Energean Oil & Gas continues strong growth trajectory in 2019

Energean Oil and Gas, the oil and gas producer focused on the Mediterranean, has announced its audited full-year results for the year ended 31 December 2019 (“FY 2019”). Having grown its reserve base at 39% year-on-year, Energean is now at its next transition point as the company begins converting this into cash flows and production, de-risking investment case and moving closer to the medium-term goal of paying a sustainable dividend, the company noted in a statement.  

Mathios Rigas, Chief Executive Officer, Energean Oil & Gas commented:

“Energean continued its strong growth trajectory in 2019, becoming firmly established as a leading, FTSE 250 E&P independent. 

“The COVID-19 pandemic and OPEC+ price war have put us into uncertain times, but we are well-placed to weather the challenges. Once the Edison E&P transaction is completed, around 70% of our production will be sold under long-term gas sales agreements that insulate our future revenues against oil price volatility. Following completion of the Edison E&P transaction, we will continue to own and operate the majority of our asset base, and are well-funded for all of our projects. This will ensure that we can respond quickly and appropriately to the macro environment and take the right decisions to protect our business and our shareholders, as demonstrated by the $155 million cut to our 2020 capex guidance. The crisis finds Energean well prepared with full discretion on our non-Israeli capex programme and a very strong balance sheet further strengthened only recently by a further $175 million committed funding for our Karish project, demonstrating the strength of our banking relationships and the commitment of our lenders to the project. 

“In the coming weeks, you will see our FPSO hull sailaway from China to Singapore, a key milestone in the delivery of first gas from Karish, which is on track for 1H 2021. During 2019 we completed the drilling of the three development wells of Karish, confirmed excellent productivity rates from the wells and made a new discovery (Karish North) in Israel that we intend to develop in 2021. We continued to gain market share in Israel securing additional long-term gas contracts and bringing us closer to our target to maximise capacity utilisation of our FPSO. We expect the Edison E&P transaction to close during 2020, which, based on the agreed locked-box date of 1 January 2019, allows us to benefit from the robust results delivered by the business during 2019, including $152 million of Free Cash Flow from the assets to be acquired. This, combined with the receivables recovered in Egypt, exclusion of the Algerian assets from the transaction perimeter and our onward disposal of the North Sea assets to Neptune Energy, contributes to a low effective purchase price.  

“Fully committed to lead also on the ESG front, Energean became the first E&P company globally to commit to net zero emissions by 2050, and we have a firm plan to reduce carbon intensity by 70% over the next three years. 

“I look forward to continuing to deliver positive momentum and sustainable growth to maximise value for all of our stakeholders”.  

Highlights

  • Karish was 72% physically complete at 31 December 2019 and remains on track to deliver first gas in 1H 2021.  Firm gas sales of 5.0 bcm/yr with a further 0.6 bcm/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 bcm/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 bcm/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 $21.5 /bbl.
  • 2019 full year revenue  was $76 million. Adjusted EBITDAX was $36 million. Capital expenditure was $685 million.
  • Recognised a $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 $834 million, excluding the undrawn $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.

 

Financial Summary 

 

FY 2019

FY 2018

 

$m

$m

Sales revenue

75.7

90.3

Cost of production ($/boe)

21.5

17.6

Operating profit / (loss)

(93.9)

23.8

Adjusted EBITDAX

35.6

52.4

Operating cash flow

36.3

62.7

Capital expenditure

685.1

494.6

Cash capital expenditure

954.6

293.6

Net debt (cash)

561.6

(75.6)

 Edison E&P Acquisition (subject to closing)

  • In July 2019, Energean agreed to acquire Edison E&P for $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 $250 million of up-front consideration.
  • Raised $265 million of equity and $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 $525 million plus a bridge to disposal of up to $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 $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 $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 YE 2020.
  • Energean expects to issue an updated CPR for the successfully appraised Karish North discovery, around end 1Q 2020. An updated Field Development Plan (“FDP”) will be submitted to the Israeli government in 2Q 2020.
  • 2020 pro forma group production (including the assets to be acquired from Edison E&P) is expected to be between 42.5 – 50.0 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 $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. $580 million will be spent in Israel and $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 $1 million.
  • Strategic review of the Prinos Area assets progressed; results expected in 2020. Capital expenditure on the assets, including Epsilon, will be minimised whilst the review is concluded. 

Operational Review 

Business Resilience and Current Response to the Macro Environment

Energean notes the recent fall in global oil prices and highlights its resilience to fluctuations in the global commodity prices. In addition, Energean has not currently suffered any delays due to the Coronavirus.

Defensive Reserve and Production Mix

  • 70% of Energean’s 2P reserve and 2C resource base will be gas once the Edison E&P transaction completes.
  • Once the Edison E&P transaction completes, around 70% of 2020 – 2025 expected production and 60% of Energean’s 2P and 2C reserve and resource base is gas that will be sold under Gas Sale & Purchase Agreements (“GSPAs”) that are largely insulated from fluctuations in the Brent price:
    • Israel gas is expected to account for 34% of 2020 – 2025 expected production and 49% of the reserve and resource base. Israel gas is sold subject to long-term GSPAs with some of the largest domestic independent power plant and industrial customers. All GSPAs have floor pricing and take-or-pay provisions, with no price no re-openers. One contract that has a limited amount of Brent exposure, representing less than 2% of current contracted gas sales.
    • Egypt gas[3] is expected to account for 37% of 2020 – 2025 expected production and 16% of the reserve and resource base. This gas is being sold to EGPC under the concession agreement. In Abu Qir, at prices of between $40 and $72 Brent, the gas price is $3.50 / mmBTU ($3.71/mcf). At $35/bbl, the gas price is $3.16 / mmBTU ($3.35/mcf). In NEA, the gas price has been agreed at a $4.60/mmBTU ($4.77/mcf). At prices between $40 and $25, the gas price gradually reduces to the floor price of $4.45/mmBTU.

Well-Funded for Current Activities and Working Capital

  • The Group retains significant liquidity and at 31 December 2019, Energean had cash of $354 million and undrawn facilities of $480 million, excluding the undrawn $600 million acquisition bridge facility. At 28 February 2020 (and after reflecting the project finance facility increase effected on 16 March 2020), Energean had undrawn facilities of $620 million, excluding the acquisition bridge facility.

Israel Project Finance Facility

  • In Israel, cash and undrawn facilities were US$555 million. On 16 March 2019, the project finance was increased to $1.45 billion, providing an additional $175 million of liquidity for the Karish project and future appraisal activity in Israel. The project finance facility aids the defensive nature of Energean’s funding position and is largely unaffected by volatility in the oil price because:
    • It is non-recourse to the parent;
    • There are no redeterminations for the duration of its tenor;
    • Interest payments and other project costs are covered by the sizing of the facility; and
    • Due to the nature of the GSPAs underpinning the Karish and Tanin projects’ revenues, fluctuations in the oil price do not materially affect the cashflow covenants in the facility.
  • Energean’s Karish development is being executed largely through a lump-sum, turnkey EPCIC contract with TechnipFMC, which helps to protect the Company against capital expenditure overruns.
  • Liquidated damages payable by the Company resulting from any potential delay to the project are broadly back-to-back with any liquidated damages payable to gas buyers that may arise from late delivery of first gas. This limits Energean’s commercial exposure to any future delay. 

Funding position ex-Israel

  • Energean’s business excluding Israel had cash and undrawn facilities of $279 million at 31 December 2019.

Flexibility over capital investment programme

  • The Prinos Basin and Katakolo assets are fully-owned and operated, providing absolute flexibility over discretionary capital expenditure.
  • Energean’s exploration assets have minimal outstanding firm commitments, again giving Energean flexibility over capital expenditure.
  • Energean’s 2020 capital expenditure guidance benefits from strong funding and its discretionary nature:
    • 2020 pro forma consolidated group (including the proposed acquisition of Edison E&P) capital expenditure has been reduced to $840 million, from $995 million. The majority of this decrease is due to i) deferral of Cassiopea[4] expenditure; ii) deferral of Epsilon expenditure; and iii) deferral of the $35 million Zeus exploration well; results from the Karish North CPR are expected to be sufficient to ensure that Energean has enough gas to be able to participate in upcoming GSPA opportunities in Israel. This has allowed Energean to defer investment and conserve capital without impacting potential cash flow-driven returns for its shareholders.
    • $580 million relates to Karish development and is funded by the project finance facility.
    • A further $140 million is fully discretionary for 2020, principally relating to capital expenditure in Egypt and various projects in Italy. 

Israel

Karish-Tanin development project

Energean is on track to deliver first gas from its Karish project in 1H 2021. As of 31 December 2019, physical progress on the project was approximately 72% complete, the drilling of the three Karish Main development wells had been completed and significant progress had been made on the hull and topsides of the Energean Power FPSO. The FPSO Hull is expected to sailaway from China to Singapore in the coming weeks, signalling delivery of a key intermediate milestone towards delivery of first gas in 1H 2021. 

FPSO progress and key milestones

FPSO keel laying took place successfully at the COSCO Yard, Zhoushan, China, in April 2019 and in October 2019 the hull was undocked and floated out from COSCO Shipyard’s dry dock.

To date, in 2020, despite Coronavirus, the workforce in the COSCO yard has been maintained above 550 people. The FPSO Hull sailaway is expected in the coming weeks and it is due to arrive in the Admiralty Yard in Singapore shortly thereafter. Good progress has been made on construction of the topsides in Singapore, and Energean is working with TechnipFMC to mitigate the impact of the deferred sailaway from China on Practical Completion of the project and is on schedule to deliver first gas in 1H 2021. 

Gas sales and purchase agreements

During 2019, Energean agreed an additional 0.8 Bcm/yr of new and increased contracted and unconditional (“firm”) GSPAs and 0.4 Bcm/yr of contracted and conditional (“contingent”) GSPAs with gas buyers. In early 2020, a further contingent GSPA for up to 0.2 Bcm/yr was signed.

Total contracted gas sales are now as follows:

Contracted and Unconditional GSPAs

  • c.5 Bcm/yr (484 mmcfd)

Contracted and Conditional GSPAs

  • IPM Beer Tuvia: 0.4 Bcm/yr (39 mmcfd) of sales post-2024. Energean may supply additional gas pre-2024 at the option of both counterparties. The IPM contract is conditional, inter alia, on Energean certifying additional 2P reserve volumes and will be converted to firm GSPAs immediately on issuance of the Karish North CPR shortly.
  • New Contract: Up to 0.2 Bcm/yr (19 mmfcd) of sales, under which supply ramps up between 2022 and 2025. The new contract is also conditional, inter alia, on Energean certifying additional 2P reserve volumes. Energean expects the contract to be converted into firm upon publication of the Karish North CPR shortly.
  • Or Contract: 0.7 Bcm/yr (68 mmcfd) of sales to Or Power, which depends on Or Power succeeding in its application to receive a new licence from the Electricity Authority to construct a new power generation plant in Israel and successfully completing this project.

In the medium term, Energean aims to secure both the resource and offtake for the remaining spare capacity in its 8 bcma (775mmcfd) capacity FPSO, whilst bearing in mind the need for capital conservation in the current market environment. 

All GSPAs contain take-or-pay and floor pricing provisions, which reduce the risks associated with Energean’s cash flow generation profile and limit Energean’s exposure to global commodity price fluctuations. 

Energean is also evaluating gas export monetisation options, including the markets of southern Europe. As part of this strategy, the Company signed a Letter of Intent (“LOI”) in January 2020 with the Public Gas Corporation of Greece for the potential sale and purchase of 2 Bcm/yr of natural gas from Energean’s fields in Israel through the proposed East Med Pipeline. At this stage, there is no commitment to supply this gas and Energean views the LOI as a longer-term option for monetisation of its gas resources. 

2019 Drilling Campaign

During 2019, Energean drilled the KM-01, KM-02, KM-03 development wells and the Karish North exploration well and sidetrack. Completions and installation of the Christmas Trees on those three development wells was the focus of operations during 1Q 2020; clean-up of two wells is complete and one is ongoing, following which the wells will be ready for integration with the subsea infrastructure and hook up to the FPSO.

The three development wells are expected to deliver 5.0 bcm/yr (484 MMscfd) of firm contracted gas into the Israeli domestic market commencing in 1H 2021. During 2020, successful results were achieved from production measurement performed during clean-up of the KM-02 and KM-01 development wells. Both wells flowed at a maximum rate of 120 million standard cubic feet per day (MMscf/d) of natural gas, limited only by the capacity of the surface equipment. Performance modelling confirms that each well will be capable of delivering at the 300 MMscf/d design capacity when connected to the FPSO. Clean-up of the third development well, KM-03 has commenced and the results of production measurement, which are expected to be similar, will be announced to the market in due course. Energean is confident that the three development wells can produce at combined rates of 800 mmscf/d, which is sufficient to fill the capacity of the FPSO. 

The Karish North field was discovered in April 2019, with appraisal confirming initial best estimate recoverable resources of 0.9 Tcf (25 bcm) of gas plus 34 MMbbl of light oil/condensate. An independent CPR is being prepared and results will be communicated to the market shortly. On publication of this CPR, 0.6 bcm/yr of contingent GSPAs are expected to be immediately converted to firm GSPAs. The company is preparing a field development plan, envisaging a tie-back to the Energean Power FPSO. A final investment decision on that project, which is estimated to cost circa $125 million, is anticipated during 2020, with first gas during 2022. 

Exploration Programme

Energean has decided to defer its exploration activity on Block 12. Results from the Karish North CPR are expected to be sufficient to ensure that Energean has sufficient gas resources  to be able to participate in upcoming GSPA opportunities in Israel. This has allowed Energean to defer investment and conserve capital without impacting potential cash flow-driven returns for its shareholders.

The Zeus and Athena prospects remain very attractive and Energean intends to re-visit its investment decision in due course. 

Acreage

Energean also added to its Israeli acreage in 2019. The Company, as part of a joint venture with Israel Opportunity, was awarded four new licences – 55, 56, 61 and 62 – in Zone D of the Israeli EEZ. The licences are situated approximately 45 kilometres off the coast of Tel Aviv and represent a strong potential source of upside in Energean’s Israel portfolio. 

