TIDMENOG

RNS Number : 4675K

Energean PLC

02 September 2021

Energean plc

("Energean" or the "Company")

Results for Half Year Ended 30 June 2021

London, 2 September 2021 - Energean plc (LSE: ENOG TASE: ) is pleased to announce its half-year results for the six months ended 30 June 2021 ("1H 2021").

Mathios Rigas, Chief Executive of Energean, commented:

"During 1H 2021, Energean delivered excellent operational and financial progress, reflecting the transformational nature of the acquisition of Edison E&P. Production is outperforming guidance, translating into record financial performance and, through successful execution of our gas- and returns-focused strategy, we have achieved a significant milestone in our transformation into a 200 kboed, $2 billion annual revenue generating, sustainable dividend yielding, energy company. In addition, we further strengthened and de-risked our balance sheet by raising the largest ever EMEA energy international high yield bond and remain fully-funded for all projects across our nine countries of operation.

"Despite continued COVID-19 related challenges, we have delivered solid progress on our flagship Karish gas development project, which remains firmly on track to deliver first gas in mid-2022. There are a number of potential acceleration measures under active consideration and, at 31 August 2021, the workforce on the Karish project was in excess of 1,700, an approximate 70% month-on-month increase. Further growth in Israel will be delivered through our (up to) five-well offshore growth programme, with the Stena IceMax drilling rig commencing operations in 1Q-2022. The programme targets an additional 1 billion boe, which has the potential to double our reserve base with high quality resource volumes that can be quickly, economically, and safely monetised. Globally, gas prices are strong and we are assessing several commercial opportunities to access international markets, as well as the growing Israeli domestic market, if (and when) additional gas resources become available to us.

"In the second half of the year, we look forward to continuing to deliver our key gas development projects in Egypt and Italy, which alongside commencement of the revised Epsilon project in Greece, will provide further, substantial near-term growth and value realisation in the Mediterranean region.

"The recently published Intergovernmental Panel on Climate Change [1] report on the impacts of global warming made for stark reading and emphasized the need for immediate action. As a business, we have taken full responsibility for our own emissions profile, showcased by publication of our first Climate Change Policy, which outlines the short, medium, and long-term actions we will take as part of our commitment to become a net zero emitter by 2050. In the first half of 2021, we reduced the carbon intensity of our operations by more than 19% versus 2020 levels [2] ; representing a 73% reduction versus our base year of 2019. This is a trajectory we are committed to continuing, and we are investigating all options to accelerate our net zero commitment ahead of 2050, in recognition of the need for urgent and immediate action."

Highlights - Operational

-- 1H 2021 average working interest production was 44.0 kboed (72% gas), ahead of full year guidance of 38 - 42 kboed (71% gas)

o Production outperformed guidance across all countries of operation

o Demonstrates Energean's ability to maximise value from the ex-Edison E&P assets and to successfully integrate Edison E&P within six-months of transaction close

   --      On track to deliver first gas from Karish in mid-2022 

o On 31 July 2021, the project was 91.5% complete [3]

o Core focus on optimising and accelerating the timetable with options being actively considered (and not reflected in the current timetable)

-- On 31 August 2021, the workforce on the Energean Power FPSO stood at more than 1,700 workers, up approximately 70% month-on-month

-- Rig contract signed with Stena Drilling Limited ("Stena") for 2022-23 growth drilling programme, offshore Israel

o Targeting the de-risking of prospective recoverable resources of over 1 billion [4] barrels of oil equivalent ("boe")

-- Awarded an Engineering, Procurement, Construction and Installation (" EPCI ") contract to TechnipFMC to develop the North East Almeyra (" NEA ")/North Idku (" NI ") project, shallow-water offshore Egypt, in February 2021

o Project remains on track to deliver first gas in 2H 2022

o Project expected to deliver IRRs in excess of 30%

-- Cassiopea gas development project, Italy, 23% complete at 31 July 2021 and on track to deliver first gas in 1H 2024

-- Final Investment Decision ("FID") taken on the revised 53 MMbbls 2P + 2C Epsilon satellite tieback project, offshore Greece

o First oil expected in 1H 2023 (subject to financing)

o Financing package expected to be finalised in 3Q 2021

Highlights - Corporate and ESG

-- Issued $2.5 billion of senior secured notes in March 2021 at an average coupon rate of approximately 5.2%

o Significantly reducing financing risk on the Karish project, as the project finance facility had been due to mature in 2022

o Extending average life of debt for Energean plc from approximately 2.5 years at 30 June 2020 to approximately 6 years at 31 July 2021

-- Completed the highly accretive acquisition of the 30% minority interest in Energean Israel Limited ("EISL") in February 2021

o Acquisition transacted at a 49% discount to CPR-derived NPV10

o Increased 2P reserves across the portfolio to nearly 1 billion boe (79% gas)

-- 1H 2021 Scope 1 and 2 carbon emissions of approximately 18 kg/boe, a significant step towards Energean's target of achieving net zero emissions ahead of 2050, representing a:

o 19% reduction versus 2020 levels [5] ;

o 73% reduction versus 2019; and

o On track to beat previous 2021 guidance of 21 kg/boe by approximately 15%

Highlights - Financial

-- Substantial year-on-year improvement in financial results, demonstrating the magnitude and significance of the acquisition of Edison E&P

o Revenues increased to $206 million (1H 2020: $2 million), primarily due to the transformational nature of the acquisition of Edison E&P

o Unit cost of production reduced by 44% to $15.4/boe (1H 2020: $27.5/boe)

o Positive EBITDAX(6) of $75 million (1H 2020: negative $8.9 million)

o Positive operating cash flows of $53.1 million (1H 2020: $14.5 million outflow)

-- Cash, cash equivalents and restricted cash of $ 1.1 billion at 30 June 2021 (restricted amounts represent $266 million)

o Providing significant financial flexibility

o Ensures all planned activities are fully-funded

 
                                 1H 2021    1H 2020   Increase / (Decrease) 
                                    $m         $m               % 
 Average working interest 
  production (kboed)              44.0        2.1            1,995% 
                               ----------  --------  ---------------------- 
 Sales and other revenue          205.5       2.1            9,686% 
                               ----------  --------  ---------------------- 
 Cash cost of production 
  [6]                           122.4 [7]    10.4            1,077% 
                               ----------  --------  ---------------------- 
 Cash cost of production 
  per boe                         15.4       27.5             (44%) 
                               ----------  --------  ---------------------- 
 Cash S,G&A(6)                    17.0        5.4             215% 
                               ----------  --------  ---------------------- 
 Adjusted EBITDAX [8]             74.7       (8.9)            939% 
                               ----------  --------  ---------------------- 
 Operating cash flow 
  [9]                             53.1      (14.5)            466% 
                               ----------  --------  ---------------------- 
 Development capital 
  expenditure                     200.8      243.9            (18%) 
                               ----------  --------  ---------------------- 
 Exploration capital 
  expenditure                     29.2        5.3             451% 
                               ----------  --------  ---------------------- 
 Decommissioning expenditure       1.7         -                - 
                               ----------  --------  ---------------------- 
 Net debt (including 
  restricted cash)               1,692.6     861.4             96% 
                               ----------  --------  ---------------------- 
 

Outlook

   --    2021 production guidance re-iterated at 38 - 42 kboed 

-- 2021 development and production capital expenditure guidance re-iterated as $470 - 550 million and exploration capital expenditure guidance re-iterated as $55 - 70 million

-- 2021 emissions intensity guidance reduced by approximately 15% to 18 kg CO2/boe (from 21 kgCO2/boe)

-- Sailaway of the Energean Power FPSO from Singapore to Israel in 1Q 2022 with first gas from Karish expected mid-2022

o Acceleration measures being considered for implementation

   --    Commencement of the high-impact growth drilling campaign in 1Q 2022, starting with Athena 

o First drilling results anticipated during 2Q 2022, marking a catalyst-rich start to 2022

   --    Continued progress on key gas development projects in Egypt (NEA / NI) and Italy (Cassiopea) 

-- Finalisation of funding for the Epsilon project, Greece, and commencement of the development programme, expected 2H 2021

   --    Acceleration of the Green Prinos suite of projects 

o Pre-Front-End Engineering Design ("pre-FEED") on the carbon capture and storage ("CCS") project expected to commence in 2H 2021

   --    Future dividend policy to be declared in due course 

Enquiries

Kate Sloan, Head of IR, ECM and Communications Tel: +44 7917 608 645

Conference call

A conference call for analysts and investors will be held at 08:30am BST today. Please register your participation in this morning's conference call at the following link. You will be given the option to either participate via webcast or dial in.

   Webcast:   https://edge.media-server.com/mmc/p/htkhfoq4 

Dial-In: +44 (0) 2071 928338

Dial-in (Israel only): 35308845

Confirmation code: 5530326

The presentation slides will be made available on the website shortly www.energean.com .

Energean Operational Review

Production

1H 2021 average working interest production was 44.0 kboed (72% gas), ahead of full year guidance, which is maintained at 38 - 42 kboed. This represents a substantial year-on-year increase, reflecting the transformational nature of the acquisition of Edison E&P and the successful, quick integration of the Edison E&P portfolio into Energean despite the operational challenges posed by COVID-19.

 
                       1H 2021 actuals   FY 2021 guidance   1H 2020 
                            Kboed              Kboed         Kboed 
 Egypt                      31.4             27 - 30           - 
                      ----------------  -----------------  -------- 
 Italy                      10.2              9 - 10           - 
                      ----------------  -----------------  -------- 
 Greece and Croatia          1.8               1.5            2.1 
                      ----------------  -----------------  -------- 
 UK                          0.6               0.5             - 
                      ----------------  -----------------  -------- 
 Total production           44.0             38 - 42          2.1 
                      ----------------  -----------------  -------- 
 

Israel

Karish Project

Energean remains firmly on track to deliver first gas from the Karish gas development project in mid-2022. At 31 July 2021, the project was approximately 91.5% complete [10] .

The next tangible milestone on the development remains sailaway of the FPSO from Singapore to Israel, currently expected in 1Q 2022. The journey from Singapore to Israel is expected to take approximately 35 days, with hook-up and pre-first gas commissioning then expected to take approximately three months.

Energean is actively working with its contractors to identify and implement potential acceleration measures for the FPSO delivery schedule, which are not reflected in the current timetable. Following agreement of an incentivisation payment of $12 million by Energean to Sembcorp in August 2021, workforce numbers on the Energean Power FPSO have increased by approximately 70%, to more than 1,700 at 31 August 2021.

Energean will update the market on whether it expects any acceleration of the delivery timetable as and when it is appropriate to do so.

 
                     % Completion at 31 July 2021 
                                 [11] 
 Production Wells               100.0 
                    ----------------------------- 
 FPSO                            96.7 
                    ----------------------------- 
 Subsea                          83.0 
                    ----------------------------- 
 Onshore                         99.8 
                    ----------------------------- 
 Total                           91.5 
                    ----------------------------- 
 

Energean has signed 18 gas sales agreements (" Agreements ") for the supply of 7.2 Bcm/yr of gas on plateau, representing almost 100% of total gas reserves volumes over the life of those Agreements. All Agreements include provisions for floor pricing and take-or-pay and / or exclusivity, providing a high level of certainty over revenues from the Karish, Karish North and Tanin projects over the next 16 years.

For one Agreement representing 0.2 Bcm/yr and commencing 2024, the buyer has been unable to meet its conditions subsequent under the Agreement and the parties have mutually agreed to terminate the Agreement. This termination is not related to the project schedule. Energean has identified a potential replacement buyer for these volumes and expects to reach an Agreement shortly; Energean's main current restriction to signing further Agreements is that it has sold substantially all of its independently audited gas reserves.

One Agreement, representing 0.8 Bcm/yr of gas supply, is at potential risk of termination; however, if it is terminated, Energean has identified multiple alternative routes to monetise those gas volumes, including both domestic and international markets, and is confident of profitably selling them. Other than that one Agreement, Energean believes that all of its Agreements are robust under the current first gas delivery timetable, notwithstanding the delays experienced due to COVID-19-related circumstances.

Growth Projects

In May 2021, Energean took FID on two high-return growth projects, offshore Israel:

-- $70 million second oil train that will enable increased production of approximately 5 million barrels of hydrocarbon liquids per year at minimal incremental operating costs; and

-- $40 million second gas sales riser, which will enable gas production at the full 8 Bcm/yr capacity of the FPSO

Both projects are progressing on schedule and are expected onstream in summer 2023.

In June 2021, Energean signed a rig contract with Stena for the drilling of up to five wells that will target derisking of unrisked prospective resources of over 1 Bnboe [12] . The contract consists of three firm wells plus two optional wells, with the first well expected to spud in 1Q 2022. The firm wells are all expected to be drilled during 2022 and consist of:

-- The Athena exploration well, located on Block 12, is situated directly between the Karish and Tanin leases and is expected to be the first well in the programme;

o Two factors support commercialisation of a Block 12 discovery. Firstly, Block 12 was a new licence award to EISL in 2018; produced volumes will therefore generate no royalty payments in respect of EISL's original acquisition of the block. Secondly, the more proximate location of the potential development to the expected position of the FPSO will reduce like-for-like development costs when compared with Tanin

   --      The Karish North development well , a key part of the Karish North development; and 

-- The Karish Main-04 appraisal well, which is expected to target further prospective volumes within the Karish Main Block, including the potential oil rim that was identified as part of the Karish Main-03 development well drilling.

Energean is in the process of identifying and working up commercialisation options in the event of discoveries being made as part of the 2022-23 growth drilling programme and monetisation options include both domestic and international markets.

Egypt

Working interest production from the Abu Qir area averaged 31.4 kboed (87% gas) during 1H 2021 with full year production guidance maintained at between 27 - 30 kboed.

The shallow-water NEA/NI satellite tie-back project is progressing in line with expectations, with first gas from one well anticipated in 2H 2022 and from the remaining three wells in 1Q 2023. The project was sanctioned in January 2021 and an EPCI contract for the four subsea wells and the associated tie-back to the Abu Qir platform and associated infrastructure was awarded to TechnipFMC in 1Q 2021.

Around the Abu Qir and NEA/NI assets, Energean is maturing several near-field and infrastructure-led opportunities, including the discovered NI-B field, as potential future drilling candidates. In addition, prospect maturation continues across the wider portfolio to unlock value from the substantial prospective resource volumes identified, including in deeper liquids-rich horizons.

At 30 June 2021, net receivables (after provision for bad and doubtful debts) in Egypt were $158.7 million (31 December 2020: $148.8 million), of which $94.0 million (31 December 2020: $78.7 million) was classified as

overdue.   Cash collection from EGPC during the period was $74.9 million. 

Italy

Working interest production from Italy averaged 10.2 kboed (41% gas) during 1H 2021 with full year production expected to be between 9 - 10 kboed.

Production continues to outperform expectations following robust operational performance across the operated oil portfolio, including the Vega and Rospo Mare fields, in which Energean increased its working interest to 100% in January 2021 following the nil-cost acquisition from ENI.

The Cassiopea (Energean 40%) gas development project was approximately 23% complete at 31 July 2021, with works to date focused on permitting, contracting and procurement, alongside a cost optimisation programme. First gas from the project is expected in 1H 2024. Development of Cassiopea will commercialise 31 MMboe of 2P reserves (100% gas) and achieve peak production of approximately 10 kboed.

Greece

Working interest production from the Prinos field averaged 1.6 kboed (0% gas) during 1H 2021 with full year production expected to be 1.5 kboed.

Prinos Area Development and Funding

In March 2021, the European Commission approved Greek state support for a EUR100 million funding package for the Prinos area, with Greek parliamentary ratification in May 2021. The full funding package is expected to be in place in 3Q 2021 with commencement of investment in the Epsilon project expected shortly thereafter.

In parallel, Energean has been evaluating a project to reinject produced carbon dioxide from Prinos back into the reservoir to reduce Scope 1 emissions from the field. The project has been approved for financial support from the European Commission's European Structural and Investment Funds ("ESIF").

"Green Prinos"

Extending the life of the Prinos production area through the Epsilon development is key to Energean's longer-term ambition of leveraging its subsurface knowledge and expertise in developing CCS and eco-hydrogen projects, which are expected to be key contributors to Energean's net zero strategy.

The Prinos CCS project proposal is to provide long-term storage for carbon dioxide emissions captured from both local and more remote emitters.

In 1H 2021, Energean submitted its CCS proposal to the Greek government, with a view to inclusion within its recovery and resilience plan, projects within which will qualify to receive funding from the Recovery and Resilience fund over the period 2021-26. In June 2021, the European Commission granted approval for the inclusion of the Greek CCS project within the fund.

A pre-FEED study for the CCS project is expected to commence in 2H 2021.

Rest of Portfolio

United Kingdom

1H 2021 production in the UK North Sea was 0.6 kboed (8% gas), ahead of full year guidance of 0.5 kboed.

Drilling operations at the Glengorm South appraisal well were safely completed in April 2021. The well contained no commercial hydrocarbons and the well has been plugged and abandoned. The existing Glengorm North discovery and the Glengorm Central appraisal well are considered to be independent of the Glengorm South appraisal well; the Glengorm Central appraisal well spudded in May 2021.

Energean has received interest from third parties with respect to the potential sale of its UK assets portfolio and is considering its options.

Croatia

During 1H 2021, working interest production from the Izabela field averaged 0.2 kboed (100% gas).

Evaluation of the results from the Irena appraisal well are ongoing.

Energean Corporate Review

ESG

Net Zero

In 1H 2021, Energean published its first Climate Change Policy, which defines the Group's actions to deliver upon its commitment to become a net-zero emitter by 2050.

Energean also took further steps towards this commitment, and is investigating an acceleration of its 2050 net-zero target, reflecting both its commitment and the importance of the global achievement of the goal. Energean's Scope 1 and 2 carbon emissions intensity in 1H 2021 was estimated to be approximately 18 kg/boe, a 19% reduction versus 2020 emissions levels [13] ; a 73% reduction versus the 2019 base measurement year; and approximately 15% below full-year 2021 guidance of approximately 21 kg/boe.

