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    ENOG   GB00BG12Y042

ENERGEAN PLC

(ENOG)
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Energean : Half Year Results RNS

09/02/2021 | 05:12am EST

Energean plc ("Energean" or the "Company")

Results for Half Year Ended 30 June 2021

London, 2 September 2021 - Energean plc (LSE: ENOG TASE: גאנא) 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 Change1 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 levels2; 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
  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.

Page | 1

  1. On 31 July 2021, the project was 91.5% complete3
    1. 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
    1. Targeting the de-risking of prospective recoverable resources of over 1 billion4 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
    1. Project remains on track to deliver first gas in 2H 2022
    1. 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
    1. First oil expected in 1H 2023 (subject to financing)
  1. 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%
  1. Significantly reducing financing risk on the Karish project, as the project finance facility had been due to

mature in 2022

    1. 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
    1. Acquisition transacted at a 49% discount to CPR-derived NPV10
    1. 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:
    1. 19% reduction versus 2020 levels5;
  1. 73% reduction versus 2019; and
  1. 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 EBITDAX6 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
  1. As measured under the TechnipFMC EPCIC
  2. The 1bn boe is composed of a combination of CPR-estimated volumes and management estimates
  3. 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

Page | 2

1H 2021

1H 2020

Increase / (Decrease)

$m

$m

%

Average working interest

44.0

2.1

1,995%

production (kboed)

Sales and other revenue

205.5

2.1

9,686%

Cash cost of production6

122.47

10.4

1,077%

Cash cost of production per boe

15.4

27.5

(44%)

Cash S,G&A6

17.0

5.4

215%

Adjusted EBITDAX8

74.7

(8.9)

939%

Operating cash flow9

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-2022o Acceleration measures being considered for implementation
  • Commencement of the high-impact growth drilling campaign in 1Q 2022, starting with Athena
    1. 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
    1. Pre-Front-EndEngineering 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.

  1. Cash Cost of production is defined in the Financial Review section
  2. Including flux of $10.3 million and purchased oil of $2.5 million
  3. Cash SG&A and Adjusted EBITDAX is defined in the Financial Review section
  4. After working capital movements

Page | 3

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% complete10.

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 202111

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

  1. As measured under the TechnipFMC EPCIC
  2. As measured under the TechnipFMC EPCIC

Page | 4

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 Bnboe12. 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.

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

Page | 5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Energean Oil & Gas plc published this content on 02 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 September 2021 09:11:03 UTC.


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