Energean Israel 3Q 2022 Accounts

RNS Number : 3141I
Energean PLC
01 December 2022
 

 

 

 

 

 

 

Energean Israel Limited

Unaudited interim condensed consolidated financial statements

30 September 2022

 

 

 

 

 

 

 

 

 

 

ENERGEAN ISRAEL LIMITED

 

 

Unaudited interim condensed consolidated financial statements

 

 

AS OF 30 SEPTEMBER 2022

 

 

 

 

 

 

 

 

 

 

INDEX

 

 

 

 

Page

 

 

 

Interim condensed consolidated statement of financial position

 

1

 

 

 

Interim condensed consolidated statement of comprehensive income

 

2

 

 

 

Interim condensed consolidated statement of changes in equity

 

3

 

 

 

Interim condensed consolidated statement of cash flows

 

4

 

 

 

Notes to the interim condensed consolidated financial statements

 

5-16

 

 

- - - - - - - - - - - - - - - - - - - -

 

 

 

 

 

 


ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in thousands US Dollars, unless otherwise stated)

 




30 

September

  2022


31 December 2021

 




Unaudited


Audited

 


Note


 

ASSETS:

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

Property, plant and equipment

 

3(A)

 

2,738,532

 

2,245,267

Intangible assets

 

3(B)


85,083

 

20,141

Other accounts receivable

 

6(B)


81

 

6,463

Loan to related party

 

6(B)


-

 

346,000

Restricted cash

 

3(D)(2)


-

 

100,000

Deferred expenses

 

3(C)


-

 

22,958

Deferred tax asset

 

5


14,528

 

11,575

 

 

 


2,838,224

 

2,838,224

 

 

 


 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Trade and other receivables

 

 

 

30,945

 

22,769

Deferred expenses

 

3(C)

 

22,958

 

-

Restricted cash

 

3(D)(2)

 

71,784

 

99,729

Cash and cash equivalents

 

 


103,966

 

349,827

 

 

 


229,653

 

472,325

 

 

 

 

 

 

 

TOTAL ASSETS

 

 


3,067,877

 

3,224,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES:

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

Share capital

 

 

 

1,708

 

1,708

Share premium

 

6(B)

 

212,539

 

572,539

Retained losses

 

 

 

(40,573)

 

(35,946)

TOTAL EQUITY

 

 

 

173,674

 

538,301

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

Senior secured notes

 

3(D)

 

2,469,349

 

2,463,524

Provision for decommissioning

 

 

 

26,834

 

35,525

Trade and other payables

 

3(F)

 

149,404

 

113,264

 

 

 

 

2,645,587

 

2,612,313

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Trade and other payables

 

3(F)

 

248,616

 

74,115

TOTAL LIABILITIES

 

 

 

2,894,203

 

2,686,428

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

 

3,067,877

 

3,224,729

 

December 1, 2022

 

 

 

 

 

 

Panagiotis Benos

Director

 

Matthaios Rigas

Director

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Nine months ended 30 September 2022

(Amounts in thousands US Dollars, unless otherwise stated)

 

 

 

 

30 September (Unaudited)

 

 

 

 

2022

2021

 

 

Note

 

 

 

 

 

 

 

 

Administrative expenses

 

4(A)

 

(7,218)

(2,717)

Exploration and evaluation expenses

 

4(A)

 

(1,277)

-

Other expenses

 

4(A)

 

(1,079)

(28)

Other income

 

4(A)

 

53

3

 

 

 

 

 

 

Operating loss

 

 

 

(9,521)

(2,742)

 

 

 

 

 

 

Finance income

 

4(B)

 

5,757

4,524

Finance expenses

 

4(B)

 

(4,931)

(14,388)

Foreign exchange gain (loss)

 

4(B)

 

1,405

(1,140)

 

 

 

 

2,231

(11,004)

 

 

 

 

 

 

Loss for the period before tax

 

 

 

(7,290)

(13,746)

 

 

 

 

 

 

Taxation income

 

5

 

2,663

3,909

 

Net loss for the period

 

 

 

 

(4,627)

 

(9,837)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Gain on cash flow hedge for the period