Actions taken to date in 2021 include:

-- Agreements put in place for the purchase of electricity from renewable sources at all operated sites in Italy. Energean sites in Italy, Israel, Greece and Croatia now operate under this policy, which has substantially reduced Energean's scope 2 emissions

   --      Zero-routine flaring policy now fully effective across all operated sites 

-- Significant progress on the "Green Prinos" suite of initiatives, as described in the Operating Review, above. Energean is assessing the potential to replicate these initiatives across its portfolio

ESG Reporting and Ratings

Energean's 2020 Annual Report and Accounts, published in April 2021, marked Energean's first period of reporting in accordance with the requirements of the Task Force on Climate Related Financial Disclosure ("TCFD").

In June 2021, MSCI updated its rating for energean to AA, up from A in the previous year.

In July 2021, Energean was rated at gold level by Israel's Maala Index for the second year running. The Maala Index is an ESG rating system and stock market index that rates the largest companies in Israel on an annual basis.

Financing

In 1H 2021, Energean issued $2.5 billion of senior secured notes, maturing in four tranches (2024, 2026, 2028 and 2031) and with an average coupon rate of 5.2% and increasing the average life of debt across Energean plc's portfolio to more than six years.

The funds raised were used to both ensure that Energean's projects in Israel are fully funded and also to refinance the Group's outstanding project finance facility and term loan; drawn amounts under these loans upon refinancing were $1,270 million and $175 million, respectively. The refinancings removed a perceived key risk on the Karish project consequent to the upcoming maturities of those facilities. $266 million of proceeds have been used to pre-fund certain reserve accounts, classified as restricted cash within this report, with remaining proceeds earmarked for capital expenditure on the Karish and Karish North projects, the 2022/2023 Israel exploration programme, to fund bond transaction costs, outstanding amounts due to Kerogen relating to the acquisition of the minority interest in EISL, and for general corporate purposes.

2021 guidance

 
                                                      FY 2021 
 Consolidated net debt ($ million)                     2,000 
                                                    ---------- 
 
 Cost of Production (Operating Costs plus 
  Royalties) 
                                                    ---------- 
                                                         - 
        *    Israel ($ million) 
                                                    ---------- 
 
        *    Egypt ($ million)                        55 - 60 
                                                    ---------- 
 
        *    Italy ($ million)                       95 - 105 
                                                    ---------- 
 
       *    Greece ($ million)                        20 - 25 
                                                    ---------- 
 
       *    Croatia ($ million                           5 
                                                    ---------- 
 
       *    UK North Sea ($ million)                  20 - 25 
                                                    ---------- 
 Total Cost of Production ($ million)                195 - 220 
                                                    ---------- 
 
 Cash SG&A ($ million)                                35 - 40 
                                                    ---------- 
 
 Development and production capital expenditure 
                                                    ---------- 
 
       *    Israel ($ million)                       350 - 400 
                                                    ---------- 
 
       *    Egypt ($ million)                         60 - 70 
                                                    ---------- 
 
       *    Italy ($ million)                         40 - 50 
                                                    ---------- 
 
       *    Greece and Croatia ($ million)            5 - 10 
                                                    ---------- 
 
       *    UK North Sea ($ million)                  15 - 20 
                                                    ---------- 
 Total Development & Production Capital 
  Expenditure ($ million)                            470 - 550 
                                                    ---------- 
 
 Exploration Expenditure 
                                                    ---------- 
 
       *    Israel ($ million)                          10 
                                                    ---------- 
 
       *    Egypt ($ million)                          0 - 5 
                                                    ---------- 
 
       *    Italy, Greece and Croatia ($ million)     5 - 10 
                                                    ---------- 
 
       *    UK North Sea ($ million)                  40 - 45 
                                                    ---------- 
 Total Exploration Expenditure ($ million)            55 - 70 
                                                    ---------- 
 
 Decommissioning 
                                                    ---------- 
 
       *    UK North Sea                                 0 
                                                    ---------- 
 
       *    Italy                                      2 - 5 
                                                    ---------- 
 Decommissioning expenditure ($ million)               2 - 5 
                                                    ---------- 
 

Energean Financial Review

Financial results summary

 
                                          1H 2021   1H 2020   Change 
 Av. daily working interest production 
  (kboed)                                  44.0       2.1     1,995% 
                                         --------  --------  ------- 
 Sales revenue ($m)                        205.5      2.1     9,686% 
                                         --------  --------  ------- 
 Realised oil price ($/boe)                47.3       9.1      419% 
                                         --------  --------  ------- 
 Cash cost of production [14] 
  ($m)                                     122.4     10.4     1,077% 
                                         --------  --------  ------- 
 Cash cost of production per barrel 
  ($/boe)                                  15.4      27.5     (44%) 
                                         --------  --------  ------- 
 Cash SG&A [15]                            17.0       5.4      215% 
                                         --------  --------  ------- 
 Adjusted EBITDAX [16] ($m)                74.7      (8.8)     939% 
                                         --------  --------  ------- 
 (Loss) after tax ($m)                    (35.7)    (77.3)     54% 
                                         --------  --------  ------- 
 Cash flow from operating activities 
  ($m)                                     53.1     (14.5)     466% 
                                         --------  --------  ------- 
 Capital expenditure ($m)                  230.0     249.0     (8%) 
                                         --------  --------  ------- 
 
 
                                      1H 2021   FY 2020   Change 
 Total borrowings ($m)                2,838.8   1,443.1    97% 
                                     --------  --------  ------- 
 Cash and cash equivalents and 
  restricted cash ($m)                1,146.3    202.9     465% 
                                     --------  --------  ------- 
 Net debt / (cash) ($m) (including 
  restricted cash)                    1,692.6   1,240.1    36% 
                                     --------  --------  ------- 
 Net debt / equity (%)                212.3%    103.8%     105% 
                                     --------  --------  ------- 
 

Revenue, production and commodity prices

Group working interest production averaged 44.0 kboed, an increase of 1,990% for the period (1H 2020: 2.1 kboed), with the Abu Qir field, offshore Egypt, accounting for approximately 70% of total output. 1H 2021 revenue was $205.5 million, a 9,827% increase for the period (1H 2020: $2.1 million), primarily due to the transformational nature of the acquisition of Edison E&P, which closed on 17 December 2020.

The increase in revenue for the period primarily reflects the increased production levels of the Group following the acquisition of Edison E&P, which closed on 17 December 2020. Revenues also benefitted from a higher commodity price environment:

-- During 1H 2021, the average Brent oil price was $ 65.2 /bbl versus $42.2/bbl in 1H 2020, the average PSV price was EUR21.2/MWH (1H 2020: EUR9.3/MWH) and the average NBP price was GBp55.4/Therm (1H 2020: GBp19.0/Therm)

-- This strength across commodity prices resulted in a 1H 2021 average realised price of $47.3/boe (1H 2020: $9.1/boe)

Depreciation, impairments and write-offs

Depreciation charges on production and development assets before impairments increased by 184 % to $ 36.3 million (1H 2020: $12.8 million) due to the higher production levels generated by the Group following the acquisition of Edison E&P, which closed on 17 December 2020.

On a per barrel of oil equivalent of production basis, this represented an 86 % decrease to $ 4.6 /boe (1H 2020: $33.7/boe).

During the period, no impairment charges were recognised (1H 2020: $63.0 million).

Other income and expenses

Other expenses of $3.1 million (1H 2020: $15.8 million) include $1.5 million of one-off transaction costs in relation to the Edison E&P acquisition (1H 2020: $8.4 million), and expected credit losses, as well as losses from disposal of property, plant and equipment of $0.3 million.

Other income of $3.6 million (1H 2020: $8.9 million) includes $3.5 million that relate to reversal of prior period provisions and $0.1 million of other income.

Other income in 1H 2020 included a $5.0 million termination fee that was payable by Neptune Energy in relation to the termination of its sale and purchase agreement to buy the UK North Sea and Norwegian subsidiaries, prior to Energean's acquisition of Edison E&P, and $3.9 million of other income related to waivers obtained for specific accounts payable balances in the Greek subsidiary.

Finance income / costs

Net finance costs in 1H 2021 were $42.2 million (1H 2020: net finance income of $0.8 million), composed of $17.0 million (1H 2020: $3.0 million) of interest on borrowings after capitalisation, $27.9 million (1H 2020: $0.5 million) of other debt arrangement fees and other finance costs and $2.7 million of finance income (1H 2020: $4.4 million). The increase in finance and other arrangement fees is due to arrangement fees for the $700 million term loan, which was fully repaid during the period. The increase in other finance costs is primarily due to unwinding costs on the decommissioning provision, which has increased following the acquisition of Edison E&P, combined with losses incurred on interest rate derivatives.

Crude oil hedging

Energean has no commodity price hedges outstanding as of 30 June 2021 (1H 2020: $nil).

Taxation

Energean recorded tax expenses of $15.2 million in 1H 2021 (1H 2020 $21.8 million tax income), composed of corporation tax charges amount $22.1 million and deferred tax income of $5.9 million. Taxation expenses in the period ended 30 June 2021 include $21.5 million relating to taxes (non-cash in nature) being deducted at source in Egypt plus deferred amounts of $5.9 million.

Operating cash flow

In 1H 20201, Energean recorded a cash inflow from operations before changes in working capital of $ 48.6 million, versus a cash outflow of $15.2 million in 1H 2020. After working capital movements, the cash inflow in 1H 2021 was $ 53.1 million versus a cash outflow of $14.5 million in 1H 2020. The year-on-year increase in operating cash flow has been predominantly driven by the growth in revenues delivered between the two periods. As discussed above, the increase in revenues during the period is due to i) the increased production levels of the Group following the acquisition of Edison E&P; and ii) the higher commodity price environment.

Non-IFRS measures

The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles. These non-IFRS measures include adjusted EBITDAX, underlying cash cost of production and SG&A, capital expenditure, net debt and gearing.

Adjusted EBITDAX

Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation and amortisation, share-based payment charge, impairment of property, plant and equipment, other income and expenses, net finance costs and exploration and evaluation expenses. The Group presents adjusted EBITDAX as it is used in assessing the Group's growth and operational efficiencies as it illustrates the underlying performance of the Group's business by excluding items not considered by management to reflect the underlying operations of the Group.

 
                                       1H 2021   1H 2020 
                                          $m        $m 
 Adjusted EBITDAX [17]                  74.7      (8.9) 
                                      --------  -------- 
 Reconciliation to profit / (loss): 
                                      --------  -------- 
 Depreciation and amortisation         (36.3)    (12.8) 
                                      --------  -------- 
 Share-based payment charge             (2.3)     (1.2) 
                                      --------  -------- 
 Impairment losses                        -      (63.0) 
                                      --------  -------- 
 Exploration and evaluation expense     (1.0)     (0.5) 
                                      --------  -------- 
 Other expenses                         (3.1)    (15.8) 
                                      --------  -------- 
 Other income                            3.6       8.9 
                                      --------  -------- 
 Finance income                          2.7       4.4 
                                      --------  -------- 
 Finance cost                          (44.9)     (3.6) 
                                      --------  -------- 
 Net foreign exchange gain/(loss)      (13.9)     (6.6) 
                                      --------  -------- 
 Taxation income / (expense)           (15.2)     21.8 
                                      --------  -------- 
 Profit / (loss) from continuing 
  operations                           (35.7)    (77.3) 
                                      --------  -------- 
 

Cash Cost of production

Cash Cost of production is a non-IFRS measure that is used by the Group as a useful indicator of the Group's underlying cash costs to produce hydrocarbons. The Group uses the measure to compare operational performance period-to-period, to monitor cost and assess operational efficiency. Cash cost of production is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory movements.

 
                                       1H 2021   1H 2020 
                                          $m        $m 
 Cost of sales                          147.6     17.9 
                                      --------  -------- 
 Less: 
                                      --------  -------- 
 Depreciation                           33.8      11.6 
                                      --------  -------- 
 Change in inventory                    (8.6)     (4.1) 
                                      --------  -------- 
 Cost of production                     122.4     10.4 
                                      --------  -------- 
 Total production for the period 
  (MMboe)                                7.9       0.4 
                                      --------  -------- 
 Cost of production per boe ($/boe)     15.4      27.5 
                                      --------  -------- 
 

Cash Selling, General & Administrative Expense (SG&A)

Cash SG&A eliminates certain non-cash accounting adjustments to the Group's SG&A. Underlying cash SG&A is defined as Administrative and Selling and distribution expenses, excluding depletion and amortisation of assets and share-based payment charge that are included in SG&A.

 
                                        1H 2021   1H 2020 
                                          $m        $m 
                                       --------  -------- 
 Administrative expenses                 21.7       6.9 
                                       --------  -------- 
 Selling and distribution expenses        0.1       0.1 
                                       --------  -------- 
 Less: 
                                       --------  -------- 
 Depreciation                             2.5       0.4 
                                       --------  -------- 
 Share-based payment charge included 
  in SG&A                                 2.3       1.2 
                                       --------  -------- 
 Cash SG&A                               17.0       5.4 
                                       --------  -------- 
 

Energean incurred Cash S,G&A costs of $17.0 million in 1H 2021. This represents a 216% increase versus the comparable period last year (1H 2020: $5.4 million) and is due to increased staffing and administrative costs following the acquisition of Edison E&P and efforts associated with developing the Group's portfolio of projects.

Capital expenditure

Capital Expenditure is defined as additions to property, plant and equipment and intangible exploration and evaluation assets, cash lease payments made in the period, less lease asset additions, asset additions due to decommissioning provisions, capitalised share-based payment charge, capitalised borrowing costs and certain other non-cash adjustments. The Directors believe that capital expenditure is a useful indicator of the Group's organic expenditure on oil and gas development assets, exploration and evaluation assets incurred during a period because it eliminates certain accounting adjustments such as capitalised borrowing costs and decommissioning asset additions.

 
 
                                              1H 2021    1H 2020 
                                             --------  ----------- 
                                                $m          $m 
                                             --------  ----------- 
 Additions to property, plant and 
  equipment                                    317.8      279.8 
                                             --------  ----------- 
 Additions to intangible exploration 
  and evaluation assets                        30.3        6.8 
                                             --------  ----------- 
 Less: 
                                             --------  ----------- 
 Capitalised borrowing cost                    114.0       40.6 
                                             --------  ----------- 
 Leased assets additions and modifications     12.3        0.9 
                                             --------  ----------- 
 Lease payments related to capital 
  activities                                   (5.8)      (4.7) 
                                             --------  ----------- 
 Capitalised share-based payment 
  charge                                        0.2        0.0 
                                             --------  ----------- 
 Capitalised depreciation                       0.1        0.3 
                                             --------  ----------- 
 Change in environmental rehabilitation 
  provision                                    (2.5)       0.5 
                                             --------  ----------- 
 Total capital expenditures                    230.0      249.0 
                                             --------  ----------- 
 Movement in working capital                  (60.0)      (5.8) 
                                             --------  ----------- 
 Cash capital expenditures per the 
  cash flow statement                          170.0    243.2 [18] 
                                             --------  ----------- 
 

The breakdown of capital expenditures during 1H 2021 and 1H 2020 was as follows:

 
                                     1H 2021               1H 2020 
                               Capital expenditure   Capital expenditure 
                                        $m                    $m 
                              --------------------  -------------------- 
 Development and Production 
                              --------------------  -------------------- 
 Israel                               161.8                 235.3 
                              --------------------  -------------------- 
 Egypt                                17.5                    - 
                              --------------------  -------------------- 
 Italy                                11.4                    - 
                              --------------------  -------------------- 
 Greece & Croatia                      3.8                   2.5 
                              --------------------  -------------------- 
 UK                                    5.3                    - 
                              --------------------  -------------------- 
 Other                                 1.0                   1.0 
                              --------------------  -------------------- 
 Total                                200.8                 243.5 
                              --------------------  -------------------- 
 
 Exploration and Appraisal 
                              --------------------  -------------------- 
 Israel                                3.7                   4.8 
                              --------------------  -------------------- 
 Egypt                                 0.3                    - 
                              --------------------  -------------------- 
 Italy                                 2.0                    - 
                              --------------------  -------------------- 
 Greece & Croatia                      0.4                   0.3 
                              --------------------  -------------------- 
 UK                                   22.5                    - 
                              --------------------  -------------------- 
 Other                                 0.3                   0.4 
                              --------------------  -------------------- 
 Total                                29.2                   5.5 
                              --------------------  -------------------- 
 

Net cash / debt and gearing ratio

Net debt is defined as the Group's total borrowings less cash and cash equivalents and restricted cash held for loan repayments. Management believes that net debt is a useful indicator of the Group's indebtedness, financial flexibility and capital structure because it indicates the level of borrowings after taking account of any cash and cash equivalents that could be used to reduce borrowings. The Group defines capital as total equity and calculates the gearing ratio as net debt divided by capital.

 
 Net debt reconciliation                    1H 2021   1H 2020 
                                                 $m        $m 
 Current borrowings                            19.0      38.0 
                                           --------  -------- 
 Non-current borrowings                     2,819.8   1,055.8 
                                           --------  -------- 
 Total borrowings                           2,838.8   1,093.9 
                                           --------  -------- 
 Less: Cash and cash equivalents              880.0     232.5 
                                           --------  -------- 
 Restricted cash held for loan repayment      266.2         - 
                                           --------  -------- 
 Net (Funds)/Debt [19]                      1,692.6     861.4 
                                           --------  -------- 
 Total equity                                 797.5   1,184.7 
                                           --------  -------- 
 Gearing ratio                               212.3%     72.7% 
                                           --------  -------- 
 

Term Loan

On 13 January 2021, Energean signed an 18-month, $700 million term loan facility agreement with J.P. Morgan AG and Morgan Stanley Senior Funding, Inc, the primary uses of which were to accelerate the Karish North development and to fund the up-front consideration for the acquisition of the minority interest in Energean Israel. At the same time, Energean also agreed with the existing lenders of its $1.45 billion project finance facility to extend its maturity by nine months, from December 2021 to September 2022. This term loan was refinanced using proceeds from the bond issuance discussed below.