Greece

Production

At the end of 2019, Energean decided to place its Prinos area assets under strategic review, the results of which will be communicated to the market once complete.  Working interest production from Greece averaged 3,312 boepd during 2019, however, investment in Prinos, Prinos North and Epsilon will continue to be limited whilst this strategic review is concluded and 2020 production is, therefore, expected to be in the range of 2,000 to 2,500 boepd, assuming no contribution from Epsilon. Output from Prinos and Prinos North is to be maintained through rig-less activities requiring limited expenditure.

Due to higher-return capital allocation priorities, Energean no longer carries a medium-term production target for the Prinos area asset; future production will be a function of the level of investment in the assets. 

Development – 2019 Overview

During 2019, all three Epsilon Lamda platform development wells were drilled successfully. As previously announced, additional pay was encountered in the deeper and dolomitic zones of the Epsilon reservoir. This resulted in an NSAI-audited reserve and contingent resource increase of 26 MMboe, to 44 mmboe.

At Katakolo, award of the EIA is expected in 2Q 2020 with potential Final Investment Decision thereafter. NSAI-audited Katakolo reserves are 14 MMboe, a 36% increase on 2018.

The proposed underground gas storage project in South Kavala saw a positive development in 4Q 2019 when an amendment to the law was passed on 10 December 2019, making it possible for the regulating energy authority to regulate the tariff. This paves the way for a tender for the project, which is expected in 2020. On 11 March 2020, the Greek Energy and Finance Ministries signed a decision to allow the country’s state-asset sales fund to proceed with an international tender to construct, maintain and operate an underground gas storage facility at the South Kavala field, with the first step a cost-benefit study.  The right to exploit the facility will be 50 years. 

Exploration

In Ioannina, interpretation of the newly acquired seismic lines is ongoing and a drill-or-drop decision will be taken in 1H 2020. The quality of acquired seismic was a major improvement when compared to historic vintages and the lines have identified two prospective trends with multiple analogue prospects. Further, the new 2D seismic has verified the existing geological model, de-risking existing prospectivity. The seismic lines were acquired with minimal environmental impact and Energean and the operator, Repsol, have agreed to plant trees in areas away from the 2D seismic lines. The outstanding net financial commitment on the Ioannina block is less than $0.5 million.

In Aitoloakarnania, the operator, Repsol, is carrying out the necessary environmental studies in preparation for the 2D seismic acquisition campaign, which is expected to commence in 2Q 2020, subject to permitting. The outstanding net financial commitment on the Aitoloakarnania is less than $3 million.

In February 2020, Energean signed an agreement for the acquisition of Total’s 50% stake in, and operatorship of, Block 2, offshore Western Greece, providing further material exploration opportunities in its core area of the Eastern Mediterranean with limited financial exposure. Energean’s net remaining expenditure (at 50% Working Interest and post including consideration) towards satisfaction of the minimum work obligation, which includes 1800 kilometres of 2D seismic acquisition and processing, is approximately €0.5 million. Energean believes that this is a highly attractive transaction in the context of the early stage prospectivity identified on the block.

Work to date on the licence has identified that Block 2 contains part of a large four-way closure at the Top Jurassic Apulia platform. The prospect is believed to be an analogue to the Vega field, offshore Italy, which Edison E&P operates with a 60% Working Interest. The structure is covered by sparse 2D seismic and could be de-risked through the seismic acquisition programme to be executed as part of the minimum work obligation. 

Montenegro

In February 2019, Energean commissioned PGS for the acquisition of a new 3D seismic survey over Blocks 26 and 30. The PGS Ramform Titan, one of the best seismic acquisition vessels in the world, deployed 14 geo-streamers, 6.5 kilometres for each streamer length, using a triple source array to cover a total area of 338 square kilometres. The 3D seismic survey substantially fulfils the licence commitment for both blocks 26 & 30 with a net outstanding financial commitment of less than $0.5 million.

Results from the seismic survey have identified a number of shallow gas prospects and deeper carbonate prospects have been identified through interpretation of the newly acquired seismic data. Energean is awaiting final data in order to confirm the primary prospect. The Ministry of Economy in Montenegro confirmed that Energean will receive an extension to the first exploration phase to 15 March 2021, with a drill-or-drop decision due by year end 2020. 

Energean Reserves and Resources

Energean increased 2P reserves and 2C resources to 558 MMboe, up 39% year-on-year, before any contribution from the Edison E&P acquisition. Energean’s reserves and resources benefitted from two discoveries during 2019, the Karish North discovery in Israel, which added 190 mmboe, and the Epsilon Deeper and Dolomitic Zones, which added 25 mmboe. 

Israel

Greece

Total

Oil

Gas

Total

Oil

Gas

Total

Oil

Gas

Total

Commercial Reserves

mmbbls

Bcf

mmboe

mmbbls

Bcf

mmboe

mmbbls

Bcf

mmboe

1 January 2019

22

1,558

298

49

5

49

71

1,563

347

Revisions

7

(99)

(11)

8

1

8

15

(98)

(3)

Disposals

Transfer from contingent resources

(2)

(2)

Production

(1)

(1)

(1)

(1)

31 December 2019

29

1,460

287

54

6

55

83

1,465

342

Contingent Resources

1 January 2019

0.7

133

23

33

15

35

33

148

58

Additions

 

Revisions and Discoveries

23

618

134

20

22

24

43

640

156

Disposals and relinquishments

Transfer to commercial reserves

31 December 2019

24

751

157

53

37

59

76

788

216

Total Commercial Reserves & Contingent Resources

1 January 2019

23

1,692

321

81

20

84

104

1,711

405

31 December 2019

53

2,211

444

107

43

114

159

2,253

558

Edison E&P acquisition

In July 2019, Energean agreed to acquire Edison E&P for $750 million plus $100 million of contingent consideration. Energean raised $265 million of new equity and $600 million in bridge financing from leading international banks to fund the deal. Energean is in the process of refinancing the acquisition bridge facility using an RBL, which is expected to be sized at up to $525 million, plus a $250 million bridge to disposal for the UK and Norway assets.

Energean is working actively to close the acquisition as soon as possible, with approval from Italian regulatory authorities anticipated soon. Formal approval from Egyptian regulatory authorities is expected soon after shareholder approval at the EGM. As announced on 23 December 2019, the transaction will now exclude the Algerian assets. Carve out of the Algerian assets from the transaction perimeter has been agreed in principle at an effective price of $155 million, based on an effective transaction date of 1 January 2019; the carve out remains subject to a signed, amended SPA.

In October 2019, Energean agreed to sell Edison E&P’s UK North Sea and Norway assets to Neptune Energy for $250 million (plus up to $30 million contingent consideration). The deal is aligned with Energean’s strategy of optimising its portfolio and the stated goal of disposing of non-core assets. The onward sale is expected to complete as soon as is practicable following the close of the acquisition of Edison E&P. 

Edison E&P financials

During 2019, Edison E&P delivered the following financial results. These results have been prepared on the basis of Edison E&P’s accounting policies and are subject to adjustments when included in Energean’s upcoming Circular and Prospectus.

Edison E&P financials are presented on a pro forma basis and are unaudited.

 

Edison E&P

 

2019 – $ million

Edison E&P exclusive UK North Sea, Norway & Algeria

2019 – $ million

Revenue

531

433

Operating Costs (including G&A)

255

196

EBITDAX

276

237

Operating Cash Flow

252

212

Development and Production Capital Expenditure

136

33

Exploration Expenditure

49

28

At 31 December 2019, net receivables (after provision for bad and doubtful debts) in Egypt were $222 million, of which $126 million were classified as overdue (31 December 2018: $240 million net receivables, of which $106 million were classified as overdue). A further payment for $55 million was received in January 2020.

Edison E&P production

Average Working Interest production from the Edison E&P portfolio during 2019 was 64.2 kboed. Average 2019 production from the assets to be retained by Energean was 56.4 kboe/d and, for this set of assets, pro forma 2020 production guidance is a range of 42.5 – 50.0 kboe/d. Average Working Interest production in the first two months of 2020 is estimated to have been 52.4 kboe/d.

During 2020, Energean expects Egyptian production to average 32 – 37 kboe/d, Italy to average 8 – 10 kboe/d and Croatia to average 0.5 kboe/d. After an initial reduction during 2020 due to the natural depletion of the fields, production is expected to rise again in the medium term mainly due to new developments; Cassiopea in Italy, Yazzi/NEA/NI in Egypt and, potentially, Irena in Croatia. Production is also expected to be enhanced through the drilling of additional wells at Abu Qir; four locations have been identified for near-to-medium term drilling that, if sanctioned (noting that these wells represent discretionary capital expenditure), would target a combined 30 mmboe of reserves for a total budget of c.$90 million.  

Country

2020 Pro Forma Production Guidance

  • kboe/d

2019 Average Working Interest Production – kboe/d[5]

Italy

8 – 10

10.4

Egypt

32 – 37

45.5

Croatia

0.5

0.5

Edison E&P Assets to be Acquired

42.5 – 50.0

56.4

Algeria

 

5.2

UK

 

2.5

Total

 

64.2

Edison E&P reserves

As at 30 June 2018, the Edison E&P assets to be acquired had 2P reserves of 239 mmboe of working interest 2P reserves according to an independent CPR prepared by DeGolyer and MacNaughton. The reserves report is currently being updated to reflect an effective date of 31 December 2019 and will be published in the Shareholder Circular, to be sent to shareholders in connection with the acquisition. The new CPR is expected to reflect a corresponding decrease in reserves as a result of 18 months of production. Reserve replacement has been limited over the period due to limited investment associated with the disposals process and change of control. 

Edison E&P Development

Italy  – Argo Cassiopea

In December 2019, ENI and Edison E&P received the renewal of the Italian EIA approval on Cassiopea (ENI 60% Op., Edison E&P 40%). The development consists of four subsea wells (two new wells and two re-completed wells) and uses a subsea production system with a 60 kilometre pipeline to shore, where gas compression and treatment will be performed inside the existing Gela refinery. The drilling campaign is expected to be undertaken between 1Q and 3Q 2022 and the subsea installation campaign 2Q to 4Q 2022, with first gas expected in early 2023. The development is expected to add an estimated 60 mmscf/d (10 kboe/d) of net production.

Egypt – NEA/NI

The NEA and NI assets are satellite fields of the Abu Qir gas-condensate asset. Edison E&P has a 100% working interest in both accumulations. The development concept includes four subsea wells, to be drilled in water depths ranging from 30 to 85 metres, and tied back to the North Abu Qir III platform. A final investment decision is expected in mid-2020 with first gas expected 18 months later. The development will target an estimated 52 million barrels of working interest 2P reserves at a total cost of approximately $200 million.  

The development will add limited operating costs to the Abu Qir complex, resulting in attractive netbacks.

Expected peak production from the NEA / NI development is an incremental 90 mmscf/d plus 1 kbopd of condensate.

Croatia

Edison E&P expects to spud the Irena-2 appraisal well in 2Q 2020. It will target the same gas-bearing horizon that was successful in Irena-1 and, in the event of a success, the well will be suspended for future production.

Edison E&P Exploration

In Egypt, the Ameeq well, which is being drilled on the North Thekah Offshore Block, spudded on 18 January 2020.

In Italy, an additional two firm exploration wells will be drilled into the Gemini and Centauro prospects, which are adjacent to the Cassiopea field, in 2022. These wells will target a combined c.9.7 mmboe of gross prospective resources and each has a Geological Chance of Success of 90%. If successful, the wells would be tied back to the Cassiopea subsea system. 

2020 Guidance – pro forma for the combined business, includes Edison E&P

The production and financial data below reflects the Edison E&P forecasts for the full year. Edison E&P will be consolidated into Energean’s financial statements from the date of transaction completion, which is expected later in 2020. Energean will benefit from net cash flows between the locked-box date of 1 January 2019 and the date of transaction completion through an adjustment to the variable consideration.

 

2020

 

Jan & Feb 2020 Performance

 

Production

 

 

 

     Egypt (kboe/d)

32 – 37

40.2

 

     Italy (kboe/d)

8 – 10

9.7

 

     Greece (kboe/d)

2 – 2.5

2.2

 

     Croatia (kboe/d)

0.5

0.3

 

Total Pro Forma Production (kboe/d)

42.5 – 50.0

52.4

 

 

 

 

 

Financials

2020

Discretionary Amount

 

Operating Costs & G&A ($ million)

225 – 250

 

 

 

 

Development and Production Capital Expenditure

 

 

 

  • Israel ($ million)

580

Funded by project finance facility

  • Egypt ($ million)

100

100

70 million NEA/NI; $20 million Abu Qir facilities; $8 million Abu Qir wells

  • Italy ($ million)

75

40

All discretionary apart from $25 million investment in Cassiopea and $10 million in Leoni

  • Greece ($ million)

5

100% owned and operated, Epsilon investment deferred

  • Croatia ($ million)

10

Appraisal well committed, capacity to delay exists

Total Pro Forma Development & Production Capital Expenditure ($ million)

770

140

 

 

 

 

 

Exploration Capital Expenditure (Firm)

 

 

 

  • Israel ($ million)

5

 

  • Egypt ($ million)

60

 

  • Italy ($ million)

 

  • Greece ($ million)

5

 

  • Croatia ($ million)

 

  • Other ($ million)

 

Total Pro Forma Exploration Capital Expenditure ($ million)

70

 

Financial review

Focused on maintaining strong financial discipline

Revenue, production and commodity prices

Working interest crude production from Greece averaged 3,312 bopd, a decrease of 18% for the period (2018: 4,053 bopd). The decrease in production was due to the decision to put the Prinos Area assets under strategic review following the review of capital allocation that was initiated earlier in the year. As a result, investment in Prinos and Prinos North was limited to $14.0 million during the period, while this process was being undertaken.

Prinos crude is sold at a $6.6/bbl. discount to Urals Med blend, adjusted for final cargo API. In 2019 the average sales price achieved was $58/bbl.

Depreciation, impairments and write-offs  

Depreciation charges before impairment on production and development assets increased by 15% to $39.1 million (2018: $34.3 million) due to increased capital expenditure invested in Greece during 2018, along with finance lease assets’ depreciation recorded for the first time in 2019 (IFRS 16 adoption). The Group recognised a gross impairment charge of $71.1 million in 2019 (2018: $nil). In the period, indicators of impairment were noted for the Prinos CGU, being a reduction in both short-term (Dated Brent forward curve) and long-term price assumptions and a change in the Group’s Prinos field production forecast, which have resulted in an impairment of $71.1 million in the carrying value of the Prinos CGU. 

