Results for Half-Year Ended 30 June 2024

Energean plc

("Energean" or the "Company")

Results for Half-Year Ended 30 June 2024

London, 11 September 2024 - Energean plc (LSE: ENOG TASE: אנאג) is pleased to announce its half-year results for the six months ended 30 June 2024 ("H1 2024").

Operational Highlights:

·      Record production to date in the period, with Group production in June 2024 averaging 177 kboed (84% gas), including 140 kboed (86% gas) from the continuing operations[1], reflecting the step-up in demand during the summer in Israel.

·      Group production during H1 2024 was 146 kboed (82% gas), a 38% increase year-on-year (H1 2023: 106 kboed).

o  Production from the continuing operations¹ during H1 2024 was 106 kboed (84% gas), a 47% increase year-on-year (H1 2023: 72 kboed).

o  Group production for the eight-months to August 2024 was 154 kboed, of which 115 kboed was from the continuing operations¹.

o  Day-to-day production in Israel continues to be unimpacted by the ongoing geopolitical developments. FPSO uptime[2] (excluding planned shutdowns) was 99% in H1 2024.

·      Strategic sale of Egypt, Italy and Croatia portfolio (the "Transaction") to an entity controlled by Carlyle International Energy Partners ("Carlyle") targeted to complete by year-end 2024, subject to customary regulatory and antitrust approvals. 

o  Anti-trust and government approvals submitted and progressing on schedule. Carlyle received unconditional clearance from the Italian Competition Authority in August and approval of the Italian Presidency of the Council of Ministers in September, in respect of the Italian Golden Power Law.

o  Energean continues to expect to have sufficient funds at closing to repay in full the $450 million PLC Corporate Bond in priority and facilitate a special dividend of up to $200 million.

·      Key projects brought online.

o  In Israel, Karish North first gas and the second gas export riser completion was achieved in February 2024. Second oil train heavy lift vessel contract signed, expected to be installed in the coming months.

o  In Italy, Cassiopea started-up in August 2024. The remaining three wells and associated facilities are expected to be brought online, tested and commissioned over the coming months.

o  In Egypt, Location B gas production was brought online in August 2024.

·      Core gas projects underway and decarbonisation business progressing to facilitate future growth.

o  Final Investment Decision ("FID") on Katlan (Israel) taken in July 2024; first gas is planned for H1 2027. Energean expects spending to accelerate reflecting progress so far and anticipated progress for the year.

o  Anchois (Morocco) drilling operations continue, with preliminary analysis indicating volumes found in the Anchois-3 well are lower than pre-drill estimates. Further updates to follow once Anchois-3 ST drilling operations and ongoing technical evaluation are complete.

o  Prinos carbon storage project: (1) Front-End Engineering Design ("FEED") activities progressing, including phase 2 that targets to establish a facility with a capacity of up to 3 million tons of CO2 per year; (2) storage permit for phase 1 (1 million tons of CO2 per year) anticipated to be received in the coming months.

Financial Highlights:

·      Record financial results for the 6-months to 30 June 2024, following the start-up of Karish North and the completion of the second gas export riser (Israel).

o  Revenues of $867 million, a 47% increase (H1 2023: $588 million), of which $643 million is associated with the continuing operations¹.

o  Adjusted EBITDAX[3] of $568 million, a 65% increase (H1 2023: $345 million), of which $436 million is associated with the continuing operations¹.

o  The Group recorded total impairments of $76 million during the period, $61 million of which was in relation to the Orion X1 exploration well in Egypt.

o  Profit after tax of $89 million, a 27% increase (H1 2023: $70 million), of which $116 million is associated with the continuing operations¹.

·      Group leverage[4] (net debt/annualised Adjusted EBITDAX) reduced to 2.5x (FY 2023: 3.1x).

o  Group cash as of 30 June 2024 was $345 million, including restricted amounts of $86 million[5], and total liquidity was $511 million[6]. This includes cash for the continuing operations¹ of $317 million, including restricted amounts of $86 million⁶, and total liquidity of $483 million.

Corporate Highlights:

·      Q2 2024 dividend of 30 US$ cents/share declared today, scheduled to be paid on 30 September 2024[7]. 

o  Including the Q2 2024 dividend, approximately $486 million will have been returned to shareholders since payments began.

o  Energean reiterates its commitment to the existing dividend policy, which targets to return $1 billion to shareholders by the end of 2025. The Group expects to redefine its dividend policy upon Transaction closing.

·      Group Scope 1 and 2 emissions intensity of 8.5 kgCO2e/boe, a 20% reduction versus H1 2023[8]. Scope 1 and 2 emissions intensity for the continuing operations¹ was 6.2 kgCO2e/boe.

