TIDMENOG
RNS Number : 9567W
Energean PLC
28 April 2021
Energean plc
("Energean" or the "Company")
Publication of 2020 Annual Report and Accounts and Notice of
Annual General Meeting ( AGM)
London, 28 April 2021 - Energean plc (LSE: ENOG, TASE: ) is
pleased to announce that it has today published its Annual Report
and Accounts for the year ended 31 December 2020, which has also
been distributed to shareholders with a Notice of AGM for the
meeting being held on 24 May 2021 and associated Form of Proxy.
2020 Annual Report and Accounts
The full report is available for download on the Company's
website at www.energean.com
A copy of the report has also been submitted to the FCA's
National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
In accordance with Disclosure and Transparency Rule 6.3.5(2)(b),
the additional information set out in the following Appendix has
been extracted (unedited) from the 2020 Annual Report and Accounts.
This information consists of principle risks and uncertainties,
related party transactions and the Directors' Responsibility
Statement; and it should be read in conjunction with the Company's
final results for the year ended 31 December 2020, which were
announced on Monday 19 April 2021.
AGM Notice
The Company's 2021 AGM will be held at the registered office of
the Company at Accurist House, London, W1U 7AL on Monday 24 May
2021 at 11:00 a.m. (BST).
Pursuant to Listing Rule 9.6.1, copies of the Notice of AGM and
Form of Proxy have been submitted to the National Storage Mechanism
and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . Electronic
copies of the 2020 Annual Report and Accounts will be available to
view and download from the Company's website: www.energean.com ,
together with the Notice of Annual General Meeting.
Defined terms used in this announcement shall, unless otherwise
specifically defined herein, have the same meanings as in the
Notice of AGM.
As a result of the ongoing COVID-19 global pandemic and the
legal measures that the UK Government has put in place relating to
the pandemic, there are significant restrictions on public
gatherings and non-essential travel that are expected to affect the
arrangements for, and attendance at, the AGM. In light of these
restrictions and the uncertainty as to whether any additional
and/or alternative restrictions or measures may be introduced by
the UK Government, for the safety of our Shareholders, our
employees, our advisers and the general public, attendance at the
AGM in person will not be possible this year and Shareholders or
their appointed proxies (other than the chair of the AGM and one
other shareholder, to ensure a quorum) will not be permitted entry
to the AGM. The Shareholders are encouraged to watch the Company's
website (www.energean.com) and regulatory news services for any
updates in relation to the AGM that may need to be provided.
This year, the AGM will be held purely to conduct the required
formal business and will not include a presentation and questions
to be put to the Board in person, as was the case in previous
years, however, Shareholders are encouraged to send any questions
which they would have, otherwise, raised at the AGM to
IR@energean.com before the date of the AGM; and after the AGM has
concluded the Company will publish responses to those questions on
its website at http://www.energean.com .
The voting results on the resolutions put to the AGM shall be
announced to the market and uploaded onto the Company's website
following the closure of the AGM. The Company will continue to
monitor the restrictions put in place in response to COVID-19 and,
if circumstances change resulting in the lifting of measures
preventing the movement of people ahead of the AGM, it will
consider if it is appropriate to open up the AGM for attendance by
Shareholders. If this is the case, an update will be given on the
Company's website at www.energean.com and by way of announcement to
the London Stock Exchange.
Shareholders are strongly encouraged to ensure that their votes
are counted at the AGM by appointing the chairman of the AGM as
their proxy and submitting their completed proxy forms to the
Company's registrars, Computershare Investor Services plc, The
Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible
and, in any event, no later than 11:00 a.m. on Thursday 20 May
2021. Alternatively, shareholders can also appoint a proxy and
indicate their voting instructions online at
www.investorcentre.co.uk/eproxy or through CREST. Any shareholder
holding shares through a nominee service, should contact the
nominee service provider regarding the process for appointing a
proxy.
Appendix
Strategic risk
#1 Progress key development projects in Israel
Principal risk: Delay to first gas at Karish
Owner: Chief Executive Officer
Link to 2020 KPIs: Delivering our strategy, growing our business
and tackling climate change
Risk appetite Low - Successful delivery of the Karish
project is crucial to achieving the Group's
ambition of becoming the leading independent
E&P company in the Mediterranean and securing
the Group's future revenue stream and its
ability to deliver material free cash flows,
the latter of which underpins the Group's
commitment to deliver material and sustainable
returns to shareholders.