Selling, general and administrative (SG&A) expenses 

Energean incurred SG&A costs of $13.7 million in 2019. This represents a 13% increase on the previous year (2018: $12.1 million) and is due to the additional staffing and administrative costs associated with the continued growth of the Group’s portfolio and the efforts associated with developing the Karish project.

For the full year 2020 Energean expects stand-alone SG&A costs to be $15.0 million. Edison E&P adds an estimated additional $30 million on a pro forma basis.

Other expenses

Other expenses of $21.6 million (2018: $1.1 million) consist predominantly of the direct costs incurred in 2019 relating to the proposed acquisition of Edison’s E&P business.

Finance costs

Financing costs before capitalisation for the period were $48.9 million (2018: $22.7 million). Included within this balance is $34.4 million of interest (2018: $12.2 million), of which $7.0 million relates to interest incurred on the RBL facility and $27.4 million on the Karish project finance facility. In addition, there was $7.2 million (2018: $5.7 million) of interest expenses relating to long term payables representing future payments to the previous Karish/Tanin licence holders. This was offset by capitalised borrowing costs of $39.9 million (2018: $9.3 million). The remainder of the total finance costs expensed relate primarily to finance and arrangement fees and other finance costs and bank charges. Total finance cost expensed amounted to $9.0 million (2018: $13.5 million).

Crude oil hedging

Energean had no hedges during the period and has no outstanding crude oil hedges at year-end. Energean will keep its hedging position under review.

Taxation               

Energean recorded tax income of $20.5 million in 2019 (2018: $15.5 million tax income) primarily associated with the deferred tax impact of the impairment losses associated with the Prinos assets.

Operating cash flow

Cash from operations before movements in working capital was $18.5 million (2018: $53.9 million). After adjusting for working capital movements, cash from operations was $36.3 million, a 42.1% decrease on the comparable period (2018: $62.7 million). The decrease is driven by reduced production and revenue in the period and due to $8.1 million of direct transaction costs for the proposed acquisition of Edison E&P in 2019, which have been recorded under operating activities.

Financial results summary

Metric

2019

2018

Av. Daily working interest production (kboed)

3.3

4.1

Sales revenue ($M)

75.7

90.3

Realised oil price ($/boe)

57.6

61.3

Cost of oil production ($m)

25.9

26.0

Cost of production per barrel ($/boe)

21.5

17.6

Administrative & selling expenses ($m)

13.7

12.1

Adjusted EBITDAX ($m)

35.6

52.4

Cash flow from operating activities ($m)

36.3

62.7

Capital expenditure ($m)

685.1

494.6

Cash capital expenditure ($m)

954.6

293.6

Net debt (cash) ($m)

561.6

(75.6)

Net debt/equity (%)

44.5%

(6.95)%

Non-IFRS measures

The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles. These non-IFRS measures include adjusted EBITDAX, cost of oil production, capital expenditure, cash capex, net debt and gearing ratio and are explained below.

Cost of oil production

Cost of oil production is a non-IFRS measure that is used by the Group as a useful indicator of the Group’s underlying cash costs to produce hydrocarbons. The Group uses the measure to compare operational performance period to period, to monitor costs and to assess operational efficiency. Cost of oil production is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory movements. 

 

2019

 

2018

$M

$M

Cost of sales

65.6

58.8

Less

          Depreciation

(36.6)

(33.9)

          Change in inventory

(2.9)

1.1

Cost of oil production

25.9

26.0

Total production for the period (boe)

1,208,978

1,479,367

Cost of oil production per boe ($)

21.5

 

17.6

Prinos production fell by 18% in 2019. This has resulted in a 22% increase in per barrel production costs, from $17.6/bbl. in 2018 to $21.5/bbl.

Adjusted EBITDAX 

Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation and amortisation, other income and expenses (including the impact of derivative financial instruments and foreign exchange), net finance costs and exploration costs. The Group presents adjusted EBITDAX as it is used in assessing the Group’s growth and operational efficiencies, because it illustrates the underlying performance of the Group’s business by excluding items not considered by management to reflect the underlying operations of the Group. 

 

2019

2018

Metric

$M

$M

Adjusted EBITDAX

35.6

52.4

Reconciliation to profit/(loss):

 

 

Depreciation and amortisation

(39.1)

(34.3)

Exploration and evaluation expense

(0.8)

(2.1)

Impairment loss on property, plant and equipment

(71.1)

Other expenses

(21.6)

(1.1)

Other income

3.1

8.9

Finance expenses

(9.0)

(13.5)

Finance income

2.5

1.7

Gain on derivative

96.7

Net foreign exchange

(3.9)

(23.5)

Taxation income/(expense)

20.5

15.5

(Loss)/income for the year

(83.8)

100.8

Capital expenditure

Capital expenditure is a useful indicator of the Group’s organic expenditure on oil and gas assets and exploration and appraisal assets incurred during a period. Capital expenditure is defined as additions to property, plant and equipment and intangible exploration and evaluation assets excluding decommissioning, capitalised depreciation, less capitalised borrowing cost.

 

2019

2018

Metric

$M

$M

Additions to property, plant and equipment

670.6

502.0

Additions to intangible exploration and evaluation assets

61.7

6.2

Less

 

Capitalised borrowing costs

(39.9)

(9.3)

Capitalised depreciation

(1.9)

(2.6)

Change in decommissioning provision

(5.4)

(1.8)

Total

685.1

494.6

Capital expenditure was $685.1 million, of which $611.9 million was invested in Israel, $68.4 million in Greece (Epsilon – $45.2 million) and $4.9 million in Montenegro.

Cash capital expenditure in 2019 was $954.5 million (FY 2018: $293.6 million).

 

2019

2018

Cash Capital Expenditure

$M

$M

Payment for purchase of property, plant and equipment

897.2

290.1

Payment for purchase of intangible assets

57.4

3.5

Total

954.5

293.6

Net cash/debt and gearing ratio

Net debt is defined as the Group’s total borrowings less cash and cash equivalents. Management believes that net debt is a useful indicator of the Group’s indebtedness, financial flexibility and capital structure because it indicates the level of borrowings after taking account of any cash and cash equivalents that could be used to reduce borrowings. The Group defines capital as total equity and calculates the gearing ratio as net debt divided by capital.

Net debt reconciliation           

 

 

2019

 

2018

 

 

$M

 

$M

Net Debt

Current borrowings

38.1

Non-current borrowings

877.9

144.3

Total borrowings 

916.0

144.3

Less: Cash and cash equivalents and bank deposits

(354.4)

(219.9)

Net (Funds)/Debt (1)

561.6

(75.6)

Total equity  (2)

1,260.8

1,087.8

Gearing Ratio (1)/(2):

44.54%

(6.95%)

In July 2019, Energean raised $265.1 million through the issuance of new ordinary shares on LSE and TASE. Net of cash transaction costs of $8.2 million this contributed $256.9 million of cash to the Group in 2019 .

Edison E&P acquisition

In July 2019, Energean agreed to acquire Edison Exploration & Production S.p.A. from Edison S.p.A. for $750 million, to be adjusted for working capital, with additional contingent consideration of $100 million payable following first gas from the Cassiopea development (expected early 2023), offshore Italy.

Energean also agreed to sell the UK and Norwegian subsidiaries of Edison E&P to Neptune Energy for $250 million, to be adjusted for working capital, with additional contingent consideration of up to $30 million. The sale is contingent on Energean completing upon its acquisition of Edison E&P and is expected to close as soon as is reasonably practicable after close of the Edison E&P transaction.

On 23 December 2019, Energean announced that Edison S.p.A. had received a letter from the Algerian authorities, which invited Edison to discuss the transaction with Sonatrach. Energean and Edison E&P subsequently agreed to exclude the asset from the transaction perimeter.  Carve out of the Algerian assets from the transaction perimeter has now been agreed in principle at an effective price of $155 million, based on an effective transaction date of 1 January 2019; the carve out remains subject to a signed, amended SPA.

Financing of the acquisition

The initial consideration was supported by a $600 million committed bridge loan facility underwritten by ING and Morgan Stanley, and S$265 million of equity financing. The total debt and equity capital raised was sized to cover both the initial consideration and working capital requirements of the enlarged group.

The bridge loan facility is expected to be replaced in 2020 using a reserve based facility and a bridge facility for the onward sale of the UK and Norwegian assets to Neptune Energy. The $100 million of contingent consideration is expected to be funded by the combined free cash flow of the Enlarged Group as well as any incremental reserve based facility capacity.

Placing

In July 2019, Energean also launched a placing with institutional investors of new ordinary shares of 1 pence each in the capital of Energean to raise up to £211 million (approximately $265 million) before expenses.

Proposed Edison E&P acquisition – 2019 financial results

During 2019, Edison E&P delivered the following financial results. These results have been prepared on the basis of Edison E&P’s accounting policies and are subject to adjustments when included in Energean’s upcoming Circular and Prospectus.

 

Edison E&P

Edison E&P exclusive of the UK, Norway and Algeria assets

 

2019 – $m

2019 – $m

Revenue

531

433

Operating costs

255

196

EBITDAX

276

237

Operating cash flow

252

212

Development and production capital expenditure

136

33

Exploration expenditure

49

28

Liquidity risk management and going concern

The Group carefully manages its risk to a shortage of funds by monitoring its funding position and its liquidity risk. Cash forecast are regularly produced and sensitivities run for different scenarios including change in Brent prices, different production rates and future capital expenditure investment profile.

Short-term cash forecasts have been stress-tested in light of the significant oil price reduction seen in early March 2020, with a primary scenario using an average price of $35.0/bbl for 2020 and $42.5/bbl for 2021, and a downside sensitivity run at $30/bbl average for both 2020 and 2021.

In this scenario, the Group would also target a further rationalisation of its cost base, including cuts to discretionary capital expenditure and operating cost. As at 31 December 2019, the Group had cash and undrawn facilities of $834.2 million million. Post-period end, Energean has also successfully increased its Israel Project Finance Facility by $175million to $1.45 billion (from $1.275 billion), providing additional headroom on its Karish development.

The Group’s revised forecasts show that the Group will be able to operate within its current debt facilities and has sufficient financial headroom for the 12 months from the date of approval of the 2019 Annual Report and Accounts. In arriving at this conclusion, the Directors also had regard to the Group’s ability to raise necessary funding as and when needed. In 2019, the Group successfully raised gross proceeds of $265.1 million through a private placement on the London and Tel Aviv Stock Exchanges. The Group also raised a $600 million bridge facility to provide funds for its acquisition of Edison E&P. The Group expects to replace this with a Reserve Based Lending (“RBL”) Facility (of up to $525m, of which between $400 and $450million is expected to be available) plus a Bridge to Disposal Facility (of up to $250million) for the sale of the UK and Norway assets to Neptune Energy. The purpose of the RBL will be to fund the acquisition, refinance the Greek RBL and provide headroom over the medium term for capital expenditure within the Group (excluding Israel).   

Based on an assessment of the Group’s cash flow forecasts under various scenarios, including the identification of associated risks and mitigants, the Directors have concluded that they have a reasonable expectation that the Group will continue in operational existence for a 12 month period from the date of approval of the 2019 Annual Report and Accounts and have therefore adopted the going concern basis in preparing the Group and parent company financial statements.

Coronavirus

Energean continues to monitor the ongoing COVID-19 outbreak, accessing the advice by the World Health Organisation and Public Health England to ensure that best-practice precautions are being applied. Clear information and health precautions on how employees should protect themselves and reduce exposure to, and transmission of, a range of illnesses along with general advice has been communicated across the organization.

Coronavirus has not yet affected Energean’s operations, but in the event that the COVID-19 outbreak escalates, Energean has contingency plans in place that will be followed.

Events since 31 December 2019

Energean is exposed to macro-economic risks, including pandemic diseases that could have a material adverse effect on its operations. We continue to monitor the recent Coronavirus outbreak, which is causing global economic disruption and may impact our performance in 2020. To date, the Coronavirus has not had a material impact on Energean’s activities. However, at present, it is not possible to predict whether the outbreak will have a material adverse effect on our future earnings, cash flows and financial condition.

On 6 March 2020, OPEC and non-OPEC allies (OPEC+) met to discuss the need to cut oil supply to balance oil markets in the wake of the Coronavirus outbreak, which has had a material adverse impact on oil demand. OPEC+ failed to reach agreement and on 7 March 2020, Saudi Aramco cut its Official Selling Prices, prioritizing market share over pricing. As a result, oil prices have fallen materially, which may have a material adverse impact on the component of Energean’s future earnings that are linked to oil prices.

In January 2020, Energean reduced the size of it EBRD Reserve Based Lending Facility to $161 million.

On 16 March 2020, Energean Israel signed a $175 million increase in its project finance facility, which is now sized at $1,450 million, increasing liquidity available to the company. 

