TIDMENOG
RNS Number : 7437Y
Energean PLC
18 January 2022
Energean plc
("Energean" or the "Company")
Trading Statement & Operational Update
London, 18 January 2022 - Energean plc (LSE: ENOG TASE: ) is
pleased to provide an update on recent operations and the Group's
trading performance in the 12-months to 31 December 2021 together
with guidance for 2022. This information is unaudited and subject
to further review.
Mathios Rigas, Chief Executive of Energean, commented:
"2021 was an outstanding year for Energean, one in which we
delivered excellent operational and record financial results.
Production came in above initial expectations and we recognised
all-time-high gas prices in Italy. As a result, we've generated
full year revenues of over $495 million and EBITDAX in excess of
$200 million.
"The FPSO for our flagship project, Karish, is expected to be
ready for sail-away by the end of this quarter. This will
kick-start an eventful 2022 with the high-impact drilling programme
in Israel beginning in mid-March, first gas from Karish by Q3 and
first gas from NEA/NI in Egypt by Q4. With our other development
projects in Israel, Italy and Greece also on track we are well
positioned to reach our medium-term targets of over 200 kboed
production, $2 billion annual revenue and $1.4 billion EBITDAX.
"In 2021, we raised over $3 billion from the debt capital
markets to refinance existing borrowings and increase liquidity. In
doing so, we extended our weighted average maturity to
approximately six years, pushed out commencement of major debt
repayment obligations to 2024 and converted floating interest rates
to fixed rates. We end the year with over $1 billion [1] of
liquidity, ensuring we are fully funded to deliver our projects and
a sustainable dividend - the policy for which we expect to announce
in March with our annual results.
"On the ESG front, we remain focused on reducing our CO2
emissions intensity and are working towards accelerating our 2050
net zero target. As such, we are assessing the feasibility of a
number of carbon capture and storage, and eco-friendly hydrogen
projects."
Highlights
-- 2021 average working interest production was approximately
41.0 kboed (72% gas), above initial expectations and at the
mid-point of the revised full year guidance range of 40.0 - 42.0
kboed
-- Revenues for the period were $495.0 million and EBITDAX was
$202.9 million, representing record full year consolidated
results
-- 2021 capital expenditure was $359.3 million versus the
revised full year guidance range of $415 - 485 million
-- The Karish development remains within budget and is on track
to deliver first gas by Q3 2022
o On 31 December 2021, the overall project was 92.5% complete[2]
with the FPSO being 98.4% complete
o The vessel is expected be ready for sail-away from Singapore
by the end of this quarter
-- At 31 December 2021, Energean had total liquidity of over $1
billion(1) and remains fully-funded for all of its key development
projects which remain on track and on budget
-- Issued $450 million senior-secured notes in November 2021,
maturing in 2027, with a fixed coupon rate of 6.5%
o Combined with the $2.5 billion senior secured notes issued in
February 2021 and the EUR100 million Epsilon funding signed in
December 2021 this has increased the weighted average maturity to
six years, with first major repayment in 2024 and blended coupon
rate of 5.5%
o Converted floating interest rates to fixed
o Increased near-term liquidity
-- Signed EUR 100 million non-recourse project funding package
backed by the Greek State, for the Epsilon development project in
Greece which is due online in H1 2023
-- Reduced EGPC receivables to $92 million at 31 December 2021 (40% y-o-y reduction)
o This continues the trend of materially reducing the
receivables balance since the economic reference date of the
acquisition of Edison E&P (31 December 2019: $222m).
