Last checked at 16 Nov 2023 07:01
ENERGEAN ISRAEL LIMITED
UNAUDITED INTERIM CONDENCED CONSOLIDATED FINANCIAL STATEMENTS
30 SEPTEMBER 2023
ENERGEAN ISRAEL LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF 30 SEPTEMBER 2023
INDEX
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Interim Condensed Consolidated Statement of Comprehensive Income | 3 | |
Interim Condensed Consolidated Statement of Financial Position | 4 | |
Interim Condensed Consolidated Statement of Changes in Equity | 5 | |
Interim Condensed Consolidated Statement of Cash Flows | 6 | |
Notes to the Interim Condensed Consolidated Financial Statements | 7-20 |
- - - - - - - - - - - - - - - - - - - -
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED 30 SEPTEMBER 2023
|
| 30 September (Unaudited) |
| ||||
Notes
| 2023 $'000
| 2022 $'000 | |||||
Revenue | 3 | 646,585 | - | ||||
Cost of sales | 4 | (313,374) | - | ||||
Gross profit | 333,211 |
| - |
| |||
Administrative expenses | 4 | (13,182) | (7,218) | ||||
Exploration and evaluation expenses | 4 | (50) | (1,277) | ||||
Other expenses | 4 | (170) | (1,079) | ||||
Other income | 4 | 2 | 53 | ||||
Operating profit/(loss) | 319,811 | (9,521) |
| ||||
Financial income | 5 | 9,133 | 5,757 | ||||
Financial expenses | 5 | (120,379) | (4,931) | ||||
Foreign exchange loss, net | 5 | (4,872) | 1,405 | ||||
Profit/(loss) for the period before tax |
|
|
| 203,693 |
| (7,290) |
|
Taxation (expense)/income | 6 | (46,766) | 2,663 | ||||
Net profit (loss) for the period | 156,927 |
| (4,627) |
| |||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF 30 SEPTEMBER 2023
| Notes
| 30 September 2023 (Unaudited) $'000
| 31 December 2022 $'000
| |||
ASSETS: | ||||||
NON-CURRENT ASSETS: | ||||||
Property, plant and equipment | 7 | 2,869,484 | 2,926,313 | |||
Intangible assets | 8 | 160,410 | 143,554 | |||
Other receivables | 10 | 507 | 108 | |||
Deferred tax asset | 9 | - | 22,886 | |||
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|
|
| 3,030,401 | 3,092,861 | |
CURRENT ASSETS: | ||||||
Trade and other receivables | 10 | 121,412 | 82,611 | |||
Inventories | 11 | 11,856 | 8,313 | |||
Restricted cash | 24,500 | 71,778 | ||||
Cash and cash equivalents | 239,076 | 24,825 | ||||
396,844 | 187,527 | |||||
TOTAL ASSETS |
| 3,427,245 |
| 3,280,388 | ||
EQUITY AND LIABILITIES: | ||||||
EQUITY: | ||||||
Share capital | 1,708 | 1,708 | ||||
Share premium | 212,539 | 212,539 | ||||
Retained earnings (losses) | 86,399 | (70,528) | ||||
TOTAL EQUITY |
|
|
| 300,646 |
| 143,719 |
NON-CURRENT LIABILITIES: | ||||||
Senior secured notes | 12 | 2,587,848 | 2,471,030 | |||
Decommissioning provisions | 73,602 | 84,299 | ||||
Deferred tax liability | 9 | 22,028 | - | |||
Trade and other payables | 13 | 180,038 | 210,241 | |||
2,863,516 | 2,765,570 | |||||
CURRENT LIABILITIES: | ||||||
Trade and other payables | 13 | 263,083 | 371,099 | |||
263,083 | 371,099 | |||||
TOTAL LIABILITIES | 3,126,599 |
| 3,136,669 | |||
TOTAL EQUITY AND LIABILITIES |
| 3,427,245 | 3,280,388 |
15 November 2023 |
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| Panagiotis Benos Director |
| Matthaios Rigas Director |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
NINE MONTHS ENDED 30 SEPTEMBER 2023
|
| Share capital $'000 |
| Share Premium $'000 |
|
| Retained earnings (losses) $'000 |
| Total equity $'000 |
Balance as of 1 January 2023 |
| 1,708 |
| 212,539 |
|
| (70,528) |
| 143,719 |
Profit for the period | - | - | 156,927 | 156,927 | |||||
Balance as of 30 September 2023 (unaudited) | 1,708 | 212,539 | 86,399 |
| 300,646 | ||||
Balance as of 1 January 2022 |
| 1,708 |
| 572,539 |
|
| (35,946) |
| 538,301 |
