Repsol given 6-month extension for Ioannina license preliminary work

A pandemic-related extension request made by Spain’s Repsol for an additional six-month period to complete preliminary research concerning a license in Ioannina, northwestern Greece, has been granted by EDEY, Greek Hydrocarbon Management Company, in a decision reached last week that resets the deadline for April 2, 2021.

Repsol, operator of a consortium formed with Energean Oil & Gas for the Ioannina license, had lodged its extension request late in August.

Repsol’s preliminary research work at the Ioannina license was initially expected to be completed by early October ahead of a decision on whether it would proceed with drilling.

The pandemic has severely impacted the upstream industry worldwide. Multinationals engaged in hydrocarbon research and production activities have severely limited their investment plans as a result of the pandemic’s impact on petroleum markets.

A rebound for the upstream sector appears highly unlikely any time soon given the rising second wave of coronavirus cases.

The EDEY extension will enable Repsol to conduct a more thorough analysis of seismic data collected and enable the company to hold on for the prospect of improved upstream industry conditions.

EDEY justified its extension by noting it will help the investors complete their assessment of technical work conducted during the preliminary stage.

 

 

Tension rises as Turkish vessel enters Greek continental shelf

The situation concerning the Turkish research vessel Oruc Reis, which entered the easternmost point of the Greek continental shelf yesterday, is unchanged today, the Athens-Macedonian News Agency has reported.

Oruc Reis is accompanied by Turkish naval units, while the situation is being monitored by the Greek Armed Forces, the Greek news agency has reported.

Tension has re-escalated in the east Mediterranean since yesterday afternoon, with Turkey disputing, in practice, the Greek-Egyptian EEZ agreement through the presence and maneuvering of its Oruc Reis research vessel and Turkish warships.

Turkish survey systems are believed to be ready for application, but, according to Greek estimates, research work cannot proceed as a result of noise being generated by nearby ships, both Greek and Turkish.

Greek navy units, lined up opposite the Turkish ships, are seeking to prompt a Turkish withdrawal. The Greek Air Force and Army are also on standby.

Posting on Twitter, Cagatay Erciyes, a senior Turkish Foreign Ministry official, noted that Greece has created problems because of a 10-square-kilometer Greek island named Kastellorizo, which lies 2 kilometers away from the Turkish mainland and 580 kilometers from the Greek mainland.

“Greece is claiming 40,000 km2 of maritime jurisdiction area due to this tiny island and attempting to stop the Oruc Reis and block Turkey in the eastern Mediterranean.

“This maximalist claim is not compatible with international law. It is against the principle of equality. Yet Greece is asking the EU and US to support this claim and put pressure on Turkey to cease its legitimate offshore activities. This is not acceptable and reasonable,” he said.

Cyprus has responded by issuing a Navtex of its own, effective from today until August 23, through which it notifies that the Turkish research vessel Oruc Reis and accompanying vessels are conducting illegal operations within Cyprus’ EEZ.

Greece, Egypt sign EEZ agreement, Turkey reacts

A Greek-Egyptian agreement signed yesterday to designate an exclusive economic zone in the eastern Mediterranean between the two countries, an area containing promising oil and gas reserves, “confirms and secures the continental shelf and EEZ rights and influence of our islands,” declared Greek Foreign Minister Nikos Dendias.

The agreement, co-signed by Dendias with Egyptian counterpart Sameh Shoukry in Cairo, takes Greek-Egyptian relations to a new level of closer ties, Dendias noted.

“The agreement with Egypt is within the framework of international law, respects all concepts of international law and the law of the sea and good neighbourly relations, and contributes to security and stability in the region,” Dendias said.

The agreement between Greece and Egypt is the complete opposite of an illegal, invalid and legally groundless memorandum of understanding between Turkey and Libya, now nullified, he pointed out.

Greece is determined to establish EEZ agreements with all other neighboring countries, always within the framework of international law and the law of the sea, Dendias noted, citing yesterday’s Greek-Egyptian agreement and an agreement in June with Italy.

