Preliminary Results

RNS Number : 4023L

Energean Oil & Gas PLC

19 April 2018

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE IT WOULD BE UNLAWFUL TO RELEASE, PUBLISH OR DISTRIBUTE THIS ANNOUNCEMENT.

For immediate release

19 April 2018

Energean Oil & Gas plc

("Energean" or the "Group")

Unaudited Preliminary Results for the year ended 31 December 2017

Energean, an independent oil and gas exploration and production company focused on the Eastern Mediterranean, today announces its unaudited Preliminary Results for the year ended 31 December 2017.

Financial Highlights

• Total revenue of US$57.8 million (31 October 2017: US$38.4 million, 31 December 2016:2016: US$39.7 million)
• Cash flow from operating activities of US$29.1 million (31 October 2017: US$23.4 million, 31 December 2016: US$15.2 million)
• Gross profit of US$9.1 million (31 October 2017: US$2.1 million, 31 December 2016: loss of US$0.8 million)
• Adjusted EBITDAX¹ of US$20.7 million (31 October 2017: US$12.3 million, 31 December 2016: US$16.2 million)
• Profit from continuing operations before tax of US$23.7 million (31 October 2017: US$13.4 million, 31 December 2016: loss US$49.9 million)
• Cost of oil production per barrel² of US$24.7 (31 October 2017: US$26.1, 31 December 2016: US$19.1)
• Net debt of US$63.1 million (31 October 2017: US$70.5 million, 31 December 2016: US$48.5 million) with a gearing ratio (Net debt/Capital) of 21.85% (31 October 2017: 24.93%, 31 December 2016: 24.39%)
• Group Cash at 31 December 2017 US$15.7 million (31 October 2017: US$8.7 million, 31 December 2016: US$17.6 million)

Operational Highlights

Production

• Production from Prinos averaged 2,803 bopd in 2017 (31 October 2017: 2,659 bopd, 31 December 2016: 3,490 bopd), impacted by the production issues experienced in the 1^st half of 2017. The remedial action that was taken resulted in average production recovering to 3,405 bopd in Q4 2017
• At Prinos, infill wells PA-38 and PA-33 commenced production and a workover of well PA-40 was completed in H1 2017. PA-37 was completed in December 2017
• All production sold to BP through the existing offtake agreement at an average realised sales price of US$46.73/bbl (31 October 2017: US$43.02/bbl, 31 December 2016: US$34.25/bbl) for the year. The offtake agreement has been extended to November 2025

Development

• Received approval for the Karish and Tanin Field Development Plan (“FDP”) from the Israeli Government in August 2017
• Secured contracts, excluding the Or gas supply agreement, for the sale of 61 BCMof gas over a period of 16 years, at an annual rate of approximately 4.2 BCM per year (on an annual contract quantity (“ACQ”) basis) with 12 leading domestic industrial and independent power producers in Israel
• cUS350 million development programme underway to significantly increase production from the Prinos Basin by 2021, including:

o  Drilling up to 24 new wells (eight wells already drilled since December 2015)

o  The construction of an unmanned platform to develop the Epsilon field adjacent to Prinos

 ·  Received approval for the FDP of the Kataloko field in Western Greece from Hellenic Hydrocarbons Resources Management

Exploration

• Farmed-out a 60% working interest in the Aitoloakarnania and Ioannina blocks, Western Greece, to Repsol as operator who will carry 90% of the gross exploration costs up to a cap of US$49.9 million
• Awarded two exploration licenses for blocks 26 and 30, offshore Montenegro
• Awarded five exploration licences for blocks 12, 21, 22, 23 and 31 offshore Israel, near to the existing Karish and Tanin fields

Reserves and Resources

• The Group’s reserves and resources grew significantly in 2017, driven by Energean’s acquisition and development strategy in Israel and Greece:

o  2P Reserves³ of 51 mmboe (2016: 41 mmboe)

o  2C Resources³ of 250 mmboe (2016: 195.6 mmboe)

¹Adjusted EBITDAX is calculated as profit or loss for the period adjusted for profit or (loss) for the period from discontinued operations, taxation (expense) / income, total depreciation, amortisation of intangible assets, other income, other expenses, finance income, finance costs, gain on derivative, net foreign exchange (loss) / gain and exploration and evaluation expenses.