Refinancing

On 24 March 2021, Energean Israel Finance Limited issued a $2.5 billion bond, split into four equal tranches with maturities in 2024, 2026, 2028 and 2031.

On 29 April 2021, the gross proceeds were released from a segregated escrow account following the satisfaction of release conditions, including the receipt of regulatory approvals and the registration of certain pledges. Part of the proceeds from the issuance were used to refinance the term loan (discussed above) and Energean Israel's $1.45 billion project finance facility. As at the date of refinancing, drawn amounts under the term loan and project finance facility were $175 million and $1,270 million, respectively.

Principal risks and uncertainties

Effective risk management is fundamental to achieving Energean's strategic objectives and protecting its personnel, assets, shareholder value and reputation. The Board has overall responsibility for determining the nature and extent of the risks it is willing to take in achieving the strategic objectives of the Group and ensuring that such risks are managed effectively. A key aspect of this is ensuring the maintenance of a sound system of internal control and risk management. For all the known risks facing the business, Energean attempts to minimise the likelihood and mitigate the impact. Energean has a zero-tolerance approach to financial fraud or ethics non-compliance and ensures that HSE risks are managed to levels that are as low as reasonably practicable.

Overview of key risks and key changes since 31 December 2020

The Group's principal risks for the remaining 6 months of the year and key changes since 31 December 2020 are set out below. For further information on key risks, please refer to Energean's 2020 Annual Report and Accounts:

Strategic risks

#1 Progress key development projects in Israel

Principal risk: Delay to first gas at Karish.

1H 2021 movement: This risk increased in 1H 2021. Following the re-introduction of enhanced COVID-19 related restrictions in Singapore for part of 1H 2021, the Energean Power FPSO is now expected to sailaway from Singapore to Israel in 1Q 2022 with first gas in mid-2022.

Energean is working on a number of contingency measures in the event that there are further outbreaks and variants of COVID-19 in Singapore that lead to the reintroduction of measures that could impact upon the first gas timetable.

Project completion has now reached 91.5% as of 31 July 2021; the closer to completion the project gets, the lower the risk of material delays. Energean is working with its contractors to ensure completion of the project as soon as is possible.

#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 gas sales and purchase agreements and could result in the failure to secure new GSPAs.

1H 2021 movement: This risk increased in 1H 2021. The market environment is competitive, and the Leviathan field continues to increase its supply of gas, alongside production from Tamar, contributing to market oversupply and a decline in Israeli domestic gas prices towards the price floor set by Energean. Nevertheless, Energean's gas sales and purchase agreements continue to remain the most commercially attractive supply option to domestic gas buyers in Israel, with a weighted average gas price of approximately $4.0/MMbtu.

#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).

1H 2021 movement: This risk decreased in 1H 2021. Energean has made good progress on its Karish North (Israel) and NEA/NI (Egypt) gas developments since taking FID in January 2021, with both projects on schedule and on budget and with no delays envisaged. The Cassiopea project was approximately 23% complete at 31 July 2021 and first gas continues to be expected in 1H 2024. The passage of time and delivery of projects in line with expectations is the key driver of the reduction in this risk.

#4 Deliver exploration success and reserve addition

Principal risk: Lack of new commercial discoveries and reserves replacement.

1H 2021 movement: This risk remained static in 1H 2021. Energean has developed a well-defined exploration plan for its 2022-23 drilling programme, offshore Israel, which will target the derisking of unrisked prospective recoverable resources of over 1 Bnboe. In May 2021, the Company signed a contract with Stena at an attractive day rate for the drilling of three firm wells and two optional wells, with the first well expected to spud in 1Q 2022.

#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.

1H 2021 movement: This risk decreased in 1H 2021. Energean continues to successfully implement its integration roadmap and has identified areas of synergy across the combined business. Implementation of the end-state operating model remains on target for year-end 2021.

Operational risks

#1 Production performance

Principal risk: Underperformance at core producing assets in Egypt and Italy.

1H 2021 movement: This risk decreased in 1H 2021. Production continues to outperform following robust operational performance across Energean's combined portfolio. Working interest production averaged 44.0 kboed in 1H 2021, around 10% above the mid-point of guidance of 38 - 42 kboed.

#2 JV misalignment

Principal risk: Misalignment with JV operators.

1H 2021 movement: This risk decreased in 1H 2021, due to Energean's increased working interest position in the Vega and Rospo Mare fields, offshore Italy, following the acquisition from ENI, plus good progress having been made on the Cassiopea project, offshore Italy.

Financial risks

#1 Maintaining liquidity and solvency

Principal risk: Insufficient liquidity and funding capacity.

1H 2021 movement: This risk decreased in 1H 2021. In April 2021, the $1.45 billion project finance facility and $700 million term loan were refinanced following a $2.5 billion issuance of senior secured notes. The bond is split into four equal tranches with maturities in 2024, 2026, 2028 and 2031. This optimised debt structure substantially extends the maturity profiles and provides additional near-term flexibility to the Group. Strengthening of commodity prices also helped to decrease this risk.

#2 Egypt receivables

Principal risk: Recoverability of revenues and receivables in Egypt.

1H 2021 movement: This risk remained static in 1H 2021. Cash collection from EGPC during the period was $74.9 million. This was approximately $10 million lower than expected cash collection, the difference being primarily due to timing of collection.

#3 Decommissioning liability

Principal risk: Higher than expected decommissioning costs and acceleration of abandonment schedules

1H 2021 movement: This risk remained static in 1H 2021. No additional decommissioning liabilities were incurred year-to-date and Energean is working on reducing decommissioning liabilities

Climate change risks

#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.

1H 2021 movement: This risk increased in 1H 2021. The climate change agenda is an ever-increasing area of focus globally and is of critical importance to Energean as it evolves the business and works towards achieving its 2050 net zero target with respect to Scope 1 and 2 emissions. Failure to progress this target could impact the commerciality of the portfolio, lead to loss of licence to operate and result in limited access to/increased cost of capital.

Energean mitigates this risk through ongoing monitoring of key performance indicators by Management. Progress demonstrated in 2021 includes:

   --      ESG ratings maintained in the top quartile. 
   --      Awarded 'Gold' by Maala in July 2021 for a second consecutive year. 

-- Three core initiatives being rolled out across all operated sites, including switching to purchasing of 'green' electricity, introduction of a zero-routine-faring policy and establishment of procedures to reduce methane emissions.

-- Technical feasibility studies are ongoing for carbon capture and storage, and eco-hydrogen projects in Prinos in Greece, in conjunction with evaluation of the wider portfolio for such projects.

#2 Physical risks related to climate change

Principal risk: Disruption to operations and/or development projects due to severe weather (both acute and chronic).

1H 2021 movement: This risk remained static in 1H 2021.

External risks

#1 Geopolitical events

Principal risk: Political and fiscal uncertainties in the Eastern Mediterranean.

1H 2021 movement: This risk remained static in 1H 2021.

#2 Global pandemic

Principal risk: Operational uncertainties and HSE incidents due to COVID-19 pandemic.

1H 2021 movement: This risk remained static in 1H 2021.

Emerging risks

Energean faces a number of uncertainties that have the potential to be material to its long-term strategy but cannot be fully defined as a specific risk at present, and therefore cannot be fully assessed or managed. These emerging risks typically have a long-time horizon, such as earlier and increased decommissioning liabilities in the UK and Italy, and elsewhere where the Company operates; increased calls for cash or letter of credit guarantees to be put in place; inadequate management of reserves and production risk resulting in poor returns and impairment.

In 1H 2021, the Group identified the increasing threat from misalignment of national and regional energy transition legislation and direct impacts from unanticipated business interruption, for example due to production downtime or one-off events, emerging risks that will be actively assessed and monitored.

Events since 30 June 2020

Compensation to gas buyers due to late supply:

During August 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Group has agreed to pay compensation to these counterparties due to the fact the gas supply date is taking place beyond a certain date as defined in the GSPAs (being 30 June 2021). The compensation will be paid on a monthly basis starting on August 2021 and is estimated at approx. US$23 million. The compensation is accounted as variable purchase consideration under IFRS 15 hence recognised once production commences and gas is delivered to the offtakers

Gas buyer request for arbitration:

During August 2021 a gas buyer sent a request to the International Court of Arbitration ("ICC") asking for arbitration on its rights of termination due to the fact the gas supply date is taking place beyond a certain date which defined in the GSPA. If the agreement it is terminated, the Group has identified multiple alternative routes to monetise those gas volumes (being 0.8 Bcm/yr), including both domestic and international markets, and hence is confident of profitably selling them

Going Concern Statement

The Group carefully manages its risk to a shortage of funds by monitoring its funding position and its liquidity risk. The going concern assessment covers for the period to 30 September 2022 'the Forecast Period'.

Cash forecasts are regularly produced based on, inter alia, the Group's latest life of field production and budgeted expenditure forecasts, management's best estimate of future commodity prices (based on recent published forward curves) and the Group's borrowing facilities. The Base Case conservatively assumes first gas from Karish in July 2022, Brent at $70/bbl for the period 1 September to 31 December 2021 and $65/bbl for the period 1 January to 30 September 2022, PSV (Italian gas price) at an average of EUR25/MWH for the period 1 September 2021 to 31 December 2021 and EUR20/MWH for the period January 2022 to 30 September 2022.

In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position for negative impacts that may result from changes to the macro-economic environment such as a fall in commodity price or increase in interest rate. The Group also looks at the impact of changes or deferral of key projects and/or portfolio rationalisation. This is done to identify risks to liquidity and covenant compliance and enable management to formulate appropriate and timely mitigation strategies in order to manage the risk of funding shortfalls or covenant breaches and to safeguard the Group's ability to continue as a going concern.

Specifically, the Group tested the following sensitivities:

-- Reduction in Commodity Prices over the Forecast Period (10% applied to PSV prices and 7.5% to Brent prices)

   --      decrease in projected collection of EGPC receivables over the Forecast Period 

-- delay in Israel first gas by 3 months to October 2022, which Energean management believes has a low probability of occurring given the acceleration and mitigation measures currently under consideration and the evolution of the COVID-19 situation

A reasonable worst case including a combination of all above sensitivities

The Group also ran a reverse stress test to stress the combination of lower Brent price, lower PSV (Italian Gas Price) and reduced collection of EGPC receivables and assess the impact of this combination on the Group's liquidity and covenants associated with its banking facilities. Energean believes that this combination of scenarios holds a low probability of occurrence.

Should a more extreme downside scenario occur, appropriate mitigating actions that are in management's control and can be executed in the necessary timeframe could be taken such as a tightening o f operating cost and reductions/postponement of other discretionary exploration and development expenditures. The Group's cash and cash equivalents at 30 June 2021 were $880 million (excluding restricted cash amounts of $266 million).

In terms of the Group's Borrowing Facilities, the following was considered in the context of the Group's liquidity and covenant compliance over the Forecast Period.

Karish Field Development, Israel:

-- Consistent with the Group's plans to implement new financing as the Karish development approaches first gas in mid-2022, Energean issued a $2.5 billion Bond to (i) refinance its $1.45 billion Project Finance Facility (ii) cancel and replace the $700m Term Loan which was drawn to fund the acquisition of Kerogen's minority interest in Energean Israel, (iii) fund future capital and exploration expenditure in Israel, including Karish and Karish North and (iv) for general corporate purposes of the Group. On 29 April 2021 the Group satisfied the escrow release conditions, as a result the proceeds of the Offering were released from the escrow account.

Greek RBL:

-- In March 2021, the Group agreed a waiver with its lenders under the EBRD reserve-based lending facility whereby there are no more Borrowing Base redeterminations and the facility effectively converts to an amortising term loan with repayments weighted towards the second half of 2022 to 2024. Covenants under the Subordinated Loan Agreement are also waived until December 2022.

Egypt RBL:

The current Borrowing Base redetermination is expected to be completed in September 2021 . Given the strong commodities prices and the higher production achieved from the Borrowing Base Assets we do not expect any reduction to the Borrowing Base when the redetermination exercise is completed.

In forming an assessment on the Group's ability to continue as a going concern and its review of the forecasted cashflow of the Group over the Forecast Period (from the date of approval of the interim condensed consolidated financial statements) the Board has made significant judgements about:

-- Reasonable sensitivities appropriate for the current status of the business and the wider macro environment; and

the Group's ability to implement the mitigating actions, if required, is within the Group's control, which would further safeguard the Group's liquidity and covenant compliance.

After careful consideration, the Directors are satisfied that the Group has sufficient financial resources to continue in operation for the foreseeable future, for a period up to 30 September 2022. For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge:

1) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted in the UK;

2) The interim management report contains a fair review of the information required by DTR 4.2.7RR (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);

3) The interim management report includes a true and fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Mathios Rigas Panos Benos

Chief Executive Officer Chief Financial Officer

01 September 2021 01 September 2021

Forward looking statements

This announcement contains statements that are, or are deemed to be, forward-looking statements. In some instances, forward-looking statements can be identified by the use of terms such as "projects", "forecasts", "anticipates", "expects", "believes", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results and events to differ materially from those expressed in or implied by such forward-looking statements, including, but not limited to: general economic and business conditions; demand for the Company's products and services; competitive factors in the industries in which the Company operates; exchange rate fluctuations; legislative, fiscal and regulatory developments; political risks; terrorism, acts of war and pandemics; changes in law and legal interpretations; and the impact of technological change. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in this announcement is subject to change without notice.

INDEPENT REVIEW REPORT TO ENERGEAN PLC

Conclusion

We have been engaged by Energean plc (the Company) to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related explanatory notes 1 to 29. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the Group will be prepared in accordance with UK adopted IFRSs. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

1 September 2021

 
 Interim Condensed Consolidated Income Statement 
  Six months ended 30 June 2021 
------------------------------------------------ 
 
 
                                                 30 June (Unaudited) 
                                                  2021         2020 
                                                  $'000       $'000 
-------------------------------------  ------  ----------  ----------- 
                                        Notes 
 Revenue                                  5       205,466        2,070 
 Cost of Sales                          6(a)    (147,640)   ( 17,934 ) 
-------------------------------------  ------  ----------  ----------- 
 Gross profit/(loss)                               57,826   ( 15,864 ) 
 
 Administrative expenses                6(b)     (21,668)      (6,853) 
 Selling and distribution expenses      6(c)        (102)         (72) 
 Exploration and evaluation expenses    6(d)      (1,041)        (529) 
 Impairment of property, plant 
  and equipment                          11             -     (63,005) 
 Other expenses                         6(e)      (3,071)   ( 15,843 ) 
 Other income                           6(f)        3,571        8,914 
-------------------------------------  ------  ----------  ----------- 
 Operating profit/(loss)                           35,515     (93,252) 
 Finance Income                           7         2,700        4,383 
 Finance Costs                            7      (44,912)      (3,563) 
 Net foreign exchange loss                7      (13,787)      (6,637) 
-------------------------------------  ------              ----------- 
 Loss before tax                                 (20,484)     (99,069) 
 
 Taxation income / (expense)              9      (15,174)       21,801 
-------------------------------------  ------  ----------  ----------- 
 Loss from continuing operations                 (35,658)     (77,268) 
-------------------------------------  ------  ----------  ----------- 
 
 Attributable to: 
 Owners of the parent                            (35,550)     (76,826) 
 Non-controlling Interests                          (108)        (442) 
-------------------------------------  ------              ----------- 
                                                 (35,658)     (77,268) 
=====================================  ======  ==========  =========== 
 
 Basic and diluted total loss per share (cents per share) 
---------------------------------------------------------------------- 
 Basic                                  10        ($0.20)      ($0.43) 
 Diluted                                10        ($0.20)      ($0.43) 
-------------------------------------  ------  ----------  ----------- 
 
 
 Interim Condensed Consolidated Statement of Comprehensive Income 
  Six months ended 30 June 2021 
------------------------------------------------------------------------------------ 
                                                           30 June (Unaudited) 
                                                         2021             2020 
                                                         $'000            $'000 
 ----------------------------------------  --------  ------------   ---------------- 
 
  Loss for the period                                    (35,658)           (77,268) 
 --------------------------------------------------  ------------   ---------------- 
 
  Other comprehensive income: 
  Items that may be reclassified 
   subsequently to profit or loss 
  Cash Flow hedges 
   Gain/(loss) arising in the period                        2,278           (11,530) 
   Reclassification to profit and 
    loss upon repayment of related 
    borrowings                                              4,641                  - 
   Income tax relating to items 
    that may be reclassified to 
    profit or loss                                        (1,591)              2,652 
  Exchange difference on the translation 
   of foreign operations, net of 
   tax                                                    (6,576)            (1,075) 
 --------------------------------------------------                 ---------------- 
  Other comprehensive profit/(loss) 
   after tax                                              (1,248)            (9,953) 
 --------------------------------------------------  ------------   ---------------- 
 
  Total comprehensive loss for 
   the period                                            (36,906)           (87,221) 
 ==================================================  ============   ================ 
 
  Total comprehensive loss attributable 
   to: 
  Owners of the parent                                   (36,800)           (84,116) 
  Non-controlling Interests                                 (106)            (3,105) 
 --------------------------------------------------                 ---------------- 
                                                         (36,906)           (87,221) 
  =================================================  ============   ================ 
 
 
 
  Interim Condensed Consolidated Statement of Financial Position 
    As at 30 June 2021 
  --------------------------------------------------------------- 
----------------------------------------------------------------------------------- 
                                                        30 June 
                                                    2021 (Unaudited)    31 December 
                                                                           2020 
                                           Notes         $'000            $'000 
---------------------------------------  -------  ------------------  ------------- 
 ASSETS 
 Non-current assets 
 Property, plant and equipment              11             3,375,231      3,107,272 
 Intangible assets                          12               286,201        275,816 
 Equity-accounted investments                                      4              4 
 Other receivables                          17                31,552         31,568 
 Deferred tax asset                         13               128,498        126,056 
 Restricted cash                            15               100,000              - 
---------------------------------------  -------  ------------------  ------------- 
                                                           3,921,486      3,540,716 
---------------------------------------  -------  ------------------  ------------- 
 Current assets 
 Inventories                                16                78,016         73,019 
 Trade and other receivables                17               281,985        318,339 
 Restricted cash                            15               166,241              - 
 Cash and cash equivalents                  14               880,017        202,939 
                                                           1,406,259        594,297 
---------------------------------------  -------  ------------------  ------------- 
 Total assets                                              5,327,745      4,135,013 
---------------------------------------  -------  ------------------  ------------- 
 
