Trading Statement & Operational Update

Energean PLC

16 November 2023

 

 Energean plc

("Energean" or the "Company")

Trading Statement & Operational Update

London, 16 November 2023 - Energean plc (LSE: ENOG, TASE: אנאג) is pleased to provide an update on recent operations and the Group's trading performance in the nine months to 30 September 2023.

Mathios Rigas, Chief Executive Officer of Energean, commented:

"I am sincerely grateful to all our employees, who have shown remarkable resilience, dedication and professionalism in the face of the challenging environment. Their unwavering commitment to our business and our values has been instrumental in delivering both operational excellence and growth. We are proud of our diverse and talented team, and we will continue to invest in their development and well-being.

"The ongoing security situation has not impacted our production. The successful ramp-up of production from our flagship Karish gas field in Israel has increased Group production to above 150 kboed in recent days. We have delivered revenues of over $1 billion and adjusted EBITDAX of $623 million in the nine months to 30 September 2023, reflecting our low-cost, high-margin business model. We have also reduced our Group leverage ratio to 3.5x and continued our dividend payments, demonstrating our commitment to delivering shareholder value.

"We have made significant progress on our growth projects, which will support our near-term targets of 200 kboed, $2.5 billion revenues, $1.75 billion adjusted EBITDAX and deleveraging target of c.1.5x, the timing of which may be impacted by the delay to the second oil train installation. We have commenced drilling of the Orion 1x well in Egypt, where we have signed a farm-out agreement[1] that will reduce our net exposure and enhance our returns. This is in addition to an attractive portfolio of exploration assets that have the potential to add significant value.

"Finally, we have made a major step forward at our Prinos carbon storage project in Greece. It has been adopted by the European Commission as a Project of Common Interest, and we have been committed EUR 150 million of grants from the Greek Government to support its development. These actions set the foundation for a transition of our mature Prinos oil field to an exciting growth investment opportunity and demonstrates our commitment to our broader energy transition strategy and being the best version of Energean we can be."

Operational Highlights

·      Production during the nine months to 30 September 2023 was 118.5 kboed (nine months 2022: 35.2 kboed); Q3 2023 production was 143 kboed

o  On track to deliver full year production in line with latest guidance of 120 - 130 kboed

o  No production impact from the ongoing security situation in Israel

·      Strong progress on our growth projects

o  Karish North and second gas export riser on track for completion by end-2023

o  Second oil train to be installed as soon as the security situation in Israel allows

o  Katlan FID on track for around year-end 2023

o  NEA/NI completion on track for year-end 2023; Cassiopea first gas on track for 2024

o  Good progress towards the delivery of near-term targets of 200 kboed, $2.5 billion revenues, $1.75 billion adjusted EBITDAX and leverage c.1.5x

·      Attractive portfolio of exploration wells targeting additional upside, including the Orion 1x exploration well in Egypt (Energean 19%, previously 30%), which commenced drilling in October 2023; farm-out agreement signed and expected to complete within the coming weeks, subject to government approvals

Financial Highlights

·      Strong financial performance for the nine months to 30 September 2023, underpinned by a quarter of steady production from Karish

o  Revenues of $1,016 million, a 85% increase (nine months 2022: $550.2 million)

o  Adjusted EBITDAX of $623 million, a 79% increase (nine months 2022: $348.5 million)

·      Strong balance sheet maintained; ongoing deleveraging

o  Group leverage[2] continued reduction to 3.5x (H1 2023: 3.9x; FY 2022: 6.0x)

o  Group cash as of 30 September 2023 was $329.0 million, including restricted amounts of $27.5 million, and total liquidity was $578.6 million

·      Energean Israel's $750 million 2033 bond was released from escrow in September and was used to repay Energean Israel's $625 million 2024 bond (redemption date on 30 September 2023).

Corporate Highlights

·      Q3 2023 dividend of 30 US$ cents/share declared today, in line with Energean's dividend policy, scheduled to be paid on 29 December 2023

·      Scope 1 and 2 emissions intensity of approximately 9.7 kgCO2e/boe, a 12% reduction versus H1 2023

Strategic Highlights

·      Energy transition plan progressing well

o  Prinos Carbon and Storage ("CS") project in Greece adopted by the European Commission as a Project of Common Interest

o  EUR 150 million of grants committed from the Greek Recovery & Resilience Facility

	Nine months 2023 $m	Nine months 2022 $m	Increase / (Decrease) %
Average working interest production (kboed)	118.5 (84% gas)	35.2 (73% gas)	236%
Sales and other revenues	1,016.3	550.2	85%
Cash Cost of Production[3]	360.7	181.4	99%
Cash Cost of Production per boe  ($/boe)	11.2	18.9	(41)%
Cash G&A	26.4	21.1	25%
Adjusted EBITDAX	623.3	348.5	79%
Development and production expenditure	423.2	494.4	(14)%
Exploration capital expenditure	24.7	71.4	(65)%
Decommissioning expenditure	3.1	3.8	(18)%
	Nine months 2023 $m	H1 2023 $m	Increase / (Decrease) %
Net Debt (including restricted cash)	2,926.3	2,715.3	8%
Leverage (Net Debt / annualised Adjusted EBITDAX[4])	3.5	3.9	(10%)

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

In the nine months to 30 September 2023, average working interest production was 118.5 (84% gas). Q3 2023 production averaged 143.0 kboed (85% gas), up 22% versus Q2 2023 due to the ramp-up of production at Karish to its initial capacity.