 

 

 

-

2,278

Reclassification adjustment for items included in loss on realisation

 

 

 

-

 

4,641

 

Tax relating to items that may be reclassified subsequently to profit or loss

 

 

 

-

 

(1,591)

 

 

 

 

 

 

Other comprehensive income for the period

 

 

 

-

5,328

 

 

 

 

 

 

Total comprehensive loss for the period

 

 

 

(4,627)

(4,509)














 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Nine months ended 30 September 2022

(Amounts in thousands US Dollars, unless otherwise stated)

 

For the period of nine months ended 30 September 2022 (Unaudited):

 

 

Share capital

Share premium

Retained losses

Total equity

 

 

 

 

 

Balance as of 1 January 2022

1,708

572,539

(35,946)

538,301

 

 

 

 

 

Changes during period:

 

 

 

 

Transactions with shareholders

 

 

 

 

Share premium reduction, see note 6(B)

-

(360,000)

-

(360,000)

Comprehensive loss:

 

 

 

 

Loss for the period

-

-

(4,627)

(4,627)

Balance as of 30 September 2022

1,708

212,539

(40,573)

173,674

 

 

 

 

 

 

 

For the period of nine months ended 30 September 2021 (Unaudited):

 

 

Share capital

Share Premium

Other reserves

Retained losses

Total equity

 

 

 

 

 

 

Balance as of 1 January 2021

1,708

572,539

(5,328)

(25,114)

543,805

 

 

 

 

 

 

Changes during period:

 

 

 

 

 

Comprehensive income (loss):

 

 

 

 

 

Loss for the period

-

-

-

(9,837)

(9,837)

Other comprehensive income, net of tax

-

-

5,328

-

5,328

Balance as of 30 September 2021

1,708

572,539

-

(34,951)

539,296

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Nine months ended 30 September 2022

 (Amounts in thousands US Dollars, unless otherwise stated)


30 September (Unaudited)


2022

Operating activities :



Loss for the period before tax

(7, 290 )

(13,746)

Adjustments to reconcile loss before taxation:



Depreciation, depletion and amortisation

232

71

Loss from disposal on property, plant and equipment

1,079

23

Exploration and evaluation expenses

1,277

-

Other expenses

-

5

Other income

-

(3)

Finance income

(5,757)

(4,524)

Finance expenses

4,932

14,388

Net foreign exchange (gain) loss

(1,405)

1,140


(6,932)

(2,646)

Changes in working capital:



Decrease (increase) in other receivables

906

(29)

Decrease in trade and other payables

(665)


241

( 6 89)

Income taxes paid

(572)

(32)

Net cash used in operating activities

(7,263)

(3,3 6 7)

Investing activities :



Payment for purchase of oil & gas leases

(10,850)

(10,850)

Payment for purchase of property, plant and equipment

(221,187)

(253,775)

Payment for exploration and evaluation, and other intangible assets

(18,823)

(3,972)

Proceeds from disposals of property, plant and equipment

188

-

Payments for buyers compensation

-

(13,271)

Amounts received from INGL related to the future transfer disposals of property, plant and equipment

17,371

5,673

Movement in restricted cash

127,945

(199,738)

Interest received

2,863

264

Net cash used in investing activities

(102,493)

Financing activities :



  Senior secured notes issuance

-

2,500,000

Transaction cost due to senior secured notes issuance

-

(37,931)

Interest paid due to senior secured notes

(128,906)

(66,600)

Drawdown of borrowings

-

118,000

Repayment of borrowings

-

(1,268,000)

Loan to related party (*)

-

(346,000)

Repayment of loan from related parties

-

(16,000)

Finance cost paid

(2,359)

(43,854)

Finance costs paid for deferred license payments

(1,501)

(3,494)

Repayment of obligations under leases

(683)

(366)

Net cash generated (used) from financing activities

(133,449)

835,755




Net increase (decrease) in cash and cash equivalents

(243,205)

356,719

Cash and cash equivalents at the beginning of the period

349,827

37,421

Effect of exchange rate fluctuations on cash held

(2,656)

Cash and cash equivalents at the end of the period

103,966

393,374

(*) The loan to related party was repaid as part of the Share Premium Capital reduction, see note 6(B).

