TIDMENOG
RNS Number : 1925N
Energean PLC
19 January 2023
Energean plc
("Energean" or the "Company")
Trading Statement & Operational Update
London, 19 January 2023 - Energean plc (LSE: ENOG TASE: ) is
pleased to provide an update on recent operations and the Group's
trading performance in the 12-months to 31 December 2022 together
with guidance for 2023. This information is unaudited and subject
to further review. Energean will release its 2022 full year results
on 23 March 2023.
Mathios Rigas, Chief Executive of Energean, commented:
"2022 was a landmark year for Energean. We commenced production
from the only FPSO in the strategically vital Eastern Mediterranean
region; commenced payment of dividends to our shareholders; and we
successfully discovered and de -risked new natural gas resource s
adjacent to our infrastructure, providing significant potential
upside and export optionality. We are proud to have helped to
underwrite Israeli and regional energy security and promote
prosperity.
"Our focus for 2023 is on continued operational growth. We will
continue to ramp up production from Karish and finalise the
development concept for the strategically significant, 67 bcm
Olympus Area. Production will also start from Karish North in
Israel and N EA/NI in Egypt. 2023 is the year that we will make a
significant step towards delivering our medium -term production
target of 200 kboed.
"If we have learned anything in 2022, it is that the world needs
additional secure supplies of energy, and that natural gas remains
the catalyst for, and foundation of, a just energy transition and
vital sustainable development. Our recent CDP rating upgrade
demonstrates our commitment to being the best version of Energean
that we can be. We are and remain an ESG leader in the sector . We
will continue to deliver on our promises.
"We are committed to investing in projects where we can create
value for all relevant stakeholders. In an uncertain world, we hope
governments understand the value of enhanced domestic and regional
energy production, value that is unlocked through long-term
investment. We hope that the intelligent policy we have seen in
Israel and Egypt can be replicated across the region , continuing
the investment that will unlock the strategic value in the
subsurface."
Operational Highlights
-- Karish project brought onstream on 26 October 2022 and
excellent reservoir deliverability confirmed
-- Successfully identified and implemented solutions to resolve
a range of typical above-ground commissioning issues at Karish,
with no further impact to production levels anticipated following
the FPSO commissioning process, expected February 2023
-- Key development projects (Karish North, NEA/NI, Cassiopea) on
track to deliver 200 kboed mid-term production target
-- Successful completion of the 2022 growth drilling programme
in Israel which discovered and de-risked approximately 75 bcm
(approximately 480 mmboe) of new gas resource
o Including 67 bcm (approximately 430 mmboe) of additional gas
resource in the Olympus Area, for which the development concept is
now being finalised
Corporate and Financial Highlights
-- Strong financial performance for the year to 31 December 2022
o Revenues were $736.7 million, a 48% increase versus 2021
comparable period ($497.0 million)
o EBITDAX of $418.5 million, an increase of 97% versus 2021
comparable period ($212.1 million)
o On track to deliver mid-term annualised targets of $2.5bn of
revenues and $1.75bn of EBITDAX
o Group cash as of 31 December 2022 was $498.0 million
(including restricted amounts of $75 million) and total liquidity
was $719.0 million
-- Q3 2022 dividend of 30 US$cents/share paid on 30 December
2022; total of 60 US$cents/shares, representing two-quarters of
dividend payments, returned to shareholders in 2022
-- Carbon Disclosure Project ("CDP") rating increased A- (from
B) and outperforming the global average for E&Ps of C
FY 2022 FY 2021 % Change
Average working interest
production kboed 41.1 41.0 0.2%
----------- -------- -------- ---------
Sales and other revenue $ million 736.7 497.0 48.2%
----------- -------- -------- ---------
Cash Cost of Production $ million 284.4 261.6 8.7%
----------- -------- -------- ---------
Adjusted EBITDAX [1] $ million 418.5 212.1 97.3%
----------- -------- -------- ---------
Capital expenditure $ million 699.8 403.5 73.4%
----------- -------- -------- ---------
Exploration expenditure $ million 135.7 48.7 178.6%
----------- -------- -------- ---------
Decommissioning expenditure $ million 7.6 2.7 181.5%
----------- -------- -------- ---------
Cash (including restricted
amounts) $ million 498.0 930.5 (46.5%)
----------- -------- -------- ---------
Net debt - consolidated $ million 2,522.9 2,016.6 25.1%
----------- -------- -------- ---------
Net debt - plc excluding
Israel $ million 146.9 102.6 43.2%
----------- -------- -------- ---------
Net debt - Israel $ million 2,376.0 1,914.0 24.1%
----------- -------- -------- ---------
Outlook
-- Continued ramp-up of Karish to initial capacity of 6.5 bcm/yr
o Final stages of FPSO commissioning process now underway with
completion expected February 2023
o Total sales gas in 2023 is expected to be between 4.5 and 5.5
bcm. The top end of this range is driven by the Annual Contract
Quantity ("ACQ") under the gas sales agreements, whilst the bottom
end of the range represents the Take Or Pay ("TOP") volumes; TOP is
viewed by Energean as a highly conservative case. No spot market
sales [2] have been assumed in this range.
