TIDMENOG

RNS Number : 9010N

Energean PLC

07 June 2022

 
Energean Israel Limited 
 Unaudited interim condensed consolidated financial statements 
 3 1 M arch 20 22 
 

ENERGEAN ISRAEL LIMITED

Unaudited interim condensed consolidated financial statements

AS OF 31 MARCH 2022

INDEX

 
                                                               Page 
                                                              ----- 
 
 Interim condensed consolidated statement of financial 
  position                                                      1 
 
 Interim condensed consolidated statement of comprehensive 
  income                                                        2 
 
 Interim condensed consolidated statement of changes 
  in equity                                                     3 
 
 Interim condensed consolidated statement of cash 
  flows                                                         4 
 
 Notes to the interim condensed consolidated financial 
  statements                                                   5-16 
 

- - - - - - - - - - - - - - - - - - - -

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Amounts in thousands US Dollars, unless otherwise stated)

 
                                                31 March    31 December 
                                                   2022         2021 
                                               ----------  ------------ 
                                                Unaudited     Audited 
                                               ----------  ------------ 
                                       Note 
                                     -------- 
ASSETS: 
 NON-CURRENT ASSETS: 
   Property, plant and equipment       3(A)     2,333,706     2,245,267 
   Intangible assets                   3(B)        25,314        20,141 
   Other accounts receivable                        9,248         6,463 
   Loan to related party                          346,000       346,000 
   Restricted cash                    3(C)(2)     100,000       100,000 
   Deferred expenses                               22,958        22,958 
   Deferred tax asset                    5         12,902        11,575 
                                               ----------  ------------ 
                                                2,850,128     2,752,404 
                                               ----------  ------------ 
 
 CURRENT ASSETS: 
   Trade and other receivables                     29,076        22,769 
   Restricted cash                    3(C)(2)      35,617        99,729 
   Cash and cash equivalents                      301,574       349,827 
                                               ----------  ------------ 
                                                  366,267       472,325 
                                               ----------  ------------ 
 
TOTAL ASSETS                                    3,216,395     3,224,729 
                                               ==========  ============ 
 
EQUITY AND LIABILITIES: 
EQUITY: 
   Share capital                                    1,708         1,708 
   Share premium                                  572,539       572,539 
   Accumulated losses                            (37,470)      (35,946) 
                                               ----------  ------------ 
   TOTAL EQUITY                                   536,777       538,301 
                                               ----------  ------------ 
 
 NON-CURRENT LIABILITIES: 
   Senior secured notes                3(C)     2,465,619     2,463,524 
   Provisions for decommissioning                  35,696        35,525 
   Trade and other payables            3(E)        54,234       113,264 
                                               ----------  ------------ 
                                                2,555,549     2,612,313 
                                               ----------  ------------ 
 
 CURRENT LIABILITIES: 
   Trade and other payables            3(E)        70,158        74,115 
   Sales consideration received 
    in advance                        3(E)(3)      53,911             - 
                                               ----------  ------------ 
                                                  124,069        74,115 
                                               ----------  ------------ 
TOTAL LIABILITIES                               2,679,618     2,686,428 
                                               ----------  ------------ 
 
TOTAL EQUITY AND LIABILITIES                    3,216,395     3,224,729 
                                               ==========  ============ 
 
 
 06 June 2022 
-------------    -----------------    ---------------- 
                  Panagiotis Benos     Matthaios Rigas 
                      Director             Director 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Amounts in thousands US Dollars, unless otherwise stated)

 
                                                          For the         For the 
                                                         period of       period of 
                                                        three months    three months 
                                                          ended 31        ended 31 
                                                         March 2022      March 2021 
                                                      --------------  -------------- 
                                                         Unaudited       Unaudited 
                                                      --------------  -------------- 
                                                Note 
                                               ----- 
 
   Administrative expenses                      4(A)         (2,205)           (878) 
   Other expenses                               4(A)           (824)            (23) 
   Other income                                 4(A)              53               - 
                                                      --------------  -------------- 
 
   Operating loss                                            (2,976)           (901) 
 