The accompanying notes are an integral part of the interim condensed consolidated financial statements.


ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 1:  GENERAL

 

A.  Energean Israel Limited (the "Company") was incorporated in Cyprus on 22 July 2014 as a private company with limited liability under the Companies Law, Cap. 113. Its registered office is at Lefkonos 22, 1st Floor, 2064, Nicosia, Cyprus.

 

B.  The Company and its subsidiaries (the "Group") was established with the objective of exploration, production and commercialisation of natural gas and crude oil. The Group's main activities are performed in Israel by the Company's Israeli Branch.

 

C.  The Group's core assets as of 30 September 2022 are composed of:

 

Country

Asset

Working interest

Field phase

Israel

Karish (including Karish North)

100%

Development

Israel

Tanin

100%

Development

Israel

Blocks 12, 21, 23, 31

100%

Exploration

Israel

Four licences Zone D (1)

80%

Exploration

 

(1)  As of 30 September 2022, the Company held an 80% interest in four licences, blocks 55, 56, 61 and 62 (together, "Zone D"), in Israel's Exclusive Economic Zone ("EEZ"). Following Energean's submission of a formal notice of relinquishment to the Ministry of Energy, the licences expired at the end of their term on 27 October 2022. See note 6(K).

 

D.  The Energean Power FPSO arrived on location in Israel on 5 June 2022 and first gas from the Karish project was achieved on 26 October 2022.

 

 

NOTE 2:  ACCOUNTING POLICIES AND BASIS OF PREPARATION

 

These unaudited interim condensed consolidated financial statements for the nine months ended 30 September 2022 have been prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by United Kingdom (UK). The unaudited interim condensed consolidated financial statements do not include all the information and disclosures that are required for the annual financial statements and must be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2021.

 

These unaudited interim financial statements have been prepared on a going concern basis.


ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 3:  FINANCIAL POSITION

 

A.  Property, Plant and Equipment:

 

1)  Composition:

 

 

 

Oil & gas properties

 

Leased assets

 

Furniture, fixtures and equipment

 

Total

Cost:

 

 

 

 

 

 

 

 

At 1 January 2021

 

1,812,758

 

604

 

635

 

1,813,997

Additions (*)

 

243,346

 

3,405

 

194

 

246,945

Disposals

 

(23)

 

-

 

-

 

(23)

Capitalised borrowing cost (**)

 

188,889

 

-

 

-

 

188,889

Capitalised depreciation

 

362

 

-

 

-

 

362

Change in decommissioning provision

 

(3,549)

 

-

 

-

 

(3,549)

Total cost at 31 December 2021

 

2,241,783

 

4,009

 

829

 

2,246,621

Additions (*)

 

390,075

 

198

 

2,104

 

392,377

Disposals

 

(900)

 

-

 

-

 

(900)

Capitalised borrowing cost (**)

 

111,096

 

-

 

-

 

111,096

Capitalised depreciation

 

656

 

-

 

-

 

656

Change in decommissioning provision

 

(9,259)

 

-

 

-

 

(9,259)

Total cost at 3 0 September 2022

 

2,733,451

 

4,207

 

2,933

 

2,740,591

 

 

 

 

 

 

 

 

 

Depreciation:

 

 

 

 

 

 

 

 

At 1 January 2021

 

-

 

331

 

143

 

474

Charge for the year

 

-

 

-

 

85

 

85

Capitalised to petroleum and gas assets

 

-

 

362


-

 

362

Write down of the assets

 

433

 

-

 

-

 

433

Total Depreciation at 31 December 2021

 

433

 

693

 

228

 

1,354

Expensed for the period

 

-

 

-

 

232

 

232

Disposals

 

(433)

 

-

 

-

 

(433)

Write down of the assets

 

250

 

-

 

-

 

250

Capitalised to petroleum and gas assets

 

-

 

656

 

-

 

656

Total Depreciation at 30 September 2022

 

250

 

 

1,349

 

460

 

2,059

 

 

 

 

 

 

 

 

 

Net property, plant and equipment at 31 December 2021

 

2,241,350

 

3,316

 

601

 

2,245,267

Net property, plant and equipment at 30 September 2022

 

2,733,201

 

2,858

 

2,473

 

2,738,532

 

 

(*) The additions to oil & gas properties are primarily due to development costs for the Karish field, incurred under the EPCIC contract. Works relate primarily to the FPSO, subsea and onshore construction.