² Cost of oil production is defined as cost of sales, less cost of services and depreciation and change in inventory (defined as the difference between opening inventory and closing inventory), divided by total production for the period.

³ 2P reserves and 2C resource figures as per NSAI CPR 31 October 2017 and include gas and liquids volumes with gas volumes converted from Bcf at the rate of 5.8. Includes 50% of volumes set out in the Karish and Tanin CPR, of total 449 mmboe. Energean Israel Limited’s working interest in the Karish and Tanin assets was 50% as of 31 December 2017 and rose to 70% in March 2018 reflecting an increase in 2C resources to 340 mmboe.

Post Period Events

Since the reporting period, the Group has continued to deliver on key strategic milestones:

·      Proceeded with Final Investment Decision ("FID") on the Karish and Tanin project on schedule

·      Signed the US$1.275 billion senior credit facility for the Karish and Tanin project

·      Successful Premium Listing on the London Stock Exchange, raising US$460 million through the Global Offer - the first significant European oil and gas E&P listing since 2014 and the largest ever primary raise for a Premium-Listed E&P company on the London Stock Exchange

·      Signed a US$180 million RBL facility with the European Bank for Reconstruction and Development ("EBRD") and other international institutions to fund the development programme for the Prinos, Prinos North and Epsilon oil fields.

·    In March 2018 the Group completed the subscription of additional shares in Energean Israel for the amount of US$266.7 million resulting in the Group increasing its holding in Energean Israel to 70%.

·      Awarded TechnipFMC an integrated Engineering, Procurement, Construction and Installation Contract for the Karish full field development, covering the design and installation of the complete subsea system, Floating Production Storage and Offloading unit (FPSO), which has been designed to allow the subsequent tie back of Tanin field, the pipeline system, and the onshore pipeline and valve station at the receiving station

·      Appointed Stena Drilling to commence a three development well drilling programme in 2019

·      Signed extension to the BP Offtake Agreement from July 2021 to November 2025

·      Successfully completed the c4km extended reach well in Prinos North field ahead of schedule in late March. The well is currently producing approximately 1,000bpd on a 41% choke 

·      Production averaged 3,673 bopd in Q1 2018, an increase of 31.6% year-on-year (Q1 2017: 2,790 bopd) and 7.9% quarter-on-quarter (Q4 2017: 3,405 bopd)

·      Progressed plans for a secondary listing on the Tel Aviv Stock Exchange in Israel, on which the Group will be filing an application in the near future

Outlook

Energean's priority for the remainder of 2018 is project delivery across its development portfolio:

·      The Group expects to complete several project milestones on the Karish and Tanin project for the remainder of this year, most importantly:

o  Submission of the Karish Lease Environmental Document to Israeli regulator which the Group expects to be approved in the second half of the year

o  Completion of the detailed design for topsides and hull Issue report, with TechnipFMC to commence fabrication of FPSO hull and topsides in the final quarter of the year

·      The Group expects to achieve average production rate of between 4,000-4,500 bopd from the Prinos license

·      During 2018, Energean plans to drill five development wells in the Prinos license

·      The Group is well positioned to capitalise on further growth opportunities in the Eastern Mediterranean

Mathios Rigas, Chief Executive of Energean, said:

"Our performance in 2017 has provided us with the platform to deliver on our exciting development plans in the Eastern Mediterranean. Energean's Premium Listing on the London Stock Exchange in March 2018, raising US$460 million, was a landmark accomplishment for the Group and the largest ever primary raise for an E&P company on the Premium Segment of the London Stock Exchange. Our investment proposition, characterised by the quality of our asset portfolio, our strategic position in the Eastern Mediterranean, our offshore experience and our management's track record of value creation, was well received by London and international institutions.

The development of the Karish Field will materially increase the scale of the Group's operations and support Energean's strategy to become a major player in the Eastern Mediterranean gas market. These assets are highly strategic for the development of the Israeli energy market and can help to meet increasing Israeli demand, increase market competition and improve security of supply.

As we progress through 2018, our priority will be to deliver significant growth in our first year as a listed business. We are well placed to capitalise on our growth plans with the infrastructure, local relationships and capability to move swiftly on future value-accretive opportunities for all our stakeholders."