2024 guidance:

·      Group production guidance narrowed to 155 - 165 kboed (from 155-175 kboed) for 2024, to reflect year-to-date performance in Israel and the actual start-date and expected ramp-up to full production of Cassiopea (Italy). 115-125 kboed is associated with the continuing operations¹.

·      Group cash cost of production (including royalties) reduced to $550-600 million (from $570-630 million), predominantly due to lower forecasted royalties in Israel. $375-405 million is associated with the continuing operations¹.

·      Development and production capital expenditure increased to $600-700 million (from $500-600 million), $60 million of this increase is related to Israel and the remainder to the disposal group. The increase in Israel is due to expected completion of milestones on the Katlan project (Israel) in 2024 versus 2025, reflecting progress so far and anticipated progress for the year. $320-380 million is associated with the continuing operations¹.

Financial Summary

Mathios Rigas, Chief Executive of Energean, commented:

"I am pleased to report our highest ever set of half-year results, with double digit year-on-year growth in production, revenue and adjusted EBITDAX. In Israel, we achieved record monthly production, reflecting the step-up in demand during the summer and excellent uptime of the FPSO. Our operations remain resilient in the face of ongoing geopolitical developments and our day-to-day production has remained unimpacted.

"During this period, we also continued our track record of maximising value for our shareholders, announcing the divestment of our Egyptian, Italian and Croatian portfolio to Carlyle for more than 3x[10] the value that we paid for them. Good progress is being made towards completion, upon which we expect to reduce gross debt and return money to shareholders in line with previous announcements.

"Our strong operational and financial performance underpins our quarterly dividend, which we have consistently paid in line with our policy. As previously communicated, we expect to redefine our dividend policy upon Transaction closing.

"We have also made significant progress on our key strategic areas, from advancing our gas-focused growth projects through the Katlan FID and the start-up of Cassiopea and Location B, to progressing our decarbonisation business via the Prinos Carbon Storage project, where we anticipate receiving the storage permit for phase 1 (1 million tons of CO2 per year) in the coming months.

"This is only the start of a new chapter in the Energean story. The combination of operational excellence and entrepreneurial deal-making is the foundation on which a new Energean will continue to deliver for its shareholders. We continue to be committed to our objectives of consistent returns to shareholders, capital discipline and responsibly produced energy with outstanding Environmental, Social and Governance ("ESG") ratings."

Enquiries

Conference call

A webcast will be held today at 08:30 BST / 10:30 Israel Time.

Webcast: https://brrmedia.news/ENOG_HY_24

Dial-In: +44 (0) 33 0551 0200

Dial-in (Israel only): +972 (0) 3 376 1321

Confirmation code (if prompted): Energean Half Year

The presentation slides will be made available on the website shortly www.energean.com.

Energean Operational Review

Production

Energean continued to deliver strong production levels in H1 2024. Group average working interest production was 146 kboed (82% gas), up 38% year-on-year, primarily as a result of the start up of Karish North and the completion of the second gas export riser in Israel.

Israel

Production

In the 6-months to 30 June 2024, working interest production from Israel averaged 104 kboed (86% gas). Gas production increased by 44% year-on-year primarily due to the start-up of Karish North and the completion of the second gas export riser. Liquids production increased by 84% year-on-year. Day-to-day production in Israel continues to be unimpacted by the ongoing geopolitical developments. FPSO uptime (excluding planned shutdowns) was 99%[11] in H1 2024.

In May 2024, the FPSO successfully completed a scheduled 5-day turnaround for routine maintenance.

In June 2024, production during the period reached record levels, with output averaging 137 kboed, as a result of strong summer gas demand. Average production in August 2024 was 139 kboed.  

Energean continues to focus on optimising production from the FPSO, including the integration of Karish North, and looks forward to bringing on M10 to provide further flexibility in its liquids and gas handling capacity.

Commercial

In line with Energean's ongoing strategy to secure long-term reliable cash flows from long-term gas contracts, a Gas Sale and Purchase Agreement ("GSPA") with Eshkol Energies Generation LTD was signed in February 2024. The contract is for the supply of an initial 0.6 bcm/yr, which commenced in June 2024, rising to 1 bcm/yr from 2032 onwards and represents circa $2 billion in revenues over the life of the 15 year contract.

Energean has also signed two contracts with two peaker stations for the supply of 0.1 bcm/yr each, commencing in October 2024 and May 2025 respectively, representing around $400 million in revenues over the life of the contracts.

Development

Karish Growth Projects

In February 2024, Karish North first gas and the completion of the second gas export riser were safely achieved.