 

(**) Capitalised borrowing costs relate primarily to the secured senior notes.

 

 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 3:  FINANCIAL POSITION (Cont.)

 

2)  Cash flow statement reconciliations:

 

 

 

30 September (Unaudited)

 

 

 

2022

2021

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

493,970

349,182

 

Associated cash flows

 

 

 

 

Payment for additions to property, plant and equipment (*)

 

(214,666)

(264,625)

 

Non-cash movements/presented in other cash flow lines

 

 

 

 

Capitalised borrowing costs

 

(111,096)

(154,921)

 

Right-of-use asset additions

 

(198)

(3,258)

 

Capitalised share-based payment charge

 

(174)

(156)

 

Capitalised depreciation

 

(656)

(197)

 

Change in decommissioning provision

 

9,259

4,034

 

Movement in working capital

 

(176,439)

69,941

 








 

 

 

 

 

 

 

 

 

 

 

 

 

(*) This amount includes US$10.85 million which was paid to the sellers of the Karish and Tanin leases during 2021 and 2022.

 

B.  Intangible Assets:

1)  Composition:  

 

 

 

Exploration and evaluation assets

 

Software license

 

Total

Cost:

 

 

 

 

 

 

At 1 January 2021

 

13,799

 

255

 

14,054

Additions

 

6,342

 

-

 

6,342

At 31 December 2021

 

20,141

 

255

 

20,396

Additions (*)

 

66,219

 

-

 

66,219

Write off of exploration and evaluation costs (**)

 

(1,277)

 

-

 

(1,277)

At 30 September 2022

 

85,083

 

255

 

85,338

 

 

 

 

 

 

 

Amortisation:

 

 

 

 

 

 

At 1 January 2021

 

-

 

247

 

247

Charge for the year

 

-

 

8

 

8

Total Amortisation at 31 December 2021

 

-

 

255

 

255

Charge for the period

 

-

 

-

 

-

Total Amortisation at 30 September 2022

 

-

 

255

 

255

 

 

 

 

 

 

 

Net intangible assets at 31 December 2021

 

20,141

 

-

 

20,141

Net intangible assets at 30 September 2022

 

85,083

 

-

 

85,083

 

(*) Additions to exploration and evaluation assets are primarily due to drilling activities. See also notes 6(E), 6(F).

 

(**)  See note 6(K).

(1) 


ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 3:  FINANCIAL POSITION (Cont.)

 

2)  Cash flow statement reconciliations:

 

 

30 September (Unaudited)

 

 

 

2022

2021

 

Additions to intangible assets

 

66,219

5,073

 

Associated cash flows

 

 

 

 

Payment for additions to intangible assets

 

(18,823)

(3,972)

 

Non-cash movements/presented in other cash flow lines

 

 

 

 

Movement in working capital

 

(47,396)

(1,101)

 








 

C.  Deferred expenses

Deferred expenses relate to compensation of US$22.9 million that was accrued in 2021 following delays to the supply of gas from the Karish project. It is presented on the balance sheet as a current asset as it will be treated as variable consideration under IFRS 15, offsetting gas sales once gas delivery commences. First gas from the Karish project was achieved on 26 October 2022.

 

 

D.  Senior secured notes:

 

1)  Issuance of US$2,500,000,000 senior secured notes:

 

On 24 March 2021 (the "Issue Date"), Energean Israel Finance Ltd (a 100% subsidiary of the Company) issued US$2,500,000,000 of senior secured notes.

