TIDMENOG
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: ) 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]
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]
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 $750 million bond, the
primary purpose of which was to repay Energean Israel's March 2024
bond [3] . The newly issued bond matures in 2033, and extends
Energean's weighted average debt maturity from just over five to
over six years
o Group leverage (Net debt/annualised Adjusted EBITDAX [4] )
reduced to 3.9x (FY 2022: 6.0x)
Corporate Highlights:
-- Q2 2023 dividend of 30 US$ 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 $m %
Average working interest production (kboed) 105.9 (82% gas) 35.4 (73% gas) 199%
---------------- --------------- -----------------------
Sales and other revenues 587.6 339.0 73%
---------------- --------------- -----------------------
Cash Cost of Production [5] (, [6]) 231.1 123.3 87%
---------------- --------------- -----------------------
Cash Cost of Production per boe (6) ($/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]) ) 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] later in the year.
Given the export potential from the Katlan licence [9] , 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
Kate Sloan, Head of IR and M&A Tel: +44 7917 608 645
For media: 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
Conference call registration link:
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 .
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] . 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 ($/mcf) 5.2 10.4 (50.0%)
-------- -------- --------
Cash cost of production [11]
($m) 231.1 123.3 87.4%
-------- -------- --------
Cash cost of production per barrel
($/boe) 12.1 19.2 (37.0%)
-------- -------- --------
Cash G&A [12] 17.9 15.1 18.5%
-------- -------- --------
Adjusted EBITDAX [13] ($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 2,518.2
cash) 2,715.3 [14] (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 (EUR87.0 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] 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] 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] 2,715.2 [18] 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.
INDEPENT 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 31 December
2023 (Unaudited) 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
--------------------------------------------------------------
Defined Equity Share
Benefit component based
Share Pension of payment Translation
Share Premium Plan convertible reserve Reserve Retained
Capital (19) (20) bonds(21) (22) (23) earnings Merger reserve Total
$'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 GBP 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
--------------------------------------------------------------
Hedge Equity
and component
Defined of Share
Benefit convertible based
Share Pension bonds(21) payment Translation
Share Premium Plan reserve Reserve Retained Merger
Capital (19) (20) (22) (23) earnings reserve Total
$'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 costs 6 113,707 38,551
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 equipment 56,906 17,371
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 (1,214) -
secured notes paid
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 EUR37/MWh for the remainder of 2023 and
EUR35/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 & Total
inter-segment
transactions
$'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 Total
transactions
$'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 & Total
inter-segment
transactions
$'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
Exploration and evaluation
(c) 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 EUR10/MWh when first gas production is
delivered from the field. US$100 million is payable if that average
price exceeds EUR20/MWh, with a range of outcomes between $0
million and $100 million if the average price is between EUR10/MWh
and EUR20/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 EUR 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 Total
3
$'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, Total
plant and
equipment
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 Other Intangible
assets Goodwill 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 Property, Right Decom-missioning Prepaid Inventory Tax Deferred Retirement Accrued Total
tax plant of use expenses losses expenses benefit expenses
(liabilities)/assets and asset and for liability and other
equipment IFRS other tax short--term
16 receivables liabilities
$'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 (4,822) (22) (214) 110,412
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 31 December
(Unaudited) 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
(Unaudited) 31 December
2022
$'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 Share capital Share premium
allotted and fully
paid
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 GBP9.50, 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 EUR90.5 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 EUR9.5 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
Borrowing
costs
including
amortisation
of Foreign 30 June
1 January Cash Cash Lease arrangement exchange 2023
2023 inflows outflows Reclassification Additions modification fees impact (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 31 December
(Unaudited) 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 Litigation Total
provision and other provisions
$'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
assumption assumption production 2023 (Unaudited) 31 December 2022
30 June 2023 30 June 2023 assumption $'000 $'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 EUR3.6 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 31 December
(Unaudited) 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 GBP10.46.
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 GBP11.50.