Further information about Energean is available on its website at www.energean.com 

Enquiries

Energean
Sotiris Chiotakis (Media Relations)	[phone]
Instinctif (PR/IR adviser to Energean):	[phone]
David Simonson
Laura Syrett
George Yeomans

IMPORTANT NOTICE - FORWARD-LOOKING STATEMENTS

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. In addition, even if results or developments are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Any forward-looking statements reflect the Group's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

 

FINANCIAL REVIEW

The Directors consider the following metrics to be the key financial and operation performance indicators ("KPIs") used by the Group to help evaluate growth trends, establish budgets and assess operational performance and efficiencies. In addition to the Group's results determined in accordance with IFRS, the Directors believe the KPIs are useful in evaluating the Group's operating performance.

	For the year ended 31 December				For the ten month period ended 31 October
	2017		2016		2017
Adjusted EBITDAX (US$ 000)* (1)	20,676		16,202		12,341
Cash Flow from Operating activities (US$ 000)	29,097		15,235		23,440
Cash capex (US$ 000)*(2)	(53,822)		(110,680)		(44,013)
Cost of oil production (US$ 000)*(3)	25,262		24,303		21,118
Cost of oil production per boe (US$)(3)	24.7		19.1		26.1
Gearing ratio (net debt/capital)(4)	21.85%		24.39%		24.93%
Realised sales price per boe (US$)	46.7		34.3		43.0
Total production for the period (boe) (5)	1,023,072		1,273,751		808,377
Average production per day (bopd) (5)	2,803		3,490		2,659
2P reserves (mboe) (6)	51		41		51
2C resources (mboe) (6)	250		196		250

*Denotes a Non-IFRS Measure

(1) Adjusted EBITDAX is calculated as profit or loss for the period adjusted for profit or (loss) for the period from discontinued operations, taxation (expense) / income, total depreciation, amortisation of intangible assets, other income, other expenses, finance income, finance costs, gain on derivative, net foreign exchange gain/(loss) and exploration and evaluation expenses

(2) Cash capex is defined as net cash payment for purchase of property, plant and equipment and payment for intangible assets.

(3) Cost of oil production is defined as cost of oil sales, less depreciation and change in inventory (defined as the difference between opening inventory and closing inventory) divided by total production for the period.

(4) Net debt is defined as the Group's total borrowings (including current and non-current borrowings), less shareholders' subordinated debt, cash and cash equivalents and bank deposits. Capital is defined as the Group's total equity, plus shareholders' subordinated debt. The gearing ratio is calculated as net debt divided by capital.

(5) Production levels refer to total oil production for the periods. Oil volumes are STOB and include natural gas liquids. Average production per day for the year ending 31 December 2017 would be 2,948 bopd if excluding 18 days of scheduled maintenance during which the plant was shut down

(6) 2P reserves and 2C resource figures as per NSAI CPR 31 October 2017 and include gas and liquids volumes with gas volumes converted from Bcf at the rate of 5.8. Includes 50% of volumes set out in the Karish and Tanin CPR, of total 449 mboe. Energean Israel Limited's working interest was 50% as of the year ended 31 December 2017 and rose to 70% in March 2018 reflecting an increase in 2C resources to 340 mboe.

 

Results of operations for the years ended 31 December 2017 and 2016

The table below sets forth the line items of the Group's unaudited consolidated statement of comprehensive income for the years ended 31 December 2017 and 2016 in US Dollars and as a percentage of revenue.