 EQUITY AND LIABILITIES 
 Equity attributable to owners of 
  the parent 
 Share capital                              18                 2,368          2,367 
 Share premium                              18               915,388        915,388 
 Merger reserve                                              139,903        139,903 
 Other reserve                                                17,577          1,792 
 Foreign currency translation reserve                        (6,618)           (42) 
 Share-based payment reserve                                  15,893         13,419 
 Retained earnings                                         (294,063)      (144,734) 
 Equity attributable to equity holders 
  of the parent                                              790,448        928,093 
---------------------------------------  -------  ------------------  ------------- 
 Non-controlling interests                  19                     -        266,299 
---------------------------------------  -------  ------------------  ------------- 
 Total equity                                                790,448      1,194,392 
---------------------------------------  -------  ------------------  ------------- 
 Non-current liabilities 
 Borrowings                                 20             2,819,809        330,092 
 Deferred tax liabilities                   13                70,151         68,609 
 Retirement benefit liability               21                 6,695          7,839 
 Provisions                                 22               855,004        881,535 
 Other payables                             23               348,818        177,193 
                                                           4,100,477      1,465,268 
---------------------------------------  -------  ------------------  ------------- 
 Current liabilities 
 Trade and other payables                   23               402,420        355,454 
 Current portion of borrowings              20                19,020      1,112,984 
 Derivative financial instruments           8                  2,405          6,915 
 Provisions                                 22                12,975              - 
                                                             436,820      1,475,353 
---------------------------------------  -------  ------------------  ------------- 
 Total liabilities                                         4,537,297      2,940,621 
---------------------------------------  -------  ------------------  ------------- 
 Total equity and liabilities                              5,327,745      4,135,013 
---------------------------------------  -------  ------------------  ------------- 
 
 
 Interim Condensed Consolidated Statement of Changes in Equity 
  Six months ended 30 June 2021 
-------------------------------------------------------------- 
 
 
                                                    Equity 
                                                   component     Share 
                                                      of         based 
                               Share     Other    convertible   payment   Translation                                         Non 
                     Share    Premium   Reserve      bonds      reserve     Reserve     Retained    Merger                Controlling 
                    Capital    [20]      [21]        [22]        [23]         [24]       earnings   reserve     Total      Interests      Total 
                     $'000     $'000     $'000       $'000       $'000       $'000        $'000      $'000      $'000        $'000        $'000 
 At 1 January 
  2021                2,367   915,388     1,792             -    13,419          (42)   (144,734)   139,903     928,093       266,299   1,194,392 
                   --------  --------  --------  ------------  --------  ------------  ----------  --------  ----------  ------------  ---------- 
 Loss for the 
  period                  -         -         -             -         -             -    (35,550)         -    (35,550)         (108)    (35,658) 
 Hedges , net 
  of tax                  -         -     5,326             -         -             -           -         -       5,326             2       5,328 
 Exchange 
  difference 
  on the 
  translation 
  of foreign 
  operations              -         -         -             -         -       (6,576)           -         -     (6,576)             -     (6,576) 
 Total 
  comprehensive 
  income                  -         -     5,326             -         -       (6,576)    (35,550)         -    (36,800)         (106)    (36,906) 
                   --------  --------  --------  ------------  --------  ------------  ----------  --------  ----------  ------------  ---------- 
 Transactions 
  with owners 
  of the company 
 Employee share 
  schemes (note 
  24)                     1         -         -             -     2,474             -           -         -       2,475                     2,475 
 Acquisition 
  of 
  non-controlling 
  Interests 
  [25]                    -         -         -        10,459         -             -   (113,779)         -   (103,320)     (266,193)   (369,513) 
 At 30 June 
  2021                2,368   915,388     7,118        10,459    15,893       (6,618)   (294,063)   139,903     790,448             -     790,448 
                   ========  ========  ========  ============  ========  ============  ==========  ========  ==========  ============  ========== 
 
 
 Interim Condensed Consolidated Statement of Changes in Equity 
  Six months ended 30 June 2021 
-------------------------------------------------------------- 
 
 
                                                        Share 
                             Share                      based                                                               Non 
                   Share    Premium       Other        payment     Translation   Retained      Merger                   Controlling 
                  Capital     (18)     Reserve(19)   reserve(21)   Reserve(22)    earnings   reserve(23)     Total       Interests      Total 
                   $'000     $'000        $'000         $'000         $'000        $'000        $'000        $'000         $'000        $'000 
 At 1 January                                                            (19,2    ( 53,320                                   259,72      1,2 60 
  2020              2,367   915,38 8        5,86 2        10,094          64 )           )       139,903   1,0 01,030             2       , 752 
                 ========  =========  ============  ============  ============  ==========  ============  ===========  ============  ========== 
 Loss for the 
  period                -          -             -             -             -    (76,825)             -     (76,825)         (442)    (77,267) 
 Cash flow 
  hedge , 
  net of tax            -          -       (6,215)             -             -           -             -      (6,215)       (2,663)     (8,878) 
 Exchange 
  difference 
  on the 
  translation 
  of foreign 
  operations            -          -             -             -       (1,075)           -             -      (1,075)             -     (1,075) 
 Total 
  comprehensive 
  income                -          -       (6,215)             -       (1,075)    (76,825)             -     (84,115)       (3,105)    (87,220) 
                 --------  ---------  ------------  ------------  ------------  ----------  ------------  -----------  ------------  ---------- 
 Transactions 
 with 
 owners of the 
 company          -                -             -             -             -   -           -                      -             -           - 
 Share capital 
  increase 
  in subsidiary         -          -             -             -             -           -             -            -         9,750       9,750 
 Employee share 
  schemes 
  (note 24)             -          -             -         1,363             -           -             -        1,363             -       1,363 
 At 30 June 
  2020              2,367    915,388         (353)        11,457      (20,339)   (130,145)       139,903      918,278       266,367   1,184,645 
                 ========  =========  ============  ============  ============  ==========  ============  ===========  ============  ========== 
 
 
 Interim Condensed Consolidated Statement of Cash Flows 
  Six months ended 30 June 2021 
------------------------------------------------------------------------------ 
                                                         30 June (Unaudited) 
                                                          2021         2020 
                                               Note       $'000        $'000 
-------------------------------------------  -------  ------------  ---------- 
 Operating activities 
-------------------------------------------  -------  ------------  ---------- 
                                                                      (99,06 9 
 Loss before taxation                                     (20,484)           ) 
 Adjustments to reconcile profit/(loss) 
  before taxation to net cash provided 
  by operating activities: 
 Depreciation , depletion and amortisation    11, 12        36,343      12,787 
 Impairment loss on property, plant 
  and equipment                                 11               -      63,005 
 Impairment on asset held for sale              11               -       4,935 
 Loss from the sale of property,                                36           - 
  plant and equipment 
 Defined benefit expenses                       21         (1,120)       (192) 
 Finance income                                 7          (2,700)     (4,383) 
 Finance costs                                  7           44,912       3,563 
 Non-cash revenues from Egypt ([26])                      (21,577)           - 
 Other liabilities derecognised                6(f)              -     (3,839) 
 Movement in provisions                         22             483           - 
 Other income                                   6          (3,602)           - 
 Share-based payment charge                     24           2,474       1,332 
 Net foreign exchange gain/(loss)               7           13,787       6,637 
-------------------------------------------  -------  ------------  ---------- 
 Cash flow from/(used in) operations 
  before working capital adjustments                        48,552    (15,224) 
-------------------------------------------  -------  ------------  ---------- 
 Increase in inventories                                   (5,185)     (4,012) 
 Decrease in trade and other receivables                   42, 392       4,565 
 (Decrease)/Increase in trade and 
  other payables                                        ( 33,082 )         225 
-------------------------------------------  -------  ------------  ---------- 
 Cash inflow/(outflow) from operations                      52,677    (14,446) 
 Income tax paid                                               388        (55) 
-------------------------------------------  -------  ------------  ---------- 
 Net cash inflow/(outflow) from 
  operating activities                                      53,065    (14,501) 
-------------------------------------------  -------  ------------  ---------- 
 Investing activities 
 Payment for purchase of property, 
  plant and equipment                                    (141,182)   (231,178) 
 Payment for exploration and evaluation, 
  and other intangible assets                             (28,818)    (12,077) 
 Acquisition of a subsidiary                    4          (3,335)           - 
 Movement in restricted cash                    15       (266,241)           - 
 Proceeds from disposal of property, 
  plant and equipment                                            -         150 
 Interest received                                             861         470 
-------------------------------------------  -------  ------------  ---------- 
 Net cash used in investing activities                   (438,715)   (242,635) 
-------------------------------------------  -------  ------------  ---------- 
 Financing activities 
 Drawdown of borrowings                         20         293,000     200,000 
 Repayment of borrowings                        20     (1,452,509)    (19,021) 
 Senior secured notes Issuance                  20       2,500,000           - 
 Transaction costs related to Senior                      (37,218)           - 
  secured notes paid 
 Proceeds from capital increases 
  by non-controlling interests                  19               -       9,750 
 Acquisition of non-controlling 
  interests                                     19       (175,000)           - 
 Transaction costs related to acquisition                  (1,677)           - 
  of non-controlling interest 
 Repayment of obligations under 
  leases                                                   (5,875)     (4,713) 
 Finance cost paid for deferred 
  license payments                                         (3,494)     (3,993) 
 Finance costs paid                                       (55,641)    (40,367) 
-------------------------------------------  -------  ------------  ---------- 
 Net cash inflow from financing 
  activities                                             1,061,586     141,656 
-------------------------------------------  -------  ------------  ---------- 
 Net increase / (decrease) in cash 
  and cash equivalents                                     675,936   (115,480) 
-------------------------------------------  -------  ------------  ---------- 
 Cash and cash equivalents at beginning 
  of the period                                            202,939     354,419 
 Effect of exchange rate fluctuations 
  on cash held                                               1,142     (6,480) 
-------------------------------------------  -------  ------------  ---------- 
 Cash and cash equivalents at end 
  of the period                                 14         880,017     232,459 
-------------------------------------------  -------  ------------  ---------- 
 

1. Corporate Information

Energean plc (the 'Company') was incorporated in England & Wales on 8 May 2017 as a public company with limited liability, under the Companies Act 2006. Its registered office is at 44 Baker Street, London W1U 7AL, United Kingdom. The Company and all subsidiaries controlled by the Company, are together referred to as "the Group".

The Group has been established with the objective of exploration, production and commercialisation of crude oil and natural gas in Greece, Israel, North Africa and the wider Eastern Mediterranean.

The Group's core assets and subsidiaries as of 30 June 2021 are presented in note 29.

2. Basis of preparation

2.1 Basis of preparation

As a result of the UK's withdrawal from the European Union on 31 December 2020, the financial statements of the Group for the year ending 31 December 2021 will be prepared under UK-adopted International Accounting Standards. Accordingly, the unaudited condensed consolidated interim financial statements for the six months ended 30 June 2021 included in this interim report have been prepared in accordance with UK-adopted International Accounting Standard 34 'Interim Financial Reporting', and unless otherwise disclosed have been prepared on the basis of the same accounting policies and methods of computation as applied in the Group's Annual Report for the year ended 31 December 2020.

The interim condensed consolidated financial statements have been prepared on a historical cost basis and are presented in US Dollars, which is also the Company's functional currency, rounded to the nearest thousand dollars ($'000) except as otherwise indicated.

The US dollar is the currency that mainly influences sales prices and revenue estimates, and also highly affects the Group's operations. The functional currencies of the Group's main subsidiaries are as follows: for Energean E&P Holdings Ltd, Energean Oil & Gas S.A, Energean Montenegro, Energean Italy Spa and Energean International E&P Spa, is Euro, for Energean International Limited, Energean Capital Ltd, Energean Egypt Ltd and Energean Israel Limited is US$.

Comparative figures for the period to 30 June 2020 and 31 December 2020 are for the period ended on that date.

The interim financial statements do not constitute statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006 and do not include all the information and disclosures required in the annual financial statements. The interim financial statements should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 December 2020, which were prepared in accordance with IFRSs in conformity with the requirements of the Companies Act 2006 and which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified with no reference to matters to which the auditor drew attention by way of emphasis and no statement under s498(2) or s498(3) of the Companies Act 2006.

Going concern

The Group carefully manages its risk to a shortage of funds by monitoring its funding position and its liquidity risk. The going concern assessment covers for the period to 30 September 2022 'the Forecast Period'.

Cash forecasts are regularly produced based on, inter alia, the Group's latest life of field production and budgeted expenditure forecasts, management's best estimate of future commodity prices (based on recent published forward curves) and the Group's borrowing facilities. The Base Case conservatively assumes first gas from Karish in July 2022, Brent at $70/bbl for the period 1 September to 31 December 2021 and $65/bbl for the period January to September 2022, PSV (Italian gas price) at an average of EUR25/MWH for the period 1 September to 31 December 2021 and EUR20/MWH for the period January to September 2022.

In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position for negative impacts that may result from changes to the macroeconomic environment such as a fall in commodity price or increase in interest rate. The Group also looks at the impact of changes or deferral of key projects and/or portfolio rationalisation. This is done to identify risks to liquidity and covenant compliance and enable management to formulate appropriate and timely mitigation strategies in order to manage the risk of funding shortfalls or covenant breaches and to safeguard the Group's ability to continue as a going concern.

Specifically, the Group tested the following sensitivities:

-- Reduction in Commodity Prices over the Forecast Period (10% applied to PSV prices and 7.5% to Brent prices)

   --      Decrease in projected collection of EGPC receivables over the Forecast Period 

-- Delay in Israel 1(st) gas by 3 months to October 2022, which Energean management believes has a low probability of occurring given the acceleration and mitigation measures currently under consideration and the evolution of the COVID-19 situation

   --      A reasonable worst case including a combination of all above sensitivities 

The Group also ran a reverse stress test to stress the combination of lower Brent price, lower PSV (Italian Gas Price) and reduced collection of EGPC receivables, and assess the impact of this combination on the Group's liquidity and covenants associated with its banking facilities. Energean believes that this combination of scenarios holds a low probability of occurrence.

Should a more extreme downside scenario occur, appropriate mitigating actions that are in management's control and can be executed in the necessary timeframe could be taken such as a tightening of operating cost and reductions/postponement of other discretionary exploration and development expenditures. The Group's cash and cash equivalents at 30 June 2021 are $880 million.

In terms of the Group's Borrowing Facilities, the following was considered in the context of the Group's liquidity and covenant compliance over the Forecast Period.

Karish Field Development, Israel:

-- Consistent with the Group's plans to implement new financing as the Karish development approaches first gas in mid-2022, Energean issued a $2.5 billion Bond to (i) refinance its $1.45 billion Project Finance Facility (ii) cancel and replace the $700m Term Loan which was drawn to fund the acquisition of Kerogen's minority interest in Energean Israel, (iii) fund future capital and exploration expenditure in Israel, including Karish and Karish North and (iv) for general corporate purposes of the Group. On 29 April 2021 the Group satisfied the escrow release conditions, as a result the proceeds of the Offering were released from the escrow account.

Greek RBL:

-- In March 2021, the Group agreed a waiver with its lenders under the EBRD reserve-based lending facility whereby there are no more Borrowing Base Redeterminations and the facility effectively converts to an amortising term loan with repayments weighted towards the second half of 2022 to 2024. Covenants under the Subordinated Loan Agreement are also waived until December 2022.

Egypt RBL:

-- The current Borrowing Base redetermination is expected to be completed in September 2021 . Given the strong commodities prices and the higher production achieved from the Borrowing Base Assets we do not expect any reduction to the Borrowing Base when the redetermination exercise is completed.

In forming an assessment on the Group's ability to continue as a going concern and its review of the forecasted cashflow of the Group over the Forecast Period (from the date of approval of the interim condensed consolidated financial statements) the Board has made significant judgements about:

-- Reasonable sensitivities appropriate for the current status of the business and the wider macro environment; and

-- The Group's ability to implement the mitigating actions, if required, is within the Group's control, which would further safeguard the Group's liquidity and covenant compliance.

After careful consideration, the Directors are satisfied that the Group has sufficient financial resources to continue in operation for the foreseeable future, for a period up to 30 September 2022. For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements.

New and amended accounting standards and interpretations

The accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2020, except for the adoption of the new standards and interpretations effective as of 1 January 2021. None of the amendments that are effective as of 1 January 2021 had a significant impact on the Group's interim condensed consolidated financial statements.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective as at 1 January 2021. Several amendments and interpretations apply for the first time in 2021, but do not have an impact on the interim condensed consolidated financial statements of the Group.

Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients:

-- A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest -- Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued

-- Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component

The Group intends to use the practical expedients in future periods if they become applicable.

2.2 Approval of accounts

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors on 1 September 2021.

3. Segmental Reporting

The information reported to the Group's Chief Executive Officer and Chief Financial Officer (together the Chief Operating Decision Makers) for the purposes of resource allocation and assessment of segment performance is focused on four operating segments: Europe, (including Greece, Italy, UK, Croatia), Israel, Egypt and New Ventures (Montenegro and Malta).

The Group's reportable segments under IFRS 8 Operating Segments are Europe, Israel and Egypt. Segments that do not exceed the quantitative thresholds for reporting information about operating segments have been included in Other. In 2020, before the acquisition of Edison E&P, the Group had no activities in Egypt and the Europe segment comprised only Greece (including the Prinos and Epsilon production asset, Katakolo non-producing assets and Ioannina and Aitoloakarnania exploration assets).

