Epsilon

Energean Prinos field support to include State participation

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A financial support plan for upstream company Energean’s Prinos field, south of Kavala, just announced by the European Commission, will be comprised of a state-guaranteed commercial loan of 90.5 million euros for the group’s domestic subsidiary, plus a supplementary loan of 9.5 million euros from the Greek State. Greek Parliament still needs to approve the plan.

As part of the plan, the Greek State will appoint a representative to the Board of Directors of the company to monitor the utilization of this financing.

Also, the financial support terms for Energean’s Prinos field, under pressure in recent years as a result of deteriorated market conditions, include a series of key guarantees for the Greek State.

Besides Energean’s bank loan, to be repaid, with interest, to the participating bank, the company’s domestic subsidiary will also need to pay related fees to the Greek State for the latter’s provision of the loan guarantee enabling the company to borrow.

The financial support will be provided until December 31, 2021, will be used to cover Energean’s investment and working capital needs over the next 12 months, and will have a maximum duration of 8 years, according to the terms.

According to Energean sources, activities at the Prinos field in 2019 and 2020 resulted in losses totaling 120 million euros. Despite an improvement in oil prices, a lack of finances for investment has led to a further reduction in output at Prinos, which is expected to lead to a further loss this year, estimated at 40 million euros.

The financing support plan will ensure the completion of development at the Epsilon deposit, which Energean considers essential to ensure ongoing operations of Prinos, along with the implementation of administrative and organizational restructuring planned by the company with the aim of reducing operating costs and moving ahead with a series of new projects.

Crisis’ impact on Prinos looked at, Energean up against time

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The energy ministry has turned to specialized consulting firm assistance for a detailed analysis on the pandemic’s financial impact on the Prinos offshore oil field in northern Greece, the country’s only producing field at present.

The energy ministry’s secretary-general Alexandra Sdoukou, handling the matter on behalf of the ministry, is currently holding talks on a daily basis with officials at Energean Oil & Gas, the field’s license holder.

The company wants emergency government support amid the extraordinary market conditions, energypress sources have informed.

The two sides are believed to be closely examining related data to determine the extent of the financial damage, for this project, due to the plunge in international oil prices, prompted by lower demand amid the widespread lockdown.

Energean Oil & Gas has invested 50 million euros between September, 2019 and May to keep production flowing at Prinos, an aging field, sources noted.

Sustainability is becoming a growing challenge at this venture, employing a workforce of approximately 270 employees, market authorities have noted. A cutdown in operating costs is seen as essential.

A cash injection for “Epsilon”, a fresher field in the area also licensed to Energean, could be made as a support for the company. Another option may entail financial support by the Greek State in exchange for a stake in Energean. Alternatively, state guarantees could be offered for a bank loan.

The finance ministry is also expected to become involved in the Prinos rescue effort. Much work lies ahead before any decisions can be reached. These will require European Commission approval.

Energean’s Prinos oil field pressured by price slump

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The oil-price plunge in international markets has placed under pressure  Greece’s only producing oil field, Epsilon, an old, high-cost unit operated by Energean Oil & Gas at an estimated 20 dollars per barrel.

Energean has made a considerable, long-running effort to keep Greece’s sole oil field alive through major investment, required to achieve acceptable production levels. However, production at this oil field is unprofitable during times of deflated oil prices, as is the case at present.

Major international credit institutions are nowadays offering far less financial support to oil-producing ventures as a result of negative conditions affecting the upstream sector. Widespread climate-change policies have not helped, while the situation has now been made worse by the ongoing oil-price crisis.

Energean’s Prinos offshore oil field, in Greece’s north, is currently producing smaller amounts after hitting a record level of 4,000 barrels per day in 2018. Last year, production at the oil field fell to 3,300 barrels per day. The current year is expected to be even more challenging, pundits have noted.

Energean is now placing greater emphasis on fully developing its neighboring Epsilon oil field. The company is awaiting the construction of a new platform, a project undertaken by a consortium of Romanian companies, so that production at Epsilon may commence in approximately one year.