Group Income Statement

 

YEAR ENDED 31 DECEMBER 2019    

 

 

2019

 

 

2018

 

Notes

$’000

 

 

$’000

Revenue

6

75,749

90,329

Cost of sales

7a

(65,552)

 

 

(60,019)

Gross profit

10,197

30,310

 

Administrative expenses

7b

(13,305)

(11,666)

Selling and distribution expenses

(345)

(453)

Exploration and evaluation expenses

 

(801)

(2,102)

Impairment of property, plant and equipment

10

(71,115)

 

 

Other expenses

7c

(21,584)

 

 

(1,118)

Other income

7d

3,095

 

 

8,869

Operating (loss)/profit

(93,858)

23,840

 

 

 

 

 

 

Finance income

8

2,496

1,735

Finance costs

8

(9,002)

(13,471)

Gain on derivative

5

96,709

Net foreign exchange losses

8

(3,933)

 

 

(23,521)

(Loss)/profit before tax

(104,297)

85,292

 

Taxation income

9

20,531

 

 

15,527

(Loss)/profit for the year

 

(83,766)

 

 

100,819

 

 

 

 

 

 

Attributable to:

 

Owners of the parent

(83,313)

105,279

Noncontrolling interests

 

(453)

 

 

(4,460)

 

 

(83,766)

 

 

100,819

 

Basic and diluted total (loss)/earnings per share (cents per share)

2

 

 

 

 

Basic

($0.50)

$0.80

Diluted

 

($0.50)

 

 

$0.79

 


 

Group Statement of Comprehensive Income

 

YEAR ENDED 31 DECEMBER 2019

 

 

 

2019

 

 

2018

 

 

$’000

 

 

$’000

Consolidated statement of comprehensive income

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the year

 

(83,766)

 

 

100,819

 

Other comprehensive loss:

 

Items that may be reclassified subsequently to profit or loss

 

Cash Flow Hedge, net of tax

 

434

 

 

Exchange difference on the translation of foreign operations

 

(3,751)

 

 

(4,288)

 

 

(3,317)

 

 

(4,288)

 

Items that will not be reclassified subsequently to profit or loss

 

Remeasurement of defined benefit pension plan

(466)

(444)

Income taxes on items that will not be reclassified to profit or loss

 

117

 

 

107

(349)

(337)

Other comprehensive loss after tax

 

(3,666)

 

 

(4,625)

 

Total comprehensive (loss)/income for the year

 

(87,432)

 

 

96,194

 

Total comprehensive (loss)/income attributable to:

 

Owners of the parent

(87,109)

100,856

Non-controlling interests

 

(323)

 

 

(4,662)

 

 

(87,432)

 

 

96,194

 

 

 

 

 


Group Statement of Financial Position

YEAR ENDED 31 DECEMBER 2019

 

 

2019

 

 

2018

 

 Notes

$’000

 

 

$’000

ASSETS

 

Non-current assets

ͮ

Property, plant and equipment

10

1,902,271

1,341,704

Intangible assets

11

71,876

10,555

Goodwill

75,800

75,800

Other receivables

4,076

71,845

Deferred tax asset

33,038

15,532

 

 

2,087,061

 

 

1,515,436

Current assets

 

Inventories

 

6,797

9,912

Trade and other receivables

12

59,892

32,883

Cash and cash equivalents

354,419

219,822

421,108

262,617

Total assets

 

2,508,169

 

 

1,778,053

 

EQUITY AND LIABILITIES

 

Equity attributable to owners of the parent

 

Share capital

13

2,367

2,066

Share premium

13

915,388

658,805

Merger reserve

139,903

139,903

Fuel price plunge pressuring refineries, opportunities seen

The plunge of international crude oil prices is impacting Greek refineries and local fuel trade, while, worse still, market forecasts are impossible to make, even for the short term.

Hellenic Petroleum (ELPE) and Motor Oil, Greece’s two refinery groups, are being tested by the fall of Brent prices to levels of around 30 dollars per barrel. Highlighting this challenge, unleaded 95 octane fuel prices have dropped to less than 1,000 euros per cubic meter (including surcharges before VAT) for the first time in many years.

This represents a drop of more than 100 euros compared to prices on March 9, dubbed “Black Monday” as it was the worst day in markets since the financial crisis, a result of the outbreak of the oil price and output level war between Russia and Saudi Arabia, along with the coronavirus spread’s impact on demand.

The drop in prices is seen continuing. Domestic fuel demand is falling as a result of the Greek government’s broadened enforcement of restrictive measures aiming to contain the coronavirus spread. Local transportation needs have subsequently dropped dramatically, while the only other viable option left for Greek refineries, exports, has been canceled out by plunging fuel demand internationally. Borders have closed and airlines are limiting flights.

The cost of fuel stocks, purchased at far higher prices, is a big concern for both ELPE and Motor Oil. This cost, however, can be partially offset by opportunities currently available for lower-cost production.

On a more positive note, both refineries reduced their loan servicing costs prior to the crisis. This is particularly so for ELPE as the petroleum group was pressured by high borrowing costs. Motor Oil has traditionally pursued a more conservative borrowing policy.

Both refineries will need to take extremely cautious steps amid these highly unpredictable market conditions, analysts agree.

Lower-cost oil, gas an obstacle for RES growth, electric cars

Lower-cost oil and gas, as well as solar module supply chain irregularities caused by the coronovarirus spread in China, the world’s dominant supplier of solar energy systems, have emerged as obstacles for RES sector growth and investments.

Numerous solar energy projects around the world are being delayed or postponed as a result of the solar module supply problems in China.

The recent plunge of oil and gas prices, prompted by the impact of the coronavirus spread on economies and a simultaneous oil-price war between Russia and Saudi Arabia, has suddenly made RES investments less competitive against conventional technologies in terms of electricity generation, energy efficiency or electrification of sectors such as transportation or shipping.

The duration of lower oil prices remains unknown.

Natural gas prices have fallen as a result of idle LNG shipments in China and forecasts for weaker demand worldwide.

Under the current conditions, market forces will turn against green energy technologies, which had just begun establishing themselves as competitive options against conventional technologies.

Questions are also being raised about the growth prospects of the electric vehicle market, still at an embryonic stage.

 

Lower-cost gas may save PPC an estimated €100m this year

The sharp drop in energy product prices, pressured by the coronavirus outbreak and an oil price war between Russia and Saudi Arabia, promises major and unexpected financial relief for power utility PPC.

The plunge of gas prices, alone, should benefit the Greek power utility by an estimated 100 million euros this year – assuming this drop is not ephemeral.

In the first half of 2019, PPC’s total purchasing cost for natural gas reached 222.5 million euros, a 57.1 percent increase.

In the liquid fuels category, PPC’s purchase expenses were also elevated, reaching 319.7 million euros, as a result of higher prices paid for mazut and diesel used by the utility at power stations on non-interconnected islands. To the delight of PPC, mazut and diesel prices are also tumbling.

Electricity tariff hikes made by PPC last September as well as a revised payback plan offering consumers greater incentive to service electricity-bill arrears through monthly installments are both producing favorable results.

A series of memorandums of cooperation, such as an agreement signed this week with Germany’s RWE, all promising dynamic penetration into Greece’s renewable energy market, offer further potential for PPC.

However, the power utility still faces an uphill struggle along its road to recovery. PPC’s financial results for 2019 will be announced in April.

 

Pros and cons for refineries, fuel demand sliding

The drop in oil prices as a result of the price war between Saudi Arabia and Russia and the coronavirus spread presents a major challenge for petroleum firms.

Brent crude’s 30 percent plunge last Monday inflicted major damage on companies stocked with petroleum products, Greek refinery officials informed, as these products had been  purchased at previously higher prices.

The market volatility, however, has also created opportunities, namely lower-cost supply of raw materials without the need for high working capital. Operating costs have dropped considerably.

The major concern at refineries and petroleum product trading companies is demand, or fuel consumption, expected to drop amid the growing number of mobility restrictions being imposed by governments around the world in an effort to contain the coronavirus outbreak.

Demand for gasoline and diesel has dropped since last weekend as a result of reduced transportation needs. This decline in fuel demand is expected to continue following latest preventive measures. The Greek government yesterday announced a measure closing all educational institutions for 15 days as of today.

Fuel demand levels during the year’s first two-month period were unchanged compared to a year earlier, but the month of March has already shown first signs of a decline. Many airlines are cancelling flights.

Petroleum companies fear a further deterioration from May onward, when Greece’s tourism season begins in earnest.

For the first time since 2009, the International Energy Agency has forecast a drop in petroleum consumption for 2020.

Natural gas, LNG, CO2 right, wholesale power prices down

Besides lower oil prices in international markets over the past few days as a result of the coronavirus spread and price war between Saudi Arabia and Russia, energy commodities across the board are under great pressure, which has led to price reductions for natural gas, CO2 emission rights and electricity.

Lower oil and gas prices are offering relief for the economy and enterprises. However, there are two sides to this story, positive and negative. On the one hand, the price drops are creating opportunities for suppliers and consumers, while, on the other, natural gas futures indicate a decline until the end of the third quarter this year, meaning markets anticipate a downward trajectory in Chinese consumption and no sign of an economic rebound until at least September.

Prices at the Dutch trading platform TTF, a key index for LNG, slid to a three-month low on Monday, registering 8.627 dollars per MMBTU, before edging up to 8.993 dollars per MMBTU yesterday. This index has fallen 39.4 percent since the end of December’s three-month peak of 14.2 dollars per MMBTU.

Besides shaping LNG prices, according to new pricing formulas adopted at Gazprom, the TTF also greatly influences the rise of Russian pipeline gas.

CO2 emission right prices have fallen by 13.6 percent between December and early February, from 26.74 euros per ton to 23.11 euros per ton. A slight rise has been registered this week, to 23.25 euros per ton on Monday and 24.07 euros per ton on Tuesday. Lower prices on this front are favorable for lignite-fired power stations as well as energy-intensive industries.

Prices have also fallen in Greece’s wholesale electricity market. In the day-ahead market, the System Marginal Price (SMP) fell from 49.2 euros per MWh on Friday to 41.42 euros per MWh on Monday before edging up to 43.12 euros per MWh yesterday. A rise to 50.44 euros per MWh is expected today.

 

Energean to acquire Total’s stake in Block 2, offshore Greece

Energean, the oil and gas producer focused on the Mediterranean, has signed an agreement for the acquisition of Total’s stake in Block 2, offshore Western Greece, providing further material exploration opportunities in its core area of the Eastern Mediterranean with limited financial exposure, the company has announced.

The deal further enhances the future growth potential of Energean’s portfolio and medium-term optionality to deliver value to all stakeholders, the company noted. 

On completion, Energean would acquire Total’s entire 50% Working Interest share and Operatorship. Energean’s net remaining expenditure towards satisfaction of the minimum work obligation, which includes 1800km of 2D seismic acquisition and processing – activity which Energean believes could significantly de-risk the prospectivity of the licence – is approximately €0.5 million. Energean believes this is a highly attractive transaction in the context of the early stage prospectivity identified on the Block.

Work to date on the licence has identified that Block 2 contains part of a large, potential target comprising of a four-way closure at the Top Jurassic Apulia platform. The prospect is thought to be an analogue to the Vega field offshore Italy, in which Edison E&P operates with a 60% working interest. The structure is covered by sparse 2D seismic which could be de-risked through the seismic programme that will be acquired as part of the minimum work programme.

The feature straddles the Greek and Italian maritime border with approximately 60% of the prospect within the Block 2 license with the remaining area part in Italian waters. Edison E&P, of which Energean expects to complete its acquisition during 1H 2020, as well as holding a 25% Working Interest in Block 2 also participates in the adjacent 84F.R-EL block offshore Italy, pending award. Post completion of the Edison E&P transaction, Energean will then own a 75% Working Interest in Block 2. Hellenic Petroleum owns the remaining 25% Working Interest.

ELPE growing internationally, expanding for bigger RES role

Hellenic Petroleum ELPE is increasingly internationalizing with project interests covering a broadened range beyond petroleum, including renewable energy and natural gas, the group’s chief executive Andreas Siamisiis, presenting the group’s future course, has underlined.

ELPE has set a short-term RES installations target of 300 MW by the end of next year, followed by a mid-term goal of 600 MW by 2025.

Renewable energy is expected to be responsible for five to 10 percent of the group’s EBITDA figure in the next five years, ELPE officials have projected.

RES involvement in the petroleum group’s annual EBITDA performances, which, in recent times, have ranged between 600 to 800 million euros, is limited to two million euros.

This EBITDA contribution is soon expected to rise sharply, to a level of 20 million euros, as a result of ELPE’s takeover of an unfinished 204-MW solar energy project, Greece’s biggest, started by Germany’s Juwi close to Kozani in Greece’s north. “This is the first such project. More will follow,” Siamisiis said.

The Kozani solar energy project, Greece’s biggest by far, twenty times the size of the largest of existing units, ranks among Europe’s four biggest solar energy parks.

This investment, totaling 130 million euros, is expected to generate 300 GWh annually. Remaining development and installation work is seen requiring 16 months to complete. The project’s launch is scheduled for the fourth quarter of 2021.

 

Crete offshore surveys by Total-led team late this year, early ’21

Intensified, follow-up seismic surveys by a Total-led consortium at two offshore licenses south and west of Crete will go ahead as scheduled late this year or early in 2021, sources have informed.

The exact commencement date will be determined by the availability of specialized research vessels and weather conditions. For now, preparations are progressing as planned.

France’s Total heads a three-member consortium for the two blocks off Crete, partnered by US giant ExxonMobil and Hellenic Petroleum (ELPE).

Low shipping traffic in the region will enable hydrocarbon exploration work as late as the spring season of 2021 if next winter’s weather conditions prove unsuitable.

Initial survey work at the Cretan blocks have produced encouraging results, especially at an offshore area given the name Talos, which has displayed similar geological traits to Egypt’s offshore Zohr gas field.

The results of preliminary research conducted by ELPE in 2015 convinced Total and ExxonMobil to form a partnership with the Greek player.

 

Athens wants greater French hydrocarbon engagement

The government wants France’s Total to play a more active role in Greek offshore hydrocarbon exploration, Prime Minister Kyriakos Mitsotakis made clear during a meeting in Paris yesterday with the French group’s chief executive Patrick Pouyanné.

The potential of Greece’s hydrocarbon market, including offshore licenses south and southwest of Crete held by a Total-led consortium – it also features Exxon Mobil and Hellenic Petroleum (ELPE) – was the main focus of yesterday’s meeting.

Processing of seismic data collected from the Cretan offshore blocks has provided strong evidence of a deposit sharing similar attributes to Egypt’s Zohr gas field. However, this needs to be proved in practice. French officials have remained cautiously optimistic as they await initial drilling operations for a clearer picture.

Total’s plans for exploration within the Cypriot Exclusive Economic Zone, specifically at Block 8, for which Total shares a license with Italy’s Eni, were also discussed yesterday.

Turkish drillship Yavuz has sought to engage in illegal exploration activities in this area. French officials do not intend to intercept any Turkish moves at this stage but are expected to do so if the exploratory rights of Total and Eni are disputed once the companies decide to start exploring the area.