12-Months to 31 12-Months to 31
December 2021 December 2020
(Pro Forma)
Revenues $ million 495.0 335.9
----------- ---------------- ----------------
Cost of production
(excluding flux) $ million 246.2 198.9
----------- ---------------- ----------------
Cost of production
(excluding flux) $/boe 16.4 11.3
----------- ---------------- ----------------
Cash SG&A $ million 35.6 33.1
----------- ---------------- ----------------
EBITDAX $ million 202.9 107.7
----------- ---------------- ----------------
Development & production
capital Expenditure $ million 359.3 460.4
----------- ---------------- ----------------
Exploration Expenditure $ million 54.0 105.4
----------- ---------------- ----------------
Decommissioning Expenditure $ million 4.0 3
----------- ---------------- ----------------
Cash (including restricted
amounts) $ million 930.4 202.9
----------- ---------------- ----------------
Net debt - consolidated $ million 2,048.9 1,241
----------- ---------------- ----------------
Net debt - plc excluding
Israel $ million 102.7 183.6
----------- ---------------- ----------------
Net debt - Israel (Israel
debt is non-recourse) $ million 1,946.2 1,056.5
----------- ---------------- ----------------
2022 Outlook
-- 2022 average working interest production, excluding Israel,
is expected to be 35.0 - 40 .0 kboed. Israel production rate in
2022 is expected to average 25.0 - 30.0 kboed and will be a
function of both the first gas date and the commercial ramp up
achieved in the initial days and weeks of production
-- 2022 development and production capital expenditure is
expected to be $ 710 - 760 million[3]
o Includes completing the flagship Karish development and
continued progress on other key development projects in Israel
(Karish North, Second Oil Train & Riser), Egypt (NEA/NI),
Greece (Epsilon) and Italy (Cassiopea)
-- Excluding any further impact from COVID-19, the Energean
Power FPSO is expected to be ready to sail-away this quarter, with
first gas from Karish by Q3 2022
-- Commencement of the high-impact growth drilling campaign in
Israel, including Block 12, in March 2022
o First drilling results anticipated during Q2 2022
-- First gas from the first well at NEA/NI (Egypt) expected in H2 2022
-- Ongoing progress towards net zero target and detailing of
plans to accelerate net zero commitment ahead of 2050
o Pre-Front-End Engineering Design ("pre-FEED") on the carbon
capture and storage ("CCS") project in Greece underway and expected
to complete by Q2 2022
-- Dividend Policy to be announced with annual results in March 2022
Webcast & conference call
A webcast will be held today at 08:30 GMT / 10:30 Israel
Time
Webcast: https://edge.media-server.com/mmc/p/fkryxi6m
Dial-In: +44 (0) 2071 928338
Dial-In (Israel only): 035308845
Confirmation code: 2576809
Should you have any questions please contact
energean@fticonsulting.com.
The presentation will be made available at www.energean.com
ahead of the call.
Enquiries
ir@energean.com
Maria Martin, Head of Corporate Finance Tel: +44 7917 573
354
Energean Operational & Financial Review
Production
In the 12-months to 31 December 2021, average working interest
production was 41.0 kboed ( 72 % gas), at the mid-point of the
revised full year guidance of 40.0 - 42.0 kboed and above the
initial guidance range given in January 2021 of 35.0 - 40.0
kboed.
2022 Israel production is dependent on both the timing of first
gas, the speed at which Energean's gas buyers transition away from
existing suppliers and the extent to which additional volumes can
be sold on a spot basis on the domestic market. The three Karish
production wells are expected to have an immediate ability to ramp
up to fill the FPSO capacity, which will be an initial 6.5 Bcm/yr,
increasing to 8 Bcm/yr once the growth projects come onstream in H2
2023. The 2022 guidance range of 25.0 - 30.0 kboed represents gas
sales of 1.0 - 1.3 Bcm plus 5.0 - 6.6 kbod liquids. Energean
expects its gas buyers to ramp up to full annual contracted
quantity by Q3 2023, 12-months following first production.
FY 2021 FY 2022 guidance
Kboed Kboed
Israel - 25.0 - 30.0
(including 1.0 - 1.3
bcm of gas)
-------- ----------------------
Egypt 29.1 24.5 - 28.0
-------- ----------------------
Italy 9.9 9.0 - 10.0
-------- ----------------------
Greece and Croatia 1.3 1.0 - 1.5
-------- ----------------------
UK 0.7 0.5
-------- ----------------------
Total production (including 41.0 60.0 - 70.0
Israel)
-------- ----------------------
Total production (excluding 41.0 35.0 - 40.0
Israel)
-------- ----------------------
Israel
Karish Project Progress
Energean remains on track to deliver first gas from the Karish
gas development project by Q3 2022. At 31 December 2021, the
project was approximately 92.5% complete[4].