   Finance income                               4(B)           3,338              23 
   Finance expenses                             4(B)         (3,078)           (157) 
   Foreign exchange gain (loss)                 4(B)            (68)             517 
                                                      --------------  -------------- 
 
   Loss for the period before tax                            (2,784)           (518) 
 
   Tax income                                    5             1,260             173 
                                                      --------------  -------------- 
 
Net loss for the period                                      (1,524)           (345) 
                                                      --------------  -------------- 
 
Other comprehensive income (loss): 
 
Items that may be reclassified subsequently 
 to profit or loss: 
Gain (loss) on cash flow hedge for 
 the period                                                        -           2,269 
Tax relating to items that may be 
 reclassified subsequently to profit 
 or loss                                                           -           (522) 
                                                      --------------  -------------- 
 
Other comprehensive income for the 
 period                                                            -           1,747 
                                                      --------------  -------------- 
 
Total comprehensive income (loss) 
 for the period                                              (1,524)           1,402 
                                                      ==============  ============== 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts in thousands US Dollars, unless otherwise stated)

For the period of three months ended 31 March 2022 (Unaudited):

 
                                  Share      Share     Accumulated    Total 
                                  capital    premium      losses      equity 
                                ---------  ---------  ------------  -------- 
 
 Balance as of 1 January 2022     1,708     572,539     (35,946)     538,301 
 
 Changes during period: 
 Comprehensive loss: 
   Loss for the period              -          -         (1,524)     (1,524) 
                                ---------  ---------  ------------  -------- 
 Balance as of 31 March 2022      1,708     572,539     (37,470)     536,777 
                                =========  =========  ============  ======== 
 
 

For the period of three months ended 31 March 2021 (Unaudited):

 
                                     Share      Share       Other     Accumulated    Total 
                                     capital    premium    reserves      losses      equity 
                                   ---------  ---------  ----------  ------------  -------- 
 
 Balance as of 1 January 2021        1,708     572,539     (5,328)     (25,114)     543,805 
 
 Changes during period: 
 Comprehensive income (loss): 
   Loss for the period                 -          -           -          (345)       (345) 
   Other comprehensive loss, net 
    of tax                             -          -         1,747          -         1,747 
                                   ---------  ---------  ----------  ------------  -------- 
 Balance as of 31 March 2021         1,708     572,539     (3,581)     (25,459)     545,207 
                                   =========  =========  ==========  ============  ======== 
 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Amounts in thousands US Dollars, unless otherwise stated)

 
                                                  For the period     For the period 
                                                  of three months    of three months 
                                                  ended 31 March     ended 31 March 
                                                       2022               2021 
                                                -----------------  ----------------- 
                                                    Unaudited          Unaudited 
                                                -----------------  ----------------- 
Cash flows from operating activities: 
    Loss for the period before tax                        (2,784)              (518) 
                                                -----------------  ----------------- 
  Adjustments for: 
    Depreciation and amortisation                              38                 29 
    Loss from disposal on property, plant 
     and equipment                                            824                 23 
    Other expenses                                              5                  - 
    Other income                                             (53)                  - 
    Decommissioning discount unwinding                        171                138 
    Finance Income                                        (3,338)               (23) 
    Finance expenses                                        2,907                 19 
    Net foreign exchange gain                                  68              (517) 
                                                -----------------  ----------------- 
                                                              622              (331) 
  Changes in working capital: 
    Decrease (increase) in other receivables                  (2)                 27 
    Increase in trade and other payables                      800                270 
                                                -----------------  ----------------- 
                                                          (1,364)              (552) 
   Income taxes paid                                        (330)                  - 
                                                -----------------  ----------------- 
Net cash used in operating activities                     (1,694)              (552) 
                                                -----------------  ----------------- 
Cash flows from investing activities: 
    Payment for purchase of oil & gas 
     leases                                                     -           (10,850) 
    Payment for purchase of property, 
     plant and equipment                                 (44,002)           (77,956) 
    Payment for purchase of intangible 
     assets                                               (2,231)            (2,812) 
    Movement in restricted cash                            64,112                  - 
    Interest received                                         692                 59 
                                                -----------------  ----------------- 
Net cash generated (used) in investing 
 activities                                                18,571           (91,559) 
                                                -----------------  ----------------- 
Cash flows from financing activities: 
    Transaction cost due to senior secured 
     notes issuance                                             -            (1,197) 
    Interest paid due to senior secured                  (64,453) 
     notes                                                                         - 
    Notes issuance- escrow account- related 
     party transfer                                             -             10,384 
    Drawdown of borrowings                                      -            118,000 
    Repayment of loan from related parties                      -           (16,000) 
    Finance cost paid                                       (384)           (21,810) 
    Finance costs paid for deferred license 
     payments                                                   -            (3,494) 
    Repayment of obligations under leases                   (248)               (82) 
                                                -----------------  ----------------- 
Net cash generated (used) from financing 
 activities                                              (65,085)             85,801 
                                                -----------------  ----------------- 
 