 

The Notes were issued in four equal tranches as follows:

 




30

 September

2022


31  December 2021

Series

 

 

Maturity

 

 

Annual fixed Interest rate

Carrying value


Carrying value

US$ 625 million

30 March 2024

4.500%

619,640

 

617,060

US$ 625 million

30 March 2026

4.875%

617,467

 

615,966

US$ 625 million

30 March 2028

5.375%

616,493

 

615,451

US$ 625 million

30 March 2031

5.875%

615,749

 

615,047

US$2,500 million

 

 

2,469,349

 

2,463,524

 

The interest on each series of the Notes is paid semi-annually, on 30 March and on 30 September of each year starting 30 September 2021.

 

The Notes are listed on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the "TASE").

With regards to the indenture document, signed on 24 March 2021 with HSBC BANK USA, N.A (the "Trustee"), no Indenture default or Indenture event of default has occurred and is continuing.

 

 

 

 

 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 3:  FINANCIAL POSITION (Cont.)

 

2)  Restricted cash:

 

As of 30 September 2022, the Company had short-term restricted cash of US$71.8 million for the debt payment fund which will be partly used for the March 2023 coupon payment. The remainder will be released during 2023, upon achieving six months of production at an annualized rate of 3.8 bcm/year.

 

3) Credit rating:

 

The senior secured notes have been assigned a Ba3 rating by Moody's and a BB- rating by S&P Global.

 

E.  Fair value measurements:

 

The information set out below provides information about how the Group determines the fair values of various financial assets and liabilities.

The fair values of the Group's non-current liabilities measured at amortised cost are considered to approximate their carrying amounts at the reporting date; with the exception of the Senior secured notes for which the fair value is set out below.

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 hierarchy of financial assets and financial liabilities that are not measured at fair value (but fair value disclosure is required) is as follows:

 

 

Fair value hierarchy as of 30 September 2022

 

Unaudited

 

Level 1

Level 2

Total

Financial assets



 

Short term restricted cash

71,784

-

71,784

Short term trade and other receivables

-

30,477

30,477

Cash and cash equivalents

103,966

-

103,966

Total

175,750

30,477

206,227

Financial liabilities



 

Senior secured notes (*)

2,201,875

-

2,201,875

Trade and other payables - long term

-

149,404

149,404

Trade and other payables - short term

-

157,130

157,130

Total

2,201,875

306,534

2,508,409

 

 

 

 

 

 

 

 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 3:  FINANCIAL POSITION (Cont.)

 

 

Fair value hierarchy as of 31 December 2021

 

Audited

 

Level 1

Level 2

Total

Financial assets

 

 

 

Long term trade and other receivables

-

6,402

6,402

Loan to related party

-

346,000

346,000

Long term restricted cash

100,000

-

100,000

Short term restricted cash

99,729

-

99,729

Short term trade and other receivables

-

22,176

22,176

Cash and cash equivalents

349,827

-

349,827

Total

549,556

374,578

924,134

Financial liabilities

 

 

 

Senior secured notes (*)

2,483,750

-

2,483,750

Trade and other payables - long term

-

59,727

59,727

Trade and other payables - short term

-

35,918

35,918

Total

2,483,750

95,645

2,579,395

 

(*) The senior secured notes are measured at amortised cost in the Company's financial statements. The notes are listed for trading on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the "TASE"). The carrying amount as of 30 September 2022 was US$2,469 million and as of 31 December 2021 was US$2,463 million.

 

F.  Trade and other payables:

 

 

 

30 September

 

31 December

 

 

2022


2021

 

 

Unaudited


Audited

Current

 

 

 

 

Financial items

 

 

 

 

Trade accounts payable (1)

 

132,480

 

32,611

Payables to related parties

 

11,680

 

1,079

Deferred license payments (2)

 

12,101

 

-

Value added tax payable

 

-

 

1,217

Current lease liabilities

 

869

 

1,011

 

 

157,130

 

35,918

 

 

 

 

 

Non-Financial items

 

 

 

 

Accrued expenses (1)

 

35,719

 

5,611

Interest payable

 

-

 

32,227

Sales consideration received in advance (4)

 

55,468

 

-

Social insurance and other taxes

 

299

 

132

Income taxes

 

-

 

227

 

 

91,486

 

38,197

 

 

 

 

 

 

 

248,616

 

74,115

 

 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 3:  FINANCIAL POSITION (Cont.)

