NOTE 2: -     Accounting policies and basis of preparation

The interim financial information included in this report has been prepared in accordance with IAS 34 "Interim Financial Reporting". The results for the interim period are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for the period ended 31 March 2024. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements do not include all the information and disclosures that are required for the annual financial statements and must be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2023.

The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing the Group's annual consolidated financial statements for the year ended 31 December 2024 which are the same as those used in preparing the annual consolidated financial statements for the year ended 31 December 2023.

The directors consider it appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.

Israel-Hamas conflict- The Group continues to monitor the ongoing conflict between the State of Israel and Hamas. While the situation has not impacted the Company's production from the FPSO (Floating Production Storage and Offloading vessel), it is not possible to predict whether the conflict will have a material adverse effect on our future earnings, cash flows and financial conditions.

 

 

NOTE 3: -     Revenues

		31 March (Unaudited)
		2024 $'000		2023 $'000
Revenue from gas sales (1)		182,245		113,090
Revenue from hydrocarbon liquids sales (2)		84,041		50,691
Compensation to customers (3)		-		(4,928)
Total revenue		266,286		158,853

⁽¹) Sales gas for three months ended 31 March 2024 totaled approximately 1.2 bcm and for three months ended 31 March 2023 totaled approximately 0.72 bcm.

⁽²⁾ Sales from hydrocarbon liquids for three months ended 31 March 2024 totaled approximately 1.07 mmbbl and for three months ended 31 March 2023 totaled approximately 0.714 mmbbl.

⁽³⁾ During 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Company paid compensation to these counterparties following delays to the supply of gas from the Karish project. The compensation is deducted from revenue in 2023, as variable consideration, as the gas is delivered to the gas buyers, in accordance with IFRS 15 Revenue Recognition.

 

 

 

NOTE 4: -     Operating profit before taxation

		31 March (Unaudited)
		2024 $'000		2023 $'000
(a)   Cost of sales
Staff costs		4,186		1,885
Energy cost		420		1,288
Royalty payable		47,122		29,474
Depreciation (Note 7)		54,317		30,279
Other operating costs (1)		22,938		20,110
Oil stock movement		(2,715)		869
Total cost of sales		126,268		83,905
(b)   Administrative expenses
Staff costs		1,478		960
Share-based payment charge		181		99
Depreciation and amortisation  (Note  7, 8)		470		592
Auditor fees		52		48
Other general & administration expenses (2)		1,228		2,223
Total administrative expenses		3,409		3,922
(c)    Exploration and evaluation expenses
Other exploration and evaluation expenses		-		50
Total exploration and evaluation expenses		-		50

⁽¹⁾ Other operating costs mainly consist of insurance and planned maintenance costs.

⁽²⁾ The Other general & administration expenses mainly consist of legal expenses, management fees recharged by other Energean Group companies and external advisors fees.

 

 

 

NOTE 5: -     Net finance income/(expenses)

		31 March (Unaudited)
				2024 $'000		2023 $'000
Interest on Senior Secured Notes (Note 12)				42,525		34,375
Interest expense on long terms payables (Note 13(2))				1,046		612
Less amounts included in the cost of qualifying assets (Note 7(A))				(3,686)		(3,568)
				39,885		31,419
Costs related to parent company guarantees				932		145
Other finance costs and bank charges				594		107
Unwinding of discount on trade payable (Note 13(3))				4,051		-
Unwinding of discount on provision for decommissioning				926		861
Unwinding of discount on right of use asset (1)				226		15
Less amounts included in the cost of qualifying assets (Note 7(A))				(60)		(60)
				6,669		1,068
Total finance costs				46,554		32,487
Interest income from time deposits				3,056		654
Profits from valuation of hedging operations				5		-
Change of discount estimate on payables				-		872
Total finance income				3,061		1,526
Net foreign exchange profits (losses)				125		(257)
Net finance costs				(43,368)		(31,218)

NOTE 6: -     Taxation

1.      Corporate Tax rates applicable to the Company:

Israel:

The Israeli corporate tax rate is 23% in 2024 and 2023.