Net decrease in cash and cash equivalents                (48,208)            (6,310) 
   Cash and cash equivalents at the beginning 
    of the period                                         349,827             37,421 
    Effect of exchange rate fluctuations 
     on cash held                                            (45)              (186) 
                                                -----------------  ----------------- 
Cash and cash equivalents at the end 
 of the period                                            301,574             30,925 
                                                =================  ================= 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 1:    GENERAL 

A. Energean Israel Limited (the "Company") was incorporated in Cyprus on 22 July 2014 as a private company with limited liability under the Companies Law, Cap. 113. Its registered office is at Lefkonos 22, 1(st) Floor, 2064, Nicosia, Cyprus.

B. The Company and its subsidiaries (the "Group") has been established with the objective of exploration, production and commercialisation of natural gas and crude oil. The Group's main activities are performed in Israel by the Company's Israeli Branch.

   C.      The Group's core assets as of 31 March 2022 are comprised of: 
 
 Country                  Asset                 Working interest   Field phase 
---------  ----------------------------------  -----------------  ------------ 
   Israel     Karish (including Karish North)          100%        Development 
   Israel     Tanin                                    100%        Development 
   Israel     Blocks 12, 21, 23, 31                    100%        Exploration 
   Israel     Four licenses Zone D (1)                 80%         Exploration 
 

(1) The Company holds 80% interests in four licenses, blocks 55, 56, 61 and 62 (together, "Zone D") in Israel's Exclusive Economic Zone ("EEZ").

D. COVID-19: Despite COVID-related challenges experienced during the period (mainly at the Admiralty Yard in Singapore, where the Karish FPSO was built), the Group has made solid progress on its flagship Karish project, offshore Israel. The FPSO sailed away from Singapore and has arrived on location in Israel at June 5, 2022. The Company expects approximately three - four months of commissioning before first gas, which expected at Q3 this year.

   NOTE 2:    ACCOUNTING POLICIES AND BASIS OF PREPARATION 

These unaudited interim condensed consolidated financial statements for the three months ended 31 March 2022, have been prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union (EU). The unaudited interim condensed 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 2021.

These unaudited interim financial statements have been prepared on a going concern basis.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION 
   A.      Property, Plant and Equipment: 
   1)      Composition: 
 
                                Petroleum              Furniture, 
                                  and Gas   Leased      fixtures 
                                  assets     assets   and equipment    Total 
                                ----------  -------  --------------  --------- 
 Cost: 
 At 1 January 2021              1,812,758     604         635        1,813,997 
 Additions (*)                   243,346     3,405        194         246,945 
 Disposals                         (23)        -           -           (23) 
 Capitalised borrowing cost 
  (**)                           188,889       -           -          188,889 
 Capitalised depreciation          362         -           -            362 
 Change in decommissioning 
  provision                      (3,549)       -           -          (3,549) 
                                ----------  -------  --------------  --------- 
 Total cost at 31 December 
  2021                          2,241,783    4,009        829        2,246,621 
 Additions (*)                    52,268      108        1,717        54,093 
 Disposals                        (900)        -           -           (900) 
 Capitalised borrowing cost 
  (**)                            35,284       -           -          35,284 
 Capitalised depreciation          177         -           -            177 
                                ----------  -------  --------------  --------- 
 Total cost at 31 March 2022    2,328,612    4,117       2,546       2,335,275 
                                ----------  -------  --------------  --------- 
 
