous schedule.
Furthermore, between 22 and 27 April 2021, the yard experienced a
five-day shut-down period, following the identification of a
COVID-19 case within the workforce, which, together with the
associated shut-down and re-start activities, resulted in an
extended period of reduced manpower. Manpower availability is
expected to improve in the coming weeks as other projects in the
yard approach completion.
Based on current restrictions in Singapore, the Energean Power
FPSO is now expected to sailaway from Singapore to Israel in 1Q
2022 with first gas in mid-2022. However, Energean and its
contractors are focused on optimising the revised Karish timetable
and have identified approximately 30 improvements that are being
considered for implementation.
Energean is committed to complying with all necessary
regulations to protect the health and safety of its workforce and
contractors.
Growth Projects
Energean has taken FID on two high-return growth projects,
offshore Israel, both of which are expected to come onstream in
summer 2023. Combined capital expenditure on the projects is
expected to be approximately $110 million, and is included in the
Karish North economics, which are expected to deliver IRRs in
excess of 40%
1. Second oil train
Installation of a second oil train is required due to the
richer-than-expected fluids discovered in the KM-03 development
well area of the Karish Main field and will increase the
hydrocarbon liquids handling capacity of the FPSO from 18 kbopd to
32 kbopd. The overall capital expenditure on the second oil train
is expected to be approximately $70 million and the incremental
hydrocarbon liquids production will be achieved with minimal
additional operating costs.
2. Second gas sales riser
The current gas sales riser allows sales gas of up to 6.5
Bcm/yr. A second sales riser is required to align the sales gas
system capacity with the maximum FPSO capacity of 8 Bcm/yr and
enable Energean to fulfil its current gas sales commitments of
approximately 7.4 Bcm/yr on reaching plateau. Capital expenditure
on the second gas sales riser is expected to be approximately $40
million.
In the coming weeks, Energean expects to sign a rig contract for
its five-well growth drilling programme. The contract is expected
to consist of three firm wells plus two optional wells, with the
first expected to spud in 1Q 2022.
-- The first firm well is expected to target the 20 Bcm (0.7
Tcf) Athena prospect, for which the primary target (11 Bcm / 0.4
Tcf) has a 70% geological chance of success. Success at Athena
would significantly de-risk the remaining recoverable resources in
Block 12, estimated at a total 88 Bcm (3.1 Tcf) of gas, such that a
development plan could be undertaken without recourse to further
exploration drilling.
-- The first Karish North development well is the second firm well.
-- The third firm well will target prospective resources in the
Karish Main block, including the potential oil rim identified as
part of the KM-03 development well drilling.
Egypt
At 30 April 2021, net receivables (after provision for bad and
doubtful debts) in Egypt were $167
million, of which $97 million were classified as overdue. Since
December 2020, the month in which Energean closed its acquisition
of Edison E&P, Energean has collected $122 million of
revenues.
Italy
Production continues to outperform in Italy. Across Energean's
operated oil portfolio, Vega, in which Energean increased its
working interest to 100% in January following the nil-cost
acquisition from ENI, continues to outperform; and a temporary
shut-down of Sarago Mare has been postponed until 2022.Operated oil
production is expected to benefit from the re-start of the Tresauro
field in 3Q 2021, which has been offline since July 2020.
Greece
Funding
In March 2021, the European Commission approved Greek state
support for a funding package for Energean's Prinos area
development plan, including the Epsilon tie-back development,
further development of Prinos and additional investment in Prinos
infrastructure. The funding package is expected to include:
-- EUR90.5 million 8-year, senior secured credit, arranged with
commercial lenders and 90% backed by the Greek government. The
facility is expected to have an extended grace period before
commencement of amortisation; and
-- EUR9.5 million 8-year subordinated loan with bullet repayment, directly from the Greek state.
An amendment that incorporates the European Commission approval
was submitted for approval by the Greek Parliament and was ratified
on 21 May 2022.