Transactions with shareholders |
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|
|
|
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|
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Share premium reduction (*) |
| - | (360,000) | - | (360,000) | ||||
Comprehensive loss |
| ||||||||
Loss for the period | - | - | (4,627) | (4,627) | |||||
Balance as of 30 September 2022 (unaudited) | 1,708 |
| 212,539 |
|
| (40,573) |
| 173,674 |
(*) In April 2022 the Company reduced its share premium capital by US$360 million and credited US$346 million against the shareholder loan account plus accrued interest.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2023
|
| 30 September (Unaudited) | ||||
Notes |
| 2023 $'000 |
| 2022 $'000 | ||
Operating activities | ||||||
Profit (Loss) for the period before tax |
|
|
| 203,693 |
| (7,290) |
Adjustments to reconcile loss before taxation to net cash provided by operating activities: |
| |||||
Depreciation, depletion and amortisation |
| 4 | 132,527 | 232 | ||
Loss from sale on equipment |
| 4 | 170 | 1,079 | ||
Exploration and evaluation expenses |
| 8 | - | 1,277 | ||
Compensation to gas buyers, payment made in advance |
| 3 | 4,929 | - | ||
Finance Income |
| 5 | (9,133) | (5,757) | ||
Finance expenses |
| 5 | 120,379 | 4,932 | ||
Net foreign exchange loss (gains) |
| 5 | 4,872 | (1,405) | ||
Cash flow from operations before working capital | 457,437 | (6,932) | ||||
(Increase)/decrease in trade and other receivables | (56,590) | 906 | ||||
Increase in inventories | (3,543) | - | ||||
Decrease in trade and other payables | (20,930) | (665) | ||||
Cash from operations | 376,374 | (6,691) | ||||
Income taxes paid | (397) | (572) | ||||
Net cash inflows from/(used in) operating activities | 375,977 819 | (7,263) | ||||
Investing activities | ||||||
Payment for exploration and evaluation, and other intangible assets | 8(B) | (92,634) | (18,823) | |||
Payment for purchase of property, plant and equipment | 7(C) | (164,913) | (232,037) | |||
Proceeds from disposals of property, plant and equipment | 2 | 188 | ||||
Amounts received from INGL related to transfer of property, plant and equipment | 10 | 56,906 | 17,371 | |||
Movement in restricted cash, net | 47,278 | 127,945 | ||||
Interest received | 9,921 | 2,863 | ||||
Net cash outflows used in investing activities | (143,440) | (102,493) | ||||
Financing activities | ||||||
Senior secured notes - interest paid | 12 | (128,906) | (128,906) | |||
Senior secured notes issuance | 12 | 750,000 | - | |||
Senior secured notes repayment | 12 | (625,000) | - | |||
Other distribution | (4,386) | - | ||||
Other finance cost paid | (335) | (2,359) | ||||
Finance costs paid for deferred licence payments | (2,496) | (1,501) | ||||
Transaction cost related to senior secured notes issuance | 16 | (3,690) | - | |||
Repayment of obligations under leases | 13 | (1,942) | (683) | |||
Net cash outflow used in financing activities | (16,755) | (133,449) | ||||
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Net increase/(decrease) in cash and cash equivalents | 215,782 | (243,205) | ||||
Cash and cash equivalents at beginning of the period | 24,825 | 349,827 | ||||
Effect of exchange differences on cash and cash equivalents | (1,531) | (2,656) | ||||
Cash and cash equivalents at end of the period | 239,076 | 103,966 | ||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
NOTE 1: - GENERAL
a. Energean Israel Limited (the "Company") was incorporated in Cyprus on 22 July 2014 as a private company with limited liability under the Companies Law, Cap. 113. Its registered office is at Lefkonos 22, 1st Floor, Strovolos, 2064 Nicosia, Cyprus.