 Depreciation: 
 At 1 January 2021                  -         331         143           474 
 Charge for the year (Note 
  14)                               -          -           85           85 
 Capitalised to petroleum 
  and gas assets                    -         362          -            362 
 Write down of the assets          433         -           -            433 
                                ----------  -------  --------------  --------- 
 Total Depreciation at 31 
  December 2021                    433        693         228          1,354 
 Expensed for the period            -          -           38           38 
 Capitalised to petroleum 
  and gas assets                    -         177          -            177 
                                ----------  -------  --------------  --------- 
 Total Depreciation at 31 
  March 2022                       433        870         266          1,569 
                                ----------  -------  --------------  --------- 
 
 Net property, plant and 
  equipment at 31 December 
  2021                          2,241,350    3,316        601        2,245,267 
                                ==========  =======  ==============  ========= 
 Net property, plant and 
  equipment at 31 March 2022    2, 328,179   3,247       2,280       2,333,706 
                                ==========  =======  ==============  ========= 
 

(*) The additions to Petroleum and Gas assets are mainly due to the development costs of

Karish field which mainly relate to the EPCIC contract (FPSO, Sub Sea and On-shore construction

cost).

(**) The borrowing costs capitalised are mainly due to the secured senior notes.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
   2)      Cash flow statement reconciliations: 
 
 
                                                For the period  For the period 
                                                   of three        of three 
                                                 months ended    months ended 
                                                   31 March        31 March 
                                                     2022            2021 
                                              ----------------  -------------- 
                                                 Unaudited        Unaudited 
                                              ----------------  -------------- 
 
 
Additions to property, plant and equipment             88,65 4         130,036 
Less 
Capitalised borrowing costs                           (35,284)        (45,278) 
Right-of-use asset additions                             (107)            (22) 
Capitalised share-based payment charge                    (40)            (24) 
Capitalised depreciation                                 (177)            (53) 
                                              ----------------  -------------- 
Total                                                  53,04 6          84,659 
Movement in working capital                            (9,044)           4,147 
                                              ----------------  -------------- 
Cash capital expenditures per the cash 
 flow statement (*)                                     44,002          88,806 
                                              ----------------  -------------- 
 
 

(*) The amount includes payment of US$10.85 million which has been paid in 2021 to the

sellers of Karish and Tanin leases.

   B.      Intangible Assets: 
   1)      Composition: 
 
                                       Exploration 
                                      and evaluation  Software 
                                          assets       license  Total 
                                     ---------------  --------  ------ 
Cost: 
At 1 January 2021                        13,799         255     14,054 
Additions                                 6,342          -      6,342 
                                     ---------------  --------  ------ 
At 31 December 2021                      20,141         255     20,396 
                                     ---------------  --------  ------ 
Additions                                 5,173          -      5,173 
                                     ---------------  --------  ------ 
At 31 March 2022                         25,314         255     25,569 
                                     ---------------  --------  ------ 
 
Amortisation: 
At 1 January 2021                           -           247      247 
Charge for the year                         -            8        8 
                                     ---------------  --------  ------ 
Total Amortisation at 31 December 
 2021                                       -           255      255 
                                     ---------------  --------  ------ 
Expensed for the period                     -            -        - 
                                     ---------------  --------  ------ 
Total Amortisation at 31 March 
 2022                                       -           255      255 
                                     ---------------  --------  ------ 
 
Net intangible assets at 31 
 December 2021                           20,141          -      20,141 
                                     ===============  ========  ====== 
Net intangible assets at 31 
 March 2022                              25,314          -      25,314 
                                     ===============  ========  ====== 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
   2)      Cash flow statement reconciliations: 
 
                                     For the period 
                                        of three     For the period 
                                      months ended    of nine months 
                                        31 March         ended 31 
                                          2022          March 2021 
                                     --------------  --------------- 
                                       Unaudited        Unaudited 
                                     --------------  --------------- 
Additions to intangible assets                5,173            2,799 
Less 
Movement in working capital                 (2,942)               13 
                                     --------------  --------------- 
Cash capital expenditures per the 
 cash flow statement                          2,231            2,812 
                                     ==============  =============== 
 
 
   C.      Senior secured Notes: 
   1)        Issuance of US$2,500,000,000 senior secured notes: 

On 24 March 2021 ("Issue Date"), Energean Israel Finance Ltd (a subsidiary of the Company, held 100%) announced on closing of an offering of US$2,500,000,000 senior secured notes.

