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RNS Number : 6251L
Energean PLC
14 January 2021
Energean plc
("Energean" or the "Company")
Karish North Final Investment Decision and New Term Loan
London, 14 January 2021 - Energean plc (LSE: ENOG, TASE: ) is
pleased to announce that it has taken Final Investment Decision
("FID") on the Karish North gas development, offshore Israel, 21-
months after the announcement of the discovery.
In November 2020, DeGolyer and MacNaughton issued an independent
Competent Persons Report that, inter alia, certified 2P reserves of
32 Bcm of gas plus 34 million barrels of liquids (approximately 241
million barrels of oil equivalent in aggregate) in Karish North as
at 30 June 2020. The discovery will be commercialised via a
low-cost tie-back to the Energean Power FPSO, which will be just
5.4km away. Production from the first well at Karish North is
expected to be up to 300 mmscf/d (approximately 3 Bcm/yr) and first
production is expected during 2H 2023. Initial capital expenditure
in the project is expected to be approximately $150 million, or
$0.6/boe; and Energean estimates that the project will deliver IRRs
in excess of 40%.
On 13 January 2021, Energean signed an 18-month, $700 million
term loan facility agreement with J.P. Morgan AG and Morgan Stanley
Senior Funding, Inc. (the "Loan"), the primary uses of which will
be:
-- Accelerating the development of Karish North, enabling the
capital expenditure on the project to be undertaken in advance of
first gas from Karish Main. Following first gas from Karish North,
the overall Karish project well stock will be able to produce well
in excess of the full 8 Bcm/yr capacity of the FPSO, retaining
operational redundancy in the well stock therefore further
enhancing overall project reliability.
-- Funding the $175 million up-front consideration for the
acquisition of the minority interest in Energean Israel Limited, as
announced on 30 December 2020, which becomes payable on transaction
close, expected 1Q 2021. Energean views the acquisition, for
between $380 million and $405 million in total, as highly
value-accretive, with very attractive transaction metrics.
Additional uses of the loan are:
-- Funding approximately $100 million of capital expenditure
required to install the second oil train and second riser on the
Energean Power FPSO, which will increase the Energean Power FPSO
liquids production capacity to approximately 40 kbopd ( from 21
kbopd) and allow maximum gas production of 800 mmscf/d
(approximately 8 Bcm/yr, from 6.5 Bcm/yr). Both the oil train and
the second riser are expected to become operational during
2022.
-- The 2022 offshore Israel exploration and appraisal drilling
programme in early 2022, with up to five wells including:
o Appraisal of the potential oil rim that was identified as part
of the Karish development drilling campaign plus exploration of
further prospective gas and liquids volumes within the Karish
lease.
o Block 12, which is located between the Karish and Tanin
leases, and is estimated to contain gross prospective recoverable
resources in excess of 108 Bcm (3.8 Tcf) according to the D&M
CPR, with the primary targets having geological chances of success
ranging between 63% and 79%. The first well is expected to target
the 20 Bcm (0.7 Tcf) Athena prospect, for which the primary target
(11 Bcm /0.4 Tcf) has a 70% geological chance of success. Success
at Athena would significantly de-risk the remaining 88 Bcm (3.1
Tcf) of prospective resources in the block. Any discovery in that
block would be prioritised over the development of Tanin due to (i)
lower capital expenditure investment (as compared to Tanin) and
(ii) the absence of any seller royalties, unlike the Karish and
Tanin leases as Block 12 was not part of the original Karish-Tanin
acquisition.
o Additional prospects assessed to contain 102 Bcm (3.6 Tcf) of
gross recoverable prospective resources, based on management
estimates, in Energean Israel's remaining exploration blocks.
-- Whilst total pre-production capex guidance for the Karish
Main project remains at $1.7 billion plus the $140 million of
deferred payments to TechnipFMC, the balance of the Loan will
provide further financial flexibility for Energean Israel
Limited.
The Loan will only be drawn to the extent necessitated and drawn
amounts will attract a margin of 5.75%, which steps up by 0.25%
every three months, with a maximum of 7.00%. The Loan has been
sized to cover the cost of associated fees and interest. Energean
maintains its target to retain its medium-term net debt / EBITDAX
ratio below 2.0x
On 13 January 2021, Energean also agreed with the existing
lenders of its $1.45 billion project finance facility to extend the
maturity by nine months, from December 2021 to September 2022.
Combined with the above Loan, the extension to the maturity date of
the project finance facility provides Energean the necessary time
and flexibility to optimise its long-term capital structure. This
is expected to take place in 2021, depending on market
conditions.
Mathios Rigas, CEO of Energean, said:
" I am delighted that we have taken Final Investment on Karish
North, proving the value of the Energean Power FPSO as a quick and
low-cost commercialisation route for our assets in Israel. We are
also increasing the liquid processing capacity of our FPSO to
process the additional volumes we discovered for minimal
incremental cost.
The new term loan and the extension of our project finance
facility are a further testament of the confidence of the financial
markets in Energean and I want to thank all the institutions for
their support. We remain committed to optimising our capital
structure to ensure that we maximise total shareholder returns
whilst implementing our growth ambitions in Israel and the East
Med.
We remain on track to achieve our goal of delivering meaningful
free cash flows that will support the payment of a sustainable
dividend whilst also moving towards our stated target to achieve
net zero emissions."
Enquiries
Investors and Analysts
Kate Sloan, Head of IR & Tel: +44 (0)7917 608 645
ECM
Media
Sotiris Chiotakis Tel: +30 210 8174 242
About Energean plc
Established in 2007, Energean is a London Premium Listed FTSE
250 and Tel Aviv 35 Listed E&P company with operations in nine
countries across the Mediterranean and UK North Sea. Since IPO,
Energean has grown to become the leading independent, gas-focused
E&P company in the Eastern Mediterranean, with a strong
production and development growth profile. The Company explores and
invests in new ideas, concepts and solutions to produce and develop
energy efficiently, at low cost and with a low carbon
footprint.
Energean's production comes mainly from the Abu Qir field in
Egypt and fields in Southern Europe and the UK. The company's
flagship project is the 3.5 Tcf Karish, Karish North and Tanin
development, offshore Israel, where it intends to use the newbuild
fully-owned FPSO Energean Power, which will be the only FPSO in the
Eastern Mediterranean, to produce first gas, commencing 4Q-2021.
Energean has signed firm contracts for 7.4 Bcm/yr of gas sales into
the Israeli domestic market, which have floor pricing, take-or-pay
and/or exclusivity provisions that largely insulate the project's
revenues against global commodity price fluctuations and underpin
Energean's goal of paying a meaningful and sustainable
dividend.
With a strong track record of growing reserves and resources,
Energean is focused on maximising production from its large-scale
gas-focused portfolio to deliver material free cash flow and
maximise total shareholder return in a sustainable way. ESG and
health and safety are paramount to Energean; it aims to run safe
and reliable operations, whilst targeting carbon-neutrality across
its operations by 2050. These aspirations were significantly
advanced with the completion of the Edison E&P acquisition in
December 2020, which is now being successfully integrated in
Energean's business.
www.energean.com
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