Segment revenues, results and reconciliation to profit before tax

The following is an analysis of the Group's revenue, results and reconciliation to profit/(loss) before tax by reportable segment:

 
                                   Europe      Israel       Egypt        Other &        Total 
                                                                       intercompany 
                                                                       transactions 
                                    $'000       $'000       $'000         $'000         $'000 
-------------------------------  ----------  ----------  ----------  --------------  ---------- 
 Six months ended 30 
  June 2021 (unaudited) 
 Revenue from Oil                    70,736           -      27,431               -      98,167 
 Revenue from Gas                    34,765           -      70,929               -     105,694 
 Petroleum products sales               492           -           -               -         492 
 Rendering of services                5,228           -           -         (4,115)       1,113 
 Total revenue                      111,221           -      98,360         (4,115)     205,466 
 Adjusted EBITDAX(25)                 9,685     (1,563)      69,113         (2,584)      74,651 
 Reconciliation to profit 
  before tax: 
 Depreciation and amortisation 
  expenses                         (21,586)        (50)    (14,256)           (451)    (36,343) 
 Share-based payment charge           (431)       (122)           -         (1,699)     (2,252) 
 Exploration and evaluation 
  expenses                            (630)           -           -           (411)     (1,041) 
 Impairment loss on property,             -           -           -               -           - 
  plant and equipment 
 Other expense                      (1,458)        (28)        (88)         (1,497)     (3,071) 
 Other income                         2,887           0         641              43       3,571 
 Finance income                       1,667       1,808         676         (1,451)       2,700 
 Finance costs                     (10,797)     (9,436)       (624)        (24,055)    (44,912) 
 Net foreign exchange 
  gain/(loss)                         2,879       (727)     (1,055)        (14,884)    (13,787) 
 Profit/(loss) before 
  income tax                       (17,784)    (10,118)      54,407        (46,989)    (20,484) 
 Taxation income / (expense)          3,342       2,571    (21,535)             448    (15,174) 
 Profit/(loss) from continuing 
  operations                       (14,442)     (7,547)      32,872        (46,541)    (35,658) 
-------------------------------  ----------  ----------  ----------  --------------  ---------- 
 Six months ended 30 
  June 2020 (unaudited) 
 Revenue from Oil                     1,914           -           -                       1,914 
 Revenue from Gas                         -           -           -               -           - 
 Petroleum products sales             3,425           -           -         (3,269)         156 
 Total revenue                        5,339           -           -         (3,269)       2,070 
 Adjusted EBITDAX [27]              (4,584)     (2,084)           -         (2,180)     (8,848) 
 Reconciliation to profit 
  before tax:                                                     - 
 Depreciation and amortisation 
  expenses                         (12,448)       (149)           -           (190)    (12,787) 
 Share-based payment charge            (13)        (39)           -         (1,102)     (1,154) 
 Exploration and evaluation 
  expenses                            (183)           -           -           (346)       (529) 
 Impairment loss on property, 
  plant and equipment              (63,005)           -           -               -    (63,005) 
 Other expense                      (6,995)       (385)           -         (8,463)    (15,843) 
 Other income                         3,913           -           -           5,001       8,914 
 Finance income                       4,094         169           -             120       4,383 
 Finance costs                      (3,449)        (26)           -            (88)     (3,563) 
 Net foreign exchange 
  gain/(loss)                         (262)         243           -         (6,618)     (6,637) 
 Profit before income 
  tax                              (82,932)     (2,271)           -        (13,866)    (99,069) 
 Taxation income / (expense)         20,999         413           -             389      21,801 
 Profit from continuing 
  operations                       (61,933)     (1,858)           -        (13,477)    (77,268) 
-------------------------------  ----------  ----------  ----------  --------------  ---------- 
 

The following table presents assets and liabilities information for the Group's operating segments as at 30 June 2021 and 31 December 2020, respectively:

 
                                Europe       Israel        Egypt      Other & intercompany      Total 
                                                                          transactions 
                                $'000         $'000        $'000             $'000              $'000 
---------------------------  -----------  ------------  ----------  -----------------------  ---------- 
 Six months ended 
  30 June 2021 (unaudited) 
 Oil & Gas properties            559,283     2,436,742     332,738                 (12,716)   3,316,047 
 Other fixed assets               30,043           687      25,343                    3,111      59,184 
 Intangible assets               137,702        93,337      21,498                   33,664     286,201 
 Trade and other 
  receivables                    108,640         8,652     161,777                    2,916     281,985 
 Deferred tax asset              103,049             0      25,448                        1     128,498 
 Other assets                    940,530       732,623      36,401                (453,724)   1,255,830 
 Total assets                  1,879,247     3,272,041     603,205                (426,748)   5,327,745 
 Trade and other 
  payables                       165,465       174,699      58,331                    3,925     402,420 
 Borrowings                      150,923     2,459,910           0                  227,996   2,838,829 
 Decommissioning 
  provision                      816,153        34,708           -                        0     850,861 
 Other current liabilities       164,508         2,405           -                (164,509)       2,404 
 Other non-current 
  liabilities                      4,337       160,580     477,858                (199,992)     442,783 
 Total liabilities             1,301,386     2,832,302     536,189                (132,580)   4,537,297 
---------------------------  -----------  ------------  ----------  -----------------------  ---------- 
 Other segment information 
 Capital Expenditure: 
 - Property, plant 
  and equipment                   21,850       162,454      17,019                    (508)     200,815 
 - Intangible, exploration 
  and evaluation assets           24,829         3,738           -                      624      29,191 
---------------------------  -----------  ------------  ----------  -----------------------  ---------- 
 Year ended 31 December 
  2020 
---------------------------  -----------  ------------  ----------  -----------------------  ---------- 
 Oil & Gas properties            572,834     2,156,236     326,366                  (1,728)   3,053,708 
 Other fixed assets               21,727           765      27,588                    3,484      53,564 
 Intangible assets               139,267        89,607      39,219                    7,723     275,816 
 Trade and other 
  receivables                    154,469         1,304     162,222                      344     318,339 
 Deferred tax asset              103,200             0      22,856                      (0)     126,056 
 Other assets                    251,240        37,464     247,028                (228,202)     307,530 
 Total assets                  1,242,737     2,285,376     825,279                (218,379)   4,135,013 
 Trade and other 
  payables                       187,117        76,146      57,959                   34,232     355,454 
 Borrowings                      121,264     1,093,965           -                  227,847   1,443,076 
 Decommissioning 
  provision                      826,729        38,399           -                        -     865,128 
 Other current liabilities       140,629         6,914      54,652                (195,280)       6,915 
 Other non-current 
  liabilities                     25,291       193,920      32,284                   18,553     270,048 
 Total liabilities             1,301,030     1,409,344     144,895                   85,352   2,940,621 
---------------------------  -----------  ------------  ----------  -----------------------  ---------- 
 Other segment information 
 Capital Expenditure: 
 - Property, plant 
  and equipment                   14,117       405,279         860                    (197)     420,059 
 - Intangible, exploration 
  and evaluation assets            1,219         6,625           -                    1,147       8,991 
---------------------------  -----------  ------------  ----------  -----------------------  ---------- 
 
 

Segment Cash flows

 
                               Europe      Israel      Egypt        Other &        Total 
                                                                  intercompany 
                                                                  transactions 
                               $'000        $'000      $'000         $'000         $'000 
---------------------------  ---------  -----------  ---------  --------------  ----------- 
 Six months ended 
  30 June 2021 (unaudited) 
 Net cash from / (used 
  in) operating activities      22,329      (2,802)     52,958        (19,420)       53,065 
 Net cash (used in) 
  investing activities        (41,614)    (378,265)   (15,695)         (3,141)    (438,715) 
 Net cash from financing 
  activities                    22,447    1,075,374   (87,054)          50,819    1,061,586 
 Net increase/(decrease) 
  in cash and cash 
  equivalents, and 
  restricted cash                3,162      694,307   (49,791)          28,258      675,936 
 Cash and cash equivalents 
  at beginning of the 
  period                        13,609       37,421     76,240          75,669      202,939 
 Effect of exchange 
  rate fluctuations 
  on cash held                     409        (146)        (1)             880        1,142 
 Cash and cash equivalents 
  at the end of the 
  period                        17,180      731,582     26,448         104,807      880,017 
--------------------------- 
 Six months ended 
  30 June 2020 (unaudited) 
 Net cash from / (used 
  in) operating activities     (6,209)      (1,359)          -         (6,933)     (14,501) 
 Net cash (used in) 
  investing activities        (14,380)    (227,713)          -           (542)    (242,635) 
 Net cash from financing 
  activities                    19,746      194,484          -        (72,574)      141,656 
 Net increase/(decrease) 
  in cash and cash 
  equivalents                      302     (34,588)          -        (80,049)    (114,335) 
 At beginning of the 
  year                           6,085      110,488          -         237,846      354,419 
 Effect of exchange 
  rate fluctuations 
  on cash held                 (1,114)         (54)          -         (5,312)      (6,480) 
 Cash and cash equivalents 
  at end of the period           5,273       75,846          -         151,340      232,459 
---------------------------  ---------  -----------  ---------  --------------  ----------- 
 

4. Prior year business combination

Acquisition of Edison E&P

On 17 December 2020, the Group acquired 100 per cent of the issued share capital and obtained control of Edison Exploration & Production S.p.A ("Edison E&P"). Edison E&P contains a portfolio of assets including producing assets in Egypt, Italy, the UK North Sea and Croatia with development assets in Egypt and Italy and balanced-risk exploration opportunities across the portfolio. The acquisition of Edison E&P qualifies as a business combination as defined in IFRS 3.

The fair values of the identifiable assets and liabilities of Edison E&P were provisionally estimated as at the date of acquisition. As of 30 June 2021 no change has been identified to the ascribed fair values of the identifiable assets and liabilities.

The base consideration payable of $398.6 million, which excludes contingent consideration, was agreed as of a locked box date of 1 January 2019 with the impact of economic performance, capital expenditure and working capital movements from this date to completion of 17 December 2020 adjusted within the final consideration payable of $269.9 million from which amount of $266.6 million was paid in December 2020 and amount $3.3 million paid in January 2021.

The contingent consideration arrangement will vary depending on future Italian gas prices at the point in time at which first gas production is delivered from the Cassiopea field in Italy which is expected in 2024. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between $0 and $100 million.

The fair value of the contingent consideration arrangement of $55.2 million was estimated by applying forward gas price curves against the expected date of first gas as at acquisition date. This resulted in an aggregate fair value of $299.3 million being allocated to the identifiable assets and liabilities acquired, prior to the recognition of a deferred tax liability of $22.9 million as further described below.

Goodwill of $25.3 million has been recognised upon acquisition. An amount of $22.9 million was due to the requirement of IAS 12 to recognise deferred tax assets and liabilities for the difference between the assigned fair values and tax bases of assets acquired and liabilities assumed. The assessment of fair value of such licences is therefore based on cash flows after tax. Hence, goodwill arises as a direct result of the recognition of this deferred tax adjustment ("technical goodwill"). None of the goodwill recognised will be deductible for income tax purposes.

5. Revenue

 
                              30 June (Unaudited) 
                                2021        2020 
                                $'000       $'000 
--------------------------  ------------  -------- 
 Crude oil sales                  98,167     1,914 
 Gas sales                       105,694         - 
 Petroleum products sales            492       156 
 Rendering of services             1,113         - 
--------------------------  ------------  -------- 
 Total revenue                   205,466     2,070 
 

6. Operating profit/(loss) before taxation

 
                                               30 June (Unaudited) 
                                                2021        2020 
                                                $'000       $'000 
-----  -----------------------------------   ----------  ---------- 
 (a)    Cost of sales 
  Staff costs                                    32,626       6,153 
  Energy cost                                     3,475       2,550 
        Royalty payable                           5,814           - 
  Other operating costs                          80,503       1,717 
  Depreciation and amortisation                  33,845      11,581 
  Stock overlift/(underlift)                                ( 4,067 
   movement                                     (8,623)           ) 
 ------------------------------------  ----  ----------  ---------- 
  Total cost of sales                           147,640      17,934 
 
 (b)    Administrative expenses 
  Staff costs                                     7,329       2,744 
  Other General & administration 
   expenses                                       8,815       2,309 
  Share-based payment charge 
   included in administrative 
   expenses                                       2,247       1,154 
  Depreciation and amortisation                   2,498         385 
  Auditor fees                                      779         261 
 ------------------------------------  ----  ---------- 
  Total administrative expenses                  21,668       6,853 
 (c)    Selling and distribution expense 
  Staff costs                                        29          22 
  Other Selling and distribution 
   expense                                           73          50 
 ------------------------------------  ----  ----------  ---------- 
  Total selling and distribution 
   expense                                          102          72 
 
        Exploration and evaluation 
 (d)     expenses 
  Staff costs for Exploration 
   and evaluation activities                        355         141 
  Other exploration and evaluation 
   expenses                                         686         388 
 ------------------------------------  ----  ----------  ---------- 
  Total exploration and evaluation 
   expenses                                       1,041         529 
 (e)    Other operating expenses 
  Transaction costs in relation 
   to Edison E&P acquisition                      1,470       8,405 
  Impairment on asset held for 
   sale                                               -       4,935 
  Intra-group merger costs                            -       1,524 
        Loss from disposal of Property 
         plant & Equipment                           36           - 
  Other indemnities                                   -         203 
  Write down of inventory                             -         124 
  Expected credit losses                            279         267 
  Other expenses                                  1,286         385 
                                       ----  ----------  ---------- 
                                                  3,071      15,843 
 (f)    Other income 
  Income from accounts payable 
   written off [28]                                   -       3,839 
        Reversal of prior period accruals         3,496           - 
  Proceeds from termination of 
   agreement with Neptune Energy 
   [29]                                               -       5,000 
  Other income                                       75          75 
 ------------------------------------  ----  ----------  ---------- 
                                                  3,571       8,914 
 

7. Net finance cost

 
                                                        30 June (Unaudited) 
                                                         2021        2020 
                                                         $'000       $'000 
---------------------------------------------------   ----------  ---------- 
 
 Interest on bank borrowings                              89,501      37,608 
 Interest expense on long term payables                      467       3,345 
 Interest expense on short term liabilities                   28           - 
 Less amounts included in the cost of 
  qualifying assets                                     (72,969)    (37,932) 
----------------------------------------------------  ----------  ---------- 
                                                          17,027       3,021 
 Finance and arrangement 
  fees                                                    11,869       2,184 
 Unamortised financing costs                                               - 
  related to the repayment 
  of the Karish project finance 
  [30]                                                    36,200 
 Other finance costs and bank charges                      2,172         678 
 Loss on interest rate hedges                              6,988           - 
 Unwinding of discount on right of use 
  asset                                                      837         116 
 Unwinding of discount on provision for 
  decommissioning                                          4,946         180 
 Unwinding of discount on deferred consideration           5,124           - 
 Unwinding of discount on contingent consideration           744 
 Less amounts included in 
  the cost of qualifying 
  assets                                                (40,995)     (2,616) 
 Total finance costs                                      44,912       3,563 
 Interest income from time deposits                      (1,534)       (396) 
 Gain from revised estimated loan cash 
  flow                                                   (1,166)     (3,987) 
 Total finance revenue                                   (2,700)     (4,383) 
----------------------------------------------------  ----------  ---------- 
 Foreign exchange losses/(gain)                           13,787       6,637 
 Net financing costs                                      55,999       5,817 
----------------------------------------------------  ----------  ---------- 
 

8. 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 of the group's finance lease obligations is estimated using discounted cash flow analysis based on the group's current incremental borrowing rates for similar types and maturities of borrowing and are consequently categorized in level 2 of the fair value hierarchy.

Contingent consideration

As part of the share purchase agreement (the "SPA") dated 4 July 2019 between Energean and Edison Spa provides for a contingent consideration of up to $100.0 million subject to the commissioning of the Cassiopea development gas project in Italy. The consideration was determined to be contingent on the basis of future gas prices (PSV) recorded at the time of the commissioning of the field, which is expected in 2024. No payment will be due if the arithmetic average of the year one (i.e., the first year after first gas production) and year two (i.e., the second year after first gas production) Italian PSV Natural Gas Futures prices is less than EUR10/Mwh when first gas production is delivered from the field. US$100 million is payable if that average price exceeds EUR20/Mwh. The contingent consideration to be payable in 2026 is estimated at acquisition date to amount to $61.7m, which discounted at the selected cost of debt results in a present value of $55.2m as at the acquisition date. The fair value of the consideration payable has been recognized at level 3 in the fair value hierarchy and has been estimated by reference to the sales and purchase agreement and by simulating PSV pricing by reference to the forecasted PSV pricing, historical volatility and a log normal distribution.

As at 30 June 2021, the two year future curve of PSV prices increased from the date of acquisition and indicate an average price in excess of EUR20/Mwh for 2023 it is probable that the average price will exceed EUR20/Mwh from 2023. The Group monitors closely the future PSV prices however given the current volatility in the commodity markets, the Group's estimate as at 30 June 2021 of the fair value of the contingent consideration payable in 2026 has not materially changed since the previous reporting date.

At 30 June 2021 the fair value has been increased to $56.1 million (31 December 2020: $55.2 million) for the unwinding cost recognised in income statement within finance cost.

Fair values of derivative financial instruments

The Group held financial instruments at fair value at 30 June 2021 related to interest rate derivatives. All derivatives are recognised at fair value on the balance sheet with valuation changes recognised immediately in the income statement, unless the derivatives have been designated as a cash flow hedge. Fair value is the amount for which the asset or liability could be exchanged in an arm's length transaction at the relevant date. Where available, fair values are determined using quoted prices in active markets. To the extent that market prices are not available, fair values are estimated by reference to market-based transactions, or using standard valuation techniques for the applicable instruments and commodities involved. Values recorded are as at the balance sheet date, and will not necessarily be realised.

As at 30 June 2021 the Group's interest rate derivative (Level 2) is not designated as hedging instruments.