Energean has signed a contract for the heavy lift vessel to transport and lift the second oil train, which will increase the FPSO's liquids production capacity. This lift is expected to occur in the coming months and will utilise the scheduled shutdown of production from the FPSO for routine maintenance. Post-lift, installation and commissioning activities are expected to take up to 6-months to complete, with liquids production expected to increase to 20-25 kbbl/d in H2 2025.

Katlan

In July 2024, Energean took FID on its Katlan development project, following the grant of the associated 30-year lease from the Ministry of Energy and Infrastructure. Capital expenditure is expected to be approximately $1.2 billion and entails:

·      Drilling: re-entry and completion of the Athena and Zeus wells.

·      Facilities: (1) Installation, amongst others, of a four-well-slot tieback capacity to a single large ~30 kilometre production line that can be used by future phases, for which Energean has awarded the integrated engineering, procurement, construction and installation ("iEPCI^TM") contract to TechnipFMC through its subsidiary Technip UK Limited. (2) An upgrade of the FPSO topsides related to MEG treatment, injection and storage (which will benefit all future subsea tie-back developments).

First gas is planned for H1 2027.

Morocco

In April 2024, Energean completed the farm-in to Chariot Limited's ("Chariot", AIM:CHAR) acreage offshore Morocco.

In August 2024, Energean (W.I. 45%; operator), alongside its partners Chariot (30%) and ONHYM (25%), started drilling the Anchois-3 appraisal well using the Stena Forth drillship on the Lixus licence. Drilling operations on the licence continue, with preliminary analysis indicating volumes found in the Anchois-3 well are lower than pre-drill estimates. Further updates will follow once Anchois-3 ST drilling operations and ongoing technical evaluation are complete.

Greece

The Prinos Carbon Storage project (W.I. 100%), which has the potential to store up to 3 million tons of CO2 per year over 25 years, is one of the largest and most advanced carbon storage projects in Southern Europe.

Energean, through its subsidiary EnEarth, has made good progress during 2024, with the Storage Permit application and the Environmental Impact Assessment submitted for the project's first phase of 1 million tons of CO2 per year. Energean anticipates that it will receive the storage permit for phase 1 in the coming months. FEED activities for the second phase, which targets to establish a facility with a capacity of up to 3 million tons of CO2 per year, are progressing.

UK

Energean is focused on optimising production from its late life assets and effectively managing its decommissioning projects.

An infill well was drilled on the Scott field (W.I. 10%) in H1 2024 and is expected to be brought online later this year. In 2025, an injector well on the Scott field is expected to be drilled.

In July 2024, Energean UK Limited awarded a contract to Petrodec UK Limited ("Petrodec") for the decommissioning of the Tors (W.I. 68%; operator) and Wenlock (W.I. 80%; operator) assets. This contract includes: the plugging and abandoning of eight platform wells with optional scope for one E&A well, the removal of three platforms and the cleaning of inter-field pipelines. Total net decommissioning expenditure for Tors and Wenlock is expected to be around GBP 80 million over the next five years and includes expenditure outside of the Petrodec contract for, amongst others, operational and project management costs, regulatory fees and subsea remediation works.

Strategic sale of Egypt, Italy & Croatia portfolio targeted to complete by year-end 2024

In June 2024, Energean entered into a binding agreement for the sale of its portfolio in Egypt, Italy and Croatia to an entity controlled by Carlyle for an enterprise value ("EV") of up to $945 million, of which $820 million is firm. This represents more than a 3x[12] return since the portfolio was acquired for $284 million in 2020. The economic effective date of the Transaction is 31 December 2023.

This sale enables Energean to rationalise the portfolio and focus on its gas-weighted, gas-development strategy. It also optimises the portfolio by divesting later life assets, removing over 60% of the Group's decommissioning liabilities, and improving free cashflow generation in the short to medium-term.

Completion is targeted by year end-2024, with all regulatory and antitrust approvals having been submitted to the relevant authorities. Carlyle received unconditional clearance from the Italian Competition Authority in August and approval of the Italian Presidency of the Council of Ministers in September, in respect of the Italian Golden Power Law.

Disposal group - operational update

Working interest production from Egypt, Italy and Croatia in H1 2024 averaged 40 kboed (75% gas), up 18% year-on-year due to the completion of NEA/NI (Egypt) in December 2023 and the start-up of the NAQPII#2 infill well on the Abu Qir field in January 2024.

Egypt

In March 2024, the Orion X1 exploration well (W.I. 19%) reached the target reservoir. Post-drilling well analysis indicates no commercial hydrocarbons.