2020 movement This risk increased primarily due to COVID-19
related challenges at the Admiralty yard
in Singapore, where the Energean Power FPSO
is under construction. Energean continues
to work towards first gas from Karish in
1Q 2022. The shipyard in Singapore remains
under limitations imposed by COVID-related
restrictions, including limited access to
workers and yard productivity. Energean
is working with its contractors to firm
up this timetable and will update the market
as the situation evolves
Impact Delayed sailaway of the FPSO could result
in a delay in delivering future cash flows,
and delay Energean's ability to pay a meaningful
and sustainable dividend to its shareholders.
Delays could also result in increased capital
expenditure and incremental G&A costs, which
could result in a reduction to said cash
flows.
A failure to achieve certain milestones,
such as targeted sailaway date and / or
first gas delivery could result in reputational
damage within the wider market, including
with Energean's investors, banks, gas buyers
and wider stakeholders.
Under its gas sale agreements (GSPAs), the
Group may be subject to various contractual
consequences in case of a delayed start
up in supplying gas in accordance with specific
deadlines detailed in the relevant GSPAs.
Such contractual consequences may include
early termination rights that certain buyers
potentially have after applicable long-stop
dates, and in the majority of the GSPAs,
monetary contractual payments or early shortfall
after the long-stop dates.
Mitigation Energean has actively engaged with its contractors
early to ensure highly effective working
relationships and to discuss incentivising
contractors to accelerate completion of
the works.
Energean's contract with TechnipFMC is a
lump-sum, turnkey EPCIC, which minimises
development risk and the potential for significant
cost overruns. Energean's 2021 budget has
been updated to reflect increased cost of
interest and potential liquidated damages
arising from a delay to first gas.
Energean benefits from strong support from
Government and continued engagement with
customers in Israel. Energean's GSPAs are
priced amongst the lowest in Israel, suggesting
that buyers (who have signed GSPAs that
contain termination rights) will have limited
incentive to terminate them due to delay
in first gas.
Ongoing monitoring of the exercise or threat
of liquidated damages, which might at a
certain point be diminished by Force Majeure
relief due to COVID-19. Force Majeure notices
have been served on all gas buyers.
Access to funding: during the year, the
Karish project finance facility was upsized
from $1.275 billion to $1.45 billion. Post-period
end, the maturity date was extended to September
2022 providing additional flexibility on
refinancing timing, in the event of ongoing
delays. In addition, the Company undertook
a $2.5 billion Bond Issue to refinance the
Karish project finance facility and raised
a $700 million Term Loan.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Deliver first gas at Karish in 1Q 2022.
Continued quantitative assessment of the
impact of delay to the Karish Project to
the revenue stream secured by the GSPAs
and of potential mitigating actions.
================ ====================================================
#2 Market risk in Israel
Principal risk: The potential for Israeli gas market oversupply
may result in offtake being at the take-or-pay level of existing
GSPAs and could result in the failure to secure new GSPAs
Owner: Commercial Director
Link to 2020 KPIs: Delivering our strategy, growing our business
and tackling climate change
Risk appetite Low - Strong commercial terms and contract
security are a core component of Energean's
business model and investment case. The
Group utilises its strong regional ties
and the experience of Energean's commercial
teams to mitigate this risk.
2020 movement This risk increased in 2020 after the Leviathan
field came onstream in December 2019, significantly
increasing the supply of gas into Israel.
COVID-19 also negatively impacted upon regional
gas demand, further contributing to potential
regional market oversupply.
Impact Increased market competition may drive Israeli
domestic gas prices down. Lower pricing
may incentivise gas buyers to make nominations
that are restricted to the take-or-pay levels
within the GSPAs, rather than the full annual
contracted quantities. This could reduce
Energean's future net revenues and cash
flows, potentially impacting upon its ambition
to pay a meaningful and sustainable dividend.
An oversupplied gas market may impact upon
Energean's ability to commercialise future
gas discoveries.
Mitigation Energean's GSPAs contain provisions for
floor pricing, take-or-pay and/or exclusivity.
Energean is investigating all options for
the commercialisation of future exploration
success, including further domestic supply
as well as supply to key regional gas markets.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Energean will continue to maintain good
relationships with its gas buyers, whilst
also evaluating potential export routes
and other options for monetisation.
================ =====================================================
#3 Progress key development projects
Principal risk: Delayed delivery of future development projects
(including NEA / NI in Egypt, Cassiopea in Italy and Karish North
in Israel)
Owner: Chief Executive Officer
Link to 2020 KPIs: Delivering our strategy and growing our
business
Risk appetite Low - The three key new development projects
are viewed as essential for the relevant
country portfolios, substantially benefitting
the long-term production profiles of the
Company, whilst bringing cost and investment
efficiencies and strategic benefits.
