Energean Israel Full Year 2023 Accounts

Energean PLC

21 March 2024

ENERGEAN ISRAEL LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2023

ENERGEAN ISRAEL LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

AS OF 31 DECEMBER 2023

INDEX

		Page

Independent Auditor's Report		2-4
Consolidated Statements of Comprehensive Income		5
Consolidated Statements of Financial Position		6
Consolidated Statements of Changes in Equity		7
Consolidated Statements of Cash Flows		8
Notes to the Consolidated Financial Statements		9-44

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Kost Forer Gabbay & Kasierer

144 Menachem Begin Road, Building A,

Tel-Aviv 6492102, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

ey.com

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Energean Israel Limited

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of Energean Israel Limited (the Company) and its subsidiaries (together,the Group), which comprise the consolidated statements of financial position as at 31 December 2023 and 2022, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years in the period then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for opinion

We conducted our audits in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

Estimation of oil and gas reserves

Key audit matter description

The estimation and measurement of oil and gas reserves is considered to be a significant risk as it impacts many material elements of the financial statements including impairment, decommissioning, recoverability and depreciation, depletion and amortisation (DD&A).

Reserve estimation is complex, requiring technical input based on geological and engineering data. Management's reserves estimates are provided by external specialists (D&M).

The Company's reserve portfolio as at 31 December 2023 included proven and probable reserves (2P) reserves of 926 Mmboe and contingent resources (2C) reserves of 47.2 Mmboe.

Our response to the risk

· We confirmed our understanding of the Company's oil and gas reserve estimation process and the control environment implemented by management including both the transfer of source data to the management's reserves specialists and subsequently the input of reserves information from the specialist reports into the accounting system;

· We obtained and reviewed the most recent third-party reserves and resources reports prepared by these specialists and compared these for consistency between other areas of the audit including the Company's reserves models, DD&A, the calculation of the decommissioning provision and the Directors' going concern assessment;

· We assessed the qualifications of management's specialists;

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group'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 management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
20 March, 2024	A Member of Ernst & Young Global

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2023

	Notes	2023 $'000	2022 $'000
Revenue	5	939,836	27,122
Cost of sales	6	(444,054)	(31,017)
Gross profit (loss)		495,782	(3,895)

Administrative expenses	6	(14,339)	(12,252)
Exploration and evaluation expenses	6	(50)	(1,819)
Other expenses	6	(190)	(1,102)
Other income	6	37	54
Operating profit (loss)		481,240	(19,014)

Finance income	8	11,319	6,379
Finance costs	8	(169,467)	(29,811)
Net foreign exchange losses	8	(8,483)	(3,087)
Profit (loss)for the year before tax		314,609	(45,533)

Taxation (expense)/income	9	(71,800)	10,951
Net profit (loss) for the year		242,809	(34,582)

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

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF 31 DECEMBER 2023

	Notes	2023 $'000	2022 $'000
ASSETS:
NON-CURRENT ASSETS:
Property, plant and equipment	10	2,797,831	2,926,313
Intangible assets	11	168,165	143,554
Other receivables	13	5,365	108
Deferred tax asset	12	-	22,886
		2,971,361	3,092,861
CURRENT ASSETS:
Trade and other receivables	13	130,135	82,611
Inventories	14	7,141	8,313
Restricted cash	16(A)	22,482	71,778
Cash and cash equivalents	15	286,625	24,825
		446,383	187,527
TOTAL ASSETS		3,417,744	3,280,388

EQUITY AND LIABILITIES:
EQUITY:
Share capital	19(A)	1,708	1,708
Share Premium		212,539	212,539
Retained earnings (losses)		74,781	(70,528)
TOTAL EQUITY		289,028	143,719
NON-CURRENT LIABILITIES:
Senior secured notes	16(A)	2,588,492	2,471,030
Decommissioning provisions	17	92,613	84,299
Deferred tax liabilities	12	46,985	-
Trade and other payables	18	127,044	210,241
		2,855,134	2,765,570
CURRENT LIABILITIES:
Trade and other payables	18	273,582	371,099
TOTAL LIABILITIES		3,128,716	3,136,669
TOTAL EQUITY AND LIABILITIES		3,417,744	3,280,388

20 March 2024

Date of approval of the consolidated financial statements

Panagiotis Benos

Director

Matthaios Rigas

Director

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

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2023

	Share capital $'000	Share Premium $'000	Accumulated losses $'000	Total equity $'000
Balance as of 1 January 2022	1,708	572,539	(35,946)	538,301
Loss for the year	-	-	(34,582)	(34,582)
Transactions with shareholders:
Share premium reduction, see note 19(c)	-	(360,000)	-	(360,000)
At 1 January 2023	1,708	212,539	(70,528)	143,719
Profit for the year	-	-	242,809	242,809
Transactions with shareholders:
Dividend, see note 19(d)	-	-	(97,500)	(97,500)
Balance as of 31 December 2023	1,708	212,539	74,781	289,028

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2023

	Notes	2023 $'000	2022 $'000
Operating activities
Profit (Loss) for the year before tax		314,609	(45,533)
Adjustments to reconcile loss before taxation to net cash provided by: operating activities:
Depreciation, depletion and amortisation	6	187,721	11,435
Loss from sale of equipment	6	-	1,102
Compensation to gas buyers, payment made in advance	5, 13	4,929	18,031
Exploration and evaluation expenses	6	-	1,819
Other expenses	6	190	-
Finance Income	8	(11,319)	(6,379)
Finance expenses	8	169,467	29,811
Net foreign exchange loss	8	8,483	3,087
Cash flow from operations before working capital		674,080	13,373
Increase in trade and other receivables		(67,207)	(40,272)
Decrease/(increase) in inventories		1,172	(8,313)
(Decrease)/increase in trade and other payables		(21,079)	27,952
Cash from operations		586,966	(7,260)
Income taxes paid		(397)	(590)
Net cash inflows from/(used in) operating activities		586,569	(7,850)
Investing activities
Payment for purchase of property, plant and equipment	10(C)	(213,322)	(278,396)
Payment for exploration and evaluation, and other intangible assets	11(B)	(98,909)	(50,332)
Amounts received from INGL related to transfer of property, plant and equipment	18(4)	56,906	17,371
Proceeds from disposal of property, plant and equipment	10(C)	2	188
Movement in restricted cash, net	16(A)	49,296	127,951
Interest received		11,194	3,178
Net cash outflow used in investing activities		(194,833)	(180,040)
Financing activities
Senior secured notes issuance	16(A)	750,000	-
Transaction costs in relation to senior secured notes issuance	16(A)	(17,634)	-
Senior secured notes repayment	16(A)	(625,000)	-
Senior secured notes - interest paid	16(A)	(128,906)	(128,906)
Dividends paid	19(D)	(97,500)	-
Other distribution (*)	22(E)	(4,383)	-
Other finance cost paid	16	(560)	(2,461)
Finance costs paid for deferred license payments	18(2)	(2,496)	(1,501)
Repayment of obligations under leases	16	(3,321)	(1,085)
Net cash outflow used in financing activities		(129,800)	(133,953)

Net increase (decrease) in cash and cash equivalents		261,936	(321,843)
Cash and cash equivalents at beginning of year		24,825	349,827
Effect of exchange differences on cash and cash equivalents		(136)	(3,159)
Cash and cash equivalents at end of year	15	286,625	24,825

* The loan to related party was repaid as part of the Share Premium Capital reduction, see note 19(C).

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

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, 1^st Floor, Strovolos, 2064 Nicosia, Cyprus.

b. The Company and its subsidiaries (the "Group") has been 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 its Israeli Branch.

c. As of 31 December 2023, the Company had investments in the following subsidiaries:

Name of subsidiary	Country of incorporation / registered office	Principal activities	Shareholding At 31 December 2023 (%)	Shareholding At 31 December 2022 (%)
Energean Israel Transmission LTD	121, Menachem Begin St. Azrieli Sarona Tower, POB 24, Tel Aviv 67012039 Israel	Gas transportation license holder	100	100
Energean Israel Finance LTD	121, Menachem Begin St. Azrieli Sarona Tower, POB 24, Tel Aviv 67012039 Israel	Financing activities	100	100

d. The Group's core assets as of 31 December 2023 were comprised of:

Country	Asset	Field	Working interest	Field phase
Israel	Karish (*)	Karish Main	100%	Production
Israel	Karish (*)	Karish North	100%	Development
Israel	Tanin (*)	Tanin	100%	Development
Israel	Block 12	Katlan	100%	Appraisal
Israel	Blocks 21, 23, 31	Hercules and Hermes	100%	Exploration

(*) The concession agreement expires in 2044.

NOTE 2: - Basis of preparation and presentation of financial information

The following accounting policies have been applied consistently in the consolidated financial statements for all periods presented, unless otherwise stated.

a. Basis of presentation of the financial statements:

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

These consolidated financial statements have not been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113 and are not intended for statutory filing in Cyprus.

The consolidated financial statements have been prepared on the historical cost basis.