In August 2024, Energean (W.I. 100%) brought the Location B infill well on the Abu Qir licence in Egypt onstream.

Italy

In August 2024, initial test production began from one of the four subsea wells on the Cassiopea field, offshore Italy (W.I. 40%). The remainder of the wells and associated facilities are expected to be brought online, tested and commissioned over the coming months.

ESG and climate change

Energean is committed to net zero emissions by 2050 and industry-leading disclosure of its energy transition intentions.

Energean's scope 1 and 2 emissions intensity in H1 2024 was 8.5 kgCO2e/boe, a 20% reduction versus H1 2023. This year-on-year reduction was primarily driven by: (1) the growth of production in Israel which has a lower emissions intensity compared to the wider group and (2) reduced fugitive methane emissions in Egypt following Leak, Detection and Repair ("LDAR") campaigns. The Group's 2024 emissions intensity is expected between 8.5-9.0 kgCO2e/boe.     

Scope 1 and 2 emissions intensity for the continuing operations¹ was 6.2 kgCO2e/boe. Post-close the Group's scope 1 and 2 emissions intensity will reduce by around 40% to ~5 kgCO2e/boe, accelerating its 2035 target of 4-6 kgCO2e/boe by 10 years.

ESG reporting and ratings

Energean is pleased to report, following Sustainalytics' May 2024 update, that it continues to be ranked in the top quartile of its sector, ranking 46 out of 307 oil and gas producers.

Financing

As announced in June 2024, Energean expects sufficient cash proceeds at closing of the Transaction to repay in full the $450 million PLC Corporate Bond.

Energean intends to refinance its 2026 Energean Israel Limited bond to maintain an efficient capital structure, freeing up liquidity for its Katlan development.

Full Year 2024 guidance

*Energean's development and production capital expenditure guidance includes Katlan and Location B expenditure. However, under IFRS accounting standards, the H1 2024 results classifies this expenditure under exploration and appraisal expenditure.

Energean Financial Review

Financial results summary

Revenue, production and commodity prices

Group

Group working interest production averaged 146 kboed with the Karish and Karish North fields contributing over 70% of total output. Increased production in Israel compared to the previous year, coupled with full-period production from NEA/NI, led to a 38% increase in group production output during H1 2024. However, this was partially offset by an 11% decrease in gas production in Italy, while oil production remained stable. Despite regional variations, the overall group production mix remained consistent at 82% gas and 18% liquids (H1 2023: 82% gas and 18% liquids).

H1 2024 revenue in Group level totalled $867 million, reflecting a 47% increase from the prior period (H1 2023: $588 million). This growth was primarily driven by sales from Israel, which accounted for 70% of Group total revenue (H1 2023: 59%).

The weighted average realised gas price for the Group was $4.6/mcf, 12% lower than in H1 2023 of $5.2/mcf leading to an 8% year-on-year decline in revenue. Gas prices in Italy were subdued at the beginning of 2024, leading to an average realised PSV price of $10.0/mcf (H1 2023: $16.7/mcf), resulting in a 7% decline in revenue year-on-year. Total gas sales increased by 25% to $504 million (H1 2023: $403 million), driven by higher sales volumes.

Total liquid, crude, and petroleum product sales reached $361 million for the period (H1 2023: $182 million) and a realised weighted average liquid price of $74.8/boe (H1 2023: $65.1/boe). The higher liquids prices realised in H1 2024 contributed to a 15% increase in total revenue compared to the prior period.

Adjusted EBITDAX for the period was $568 million (H1 2023: $345 million). The overall 65% increase was primarily driven by higher revenue, combined with a 17% reduction in cash production costs per boe, half of which was attributed to continuing operations.

Continuing operations

Working interest production from continuing operations averaged 106 kboed, with the Karish and Karish North fields contributing 98% of total output. Increased production in Israel compared to the previous year, led to a 47% increase in production output during H1 2024. The production mix was at 85% gas and 15% liquids (H1 2023: 89% gas and 11% liquids). Notably, production in Greece and the UK each grew by 31% compared to H1 2023.

Revenue from continuing operations rose to $643 million, a 71% increase compared to the previous period (H1 2023: $376 million). This growth was primarily driven by sales from Israel, which accounted for 94% of revenue from continuing operations (H1 2023: 93%).

Gas sales from continuing operations increased by 45% to $389 million (H1 2023: $268 million), due to higher sales volumes.

Liquid, crude, and petroleum product sales reached $252 million (H1 2023: $106 million), and a realised weighted average liquid price of $79.8/boe (H1 2023: $71.0/boe). The higher liquids prices realised in H1 2024 contributed to a 10% increase in total revenue compared to the prior period. During H1 2024, the average Brent oil price was $83.5/bbl (H1 2023: $79.6/bbl).

