Energean makes solid first-half progress

Independent oil and gas exploration and production company Energean Oil and Gas announced its half-year results for the six months ended 30 June on Wednesday, with sales revenue falling 1.9% year-on-year to $26.3m.

The FTSE 250 firm swung to an operating profit of $10.2m, however, compared to a loss of $7.9m in the first half of last year, with its profit before tax coming in at $82.1m, from a loss of $4.4m 12 months ago.

Operating cash flow improved 5.6% to $16.9m, while the company’s cash capital expenditure rose 424.6% to $136.4m.

Its net debt position at period end was $166.5m, compared to a net cash position of $59.4m at the interim point last year.

On the operational front, the board highlighted its $460m raise through its premium LSE IPO - the largest oil and gas IPO for nearly four years.

It also arranged $1.28bn of project financing, with what the board called an “attractive” estimated average margin of 4%.

During the period, Energean took its final investment decision for Karish-Tanin in March, and remained on track to deliver first gas in the first quarter of 2021.

The board also points to the firm’s increased net 2P reserves to 349 mmboe - a more-than-sixfold increase compared the 51 mmboe identified at the point of listing.

It also identified 7.5 Tcf of gross prospective resources offshore Israel, with a high geological chance of success.

Energean said it was “committed” to the high impact Karish North exploration well, beginning in the first quarter of 2019 and targeting 1.3 Tcf and 16 million bbls of gross recoverable prospective resource, of which it holds 70%, with a volume-weighted geological chance of success of 69%.

The firm delivered 3,801 bopd of production during the period - a 50% year-on-year improvement.

It also drilled an extended reach horizontal well into Prinos North, which contributed more than 1,000 bopd in the first half.

The company managed to reduce its production costs by 27% to $19/bbl, with the board saying its costs per barrel were forecast to reduce further.

“During the period we made substantial progress in de-risking our flagship Karish and Tanin development project,” said chief executive officer Mathios Rigas.

“We signed a lump-sum, turnkey EPCIC contract with TechnipFMC, simplifying project management and reducing our financial risk exposure, and secured $12 billion of future revenue by signing 12 firm gas sales agreements to deliver a total of 4.2 bcm/yr.”

Rigas said that over the next 18 months, Energean was aiming to prove up sufficient resource to fill the 3.8 bcm per year of spare capacity in its Karish FPSO, delivering “significant” incremental value to stakeholders.

“Our independent reserves auditor has identified 7.5 Tcf of Israeli prospective resource with a high geological probability of success, which gives us confidence that we can meet this target whilst adhering to our exploration strategy to target resource that can be quickly and economically monetised.

“We look forward to the results from the Karish North exploration well in the second quarter of 2019.”