 

Energean releases update on recent operations, performance

Energean Oil and Gas has provided an update on recent operations and the Group’s trading performance in 2019 together with guidance for 2020. This information is unaudited and subject to further review.
Mathios Rigas, Chief Executive, Energean commented: “Karish and Tanin is on track to deliver first gas in 1H 2021 and we have now secured 5.0 bcm/yr of firmly contracted gas sales to Israeli domestic buyers, 1.3 bcm/yr of contingent gas sales and 2.0 bcm/yr of potential sales to be discussed under a Letter of Intent with Greece’s DEPA. With the above we are fast approaching our goal to fill the capacity of the Energean Power. We are already looking at growth opportunities on the resource side from our nine blocks in Israel and on potential additional infrastructure capacity that will allow us to expand gas sales in the region. With the expected closing of the acquisition of Edison E&P and subsequent sale of the North Sea assets to Neptune, we will further enhance our position
in our core markets, substantially increase our reserves and production and realise immediate operating cash flow. Post completion, the combined portfolio will establish a material long-term cash flow profile that supports our ambition to pay a sustainable dividend. I look forward to continuing this positive momentum in 2020, with a key focus on delivering Karish; closing and integrating Edison E&P; and continuing the sustainable growth of Energean, maximising value for all of our stakeholders.”
“2019 has undoubtedly been the year that climate change has dominated the energy discussion; Sustainability continues to be at the core of Energean’s gas-focused strategy and in 2019, we became one of the first E&P Companies in the world to commit to net zero carbon emissions by 2050 and we are targeting over 70% reduction in our carbon intensity over the next three years, with a firm intention to continue our reduction efforts until we achieve our net zero target. In 2019, we also continued to deliver upon our exemplary HSE track record with one million hours free of Lost Time Incidents in Energean sites plus four million man hours in the FPSO construction yard in China.”

Highlights

Energean expects that year end 2019 Working Interest reserves and resources will be 554 million boe, a 38% increase on 2018 year end, driven primarily by the 190 mmboe Karish North Discovery.
The Karish development is on track to deliver first gas in 1H 2021.
Subject to finalisation of Netherland Sewell and Associates Competent Persons’ Reports. 2C resources for Karish
North are based on management estimates. Stated before Edison E&P assets are taken into account 

5.0 Bcm/yr of firm Gas Sales and Purchase Agreements (“GSPAs) signed in Israel, with a further 1.3 Bcm/yr of contingent contracts and 2.0 Bcm/yr of potential sales to be discussed under a Letter of Intent, demonstrating significant progress on our ambition to fill the 8 Bcm/yr capacity of our FPSO.
2019 average Working Interest production of 3.3 kbopd. Cost of Production was approximately $21 /bbl.
2019 full year revenue is expected to be approximately $76 million. Capital expenditure was $721 million.
At 31 December 2019, Energean had net debt of $557 million, including the non-recourse $638 million of net project finance debt within Energean Israel. Cash and undrawn facilities were $834 million.
Edison E&P (subject to closing)
Energean is working to close its acquisition of Edison E&P as soon as possible in 2020, with approval from Italy anticipated shortly. Formal approvals from Egypt are expected soon after shareholder approval at the EGM.
The acquisition is now expected to exclude the Algerian Asset. An update will be provided on the appropriate settlement on the total transaction consideration once this has been agreed.
Exclusive of the Algeria, the UK North Sea and Norway, Edison E&P delivered Operating Cash Flow of $212 million during 2019. Capital expenditure was $61 million3.
The updated Italian EIA approval on Cassiopea has been received by Edison E&P. The development is progressing as planned with First Gas expected in 2022.
Exclusive of Algeria and the UK North Sea assets, 2019 average Working Interest production was 56 kboe/d (64 kboe/d inclusive of these assets).

Outlook

Expected closing of the Edison E&P acquisition and subsequent sale of the North Sea assets to Neptune as soon as possible in 2020.
Following successful appraisal of the 190 mmboe Karish North discovery, Energean expects to issue an updated CPR and Field Development Plan. Energean Final Investment Decision on the Karish North development is expected during 2020.
Drilling of the Zeus exploration well plus two contingent exploration wells offshore Israel.
The Energean Power FPSO hull is expected to sailaway from China in March 2020. FPSO sailaway from Singapore is still anticipated around Year End 2020.
Strategic review of the Prinos Area assets initiated.
2020 pro forma group production4 is expected to be between 42.5 – 50.0 kboe/d5.
2020 pro forma consolidated group capital expenditure of $995 million6, of which $620 million is to be spent in Israel.
Decisions on FID at Katakolo (Greece) and Drill or Drop on both Ioannina (Greece) and
Montenegro.

Edison E&P Acquisition

Energean is working actively to close its Acquisition of Edison E&P as soon as possible, with approval from Italy anticipated shortly. Formal approvals from Egypt are expected soon after EGM approval. As announced on 23 December 2019, the transaction is now expected to exclude the Algerian Asset; Energean will provide an update on the settlement to the total transaction consideration once this has been agreed. Energean does not expect the exclusion of the Algerian Asset from the transaction perimeter to affect its ability to close the transaction on the remainder of the assets.
Average Working Interest production from the Edison E&P portfolio during 2019 was 64.2 kboed:

Country 2019 Average Working Interest Production –
kboe/d
7
Italy 10.4
Egypt 45.5
Croatia 0.5
Edison E&P Assets to be Acquired 56.4
Algeria 5.2
UK 2.5
Total 64.2

During 2019, Edison E&P delivered the following financial results. These results have been prepared on the basis of Edison E&P’s accounting policies and are subject to adjustments when included in Energean’s upcoming Circular and Prospectus.

Edison E&P
2019 – $ million
Edison E&P exclusive UK North
Sea, Norway & Algeria
2019 – $ million
Revenue 531 433
Operating Costs 255 196
EBITDAX 276 237
Operating Cash Flow 252 212
Development and Production
Capital Expenditure
136 33
Exploration Expenditure 49 28

In December 2019, ENI and Edison E&P received the renewal of the Italian EIA approval on Cassiopea. The development is now progressing in line with expectations, with first gas expected during 2022.
Gas has been converted to boe using a conversion factor of 5.8 mcf/boe. Numbers may not sum due to rounding. 

At 31 December 2019, net receivables (after provision for bad and doubtful debts) in Egypt were $222 million, of which $126 million were classified as overdue (31 December 2018: $240 million net receivables, of which $106 million were classified as overdue). A further payment for $55 million was received in January 2020.
The Ameeq well, which is being drilled on the North Thekah Offshore Block, spudded on 18 January 2020.
No material capex is expected to be incurred in Edison E&P before closing, except for committed exploration and sanctioned developments.

Reserves and Resources (exclusive of the Edison E&P portfolio)

Energean expects that year end 2019 Working Interest reserves and resources will be 554 million boe, a 38% increase on 2018 year end. The table below is preliminary and subject to finalisation.

Israel Greece Total
Oil
Mmbls
Gas
Bcf
Total
mmboe
Oil
Mmbls
Gas
Bcf
Total
mmboe
Oil
Mmbls
Gas
Bcf
Total
mmboe
Commercial Reserves
At 1 Jan 2019 22 1,558 298 49 5 49 71 1,563 347
Revisions 7 (99) (11) 5 2 6 12 (97) (5)
Production 0 (1) 0 (1) (1) 0 (1)
At 31 Dec 2019 29 1,460 287 53 7 54 82 1,466 341
Contingent Resources
At 1 Jan 2019 1 133 24 29 8 30 29 141 54
Revisions &
Discoveries
27 618 136 18 25 23 45 643 159
At 31 Dec 2019 27 751 160 47 33 53 74 784 213
Total Commercial Reserves & Contingent Resources
1 Jan 2019 23 1,692 322 77 13 79 100 1,704 402
31 Dec 2019 56 2,211 448 100 40 106 156 2,250 554

Israel

Energean’s Karish development project remains on track to deliver first gas into the Israeli domestic market in 1H 2021. Physical progress on the project as of 31 December 2019 was 72% complete.

Gas Sales & Purchase Agreements (“GSPAs”)

In January 2020, Energean signed a further GSPA that will add between 0.1 and 0.2 Bcm/yr of contingent gas sales. Energean now has firm gas sales agreements in place for 5.0 bcm/yr on plateau. The new contingent agreement adds a further 0.2 Bcm/yr, I.P.M Beer Tuvia contingent contract adds a further 0.4 Bcm/yr (both contingent, inter alia, on the booking of additional reserves from Karish North or other sources), and Or adds 0.7 Bcm/yr, increasing total potential domestic GSPAs to 6.3 Bcm/yr. During 2020 a
further IEC power plant (Ramat Hovav) is expected to be privatised. Energean notes that the first privatisation (Alon Tavor), which was completed in 2019, resulted in a GSPA for Energean with MRC, the winning bidder.

Subject to finalisation of NSAI reports Israel reserves and resources shown at 70% working interest

In January 2020, Energean and the Public Gas Corporation of Greece (“DEPA”) signed a Letter of Intent (“LOI”) for the potential sale and purchase of 2 Bcm/yr of natural gas from Energean’s fields in Israel through the proposed East Med Pipeline. The LOI provides a further option to monetise future discoveries across Energean’s nine leases in Israel, with clear visibility on a path to filling the capacity of the FPSO and potentially leading to the need to expand the capacity of Energean’s infrastructure in Israel. The LOI was signed concurrently with the Intergovernmental Agreement on the East Med Pipeline, which has a proposed capacity of 10 Bcm/yr and will connect Greece, Israel and the Republic of Cyprus to Italy and the rest of the EU and is currently envisaged to be operational by 2025 subject to FID by the promoters of the pipeline, IGI Poseidon.
Key development activities for 2020

2020 Drilling Programme

Energean completed the drilling of the three Karish Main development wells during 2019. Completions are currently being run and the Christmas Trees are expected to be installed before end 1Q 2020. All three development wells will then be ready for integration with the Sub Sea infrastructure and Hook Up to the FPSO.
Energean expects to spud the Zeus exploration well, targeting 0.6 Tcf of Gas Initially in Place (“GIIP”) in March 2020. In addition to Zeus, Energean is preparing to drill two additional exploration wells during 2020, which will be contingent on the results from Zeus. Prospects being evaluated for drilling include Athena (0.6 Tcf GIIP, Block 12), Hera (0.4 Tcf GIIP, Block 12) and Poseidon (1.0 Tcf GIIP, Block 21). Following this campaign, the rig will be released to another operator, which will execute a 3-4 well campaign in the
region. Following this campaign, Energean intends to take the rig back for the remaining options under its drilling contract.
Following the Zeus exploration well, Energean has five remaining drilling options under its contract with Stena Drilling.
Exploration activities during the second half of 2020 will focus on the analysis of well results and the reprocessing, integration and evaluation of seismic data.
FPSO Hull and Topsides The hull sailaway date from the Cosco Yard in China has been deferred to 31 March, a delay of 3.5 months.
However, excellent progress has been made on the topsides at the Admiralty Yard in Singapore and it is still anticipated that the integrated Hull and Topsides will sail away from Singapore to Israel around Year End 2020 with first gas from the project anticipated during 1H 2021.
Subsea Installation and Pipeline
During 2020, all components of the subsea production system will be installed using vessels provided by TechnipFMC.
The sales gas pipeline will be installed with activities commencing close to shore in territorial waters and then moving progressively offshore towards the FPSO location.

Karish North

Energean expects to submit an updated Field Development Plan to address the tie-back of the 0.9 Tcf (25 Bcm) plus 34 mmbbls Karish North discovery in 1H 2020. A CPR is also expected during 1H 2020.

Greece

In Greece, total reserves and contingent resources have seen a 34% year-on-year increase, to 106 mmboe. This has resulted from the new discoveries in the Epsilon reservoir and reprocessing and interpretation of data at Katakolo.
Energean has decided to place its Prinos Area assets under strategic review. Investment in Prinos and Prinos North will remain limited whilst this work is concluded. Energean delivered average 2019 FY production of 3.3 kbopd. Due to limited investment resulting from the strategic review, 2020 production is expected to be in the range of 2.0 to 2.5 kbopd. The Energean Force remains smart-stacked in Phillipos Port; 2020 production from Prinos and Prinos North will be maintained through rig-less activities requiring
limited expenditure.
During 2019, all three Epsilon Lamda platform development wells were successfully drilled. As previously announced, additional pay was encountered in the deeper and dolomitic zones of the Epsilon reservoir.
This is expected to result in a reserve and contingent resource increase of 16 mmboe. The jacket for the Lamda platform is 80 – 85% complete in the Constanza shipyard.
At Katakolo, award of the EIA is expected in 2Q 2020 with potential Final Investment Decision thereafter.
Katakolo reserves are expected to be 14 mmbbls, a 33% increase on 2019.
The Underground Gas Storage project in South Kavala saw a positive development in 4Q 2019 when an amendment to the law was passed on 10 December. A paragraph was added at the end of article 93, making it possible for the Regulating Energy Authority to pass regulation on the tariff. This paves the way for a tender for the project, which is expected during 2020.

Exploration

In Ioannina, interpretation of the newly acquired seismic lines is ongoing and a drill-or-drop decision will be taken in 1H 2020. The quality of acquired seismic was a major improvement when compared to historic vintages and the lines have identified two prospective trends with multiple analogue prospects. Further, the new 2D seismic has verified the existing geological model, de-risking existing prospectivity. The seismic
lines were acquired with minimal environmental impact and Energean and the operator, Repsol, have agreed to plant trees in areas away from the 2D seismic lines.
In Aitoloakarnania, the operator, Repsol, is carrying out the necessary environmental studies in preparation for the 2D seismic acquisition campaign, which is expected to commence in 2Q 2020, subject to permitting.

In Montenegro, a number of shallow gas prospects and deeper carbonate prospects have been identified through interpretation of the newly acquired seismic data. Energean is awaiting final data in order to confirm the primary prospect. The Ministry of Economy in Montenegro confirmed that Energean will receive an extension to the first exploration phase to 15 March 2021, with a drill-or-drop decision by year end 2020.

Financial and Corporate Update

Guidance is provided in relation to Energean’s full year reporting to 31 December 2019 in advance of the Group’s Full Year Results release on 19 March 2020. Guidance figures have not been audited and may be subject to further review and amendment.

