STRATEGIC REPORT
Key Metrics and Report Highlights
2022
2021
% change
Average working interest 2P reserves
and 2C resources (MMboe)
1,378
1,154
19%
Average working interest production (kboepd)
41.2
41.0
0.5%
Sales revenues ($ million)
737
497
48%
Cost of production ($/boe)
18.9
17.5
8%
Adjusted EBITDAX ($ million)
1
422
212
99%
Operating profit ($ million)
232
32.1
623%
Profit/(loss) after tax ($ million)
17
(96)
118%
Cash flow from operating activities ($ million)
272
133
105%
Net debt / (cash) ($ million)
2,518
2,017
25%
Operational Highlights
Karish onstream
First gas was safely delivered at Energean’s flagship project on 26 October 2022. Initially flowing from
one well, all three production wells were brought online by year-end, with excellent reservoir deliverability
confirmed. Energean has completed commissioning under the GSPAs and, at the time of writing, is
sequentially notifying gas buyers that commercial obligations have commenced. Energean is on track to
complete the FPSO debottlenecking by year-end 2023
(see pages 39-40 for further details).
Key development projects on track
First gas from the first well at NEA/NI was brought onstream in March 2023. Energean’s other key
development projects, (Karish North and Cassiopea) are on track to deliver Energean’s 200 kboepd
production target in H2 2024
(see pages 41-42 for further details).
Exploration success
The 2022 growth drilling programme in Israel was successfully completed and discovered and de-risked
73 bcm (480 MMboe) of new gas volumes. This includes 68 bcm (449 MMboe) of gas volumes in the
Olympus Area (Block 12 and Tanin lease), for which the development concept is being finalised
(see
pages 40-41 for further details)
.
Corporate and Financial Highlights
Commencement of dividend payments
In total, Energean returned US$0.60/share to shareholders ($106.5 million) in 2022, in line with Energean’s
target to pay dividends of at least $1 billion by end-2025
(see page 38 for further details)
.
Strong financial performance
Record revenues ($737 million) and adjusted EBITDAX
1
results ($422 million) on the back of strong
commodity prices
(see pages 36 and 67 for further details)
. Energean paid a total of $29.3 million of
one-off windfall taxes in Italy in 2022.
Emissions intensity reduced
13% year-on-year reduction in carbon emissions intensity to 16.0 kgCO2e/boe
(see pages 37 and 65-67 for
further details)
, on track to achieve reduction to 7-9 kgCO2e/boe once Karish is on plateau.
1
The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include adjusted EBITDAX. More information can be found in the Financial
Review section, under the heading ‘Non-IFRS measures’.
Page 2 of 255
STRATEGIC REPORT
Non-Financial Information Statement
The following table constitutes our Group Non-Financial Information Statement in compliance
with Sections 414CA and 414CB of the Companies Act 2006. The information listed is incorporated
by cross-
reference. Additional Group Non-Financial Information is also available on our website
www.energean.com
.
Reporting
Requirement
Group Approach and Policies
Relevant Information
Relevant
Pages
Environment
Environmental Policy
Climate Change Policy
Zero-Routine-Flaring Policy
Task Force on Climate Related
Disclosure
Environmental policies
17, 61-64
Environmental targets
32
Environmental data
62, 65-66
Environmental KPIs
37, 62
TCFD disclosure
20-32
Employees
CSR Policy
Equal Opportunities Policy
Diversity, Equity and Inclusion Policy
Code Of Ethics
Corporate Major Accident Prevention
Policy
Data Privacy Policy
HSE Policy for Contractors
HSE policies
56-61
HSE KPIs
37
HSE data
56, 60-61
Excellence through our people
52-56
Human Rights
Code of Ethics
CSR approach
45-52
Excellence through our people
52-56
Social Matters
CSR Policy
Code of Ethics
UN’s 17 Sustainable Development
Goals
CSR approach
45-52
Anti-Corruption
& Anti-Bribery
Code of Ethics
UK Bribery Act
Applicable Local Anti-Bribery Laws
Anti-Corruption and Bribery Policy
Whistleblowing Policy
CSR approach
45-52
Corporate governance
99-108
Governance
and Risk
Management
Corporate Governance Code
Principal Risks and Uncertainties
Governance & Risk Management
Risk management
74-91
Corporate governance
99-108
Audit & Risk Committee
110-115
Business Model
Our Business Model
N/A
15-16
Strategy
Our Strategy
N/A
17-19
Non-Financial
Key Performance
Indicators
Key Performance Indicators
N/A
37
Page 3 of 255
Contents
Key Metrics and Report Highlights
............................................................................................................................
2
Non-Financial Information Statement
.......................................................................................................................
3
Contents
..........................................................................................................................................................................
4
Strategic Review
About Us
..........................................................................................................................................................................
6
Performance in 2022
....................................................................................................................................................
8
Chair’s Statement
........................................................................................................................................................
10
Chief Executive’s Review
............................................................................................................................................
12
Our Business Model
....................................................................................................................................................
15
Our Strategy
..................................................................................................................................................................
17
Task Force on Climate-related Disclosures
...........................................................................................................
20
Market Overview
..........................................................................................................................................................
33
Our Key Performance Indicators
..............................................................................................................................
35
Review of Operations
..................................................................................................................................................
39
Corporate Social Responsibility
................................................................................................................................
45
Financial Review
..........................................................................................................................................................
67
Risk Management
.......................................................................................................................................................
74
Viability Statement
......................................................................................................................................................
92
Corporate Governance
Board of Directors
.......................................................................................................................................................
94
Corporate Governance Statement
...........................................................................................................................
99
Section 172 (1) Companies Act 2006 Statement
...............................................................................................
106
Audit & Risk Committee Report
..............................................................................................................................
110
Environment, Safety & Social Responsibility Committee
..................................................................................
116
Nomination & Governance Committee
.................................................................................................................
118
Remuneration Report
...............................................................................................................................................
123
Remuneration Policy
.................................................................................................................................................
127
Annual Report on Remuneration
............................................................................................................................
131
Group Directors’ Report
............................................................................................................................................
148
Statement of Directors’ Responsibilities
...............................................................................................................
152
Financial statements
Independent Auditor’s Report to the Members of Energean plc
......................................................................
154
Group Income Statement
........................................................................................................................................
165
Group Statement of Comprehensive Income
......................................................................................................
166
Group Statement of Financial Position
.................................................................................................................
167
Group Statement of Changes in Equity
.................................................................................................................
168
Group Statement of Cash Flows
............................................................................................................................
170
Group Accounting Policies and Notes
..................................................................................................................
172
Page 4 of 255
Company Statement of Financial Position
...........................................................................................................
237
Company Statement of Changes in Equity
..........................................................................................................
238
Company
Accounting Policies
................................................................................................................................
239
Notes to the Financial Statements
........................................................................................................................
242
Other Information
2022 Report on Payments to Governments
........................................................................................................
248
Glossary
.......................................................................................................................................................................
252
Company Information
..............................................................................................................................................
255
Page 5 of 255
STRATEGIC REPORT
Strategic Review
About Us
Energean at a glance
The leading independent, gas and ESG-focused E&P company in the Mediterranean
Established in 2007, Energean is a London Premium Listed FTSE 250 and Tel Aviv Listed TA-35 E&P
company with operations in seven countries across the Mediterranean and UK North Sea. Since IPO in
2018, Energean has grown to become the leading independent, gas-producer in the Mediterranean with a
material reserve base of 1,161 boe of 2P reserves (84% gas).
Energean’s flagship Karish project was brought safely onstream in October 2022, with excellent reservoir
deliverability confirmed. Gas from Karish will be used to help Israel transition away from coal-powered
electricity in line with the country’s commitment to close all coal power stations by 2025.
Karish, combined with Energean’s other development projects in Israel, Egypt, Italy and Greece, is targeted
to grow production from 41.2
kboepd
to over 200 kboepd in H2 2024 and achieve the Group’s revenue
and EBITDAX targets of $2.5 billion and $1.75 billion, respectively. Over 75% of the near-term production
target is underpinned by long-term gas contracts with floor pricing, which ensures cash flow predictability.
Energean is also poised for further value-creation following the discovery of additional gas resources
offshore Israel in 2022. This includes 68 bcm (449 MMboe) of gas volumes in the Olympus Area (Block
12 and Tanin lease), for which the development concept is being finalised.
The Company has a disciplined capital allocation policy and is focused on shareholder returns. It aims to
provide a reliable and progressive dividend stream and is targeting to pay cumulative dividends of at least
$1 billion by the end of 2025. In 2022, Energean returned US$0.60/share to shareholders (approximately
$106 million), representing two-quarters of dividend payments. This was aligned with its commitment to
return an initial $50 million to shareholders per quarter no later than the end of 2022, which will rise to
at least $100 million per quarter (on average) once its stated financial targets are achieved. Energean’s
dividend policy has no impact on its targeted deleveraging after first gas to <1.5x net debt/EBITDAX or on
operational re-investment to continue its organic growth and opportunistic M&A strategy. Energean had
$720 million of liquidity as at 31 December 2022, and has minimal exposure to interest rate rises following
its 2021 refinancings.
ESG, health and safety is of central importance to Energean. We aim to run safe and reliable operations and
are committed to achieving net-zero carbon emissions by 2050 and to reducing our methane emissions.
Where we operate
Energean holds a balanced portfolio of exploration, development and production assets, with operations
in seven countries across the Mediterranean and UK North Sea. We have interests in more than 65 leases
and licences, 6 of which are located offshore Israel, one of our core countries of operation.
Please see pages 234-236 for a full breakdown of all our licences.
Page 6 of 255
STRATEGIC REPORT
Figure 1. Map of Energean’s operations
Figure 2. Energean Israel Limited (EISL) leases and licenses
Red licences indicate Energean’s acreage which contain discovered volumes. Green licences are Energean’s
acreage which have not been explored.
Page 7 of 255
STRATEGIC REPORT
Performance in 2022
Operational highlights
Production
41.2 (75% gas)
kboepd
2P Reserves
1,161 (84% gas)
MMboe
2C Resources
217 (41% gas)
MMboe
Financial and corporate highlights
Revenues
737.1
$ million
EBITDAX
421.6
$ million
Dividend
$106.5 million
Distributed in 2022
•
2022 sales revenues of $737.1 million (48.3%; 2021: $497.0 million)
•
Adjusted EBITDAX of $421.6 million (98.8%, 2021: $212.1 million)
•
Profit / loss after tax of $17.3 million (118%, 2021: $(96) million)
•
Cash flow from operating activities of $272.2 million (106.7%, 2021: $132.5 million)
•
$720 million liquidity at 31 December 2022
•
Spot gas agreement signed with the Israel Electric Company (“
IEC
”) for Karish gas and a sales and
purchase agreement signed with Vitol for the marketing of a number of cargoes of Karish blend
hydrocarbon liquids
•
Commenced dividend payments, returning a total of 60 US$cents/share ($106.5 million) to
shareholders in 2022
•
Signed a three-year $275 million Revolving Credit Facility (
“
RCF
”)
2
in September 2022, providing
liquidity for general corporate purposes, if needed.
Decarbonisation and ESG highlights
•
13% year-on-year reduction in carbon emissions intensity to 16 kgCO2e/boe on an equity share
basis
•
76.6% reduction in carbon emissions intensity since our baseline year (2019)
•
Verified all scope 1, 2 and 3 emissions to ISO 14064-1 based on the operational accounting
approach
•
Pre-FEED and subsurface study completed and exploration licence awarded for the Prinos CCS
project, Greece
•
Zero-routine flaring policy fully implemented across all operated and JV’s sites
•
Successful purchase of renewable-sourced electricity (“
green electricity
”) across all our operated
sites
Energean continued to deliver strong performance against its strategic goals in 2022, producing record
financial results and declaring its maiden dividend.
Please see the Key Performance Indicators section on pages
35-
38 for more detail.
•
Working interest production of 41.2 kboepd (75% gas), (2021: 41.0 kboepd (72% gas))
•
2P + 2C reserves and resources of 1,378 MMboe (19%; 2021: 1,154 MMboe)
•
Karish brought onstream on 26 October 2022, with excellent reservoir deliverability confirmed
•
Key development projects (Karish North and Cassiopea) on track to deliver 200 kboepd production
target in H2 2024 – NEA/NI achieved first gas in March 2023
•
Successful completion of the 2022 growth drilling programme in Israel which discovered and de-
risked 73 bcm (480 MMboe) of new gas volumes
•
Including 68 bcm (approximately 449 MMboe) of additional gas volumes in the Olympus Area,
for which the development concept is now being finalised. This includes an addition of 31 bcm
(approximately 206 MMboe) of 2P reserves in the Olympus Area, offshore Israel, that have been
certified by Energean’s reserve auditor, Degolyer and McNaughton (“
D&M
”)
2
$101 million of the $275 million is reserved for Letters of Credit (at 31 December 2022), which replace the Letters of Credit
previously issued under the previous facility with ING on a one-for-one basis.
Page 8 of 255
STRATEGIC REPORT
•
Performed three methane emissions detection campaigns at major process installations in Italy
•
Achieved an upgraded score of A- for the CDP’s Climate Change disclosure and aligned with all
recommended pillars of TCFD disclosure
•
Continued to implement climate-based scenario analysis and used internal carbon pricing to assist
with investment-decision making
•
ESG ratings in top quartile, awarded the “Platinum” index by MAALA, rated at ‘AA’ by MSCI and 30
out of 112 by Sustainalytics
HSE highlights
•
Safe and reliable operations, zero serious personnel injuries
•
Zero oil spills and zero environmental damage
Awards
•
Awarded ‘Best ESG Energy Growth Strategy in Europe 2022’ by CFI
•
Sembcorp Marine’s Admiralty Yard was awarded two Safety and Health Award Recognition for
Projects for Safety Excellence for Energean’s FPSO Karish Project, taking the total number of
awards to five since the project began in 2020
Page 9 of 255
STRATEGIC REPORT
Chair’s Statement
Karen Simon, Independent Chair
Dear Shareholders,
2022 was a year of significant volatility. A high intensity war in Europe, with the renewed Russian invasion
of Ukraine was the catalyst for the world to reconsider the parameters of the global energy dynamic.
Without going into the detail here, the world has seen how it has to reconsider the prism through which we
view energy. It is clear that whilst we must not waver on the road to a just transition, we cannot pretend
that overreliance on singular suppliers are part of the ripple effect that has affected almost every living
person on the planet.
Energean can be part of the solution to the challenge that we all face. This is not to overstate our role. We
cannot replace Russia’s 150 bcm of natural gas exports. However, we are committed to rapidly growing
and developing our portfolio, a policy that will benefit both shareholders and our broader stakeholder
community. The world needs additional supplies of energy, and natural gas can be both the foundation of
and catalyst for a more sustainable energy dynamic. Our role as the largest gas focused E&P company
in the Mediterranean has taken on a greater significance in 2022 and we expect this trend to continue.
Environmental, Social and Governance
The Board and I are keenly focused on ensuring that Energean is managed at the highest levels of
environmental, social and governance (“
ESG
”) standards. ESG is at the heart of Energean’s operations.
Strategic ESG consideration has three positive drivers: it underwrites our licence to operate with external
stakeholders, it positively engages our colleagues around the world and finally, it is good for our collective
societal wellbeing.
We have always been a leader in the field of ESG consideration. We are committed to outperforming
our peer group in this category because it will be good for our business, but more importantly for the
communities that host our operations and the global environment. We are proud to have been the first
independent E&P company to make a Net Zero pledge.
Myself and the Board are very proud that we have significantly outperformed our relevant peer group
across all the major ESG ratings agencies. Sustainalytics ESG, Bloomberg, MSCI, Maala & CDP have
all maintained their highly positive assessment of our ESG impact. Maala have upgraded our rating to
“platinum” and our CDP score has been upgraded to A-, moving us to the higher band, the “Leadership”
band of our peer group.
I and the rest of the Board recognise that the success of the business depends on our people. Through
2022 we continued to work on the integration of our colleagues across our company, creating a “one
team” approach. We aim to maintain a positive, open and collaborative work environment to equip our
people from all backgrounds to fulfil their potential. In 2023, we will continue on this road, with Energean’s
first Diversity, Equity & Inclusion policy. You can find more detail our external and internal engagement in
the CSR section of this Annual Report.
HSE
The safety of our people will always remain the Board’s number one priority. Safety at Energean is
underpinned by our well-structured and continuously improving HSE Management system. I’m pleased
to report that we ended the year with zero serious injuries. 2023 will see the investment in, and roll out of,
a new integrated issues and crisis management electronic program that will further ensure best-in-class
management of any potential risks.
Board composition
During 2022, I was delighted that Roy Franklin stepped up to become a Senior Independent Director.
Roy’s significant experience in the Independent E&P sector is both well recognised by all our stakeholders
and we are lucky to benefit from his years of hard won wisdom. I would like to thank Robert Peck, who
stepped down from the Board in 2022. Robert’s 5 years of service brought Energean significant value, as
his experience of geopolitical engagement as a Canadian diplomat was much in need, as we successfully
navigated the waters of the East Med.
Page 10 of 255
STRATEGIC REPORT
The opening up of the world post COVID has allowed the Board to meet both in person, and engage with
Energean employees across the world. We have met in London and we have visited the FPSO. This is
important not only for the effective functioning of the Board, but to also better engage with the workforce
of Energean. We must know the people we lead – this supports our commitment to the highest standards
of governance.
Operational delivery
2022 was the year Energean made the final steps on a long road to first gas from Karish. Energean today
produces natural gas and fluids from the only Floating Production and Storage & Offloading vessel in
the Eastern Mediterranean. The “Energean Power” is a remarkable feat of engineering, and first gas from
Karish was a remarkable achievement. This is not a purely matter of geology and engineering and finance.
Energean achieved this success against the uniquely complex geopolitical dynamic of the region. Mathios
and the team managed the situation with the correct combination of diplomacy and commitment –
demonstrating the unique multi stakeholder value creation capability of an independent E&P company
with deep regional understanding.
On top of this success, the 2022 drilling campaign has added significant value to the Group. Energean has
discovered and de-risked approximately 73 bcm (480 MMboe) of natural gas. This “new” resource can
create a major growth catalyst. We look forward to the announcement of how Energean will develop this
new resource during 2023.