b. The Company and its subsidiaries (the "Group") has been established with the objective of exploration, production and commercialisation of natural gas and crude oil. The Group's main activities are performed in Israel by its Israeli Branch.
c. As of 30 September 2023, the Company had investments in the following subsidiaries:
Name of subsidiary | Country of incorporation / registered office | Principal activities | ShareholdingAt 30 September 2023(%) | ShareholdingAt 31 December 2022(%) |
Energean Israel Transmission LTD | 121, Menachem Begin St.Azrieli Sarona Tower, POB 24,Tel Aviv 67012039 Israel | Gas transportation license holder | 100 | 100 |
Energean Israel Finance LTD | 121, Menachem Begin St.Azrieli Sarona Tower, POB 24,Tel Aviv 67012039 Israel | Financing activities | 100 | 100 |
d. The Group's core assets as of 30 September 2023 are comprised of:
Country | Asset | Field | Working interest | Field phase |
Israel | Karish | Karish Main | 100% | Production |
Israel | Karish | Karish North | 100% | Development |
Israel | Tanin | Tanin | 100% | Development |
Israel | Block 12, | Katlan | 100% | Appraisal |
Israel | Blocks 21, 23, 31 | Hercules and Hermes | 100% | Exploration |
NOTE 2: - Accounting policies and basis of preparation
The interim financial information included in this report has been prepared in accordance with IAS 34 "Interim Financial Reporting" . The results for the interim period are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for the period ended 30 September 2023. All such adjustments are of a normal recurring nature. The unaudited interim condensed consolidated financial statements do not include all the information and disclosures that are required for the annual financial statements and must be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2022.
The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing the Group's annual consolidated financial statements for the year ended 31 December 2023 which are the same as those used in preparing the annual consolidated financial statements for the year ended 31 December 2022.
The directors consider it appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.
NOTE 3: - Revenues
|
| 30 September (Unaudited) | ||||||
2023 $'000 | 2022 $'000 | |||||||
Revenue from gas sales (1) | 484,238 | - | ||||||
Revenue from hydrocarbon liquids sales (2) | 167,275 | - | ||||||
Compensation to customers (3) | (4,928) | - | ||||||
Total revenue |
| 646,585 |
| - | ||||
(1) Sales gas for nine months ended 30 September 2023 totaled approximately 3.1 bcm (the Company started production on 26 October 2022).
(2) Sales from hydrocarbon liquids for nine months ended 30 September 2023 totaled approximately 2.22 mmbbl (the Company did not sell hydrocarbon liquids during 2022).
(3) During 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Company paid compensation to these counterparties following delays to the supply of gas from the Karish project. The compensation is deducted from revenue, as variable consideration, as the gas is delivered to the gas buyers, in accordance with IFRS 15 Revenue Recognition
NOTE 4: - Operating profit (loss) before taxation
30 September (Unaudited) |
| ||||
2023 $'000 | 2022 $'000 |
| |||
(a) Cost of sales | |||||
Staff costs | 6,566 | - | |||
Energy cost | 2,869 | - | |||
Royalty payable | 117,266 | - | |||
Other operating costs | 57,061 | - | |||
Depreciation and amortisation (Note 7) | 131,262 | - | |||
Hydrocarbon liquids inventory movement (Note 11) | (1,650) | - | |||
Total cost of sales |
| 313,374 |
| - | |
(b) General & administration expenses |
|
| (c) |
| |
Staff costs | 2,544 | 1,115 | |||
Share-based payment charge | 517 | 128 | |||
Depreciation and amortisation (Note 7, 8) | 1,265 | 352 | |||
Auditor fees | 135 | 200 | |||
Other general & administration expenses | 8,721 | 5,423 | |||
Total administrative expenses |
| 13,182 |
| 7,218 | |
(c) Exploration and evaluation expenses | |||||
