Energean plc
("Energean" or the "Company")
2023 Full Year Results
London, 21 March
2024 - Energean plc (LSE: ENOG, TASE: אנאג) is pleased to
announce its audited full-year results for the year ended 31
December 2023 ("FY
2023").
Mathios Rigas, Chief
Executive Officer of Energean, commented:
"2023 was another transformational
year for Energean. We grew production by 200% year-on-year, reached
c. 150 kboed peak production and brought NEA/NI online on time and
on budget. Despite the challenging geopolitical environment, all of
our operations were managed without any impact from the regional
conflicts. Since the year-end, the start-up of Karish North and the
second gas export riser mean we are now able to utilise the FPSO's
maximum gas capacity and our production guidance illustrates the
next step towards our near-term target of 200 kboed.
"We also had a strong year
financially, generating full-year revenues of $1,420 million and
adjusted EBITDAX of $931 million. As a result, we have reduced our
leverage ratio by 50% to 3x. These strong results coupled with our
long-term gas contracting strategy, which underpins our dividend
policy, has seen us return approximately $370
million[1] (210
US$ cents/share) to shareholders since our inaugural payment in Q3
2022.
"We are looking beyond our near-term
targets and this is reflected in our new Morocco country entry
project and in Italy, where we see a new era for the industry
following the annulment[2]
of prohibitive laws, thereby releasing previously
restricted acreage. We also remain alert to opportunities that fit
our key business drivers (paying a reliable dividend, deleveraging,
growth, and our commitment to Net Zero[3]) and can move quickly to take
advantage when they arise.
"On sustainability, we are
contributing to Israel's transition away from coal as well as its,
and the wider region's, energy security - helping to meet the
growing demand for natural gas. We further reduced our emissions
intensity and have now delivered an 86% reduction from our original
2019 baseline. We are also now rated AAA by MSCI[4]. Our Prinos Carbon Storage
("CS") project will add another pillar and help decarbonise heavy
industries in Southeast Europe, in line with our commitment during
COP28.
"Our ongoing success is due to the
entire global team working together during what has been a
challenging period in the East Mediterranean. I am proud to lead
such a diverse and dedicated team and as we continue to grow, our
commitment to integrity, corporate sustainability and operational
excellence will remain."
Operational
Highlights
· First major step-up in
production achieved.
o FY23 production of
123 kboed (83% gas), up 200% year-on-year, primarily as a result of
a full-year of production from Karish (Israel).
o Day-to-day
production in Israel continues to be unimpacted by the ongoing
geopolitical developments.
o FPSO uptime
(excluding planned shutdowns) was 99%[5]
in Q4 2023.
· Key growth projects
complete.
o The NEA/NI
development (Egypt) was completed in December 2023.
o Karish North and
the second gas export riser were brought online in February
2024.
· Confirmed year-end 2P
reserves of 1,115 mmboe, stable year-on-year before produced 2023
volumes and demonstrating material reserves life of around 19
years[6].
· New gas contract
signed in Israel in February 2024.
o Adds circa $2
billion of revenues over the life of the contract and is in line
with the Group's strategy to secure long-term reliable cash
flows.
· Morocco country entry
through farm-in to Chariot Limited's Lixus and Rissana licences,
expected to complete imminently.
Financial Highlights
· Strong financial
performance, underpinned by a full-year of production from
Karish.
o 2023 sales and
other revenues of $1,420 million, representing a 93% increase
(2022: $737 million).
o 2023 adjusted
EBITDAX of $931 million, representing a 121% increase (2022: $422
million).
o 2023 profit after
tax of $185 million was a significant improvement versus the
previous year (2022: $17 million). Profit after tax was negatively
impacted by $100 million of deferred tax charges.
o Group cash as of 31
December 2023 was $372 million (including restricted amounts of $26
million) and total liquidity was $607 million.
o 50% reduction in
Group leverage to 3x (FY 2022: 6x).
o No immediate debt
maturities following Energean Israel's bond refinancing in July
2023.
· Q4 2023 dividend of 30
US$cents/share declared on 22 February 2024 and scheduled to be
paid on 29 March 2024[7].
o A total of 210
US$cents/share (approximately $370 million), including the Q4 2023
dividend1, returned to shareholders since maiden
payments began.
· 42% year-on-year
reduction in carbon emissions intensity to 9.3 kgCO2e/boe and an
86% reduction since our original baseline year[8], ahead of schedule with the Group's stated
2019-2025 target.
Outlook
· 2024 production
guidance reiterated at 155 - 175 kboed (production to end-February
was 144 kboed; 82% gas), a significant step up towards Energean's
near-term targets.
Production is second-half weighted due to:
o Peak gas demand
during the summer driving maximum gas output from the Energean
Power FPSO.
o Cassiopea (Italy)
first gas expected in the summer of 2024.
· Focused on backfilling
the Energean Power FPSO and meeting growing gas demand in Israel
and the region.
o The start of the
Katlan (Israel) development will extend the gas production plateau
and has potential for exports.
· New areas of
development underway to grow the current business base:
o Morocco farm-in
expected to complete imminently; appraisal well planned for Q3
2024.
o In March 2024, a
court ruling annulled the PITESAI plan and its associated acts in
Italy. This ruling[9] has unlocked previously
restricted acreage in addition to those already identified and
highlighted by Energean.
· Quarterly dividend
payments intended to be declared in line with previously
communicated dividend policy.
· Evaluating all
opportunities, with continued capital discipline, that are dividend
accretive, meet Energean's deleveraging targets, achieve its growth
objectives and contribute to the Group's Net Zero target.
Financial Summary
|
|
|
FY 2023
|
FY 2022
|
% Change
|
|
Average working interest
production
|
Kboed
|
123
|
41
|
200%
|
|
Sales and other revenue
|
$ million
|
1,420
|
737
|
93%
|
|
Cash Cost of Production
|
$/boe
|
11
|
19
|
(42%)
|
|
Adjusted EBITDAX[10]
|
$ million
|
931
|
422
|
121%
|
|
Profit after tax
|
$ million
|
185
|
17
|
988%
|
|
Cash flow from operating
activities
|
$ million
|
656
|
272
|
141%
|
|
|
|
|
|
|
|
Development and production
expenditure
|
$ million
|
487
|
729
|
(33%)
|
|
Exploration expenditure
|
$ million
|
57
|
140
|
(59%)
|
|
Decommissioning expenditure
|
$ million
|
19
|
9
|
111%
|
|
|
|
|
|
|
|
|
|
31 December 2023
|
31 December 2022
|
% Change
|
|
Cash (including restricted
amounts)
|
$ million
|
372
|
503
|
(26%)
|
|
Net Debt
|
$ million
|
2,849
|
2,518
|
13%
|
|
Leverage (Net Debt / Adjusted
EBITDAX)
|
$ million
|
3x
|
6x
|
50%
|
Conference Call
A webcast will be held today at 08:30 GMT /
10:30 Israel Time.