Our strategic direction and 2023 outlook
Energean’s purpose is to become the leading, gas focused E&P company in the Mediterranean, with the
highest of ESG and HSE standards at the heart of our operations. Our aim is to grow the company to
become a 200 kboepd producer and a $1.75 billion per year EBITDAX generator.
2023 will take us a long way on this journey. As we ramp up production from Karish and debottleneck our
production capacity on the FPSO as well and optimising production in Egypt and our broader portfolio, we
are targeting 131 – 158 kboepd.
This increase in production is what gave the Board confidence in sanctioning Energean’s sustainable and
progressive dividend policy. Whilst we remain committed to growth and diversification, we will also be a
significant producer and which to share our success with our shareholders.
Our priorities for 2023 are to build on the success of 2022. (1) We will ramp up production from offshore
Israel and invest in the FPSO to enhance production capacity. We will also enhance production across
the portfolio, with a particular focus on Egypt, with NEA/NI coming onstream. (2) Our strategic approach
to portfolio development means that we can provide both sustainable returns to shareholders while
continuing to grow organically. (3) Delivering energy responsibly and safely on our path to net-zero. ESG &
CSR will remain at the heart of Energean. (4) This is why we will continue to focus on our people, culture
and infrastructure in our transition to a 200 kboepd
company.
I thank you, our shareholders, new and existing, for your continued support.
Karen Simon
Independent Chair
Page 11 of 255
STRATEGIC REPORT
Chief Executive’s Review
Mathios Rigas, Chief Executive Officer
2022 – a landmark year for Energean, the Global Energy Dynamic, and the East Mediterranean
2022 was a landmark year for Energean, just as it was a deeply volatile year for the global energy dynamic.
The two are somewhat intertwined.
In 2022, Energean commenced production from the only FPSO in the strategically vital Eastern
Mediterranean region; commenced payment of dividends to our shareholders; and we successfully
discovered and de-risked new natural gas resources adjacent to our infrastructure, providing significant
potential upside and export optionality. 2022 was the year we made our dream a reality.
The Russian invasion of Ukraine has underlined the lack of global upstream investment in the past decade
– and the resultant energy security risk of assuming a single dominant supplier would always deliver. The
global gas market was tight before Russian supplies were constrained. Now, there is no surplus supply,
which drives price volatility and creates an advantage for any producer bringing new molecules onstream,
especially if they are adjacent to multiple demand markets.
Energean was and remains an Eastern Mediterranean focused exploration and production company. We
explore, develop, produce and sell natural gas and fluids from and within the region. In Israel and Egypt in
particular, we produce energy for local clients. The Russian invasion of Ukraine however has concentrated
the minds of energy policy and commercial decision makers around the world. Our landmark moment of
2022, bringing Karish onstream, both underwrites Israeli energy security and suggests the potential value
of regional hydrocarbons in global markets.
Record numbers creating sustainable returns
Energean is not purely a “Karish” or “Israel” story. In 2022, Energean delivered record financial performance
that was driven by strong production in both Egypt and Italy, and our positive exposure to market based
pricing, where we were able to benefit from historically high oil and gas prices. Revenues were $737.1 million,
a 48% increase versus 2021 comparable period ($497.0 million). EBITDAX was $421.6 million, an increase
of 99% versus 2021 comparable period ($212.1 million).
2022 was a transitional year for the Group. In 2023, whilst we remain committed to strategic growth,
there remain multiple opportunities in the greater Mediterranean region that are open to consideration; we
recognise that we will have completed a major phase of corporate development. As a significant producer
of gas and oil, we can share our success with our shareholders and are committed to maintaining our
progressive dividend policy.
Our operational success, combined with our prudent use of capital creates our core financial strength.
This allowed us to commence our progressive and sustainable dividend policy to shareholders in 2022.
We have paid out a total of 60 US$cents/shares in 2022, representing two-quarters of dividend payments,
to shareholders.
A platform for significant operational growth
First gas at Karish was complemented by a successful exploration program. The 2022 growth drilling
programme in Israel discovered and de-risked approximately 73 bcm (480 MMboe) of new gas resource,
including 68 bcm (449 MMboe) of additional gas resource in the Olympus Area, for which the development
concept is now being finalised.
We have for many years stated that our objective is to transform Energean into a 200 kboepd producing
and $1.75 billion EBITDAX generating company. 2022 laid the necessary foundation for us to achieve
that objective. The successes of 2022 mean that we project 131 – 158
kboepd production for 2023, with
major increases in Israeli production through ramping up Karish and debottlenecking the FPSO, as well as
optimising Abu Qir & first gas onwards at NEA/NI in Egypt.
Page 12 of 255
STRATEGIC REPORT
200 kboepd is now within both sight and can be easily mapped. All six of our major projects are on
track and are expected to come online over the next two years. In order of timing; NEA/NI (Egypt; which
achieved first gas from the first well in March 2023), Karish North and the second gas export riser and oil
train (Israel), Cassiopea (Italy) and finally Epsilon (Greece) will take us to and past our goals – all built on
the foundation of 2022.
Of course there’s more on top of this. We have an extremely exciting and potentially regionally significant
exploration project at North East Hap’y in Egypt, that has attracted global industry interest. The well spud
is scheduled for 2023. We are also keen to continue our progress with our JV in Croatia, with the Izabela
well slated to spud in 2023.
ESG & CSR at the Heart of Energean’s Operations
Energean’s ESG strategy is to provide affordable and reliable energy, for our shareholders and societies in
which we operate. We have chosen to focus on natural gas because it is and will remain the foundation of
and catalyst for a more sustainable energy dynamic. Gas is and will continue to be a driver for enhanced
sustainable development in the Eastern Mediterranean, displacing more polluting fuels and underwriting
energy and economic security.
We remain committed to reducing emissions from our operations. We were the first E&P company to
announce a Net Zero target and we remain on our clear roadmap for reaching our net-zero target in the
short, medium and long-term. Our ESG ratings outperform our peer group and underline our leadership
position. Sustainalytics, MSCI, Maala, FTSE4Good, CDP and Bloomberg ratings all independently verify
not only our ambition, but our ongoing commitment.
Our Prinos CCS project is the East Med’s only Carbon Capture & Storage project under evaluation. We
have worked with both Halliburton and Wood to assess the potential of the projects and have successfully
qualified for funding from the European Commission’s Recovery and Resilience Fund. At the time of
writing, we are in discussions with third party CO2 providers and are applying for additional funding from
the European Innovation Fund. 2023 will be a critical year in making a potential project a commercial
reality.
Finally, we have continued to place ourselves at the heart of the local communities that host our operations.
We work together with community stakeholders, positively engaging with our communities through
cultural events, sponsorships, donations and the provision of educational and professional opportunities.
Health and safety remains our top priority
During 2021, we continued to ensure that our all our staff across all sites remained protected against
COVID-19 as we came to the end of the global pandemic We are proud to have continued our excellent
safety record – at a group level, and alongside our contractors, we achieved an LTIF
3
of 0.47 per million
hours which is within the target of 0.5 set for the year.
Energy security requires intelligent policy support
The world needs secure supplies of energy, and the time has not arrived when renewable / green energy
can take the place of hydrocarbons. The reality of today is that we need more of everything. More nuclear,
more green, more hydrocarbons. As populations continue to grow, energy demand will continue to grow,
and if upstream investments are not made, then the price volatility following the Russian invasion of
Ukraine will become the new normal.
This is why we implore all policy makers to consider the combination of energy security and the value
of domestic supply when considering fiscal policy. We want to work in partnership with governments
and are very keen to continue investing in major upstream projects. Israel and Egypt have incentivised
domestic energy production. We hope other governments will learn the lesson.
Outlook for 2023
Energean is poised to become a major regional producer of hydrocarbons in a strategically vital region.
We are in the middle of three hot markets (Israel, Egypt and the EU) and have significant organic growth
opportunities to create value for all our stakeholders through 2023 and beyond. In the medium term, the
world and in particular our markets’ energy demand will continue to grow.
3
Lost Time Injuries Frequency: The number of Lost Time Injuries per million hours worked.
Page 13 of 255
STRATEGIC REPORT
Europe in particular remains gas hungry. A globally tight gas market, and a return of demand from China
means that energy security should remain high on policy makers’ agendas. Energean, with our unique
portfolio of assets in a strategically vital region could be part of the answer to this challenge – whether
that is through increased domestic production, or through new export liquidity.
Our growth and our success are the results of outstanding teamwork. We have an industry leading team
at Energean. This is why we are the leading gas focused E&P in the region – because our colleagues buy
into our vision and are committed to achieving our goals.
2023 will be an exciting year. The reason it is so exciting is that we are entering a new stage in our
development. Energean is a sophisticated, ESG focused, corporately robust, natural gas focused energy
production company.
Mathios Rigas
Chief Executive Officer
Page 14 of 255
STRATEGIC REPORT
Our Business Model
Our purpose
Energean’s aim is to lead the energy transition in the eastern Mediterranean through a strategic focus on
gas and achieve its net-zero ambition in advance of 2050, whilst delivering meaningful and sustainable
returns to our shareholders.
Our business model
Across each part of the hydrocarbon lifecycle we work to create value for our investors, host countries
and people.
Energean’s business model is to find and monetise hydrocarbons from its portfolio of assets across the
Mediterranean.
Our activities are focused on generating sustainable cashflow from production through selective
development and appraisal of the highest return growth options with a focus on those opportunities with
the lowest carbon intensities. We are focused on organic growth, but will continue to evaluate inorganic
opportunities that complement and supplement our strategic targets and ambitions.
Underpinning our business model is a strategic focus on gas and a commitment to be a net-zero emitte
r
4
by 2050.
Our value life cycle
Find and Appraise
Through targeted exploration and appraisal in the Mediterranean we aim to find hydrocarbons, to build
reserves and resources, to monetise, or to selectively develop for future production. We have a ranked
portfolio of prospects for drilling and remain agile to take advantage of opportunities that support our
organic-focused growth strategy.
Develop
We focus on selective development of material hydrocarbon discoveries we have either found or acquired.
We invest in low-cost, high-return drilling options that lie in close proximity to existing infrastructure and
aim to deliver cost-effective, timely solutions to convert reserves into cash flows. In developing these
solutions, minimising carbon emissions is at the forefront of our minds, and we apply an internal carbon
pricing system in assessing new projects and investment opportunities.
Produce
Production is the cash engine of our business and we are investing in options to maximise production
across our producing assets in the Mediterranean, whilst also investing in opportunities to reduce
the carbon footprint of these assets, such as the switch to sourcing electricity from 100% renewable
sources through the national grid in Greece, Israel, Italy and Croatia. In addition, Energean is committed to
evaluating carbon, capture and storage opportunities, and this will continue in 2023.
4
Scope 1 and 2 emissions.
Page 15 of 255
STRATEGIC REPORT
Acquire
Energean also seeks to grow its portfolio through highly selective and value accretive M&A that are a
natural strategic fit, such as the Edison acquisition in 2020 and the consolidation of our Israel position
through the Kerogen acquisition
5
in 2021.
Our Strategic Pillars
5
Energean’s acquisition of Kerogen’s 30% stake in Energean Israel closed on 25 February 2021.
Page 16 of 255
STRATEGIC REPORT
Our Strategy
1
East Mediterranean
Energean has a long-standing history of operating in the Mediterranean, having originated in Greece in
2007 with the purchase of the Prinos assets for approximately $1.5 million. We have demonstrated our
ability to deliver growth and value in the Mediterranean and expect to continue to maintain our strategic
focus and investment in this area. We know the governments and we know the rocks in this geographical
area, and will continue to leverage this understanding and knowledge to grow the business.
2
Gas
We are committed to focusing our production mix in a way that promotes the Mediterranean’s energy
transition and creates long-term value for all or our stakeholders. Natural gas emits only half as much CO2
as coal, yet a large percentage of electricity generated in the region comes from coal-fired power plants.
Replacing these facilities with gas-fired units is one of the fastest, most efficient and cost-effective ways
to reduce global CO2 emissions. Israel, our core market, has understood this, as the Israeli government’s
decision to convert all coal powered stations to gas by 2025 attests. The Ministry of Energy is also
targeting a fuel mix of 70% gas and 30% renewable energy by 2030.
However, the natural gas of the Mediterranean is not just a near-term energy transition source, it is also an
energy of the future. The region has sufficient large-scale natural gas resources to provide a sustainable
supply to meet rising regional energy demand. Gas is also sustainable and efficient, and its flexibility
as an energy source allows for agile production facilities. This makes gas a good partner for renewable
energies, providing a useful backup source when there is no sunlight or wind.
3
Tackling Climate Change and the Energy Transition
Energean is fully committed to taking action on climate change, supporting the Paris Agreement, in
particular Article 2.1(a) which states the goal of keeping the increase in global average temperatures to
below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase even further
to 1.5°C. To do this, as recognised in Article 4.1 of the Paris Agreement, we are committed to achieving
net-zero emissions by 2050.
Energean was the first E&P company in the world to announce a net-zero by 2050 target in respect of
absolute Scope 1 and Scope 2 GHG emissions. Our baseline year is 2019 and our commitment covers all
existing and future assets. This commitment will be delivered through the implementation of our Climate
Change Strategy, published in 2021, which provides a blueprint for reducing our greenhouse gas (“
GHG
”)
emissions and strengthening our low carbon portfolio. This report contains our short (by 2025), medium
(by 2035) and long-term (by 2050) plans to reach this, details of which can be found within this Annual
Report between pages 30-32.
In regards to scope 3 emissions, Energean has not set a specific commitment on reducing emissions,
but it is considering tangible actions to reduce scope 3 emissions. Energean’s Group Procurement Policy
and HSE Policy encourages preference given towards vendors and contractors who can demonstrate
emissions reduction policies. In 2022, Energean has continued to publish its scope 3 emissions. This
data can be found on page 65 in the CSR section – 2022 data will be disclosed in this year’s CDP Report.
4
Organic Growth
At the core of this strategic pillar is our commitment to explore, develop and learn. We explore new ways
to find, produce and develop hydrocarbons. We explore new technologies and low carbon solutions, such
as carbon capture and storage and blue hydrogen. We at Energean believe that this mindset, combined
with our strong subsurface and technical expertise, will enable us to deliver a growth strategy that is
sustainable, successful and will lead to the achievement of our near-term financial and operational targets.
It was this approach that bore fruit in 2019 with the discovery of Karish North. By actively pursuing new
Page 17 of 255
STRATEGIC REPORT
exploration opportunities in core areas and maximising output from producing fields, we aim to ensure at
least 100% reserves replacement on an annual basis.
Our exploration portfolio is spread across the Mediterranean and represents a balanced mix of new frontier
areas and lower risk mature basins. Our Israel drilling campaign commenced in March 2022 and in the
year we made four gas discoveries (Athena, Zeus, Hermes and Hercules), discovering approximately 36
bcm, and derisking 37 bcm in the wider Olympus Area. We expect to announce a development concept
for the Olympus Area in the coming months
.
5
Value and returns-driven
Disciplined capital allocation that maximises total shareholder returns is a top priority for Energean.
In March 2022, we announced our dividend policy, wherein we committed to return at least $1 billion to
shareholders by end-2025. In the policy, we also committed to an initial $50 million per quarter, starting
no later than Q4 2022, ramping-up in line with Energean’s near-term production and revenue targets to
at least $100 million per quarter. Energean is committed to providing a reliable and progressive dividend,
with no impact on targeted deleveraging after first gas to <1.5x net debt/EBITDAX nor on operational re-
investment to continue our organic growth and opportunistic M&A strategy.
In 2022, Energean returned a total of US$0.60/share to shareholders (approximately $106 million),
representing two-quarters of dividend payments.
2022 dividend payments
Quarter
Cash dividend
Declaration
date
Ex-dividend date
Record date
Payment
date
Q2 2022
30 US$ cents
per share
8 Sep 2022
LSE – 15 Sep 22
TASE – 16 Sep 22
LSE – 16 Sep 22
TASE – 18 Sep 22
30 Sep 2022
Q3 2022
30 US$ cents
per share
17 Nov 2022
LSE – 8 Dec 22
TASE – 11 Dec 22
LSE – 9 Dec 22
TASE – 9 Dec 22
30 Dec 2022
In 2021, we optimised our capital structure via the raise of over $3 billion of bonds, with fixed interest
rates. We remain focused on maintaining an optimal capital structure throughout the cycle. Our near-term
target is to lower net debt / EBITDAX to <1.5x, and to pay down debt according to a fixed repayment
schedule with refinance options available.
M&A will also play a role in growing the business; however, we will only do deals that are a strong strategic
fit and value accretive. Energean was built through four value-accretive acquisitions. We continue to
assess all available opportunities in the region. All M&A opportunities are also tested against our climate
change plan to ensure they align with our ESG strategy.
Business model foundations
Page 18 of 255
STRATEGIC REPORT
These are the building blocks that every E&P business need and are critical foundations for what we do
and how we do it.
Safe, Reliable and Responsible Operations
We value the safety of our workforce above all else and focus on maintaining a safe operating culture
every day. This culture of safety also improves the integrity and reliability of our assets.
Partnerships and Collaboration
We aim to build long-term relationships with our key stakeholders, and partner with leaders of industry to
find innovations that can improve efficiency and deliver low carbon solutions.
Talented People
We work to attract, motivate and retain talented people and provide our employees with the right skills for
the future. Our performance and ability to grow depend on it.
Governance and Oversight
Our board has a diversity of knowledge, expertise, and ways of thinking that help us grow our business,
manage risks and continue to deliver long-term value.
Technology and Innovation
New technologies help us produce energy safely and more efficiently. We selectively invest in areas with
the potential to add greatest value to our business, now and in the future, including lower carbon solutions.
Page 19 of 255
STRATEGIC REPORT
Task Force on Climate-related Disclosures
Energean is committed to addressing the environmental impact of our operations.
In compliance with the FCA’s listing rule 9.8.6(8), Energean has continued to support the recommendations
of the Task Force on Climate-related Financial Disclosures. We set out below our climate-related financial
disclosures consistent with all of the TCFD recommendations and recommended disclosures. By this we
reference the 2021 Annex “Implementing the Recommendations of the Task Force on Climate-related
Disclosures.”