The consolidated financial statements have been prepared on a going concern basis. The principal accounting policies adopted by the Group are set out below.

b. The financial statements are presented in U.S. Dollars and all values are rounded to the nearest thousand

dollars except where otherwise indicated.

c. 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 from the date of approval of the Group Financial Statements on 20 March 2024 to 30 June 2025 ('the Assessment Period'). Cash forecasts are regularly produced based on, inter alia, the Group's latest life of field production, budgeted expenditure forecasts, price estimates based on signed GSPAs and oil price forward curves. In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position to evaluate adverse impacts that may result from changes to the macro economic environment and downside scenarios to budgeted production forecasts. The Group does this to identify risks to liquidity to formulate appropriate and timely mitigation strategies in order to manage the risk of funds shortfalls and to ensure the Group's ability to continue as a going concern.

On 11 July 2023, Energean Israel Finance Ltd. completed the offering of US$750 million aggregate principal amount of senior secured notes with a fixed annual interest rate of 8.500%. The proceeds from the Offering, were released from escrow in September 2023 and were used to a) refinance the $625 million notes due in 2024 (redemption date on 30 September 2023), b) pay fees and expenses associated with this refinancing, c) contribute towards funding the interest payment reserve account and d) contribute towards the payment of the final deferred consideration to Kerogen.

The going concern assessment is founded on a cashflow forecast prepared by management, which is based on a number of assumptions, most notably the Group's latest life of field production forecasts, budgeted expenditure forecasts, estimated of future commodity prices (based on recent published forward curves). The going concern assessment contains a 'Base Case' and a 'Reasonable Worst Case' ('RWC') scenario.

The Base Case scenario assumes Brent at $80/bbl in 2024 and $75/bbl in 2025. A reasonable production from the Karish field is assumed throughout the going concern assessment period, with prices for gas sold assumed at contractually agreed prices. Under the Base Case, sufficient liquidity is maintained throughout the going concern period.

The Group also routinely performs sensitivity tests 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. These downsides are considered in the RWC going concern assessment scenario. The Group is not exposed to floating interest rate risk since its borrowings are fixed-rate. The Group also looks at the impact of changes or deferral of key projects and downside scenarios to budgeted production forecasts in the RWC.

The two primary downside sensitivities considered in the RWC are: (i) reduced commodity prices; (ii) reduced production - these downsides are applied to assess the robustness of the Group's liquidity position over the Assessment Period. The conditions necessary for liquidity headroom to be eliminated are judged to have a remote possibility of occurring, given the 'natural hedge' provided by virtue of the Group's fixed-price gas contracts.

Under the RWC scenario, liquidity is maintained throughout the going concern period.

NOTE 2: - Basis of preparation and presentation of financial information (Cont.)

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 within the Group's control, in the event these actions were 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 Assessment Period from the date of approval of the Group Financial Statements on 20 March 2024 to 30 June 2025. For this reason, they continue to adopt the going concern basis in preparing the Group financial statements.

Israel-Hamas conflict- The Group continues to monitor the ongoing conflict between the State of Israel and Hamas. While the situation has not impacted the Company's production from the FPSO, it is not possible to predict whether the conflict will have a material adverse effect on our future earnings, cash flows and financial conditions.

d. New and amended accounting standards and interpretations:

The following amendments became effective as at 1 January 2023:

· 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 consolidated 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.

New and amended standards and interpretations in issue but not yet effective for the 2023 year end:

· Amendments to IAS 1 - Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants - 1 January 2024

The adoption of the above standard and interpretations is not expected to lead to any material changes to the Group's accounting policies or have any other material impact on the financial position or performance of the Group.

e. Basis of consolidation:

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) as detailed in Note 1 above.

NOTE 3: - Material accounting policies

Accounting Policies:

The principal accounting policies and measurement bases used in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all periods presented in the consolidated financial statements unless otherwise stated.

a) Functional and presentation currency and foreign currency:

1. Functional and presentation currency:

Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (''the functional currency'').

The functional currency of the Company is U.S. Dollars (US$). The U.S. Dollar is the currency that influences future sales prices, revenue estimates and also highly affect the Group's operations.

The presentation currency of the Group's consolidated financial statements is U.S. Dollar.

NOTE 3: - Material accounting policies (Cont.)

2. Transactions and balances:

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. Such monetary assets and liabilities are translated using the functional currency exchange rates at the reporting date. Non-monetary items that are measured in terms of historical cost denominated in a foreign currency are translated at the exchange rates prevailing at the date of the transaction and are not subsequently remeasured.

b) Intangible assets - Exploration and evaluation expenditures:

The Group adopts the successful efforts method of accounting for exploration and evaluation costs. Pre-licence costs are expensed in the period in which they are incurred. All licence acquisition, exploration and evaluation costs and directly attributable administration costs are initially capitalised as intangible assets by field or exploration area, as appropriate. All such capitalised costs are subject to technical, commercial and management review, as well as review for indicators of impairment at least once a year. This is to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are written off through the statement of comprehensive income (loss). When proved reserves of oil and gas are identified and development is sanctioned by management, the relevant capitalised expenditure is first assessed for impairment and (if required) any impairment loss is recognised, then the remaining balance is transferred to oil and gas properties.

c) Commercial reserves:

Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. There should be a 50 per cent statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as proven and probable reserves and a 50 per cent statistical probability that it will be less.

d) Oil and gas properties - assets in development:

Expenditure is transferred from 'Exploration and evaluation assets' to 'Assets in development' which is a subcategory of 'Oil and gas properties' once the work completed to date supports the future development of the asset and such development receives appropriate approvals. After transfer of the exploration and evaluation assets, all subsequent expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, including unsuccessful development or delineation wells, is capitalised within 'Assets in development'.

Proceeds from any oil and gas produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management (such as samples produced when testing whether the asset is functioning properly) has been recognised in profit or loss in accordance with IFRS 15 Revenue Recognition. The Group measures the cost of those items applying the measurement requirements of IAS 2 Inventories. When a development project moves into the production stage, all assets included in 'Assets in development' are then transferred to 'Producing assets' which is also a sub-category of 'Oil and gas properties. The capitalisation of certain construction/development costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to 'Oil and gas properties' asset additions, improvements or new developments.

e) Depletion and amortisation:

All expenditure carried within each field will be amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, generally on a field-by-field basis or by a group of fields which are reliant on common infrastructure.

NOTE 3: - Material accounting policies (Cont.)

f) Impairments of oil & gas properties:

Where there is evidence of economic interdependency between fields, such as common infrastructure, the fields are grouped as a single CGU for impairment purposes. A CGU's recoverable amount is the higher of its fair value less costs of disposal and its value in use. Where the carrying amount of a CGU exceeds its recoverable amount, the CGU is considered impaired and is written down to its recoverable amount.

Fair value less costs of disposal is the price that would be received to sell the asset in an orderly transaction between market participants and does not reflect the effects of factors that may be specific to the Group and not applicable to entities in general.

For discount of the future cash flows the Group calculates CGU-specific discount rate. The discount rate is based on an assessment of a relevant peer group's pre-tax Weighted Average Cost of Capital (WACC). The Group then adds any exploration risk premium which is implicit within a peer group's WACC and subsequently applies additional country risk premium for Israel.

g) Impairment of non-financial assets:

At each reporting date, the Group reviews the carrying amounts of its depreciable property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Impairment is assessed at the level of cash-generating units (CGUs) which, in accordance with IAS 36 'Impairment of Assets', are identified as the smallest identifiable group of assets that generates cash inflows, which are largely independent of the cash inflows from other assets. This is usually at the individual royalty, stream, oil and gas or working interest level for each property from which cash inflows are generated.

An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount, which is the higher of fair value less costs of disposal (FVLCD) and value-in-use (VIU). The future cash flow expected is derived using estimates of proven and probable reserves, a portion of resources that is expected to be converted into reserves and information regarding the mineral, stream and oil & gas properties, respectively, that could affect the future recoverability of the Group's interests. Discount factors are determined individually for each asset and reflect their respective risk profiles.

In addition, exploration and evaluation assets are assessed for impairment upon their reclassification to producing assets (oil and gas interest in property, plant and equipment).

In assessing the impairment of exploration and evaluation assets, the carrying value of the asset would be compared to the estimated recoverable amount and any impairment loss is recognised immediately in profit or loss.

h) Leases:

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the date of inception. The arrangement is assessed to determine whether fulfilment is dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the asset (or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement. The Group is not a lessor in any transactions, it is only a lessee.

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

NOTE 3: - Material accounting policies (Cont.)

i) Right-of-use assets:

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

- Property leases 2 to 5 years

- Motor vehicles and other equipment 1 to 3 years

- Fiber Optic 14 years

Lease liabilities:

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.

Other leases outside the scope of IFRS 16:

Leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources are outside the scope of IFRS 16 and are recognised as exploration and evaluation costs or as oil and gas assets, as appropriate. Please refer to notes c and e above.

j) Financial instruments - initial recognition and subsequent measurement:

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

1. Financial assets:

Initial recognition and measurement:

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

NOTE 3: - Material accounting policies (Cont.)