2020 movement This risk increased during 2020 as Energean's
development portfolio increased with (i)
the maturation of the Karish North development,
which was sanctioned in early 2021; and
(ii) the acquisition of Edison E&P resulting
in the addition of the Cassiopea (Italy)
and NEA/NI (Egypt) projects to the portfolio.
Impact A delay to any of these projects could result
in a delay to, or reduction of, future cash
flows, which could impact upon Energean's
goal of paying a meaningful and sustainable
dividend to its shareholders.
Mitigation Energean is actively engaged with its partners,
contractors and all other relevant stakeholders
on all development projects to ensure effective
working relationships.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Developments to progress in line with expectations,
targeting first gas from NEA/NI in 2H 2022,
Karish North in 2H 2023 and Cassiopea in
1H 2024.
Continue to monitor project progress.
================ ====================================================
#4 Deliver exploration success and reserves addition
Principal risk: Lack of new commercial discoveries and reserves
replacement
Owner: Chief Growth Officer
Link to 2020 KPIs: Delivering our strategy and growing our
business
Risk appetite Medium - Exposure to exploration and appraisal
failure is inherent in accessing the significant
upside potential of exploration projects,
and this remains a core value driver for
Energean. The Group invests in data and
exploits the strong experience of Energean's
technical teams to mitigate this risk.
2020 movement This risk remained static in 2020 following
the decision of the Group to postpone its
exploration plans offshore Israel due to
the low commodity price environment. The
Group is preparing for its next four-well
exploration and appraisal campaign offshore
Israel in 2022.
Impact Failure to make new significant gas discoveries
and replenish the exploration portfolio
will reduce the Group's ability to grow
the business and deliver its strategy.
Mitigation Energean focuses on high-grading of its
exploration and appraisal programme and
maintains a focus on low-risk, high-reward
prospects with clear and short-term routes
to commercialisation.
Planning for the Group's next major exploration
and appraisal campaign, offshore Israel,
are underway. Drilling is expected to commence
in early 2022 for up to four exploration
and appraisal wells.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Maturation of planning for the four-well
exploration and appraisal campaign offshore
Israel.
================ ==================================================
#5 Portfolio Integration
Principal risk: Failure to successfully integrate Edison E&P
into Energean's day-to-day business activities resulting in limited
financial, social and environmental benefits
Owner: Chief Executive Officer
Link to 2020 KPIs: Growing our business
Risk appetite Low - Edison E&P integration is a top priority
for the Board and Executive Management.
Successful integration of Edison E&P with
Energean's existing business will depend
on our ability to combine the two businesses,
including bringing together the cultures
and capabilities of both organisations in
an effective manner, which will require
the co-operation of Edison E&P's existing
workforce.
2020 movement This risk remained static in 2020. The
acquisition of Edison E&P closed successfully
in December 2020 and constitutes the largest
acquisition the Group has undertaken to
date.
Impact The potential impacts of inadequate portfolio
integration are multi-fold and include:
* Disruption to ongoing operations and development
projects
* Diversion of Executive Management's attention; and
* A lack of ability to realise anticipated financial
benefits and cost synergies.
The challenges and/or costs associated with
integration may be higher than expected
and the benefits expected from the acquisition
of Edison E&P may not be fully achieved.
Mitigation Energean developed a detailed integration
and strategic plan with activities and milestones,
for example, providing strategic access
to the Edison E&P SAP system from day one
to provide immediate and full control over
the acquired business.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Continued implementation of the integration
roadmap, including further definition of
the one-year ahead plan and mapping of identified
synergies, resulting in finalisation and
implementation of the end-state operating
model.
================ ===============================================================
Operational risk
#1 Production performance
Principal risk: Underperformance at core producing assets in
Egypt and Italy
Owner: Chief Growth Officer
Link to 2020 KPIs: Growing our business
Risk appetite Low - Delivering operational excellence
in all of Energean's activities is a strategic
objective and we work closely with all partners
to mitigate the risk and impact of any operational
delay or underperformance. As such, the
Company has a low appetite for risks which
may impact on operating cash flow.
2020 movement This risk increased during 2020 following
the acquisition of Edison E&P, which has
seen increased scrutiny on the performance
of the acquired assets. Pro forma Working
Interest production averaged 48.3 kboepd,
around the mid-point of guidance of 44.5
- 51.5 kboepd. The risk around operational
readiness e.g. the availability of highly
trained technical staff to operate assets
and man vessels, also increased in 2020
largely due to the COVID-19 pandemic.
Impact Delay to, or reduction of, operating cash
flows.
Increased unit operating costs.
Mitigation Executive Management works closely with
technical leads, the HSE Director and Country
Managers to deliver risk mitigation plans
and project solutions.