Governance: Disclose the organisation’s governance around climate related risks and opportunities
a.
Describe the board’s oversight of climate-related risks and opportunities
Energean sees climate change as a major global concern and a top priority for our business. This is
reflected in our strategy, and we apply all our governance processes to climate change-related issues.
Responsibility for the governance of climate change issues within Energean rests with the Board. To reflect
the increasing importance of climate change-related risks and opportunities, the ESSR Committee has
taken over responsibility for climate change matters on behalf of the Board. The Board is also charged
with reviewing investments for climate-related risks (among other risks).
The ESSR Committee evaluates Energean’s policies and systems for identifying and managing ESG risks,
which includes identification of emerging risks, such as climate change risks, and proposes mitigation
measures. The Committee further ensures Energean’s compliance with relevant regulatory requirements
and/or applicable international standards and guidelines. The Committee follows political and regulatory
discussions and developments on an international, EU-wide and national level on a variety of ESG issues,
including energy, climate and environment, and industrial trends, etc.
The ESSR Committee convenes three times a year and reviews the Board papers on Energean’s carbon
emissions performance and KPIs where possible when the Committee meets before a Board meeting.
In addition, the Audit & Risk Committee looks at climate change-related issues, to ensure the identification
of multi-disciplinary risks (including climate change-related risks), which may impact more than one part
of the Company. This Committee is responsible for ensuring that measures to mitigate and adapt to the
risks identified are effective and implemented as necessary.
The Remuneration & Talent Committee has responsibility for the annual directors’ bonus targets, long
term incentive plans, and the overall Remuneration Policy. Both the annual directors’ bonus targets and
the long-term incentive plans link executive bonuses to the achievement of emission reduction targets.
For more information on how remuneration is linked to sustainability targets, please refer to pages
13
1-147
in the Corporate Governance section of this Annual Report.
b.
Describe management’s role in assessing and managing climate-related risks and opportunities
The Board sets the Company’s values and standards, including the Group’s long-term objectives and
commercial strategy, and ensures that its obligations to its shareholders and others are understood and
met. Day to day responsibility and accountability for the Company’s environmental and climate change
policy, strategy and targets related to short, medium and long-term plans lies with the CEO.
The CEO is responsible for identifying and assessing business and climate-related risks, defining the
strategy and approving action plans suitable to control and mitigate the identified risks. Furthermore,
the CEO oversees the Company’s overall environmental performance and sets climate performance
expectations and targets. The CEO discusses all relevant actions and activities related to climate change
and the energy transition with the Board. The CEO and the Board regularly discuss climate change-related
issues, such as climate change policies, investment decisions where climate change considerations are a
major driver, and the carbon credit price’s impact on Energean’s future financial performance.
The operational management of climate change issues is conducted by the HSE Director, who reports
directly to the CEO and provides updates to the Board on a regular basis. The HSE Director maintains and
oversees the development of Energean’s Corporate HSE and Climate Change Policy, defines appropriate
training programmes and drills for the entire Company to increase safety, environmental and climate
change awareness, and monitors technological developments and opportunities to help achieve defined,
Page 20 of 255
STRATEGIC REPORT
appropriate climate change targets. The HSE Director is tasked with ensuring that the Company stays on
track to meet its net-zero 2050 target. The HSE Director oversees the monitoring of Energean’s carbon
emissions throughout all assets and defines the carbon emission factors that Energean’s financial team
uses to understand the financial impact of climate change on Energean’s portfolio. Furthermore, the HSE
Director assesses the climate risks and opportunities in cooperation with Energean’s financial, economic
and technical departments.
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning where such information is material
a.
Describe the climate-related risks and opportunities the organisation has identified over the
short, medium and long term
In setting and monitoring the delivery of Energean’s strategy (pages
17-
19), the Board and Management
team consider climate relate risks and opportunities across the following three time horizons:
•
Short-term (to 2025)
•
Medium-term (to 2035)
•
Long-term (to 2050)
Energean conducts detailed financial projections over a five year period. This currently fully covers the
short and partly covers the medium-term horizons mentioned above. Looking beyond this, we consider
the potential risks and opportunities and adjust our planning if appropriate. Climate-related issues, in
particular physical risks, manifest over longer-term horizons, and so pose less of a risk to our operations.
b.
Describe the impact of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning
Inclusion of climate-related risks into decision making and business planning
The Board is charged with reviewing investments for climate-related risks. The CEO and the Board
regularly discuss climate change-related issues such as investment decisions where climate change
considerations are a major driver and the carbon credit price’s impacts on Energean’s financial future.
Energean’s business plan is underpinned by assumptions made to, but not limited by: commodity prices,
exchange rates, carbon prices, schedules of capital investment and risks and opportunities that m
ay have
an impact on revenue and free cash flow. The level of uncertainty increases over longer time horizons.
The findings of the scenario analysis exercise (see pages
27-28), as well as stringent stress-tests for
new investments, inform our corporate strategy and investment decision-making, ensuring that climate
change-related risks are adequately considered in managing our portfolio. This includes planning capital
allocations and making business decisions based on criteria that are as challenging as those posed by
the carbon constrained scenarios examined.
Our current portfolio remains resilient under the climate scenarios tested, and we expect to continue
helping meet global energy demand over the coming decades. We will continue to make capital allocation
decisions for our portfolio using rigorous planning assumptions flowing from the scenario analysis
exercise, such as the evaluation of FID of Irena in Croatia and for any M&A decisions.
Risks and opportunities
Climate change related risk and opportunities have been identified, and future scenarios that aid in
developing an integrated strategy approach have been analysed. Our strategy and business contribute
to limiting global warming and has been structured, and is currently being implemented, in three different
phases; short, medium and long-term, as per our Climate Change Policy published in 2021. The below
table presents the risks associated with climate change, as per the Principal Risks in the Risk
Management
section of the report (pages 89-9
0), but with more detail.
Page 21 of 255
STRATEGIC REPORT
The process for identifying and assessing climate-related risks is set out under the climate-related Risk
Management section below, on pages 74-77.
Physical risks
Risk
Acute
Chronic
Description
Increased severity of extreme weather
events such as flooding,
may impact
Energean’s normal course of operations.
This
may also result in damage to
infrastructure and increase associated
costs.
Atmospheric or sea temperature rises
m
ay cause faster degradation of the
company’s infrastructure and necessitate
operational changes to the running of the
plants.
Financial
impact
Increased severity of extreme weather
events
may lead to reduced revenue from
decreased production capacity, transport
difficulties and supply chain interruptions.
Early retirement of existing assets m
ay
possibly arise, e.g. damage to property
in “high-risk” asset locations. It also
m
ay
lead to uncreased insurance premiums
for insuring assets at high-risk locations.
Increased operating costs
may arise from
potential inadequate water supply for
energy producing plants due to changes
in precipitation patterns. In addition,
increased insurance premiums m
ay occur
for insuring assets at high-risk locations.
Risk rating
Medium
Medium
Time-
horizon
Long-term
Long-term
Energean’s
response
(mitigation)
Energean is monitoring the weather
conditions near its assets and has built
protective barriers to combat potential
flooding. No extreme weather events have
occurred to date, but the threat remains.
The risk has been recognised by the
company and we have assessed asset
sensitivity to natural disasters following
the EU Directive 2014/52/EU and we are
monitoring these conditions. Metocean
data are fed to the risk assessment
procedures. The Audit & Risk committee
is incorporating the abovementioned data
for the assessment of already existing or
new projects.
Energean’s is monitoring the conditions
at all sites and has incorporated this data
into assessments of both existing and
new projects. The Audit & Risk committee
is incorporating the abovementioned data
for the assessment of already existing or
new projects.
Geographies
impacted
Our offshore sites are considered at the
highest risk, while onshore sits are facing
a moderate risks.
All assets in all countries
Metrics used
to assess
risk
Air temperature and sea-level
measurements
Air temperature and sea-level
measurements
Page 22 of 255
STRATEGIC REPORT
Transition risks
Risk
Policy/Legal
Technology
Market
Reputation
Description
a) EU Emissions Trading System (ETS) prices
are expected to increase, resulting in higher
operational costs (in Greece) and possible
additional taxes for exceeding GHG emissions.
b) Carbon emissions taxes m
ay be applied in the
future in Israel and Egypt, which would increase
the operational costs.
The development of new
technologies and alternative
energy sources
m
ay result in
reduced demand for the company’s
products. Increased energy
demand m
ay also accelerate the
development of renewable energy
production and storage.
Changing customer behaviour m
ay
reduce demand for our oil and gas
products. An excess of supply over
demand m
ay also lead to lower
global commodity prices.
Pollution incidents, both through
liquid spills and GHG emissions,
m
ay lead to the loss of investor
confidence and subsequent loss of
revenue.
Financial
impact
a) Increased pricing of GHG emissions
m
ay
lead to increased operating costs (e.g. higher
compliance costs and potential increased
insurance premiums). Assets that emit
extensively may be subject to early retirement
due to policy changes. Regulatory changes in
the EU ETS shall gradually lead the company
to no longer receive free GHG allowances,
leading to increased operational costs. The
company currently receives allowances and
has a portfolio of allowances that
m
ay be used
in future years. The number of free allowances
decreases y-o-y.
b) Carbon emissions taxes m
ay be applied in
the future in Israel, which would increase the
operational costs.
Technological changes
m
ay
lead to reduced demand for our
hydrocarbon products, which
could lead to the early retirement
of existing assets. We also
risk investing in research and
development (e.g. on CCS and Eco-
hydrogen) if they are unsuccessful
– albeit the current expenditure is
minor compared to the rest of the
Group.
Market risks
m
ay lead to reduced
demand for goods and services
due to a shift in consumer
preferences. This
m
ay also affect
the cost of production. As the
supply of products
m
ay change in
the future, a re-pricing of assets
m
ay take place due to fossil fuel
reserves, land valuations etc.
Poor reputation
m
ay adversely
impact the company by decreasing
the demand for its goods and
services. It
m
ay also reduce the
company’s production capacity,
due to delayed planning approvals
and supply chain interruptions.
A negative reputation
m
ay also
block access to finance as
investors move away from E&P
companies and cause litigation
damage from climate action.
Risk rating
Medium
Medium
Medium
Low
Time horizon
Medium term
Long term
Long term
Short, medium and long term
Page 23 of 255
STRATEGIC REPORT
Transition risks
Risk
Policy/Legal
Technology
Market
Reputation
Energean’s
response
(mitigation)
a) Energean is targeting to reduce its emissions
to mitigate the impact of carbon taxes. In
Greece, for example, it is currently evaluating the
development of a CCS site in the Prinos asset,
which has been included in the Recovery &
Resilience Fund (RRF) implementation proposal
for Greece.
b) Energean has imposed shadow pricing to be
used as a sensitivity tool in order to assess the
viability of the project in Israel. The annual free
cash flow was not significantly affected and the
project was proven not to lose value in the face
of carbon taxation.
For more details on the impact of sensitivities
to carbon prices, please refer to page 190 in the
Estimation uncertainty section of the Financial
Statements in this Annual Report
All pre-FEED activity costs
regarding the Prinos CCS project
are currently being funded by
existing EU facilities. Energean.
Energean fully incorporates climate
and market-risks into investment
decision making to ensure risks are
adequately managed.
Energean fully incorporates
climate change-related risks into
investment decision-making. The
findings of the recently conducted
scenario analysis exercise (see
pages 27-28, as well as stringent
stress-tests for new investments,
inform our corporate strategy
and investment decision-making,
ensuring that climate change-
related risks are adequately
considered in managing our
portfolio.
Energean is assessing the risks
associated with pollution, including
climate related risks, at the
company and asset level and takes
all necessary control and mitigation
measures which are reviewed the
Audit & Risk Committee on an
annual basis and included in the
business risk management.
Geographies
impacted
Currently impacted: Greece and UK (assets
participate in the EU and UK ETS). Risk of future
impact: Israel (Energean’s largest source of
production in 2023) and Egypt
Greece and Italy are considered
to be the most vulnerable assets
regarding oil production.
Greece and Italy are considered
to be the most vulnerable assets,
as per the TCFD scenario analysis
modelling (see pages
27-28).
Highest risk related to oil
production assets in Greece and
Italy.
Metrics used
to evaluate
risks
Carbon emissions and carbon prices.
Realised commodity price
Realised commodity prices &
Cost
of Production (see pages 67-68)
Hydrocarbon spills & revenue (see
pages 66-67)
Page 24 of 255
STRATEGIC REPORT
Opportunities
Opportunities
Resource efficiency
Energy source
Products/services
Markets
Resilience
Description
a) The continuous
development of technology
provides new opportunities
in the field of resource
efficiency. Optimized
operations are able now to
consume less water and
energy, increasing the value
of fixed assets and the
production capacity.
b) Reinjection of sour
gas in the Prinos field
instead of processing it
and thus reducing energy
consumption.
The energy transition creates
the opportunity for Energean
to reorient its portfolio
towards gas, which is deemed
to be a transition fuel, and
correspondingly increase
production capacity.
Development and/or
expansion of low emission
goods and services. Energean
expects the development of
appropriate carbon capture,
and storage (CCS) technology
in conjunction with blue-
hydrogen to provide low
carbon energy to the market.
We also expect to provide the
opportunity to third parties to
sequester their emission in
parallel.
Energean’s gas focused
strategy is aligned with
the East Med’s rising gas
demand.
The Companyy’s resilience to
commodity price fluctuations
comes hand in hand with the
new market opportunities.
Transition to gas production
is considered the key to
Company’s enhanced
resilience to climate change.
Financial impact
a) Potentially resulting in
increased revenues, while
transition to more efficient
buildings or application
of more efficient available
technology m
ay lead to
reduced operating costs
through efficiency gains and
cost reductions.
b) Reduces cost of
processing sour gas and
enhancing production
through sour gas reinjection
to the field.
The re-oriented portfolio leads
to reduced operational costs
due to lower process needs
of the final product, which
is mainly natural gas. The
reduced exposure to GHG
emissions due to the change
in the energy mix leads to
less sensitivity to changes
of carbon cost. Additionally,
the energy shift favours
the company as there is
increased capital availability
with more investors to be
interested in lower emissions
producers. Finally, reputational
benefits m
ay be resulting due
to the increased demand of
low carbon services.
The products and services
that emerge from CCS
and Blue-Hydrogen m
ay
increase the revenues
through demand for products
and services with lower or
zero emissions. Providing
products of this kind provides
better competitive position
to reflect shifting customer
preferences, resulting in
increased revenues.
Gas is considered to be
the transition medium to a
low-carbon future enhancing
Company’s position with
increased revenues.
Energean’s focus on gas,
which is a lower carbon fuel
than oil, combined with the
long-term gas contracts
with floor pricing in Israel
and Egypt, protects the
Company’s revenue stream
from commodity price
fluctuations.
Materiality level
Medium
High
Medium
Medium
High
Time horizon
Short to medium
Short, medium and long term
Medium to long term
Short term
Short to medium term
Page 25 of 255
STRATEGIC REPORT
Opportunities
Opportunities
Resource efficiency
Energy source
Products/services
Markets
Resilience
Energean’s
response
(strategy
to realise
opportunity)
a) Energean assigned the
management of climate
change projects to a group
company in Egypt named
Egypt Energy Services
(EES), engaged with energy
efficiency projects from
cradle to grave and projects
also related to low carbon
energy generation and carbon
sequestration.
b) An engineering study of
the re-injection process,
modification of existing
infrastructure, construction of
new equipment and vessels
and additional pipe-laying will
need to be implemented.
By shifting its portfolio
towards gas, Energean can
reduce its carbon emissions
intensity whilst also increasing
production capacity. Gas will
make up 80% of its portfolio
and Energean is investing in
new gas-orientated assets
included in the Edison E&P
portfolio.
Energean aims to capitalise
on the opportunity presented
by CCS by drawing on the
company’s existing expertise
in managing reservoirs.
Further to that, Energean is
evaluating Blue-Hydrogen
in conjunction with its CCS
project at Prinos, Greece, and
is exploring replicating this
in other operated countries.
Although the IEA notes that
the supply chain m
ay struggle
with the number of planned
projects, Energean believes
this risk is low as the number
of CCS sites currently under
discussion for development
in the East Mediterranean is
low.
Shifting production from
oil to gas has already
commenced by investing in
gas fields that will further
expand following Company’s
policy.
Shifting production from oil to
gas has already commenced
by investing in gas fields that
will further expand following
Company’s policy.
Geographies
impacted
Existing assets in Greece,
Italy and Egypt are initially
targeted.
All assets in all countries
Initially Greece and
subsequently Italy by utilising
depleted fields. Further to
that Energean also considers
its opportunities to develop
such projects in Israel as the
Company’s future highest
production asset.
Israel and Egypt are the
Company’s main gas
producers.
Israel and Egypt are the
Company’s main gas
producers.
Metrics used
to evaluate
opportunity
Total water usage and total
energy consumption intensity
(page 66)
% of production which is
gas and operational costs
(pages
39 and 67-68)
CCS and hydrogen related
revenue streams
Ability to attract investment
Revenue (page 67)
Page 26 of 255
STRATEGIC REPORT
c.
Describe the resilience of the organisation’s strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario
Energean has taken decisive steps in the previous decade to adjust our business strategy to not only
mitigate climate change-related risks but also to capture opportunities. Over the past five years, Energean
shifted its portfolio from 100% oil to more than 75% gas, recognising that gas plays an important role
as a bridge fuel in the transition to a lower-carbon future. For example, in Israel, gas produced from our
operations will be key in replacing high-carbon coal power plants and thus, will play a big role in lowering
the country’s absolute emissions by around 3 million tonnes.
Portfolio resilience
Since 2021, in line with the TCFD’s recommendations, we have tested the resilience of our portfolio
against the scenarios from the International Energy Agency’s (“
IEA
”) annual World Energy Outlook
(“
WEO
”) report to address the risks and opportunities presented by a potential transition to a lower-carbon
economy. Resilience is defined as the ability to generate value in a low-price environment. Energean is
developing models to carry out scenario analysis on physical risks, which is not included in the analysis
below. Energean has historically assessed asset sensitivity to natural disasters following the EU Directive
2014/52/EU.