The Group's business model for managing financial assets refers to how it manages its financial assets in order

to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Subsequent measurement- Financial assets at amortised cost:

The Group measures financial assets at amortised cost if both of the following conditions are met:

- The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment under the expected credit loss model. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group's financial assets at amortised cost includes trade receivables.

Impairment of financial assets:

For trade receivables and contract assets, the Group applies a simplified approach in calculating allowance for expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.

2. Financial liabilities:

Initial recognition and measurement:

The Group's financial liabilities include trade and other payables and senior secured notes.

Subsequent measurement:

Loans and borrowings:

After initial recognition, interest-bearing liabilities such as senior secured notes are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, modified and through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.

Derecognition:

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

3. Offsetting of financial instruments:

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

k) Equity instruments:

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Ordinary shares

Ordinary shares are classified as equity and measured at their nominal value that have been issued.

NOTE 3: - Material accounting policies (Cont.)

Any premiums received on issue of share capital above its nominal value, are recognised as share premium within equity. Associated issue costs are deducted from share premium.

Other components of equity include the following:

Retained earnings (losses) includes all current and prior period retained earning (losses).

l) Dividend payments

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the balance sheet date.

m) Share-based payments:

Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments issued and charge upon vesting by the Ultimate Parent Company (Energean plc).

n) Fair value measurement:

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities, for which fair value is measured or disclosed in the financial statements, are categorised within the fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:

- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

- Level 2 - Valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly or indirectly observable.

- Level 3 - Valuation techniques for which the lowest-level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest-level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

o) Cash and cash equivalents and restricted cash:

Cash and cash equivalents comprise of cash in hand and time deposits, with a maturity of three months or less, that are subject to an insignificant risk of changes in their fair value.

Restricted cash comprises balances retained in respect of the Group's Senior Secured Notes and cash collateral provided under a letter of credit facility for issuing bank guarantees for Group's activities in Israel (see Note 16A). The nature of the restrictions on these balances mean that they do not qualify for classification as cash equivalents.

p) Inventories:

Inventories comprise hydrocarbon liquids and natural gas, consumables and other spare parts. Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads. It does not include borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. Spare parts consumed within a year are carried as inventory and recognised in profit or loss when consumed.

NOTE 3: - Material accounting policies (Cont.)

q) Decommissioning provision:

Provision for decommissioning is recognised in full when the related facilities are installed. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of decommissioning, discounted to its net present value at a risk-free discount rate, and is reassessed each year in accordance with relevant conditions and requirements. Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The unwinding of the discount on the decommissioning provision is included as a finance cost.

r) Revenue

Revenue from contracts with customers is recognised when control of the gas/ hydrocarbon liquids are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.

In Israel royalties are levied by the government. The government can request that these royalty payments be made in cash or in kind. In the current year and in prior year the government has requested cash payments be made and therefore the Group has not made any royalty payments in kind. As such the Group obtains control of all the underlying reserves once extracted, sells the production to its customers and then remits the proceeds to the royalty holder and is therefore considered to be acting as the Principal.

Sale of natural gas and hydrocarbon liquids

Sales revenue represents the sales value, net of VAT, of actual sales volumes to customers in the year.

The Group's accounting policy under IFRS 15 is that revenue is recognised when the Group satisfies a performance obligation by transferring hydrocarbon liquids or gas to its customer. The title to hydrocarbon liquids and gas typically transfers to a customer at the same time as the customer takes physical possession of the hydrocarbon liquids or gas. Typically, at this point in time, the performance obligations of the Group are fully satisfied. The revenue is recorded when the hydrocarbon liquids or gas has been physically delivered to a vessel or pipeline.

s) Retirement benefit costs regarding the employees by the directly owned Branch in Israel:

The Israeli Branch has defined contribution plans pursuant to section 14 to the Severance Pay in Israel Law under which the Israeli Branch pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognised as an expense when contributed concurrently with performance of the employee's services.

t) Borrowing costs:

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Excluded from the above capitalisation policy are any qualifying assets that are inventories that are produced in large quantities on a repetitive basis.

NOTE 3: - Material accounting policies (Cont.)

u) Tax:

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the financial statements because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The Group recognises tax provision liabilities for anticipated tax issues based on if it is probable, defined as more likely than not, that additional taxes will be due. This assessment is based on all available evidence and, where appropriate, in the light of external advice. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax liability in the period in which such determination is made.

v) Levies:

Levies imposed on the Company by government entities through legislation, are accounted for pursuant to IFRIC 21 according to which the liability for the levy is recognized only when the activity that triggers payment occurs.

NOTE 4: - Critical accounting estimates and judgments

The preparation of these consolidated financial statements in conformity with IFRS requires the use of accounting estimates and assumptions, and also requires management to exercise its judgement, in the process of applying the Group's accounting policies.

Estimates, assumptions and judgement applied are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates, assumptions and judgement are based on management's best knowledge of current events and actions, actual results may ultimately differ.

1. Critical judgements in applying the Group's accounting policies:

The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements:

Carrying value of intangible exploration and evaluation assets:

Amounts carried under intangible exploration and evaluation assets represent active exploration projects. Capitalised costs will be written off to the income statement as exploration costs unless commercial reserves are established, or the determination process is not completed and there are no indications of impairment in accordance with the Group's accounting policy. The process of determining whether there is an indicator for impairment or calculating the impairment requires critical judgement. The key areas in which management has applied judgement are as follows: the Group's intention to proceed with a future work programme; the likelihood of licence renewal or extension; the assessment of whether sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale; and the success of a well result or geological or geophysical survey.

Identification of cash generating units (note 10):

In considering the carrying value of property, plant and equipment the Group has to make a critical judgement in relation to the identification of the smallest cash generating unit to which those assets are allocated.

The Israel development is one CGU, all the production from both the Karish Main and Karish North fields is processed through the FPSO and flows through one pipeline onto gas buyers and therefor there are no separate cash inflows.

NOTE 4: - Critical accounting estimates and judgments (Cont.)

2. Estimation uncertainty:

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities, are discussed below:

Carrying value of property, plant and equipment (note 10):

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an indicator of impairment exists, the recoverable amount (which is the higher of fair value less costs to sell and value in use) of the cash-generating unit to which the assets belong is then estimated based on the present value of future discounted cash flows.

For oil and gas assets, the expected future cash flow estimation is based on a number of factors, variables and assumptions, the most important of which are estimates of reserves, future production profiles, oil prices and costs. In most cases, the present value of future cash flows is most sensitive to estimates of future oil and gas price, estimates of reserves, estimates of development costs and discount rates.

A change in the assumptions could materially change the recoverable amount. In the event that future circumstances vary from these assumptions, the recoverable amount of the Group's development and production assets could change materially and result in impairment losses or the reversal of previous impairment losses.

Hydrocarbon reserve and resource estimates (Note 10, 11, 12 and 17):

The Company's oil and gas development and production properties are depreciated on a unit of production basis at a rate calculated by reference to developed and undeveloped proved and probable commercial reserves (2P developed and undeveloped) which are estimated to be recoverable with existing and future developed facilities using current operating methods, determined in accordance with the Petroleum Resources Management System published by the Society of Petroleum Engineers, the World Petroleum Congress and the American Association of Petroleum Geologists.
Commercial reserves are determined using estimates of oil and gas in place, recovery factors and future oil prices. The level of estimated commercial reserves is also a key determinant in assessing whether the carrying value of any of the Company's oil and gas properties has been impaired. As the economic assumptions used may change and as additional geological information is produced during the operation of a field, estimates of recoverable reserves may change.

Such changes may impact the Company's reported financial position and results which include:

• Depreciation and amortisation charges in profit or loss may change where such charges are determined using the units of production method, or where the useful life of the related assets change.

• Impairment charges in the income statement

• Provisions for decommissioning may change - where changes to the reserve estimates affect expectations about when such activities will occur and the associated cost of these activities.

• The recognition and carrying value of deferred tax assets may change due to changes in the judgements regarding the existence of such assets and in estimates of the likely recovery of such assets

Decommissioning liabilities (Note 17):

There is uncertainty around the cost of decommissioning as cost estimates can vary in response to many factors, including from changes to market rates for goods and services, to the relevant legal requirements, the emergence of new technology or experience at other assets. The expected timing, work scope, amount of expenditure, discount and inflation rates may also require estimation. Therefore, significant estimates and assumptions are made in determining the provision for decommissioning. The discount rate applied to determine the carrying amount of provisions provides a source of estimation uncertainty as referred to in IAS 1.

The estimated decommissioning costs are reviewed annually by management and the results of this review are then assessed alongside estimates from operators. Provision for environmental cleanup and remediation costs is based on current legal and contractual requirements, technology and price levels. Discount rate applied is reviewed regularly and adjusted following the changes in market rates.