The Notes were issued in four series as follows:

 
                                                           31          31 December 
                                                          March            2021 
                                                          2022 
                                                    ---------------  --------------- 
      Series            Maturity      Annual fixed 
                                        Interest 
                                          rate       Carrying value   Carrying value 
------------------  ---------------  -------------  ---------------  --------------- 
   US$ 625 million    30 March 2024         4.500%          617,942          617,060 
   US$ 625 million    30 March 2026         4.875%          616,498          615,966 
   US$ 625 million    30 March 2028         5.375%          615,842          615,451 
   US$ 625 million    30 March 2031         5.875%          615,337          615,047 
------------------                                  ---------------  --------------- 
                   US$2,500 million                       2,465,619        2,463,524 
===================================                 ===============  =============== 
 

The interest on each series of the Notes will be paid semi-annually, on 30 March and on 30 September of each year.

The Notes are listed for trading on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the "TASE").

With regards to the Indenture document, signed on 24 March 2021 with HSBC BANK USA, N.A (the "Trustee"), no Indenture default or Indenture event of default has occurred and is continuing.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
   2)      Restricted cash: 

As of 31 March 2022 the restricted cash of the Company includes:

o Long term restricted cash of US$100 million Debt Payment Fund that would be released upon achieving three quarters annualized production of 3.8 BCM/year.

o Short term restricted cash of US$35.6 million to cover the Interest Reserve Account for the accrued interest of the senior Secured Notes till 30 June 2022.

                3)     Credit rating: 

Moody's assigns Ba3 rating the senior secured notes, and S&P Global assigns BB- rating the senior secured notes.

   D.      Fair value measurements: 

The information set out below provides information about how the Group determines the fair values of various financial assets and liabilities.

The fair values of the Group's non-current liabilities measured at amortised cost are considered to approximate their carrying amounts at the reporting date.

The carrying value less any estimated credit adjustments for financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair values due to their short term-nature.

The fair value hierarchy of financial assets and financial liabilities that are not measured at fair value (but fair value disclosure is required) is as follows:

 
                                  Fair value hierarchy as of 31 March 2022 
                              ----------------------------------------------- 
                                                 Unaudited 
                              ----------------------------------------------- 
                                Level 1     Level 2     Level 3      Total 
                              ----------  -----------  ---------  ----------- 
            Financial assets 
   Long term trade and other 
                 receivables       -         9,184         -         9,184 
       Loan to related party       -        346,000        -        346,000 
   Long term restricted cash    100,000        -           -        100,000 
  Short term restricted cash    35,617         -           -         35,617 
  Short term trade and other 
                 receivables       -         29,076        -         29,076 
   Cash and cash equivalents    301,574        -           -        301,574 
                              ----------  -----------  ---------  ----------- 
                       Total    437,191     384,260        -        821,451 
                              ----------  -----------  ---------  ----------- 
       Financial liabilities 
        Senior secured notes       -       2,465,619       -       2,465,619 
    Trade and other payables 
                 - long term       -         54,234        -         54,234 
    Trade and other payables 
                - short term       -         69,949        -         69,949 
                              ----------  -----------  ---------  ----------- 
                       Total       -       2,589,802       -       2,589,802 
                              ----------  -----------  ---------  ----------- 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
 