The Greek agreement with Italy, on maritime boundaries that established an EEZ, resolved longstanding issues over fishing rights in the Ionian Sea.

Turkey responded to yesterday’s Greek-Egyptian agreement by notifying it has scheduled a live-fire military exercise at a sea area between the Greek islands Rhodes and Kastelorizo for August 10 and 11.

Prinos rescue plan may offer Greek State stake in Energean Oil & Gas SA

A government rescue plan for Prinos, Greece’s only producing oil field, in the country’s offshore north, will offer the Greek State a small stake in Energean Oil & Gas, the field’s operator, and provide state guarantees for 75 million euros in financing needed by the company in 2020 and 2021 for investments included in its business plan, according to well informed sources.

The government is believed to be just days away from announcing its finalized rescue plan for Energean’s Prinos field, hit hard by the pandemic and lower international oil prices, factors that have impacted the global upstream industry.

Greek government officials are currently discussing the Prinos rescue plan with the European Commission, whose approval will be required. Though alterations to the aforementioned solution cannot be ruled out, good news on the rescue plan appears imminent.

Energean Oil & Gas recently published a business plan that lists interventions needed for Prinos’ rescue as well as the field’s sustainability over the next 15 years. The plan’s measures include actions to reduce emissions and drastically reduce the company’s environmental footprint.

Energean has invested approximately 460 million euros at Prinos during the company’s 13 years of operations at the field, including 50 million euros between last September and May, to avoid the closure of offshore and related onshore facilities. Some 270 jobs have been protected.

Prinos field rescue effort now at the finance ministry

A government effort to rescue offshore Prinos, Greece’s only producing field, in the north, is now in the hands of the finance ministry following preceding work at the energy ministry, sources have informed.

The field, like the wider upstream industry, has been impacted by the pandemic and plunge in oil prices.

Deputy finance minister Theodoros Skylakakis is now handling the Prinos rescue case following the transfer of a related file from the energy ministry.

According to the sources, three scenarios are being considered. A financing plan through a loan with Greek State guarantees appears to be the top priority. A second option entails the utilization of an alternate form of state aid. The other consideration involves the Greek State’s equity participation in the Prinos field’s license holder, Energean Oil & Gas.

The European Commission will need to offer its approval to any of these options as they all represent forms of state aid.

Energy ministry sources have avoided offering details but are confident a solution is in the making.

Turkey tensions will not be escalated, ‘aim achieved’

Turkey will not continue intensifying its provocations in the East Mediterranean as the neighboring country has already achieved its main goal, a State Department declaration noting that the country is performing hydrocarbon exploration activities in disputed territory, Dr Konstantinos Nikolaou, a seasoned petroleum geologist and energy economist, supports.

Turkey’s provocations over the past few days – the country sent a seismic survey vessel into Greek EEZ waters for further exploration work following such initiatives in the past – represent part of a carefully planned strategy whose aim is to end Turkey’s East Mediterranean isolation of recent years and put the country back in the frame of the region’s hydrocarbon developments, experts believe.

Turkey has refused to sign the UN’s International Law of the Sea treaty, strongly disagreeing with Article 121, giving EEZ and continental shelf rights to island areas.

Instead, the country has followed its own rules, adjusting them as it pleases, to avoid giving any rights to island areas.

Besides seeking to reinforce the country’s position that rejects any EEZ rights for islands, the latest Turkish moves also aim to cancel EEZ agreements signed by Cyprus with Egypt, Israel and Lebanon.

Turkey has unsuccessfully sought to sign an EEZ agreement with Egypt, during Muslim Brotherhood times.

Dr. Nikolaou predicts that there will be no Turkish movement south of Crete as the transfer of an area by Libya, Turkey’s regional partner, would be required. The area of Benghazi is not controlled by Fayez al-Sarraj, the head of Libya’s UN-recognized government, but by renegade commander Khalifa Haftar.