2019
Total Revenue ($ million) 76
Cost of Production ($ million) 26
EBITDAX ($ million) 36
Operating Cash Flow ($ million) 32
Development & Production Capital Expenditure ($
million)
Israel ($ million) 597
Greece ($ million) 63
Total ($ million) 660
Exploration Capital Expenditure ($ million)
Israel ($ million) 47
Greece ($ million) 9
Montenegro ($million) 5
Total ($ million) 61
Total Net Debt ($ million) 557
Net Debt – Israel ($ million) 638
Cash and Undrawn Facilities ($ million)10 834
Israel – Cash ($ million) 110
Israel – Undrawn Facilities ($ million) 445
Ex Israel – Cash ($ million) 244
Ex Israel – Undrawn Facilities ($ million) 35

Excluding the $600 million acquisition bridge

2020 Pro Forma Guidance

2020
Production
Egypt (kboe/d) 32 – 37
Italy (kboe/d) 8 – 10
Greece (kboe/d) 2 – 2.5
Croatia (kboe/d) 0.5
Total Pro Forma Production (kboe/d) 42.5 – 50.0
Operating Costs ($ million) 225 – 250
Development and Production Capital Expenditure
– Israel ($ million) 590
– Egypt ($ million) 10012
– Italy ($ million) 120
– Greece ($ million) 65
– Croatia ($ million) 10
Total ($ million) 885
Exploration Capital Expenditure (Firm)
– Israel ($ million) 40
– Egypt ($ million) 60
– Italy ($ million)
– Greece ($ million) 10
– Croatia ($ million)
– Other ($ million)
Total ($ million) 110

 

Cippe 2020 in Beijing next March promises glimpse into oil, gas future

cippe, the world’s leading trade fair for the petroleum and petrochemical industry, hailed as the wind vane of the industry and the shortcut for key stakeholders to sense the change in the energy market, gathers global manufacturers, purchasers, engineers, officials, agents and media in Beijing at the end of March each year.

The next cippe event, the 20th edition, is scheduled to be staged March 26-28, 2020 at the Beijing New China International Exhibition Center.

cippe2020 will add one more exhibiting hall, for seven in total. In addition, a dramatic increase in the number and quality of exhibitors is expected, organizers noted.

Besides domestic giants such as CNPC, Sinopec, CNOOC, Jereh, KERUI, SANY, CIMC ENRIC, CASIC, JS, JERRYWON, ANTON, HBP, BL, Brightway, HBIS GROUP and so on, cippe2020 will have leading international exhibitors including Schlumberger, KOGAS, Naftogaz, SOCAR, CATERPILLAR, MTU, ARIEL, ALLISON, NOV, API and Cummins, etc.

In the past 19 years, cippe has brought together millions of high-quality visitors. The Global Buyers Invitation Plan has also received positive feedback from the market. cippe2019 attracted 120,000 professional visitors and more than 400 purchasing groups from home and abroad.

Through nearly 100 concurrent high-end forums, conferences and new product launches, visitors can interact fully with exhibitors and speakers, and learn a lot about the development of petroleum and petrochemical industry. cippe is where the participants’ practice becomes the mainstream trend, and the speakers’ opinions become the voice of industry.

cippe Gold Award of Innovative Product, “International Petroleum & Natural Gas Summit,” The International Petroleum and Petrochemical Technology Conference, Embassy (Oil & Gas) Promotion Conference, cippe Business Matchmaking Conference and other thematic events will create numerous interactive opportunities for the visitors and the exhibitors.

Contacts

cippe2020 Organizing Committee

For Exhibitors 
Mona Wang, 86-10-56176968
cippe@vip.163.com
cippe@zhenweiexpo.com

For Visitors 
Yolanda Zhao, 86-10-56176962
yolanda@zhenweiexpo.com

For Media 
Max Heinrich, 86-10-5617 6931
mxj@zhenweiexpo.cm

Energean honors International Day of Persons with Disabilities

Energean, the oil and gas producer focused on the Mediterranean, has honored the International Day of Disabled Persons across its international locations, the company announced in a statement.

In Israel, Energean supported an event at Rabin elementary school, located in the northern city of Nesher, attended by approximately 100 4th grade students. The aim of the activity was for the children to experience some of the daily challenges faced by disabled people. Activities included communicating in sign language and maneuvering through a room full of obstacles in a wheelchair.

In Kavala, Greece, Energean has continued supporting the School of Special Vocational Education and Training. This year, the company offered its support to an event organised by the school on the International Day of Disabled Persons, and donated equipment for the school’s multi-sensory room, aiding children on the autistic spectrum and with learning difficulties. The school’s multi-sensory room was constructed with proceeds from a crowd-funding effort initiated by Energean.

In the Ilia region, west Peloponnese, Energean made a donation to the Association of Paraplegics and Disabled people, a foundation the company has continued to support and collaborate with.

Mrs. Ilia Rigas, Head of Energean Corporate Social Responsibility, commented:  

“We are very happy and proud for all the initiatives we have undertaken to honor the International Day of Disabled Persons. These events are important to Energean as we continue our efforts to contribute to the United Nations’ 2030 agenda and UN’s effort towards a world that is fully inclusive for persons with disabilities. The initiatives serve the UN’s Sustainable Development Goals, specifically Goal 10, which is to reduce inequalities, and Goal 17, which is partnerships for the Goals.”

“At Energean, December 3rd is celebrated all year round, since it is our philosophy to support, every single day, a world of inclusion, empowerment and equality for Persons with Disabilities.”

Energean appoints Non-Executive Chairman, Ind. Non-Executive Director

Energean Oil and Gas, the oil and gas producer focused on the Mediterranean, has announce the appointment of Karen Simon (photo), currently Independent Non-Executive Director, as Non-Executive Chairman, replacing Simon Heale, who has retired; and Amy Lashinsky as Independent Non-Executive Director, all effective on 21 November 2019.

Karen Simon is newly retired from J.P. Morgan as a Vice Chairman in the Investment Bank with over 35 years of corporate finance experience with the firm.

Most recently, Ms. Simon headed up Director Advisory Services, a newly established client service at J.P. Morgan focused on public company directors.

From 2004 to 2016, Ms. Simon worked with private equity firms in J.P. Morgan’s Financial Sponsor Coverage group and was promoted to head the European group in 2007 and the North American group in 2013.

Ms. Simon held a number of other senior positions previously, including Co-Head of EMEA Debt Capital Markets and Head of EMEA Oil & Gas coverage.

Ms. Simon spent 20 years of her career working in London and is a dual US/UK citizen. She currently sits on the boards of Aker ASA in Oslo, an industrial investment company, and the Texas Woman’s Foundation, a non-profit charity focused on the needs of underprivileged girls and women across Texas.

Ms. Simon graduated from the University of Colorado and has Masters degrees from Southern Methodist University and from the American Graduate School of International Management.

Karen Simon, Non-Executive Director and new Chairman, remarked:

“It is a privilege for me to step up as Chairman at Energean, a company with a clear strategy, a strong and growing asset base and a focused, diverse and professional team. I look forward to working closely with colleagues to drive the business forward and create value for our shareholders as we execute our transition fuel strategy. On behalf of the Board I would like to thank Simon [Heale] for his significant contribution to Energean and the entire Energean team offers Simon all best wishes for the future.”

Simon Heale, non-executive Chairman, noted:

“Karen Simon has made a significant contribution to Energean since she became a Non-Executive Director in 2017 and I leave Energean in excellent hands, with listings in London and Tel Aviv, a significant development in Israel and a growing reserves and production base in the Mediterranean. With its gas-weighted strategy and portfolio, Energean is well-placed to address the many challenges and opportunities ahead. It has been an honor to serve on the Board and I wish Energean every success, going forward.”

Amy Lashinsky, the new independent Non-Executive Director, is a co-founder of Alaco, the international risk management company, and a member of its Board.

Ms Lashinsky trained as a securities analyst on Wall Street before joining Kroll in New York in 1985. She moved to London in 1988 to help establish Kroll’s first overseas office where she became Managing Director of its business intelligence unit.

In 1995 Ms. Lashinsky set up Asmara Limited, which was sold to NYSE-listed Armor Holdings in 1998, before founding Alaco in 2002.  Ms Lashinsky graduated from the University of Michigan.

New and ambitious NECP set for consultation procedure

Greece’s new National Energy and Climate Plan, expected this week for public consultation, will be aggressive in terms of decarbonization targets and principles, details discussed by the plan’s committee last Friday have indicated.

Besides total decarbonization by 2028 and a RES sector energy mix percentage of 35 percent by 2030, the new NECP also includes energy savings of at least 35 percent compared to 2007 consumption levels, energypress sources have informed.

The targets set for electric vehicle usage are also ambitious. Despite initial reservations, the maintenance of a target for a domestic electric car fleet of 10 percent by 2030 is being considered, the same sources noted.

The swift withdrawal of lignite-fired units during the NECP’s early stages, combined with the development of natural gas-fueled units will be pivotal for the new plan’s success.

Like its precursor, the new plan is also expected to feature targets aiming for reduced greenhouse emissions and energy dependence, the latter resulting from high-level usage of petroleum products and, to a lesser extent, natural gas. Combined, the two energy sources represent over 65 percent of the country’s gross energy consumption.

A longer second national plan with targets reaching 2050 is also expected to soon be delivered by the ministry for consultation, sources noted.

Energean releases trading update covering recent activity

Energean Oil and Gas, the oil and gas producer focused on the Mediterranean, has released the following trading update for the period from 30 June 2019 to 12 November 2019.

Highlights

Transaction Update:

  • On track to complete the Edison E&P acquisition around year end 2019 (“Acquisition Completion”). The onward sale of Edison E&P’s UK and Norwegian subsidiaries to Neptune Energy is on track to complete as soon as is reasonably practicable thereafter.
  • Refinancing of the $600 million committed bridge facility with a Reserve Based Lending (“RBL”) facility progressing well; expected to be in place in 4Q 2019, before Acquisition Completion.

Operational:

  • On track to deliver first gas from the Karish Development in early 2021.
  • Completed the drilling of the three development wells required to deliver first gas from Karish.
  • Karish North appraisal confirmed best estimate recoverable resource volumes of 0.9 Tcf (25 Bcm) plus 34 MMbbls of light oil / condensate (combined c.190 mmboe).
  • Signed a Term Sheet with MRC Alon Tavor Power, Ltd., the winning bidder of the Alon Tavor tender, which could add a further 0.5 Bcm/yr of firm gas sales.

Outlook:

  • Committed to drilling the Zeus exploration well in Block 12, Israel, targeting 0.6 Tcf.
  • Full year production guidance maintained at 3,400 – 3,600 bopd.
  • At 30 September 2019, Energean had cash and undrawn debt facilities of $1.6 billion.  

Acquisition of Edison E&P

Energean remains on track to complete the acquisition of Edison E&P, announced on 4 July 2019, around year end 2019 and Edison E&P continues to perform in line with expectations. Energean is progressing the necessary regulatory approvals. To date, approvals have been received in France, Norway and Greece. Approvals are outstanding, and expected shortly, in Italy, Egypt, Algeria and the UK.

The $600 Bridge Loan is expected to be replaced with a reserve-based lending facility before Acquisition Completion. The process is progressing in line with expectations.

Disposal of UK North Sea & Norway Assets to Neptune Energy

Energean remains on track to complete the sale of Edison E&P’s UK and Norwegian subsidiaries to Neptune Energy, as announced on 14 October 2019. The sale is contingent on Acquisition Completion and is expected to close as soon as is reasonably practicable thereafter.

Israel – Karish and Tanin Development

Energean’s Karish and Tanin development project remains on track to deliver first gas into the Israeli domestic market in 2021. During the period, Energean met its key milestones of completing the drilling of the three development wells required to deliver first gas from Karish, appraising the Karish North Discovery and launch of the Energean Power FPSO hull.

Israel – Drilling

As announced on 4 November 2019, Energean has now completed sidetrack appraisal operations at Karish North, confirming best estimate recoverable resources of 0.9 Tcf (25 BCM) plus 34 million barrels of light oil / condensate (combined c.190 mmboe), significantly enhancing Energean’s discovered resource volumes across its Karish and Tanin leases.

Low, Best and High case estimated resources are outlined in the table below. The remaining volumetric uncertainty is largely associated with thinly bedded sections of the reservoir in the B Sand Unit. This potential will be confirmed via acquisition of a core from this section, which is expected to be achieved when the well is completed as a producer.

Low Case Best Estimate High Case
GIIP (Tcf) 1.1 1.3 1.8
GIIP (BCM) 30.0 35.6 51.6
Recoverable Gas (Tcf) 0.7 0.9 1.4
Recoverable Gas (BCM) 19.5 24.9 38.7
Recoverable Liquids (MMbbls) 25.2 34.2 55.0

 

The Karish North Discovery will be developed via a tie-back to the Energean Power FPSO, which will be located 5.4 kilometers away and is being built with 8 Bcm/yr (775 mmcf/d) of capacity. Future GSPAs will target both the growing domestic market and key regional export markets.

As planned, the Stena DrillMax has now moved to complete the three Karish Main development wells. Following completion of these wells, Energean has elected to drill the Zeus exploration well, which is targeting 0.6 Tcf of Gas Initially In Place (“GIIP”) across three reservoir intervals. Zeus is located in Block 12, between the Karish and Tanin leases, and a discovery would be commercialised through the Energean Power FPSO. The Zeus exploration well is expected to cost $35 million (gross).

Energean is assessing options for the remaining five drilling options available under its contract with Stena.

Israel – Commercial

In December 2018, Energean signed a GSPA with I.P.M Beer Tuvia Ltd. (“I.P.M.”) to supply an estimated 5.5 Bcm (c. 0.2 Tcf) of gas over the life of the contract. The contract is contingent, inter alia, on the results of Energean’s 2019 drilling programme and the results from the Karish North exploration well and appraisal sidetrack well significantly increase the likelihood of it becoming unconditional. Inclusive of the I.P.M contract, Energean’s firm contracted gas sales are equivalent to 4.7 Bcm/yr.

Energean has also recently signed a detailed term sheet with MRC Alon Tavor Power, Ltd., the winning bidder in the IEC Alon Tavor tender process. If, as is the express intention of the parties, this is converted into a GSPA, this will add c.0.5 Bcm/year (48 mmcf/d).

Finally, Energean also has a conditional GSPA with Or Power Energies (Dalia) Ltd. (“Or”), which is contingent, inter alia, on certain conditions precedent. The contract is for c.0.7 Bcm/yr (68 mmcf/d). It should be noted that, in common with other GSPAs in Israel where Energean is the seller, Or has an unlimited ability to dispose of gas for alternative end uses.

The weighted average contract price was US$4.22/mmbtu as of 30 September 2019 based on the Israeli electricity production component index, Brent oil price and exchange rates as of that date.

Greece – Prinos Area

Production in the year to 30 September 2019 was 3,577 bopd. Full year production guidance is maintained at 3,400 – 3,600 bopd. Energean’s review of capital allocation is ongoing.