                                Fair value hierarchy as of 31 December 
                                                 2021 
                             -------------------------------------------- 
                                               Audited 
                             -------------------------------------------- 
                              Level 1     Level 2    Level 3     Total 
                             ---------  -----------  --------  ---------- 
Financial assets 
Long term trade and other 
 receivables                               6,402        -        6,402 
Loan to related party                     346,000       -       346,000 
Long term restricted cash     100,000                   -       100,000 
Short term restricted cash    99,729                    -        99,729 
Short term trade and other 
 receivables                     -        22,176        -        22,176 
Cash and cash equivalents     349,827        -          -       349,827 
                             ---------  -----------  --------  ---------- 
Total                         549,556     374,578       -       924,134 
                             ---------  -----------  --------  ---------- 
Financial liabilities 
Senior secured notes             -       2,495,751      -      2,495,751 
Trade and other payables 
 - long term                     -        59,727        -        59,727 
Trade and other payables 
 - short term                    -        40,312        -        40,312 
                             ---------  -----------  --------  ---------- 
Total                            -       2,595,790      -      2,595,790 
                                        -----------  --------  ---------- 
 
   E.      Trade and other payables: 
 
                                    31 March   31 December 
                                      2022        2021 
                                    ---------  ----------- 
                                    Unaudited    Audited 
                                    ---------  ----------- 
Current 
Financial items 
Trade accounts payable (1)             27,649       32,611 
Accrued expenses (1)                   11,036        5,611 
Payables to related parties             5,538        1,079 
Deferred license payments (2)          24,695            - 
Interest payable                            -       32,227 
Current lease liabilities               1,031        1,011 
                                    ---------  ----------- 
                                       69,949       72,539 
 
Non-Financial items 
VAT payable                                 -        1,217 
Social insurance and other taxes          192          132 
Income taxes                               17          227 
                                    ---------  ----------- 
                                          209        1,576 
 
                                       70,158       74,115 
                                    =========  =========== 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
 
                                           31 March   31 December 
                                             2022        2021 
                                           ---------  ----------- 
                                           Unaudited    Audited 
                                           ---------  ----------- 
Non-current 
Financial items 
Accrued expenses to related parties              152          294 
Long term lease liabilities                    2,134        2,203 
Trade and other payables (4)                  18,171            - 
Deferred license payments (2)                 33,777       57,230 
                                           ---------  ----------- 
                                              54,234       59,727 
Non-Financial items 
Sales consideration received in advance 
 (INGL) (3)                                        -       53,537 
                                           ---------  ----------- 
                                                   -       53,537 
 
                                              54,234      113,264 
                                           =========  =========== 
 

(1) The change in Trade payables and accrued expenses represents mainly timing differences and levels of work activity in Karish project. Trade payables are non-interest bearing.

(2) In December 2016, the Company acquired the Karish and Tanin offshore gas fields for US$40 million closing payment with an obligation to pay additional consideration of US$108.5 million plus interest inflated at an annual rate of 4.6% in ten equal annual payments. As at 31 March 2022 the total discounted deferred consideration was approx. US$58 million (as at 31 December 2021: approx. US$57million).

The Sale and Purchase Agreement ("SPA") includes provisions in the event of Force Majeure that prevents or delays the implementation of the development plan as approved under one lease for a period of more than ninety (90) days in any year following the final investment decision ("FID") date. In the event of Force Majeure, the applicable annual payment of the remaining consideration will be postponed by an equivalent period of time, and no interest will be accrued in that period of time as well.

Due to the effects of the COVID-19 pandemic which constitute a Force Majeure event, the deferred payment due in March 2022 was postponed.

(3) The sales consideration received in advance is related to the agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "hand over") of the near shore and onshore part of the infrastructure that will deliver gas from the Energean Power FPSO into the Israeli national gas transmission grid. It is intended that the hand over to INGL will become effective at least 90 days after the delivery of first gas from the Karish field which expected in Q3-2022. Following Hand Over, INGL will be responsible for the operation and maintenance of this part of the infrastructure.

As of 31 March 2022, the sales consideration received in advance presented as short term liability (on 31 December 2021 was presented under long term payables).