Other exploration and evaluation expenses | 50 | 1,277 | |||
Total exploration and evaluation expenses |
| 50 |
| 1,277 | |
(d) Other expenses | |||||
Loss from disposal of inventory property, plant and equipment | 170 | 1,079 | |||
Total other expenses |
| 170 |
| 1,079 | |
(e) Other income |
|
| (f) |
| |
Other income | 2 | 53 | |||
Total other income |
| 2 |
| 53 | |
NOTE 5: - Net finance income/(expenses)
30 September (Unaudited) | ||||
2023 $'000 | 2022 $'000 | |||
Interest on senior secured notes (1) | 119,322 | 102,505 | ||
Interest expense on long terms payables (2) | 2,485 | 8,716 | ||
Less amounts included in the cost of qualifying assets (3) | (11,813) | (107,177) | ||
109,994 |
| 4,044 | ||
Finance and arrangement fees | 1,757 | 3,681 | ||
Other finance costs and bank charges | 497 | 319 | ||
Unwinding of discount on trade payable | 5,407 | - | ||
Unwinding of discount on provision for decommissioning | 2,513 | 568 | ||
Unwinding of discount on right of use asset (1) | 391 | 238 | ||
Less amounts included in the cost of qualifying assets (3) | (180) | (3,919) | ||
10,385 |
| 887 | ||
Total finance costs |
| 120,379 |
| 4,931 |
Interest income from time deposits | (9,133) | (2,543) | ||
Interest income from loans to related parties | - | (3,214) | ||
Total finance income | (9,133) | (5,757) | ||
Net foreign exchange (gains) losses | 4,872 | (1,405) | ||
Net finance expense (income) | 116,118 |
| (2,231) | |
(1) Refer also to Note 12.
(2) Refer also to Note 13.
(3) Refer also to Note 7(A).
NOTE 6: - Taxation
1. Taxation charge:
30 September (Unaudited) | |||||
2023 $'000 | 2022 $'000 | ||||
Tax - current period | (1,853) | (291) | |||
Deferred tax | (44,913) | 2,954 | |||
Total taxation income (expense) yyyyyuuuu( |
| (46,766) | 2,663 | ||
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NOTE 7: - Property, Plant and Equipment
a. Composition:
|
| Oil and gas Assets $'000 |
| Leased assets $'000 |
| Furniture, fixtures and equipment $'000 |
| Total $'000 |
Cost: |
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|
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|
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At 1 January 2022 |
| 2,241,783 |
| 4,009 |
| 829 |
| 2,246,621 |
Additions (1) | 514,373 | 731 | 1,165 | 516,269 | ||||
Disposals | (900) | - | - | (900) | ||||
Capitalised borrowing cost | 129,357 | - | - | 129,357 | ||||
Capitalised depreciation | 632 | - | - | 632 | ||||
Change in decommissioning provision | 47,544 | - | - | 47,544 | ||||
Total cost at 31 December 2022 |
| 2,932,789 |
| 4,740 |
| 1,994 |
| 2,939,523 |
Additions (1) | 175,598 | 12,197 | 311 | 188,106 | ||||
Handover to INGL(2) | (111,448) | - | - | (111,448) | ||||
Capitalised borrowing cost | 11,993 | - | - | 11,993 | ||||
Change in decommissioning provision | (13,211) | - | - | (13,211) | ||||
Total cost at 30 September 2023 (unaudited) |
| 2,995,721 |
| 16,937 |
| 2,305 |
| 3,014,963 |
| ||||||||
Depreciation: | ||||||||
At 1 January 2022 |
| 433 |
| 693 |
| 228 |
| 1,354 |
Charge for the year | 10,976 | 134 | 297 | 11,407 | ||||
Capitalised to oil and gas assets | - | 632 | - | 632 | ||||
Disposals | (433) | - | - | (433) | ||||
Write down of the assets | 250 | - | - | 250 | ||||
Total Depreciation at 31 December 2022 |
| 11,226 |
| 1,459 |
| 525 |
| 13,210 |
Charge for the period | 130,211 | 1,400 | 659 | 132,270 | ||||
Total Depreciation at 30 September 2023 (unaudited) |
| 141,436 |
| 2,859 |
| 1,184 |
| 145,479 |
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At 31 December 2022 |
| 2,921,563 |
| 3,281 |
| 1,469 |
| 2,926,313 |
At 30 September 2023 (unaudited) |
| 2,854,285 |
| 14,078 |
| 1,121 |
| 2,869,484 |
(1) The additions to oil & gas assets in nine month period 2023 are primarily due to development costs for the FPSO, Karish North and 2nd Oil Train. The additions in 2022 are primarily due to development costs for the Karish field, incurred under the EPCIC contract, FPSO, subsea and onshore construction.