We have chosen to use the IEA scenarios as it enables standardisation in approach and comparison
between companies. The IEA’s scenarios change slightly each year – in the 2022 WEO report, the three
scenarios are:
IEA’s 2022 WEO climate scenarios
Stated Policies
Scenario (STEPS)
Announced Pledges
Scenario (APS)
Net-Zero Emissions
by 2050 Scenario
(NZE)
Overview
Does not take for granted
that governments will
reach all announced
goals. Instead, it
explores where the
energy system might go
without additional policy
implementation
Takes account of all
climate commitments
made by governments
around the world and
assumes they will be
met in full and on time
Sets out a pathway for
the global energy sector
to achieve net-zero CO2
emissions by 2050
Temperature rise
2.5°C by 2100
1.7°C by 2100
1.4°C in 2100
2030 oil price
$82/bbl
$64/bbl
$35/bbl
2030 EU gas price
$8.5/Mbtu
$7.9/Mbtu
$4.6/Mbtu
2030 carbon price
$90/tonne
$135/tonne
$140/tonne
Methodology
We have applied the IEA’s price forecasts for each scenario to our portfolio and have compared the impact
on the net present value (“
NPV
”) for each country versus our base case budgetary assumptions. We have
not included our exploration assets in this analysis.
The IEA provides 2030 and 2050 oil and gas prices for each scenario. It also provides 2030, 2040 and
2050 carbon prices for each scenario. We have assumed a straight-line increase between the price points
and then assumed flat prices from 2050 onwards. Because the IEA provides general oil and European gas
prices, we have taken the differential between their base case and their forecast and applied this to our
2021 base case for Brent and the various regional gas prices to generate comparable commodity price
forecasts.
The impact to net present values described below are based on the development of our 2P reserves
position ‘as is’, and do not include any unsanctioned steps that we are taking to mitigate the impacts of
climate change.
Page 27 of 255
STRATEGIC REPORT
Results
Net Present Value of portfolio
6
STEPS
APS
NZE
Israel
Egypt
Italy
Greece
UK
Croatia
Impact on NPV
>0%
0 to -10%
-11 to -55%
>-56%
Our portfolio continues to create value under all scenarios and our gas-focused business positions us
strongly to adapt to changing demand in a carbon-constrained world.
Under the NZE, the NPV is reduced by 17% overall compared to the base case, but remains positive. This
is because the portfolio is predominately gas weighted and thus is largely protected against falls in oil
prices.
In Israel, gas revenues are protected against fluctuations in international commodity prices as there are
fixed gas contracts with floor pricing. Only under the NZE is there a minor impact on the NPV (-8%) due
to the price realised for the liquids stream. Likewise in Egypt, gas revenues are protected with cap and
collar and floor pricing – the change to NPV seen under the NZE is due to Brent falling below $40/bbl and
because of lower liquid prices received compared to our base case forecast.
Our assets in Italy and Greece are more exposed to the effects of lower commodity prices under the
scenarios considered. We are already taking steps to mitigate this impact, and are looking at longer-term,
climate friendly solutions, including carbon capture solutions. Energean is a nimble operator with the
ability to deliver solutions that deliver maximum value for our shareholders, and we view scenario analysis
as a key tool in continuing to deliver upon this as we move into a lower-carbon world.
Further information on the potential impact of commodity price assumptions and the risks associated
with climate change can be found in the Group’s impairment assessment within the Financial Statements
of this Annual Report on pages 190-195.
Carbon price forecast
Energean uses an internal price on carbon to stress-test new projects, acquisitions and investments.
This allows us to measure the impact of any investment decision on the company’s carbon footprint,
and to determine whether any future investments would increase our carbon intensity. Furthermore, the
internal price on carbon ensures that we include the possibility of additional carbon taxation schemes
being introduced which would result in a reduction of our income and valuation on individual assets.
6
Relative to Energean’s budget planning Brent oil price of $60/bbl.
Page 28 of 255
STRATEGIC REPORT
Our internal carbon prices for countries which do not currently have a regulated carbon tax market (e.g.
outside of the EU and UK ETS regions) are:
Year
($/tCO2)
2023
35 – 40
2025
34 – 50
2035
100 – 110
2050
150 – 160
This carbon price is based upon an average of the IEA’s NZE scenario in their 2022 WEO Report and the
current carbon removal cost on the voluntary market, inflated at the same rate as the IEA’s NZE scenario.
The internal carbon price helps mitigate future potential climate change impacts by helping us safeguard
the value of future investments under different scenarios where the cost of emitting GHG increases as a
result of more stringent regulated trading schemes. In our sensitivity analysis, we have seen that climate
change constitutes a significant risk (albeit with a low probability) in this respect. Engineering solutions
have been incorporated in the design of future projects and in operational performance improvements
to emissions, in addition to considerations around carbon capture and offsetting projects in the medium
term.
We have already pivoted our portfolio predominantly toward gas as part of an overall strategic decision to
more strongly position the company to meet global energy needs in a carbon-constrained world.
We use carbon prices in our asset impairment tests and in the annual Competent Person’s Report (“
CPR
”)
(an independent appraisal of our oil and gas assets). The lack of net-zero-aligned global and national
policies and frameworks increases the uncertainty around how carbon pricing and other regulatory
mechanisms will be implemented in the future. This makes it harder to determine the appropriate
assumptions to be taken into account in our financial planning and investment decision processes.
Risk Management: Disclose how the organisation identifies, assesses, and manages climate-related
risks
As discussed above, Energean considers climate change and GHG emissions a material risk factor.
Energean first recognised climate change as a rapidly emerging risk in 2019. Climate change related risks
and opportunities are fully integrated with Energean’s multi-disciplinary, Group-wide risk management
process. The risk management framework ensures effective identification, assessment, control and
monitoring of climate change-related risks against their potential financial, legal, physical, market and
reputational impact, and further ensures that key strategic and commercial decisions are assessed by
reference to their financial importance.
Energean monitors the risks associated with physical and transition-related risks to ensure these are
being managed within our overall risk appetite over different time horizons.
Please refer to the Risk Management section between pages
74-91 of this Annual Report for further
information.
Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-
related risks and opportunities where such information is material
a.
Disclose the metrics used by the organisation to assess climate-related risks and opportunities
in line with its strategy and risk management process
The key metric we used to track our progress against our energy transition strategy to be Net Zero by
2050 is the carbon intensity of our portfolio across scope 1 and 2 emissions, on an equity-share basis.
Executive remuneration is partly linked to sustainability metrics, which includes emission reductions,
which is one of the Group’s KPIs. Please refer to pages
127-14
7 in the Corporate Governance section for
further detail.
Page 29 of 255
STRATEGIC REPORT
Energean’s net-zero plan
Figure 4. Climate change plan
7
Energean intends to reach net-zero by 2050 (scope 1 and 2 emissions) via the following steps:
1.
Increase percentage of gas in portfolio (short-term plan).
a.
This has already been achieved, with our production being 75% gas weighted in 2022
(versus 0% in our baseline year of 2019)
2.
Asset performance optimisation
a.
Zero-routine flaring implemented at all operated sites
b.
Renewable-sourced electricity used at all operated sites
c.
Continued investment in methane emissions monitoring and reduction and encourage our
JVs to engage in this target
d.
Investment in technical solutions such as energy efficiency management and fuel
replacement to reduce absolute emissions
3.
Natural-Based Solution (“
NBS
”) Projects
a.
Invest in NBS projects to generate or purchase carbon removals for less than 50% of the
total projected carbon emissions of our equity share production. Our carbon removals
portfolio is expected to involve a mixture of NBS technologies, such as forestry, soil, blue
carbon and biochar etc.
4.
Carbon Capture & Storage and Eco-Hydrogen
a.
Investment in CCS projects to inject emissions from ourselves and others
i.
Our Prinos CCS project in Greece is the most advanced. We have also signed an MOU
with Shell in Egypt and exploring other CCS projects across the portfolio
b.
Evaluate and invest in Eco-Hydrogen projects
7
2019 is pre-Edison acquisition inclusion. 2020 pro forma emissions intensity are presented as if Edison E&P results were
consolidated for the entire year, as the locked box date of the transaction was 1 January 2019.
Page 30 of 255
STRATEGIC REPORT
Short-term plan
Our short-term plan, which extends to 2025, to reduce the Group’s absolute scope 1 and 2 emissions,
includes: increased efficiency of production installations by optimising performance and replacing fuel
sources, using low or zero carbon electricity and re-focusing our production mix from oil to gas. We are
also evaluating opportunities to invest in natural based solution (“
NBS
”) projects, which are defined as
actions to protect, sustainably manage, and restore natural or modified ecosystems that address societal
challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits
by the International Union for Conservation of Nature. Examples of projects include reforestation.
2022 progress on reaching our emission reduction targets
•
In 2022, we reduced our equity share carbon emissions intensity to 16.0 kgCO2e/boe, a 13%
reduction y-o-y.
•
In 2022, 75% of our working interest production was gas, up from 72% in 2021 and up from 0% in
2019 (Energean standalone)
•
All operated sites (which require electricity) purchase electricity generated by renewables. As a
result, our absolute scope 2 emissions from our operated sites reduced by 79% in 2022 versus
2021.
•
In 2022, we performed three methane emissions detection campaigns at major sites in Italy. The
results found minimal amounts of fugitive emissions, requiring minimal corrective actions for one
asset, and no further action in the other two
Medium to long-term plan
Following these initial actions, we will maintain and intensify our efforts towards reducing carbon
emissions. Remaining emissions will be balanced with an equivalent amount sequestered or offset, or
through buying enough carbon credits to make up the difference. Energean is currently working on various
projects, including Carbon Capture and Storage (“
CCS
”) opportunities across its portfolio.
CCS Progress
At Energean, we believe there is considerable opportunity to employ efficient CCS technologies in the
regions we operate. Besides capacity from our own assets, we believe that there will also be external
interest, e.g. from power plants, in providing their produced CO2 to be stored in our company’s depleted
reservoirs. Energean is a highly experienced offshore operator and developer, and thus is well placed to
realise such projects.
In 2022, we completed pre-FEED activities at our Prinos CCS project in Greece, the results of which are
currently being analysed. The Greek Government also awarded Energean a CO2 Storage Exploration
Licence in 2022 which enables Energean to proceed with FEED activities.
In February 2023, Energean Egypt signed a memorandum of understanding (“
MoU
”) with Shell Egypt
to explore a mutually beneficial decarbonisation solution. The proposed partnership is addressing a
major CCS feasibility challenge, which is the ability to connect sizeable carbon emitters to an adequate
geological structure. The study will focus on the decarbonisation of the LNG terminal in Idku operated
by Shell through capturing and storing the carbon dioxide in a depleted reservoir in the Abu Qir offshore
concession operated by Energean. Future development stages will permit such facility to take emissions
from other industrial emitters (e.g. fertilisers).
Recognitions of our climate change strategy
Energean continued its participation in the Climate Disclosure Project in 2022, in which we promoted
disclosure transparency and further developed our climate change initiatives.
The climate change rating assesses the level of detail and comprehensiveness of the content, as well as
the company’s awareness of climate change issues, management methods and progress towards action
taken on climate change.
The supplier engagement rating assesses performance on governance, targets, scope 3 emissions, and
value chain engagement.
We were awarded an improved score of A- in 2022 on climate change (up from B in 2021 and B- in 2020)
based on our strategy and set targets.
Page 31 of 255
STRATEGIC REPORT
b.
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the
related risks
Emissions Intensity
(Equity Share)*
2022
2021
Pro
forma
2020
8
2020
Target
2035
Target
2050
Scope 1 (kgCO2e/
boe)
15.9
18.3
19.5
37.7
Reduce scope 1
& 2 by 2035 to
2-4 kgCO2e/boe
0
Scope 2 (kgCO2e/
boe)
0.1
0.1
0.3
0.2
0
Scope 1 and 2
(kgCO2e/boe)
16.0
18.4
19.8
37.9
0
Scope 3 (Operated
share, kgCO2e)
**
1,889,018
1,488,772
1,488,772
No target
No target
* Methodologies used to calculate scope 1 emissions include the standards and protocols of EU ETS, IPCC,
Concawe and EPA. Scope 2 emissions were calculated using the GHG protocol standards.
** To be disclosed in the 2023 CDP climate change questionnaire
For further detail on our GHG emissions, please refer to the table in the ‘Our environment, our highest
commitment’ section between pages 65-66 in this Annual Report.
c.
Describe the targets used by the organisation to manage climate-related risks and opportunities
and performance against targets
Energean is committed to be Net Zero by 2050 across its absolute scope 1 and scope 2 emissions on an
equity share basis. In 2019, we pledged to reduce the carbon intensity of our business by 85% by 2023
(from the 2019 base year). We are on track to meet this, as we expect our 2023 emissions intensity to be
between 7-9 kgCO2e/boe in 2023, primarily driven by the start-up Karish which has a low carbon intensity
of between 4-5 kgCO2e/boe. We also have a 2035 target to reduce our emissions intensity to 2-4 kgCO2e/
boe. These targets are continuously monitored by our HSE Director as well as the CEO and the Board.
8
Reserves are pro forma Energean + Edison plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“
EISL
”). The
transaction closed on 25 February 2021.
Page 32 of 255
STRATEGIC REPORT
Market Overview
Brent oil price
In the first half of 2022, oil prices rose significantly due to Russia’s invasion of Ukraine. This increased
supply concerns, which were already elevated because of low global crude oil inventories following
withdrawals to meet rising demand after pandemic-related restrictions eased. In the second half of 2022,
oil prices generally decreased amidst rising concerns about a possible recession.
Brent averaged $99.0/bbl in 2022, a 40% increase from 2021 levels. Brent varied significantly from a daily
low of $76.1/bbl in September 2022 to a high of $128.0/bbl in March 2022.
Our liquids production in Israel, Italy, Egypt and the UK is Brent-linked.
Focus on gas
Over 75% of our production is from gas fields. Gas prices from production in Italy, the UK and Croatia are
linked to the European gas market. Our contracts in Israel have fixed long-term floor prices. In Egypt, gas
prices are linked to Brent but include cap and collar pricing, with fixed prices between $40 and $75/bbl.
European gas prices
European gas prices were highly volatile in 2022, with the Italian PSV reaching daily highs of €309.0/
MWh in August 2022 and lows of €23.5/MWh in November 2022. The average PSV price in 2022 was
€125.0/MWh. Cuts in Russian gas supply to Europe, combined with falling domestic supply, hot summer
temperatures and poor renewable-energy generation, caused gas prices to jump in the first 9-months of
the year. Gas prices subsequently fell due to unseasonably warm weather and high gas storage levels.
Israel
Gas
In 2022, Israel’s third gas field, Karish, commenced production in October 2022, following Leviathan (first
gas in December 2019) and Tamar (2013). Tamar produced 10.1 Bcm in 2022 and Leviathan produced
approximately 11Bcm (based upon 8.5 bcm reported between Q1-Q3 2022). Of this, Tamar exported
8.7 Bcm to Egypt. Leviathan, between Q1-Q3 2022, exported 5.6 Bcm (3.6 Bcm to Egypt and 2.0 Bcm to
Jordan).
9
Since 2018, the Ministry of Energy has focused its efforts on transitioning to greener sources of energy
through the increased use of gas and renewables, while phasing out coal. The Israeli government aims to
convert all coal powered stations in the country to gas by 2025 and is targeting a fuel mix of 70% gas and
30% renewable energy by 2030.
In 2022, demand for gas in Israel was approximately 12.7 Bcm. Israel’s long-term gas demand outlook
remains robust, with demand forecast to grow to 17.0 Bcm by 2025 and approximately 21.5 Bcm by
2035.
10
Natural gas demand increase is driven by the enduring growth in electricity demand, as well as by
a transition of fuel mix, from coal and oil to natural gas and renewables.
Liquids
Karish, Karish North and Tanin contain total 2P liquids reserves of 95.6 MMboe (as of year-end 2022
CPR). The
Energean Power
FPSO
has onboard storage facilities that can store up to 800,000 barrels of
liquid. The hydrocarbon liquids are exported via tankers to international markets.
In October 2022, Energean signed a sale and purchase agreement with Vitol for the marketing of a number
of cargoes of Karish blend hydrocarbon liquids. The first shipment of crude was offloaded in February
2023.
Energean expects, based on analysis of individual well test samples, that the Karish blend trades at a
similar price point to Asgard blend, given the similarity in their characteristics. The realised price is market
price less certain freight, logistics and marketing costs.
9
Tamar data from Isramco Negev 2 LP’s 2022 report, Leviathan data from NewMed Energy’s Q3 2022 presentation
10
Page 33 of 255
BDO March 2023 report
STRATEGIC REPORT
Egypt
Egypt’s gas market has seen substantial change over the past two decades, owing to several large
domestic discoveries, headlined by Eni’s super-giant Zohr field in 2015. Zohr reached first gas in 2017,
enabling the country to move from being a net importer to net exporter of gas. Egypt also started importing
gas from Israel in January 2020, realising its ambitions to become a regional gas hub.
However, a lack of a major discovery between 2016-2021, combined with rising gas demand (63.1 Bcm
in 2020 rising to 71.5 Bcm in 2025 and 78.8 Bcm in 2030)
11
will result in Egypt becoming a net importer of
gas early this decade. In January 2023, Chevron and Eni announced that they had discovered 3.5 tcf (c.
100 bcm) with their Nargis-1 exploration well, located offshore Egypt. Even if this discovery is developed,
Egypt still requires more discoveries to be made to meet both its domestic demand growth and its pledge
to become a regional energy hub
12
.
Energean has a MOU with EGAS for the sale and purchase of up to 3 Bcm/yr of natural gas on average
for a period of 10 years, commencing with initial volumes of up to 1 Bcm/yr. There are existing export
pipelines from Israel to Egypt that Energean could utilise.
11
BDO March 2023 report
12
Welligence – Chevron hits major gas discovery offshore Egypt – what happens next? January 2023
Page 34 of 255
STRATEGIC REPORT
Our Key Performance Indicators
We measure performance over a range of key operational, commercial, financial and non-financial metrics
to ensure the sustainable management of our long-term success. This keeps us focused on our strategic
objectives, whilst allowing us to remain agile and responsive to external events.