Cyprus:

For its activity in Cyprus, the Company is subject to corporation tax on its taxable profits at the rate of 12.5%.

Starting from 1 January 2024, the Company's control and management was transferred from the Republic of Cyprus ("Cyprus") to the United Kingdom ("UK") and as such the Company's tax residency migrated from Cyprus to UK.

2.      The Income and Natural Resources Taxation Law, 5771-2011 - Israel- the main provisions of the law are as follows:

n April 2011, the Knesset passed the Income and Natural Resources Tax Law, 5771-2011 ("the Law"), which imposed an oil and gas profits levy at a rate set out below. The rate of the levy is calculated according to a proposed R factor mechanism, according to the ratio between the net accrued revenues from the project and the cumulative investments as defined in the Law. A minimum levy of 20% is levied at the stage where the R factor ratio reaches 1.5, and when the ratio increases, the levy will increase gradually until the maximum rate of 50% until the ratio reaches 2.3. In addition, it was determined that the rate of the levy as stated will be reduced starting in 2017 by multiplying 0.64 by the difference between the corporate tax rate prescribed in section 126 of the Income Tax Ordinance for each tax year and the tax rate of 18%. In accordance with the corporate tax rate from 2018 onwards, the maximum rate will be 46.8%.

In addition, additional provisions were prescribed regarding the levy, inter alia, the levy is recognised as an expense for the purpose of calculating income tax; the limits of the levy shall not include export facilities; the levy will be calculated and imposed for each reservoir separately (Ring Fencing); payment by the owner of an oil right calculated as a percentage of the oil produced, the recipient of the payment will be liable to pay a levy according to the amount of the payment received, and this amount will be subtracted from the amount of the levy owed by the holder of the oil right.

NOTE 6: -     Taxation (Cont.)

The Law also sets rules for the unification or separation or consolidation of oil projects for the purposes of the Law. In accordance with the provisions of the Law, the Group is not yet required to pay any payment in respect of the said levy, and therefore no liability has been recognised in the financial statements in respect of this payment.

 

3.      Taxation charge:

		31 March (Unaudited)
		2024 $'000	2023 $'000
Current income tax charge		(246)	(143)
Deferred tax relating to origination and reversal of temporary differences (Note 9)		(13,085)	(9,339)
Total taxation expense		(13,331)	(9,482)

NOTE 7: -     Property, Plant and Equipment  

a.          Composition:

		Oil and gas Assets $'000		Leased assets $'000		Furniture, fixtures and equipment $'000		Total $'000
Cost:
At 1 January 2023		2,932,789		4,740		1,994		2,939,523
Additions		135,126		12,246		396		147,768
Handover to INGL(1)		(111,448)		-		-		(111,448)
Capitalised borrowing cost		17,658		-		-		17,658
Change in decommissioning provision		4,913		-		-		4,913
Total cost at 31 December 2023		2,979,038		16,986		2,390		2,998,414
Additions		36,962		47		7		37,016
Capitalised borrowing cost		3,746		-		-		3,746
Change in decommissioning provision		(7,072)		-		-		(7,072)
Total cost at 31 March 2024		3,012,674		17,033		2,397		3,032,104
Depreciation:
At 1 January 2023		11,226		1,459		525		13,210
Charge for the year		183,898		2,966		509		187,373
Total Depreciation at 31 December 2023		195,124		4,425		1,034		200,583
Charge for the period		53,380		1,203		99		54,682
Total Depreciation at 31 March 2024		248,504		5,628		1,133		255,265
At 31 December 2023		2,783,914		12,561		1,356		2,797,831
At 31 March 2024		2,764,170		11,405		1,264		2,776,839

The additions to oil & gas assets in 2024 and 2023 are primarily due to development costs for the FPSO, Karish North and 2^nd Oil Train.

