Energean report highest ever H1 results, double digit YOY growth

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Energean plc (LON:ENOG) has announced its half-year results for the six months ended 30 June 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.

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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

	H1 2024Energean Group	H1 2023Energean Group	Increase/ (Decrease) %	H1 2024Continuing operations	H1 2023Continuing operations	Increase/ (Decrease) %
Average daily working interest production (kboed)	146	106	38%	106	72	47%
Sales revenue ($m)	867	588	47%	643	376	71%
Cash cost of production per barrel ($/boe)	10	12	(17%)	10	11	(9%)
Cash G&A^[9]	19	18	6%	10	9	11%
Adjusted EBITDAX³ ($m)	568	345	65%	436	230	90%
Profit after tax ($m)	89	70	27%	116	27	330%
Capital expenditure ($m)	393	291	35%	211	151	40%
Decommissioning expenditure ($m)	16	4	300%	5	0	100%

	H1 2024Energean Group	FY 2023Energean Group
Net debt ($m) (including restricted cash)	2,902	2,849
Leverage⁴ (net debt / adjusted EBITDAX)	2.5x	3.1x

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.”