Energean completed the acquisition of Edison E&P on 17 December 2020, and in doing so, reinforced its
commitment to the Mediterranean region. The economic reference date of the transaction was 1 January
2019 and all results subsequent to this date accrue to Energean. However, for accounting purposes, the
figures for Edison E&P are only consolidated into the financial statements subsequent to the completion
date; all results between the economic reference date and the completion date are reflected through a
series of completion adjustments and are incorporated in the net consideration. Throughout the Key
Performance Indicators section, both 2020 operational and financial results are presented on an actual
and pro forma (Energean plus Edison E&P) basis.
Operational
We continued our strong track record of growing reserves and resources with a 20% y-o-y increase vs
2021, while production performance was 41.2 kboepd (75% gas) in 2022.
1.
Working Interest Production
Working Interest Production
2022
2021
Pro forma 2020
2020
kboepd
41.2
41.0
48.3
3.6
Objective:
Energean is focused on maximising production from its existing asset base and delivering net
production of at least 200 kboepd from its gas-weighted portfolio in H2 2024.
2022 progress:
•
Average working interest production of approximately 41.2
kboepd in 2022
•
First gas achieved at Karish on 26 October 2022
•
NEA/NI brought onstream in March 2023; three further development projects (Karish North,
Cassiopea and Epsilon) progressed and expected onstream end-2023, 2024 and 2024
2.
2P Reserves and 2C Resources
2P Reserves
2022
2021
Pro forma 2020
13
2020
MMboe
1,161
965
982
762
2C Reserves
2022
2021
Pro forma 2020
13
2020
MMboe
217
188
158
158
Objective:
Energean aims to replace the reserves it has produced and grow its reserve and resource base
through a combination of successful exploration and appraisal and selective value accretive acquisitions.
2022 progress:
•
19% year-on-year increase in 2P + 2C reserves and resources to approximately 1,378 MMboe, 77%
gas, driven primarily by the Athena, Zeus, Hermes and Hercules discoveries as part of the 2022
Israel growth drilling campaign
•
In 2022, 15 MMboe was produced and 210 MMboe was added to 2P reserves, which equates to a
reserve replacement ratio of +1400%
13
Reserves are
pro forma
Energean + Edison plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“
EISL
”). The
transaction closed on 25 February 2021.
Page 35 of 255
STRATEGIC REPORT
Financial
Energean is focused on increasing production from its large-scale, gas-focused portfolio to deliver
material free cash and maximise total shareholder return.
1. Revenues
Sales Revenues
2022
2021
Pro forma 2020
2020
$ million
737.1
497
.0
335.9
28.0
Objective:
Energean’s near-term target is to generate revenues in excess of $2.5 billion per annum. With
approximately 1,161 million boe of 2P reserves to be monetised and a revenue growth profile underpinned
by gas sold under largely fixed price contracts, we at Energean believe this target is both achievable and
sustainable.
2022 progress:
•
2022 revenues of $737.1 million
•
2022 revenue was higher than 2021 primarily because of higher realised commodity prices
•
Abu Qir Production Sharing Contract (“
PSC
”) amendment increased the gas sales price
from November 2022, resulting in higher revenues
2.
Cost of Production
14
Cost of Production
2022
2021
Pro forma 2020
2020
$/boe
18.9
17.5
11.3
21.4
Objective:
Following completion of the Edison E&P acquisition Energean has started to implement
programmes to further the reduction of operating costs with the aim of creating a sustainable low-cost
business. The Group’s near-term cost of production (operating costs plus all royalties) target is $9-11/
boe.
2022 progress:
•
The increase in cash unit production cost was primarily driven by increased royalties paid in Italy
and increased energy costs across the group
3. Adjusted EBITDAX
15
Adjusted EBITDAX
2022
2021
Pro forma 2020
2020
$ million
421.6
212.1
107.7
(8.3)
Objective
: Energean aims to maximise EBITDAX to maintain the profitability of the business. The Group
expects to grow EBITDAX to $1.75 billion per annum in the short-term through the successful delivery of
sanctioned key growth projects.
2022 progress:
•
2022 adjusted EBITDAX was higher than 2021 because of higher revenue partially offset by higher
operating costs from the enlarged group
4.
Cash Flow from Operating Activities
Cash Flow
from Operating Activities
2022
2021
Pro forma 2020
2020
$ million
272.2
132.5
137.0
1.5
•
The increase was primarily driven by higher realised commodity prices versus 2021
14
The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include Cost of Production. More information can be found in the Financial
Review section, under the heading ‘Non-IFRS measures’.
15
The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include adjusted EBITDAX. More information can be found in the Financial
Review section, under the heading ‘Non-IFRS measures’.
Page 36 of 255
STRATEGIC REPORT
5.
(Loss)/Profit After Tax
Profit After Tax
2022
2021
Pro forma 2020
2020
$ million
17.3
(96.2)
(416.4)
(92.9)
•
The increase was primarily driven by higher realised commodity prices versus 2021, partially offset
through the windfall taxes in Italy
Net-zero carbon emissions
Energean’s aim is to lead the energy transition in the eastern Mediterranean through a strategic focus on
gas and achieve its net-zero ambition by 2050.
1.
Carbon Intensity Reduction
Carbon Intensity
on equity share*
2022
2021
Pro forma 2020
2020
KgCO2e/boe (Scope 1 and 2)
16.0
18.3
19.8
37.9
*Methodologies used to calculate scope 1 emissions include the standards and protocols of EU ETS, IPCC, Concawe and EPA.
Scope 2 emissions were calculated using the GHG protocol standards.
Objective:
In 2019, we were the first E&P company in the world to commit to net-zero emissions by 2050.
As part of this commitment, we pledged to reduce by the carbon intensity of our business, by 85% by
2023, versus our 2019 base year
16
.
Energean used internationally recognised standards and guidance to calculate its GHG emissions. We
followed the recommendations of the Greenhouse Gas Protocol, as well as guidance from IPIECA, the
UK’s Department for Environment, Food and Rural Affairs (DEFRA), the International Energy Agency (IEA),
the UN Intergovernmental Panel on Climate Change (IPCC) and the EU Emission Trading System. Our
scope 1 emissions under the EU ETS have been verified by TUV Austria Hellas.
2022 progress:
•
We delivered a 13% year-on-year reduction in the carbon intensity of our operations to 16.0 kgCO2e/
boe on equity share basis
HSE
Energean is fully committed to behaving responsibly and conducting its business with integrity in
everything it does.
1.
Lost Time Injury Frequency Rate
LTI Frequency Rate
2022
2021
Pro forma 2020
2020
No. per million hours worked
17
0.47
0.33
0.63
0.65
Objective:
Energean is committed to managing its operations in a safe and reliable manner to prevent
major accidents and to provide a high level of protection to its employees and contractors. Our target is
to keep the LTIF Rate below 0.50.
2022 progress:
•
Safe and reliable operations, zero serious injuries
•
Zero environmental damage and zero oil spills
•
Zero health damage and occupational illnesses
16
Scope 1 and 2 emissions.
17
Refers to employees and contractors.
Page 37 of 255
STRATEGIC REPORT
Total shareholder return
In September 2022, Energean declared its maiden quarterly dividend, aligned with its commitment to
return an initial $50 million to shareholders per quarter no later than the end of 2022.
In total, Energean returned US$0.60/share to shareholders (approximately $106 million) in 2022,
representing two-quarters of dividend payments.
In 2023, Energean intends to continue to pay quarterly dividends to its shareholders in line with its
previously communicated dividend policy, which includes:
•
Targeting to pay cumulative dividends of at least $1 billion by the end of 2025
•
•
This is underpinned by predictable cashflows, largely insulated from commodity price fluctuation,
thanks to long-term gas contracts with floor-price protection and high take-or-pay provisions
•
Paying a dividend of at least $50 million per quarter. The amount will ramp-up in line with Energean’s
near-term production and revenue targets to at least $100 million per quarter, as the Company’s
developments come onstream during the next 18 months
•
The Board and Management will regularly review its capital allocation to ensure that sufficient
liquidity remains within the Group, to continue Energean’s organic growth strategy and consider the
potential for opportunistic M&A and/or supplementary capital returns to shareholders.
•
Energean is targeting to reduce net debt/EBITDAX on a Group consolidated basis to levels below
1.5x and sees this being met no later than 2024
•
Post 2025, Energean targets maintenance of a progressive dividend policy, in line with its focus on
maximising total shareholder returns
Page 38 of 255
STRATEGIC REPORT
Review of Operations
Production
Group working interest production averaged 41.2 kboepd
in 2022 (2021: 41.0
kboepd
). 2022 production
was higher than 2021 because of the start-up of production from Karish on 26 October 2022.
Working interest hydrocarbon production (kboepd)
2022
2021
Israel
5.4 (92% gas)
N/A
Egypt
25.1 (87% gas)
29.1 (87% gas)
Rest of portfolio
10.7 (40% gas)
11.9 (36% gas)
Total
41.2 (75% gas)
41.0 (72% gas)
Israel
Karish
Production commenced at Karish on 26 October 2022, marking a pivotal milestone for Energean. All three
wells (Karish Main-01, 02 and 03) had been opened before year end. Data collected from the wells has
demonstrated the reservoir’s ability to produce in line with expectations.
Sales gas between 26 October 2022 and 31 December 2022 totalled 0.28 bcm. Notwithstanding the
excellent reservoir deliverability, this was lower than projected as a result of the project being in the
commissioning phase, during which variability in production is higher than in the post-commissioning
phase.
Further to the progress of commissioning activities on the Karish Field and the Energean Power FPSO,
Energean is, at the time of writing, now sequentially notifying gas buyers that the commissioning period
under the GSPAs has ended and the start date for commercial obligations has commenced. Energean
expects to have completed this process for all gas buyers by the end of March 2023.
The history of Karish
In 2016, Energean acquired the Karish and Tanin licences from NewMed Energy (formerly Delek Drilling)
and in March 2018, Energean took FID on Karish. An EPCIC contract was then signed with Technip to
build the Energean Power FPSO. First steel was cut in China in November 2018 and in April 2020 the
hull arrived in Singapore for the integration of the topsides. The Covid pandemic lead to shut-downs
in the yard, which impacted the timely completion and sail-away of the FPSO, which occurred in April
2022. The FPSO then arrived in Israeli waters in June 2022, following which the hook-up of the wells and
commissioning process occurred prior to first gas.
Karish North
In January 2021, Energean reached FID at the 1.2 Tcf (34 Bcm) Karish North field, 21-months after the
announcement of the discovery. The field is being commercialised via a low-cost tie-back to the Energean
Power FPSO, which is situated approximately 5 kilometres away.
The Karish North development well was successfully drilled as part of the 2022 growth drilling campaign.
Key upcoming activities ahead of Karish North first gas include installation of the Karish North manifold,
umbilical and spool, ahead of opening of the well before year-end 2023.
The production capacity from the first well is expected to be up to 300 MMscf/d (approximately
3 Bcm/yr). A second well is expected to be drilled in 2026 and, combined with later life workovers to both
wells, is expected to be sufficient to fully develop the 256 MMboe of 2P reserves.
Second Oil Train and Gas Sales Riser
In May 2021, Energean took FID on two high-return growth projects. The first, a second oil train on
the FPSO that will increase the liquids capacity from 18
kboepd to 32 kboepd, at minimal incremental
operating costs. The second, a second gas sales riser, will enable gas production and delivery at the full
8 Bcm/yr capacity of the FPSO.
Page 39 of 255
STRATEGIC REPORT
Both projects made good progress in 2022, with first steel cut at the yard in Dubai in H2 2022 for the
second oil train. The second export riser and the Karish North flowline were transported from the UK
to Israel in March 2023. The riser will be installed shortly and will connect the production facilities on
the FPSO to the pipeline-to-shore. The second oil train will be installed and commissioned in-situ, and is
expected to be ready to process hydrocarbon liquids by year-end 2023.
Gas and Liquids Contracts
GSPAs
Energean has signed gas sales agreements (“
Agreements
”) for the supply of approximately 7.4 Bcm/yr of
gas on plateau. The weighted average tenor of the GSPAs is 15 years. All Agreements include provisions
for floor pricing and take-or-pay and / or exclusivity, providing a high level of certainty over revenues from
the Karish, Karish North and Tanin projects over the next 20 years.
2022 activities
In March 2022, Energean signed a supply agreement with the Israel Electric Company (“
IEC
”), the largest
natural gas consumer in Israel for Karish Gas. The gas price is determined a month ahead, with volumes
determined on a daily basis. The agreement started upon the commencement of first gas production
from Karish, and is valid for an initial one-year period with an option to extend subject to ratification by
both parties.
In May 2022, Energean signed a new GSPA, representing up to 0.8 bcm/yr, to supply gas to the East
Hagit Power Plant Limited Partnership (“
EH Partnership
”), a partnership between the Edeltech Group and
Shikun & Binui Energy. The GSPA is for a term of approximately 15 years, for a total contract quantity of
up to 12 bcm. The contract contains provisions regarding floor pricing, offtake exclusivity and a price
indexation mechanism (not Brent price linked).
In July 2022, Energean Israel signed a new GSPA, representing 0.08 bcm/yr, to supply gas to Shapir-G.E.S
Concessionaire IPP Ltd for the Ashdod Desalination Plant. The GSPA is for a term of 20 years starting
from January 2024 and includes take-or-pay provisions and floor pricing.
Liquids
In October 2022, Energean signed a sale and purchase agreement with Vitol for the marketing of a number
of cargoes of Karish blend hydrocarbon liquids.
The first sale of Karish hydrocarbon liquids was completed in February 2023, and Energean expects Israel
to contribute 15 – 18
kboepd of hydrocarbon liquids production in 2023, at an estimated one sale per
month.
Energean expects, based on analysis of individual well test samples, that Karish blend will trade at a
similar price point to Asgard blend, given the similarity in their characteristics. The realised price will be
market price less certain freight, logistics and marketing costs.
Exploration
In 2022, Energean drilled four exploration wells, offshore Israel. Energean’s growth drilling programme
discovered and de-risked approximately 73 bcm (approximately 480 MMboe).
•
Athena and Zeus (part of Olympus Area)
•
•
The Athena (May 2022) and Zeus (November 2022) wells, block 12, discovered 25 bcm
(approximately 167 MMboe) of natural gas resources. D&M’s analysis determined that the
proximate Hera prospect, was also sufficiently de-risked to be classified as 2P reserves.
Together, these total 31 bcm of 2P reserves. This, in turn, substantially de-risked a further 37
bcm (approximately 243 MMboe) of prospective resources across the Olympus Area in nearby
prospects that have equivalent geological properties and seismic attributes.
•
Hermes (part of Arcadia Area)
•
•
Following post-well studies, recoverable resources in the Hermes discovery (October 2022),
block 31, are now estimated to be approximately 5 bcm (32 MMboe). The results from this well
have provided important additional information about Orpheus and Poseidon, nearby prospects,
that
may be future targets of appraisal activity to firm up resource volumes within this area,
which Energean has named the “Arcadia Area”
Page 40 of 255
STRATEGIC REPORT
•
Energean is preparing notices of commerciality for both the Olympus Area and Arcadia Area,
required for the conversion of those exploration licences into development leases
•
Hercules
•
•
In December 2022, the Hercules well, block 23, made a discovery in the Miocene. The C and D
sands are estimated to contain mean Gas Initially In Place (“
GIIP
”) of approximately 3 bcm. This
excludes discovered volumes in the A and B sands (which were the subject of the upgrade to
discovered Athena resource volumes in November 2022), which are currently being evaluated,
and volumes will be communicated once available, along with Energean’s assessment of
commerciality of the discovery. The large, deeper, liquids target in the Hercules prospect was
not considered drill-ready and remains a potential target of future exploration.
Egypt
Production
The Abu Qir gas-condensate field offshore Egypt was the largest producing asset in the Group’s portfolio
in 2022. The field delivered 25.1 kboepd of working interest production in the 12 months to 31 December
2022, approximately 87% of which was gas. The NAQ-PII6 well was brought onstream in September 2022
at a rate of 26 MMscfd, which increased Q4 production versus the previous quarters.
Production is expected to grow in 2023, as the remaining three NEA/NI wells are brought online.
Development
NEA/NI subsea tieback
In January 2021, Energean sanctioned the NEA/NI project, which is in shallow-water offshore Egypt and
neighbouring the Abu Qir concession. An EPCI contract for the four subsea wells and the associated
tie-back to the Abu Qir NAQ PIII platform and associated infrastructure was awarded to TechnipFMC
in February 2021.
The NEA/NI project achieved first gas in March 2023, following the completion of the NEA6 well in January
2023. The remaining three wells are expected online throughout 2023. The project contains an estimated
39 MMboe of 2P reserves according to D&M. Peak working interest production is anticipated to be around
15 kboepd.
Abu Qir infill drilling programme
Energean expects to drill an additional four wells on the Abu Qir licence in 2024.
Exploration
North East Hap’y Offshore
Energean expects to participate in an exploration well targeting the Orion prospect (W.I. 30%) along with
its partner IEOC (ENI; 70%; operator) on the North East Hap’y block, offshore Egypt, in 2023. Energean
expects to farm down 12% of its interest to 18% in the North East Hap’y block ahead of spudding the well.
East Bir El-Nus concession (Block-8)
On 3 January 2022, an international consortium led by Energean Egypt (50% operator and Croatia’s INA,
d.d. 50%) was awarded an exploration licence for the East Bir El-Nus concession (Block-8), in the Western
Desert of Egypt. The award is in line with Energean’s strategy to increase and diversify its presence in
Egypt and reinforces its commitment to the country.
The work programme for the licence includes a 180 linear km 2D seismic survey, a 200km2 3D seismic
survey plus two exploration wells, which are expected to target estimated resources (in place) of
approximately 100 MMboe.
Page 41 of 255
STRATEGIC REPORT
Europe
Production
Working interest production from the Group’s European portfolio averaged 10.7 kboepd (40% gas) in
2022.