Ultimately, the Turkish strategy in the wider region is aiming for co-exploitation of hydrocarbon deposits that may be discovered.

Ministry OKs environmental study for blocks south of Crete

Energy minister Costis Hatzidakis has approved a strategic environmental impact study concerning an offshore area south of Crete in preparation for tenders to offer exploration and production licenses for two blocks covering most of the island’s width.

Giannis Basias, the former head official at EDEY, the Greek Hydrocarbon Management Company, went ahead with the strategic environmental impact study last August to clear the way for government authorities to stage tenders for licenses and also spare  winning bidders of needing to wait for pending issues to be resolved before they can begin their exploration efforts.

In addition, it is believed EDEY took swift action for the environmental impact study covering the offshore area south of Crete in response to interest expressed by oil majors.

The two offshore blocks south of Crete measure a total of 33,933 square kilometers and cover all four prefectures spread across the island.

These vacant blocks are situated next to two blocks southwest and west of Crete that have already been licensed out to a three-member consortium headed by Total with ExxonMobil and Hellenic Petroleum as partners.

The eastern flank of these two blocks is intruded by a corridor defined in a recent Turkish-Libyan maritime deal.

The Greek energy ministry’s approval of the strategic environmental impact study for south of Crete is not linked to Turkey’s heightened provocations in the Aegean Sea, ministry officials told energypress.

The environmental study’s approval means this offshore area is now set for tenders and also sends out a signal of readiness to the international upstream industry, the ministry officials explained.

Just days ago, the newly appointed EDEY administration and the energy ministry’s secretary-general Alexandra Sdoukou met with officials of Total, operator of the consortium holding the two licenses southwest and west of Crete. Seismic surveys for these blocks will be completed by March next year, the Total officials appear to have promised.

New leadership at hydrocarbon management company EDEY

The Greek Hydrocarbon Management Company (EDEY), an independent company owned by the Hellenic Republic that oversees and manages the nation’s oil & gas exploration & production, investor relations and a growing portfolio of international energy infrastructure projects, has announced the appointment of a new chairman of the board of directors and a new chief executive. 

The appointments by Prime Minister Kyriakos Mitsotakis, follow the nomination by Greece’s energy minister Costis Hatzidakis and endorsement by the Special Permanent Committee on Institutions and Transparency of the Hellenic Parliament.

In a statement, the Minister of Environment and Energy, Costis Hatzidakis, noted that the appointments “mark a new chapter for the company, which now has an expanded role following the absorption of a number of International trans-boundary gas pipeline projects, such as the Greek-Bulgarian (IGB) pipeline, IGI Poseidon and East Med – projects supported by inter-governmental agreements between several countries in the Mediterranean region that will strengthen European security of supply as well as Greece’s role as a protagonist nexus in some of the region’s most important strategic developments.” 

The newly appointed chairman, Rikard Scoufias, who joins the company in a non-executive capacity from a distinguished energy and extractives career in Europe, the Americas, Asia and Africa, commented: “This is an important moment in the history of EDEY. Strong corporate governance, especially environmental and social governance (ESG), is in unprecedented focus, nowhere more so than the energy and extractive sectors. It is a privilege to be asked to lead such an eminent board of directors, with distinguished careers from Greece, Norway, the Netherlands, Cyprus, Denmark and the United Kingdom, and we all look forward to work closely with the executive team and to guide the company into this new chapter of growth and continued success.”  

Aristofanis Stefatos, EDEY’s newly appointed CEO, who returns to Greece following a successful executive career in Norway’s oil and gas industry, where he served as COO, CEO and in non-executive roles noted: “Τhe opportunities that hydrocarbon exploration and production offer Greece are significant. By securing these opportunities today, we position the country for the widest possible strategic choices for the future – including the delivery of Greece’s committed plans for alternative energies and long-term decarbonization. We will achieve this ensuring that EDEY is widely recognized as an efficient, transparent and dedicated partner to investors and all stakeholders, whilst at the same time holding those partners to the highest international environmental and social standards.” 