(2) Handover to INGL took place on 22 March 2023, please refer to note 13
NOTE 7: - Property, Plant and Equipment (Cont.)
b. Depreciation expense for the period has been recognised as follows:
30 September (Unaudited) | |||||
2023 $'000 | 2022 $'000 | ||||
Cost of sales | 131,262 | - | |||
Administration expenses | 1,008 | 110 | |||
Capitalised depreciation in oil & gas assets | - | 357 | |||
Total | 132,270 | 467 |
| ||
c. Cash flow statement reconciliations:
| 30 September (Unaudited) | |||||
| 2023 |
| 2022 | |||
$'000 |
| $'000 | ||||
Additions to property, plant and equipment | 188,106 | 392,377 | ||||
Less: | ||||||
Right-of-use asset additions | 12,197 | 198 | ||||
Capitalised depreciation | - | 656 | ||||
Capitalised share-based payment charge | - | 174 | ||||
Add: | ||||||
Lease payments related to capital activities | 1,942 | - | ||||
Capital expenditures | 177,851 |
| 391,349 | |||
Movement in working capital | (12,938) | (159,312) | ||||
Payment for additions to property, plant and equipment as per the cash flow statement | 164,913 |
| 232,037 | |||
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| |||
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NOTE 8: - Intangible Assets
a. Composition:
|
| Exploration and evaluation assets $'000 |
| Software licences $'000 |
| Total $'000 |
Cost: | ||||||
At 1 January 2022 | 20,141 | 255 | 20,396 | |||
Additions (1) | 123,005 | 1,713 | 124,718 | |||
Write off of exploration and evaluation costs (2) | (1,277) | - | (1,277) | |||
At 31 December 2022 |
| 141,869 |
| 1,968 |
| 143,837 |
Additions (1) | 17,113 | - | 17,113 | |||
At 30 September 2023 (unaudited) |
| 158,982 |
| 1,968 |
| 160,950 |
Amortisation: |
|
|
|
|
|
|
At 1 January 2022 |
| - |
| 255 |
| 255 |
Charge for the year | - | 28 | 28 | |||
Total Amortisation at 31 December 2022 |
| - |
| 283 |
| 283 |
Charge for the period | - | 257 | 257 | |||
Total Amortisation at 30 September 2023 (unaudited) |
| - |
| 540 |
| 540 |
At 31 December 2022 |
| 141,869 |
| 1,685 |
| 143,554 |
At 30 September 2023 (unaudited) |
| 158,982 |
| 1,428 |
| 160,410 |
(1) Additions to exploration and evaluation assets are primarily related to the 2022 growth drilling programme undertaken offshore Israel.
(2) Zone D: On 27 July 2022, the Company sent a formal notice to the Ministry of Energy notifying the relinquishment of Zone D and discontinuation of related work. As such, the licences subsequently expired on 27 October 2022.
b. Cash flow statement reconciliations:
| 30 September (Unaudited) | ||||
| 2023 |
| 2022 | ||
$'000 |
| $'000 | |||
Additions to intangible assets | 17,113 | 66,219 | |||
Associated cash flows |
| ||||
Movement in working capital | 75,521 | (47,396) | |||
Payment for additions to intangible assets | 92,634 | 18,823 | |||
NOTE 9: - Deferred taxes
The Group is subject to corporation tax on its taxable profits in Israel at the rate of 23%. The capital gain tax rates depend on the purchase date and the nature of the asset. The general capital gains tax rate for a corporation is the standard corporate tax rate.
Tax losses can be utilised for an unlimited period, and tax losses may not be carried back.
According to Income Tax (Deductions from Income of Oil Rights Holders) Regulations, 5716-1956, the exploration and evaluation expenses of oil and gas assets are deductible in the year in which they are incurred.