Positive regular engagement with the Technical
team and partners to share knowledge, offer
support and exert influence.
Strong work ethic and culture, with good
policies, procedures and practices in place.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Ongoing management of risks surrounding
production.
================ ====================================================
#2 JV Misalignment
Principal risk(s): Misalignment with JV operators
Owner: Chief Growth Officer
Link to 2020 KPIs: Growing our business
Risk appetite Medium - The Group seeks to operate assets
which align with the Group's core areas
of expertise, but recognises that a balanced
portfolio will also include non-operated
ventures. The Group accepts that there are
risks associated with a non-operator role
and will seek to mitigate these risks by
working with partners of high integrity
and experience and maintaining close working
relationships with all JV partners.
2020 movement - This is an increased risk in 2020 that
follows the acquisition of Edison E&P. Commodity
price volatility continues to have a financial
impact across the sector and the risk remains
that the Group's JV partners may not be
able to fund work programme expenditures
and/or reprioritise projects. A large component
of the Italian portfolio and the entire
UK portfolio are operated by joint venture
partners.
Impact Cost/schedule overruns.
Poor operational performance of assets.
Poor HSE performance.
Delay in first production from new projects.
Negative impact on asset value.
Ability to effect change towards lowering
carbon footprint.
Mitigation Actively engage with all JV partners early
to establish good working relationships.
Actively participate in operational and
technical meetings to challenge, apply influence
and/or support partners to establish a cohesive
JV view.
Active engagement with supply chain providers
to monitor performance and delivery.
Application of the Group risk management
processes and non-operated ventures procedure.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Continue to engage with JV partners and
monitor project progress.
================ ==================================================
Financial risk
#1 Maintaining liquidity and solvency
Principal risk: Insufficient liquidity and funding capacity
Owner: Chief Financial Officer
Link to 2020 KPIs: Growing our business
Risk appetite Low - Energean seeks to maintain liquidity
and to develop and implement a funding strategy
that allows a value generative plan to be
executed and ensures minimum headroom from
existing sources of funding is maintained.
2020 movement This risk remained static in 2020.
Impact The Company has secured loan agreements
and is subject to restrictive debt covenants
and security arrangements that may limit
its ability to finance its future operations
and capital needs and to pursue business
opportunities and activities. Breach of
financial covenants may lead to default
and/or liquidity risk.
The Company is exposed to commodity prices
in relation to its sales and revenues under
its crude oil and gas sales contracts, which
are subject to variable market factors.
The full impact of COVID-19 to a lower price
environment could impact the Group's cash
flows and results.
Interest and foreign exchange rate movements
could negatively affect profitability, cash
flow and balance sheets (see Note ___ to
the consolidated financial statements).
Funding and liquidity risks could impact
viability and ability to continue as a going
concern, including a downturn in business
operations for unexpected factors, e.g.
COVID-19.
Erosion of balance sheet through impairments
of financial assets may further impact the
Group's financial position.
Mitigation Regular monitoring of financial covenants
on an actual and forecast basis as part
of the monthly reporting to management and
the Board.
The Karish project finance facility, Egypt
RBL and Greek RBL have covenants and metrics
to monitor the ability to refinance via
capital markets or by conversion of existing
commitments to a term loan. The Company
ensures that these covenants are met on
a quarterly basis. During the period, the
Karish project finance facility was upsized
from $1.275 billion to $1.45 billion and,
post-period end, maturity was extended to
September 2022. Post-period end, a new 18-month,
$700 million term loan was arranged in January
2021, and both facilities will be refinanced
under a $2.5 billion Bond Issue in March
2021.
The Group's debt facilities have been sized
and structured on conservative oil and gas
price assumptions versus the prevailing
market prices.
The Group actively monitors oil price movements
and may hedge part of its production to
protect the downside while maintaining access
to upside and to ensure availability of
cashflows for re-investment and debt-service.
All Karish gas contracts are based on pricing
formulas which include floor prices; that
ensures a minimum price for gas sales whatever
the market conditions or pricing formulas
outcome.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Refinance the Israeli project finance facility
and $700 million term loan.
Continuous stress testing of short-term
cash forecasts.
================ ==================================================
#2 Egypt receivables
Principal risk: Recoverability of revenues and receivables in
Egypt
Owner: Chief Financial Officer
Link to 2020 KPIs: Growing our business
Risk appetite Low - Edison E&P has receivables due from
its operations in Egypt which have historically
been paid irregularly and after significant
delay. Energean management believes that
this risk is not specific to Edison E&P
and affects all operators in the country.
The Group utilises its strong regional ties
and the experience of its commercial teams
to mitigate this risk.