International investors link up for Timor-Leste Oil & Gas summit

The ​Timor-Leste (East Timor) Oil & Gas Online Summit​, organised by IN-VR and under the endorsement of ANPM, Timor-Leste’s petroleum and minerals authority, took place on July 9, bringing together international investors together with the government, IOCs and key service providers.

The summit was sponsored by SundaGas​, ​Pacific Towing​, ​Vieira De Almeida​, ​TIMOR GAP​, ​CGG​, ​GLJ and ​Clifford Chance​.

H.E. Dr. Victor da Conceicao Soares, Minister of Petroleum and Minerals opened the summit welcoming investors and operators. He was followed by Dino da Silva, President of ANPM, who gave an overview of Timor-Leste’s 2nd Licensing Round, and Timor-Leste’s onshore and offshore opportunities.

“A very friendly tax system with relatively low tax rates [is offered] when compared with the average that we see not only in South East Asia, but in the world , when compared not only with the rest of South-East Asia, but even worldwide. It is clearly one of the most competitive countries in the world for the industry,” said ​Joao Afonso Fialho​, Partner and Head of Oil & Gas, VdA in his presentation on Timor-Leste’s investment environment.

“We are very nicely positioned in regards to infrastructure and transportation of gas. At the moment we are looking into having appraisal wells drilled in 2022,” noted Colin Murray, VP of Technical, Sundagas when discussing the Chuditch gas discovery and SundaGas’ progress within only one year of signing a PSC with Timor-Leste.”

“We look forward to establishing a similar relationship with Timor-Leste. In fact, it’s essential to the success of any marine business and essential to us. A strong relationship with the government is a critical component to our investments,” said ​Neil Papenfus​, General Manager of Pacific Towing, on comparing the company’s success in Papua New Guinea and investing in Timor-Leste.

“Timor-Leste has chosen the best solution, making access to its data free for interested investors, a model that works well for frontier countries,” commented Martin Bawden, Business Development Manager of Zebra Data, when asked about ANPM’s usage of their Virtual Data Room service.

ANPM, IOCs and investors renewed their meeting for the ​2nd Timor-Leste Oil & Gas Summit​ in Dili, Timor-Leste in 2021.

Turkish-Libyan MoU ‘ignores’ International Law of the Sea

A Turkish-Libyan Memorandum of Understanding emphatically ignores article 121 of the International Law of the Sea (UNCLOS 1982), which recognizes Exclusive Economic Zone and continental shelf rights for island areas, and overlooks the existence of Crete, Karpathos, Kasos, Rhodes and Kastellorizo to carve out approximately 39,000 square kilometers of Greek territory south of Crete for Libya, petroleum geologist and energy economist Dr. Konstantinos Nikolaou, a former member of the board at the Cyprus Hydrocarbons Company, has pointed out in an analysis, spelling out the dangers of Turkey’s provocative behavior in the region.

Turkey misappropriates the continental shelf and EEZ associated with Crete, Karpathos, Kasos, Rhodes and Kastellorizo in the east Mediterranean, he noted on the MoU, submitted by Turkey to the UN in an effort to make gains at Greece’s expense.

Hydrocarbon licenses for plots south and southwest of Crete that have been awarded by the Greek State to Total, ExxonMobil and ELPE (Hellenic Petroleum) and published in the Official Journal of the European Union, set a precedent that backs the positions of Greece, whose division of the area is based on International Law of the Sea guidelines, Nikolaou highlighted.

Turkey is using its state-run petroleum corporation TPAO as a tool to exercise foreign policy for territorial gains, Nikolaou added.

Natural gas discoveries in the east Mediterranean serve as a major driving force behind the actions of Turkey, whose energy sector is import-dependent, he pointed out.

Oil drilling plans on hold, forced by price collapse, pandemic

Preliminary hydrocarbon exploration work planned by oil companies at licenses in the Ionian Sea and south of Crete is being postponed for an indefinite period that could last as much as a year, possibly more.