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 at 30 June 2021 (Unaudited) 
                                         Level 1          Level 2       Level 3         Total 
                                           $'000            $'000         $'000          $'000 
------------------------------  ---  ---------------  ---------------  ---------  ----------------- 
 Financial assets 
 Trade and other receivables 
  (note 17)                                        -          237,673          -            237,673 
 Cash and cash equivalents 
  and bank deposits (note 
  14)                                            880,017             -          -           880,017 
 Restricted cash                                 266,241             -          -           266,241 
----------------------------------------  --------------  ------------  ---------  ---------------- 
 Total                                     1,146,258          237,673          -          1,383,931 
-----------------------------------  ---------------  ---------------  ---------  ----------------- 
 Financial liabilities 
 Financial liabilities held 
  at amortised cost: 
 Trade and other payables 
  - current                                            -       272,207          -           272,207 
 Trade and other payables 
  - non-current                                        -         1,435          -             1,435 
 Borrowings (note 20)                              -        2,838,829          -          2,838,829 
 Deferred consideration 
  for acquisition of minority                      -          159,551          -            159,551 
 Net obligations under 
  finance leases (note 
  23)                                              -           53,254          -             53,254 
 Deferred licence payments 
  (note 23)                                        -           54,712          -             54,712 
 Convertible loan notes 
  (note 20)                                        -           39,590          -             39,590 
 Financial liabilities 
  held at FVTPL: 
 Interest rate derivatives                         -            2,405          -              2,405 
 Contingent consideration 
  (note 4)                                         -                -     56,091             56,091 
-----------------------------------  ---------------  ---------------  ---------  ----------------- 
 Total                                             -        3,421,983     56,091          3,478,074 
-----------------------------------  ---------------  ---------------  ---------  ----------------- 
 
 
 
 
                                              Fair value hierarchy as at 31 December 2020 
                                           Level 1           Level 2      Level         Total 
                                                                            3 
                                             $'000             $'000       $'000         $'000 
-----------------------------  ---  --------------------  ------------  --------  ---------------- 
 Financial assets 
 Trade and other receivables 
  (note 17)                                            -       246,307         -           246,307 
 Cash and cash equivalents 
  and bank deposits (note 
  14)                                               202,939          -          -          202.939 
----------------------------------  ------------------------  --------  ---------  --------------- 
 Total                                           202,939       246,307         -           449,246 
----------------------------------  --------------------  ------------  --------  ---------------- 
 
   Financial liabilities 
 Financial liabilities 
  held at amortised cost: 
 Borrowings (note 20)                                  -     1,443,076         -         1,443,076 
 Net obligations under 
  finance leases (note 
  23)                                                  -        47,623         -            47,623 
 Deferred licence payments 
  (note 22)                                            -        69,518         -            69,518 
 Financial liabilities                                                                           - 
  held at FVTPL: 
 Interest rate derivatives                             -         6,915         -             6,915 
 Contingent consideration 
  (note 4)                                             -             -    55,222            55,222 
----------------------------------  --------------------  ------------  --------  ---------------- 
 Total                                                 -     1,567,132    55,222         1,622,354 
----------------------------------  --------------------  ------------  --------  ---------------- 
 
 

9. Taxation

 
                                       30 June (Unaudited) 
                                         2021        2020 
                                         $'000       $'000 
-----------------------------------  ------------  -------- 
 Corporation tax - current period        (21,565)         - 
 Corporation tax - prior years                448       386 
 Deferred tax (Note 13)                     5,943    21,415 
-----------------------------------  ------------  -------- 
 Total taxation income / (expense)       (15,174)    21,801 
-----------------------------------  ------------  -------- 
 

(b) Reconciliation of the total tax charge

The Group calculates its income tax expense as per IAS 34 by applying a weighted average tax rate calculated based on the statutory tax rates in Greece (25%), Israel (23%), Italy (24%) and United Kingdom (40%) weighted according to the profit or loss before tax earned by the Group in each jurisdiction where deferred tax is recognised or material current tax charge arises. The effective tax rate for the period is -74% (30 June 2020: -22%).

The tax (charge)/credit of the period can be reconciled to the loss per the consolidated income statement as follows:

 
                                                   30 June (Unaudited) 
                                                     2021        2020 
                                                    $'000       $'000 
-----------------------------------------------  -----------  --------- 
 
 Profit/(loss) before tax                           (20,484)   (99,069) 
-----------------------------------------------  -----------  --------- 
 
 Tax calculated at 19.70% weighted average 
  rate (2020: 24.95%) [31]                             4,035     24,724 
 Impact of different tax rates                            13       (19) 
 Reassessment of recognised deferred tax asset 
  in the current period                                (348)       (90) 
 Permanent differences [32]                          (1,912)    (2,608) 
 Non recognition of deferred tax on current 
  period losses [33]                                 (4,486)    (1,265) 
 Tax effect of non-taxable income                          -        625 
 Foreign taxes [34]                                 (21,535) 
 Tax effect of non-taxable income [35]                10,985 
 Other adjustments [36]                            (2, 374 )         47 
 Prior year tax                                          448        387 
-----------------------------------------------  -----------  --------- 
 Taxation income/(expense)                          (15,174)     21,801 
-----------------------------------------------  -----------  --------- 
 

10. Loss per share

The earnings per share has been calculated by dividing the net profit or loss for the period by the weighted average number of shares outstanding during the period ended 30 June 2021 and 30 June 2020.

 
                                               30 June (Unaudited) 
                                              2021            2020 
                                              $'000           $'000 
---------------------------------------  --------------  -------------- 
 
 Total loss attributable to equity 
  shareholders                                 (35,550)        (76,826) 
 Effect of dilutive potential ordinary 
  shares                                              -               - 
---------------------------------------  --------------  -------------- 
                                               (35,550)        (76,826) 
 Number of shares 
 Basic weighted average number 
  of shares                                 177,117,612     177,089,406 
 Dilutive potential ordinary shares                   -               - 
---------------------------------------  --------------  -------------- 
 Diluted weighted average number 
  of shares                                 177,117,612     177,089,406 
---------------------------------------  --------------  -------------- 
 Basic loss per share                     ($0.20)/share   ($0.43)/share 
---------------------------------------  --------------  -------------- 
 Diluted loss per share                   ($0.20)/share   ($0.43)/share 
---------------------------------------  --------------  -------------- 
 

11. Property, plant and equipment

 
                             Oil and gas   Leased assets   Other property,    Total 
                              properties                      plant and 
                                                              equipment 
 Property, plant and            $'000          $'000           $'000          $'000 
  equipment at Cost 
--------------------------  ------------  -------------- 
At 1 January 2020              2,147,163           9,117            56,699  2,212,979 
Additions                        411,932           1,951             1,581    415,464 
Acquisition of subsidiary        646,507          40,549             2,132    689,188 
Lease modification                     -         (1,519)                 -    (1,519) 
Disposal of assets               (4,795)               -           (5,328)   (10,123) 
Capitalized borrowing 
 cost                             94,929               -                 -     94,929 
Capitalized depreciation             576               -                 -        576 
Change in decommissioning 
 provision                        39,620               -                 -     39,620 
Transfer from Intangible 
 assets                           41,822               -                 -     41,822 
Foreign exchange impact           52,575             743             5,153     58,471 
At 31 December 2020            3,430,329          50,841            60,237  3,541,407 
Additions                        195,062           2,250                85    197,397 
Lease modifications                    -          10,009                 -     10,009 
Disposal of assets                  (23)               -              (36)       (59) 
Capitalized borrowing 
 cost                            112,829               -                 -    112,829 
Capitalised depreciation             106               -                 -        106 
Change in environmental 
 rehabilitation provision        (2,500)               -                 -    (2,500) 
Transfer from Intangible 
 assets                           13,787               -                 -     13,787 
Foreign exchange impact         (40,666)         (1,535)           (1,726)   (43,927) 
At 30 June 2021                3,708,924          61,565            58,560  3,829,049 
 
Accumulated Depreciation 
At 1 January 2020                263,512           3,448            43,748    310,708 
Charge for the period 
Expensed                          18,105           3,073             2,149     23,327 
Impairments                       64,727               -               572     65,299 
Foreign exchange impact           30,299             458             4,044     34,801 
At 31 December 2020              376,643           6,979            50,513    434,135 
Charge for the period             28,374           4,550               616     33,540 
Disposal of assets                     -               -              (23)       (23) 
Foreign exchange impact         (12,140)           (202)           (1,492)   (13,834) 
At 30 June 2021                  392,877          11,327            49,614    453,818 
Net carrying amount 
At 31 December 2020            3,053,686          43,862             9,724  3,107,272 
At 30 June 2021               3,316, 047         50, 238            8, 946  3,375,231 
 

Included in the carrying amount of leased assets at 30 June 2021 is right of use assets related to oil and gas properties and Other property, plant and equipment of $43.3 million and $6.9 million respectively.

The depreciation charged on these classes for the six-month ending 30 June 2021 were $4.1 million and $0.4 million respectively.

The additions to oil & gas properties for the period of six months ended 30 June 2021 is mainly due to development costs of Karish field related to the EPCIC contract (FPSO, Sub Sea and On-shore construction cost) at the amount of $161.8 million , development cost for Cassiopea project in Italy at the amount of $8.4 million and NEA/NI project in Egypt at the amount of $17.5 million.

Borrowing costs capitalised for qualifying assets, included in oil & gas properties, for the six months ended 30 June 2021 amounted to $123.4 million (year ended 31 December 2020: $94.9 million). The weighted average interest rates used:

   --      7.66% (for the six months ended 30 June 2021) 
   --      8.72% (for the year ended 31 December 2020) 

During the year 2020 the Group executed an impairment test for the Prinos CGU (Prinos and Epsilon fields). In that period, indicators of impairment were noted for the Prinos CGU, being a reduction in both short-term (Dated Brent forward curve) and long-term price assumptions and a change in the Group's Prinos field production forecast, which have resulted in an impairment of $65.3 million in the carrying value of the Prinos CGU.

12. Intangible assets

 
                              Exploration 
                             and evaluation            Other Intangible 
                                 assets      Goodwill       assets        Total 
                                 $'000        $'000         $'000         $'000 
Intangibles at Cost 
At 1 January 2020                    71,601    75,800             1,941   149,342 
Additions                             8,379         -               612     8,991 
Acquisition of subsidiary           115,438    25,346            18,348   159,132 
Capitalized borrowing 
 costs                                2,761         -                 -     2,761 
Transfers to property, 
 plant and equipment               (41,822)         -                 -  (41,822) 
Exchange differences                  1,856         -             1,454     3,310 
At 31 December 2020                 158,213   101,146            22,355   281,714 
Additions                            28,255         -               937    29,192 
Capitalized borrowing 
 costs                                1,134         -                 -     1,134 
Transfers to property, 
 plant and equipment                  (278)         -          (13,509)  (13,787) 
Exchange differences                  (500)                     (3,218)   (3,718) 
At 30 June 2021                     186,824   101,146             6,565   294,535 
 
Accumulated amortisation 
 and impairments 
At 1 January 2020                       261         -             1,405     1,666 
Charge for the period                     -         -             1,375     1,375 
Impairment                            2,936         -                 -     2,936 
Exchange differences                  (193)         -               114      (79) 
At 31 December 2020                   3,004         -             2,894     5,898 
Charge for the period                 2,031         -               772     2,803 
Exchange differences                  (114)                       (253)     (367) 
30 June 2021                          4,921         -             3,413     8,334 
 
Net Carrying Amount 
At 31 December 2020                 155,209   101,146            19,461   275,816 
At 30 June 2021                     181,903   101,146             3,152   286,201 
 

Borrowing costs capitalised for qualifying assets for the period ended 30 June 2021 amounted to $1.1 million (31 December 2020: $2.8 million). The weighted average interest rate used was 7.34% (31 December 2020: 8.72%).

13. Net deferred tax (liability)/ asset

 
Deferred               Property,  Right    Decom-missioning  Prepaid      Inventory  Tax        Deferred  Retirement  Accrued      Total 
tax                    plant       of use                    expenses                 losses    expenses   benefit    expenses 
(liabilities)/assets   and         asset                     and other                          for tax    liability  and other 
                       equipment   IFRS                      receivables                        (1)                   short--term 
                                   16                                                                                 liabilities 
                         $'000     $'000        $'000           $'000       $'000      $'000       $'000    $'000        $'000       $'000 
At 1 January 
 2020                  (137,998)  (1,078)                 -        (971)        733     90,412         -         913        7,646    (40,343) 
Acquisition 
 of subsidiary 
 (Note 4)                 10,080                                                        60,752         -                               70,832 
Increase 
 / (decrease) 
 for the period 
 through: 
profit or 
 loss (Note 
 9)                        8,381      819             8,877      (3,474)       (98)      7,384         -          53        (434)      21,508 
other comprehensive 
 income                        -        -                 -          130          -          -         -           -        1,603       1,733 
Exchange 
 difference              (4,006)     (33)                 -        (336)         60      7,293         -          84          655       3,717 
31 December 
 2020                  (123,543)    (292)             8,877      (4,651)        695    165,841         -       1,050        9,470      57,447 
Increase 
 / (decrease) 
 for the period 
 through: 
profit or 
 loss (Note 
 9)                     (14,853)       67             (774)        1,053      (659)     12,261     1,908          43        6,897       5,943 
other comprehensive                                                                                                       ( 1,591 
 income                                                                                                                         )     (1,591) 
Reclassifications 
 in the current 
 period [37]            (28,442)        -            33,644        2,025      (233)    (4,903)     6,010         200      (8,301)           - 
Exchange 
 difference                (243)        6             (421)          132       (13)    (2,742)                  (32)        (139)     (3,452) 
30 June 2021           (167,081)    (219)            41,326      (1,441)      (210)    170,457     7,918       1,261        6,336      58,347 
                                                                                                                                31 December 
                                                                                                        30 June 2021                   2020 
                                                                                                               $'000                  $'000 
Deferred tax liabilities                                                                                    (70,151)               (68,609) 
Deferred tax assets                                                                                          128,498                126,056 
Net deferred tax assets / (liabilities)                                                                       58,347                 57,447 
 
 

At 30 June 2021 the Group has gross unused tax losses of $757.3 million (as of 31 December 2020: $783.6 million) available to offset against future profits. Out of the total tax losses, $380.4 million come from the Greek operations whereas amount of $18.1 million comes from the Israeli operations and specifically the Karish licence which is in the development phase and expected to commence production by 2021. Tax losses of $329.6 million comes from the Italian and UK operations of the former Edison E&P Group.

With respect to the Greek tax losses carried forward, the majority of them ($374.3 million) come from the Prinos exploitation area, whereas an amount of $1.5 million comes from Ioannina and Katakolo areas which are in the exploration and development phase respectively.

A deferred tax asset of $170.5 million has been recognised as of 30 June 2021 (as of 31 December 2020: $165.8 million) in respect of such tax losses. This represents the losses which are expected to be utilised based on Group's projection of future taxable profits in the jurisdictions in which the losses reside. It is considered probable based on business forecasts that such profits will be available.

14. Cash and cash equivalents

 
                         30 June       31 December 
                     2021 (Unaudited)     2020 
                          $'000           $'000 
 
Cash at bank                  878,580      197,514 
Deposits in escrow              1,437        5,425 
                              880,017      202,939 
 

Bank demand deposits comprise deposits and other short-term money market deposit accounts that are readily convertible into known amounts of cash. The effective interest rate on short--term bank deposits was 0.3% for the six months period ended 30 June 2021 (year ended 31 December 2020: 1.07%).

Deposits in escrow comprise mainly cash retained as a bank security pledge for the Group's performance guarantees in its exploration blocks. These deposits can be used for funding the exploration activities of the respective blocks.

15. Restricted Cash

Restricted cash comprise mainly cash retained under the Senior S ecured Notes requirement as follows:

-- Short term - US$163.3 million Interest Payment Account for the accrued interest period until 30 June 2022 (less coupons actually paid) and from 30 June 2022 the Interest Reserve Account will be funded 6 months forward

-- Long term - US$100 million Debt Payment Fund that would be released upon achieving three quarters annualized production of 3.8 BCM/year from Karish asset in Israel.

The remaining amount of $2.96 included in restricted cash is related to cash collateral provided under a letter of credit facility for issuing bank guarantees for Group's activities in Israel up to $75 million.

16. Inventories

 
                             30 June 20201 
                              (Unaudited)    31 December 2020 
                                 $'000            $'000 
Raw materials and supplies          53,057             56,073 
Crude oil                           24,959             16,946 
Total inventories                   78,016             73,019 
 

In the period ended 30 June 2021 the write-down of crude oil inventory to net realisable value amounted to $nil million (six months ended 30 June 2020: $5.6 million) which is included in "cost of sales".

17. Trade and other receivables

 
                                                 30 June       31 December 
                                             2021 (Unaudited)     2020 
                                                  $'000           $'000 
Trade and other receivables-Current 
Financial items: 
Trade receivables                                     185,967      226,118 
Receivables from partners under JOA                    28,190            - 
Other receivables                                       3,213            - 
Government subsidies [38]                               3,371        3,481 
Receivables from related parties (note 24)                  -           22 
                                                      220,741      229,621 
Non-financial items: 
Deposits and prepayments [39]                          26,974       38,756 
Refundable VAT                                         32,747       49,414 
Other taxes receivable                                    209            - 
Deferred insurance expenses                               579          507 
Accrued interest income                                   735           41 
                                                       61,244       88,718 
                                                      281,985      318,339 
Trade and other receivables-Non Current 
Financial items: 
Accrued interest income                                     1            - 
Other tax recoverable                                  16,931       16,686 
                                                       16,932       16,686 
Non-financial items: 
Deferred borrowing fees                                    49            - 
Deposits and prepayments                               12,945       13,409 
Other deferred expenses                                   209            - 
Other non-current assets                                1,417        1,473 
                                                       14,620       14,882 
                                                       31,552       31,568 
 

18. Share capital

The below tables outline the share capital of the Company.