NOTE 4: - Critical accounting estimates and judgments (Cont.)

The Group considers the impact of climate change on environmental restoration and decommissioning provisions, specifically the timing of future cash flows, and has concluded that it does not currently represent a key source of estimation uncertainty. Changes to legislation, including in relation to climate change, are factored into the provisions when the legislation becomes enacted.

Deferred taxes (Note 12):

The Group has recognised deferred tax assets in respect of losses and other temporary differences to the extent that it is probable that there will be future taxable profits against which the losses and other temporary differences can be utilised. The Group has considered their carrying value at each balance sheet date and concluded that based on management's estimates, sufficient taxable profits will be generated in future years to recover such recognised deferred tax assets. These estimates are based on forecast performance. The management regards the deferred tax asset in relation to tax losses and other temporary differences as recoverable, despite the loss-making situation that currently exists, based on its best estimate of future sources of taxable income.

NOTE 5: - Revenues

	2023 $'000	2022 $'000
Revenue from gas sales ⁽¹⁾	679,410	45,153
Revenue from hydrocarbon liquids sales ⁽²⁾	265,355	-
Compensation to customers ⁽³⁾	(4,929)	(18,031)
Total revenue	939,836	27,122

⁽¹) Sales gas for 2023 totaled approximately (4.4 bcm) and between 26 October 2022 and 31 December 2022 totaled approximately 0.28 bcm.

⁽²⁾ Sales from hydrocarbon liquids for 2023 totaled approximately 3.492 mmbbl (the Company did not sell hydrocarbon liquids during 2022).

⁽³⁾ During 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Company paid compensation to these counterparties following delays to the supply of gas from the Karish project. The compensation is deducted from revenue, as variable consideration, as the gas is delivered to the gas buyers, in accordance with IFRS 15 Revenue Recognition.

NOTE 6: - Operating profit (loss) before taxation

	2023 $'000	2022 $'000
(a) Cost of sales
Staff costs (Note 7)	9,766	1,174
Energy cost	3,652	1,030
Royalty payable (Note 21 (e))	167,179	8,128
Depreciation (Note 10)	185,884	10,976
Other operating costs ⁽⁴⁾	76,997	12,440
Oil stock movement (Note 14)	576	(2,731)
Total cost of sales	444,054	31,017
(b) General & administration expenses
Staff costs (Note 7)	3,163	2,121
Share-based payment charge (note 20)	730	214
Depreciation and amortisation (Note 10, 11)	1,837	459
Auditor fees ⁽³⁾	356	254
Other general & administration expenses ⁽²⁾	8,253	9,204
Total administrative expenses	14,339	12,252
(c) Exploration and evaluation expenses
Exploration costs written off ⁽¹⁾	-	1,518
Other exploration and evaluation expenses	50	301
Total exploration and evaluation expenses	50	1,819
(d) Other expenses
Loss from disposal of property, plant and equipment	190	1,102
Total other expenses	190	1,102
(e) Other income
Other income	37	54
Total other income	37	54

⁽¹⁾ Zone D: On 27 July 2022, the Company sent a formal notice to the Ministry of Energy notifying relinquishment of Zone D and discontinuation of related work. As such, the licences subsequently expired on 27 October 2022. Capitalised costs associated with Zone D were written off during 2022 (Note 11).

⁽²⁾ The Other general & administration expenses mainly consists of legal expenses, intercompany management fees and external advisors fees.

⁽³⁾ In addition to the services outlined in the preceding table, the Company's auditor also rendered services related to the senior secured notes issuance in 2023. These services were capitalized as transaction costs.

⁽⁴⁾ Other operating costs comprise of insurance costs and planned maintenance costs.

NOTE 7: - Staff costs

The average monthly number of employees employed by the Group was:

2023

$'000

2022

$'000

Average number of employees

			2023 $'000			2022 $'000
Wages and salaries		9,500		6,961
Bonuses	963				538
Expenses related to pension plans	2,699				1.396
Social insurance costs and other funds		906		575
Other staff costs	908				455
Share-based payments		730		410
Payroll Cost capitalised in oil & gas assets	(1,809)				(6,826)
Payroll Cost capitalised in intangible assets		(238)		-
		13,659		3,509
Total payroll cost in cost of sales		9,766		1,174
Total payroll cost in administration expenses		3,893		2,335
Total payroll cost		13,659		3,509

NOTE 8: - Net finance income/(expenses)

	2023 $'000	2022 $'000
Interest on Senior Secured Notes (Note 16)	161,918	136,412
Interest expense on long terms payables (Note 18(2))	7,159	14,660
Less amounts included in the cost of qualifying assets (Note 10(A))	(17,415)	(123,634)
	151,662	27,438
Finance and arrangement fees	3,855	4,713
Other finance costs and bank charges	1,403	1,118
Unwinding of discount on trade payable (Note 18(3))	8,753	-
Unwinding of discount on provision for decommissioning (Note 17)	3,401	1,230
Unwinding of discount on right of use asset (1)	636	1,035
Less amounts included in the cost of qualifying assets (Note 10(A))	(243)	(5,723)
	17,805	2,373
Total finance costs	169,467	29,811
Interest income from time deposits	11,319	3,165
Interest income from loans to related parties (Note 22(E)(3))	-	3,214
Total finance income	11,319	6,379
Net foreign exchange losses	(8,483)	(3,087)
Net finance costs	(166,631)	(26,519)

NOTE 9: - Taxation

1. Corporate Tax rates applicable to the Company:

Israel:

The Israeli corporate tax rate is 23% in 2023 and 2022.

Cyprus:

For its activity in Cyprus, the Company is subject to corporation tax on its taxable profits at the rate of 12.5%.

Starting from 1 January 2024, the company's control and management shall be transferred from the Republic of Cyprus ("Cyprus") to the United Kingdom ("UK") and as such the company's tax residency will be migrated from Cyprus to UK. See Note 24.

2. The Income and Natural Resources Taxation Law, 5771-2011 - Israel- the main provisions of the law are as follows:

In April 2011, the Knesset passed the Income and Natural Resources Tax Law, 5771-2011 ("the Law"). The imposition of an oil and gas profits levy at a rate to be set as set out below. The rate of the levy will be calculated according to a proposed R factor mechanism, according to the ratio between the net accrued revenues from the project and the cumulative investments as defined in the law. A minimum levy of 20% will be levied at the stage where the R factor ratio reaches 1.5, and when the ratio increases, the levy will increase gradually until the maximum rate of 50% until the ratio reaches 2.3. In addition, it was determined that the rate of the levy as stated will be reduced starting in 2017 by multiplying 0.64 by the difference between the corporate tax rate prescribed in section 126 of the Income Tax Ordinance for each tax year and the tax rate of 18%. In accordance with the corporate tax rate from 2018 onwards, the maximum rate will be 46.8%.

In addition, additional provisions were prescribed regarding the levy, inter alia, the levy will be recognised as an expense for the purpose of calculating income tax; The limits of the levy shall not include export facilities; The levy will be calculated and imposed for each reservoir separately (Ring Fencing); Payment by the owner of an oil right calculated as a percentage of the oil produced, the recipient of the payment will be liable to pay a levy according to the amount of the payment received, and this amount will be subtracted from the amount of the levy owed by the holder of the oil right. The law also sets rules for the unification or separation or consolidation of oil projects for the purposes of the Law. In accordance with the provisions of the Law, the Group is not yet required to pay any payment in respect of the said levy, and therefore no liability has been recognised in the financial statements in respect of this payment.

3. Taxation charge:

	2023 $'000	2022 $'000
Current income tax charge	(1,929)	(360)
Deferred tax relating to origination and reversal of temporary differences (Note 12)	(69,871)	11,311
Total taxation income (expense)	(71,800)	10,951

NOTE 9: - Taxation (Cont.)

4. Reconciliation of the total tax charge:

The reconciliation between the tax expense, assuming that all the income, expenses, gains and losses in profit or loss were taxed at the statutory tax rate of Israel and the taxes on income recorded in profit or loss is as follows:

	2023 $'000	2022 $'000
Profit (loss) before tax	314,609	(45,533)
Tax credit at the applicable tax rates of 23% ⁽¹⁾	(72,360)	10,473
Impact of different tax rates ⁽²⁾	8	331
Temporary differences in respect of different tax recognition, resulting in timing differences	764	-
Permanent differences - non deductible ⁽³⁾	(174)	(137)
Permanent differences additional expenses for Cyprus tax ⁽⁴⁾	-	314
Other adjustments	(38)	(19)
Taxation income	(71,800)	10,962
Effective tax rate	23%	24%

¹⁾ For the reconciliation of the effective tax rate, the statutory tax rate of the Israeli Branch of 23% has been used.

²⁾ Energean Israel Limited (Cyprus) is subject to corporation tax rate of 12.5%.

³⁾ Permanent differences consisted of non-deductible expenses with the majority derived from the Israeli Branch and, inter alia, related to refreshments, accommodation, donations and travelling.