The Epsilon Platform Development remains on track to deliver first oil in 2H 2020.

Additional activities

At Katakolo, legacy 3D seismic re-processing has been finalised in parallel with application for necessary environmental permits. Analysis suggests significant upside to in place volumes. A decision on whether to farm down or take Final Investment Decision will be taken after the results from this analysis have been finalised.

In Ioannina, 2D seismic acquisition has been completed and interpretation is ongoing. In Aitokarnania, activities are focused on the re-processing of existing data and preparation for the new seismic campaign, which is scheduled to start before year end.

In Montenegro, processing and interpretation of the recently acquired 3D seismic survey is ongoing. Results are anticipated before year end 2019. 

Financial Update

Energean recorded revenues of $52.4 million in the 9 months to 30 September 2019, (1Q-3Q 2018:  US$55.4 million). Unit cost of production was $19.8/bbl and Energean maintains Full Year Guidance of $20/bbl.

Revised capital expenditure guidance is shown in the table below. Development capex is reduced by $25 million on expected timing.  Exploration capital expenditure in increased by $8 – 23 million due to the inclusion of the Karish North sidetrack and preparatory activities for the Zeus exploration well, which is expected to be drilled during 2020.

Revised Full Year 2019 Capital Expenditure Guidance

$m

Previous Full Year 2019 Capital Expenditure Guidance

$m

Prinos & Epsilon 70 – 80 70 – 80
Israel – Development 625 650
Total Development & Production Capital Expenditure 695 – 705 720 – 730
Israel Exploration 65 45 – 55
Western Greece 7 – 8 5 – 10
Montenegro 5 5
Total Exploration 77 – 78 55 – 70

 

At 30 September 2019, Energean had net debt of $348.6 million. Gross cash was $393.1 million, offset by $741.7 million of borrowings. As at this date, Energean had $36 million remaining undrawn under its Greece RBL facility, $615 million under the $1.275 billion Karish-Tanin project finance facility and $600 million of debt available under the committed Bridge Facility.

Energean has no crude oil hedges outstanding.

ELPE reports significantly higher operating profitability

HELLENIC PETROLEUM Group announced its 3Q/9M19 financial results in accordance with IFRS. 3Q19 Adjusted EBITDA came in at €201m, a notable improvement vs last quarters, while Adjusted Net Income amounted to €90m. Higher total production, at 4.3m MT and good operations at refining units, despite end of run performance ahead of scheduled shut-downs and IMO test runs, resulted to sales exceeding 4m MT. Equally, improved performance in Domestic and International Fuels Marketing had a positive contribution.

The BoD, considering the strong results, as well as positive outlook for the Group, decided the distribution of an interim dividend of €0.25/share, payable in January 2020.

Performance was also positively affected by improved refining environment, despite weaker benchmark refining margins compared to historical highs recorded in recent years, as well as the restoration of the Russian crude oil supply infrastructure in Central Europe and a strong US dollar vs the Euro.

IFRS Reported Results were affected by crude price movements, which in 3Q19 dropped to the lower levels of the last two years, leading to a 12% drop in Revenues to €2.3bn. Equally, impact on Net Income was also negative, with inventory valuation losses of €43m, vs €53m gains recorded in 3Q18, as prices then increased. It should be noted that the results include for the first time the impact of new IFRS 16 on operating leases of retail fuel stations and other equipment.

The Group continued to improve its financial position, with finance cost further dropping by 25% y-o-y in 3Q19, at €27m, mainly on account of repayment of the €325m Eurobond issued in 2014. Furthermore, during the quarter, the Group proceeded to the successful issue of a new €500m, 2% Eurobond, with partial refinancing of existing bonds maturing in 2021. The transaction is expected to lead to an additional annual decrease in finance costs of approximately €15m, with total reduction exceeding 50% in the last 3 years, with a notable impact on the Group’s cash flow profile and dividend distribution capacity.

Commenting on the results, Andreas Shiamishis, Group CEO, noted:

“Improved 3Q19 results, the strongest of last 3 quarters, are particularly encouraging, on the back of a material improvement in environment. We are operating in a highly cyclical industry, without the ability to influence international developments. As a result, it is important to focus on issues we can control through strategic direction, managing and operating our business units and improving competitiveness. Despite 2019 being the most challenging refining environment in the last few years, our results and financial position are strong. On a positive note, domestic fuels market recorded a 3% growth. We consider the short term outlook to be positive, with the introduction of new bunkering fuel specs; our recent performance in capital markets, with the successful Eurobond issue in 3Q19, further confirms the confidence of the domestic and international investor community in HELLENIC PETROLEUM. I would like to thank once again the management and employees for their significant contribution to our successful performance.” 

Volatile refining environment and stronger USD

Global macroeconomic developments, especially around international trade relations, led to weaker crude oil prices, with Brent averaging at $62/bbl, lower vs both 2Q19 ($69/bbl), as well as 3Q18 ($76/bbl).

The US dollar strengthened for one more quarter, with average Euro/USD exchange rate at €1.11, mainly driven by central banks monetary policy.

In product markets, an important development was the drop in HSFO cracks, in contrast with other products, that were notably stronger q-o-q, leading refining benchmark margins higher vs 1H19. This trend, was sustained in 4Q19, especially for diesel, ahead of IMO regulation implementation, confirming the Group’s strategy for structural minimization of HSFO production, while increasing high value products output, through the investment in Elefsina refinery upgrade, as well as the new Aspropyrgos refinery operating model for bunkering fuels in 2020.

Urals pricing at parity to Brent, albeit with volatility during the quarter, led to weaker refining margins vs last year. FCC margins averaged at $4.9/bbl, vs $5.7/bbl in 3Q18, with Hydrocracking margins at $4.8/bbl (3Q18: $5.6/bbl). 

Increasing demand for domestic fuels market

Domestic fuel demand in 3Q19 amounted to 1.6m MT (+3%), with a respective increase in auto-fuels, the highest in the last few quarters. Aviation and bunkering fuels grew significantly (+14%), mainly on account of higher marine fuel offtake (+22%). 

Strong balance sheet, improved capital structure, reduction in finance costs

The new €500m Eurobond issue, at the lowest cost for the Group in more than 10 years, combined with the partial refinancing of 2021 eurobonds through a tender offer, as well as the repayment of the €325m notes in 3Q19, are expected to have a positive impact on finance costs of over €30m. Furthermore, the new issue has improved commercial terms vs previous, enhancing flexibility, while extending the Group’s maturity profile.

Net Debt at €1.5bn, significantly lower y-o-y, with gearing ratio at 39%.

Key strategic developments

Aspropyrgos refinery is planning its transition to the new operating model in November, in view of new MARPOL regulation implementation for bunkering fuels, in order to effectively respond to the new market needs. A material part of feedstock required to operate the new model has already been secured, de-risking our planning.

During October 2019 a full turnaround, involving extended maintenance at all units, was successfully completed at Elefsina refinery, safely and in line with timetable. Works are now concluded and the refinery will resume operations in the next days.

In E&P, the Greek parliament proceeded to the ratification of the Lease Agreements (effective 10 October 2019) for the offshore areas of ‘West Crete’ and ‘Southwest Crete’ (Total 40% – Operator, ExxonMobil 40%, HELLENIC PETROLEUM 20%), as well as ‘Ionio’ (REPSOL 50% – Operator, HELLENIC PETROLEUM 50%) and ‘Kyparissiakos Gulf’ (HELLENIC PETROLEUM 100%), while planned environmental and exploration studies in the other Western Greece concessions continued.

Key highlights and contribution for each of the main business units in 3Q19 were:

REFINING, SUPPLY & TRADING

­     Refining, Supply & Trading 3Q19 Adjusted EBITDA at €129m (-25%).

  • Net production amounted to 3.8m MT (-5%), with sales at 4m MT (-1%).
  • Realised ELPE system margin came in at $10.1/bbl, a significant recovery vs 1H19.
  • During 3Q19, the IMO test run led to further diversify crude slate.

PETROCHEMICALS

  • Lower PP sales (-5%), as well as inventory losses, led EBITDA to €20m (- 20%).

MARKETING

  • 3Q19 Marketing Adjusted EBITDA at €51m, with 9M at €111m. Excluding the impact of IFRS 16 implementation, Comparable EBITDA was €46m (+9%), with 9M at €86m (+7%).
  • In Domestic Marketing, improved performance in Retail and Aviation led 3Q19 Comparable EBITDA at €27m (+5%).
  • Profitability improved in most markets the Group operates, with 3Q19 International Marketing Comparable EBITDA at €19m (+16%).

ASSOCIATE COMPANIES

  • DEPA Group contribution to consolidated Net Income was €17m for 9M19.
  • Higher production in both ELPEDISON plants, led EBITDA to €8m (+79%).

Key consolidated financial indicators (prepared in accordance with IFRS) for 3Q/9M19 are shown below:

€ million 3Q18 3Q19 % Δ 9M18 1H19 % Δ
P&L figures  
Refining Sales Volumes (‘000 ΜΤ) 4,087 4,037 -1% 12,354 11,727 -5%
Sales 2,674 2,348 -12% 7,341 6,805 -7%
EBITDA 258 141 -45% 731 464 -37%
Adjusted EBITDA 1 237 201 -15% 574 453 -21%
Net Income 135 46 -66% 360 167 -53%
Adjusted Net Income 1 111 90 -19% 239 160 33%
Balance Sheet Items
Capital Employed 4,421 3,916 -11%
Net Debt 1,773 1,509 -15%
Debt Gearing (ND/ND+E) 40% 39%

 

20th Cippe, major petroleum industry event, in Beijing March 26-28

The 20th China International Petroleum & Petrochemical Technology and Equipment Exhibition (cippe2020) will be held on March 26-28, 2020 at the New China International Exhibition Center in Beijing.

For its 20th edition, cippe2020 is once again inviting global industry giants to showcase latest petroleum equipment and technologies, as well as discuss the latest trends in the industry with experts and professional buyers from all over the world.

cippe2020 will continue to expand its scale by providing seven halls and eight exhibiting zones, focusing on technologies and equipment of petroleum & petrochemical, natural gas, offshore oil & gas, offshore engineering, pipelines & storage, shale gas, as well as explosion-proof instruments and oilfield soil remediation.

In response to the national strategy for clean energy development and transformation to promote energy consumption, a new hall will be dedicated to showcasing natural gas and shale gas.

An Event Gathering Global Giants

As the world’s leading petroleum & petrochemical equipment event, cippe is an annual gathering of leading petroleum & petrochemical companies in the world. International exhibitors will include ExxonMobil, Rosneft, Gazprom, Transneft, Caterpillar, NOV, Schlumberger, Baker Hughes, GE, Cameron, Honeywell, Philips, Schneider, Dow Chemical, Rockwell, Cummins, Emerson, AkzoNobel, API, 3M, E+H, MTU, ARIEL, KSB, Tyco, Atlas Copco, Forum, Huisman, Sandvik, AKSA, HEMPEL, etc.

Domestic exhibitors will include CNPC, Sinopec, CNOOC, CSSC, CSIC, CASC, AVIC, Jereh, Honghua, CIMC Raffles, Kerui, RG Petro-Machinery Group, Sany Group, NHI, CITIC HIC, CITIC Pacific, etc.

Various Concurrent Events

As a global display platform, cippe is keen on promoting the exhibition effectiveness and providing communication opportunities for the exhibitors. Therefore, cippe2020 will hold many concurrent events including the cippe Gold Innovation Award, the 12th International Petroleum and Natural Gas Summit, International Petroleum and Petrochemical Technology Conference 2020, cippe2020 Embassy (Oil & Gas) Promotion Conference. In addition, special events such as one-on-one purchasing meeting–cippe2020 Business Matchmaking Meeting, technical exchange meetings and product launching conferences will also be held.

Currently, the cippe2020 organizing committee is visiting major oil producing countries such as Russia, the United States, Norway, the United Arab Emirates, Saudi Arabia, Malaysia, Canada, Iran, Brazil and the United Kingdom to invite more global professional buyers.

Contacts:

cippe2020 Organizing Committee

For Exhibitors

Mona Wang, 86-10-56176968

cippe@vip.163.com

cippe@zhenweiexpo.com

For Visitors

Yolanda Zhao, 86-10-56176962

yolanda@zhenweiexpo.com

Jetoil placed on the comeback trail by new owner Centracore

Bankruptcy-struck oil trading company Jetoil, now controlled by Austria’s Centracore and on the rebound, has reclaimed approximately 15 percent of the fuel-station network it controlled prior to the rescue plan.

Jetoil now operates 83 fuel stations (DODO, dealer-owned, dealer-operated), primarily in northern Greece, as well as the Thessaly, Epirus and other mainland regions.

At the peak of Jetoil’s crisis in the summer of 2016 – when founder Kyriakos Mamidakis committed suicide, aged 84, not long after the company had filed for bankruptcy – the company’s retail network had shrunk to just 34 outlets.

A Jetoil rescue plan was approved Iast year. Strategic investor Centracore agreed to take on the company’s liabilities following a partial haircut.

Besides a purchase price of 107 million euros, the new Jetoil shareholder has invested 10 million euros to upgrade the company’s storage facility in Kalohori, on the outskirts of Thessaloniki.

Jetoil has increased its sales in Greece and achieved significantly higher exports since its takeover. Total sales for the first financial year since Centracore’s entry reached 420 million euros generated by a trading volume of 350,000 metric tons.

In a year, the company has achieved 35 percent of its business plan’s target, set at one million metric tons of trading volume, or a 10 percent Greek market share, including exports.

The strategic investor, maintaining access to Russian refineries, has admitted the decision to invest in Greece was based on export potential to Balkan markets. Centracore obtained a Greek trading license in July, 2018.

Centracore is a Vienna-based trading company headed by Luxembourg’s UFG Europe Holding, holding an 80.1 percent share and comprised of private equity funds. Russian Petroleum company Rosneft holds the other 19.9 percent.

Repsol-Energean given extra year for Ioannina license preliminary stage

A consortium comprising Repsol and Energean Oil & Gas has been granted a one-year extension by EDEY, the Greek Hydrocarbon Management Company, to complete preliminary exploration work at an onshore license in the wider region of Ioannina, northwestern Greece.

Repsol, controlling a 60 percent stake in the consortium, and Energean, holding 40 percent stake, requested an additional year until October 2, 2020, to complete preliminary exploration work at the license.