The Group expects that there will be sufficient taxable profits in the following years and that deferred tax assets, recognised in the interim condensed consolidated financial statements of the Group, will be recovered.
NOTE 9: - Deferred taxes (Cont.)
Below are the items for which deferred taxes were recognised:
|
| Property, plant and equipment & intangible assets $'000 | Right of use asset IFRS 16 $'000 |
| Tax losses $'000 | Deferred expenses for tax $'000 | Staff leaving indemnities $'000 | Accrued expenses and other short?term liabilities and other long?term liabilities $'000 |
|
| Decommissioning provision $'000 |
| Total $'000 | |||||
At 1 January 2022 | (12,632) | (762) | 4,750 | 11,031 | 94 | 923 | 8,171 | 11,575 | ||||||||||
Increase/(decrease) for the year through: | ||||||||||||||||||
Profit or loss | (27,712) | 8 | 51,665 | (4,822) | 73 | 270 | (8,171) | 11,311 | ||||||||||
At 1 January 2023 | (40,344) | (754) | 56,415 | 6,209 | 167 | 1,193 | - | 22,886 | ||||||||||
Increase/(decrease) for the period through: |
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Profit or loss | (16,269) | (2,393) | (28,382) | (472) | 50 | 2,552 | - |
| (44,914) | |||||||||
At 30 September 2023 |
| (56,613) |
| (3,147) |
|
| 28,033 |
| 5,737 |
| 217 |
| 3,745 |
|
| - |
| (22,028) |
30 September 2023 (Unaudited) $'000 | 31 December 2022 $'000 | |||
Deferred tax liabilities | (59,760) | (41,099) | ||
Deferred tax assets | 37,732 | 63,985 | ||
|
| (22,028) |
| 22,886 |
NOTE 10: - Trade and other receivables
30 September 2023 (Unaudited) $'000 | 31 December 2022 $'000 | |||
Current | ||||
Financial items Trade receivables | ||||
Trade receivables | 112,955 | 37,491 | ||
Other receivables (1) | 6,646 | 999 | ||
Refundable VAT | - | 37,131 | ||
Accrued interest income | 101 | 888 | ||
119,702 |
| 76,509 | ||
Non-financial items | ||||
Prepayments | 544 | 159 | ||
Deferred expenses (2) | - | 4,929 | ||
Prepaid expenses and other receivable | 1,166 | 1,014 | ||
1,710 |
| 6,102 | ||
Total current trade and other receivables | 121,412 |
| 82,611 | |
Non-current | ||||
Financial items
| ||||
Deposits and prepayments | 507 | 108 | ||
507 | 108 | |||
Total non-current trade and other receivables | 507 |
| 108 |
(1) The increase from 2022 is due to the recognition of a receivable from INGL, please refer to Note 13(4) for further details.
(2) Deferred expenses relate to compensation to gas buyers following delays to the supply of gas from the Karish project. This compensation is treated as variable consideration under IFRS 15 Revenue Recognition and therefore, reduced from gas sales following commencement of production, please refer also Note 3.
NOTE 11: - Inventory
30 September 2023 (Unaudited) $'000 | 31 December 2022 $'000 | |||
Raw materials and supplies | 7,379 | 5,563 | ||
Hydrocarbon liquids | 3,987 | 2,367 | ||
Natural gas | 490 | 383 | ||
Total |
| 11,856 |
| 8,313 |
NOTE 12: - Borrowings and secured notes
a. Issuance of US$2,500,000,000 senior secured notes:
On 24 March 2021 (the "Issue Date"), Energean Israel Finance Ltd (a 100% subsidiary of the Company) issued US$2,500 million of senior secured notes. The proceeds were primarily used to repay in full the project finance facility.
On 11 July 2023, Energean Israel Finance Ltd. Ltd completed the offering of US$750 million aggregate principal amount of senior secured notes with a fixed annual interest rate of 8.500%. The interest on the Notes will be paid semi-annually, on March 30 and September 30 of each year, beginning on March 30, 2024. The Notes are listed for trading on the TASE-UP of the Tel Aviv Stock Exchange Ltd. (the "TASE"). The proceed from the Offering, was released from escrow in September 2023 and was used to a) refinance the $625 million notes due in 2024 (redemption date on 30 September 2023), b) pay fees and expenses associated with this refinancing, c) contribute towards funding the interest payment reserve account, and d) contribute towards the payment of the final deferred consideration to Kerogen.