2020 movement N - This is a new risk for 2020 that arises
due to the acquisition of producing assets
in Egypt through the acquisition of Edison
E&P. At 31 December 2020, net receivables
(after provision for bad and doubtful debts)
in Egypt were $153.5 million.
Impact Loss of value.
Work programme restricted by reduced financial
capability.
Inability to fund key development projects,
including NEA/NI.
Reduced ability to meet debt covenants and
service outstanding debt.
Mitigation Energean has a number of contractual solutions
with EGPC to ensure an effective collection
policy, including condensate proceeds, lump-sum
payments, Abu Qir payables offsetting and
local currency collection.
Continued engagement with the Egyptian government
and Ministry of Petroleum.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Improve receivables position and agreements
in place to accelerate recovery of overdue
receivables.
Maintain an active investment programme.
================ ===================================================
#3 Decommissioning liability
Principal risk: Higher than expected decommissioning costs and
acceleration of abandonment schedules
Owner: Chief Financial Officer
Link to 2020 KPIs: Growing our business
Risk appetite Low - Energean is committed to optimising
its decommissioning activities and spend.
2020 movement N - This is a new, but material risk for
2020 onwards following the closing of the
acquisition of Edison E&P. Decommissioning
estimates and timing of abandonment schedules
are subject to uncertainty but are expected
to be material for the Group, particularly
in the UK and Italy. The estimates for decommissioning
obligations vary depending on the sources
provided during the due diligence undertaken
as part of the competitive sale process
for Edison E&P but are estimated to be in
excess of $500 million.
Impact Reduction in cash flow.
Work programme restricted by reduced financial
capability.
Negative impact on asset value.
Mitigation Utilisation of the strong experience of
Energean's technical teams and commercial
partnerships
Proactive interaction with local government
and regulation bodies to jointly design/review
decommissioning regulation.
Scale achievement through grouping of assets
in adjacent areas also promoting increased
negotiation leverage in contracting activities.
Potential creation of partnerships for decommissioning
activities, further increasing scale potential
and promoting transfer of decommissioning
solutions.
Adoption of new technologies promoting innovative
solutions to further optimise costs and
maximise operational excellence.
Continued effort in identifying potential
alternative uses for existing platforms
prioritising assets with higher cost base.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Continue to develop and refine strategy
for optimising decommissioning spend.
================ ========================================================
Organisational, compliance and regulatory risk
#1 Cyber
Principal risk: Major cyber-attack or information security
incident
Owner: Information Technology Manager
Link to 2020 KPIs: Growing our business and 'Best in Class' on
safety
Risk appetite Low - Energean is committed to maintaining
the security and integrity of its data and
IT systems.
2020 movement This risk increased in 2020. Energean continues
to grow its operational presence in the
Mediterranean and is in the process of integrating
the recently acquired Edison E&P company
into its day-to-day business activities,
putting the Group at further risk of cyber-attacks
or IT system failure.
Impact Loss of value.
Reputational damage.
Loss of data and theft of confidential information,
and personal data.
Regulatory implications and financial penalties.
Mitigation Digital transformation of email and collaboration
services to the Cloud.
Constant implementation and monitoring of
the Company's IT Security Policy.
Control of disclosures and protection of
any disclosed confidential information in
third party contracts.
Advanced network security detection and
data encryption. Vulnerability Assessment
and Penetration Testing.
Annual mandatory security and GDPR awareness
training. Staff susceptibility to phishing
regularly tested.
Insurance policies in place.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Complete digital transformation and integration
project as part of Edison E&P acquisition.
================ =====================================================
#2 Ethics, culture and compliance
Principal risk: Major breach of values, business principles and
'Ethos'
Owner: Compliance Officer
Link to 2020 KPIs: Growing our business and 'Best in Class' on
safety
Risk appetite Low - Energean is committed to maintain integrity
and high ethical standards in all of the Group's
business dealings. The Group has a zero-tolerance
approach to conduct that may compromise its reputation,
safety procedures or integrity.
2020 movement This risk remained static in 2020. There were
no reportable instances of fraud, bribery or
corruption.
Impact Reputational damage.
Financial penalties or civil claim.
Criminal prosecution.
Breach of safety procedures resulting in a HSE
incident.
Mitigation Business Code of Ethics and bribery and corruption
policies and procedures. Audit reviews, use of
data analytics and continuous monitoring of policies.
Financial procedures in place to mitigate fraud.
Annual training programme in place for all employees.
Enhanced due diligence of business partners and
suppliers and compliance auditing of contractors.
Enhancement of our whistleblowing process through
creation of a confidential reporting channel.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives Continued focus on enhanced due diligence and
monitoring, as well as the review of higher risk
areas.