 

 

30 September

 

31 December

 

 

2022


2021

 

 

Unaudited


Audited

Non-current

 

 

 

 

Financial items

 

 

 

 

Accrued expenses to related parties

 

281

 

294

Long term lease liabilities

 

2,123

 

2,203

Trade and other payables (3)

 

109,994

 

-

Deferred license payments (2)

 

37,006

 

57,230

 

 

149,404

 

59,727

Non-Financial items

 

 

 

 

Contract Liability (4)

 

-

 

53,537

 

 

 

 

 

 

 

149,404

 

113,264

 

(1)  Trade payables and accrued expenses relate primarily to development expenditure on the Karish project, with the main contributors being FPSO and subsea construction costs. Trade payables are non-interest bearing.

 

(2)  In December 2016, the Company acquired the Karish and Tanin leases for US$40 million of up front consideration plus contingent consideration of US$108.5 million (paid over 10 equal instalments) bearing interest at an annual rate of 4.6%. As at 30 September 2022, the total discounted deferred consideration was US$49 million (31 December 2021: US$57million).

The Sale and Purchase Agreement ("SPA") includes provisions in the event of Force Majeure that prevents or delays the implementation of the development plan as approved under one lease for a period of more than ninety (90) days in any year following the final investment decision ("FID") date. In the event of Force Majeure, the applicable annual payment of the remaining consideration will be postponed by an equivalent period of time, and no interest will be accrued in that period of time as well.

  Due to the effects of the COVID-19 pandemic which constitute a Force Majeure event, the deferred payment due in March 2022 was postponed accordingly and payment thereof was made in September 2022  

 

(3)  Amount payable to Technip in respect of the EPCIC contract. The amount is payable in eight equal instalments commencing nine-months following practical completion of the project and therefore has been discounted at 5.831% per annum.

 

(4)  The sales consideration received in advance relates to the agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "Hand Over") of the near shore and onshore part of the infrastructure that will deliver gas from the Energean Power FPSO into the Israeli national gas transmission grid. It is intended that the hand over to INGL will become effective at least 90 days after the delivery of first gas from the Karish field, which was achieved on 26 October 2022. Following Hand Over, INGL will be responsible for the operation and maintenance of this part of the infrastructure.

 

 

 

 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 4:  COMPREHENSIVE INCOME

 


 

 

30 September (Unaudited)

 

 

2022

2021


 

General & administration expenses

 

 

 

 

 

Staff costs

 

1,115

946

 

 

Share-based payment charge included in administrative expenses

 

128

129

 

 

Depreciation, depletion and amortisation (Notes 3(A) and 3(B))

 

352

71

 

 

Auditor fees

 

200

156

 

 

Other general & administration expenses

 

5,423

1,415

 

 

Total administrative expenses

 

7,218

2,717

 

 

 

 

 

 

 

 

 

Exploration and evaluation expenses

 

 

 

 

 

Exploration costs written off (Note 6(K)).

 

1,277

-

 

 

Total exploration and evaluation expenses

 

1,277

-

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

Reversal of prior period provision

 

-

5

 

 

Loss from property, plant and equipment disposal

 

1,079

23

 

 

Total other expenses

 

1,079

28

 

 

 

 

 

 

 

 

Other income

 

 

 

 

 

Gain from disposal

 

53

3

 

 

Total other income

 

53

3

 

 

 

 

 

 

 

 

A.  Operating loss:

.

 


ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 4:  COMPREHENSIVE INCOME (Cont.)