⁽¹⁾ Handover to INGL took place on 22 March 2023, please refer to Note 10(1).

 

NOTE 7: -     Property, Plant and Equipment  (Cont.)

b.         Depreciation expense for the year has been recognised as follows:

	31 March (Unaudited)
	2024 $'000		2023 $'000
Cost of sales	54,317		30,279
Administration expenses	365		507
Total	54,682		30,786

 

c.          Cash flow statement reconciliations:

				31 March (Unaudited)
				2024 $'000		2023 $'000
Additions and disposals to property, plant and equipment, net			33,690		77,368
Associated cash flows
Payments and receipts for additions to property, plant and equipment, net			(67,448)		(55,752)
Non-cash movements/presented in other cash flow lines
Capitalised borrowing costs			(3,746)		(3,628)
Right-of-use asset additions			(47)		-
Change in decommissioning provision			7,072		(1,020)
Lease payments related to capital activities			1,381		-
Movement in working capital			29,098		(16,968)

 

d.         Details of the Group's rights in petroleum and gas assets are presented in note 1.

 

 

 

NOTE 8: -     Intangible Assets

a.          Composition:

		Exploration and evaluation assets $'000		Software licences $'000		Total $'000
Cost:
At 1 January 2023		141,869		1,968		143,837
Additions		24,597		362		24,959
At 31 December 2023		166,466		2,330		168,796
Additions		6,237		-		6,237
At 31 March 2024		172,703		2,330		175,033
Amortisation:
At 1 January 2023		-		283		283
Charge for the year		-		348		348
Total Amortisation at 31 December 2023		-		631		631
Charge for the period		-		105		105
Total Amortisation at 31 March 2024		-		736		736
At 31 December 2023		166,466		1,699		168,165
At 31 March 2024		172,703		1,594		174,297

Additions to exploration and evaluation assets are mainly related to pre-FID cost for Katlan.

b.         Cash flow statement reconciliations:

			31 March (Unaudited)
				2024 $'000		2023 $'000
Additions to intangible assets				6,237		9,089
Associated cash flows
Payment for additions to intangible assets				(5,724)		(25,318)
Non-cash movements/presented in other cash flow lines
Movement in working capital				(513)		16,229

 

c.          Details on the Group's rights in the intangible assets:

Right	Type of right	Valid date of the right	Group's interest as at 31 Match 2024
Block 12	Exploration license	13 January 2025	100%
Block 21	Exploration license	13 January 2025	100%
Block 23	Exploration license	13 January 2025	100%
Block 31	Exploration license	13 January 2025	100%

 

NOTE 8: -     Intangible Assets (Cont.)

d.         Additional information regarding the Exploration and Evaluation assets:

As of 31 March 2024, the Group holds four licences to explore for gas and oil in Block 12, Block 21, Block 23 and Block 31, which are located in the economic waters of the State of Israel. In January 2024 the licences were extended until 13 January 2025, and they may be extended for a further one year.

In 2022, during the Company's growth drilling programme, it discovered gas in Block 12, offshore Israel. The Company expects to take FID upon the finalisation of EPC ("Engineering, Procurement and Construction") terms, which are currently under negotiation.

 

NOTE 9: -     Deferred taxes

The Group is subject to corporation tax on its taxable profits in Israel at the rate of 23%. The Capital Gain Tax rates depends on the purchase date and the nature of asset. The general capital tax rate for a corporation is the standard corporate tax rate.

Tax losses can be utilised for an unlimited period, and tax losses may not be carried back.

According to Income Tax (Deductions from Income of Oil Rights Holders) Regulations, 5716-1956, the exploration and evaluation expenses of oil and gas assets are deductible in the year in which they are incurred.

The Group expects that there will be sufficient taxable profit in the following years and that deferred tax assets, recognised in the consolidated financial statements of the Group, will be recovered.