Implementing compliance programmes and employee
awareness communication and training to all different
countries of operations, translated to local
languages where appropriate, to enhance corporate
compliance and governance and ensure the organisational
culture is 'fit for purpose' everywhere that
the Company operates.
================ =========================================================
#3 HSE
Principal risk: Lack of adherence to health, safety, environment
and security policies
Owner: HSE Director
Link to 2020 KPIs: 'Best in Class' on safety
Risk appetite Low - Energean continuously strives to
reduce risks that could lead to an HSE incident
to as low as reasonably practicable
2020 movement This risk remained static in 2020. The
Group's pro forma LTIF [1] for operated
activity in 2020 was 0.63 per million hours
worked. Our pro forma TRIR [2] for 2020
was 1.05 per million hours worked. There
were no spills to the environment.
Impact Serious injury or death.
Negative environmental impacts.
Reputational damage.
Regulatory penalties and clean-up costs.
Physical impact of climate change.
Loss or damage to Company's assets and potential
business interruption.
Loss or damage to third parties and potential
claims.
Mitigation Effectively managing health, safety, security
and environmental risk exposure is the first
priority for the Board, Senior Leadership
Team and Management Team
Training for all employees and creation
of a strong HSE culture. Additional HSE
training is included as part of all staff
and contractor inductions.
Crisis and emergency response procedures
and equipment are maintained and regularly
tested to ensure the Group is able to respond
to an emergency quickly, safely and effectively.
Process in place for assessing an operator's
overall operating and HSE capabilities,
including undertaking audits to determine
the level of oversight required.
Comprehensive insurance policies in place.
Ongoing monitoring of KPIs by Executive
Management.
2021 Objectives Achieve a number of specified indicators
in relation to governance, people and society.
================ ==================================================
Climate change risk
#1 Failure to manage the risk of climate change and to adapt to
the energy transition
Principal risk: Climate change policy, technological
development, changing consumer behaviour and reputational
damage
Owner: Chief Executive Officer
Link to 2020 KPIs: Delivering our strategy, growing our business
and tackling climate change
Risk appetite Low - The Group is committed to achieving
its net zero emissions [3] target by 2050
and reducing the near-term carbon intensity
of its operations by over 70% through the
implementation of low carbon solutions and
the acquisition of low carbon intensity
hydrocarbons. Energean is focused on taking
near-term investment decisions that ensure
its assets remain competitive in an environment
where demand for oil and gas may be lower
than today and will continue to stress test
its portfolio against a range of climate
change scenarios, in line with the recommendations
of the TCFD.
2020 movement This risk increased in 2020. There was
continued and increased attention to climate
change from a range of stakeholders in 2020.
This attention has led, and we expect it
to continue to lead, to acceleration of
the energy transition, as well as additional
regulations designed to reduce greenhouse
gas (GHG) emissions.
Impact Providers of capital limit exposure to oil
and gas projects (short-term).
Increasing costs e.g. higher compliance
costs and increased insurance premiums (short
to medium-term).
Early asset retirement (medium to long-term)
Limited access to R&D opportunities (medium
to long-term).
Climate-related policy changes (short to
medium-term).
Reputational damage (medium to long-term).
Retaining and attracting talent (short to
medium-term).
Ability to effect change towards lowering
carbon footprint (medium to long-term).
Mitigation Aligned with the TCFD recommendations across
all TCFD pillars in our year-end reporting.
Established a new climate change and sustainable
development department to manage climate
change projects.
Implemented climate-based scenario analysis
and internal carbon pricing to assist with
investment-decision making.
Enhanced climate disclosure in our Annual
Report and Sustainability Report. Achieved
a B- score on climate change and B score
on supplier engagement in our first CDP.
ESG ratings in top quartile, awarded 'A'
rating by MSCI, 'Gold' by Maala and ranked
16 out of 114 peer companies by Sustainalytics.
Executive compensation tied to ESG performance
targets from 2020. Fully committed to transparency
and adherence to the 17 UN SDGs. First E&P
company globally to commit to net zero emissions
by 2050.
Ongoing monitoring of KPIs by Executive
Management.
Established a dedicated Environment, Safety
and Social Responsibility committee chaired
by Non-Executive Director Robert Peck to
review climate change related risks and
projects.
2021 Objectives Evaluation of Carbon Capture and Storage
(CCS) projects underway, including the maturation
of the conversion of Prinos into the first
CCS project in the East Med.
Small-scale blue hydrogen production facility
at the Sigma plant in Kavala, Greece, also
under evaluation.