 
                           Equity share capital  Share capital  Share premium 
                             allotted and fully 
                                           paid 
                                         Number          $'000          $'000 
Issued and authorized 
At 1 January 2020                   177,089,406          2,367        915,388 
Issued during the year 
- New shares                                  -              -              - 
- Share based payment                         -              -              - 
At 31 December 2020                 177,089,406         2,36 7        915,388 
Issued during the period 
- Share based payment                    51,361              1 
At 30 June 2021                     177,140,767          2,368        915,388 
 

19. Non--controlling interests

 
Name of subsidiary         Voting rights                   Share of loss               Accumulated balance 
                       30 June      Year ended   30 June (Unaudited)   Year ended     30 June      Year ended 
                      (Unaudited)   31 December                        31 December   (Unaudited)   31 December 
                         2021          2020             2021              2020          2021          2020 
                          %             %               $'000            $'000         $'000         $'000 
 Energean Israel 
  Ltd                           -         30.00                (106)       (3,173)             -       266,299 
Total                           -         30.00                (106)       (3,173)             -       266,299 
 

On 25 February 2021, the Group completed the acquisition of the remaining 30% minority interest in Energean Israel Limited from Kerogen Investments No.38 Limited, Energean now owns 100% of Energean Israel Limited.

This resulted in a reduction of the Group's reported non-controlling interest balance to $nil at 30 June 2021.

The Total Consideration includes:

-- An up-front payment of $175 million (the "Up-Front Consideration") paid at completion of the transaction

-- Deferred cash consideration amounts totalling $180 million, which are expected to be funded from future cash flows and optimisation of the group capital structure, post-first gas from the Karish project. The deferred consideration is discounted at the selected unsecured liability rate of 9.77%.

-- $50 million of convertible loan notes (the "Convertible Loan Notes"), which have a maturity date of 29 December 2023, a strike price of GBP 9.50 and a zero-coupon rate.

The following is a schedule of additional interest acquired in Energean Israel Limited:

 
                                                               $'000 
Cash consideration paid to non-controlling shareholders at 
 completion                                                    175,000 
Deferred cash consideration                                    154,499 
Convertible Loan Notes - Liability Component                    38,337 
Convertible Loan Notes - Equity Instrument Component            10,459 
Cost related to the transaction                                  1,677 
Carrying value of the 30% minority interest                  (266,193) 
Difference recognised in retained earnings                     113,779 
 

The Acquisition of the remaining 30% minority interest in Energean Israel adds 2P reserves of 29.5 billion cubic metres ("Bcm") of gas and 30 million barrels of liquids, representing approximately 219 million barrels of oil equivalent ("MMboe") in total, to the Group.

20. Borrowings

 
                                                 30 June (Unaudited)  31 December 
                                                        2021             2020 
                                                        $'000            $'000 
Non-current 
Bank borrowings - after two years but withing 
 five years 
4,5% Senior Secured notes due 2024 ($625 
 million)                                                    615,419            - 
4,875% Senior Secured notes due 2026 ($625 
 million)                                                    615,030            - 
Senior Credit facility ($237 million)                        229,485      227,848 
EBRD Senior Facility Loan ($180 million)                      75,696       84,420 
EBRD Subordinated Facility Loan ($20 million)                 15,128       17,824 
Convertible loan notes ($50 million) - (note 
 19)                                                          39,590            - 
Bank borrowings - more than five years 
5.375% Senior Secured notes due 2028 ($625 
 million)                                                    614,818            - 
5.875% Senior Secured notes due 2031 ($625 
 million)                                                    614,643            - 
Carrying value of non-current borrowings                   2,819,809      330,092 
 
Current 
6,83% EBRD Senior Facility Loan due 2024 
 ($97,6 million)                                              19,020       19,020 
Senior Credit Facility for the Karish-Tanin 
 Development ($1,450 million)                                      -    1,093,964 
Carrying value of current borrowings                          19,020    1,112,984 
 
Carrying value of total borrowings                         2,838,829    1,443,076 
 

The Group has provided security in respect of certain borrowings in the form of share pledges, as well as fixed and floating charges over certain assets of the Group.

US$2,500,000,000 senior secured notes:

On 24 March 2021, the Group completed the issuance of US$2.5 billion aggregate principal amount of senior secured notes.

The Notes have been issued in four series as follows:

-- Notes in an aggregate principal amount of US$625 million, maturing on 30 March 2024, with a fixed annual interest rate of 4.500%.

-- Notes in an aggregate principal amount of US$625 million, maturing on 30 March 2026, with a fixed annual interest rate of 4.875%.

-- Notes in an aggregate principal amount of US$625 million, maturing on 30 March 2028, with a fixed annual interest rate of 5.375%.

-- Notes in an aggregate principal amount of US$625 million, maturing on 30 March 2031, with a fixed annual interest rate of 5.875%.

The interest on each series of the Notes will be paid semi-annually, on 30 March and on 30 September of each year, beginning on 30 September 2021.

On 29 April 2021 the Group satisfied the escrow release conditions in respect of its US$2.5 billion aggregate principal amount of the Notes offering. As a result of satisfying the said escrow release conditions, the proceeds of the Offering were released from escrow.

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

The use of proceeds from the Offering is as follows :

-- To repay outstanding Senior Credit Facility for the Karish-Tanin Development facility and outstanding amount under a US$700 million term loan;

   --      To replace the existing undrawn amounts available under those facilities; 
   --      To fund certain reserve accounts; and 
   --      For transaction expenses and the Group's general corporate purposes. 

The Company had undertook to provide the following collateral in favor of the Trustee:

-- First rank Fixed charges over the shares of Energean Israel Limited, Energean Israel Finance Ltd and Energean Israel Transmission Ltd, the Karish & Tanin Leases, the gas sales purchase agreements ("GSPAs"), several bank accounts, Operating Permits (once issued), Insurance policies, the Company exploration licenses (Block 12, Block 21, Block 23, Block 31 and 80% of the licenses under "Zone D") and the INGL Agreement.

-- Floating charge over all of the present and future assets of Energean Israel Limited and Energean Israel Finance Ltd.

-- Energean Power FPSO (subject to using commercially reasonable efforts, including obtaining Israel Petroleum Commissioner approval and any other applicable governmental authority).

Senior Credit Facility for the Karish-Tanin Development:

On 29 April 2021, following the release of the senior secured notes proceeds of $2.5bn, the Company repaid its existing outstanding facility.

Capital management

The Group defines capital as the total equity and net debt of the Group. Capital is managed in order to provide returns for shareholders and benefits to stakeholders and to safeguard the Group's ability to continue as a going concern.

 
                                           30 June 2021 
                                           (Unaudited)      31 December 2020 
                                              $'000              $'000 
Net Debt 
Current borrowings                                 19,020          1,112,984 
Non-current borrowings                          2,819,809            330,092 
Total borrowings                                2,838,829          1,443,076 
Less: Cash and cash equivalents                 (880,017)           (202,939)                   (202,939) 
Restricted cash                                 (266,241)                   - 
Net Debt (1)                                    1,692,571          1,240,137 
Total equity (2)                                  790,448          1,194,392 
Gearing Ratio (1/2):                              214.13%            103.83% 
 
 

Reconciliation of liabilities arising from financing activities

 
                                                                                                  Borrowing    Derivatives       Gain 
                                                                                                      costs  de-designated       from 
                                                                                                  including        as cash    revised 
                                                                                               amortisation    flow hedges  estimated 
                                                                                                         of     during the       loan   Foreign     Fair 
                1 January        Cash         Cash                                      Lease   arrangement         period       cash  exchange    value    30 June 
                     2021     inflows     outflows  Reclassification  Additions  modification          fees                      flow    impact  changes       2021 
                    $'000       $'000        $'000             $'000      $'000         $'000         $'000          $'000                $'000               $'000 
                                       (1, 559,213          ( 34,676                                                                             ( 6,915     3,164, 
30 June 2021    1,622,354  2, 793,000            )                 )    190,776        10,055       143,102          4,641    (1,146)     2,864        )        842 
Secured Senior 
 Notes                      2,500,000     (37,218)          (36,663)                                 33,791              -                                2,459,910 
Convertible 
 loan notes 
 (note 
 19)                    -                        -                 -     38,337             -         1,253              -          -         -        -     39,590 
Long -term 
 borrowings       330,092     175,000    (200,131)              (31)          -             -        16,484              -    (1,146)        41        -    320,309 
Current 
 portion 
 of long-term 
 borrowings     1,112,984     118,000  (1,297,062)             2,080          -             -        82,984              -                   34        -     19,020 
Lease 
 liabilities       47,623           -      (5,875)              (62)      2,250        10,055           837              -              (1,574)        -     53,254 
Deferred 
 licence 
 payments          69,518           -     (14,344)                 -          -             -         (462)              -                    -        -     54,712 
Contingent 
 consideration     55,222           -            -                 -                        -           744              -                    -        -     55,966 
Deferred 
 consideration 
 for 
 acquisition 
 of minority            -           -            -                 -    150,189             -         5,124              -                4,363             159,676 
Derivatives 
 not 
 designated 
 as hedging 
 instruments        6,915           -      (4,583)                 -          -             -         2,347          4,641                    -  (6,915)      2,405 
 

21. Retirement benefit liability

21.1 Provision for retirement benefits

 
                                     30 June 2021 
                                      (Unaudited)  31 December 2020 
                                        $'000           $'000 
Defined benefit obligation                  6,695             7,839 
Provision for retirement benefits 
 recognised                                 6,695             7,839 
Allocated as: 
Non current portion                         6,695             7,839 
 

21.2 Defined benefit obligation

 
                                   30 June 2021 (Unaudited)  31 December 
                                                                 2020 
                                            $'000               $'000 
At 1 January                                          7,839        4,265 
Acquisition of subsidiary                                          3,021 
Current service cost                                    183          364 
Interest cost                                            21           39 
 Extra payments or expenses                              69          557 
Actuarial losses - from changes 
 in financial assumptions                                50           49 
Benefits paid                                       (1,197)        (866) 
Transfer in/(out)                                      (35)            - 
Exchange differences                                  (235)          410 
At 30 June / 31 December                              6,695        7,839 
 

22. Provisions

 
                                Provision for          Litigation and     Total 
                          environment rehabilitation   other provisions 
                                    $'000                   $'000         $'000 
At 1 January 2021                            865,127             16,408   881,535 
New provisions                                     -              1,227     1,227 
Change in estimates                          (2,500)                  -   (2,500) 
Payments                                     (1,710)                      (1,710) 
Unwinding of discount                          4,946                  -     4,946 
Currency translation 
 adjustment                                 (15,002)              (517)  (15,519) 
At 30 June 2021                              850,861             17,118   867,979 
Current provisions                            12,975                  -    12,975 
Non-current provisions                       837,886             17,118   855,004 
 

Decommissioning provision

The decommissioning provision represents the present value of decommissioning costs relating to oil and gas properties, which are expected to be incurred up to 2040, when the producing oil and gas properties are expected to cease operations. The future costs are based on a combination of estimates from an external study completed at the end of 2019 and internal estimates. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required that will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This, in turn, will depend upon future oil and gas prices, which are inherently uncertain.

The decommissioning provision represents the present value of decommissioning costs relating to assets in Italy, Greece, UK, Israel and Croatia. No provision is recognized for Egypt as there is no legal or constructive obligation as at 30 June 2021.

 
                  Inflation  Discount rate  Cessation of  30 June 
                 assumption     assumption    production     2021  31 December 2020 
               30 June 2021   30 June 2021    assumption    $'000             $'000 
Greece         1.01% - 1.3%           0.8%          2034   17,186            16,082 
Italy             0.6%-1.4%          1.45%     2021-2040  536,180           551,464 
UK                     1.9%          0.35%     2022-2030  243,700           239,708 
Israel           1.02%-1.6%           2.0%          2040   34,708            38,399 
Croatia                  na             na          2022   19,087            19,474 
Total                                                     850,861           865,127 
 

Litigation and other claims provisions

Litigation and other claim provision relates to litigation actions currently open in Italy with the Termoli Port Authority in respect of the fees payable under the marine concession regarding FSO Alba Marina serving the Rospo Mare field in Italy. Energean Italy Spa has appealed these cases to the Campobasso Court of Appeal. None of the other cases has yet had a decision on the substantive issue. The Group contain a provision of EUR4.7 million against an adverse outcome of these court cases.

Energean Italy Spa has currently open litigations with five municipalities in Italy related to the imposition of real estate municipality taxes (IMU/TASI), interest and related penalties concerning the periods 2016 to 2019. For the years before 2019, Edison SpA bears uncapped liability for any amount assessed according the sale and purchase agreement (SPA) signed between the companies while the Company is liable for any tax liability related to tax year 2019. For all five cases, Energean Italy Spa (together with Edison SpA, as appropriate) filed appeals presenting strong legal and technical arguments for reducing the assessed taxes to the lowest possible level as well as cancelling entirely the imposed penalties. The Group strongly believes based on legal advice received that the outcome of the court decisions will be in its favour with no material exposure expected, therefore the Group recognised a provision of $1.2 million in respect of this claims.

Amount of $1.8 million provision relates to leasing cost charged to ENI on the floating storage located in the Leoanis plan. The Group following a claim from ENI accounted for this provision since these overestimated costs were required to be reimbursement.

Other provisions include non-income tax provision and other potential claim in Egypt.

It is not currently possible to accurately predict the timing of the settlement of these claims and therefore the expected timing of the cash flows.

23. Trade and other payables

 
                                   30 June 2021 (Unaudited)  31 December 2020 
                                            $'000                 $'000 
 
Trade and other payables-Current 
Financial items: 
Trade accounts payable 
 [40]                                               214,290           193,987 
Payables to partners under 
 JOA [41]                                            46,922            64,752 
Deferred licence payments 
 due within one year [42]                                 -            14,344 
Other creditors                                      10,995            12,502 
Short term lease liability                           12,247            10,561 
                                                    284,454           296,146 
Non-financial items: 
Accrued Expenses(38)                                 79,149            49,812 
Other finance costs accrued                          34,840             2,630 
Social insurance and other 
 taxes                                                3,947             5,695 
Income taxes                                             30             1,171 
                                                    117,966            59,308 
                                                    402,420           355,454 
Trade and other payables-Non 
 Current 
Financial items: 
Deferred consideration 
 for acquisition of minority 
 (note 19)                                          159,551                 - 
Deferred licence payments(40)                        54,712            55,174 
Contingent consideration 
 (note 4 )                                           56,091            55,222 
Long term lease liability                            41,007            37,062 
Other payables                                        1,435                 - 
                                                    312,796           147,458 
Non-financial items: 
Long term prepayment [43]                            35,525            29,105 
Social insurance                                        497               630 
                                                     36,022            29,735 
                                                    348,818           177,193 
 

24. Share based payments

Analysis of share-based payment charge

 
                                       30 June (Unaudited) 
                                         2021       2020 
                                        $'000       $'000 
 
 
Energean DSBP Plan                           530        290 
Energean Long Term Incentive 
 Plans                                     1,944      1,075 
 
Total share-based payment charge           2,474      1,365 
Capitalised to intangible and 
 tangible assets                             207         33 
Expensed as cost of sales                      5 
Expensed as administration expenses        2,247      1,154 
Expensed to exploration and 
 evaluation expenses                          14        174 
Expensed as other expenses                     1          4 
 
Total share-based payment charge           2,474      1,365 
 

Energean Long Term Incentive Plan (LTIP)

Under the LTIP, Senior Management can be granted nil exercise price options, normally exercisable from three to ten years following grant provided an individual remains in employment. The size of awards depends on both annual performance measures and Total Shareholder Return (TSR) over a period of up to three years. There are no post-grant performance conditions. No dividends are paid over the vesting period; however, Energean's Board may decide at any time prior to the issue or transfer of the shares in respect of which an award is released that the participant will receive an amount (in cash and/or additional Shares) equal in value to any dividends that would have been paid on those shares on such terms and over such period (ending no later than the Release Date) as the Board may determine. This amount may assume the reinvestment of dividends (on such basis as the Board may determine) and may exclude or include special dividends.

The weighted average remaining contractual life for LTIP awards outstanding at 30 June 2021 was 1.6 years, number of shares outstanding 2,036,982 and weighted average price at grant date GBP5.99.

Deferred Share Bonus Plan (DSBP)

Under the DSBP, the portion of any annual bonus above 30 per cent of the base salary of a Senior Executive nominated by the Remuneration Committee was deferred into shares.

Deferred awards are usually granted in the form of conditional share awards or nil-cost options (or, exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award although may vest early on leaving employment or on a change of control.

The weighted average remaining contractual life for DSBP awards outstanding at 30 June 2021 was 1.3 years, number of shares outstanding 234,902 and price at grant date GBP6.75.

25. Related parties

25a. Related party relationships

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.

The Directors of Energean Plc are considered to be the only key management personnel as defined by IAS 24. The following information is provided in relation to the related party transaction disclosures provided in note 25b below:

-- Adobelero Holdings Co Ltd . is a beneficially owned holding company controlled by Panos Benos, the CFO of the Group.

-- Growthy Holdings Co Ltd is a beneficially owned holding company controlled by Matthaios Rigas, the CEO of the Group.

-- Oil Co Investments Limited is beneficially owned and controlled by Efstathios Topouzoglou, a Non-Executive Director of the Group. The nature of the Group's transactions with the above related parties is mainly financing activities.

-- Kerogen Capital is an independent private equity fund manager specialising in the international oil and gas sector, which until February 2021 held the 30% of Energean Israel ordinary shares not held by the group (please refer to note 19).

-- Seven Maritime Company (Seven Marine) is a related party company controlled by one the Company's shareholder Mr Efstathios Topouzoglou. Seven Marine owns the offshore supply ships Valiant Energy and Energean Wave which support the Group's investment program in northern Greece.

-- Capital Earth: During the period ended 30 June 2021 the Group received consultancy services from Capital Earth Limited, a consulting company controlled by the spouse of one of Energean's executive directors, for the provision of Group Corporate Social Responsibility Consultancy and Project Management Services.

25b. Related party transactions

Purchases of goods and services

 
                                                    30 June (Unaudited) 
                                                      2021       2020 
                                                     $'000       $'000 
                        Nature of transactions 
Other related party 
 "Seven Marine"         Vessel leasing                    993      1,189 
Other related party     Construction 
 "Prime Marine Energy    of field support 
 Inc"                    vessel                         3,300          - 
Other related party 
 "Capital Earth Ltd"    Consulting services                46         63 
                                                        4,339      1,252 
 

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.