Upstream players are revising plans as a result of the collapse in oil prices and the coronavirus pandemic, a double setback for the sector.

Worse still, investment conditions for the Ionian Sea and Crete areas are made even more challenging by the fact that neither has yet to reveal sustainable fields.

In addition, both Greek zones are deep-sea areas of depths ranging from 2,500 to 3,000 meters, making exploration a high-cost venture.

Global oil majors are reducing investments and expenses by the billions in response to the unfavorable market conditions that have emerged over the past couple of months.

Fields with proven reserves have not been spared, which pushes untested fields such as those in Greece even further down the priority list.

The resumption of drilling ventures still at preliminary stages is not likely until oil prices rebound, energy minister Costis Hatzidakis noted in an interview with Greek daily To Ethnos.

It is a similar picture for Cyprus. The Eni-Total consortium yesterday announced it is postponing oil drilling activities in Cyprus’ Exclusive Economic Zone until March or April next year.

Greek upstream investments suspended, oil crisis hits hard

The current oil crisis, prompted by a Saudi-Russian price war and lower demand amid the coronavirus pandemic, comes as the latest setback for the upstream sector. The oil price slide, during which prices have plummeted to levels as low as 25 dollars per barrel, had added to the strain already felt by investors as a result of excessive bureaucracy in the Greek market.

Upstream players, troubled by the overall uncertainty, are believed to have suspended their investment plans despite a mild market rebound over the past few days, lifting oil prices to levels between 33 and 34 dollars per barrel.

Energean Oil & Gas’ Katakolo license off western Peloponnese and the Gulf of Patras license, co-owned by Hellenic Petroleum (ELPE) and Energean, rank as Greece’s two most mature upstream projects.

An environmental study for the Katakolo license has not yet been approved by the energy ministry. Even if it had, Energean would not move ahead with the venture under the existing market conditions. Current oil price levels would simply not cover investment costs.

Just before Christmas, investors behind the Gulf of Patras license were given an 18-month extension to begin drilling at this project, taking the date to June, 2021. Regional port facilities had been deemed insufficient by the consortium. All activity for this investment has also been suspended, sources informed.

Energean to utilize measures for crisis-hit Prinos field

Energean Oil & Gas, whose offshore Prinos oil field in the country’s north has been heavily impacted by the coronavirus pandemic’s effects on the global economy, including record-low oil prices, intends to utilize relief measures offered by the Greek government for various sectors, including the upstream industry.

The government’s relief measures, introduced to help enterprises weather the financial impact of the unprecedented coronavirus crisis, promise respite in a variety of forms, including tax payment delays, VAT discounts as well as employee allowances covering suspended work contracts.

Energean, which has invested tens of millions of euros to keep upstream  activities alive in Greece, now needs to reduce its Prinos operating costs and keep production flowing. A disruption of production and resumption at a latter date is not technically feasible. Prinos is Greece’s only producing oil field.

The oil price plunge has made big impact on the Prinos field, an old high-cost venture whose production costs are estimated at 21.5 dollars per barrel.

This specific field produces heavy crude of higher refining demands. Subsequently, Energean sells the unit’s output to BP at price levels that are between 7 and 8 dollars lower per barrel compared to Brent prices.

Production at Prinos is declining. Output peaked at 4,000 barrels per day in 2018 but fell to 3,300 in 2019 and is projected to slide further in 2020, officials noted.

Energean has cut back on investments at Prinos by 80 million dollars.

International crude prices plunged from 66 dollars to less than 25 dollars per barrel in the first quarter. Prices have not fallen so low since 2003.

 

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

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.

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

 

ELPE-Edison granted extra 18 months for troubled Patras license

Hellenic Petroleum ELPE, the local partner of Gulf of Patras license in western Greece, has been granted an 18-month extension to complete second-phase work at the license. Project delays have been attributed to inadequate port infrastructure and bureaucracy.

ELPE, joined by Edison as a consortium partner for this hydrocarbon project, requested more time to complete the second phase, including exploratory drilling.