Webcast:
https://brrmedia.news/ENOG_FY23
Dial-In:
+44 (0) 33
0551 0200
Dial-in (Israel
only): +972 (0) 3 376 1321
Confirmation code (if
prompted): Energean Results
The presentation slides will be made available
on the website shortly at www.energean.com
Enquiries
For capital
markets: ir@energean.com
Kyrah McKenzie, Investor Relations Manager
Tel: +44 7921 210
862
For media: pblewer@energean.com
Paddy Blewer, Head of Corporate
Communications
Tel: +44
7765 250 857
Operational
Review
HSE
In 2023, Energean delivered another strong HSE
record with zero serious injuries recorded. The Loss Time Injury
Frequency ("LTIF") Rate was 0.47 (2022: 0.47) and the Total
Recordable Incident Rate ("TRIR") was 1.09 (2022: 1.18).
Reserves
Full year 2023 working interest 2P reserves were
1,115 mmboe, stable year-on-year before produced 2023 volumes (47
mmboe) and demonstrating material reserves life of around 19
years[11].
|
|
2023 2P Reserves
mmboe (% gas)
|
2022 2P Reserves
mmboe (% gas)
|
% Increase / (Decrease)
|
|
Israel
|
926
(89%)
|
940
(89%)
|
(1%)
|
|
Egypt
|
70
(88%)
|
99
(87%)
|
(29%)
|
|
Rest of Portfolio
|
119
(37%)
|
122
(38%)
|
(2%)
|
|
Total
|
1,115 (83%)
|
1,161 (84%)
|
(4%)
|
Production and
Operational Update
In 2023, total production was 123 kboed (83%
gas), up 200% year-on-year primarily due to the first full year of
production from Karish (Israel).
|
|
2023
kboed
(% gas)
|
2022
kboed
(% gas)
|
%
Increase / (Decrease)
|
|
Israel
|
87
(89%)
|
5
(92%)
|
1640%
|
|
Egypt
|
25
(86%)
|
25
(87%)
|
0%
|
|
Rest of portfolio
|
11
(34%)
|
11
(40%)
|
0%
|
|
Total
|
123 (83%)
|
41 (75%)
|
200%
|
2024 is expected to be another significant year
for Energean and a material step towards its near-term targets.
Group production in the first two-months of 2024 was 144 kboed (82%
gas). Energean reiterates the guidance range of 155 - 175 kboed
that was communicated in its January trading update, which is
weighted towards the second half of the year owing to:
·
Peak gas
demand during summer in Israel driving maximum gas output from the
Energean Power FPSO.
·
The start-up
of Cassiopea (Italy), expected in the summer of 2024.
Israel
Production
In the 12-months to 31 December 2023, working
interest production from Israel averaged 87 kboed (89% gas).
Commercial sales for the majority of Energean's long-term gas sale
and purchase agreements ("GSPAs") began in April 2023. Slower than
expected commissioning and ramp-up resulted in lower than expected
production from Karish in the first half of the year. This was
overcome, with production successfully increased in Q3 to the
FPSO's initial capacity and uptime increased in Q4 to
99%[12]. Peak gas demand from
Energean's GSPAs was seen during Q3. Day-to-day production was and
continues to be unimpacted as a result of the ongoing geopolitical
developments.
Development
In February 2024, Energean brought Karish North
and the second gas export riser online, enabling utilisation of the
FPSO's maximum gas capacity. The Energean Power FPSO now has four
production wells in operation, increasing well stock redundancy and
flexibility to meet the demand requirements of Energean's gas
buyers. The second oil train will be installed as soon as
feasible.
Energean intends to develop the Katlan/Tanin
area in a phased development. Phase 1 includes the Athena, Zeus,
Hera and Apollo accumulations, for which the field development plan
was approved by the Israeli Government in December 2023. Energean
expects to take FID upon finalisation of EPC terms, which are
currently under negotiation. Energean expects to be granted a
30-year production licence for Katlan from the Israeli Government
in the upcoming weeks.
Technip
In February 2024, Energean signed an amendment
to the terms of the deferred payment agreement with Technip and
reduced the amount to $210 million. This remaining amount will be
paid in twelve equal quarterly instalments starting in March 2024.
Deferred amounts do not incur any interest. Energean's 2024 capital
expenditure guidance does not include this amount, as it was
accrued in 2022.
Eshkol Energies Generation LTD
Also in February 2024, Energean Israel Limited
signed a new GSPA with Eshkol Energies Generation LTD, majority
owned by Dalia Energy Companies Ltd, for the supply of an initial
quantity of 0.6 bcm/yr[13], rising to 1 bcm/yr from 2032 onwards.
The GSPA is for a term of approximately 15 years, for a total
contract quantity of up to approximately 12 bcm and represents
circa $2 billion in revenues over the life of the contract. The
contract contains provisions regarding floor and ceiling pricing,
take or pay and price indexation (not Brent-price linked). The GSPA
has been signed at levels that are in line with the other large,
long-term contracts within Energean's portfolio.
Egypt
Production
In the 12-months to 31 December 2023, working
interest production from Egypt averaged 25 kboed (86% gas). The
NEA/NI project achieved first gas from the first well (NEA#6) in
March 2023, followed by the second (NEA#5) in July 2023 and then
the remaining two in December 2023 (PY#1 and NI#1). The latter
three wells are performing in line with expectations at 73 mmscfd
(15 kboed). The NEA#6 well ceased production in November 2023 owing
to higher than expected rates of decline. There is no read-across
of this on the other wells. The project was delivered in line with
budget.
An infill well (NAQPII#2) on the Abu Qir field
was brought online in January 2024 and is producing in line with
expectations at 19 mmscfd (4 kboed). Energean continues to evaluate
other infill and exploration opportunities around its Abu Qir
hub.
Production Licences
Conversations are ongoing with the Egyptian
authorities to merge Energean's three production concessions (Abu
Qir, NEA and NI) into a single concession. The resultant single
concession is expected to streamline the fiscal conditions and
extend the economic life of the fields.
Receivables
At 31 December 2023, net receivables (after
provision for bad and doubtful debts) in Egypt were $147 million
(31 December 2022: $117 million), of which $114 million (31
December 2022: $41 million) was classified as overdue.
Exploration
The Orion X1 exploration well (W.I.
19%[14]) reached the target reservoir in March
2024. Preliminary results indicate that the well contains no
commercial hydrocarbons. Further appraisal activity is contingent
upon the completion of post-drilling well analysis.
Rest of the
Portfolio
In the 12-months to 31 December 2023, working
interest production from the rest of the portfolio averaged 11
kboed (34% gas).
Italy
First gas from Cassiopea (W.I. 40% non-operator)
is expected in the summer of 2024. Pipelaying activities were
completed in July 2023 and drilling operations began in November
2023, with the first production well completed in January 2024. The
remaining offshore and onshore work is progressing well.
In March 2024, the administrative court of Lazio
(Rome) ruled in favour on a claim presented by Energean and several
other operators, annulling the PITESAI plan and its applicable
acts[15]. The annulment of these restrictive laws
allows potential new activities either on exploration acreages or
in existing leases in addition to those highlighted by Energean in
its January 2024 Trading and Operations Update. Energean welcomes
this decision and looks forward to progressing certain
concessions.
Greece
Energean's Prinos CS project in Greece has been
included by the European Commission as a Project of Common
Interest. Non-binding memoranda of understandings have been signed
for c.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.