In Israel, production has remained at a steady state over the past two months, averaging around 570 mmscfd (~6 bcm/yr equivalent). Day-to-day production has not been impacted as a result of the security situation in Israel, but it has impacted the timing of the installation of the second oil train, which will be installed once the security situation allows.

In Egypt, NEA#5 has continued to produce at a steady state of 27 mmscfd (~5 kboed). The NEA#6 well is expected to shut-in by year-end, in line with previous communication.

	Nine months to 30 September 2023 Kboed	Nine months to 30 September 2022 Kboed	% change	FY 2023 guidance Kboed
Israel	82.6 (including 3.1 bcm of gas)	-	-	87 - 94 (including 4.4-4.7 bcm of gas)
Egypt	25.2	24.5	3%	23 - 25
Rest of portfolio	10.6	10.7	(1%)	10 - 11
Total production	118.5[5]	35.2	237%	120 - 130

Development

Israel - Karish Growth Projects

Karish North and the second gas export riser remain on track for completion for the end of the year. All infrastructure associated with these projects is in place ahead of final commissioning planned for early December.

Construction of the second oil train has been completed and the module was scheduled to leave Dubai in early October. However, because of the security situation in Israel, it has impacted the timing of the installation of the second oil train, which will be installed once the security situation allows.

Israel - Katlan

In October 2023, Energean signed a FEED contract with Technip UK Limited. FID is expected around year-end 2023.

Egypt

The PY#1 well finished drilling in September 2023 and has been suspended ahead of first gas. The NI#1 well spudded in September 2023 and is expected to complete in December 2023; results to date are in line with the pre-drill prognosis. Both wells are expected onstream by year-end 2023, marking the completion of the NEA/NI development project. Following the completion of the NEA/NI wells, the El Qaher-1 rig will move to drill an infill well (NAQ-PII#2) on the Abu Qir licence.

At 30 September 2023, net receivables (after provision for bad and doubtful debts) in Egypt were $161.9 million (30 June 2023: $143.1 million), of which $118.5 million (30 June 2023: $107.8 million) was classified as overdue. In October 2023, a $23 million collection was made, which has reduced the receivables position, as of 31 October 2023, to $151.2 million.

Italy

At Cassiopea, drilling is expected to commence in early December 2023. First gas remains on track for 2024.

Greece

Energean's Prinos Carbon and Storage ("CS") project in Greece has been adopted by the European Commission as a Project of Common Interest. Non-binding memorandum of understandings have been signed for ~5 million tonnes per annum of storage and EUR 150 million of grants have been committed. Energean is advancing the conversion of its exploration licence into a storage permit.

Exploration and Appraisal

The Orion-1X exploration well located on the North East Hap'y Concession, offshore Egypt, started drilling in October 2023. The gross unrisked P50 GIIP is 283 bcm (9,996 bcf / 1.8 bnboe). Energean has signed farm-out agreements to reduce its working interest in the licence to 19% (from 30%) and this is expected to complete within the coming weeks, subject to government approvals.

Net Zero progress

Energean's scope 1 and 2 emissions intensity in the nine months to 30 September 2023 was estimated to be approximately 9.7 kgCO2e/boe, a 12% reduction versus H1 2023 (11.0 kgCO2e/boe). FY 2023 emissions intensity are expected between 9.5 - 10.5 kgCO2e/boe.

Financing

In July 2023, Energean issued $750 million of senior secured notes via its subsidiary Energean Israel Finance Ltd ("Energean Israel"). 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 in relation to Energean's previous acquisition in 2021 of the remaining 30% minority interest in Energean Israel.

In October 2023, the $350 million unsecured term loan facility was amended and restated to $120 million.

Corporate

As previously communicated, in November 2022, Italy introduced a new windfall tax, which totalled EUR 87.0 million ($94.5 million). This amount was paid in July 2023.

Also in July 2023, the deferred consideration ($150 million) due to Kerogen, as part of the 2021 acquisition of Kerogen's 30% minority interest in Energean Israel Ltd, was paid.

In November 2023, Energean Israel reached a settlement with NewMed Energy for the remaining deferred consideration under the original purchase agreement of the Karish and Tanin leases of approximately $47.4 million, which includes the agreed annual interest. This will be paid in 2024 in two instalments. This agreement is final and unappealable. 

Guidance

	FY 2023 Guidance
Production
Israel (kboed)	87 - 94 (including 4.4 - 4.7 bcm of gas)
Egypt (kboed)	23 - 25
Rest of Portfolio (kboed)	10 - 11
Total Production (kboed)	120 - 130
Consolidated net debt ($ million)	2,700 - 2,900
Cash Cost of Production (operating costs plus royalties)
Israel ($ million)	275 - 300
Egypt ($ million)	40 - 50
Rest of portfolio ($ million)	160 - 200
Total Cash Cost of Production ($ million)	475 - 550
Development and production capital expenditure
Israel ($ million)	200 - 220 (revised from 170 - 200)
Egypt ($ million)	120 - 130 (reduced from 140 - 150)
Rest of portfolio ($ million)	230 - 250 (reduced from 270 - 290)
Total development & production capital expenditure ($ million)	550 - 600 (reduced from 580 - 640)
Exploration expenditure ($ million)	50 - 60
Decommissioning expenditure ($ million)	10 - 20 (reduced from 20 - 30)

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] Subject to government approvals

[2] Net debt / annualised adjusted EBITDAX

^[3] Includes flux costs of $25.3 million in nine months 2023 and $26.8 million in nine months 2022

^[4] Nine months 2023 leverage based upon nine months 2023 annualised Adjusted EBITDAX

[5] Numbers may not sum due to rounding

 

END