⁴⁾ The Cypriot Income Tax Law (ITL) provides for a notional interest deduction (NID) from the taxable profits of entities financing their operations through new equity. In view of this, the Company proceeded with the relevant calculation regarding the new equity used to finance asset.

NOTE 10: - Property, Plant and Equipment

a. Composition:

	Oil and gas Assets $'000	Leased assets $'000	Furniture, fixtures and equipment $'000	Total $'000
Cost:
At 1 January 2022	2,241,783	4,009	829	2,246,621
Additions	514,373	731	1,165	516,269
Disposals	(900)	-	-	(900)
Capitalised borrowing cost	129,357	-	-	129,357
Capitalised depreciation	632	-	-	632
Change in decommissioning provision	47,544	-	-	47,544
Total cost at 31 December 2022	2,932,789	4,740	1,994	2,939,523
Additions	135,126	12,246	396	147,768
Handover to INGL⁽¹⁾	(111,448)	-	-	(111,448)
Capitalised borrowing cost	17,658	-	-	17,658
Change in decommissioning provision	4,913	-	-	4,913
Total cost at 31 December 2023	2,979,038	16,986	2,390	2,998,414

Depreciation:
At 1 January 2022	433	693	228	1,354
Charge for the year	10,976	134	297	11,407
Capitalised to petroleum and gas assets	-	632	-	632
Disposals	(433)	-	-	(433)
Write down of the assets	250	-	-	250
Total Depreciation at 31 December 2022	11,226	1,459	525	13,210
Charge for the year	183,898	2,966	509	187,373
Total Depreciation at 31 December 2023	195,124	4,425	1,034	200,583

At 31 December 2022	2,921,563	3,281	1,469	2,926,313
At 31 December 2023	2,783,914	12,561	1,356	2,797,831

The additions to oil & gas assets in 2023 are primarily due to development costs for the FPSO, Karish North and 2^nd Oil Train. The additions in 2022 are primarily due to development costs for the Karish field, incurred under the EPCIC contract, FPSO, subsea and onshore construction.

⁽¹⁾ Handover to INGL took place on 22 March 2023, please refer to Note 18(4).

b. Depreciation expense for the year has been recognised as follows:

	2023 $'000	2022 $'000
Cost of sales	185,884	10,976
Administration expenses	1,489	431
Capitalised depreciation in oil & gas assets	-	632
Total	187,373	12,039

NOTE 10: - Property, Plant and Equipment (Cont.)

c. Cash flow statement reconciliations:

		2023 $'000		2022 $'000
Additions and disposals to property, plant and equipment, net	58,891		692,902
Associated cash flows
Payments and receipts for additions to property, plant and equipment, net	(156,414)		(278,396)
Non-cash movements/presented in other cash flow lines
Capitalised borrowing costs	(17,658)		(129,357)
Right-of-use asset additions	(12,246)		(731)
INGL hand over	111,448		-
Capitalised share-based payment charge	-		(196)
Capitalised depreciation	-		(632)
Change in decommissioning provision	(4,913)		(47,544)
Lease payments related to capital activities	3,321		1,085
Movement in working capital	17,571		(237,131)

d. Details of the Group's rights in petroleum and gas assets are presented in note 1.

NOTE 11: - Intangible Assets

a. Composition:

	Exploration and evaluation assets $'000	Software licences $'000	Total $'000
Cost:
At 1 January 2022	20,141	255	20,396
Additions	123,005	1,713	124,718
Write off of exploration and evaluation costs ⁽¹⁾	(1,277)	-	(1,277)
At 1 January 2023	141,869	1,968	143,837
Additions	24,597	362	24,959
At 31 December 2023	166,466	2,330	168,796
Amortisation:
At 1 January 2022	-	255	255
Charge for the year	-	28	28
Total Amortisation at 31 December 2022	-	283	283
Charge for the year	-	348	348
Total Amortisation at 31 December 2023	-	631	631

At 31 December 2022	141,869	1,685	143,554
At 31 December 2023	166,466	1,699	168,165

Additions to exploration and evaluation assets are primarily related to the growth drilling programme undertaken offshore Israel and related to Katlan.

NOTE 11: - Intangible Assets (Cont.)

Block 12 ("Katlan") offshore Israel - Gas Discovery:

During 2022 the Company's growth drilling programme discovered gas in Block 12, offshore Israel. Successful exploration wells were drilled into the Athena and Zeus prospects, resulting in the award of 2P reserves by Energean's reserve auditor, D&M. The Hera prospect shared sufficient geological and seismic attributes to also be classified as 2P reserves. As a result, and in accordance with the Company's Competent Person's Report ("CPR") as of 31 December 2023, Block 12 is estimated to contain 2P reserves of 31.9 bcm and 5.4 mmboe of hydrocarbon liquids. Energean expects to take FID upon the finalisation of EPC ("Engineering, Procurement and Construction") terms, which are currently under negotiation.

⁽¹⁾ 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.

b. Cash flow statement reconciliations:

	2023 $'000	2022 $'000
Additions to intangible assets	24,959	123,441
Associated cash flows
Payment for additions to intangible assets	(98,909)	(50,332)
Non-cash movements/presented in other cash flow lines
Write off of exploration and evaluation costs	-	1,277
Movement in working capital	73,950	(74,386)

c. Details on the Group's rights in the intangible assets:

Right	Type of right	Valid date of the right	Group's interest as at 31 December 2023
Block 12	Licence	13 January 2025	100%
Block 21	Licence	13 January 2025	100%
Block 23	Licence	13 January 2025	100%
Block 31	Licence	13 January 2025	100%

d. Additional information regarding the Exploration and Evaluation assets:

As of 31 December 2023, the Group held four licences to explore for gas and oil in Block 12, Block 21, Block 23 and Block 31, which are located in the economic waters of the State of Israel. On January 2024 the licences were extended until 13 January 2025, and they may be extended for a further one year.

NOTE 12: - Deferred taxes

The Group is subject to corporation tax on its taxable profits in Israel at the rate of 23%. The Capital Gain Tax rates depends on the purchase date and the nature of asset. The general capital tax rate for a corporation is the standard corporate tax rate.

Tax losses can be utilised for an unlimited period, and tax losses may not be carried back.

According to Income Tax (Deductions from Income of Oil Rights Holders) Regulations, 5716-1956, the exploration and evaluation expenses of oil and gas assets are deductible in the year in which they are incurred.

The Group expects that there will be sufficient taxable profit in the following years and that deferred tax assets, recognised in the consolidated financial statements of the Group, will be recovered.

NOTE 12: - Deferred taxes (Cont.)

Below are the items for which deferred taxes were recognised:

	Property, plant and equipment & intangible assets $'000	Right of use asset IFRS 16 $'000	Tax losses $'000	Deferred expenses for tax $'000	Staff leaving indemnities $'000	Accrued expenses and other short‑term liabilities and other long‑term liabilities $'000	Decommissioning provision $'000	Total $'000
At 1 January 2023	(40,344)	(754)	56,415	6,209	167	1,193	-	22,886
Increase/(decrease) for the year through:
Profit or loss	(20,706)	(2,134)	(47,432)	(2,127)	170	2,358	-	(69,871)
At 31 December 2023	(61,050)	(2,888)	8,983	4,082	337	3,551	-	(46,985)
At 1 January 2022	(12,632)	(762)	4,750	11,031	94	923	8,171	11,575
Increase/(decrease) for the year through:
Profit or loss	(27,712)	8	51,665	(4,822)	73	270	(8,171)	11,311
At 31 December 2022	(40,344)	(754)	56,415	6,209	167	1,193	-	22,886

	2023 $'000	2022 $'000
Deferred tax liabilities	(63,938)	(41,098)
Deferred tax assets	16,953	63,984
	(46,985)	22,886

NOTE 13: - Trade and other receivables

	2023 $'000	2022 $'000
Current
Financial items Trade receivables
Trade receivables	114,139	37,491
Other receivables ⁽¹⁾	6,994	999
Refundable VAT	1,196	37,131
	122,329	75,621
Non-financial items
Accrued interest income	1,015	888
Prepayments	461	159
Deferred expenses ⁽²⁾	-	4,929
Prepaid expenses	6,330	1,014
	7,806	6,990
Total current trade and other receivables	130,135	82,611
Non-current
Non-financial items
Prepaid expenses	4,852	-
Deposits and prepayments	513	108
Total non-current trade and other receivables	5,365	108

⁽¹⁾ Other receivables mainly comprise the consideration receivable from INGL as discussed in Note 18(4).

⁽²⁾ Deferred expenses relate to compensation to gas buyers following delays to the supply of gas from the Karish project. This compensation is treated as variable consideration under IFRS 15 Revenue Recognition and therefore, reduced from gas sales following commencement of production, please refer also Note 5.