Morocco Country
Entry
As announced on 7 December 2023, Energean has
agreed to farm-in to Chariot Limited's ("Chariot", AIM:CHAR)
Rissana (W.I. 37.5% operator) and Lixus (W.I. 45% operator)
licences, the latter includes the 18 bcm (gross)[16] Anchois gas development.
Completion of the Morocco farm-in is expected
imminently, upon receipt of the remaining approvals from the
Moroccan Authorities.
Energean (Operator) and Chariot plan to drill an
appraisal well on the Anchois field in Q3 2024.
Financing
Energean ended 2023 with total available
liquidity of $607 million (2022: $720 million), including undrawn
amounts of $235 million under its Revolving Credit
Facilities.
In July 2023, Energean issued $750 million of
senior secured notes via its subsidiary Energean Israel Finance Ltd
("Energean Israel"), maturing in 2033 with a coupon of 8.5%. The
funds were used primarily to repay Energean Israel's $625 million
notes due in March 2024. As a result of this refinancing,
Energean's weighted average life of debt has been extended to more
than six years and results in a weighted average interest rate of
6.13%.
In October 2023, the $350 million unsecured plc
term loan facility was amended and restated to a $120 million
unsecured RCF.
Energean remains committed to its near-term
target of reducing leverage, which is defined as net debt /
adjusted EBITDAX to around 1.5x.
Kerogen Investments No.
38 Limited
In 2023, the remaining two consideration items
to Kerogen Investments No. 38 Limited ("Kerogen") as part of the
2020 acquisition of the 30% minority interest in Energean Israel
Limited were completed:
·
In July 2023,
the remaining deferred consideration ($150 million) to Kerogen was
paid.
·
In December
2023, Kerogen exercised its option to convert its $50 million of
convertible loan notes into shares. This resulted in the issuance
of 4,422,013 new ordinary shares ("New Ordinary Shares") at a
conversion price of GBP 8.3843 per New Ordinary Share. The New
Ordinary Shares were admitted to trading on the London and Tel Aviv
Stock Exchanges on 20 December 2023.
ESG and Climate
Change
Energean is committed to net zero scope 1 and 2
emissions by 2050 and industry-leading disclosure of its energy
transition intentions.
Emissions Reduction
The Group recorded full-year 2023 scope 1 and 2
emissions intensity of 9.3 kgCO2/boe, a 42% year-on-year reduction,
and a 86% reduction versus its original baseline year (2019), ahead
of schedule for its stated 2019-2025 target. Energean expects to
further reduce emissions intensity to 8.5 - 9.0 kgCO2/boe in
2024.
Energean maintains a rolling carbon intensity
reduction plan and currently targets to halve its emissions
intensity to 4.0-6.0 kgCO2/boe by 2035. Energean intends to reach
this medium-term target through the advancement of CCS,
electrification and natural-based solution projects.
ESG Ratings and Affirmations
In 2023, Energean has continued to receive
strong ESG ratings across the major ESG rating agencies. This
includes:
·
Carbon
Disclosure Project ("CDP") Climate Change rating maintained at A-
and aligned with all recommended pillars of the Task Force on
Climate Related Financial Disclosure ("TCFD").
·
MSCI rating
increased to AAA from AA, in the top 17% of our sector.
·
Sustainalytics ranked in the top 18% of our
sector, up from the top 30% in 2022.
·
Maala Index
rating maintained at platinum.
·
Constituent
of the FTSE4Good Index Series.
2024 Guidance
|
|
FY 2024
|
|
Production
|
|
|
Israel (kboed)
|
115-130
|
|
Egypt (kboed)
|
29-31
|
|
Rest of portfolio (kboed)
|
11-14
|
|
Total
production (kboed)
|
155-175
|
|
|
|
|
Consolidated net debt ($
million)
|
2,800-2,900
|
|
|
|
|
Cash
Cost of Production (operating costs plus
royalties)
|
|
|
Israel ($ million)
|
350-380
|
|
Egypt ($ million)
|
30-40
|
|
Rest of portfolio ($ million)
|
190-210
|
|
Total
Cash Cost of Production ($ million)
|
570-630
|
|
|
|
|
Development and production capital
expenditure
|
|
|
Israel ($ million)
|
150-200
|
|
Egypt ($ million)
|
30-50
|
|
Rest of portfolio ($ million)
|
220-250[17]
|
|
Total
development & production capital expenditure ($
million)
|
400-500
|
|
|
|
|
Exploration expenditure ($
million)
|
130-170[18]
|
|
|
|
|
Decommissioning expenditure ($
million)
|
40-50
|
Financial Review
Financial results
summary
|
|
2023
|
2022
|
Change from 2022
|
|
Average
working interest production (kboepd)
|
123
|
41
|
200%
|
|
Revenue
($m)
|
1,420
|
737
|
93%
|
|
Cash
cost of production ($m)
|
475
|
284
|
67%
|
|
Cost of
production ($/boe)
|
11
|
19
|
(42%)
|
|
Administrative & selling expenses
($m)
|
43
|
46
|
(7%)
|
|
Operating profit ($m)
|
598
|
232
|
158%
|
|
Adjusted EBITDAX ($m)
|
931
|
422
|
121%
|
|
Profit
after tax ($m)
|
185
|
17
|
988%
|
|
Cash
flow from operating activities ($m)
|
656
|
272
|
141%
|
|
Capital
expenditure ($m)
|
544
|
870
|
(37%)
|
|
Cash
capital expenditure ($m)
|
541
|
460
|
18%
|
|
Net
debt ($m)
|
2,849
|
2,518
|
13%
|
|
Leverage Ratio (Net debt/ Adjusted
EBITDAX)
|
3
|
6
|
(50%)
|
Revenue, production, and commodity
prices
Revenue increased by $683 million to $1,420
million (2022: $737 million) primarily as a result of the
successful ramp-up of production from our flagship Karish gas
field, located offshore Northern Israel, to its initial capacity.
The Group's realised weighted average oil and gas price for the
year was $72/bbl (2022: $81/bbl) and $5/mcf (2022: $11/mcf),
respectively.
Working interest production averaged 123 kboepd
in 2023 (2022: 41 kboepd), with the Karish gas field accounting for
over 70% of total output.
Adjusted EBITDAX amounted to $931 million (2022:
$422 million). The increase from 2022 was due to higher revenue
complimented by slightly lower operating costs.
Cash
cost of production
During the period, our cash unit production
costs decreased to $11 per barrel of oil equivalent (boe), compared
to $19/boe in 2022. This reduction was primarily due to the
increased production for the year coming from the successful
ramp-up of production from the Karish gas field in Israel. In
addition, the Egyptian currency, has fallen sharply against the US
dollar, also leading to a reduction of the cost per bbl in Egypt.
Excluding royalties of $186 million (2022: $46 million), our cash
production costs amounted to $289 million in 2023, (2022: $238
million including only 2 months of production in Israel).
Consequently, the related cost per boe excluding royalties
decreased to $6.4 in 2023, down from $15.9 in 2022.
Depreciation, impairments and
write-offs
Depreciation charges before impairment on
production and development assets increased to $306 million (2022:
$83 million) with the related increase in the depreciation unit
expense to $6.8/boe (2022: $5.5/boe).