Adjusted EBITDAX for the period was $436 million (H1 2023: $230 million). The overall 90% increase primarily driven by higher revenue, combined with a 9% reduction in cash production costs per boe, half of which was attributed to continuing operations.

Underlying cash production costs

Group

Total cash production costs for the period were $271 million (H1 2023: $231 million) with 61% attributed to production in Israel. Cash production costs for the rest of the Group, excluding Israel, amounted to $107 million (H1 2023: $123 million). Unit costs for the period were $10/boe (H1 2023: $12/boe), primarily reflecting the impact of increased production on a largely fixed cost base. As detailed in note 5 of the financial statements, royalties-payable in Italy and Israel-are a significant component of production costs. Excluding royalties, production costs would be $155 million (H1 2023: $158 million) with a representative unit cost of $6/boe (H1 2023: $8/boe).

Continuing operations

Cash production costs for the period were $189 million (H1 2023: $139 million), with 87% attributed to production in Israel. Unit costs for the period were $10/boe (H1 2023: $11/boe), decreased by 9% from the previous period. As detailed in note 5 of the financial statements, royalties-payable in Israel-are a significant component of production costs. Excluding royalties, production costs would be $83 million (H1 2023: $76 million), with a representative unit cost of $4/boe (H1 2023: $6/boe).

Depreciation

Group

Depreciation charges on production and development assets rose to $184 million (H1 2023: $116 million). The growth was driven by increased production in Israel and Egypt. In Egypt, depreciation charges increased by 129% to $46 million (H1 2023: $20 million), while Israel's charges increased by 55% to $124 million (H1 2023: $80 million). On a per barrel of oil equivalent basis, this represented a 15% increase, rising to $7/boe (H1 2023: $6/boe).

Continuing operations

Depreciation charges on production and development assets rose to $132 million (H1 2023: $84 million) primarily due to the 55% increase in Israel's charges to $124 million (H1 2023: $80 million).

Exploration and evaluation expenditure and new ventures

Group

During the period, the Group expensed $79 million (H1 2023: $2 million) for exploration and new venture evaluation activities. Total impairment costs of $76 million were recognised during the period for projects that will not progress to development. In 2024, the Orion X1 exploration well in Egypt reached the target reservoir but indicated no commercial hydrocarbons, resulting in a full impairment of the related exploration asset valued at $61 million. Additionally, the exploration license for Ioannina expired on 2 April 2024, leading to a full impairment of the exploration asset valued at $15 million.

Continuing operations

During the period, $16 million (H1 2023: $1 million) were expensed for exploration and new venture evaluation activities. Impairment costs of $15 million were recognised during the period for Ioannina license which expired on 2 April 2024, leading to a full impairment of the exploration asset.

Other income and expenses

Group

Other expenses increased to $7 million (H1 2023: $2 million). The $7 million in other expenses primarily consists of $4 million in transaction costs related to ECL Group disposal and $1 million expected credit loss provision on trade receivables within the disposal group. Other income totalled $2 million (H1 2023: $7 million), mainly due to the reversal of prior period provisions, reassessed in the current year based on updated facts and circumstances.

Continuing operations

Other expenses from continuing operations increased to $4 million (H1 2023: $1 million). The $4 million in other expenses primarily consists of the $4 million in transaction costs related to ECL Group disposal. Other income from continuing operations totalled $1 million, unchanged from the prior period (H1 2023: $1 million).

Finance income / costs

Group

Total finance costs in H1 2024 amounted to $138 million (H1 2023: $114 million). Total financing costs before capitalisation were $143 million.  The finance costs included $100 million in interest expense on Senior Secured notes, $8 million on debt facilities, $1 million in interest expense related to long-term payables, $30 million from the unwinding of discounts on contingent consideration, long-term payables, and decommissioning provisions, and $4 million in commissions for guarantees and other bank charges. Net finance costs also reflect foreign exchange gains of $11 million and finance income of $5 million, which includes interest income from time deposits.

Continuing operations

Total finance costs in H1 2024 for continuing operations amounted to $122 million (H1 2023: $103 million). Total financing costs before capitalisation were $127 million.  The finance costs included $100 million in interest expense on Senior Secured notes, $8 million on debt facilities, $1 million in interest expense related to long-term payables, $14 million from the unwinding of discounts on contingent consideration, long-term payables, and decommissioning provisions, and $4 million in commissions for guarantees and other bank charges. Net finance costs also reflect finance income of $5 million, which includes interest income from time deposits.

