Energean Says it Can Weather the Downturn
Mediterranean-focused Energean Oil & Gas has said it is "well-placed" to withstand the challenges of the coronavirus (Covid-19) pandemic and the Opec+ price war, despite suffering a sharp decline in earnings last year.
The company's adjusted core earnings (Ebitdax) slumped 47% in 2019 to $35.6mn, and it swung to an operating loss of $93.9mn, versus an operating profit of $23.8mn in 2018. Sales revenues were down 16% at $75.7mn, while production costs crept up 22% to $21.5/boe.
Energean, whose main focus is the Karin and Tanin gas projects off Israel, agreed to acquire the upstream arm of Italian energy firm Edison in July 2019 for $750mn plus $100mn in contingent costs, giving it interests in Italy, Croatia and the UK and Norwegian North Sea. Edison's Algerian oil and gas operations were excluded from the transaction, and Energean went on to agree a sale of Edison E&P's UK and Norwegian interests to Neptune Energy for $250mn in October.
Energean raised $265mn of new equity and $600mn in bridge financing to pay for the Edison deal. Its net debt came to $561.6mn at the end of 2019, while its capital expenditure during the year rose 39% to $685.1mn. Its operating cash flow subsequently shrunk 42% to $36.3mn.
The company expects to net pro-forma production from the assets it is acquiring of 42,500-50,000 boe/day in 2020, down from 56,400 boe/day in 2019.
CEO Mathios Rigas was upbeat about the company's prospects, despite the weaker numbers in 2019.
"The Covid-19 pandemic and Opec+ price war have put us into uncertain times, but we are well-placed to weather the challenges. Once the Edison E&P transaction is completed, around 70% of our production will be sold under long-term gas sales agreements that insulate our future revenues against oil price volatility," he said.
"Following completion of the Edison E&P transaction, we will continue to own and operate the majority of our asset base, and are well-funded for all of our projects," he continued. "This will ensure that we can respond quickly and appropriately to the macro environment and take the right decisions to protect our business and our shareholders, as demonstrated by the $155mn cut to our 2020 capex guidance."
Rigas noted that Energean had full discretion over its capital expenditure programme outside of Israel, and boasted a very strong balance sheet.
Energean's Karish field in Israel is expected to deliver its first gas in 2021, and the company expects to be producing up to 200,000 boe/day once its Israeli projects reach full capacity.