The Group's impairment assessment did not
identify any cash generating units for which a reasonably possible
change in a key assumption would result in impairment or impairment
reversal.
Management has considered how the Group's
identified climate risks and opportunities (as discussed in the
Strategic Report) may impact the estimation of the recoverable
amount of cash-generating units in the impairment assessments. The
anticipated extent and nature of the future impact of climate on
the Group's operations and future investment, and therefore
estimation of recoverable value, is not uniform across all
cash-generating units. There is a range of inherent uncertainties
in the extent that responses to climate change may impact the
recoverable value of the Group's cash-generating units. These
include the impact of future changes in government policies,
legislation and regulation, societal responses to climate change,
the future availability of new technologies and changes in supply
and demand dynamics.
The Group has incorporated carbon pricing when
preparing discounted cash flow valuations. Carbon prices are
incorporated based on currently enacted legislation (where
relevant). Carbon costs are based on the forecast carbon price per
tonne/CO2e, multiplied by estimated Scope 1 and 2 emissions
for the relevant operation(s).
As part of the impairment assessment the Group
has run sensitivity scenarios based on the International Energey
Agency's (IEA) 2023 World Energy Outlook climate projections
including Stated Policies Scenario (STEPS), Announced Pledges
Scenario (APS) and Net-Zero Emissions by 2050 Scenario (NZE).
These specific scenarios were not directly applied in the assets
valuation for financial reporting purposes. This is because no
single scenario fully aligns with the management consensus on the
assumptions market participans may use in appraising the Group's
assets. The assessment revealed that the Group's CGUs in Italy and
Greece, particularly the Vega field, are significantly affected by
these scenarios due to their sensitivity to fluctuations in Brent
oil prices. Conversely, the Group's assets in Israel and Egypt are
less influenced by these scenarios, attributed to the localized
approach to price definition.
Exploration and evaluation expenditure and new
ventures
During the period the Group expensed $34 million
(2022: $71 million) for exploration and new ventures evaluation
activities. This includes impairment costs of $29 million (2022:
$66 million) for projects that will not progress to development,
primarily Isabella in the UK.
In addition, new ventures evaluation expenditure
amounted to $5 million (2022: $5 million), mainly related to
pre-licence assessment costs.
General
and administrative (G&A) expenses
Energean incurred G&A costs of approximately
$43 million in 2023 (2022: $46 million). Cash SG&A was $31
million (2022: $36 million).
Cash G&A excludes certain non-cash
accounting items from the Group's reported G&A. Management uses
this alternative performance measure to monitor the Group's
performance, as it assists in making informed decisions about
capital allocation . Cash G&A is calculated as follows:
Administrative and Selling and distribution expenses, excluding
depletion and amortisation of assets and share-based payment charge
that are included in G&A.
|
|
2023 ($m)
|
2022 ($m)
|
|
Administrative expenses
|
43
|
46
|
|
Less:
|
|
|
|
Depreciation
|
5
|
4
|
|
Share-based payment charge included in
G&A
|
7
|
6
|
|
Cash
G&A
|
31
|
36
|
Net
other expenses
Net other expenses of $2 million in 2023 (2022:
$1 million income) includes reversal of provision for legal claims
of $3 million, expected credit loss provisions of $4 million and
other non-recurring items.
Unrealised loss on
derivatives
The Group has recognised unrealised loss on
derivative instruments of $7 million (2022: $5 million) related to
the Cassiopea contingent consideration. A contingent consideration
of up to $100.0 million is payable and determined based on future
Italian gas prices recorded at the time of the commissioning of the
field, which is expected in the summer of 2024.
As at 31 December 2023, the two-year Italian gas
(PSV) futures curve indicated higher pricing than that at the date
of acquisition, with a forward price in excess of €20/Mwh. As a
result, the fair value of the contingent consideration as at 31
December 2023 was estimated to be $91 million based on a Monte
Carlo simulation (31 December 2022: $86 million).
Net
financing costs
Financing costs before capitalisation for the
period were $268 million (2022: $237 million). Finance costs
include: $193 million of interest expenses incurred on Senior
Secured notes (2022: $167 million), $6 million on debt facilities
(2022: $2 million), $7 million of interest expenses relating to
long-term payables (2022: $15 million), $51 million unwinding of
discount on deferred consideration, contingent consideration,
long-term payables, convertible loan notes and decommissioning
provisions (2022: $37 million); $11 million commissions for
guarantees and other bank charges of (2022: $16
million).
Net finance costs include foreign exchange
losses of $17 million (2022: $22 million) and finance income
of $19 million (2022: $10 million), including Interest income from
time deposits.
Taxation
In 2023, Energean recorded tax charges totalling
$159 million, compared to $90 million in 2022. This comprised a
current year tax expense of $59 million (down from $200 million in
2022) and a deferred tax expense of $100 million (compared to a
credit of $110 million in 2022), resulting in an effective tax rate
of 46% (down from 84% in 2022).
The decrease in current tax from 2022 was
primarily due to a one-off windfall tax of $119 million charged in
Italy in 2022. Additionally, the current tax expense for Italy and
Egypt decreased by $13 million and $10 million respectively
compared to the previous year.
Regarding deferred tax movement, both Italy and
Israel realised previously recognised deferred tax assets due to
the utilisation of tax losses, amounting to $15 million and $47
million respectively. Furthermore, Italy reassessed its deferred
tax asset recognised on decommissioning provision, resulting in a
reduction of $20 million.
Operating cash flow
Cash from operations before tax and movements in
working capital was $874 million (2022: $373 million). After
adjusting for tax and working capital movements, cash from
operations was $656 million (2022: $272 million).
Capital
Expenditure
During the year, the Group incurred capital
expenditure of $544 million (2022: $870 million). Capital
expenditure mainly comprise development expenditure in relation to
the Karish Main and Karish North Fields in Israel ($148 million),
NEA/NI project in Egypt ($123 million), Cassiopea field in Italy
($161 million), and exploration expenditures in Katlan, Athena,
Zeus, Hermes and Hercules in Israel ($25 million) and in North East
Happy and East Bir El Nus in Egypt ($26 million).
Net
Debt
As at 31 December 2023, net debt of $2,849
million (2022: $2,518 million) consisted of $2,500 million Israeli
senior secured notes, $450 million of corporate senior secured
notes and $64 million draw down of the Greek loans, less deferred
amortised fees and cash, bank deposits and restricted cash balances
of $372 million. On 11 July 2023 Energean priced the offering of
$750 million aggregate principal amount of senior secured notes.
Net debt excluding Israel is $569 million (2022: $144
million).
In accessing the debt capital markets, Energean
is only exposed to floating interest rates for the Greek loan and
Revolving Credit Facility ('RCF').
Credit
ratings
Energean maintains corporate credit ratings with
Standard and Poor's (S&P) and Fitch Ratings (Fitch). In
November 2023:
·
S&P affirmed 'B+' ratings on Energean and
its senior secured notes maturing in 2027 however the Outlook was
revised to Negative from Stable. The negative outlook reflects the
escalated geopolitical and security risk in Israel. The
ratings were affirmed at B+ as Energean's assets remain fully
operational, cash flows have not been affected and the conflict is
expected to have limited impact on Energean's operations in
Israel.