(4) In March 2022 the company signed the amendment to EPCIC contract to delay part of the payments according to agreed schedule.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 4:    COMPREHENSIVE INCOME 
 
                                             For the period 
                                                of three       For the period 
                                              months ended     of three months 
                                                31 March       ended 31 March 
                                                  2022              2021 
                                             --------------  ------------------ 
                                               Unaudited        Unaudited 
                                             --------------  ---------------- 
General & administration expenses 
Payroll costs                                           397               384 
Share-based payment charge included in 
 administrative expenses                                 31                21 
Depreciation and amortisation (Notes 3(A) 
 and 3(B))                                               38                29 
Auditor fees                                             80                98 
Other general & administration expenses               1,659               346 
                                             --------------  ---------------- 
Total administrative expenses                        2,20 5               878 
 
Other expenses 
Loss from property, plant and equipment 
 disposal                                               824                23 
                                             --------------  ---------------- 
Total other expenses                                    824                23 
                                             --------------  ---------------- 
 
Other income 
Gain from disposal                                     (53)                 - 
                                             --------------  ---------------- 
Total other income                                     (53)                 - 
                                             --------------  ---------------- 
 
 
   A.      Operating loss: 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 4:    COMPREHENSIVE INCOME (Cont.) 
   B.      Net finance income (expenses): 
 
                                               For the         For the 
                                              period of       period of 
                                             three months    three months 
                                               ended 31        ended 31 
                                              March 2022      March 2021 
                                            -------------  --------------- 
                                              Unaudited      Unaudited 
                                            -------------  ------------- 
 
Interest on bank borrowings                             -         27,213 
Interest on senior secured notes (1)               34,323          2,507 
Interest expense on long terms payables             2,064          1,913 
Interest on shareholders loan                           -              9 
Less amounts included in the cost of 
 qualifying assets (2)                           (33,744)       (31,642) 
                                            -------------  ------------- 
                                                    2,643              - 
 
Finance and arrangement fees                        1,459         11,374 
Other finance costs and bank charges                  264             19 
Interest expenses from Hedging                          -          2,249 
Unwinding of discount on decommissioning 
 liabilities                                          171            138 
Interest on obligations for leases                     83             13 
Less amounts included in the cost of 
 qualifying assets (2)                            (1,542)       (13,636) 
                                            -------------  ------------- 
                                                      435            157 
 
Total finance costs                                 3,078            157 
 
Interest income from time deposits                    557             23 
Interest income from loans to related 
 parties                                            2,781              - 
                                                           ------------- 
Total finance income                                3,338             23 
 
Net foreign exchange gain (loss)                     (68)            517 
 
Net finance income                                    192            383 
                                            -------------  ------------- 
 
 

(1) See also Note 3(C)(1).

(2) See also Note 3(A).

   NOTE 5:    TAXATION 
   A.      Tax income: 
 
                                           For the         For the 
                                          period of       period of 
                                         three months    three months 
                                           ended 31        ended 31 
                                          March 2022      March 2021 
                                        -------------  --------------- 
                                          Unaudited      Unaudited 
 
 Corporation tax - current year                  (67)              - 
 Deferred tax income                            1,327            173 
                                        -------------  ------------- 
 Total taxation income                          1,260            173 
                                        =============  ============= 
 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 5:    TAXATION (Cont.) 
   B.      Deferred tax: 

The deferred taxes, driven from the activity in Israel by the Israeli Branch of the Company, are computed at the average tax rate of 23%, based on the tax rates that are expected to apply upon reversal. The deferred taxes are presented in the statement of financial position as non-current assets. Below are the items for which deferred taxes were recognised:

 
                                                                         Accrued 
                    Property,                                           expenses 
                      plant     Right                                   and other 
                       and       of                                    short--term 
                    equipment    use                                   liabilities 
                        &       asset           Deferred     Staff      and other                 Provisions 
                    intangible  IFRS     Tax    expenses    leaving    long--term   Derivative        for 
                      asset      16     losses  for tax   indemnities  liabilities   liability  decommissioning   Total 
                    ----------  -----  -------  --------  -----------  -----------  ----------  ---------------  ------- 
 
 
At 1 January 2021     (12,140)   (62)    9,325         -           63          293       1,591            8,769    7,839 
Increase 
(decrease) for 
the year through: 
Profit or loss           (492)  (700)    1,436     5,020           31          630           -            (598)    5,327 
Reclassification 
 for the 
 current year                -      -  (1,090)     1,090            -            -           -                -        - 
Other 
 comprehensive 
 income                      -      -        -         -            -            -     (1,591)                -  (1,591) 
                    ----------  -----  -------  --------  -----------  -----------  ----------  ---------------  ------- 
 
