Trading Statement & Operational Update

Energean PLC

18 May 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 Energean plc

("Energean" or the "Company")

Trading Statement & Operational Update

London, 18 May 2023 - Energean plc (LSE: ENOG, TASE: אנאג) is pleased to provide an update on recent operations and the Group's trading performance in the 3-months to 31 March 2023.

Highlights - Financial and Corporate

·      Revenues for the period were $288.8 million, a 69% increase versus Q1 2022 ($170.7 million)

·      EBITDAX for the period was $162.2 million, a 81% increase versus Q1 2022 ($89.6 million)

·      Group cash as of 31 March 2023 was $379.6 million (including restricted amounts of $11.5 million) and total liquidity was $943.5 million

·      Q1 2023 dividend of 30 US$ cents/share declared today, scheduled to be paid on 30 June 2023

·      Emissions intensity[1] for the period was 11.1 kgCO2e/boe, a 36% reduction versus Q1 2022 (17.2 kgCO2e/boe)

o  Emissions intensity¹ in the four-months to 30 April 2023 was 10.1 kgCO2e/boe

Highlights - Operational

·      Production for the period was 94.4 kboed, a 161% increase versus Q1 2022 (36.1 kboed)

o  Production in the four-months to 30 April 2023 was 100.0 kboed (82% gas)

·      Commercial period under the gas sales agreements in Israel commenced for gas buyers on or before 1 April 2023[2], with production continuing to ramp up

·      Three hydrocarbon liquid cargoes cumulating in approximately 1 million bbls from Karish sold to Vitol year to date

·      The second gas export riser was successfully installed at Karish in March 2023; followed by key Karish North infrastructure in March and April 2023

·      Olympus development concept chosen to align with strategy to optimise free cash flows and shareholder value

o  Tie-back to Energean Power FPSO, with Olympus prioritised over Tanin

o  Production plateau maintained by monetising newly discovered resources that do not incur seller royalties nor carry export restrictions

o  Focus maintained on capital discipline: Lower cost development versus Tanin driving lower capital expenditure for the next phase of tie-backs to the Energean Power FPSO; plus avoiding significant capital expenditure to add capacity through FPSO expansion projects or a new FPSO/FPU

o  Production expected to underpin existing gas sales agreements plus target international markets that can be accessed through existing and planned third party infrastructure

Outlook

·      Full year production guidance revised to 125 - 140 kboed (from 131 - 158 kboed) due primarily to:

o  Revised gas sales forecast in Israel with full year quantities now expected to be 4.5 - 5.0 bcm (versus 4.5 - 5.5 bcm) due to the ramp up profile of buyer offtake and ongoing optimisation of the operations of the Energean Power FPSO

o  Higher-than-expected decline from NEA#6 in Egypt following the positive initial flow rates. There is no expected read-across to the PY#1 and NI#1 wells; extended flow testing is required at NEA#5 to confirm no read-across for this well. These three remaining NEA/NI wells are expected onstream over the course of 2023; NEA#5 drilling was completed in May 2023 with results in line with pre-drill geological expectations.

·      Karish growth projects on track for completion by end-2023

·      On track to deliver near-term targets of 200 kboed, $2.5 billion revenues, $1.75 billion EBITDAX and leverage < 1.5x in 2H 2024, and pay dividends in line with previously communicated policy

·      Final investment decision on the Olympus Area expected in late 2023

·      Orion 1X spud expected towards the end of the year

Mathios Rigas, Chief Executive Officer of Energean, commented:

"We are ramping up production from the Karish field and have seen four months of solid gas and liquids production in Israel, whilst optimising the operations of the Energean Power FPSO. Our Israeli gas contracts have moved to commercial status and our buyers are increasing nominations. This year, Energean expects to supply a significant proportion of Israel's gas demand.

"This is why we are moving quickly to develop our newly discovered Olympus Area resource, as efficiently as possible. As there is limited incremental capex, the initial development concept is in line with our stated commitment to remain capital disciplined. With no seller royalty payments or export restrictions, this strategy will create sustainable value for all our stakeholders and allow us to maintain and grow our stated sector-leading dividend policy.

"We continue to focus on our Net Zero stated path through continuous reductions in our carbon intensity. We are and will remain a responsible hydrocarbon producer. We are committed to being the best version of Energean we can be: provide a secure and reliable energy supply, support our communities and underwrite the transition."

Enquiries

For capital markets: [e-mail]

Kate Sloan, Head of IR and M&A                                                                                                          Tel: [phone]

For media: [e-mail]

Paddy Blewer, Head of Corporate Communications                                                                        Tel: [phone]

Energean Operational & Financial Review

Production

Average working interest production for the three months to 31 March 2023 was 94.4 kboed, increasing to 100 kboed (82% gas) for the 4-months to 30 April 2023.