The full funding package is expected to be in place in 3Q 2021
with commencement of investment expected shortly thereafter.
Prinos Area Development Plan
Energean has taken FID on the revised Epsilon shallow-water
tie-back development, subject to finalisation on the funding
package discussed above.
Epsilon Phase 1 development capex is expected to be
approximately $70 million, including construction of the Lamda
platform and completion of the three pre-drilled production wells.
Production is expected to commence approximately 15 months
following the start of reinvestment.
The wider Prinos area development plan is expected to increase
production levels to more than 10 kboepd on plateau, generating
field-wide IRRs in excess of 30%. Key activities include:
-- Phase 1: Epsilon development
-- Phase 2: Six workovers on existing wells
-- Phase 3: Nine further wells at the Epsilon Lamda platform
-- Phase 4: Prinos North B and Lydia horizontal wells and Prinos Main infill drilling.
CCUS
Extending the life of the Prinos production area is key to
Energean's longer-term ambitions of leveraging its subsurface
knowledge and expertise in developing a CCUS and eco-hydrogen
project, for which economic and technical feasibility studies are
underway.
Financial
The table below presents Energean's key results to 31 March
2021.
On 29 April 2021, Energean Israel Finance Limited satisfied the
escrow release conditions in respect of its $2.5 billion aggregate
principal amount of senior secured notes offering completed on 24
March 2021. On the same date, the proceeds were released from
escrow and were part used to refinance the $1.45 billion project
finance facility and $700 million term loan.
Three months to 31 March 2021
Revenues $ million 94.9
----------- ------------------------------
Cost of production (excluding $ million 59.2 / (52.6)
flux)
----------- ------------------------------
Cost of production (excluding $ / boe 14.9 / (13.3)
flux)
----------- ------------------------------
G&A $ million 10.2
----------- ------------------------------
EBITDAX $ million 32.9
----------- ------------------------------
Capital expenditure $ million 91.2
----------- ------------------------------
Exploration expenditure $ million 16.0
----------- ------------------------------
Decommissioning expenditure $ million 1.1
----------- ------------------------------
Net debt - consolidated $ million 1,630.2
----------- ------------------------------
Net debt - plc excluding
Israel $ million 438.0
----------- ------------------------------
Net debt - Israel $ million 1,192.2
----------- ------------------------------
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", "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.
About Energean plc
Established in 2007, Energean is a London Premium Listed FTSE
250 and Tel Aviv 35 Listed E&P company with operations in nine
countries across the Mediterranean and UK North Sea. Since IPO,
Energean has grown to become the leading independent, gas-focused
E&P company in the Eastern Mediterranean, with a strong
production and development growth profile. The Company explores and
invests in new ideas, concepts and solutions to produce and develop
energy efficiently, at low cost and with a low carbon
footprint.
Energean's production comes mainly from the Abu Qir field in
Egypt and fields in Southern Europe and the UK. The company's
flagship project is the 3.5 Tcf Karish, Karish North and Tanin
development, offshore Israel, where it intends to use the newbuild
fully-owned FPSO Energean Power, which will be the only FPSO in the
Eastern Mediterranean. Energean expects to deliver first gas in
mid-2022. Energean Israel Limited has signed contracts for 7.4
Bcm/yr of gas sales into the Israeli domestic market, which have
floor pricing, take-or-pay and/or exclusivity provisions that
largely insulate the project's revenues against global commodity
price fluctuations and underpin Energean's goal of paying a
meaningful and sustainable dividend.
With a strong track record of growing reserves and resources,
Energean is focused on maximising production from its large-scale
gas-focused portfolio to deliver material free cash flow and
maximise total shareholder return in a sustainable way. ESG and
health and safety are paramount to Energean; it aims to run safe
and reliable operations, whilst targeting carbon-neutrality across
its operations by 2050.
www.energean.com
[1] Numbers may not sum due to rounding
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