This is the second deadline extension granted to Repsol-Energean for the license’s preliminary phase. A first extension, granted in 2017, expires next month. The consortium is currently processing new seismic data.

The EDEY extension decision also requires the consortium to complete a second exploration phase, involving deep drilling, by October 2, 2022, should the partners decide to pursue the license further.

The license location’s geological features, featuring rocky terrain, are considered challenging. Also, the two companies have faced resistance, at times extreme, from small groups representing local communities while conducting their seismic research and related activities. The support of local landowners exceeds 90 percent, which has enabled the completion of research work in recent weeks.

ELPE roadshow ahead of bond issue, €300-400m sought

Hellenic Petroleum ELPE has organized a series of meetings with institutional investors over the next few days to pitch an imminent five-year bond issue aiming to attract a capital amount of between 300 and 400 million euros at an interest rate, according to some sources, of just under 3 percent.

The ELPE bond issue could take place this week, sources have informed.

The listed petroleum group has asked participating banks to organize a series of presentations, the first in London today. Zurich and Paris follow tomorrow, while an Athens session is planned for Thursday.

ELPE officials are optimistic on the prospects of the bond issue, whose objectives include premature settlement of a bond with a 4.875 percent interest rate, expiring October 2021. This bond is worth 449.53 million euros.

The new ELPE bond issue comes amid a favorable time for the Greek economy and following a successful bond issue by Hellenic Telecommunications OTE.

A privatization plan to offer part of the Greek State’s 35.48 percent stake of ELPE has yet to be finalized, according to energy minister Costis Hatzidakis. Sources insist the privatization will take place through the Athens bourse.

Major upstream players meet at EPOCH congress in Thessaloniki

Over 100 companies participated at the Exploration and Production Offshore Congress Hub (EPOCH) Congress, a two-day event held September 16 and 17 in Thessaloniki.

The event, a closed-door congress supported by Greek and international media and co-hosted by Hellenic Petroleum (ELPE), drew keynote speakers who covered both the business and technical sides concerning the developing markets of the Mediterranean and offshore West Africa.

Over the event’s two days, major players of the upstream industry, representing E&P companies, EPC contractors, drilling contractors, service providers & equipment manufacturers, shared their experience and views on the current situation in regions and presented solutions, cases and technologies to overcome these challenges.

Besides discussions, delegates also established new business contacts and held preliminary talks for further cooperation.

The first day of the event began with presentations highlighting new challenges, opportunities and strategies across the Mediterranean region, while the second day’s plenary session was devoted to an overview of the West African offshore region and its current performance.

The keynote speakers at EPOCH were: Dr Abdelarahim Mohamed – Board Director for Exploration & Production of National Oil Corporation of Libya; Yannis Bassias – President & CEO of Hellenic Hydrocarbon Resources Management; Kees Jongepier – VP Exploration of Aker Energy AS; Chijioke Akwukwuma – CEO of Ocean Deep Drilling ESV Nigeria Limited (ODENL); Dr. Jörg Köhli – Senior Expert – Head of Upstream Oil and Gas of European Commission; Christophe Souillart – BD Director Africa, Mediterranean and Southern Europe of Subsea 7; and Henry Okolie-Aboh – Founder & CEO of Westfield Energy Resources Limited.

ELPE bond issue plan may be delayed by Middle East tension

A Hellenic Petroleum ELPE plan for an imminent bond issue that will seek to raise a sum of at least 300 million euros at an interest rate of less than 2 percent in order to refinance an existing loan could be delayed by increased tension in the Middle East over the past few days as a result of drone attack on Saudi Arabia’s oil installations.

A firm US reaction against Iran would further escalate this tension in the wider area and could negatively impact ELPE’s planned bond issue as some investors would certainly hesitate to invest.

The petroleum group’s net debt is 1.4 billion euros, down by approximately 500 million euros compared to a year earlier, according to ELPE’s first half results, announced August 29.

Along with its first-half results, ELPE announced a bond issue plan for within 2019, the objective being to further decrease its financial costs.

Energean up to 4th in European upstream with Edison E&P deal

Greece’s Energean Oil and Gas has risen to fourth place among Europe’s independent hydrocarbon exploration and production companies, in terms of proven reserves, following its acquisition of Edison’s E&P, a sale and purchase agreement announced yesterday.

Energean Oil and Gas, a London Premium Listed FTSE 250 and Tel Aviv Listed E&P company, will, as a result, possess 639 million barrels.

Israel’s Delek Drilling, with one billion barrels, and Norway’s Aker BP, with 917 million barrels, and Lundin, also Norwegian, with 745 million barrels, make up Europe’s top three.

Energean anticipates it will capture first place within the next two to three years, in terms of daily hydrocarbon production, expected to rise to 200,000 barrels, when an FPSO at Israel’s Karish and Tanin reserves begins operating.

The company’s Edison E&P acquisition – expected to be finalized by the end of 2019 as it is subject to conditions for transactions of this kind, including Italian Economic Development Ministry approval – stands to place Energean at the forefront of Greece’s upstream as the company will gain licenses in western Greece.

Energean will take over Edison’s stakes in two consortiums, the first with Total and Hellenic Petroleum (ELPE) for Block 2 west of Corfu, and the second with ELPE for a license at the Gulf of Patras.

Energean also holds rights to a license in Etoloakarnania, western Greece, with Spain’s Repsol, the operator, as well as in the Ioannina region, in the northwest.

The Edison E&P acquisition will also broaden Energean’s portfolio, to possess 90 licenses in nine countries.

The agreement also adds 434 million dollars to Energean’s earnings before interest, tax, depreciation and amortization (EBITDA), up from 52 million dollars last year.

 

Edison agrees to sell exploration and production to Energean

Italian energy giant Edison has announced the signing of a sale and purchase agreement with Energean Oil and Gas to sell the 100% of Edison Exploration and Production (E&P) and its subsidiaries in the hydrocarbons exploration and production business (oil and natural gas). The Edison Board of Directors approved the transaction yesterday.
The price of the transaction is based on an enterprise value of USD 750 million, with an additional consideration of USD 100 million contingent on the commissioning of Cassiopea development gas project in Italy.

Additionally, Edison will be entitled to royalties associated with further potential developments in Egypt that would bring the aggregate value close to USD 1 billion. The transaction also includes the transferring to the buyer of all Edison future decommissioning obligations.

Edison Exploration and Production manages all of Edison’s activities, mining titles and corporate shareholdings in the hydrocarbons business in Italy and abroad. In particular, Edison E&P owns a portfolio of approximately 90 licences in 9 countries in the Mediterranean and Northern Europe, corresponding to approximately 49,000 barrels per day of net entitlement production as December 31, 2018.

Following the transaction, considering the first half 2019 developments, in particular in terms of regulations as well as brent and gas market trends, and the contractual terms currently being finalized, a 400-500 million euros writedown at Group level is expected.

Edison’s Board of Directors has reserved the right to perform suitable analyses to evaluate the possible capital surplus with respect to the guarantee requirements it is
called upon to meet, considering that the transaction means exiting from a highly volatile and capital-intensive segment, with a higher risk profile than Edison’s other strategic businesses.

This is with a view to possibly reducing the ordinary capital to an extent of covering prior losses as well as those that will be recorded in the 2019 financial statements.
Energean Oil and Gas, a London Premium Listed FTSE 250 and Tel Aviv Listed E&P company with operations offshore Israel, Greece and the Adriatic, has committed to guaranteeing a future of development for the E&P business area and its employees, being the ideal operator to unleash all the potential of the business.

The workforce employed by Edison Exploration and Production amounts to 282 people as June 30, 2019.

Edison Exploration and Production counts also to the staff of the Egyptian Operating Company Abu Qir Petroleum (AQP). With regard to the acquired personnel, Energean Oil and Gas is committed to ensuring certain protections, taking into account the specific regulatory conditions governing the employment rules and
the existing market practices in the various countries.

The closing of the transaction with Energean Oil and Gas is expected to take place by the end of 2019 and it is subject to conditions for transactions of this kind, including Italian Economic Development Ministry approval.

The financial resources deriving from this transaction will support Edison’s strategic development plan, which envisages very significant investments in Italy in the 2019-2021 three-year period intended mainly for sustainable production from renewable sources and gas, as well as the strengthening of the Company’s activities in retail market and energy efficiency services.

Edison has a target to produce by 2030 40% of its energy from green sources and an emissions target of 0.26 kilogrammes of CO2 per kilowatt hour produced. In this way Edison contributes effectively to the energy transition providing Italy with a balanced production mix, able to guarantee the security and flexibility of the country’s energy system.

Edison, with 91 hydroelectric power stations (of which 53 mini-hydroelectric), 45 wind farms and 65 photovoltaic power plants, has an installed capacity in Italy of 1,900 megawatts in renewable sources, with more than 4,000 gigawatt hours of electricity generated in 2018 (21% of the Company’s total electricity production, of which 3,000 gigawatt hours from hydroelectric power plants and 1,000 gigawatt hours from
wind farms).

Investors will ‘abandon Crete blocks if discoveries not significant’

Two offshore blocks west and southwest of Crete, licensed out just days ago to a three-member consortium comprised of Total (40%), ExxonMobil (40%) and Hellenic Petroleum-ELPE (20%), promise far greater production potential than blocks further north in the Ionian Sea, but investors will leave if these Cretan blocks do not offer significant output, a top-ranked official has noted.

Investors will abandon their efforts if a production target of at least 500 million barrels is not reached as the investment costs are considerable, Yiannis Basias, the head official at EDEY, the Greek Hydrocarbon Management Company, told state-run radio Proto Programma.

He denounced environmental concerns being expressed, describing these as inexplicable, “unless the intention is to stop the exploration activity altogether.”

Hydrocarbon companies spend vast amounts of money to ensure the avoidance of problems as, besides affecting the environment, local economy and health of individuals, any accident would also instantly blacklist companies and trouble their futures, the EDEY chief highlighted.

Sizable discoveries promise to greatly change Greece’s image and standing in the southeast Mediterranean region, Basias remarked, adding that the country’s economy would gain some balance for a less burdensome future.

At present, economic gains generated by tourism are immediately offset by costs concerning  natural gas and crude costs, the EDEY chief said.

PM to attend Cretan block signing ceremony, reshuffling in west

A signing ceremony scheduled to take place tomorrow for hydrocarbon exploration and production rights concerning at least one of two offshore Cretan blocks will be attended by Prime Minister Alexis Tsipras, whose speech is expected to emphasize Greece’s effort to utilize the country’s mineral wealth and also project a message opposing Turkey’s provocative behavior in the southeast Mediterranean.

The energy ministry will sign an agreement tomorrow with a three-member consortium comprised of ExxonMobil, Total and Hellenic Petroleum (ELPE) for an offshore license west of Crete.

A second block, situated adjacently southwest of Crete, could also be signed by the two sides tomorrow. But it still needs to be endorsed by a local authority, making the prospect highly unlikely.

Both agreements will first need to be approved by Greek Parliament before exploration work commences. A first phase of exploratory survey work is planned to last three years. If the feedback is favorable, drilling activities will follow after 2022, according to current plans.

Meanwhile, consortiums that have secured licenses for blocks in western Greece are moving to reshuffle their line-ups, energypress sources have reported.

This activity, a common occurrence in the global oil industry, has been attributed to maneuvering by multinationals for moves to blocks seen offering better prospects as well as efforts to seek additional partners for investment cost sharing.

Greece’s geopolitical role and blocks are gaining stature on the international map amid all this activity.

EDEY aims to offer complete Crete portfolio with new areas to next gov’t

EDEY, the Greek Hydrocarbon Management Company, is striving to have completed all preliminary work for new licenses off Crete so that Greece’s next government can be handed a complete portfolio ready for licensing procedures when it begins its tenure following the snap elections on July 7.

The country’s next administration will need to push ahead with new hydrocarbon projects.

EDEY is currently working on environmental studies concerning new areas south of Crete, which the company intends to offer to investors for exploration and production.

Their features differ to those of two offshore licenses already secured by a three-member consortium comprised of ExxonMobil, Total and Hellenic Petroleum (ELPE), west and southwest of Crete.

The new areas south of Crete had been swept aside in previous procedures but new scientific data has revitalized the interest of investors.

A signing ceremony for one of the two Cretan hydrocarbon exploration and production licenses, west of Crete, will be staged this Thursday, the ExxonMobil- Total-ELPE consortium has been informed.

The second license, southwest of Crete, may also be added to Thursday’s signing ceremony. However, its finalized version still needs to be formally presented, meaning investors will most probably need to wait until after Greece’s snap elections for this license to be signed.

Crete offshore licenses a step away from finalization

A decision by the Court of Audit, one of Greece’s highest ranking courts, approving two hydrocarbon exploration and production licenses for offshore blocks south and west of Crete to a consortium comprised of Total, ExxonMobil and Hellenic Petroleum (ELPE) paves the way for the signing of finalized agreements.

This could take place at a signing ceremony on Crete prior to the July 7 snap elections with the participation of energy minister Giorgos Stathakis.

The three companies, keen to begin exploration activities before the end of the year, have urged the government for a swift completion of procedures.

The two agreements will still need to be ratified in Parliament following next month’s general elections before the three-member consortium can commence work.

The Court of Audit’s favorable decision represents one of the final steps in a procedure started in 2017, when Total and ExxonMobil had expressed interest.

 

Heightened activity, consortium reshuffling as drilling nears

Following a wider trend observed in the southeast Mediterranean, consortiums holding hydrocarbon exploration and production licenses in Greek territory are moving to reshuffle their line-ups, especially for blocks in the Ionian Sea, as the first local drilling operations in decades draw nearer, energypress sources have informed.

The reshuffling activity, which has not involved blocks off Crete, has been attributed to a search by multinationals for additional partners in consortiums established with Hellenic Petroleum (ELPE) as a means of reducing high costs demanded by deep-water exploration in the Ionian Sea.

ELPE holds exploration and production rights for various blocks in the Ionian Sea through consortiums established with Total, Edison and Repsol.

Video Data Rooms have been set up to enable prospective participants to view seismic survey data for Ionian Sea blocks, as well as technical and financial information.

The current reshuffling activity could produce new consortium line-ups by the end of the year, sources have informed.

Greece’s first drilling operation in several decades, at the Gulf of Patras, is expected to commence early next year. Positive results promise to provide further impetus for more drilling in Greek territory.