In December 2021, the penultimate major technical milestone
associated with the construction of the Energean Power FPSO was
successfully completed. This involved testing the telescopic design
of the emergency flare stack which will allow the vessel to pass
under the Suez Canal Bridge, hence avoiding the need to either sail
around Africa or to install the system in the Mediterranean Sea.
This has further reduced the environmental footprint of the
construction phase whilst shortening the schedule.
The FPSO is expected to be ready for sail-away from Singapore by
the end of this quarter. We expect approximately four - five months
from sail-away to first gas, including the tow from Singapore to
Israel, hook-up and commissioning. Commissioning and testing of
mechanical and electrical systems is being done in the yard before
sail-away with the final commissioning work to be performed
offshore upon arrival in Israeli waters.
% Completion at 31 December 2021[5]
Production Wells 100.0
------------------------------------
FPSO 98.4
------------------------------------
Subsea 83.6
------------------------------------
Onshore 99.9
------------------------------------
Total 92.5
------------------------------------
Growth Projects
In December 2021, Energean signed an EPC contract with KANFA AS
for the second oil train, which will increase the FPSO's liquid
production capacity to 32.0 kbod from 18.0 kbod.
The second oil train, second gas sales riser and Karish North
are progressing on schedule and are on track to come onstream in H2
2023.
The Karish North development well is scheduled to be drilled
during the summer 2022 following completion of the Athena (Block
12) exploration well and the Karish Main-04 appraisal well.
Drilling Campaign
Energean's preparatory work ahead of this quarter's drilling
campaign is progressing in line with expectations. The Drilling
Campaign is expected to commence in March 2022 with the following
sequence:
Athena (Block 12) - Exploration - Firm
Karish Main 4 - Appraisal - Firm
Karish North - Development - Firm
Hermes (Block 31) - Exploration - Optional
Hercules (Block 23) - Exploration - Optional
A decision on whether to drill the optional wells, as part of
this drilling campaign, will be made in Q3 2022.
Local Israeli market opportunities as well as export
commercialisation routes are being matured to access international
gas prices if (and when) additional volumes become available.
Gas Contracts
As previously announced, in November 2021, Dalia sent notices to
Energean purporting to terminate its gas sales agreement (which
represents 0.8bcm/yr of contracted gas sales), whilst also
attempting to reserve its rights by claiming that should the
notices be determined to be invalid or wrongly issued, the gas
sales agreement would not have been terminated.
Energean believes that the notices served by Dalia are invalid
and constitute a material breach of contract, giving it the right
to terminate the contract. Energean has exercised this right. If
Dalia does not withdraw its notices the gas sales agreement will be
terminated and Energean will seek to recover any damages suffered
by it as a result.
Energean has identified a number of incremental buyers for its
gas reserves and prospective resources. In Israel, the third gas
fired power plant auctioned as part of the IEC privatisation
process (Hagit) has been awarded. The winning consortium is now
seeking gas supply.
In December 2021, Energean signed an MOU with EGAS for the sale
and purchase of up to 2 Bcm/yr of natural gas on average for a
period of 10 years, commencing with initial volumes of up to 1
Bcm/yr. This represents a commercialisation option for gas
resources discovered in the 2022/23 drilling campaign.
Energean is confident of selling all volumes profitably and
commercial discussions are underway with a number of domestic and
international buyers.
Egypt
In the 12-months to 31 December 2021, w orking interest
production from the Abu Qir area averaged 29.1 kboed ( 87 % gas),
around the mid-point of full year production guidance (28.5 - 30.0
kboed). Q4 production was impacted by scheduled work-over
activities.
NEA/NI is progressing on budget and on schedule, being 37.0 %
complete as of 31 December 2021. Onshore fabrication of the subsea
kit is progressing well. First gas from one well is anticipated in
2H 2022, with the remaining three wells expected online in 1H 2023.
