Last checked at 17 Nov 2022 07:00
Energean plc
("Energean" or the "Company")
Trading Statement & Operational Update
London, 17 November 2022 - Energean plc (LSE: ENOG TASE: אנאג) is pleased to provide an update on the Group's trading performance in the 9-months to 30 September 2022 and recent operations.
Mathios Rigas, Chief Executive of Energean, commented:
"The period has been about meeting major milestones and underpinning the next growth phase of Energean. We delivered first gas, underwriting Israeli energy security and introducing competition into the Israeli gas market. We have delivered 5 successful deepwater wells out of 5 in our growth drilling campaign, demonstrating our deep knowledge of the East Med rocks. Financially, we have commenced our dividend program that we are committed to deliver on our promise of at least $1 billion until 2025.
"The year has seen increased international interest in the Eastern Mediterranean as an energy province; the world is beginning to understand what we have known since our inception. The East Med is a highly prospective region. There is every chance of more big gas discoveries to come. There is a growing regional population in need of secure and reliable energy supply to drive sustainable development and a growing realisation of the export potential to European and global markets."
Highlights
· Delivered first gas from Karish on 26 October 2022
o Commissioning and ramp-up to initial 6.5 bcm/yr capacity ongoing
o Two wells onstream with the third expected onstream shortly
· Sale and purchase agreement signed with Vitol SA for the marketing of the initial cargoes of Karish blend hydrocarbon liquids
· Continued exploration success in the Olympus Area, offshore Israel, discovering 25 bcm and de-risking a further 42 bcm
o 13.3 bcm discovered by the Zeus exploration well
o Athena discovery upgraded from 8 bcm to 11.75 bcm following post-well analysis
· Strong financial performance for the nine months to 30 September 2022
o Revenues were $550.2 million, a 57% increase versus 2021 comparable period ($350 million)
o Adjusted EBITDAX was $348.5 million, a 147% increase versus 2021 comparable period ($141 million)
o Group cash as of 30 September 2022 was $608.1 million (including restricted amounts of $74.6 million), and total liquidity was $855.0 million
· Average working interest production for the period was 35.2 kboed (73% gas), in line with full year guidance (excluding Israel)
· Declared Q3 dividend of 30 US$ cents/share, scheduled to be paid on 30 December 2022
· Signed a three-year $275 million Revolving Credit Facility ("RCF") in September 2022, which, although expected to remain undrawn[1], provides liquidity for general corporate purposes, if needed.
|
| 9-Months to 30 September 2022 |
Average working interest production | (kboed) | 35.2 (73% gas) |
Sales and other revenue | $ million | 550.2 |
Cash Cost of Production[2] | $ million | 181.4 |
Cash Cost of Production | $/boe | 18.9 |
Cash S,G&A | $ million | 21.1 |
Adjusted EBITDAX[3] | $ million | 348.5 |
Operating Cash Flow[4] | $ million | 183.4 |
Capital expenditure | $ million | 494.4 |
Exploration expenditure | $ million | 71.4 |
Decommissioning expenditure | $ million | 3.8 |
Cash (including restricted amounts) | $ million | 608.1 |
Net debt - consolidated | $ million | 2,380.1 |
Net debt - plc excluding Israel | $ million | 86.5 |
Net debt - Israel | $ million | 2,293.6 |
Outlook
· Karish Main-03 production well onstream
o Full year production guidance updated to 44 - 47 kboed (including Israel), reflecting the start-up of Karish on 26 October 2022
· Results from the Hercules well before year-end
· First gas from NEA/NI, Egypt is expected in H1 2023
· Independent certification of the total resource volumes within the Olympus area, expected in in early 2023
· Development concept for the Olympus area in H1 2023
· Commitment to a progressive quarterly dividend and to return at least $1 billion by the end of 2025
Enquiries
For capital markets: ir@energean.com
Kate Sloan, Head of IR and ECM Tel: +44 7917 608 645
For media: pblewer@energean.com
Paddy Blewer, Head of Corporate Communications Tel: +44 7765 250 857
Energean Operational & Financial Review
Production
In the 9-months to 30 September 2022, production averaged 35.2 kboed (73%) gas. Q3 2022 production increased by 0.3% versus Q2 2022, primarily as a result of increased production in Italy following maintenance activities in Q2 2022.
| 9-Months to September 2022 Kboed | FY 2022 guidance Kboed |
Israel | - | 10.0 (including 0.5 bcm of gas) |
Egypt | 24.5 (87% gas) | 24.0 - 26.0 |
Italy | 9.4 (42% gas) | 9.0 - 9.5 |
Greece, Croatia and UK | 1.3 (28% gas) | 1.0 - 1.5 |
Total production (including Israel) | 35.2 (73% gas) | 44.0 - 47.0 |
Total production (excluding Israel) | 35.2 (73% gas) | 34.0 - 37.0 |
Israel
Karish
The Karish project commenced production on 26 October 2022. Production is ramping up, with gas currently flowing from the Karish Main-02 and Karish Main-01 wells. The Karish Main-03 well is expected to be opened shortly.
Substantially all of Energean's gas buyers have served notice to transition from their existing supplier to Energean. Commercial gas sales began on 28 October 2022.
Growth Projects
First gas from Karish North, as well as the completion and installation of the second gas sales export riser and the second oil train, which will enable Energean to produce to the full 8 bcm/yr capacity of the FPSO, remains on track for end-2023.