At 31 December 
 2021                 (12,632)  (762)    9,671     6,110           94          923           -            8,171   11,575 
                    ==========  =====  =======  ========  ===========  ===========  ==========  ===============  ======= 
 
Increase 
(decrease) for 
the period 
through : 
Profit or loss         (1,285)   (11)    2,568         -            -           16           -               39    1,327 
                    ----------  -----  -------  --------  -----------  -----------  ----------  ---------------  ------- 
 
At 31 March 2022      (13,917)  (773)   12,239     6,110           94          939           -            8,210   12,902 
                    ==========  =====  =======  ========  ===========  ===========  ==========  ===============  ======= 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 6:    SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD 

A. Gas supply agreement with the Israel Electric Company

In March 2022, Energean signed a gas supply agreement with the Israel Electric Company.

The gas price will be determined in each period, with volumes determined on a daily basis.

Starting upon the commencement of first gas production from Karish, the agreement will

be valid for an initial one-year period with an option to extend subject to ratification by

both parties

   B.      Offshore Israel during March 2022: 

The company started the drilling of three wells during March 2022. See also Note 7(D).

   NOTE 7:    SIGNIFICANTS EVENTS AND TRANSACTIONS AFTER THE REPORTING PERIOD 
   A.      Share Premium Capital reduction: 

On 8 April 2022 the Company reduced its share premium capital at the amount of 360 million USD and credited against it the loan to its shareholder at the amount of $US346 million and the accrued interest to receive as of 8 April 2022.

   B.      Termination of contract with Gas Buyer 

In May 2022, further to the claims raised by the parties in the related arbitration proceedings (including the counterclaim filed by Energean seeking a declaration that Energean is entitled to terminate the GSPA as well as damages), Dalia and the Company agreed to end all claims and disputes between them. Both sides agreed that the Dalia GSPA (which represents up to 0.8 billion cubic meter ("bcm") per year was lawfully terminated, that the arbitration proceedings are terminated, and that neither party owes or will be liable to the other for any payment in connection with and due to the Dalia GSPA, the arbitration proceedings and the facts subject thereof. This was agreed to be final and unappealable.

   C.      Contract signed with new Gas Buyer 

In May 2022 Company has signed a new GSPA, representing up to 0.8 bcm/year , to supply gas to the East Hagit Power Plant Limited Partnership ("EH Partnership"), a partnership between the Edeltech Group and Shikun & Binui Energy.

The GSPA is for a term of approximately 15 years, for a total contract quantity of up to 12 bcm. The contract contains provisions regarding floor pricing, offtake exclusivity and a price indexation mechanism.

   D.      Athena Gas Discovery 

Commercial discovery made by the Athena exploration well, Block 12, in the A, B and C sands. Preliminary analysis indicates that the Athena discovery contains recoverable gas volumes of 8 bcm on a standalone basis.

This discovery is particularly significant as it de-risks an additional 50 bcm of mean unrisked prospective resources across Energean's Olympus Area (total 58 bcm including Athena). The Olympus Area is Energean's newly defined area which includes Athena, plus the undrilled prospects on Block 12 and the adjacent Tanin Lease.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 7:    SIGNIFICANTS EVENTS AND TRANSACTIONS AFTER THE REPORTING PERIOD (Cont.) 
   E.      Claim submitted under the Karish-Tanin SPA 

On 31 May 2022, NewMed Energy LP (previously named Delek Drilling LP) ("NewMed") filed a lawsuit against the Company before the Tel Aviv District Court. The claim is for the amount of US$65.1 million plus interest and indexation, constituting the outstanding consideration under the SPA (see Note 3(E)(2)). The residual remedy requested is US$10.85 million plus interest and indexation, reflecting the annual payment for the year 2021. The claim is purportedly based on a payment acceleration mechanism set in the SPA, combined with NewMed's rejection of the Company's Force Majeure claim. The claim is being assessed by the Company together with its legal advisors.

   F.      The FPSO sailed away from Singapore and has arrived on location in Israel on 5 June 2022. 

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END

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(END) Dow Jones Newswires

June 07, 2022 02:00 ET (06:00 GMT)

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