On 9 January 2022, the rig contract for the four well drilling
campaign was signed with EDC for the El Qaher-1 jack-up rig.
At 31 December 2021, net receivables (after provision for bad
and doubtful debts) in Egypt were $ 92 million, of which $49
million was classified as overdue. Energean has reduced its net
EGPC receivables balance by over 50% compared to the balance
prevailing at the economic reference date of the Edison E&P
acquisition (31 December 2019: $222 million), highlighting the
successful outcome of Energean's strategy to reduce the receivables
balance and generating additional value from the acquisition.
Cash collection from EGPC during the 12-months of 2021 was $209
million, which was above budget.
New onshore exploration acreage signed
On 3 January 2022, an international consortium led by Energean
Egypt (50% operator and Croatia's INA Nafta 50%) was awarded an
exploration licence for the East Bir El-Nus concession (Block-8),
in the Western Desert of Egypt. The award is in line with
Energean's strategy to increase and diversify its presence in Egypt
and reinforces its commitment to the country.
The work programme for the licence includes a 170km 2D seismic
survey, a 200km(2) 3D seismic survey plus two exploration wells,
which are expected to target estimated resources (in place) of
approximately 100 mmboe.
Europe
Italy
In the 12-months to 31 December 2021, w orking interest
production from Italy averaged 9.9 kboed ( 41 % gas), at the top
end of full year production guidance (9.5 - 10.0 kboed).
First gas from Cassiopea remains on track for 1H 2024, being
24.2% complete as of 31 December 2021.
Greece and the Adriatic
In the 12 months to 31 December 2021, w orking interest
production from Greece and Croatia averaged 1.3 kboed (12% gas),
slightly lower than the full year production guidance of 1.5 kboed
due to downtime for scheduled maintenance on the Prinos Assets in
Greece.
Greece
On 27 December, the EUR 100 million funding package, backed by
the Greek State, for the Epsilon and Prinos area development was
finalised. EUR 90.5 million was provided by the Black Sea Trade and
Development Bank ("BSTDB") and EUR 9.5 million directly by the
Greek State. The tenor is seven and eight years respectively with
first repayment not due until 2027. The blended interest rate is
2%. This Facility is non-recourse to the Group.
Following the signing of the funding package, Energean has
recommenced work on the Epsilon development which includes the
completion of the Lamda platform, tie back to the existing Prinos
complex and completion of three wells which were pre-drilled in
2019. First oil from the Epsilon development, which has 2P reserves
and 2C resources of 53 mmboe[6] in aggregate, is expected in 1H
2023.
Pre-FEED for the Prinos CCS project is progressing well and is
expected to complete by Q2 2022.
Croatia
Energean is currently in FEED for the development of the Irena
gas field, located five kilometres north of the Izabela field
offshore Croatia, with the target to take FID on the project in Q4
2022. If progressed, first gas is anticipated in Q4 2024. The field
has mid-case resources of 0.93 bcm (5.6 mmboe).
United Kingdom
In the 12-months to 31 December 2021, production in the UK North
Sea was 0.7 kboed ( 16 % gas), ahead of full year guidance of 0.5
kboed due to extended production from the Wenlock field.
The Glengorm Central appraisal well contained no commercial
hydrocarbons and has been plugged and abandoned. A comprehensive
data analysis program is underway. The results of the Glengorm
appraisal programme will be evaluated to inform forward plans for
the P.2215 licence.
Energean has received interest from third parties with respect
to the potential sale of its UK assets portfolio and is continuing
to consider and develop its options.
Malta
On 17 December 2021, Energean terminated its Malta Exploration
Study Agreements (Blocks 1,2, and 3 of Area 3). This marked an exit
from operations in the country.
Financing
During the course of 2021, Energean raised over $3 billion of
funding including: (i) $2.5 billion senior secured notes,
non-recourse to the Group, at the 100% subsidiary Energean Israel,
(ii) EUR100 million Greek state-backed loan, non-recourse to the
Group, at Energean Greece and (iii) $450 million senior secured
notes at Energean plc.