The table below summarises the maturity profile of the Group receivables:

31 December 2023 ($'000)	Carrying amounts	Contractual cash flows	3 months or less	3-12 months
Trade receivables	114,139	114,139	114,139	-
Refundable VAT and excise	1,196	1,196	1,196	-
Short term other receivables	6,994	6,994	1,930	5,064
Total	122,329	122,329	117,265	5,064

31 December 2022 ($'000)	Carrying amounts	Contractual cash flows	3 months or less	3-12 months
Short term trade and other receivables	37,491	37,491	37,491	-
Refundable VAT and excise	37,131	37,131	19,113	18,018
Short term other receivables	999	999	999	-
Total	75,621	75,621	57,603	18,018

NOTE 14: - Inventories

	2023 $'000	2022 $'000
Hydrocarbon liquids	1,685	2,367
Natural gas	553	383
Raw materials and supplies	4,903	5,563
Total	7,141	8,313

NOTE 15: - Cash and cash equivalents

	2023 $'000	2022 $'000
Cash at bank and in hand	264,143	14,825
Banks short-term deposits	22,482	10,000
Total	286,625	24,825

Bank deposits comprise short-term deposit accounts that are readily convertible into known amounts of cash. The effective interest rate on short‑term bank deposits was 4.585% for the year ended 31 December 2023 (year ended 31 December 2022: 1.115% %).

NOTE 16: - Senior secured notes

a. 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 proceeds were primarily used to prepay in full the Project Finance Facility.

On 11 July 2023, Energean Israel Finance Ltd. Ltd completed the offering of US$750 million aggregate principal amount of senior secured notes with a fixed annual interest rate of 8.500%. The funds were released from escrow in September 2023 and were used to repay Energean Israel's $625 million notes due in March 2024 and pay fees and expenses associated with this refinancing, contribute towards funding the interest payment reserve account, and contribute towards the payment of the final deferred consideration to Kerogen.

The Notes were issued in four equal tranches as follows:

Series	Maturity	Annual fixed Interest rate	31 December 2023 Carrying value $'000	31 December 2022 Carrying value $'000
US$ 625 million	30 March 2024	4.500%	-	620,461
US$ 625 million	30 March 2026	4.875%	619,932	617,912
US$ 625 million	30 March 2028	5.375%	618,145	616,767
US$ 625 million	30 March 2031	5.875%	616,762	615,890
US$ 750 million	30 September 2033	8.5%	733,653	-
US$2,625 million			2,588,492	2,471,030

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 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.

NOTE 16: - Senior secured notes (Cont.)

Collateral:

The Company has provided/undertakes to provide the following collateral in favor of the Trustee:

a. 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, insurance policies, the Company's exploration licences and the INGL Agreement.

b. Floating charge over all of the present and future assets of Energean Israel Limited and Energean Israel Finance Ltd.

c. The Energean Power FPSO.

Restricted cash:

As of 31 December 2023, the Company had short-term restricted cash of US$22.48 million (31 December 2022: US$71.8 million), which will be used for the March 2024 interest payment.

Credit rating:

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

NOTE 16: - Senior secured notes (Cont.)

b. Reconciliation of liabilities arising from financing activities:

	1 January	Cash outflows	Cash inflows	Additions	Borrowings costs including amortisation of arrangement fee	Foreign exchange impact		Reclassification to short term	31 December
2023 ($'000)	2,526,869	(788,205)	750,000	12,260	170,487	17		(23,184)	2,648,244
Senior secured notes	2,471,030	(771,539)	750,000	-	162,185	-		(23,184)	2,588,492
Lease liabilities	4,006	(3,321)	-	12,260	636	17		-	13,598
Deferred licence payments ⁽¹⁾	51,833	(13,345)	-	-	7,666	-		-	46,154
2022 ($'000)	2,523,968	(142,342)	-	731	144,412	100		-	2,526,869
Senior secured notes	2,463,524	)128,906)	-	-	136,412	-		-	2,471,030
Lease liabilities	3,214	(1,085)	-	731	1,046		100	-	4,006
Deferred licence payments (1)	57,230	(12,351)	-	-	6,954		-	-	51,833

⁽¹⁾ Cash outflows relate to finance costs paid for deferred licence payments of approximately US$2,496 thousands in 2023 and US$1,501 thousand in 2022 and payment for purchase of oil & gas leases of US$10,850 thousand in 2023 and 2022, which are included in the cash flows from financing and investing activities respectively, in the Consolidated Statement of Cash Flows.

NOTE 17: - Decommissioning provisions

	2023 $'000	2022 $'000
At 1 January	84,299	35,525
New provisions	4,913	56,803
Changes in estimates	-	(9,259)
Unwinding of discount	3,401	1,230
At 31 December	92,613	84,299
Current provisions	-	-
Non-current provisions	92,613	84,299

As of 31 December 2023, the decommissioning provision represents the present value of decommissioning costs relating to the four wells for Karish, Karish North and subsea infrastructure.

The decommissioning provision represents the present value of decommissioning costs relating to oil and gas properties, which are expected to be incurred up to 2044, when the producing oil and gas properties are expected to cease operations. These provisions have been created based on the Group's internal estimates. Assumptions based on the current economic environment have been made, which management believes form a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required that will reflect market conditions at the relevant time.

Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This, in turn, will depend upon future oil and gas prices, which are inherently uncertain.

The discount rate applied at 31 December 2023 is 4.18% (31 December 2022: 4.15%).

Depreciation is based on the depletion method upon commercial production.

NOTE 18: - Trade and other payables

	2023 $'000		2022 $'000
Current
Financial items
Trade accounts payable ⁽¹⁾	97,350		209,853
Payables to related parties (Note 22)	19,023		21,028
Deferred licence payments due within one year ⁽²⁾	46,154		13,345
Other creditors ⁽⁵⁾	32,034		6,712
Income taxes	1,585		6
Short term lease liabilities	4,718		1,792
	200,864		252,736
Non-financial items
Accrued expenses ⁽¹⁾	16,765		29,404
Other finance costs accrued	55,411		32,227
Contract liability ⁽⁴⁾	-		56,230
Social insurance and other taxes	542		502
	72,718		118,363
Total current trade and other payables	273,582		371,099
Non-current
Financial items
Trade and other payables ⁽³⁾		117,796	169,360
Deferred licence payments ⁽²⁾		-	38,488
Long term lease liabilities		8,880	2,214
		126,676	210,062
Non-financial items
Accrued expenses to related parties		368	179
		368	179
Total non-current trade and other payables		127,044	210,241

⁽¹⁾ Trade payables and accrued expenses relate primarily to development expenditure on the Karish project, with the main contributors being mainly FPSO, Karish North, Second oil train. Trade payables are non-interest bearing.

⁽²⁾ In December 2016, Energean Israel acquired the Karish and Tanin offshore gas fields for $40.0 million closing payment with an obligation to pay additional consideration of $108.5 million plus interest inflated at an annual rate of 4.6% in ten equal annual payments. A settlement agreement was signed on November 2023, whereby it was agreed that the final amount owed would be paid in two instalments in March ($30.0 million) and May 2024 ($17.4 million). As at 31 December 2023 the total discounted deferred consideration was $46.2 million (as at 31 December 2022: $51.8 million).

⁽³⁾ The amount represents a long-term amount payable in terms of the EPCIC contract. Following the amendment to the terms of the deferred payment agreement with Technip signed in February 2024 the remaining amount payable under the EPCIC contract has been reduced to $210 million. The amount is payable in twelve equal quarterly deferred payments starting in March and therefore has been discounted at 8.668%. p.a. (being the yield rate of the senior secured loan notes, maturing in 2026, at the date of agreeing the payment terms).

NOTE 18: - Trade and other payables (Cont.)

⁽⁴⁾ The contract liability relates to the agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "Hand Over") of the near shore and onshore segments of the infrastructure that delivers gas from the Energean Power FPSO into the Israeli national gas transmission grid. The Hand Over became effective in March 2023. Following the Hand Over, INGL is responsible for the operations and maintenance of this part of the infrastructure and the related asset (refer to Note 10) and contract liability was derecognised. The final consideration ($7million) is receivable within 12 months of handover and is recognised within other receivables (refer to Note 13(1)).

⁽⁵⁾ The amount comprise mainly royalties payables including $12.1 million (2022:$2.5 million) of royalties payable to third parties. Contractual royalties are payable to NewMed (previously Delek Drilling) and third-party holders at a total rate of 7.5%, increasing to 8.25% (with such increase expected in 2026 for the Karish lease) after the date at which the lease in question starts to pay the Oil Levy. The royalty payable to NewMed under the SPA is calculated on the value of the total amount of natural gas and condensate produced at the wellhead without any deduction (except for natural gas and Petroleum (as defined under the Petroleum Law) used in the production process). No contractual royalties under the SPA will be payable on future discoveries that were not part of the original acquisition of the Karish and Tanin leases. Royalties under the SPA are deductible for corporate tax and for the Oil Levy tax base.