The Notes were issued in five tranches as follows:
30 September 2023 (Unaudited)
| 31 December 2022 | ||||
Series
| Maturity
| Annual fixed Interest rate | Carrying value $'000 | Carrying value $'000 | |
US$ 625 million | 30 March 2024 | 4.500% | - | 620,461 | |
US$ 625 million | 30 March 2026 | 4.875% | 619,462 | 617,912 | |
US$ 625 million | 30 March 2028 | 5.375% | 617,852 | 616,767 | |
US$ 625 million | 30 March 2031 | 5.875% | 616,628 | 615,890 | |
US$ 750 million | 30 September 2031 | 8.500% | 733,906 | - | |
US$2,625 million | 2,587,848 |
| 2,471,030 |
The interest on each series of the Notes is paid semi-annually, on 30 March and on 30 September of each year.
The Notes are listed on the TASE-UP of the Tel Aviv Stock Exchange Ltd (the "TASE").
With regards to the indenture document, signed on 24 March 2021 with HSBC BANK USA, N.A (the "Trustee"), as amended and supplemented, no indenture default or indenture event of default has occurred and is continuing.
Collateral:
The Company has provided/undertakes to provide the following collateral in favor of the Trustee:
a. 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 sale and purchase agreements ("GSPAs"), several bank accounts, operating permits, insurance policies, the Company's exploration licences and the INGL Agreement.
b. Floating charge over all of the present and future assets of Energean Israel Limited and Energean Israel Finance Ltd.
c. The Energean Power FPSO.
Credit rating:
The senior secured notes have been assigned a Ba3 rating by Moody's and a BB- rating by S&P Global.
NOTE 13: - Trade and other payables
30 September 2023 (Unaudited) $'000 | 31 December 2022 $'000 | ||||
Current | |||||
Financial items | |||||
Trade accounts payable (1) | 144,990 | 209,853 | |||
Payables to related parties | 14,103 | 21,028 | |||
VAT payable | 5,105 | - | |||
Deferred licence payments due within one year (2) | 12,852 | 13,345 | |||
Other creditors | 21,843 | 6,712 | |||
Current lease liabilities | 7,870 | 1,792 | |||
|
| 206,763 |
| 252,730 | |
Non-financial items | |||||
Accrued expenses (1) | 39,897 | 29,404 | |||
Other finance costs accrued | 14,147 | 32,227 | |||
Contract liability (4) | - | 56,230 | |||
Social insurance and other taxes | 759 | 502 | |||
Income taxes | 1,517 | 6 | |||
|
| 56,320 |
| 118,369 | |
Total current trade and other payables |
| 263,083 |
| 371,099 | |
Non-current |
| ||||
financial items |
| ||||
Trade and other payables (3) | 144,092 | 169,360 |
| ||
Deferred licence payments (2) | 28,629 | 38,488 |
| ||
Long term lease liabilities | 6,786 | 2,214 |
| ||
179,507 |
| 210,062 |
| ||
Non-financial items |
|
|
|
| |
Accrued expenses to related parties | 531 | 179 |
| ||
|
| 531 |
| 179 |
|
Total non-current trade and other payables | 180,038 | 210,241 |
| ||
(1) Trade payables and accrued expenses relate primarily to development expenditure on the Karish project, with the main contributors being FPSO and subsea construction costs and for drilling activities performed offshore Israel. Trade payables are non-interest bearing.
(2) In December 2016, the Company acquired the Karish and Tanin leases for US$40 million of upfront consideration plus contingent consideration of US$108.5 million (paid over 10 equal instalments) bearing interest at an annual rate of 4.6%. On 30 September 2023, the total discounted deferred consideration was US$41 million (31 December 2022: US$52million). Refer to Note 16.
(3) This represents the amount payable to Technip in respect of the EPCIC contract. Under this contract, US$250 million becomes payable nine months following the practical completion date (June 18, 2023), and is payable in eight equal quarterly instalments, bearing no interest. A discount rate of 5.831% has been applied (being the yield rate of the senior secured loan notes, maturing in 2024, at the date of entering into the settlement agreement). The amounts payable to Technip up to 30 September 2024 under this contract are presented as part of trade accounts payable - current.