	For the year ended 31 December (US$ 000)					For the ten months ended 31 October (US$ 000)
	2017	% of revenue	2016	% of revenue		2017	% of revenue
Revenue	57,752	100.0%	39,724	100.0%		38,425	100.0%
Cost of Sales	(48,648)	84.2%	(40,551)	102.1%		(36,363)	94.6%
Gross profit / (loss)	9,104	15.8%	(827)	2.1%		2,062	5.4%
Administration expenses	(5,991)	10.4%	(4,134)	10.4%		(4,339)	11.3%
Selling and distribution expenses	(445)	0.8%	(336)	0.8%		(313)	0.8%
Exploration and evaluation expenses	(9,966)	17.3%	(1,133)	2.9%		(7,050)	18.3%
Other income	1,789	3.1%	248	0.6%		2,169	5.6%
Other expenses	(8,187)	14.2%	(4,688)	11.8%		(9,770)	25.4%
Finance Income	14	0.0%	327	0.8%		14	0.0%
Finance Costs	(22,940)	39.7%	(29,311)	73.8%		(21,132)	55.0%
Gain on derivative	24,109	41.7%	-	0.0%		24,109	62.7%
Net foreign exchange (loss) / gain	36,244	62.8%	(10,043)	25.3%		27,621	71.9%
Profit / (loss) from continuing operations before tax	23,731	41.1%	(49,897)	125.6%		13,371	34.8%
Taxation (expense) / income	(14,061)	24.3%	11,517	29.0%		(8,776)	22.8%
Income / (loss) from continuing operations	9,670	16.7%	(38,380)	96.6%		4,595	12.0%
Loss from discontinued operations	(1,404)	2.4%	(229)	0.6%		(1,403)	3.7%
Income / (loss) for the period	8,266	14.3%	(38,609)	97.2%		3,192	8.3%
Profit / (loss) per ordinary share from continuing activities (cents per share)
From continuing operations	$0.14	n/a	($0.54)	n/a		$0.07	n/a
From total earnings	$0.12	n/a	($0.54)	n/a		$0.05	n/a

General note

For the year ended 31 December 2017 (the "reporting period") total income for the period increased by US$46.9 million to US$8.3 million (FY 2016: loss of US$38.6 million). This increase is mainly driven by an increase in revenue amount US$18.0 million and gain on derivative amount US$24.1 million

Revenue

The Group's revenue increased by 45.4% to US$57.8 million for the reporting period (31 October 2017: US$38.4 million, 31 December 2016: US$39.7 million). This is mainly explained by the increase in the average realised crude oil price from US$34.25/bbl during 2016 to US$46.73/bbl during the reporting period (as of 31 October 2017 US$43.02/bbl).

For the year ended 31 December 2017, average production was 2,803 bopd (2,948 bopd if excluding 18 days of scheduled maintenance during which the plant was shut down). This figure reflected asphaltene and drilling difficulties in the first half of 2017, which impacted production for the period. Remedial action taken resulted in production recovering to an average 3,405 bopd in Q4 2017.

Gain on Derivative

The gain on derivative of US$24.1 million was driven by the valuation of a derivative financial instrument, measured at fair value at the end of each reporting date, which related to the EISL Class B Shares the Group had a contingent commitment to acquire. Pursuant to the Reorganisation Agreement, the Group had committed to acquire in an exit event 50% of the EISL Class B Shares of Energean Israel Limited held by the Founders. The valuation technique used to value this asset multiplies the estimated likelihood of an exit (being an IPO or a sale) by the estimated difference between the consideration payable under the commitment and the estimated value of the B shares to be acquired under the commitment. The change in fair value of US$24.1 million due to changes in measurement assumptions between 30 June 2017 and 31 October 2017 is included in gain on derivative in the consolidated statement of profit or loss.

Pursuant to the Reorganisation Agreement, the Group acquired the Founders' 50% economic interest in Energean Israel on 16 March 2018 in exchange for US$10 million, leaving the Group with a 50% economic interest and 50.0001% voting rights in Energean Israel. Pursuant to Second Subscription Agreement with Kerogen and after taking a final investment decision in respect of the Karish and Tanin assets the Group's interest in Energean Israel was further increased to 70% on 29 March 2018.

Exploration and evaluation expenses

Exploration and evaluation expense increased to US$10.0 million in the year ended 31 December 2017 from US$1.1 million in the year ended 31 December 2016. This is largely due to the impairment of US$9.3 million of exploration expenditure in the West Kom Ombo asset, in Egypt.

Other expenses

Other expenses increased to US$8.2 million, in the year ended 31 December 2017 from US$4.7 million in the year ended 31 December 2016, largely due to an increase in provisions for litigation expenses of US$6.9 million relating to the tax appeal of the Group's subsidiary in Greece.

Net foreign exchange (loss)/gain

The Group's revenue and most of its working capital outside of Greece are in U.S. dollars. The Group does not currently engage in any foreign exchange hedging activity. The Group converts funds to foreign currencies as its payment obligations in jurisdictions where the U.S. dollar is not an accepted currency become due. Certain of the Group's costs are incurred in currencies other than U.S. dollars, including euros and pounds sterling. In particular a substantial portion of the Group's operating costs in Greece are in euros. Significant amounts of foreign exchange income/(loss) related to unrealised foreign exchange arise due to retranslation of U.S. dollar denominated debt, in the subsidiary company Energean Oil & Gas SA (whose functional currency is the Euro) at each period end. Realised exchange differences reflect the impact of movements in exchange rates for foreign currency transactions between the date of transaction and the date of settlement.

