Earnings Release • Nov 16, 2023
Earnings Release
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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.
"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 agreement1 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."
1 Subject to government approvals
| 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 Production3 | 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 EBITDAX4 ) |
3.5 | 3.9 | (10%) |
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
For capital markets: [email protected]
Kate Sloan, Head of IR and M&A Tel: +44 7917 608 645
For media: [email protected]
Paddy Blewer, Head of Corporate Communications Tel: +44 7765 250 857
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 |
Nine months to 30 September 2022 |
FY 2023 guidance | ||
|---|---|---|---|---|
| Kboed | Kboed | % change | 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 | 118.55 | 35.2 | 237% | 120 – 130 |
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.
5 Numbers may not sum due to rounding
In October 2023, Energean signed a FEED contract with Technip UK Limited. FID is expected around year-end 2023.
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.
At Cassiopea, drilling is expected to commence in early December 2023. First gas remains on track for 2024.
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.
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.
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.
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.
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.
| 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 (\$ | 550 – 600 (reduced from 580 – 640) | |
| million) | ||
| Exploration expenditure (\$ million) | 50 – 60 | |
| Decommissioning expenditure (\$ million) | 10 – 20 (reduced from 20 – 30) |
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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