·
Fitch upgraded Energean plc's corporate credit
rating to 'BB-' from 'B+' with Stable Outlook. Energean's senior
secured notes maturing in 2027 were also upgraded to 'BB' from
'B+'. Key drivers for the upgrade were: production performance,
driven by the successful ramp-up of the Karish field, Energean's
clear path to deleveraging, defined Dividend Policy, low
re-contracting risk and improving cost of
production.
Risk Management
Principal
Risks
Energean has long identified geopolitical risks
as one of the principal risks facing the Group. Considering the
events since October 2023, the Group has introduced a new principal
risk specifically relating to the increased regional and domestic
geopolitical and security risks in Israel. Day-to-day production
and payments from domestic gas offtakers have been unimpacted by
the geopolitical developments. Energean continues to monitor the
situation and has mitigations in place, including an insurance
package for certain risks as a result of damage to the assets.
There is also a potential compensation mechanism by the Israeli
government under the Property Tax and Compensation Fund Law. A full
description of the Group's mitigations in relation to this risk can
be found in the 2023 Annual Report & Accounts.
The remainder of the principal risks are
unchanged from those disclosed in the 2023 Interim Results. A full
description of Energean's principal risks is disclosed in the 2023
Annual Report & Accounts.
Liquidity risk management and going
concern
The Group carefully manages the risk of a
shortage of funds by closely monitoring its funding position and
its liquidity risk. The going concern assessment covers the period
from the date of approval of the Group Financial Statements on 21
March 2024 to 30 June 2025 'the Assessment Period'.
As of 31 December 2023, the Group's available
liquidity was approximately $607 million. This available liquidity
figure includes: (i) c. $115 million available under the $300
million Revolving Credit Facility ('RCF') signed by the Group in
September 2022 and as amended in May 2023 (with the remainder being
utilized to issue Letters of Credit for the Group's operations) and
(ii) c. $120 million under the $120 million Revolving Credit
Facility signed up by the Group in October 2023.
The going concern assessment is founded on a
cashflow forecast prepared by management, which is based on a
number of assumptions, most notably the Group's latest life of
field production forecasts, budgeted expenditure forecasts,
estimated of future commodity prices (based on recent published
forward curves) and available headroom under the Group's debt
facilities. The going concern assessment contains a 'Base Case' and
a 'Reasonable Worst Case' ('RWC') scenario.
The Base Case scenario assumes Brent at $80/bbl
in 2024 and $75/bbl in 2025 and PSV (Italian gas price) at €30/MWH
in 2024 and 2025. A reasonable ramp-up of production from the
Karish Field is assumed throughout the going concern assessment
period, with prices for gas sold assumed at contractually agreed
prices. Under the Base Case, sufficient liquidity is maintained
throughout the going concern period.
The Group also routinely performs sensitivity
tests of its liquidity position to evaluate adverse impacts that
may result from changes to the macro-economic environment, such as
a reduction in commodity prices. These downsides are considered in
the RWC going concern assessment scenario. The Group is not
materially exposed to floating interest rate risk since the
majority of its borrowings are fixed-rate. The
Group also looks at the impact of changes or
deferral of key projects and downside scenarios to budgeted
production forecasts in the RWC.
The two primary downside sensitivities
considered in the RWC are: (i) reduced commodity prices; (ii)
reduced production - these downsides are applied to assess the
robustness of the Group's liquidity position over the Assessment
Period. In a RWC downside case, there are appropriate and timely
mitigation strategies, within the Group's control, to manage the
risk of funding shortfalls and to ensure the Group's ability to
continue as a going concern. Mitigation strategies, within
management's control, modelled in the RWC include deferral of
capital expenditure on operated assets and/or management of
operating expenses to improve the liquidity.
Under the RWC scenario, after considering
mitigation strategies, liquidity is maintained throughout the going
concern period.
Reverse stress testing was also performed to
determine what commodity price or production shortfall would need
to occur for liquidity headroom to be eliminated. The conditions
necessary for liquidity headroom to be eliminated are judged to
have a remote possibility of occurring, given the diversified
nature of the Group's portfolio and the 'natural hedge' provided by
virtue of the Group's fixed-price gas contracts in Israel and
Egypt. In the event a remote downside scenario occurred, prudent
mitigating strategies, consistent with those described above, could
also be executed in the necessary timeframe to preserve liquidity.
There is no material impact of climate change within the Assessment
Period and therefore it does not form part of the reverse stress
testing performed by management.
In forming its assessment of the Group's ability
to continue as a going concern, including its review of the
forecasted cashflow of the Group over the Forecast Period, the
Board has made judgements about:
• Reasonable sensitivities appropriate for the
current status of the business and the wider macro environment;
and
• the Group's ability to implement the
mitigating actions within the Group's control, in the event these
actions were required.
After careful consideration, the Directors are
satisfied that the Group has sufficient financial resources to
continue in operation for the foreseeable future, for the
Assessment Period from the date of approval of the Group Financial
Statements on 21 March 2024 to 30 June 2025. For this reason, they
continue to adopt the going concern basis in preparing the group
financial statements.
Post
balance sheet events
On 21 February 2024 Energean approved its 4Q
dividend of US$30 cents per share, to be paid on 29 March
2024.
On 22 February 2024 Karish North first gas was
achieved and the second gas export riser was completed.
The Orion X1 exploration well reached the target
reservoir in March 2024. Preliminary results indicate that well
contains no commercial hydrocarbons. Further appraisal activity is
contingent upon the completion of post-drilling well analysis. The
carrying value of the related capitalised exploration and
evaluation expenses as of 31 December 2023 was $23.3 million. There
has been no impairment recognized related to this
investment.
Non-IFRS
measures
The Group uses certain measures of performance
that are not specifically defined under IFRS or other generally
accepted accounting principles. These non-IFRS measures include
Adjusted EBITDAX, cost of production, capital expenditure, cash
capital expenditure, net debt and gearing ratio and are
explained below.
Cash
cost of production
Cash cost of production is a non-IFRS measure
that is used by the Group as a useful indicator of the Group's
underlying cash costs to produce hydrocarbons. The Group uses the
measure to compare operational performance period to period, to
monitor costs and to assess operational efficiency. Cash cost of
production is calculated as cost of sales, adjusted for
depreciation and hydrocarbon inventory movements.
|
($m)
|
2023
|
2022
|
|
Cost of
sales
|
760
|
359
|
|
Less:
|
|
|
|
Depreciation
|
301
|
79
|
|
Change in
inventory
|
(16)
|
(4)
|
|
Cost of
production1
|
475
|
284
|
|
Total
production for the period (kboe)
|
44,731
|
15,038
|
|
Cash
cost of production per boe ($/boe)
|
11
|
19
|
1Numbers may not sum due to
rounding
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure used by
the Group to measure business performance. It is calculated as
profit or loss for the period, adjusted for discontinued
operations, taxation, depreciation and amortisation, other income
and expenses (including the impact of derivative financial
instruments and foreign exchange), net finance costs and
exploration costs. The Group presents Adjusted EBITDAX as it is
used in assessing the Group's growth and operational efficiencies,
because it illustrates the underlying performance of the Group's
business by excluding items not considered by management to reflect
the underlying operations of the Group.