Evaluation of use of captured CO2 at Prinos
for enhanced oil recovery (EOR), to unlock
additional upstream value.
Explore the roll out of 'Green Electricity'
across all operated assets.
================ ====================================================
#2 Physical risks related to climate change
Principal risk: Disruption to operations and/or development
projects due to severe weather (both acute and chronic)
Owner: Chief Executive Officer
Link to 2020 KPIs: Delivering our strategy, growing our business
and tackling climate change
Risk appetite Low - Management recognises that Climate
change is expected to lead to rising temperatures
and changes to rainfall patterns in all
the countries where it operates. Energean
is reviewing its response to the increased
risk that changing weather events presents
to both its assets and its people.
2020 movement This risk remained static in 2020. Rising
sea levels coupled with extreme flooding
could cause disruptions to the operational
performance of Energean's assets, especially
those located in higher risk areas, in the
medium-term. This could also result in damage
to infrastructure and an increase in associated
asset integrity and insurance costs. Longer
term atmospheric or sea temperature rises
could result in faster degradation of infrastructure
and necessitate operational changes to the
running of the Group's facilities.
Impact Unexpected asset costs arising from operational
incidents (medium to long-term).
Early asset retirement e.g. due to damage
or property being situated in high risk
locations (long-term)
Negative market reaction (medium to long-term).
Loss of investor confidence (medium to long-term).
Serious injury or death (medium to long-term).
Environmental impacts due to spills (medium
to long-term).
Reputational damage (medium to long-term).
Loss or damage to assets and business interruption
(medium to long-term).
Mitigation Monitoring of weather conditions and sea
conditions.
Use of protective barriers to combat flooding.
Comprehensive insurance policies in place
for key assets and infrastructure.
Established a dedicated Environment, Safety
and Social Responsibility committee chaired
by Non-Executive Director Robert Peck to
review climate change related risks and
projects.
2021 Objectives Continue monitoring of environmental conditions
and reporting at both an asset and corporate
level.
Evaluation of climate change projects and
data by Energean Egypt Energy Services (EES).
================ ======================================================
External risk
#1 Geopolitical events
Principal risk: Political and fiscal uncertainties in the
Eastern Mediterranean
Owner: Chief Executive Officer
Link to 2020 KPIs: Delivering our strategy and growing our
business
Risk appetite Medium - Energean faces an uncertain economic
and regulatory environment in some countries
of operation. The Company is willing to
invest in countries where political and/or
fiscal risks may occur provided such risks
can be adequately managed to minimise the
impact where possible.
2020 movement This risk increased in 2020. Energean continues
to source new opportunities in the Eastern
Mediterranean and this can be in jurisdictions
deemed at higher risk of political or fiscal
uncertainty. In addition, Energean entered
into new countries, through the acquisition
of Edison E&P, with an increased risk profile.
The Group will strive for full compliance
with regards to fiscal requirements across
all assets.
Impact Loss of value; increasing costs; uncertain
financial outcomes; HSE incidents; loss
of production.
Mitigation Operate to the highest industry standards
with regulators and monitor compliance with
the Group's licence, Production Sharing
Contracts and taxation requirements.
Maintain positive relationships with governments
and key stakeholders through robust investment
plans and engagement in local projects.
Continuous monitoring of the political and
regulatory environments in which we operate.
2021 Objectives Maintain balance sheet strength, continued
monitoring of geopolitical events and regulatory
changes.
Undertake risk assessment and internal audit
activities in relation to the Karish project
(development project-to-operations transition).
Integration of targets and sustainability
projects (i.e. community investment) within
the strategic plan and management incentive
program.
================ ==================================================
#2 Global pandemic
Principal risk: Operational uncertainties and HSE incidents due
to COVID-19 pandemic
Owner: Executive Management and HSE Director
Link to 2020 KPIs: Delivering our strategy, growing our business
and 'Best in Class' on Safety
Risk appetite Low - COVID-19 and its impact on Energean's
development projects and operations was
identified as an emerging risk to its business
in 2019. Energean has been tracking the
spread of COVID-19 and its impact over the
past year, recognising it as a principal
risk to the business for the first time
in 2020; and is continuing to actively monitor
developments and take precautions to ensure
the health and safety of employees, partners
and contractors.
2020 movement This risk increased in 2020. COVID-19 spread
across the globe in 2020 and government
responses to limit transmission of the virus
significantly weakened global energy demand,
putting huge pressure on the E&P sector.
As a business, and at individual levels,
conditions were extremely challenging.
Impact Project delays; delay in revenue income,
termination of GSPAs, penalties under GSPAs,
supply chain interruption; HSE risk / risk
to employee wellbeing; operational restrictions
e.g. ability to mobilise workforce.