-- The funds raised were used mainly to refinance the Israel
Project Finance bank facility, and the Reserve Based Lending
("RBL") facilities in place for the Greek and Egyptian assets, as
well as to fund the ongoing Group developments.
-- This funding has increased near-term liquidity in excess of
$1 billion, pushed out commencement of debt repayments to 2024 and
increased Energean's weighted average debt maturity to
approximately six years as of 31 December 2021
-- $2.6 billion of this funding is project funding non-recourse to Energean plc
-- In accessing the bond markets, Energean has converted
floating interest rate exposure to fixed rates giving a blended
average interest rate of approximately 5%.
ESG
In December 2021, the Carbon Disclosure Project (CDP) upgraded
its rating for Energean to B, from B- in the previous year (this
compares to a flat y-o-y sector average of C). Energean implemented
a zero flaring policy across its operated sites and rolled out
'Green electricity' in Israel, Greece and Italy.
Energean published its first Climate Change Policy and was
awarded 'Best ESG Energy Growth Strategy - Europe 2021' by CFI.
12-months to 31 December 2021 performance and 2022 guidance
FY 2022 guidance FY 2021
Consolidated net debt ($
million) 2,600 - 2,800[7] 2,048.9
------------------------ -----------------------------
Cost of Production (Operating
Costs plus Royalties)
------------------------ -----------------------------
90-120 -
* Israel ($ million)[8]
------------------------ -----------------------------
* Egypt ($ million) 60 51.3
------------------------ -----------------------------
150 (including flux 153.8 (including
* Italy ($ million) costs of approximately flux costs of approximately
$20 million) $13.9 million)
------------------------ -----------------------------
* Greece & Croatia ($ million) 30 26.8
------------------------ -----------------------------
* UK North Sea ($ million) 30 28.2
------------------------ -----------------------------
Total Cost of Production
($ million) 360-390 260.1
------------------------ -----------------------------
Cash SG&A ($ million) 35 - 40 35.6
------------------------ -----------------------------
Development and production
capital expenditure
------------------------ -----------------------------
* Israel ($ million) 450-500[9] 242.7
------------------------ -----------------------------
* Egypt ($ million) 140 52.4
------------------------ -----------------------------
* Italy ($ million) 80 42.9
------------------------ -----------------------------
* Greece and Croatia ($ million) 35 9.7
------------------------ -----------------------------
* UK North Sea ($ million) 5 11.6
------------------------ -----------------------------
Total Development & Production
Capital Expenditure ($
million) 710-760 359.3
------------------------ -----------------------------
Exploration Expenditure
------------------------ -----------------------------
* Israel ($ million) 85 6.0
------------------------ -----------------------------
* Egypt, Italy, Greece and Croatia ($ million) 5 7.2
------------------------ -----------------------------
* UK North Sea ($ million) 10 40.8
------------------------ -----------------------------
Total Exploration Expenditure
($ million) 100 54.0
------------------------ -----------------------------
Decommissioning
------------------------ -----------------------------
* UK North Sea 5 0.0
------------------------ -----------------------------
* Italy 15 4.0
------------------------ -----------------------------
Decommissioning expenditure
($ million) 20 4.0
------------------------ -----------------------------
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.
[1] Including restricted cash amounts of $200 million and
undrawn Greek debt facility of EUR100 million
[2] As measured by project milestones under the TechnipFMC
EPCIC
[3] Includes (i) $140 million of payments to Technip under the
EPCIC which may be deferred (ii) $120 million of underspend carried
over from 2021 and (iii) $120 million of Karish North, Second Oil
Train and Riser growth expenditure
[4] As measured by project milestones under the TechnipFMC
EPCIC
[5] As measured by project milestones under the TechnipFMC
EPCIC
[6] YE 2020 CPR
[7] Forecast net debt is presented on a gross basis. i.e.
without amortisation of fees
[8] Based on 0.9-1.2bcm of gas sales
[9] Includes (i) $140 million of payments to Technip under the
EPCIC which may be deferred (ii) $120 million of underspend carried
over from 2021 and (iii) $120 million of Karish North, Second Oil
Train and Riser growth expenditure
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END
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