o First cargo of hydrocarbon liquids lifted under the contract
with Vitol expected in February 2023
-- Practical completion under the EPCIC contract with TechnipFMC and Technip Energies
-- Delivery of development projects that are key to achieving
Energean's mid-term production target of 200 kboed
o Installation of the second oil train and gas export riser, and
first gas from Karish North expected by year-end 2023,
debottlenecking FPSO capacity to 8 bcm/yr
o First gas from NEA/NI, Egypt expected in 1H 2023
o First gas from Cassiopea, Italy, expected in 1H 2024
-- Israel expansion: development concept for the 67 bcm Olympus
area to be communicated in 1H 2023
o Various commercial and technical solutions under consideration
to identify development concept that will deliver the most value to
shareholders
o Publication of Competent Persons Report ("CPR") to certify
volumes, expected in 1Q 2023 and expected to include approximately
30 Bcm of 2P reserves and 37 bcm of volumes in nearby de-risked
structures.
-- Quarterly dividend payments to be declared in line with
previously communicated dividend policy
Conference call
A webcast will be held today at 08:30 GMT / 10:30 Israel
Time.
Webcast: https://edge.media-server.com/mmc/p/hrhvh72z
Conference call registration link:
https://register.vevent.com/register/BI0c90f15b4cf7495c84ea3e2cb8abc962
After completing your conference call registration you will
receive dial-in details on screen and via email. Please note the
dial-in pin number is unique and cannot be shared.
The presentation slides will be made available on the website
shortly at www.energean.com .
Enquiries
For capital markets: ir@energean.com
Kate Sloan, Head of IR and ECM
Tel: +44 7917 608 645
For media: pblewer@energean.com
Paddy Blewer, Head of Corporate Communications Tel: +44 7765 250
857
Energean Operational Review
Production
Production excluding Israel was 35.7 kboed, in the middle of the
guidance range of 34.0 - 37.0 kboed. In 2023, underlying production
(excluding Israel) is expected to increase by approximately 12% at
the mid-point of the guidance range (2023: 37.0 - 43.0 kboed),
benefitting from contribution by the NEA/NI development, offshore
Egypt.
Israel 2022 production was lower than forecast due to the
project being in the commissioning phase. In 2023, Energean expects
to produce between 4.5 and 5.5 bcm of sales gas plus 15 and 18
kboed of hydrocarbon liquids. The top end of this range is driven
by the ACQ under the gas sales agreements, whilst the bottom end of
the range represents the TOP volumes, and is viewed by Energean as
a highly conservative case. No spot market sales [3] have been
assumed within this range.
Portfolio-wide production in 2023 is expected to be between 131
and 158 kboed, a major step towards Energean's mid-term production
target of 200 kboed.