The consortium was expected to conduct its first drilling operation at the Gulf of Patras license this year but has been slowed down by insufficient port facilities at the regional Patras and Astakos ports, as well as environmental licensing procedures, according to sources.

ELPE and Edison require adequate port facilities, including storage, to ship in the project’s drilling equipment.

The Gulf of Patras drilling operation is seen as a project that could prompt further hydrocarbon investments, especially if this field’s probable oil deposit, estimated at 140 million barrels, is confirmed.

Bureaucracy and a lack of strategic planning for development of the country’s upstream sector has kept investors at a distance, oil company officials and industry experts have repeatedly noted over a number of years

The regional infrastructure’s inability to serve this venture’s needs has frustrated officials. The Gulf of Patras tender was launched back in 2012.

A previous extension had given the ELPE-Edison consortium until April 2, 2018 to complete the project’s second phase. This deadline has now been extended to October, 2, 2021.

 

ELPE’s Gulf of Patras drilling delayed until ’21, red tape cited

Exploratory drilling by ELPE (Hellenic Petroleum) at its Gulf of Patras license in western Greece will be delayed until 2021 instead of the first quarter of 2020, as was officially planned, or, late 2020, the unofficial target, primarily as a result of bureaucratic obstacles, according to updates offered by company officials at an EAGE (European Association of Geoscientists and Engineers) event just held in Athens.

The Gulf of Patras license was awarded to a consortium comprising ELPE and Edison through an open-door tender launched in 2012 and completed in 2014. Energean Oil and Gas is also involved as a result of its recent acquisition of Edison’s E&P.

The license area, situated between Kefalonia, Achaia and Etoloakarnania, measures 1,419 square kilometers.

Preliminary research work has been completed, identifying wider areas to be explored, including specific drilling spots.

The delay of a concession agreement for a port in the wider region, needed to facilitate drilling needs, has held back the venture.

ELPE has, so far, unsuccessfully sought concession agreements with four ports, Patras, Kyllini, Aigio and Astakos.

Any port that would accept heavy drilling equipment needs to have included such activities in its official operating plan. The detail has prompted bureaucratic issues for ELPE in its effort to secure a port facility.

The project is a high-cost venture as it will be performed in deep-sea territory. Preliminary estimates put the size of the prospective reserves at 140 million barrels.

 

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.

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.

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

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.

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.

Four hydrocarbon licenses taken to parliament, interest in new areas

The energy ministry has submitted to parliament four draft bills for the approval of as many offshore hydrocarbon exploration and production licenses near Crete and in the Ionian Sea.

The imminent approval of these agreements, negotiated between 2015 and 2019, will enhance Greece’s ability to attract foreign investments in the developing hydrocarbon sector, the ministry noted in a statement. The bills were delivered to parliament yesterday.

Exploration-related investments for the four licenses are expected to reach 140 million euros, create jobs and support local communities, according to the ministry’s statement. The recently elected government is striving to project Greece as a business and investment-friendly country.

Agreements for two offshore licenses southwest and west of Crete were signed in June between the Greek State and a consortium comprising Total, ExxonMobil and Hellenic Petroleum (ELPE).

These were preceded by two agreements signed several months earlier, in April – one for an offshore block in the Ionian Sea, whose rights were acquired by a two-member consortium made up of Repsol and ELPE; the other, for a block west of the Peloponnese, secured by ELPE, the sole participant.

Investors are also believed to be interested in new areas for hydrocarbon exploration.

Ratification of Cretan, western offshore licenses just days away

Parliamentary approval of offshore hydrocarbon exploration and production licenses awarded for four fields west and southwest of Crete as well as Greece’s west is now just days away.

The submission of all four licenses to Greek Parliament by this Friday for ratification is seen as a very likely prospect.

The related draft bill carrying the four licenses will essentially represent the recently appointed energy ministry’s first legislative act.

A consortium comprised of Total, ExxonMobil and Hellenic Petroleum (ELPE) has been awarded two licenses for blocks west and southwest of Crete. Repsol and ELPE were the winning bidders of a tender for a block in the Ionian Sea.