 

B.  Net finance income (expenses):

 

 

30 September) Unaudited)

 

 

2022

2021

 

 

 

 

 

 

Interest on bank borrowings

 

-

76,890

 

Interest on senior secured notes (1)

 

102,505

68,047

 

Interest expense on long terms payables

 

8,716

2,267

 

Interest on shareholders loan

 

-

9

 

Less amounts included in the cost of qualifying assets (2)

 

(107,177)

(138,147)

 

 

 

4,044

9,066

 

 

 

 

 

 

Finance and arrangement fees

 

3,681

14,383

 

Other finance costs and bank charges

 

319

53

 

Interest expenses from Hedging

 

-

7,002

 

Unwinding of discount on decommissioning liabilities

 

568

516

 

Interest on obligations for leases

 

238

142

 

Less amounts included in the cost of qualifying assets (2)

 

(3,919)

(16,774)

 

 

 

887

5,322

 

 

 

 

 

 

Total finance costs

 

4,931

14,388

 

 

 

 

 

 

Interest income from time deposits

 

2,543

965

 

Interest income from loans to related parties

 

3,214

3,559

 

Total finance income

 

5,757

4,524

 

 

 

 

 

 

Net foreign exchange gain (loss)

 

1,405

(1,140)

 

 

 

 

 

 

Net finance gain (loss)

 

2,231

(11,004)

 

 

(1)  See also Note 3(D)(1).

(2)  See also Note 3(A).

 

NOTE 5:  TAXATION

 

A.  Tax income:

 

 

30 September (Unaudited)

 

 

2022

2021

 

 

 

 

 

 

Corporation tax - current year

 

(290)

(193)

 

Deferred tax income

 

2,953

4,102

 

Total taxation income

 

2,663

3,909

 


ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 5:  TAXATION (Cont.)

 

B.  Deferred tax:

 

Deferred taxes, driven by the activity in Israel by the Israeli Branch of the Company, are computed at an average tax rate of 23%, based on the tax rates that are expected to apply upon reversal. The deferred taxes are presented in the statement of financial position as non-current assets. Below are the items for which deferred taxes were recognised:

 


 

Property, plant and equipment & intangible asset


Right of use asset

IFRS 16


 

Tax losses


Deferred expenses for tax


Staff leaving indemnities


Accrued expenses and other short‑term liabilities and other long‑term liabilities

 

Derivative liability

 

Provisions for decommissioning

 

Total

 


 

 


















 

 

At 1 January 2021


(12,140)


(62)



9,325


-


63


293


1,591


8,769

 

7,839

Increase (decrease) for the year through:



 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit or loss


(492)

 

(700)

 

 

1,436

 

5,020


31

 

630


-


(598)

 

5,327

Reclassification for the current year


-


-



(6,011)


6,011


-


-


-


-

 

-

Other comprehensive income


-


-



-


-


-


-


(1,591)


-

 

(1,591)




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,632)

 

(762)

 

 

4,750

 

11,031

 

94

 

923

 

-

 

8,171

 

11,575





















Increase (decrease) for the period through :


















 

 

Profit or loss


(12,743)


(159)



22,448


(4,648)


43


11


-


(1,999)

 

2,953















 

 

 

 

 

 

At 30 September 2022

 

(25,375)

 

(921)

 

 

27,198

 

6,383

 

137

 

934

 

-

 

6,172

 

14,528

 

 

 


ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 6:  SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD

 

A.  Gas supply agreement with the Israel Electric Company

In March 2022, Energean signed a gas supply agreement with the Israel Electric Company.
The gas price will be determined in each period, with volumes determined on a daily basis.
The agreement is valid for an initial one-year period starting from first gas from Karish, and includes an option to extend subject to ratification by both parties.

 

B.  Share Premium Capital reduction:

In April 2022 the Company reduced its share premium capital by US$360 million and credited US$346 million against the shareholder loan account plus accrued interest.

 

C.  Termination of contract with Gas Buyer

In May 2022, further to the claims raised by the parties in the related arbitration proceedings with Dalia Power Energies LTD ("Dalia") (including the counterclaim filed by the Company seeking a declaration that Company is entitled to terminate the GSPA), Dalia and the Company agreed to end all claims and disputes between the parties. Both sides agreed that the Dalia GSPA (which represented up to 0.8 bcm/year) was lawfully terminated, that the arbitration proceedings were terminated, and that neither party owes or will be liable to the other for any payment in connection with and due to the Dalia GSPA, the arbitration proceedings and the facts subject thereof. This was agreed to be final and unappealable.