Italy – Cassiopea development
The Cassiopea project (180 Bcf 2P reserves), in which Energean has a 40% non-operated equity stake,
remains on track for 2024. The field will deliver plateau working interest production rates of approximately
10 kboepd (100% gas) from the middle of the decade, providing more than 30% of the region’s gas
consumption. Onshore work is progressing well and offshore installation activities are expected to begin
in Q2 2023. The operator expects to start drilling activities in the summer 2023, which includes two new
wells and two recompletions. Upside exists within the surrounding area from potential satellite tie-back
options, including the Gemini and Centauro prospects, which Energean expects to participate it, with its
partner ENI, in 2024.
Greece – Epsilon Development
Energean’s Epsilon project involves three wells (which were pre-drilled in 2019 and require completion)
from the new-build Lamda platform, which will be tied-back to the existing Prinos complex.
First oil from the Epsilon development, which has 2P reserves of 23.6 MMboe in aggregate, is expected in
2024. The installation of the platform jacket at the field is expected to take place in Q2 2023.
Croatia – Irena Development
Energean is currently in FEED for the development of the Irena gas field. Energean expects to take FID for
the project in 2023. If progressed, first gas is anticipated for Q4 2024. The field has 2P reserves of 13.3
Bcf (2.3 MMboe).
Exploration
Croatia
Energean (30%) expects, alongside operator EdINA, to drill the Izabela-9 exploration well, offshore Croatia,
in Q2/Q3 2023. This well is being drilled into the northern segment of the Izabela SE prospect, which has
gross unrisked P50 GIIP of 0.49 Bcm.
Greece
Energean holds a 75% stake in Block 2, located offshore western Greece. Hellenic Petroleum holds the
remaining 25%. A 3D seismic campaign was completed in November 2022. The results of this is currently
being processed and analysed to determine next steps.
Energean also holds a 100% stake in the Ioannina licence, located onshore Greece. A drill or drop decision
will be taken in 2023.
UK
In December 2022, the Isabella appraisal well encountered hydrocarbons in the targeted reservoir. The
operator has completed the gathering of data and has plugged and abandoned the well. The operator
intends to evaluate the drilling results to establish the commerciality of the reservoir.
Carbon Capture and Storage Projects
Energean is committed to meeting its net-zero emissions target by 2050 and leading the Mediterranean
region’s energy transition. The Prinos CCS (Greece) project proposal is to provide long-term storage for
carbon dioxide emissions captured from both local and more remote emitters. Energean estimates that
the Prinos subsurface volumes are sufficient to sequester up to 100 million tonnes of CO2, representing
up to around 50% of total annual emissions from the Greek manufacturing sector for 20 years.
In September 2022, Energean was awarded a CCUS exploration licence from the Greek government. The
results of the pre-FEED with Wood Group and the subsurface studies with Halliburton are currently being
assessed.
Page 42 of 255
STRATEGIC REPORT
Reserves
Energean’s year-end 2022 working interest reserves
18
are 1,161 MMboe, a 19% increase versus 2021. The increase in reserves versus 2021 was primarily due to the
Olympus Area discoveries, offshore Israel.
At
1 January
2021
19
Revisions
Discoveries
Acquisitions/
(Disposals)
Transfers from / (to)
contingent
Production
At
31 December 2022
Israel
Oil
MMbbls
101
0
5
–
(6)
(0)
101
Gas
Bcf
3,537
47
1,105
–
(56)
(10)
4,624
Total
MMboe
744
8
206
–
(16)
(2)
940
Greece
Oil
MMbbls
36
(12)
–
–
14
–
38
Gas
Bcf
6
(5)
–
–
4
–
5
Total
MMboe
37
(13)
–
–
15
–
39
Egypt
Oil
MMbbls
13
0
–
–
0
(1)
13
Gas
Bcf
508
12
–
–
15
(45)
490
Total
MMboe
103
2
–
–
3
(9)
99
Italy
Oil
MMbbls
35
3
–
–
–
(2)
36
Gas
Bcf
248
2
–
–
–
(8)
242
Total
MMboe
78
3
–
–
–
(3)
78
United
Kingdom
Oil
MMbbls
1
0
–
–
0
(0)
2
Gas
Bcf
1
(2)
–
–
3
(0)
2
Total
MMboe
1
0
–
–
1
(0)
2
Croatia
Oil
MMbbls
–
–
–
–
–
–
–
Gas
Bcf
14
(0)
–
–
–
(0)
14
Total
MMboe
2
(0)
–
–
–
(0)
2
18
YE22 D&M and NSAI CPR.
19
Pro forma
Energean (includes Edison) plus the acquisition of Kerogen’s 30% holding in EISL.
Page 43 of 255
STRATEGIC REPORT
At
1 January
2021
19
Revisions
Discoveries
Acquisitions/
(Disposals)
Transfers from / (to)
contingent
Production
At
31 December 2022
Total
20
Oil
MMbbls
187
(8)
5
–
9
(4)
189
Gas
Bcf
4,315
55
1,105
–
(34)
(64)
5,376
Total
MMboe
965
1
206
–
3
(15)
1,161
Present Value of 2P Reserves
21
($ million)
7,357
Adjusted TopCo
22
Group Net Debt YE22 ($ million)
107.3
20
Numbers may not sum due to rounding
21
YE22 NSAI and D&M CPR’s High Case (based on forward curve), NPV10
22
The Group excluding Israel and Greece.
Page 44 of 255
STRATEGIC REPORT
Corporate Social Responsibility
Our approach
At Energean, we are strongly committed to creating shared value for our stakeholders and local
communities. Guided by our Ethos and international best practices, we implement a variety of corporate
social responsibility (CSR) activities aiming to protect the environment and improve the quality of life of
those around us.
In what follows, we provide some important insights on the measures we are taking:
•
We have committed to achieve Net Zero emissions by 2050 (we were the first E&P to set this
target) and are further planning to set science-based targets (SBTi)
•
We publish an annual Sustainability Report that is in accordance with the Global Reporting Initiative
(GRI) Standards and the guidelines of the Sustainability Accounting Standards Board (SASB) for oil
and gas E&P companies
•
We implement initiatives that contribute to achieving the entire spectrum of the United Nations’
Sustainable Development Goals (UN SDGs)
•
We participate in the Carbon Disclosure Project (CDP) in the categories of Climate Change and
Supplier Engagement, achieving exceptional ratings that exceed the industry average
•
We align our disclosures with the reporting recommendations of the Task Force on Climate-Related
Financial Disclosures (TCFD) and present our approach within our Annual and Sustainability
Reports
•
We are an active signatory to the United Nations Global Compact (UNGC), committed to adhering
to its principles on human rights, labour, environmental and anti-corruption issues
•
We engage with prominent ESG ratings such as the Sustainalytics and the Maala Index as well as
voluntary initiatives such as the Terra Carta – the Sustainable Markets Initiative of King Charles III,
the former Prince of Wales
Our people are at the forefront of Energean’s success. Operating in numerous countries, we acknowledge
that it is essential to bring our people together and unite diverse cultures. To this end, we design initiatives
to create an inclusive and attractive workplace for our employees, with prominent examples being the
“Did you know” and the “Evolve and get involved” series. At the same time, we are aware of the unsafe
working conditions that may arise and therefore take a proactive approach to ensure that the health,
safety and security of our employees remains a priority.
As a corporate citizen, we understand that our stakeholders have certain expectations of us. We welcome
these expectations and constantly strive to incorporate CSR considerations into our business planning
processes. Energean’s CSR programme is designed to address the needs of our stakeholders, facilitate
the formation of long-lasting relationships and provide tangible benefits to the communities in which we
operate.
Our CSR policy
Energean’s CSR policy is based on our principles and values, which are the cornerstone of our daily
actions. Our stakeholders’ expectations and priorities are embedded in the policy, enabling us to prioritise
the most important sustainability aspects of our business: our people, health and safety, the environment
and community relations.
Our CEO, Board of Directors and Senior Management are responsible for setting, shaping and monitoring
our CSR and sustainability goals and objectives. As such, they are fully aligned with our goal to lead the
energy transition in the Mediterranean through a strategic focus on gas.
In an effort to continuously enhance our sustainability profile, we work together with governments, the
private sector and wider society to exchange views and further improve our approach.
Page 45 of 255
STRATEGIC REPORT
Corporate Governance is a top priority
Energean adheres to the highest ethical standards, consistent with internationally recognised frameworks
and industry best practices. We maintain a strong corporate governance system that enables us
to accomplish our CSR objectives and fulfil our responsibilities towards our stakeholders and secure
their trust. Meanwhile, we strive to increase our productivity and maintain a flexible operating model to
effectively adapt to any changes in the macroeconomic environment. We build on best practices and
continuously strengthen our governance and internal control functions to maintain and improve our
efficiency and transparency.
Equality and transparency
Energean adopts business practices characterised by professionalism, fairness and transparency. Guided
by our Code of Ethics, we demonstrate to all our employees and stakeholders how important compliance
with laws and regulations is to us.
The Code explicitly states our zero-tolerance approach towards any form of bribery, corruption and other
forms of financial crime and this position is strongly reinforced by Energean’s Management and Board.
Furthermore, the Code of Ethics underpins our stance on human rights, lobbying and advocacy, the
prevention of the facilitation of tax evasion, anti-slavery and the General Data Protection Regulation.
We ensure that all our business partners and those acting on our behalf, are in line with our Code of
Ethics and comply with the applicable ethics and compliance clauses in their contracts. In addition, before
entering into any partnership, we follow a risk-based third-party due diligence approach to manage risks
related to ownership structure, anti-bribery and corruption, sanctions, trade restrictions, human rights and
labour conditions.
Bribery and corruption
It is crucial for us to act and operate ethically and honestly. Energean complies with all laws and regulations
relating to bribery and corruption that apply in all countries in which we operate, including the U.K. Bribery
Act 2010.
We show zero tolerance towards any incidents of bribery and corruption as covered by our Anti-Corruption
and Bribery Policy, and frequently engage with our employees and business partners to maintain our
integrity. We also implement an anti-bribery and anti-corruption compliance programme, overseen by the
Board of Directors, to identify and mitigate related risks that could lead to ethical misconduct.
Our contribution to the 17 United Nations’ Sustainable Development Goals
We recognise that as an energy company we have an obligation to contribute to the United Nations 17
Sustainable Development Goals (SDGs). For this reason, we link our actions and initiatives to these goals.
The following table displays Energean’s main CSR activities in 2022 and the respective SDGs they serve.
SDGs
Our commitments and actions
•
“Back to School” with Energean
•
Greece – we donated school supplies and stationery equipment to three
social institutions, two community centres and one kindergarten, supporting
over 400 students and their families in need – Kavala, Island of Thassos,
Zitsa (Ioannina)
•
Italy – in collaboration with “Caritas” (a Catholic organisation for charity) and
with the support of our colleagues, we donated school supplies, backpacks,
and stationery equipment, helping schools, an Aid Center, and families in
need & their children – Sambuceto, Vasto, Siracusa, Pozzallo, Milan
•
Egypt – we supported the “FLDO Foundation” (an NGO that empowers female
employment), by ordering 300 school bags manufactured with recycled
materials. The bags were donated to underprivileged students of two villages.
Also, along with the company’s employees, we donated the tuition fees to
all primary school students in need of those same two villages – Villages of
Zirzarah and Maadeyah
Page 46 of 255
STRATEGIC REPORT
•
Israel – in collaboration with “Yeladim – Fair Chance for Children” (an NGO
which takes care of children that were transferred from broken homes by
welfare authorities and now live in boarding schools), we opened the new
school year by donating school bags and stationery equipment to 300 children
living in four welfare boarding schools – Haifa, Carmel
•
Supported the “14th International Diplomatic Charity Christmas Bazaar”, in
collaboration with the Embassy of Greece, raising funds for a Neonatology
Clinic and two Primary Schools – Podgorica / Montenegro.
•
Donated to the Holy Metropolis of Philippi, Neapolis and Thasos, for the support of
the Central Welfare Fund and the “Meal of Love” (the daily soup kitchen performed
by the 95 parish churches of the Holy Metropolis) – Kavala / Greece.
•
Energean teamed up with the Greek Embassy of Montenegro and donated
valuable food packages to the donation campaign of the NGO “Women of Bar” –
City of Bar / Montenegro.
•
Donated 152 Christmas supermarket vouchers to families in need, supporting the
Social Market in the Municipality of Zitsa – Ioannina, Greece.
•
Continued our excellent HSE performance with almost 1 million man-hours with
no Lost Time Injuries regarding all Energean employees.
•
Maintained the ISO 45001 Health and Safety Management System certificates in
all our operated sites and established it in Prinos in order to be certified in 2022.
•
Participated in a Relay Marathon in support of cancer research. The event was
in support of LILT, the National Association for the Research Against Cancer –
Milan / Italy.
•
Donated a Chest Compression System (a cardiopulmonary resuscitation
machine) to the Health Center of Prinos, in honour of the “World Heart Day 2022”
(29 September) – Island of Thassos / Greece.
•
During Breast Cancer Awareness Month (October), while supporting women’s
health
•
Italy:
•
Donated to the National Association for the Research Against Cancer
(LILT).
•
Organised a webinar on cancer prevention through nutrition and a healthy
lifestyle.
•
Arranged a free check-up for the female employees & delivered a LILT
leaflet and ribbon to all colleagues.
•
Greece:
•
Organised a presentation on the “Causes, Risk Factors and Prevention of
Breast Cancer”, for all female employees.
•
Egypt:
•
Organised a breast cancer awareness campaign for the residents of
Maadeyah village, followed by the transportation of women to the Baheya
Foundation, Cairo, for routine check-ups.
•
Israel:
•
Arranged for a breast surgeon to visit the offices in Haifa and Tel-Aviv
and to perform checks-up to all female employees. The service was
available also to the female family members of all staff (wives, sisters,
and mothers).
Page 47 of 255
STRATEGIC REPORT
•
Offered paid internships to 24 university students around the Group
•
Organized an educational session addressed to primary school students, in
order to introduce them to the concepts of sustainability, climate change, and
biodiversity preservation – Village of Maadeyah / Egypt.
•
Set-up of a webinar on Ancient Greek Philosophy, titled “An anatomy of Ancient
Greek Philosophy: How Philosophy leads us to success”. The webinar invited our
colleagues to be enlightened and inspired physically, spiritually, and mentally,
to expand our comfort zone and to improve our leadership, managerial and
persuasion skills.
•
On 5 June (World Environment Day), Energean aligned with the United Nations’
2022 theme “Only One Earth”, focused on positive sustainability actions, and
increased environmental awareness:
•
Greece:
•
Donated waste disposal bins to the village of New Peramos – Kavala.
•
Organised and performed a beach clean-up at Richo Beach, in collaboration
with the Municipality of Paggaion, in the villages of Nea Peramos & Nea
Iraklitsa – Kavala.
•
Egypt:
•
Performed a beach clean-up in the village of Al Maadeyah, in cooperation
with AQP and “GoClean”.
•
Distributed LED lamps to underprivileged families, in cooperation with
AQP.
•
Distributed recycling bins to schools and the Al Maadeyah beach club.
•
Hosted an environmental awareness session titled “Preserve the
Environment by Recycling”, encouraging our employees to form
sustainable habits and raise awareness for the next generation.
•
Montenegro:
•
Donated concrete waste disposal bins to the Maljevik and Sutmore sea-
side promenades, in cooperation with the Municipality of Bar.
•
Granted two Master’s degrees Clean Energy scholarships to students at the
Technion (the Israel Institute of Technology), to reward excellence and promote
academic research on clean energy – Haifa / Israel.
•
Developed a partnership between the public and the private sector, fostering
a mutual collaboration between a university and a business, by signing two
three-year agreements: i) for a PhD scholarship with the University of Insubria,
regarding CO2 Underground Storage within the CCUS (Carbon Capture, Utilization
& Storage) Value Chain, and ii) with the University of Bologna who assigned a PhD
Researcher & Assistant Professor to integrate CCUS within Circular Economy
solutions – Varese, Bologna / Italy.
•
Supported the USAID Scholars Activity Internship Program, implemented by the
American University in Cairo. Committed to empowering young leaders through
skills enhancement programs, Energean successfully provided five internships –
Cairo / Egypt.
•
Collaborated with the San Benedetto del Tronto’s Port Authorities, Coast Guard,
and Harbour Master’s Office. Along with the Montani Technical Institute in
Fermo, all parties worked together for safeguarding the sea while providing real
life educational opportunities to the new generations. The Institute’s students
had the opportunity to learn about safety aspects in the field, and to define and
manage an emergency sea protection exercise plan.
Page 48 of 255
STRATEGIC REPORT
•
In 2022, we increased the overall percentage of women at Energean for a second
year running (2022: 24%; 2021: 16%; 2020: 14%) and the number of women on the
Board increased slightly from 30% to 33%. We also maintained a healthy mix of
employees from different generations.
•
Supported, in cooperation with Dar Al Orman Association, and personally delivered
supplies to five small businesses owned by women that support themselves and
their families – Village of Maadeyah / Egypt.
•
Energean recycled 95.2% of water withdrawals at its production sites in 2022.
•
Installed clean water connections to the 10 homes most in need in the Beheira
Governorate, by successfully partnering with Dar Al Orman Association on a
project to install clean water to low-income villages – Egypt.
•
Energean is focused on providing cleaner and affordable energy. In 2022,
Energean began production from its flagship Karish field in Israel. Gas from this
field is sold into the market at lower prices than the existing producers and is
helping Israel shut all its coal-powered power plants by 2050, which will remove
around 3 million tonnes of CO2.
•
The number of employees aged 15-24 increased by 1000% y-o-y
•
The number of nationalities increased y-o-y: 33 as of 31 December 2022 (versus
24 as at 31 December 2021)
•
Supported (donation and sponsorship) the “Athletic Club of Kavala (AOK) –
Department of Wheelchair Basketball”, by covering the fixed needs and expenses
of the Department for the entire Wheelchair Basketball Season 2021-22 – Kavala
/ Greece.
•
Supported and ran alongside the Muscular Dystrophy Association of Greece (MDA
Hellas) and patients in wheelchairs, by participating in the 5km Road Race running
event of the “Athens Half-Marathon 2022” in the centre of Athens. MDA Hellas is
a non-profit organisation that supports people that suffer with neuromuscular
diseases – Athens / Greece.
•
Supported the Prefectural Association of People with Disabilities of Kavala, by
financing the operation, service and maintenance of a special vehicle/van that
transports their members daily – Kavala / Greece.