Tenders for these three licenses were held following interest expressed in 2017.

ELPE is the sole participant in a license awarded for Block 10 northwest of the Peloponnese, following a tender launched in 2014.

Scientific surveys have confirmed many geological similarities between the two Cretan offshore blocks and southeast Mediterranean natural gas fields that have produced major discoveries such as Egypt’s Zohr, Cyprus’ Aphrodite and Israel’s Leviathan.

A clearer picture on the prospects of the Greek fields is expected in  eight years, the amount of time it should take to complete related exploration work. A first drilling operation is expected towards the end of this eight-year effort.

The presence of ExxonMobil and Total signals heightened US and French hydrocarbon interest in the wider southeast Mediterranean region.

Industry experts believe ratification of the four Greek licenses will spark further upstream developments in the wider region, including Greece. Preparations are underway for more offshore licenses, especially south of Crete, according to some sources.

Hydrocarbon, PPC, DEPA draft bills to follow Thessaloniki Fair

Energy minister Costas Hatzidakis’ team and related departments are busy preparing three draft bills for submission to parliament, one by one, by October, following this year’s Thessaloniki International Fair, to take place September 7 to 15.

The first of these three draft bills concerns the approval of hydrocarbon exploration and production licenses in offshore areas west and southwest of Crete, involving a consortium comprising Total, ExxonMobil and Hellenic Petroleum ELPE; an Ionian Sea license involving Repsol and ELPE; and Block 10, west of the Peloponnese, for which ELPE is the sole holder.

The US Ambassador to Greece, Geoffrey R. Pyatt, made reference to the licenses yesterday as a means of underlining the investment interest in the sector of US firms, including ExxonMobil.

The second draft bill to be tabled in parliament will detail operational revisions at power utility PPC. Hatzidakis, the energy minister, has noted the state-controlled power utility needs to rely less on the Greek State and compete on equal terms with rivals. The power utility draft bill will alter how PPC stages various auctions concerning supply and services. These auctions are strictly regulated by state terms.

A third draft bill, expected to be delivered to parliament within October, will nullify the previous Syriza government’s privatization plan for gas utility DEPA. It entailed splitting the utility into DEPA Trade and DEPA Infrastructure ahead of the sale of respective majority and minority stakes.

The recently elected New Democracy government appears determined to pursue a more aggressive DEPA privatization policy offering majority stakes in both the utility’s distribution network and trading interests.

 

 

 

 

 

Ratification of hydrocarbon licenses within August

Four offshore hydrocarbon exploration and production licenses signed by three groups of investors for areas off Crete, in the Ionian Sea and west of the Peloponnese are expected to be ratified in Greek Parliament within the next few days, possibly before the end of August, energypress sources have informed.

These licenses are significant for the reputation of the recently elected conservative New Democracy party, keen to underline its willingness to cooperate in the energy sector and draw major investments to the country.

Oil majors are involved. France’s Total heads a consortium that includes US giant ExxonMobil and Hellenic Petroleum (ELPE) for the two licenses off Crete, south and southwest of the island.

ELPE has joined forces with Spain’s Repsol for a license in the Ionian Sea, while ELPE is the sole participant in the offshore license west of the Peloponnese.

Greek energy minister Costis Hatzidakis, in talks with US Assistant Secretary of State for Energy Resources Francis Fannon earlier this month, pledged the licenses would soon be ratified in parliament.

A swift ratification procedure by the new government would send out a positive message to international investors.

More than €3bn invested during crisis, ELPE Upstream chief tells

Hellenic Petroleum ELPE’s Upstream S.A. CEO  Yannis Grigoriou was interviewed for the 3rd episode of BGS Talks Youtube show, discussing, with Regina Chislova, Project Director of Exploration and Production Offshore Congress Hub EPOCH 2019, offshore exploration in Greece; relations between the company and the Greek government; cooperation with ExxonMobil and Total; investments during the crisis and other topics. Excerpts, provided by the BGS Group, follow below. The full interview is available on BGS Talks Youtube channel.

