Energean Oil and Gas plc (ENOG), the oil and gas producer focused on the Mediterranean, is pleased to issue the following trading update for the period from 30 June 2019 to 12 November 2019.
Highlights
Transaction Update:
- On track to complete the Edison E&P acquisition around year end 2019 (“Acquisition Completion”). The onward sale of Edison E&P’s UK and Norwegian subsidiaries to Neptune Energy is on track to complete as soon as is reasonably practicable thereafter.
- Refinancing of the $600 million committed bridge facility with a Reserve Based Lending (“RBL”) facility progressing well; expected to be in place in 4Q 2019, before Acquisition Completion.
Operational:
- On track to deliver first gas from the Karish Development in early 2021.
- Completed the drilling of the three development wells required to deliver first gas from Karish.
- Karish North appraisal confirmed best estimate recoverable resource volumes of 0.9 Bcf (25 Bcm) plus 34 MMbbls of light oil / condensate (combined c.190 mmboe).
- Signed a Term Sheet with MRC Alon Tavor Power, Ltd., the winning bidder of the Alon Tavor tender, which could add a further 0.5 Bcm/yr of firm gas sales.
Outlook:
- Committed to drilling the Zeus exploration well in Block 12, Israel, targeting 0.6 Tcf.
- Full year production guidance maintained at 3,400 – 3,600 bopd.
- At 30 September 2019, Energean had cash and undrawn debt facilities of $1.6 billion1.
Acquisition of Edison E&P
Energean remains on track to complete the acquisition of Edison E&P, announced on 4 July 2019, around year end 2019 and Edison E&P continues to perform in line with expectations. Energean is progressing the necessary regulatory approvals. To date, approvals have been received in France, Norway and Greece. Approvals are outstanding, and expected shortly, in Italy, Egypt, Algeria and the UK.
The $600 Bridge Loan is expected to be replaced with a reserve-based lending facility before Acquisition Completion. The process is progressing in line with expectations.
Disposal of UK North Sea & Norway Assets to Neptune Energy
Energean remains on track to complete the sale of Edison E&P’s UK and Norwegian subsidiaries
to Neptune Energy, as announced on 14 October 2019. The sale is contingent on Acquisition
Completion and is expected to close as soon as is reasonably practicable thereafter.
Israel – Karish and Tanin Development
Energean’s Karish and Tanin development project remains on track to deliver first gas into the
Israeli domestic market in 2021. During the period, Energean met its key milestones of
completing the drilling of the three development wells required to deliver first gas from Karish,
appraising the Karish North Discovery and launch of the Energean Power FPSO hull.
Israel – Drilling
As announced on 4 November 2019, Energean has now completed sidetrack appraisal operations
at Karish North, confirming best estimate recoverable resources of 0.9 Tcf (25 BCM) plus 34
million barrels of light oil / condensate (combined c.190 mmboe), significantly enhancing
Energean’s discovered resource volumes across its Karish and Tanin leases.
Low, Best and High case estimated resources are outlined in the table below. The remaining
volumetric uncertainty is largely associated with thinly bedded sections of the reservoir in the B
Sand Unit. This potential will be confirmed via acquisition of a core from this section, which is
expected to be achieved when the well is completed as a producer.
The Karish North Discovery will be developed via a tie-back to the Energean Power FPSO, which
will be located 5.4 kilometers away and is being built with 8 Bcm/yr (775 mmcf/d) of capacity.
Future GSPAs will target both the growing domestic market and key regional export markets.
As planned, the Stena DrillMax has now moved to complete the three Karish Main development
wells. Following completion of these wells, Energean has elected to drill the Zeus exploration well, which is targeting 0.6 Tcf of Gas Initially In Place (“GIIP”) across three reservoir intervals.
Zeus is located in Block 12, between the Karish and Tanin leases, and a discovery would be commercialised through the Energean Power FPSO. The Zeus exploration well is expected to cost $35 million (gross).
Energean is assessing options for the remaining five drilling options available under its contract
with Stena.
Israel – Commercial
In December 2018, Energean signed a GSPA with I.P.M Beer Tuvia Ltd. (“I.P.M.”) to supply an estimated 5.5 Bcm (c. 0.2 Tcf) of gas over the life of the contract. The contract is contingent, inter alia, on the results of Energean’s 2019 drilling programme and the results from the Karish North exploration well and appraisal sidetrack well significantly increase the likelihood of it becoming unconditional. Inclusive of the I.P.M contract, Energean’s firm contracted gas sales are equivalent to 4.7 Bcm/yr.
Energean has also recently signed a detailed term sheet with MRC Alon Tavor Power, Ltd., the winning bidder in the IEC Alon Tavor tender process. If, as is the express intention of the parties, this is converted into a GSPA, this will add c.0.5 Bcm/year (48 mmcf/d).
Finally, Energean also has a conditional GSPA with Or Power Energies (Dalia) Ltd. (“Or”), which is contingent, inter alia, on certain conditions precedent. The contract is for c.0.7 Bcm/yr (68 mmcf/d). It should be noted that, in common with other GSPAs in Israel where Energean is the seller, Or has an unlimited ability to dispose of gas for alternative end uses.
The weighted average contract price was US$4.22/mmbtu as of 30 September 2019 based on the Israeli electricity production component index, Brent oil price and exchange rates as of that date.