25c. Related party balances

Payables

 
                                     30 June 2021  31 December 
                                      (Unaudited)      2020 
                                        $'000         $'000 
               Nature of balance 
Seven Marine   Vessel leasing                 882          407 
                                              882          407 
 

26. Commitments and contingencies

In acquiring its oil and gas interests, the Group has pledged that various work programmes will be undertaken on each permit/interest. The exploration commitments in the following table are an estimate of the net cost to the Group of performing these work programmes:

 
                                        30 June 2021     31 December 
                                         (Unaudited)         2020 
                                            $'000             $'000 
Capital Commitments: 
Due within one year                            97,351         102,255 
Due later than one year but within 
 two years                                    138,665          84,855 
Due later two years but within five 
 years                                         75,344         200,895 
                                              311,360         388,005 
 Contingent liabilities: 
 
  Performance guarantees: 
Greece                                          4,751           6,743 
Israel                                         64,740          62,101 
UK                                             98,078          96,655 
Italy                                           9,455          15,361 
Montenegro                                        594             614 
                                              177,618         181,474 
 
 

Performance guarantees are mainly in respect of committed work programmes and certain financial obligations.

Issued guarantees:

Karish and Tanin Leases - As part of the requirements of the Karish and Tanin Lease deeds, the Group provided the Ministry of National Infrastructures, Energy and Water with bank guarantees in the amount of US$10 million for each lease (total US$20 million). The bank guarantees were in force until 29 December 2019, and were renewed in March 2021 until 31 March 2022.

Blocks 12, 21, 23 and 31 in Israel - As part of the requirements of the exploration and appraisal licences which granted to the Group during the Israeli offshore BID in December 2017, the Group provided the Ministry of National Infrastructures, Energy and Water in January 2018 with bank guarantees in the amount of US$6.0 million for all 5 blocks mentioned above. The bank guarantees are in force until 13 January 2023.

Blocks 55, 56, 61 and 62 , also known as "ZONE D" - As part of the requirements of the exploration and appraisal licences which granted to the Group during the Israeli 2nd offshore BID in July 2019, the Group provided the Ministry of National Infrastructures, Energy and Water in January 2018 with bank guarantees in the amount of US$3.2 million for all 4 blocks mentioned above. The bank guarantees are in force until 28 September 2022.

Israeli Natural Gas Lines ("INGL") - As part of the agreement signed with INGL on June 2019 the Group provided INGL bank guarantee at the amount of 92 million ILS (approx. US$28.6 million) in order to secure the first milestone payment from INGL. The first bank guarantee at the amount of 92 million ILS (approx. US$28.3 million) was issued on June 2019 and is in force until 21 November 2021. During Q2 2021 an additional bank guarantee was issued to secure INGL's additional milestone payment in total of 18 million ILS (approx. US $5.6 million). This bank guarantee is in force until 30 June 2022.

Israel Custom Authority - As part of the ongoing importation related Karish development, the Group provided the Israeli Custom authority bank guarantees in 2019 at the amount of 12 million ILS (approx. $3.7 million). During Q2 2021 total amount of 8 million ILS (approx. $2.5 millions) of the guarantees was revoked. The remaining bank guarantees at amount of 4 million ILS (approx. US$1.1 million). The bank guarantees are in force until 28 February 2022.

United Kingdom: Following Edison E&P acquisition the Group issued letters of credit amount $92.1 million for United Kingdom decommissioning obligations and obligations under the United Kingdom licenses

Italy: Following Edison E&P acquisition the Group issued letters of credit amount $13.3 million for decommissioning obligations and obligations under the Italian licenses

Legal cases and contingent liabilities

The Group had no material contingent liabilities as of 30 June 2021 and 31 December 2020.

27. Subsequent events

Compensation to gas buyers due to late supply:

During August 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Group has agreed to pay compensation to these counterparties due to the fact the gas supply date is taking place beyond a certain date as defined in the GSPAs (being 30 June 2021). The compensation will be paid on a monthly basis starting on August 2021 and is estimated at approx. US$23 million. The compensation is accounted as variable purchase consideration under IFRS 15 hence recognised once production commences and gas is delivered to the offtakers

Gas buyer request for arbitration:

During August 2021 a gas buyer sent a request to the International Court of Arbitration ("ICC") asking for arbitration on its rights of termination due to the fact the gas supply date is taking place beyond a certain date which defined in the GSPA. If the agreement it is terminated, the Group has identified multiple alternative routes to monetise those gas volumes (being 0.8 Bcm/yr), including both domestic and international markets, and hence is confident of profitably selling them

28. Subsidiary undertakings

At 30 June 2021, the Group had investments in the following subsidiaries:

 
Name of subsidiary       Country of incorporation   Principal activities   Shareholding      Shareholding 
                          / registered office 
                                                                                  At 30    At 31 December 
                                                                              June 2021              2020 
                                                                                    (%)               (%) 
Energean E&P             22 Lefkonos Street, 
 Holdings Ltd             2064 Nicosia, Cyprus            Holding Company           100               100 
Energean Capital         22 Lefkonos Street, 
 Ltd                      2064 Nicosia, Cyprus            Holding Company           100               100 
                                                              Oil and gas 
                         44 Baker Street,                    exploration, 
Energean MED              London W1U 7AL,                     development 
 Limited                  United Kingdom                   and production           100               100 
                                                              Oil and gas 
                         32 Kifissias Ave.                   exploration, 
Energean Oil              151 25 Marousi Athens,              development 
 & Gas S.A.               Greece                           and production           100               100 
                                                              Oil and gas 
                                                             exploration, 
Energean International   22 Lefkonos Street,                  development 
 Limited                  2064 Nicosia, Cyprus             and production           100               100 
                                                              Oil and gas 
Energean Israel                                              exploration, 
 Limited (Note           22 Lefkonos Street,                  development 
 19)                      2064 Nicosia, Cyprus             and production           100                70 
                                                              Oil and gas 
                                                             exploration, 
Energean Montenegro      22 Lefkonos Street,                  development 
 Limited                  2064 Nicosia, Cyprus             and production           100               100 
Energean Israel          560A rue de Neudorf, 
 Finance SARL             L-2220, Luxembourg         Financing activities           100                70 
Energean Israel 
 Transmission            Andre Sakharov 9,             Gas transportation 
 LTD                      Haifa, Israel                    license holder           100                70 
Energean Israel          Andre Sakharov 9, 
 Finance LTD              Haifa, Israel              Financing activities           100                70 
                                                              Oil and gas 
                                                             exploration, 
Energean Egypt           22 Lefkonos Street,                  development 
 Limited                  2064 Nicosia, Cyprus             and production           100               100 
                                                              Oil and gas 
                                                             exploration, 
Energean Hellas          22 Lefkonos Street,                  development 
 Limited                  2064 Nicosia, Cyprus             and production           100               100 
                                                              Oil and gas 
                                                             exploration, 
Energean Italy           Piazza Sigmund Freud                 development 
 S.p.a.                   1                                and production           100               100 
  20154 Milan,Italy 
                                                              Oil and gas 
                                                             exploration, 
Energean International   Piazza Sigmund Freud                 development 
 E&P S.p.a.               1                                and production           100               100 
  20154 Milan,Italy 
                                                              Oil and gas 
                         Via Salvatore Quasimodo             exploration, 
Energean Sicilia          2 - 97100 Ragusa                    development 
 Srl                      (Ragusa)                         and production           100               100 
                                                              Oil and gas 
                         44 Baker Street,                    exploration, 
Energean Exploration      London W1U 7AL,                     development 
 Limited                  United Kingdom                   and production           100               100 
                                                              Oil and gas 
                         44 Baker Street,                    exploration, 
Edison E&P UK             London W1U 7AL,                     development 
 Ltd                      United Kingdom                   and production           100               100 
                         Building 11, 273                     Oil and gas 
Edison Egypt              Palestine Street                   exploration, 
 Energy Services          New Maadi , Cairo                   development 
 JSC                      EGYPT                            and production            98                98 
 

29. Exploration, Development and production interests

 
Country  Fields                   Fiscal      Group's    Field Phase 
                                   Regime      working 
                                               interest 
Israel 
         Karish                   Concession       100%  Development 
         Tanin                    Concession       100%  Development 
         Blocks 12, 21, 23,       Concession       100%  Exploration 
          31 
         Four licences Zone       Concession        80%  Exploration 
          D 
Egypt 
         Abu Qir                  PSC              100%   Production 
         Abu Qir North            PSC              100%   Production 
         Abu Qir West             PSC              100%   Production 
         Yazzi                    PSC              100%  Development 
         Python                   PSC              100%  Development 
         Field A (NI-1X)          PSC              100%  Exploration 
         Field B (NI-3X)          PSC              100%  Exploration 
         NI-2X                    PSC              100%  Exploration 
         North East Hap'y         PSC               30%  Exploration 
         Viper (NI-4X)            PSC              100%  Exploration 
Greece 
         Prinos                   Concession       100%   Production 
         Epsilon                  Concession       100%  Development 
         Prinos exploration       Concession       100%  Exploration 
          area 
         South Kavala             Concession       100%   Production 
         Katakolo                 Concession       100%  Undeveloped 
         Ioannina                 Concession        40%  Exploration 
         West Patraikos           Concession        50%  Exploration 
         Block-2                  Concession        75%  Exploration 
Italy 
         Vega A                   Concession       100%   Production 
         Vega B                   Concession       100%   Production 
         Rospo Mare               Concession       100%   Production 
         Verdicchio               Concession       100%   Production 
         Vongola Mare             Concession        95%   Production 
         Gianna                   Concession       100%  Development 
         Accettura                Concession        50%   Production 
         Anemone                  Concession        19%   Production 
         Appia                    Concession        50%   Production 
         Argo-Cassiopea           Concession        40%  Development 
         Azalea                   Concession        16%   Production 
         Calipso                  Concession        49%   Production 
         Candela Dolce            Concession        40%   Production 
         Candela Povero           Concession        40%   Production 
         Carlo                    Concession        49%   Production 
         Cassiano                 Concession        50%   Production 
         Castellaro               Concession        50%   Production 
         Cecilia                  Concession        49%   Production 
         Clara East               Concession        49%   Production 
         Clara North              Concession        49%   Production 
         Clara Northwest          Concession        49%   Production 
         Clara West               Concession        49%   Production 
         Comiso                   Concession       100%   Production 
         Cozza                    Concession        85%   Production 
         Daria                    Concession        49%   Production 
         Didone                   Concession        49%   Production 
         Emma West                Concession        49%   Production 
         Fauzia                   Concession        40%   Production 
         Giovanna                 Concession        49%   Production 
         Leoni                    Concession        50%   Production 
         Monte Urano-San Lorenzo  Concession        40%   Production 
         Naide                    Concession        49%   Production 
         Portocannone             Concession        62%   Production 
         Quarto                   Concession        33%   Production 
         Ramona                   Concession        49%   Production 
         Regina                   Concession        25%   Production 
         Salacaro                 Concession        50%   Production 
         San Giorgio Mare         Concession        95%   Production 
         San Marco                Concession       100%   Production 
         Santa Maria Mare         Concession        96%   Production 
         Santo Stefano            Concession        95%   Production 
         Sarago Mare              Concession        85%   Production 
         Sinarca                  Concession        40%   Production 
         Talamonti                Concession        50%   Production 
         Tresauro                 Concession        25%   Production 
UK 
         Garrow                   Concession        68%   Production 
         Kilmar                   Concession        68%   Production 
         Scott                    Concession        10%   Production 
         Telford                  Concession        16%   Production 
         Wenlock                  Concession        80%   Production 
         Glengorm                 Concession        25%  Exploration 
         Isabella                 Concession        10%  Exploration 
Montenegro 
         Block 26, 30             Concession       100%  Exploration 
Croatia 
         Irena                    PSC               70%  Exploration 
         Izabela                  PSC               70%   Production 
Malta 
         Blocks 1, 2 and 3        Concession       100%  Exploration 
          of Area 3 
 

[1] The Intergovernmental Panel on Climate Change (IPCC) is the United Nations body for assessing the science related to climate change

[2] 2020 emissions are quoted on a pro forma basis, i.e. stated as if Energean had owned Edison E&P for the full year. The transaction closed on 17 December 2020.

[3] As measured under the TechnipFMC EPCIC

[4] The 1bn boe is composed of a combination of CPR-estimated volumes and management estimates

[5] 2020 emissions are quoted on a pro forma basis, i.e. stated as if Energean had owned Edison E&P for the full year. The transaction closed on 17 December 2020

   [6]   Cash Cost of production is defined in the Financial Review section 

[7] Including flux of $10.3 million and purchased oil of $2.5 million

   [8]   Cash SG&A and Adjusted EBITDAX is defined in the Financial Review section 
   [9]   After working capital movements 

[10] As measured under the TechnipFMC EPCIC

[11] As measured under the TechnipFMC EPCIC

[12] The 1 bn boe is composed of a combination of CPR-estimated volumes and management estimates

[13] 2020 emissions are quoted on a pro forma basis, i.e. stated as if Energean had owned Edison E&P for the full year. The transaction closed on 17 December 2020

[14] Cash cost of production is defined later in the financial review

[15] Cash SG&A is defined later in the financial review

[16] Adjusted EBITDAX is defined later in the financial review. Energean uses Adjusted EBITDAX as a core business KPI.

[17] Adjusted EBITDAX calculation has been changed to exclude the impact of the non-cash item of share-based payment charges. This adjustment is aligned with the underlying Group's adjusted EBITDAX calculation which excludes the impact of costs which tend to be one-off in nature and the non-cash costs. Comparative EBITDAX has been restated accordingly.

[18] Numbers may not sum due to rounding

[19] Inclusive of restricted cash

[20] The share premium account represents the total net proceeds on issue of the Company's shares in excess of their nominal value of GBP 0.01 per share less amounts transferred to any other reserves.

[21] Other reserves are used to recognise remeasurement gain or loss on cash flow hedges and actuarial gain or loss from the defined retirement benefit plan.

[22] Refer to note 19

[23] The share-based payments reserve is used to recognise the value of equity-settled share-based payments granted to parties including employees and key management personnel, as part of their remuneration.

[24] The foreign currency translation reserve is used to record unrealised exchange differences arising from the translation of the financial statements of entities within the Group that have a functional currency other than US dollar.

[25] Represents the acquisition of the remaining 30% minority interest in Energean Israel Limited from Kerogen Investments No.38 Limited, for more details please refer to note 19

[26] Non-cash revenues from Egypt arise due to taxes being deducted at source from invoices as such revenue and tax charges are grossed up to reflect this deduction but no cash inflow or outflow results.

[27] Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation and amortisation, share-based payment charge, impairment of property, plant and equipment, other income and expenses (including the impact of derivative financial instruments and foreign exchange), net finance costs and exploration and evaluation expenses.

[28] Related to derecognition of specific accounts payables balances in the Greek subsidiary following waiver agreements with creditors

[29] Related to termination fees paid from Neptune Energy following the termination of the agreement for Neptune Energy to acquire Edison E&P's UK and Norwegian subsidiaries from the Group.

[30] On 29 April 2021, the Group fully repaid the Israel Project Finance Facility before the maturity date of 31 December 2021 and, as such, the unamortised financing costs have been expensed in the period.

[31] For the reconciliation of the tax rate, the weighted average rate of the statutory tax rates in Greece (25%), Israel (23%), Italy (24%) and United Kingdom (40%) was used weighted according to the profit or loss before tax earned by the Group in each jurisdiction. These are jurisdictions where current and/or deferred tax is recognised.

   [32]   Permanent differences mainly consisted of non-deductible expenses. 

[33] Tax losses generated from entities which are not expected to generate sufficient taxable profits in the near future and for which deferred tax is not recognised.

   [34]   Income tax paid in Egypt branch based on the Production Sharing Agreement (PSA) regime 

[35] Utilisation of foreign tax credits in Italy to offset taxable profits arising from the operations in the Egyptian branch

[36] Other adjustments mainly related to the tax effect of consolidation differences due to the elimination of intra-group transactions.

[37] These reclassifications primarily relate to the assets and liabilities acquired in the Edison E&P acquisition which completed in December 2020 and reflect updated information on the allocation of the deferred taxes across the relevant categories.

[38] Government subsidies mainly relate to grants from Greek Public Body for Employment and Social Inclusion (OAED) to financially support the Kavala Oil S.A. labour cost from manufacturing under the action plan for promoting sustainable employment in underdeveloped or deprived districts of Greece, such as the area of Kavala.

[39] Included in deposits and prepayments, are mainly prepayments for goods and services under the GSP Engineering, Procurement, Construction and Installation Contract (EPCIC) for Epsilon project.

[40] Included in trade payables and accrued expenses in 30 June 2021 and FY2020, are mainly Karish field related development expenditures (mainly FPSO and Sub Sea construction cost) .

[41] Payables related to operated Joint operations primarily in Italy

[42] In December 2016, Energean Israel acquired the Karish and Tanin offshore gas fields for $40.0 million closing payment with an obligation to pay additional consideration of $108.5 million plus interest inflated at an annual rate of 4.6% in ten equal annual payments. As at 30 June 2021 the total discounted deferred consideration was $54.71 million (as at 31 December 2020: $69.52 million). 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, postponing the deferred payment due in March 2022 by the number of days that such Force Majeure event last. As of 30 June 2021 Force Majeure event length has not been finalised as the COVID-19 pandemic continue to affect the progress of the project , and in such the deferred payment due in March 2022 will be made after 1 July 2022 . As at 30 June 2021 the total discounted deferred consideration was $54.7 million (31 December 2020: $69.5 million).

[43] In June 2019, Energean signed a Detailed 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 Karish and Tanin FPSO into the Israeli national gas transmission grid. As consideration, INGL will pay Energean 369 million Israeli new shekel (ILS), approximately $102 million for the infrastructure being built by Energean which will be paid in accordance with milestones detailed in the agreement. The agreement covers the onshore section of the Karish and Tanin infrastructure and the near shore section of pipeline extending to approximately 10km offshore. It is intended that the hand over to INGL will become effective shortly after the delivery of first gas from the Karish field expected in mid-2022 . Following hand over, INGL will be responsible for the operation and maintenance of this part of the infrastructure.

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September 02, 2021 02:00 ET (06:00 GMT)

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