Mitigation Energean is constantly re-assessing our
contingency planning, our emergency/incident
response plan and our business continuity
management plan. Effective communication
plans are in place to respond to the changing
demands of the crisis. As part of the HSE
policies, various measures have been introduced
to protect the health and safety of employees
and contract personnel. Working from home,
revamping office space and a COVID-19 business
continuity plan is in place for all the
company's offices and plant.
2021 Objectives Continued modelling of COVID-19 scenarios
to identify and evaluate financial impacts,
with an assessment of potential mitigating
options.
Continued quantitative assessment of the
impact of delay to the Karish Project to
the revenue stream secured by the Israel
GSPAs and of potential mitigating actions.
Conduct risk assessments for each country
where operations exist to identify potential
strategic, operational, regulatory and people
related-exposures.
================ =================================================
Statement of Directors' Responsibilities
The directors are responsible for preparing the annual report
and the group financial statements in accordance with applicable
United Kingdom law and regulations. Company law requires the
directors to prepare financial statements for each financial
year.
Under that law the directors have elected to prepare the group
financial statements in accordance with International Financial
Reporting Standards (IFRSs) in conformity with the Companies Act
2006 and the parent company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), including
Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS
101").
Under the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules, group financial statements are required to be
prepared in accordance with IFRSs adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. Under
company law the directors must not approve the group financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and the company and of
the profit or loss of the group and the company for that
period.
In preparing these financial statements the directors are
required to:
-- Select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently
-- Make judgements and accounting estimates that are reasonable and prudent
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information
-- Provide additional disclosures when compliance with the
specific requirements in IFRSs (or in respect of the parent company
financial statements, FRS 101 ) is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the group's financial position and financial
performance
-- In respect of the group financial statements, state whether
IFRSs in conformity with the Companies Act 2006 and IFRSs adopted
pursuant to Regulation(EC) No 1606/2002 as it applies in the
European Union have been followed, subject to any material
departures disclosed and explained in the financial statements
-- In respect of the parent company financial statements, state
whether applicable UK Accounting standards including FRS 101 have
been followed, subject to any material departures disclosed and
explained in the financial statements
-- Prepare the financial statements on the going concern basis
unless it is appropriate to presume that the company and the group
will not continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's and
group's transactions and disclose with reasonable accuracy at any
time the financial position of the company and the group and enable
them to ensure that the company and the group financial statements
comply with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors' report,
directors' remuneration report and corporate governance statement
that complies with that law and those regulations. The directors
are responsible for the maintenance and integrity of the corporate
and financial information included on the company's website.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Responsibility statement of the directors in respect of the
annual financial report:
The directors confirm, to the best of their knowledge:
-- That the consolidated financial statements, prepared in
accordance with IFRSs in conformity with the Companies Act 2006 and
IFRSs adopted pursuant to Regulation(EC) No 1606/2002 as it applies
in the European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the parent company
and undertakings included in the consolidation taken as a whole
-- That the annual report, including the strategic report,
includes a fair review of the development and performance of the
business and the position of the company and undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face
-- That they consider the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group's
position and performance, business model and strategy.
Mathios Rigas Panos Benos
Director Director
18 April 2021 18 April 2021
Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Purchases of goods and services
2020 2019
$'000 $'000
Nature of transactions
Other related party "Seven Vessel leasing
marine" and services 1,473 4,066
Other related party "Prime Construction of
Marine Energy Inc" field support vessel 19,950 -
Other related party "Capital
Earth Ltd" Consulting services 129 129
21,552 4,195
======= =======
Following a competitive tender process, the Group has entered
into an agreement to purchase a Field Support Vessel ("FSV") from
Prime Marine Energy Inc., a company controlled by director and
shareholder at Energean plc, for US$33.3 million. The FSV is being
constructed to meet the Group's specifications and will provide
significant in-country capability to support the Karish project,
including FPSO re-supply, crew changes, holdback operations for
tanker offloading, emergency subsea intervention, drilling support
and emergency response. The purchase of this multi-purpose vessel
will enhance operational efficiencies and economics when compared
to the leasing of multiple different vessels for the various
activities.
Payables
2020 2019
$'000 $'000
Nature of balance
Vessel leasing
Seven marine and services 407 6,105
407 6,105
[1] Lost Time Injury Frequency
[2] Total Recordable Incident Rate
[3] Scope 1 & 2 emissions
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END
ACSBSGDSCSDDGBI
(END) Dow Jones Newswires
April 28, 2021 11:03 ET (15:03 GMT)
Energean (LSE:ENOG)
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Energean (LSE:ENOG)
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