Drilling campaign
Hermes discovery
In October 2022, Energean announced that the Hermes exploration well had made a commercial gas discovery of between 7 and 15 bcm.
Detailed analysis of the data collected by the well is ongoing, with the aim of refining volumetric estimates and potential commerciality for both the discovery and the full area. The Hermes discovery has helped to de-risk the nearby Poseidon and Orpheus structures, which represent attractive potential future appraisal targets to fully assess the potential of the area around block 31.
Zeus well
In November 2022, Energean announced that the Zeus exploration well, block 12, offshore Israel, made a commercial discovery with preliminary estimates indicating that the structure contains 13.3 bcm of recoverable natural gas resources (pre-drill estimate 10.8 bcm). Post-drill analysis is ongoing to assess the gas volumes contained within the structure.
Olympus Area
Energean's reserve auditor, D&M, has certified contingent resources of 11.75 bcm in the Athena discovery, an increase of 3.75 bcm on the Company's 8 bcm preliminary estimate. This increase follows post well studies undertaken on data collected during the drilling process.
The results from the Zeus well and the Athena post-well analysis provide Energean with additional confidence about the volumes and commerciality of the Olympus area, and the Company is now progressing its field development plan. Energean now has discovered resource volumes of 25 bcm and a further 42 bcm has been de-risked in the Olympus Area. Energean expects to update the market on the total resource volumes within the Olympus area in early 2023. This update will be based upon a Competent Persons Report that is being undertaken by D&M.
Hercules exploration well
The Hercules exploration well spudded in November 2022. Drilling operations are ongoing, with results expected later this year. The well will target gas in the Miocene horizon, which is estimated to contain 8 - 12 bcm of prospective unrisked gas resources.
Liquids contract
In October 2022, Energean signed a sale and purchase agreement with Vitol for the marketing of a number of cargoes of Karish blend hydrocarbon liquids.
Energean expects, based on analysis of individual well test samples, that Karish blend will trade at a similar price point to Asgard blend, given the similarity in their characteristics. The realised price will be market price less certain freight, logistics and marketing costs.
Egypt
In the 9-months to 30 September 2022, working interest production from the Abu Qir area averaged 24.5 kboed (87% gas), within full year production guidance of 24.0-26.0 kboed. The NAQ-PII#6 well was brought onstream in September 2022 at a rate of 26 mmscfd.
NEA/NI was 76.8% complete as of 30 September 2022, as measured under the EPIC contract. The NEA#6 well spudded in September 2022 and is expected to complete drilling in Q1 2023. First gas from the first well is expected in H1 2023.
At 30 September 2022, net receivables (after provision for bad and doubtful debts) in Egypt were $112 million, of which $66 million was classified as overdue.
Italy
In the 9-months to 30 September 2022, working interest production from Italy averaged 9.4 kboed (42% gas), within full year production guidance of 9.0 - 9.5 kboed.
First gas from Cassiopea remains on track for H1 2024.
Rest of producing portfolio
In the nine-months to 30 September 2022, working interest production from the rest of the portfolio averaged 1.3 kboed (28% gas), within full year production guidance of 1.0 - 1.5 kboed.
Financing
On 8 September 2022, Energean signed a three-year $275 million RCF with a consortium of four banks, led by ING Bank N.V. The RCF provides additional liquidity for general corporate purposes, if required. Under its current business plan, Energean expects the RCF to remain undrawn, apart from $90 million of Letters of Credit ("LCs"), which replace the LCs that relate to certain assets in the UK and Italy that are currently issued under the existing facility with ING on a one-for-one basis.
9-months to 30 September 2022 performance and 2022 guidance
FY 2022 | |
Consolidated net debt ($ million) | 2,500 - 2,600 |
Cash Cost of Production (operating costs plus royalties) | |
Israel ($ million) | 50 |
Egypt ($ million) | 55 |
Italy ($ million) | 170 (including flux costs of 30) |
Greece, Croatia & UK North Sea ($ million) | 55 |
Total Cash Cost of Production ($ million) | 330 |
|
|
Cash S,G&A ($ million) | 35 -40 |
Development and production capital expenditure | |
Israel ($ million) | 570 - 600 |
Egypt ($ million) | 140 |
Italy ($ million) | 60 |
Greece, Croatia & UK North Sea ($ million) | 40 |
Total development & production capital expenditure ($ million) | 810 - 840 |
Exploration expenditure | |
Israel ($ million) | 190[5] |
Egypt, Italy, Greece, Croatia & UK North Sea ($ million) | 20 |
Total exploration expenditure ($ million) | 210 |
Decommissioning | |
UK North Sea | 2 |
Italy | 8 |
Decommissioning expenditure ($ million) | 10 |
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", "on track", "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] $90 million of the $275 million is reserved for Letters of Credit, which replace the Letters of Credit previously issued under the previous facility with ING on a one-for-one basis
[2] Cash cost of production is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory movements.
[3] Adjusted EBITDAX 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. Adjusted EBITDAX includes losses on forward transactions of $39.1 million. Adjusted EBITDAX excluding these hedges would be $387.6 million.
[4] Excluding the impact of the hedging losses, operating cash flow would be $222.5 million.
[5] Updated to include Hercules