Taxation

Group

The Group had a tax expense of $86 million in H1 2024 (H1 2023: $65 million), consisting of a current tax expense of $52 million and a deferred tax expense of $34 million, resulting in an effective tax rate of 49% (up from 48% in H1 2023). The increase in tax expense compared to the prior period is primarily due to higher taxable profits and changes in deferred tax, largely driven by the utilisation of tax losses in Israel and Italy.

Taxation charges in H1 2024 also included $19 million (H1 2023: $26 million) related to non-cash taxes deducted at source in Egypt and $12 million deferred tax expense related to changes in the decommissioning provision in Italy.

Continuing operations

Tax charges for continuing operations totalled $46 million (H1 2023: $20 million), including $30 million in corporation tax charges and $16 million in deferred tax charges.

Profit after tax

Group

Profit after tax was $89 million (H1 2023: $70 million). The increase in profit compared to the prior period is primarily due to higher taxable profits, despite an increased tax expense (H1 2024: $86 million versus H1 2023: $65 million). Profit before tax rose by 30% to $175 million (H1 2023: $135 million).

Continuing operations

Profit after tax from continuing operations was $116 million (H1 2023: $27 million). The increase in profit compared to the prior period is primarily due to higher taxable profits, despite an increased tax expense (H1 2024: $46 million versus H1 2023: $20 million). Profit before tax rose by 245% to $162 million (H1 2023: $47 million).

Earnings per share

Group

In H1 2024, earnings per share were $0.48 (H1 2023: $0.39), with diluted earnings per share remaining the same.

Continuing operations

Earnings per share from continuing operations were $0.63 (H1 2023: $0.17). The diluted earnings per share for continuing operations were also $0.63 (H1 2023: $0.16), reflecting mainly the impact of convertible loan notes in H1 2023.

Operating cash flow

Group

In H1 2024, the Group had a net cash inflow from operations of $527 million (H1 2023: $233 million). The significant increase in operating cash flow compared to the prior period was primarily driven by the significant growth in revenues from Israel.

Continuing operations

In H1 2024, Energean recorded a net cash inflow from operations of $447 million (H1 2023: $141 million).

Capital Expenditures

Group

During the period, the Group incurred capital expenditures of $393 million (H1 2023: $292 million). The expenditures were primarily focused on development activities, including $50 million for the Karish Main Field, Second Oil Train, and the riser, as well as the Karish North Field in Israel, and $105 million for the Cassiopea field in Italy. Exploration and appraisal expenditures were mainly directed towards the Katlan field in Israel ($130 million) and the North East Hap'y and Location B developments in Egypt ($49 million). Additionally, in April 2024, the Group invested $13 million to acquire licenses for the Anchois gas development in Morocco.

Continuing operations

During the period, capital expenditures of $211 million related to continuing operations (H1 2023: $151 million) were incurred. The expenditures were primarily focused on development and exploration activities in Israel as discussed above in addition to investment to acquire licenses in Morocco.

Decommissioning provision

A total change in the decommissioning provision of less than $1 million (H1 2023: $22 million) was expensed during the period. An impairment reversal of $3 million related to discontinued operations, resulting from a decrease in the decommissioning provision estimate in Italy due to increased discount rates, was partially offset by an additional impairment charge of $3 million in the UK (continuing operations). In H1 2024, the Group spent $16 million on decommissioning activities, including $5 million on the Tors and Wenlock decommissioning related to continuing operations, and $11 million in Italy related to discontinued operations. (H1 2023: $4 million).

Net Debt

As of 30 June 2024, net debt totalled $2,902 million (FY23: $2,849 million), comprising $2,625 million in Israeli senior secured notes, $450 million in corporate senior secured notes, and $105 million from the Greek Black Sea Trade Development Bank loan, offset by deferred amortized fees and cash, bank deposits, and restricted cash balances of $345 million (including $86 million of restricted cash). In the debt capital markets, Energean is only exposed to floating interest rates for the Greek loan and Revolving credit facility, while the Senior Secured Notes at both Energean Plc and Energean Israel carry fixed interest rates.

Shareholder Distributions

In line with the Group's dividend policy, Energean returned US$0.60 per share to shareholders in H1 2024, totalling $110 million, representing two-quarters of dividend payments. In H1 2023, Energean returned US$0.60 per share.

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, underlying cash cost of production and G&A, capital expenditure, net debt and leveraging.

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, share-based payment charge, impairment of property, plant and equipment, other income and expenses, 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.

While adjusted EBITDAX excludes the financial results of discontinued operations by definition, the Group has chosen to present equivalent non-IFRS financial metrics for the entire Energean Group, including discontinued operations, for comparison purposes.

