Nicholas Woodroof
Energean Oil and Gas plc has announced its audited full-year results for the year ended 31 December 2019 (FY19).
Highlights
- Karish was 72% physically complete at 31 December 2019 and remains on track to deliver first gas in 1H21. Firm gas sales of 5 billion m3/yr with a further 0.6 billion m3/yr to be converted to a firm basis immediately on publication of a satisfactory Karish North CPR, expected at the end of March 2020.
- Post-period end, two of the three Karish development wells successfully flowed during clean-up operations, confirming that each will be capable of delivering up to the design limit of 300 mmscf/d (c.3 billion m3/yr). The third development well is currently in the clean-up phase and production performance is expected to be similar, confirming that the three wells will be able to produce to the 8 billion m3/yr capacity of the FPSO.
- Increased 2P reserves and 2C resources to 558 MMboe, representing a 39% year-on-year increase, before any contribution from the Edison E&P acquisition. Energean is at a transition point in its history, from which it will convert this growth in reserves to growth in production and cash flow.
- 2019 average Working Interest production was 3.3 kbopd from the Prinos field. Cost of production was approximately US$21.5 /bbl.
- 2019 full year revenue was US$76 million. Adjusted EBITDAX was US$36 million. CAPEX was US$685 million.
- Recognised a US$71 million impairment charge on the Prinos area, reflecting a reduction in Energean’s oil price assumptions and a change in the Group’s Prinos field production forecast.
- Energean retains significant liquidity. At 31 December 2019, Energean had cash and undrawn facilities of US$834 million, excluding the undrawn US$600 million acquisition bridge facility.
- Became the first E&P company globally to commit to net zero emissions by 2050 and have a firm plan to reduce carbon intensity by 70% over the next three years.
- Edison E&P Acquisition (subject to closing)
- In July 2019, Energean agreed to acquire Edison E&P for US$750 million of up-front consideration, adding immediate cash flows, EBITDAX and incremental growth opportunities. In October 2019, Energean agreed to sell Edison E&P’s UK and Norwegian subsidiaries to Neptune Energy for US$250 million of upfront consideration.
- Raised $265 million of equity and US$600 million of bridge financing to fund the acquisition. The take-out of the bridge facility using a Reserve Based Lending (RBL) Facility of up to US$525 million plus a bridge to disposal of up to US$250 million for the UK and Norway Assets is progressing as expected.
- Carve out of the Algerian assets from the transaction perimeter has been agreed in principle at an effective price of US$155 million, based on an effective transaction date of 1 January 2019; the carve out remains subject to a signed, amended SPA.
- Excluding Algeria, UK and Norwegian subsidiaries, Edison E&P delivered Free Cash Flow of US$152 million during 2019.
- Exclusive of Algeria and the UK and Norwegian subsidiaries, 2019 average Edison E&P working interest production was 56 kboe/d (64 kboe/d inclusive of these assets).
- In January 2020, Edison E&P received the updated Environmental Impact Assessment (EIA) approval on the Cassiopea development, offshore Italy. The development is progressing as planned with first gas expected in early 2023.
Outlook
- Closing of the Edison E&P acquisition and subsequent sale of the UK and Norwegian subsidiaries to Neptune Energy will occur once the remaining conditions precedent to the transaction are fulfilled, which is expected during 2020. Energean is working with Edison E&P to fulfil these conditions precedent as soon as possible.
- The Energean Power FPSO hull for the Karish gas project is expected to sailaway from China to Singapore in the coming weeks, and from Singapore to Israel around year-end 2020.
- Energean expects to issue an updated CPR for the successfully appraised Karish North discovery, around end 1Q20. An updated Field Development Plan (FDP) will be submitted to the Israeli government in 2Q20.
- 2020 pro forma group production (including the assets to be acquired from Edison E&P) is expected to be between 42.5 - 50 kboe/d. Production in the first two months of 2020 averaged 52.4 kboe/d.
- 2020 pro forma consolidated group capital expenditure (including the assets to be acquired from Edison E&P) of US$840 million, an adjustment to the net consideration, the quantum of which is being agreed, on previous guidance following actions taken by management in the last two weeks. US$580 million will be spent in Israel and US$140 million is fully discretionary.
- Decisions on FID at Katakolo (Greece) and Drill or Drop on both Ioannina (Greece) and Montenegro; outstanding financial commitment across these licences of US$1 million.
- Strategic review of the Prinos Area assets progressed; results expected in 2020. CAPEX on the assets, including Epsilon, will be minimised whilst the review is concluded.
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