Energean's full year production guidance is significantly second half-weighted due to the timing of its projects, and particularly the ramp up of production from Karish. Energean is adjusting its full year 2023 production guidance range to 125 - 140 kboed (from 131 - 158) kboed for reasons outlined in the country-specific sections below.

In Israel:

·      Commercial sales under the gas sales agreements commenced on or before 1 April 2023[3] following the completion of commissioning under the GSPAs.

·      Energean is narrowing its full year gas production guidance to 4.5 - 5.0 bcm (from 4.5 - 5.5 bcm), reflecting the above commencement date of commercial sales and the ramp up profile of buyer offtake from long-term contracted gas buyers (i.e. excluding spot sales) as they exit their obligations to other suppliers, combined with completion of activities to optimise the operations of the Energean Power FPSO.

·      Energean has sales contracts with aggregate Annual Contracted Quantities ("ACQ") of 7.4 bcm on plateau. Buyers nominate volumes on a daily basis up to their Daily Contracted Quantities (ACQ divided by 365 days). On an annual basis the take-or-pay averages 75% of the ACQs.

·      Oil production guidance reduced to between 13 and 16 kboed (previously 15 - 18 kboed) reflecting  the revision to the expected management of production between the wells. There has been no change to the estimated hydrocarbon liquids yields across the fields.

In Egypt:

·      As previously reported, NEA#6 delivered first gas on 6 March 2023. Initial rates were in line with expectations, but subsequently, the rate of decline has been higher than expected.

·      NEA#5 completed drilling in May 2023, with results in line with pre-drill expectations. The well will be flow tested ahead of first gas later this year. The El Qaher-1 rig has now moved to drill the PY#1 well, after which NI#1 will be drilled. These three remaining NEA/NI wells are expected onstream over the course of 2023; there is no expected read-across to the PY#1 and NI#1 wells; extended flow testing is required at NEA#5 to confirm no read-across for this well.

·      Abu Qir is performing in line with expectations

·      As a result of the impact on NEA#6, Energean is revising its 2023 production guidance for Egypt to 23 - 25 kboed (from 28 - 32 kboed)

Rest of portfolio:

·      1Q 2023 production of 10.9 kboed was towards the top end of the guidance range following continued strong production across the Italian portfolio. Full year guidance is narrowed to 10 - 11 kboed

	Three-months to 31 March 2023 Kboed	Three-months to 31 March 2022 Kboed	% change	Four-months to 30 April 2023 Kboed	FY 2023 guidance Kboed
Israel	59.0 (inc. 0.7 bcm of sales gas)	-	-	64.5 (inc. 1.1 bcm of sales gas)	92 - 104 kboed (including 4.5 - 5.0 bcm of sales gas)
Egypt	24.6	25.2	(2%)	24.9	23 - 25
Rest of portfolio	10.9	10.9	0%	10.7	10 - 11
Total production (including Israel)	94.4[4]	36.1	162%	100.04	125 - 140

Development

Israel - Karish Growth Projects

The completion of the second gas export riser, second oil train and Karish North projects will increase the total gas processing capacity of the Energean Power FPSO to a maximum of 8 bcm/yr (at 100% uptime). Energean has made good progress on these projects in the year-to-date: the second gas export riser was successfully installed in March 2023; the Karish North flowline in March 2023; and the Karish North manifold in April 2023. Completion of this suite of projects remains on track for the end of the year.

Israel - Olympus

The Olympus area is planned to be developed as a tie-back to the Energean Power FPSO, prioritised over the Tanin development, which is now expected to be deferred into the 2030s. The development concept has been selected to align with Energean's strategy of maximising shareholder value, which this concept achieves by optimising the free cash flow profile of the business because:

·      Olympus resources can be developed at lower cost than those of Tanin due to closer proximity to the FPSO, resulting in lower capex for the next phase of tie-backs

·      Significant capital expenditure on FPSO expansion projects is avoided as well as new major infrastructure investments

·      Olympus resources carry no seller royalties: gas produced from the Karish and Tanin reservoirs bears 7.5% / 8.25% (pre-and post Sheshinsky levy) royalty on the value of production at the wellhead

Energean expects to submit the final field development plan for the Olympus Area to the Israeli Government in 3Q 2023 for approval and take final investment decision before year-end 2023.

Olympus gas production is anticipated to be sold into the Israeli domestic market under the existing gas sales agreements. As there are no export restrictions on gas produced from block 12, production in excess of domestic gas buyer nominations is expected to target demand in Egypt (including international markets through the LNG facilities) and Jordan, utilising existing export infrastructure and spare capacity in the Energean Power FPSO. Exports to Cyprus remain an option provided new pipeline infrastructure is developed by third parties.

Egypt

The remaining three NEA/NI well developments are expected to come onstream later in 2023, following which the project will reach peak production.