|
($m)
|
2023
|
2022
|
|
Adjusted EBITDAX
|
931
|
422
|
|
Reconciliation to
profit/(loss):
|
|
|
|
Depreciation and
amortisation
|
(306)
|
(83)
|
|
Share-based payment
|
(7)
|
(6)
|
|
Exploration and evaluation
expense
|
(34)
|
(71)
|
|
Change
in decommissioning cost
|
17
|
(28)
|
|
Other
expense
|
(10)
|
(4)
|
|
Other
income
|
8
|
3
|
|
Finance
expenses
|
(250)
|
(107)
|
|
Finance
income
|
19
|
10
|
|
Unrealised loss on
derivatives
|
(7)
|
(5)
|
|
Net
foreign exchange
|
(17)
|
(22)
|
|
Taxation
income/(expense)
|
(159)
|
(90)
|
|
Profit/
(Loss) for the year
|
185
|
17
|
Capital expenditure
Capital expenditure is a useful indicator of the
Group's organic expenditure on oil and gas assets and exploration
and appraisal assets incurred during a period. Capital expenditure
is defined as additions to property, plant and equipment and
intangible exploration and evaluation assets less decommissioning
asset additions, right-of-use asset additions, capitalised
share-based payment charge and capitalised borrowing
costs:
|
($m)
|
2023
|
2022
|
|
Additions to property, plant and
equipment
|
533
|
878
|
|
Additions to intangible exploration and
evaluation assets
|
57
|
141
|
|
Less:
|
|
|
|
Capitalised borrowing
cost
|
18
|
109
|
|
Impairment of property,
plant and equipment
|
-
|
28
|
|
Leased assets additions
and modifications
|
47
|
2
|
|
Lease payments related
to capital activities
|
(16)
|
(13)
|
|
Capitalised
depreciation
|
-
|
1
|
|
Change in
decommissioning provision
|
(3)
|
22
|
|
Total
capital expenditure
|
544
|
870
|
|
Movement in working
capital
|
(3)
|
(410)
|
|
Cash
capital expenditure per the cash flow
statement
|
541
|
460
|
Cash Capital Expenditure
|
($m)
|
2023
|
2022
|
|
Payment
for purchase of property, plant and
equipment
|
436
|
396
|
|
Payment for exploration and
evaluation,
and other intangible assets
|
105
|
64
|
|
Total
Cash Capital Expenditure
|
541
|
460
|
Net debt/(cash) and leverage
ratio
Net debt is defined as the Group's total
borrowings less cash and cash equivalents. Management believes that
net debt serves as a valuable indicator of the Group's
indebtedness, financial flexibility, and capital structure because
it reflects the level of borrowings after accounting for any cash
and cash equivalents that could be utilised to reduce
borrowings.
The management closely monitors the leverage
ratio, as it provides a comprehensive picture of the Group's
financial leverage by comparing net debt to EBITDAX. This
monitoring is crucial for making informed decisions regarding
dividend distributions, ensuring that such payments are made from a
position of financial strength. It maintains the balance between
rewarding shareholders and sustaining the Group's long-term
financial stability.
|
($m)
|
2023
|
2022
|
|
Current borrowings
|
80
|
46
|
|
Non-current borrowings
|
3,141
|
2,975
|
|
Total
borrowings
|
3,221
|
3,021
|
|
Less: Cash and cash equivalents and bank
deposits
|
(347)
|
(428)
|
|
Restricted cash
|
(25)
|
(75)
|
|
Net
Debt
|
2,849
|
2,518
|
|
Adjusted EBITDAX
|
931
|
422
|
|
Leverage Ratio (Net debt/ Adjusted
EBITDAX)
|
3
|
6
|
Forward Looking
Statements
This announcement contains statements that are,
or are deemed to be, forward-looking statements. In some instances,
forward-looking statements can be identified by the use of terms
such as "projects", "forecasts", "on track", "anticipates",
"expects", "believes", "intends", "may", "will", or "should" or, in
each case, their negative or other variations or comparable
terminology. Forward-looking statements are subject to a number of
known and unknown risks and uncertainties that may cause actual
results and events to differ materially from those expressed in or
implied by such forward-looking statements, including, but not
limited to: general economic and business conditions; demand for
the Company's products and services; competitive factors in the
industries in which the Company operates; exchange rate
fluctuations; legislative, fiscal and regulatory developments;
political risks; terrorism, acts of war and pandemics; changes in
law and legal interpretations; and the impact of technological
change. Forward-looking statements speak only as of the date of
such statements and, except as required by applicable law, the
Company undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise. The information contained in this
announcement is subject to change without notice.
|
($'000)
|
2023
|
2022
|
|
Deferred tax liabilities
|
(122,785)
|
(56,114)
|
|
Deferred tax assets
|
217,504
|
242,226
|
|
|
94,719
|
186,112
|
At 31 December 2023 the Group had
gross unused tax losses of $907.4 million (as of 31 December 2022:
$1,093.8 million) available to offset against future profits and
other temporary differences. A deferred tax asset of $144.9 million
(2022: $197.0 million) has been recognised on tax losses of $571.5
million, based on the forecasted profits. The Group did not
recognise deferred tax on tax losses and other differences of total
amount of $655.1 million.
In Greece, Italy and the UK, the
net DTA for carried forward losses recognised in excess of the
other net taxable temporary differences was $77.8 million, $19.6
million and $10.8 million (2022: $69.2 million, $33.4 million and
$15.1 million) respectively. An additional DTA of $109.3
million (2022: $124.6 million) arose primarily in respect of
deductible temporary differences related to property, plant and
equipment, decommissioning provisions and accrued expenses,
resulting in a total DTA of $217.5 million (2022: $242.2 million).
During the period, Italy recognised a DTA of $19.6m on tax losses
of $81.6m in accordance with its latest tax losses utilisation
forecast.
Greek tax losses (Prinos area) can be carried forward
without limitation up until the relevant concession agreement
expires (by 2039), whereas the tax losses in Israel, Italy and the
United Kingdom can be carried forward indefinitely. Based on the
Prinos area forecasts (including the Epsilon development), the
deferred tax asset is fully utilised by 2032. In Italy, deferred
tax asset of $94.6 million recognised on decommissioning costs
scheduled up to the year the Italian assets expect to enter into a
declining phase assuming that there still be available profits from
Cassiopea asset and other long-lived assets. Finally, in the UK,
decommissioning losses is expected to be tax relieved up until 2028
in accordance with the latest taxable profits forecasts.
11. Cash and cash
equivalents
|
($'000)
|
2023
|
2022
|
|
Cash and bank deposits
|
346,772
|
427,888
|
|
|
346,772
|
427,888
|
Bank demand deposits comprise deposits and other
short-term money market deposit accounts that are readily
convertible into known amounts of cash. The effective interest rate
on short‑term bank deposits was 4.371% for the year ended 31
December 2023 (2022: 1.716%).
12. Restricted cash
Restricted cash comprises cash retained under the
Israel Senior Secured Notes and the Greek State Loan requirement as
follows:
Current
The current portion of restricted cash at 31
December 2023 was $22.48 million. It mainly relates to the March
2024 coupon payment on Senior Secured Notes.