Regina Chislova: In general, let us list the most important projects happening in the region right now.

Yannis Grigoriou: I think what is going on around Cyprus is very interesting, the big majors are there… I think that over the next days we will have some positive announcements. The licensing round of Egypt was a success for the country…And, in Greece, we are signing the lease agreement for two huge offshore blocks around Crete together with Total and Exxon Mobil.

R.C: Could you give us more details on this project, since the majors came to the region.

Y.G: We have geological concepts in our mind. It was almost three years ago, when we had in our hands some multi-client seismic data sold by PGS. We were looking at those and trying to interpret the complex geology of the area…So we worked on that for 2 or 3 months and then we discussed it with Total…We thought: “Let’s form a joint venture to go further on that.” We did that and then we thought again “We need another company to join us” and…we approached Exxon Mobil. In autumn 2016, we created a very strong joint venture for the exploration in the country – Total 40% operator, Exxon Mobil 40%, and ELPE 20%. Following negotiations and other things we are set to sign the lease agreements for these 2 blocks which are really big and very promising.”

“R.C: The country suffered from an enormous crisis. How has the oil and gas industry survived?

Y.G: At ELPE, we survived the crisis because we invested more than €3 billion in building a brand new refinery near Athens and also upgraded our refineries. As the group mostly consists of the downstream oriented group, these investments, first of all, created a number of jobs. We had an opportunity to produce high-quality products according to the strictest EU specifications, which we exported to nearby countries – to Italy, France; we are exporting petrochemicals to Turkey. So, we overcame the Greek crisis by exporting products. We have experienced high profits over the last 3 years…Our profits on an EBITDA basis are almost €800-900 million, which gives us an opportunity for further growth and investments in other business opportunities like upstream or renewables. The export of renewables is also the next pillar for growth for the company.”

“R.C: The principle of your company is “we operate with responsibility towards society and the environment”. Can you elaborate?

Y.G: Health, safety and environment is our first principle for all the company’s activities. We are trying our best, in all our activities, to protect the health of our employees, the health of the local communities, and their safety and the environment. At a recent Gulf of Patras project, for example, where we conducted a 3D seismic survey, we did so in compliance with environmental regulations and special attention to the dolphins.

“R.C: How do you approach your team as a senior-level manager?

Y.G: If I say “as a friend” perhaps there would be misunderstanding in the whole group, but the way we work is like that. We are not a kindergarten. Perhaps, if you ask them, they might tell you that I’m a very strict boss and I push them to the end. But we set goals – sometimes difficult ones – and all of us work together to achieve them.”

Watch the full interview on BGS Talks Youtube channel for insight into why Yannis Grigoriou thinks it is possible to discover fields the size of Zohr in the Greek offshore area; how to cope with failure, and other matters.  

 

Total seeking buyer for its 50% stake in Block 2, west of Corfu

French oil and gas multinational Total appears to be preparing to sell its 50 percent stake in an offshore license west of Corfu, Block 2, preferring instead to focus on other hydrocarbon interests in Greece, west and southwest of Crete.

Total, the operator of Corfu’s Block 2 license, established a consortium for this venture with Edison and Hellenic Petroleum (ELPE), each holding 25 percent stakes.

This license was signed in October, 2017 following the launch of a tender in 2014 that offered a total of 20 offshore blocks in the Ionian Sea and south of Crete.

Total is in partnership with US major ExxonMobil and ELPE for its licenses west and southwest of Crete.

Recent activity in Cyprus’ Exclusive Economic Zone (EEZ) – an area in which Total has joined forces with Italy’s Eni to take on Block 7 – as well as developments in the wider eastern Mediterranean, has turned the French oil and gas giant’s attention to this region, sources told energypress.

Further changes are expected in the Greek market. ELPE is believed to be seeking partners for exploration and production licenses it has acquired alone.