NOTE 19: - Equity

a. Share capital:

	31 December 2023		31 December 2022
	Number of shares	US$	Number of shares	US$
Authorised, issued and fully paid
Ordinary A shares of US$1 each	1,708,415	1,708,415	1,708,415	1,708,415

b. Shares rights:

An ordinary share gives the shareholder the right to vote on matters put before all of the shareholders of the Company. One share equals one vote. An ordinary share also provides the shareholder with the right to receive a share of the Company's profits by way of dividends.

c. 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.

d. Interim dividend

An interim dividend of US$97.5 million was declared and paid during 2023.

NOTE 20: - Share-based payment

Analysis of share-based payment charge:

	2023 $'000	2022 $'000
Energean 2018 Long Term Incentive Plan	548	329
Energean Deferred Share Bonus Plan	182	81
Total share-based payment charge	730	410
Capitalised to property, plant and equipment assets	-	196
Expensed as administration expenses	730	214
Total share-based payment charge	730	410

NOTE 20: - Share-based payment (Cont.)

Energean plc's 2018 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. Awards are subject to performance conditions including Total Shareholder Return (TSR) normally measured over a period of three years. Vesting of awards 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 plc'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 as the Energean plc 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 31 December 2023 was 1.32 years, (31 December 2022: 1.22 years).

All amounts related to share-based payments are recognised as liabilities, because Energean plc charges the Group, using the share price at grant date, for the shares issued upon vesting.

Deferred Share Bonus Plan (DSBP)

Under the DSBP, a portion of any annual bonus of a senior executive may be deferred into shares.

Deferred awards are usually granted in the form of conditional share awards. 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 31 December 2023 was 0.76 year, (31 December 2022 was 0.8 year).

All the amount related to share-based payment is recognised as liability since Energean plc charges the Group, using the share price at grant date, for the shares issued upon vesting.

NOTE 21: - Material engagements, commitments and contingencies

a. Material engagements:

Gas Sales Agreements - Energean signed in 2023 spot gas sale and purchase agreements with four Israeli gas buyers. The gas price and amounts are determined on a "spot" basis, with no firm commitment by Energean to supply gas. These agreements are in force for one year and are automatically extended for additional periods of one year each, unless terminated by the parties.

b. Performance guarantees:

2023

$'000

2022

$'000

Performance guarantees - see Note 21(C)

53,006

97,572

1. Letter of Credit Facility Agreement - In 2021, the Company signed with a banking corporation a 355 million ILS (approx. US$101 million) facility for issuing bank guarantees for its operations in Israel. The facility term ended in April 2023. The facility beard interest of 1.5% for drawn amounts and 0.8% commitment fee for undrawn amounts. The banking corporation security is a US$112 million PCG granted by Energean plc and cash collateral of US$2.96 million. On 23 July 2023 an extension to the Guarantee Facility Agreement was signed among Energean Israel Limited, Energean Israel Finance LTD and Bank Hapoalim for the period until 30 June 2024 with interest of 1.5% for drawn amounts and 0.8% commitment fee for undrawn amounts. The agreement included a $70Mmillions Guarantee Facility by Bank Hapoalim backed by $70 million Parent Company Guarantee by Energean PLC.

NOTE 21: - Material engagements, commitments and contingencies (Cont.)

2. Karish and Tanin Leases- As part of the requirements of the Karish and Tanin Lease deeds, the Group provided the Israeli Ministry of National Infrastructures, Energy and Water with bank guarantees in the amount of US$15 million for Karish and US$10 million for Tanin. These Bank guarantees are in force until June 2024.

Exploration blocks (Blocks 12, 21, 23 and 31)- As part of the requirements of the exploration and appraisal licences which were granted to the Group, the Group provided the Israeli Ministry of National Infrastructures, Energy and Water bank guarantees for the drilling in the amount of US$6 million for all blocks. The bank guarantees are in force until January 2025.

3. Blocks 12, 23 and 31 Drilling guaranties - As part of the requirements of the exploration and appraisal licences which granted to the Group, the Group provided the Israeli Ministry of National Infrastructures, Energy and Water bank guarantees for the drilling in the amount of US$15 million for all blocks. The bank guarantee for Block 12 is valid until Nov 2024 and the bank guarantees for Block 23&31 are in force until May 2024.

4. Israeli Natural Gas Lines ("INGL") - As of 31 December 2023 a bank guarantee for the warranty period was issued in total of ILS 9.213M (approx. US$2.5 million) and is valid until July 2024.

5. Other - As part of the ongoing operations in Israel, the Group provided as of 31 December 2023 various bank guarantees to third parties and Israel Custom Authority in Israel which amounted approx. US$4.5 million. The main bank guarantees are in force until the end of the first half of 2024, the remaining bank guarantees are in force until the end of the third quarter of 2024.

NOTE 22: - Related parties

a. As of 31 December 2023, the Group's ordinary shares are owned 100% by Energean E&P Holdings Limited, incorporated in Cyprus.

b. Details of related parties:

Name	Country of incorporation / registered office	Principal activities	Relationship as of 31 December 2023	Relationship as of 31 December 2022
Energean plc	44 Baker Street, London W1U 7AL, United Kingdom	Holding company	Ultimate Parent company	Ultimate Parent company
Energean E&P Holdings Ltd	22 Lefkonos Street, 2064 Nicosia, Cyprus	Holding Company	Parent company	Parent company
Energean Oil & Gas S.A.	32 Kifissias Ave. 151 25 Marousi Athens, Greece	Oil and gas exploration, development and production	Sister company	Sister company
Energean Egypt Limited	22 Lefkonos Street, 2064 Nicosia, Cyprus	Oil and gas exploration, development and production	Sister company	Sister company
Energean International Limited	22 Lefkonos Street, 2064 Nicosia, Cyprus	Oil and gas exploration, development and production	Sister company	Sister company
Energean Italy S.p.a.	31 Foro Buonaparte, 20121 Milano, Italy	Oil and gas exploration, development and production	Sister company	Sister company
Energean Capital Ltd	22 Lefkonos Street, 2064 Strovolos, Nicosia, Cyprus	Holding of investments and management services	Sister company	Sister company

Energean Group Services Limited	44 Baker Street, London W1U 7AL, United Kingdom	Oil and gas exploration, development and production	Sister company	Sister company
Energean Israel Transmission LTD	121, Menachem Begin St. Azrieli Sarona Tower, POB 24, Tel Aviv 67012039 Israel	Gas transportation licence holder	Subsidiary 100%	Subsidiary 100%
Energean Israel Finance Ltd	121, Menachem Begin St. Azrieli Sarona Tower, POB 24, Tel Aviv 67012039 Israel	Financing activities	Subsidiary 100%	Subsidiary 100%
Prime Marine Energy Inc	Trust Company Complex, Ajeltake Roa, Majuro, MH96960, MH (Marshall Islands)	Construction of field support vessel	A company controlled by a non-executive director and shareholder of Energean plc	A company controlled by a non-executive director and shareholder of Energean plc
Egypt Energy Services JSC	Cairo, Egypt	Oil and gas exploration, development and production	Sister company	Sister company

NOTE 22: - Related parties (Cont.)

c. Balances with related parties:

	Nature of balance	2023 $'000	2022 $'000
In current liabilities:
Payables to related parties - Note 18:
Energean plc (the ultimate parent company)	Trading	(4,299)	(5,311)
Energean Oil & Gas S.A (under common control)	Trading	(6,118)	(1,911)
Energean International UK branch (under common control)	Trading	(33)	(949)
Energean Group Services (under common control)	Trading	(4,044)	(3)
Energean E&P Holdings Limited (controlling party)	Trading	(1,386)	(8,058)
Energean International Limited (under common control)	Trading	(286)	(164)
Energean Capital Limited (controlling party)	Trading	(960)	(70)
Energean Italy SPA (under common control)	Trading	(2,865)	(4,949)
Energean plc (the ultimate parent company)	Share based payments	(699)	-
Energean Egypt Ltd.	Trading	-	(6,951)
		(20,690)	(28,366)
In non-current liabilities:
Accrued expenses to related parties - Note 18:
Energean plc (the ultimate parent company)	Share based payments	(360)	(182)

NOTE 22: - Related parties (Cont.)

d. Transactions with related parties:

	2023 $'000	2022 $'000
Service received in connection with the oil and gas assets:
Related companies	3,083	8,853
Ultimate and parent company	3,197	8,303
Other related party - Prime Marine Energy Inc see Note 22(E)(2)	-	8,060
	6,280	25,216
Service received in connection with the intangible assets:
Related companies	3,957	1,858
Ultimate and parent company	2,585	-
	6,542	1,858
Service received in connection with senior secure notes:
Ultimate and parent company	1,246	-
Related companies	296	-
	1,542	-
Service received in connection with borrowings:
Related companies	1,262	-
Ultimate and parent company	2,855	2,749
	4,117	2,749
Service received in connection with cost of sales:
Related companies	1,348	-
Ultimate and parent company	263	-
	1,611	-
In administrative expenses:
Related companies	406	1,687
Ultimate and parent company	725	2,512
	1,131	4,199
In prepaid:
Ultimate and parent company	-	199

e. Additional information:

1. The Group and related companies of Energean Group entered into an agreement for the provision of consulting services which includes administrative, technical, finance and commercial matters for the development of the Karish and Tanin reservoirs. The consideration for the said services and the respective balances presented above at Note 22 (C) and 22 (D).