FY 2022 FY 2023 guidance
Kboed Kboed
Israel 5.3 94 - 115
(including 0.28 (including 4.5 - 5.5
bcm of sales gas) bcm of sales gas)
--------------------- ----------------------
Egypt 25.1 (87% gas) 28 - 32
--------------------- ----------------------
Rest of portfolio 10.6 (39% gas) 9 - 11
--------------------- ----------------------
Total production (including
Israel) 41.0 (75% gas) 131 - 158
--------------------- ----------------------
Total production (excluding
Israel) 35.7 (73% gas) 37 - 43
--------------------- ----------------------
Israel
Karish Main Development
Karish came onstream on 26 October 2022 and all three wells has
been opened before year end. Data collected from the wells has
demonstrated the reservoir's ability to produce in line with
expectations.
Sales gas between 26 October 2022 and 31 December 2022 totaled
0.28 bcm. Nothwithstanding the excellent reservoir deliverability,
this was lower than projected as a result of the project being in
the commissioning phase, during which variability in production is
higher than in the post-commissioning phase.
A number of minor issues, which are typical of new
infrastructure and systems, have been experienced with the topside
processing infrastructure. Energean has successfully identified and
implemented solutions to resolve these issues, with no further
impact to production levels anticipated post the FPSO commissioning
process. Energean is now undertaking the final steps of this
process, which it expects to complete in February 2023.
Karish Growth Projects
Construction of the second gas export riser and second oil train
are progressing in line with expectations. Both pieces of
infrastructure are required to debottleneck the FPSO capacity to
8.0 bcm/yr, with this increase expected to be delivered by year-end
2023.
-- Installation of the second gas export riser on the FPSO is expected in 1H 2023
-- The second oil train is scheduled to be lifted and installed
on the FPSO in 2H 2023, ahead of the completion of commissioning by
year-end 2023
The Karish North development well was successfully drilled as
part of the 2022 growth drilling campaign. The well is expected to
be hooked-up to the Karish Main manifold using a spare slot in 2Q
2023 and will be ready to deliver first gas in 2H 2023. Due to the
high liquids content of the field, Karish North will not have a
material impact on production rates until the infrastructure
discussed above has been installed and commissioned in late
2023.
Israel Expansion
The Olympus Area, the discovery of which is discussed below,
will be the focus of near-term development plans. Energean is
currently finalising the development concept and commercial
solution for this strategically significant project and will
communicate its plan to the market at the appropriate time
(expected 1H 2023). A number of solutions have been considered,
providing optionality around further debottlenecking of
infrastructure above the current 8 bcm/yr nameplate capacity of the
Energean Power FPSO, and also access to gas export markets.
In 2022, Energean's growth drilling programme discovered and
de-risked approximately 75 bcm (approximately 480 mmboe) of natural
gas through its growth drilling programme.
-- The Zeus and Athena wells, block 12, discovered 25 bcm
(approximately 160 mmboe) of natural gas resources. This, in turn,
substantially de-risked a further 42 bcm (approximately 269 mmboe)
of prospective resources across the Olympus Area in nearby
prospects that have equivalent geological properties and seismic
attributes.
DeGolyer & MacNaughton, is producing a CPR to certify
resource volumes across the Olympus Area, with results expected to
be announced to the market in 1Q 2023. Energean expects
approximately 30 Bcm - Zeus, Athena and Hera - to be classified as
2P reserves, with a further 37 bcm of prospective volumes contained
within the de-risked prospects.
-- Following post-well studies, recoverable resources in the
Hermes discovery, block 31, are now estimated to be approximately 7
bcm (45 mmboe). The results from this well have provided important
additional information about Orpheus and Poseidon, nearby
prospects, that may be future targets of appraisal activity to firm
up resource volumes within this area, which Energean has named the
"Arcadia Area"
-- Energean is preparing notices of commerciality for both the
Olympus Area and Arcadia Area, required for the conversion of those
exploration licences into development leases
-- In December 2022, the Hercules well, block 23, made a
discovery in the Miocene. The C and D sands are estimated to
contain mean Gas Initially In Place ("GIIP") of approximately 3
bcm. This excludes discovered volumes in the A and B sands (which
were the subject of the upgrade to discovered Athena resource
volumes in November 2022), which are currently being evaluated, and
volumes will be communicated once available, along with Energean's
assessment of commerciality of the discovery. The large, deeper,
liquids target in the Hercules prospect was not considered
drill-ready and remains a potential target of future
exploration.