The Group's gain from foreign exchange transactions increased significantly to US$36.2 million in the reporting period from loss US$10.0 million in the year ended 31 December 2016. This was attributable primarily to an increase in the euro/dollar exchange rate.

 

Cost of oil sales

	For the year ended 31 December (US$ 000)
	2017		2016	variance	variance %
Inventory change	5,003		(4,970)	9,973	200.7%
Direct costs
Depreciation	17,640		21,218	-3,578	-16.9%
Staff costs	12,598		11,609	989	8.5%
Electricity and fuel	5,767		6,014	-247	-4.1%
Operational and production costs	6,721		6,350	371	5.8%
Royalties	176		330	-154	-46.7%
Total cost of production	42,902		45,521	-2,619	-5.8%
Total Cost of Oil Sales	47,905		40,551	7,354	18.1%

Cost of oil sales was affected by the increase in U.S. dollar/Euro exchange rate by 2.1% as most of the Group's staffing and certain other operating costs are denominated in Euro. Total cost of oil sales increased by 18.1% principally due to the decreased closing balance of oil inventory in the period. Subcontracted work and machinery repairs and maintenance increased in the year ended 31 December 2017 reflecting shut down expenses.

Liquidity and capital resources

The following table sets forth a summary of the unaudited Group's consolidated cash flow statement data for the reporting period and FY 2016

	For the year ended 31 December (US$ 000)			For the ten months ended 31 October (US$ 000)
	2017	2016		2017
Cash and cash equivalents at the beginning of the period	17,586	8,238		17,586
Net cash flow from operating activities	29,097	15,235		23,440
Net cash used in investing activities	(58,418)	(108,844)		(48,655)
Net cash from financing activities	28,421	103,056		17,202
Effects of exchange rate changes on cash and cash equivalents	(994)	(99)		(910)
Cash and cash equivalents at the end of the period	15,692	17,586		8,663

Net cash flows from operating activities was increased to US$29.1 million for the reporting period (2016: US$15.2 million) and was primarily attributable to increase in revenue by 45.4% and decrease in inventory balance.

Net cash flows used in investing activities decreased to US$58.4 million in the year ended 31 December 2017 from US$108.8 million in the year ended 31 December 2016. This decrease reflected a reduction in drilling capital expenditure in Prinos. Also in the year ended 31 December 2016 the net cash used in investing activities included amount of US$40.0 million for acquisition cost of Karish and Tanin licenses.

Net cash from financing activities decreased by US$74.7 million, to US$28.4 million in the reporting period from US$103.1 million in the year ended 31 December 2016. In the reporting period the Group drew US$28.9 million from the available amount under the EBRD facilities.

Consolidated statement of financial position

		As at 31 December (US$ 000)					As at 31 October (US$ 000)
	Notes	2017		2016			2017
ASSETS
Non-current assets				ͮ
Property plant and equipment	6	309,976		230,180			290,318
Intangible assets	7	4,001		8,278			3,616
Other non-current assets	13	591		382			575
Deferred tax asset	18	13,473		20,678			16,761
Bank deposits	15	1,899		1,116			1,828
		329,940		260,634			313,098
Current assets
Inventories	11	9,528		12,757			14,276
Trade and other receivables	12	24,684		13,739			11,716
Current tax assets	14	-		92			-
Cash and cash equivalents	15	13,793		11,861			6,835
Derivative asset	36	93,292					91,615
Assets classified as held for sale	9	-		45,203			-
		141,297		83,652			124,442
Total assets		471,237		344,286			437,540
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital	16	917		14,904			917
Equity reserves	16	64,000		117,080			62,981
Merger reserves	16	139,903		-			139,903
Retained earnings		(140,132)		(148,407)			(145,206)
Equity attributable to equity holders of the parent		64,688		(16,423)			58,595
Non-controlling interests	10	224,294		303			224,294
Total Equity		288,982		(16,120)			282,889
Non-Current Liabilities
Borrowings	17	78,831		255,118			79,186
Deferred tax liabilities	18	3,570		2,989			3,732
Retirement benefit liability	20	3,288		2,425
Provisions for liabilities	19	5,688		2,240			6,749
Other long term liabilities	21	2,544		2,737			2,555
		93,921		265,509			92,222
Current Liabilities
Trade and other payables	21	66,528		29,082			54,607
Borrowings	9, 17	12,500		21,130			-
Provisions for liabilities	19	9,306		-			7,822
Liabilities directly associated with assets classified as held for sale	9	-		44,685			-
		88,334		94,897			62,429
Total Liabilities		182,255		360,406			154,651
Total Equity and Liabilities		471,237		344,286			437,540