2. During 2020 Energean Israel, purchased a Field Support Vessel ("FSV") from Prime Marine Energy Inc a company controlled by a non-executive director and shareholder of Energean plc.

The FSV provides 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 enhances 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. The FSV is in place supporting the various activities in Israel since Q3 2023.

NOTE 22: - Related parties (Cont.)

3. On 29 April 2021 and in accordance with the Senior Secured Notes financing documents, the Company and its parent company Energean E&P Holdings Limited entered into a loan agreement which established that the Company will provide a loan facility of up to US$500 million to Energean E&P Holdings Limited for a period of 24 months, The loan and interest (which was determined upon market conditions) will be paid at the maturity date. Notwithstanding the above, Energean E&P Holdings Limited may, at its discretion, repay the loan, in whole or in part, at any time before 28 April 2023. As of 31 December 2021, US$346 million was loaned to Energean E&P Holdings Limited which was settled in April 2022 as part of the Company share premium reduction. See also Note 19.

f. Parent Company Guarantees (PCG):

1. Under the Karish EPCIC. Energean plc provided a PCG dated 27 July 2018, guaranteeing the deferred payment obligations of Energean Israel Limited under the contract which were amounted to US$250 million which was subsequently reduced to US$210 million.

2. Purchase Karish and Tanin rights - In order to secure the payments to the sellers, Energean E&P Holdings Limited, the Parent company, granted a corporate guarantee to the sellers.

3. As part of a GSPA the Company signed, to secure the agreement obligations to certain gas buyers, Energean E&P Holdings Limited, the Parent company, granted a corporate guarantee to certain gas buyers amounting to US$ 38 million, the parent company guarantee will be in force till June 2024 and from that date reduced to US$ 10 million.

4. As part of the banking corporation security of the Letter of Credit Facility Agreement Energean plc granted a PCG of US$70 million. The parent company guarantee will be in force until June 2024.

NOTE 23: - Financial Instruments

Financial risk management objectives

The Group is exposed to market price risk which comprises: foreign currency risk, credit risk, liquidity risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:

a. Foreign exchange risk:

The Group is exposed to foreign exchange risk as it undertakes operations in various foreign currencies. The key sources of the risk are attributed to the fact that the Group has certain financial assets (mainly other receivables and cash and cash equivalents) and financial liabilities (mainly trade and other payable) with different currencies than the functional currency of the Group, mainly Israeli Shekel (ILS) United Kingdom Pound Sterling (GBP) and Euro.

The Group's exposure to foreign currency risk at each reporting date is shown in the table below. The amounts shown are the US$ equivalent of the foreign currency amounts.

	Liabilities		Assets
	2023 $'000	2022 $'000	2023 $'000	2022 $'000
Israeli New Shekel (ILS)	7,874	9,354	30,441	19,383
United Kingdom Pound (GBP)	28,252	35,905	1,532	1,783
Euro	41,224	28,178	2,279	1,709
Norwegian Krone (NOK)	*	7,956	*	22
Total	77,350	81,393	34,252	22,897

NOTE 23: - Financial Instruments (Cont.)

The following table reflects the sensitivity analysis for profit and loss result for the year and the equity, taking into consideration for the periods presented foreign exchange variation by +/- 10%.

	ILS		GBP		EURO		NOK
	Variation		Variation		Variation		Variation
	10%	-10%	10%	-10%	10%	-10%	10%	-10%
31 December 2023 ($'000)
Profit (loss) before tax	2,242	(2,052)	(2,672)	2,429	(3,894)	3,540	*	*
Equity	1,727	(1,580)	(2,057)	1,870	(2,999)	2,726	*	*
31 December 2022 ($'000)
Profit (loss) before tax	1,003	(912)	(3,412)	3,102	(2,647)	2,406	(793)	721
Equity	772	(702)	(2,627)	2,389	(2,038)	1,853	(611)	555

* Not material in 2023.

b. Credit risk:

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Group has policies in place to ensure that all of its transactions giving rise to credit risk are made with parties having an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables.

Also, the Group has policies to limit the amount of credit exposure to any banking institution, considering among other factors the credit ratings of the banks with which deposits are held. Credit quality information in relation to those banks is provided below.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date, without taking account of any collateral obtained, was:

	2023 $'000	2022 $'000
Restricted cash	22,482	71,778
Trade and other receivables	122,329	75,621
Cash and cash equivalents and bank deposits	286,625	24,825
	431,436	172,224

Credit quality of cash equivalents and bank deposits:

The credit quality of the banks in which the Group keeps its deposits is assessed by reference to the credit rating of these banks. Moody's credit ratings of the corresponding banks in which the Group keeps its deposits are as follows:

	2023 $'000	2022 $'000
A1	3	43
A3	286,615	24,767
Baa3	7	-
B1	-	15
Total	286,625	24,825

The Company has assessed the recoverability of all cash balances and believes they are carried within the Consolidated Statement of Financial Position at amounts not materially different to their fair value.

NOTE 23: - Financial Instruments (Cont.)

c. Liquidity risk:

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The Group has procedures with the object of minimizing this risk such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

The following tables detail the Group's remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

The Group manages its liquidity risk by ongoing monitoring of its cash flows. Group management prepares budgets and regular cash flow forecasts and takes appropriately actions to ensure available cash balances.

On 24 March 2021, Energean Israel Finance Ltd (a subsidiary of the Company, held 100%) issued US$2.5 billion senior secured notes.

On 11 July 2023, Energean Israel Finance Ltd completed the offering of US$750 million aggregate principal amount of senior secured notes and repaid Energean Israel's US$625 million notes due in March 2024, bringing the total amount of the senior secured notes to US$2,625 million.

	Carrying amounts	Contractual cash flows	3 months or less	3-12 months	1-2 years	2-5 years	More than 5 years
31 December 2023 ($'000)	2,916,032	4,135,421	228,708	156,284	1,086,808	876,716	1,786,905
Senior secured notes ⁽¹⁾	2,588,492	3,779,469	96,500	82,266	938,828	876,328	1,785,547
Lease liabilities	13,598	15,223	1,379	4,118	7,980	388	1,358
Deferred license payments ⁽²)	46,154	47,400	30,000	17,400	-	-	-
Trade and other payables - long term	117,796	140,000	-	-	140,000	-	-
Trade and other payables - short term	149,992	153,329	100,829	52,500	-	-	-
31 December 2022 ($'000)	2,933,822	3,637,663	285,838	96,432	980,142	878,386	1,396,865
Senior secured notes ⁽¹⁾	2,471,030	3,145,703	64,453	64,453	840,625	780,859	1,395,313
Lease liabilities	4,006	4,883	283	729	1,666	653	1,552
Deferred license payments ⁽²	51,833	61,741	13,345	-	12,851	35,545	-
Trade and other payables - long term	169,360	186,329	-	-	125,000	61,329	-
Trade and other payables - short term	237,593	239,007	207,757	31,250	-	-	-

⁽¹⁾ As of 31 December 2023, include short term accrued interest of US$55,411 (31 December 2022: US$32,227). See Note 18.

⁽²⁾ Includes commitment to Karish and Tanin sellers, for more information see Note 18(2)).

d. Capital risk management:

Capital includes equity shares and share premium. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions, in order to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group's overall objectives, policies and processes remained unchanged from last year.

NOTE 23: - Financial Instruments (Cont.)

e. Fair Values of other financial instruments

The following financial instruments are measured at amortised cost and are considered to have fair values different to their book values.

	2023		2022
	Book Value $'000	Fair value $'000	Book Value $'000	Fair value $'000
Senior Secured Notes (Note 16)	2,588,492	2,371,125	2,471,030	2,298,125

The fair value of the Senior Secured Notes is within level 2 of the fair value hierarchy and has been estimated by discounting future cash flows by the relevant market yield curve at the balance sheet date. The fair values of other financial instruments not measured at fair value including cash and short-term deposits, trade receivables and trade and other payables equate approximately to their carrying amounts.

NOTE 24: - Subsequent events

a) An interim dividend of US$80 million was declared and paid in Q1 2024.

b) On 22 February 2024, Karish North first gas was achieved and the second gas export riser was completed.

c) In February 2024 the Company has signed a new GSPA with Eshkol Energies Generation LTD, majority owned Dalia Energy Companies Ltd, for the supply of an initial quantity of 0.6 bcm/year starting June 2024, rising to 1 bcm/ year from 2032 onwards. The GSPA is for a term of approximately 15 years, for a total contract quantity of up to approximately 12 bcm. The contract contains provisions regarding floor and ceiling pricing, take or pay and price indexation (not Brent-price linked). The GSPA has been signed at levels that are in line with the other large, long-term contracts within Energean's portfolio.

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END

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Energean (ENOG)

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