In 2022 it was $71.8 million comprising $3 million
for bank guarantees and $68.8 million for debt repayment fund.
Non-Current
The cash restricted for more than 12 months after
the reporting date was $3.1 million (2022: $3.0 million) mainly
comprising $2.3 million (2022: $2.3 million) held on the Interest
Service Reserve Account ('ISRA') in relation to the Greek Loan
Notes and $0.8 million (2022: $0.7million) for Prinos
Guarantee.
13. Trade and other
receivables
|
($'000)
|
2023
|
2022
|
|
Trade and other receivables - Current
|
|
Financial items:
|
|
|
|
Trade receivables
|
297,305
|
215,215
|
|
Receivables from partners under
JOA
|
1,996
|
4,539
|
|
Other receivables[35]
|
9,479
|
2,344
|
|
Government
subsidies[36]
|
82
|
3,025
|
|
Refundable VAT
|
19,273
|
89,400
|
|
Accrued interest income
|
1,016
|
1,445
|
|
|
329,151
|
315,968
|
|
Non-financial items:
|
|
|
|
Deposits and
prepayments[37]
|
19,174
|
15,084
|
|
Other deferred expense
|
4,932
|
6,912
|
|
|
24,106
|
21,996
|
|
|
353,257
|
337,964
|
|
Trade and other receivables - Non-Current
|
|
Financial items:
|
|
|
|
Other tax recoverable
|
15,544
|
14,701
|
|
|
15,544
|
14,701
|
|
Non-financial items:
|
|
|
|
Deposits and prepayments
|
17,612
|
11,726
|
|
Other non-current assets
|
526
|
513
|
|
|
18,138
|
12,239
|
|
|
33,682
|
26,940
|
14. Borrowings
|
($'000)
|
2023
|
2022
|
|
Non-current
|
|
Bank borrowings - after one year but within five
years
|
|
|
|
4.5% Senior Secured notes due 2024
($625 million)
|
-
|
620,461
|
|
4.875% Senior Secured notes due
2026 ($625 million)
|
619,932
|
617,912
|
|
Bank borrowings - more than five years
|
|
|
|
6.5% Senior Secured notes due 2027
($450 million)
|
444,313
|
442,879
|
|
5.375% Senior Secured notes due
2028 ($625 million)
|
618,145
|
616,767
|
|
5.875% Senior Secured notes due
2031 ($625 million)
|
616,762
|
615,890
|
|
8.50% Senior Secured notes due 2033
($750 million)
|
733,653
|
-
|
|
BSTDB Loan and Greek State Loan
Notes
|
108,392
|
61,437
|
|
Carrying value of non-current borrowings
|
3,141,197
|
2,975,346
|
|
Current
|
|
Revolving credit
facility
|
80,000
|
-
|
|
Convertible loan notes ($50
million)
|
-
|
45,550
|
|
Carrying value of current borrowings
|
80,000
|
45,550
|
|
Carrying value of total borrowings
|
3,221,197
|
3,020,896
|
The Group has provided security in respect of certain
borrowings in the form of share pledges, as well as fixed and
floating charges over certain assets of the Group.
$2,500,000,000 senior secured notes:
On 24 March 2021, the Group completed the issuance of
$2.5 billion aggregate principal amount of senior secured
notes.
The Notes have been issued in four series as
follows:
·
Notes in an aggregate principal amount of $625
million, maturing on 30 March 2024, with a fixed annual interest
rate of 4.500%.
·
Notes in an aggregate principal amount of $625
million, maturing on 30 March 2026, with a fixed annual interest
rate of 4.875%.
·
Notes in an aggregate principal amount of $625
million, maturing on 30 March 2028, with a fixed annual interest
rate of 5.375%.
·
Notes in an aggregate principal amount of $625
million, maturing on 30 March 2031, with a fixed annual interest
rate of 5.875%.
The Notes are listed for trading on the TACT
Institutional of the Tel Aviv Stock Exchange Ltd. (the "TASE").
The March 2024 notes of $625
million were repaid on 30 September 2023.
$750,000,000 senior secured notes:
On the 11 July 2023
Energean priced the offering of $750 million aggregate principal
amount of senior secured notes due 30 September 2033, with a fixed
annual interest rate of 8.5%. The interest on the Notes will be
paid semi-annually, on March 30 and September 30 of each year,
beginning on March 30, 2024.
The Notes are listed for
trading on the TASE-UP of the Tel Aviv Stock Exchange Ltd.
The funds were mainly used
to repay Energean Israel's $625 million notes due in March
2024.
Kerogen Convertible Loan:
On 20 December 2023, the loan was converted into
equity, resulting in the issuance of 4,422,013 ordinary shares at a
conversion price of £8.3843 per share (equivalent to $10.60).
$450,000,000 senior secured notes:
On 18th November 2021, the Group completed the
issuance of $450 million of senior secured notes, maturing on 30
April 2027 and carrying a fixed annual interest rate of 6.5%.
The interest on the notes is paid semi-annually on 30
April and 30 October of each year, beginning on 30 April 2022.
The notes are listed for trading on the Official List
of the International Stock Exchange ("TISE").
The issuer is Energean plc and the Guarantors are
Energean E&P Holdings, Energean Capital Ltd and Energean Egypt
Ltd
Energean Oil and Gas SA ('EOGSA') loan for Epsilon/ Prinos
Development:
On 27 December 2021 EOGSA entered into a loan
agreement with Black Sea Trade and Development Bank for €90.5
million to fund the development of Epsilon Oil Field. The loan is
subject to an interest rate of EURIBOR plus a margin of 2% on 90%
of the loan (guaranteed portion) and 4.9% margin on 10% of the loan
(unguaranteed portion). The loan has a final maturity date 7 years
and 11 months after first disbursement.
On 27 December 2021 EOGSA entered into an agreement
with Greek State to issue €9.5 million of notes maturing in 8 years
with fixed rate -0.31% plus margin. The margin commences at 3.0% in
year 1 with annual increases, reaching 6.5% in year 8.
At 31 December 2023 the loan was fully
drawn.
Revolving Credit Facility ('RCF'):
On 8 September 2022, Energean signed a three-year $275
million RCF with a consortium of banks, led by ING Bank N.V. In May
2023, this facility's limit was increased to $300 million. The RCF
is designed to provide additional liquidity for general corporate
needs as necessary. The interest rate applied to any amounts drawn
as loans is set at 5% plus the SOFR rate.
Throughout 2023, the Company utilized $80 million from
this facility at an average interest rate of 10.3%. Of this amount,
$40 million has been repaid subsequent to the reporting
date.