Oil and Gas Assets

	US$ 000
Opening oil and gas assets at 1 January 2017	187,137
Development additions
Greece	66,364
Exploration and appraisal additions
Greece	2,264
Egypt	1,994
Montenegro	107
Write-off of exploration and evaluation costs	(6,774)
Disposal of Exploration and evaluation cost	(2,383)
Depletion and amortisation	(17,021)
Foreign exchange impact	20,605
Closing oil and gas assets at 31 December 2017	252,293

Exploration assets

1.     In March 2017, the Group agreed to farm out a 60% working interest and operatorship of the Ioannina licence to Repsol. The Group retains a 40% working interest as of 31 December 2017. According to Farm out agreement Repsol will conduct the exploration of the Ioannina block, providing 90% of the committed investment up to US$25 million and 60% thereafter in exchange for a 60% interest. The Group does not record any expenditure made by the farminee on its account. It also does not recognise any gain or loss on its exploration and evaluation farm-out arrangements, but re-designates any costs previously capitalised in relation to the whole interest as relating to the partial interest retained. Any cash consideration received directly from the farminee is credited against costs previously capitalised in relation to the whole interest with any excess accounted for by the farminor as a gain on disposal.

2.   The Group recognised US$6,774 million impairment losses in exploration and evaluation expenses in the period ended 31 December 2017, relating to exploration expenditure for West Kom Ombo in Egypt. West Kom Ombo is an exploration block in Upper Egypt, the licence for which expired on 2 October 2017. There are no recoverable costs associated with West Kom Ombo and the asset has been fully written off. in 2017.

Development assets

·    In Greece, work continued using our drilling rig: the Energean Force.  throughout the year on the in-fill development campaign of our main producing field: Prinos. Three new wells were completed - PA-33, PA-37 and PA-38 - and wells PA-40 and PA-19 were worked over.  Well PN-H4 - the first extended reach well to be drilled by our own rig was being drilled at year end. 

Group Reorganisation

On 30 June 2017, Energean reorganised the business and became the parent company of the Group through the acquisition of the full share capital of Energean E&P Holdings Limited in exchange for 65,643,120 £0.01 shares in Energean. The previously recognised share capital of US$14,904 thousand and share premium of US$125,851 thousand was eliminated with a corresponding positive merger reserve recognised of US$139,903 thousand.

Pursuant to the to the Reorganisation Agreement the senior secured loan from Third Point and certain other parties was discharged in exchange for $224 million preference shares in Energean International Limited.

Under the same agreement the Group had committed to acquire in an exit event 50% of the Energean Israel Limited Class B Shares held by the founder shareholders. The valuation technique used to value this asset multiplies the estimated likelihood of an exit (being an IPO or a sale). by the estimated difference between the consideration payable under the commitment and the estimated value of the B shares to be acquired under the commitment. The change in fair value of US$24.1 million due to changes in measurement assumptions between 30 June 2017 and 31 October 2017 is included in gain on derivative in the consolidated statement of profit or loss.

Also on 31 October 2017, under the Supplementary Agreement the consideration payable to acquire the B shares in the event of an IPO was reduced from $150m to $10m.  The resulting increase in the value of the derivative asset of US$69,183 (after applying the 50% IPO likelihood assumption and other discounting effects) is recorded in the consolidated statement of changes in equity as the Supplementary Agreement is a transaction with owners, giving the derivative asset a closing value of $93,262.

Dividend Policy

The Group currently pays no dividend. This will be reviewed annually by the Board.

END

 

END

 

 

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