 

D.  Contract signed with East Hagit Power Plant

In May 2022, the Company signed a new GSPA, representing up to 0.8 bcm/year, to supply gas to the East Hagit Power Plant Limited Partnership ("EH Partnership"), a partnership between the Edeltech Group and Shikun & Binui Energy. The GSPA is for a term of approximately 15 years, for a total contract quantity of up to 12 bcm. The contract contains provisions regarding floor pricing, offtake exclusivity and a price indexation mechanism (not Brent price linked).

 

E.  Drilling campaign offshore Israel:

The Company started its 2022 drilling campaign in March 2022, which originally included three firm wells. In June 2022, the Company exercised its contractual option to drill two further wells. Subsequently, in October 2022 Energean exercised its option to drill a sixth well, Hercules (located on block 23, offshore Israel), which spudded in November 2022.

 

F.  Athena Gas Discovery

In May 2022, a commercial discovery was made by the Athena exploration well, located in block 12, in the A, B and C sands. Subsequently in November 2022, Energean's reserve auditor, D&M, certified contingent resources of 11.75 bcm in the Athena discovery, an increase of 3.75 bcm on the Company's 8 bcm preliminary estimate.

 

G.  Claim submitted under the Karish-Tanin SPA

  On 31 May 2022, NewMed Energy LP (previously Delek Drilling LP) ("NewMed") filed a lawsuit against the Company before the Tel Aviv District Court. NewMed claimed that the remaining US$48 million (US$65.1 million as of 31 May 2022) of outstanding contingent consideration due under the SPA for the Karish and Tanin leases (see Note 3(E)(2)) plus interest and indexation, should be accelerated. The residual remedy requested is US$10.85 million plus interest and indexation, reflecting the annual payment for the year 2021. The claim is purportedly based on a payment acceleration mechanism set in the SPA, combined with NewMed's rejection of the Company's Force Majeure claim.

 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Amounts in thousands US Dollars, unless otherwise stated)

 

NOTE 6:  SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD (Cont.)

 

  In September 2022, the Company paid the annual installment and filed its Statement of Defence with the court. NewMed then filed a Reply in October 2022.

 

H.  The FPSO sailed away from Singapore and arrived on location in Israel on 5 June 2022.

 

J.  Bank Guarantee Facility:

On 8 June 2022 the Company's guarantee facility was extended and amended to a total of NIS355 million instead of NIS250 million. The facility is secured by Energean PLC parent company guarantee of US$112 million. This facility is valid until 30 April 2023.

 

K.  Zone D:

On 27 July 2022, the Company sent a formal notice to the Ministry of Energy notifying the relinquishment of Zone D and discontinuation of related work. As such, the licences subsequently expired on 27 October 2022.

 

 

NOTE 7:  SIGNIFICANTS EVENTS AND TRANSACTIONS AFTER THE REPORTING PERIOD

 

A.  Hermes Gas Discovery:

In October 2022, the Hermes exploration well, block 31, offshore Israel, made a commercial gas discovery. Preliminary estimates indicate that the structure contains 7-15 bcm of recoverable natural gas resources.

 

B.   Liquids Contract:

In October 2022, Energean signed a sale and purchase agreement with Vitol for the marketing of a number of cargoes of Karish blend hydrocarbon liquids. Energean expects, based on analysis of individual well test samples, that the Karish blend will trade at a similar price point to Asgard blend, given the similarity in their characteristics. The realised price will be market price less certain freight, logistics and marketing costs.

 

C.   First gas from Karish:

On 26 October 2022, first gas was delivered at the Karish field, offshore Israel.

 

D.  Zeus Gas Discovery:

In November 2022, the Zeus exploration well, block 12, offshore Israel, made a commercial discovery with preliminary estimates indicating that the structure contains 13.3 bcm of recoverable natural gas resources.

The results from the Zeus well and the Athena post-well analysis provide Energean with additional confidence about the volumes and commerciality of the Olympus area, and the Company is now progressing its field development plan. Energean now has discovered resource volumes of 25 bcm and a further 42 bcm has been de-risked in the Olympus Area. Energean expects to update the market on the total resource volumes within the Olympus area in early 2023. This update will be based upon a Competent Persons Report that is being undertaken by D&M.

 

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