Cash Cost of Production

Cash Cost of 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 cost and assess operational efficiency. Cash cost of production is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory movements.

Cash General & Administrative Expense (G&A)

Cash G&A excludes certain non-cash accounting items from the Group's reported G&A. Cash G&A is calculated as follows: administrative and distribution expenses, excluding depletion and amortisation of assets and share-based payment charge that are included in G&A.

The Group's total cash G&A expenses for H1 2024 amounted to $19 million, with $10 million attributed to continuing operations. This reflects a 6% overall increase from the previous period, and a 11% increase specifically for continuing operations. The rise in costs is primarily driven by an increase in staff expenses in Israel due to ram-up of operations.

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 less decommissioning asset additions, right-of-use asset additions, capitalised share-based payment charge and capitalised borrowing costs:

Net Debt

Net debt is defined as the Group's total borrowings less cash and cash equivalents. Management believes that net debt serves as a valuable indicator of the Group's indebtedness, financial flexibility, and capital structure because it reflects the level of borrowings after accounting for any cash and cash equivalents that could be utilised to reduce borrowings.

Going Concern

The Directors assessed the Group's ability to continue as a going concern over a going concern assessment period to 31 December 2025. As a result of this assessment, the Directors are satisfied that the Group has sufficient financial resources to continue in operation for the foreseeable future and for this reason they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements. Detail of the Group's going concern assessment for the period can be found within note 2.2 of the condensed consolidated interim financial statements.

Subsequent Events

In July 2024, management made a final investment decision for the Katlan development project in Israel. The carrying value of the exploration asset at 30 June 2024 was $207 million. The Katlan area will be developed in a phased approach through a subsea tieback to the existing Energean Power FPSO, which currently serves the Karish and Karish North fields. The first gas production is expected in the first half of 2027.

In August 2024, first gas production was achieved at the Cassiopea field, located offshore in Italy.

In August 2024, the prospective buyer of the ECL Group obtained unconditional clearance from the Italian Competition Authority followed by approval of the Italian Presidency of the Council of Ministers in respect of the Italian Golden Power Law in September 2024.

Principal risks at half-year 2024 and key developments since the 2023 Annual Report

Effective risk management is fundamental to achieving Energean's strategic objectives and protecting its personnel, assets, shareholder value and reputation. The Board has overall responsibility for determining the nature and extent of the risks it is willing to take in achieving the strategic objectives of the Group and ensuring that such risks are managed effectively.

Key developments in relation to Energean's risks

On 19 June 2024, the Company entered into a sale and purchase agreement with CIEP Spin BidCo Limited (the "Buyer"), an entity controlled by Carlyle, regarding the strategic sale of the Company's Egyptian, Italian and Croatian portfolio. On the basis that the Transaction amounts to a significant transaction, its implementation is expected to have an impact on Energean, either as a result of the Transaction, or related to the Transaction in the sense that material risk factors will be affected by the Transaction. These material risks are described in section 3.1 as announced on 29 August 2024 pursuant to the UK Listing Rule 7.3. As the Transaction is subject to conditions being satisfied by a longstop date of 20 March 2025 (or such other date as may be agreed by Energean and Carlyle), there can be no certainty that the Transaction will complete. As a result, other than the risk of the Transaction not completing, the Board has made no changes to the Group's principal risks as a result of the Transaction at this time.     

Looking to the second half of 2024, Energean highlights the following developments as important in relation to its principal risks. Since 7 October 2023 and the ongoing conflict in Israel, the magnitude of regional geopolitical risk remains elevated. Growing concerns of escalations in the Middle East have intensified the security risk in the region, as essential infrastructure systems (such as the Energean Power FPSO offshore Israel) may be targets for missile fire and sabotage operations. While the Karish field has continued to produce in line with guidance and with no disruption to its production since the start of the conflict, any event that impacts production from this field could have a material adverse impact on the business, results of operations, cash flows, financial condition and prospects of the Group. In the first half of 2024, Energean has ensured that all measures are in place to continue business operations, maintain the mobility of our people and make certain that the security of information is unaffected.

Despite these challenges, Energean has achieved a number of positive milestones during the first half of 2024, including: (i) the start-up of Karish North and the second gas export riser installation, which enables Energean to utilise the FPSO's maximum capacity; (ii) FID on Katlan with first gas planned for H1 2027; (iii) good progress on the Cassiopea gas development, with initial test production from one of the four subsea wells started in August 2024 and; (iv) success at the Abu Qir infill well drilling campaign in Egypt, with first gas achieved in August 2024.

