Revenue and earnings rise comfortably at Energean

The FTSE 250 company said its cost of production in the year ended 31 December fell to $17.60 per barrel of oil equivalent, from $24.70, while it swung to an operating profit of $23.8m from a loss of $13.7m in 2017.

Adjusted EBITDAX - earnings before interest, taxes, depreciation, amortisation and exploration expenses - rose to $52.4m from $20.7m, while operating cash flow surged to $62.7m from $29.1m.

Capital expenditure rocketed during the year to $494.6m compared to the $67.3m reported a year ago, with Energean swinging to a net cash position of $75.6m a year-end, from a net debt position of $75.6m at the end of the prior year.

On the operational front, Energean said it increased its 2P reserves to 347 million barrels with 2C resources standing at 58 million barrels, making for a combined 35% year-on-year increase.

It also delivered on its milestone goals to achieve first gas from Karish and Tanin in the first quarter of 2021, having secured $460m of equity and a $1.275bn project finance facility in March, before taking the final investment decision that same month.

Energean then achieved first steel cuts on the FPSO hull and topsides in November and December, and began the four-well drilling campaign on 28 February 2019, before spudding Karish North on 15 March this year.

The company said it secured $13bn of future revenues during 2018 by signing 12 gas sales agreements, excluding Or, to supply an average 4.6 billion cubic metres per annum to the Israel domestic market.

It signed a memorandum of understanding with INGL for the transfer of the onshore infrastructure following first gas, which would result in cash inflow of NIS 369m ($98m) for Energean Israel, and delivered 4,053 barrels of oil per day of production, which was a 45% increase year-on-year.

The board sanctioned the Epsilon development during the year, before commencing platform construction and the drilling programme, and also submitted the environmental and social impact assessment for the Katakolo project, before beginning seismic operations in Western Greece, Israel and Montenegro.

Looking ahead, Energean’s board said it was looking forward to results from Karish North, and the completion of the three Karish Main development wells, including an exploration component.

It said sailaway of the Energean Power FPSO Hull from China to Singapore for integration of the topsides was due to take place this year as well.

The board said that in 2019, it would continue to pursue its strategy to secure both the resource and offtake for the remaining spare capacity in its eight billion cubic metres per annum FPSO.

Average production volume forecasts for the year had been narrowed to between 5,000 and 5,500 barrels of oil per day, which the board said reflected the delay experienced by the Epsilon extended reach well.

Continued progress was expected in the coming year at Epsilon, with drilling of the extended reach well now complete and the well completion ongoing, and first oil expected before the end of March.

Pre-drilling of the vertical wells and platform construction was also ongoing, the Energean board said.

Finally, it said it was also looking forward to conclusions from early stage seismic operations in Israel, Montenegro and Western Greece.

“In 2018 we made substantial progress in advancing our flagship Karish and Tanin development project and remain on-track to deliver first gas in the first quarter of 2021,” said Energean Oil & Gas chief executive Mathios Rigas.

“We secured $13bn of future revenues by signing 12 gas sales agreements to deliver a total volume of 4.6 billion cubic metres per annum, firmly underpinning the project's economics, signed a lump-sum, turnkey EPCIC contract with TechnipFMC, simplified project management, reduced our financial risk exposure, and secured funding for the project through the combination of a $1.3bn project finance facility and the funds raised through our IPO on the LSE in March.”

Rigas said the board remained focussed on delivering the project, with its medium-term strategy being to secure both the additional resource and offtake for the remaining spare capacity in its eight billion cubic metres per annum FPSO, which it believed would create “significant” further value for all stakeholders.

“In Greece, we grew production by 45% whilst simultaneously reducing costs per barrel by 29% - a tangible result of our commitment to optimising cash flows from our producing assets.

“We also commenced exploration activities in Western Greece and Montenegro.

“We continue to target value-enhancing opportunities in the Mediterranean area and aim to replicate the growth achieved over the last decade.”