At Abu Qir, further infill and exploration targets to support production from the field are being studied for drilling in 2024.

Italy - Cassiopea

First gas remains on track for 2024. Offshore seabed survey campaigns have been completed ahead of the planned pipeline installation.

Greece

Energean has begun FEED activities on the Prinos CCS project.

Croatia

Energean expects to take final investment decision for the Irena gas field development in 2023. The field has 2P reserves of 13.3 Bcf (2.3 MMboe).

Exploration and Appraisal

The Orion-1X (Energean, 30%), located on the North East Hap'y Concession, offshore Egypt, is expected to spud in late 2023. Energean is finalising the farm out of 12% of its working interest (new ownership is 18%).

The Izabela-9 well (Energean, 70%) located offshore Croatia, is expected to spud in Q2/Q3 2023.

In Greece, 3D seismic interpretation on Block 2 (Energean, 75%) and a drill or drop decision on the Ioannina licence (Energean, 100%) is expected to be completed in 2023.

On 16 May 2023, Energean submitted notice of its intention to terminate its Montenegrin exploration licences (Blocks 26 and 30).

Corporate

Financing

Energean intends to refinance its 2024 Energean Israel Limited bond to maintain an efficient capital structure.

ESG

The Group's Scope 1 and 2 carbon emissions intensity in Q1 2023 was estimated to be approximately 11.1 kgCO2e/boe, a 36% reduction versus 2022 emissions levels; and a 83% reduction versus the 2019 base measurement year. Energean expects to further reduce emissions intensity to 7.0 - 9.5 kgCO2/boe in 2023 on its path to net zero by 2050.

Financial

The table below presents Energean's key results to 31 March 2023.

		Three months to 31 March 2023	Three months to 31 March 2022	% change
Revenues	$ million	288.8	170.7	69%
Cost of production	$ million	116.5	62.3	87%
Cost of production	$/boe	13.7	19.2	(29%)
Cash G&A	$ million	11.7	8.2	42%
Adjusted EBITDAX	$ million	162.2	89.6	81%
Capital expenditure	$ million	92.8	74.3	25%
Exploration expenditure	$ million	14.3	5.8	147%
Decommissioning expenditure	$ million	1.2	0.6	100%
Cash (including restricted amounts)[5]	$ million	379.6	812.7	(53%)
Net debt - consolidated	$ million	2,646.8	2,148.3	23%
Net debt - plc excluding Israel	$ million	214.2	119.8	79%
Net debt - Israel	$ million	2,432.6	2,028.4	20%

2023 Guidance

	FY 2023 Revised Guidance	FY 2023 Previous Guidance
Production
Israel (kboed)	92 - 104	94 - 115
Egypt (kboed)	23 - 25	28 - 32
Rest of Portfolio (kboed)	10 - 11	9 - 11
Total Production (kboed)	125 - 140	131 - 158
Consolidated net debt ($ million)	2,700 - 2,900	2,600 - 2,800
Cash Cost of Production (operating costs plus royalties)
Israel ($ million)	300 - 350	350 - 400
Egypt ($ million)	40 - 50	50 - 60
Rest of portfolio ($ million)	160 - 200	200 - 240
Total Cash Cost of Production ($ million)	500 - 600	600 - 700
Development and production capital expenditure
Israel ($ million)	170 - 200	140 - 160
Egypt ($ million)	140 - 150	140 - 150
Rest of portfolio ($ million)	270 - 290	300 - 330
Total development & production capital expenditure ($ million)	580 - 640	580 - 640
Exploration expenditure ($ million)	50 - 60	40 - 60
Decommissioning expenditure ($ million)	20 - 30	30 - 40

Inside Information

Some of the information contained within this announcement is considered by Energean to constitute inside information, as defined under the EU Market Abuse Regulation, EU No.596/2014 (which forms part of domestic UK law pursuant to the European Union (Withdrawal) Act 2018. By the publication of this Announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of Energean is Eleftheria Kotsana, Company Secretary.

Forward looking statements

This announcement contains statements that are, or are deemed to be, forward-looking statements. In some instances, forward-looking statements can be identified by the use of terms such as "projects", "forecasts", "on track", "anticipates", "expects", "believes", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results and events to differ materially from those expressed in or implied by such forward-looking statements, including, but not limited to: general economic and business conditions; demand for the Company's products and services; competitive factors in the industries in which the Company operates; exchange rate fluctuations; legislative, fiscal and regulatory developments; political risks; terrorism, acts of war and pandemics; changes in law and legal interpretations; and the impact of technological change. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in this announcement is subject to change without notice.

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[1] Scope 1 and 2 emissions

[2] With the exception of one GSPA, whose commercial period begins in November

[3] With the exception of one GSPA, whose commercial period begins in November

[4] Total differs to the sum of the countries due to rounding

[5] Restricted amounts of $11.5 million

 

END