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 Construction
"Prime Marine Energy of field support
Inc" vessel - 1,556
Other related party
"Capital Earth Ltd" Consulting services - 48
- 2,683
24c. Related party balances
Payables
30 June 2023 31 December
(Unaudited) 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 31 December
(Unaudited) 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 Principal activities Shareholding Shareholding
/ registered office
At 30 June At 31 December
2023 2022
(%) (%)
Energean E&P Holdings 22 Lefkonos Street,
Ltd 2064 Nicosia, Cyprus Holding Company 100 100
Energean Capital 22 Lefkonos Street,
Ltd 2064 Nicosia, Cyprus Holding Company 100 100
Hydrogean Ltd 22 Lefkonos Street, Holding Company 100 N/A
2064 Nicosia, Cyprus
Oil and gas
exploration,
Energean Group 44 Baker Street, London development
Services Limited W1U 7AL, United Kingdom and production 100 100
Oil and gas
32 Kifissias Ave. exploration,
Energean Oil & 151 25 Marousi Athens, development
Gas S.A. Greece and production 100 100
Oil and gas
exploration,
Energean International 22 Lefkonos Street, development
Limited 2064 Nicosia, Cyprus and production 100 100
Oil and gas
exploration,
Energean Israel 22 Lefkonos Street, development
Limited 2064 Nicosia, Cyprus and production 100 100
Oil and gas
exploration,
Energean Montenegro 22 Lefkonos Street, development
Limited 2064 Nicosia, Cyprus and production 100 100
Energean Israel Andre Sakharov 9, Gas transportation
Transmission LTD Haifa, Israel license holder 100 100
Energean Israel Andre Sakharov 9,
Finance LTD Haifa, Israel Financing activities 100 100
Oil and gas
exploration,
Energean Egypt 22 Lefkonos Street, development
Limited 2064 Nicosia, Cyprus and production 100 100
Oil and gas
exploration,
Energean Hellas 22 Lefkonos Street, development
Limited 2064 Nicosia, Cyprus and production 100 100
Oil and gas
exploration,
Energean Italy Piazza Sigmund Freud development
S.p.a. 1 and production 100 100
20154 Milan,Italy
Oil and gas
exploration,
Energean International Piazza Sigmund Freud development
E&P S.p.a. 1 and production 100 100
20154 Milan,Italy
Oil and gas
exploration,
Energean Sicilia Via Salvatore Quasimodo development
Srl 2 - 97100 Ragusa (Ragusa) and production 100 100
Oil and gas
exploration,
Energean Exploration 44 Baker Street, London development
Limited W1U 7AL, United Kingdom and production 100 100
Oil and gas
exploration,
44 Baker Street, London development
Energean UK Ltd W1U 7AL, United Kingdom and production 100 100
Building 11, 273 Palestine Oil and gas
Energean Egypt Street exploration,
Energy Services New Maadi , Cairo development
JSC EGYPT and production 100 100
28. Exploration, Development and production interests
Development and Production
Country Licence /Unit Fields Fiscal Regime Group's working Joint Operation Operator
area interest
Israel
Karish Karish, Karish Main Concession 100% No NA
Tanin Tanin Concession 100% No NA
Egypt
Abu Qir Abu Qir, Abu Qir PSC 100% No NA
North, Abu Qir West,
Yazzi (32.75%)
NEA Yazzi (67.25%) PSC 100% No NA
Python PSC 100% No NA
NI Field A (NI-1X), PSC 100% No NA
Field B (NI-3X),
NI-2X, Viper (NI-4X)
Greece
Prinos Prinos, Epsilon Concession 100% No NA
South Kavala Concession 100% No NA
Katakolo Katakolo Concession 100% No NA
(undeveloped)
Italy
C.C6.EO Vega A (Vega B, Concession 100% Yes Energean
undeveloped)
B.C8.LF Rospo Mare Concession 100% Yes Energean
Fiume tenna Verdicchio Concession 100% No NA
B.C7.LF Sarago, cozza, Concession 95% Yes Energean
vongola
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, Concession 10% Yes ENI
Emanuela, Melania
A.c16.AG Delia, Demetra, Sara, Concession 30% Yes ENI
Dacia, Nicoletta
A.C8.ME Anemone and Azelea Concession 19% Yes ENI
Masseria Monaco Appia and Salacaro Concession 50% Yes Energean
(undeveloped)
G.C1.AG Cassiopea , Gemini, Concession 40% Yes ENI
Centauro
B.C14.AS Calipso and Clara Concession 49% Yes ENI
West
B.C20.AS Carlo, Clotilde e Concession 49% Yes ENI
Didone (undeveloped)
Montignano Cassiano and Concession 50% Yes Energean
Castellaro
B.C13.AS Clara Est, Clara Concession 49% Yes ENI
Nord, Clara NW,
(Cecilia undeveloped)
Comiso (EIS) Comiso Concession 100% No NA
A.c13.AS Daria, ( Manuela Concession 49% Yes ENI
,Arabella, Ramona
undeveloped)
B.C10.AS Emma West and Concession 49% Yes ENI
Giovanna
A.C36.AG Fauzia Concession 40% Yes ENI
Torrente Grottammare Concession 88% Yes Petrorep
menocchia (undeveloped)
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 Traetta Concession 14% Yes Canoel
Grottavecchia
S. Anna (EIS) Tresauro Concession 25% Yes Enimed
Torrente Celone Vigna Nocelli Concession 50% Yes Rockhopper
(Masseria Conca Italia
undeveloped)
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 Joint Operation Operator
interest
Israel
Blocks 12, 21, Athena, Zeus, Concession 100% No NA
23, 31 Hera, Hermes
and Hercules
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 Concession 40% Yes ENI
prospect
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] Katlan covers gas fields on the Katlan licence (formerly
Block 12) and parts of the Tanin licence
([2]) 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] The cash is currently in escrow pending government
approvals, which are expected shortly
([4]) H1 2023 leverage based upon H1 2023 annualised Adjusted
EBITDAX
([5]) Includes flux costs of $18.4 million in H1 2023 and $17.4
million in H1 2022
[6] Cash cost of production, Adjusted EBITDAX, Capital
Expenditure, Net Debt are non-IFRS measures that are defined in the
Financial Review section
([7]) H1 2023 leverage based upon H1 2023 annualised Adjusted
EBITDAX
[8] Katlan covers gas fields on the Katlan licence (formerly
Block 12) and parts of the Tanin licence
[9] 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] Currently in escrow pending government approvals
[11] Cash cost of production is defined later in the financial
review.
[12] Cash G&A is defined later in the financial review.
[13] Adjusted EBITDAX is defined later in the financial review.
Energean uses Adjusted EBITDAX as a core business KPI.
[14] Numbers may not sum due to rounding.
[15] Numbers may not sum due to rounding.
[16] Numbers may not sum due to rounding.
[17] Inclusive of restricted cash
[18] Numbers may not sum due to rounding
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END
IR NKABDCBKDBCK
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