15. Provisions
|
($'000)
|
Decommissioning
|
Provision for litigation and
other claims
|
Total
|
|
At
1 January 2022
|
802,098
|
11,294
|
813,392
|
|
New provisions
|
-
|
1,619
|
1,619
|
|
Change in estimates
|
49,313
|
(551)
|
48,762
|
|
Spend
|
(8,898)
|
(344)
|
(9,242)
|
|
Reclassification
|
-
|
(1,568)
|
(1,568)
|
|
Unwinding of discount
|
21,495
|
-
|
21,495
|
|
Currency translation
adjustment
|
(55,251)
|
(1,104)
|
(56,355)
|
|
At
31 December 2022
|
808,757
|
9,346
|
818,103
|
|
Current provisions
|
8,376
|
-
|
8,376
|
|
Non-current provisions
|
800,381
|
9,346
|
809,727
|
|
At
1 January 2023
|
808,757
|
9,346
|
818,103
|
|
New provisions
|
4,913
|
-
|
4,913
|
|
Change in estimates
|
(24,413)
|
(2,076)
|
(26,489)
|
|
Spend
|
(18,697)
|
-
|
(18,697)
|
|
Reclassification
|
(1,023)
|
-
|
(1,023)
|
|
Unwinding of discount
|
31,255
|
-
|
31,255
|
|
Currency translation
adjustment
|
29,884
|
240
|
30,124
|
|
At
31 December 2023
|
830,676
|
7,510
|
838,186
|
|
Current provisions
|
51,824
|
-
|
51,824
|
|
Non-current provisions
|
778,852
|
7,510
|
786,362
|
Decommissioning provision
The decommissioning provision represents the present
value of decommissioning costs relating to oil and gas properties,
which are expected to be incurred up to 2044 when the producing oil
and gas properties are expected to cease operations. The future
costs are based on a combination of estimates from an external
study completed in previous years and internal estimates. These
estimates are reviewed annually to take into account any material
changes to the assumptions. However, actual decommissioning costs
will ultimately depend upon future market prices for the necessary
decommissioning works required that will reflect market conditions
at the relevant time. Furthermore, the timing of decommissioning is
likely to depend on when the fields cease to produce at
economically viable rates. This, in turn, will depend upon future
oil and gas prices and the impact of energy transition and the pace
at which it progresses which are inherently uncertain. The
decommissioning provision represents the present value of
decommissioning costs relating to assets in Italy, Greece, UK,
Israel and Croatia. No provision is recognised for Egypt as there
is no legal or constructive obligation as at 31 December 2023.
The principal assumptions used in determining
decommissioning obligations for the Group are shown below:
|
|
Inflation assumption
|
Discount rate assumption
|
Cessation of production assumption
|
Spend in
2023
|
2023
($'000)
|
2022
($'000)
|
|
Greece
|
1.8%-
2.7%
|
3.08%
|
2034
|
-
|
19,359
|
13,036
|
|
Italy
|
3.0%-
2.0%
|
4.17%
|
2023-2039
|
8,831
|
497,827
|
519,749
|
|
UK
|
2.34%
|
3.31%
|
2023-2030
|
9,866
|
202,874
|
176,063
|
|
Israel
|
3.0%-
1.6%
|
4.18%
|
2044
|
-
|
92,613
|
84,299
|
|
Croatia
|
3.0%-
2.0%
|
4.17%
|
2036
|
-
|
18,003
|
15,610
|
|
Total
|
|
|
|
18,697
|
830,676
|
808,757
|
16. Trade and other
payables
|
($'000)
|
2023
|
2022
|
|
Trade and other payables-Current
|
|
Financial items:
|
|
|
|
Trade accounts payable
|
225,451
|
298,091
|
|
Payables to partners under
JOA[38]
|
170,470
|
58,336
|
|
Deferred licence payments due
within one year
|
46,154
|
13,345
|
|
Deferred consideration for
acquisition of minority
|
-
|
144,326
|
|
Other payables[39]
|
53,756
|
34,644
|
|
Contingent consideration (note
17)
|
91,075
|
-
|
|
Short term lease
liability
|
16,498
|
9,208
|
|
Deferred income
|
548
|
|
|
VAT payable
|
20
|
|
|
|
603,972
|
557,950
|
|
Non-financial items:
|
|
|
|
Accrued expenses[40]
|
65,033
|
98,650
|
|
Contract Liability[41]
|
-
|
56,230
|
|
Other finance costs accrued (note
6)
|
63,893
|
39,672
|
|
Social insurance and other
taxes
|
4,705
|
4,372
|
|
|
133,631
|
198,924
|
|
|
737,603
|
756,874
|
|
Trade and other payables-Non-Current
|
|
Financial items:
|
|
|
|
Trade and other
payables[42]
|
117,796
|
169,360
|
|
Deferred licence
payments[43]
|
-
|
38,488
|
|
Contingent consideration (note
17)
|
-
|
86,320
|
|
Long term lease
liability
|
48,598
|
23,063
|
|
|
166,394
|
317,231
|
|
Non-financial items:
|
|
|
|
Social insurance
|
529
|
827
|
|
|
529
|
827
|
|
|
166,923
|
318,058
|
17. Contingent
consideration
The share purchase agreement (the "SPA") dated 4 July
2019 between Energean and Edison SpA provides for a contingent
consideration of up to $100.0 million subject to the commissioning
of the Cassiopea development gas project in Italy. The
consideration was determined to be contingent on the basis of
future gas prices (PSV) recorded at the time of the at the time of
first gas production at the Cassiopea field, which is expected in
2024. No payment will be due if the arithmetic average of the year
one (i.e., the first year after first gas production) and year two
(i.e., the second year after first gas production) Italian PSV
Natural Gas Futures prices is less than €10/Mwh when first gas
production is delivered from the field. $100 million is payable if
that average price exceeds €20/Mwh. The fair value of the
contingent consideration is estimated by reference to the terms of
the SPA and the simulated PSV pricing by reference to the
forecasted PSV pricing, historical volatility and a log normal
distribution, discounted at an estimated cost of debt
The contingent consideration to be payable on 1
October 2024 was estimated at acquisition date to amount to
$61.7 million, which discounted at the selected cost of debt
resulted in a present value of $55.2 million as at the
acquisition date.
As at 31 December 2023, the two-year future curve of
PSV prices increased from the date of acquisition and indicate an
average price in excess of €20/Mwh (the threshold
for payment of $100 million), we estimate the fair value of
the contingent consideration as at 31 December 2023 to be
$91.1 million based on a Monte Carlo simulation (31 December
2022: $86.3 million).
The fair value of the consideration payable has been
recognised at level 3 of the fair value hierarchy.
|
Contingent consideration
|
2023
|
|
1
January
|
86,320
|
|
Fair value adjustment including
|
4,755
|
|
Discount unwinding
|
(1,855)
|
|
Unrealised loss on
derivates
|
6,610
|
|
31
December
|
91,075
|
18. Dividends
In line with Energean's dividend
policy, Energean returned US$1.2/share to shareholders in 2023,
representing four quarters of dividend payments. US$0.60/share was
returned to shareholders in 2022, representing two quarters of
dividend payments (maiden dividend was declared in September
2022).
|
|
US$ cents per
share
|
$' 000
|
|
|
2023
|
2022
|
2023
|
2022
|
|
Dividends announced and paid in cash
|
|
|
|
|
|
Ordinary shares
|
|
|
|
|
|
March
|
30
|
-
|
53,252
|
-
|
|
June
|
30
|
-
|
53,411
|
-
|
|
September
|
30
|
30
|
53,518
|
53,252
|
|
December
|
30
|
30
|
53,517
|
53,252
|
|
Total
|
120
|
60
|
213,698
|
106,504
|