Rest of Portfolio - Development
Egypt
The NEA/NI development project is on track to deliver first gas
in 1H 2023. Gas will initially be produced from one well, NEA#6,
drilling of which completed in January 2023, with the remaining
three wells expected to be brought onstream over the course of
2023.
Italy
First gas from Cassiopea remains on track for H1 2024.
Rest of Portfolio - Exploration and Appraisal
Egypt - North East Hap'y Offshore
Energean expects to participate in an exploration well targeting
the Orion prospect (W.I. 30%) along with its partner IEOC (ENI;
70%; operator) on the North East Hap'y block, offshore Egypt, in
2023. Energean expects to farm down 12% of its interest in the
North East Hap'y block ahead of spudding the well.
UK - Isabella appraisal well
In December 2022, the Isabella appraisal well encountered
hydrocarbons in the targeted reservoir. The operator has completed
the gathering of data and has plugged and abandoned the well. The
operator intends to evaluate the drilling results to establish the
commerciality of the reservoir.
Energean Corporate Review
Dividend
In September 2022, Energean declared its maiden quarterly
dividend, aligned with its commitment to return an initial $50
million to shareholders per quarter no later than the end of
2022.
In total, Energean returned US$0.60/share to shareholders
(approximately $106 million) in 2022, representing two-quarters of
dividend payments.
In 2023, Energean intends to continue to pay quarterly dividends
to its shareholders in line with its previously communicated
dividend policy.
Windfall taxes
Energean notes the imposition of windfall taxes across the
European Union and United Kingdom. Cash taxes borne by the
contractor are not part of the Egypt fiscal regime and Israel has
already implemented its Sheshinsky Levy. Energean's exposure in the
United Kingdom is de minimis. As such, Energean's main exposure to
windfall taxes primarily relates to Italy and recently introduced
legislation.
In November 2022, Italy introduced a new windfall tax that
imposed a 50% one-off tax, calculated on 2022 taxable profits that
are 10% higher than the average taxable profits between 2018-2021.
This amount has a ceiling equal to 25% of the value of the net
assets at end-2021. Based on this, Energean estimates that it would
be required to pay an additional one-off tax of EUR 87 million in
June 2023. Energean expects to challenge this tax through the
Italian and/or EU courts.
ESG
In December 2022, the Carbon Disclosure Project updated its
rating for Energean to A-, up from B in the previous year, and
outperforming the global average for E&Ps of C.
2023 guidance
FY 2023
Consolidated net debt ($ million) 2,600 - 2,800
--------------
Cash Cost of Production (operating
costs plus royalties)
--------------
Israel ($ million) 350 - 400
--------------
Egypt ($ million) 50 - 60
--------------
Rest of portfolio ($ million) 200 - 240
--------------
Total Cash Cost of Production ($ million) 600 - 700
--------------
Development and production capital
expenditure
--------------
Israel ($ million) 140 - 160
--------------
Egypt ($ million) 140 - 150
--------------
Rest of portfolio ($ million) 300 - 330
--------------
Total development & production capital
expenditure ($ million) 580 - 640
--------------
Exploration expenditure ($ million) 40 - 60
--------------
Decommissioning expenditure ($ million) 30 - 40
--------------
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.
[1] Adjusted EBITDAX is calculated as profit or loss for the
period, adjusted for discontinued operations, taxation,
depreciation and amortisation, share-based payment charge,
impairment of property, plant and equipment, other income and
expenses, net finance costs and exploration and evaluation
expenses.
[2] Post commencement of obligations under the gas sales
agreements
[3] Post commencement of obligations under the gas sales
agreements
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