Principal risks and uncertainties

Energean has closely monitored its risks and uncertainties throughout the year and has identified one new principal risk, which is detailed below. All other principal risks that the Group will be exposed to in the second half of 2024, alongside the trends and developments as highlighted above, are the same as those described in the principal risks section in Energean's 2023 Annual Report (pages 85-96) and are summarised below.

Overview of key risks and principal uncertainties since 31 December 2023

1.     Strategic risk: Regional and domestic geopolitical and security risks in Israel

2.     Operational risk: Delayed delivery of further growth projects

3.     Strategic risk: Lack of new commercial discoveries and reserves replacement

4.     Operational risk: Production uptime reliability and operating efficiency (including reliability of the production systems, i.e. FPSO and subsea)

5.     Financial risk: Maintaining liquidity and solvency

6.     Macro-economic risk (including inflation, interest rates and commodity price fluctuations)

7.     Organisational & HR risk: Failure to attract, retain and develop staff

8.     Deterioration or misalignment of JV relationships risk

9.     Recoverability of production cost and receivables in Egypt risk

10.  Significant IT and OT cyber risk, including a security breach of internal systems or a cyber attack

11.  Ethics and Business Conduct. Fraud, Bribery and corruption risk

12.  Health Safety and Environment (HSE) risk

13.  Failure to manage the risk of climate change and to adapt to the energy transition

14.  Climate Change risk: Physical risks

15.  Strategic risk: Geopolitical conflicts outside of Israel in areas of operation affecting production and distribution (including fiscal uncertainties)

16.  New: Risk of the Transaction not proceeding

The Transaction is conditional upon the satisfaction or, where applicable, waiver of the following conditions: (1) regulatory approvals in Italy and Egypt; (2) anti-trust approvals in Italy, Egypt and COMESA; and (3) transfer of the North Sea Assets from Energean Capital Limited to a member of the Group. Progress is ongoing to satisfy or, where permitted, waiver these conditions by the long stop date of 20 March 2025. Although Energean is optimistic about achieving these conditions by the long stop date, the Group recognises that there is a residual risk that the conditions may not be met. Failure to satisfy or obtain waiver of any condition may result in the Transaction not being completed. The Sale and Purchase Agreement may also be terminated for any breach of certain fundamental warranties and the occurrence of certain material adverse events affecting the Target Group following signing, subject to customary rights to remedy.

 If the Transaction is not completed, or the Sale and Purchase Agreement is terminated, the Group will not receive any of the consideration payable in respect of it. This would prejudice its ability to create shareholder value by being unable to repay the 2027 PLC Notes in full prior to their scheduled maturity and facilitate a special dividend of up to $200 million.

If Completion does not occur, or the Sale and Purchase Agreement is terminated, the Company will also have incurred significant costs and management time in connection with the Transaction, which it will not be able to recover (other than through the Non-Completion Payment, to the extent applicable). It will also not realise the anticipated benefits of the Transaction and its ability to implement its stated strategy may be prejudiced.

Statement of Directors' responsibilities

The Directors confirm that, to the best of their knowledge:

·      The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted in the United Kingdom.

·      The interim management report includes a fair review of the information required by the Disclosure Transparency Rules (DTR) 4.2.7R, namely an indication of important events during the six months ended 30 June 2024 and a description of the principal risks and uncertainties for the remaining six months of the financial year.

·      The interim management report includes a true and fair view of the information required by the DTR 4.2.8R, including disclosure of related party transactions and any changes therein during the reporting period.

Forward looking statements

This announcement contains statements that are, or are deemed to be, forward-looking statements. In some instances, forward-looking statements can be identified by the use of terms such as "projects", "forecasts", "on track", "anticipates", "expects", "believes", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results and events to differ materially from those expressed in or implied by such forward-looking statements, including, but not limited to: general economic and business conditions; demand for the Company's products and services; competitive factors in the industries in which the Company operates; exchange rate fluctuations; legislative, fiscal and regulatory developments; political risks; terrorism, acts of war and pandemics; changes in law and legal interpretations; and the impact of technological change. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in this announcement is subject to change without notice.

Numbers outside of the unaudited consolidated interim financial statements, where applicable, are rounded to the nearest  million US$ and therefore may differ in the order of a million US$.

INDEPENDENT REVIEW REPORT TO ENERGEAN PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2024 which comprises the interim consolidated income statement, the interim consolidated statement of comprehensive income, the interim consolidated statement of financial position, interim consolidated statement of changes in equity, the interim consolidated statement of cash flows and the related explanatory notes 1 to 29. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2024 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE) issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

10 September 2024

*Restated for discontinued operations, refer to Note 24 for further detail.

*Restated for discontinued operations, refer to Note 24 for further detail.