(4) The contract liability relates to the agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "Hand Over") of the near shore and onshore segments of the infrastructure that delivers gas from the Energean Power FPSO into the Israeli national gas transmission grid. The Hand Over became effective in March 2023. Following the Hand Over, INGL is responsible for the operations and maintenance of this part of the infrastructure and the related asset (refer to Note 7) and contract liability was derecognised. The final $5million consideration is receivable within 12 months of handover and is recognised within other receivable (refer to Note 10).
NOTE 14: - Financial Instruments
Fair Values:
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.
There were no transfers between fair value levels during the period.
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 September 2023 (unaudited) | |||||||
Level 1 $'000 | Level 2 $'000 | Total $'000 | |||||
Financial assets |
|
|
| ||||
Short term restricted cash | 24,500 | - |
| 24,500 | |||
Short term trade and other receivables | - | 119,702 |
| 119,702 | |||
Cash and cash equivalents | 239,076 | - |
| 239,076 | |||
Total | 263,576 | 119,702 |
| 383,278 | |||
Financial liabilities |
|
|
| ||||
Senior secured notes (1) | 2,439,500 | - |
| 2,439,500 | |||
Trade and other payables - long term | - | 179,507 |
| 179,507 | |||
Trade and other payables - short term | - | 206,763 |
| 206,763 | |||
Total |
| 2,439,500 | 386,270 |
| 2,825,770 | ||
Fair value hierarchy as at 31 December 2022 | |||||||
Level 1 $'000 | Level 2 $'000 | Total $'000 | |||||
Financial assets |
|
|
| ||||
Short term restricted cash | 71,778 | - |
| 71,778 | |||
Short term trade and other receivables | - | 76,509 |
| 76,509 | |||
Cash and cash equivalents | 24,825 | - |
| 24,825 | |||
Total | 96,603 | 76,509 |
| 173,112 | |||
Financial liabilities |
|
|
| ||||
Senior secured notes (1) | 2,298,125 | - |
| 2,298,125 | |||
Trade and other payables - long term | - | 210,062 |
| 210,062 | |||
Trade and other payables - short term | - | 252,730 |
| 252,730 | |||
Total |
| 2,298,125 | 462,792 |
| 2,760,917 | ||
(1) The senior secured notes are measured at amortised cost in the Group's financial statements. The notes are listed for trading on the TACT Institutional of the Tel Aviv Stock Exchange Ltd (the "TASE"). The carrying amount as of 30 September 2023 was US$2,588 million and as of 31 December 2022 was US$2,471 million.
NOTE 15: - Significant events and transaction during the reporting period
(a) Gas Sales Agreements - Energean signed spot gas sale and purchase agreement with three Israeli gas buyers. The gas price will be determined in each period, with purchased amounts determined on a daily basis. The agreement will be valid for an initial one-year period with an option to extend subject to ratification by both parties.
(b) INGL Hand-Over completion - The Hand Over became effective in March 2023. Following the Hand Over, INGL is responsible for the operations and maintenance of this part of the infrastructure.
(c) Completion of offering of US$750,000,000 senior secured notes - see Note 12.
NOTE 16: - Significant events and transaction after the reporting period
(a) Interim dividend - An interim dividend of US$78 million was declared and paid on the 18 October, as part of the process to make the final deferred consideration to Kerogen.
(b) Israel-Hamas conflict (Swords of Iron War) - as of 7 October 2023, following an unprecedented attack against Israel by Hamas, Israel has been declared in a state of war. While the situation has not impacted the Company's production from the FPSO, it is not possible to predict whether the conflict will have a material adverse effect on our future earnings, cash flows and financial conditions.
(c) Karish and Tanin purchase agreement - In November 2023, Energean Israel reached a settlement with NewMed Energy for the remaining deferred consideration under the original purchase agreement of the Karish and Tanin leases of approximately $47.4 million, which includes the agreed annual interest. This will be paid in 2024 in two instalments. This agreement is final and unappealable.