•
Continued the support to “Etgarim” for the fourth year, an NGO dedicated to the
empowerment and social integration of people with disabilities through outdoor
sports. For a second year in a row, Energean colleagues ran 5 and 8 kilometres in
Etgarim’s “Spring Run” delivering a message of inclusivity – Israel.
•
Donated to “IdeaVita”, an organisation with the aim of designing and implementing
independent life paths to people with disabilities, affirming and guaranteeing
their right to a full and independent life over time. Along with the donation, we
organized an internal workshop for our employees on the power to go beyond
one’s limits – Milan / Italy.
•
Supported and ran alongside the Muscular Dystrophy Association of Greece (MDA
Hellas) and patients in wheelchairs, by participating in the 39th Athens Classic
Marathon events for 2022 (5K & 10K Races), with our CEO, Mathios Rigas, leading
our company’s running team in the center of Athens (November 2022). This year,
Energean had 12 employees-runners participating in “The Authentic” 42K Classic
Marathon Race and supporting MDA Hellas, coming from Greece and 3 more
countries. MDA Hellas is a non-profit organisation that supports people that
suffer with neuromuscular diseases – Athens and Marathon / Greece.
Page 49 of 255
STRATEGIC REPORT
•
Donated to MDA Hellas for the operation of the Neuromuscular Diseases Unit
of the “AHEPA” University General Hospital (“
AHEPA
” Hospital) of Thessaloniki,
which will serve about 350 people in the coming year, children and adults – the
Unit covers the geographical area of all Northern Greece.
•
Signed a new partnership with ‘Special Olympics Italia’, an organisation that
promotes sport as a means of inclusion for children and adults with intellectual
disabilities. Specifically, we support Francesca, a basketball athlete who will
participate in the Berlin “Special Olympics World Games 2023” – Italy.
•
Sponsored an experiential event where the 400 elementary school students who
participated were introduced to the way people with different disabilities live their
lives and the everyday challenges they face. Organized by the Municipality of
Kavala, the local Directorate of Secondary Education and NGOs for people with
disabilities – Kavala / Greece.
•
Supported “Così come sei”, an association committed to responding to the need
for inclusion of families with disabled children – Ragusa / Italy.
•
Provided financial aid to Rahaf Sailing and Surfing Club, supporting young sailors
from low-income communities. Our donation helped the sailing club with their
preparations for the 2024 Paris Olympics, supporting over 120 sailors and surfers
from Rehaf to participate in multiple competitions – Rehaf / Israel.
•
Became the main sponsor of OKAK (Kavala’s Track and Field Athletic Club), for
the 2022-2023 season. OKAK is one of the biggest clubs in Track and Field in the
East Macedonia & Thrace Region of Greece, that promotes good sportsmanship
and ethos to more than 200 young athletes in the city of Kavala, making OKAK a
role model for the sporting community of the country – Kavala / Greece.
•
Became a sponsor of the “Aretusa” Handball Team in Siracusa, for the 2022-23
Season. “Aretusa” participates in both men’s and women’s A2 championships,
and works directly with local youth and schools, especially in the most deprived
areas of the city – Siracusa / Italy.
•
Partnered with the broader Egyptian Petroleum Sector to provide support and new
houses to the victims of the terrible flood at Khor Awada village – Aswan / Egypt.
•
Grand Sponsor of the 6th Dodoni Festival – a summer open-air Cultural Festival
in the area of Ancient Dodoni – Ioannina / Western Greece.
•
Grand sponsor of the 22nd “Trofeo Del Mare” (“
The Trophy of the Sea
”), the
International Maritime Awards 2022, that took place in Marina di Ragusa. The
awards highlight the excellent work of men, women and institutions who are
committed to and passionate about the Mediterranean Sea – Sicily / Italy.
•
Continued the support to “Etgarim” – a Haifa Sailing Club that empowers people
with disabilities and youth with special needs through outdoor sports – Israel.
•
Recycled 90.5% of the waste generated during 2021 in production sites.
•
Maintained the ISO 14001 Environmental Management System certificates in all
our operated sites.
•
Energean’s Egyptian Abu Qir Petroleum (AQP) joint venture (JV) partners received
their first certificate for waste segregation and paper recycling in Egypt. AQP
becomes the first Oil & Gas JV in Egypt to entirely (100%) recycle its paper,
cartons and plastic waste from all its offices and operational sites (onshore and
offshore). Energean’s Cairo branch has followed the same approach of waste
segregation and recycling, by cooperating with “Go Clean”, a recycling solutions
company – Egypt.
•
Hosted a local stakeholder engagement initiative, by welcoming a delegation of
30 local journalists on board our offshore infrastructure located in the Adriatic
Sea, part of the “full immersion” sessions organized by the Order of Journalists
of Molise and Energean Italy. It explained how the Rospo Mare field works in full
compliance with all the relevant and most recent HSE regulations – Vasto / Italy.
Page 50 of 255
STRATEGIC REPORT
•
Energean continuously pursues its pledge to become a net-zero emitter by 2050.
•
Energean’s strategy to Net-Zero emissions by 2050:
•
> Short-term plan – by 2025.
•
> Medium-term plan – by 2035.
•
> Long-term plan – by 2050.
•
Improved our Carbon Disclosure Project (CDP) score to A from B in 2022-, for
Climate Change
•
Continued to align our annual reporting to the TCFD recommendations.
•
Successful roll out of “green electricity” at all our operated sites
•
Continued as a member and participant of the Terra Carta and Sustainable
Markets Initiative
•
During 2022, we maintained our zero oil spills record, a record that we hold since
the beginning of our operations in 2008.
•
Grand sponsor of the 22nd “Trofeo Del Mare” (“
The Trophy of the Sea
”), the
International Maritime Awards 2022, that took place in Marina di Ragusa. The
awards highlight the excellent work of men, women and institutions who are
committed to and passionate about the Mediterranean Sea – Sicily / Italy.
•
Maintenance of Telemetric Stations in surface waters of Nestos River Delta, Lakes
Vistonida-Ismarida and Thassos Island Management Body – Northeastern Greece.
•
Organised and performed a beach clean-up at Richo Beach, in collaboration with
the Municipality of Paggaion, in the villages of Nea Peramos & Nea Iraklitsa –
Kavala / Greece.
•
Performed a beach clean-up in the village of Al Maadeyah, in cooperation with AQP
and “GoClean” – Egypt.
•
Performed an invasive species survey and treatment at the onshore valve station
area, in accordance with the National Nature and Parks Authority guidelines of
Israel.
Energean collaborated with:
•
UN Global Compact.
•
UN Global Working Group participation.
•
Maala, a non-profit, CSR standards-setting organization in Israel, which has set a
dedicated CSR index on Tel Aviv Stock Exchange. Maala’s CSR Index is an ESG
rating system used as an assessment tool, benchmarking Israeli companies on
their CSR performance. Energean was rated at Platinum Level at the 2022 Maala
ESG Index – Israel.
•
Management body of the Nestos River Delta, Lakes Vistonida-Ismarida and
Thassos Island – Northeastern Greece.
•
The Greek Embassy – Podgorica, Montenegro.
•
“Caritas Diocesana”, a Catholic organisation for charity – Vasto, Siracusa and
Pozzallo, Italy.
•
“Go Clean”, a recycling solutions company – Egypt.
•
The Regional Unit of Kavala – Greece.
•
The Municipality of Bar – City of Bar, Montenegro.
•
“IdeaVita”, an organisation with the aim of designing and implementing
independent life paths to people with disabilities, affirming and guaranteeing their
right to a full and independent life over time – Milan, Italy.
•
The American University of Cairo – Egypt.
•
“Etgarim”, an NGO dedicated to the empowerment and social integration of people
with disabilities through outdoor sports – Haifa, Israel.
•
“Athletic Club of Kavala – Department of Wheelchair Basketball” – Kavala, Greece.
•
Energean’s Joint Venture, Abu Qir Petroleum (AQP) – Egypt.
•
“Aretusa” Handball Team – Siracusa, Italy.
•
The Nature and Parks Authority – Israel.
Page 51 of 255
STRATEGIC REPORT
•
The Holy Diocese of Philippi, Neapolis and Thassos – Northeastern Greece.
•
Democritus University of Thrace (DUTH), Department of Environmental
Engineering – Xanthi, Greece.
•
Order of Journalists of Molise – Vasto, Italy.
•
Dar Al Orman Association, an NGO that performs charity work – Egypt.
•
The Technion (the Israel Institute of Technology) – Israel.
•
MDA Hellas (the Muscular Dystrophy Association of Greece), a non-profit
organisation that supports people that suffer with neuromuscular diseases –
Greece.
•
University of Studies Insubria – Varese, Italy.
•
“Yeladim – Fair Chance for Children”, an NGO which takes care of children that
were removed from their homes and live in boarding schools – Israel.
•
LILT, the National Association for the Research Against Cancer – Italy.
•
“Special Olympics Italia”, an organisation that promotes sport as a means of
inclusion for children and adults with intellectual disabilities – Italy.
•
Rahaf Sailing and Surfing Club, a Club that supports young sailors from low-income
communities – Rehaf, Israel.
•
OKAK (Kavala’s Track and Field Athletic Club) – Kavala, Greece.
•
Alma Mater Studiorum, University of Studies Bologna – Italy.
•
Egyptian Petroleum Sector – Egypt.
•
The Prefectural Association of People with Disabilities of Kavala – Greece.
•
The Health Center of Prinos – Island of Thassos, Greece.
•
Assorisorse – Natural Resources and Sustainable Energy, a Confindustria
Association made up of about 100 companies committed to enhancing natural
resources and intellectual skills through technological innovation and the circular
economy, with the aim of decarbonising industrial processes and achieving
environmental, economic and social sustainability – Italy.
•
San Benedetto del Tronto’s Port Authorities, Coast Guard, and Harbour Master’s
Office – Italy.
•
Montani Technical Institute – Fermo, Italy.
•
The Municipality of Zitsa – Ioannina, Greece.
•
“Così come sei”, an association committed to respond to the needs for inclusion
of families with disabled children – Ragusa, Italy.
Excellence through our people
Energean’s successes in 2022 were due to tireless effort from our people. Our commitment is to continue
motivating, engaging with, and further developing our diverse workforce to enable the delivery of our
goals and strategy.
We are focused on offering an attractive workplace and being an employer of choice, thus learning and
development and reward and compensation plans have been at the forefront of our activities in 2022. The
emphasis on compensation was essential during 2022 due to the rising cost of living in most parts of the
world, mostly as a result of the ongoing conflict in Ukraine. We foster an inclusive culture that enables
diversity of thought, and for the first ever time this year we conducted a culture survey and benchmarked
our Diversity, Equity and Inclusion standards and processes against global best practices.
Learning and development
We invest in the potential of our people, who are the real facilitators of our growth, to facilitate the
advancement of their career within our company. In 2022, there was a 195% y-o-y increase in the overall
training hours completed to over 19 hours of learning in the year. In addition, at the end of 2022 we started
the process of incorporating the Udemy business e-learning library to our learning management system
to further support the continuous development of hard and soft skills.
Page 52 of 255
STRATEGIC REPORT
At Energean we are committed in having the “right people for the right position” – our staff’s career
development is key to Energean’s success. This year, 22 of our colleagues were offered an internal
move opportunity, either via promotions or through lateral transfers in roles that better met their career
aspirations and the company needs.
Compensation and benefits
We are committed to offer competitive compensation and benefits packages, particularly in 2022 when
the cost of living saw a significant increase in the majority of the countries that we operate. We monitor
the market aiming to ensure that our workforce feels fulfilled with their careers at Energean and are
motivated to perform at the best of their abilities.
We conducted our first group-wide compensation and benefits benchmark allowing an objective and
data-driven evaluation of both. This benchmark has allowed us to better structure our reward plans in
order to attract future and retain existing employees.
At a local level we adjusted our compensation and benefit plan in order to align these packages across
the Group. These packages also factored in differences in inflation across of countries’ of operations. As
a result, we have reviewed both the salaries and benefits in each country that we operate in to support all
our colleagues with the aim to minimize the impact of rising inflation.
In addition, as our culture is driven by performance and great results aiming to reward and recognise those
striving for excellence, we continue to offer variable pay in the form of cash bonus, LTIP and deferred
bonuses to our employees as well as salary adjustments following yearly performance appraisals.
During 2022 we commenced the implementation of the compensation module for our SAP SuccessFactors,
and we expect this module to go live on the first quarter of 2023. This module, combined with the
performance management system also on SuccessFactors, will allow the management team to make
more informed decisions on compensation and benefits across the group, incorporating the group grading
structure, the compensation and benefits benchmark, the individual performance and consolidate all the
compensation and benefits information for all Energean employees.
Employee engagement
We engage with our people through regular team and townhall meetings, messages from the CEO and
our intranet. We aim to have an open culture where people can actively contribute towards our success.
This year we conducted our first ever culture survey to understand how people perceive our culture and
to redefine the way we behave, work, and interact with each other. The results of this survey have been
received and analysed and in 2023 we will define the Energean culture of tomorrow and meet the needs
of our multicultural group.
We respect the rights of all our employees to join a legitimate trade union and bargain collectively – we
have collective bargaining agreements in place.
Diversity, Equity and Inclusion (DEI)
We consider diversity, equity, and inclusion business critical, not a compliance necessity and we continue
our participation in the UN Compact Global DEI working group. Our aim is for our workforce to be truly
representative of all sections of society, and for each employee to feel respected and able to give their
best.
In addition to the equal opportunities policy, we introduced this year the diversity, equity and inclusion
policy while setting simultaneously ambitious 3-year plan targeting holistically our DEI practices. This
includes the attraction and retention of people, performance management, communications, learning and
development as well as responsible sourcing, community, governmental relationships, and philanthropy.
Our target is to enable a systematic implementation of the DEI practices beyond of what is required or
expected, benchmarked by international standards.
Focusing on gender equality, for another consecutive year we increased our overall percentage of women
at Energean from 18% to 23% by increasing the representation in senior and middle management and
the rest of the staff. The percentage of women at the executive committee level decreased because of
the restructuring of the committee to reduce the overall number of people on the committee (2022: 22%;
2021: 38%). Finally, our gender pay gap for 2022 was -15% at median hourly wage rates.
Page 53 of 255
STRATEGIC REPORT
We are proud to have doubled the under 30s population ensuring that we provide exciting career
opportunities to the younger generation, tackling in parallel the ageing workforce and talent gap in the oil
and gas industry by preparing the next generation of Energean leaders.
In 2022, our underlying employee retention rate was 87.33%, reduced to 62.67% after taking into account
exceptional circumstances at our operations in Greece. Our turnover rate that measures employee
resignations, remained fairly stable at 5.93% compared to 4.53% in 2021.
Headcount by seniority and gender
Gender balance by seniority
Men
Women
Total
Board
6
3
9
Executive Committee
7
2
9
Senior Management
18
8
26
Middle Management
35
11
46
Rest of staff
343
103
446
Gender balance by seniority
7JXY TK XYFKK
2NIIQJ 2FSFLJRJSY
8JSNTW 2FSFLJRJSY
*]JHZYN[J (TRRNYYJJ
'TFWI TK )NWJHYTWX
2JS
<TRJS
Headcount by age
Category
Number
% vs. total no.
of employees
2022
2021
2022
2021
Up to 30 years old
56
33
10%
5%
31 to 50 years old
327
393
61%
65%
Over 51 years old
153
178
29%
29%
Page 54 of 255
STRATEGIC REPORT
:U YT ^JFWX TQI
YT ^JFWX TQI
4[JW ^JFWX TQI
Headcount by seniority and age range
7JXY TK XYFKK
2NIIQJ 2FSFLJRJSY
8JSNTW 2FSFLJRJSY
*]JHZYN[J (TRRNYYJJ
'TFWI TK )NWJHYTWX
:U YT ^JFWX TQI
YT ^JFWX TQI
4[JW ^JFWX TQI
Headcount by country
At the end of 2022, our workforce decreased from 604 employees to 536, representing 33 different
nationalities.
Country
No of employees
23
2022
2021
Greece
185
295
UK
36
35
24
Montenegro
2
2
Cyprus
5
5
Israel
84
41
Egypt
39
42
Italy
184
183
Croatia
1
1
Total
536
604
23
Excludes JV partners.
24
Includes Board Members
Page 55 of 255
STRATEGIC REPORT
Employees per country
,WJJHJ
.YFQ^
.XWFJQ
*L^UY
:0
(^UWZX
2TSYJSJLWT
(WTFYNF
Providing a safe working environment
Protecting the health and safety of all individuals affected by our corporate activities is our top priority.
In 2022, we improved our safety performance compared to 2021 by digitalising our safety management
systems. In doing so, we have shifted the focus from systems to people, placing them at the centre of our
performance. This has enabled us to have quicker response times and corrective actions, which in turns
facilitates a faster return to normal operations.
In the first year of this digitalisation project, our total Lost Time Injury Frequency (“
LTIF
”) for employees
and contractors was 0.47, which was below our targeted maximum performance of 0.50. Our Total
Recordable Injury Rate (“
TRIR
”) was 1.18, slightly higher than the previous year, but still lower than our
target of 1.20, despite a lower total man-hours worked than the previous year.
Key HSE metrics
LTIF
25
2022
2021
Pro forma 2020
2020
Employees
0.00
0.98
0.00
0.00
Contractors
0.52
0.25
0.72
0.73
Personnel total
0.47
0.33
0.63
0.65
TRIR
26
2022
2021
Pro forma 2020
2020
Employees
1.29
1.97
0
0
Contractors
1.17
0.62
1.20
1.46
Personnel total
1.18
0.77
1.05
1.31
FAR
27
2022
2021
Pro forma 2020
2020
Employees
0
0
0
0
Contractors
0
0
0
0
Personnel total
0
0
0
0
25
LTI Frequency: The number of Lost Time Injuries (fatalities +LTIs) per million hours worked.
26
TRIR: The number of Total Recordable Injuries (fatalities + LTIs+ restricted work cases + medical treatment cases).
27
FAR: The number of fatalities per 100 million hours worked.
Page 56 of 255
STRATEGIC REPORT
Humanising our HSE management system
Digitalization has revolutionized the way we approach safety management and it has opened up new
possibilities for humanizing the safety management system. By leveraging technology, we can now
incorporate a more human-centric approach to safety, with a focus on the people who are using the
systems. Digitalization enables us to collect and analyse vast amounts of data, providing insights into
how our safety systems are working and where improvements are needed. This data can be used to drive
human-centred safety solutions that are tailored to the specific needs of our employees, contractors, and
stakeholders.
For example, digitalization enables us to provide more personalized safety training programs that can
be accessed online, making it easier for employees and contractors to learn at their own pace. We can
also use digital tools to facilitate communication and collaboration between employees and contractors,
providing a platform for open and honest discussion about safety issues. This not only improves safety,
but it also fosters a culture of trust and collaboration.
In addition, digitalization has made it possible to collect and analyse real-time safety data, enabling us
to quickly identify potential safety hazards and take corrective action before they cause harm. This has
significantly reduced the risk of accidents and injuries, and has helped to build a culture of safety where
everyone is responsible for ensuring that safety is a top priority. By humanizing our safety management
system through digitalization, we are creating a safer, more productive workplace for everyone.
Energean has implemented an HSE management system based on the classic ‘Plan-Do-Assess-Adjust’
cycle, which covers activities in all operated areas.
Page 57 of 255
STRATEGIC REPORT
Managing risks and ensuring safe working conditions
At Energean, the effective management of risks and incidents is crucial in ensuring the safety of our
employees, customers, and the environment. Incident reporting and investigation processes enable us
to identify the root cause of incidents, develop corrective actions, and prevent future occurrences. Safety
observations, inspections, and audits help to identify and control hazards, and also monitor compliance
with established standards and regulations. Effective environmental management is also essential in
ensuring the sustainable use of resources and minimising negative impacts on the environment. By
implementing a comprehensive safety and environmental management system, we can promote a
culture of safety and environmental responsibility, reduce risk, and enhance our overall performance.
The main components of our digitalized system covers the following key areas in Health and Safety:
In 2022, over 18,000 safety observations were documented at Energean-operated sites and the FPSO
project in Israel. All of these observations were successfully managed, and all work underwent risk
assessments to prevent potential escalation to major accidents, harm to individuals, or damage to the
environment.
Corporate Major Accident Prevention Policy (CMAPP)
Energean has a strong HSE framework, including our Corporate Major Accident Prevention Policy and
Health Safety Environmental and Social Responsibility Policy, to effectively manage major and on-the-job
risks.
Energean’s Board of Directors is committed to promoting, enhancing and sustaining a strong health
and safety culture, as well as the implementation of measures for maintaining safety, environmental
protection and control of major accident hazards as core corporate values.
Energean’s Board approved Corporate Major Accident Prevention policy (CMAPP) recognises:
•
The possibility of significant accidents in the Exploration and Production (E&P) industry and the
significance of quick decisions and actions to avert them.
•
Company’s accountability to manage the hazards of major accidents and enhance the effectiveness
of these controls continuously.
•
The essentiality of digitalization, cutting-edge technology and the application of best practices in
the oilfield.
•
Company’s responsibility to attain the utmost standards of Health, Safety, and Environment (HSE)
performance.
•
The significance of a proficient, human-centred HSE Management System.
During 2022, no major accidents were recorded.
Page 58 of 255
STRATEGIC REPORT
Leadership and accountability
HSE leadership and accountability starts with the CEO, who ensures that all necessary steps are taken
to achieve the highest possible level of HSE performance across the business. The CEO proposes to
the Board of Directors all actions and activities related to HSE deemed necessary to fulfil Energean’s
commitments. In addition, the CEO defines the strategy and approves action plans suitable to control and
mitigate identified risks and takes advantage of new opportunities. The CEO also promotes direct, open,
and honest communication between all levels of management and the workforce to foster a culture of
safety and environmental responsibility.
During 2022, more than 250 leadership visits and managerial walk-arounds were performed in Energean’s
operated sites and the FPSO project in Israel.
Crisis Management Plan (CMP)
Energean’s Crisis Management Plan (CMP) covers all assets and operations, and is formally tested
to ensure it meets all requirements at the strategic, incident management and response level. Early
identification of a potential crisis and immediate action in the event of a crisis, provides the necessary
management assurance for:
•
Protecting human lives
•
Protecting the environment
•
Protecting tangible and intangible assets
•
Ensuring business continuity and sustainable development
•
Protecting the Company’s reputation
During 2022, more than 650 drills and exercises were performed at Energean operated sites and for the
Energean Power FPSO construction and commissioning project.
Legal and regulatory compliance
Compliance with all applicable HSE legislation and regulations is a fundamental requirement of Energean’s
HSE Management System. Energean conducts its operations at all workplaces in accordance with the
corresponding local laws and regulations, and European and international standards. This commitment
to compliance reflects Energean’s dedication to responsible business practices and the protection of the
health and safety of its employees and the surrounding communities. By operating within the parameters
of the law and following established industry standards, Energean is able to build a foundation of trust
with stakeholders and uphold its reputation as a reliable and ethical business.
During 2022, more than more than 640 HSE audits were performed in Energean operated sites and the
Energean Power FPSO construction and commissioning project.
Competence management and training
Energean maintains an ongoing competence and assurance management scheme and provides an
adequate level of HSE training. All Energean personnel are suitably trained to meet the standards set
by the Statutory Bodies and the Company’s requirements. This ensures the ongoing development of a
competent workforce which, in the long term, benefits both individuals and Energean.
During 2022, more than 7,250 hours of certified training and more than 900 hours of internal training were
provided to Energean personnel.
Contractors’ management
Energean evaluates and selects contractors based on their ability to provide services according to the
project, contract requirements, HSE & climate change policies, as well as specific local requirements.
Criteria for pre-qualification, selection, evaluation and re evaluation of contractors are established to
assure suitability and efficient monitoring of contractors’ performance.
Our Contractors’ HSE management policy ensures that contractors are working in a safe and healthy
environment and that they are following proper procedures to minimize risks and prevent accidents.
During 2022, more than 60 contractors were evaluated against this HSE criteria, both before and after the
completion of their work, and were deemed to have performed their operations in an appropriate manner.
Page 59 of 255
STRATEGIC REPORT
Occupational health
An annual health programme is provided to all employees to assure that the highest levels of health and
wellbeing are maintained. All employees and contractors hold medical fitness certificates based on the
requirements of their position.
During 2022, all employees in operated sites participated in the annual health program and zero work-
related illnesses occurred.
HSE awards and records
Energean continued delivering upon its exemplary HSE track record. At Energean, we believe that
protecting the environment and the health & safety of our staff and stakeholders, is a key factor in the
overall success of our business and we are committed to continuously improving in all aspects of HSE.
For the third consecutive year, Sembcorp Marine’s Admiralty Yard was awarded a Safety and Health
Award Recognition for Projects for Safety Excellence for Energean’s Karish Project.
Our Health and Safety performance in numbers
Occupational safety
2022
2021
Pro forma 2020
2020
Employees man hours worked
772,865
1,015,866
1,130,183
650,405
Contractors man hours worked
7,724,105
8,118,433
8,362,784
5,466,939
Total man hours worked
8,496,970
9,134,309
9,492,967
6,117,344
Number of Employees Fatalities
0
0
0
0
Number of Contractors Fatalities
0
0
0
0
Employees Fatal Accident Rate (FAR)
28
0
0
0
0
Contractors Fatal Accident Rate (FAR)
0
0
0
0
Total Fatal Accident Rate (FAR)
0
0
0
0
Employees Lost Time Injuries (LTIs)
0
1
0
0
Contractors Lost Time Injuries (LTIs)
4
2
6
4
Total Lost Time Injuries (LTIs)
4
3
6
4
Employees LTI Frequency (LTIF)
29
0
0.98
0
0
Contractors LTI Frequency (LTIF)
0.52
0.25
0.72
0.73
Total LTI Frequency (LTIF)
0.47
0.33
0.63
0.65
Employees Total Recordable Injuries (TRIs)
1
2
0
0
Contractors Total Recordable Injuries
(TRIs)
9
5
10
8
Employees and Contr. Total Recordable
Injuries (TRIs)
10
7
10
8
Employees TRI Rate (TRIR)
30
1.29
1.97
0
0
Contractors TRI Rate (TRIR)
1.17
0.62
1.20
1.46
Employees and Contractors TRI Rate (TRIR)
1.18
0.77
1.05
1.31
Process safety
2022
2021
Pro forma 2020
2020
Process safety incidents
1
0
0
0
Loss of containment incidents
10
31
0
0
0
28
Per 100 million hours worked.
29
Per 1 million hours worked.
30
Per 1 million hours worked.
31
Loss of containment incidents increased in 2022 due to the FPSO commissioning phase in Israel with zero effect on people and
the environment
Page 60 of 255
STRATEGIC REPORT
Safety training
2022
2021
Pro forma 2020
2020
Internal training (hours)
457
950
3,366
2,743
Certified training (hours)
7,295
1,401
561
183
Total training (hours)
7,752
2,351
3,927
2,926
Our environment, our highest commitment
At Energean we are committed to protecting the natural environment by identifying the potential impact
of our operations and taking all necessary measures to prevent them. Adopting the highest level of
environmental standards constitutes the core of our strategy.
Based on UN Development Plan, many countries have recognized the socio-economic challenges that
accompany the shift from fossil fuels and are taking measures to protect the most exposed, referencing
just transition in their Nationally Determined Contributions (NDCs) and Long Term Strategies (LTS). The
challenges, and opportunities, however, lie not just in the race to cut GHG emissions. There are also
profound social implications in how we do it – implications for social justice, human rights, gender
equality, health, education, jobs, and livelihoods.
Energean’s vision is to provide safe and clean energy to the world, promoting the energy transition in
a fair and inclusive manner. We aim to act as a positive driving force, aiding a just change, by lowering
emissions coming from energy production, protecting the environment and supporting financial and
social development at countries we conduct works.
We maintain our commitment to the natural environment and ecosystems by operating with the utmost
care and diligence. Our focus on ecosystem conservation is evident through our impeccable track record
of zero oil spills and zero environmental damage. We adhere to both national and international regulations,
and continuously strive to achieve best practices in order to minimize our environmental impact. At
Energean, we hold a deep respect for the environment and remain fully committed to safeguarding it for
future generations.
In 2022, Energean established an integrated environmental metrics reporting system, called Synergi
Life, that collect information from local HSE departments and presents it to decision makers. Accurate
measurements using the best-available techniques and elimination of manual data processing provides
better-informed decisions on reduction initiatives.
Our environmental policy meets national and international standards. All our assets’ environmental
management systems are certified to the international standard ISO 14001, including processes for:
•
Monitoring, recording and evaluating air emissions’ levels
•
Defining suitable control and mitigations barriers against oil spills and chemical leaks
•
Prudent management of water resources
•
Sustainable management of wastes
•
Monitoring and conserving ecosystems and biodiversity
Key metrics monitored
Equity share versus operational accounting approach
We report emissions based on an equity share accounting approach and also on the operational accounting
approach. All other environmental data is recorded based on the operational accounting approach.
The definition of equity share is Energean’s working interest across both operated and non-operated
sites. For example, this accounting measure would include 10.47% of the total gross emissions from
Scott, UK, which we hold a 10.47% non-operated working interest in.
In comparison, the operational approach does not take into account Energean’s working interest – it
includes the gross (i.e. 100%) project emissions only for assets that Energean operates. For example, this
approach does not include any emissions from the UK, as we hold no operated positions, and includes
100% of emissions from Accettura, Italy, even though our working interest in the field is 50.33%.
Page 61 of 255
STRATEGIC REPORT
Environmental KPIs
2022
2021
Pro forma 2020
2020
Environmental expenditure $ million
32
3.3
1.1
4.6
0.4
Energy consumption intensity (MJ/
boe)
33
,
34
– operated share
174.9
370.3
421.3
986.5
Scope 1&2 carbon emissions intensity
(kgCO2e/boe)
35
– net equity share
16.0
18.3
19.8
37.9
Water use intensity (m3/boe)
36
– operated share
0.01
0.2
0.1
0.4
Water volume recycled (%)
37
– operated share
99
95
92
92
Non- hazardous waste intensity (kg/boe)
38
– operated share
0.8
0.2
0.5
0.6
Hazardous waste intensity (kg/boe)39
– operated share
0.1
0.1
0.6
1.2
Waste recycled (%)
40
– operated share
95.2
90.5
52.1
90.4
Waste energy recovery (%)
41
– operated share
0.0
0.0
2.0
3.9
Air quality
Maintaining high air quality through responsible and sustainable operations is a key priority for Energean.
We continuously monitor all our atmospheric emissions to ensure this.
During 2022, the total amount of nitrous emissions (NOx) generated across the Group increased by 56%
versus 2021 because of the commissioning of the FPSO in Israel. The amount of sulfurous emissions
decreased due to lower production from Prinos, Greece.
During 2022, we increased the number of assets that undergo Leak Detection and Repair (LDAR) surveys
to monitor and reduce fugitive emissions (particular methane) across our operated sites. We carried out
campaigns at our Vega, Garaguso and Larino fields in Italy. The results found minimal amounts of fugitive
emissions, requiring minimal corrective actions for one asset, and no further action in the other two. In
2023, the LDAR program will include other assets that had not been checked in the past, in order to keep
our fugitive emissions as low as possible.
Biodiversity
Preserving marine, terrestrial and avian species diversity is of significant importance for Energean. Our
team is dedicated to monitoring the effects of our activities and taking steps to mitigate them.
In 2022, we conducted several biodiversity surveys and undertook initiatives to identify and protect
vulnerable habitats and evaluate the influence of our operations, including:
Israel
•
An invasive species survey and treatment at the onshore valve station area, Israel. Invasive species
were found in the carob trees restored area. Treatment to remove invasive species commenced
and is still in progress
32
Capital expenditures related to environmental protection activities.
33
Ratio of energy (thermal & electrical) consumption over gross hydrocarbons production.
34
2020-2021 figures are re-reported due to updated alignment with GRI standards which state that, to avoid double counting, self-
produced electricity should not be counted, as thermal energy already includes fuel consumption sourced from production
35
Ratio of direct and indirect (consumed electricity) carbon emissions over gross hydrocarbons production.
36
Ratio of total fresh and seawater used for processes over gross hydrocarbons production.
37
Proportion of water used in the process that is returned to the same catchment area or the sea, from where is was initially
drawn.
38
Ratio of municipal and industrial waste, that according to regulation do not pose a severe threat to human health or the
environment over gross hydrocarbons production.
39
Ratio of municipal and industrial waste, that according to regulation pose a severe threat to human health or the environment
over gross hydrocarbons production.
40
Proportion of waste that are reprocessed into other products, materials or substances whether for the original use or for other
purposes.
41
Proportion of non-recyclable waste materials that are converted into usable heat, electricity or fuel through a variety of processes.
Page 62 of 255
STRATEGIC REPORT
•
Vertical Seismic Profile surveys during the 2022 drilling campaign in Israel were supported by
Marine Mammal Observers and Passive Acoustic Monitoring operators, in line with local guidelines
that are based on the Joint Nature Conservation Committee guidance for the minimization of risk
of injury of marine mammals from geophysical surveys
•
Compliance with “IMO Resolution MEPC.207(62): guidelines for the control and management of
ships’ biofouling to minimize the transfer of invasive aquatic species” for all 23 vessels used for the
development operations of Karish during 2022
•
A post-drilling survey is planned for 2023 to map and quantify the actual impact of the drilling
activity on the ecology of the marine environment
Italy
•
Continued monitoring of the “Tecnoreef” structure, that was installed to promote the development
of biodiversity in the Marine Protected Area “Isola dei Ciclopi” in Italy. Results have shown a high
amount of biodiversity in the area
•
Initiated the “Acquisition and data analysis using marine bioreceptors” project in collaboration with
the Zooprophylactic Institute of Teramo in Rospo Mare, Italy to investigate biodiversity in beneath
platforms. The ultimate goal is to establish a biological pre-alarm system in a crucial area of the
central southern Adriatic basin. By utilizing this system on different platforms in the Adriatic, it
may
be possible to create databanks that could be helpful in managing coastal areas more effectively.
•
Energean has established a new partnership with 3BEE, an agri-tech start up with the aim of
protecting the bees, in the province of Vasto, just opposite our Rospo Mare offshore platform in
Italy.
Greece:
•
Providing ongoing assistance to the management team responsible for the Nestos River Delta,
Lakes Vistonida-Ismarida, and Thassos in maintaining the telemetric stations used for monitoring
biodiversity in the northeastern region of Greece.
Water resources
Fresh water management is a high priority for Energean. We recognise the importance of freshwater
availability, increased future global demands, high-quality standards requirements as well as stakeholders’
expectations.
In 2022, 99% of water withdrawals were recycled. Our onshore and offshore water discharges are
continuously monitored by both automatic and manual analytical means to meet all relevant regulatory
limits.
Total recycled water %
UWT KTWRF
Page 63 of 255
STRATEGIC REPORT
Oil spills prevention
Energean has established a robust and well-tested oil spill prevention management system. We have
control measures to mitigate the risk of spills, leaks and uncontrolled discharges that include statutory
discharge limits depending on the location of operation and online sensors interrupting such events,
secondary containments for hydrocarbons carrying vessels, barrels, drums etc and comprehensive plans
for inspection and maintenance of equipment with significant oil spill risks.
As a result, in 2022 we achieved another consecutive year with zero oil spills. Oil spill emergency response
drills and training take place on an annual basis to maintain a high level of equipment availability and
personnel preparedness. Furthermore, we are associate members of Oil Spill Response Limited, an
industry consortium that is a world leader oil spill response provider.
Waste management
At Energean, we maintain a strong code of ethics regarding discharges and waste, by enforcing waste
recycling and energy recovery activities. As part of the Environmental Social Impact Assessment of each
asset we design an action plan to facilitate waste management.
In 2022, 95% of total waste was recycled (2021: 91%) and 5% (2021: 9%) was disposed at local landfill
facilities.
UWT KTWRF
9TYFQ \FXYJ WJH^HQJI
9TYFQ \FXYJ JSJWL^ WJHT[JW^
9TYFQ \FXYJ JSJWL^ INXUTXFQ
Page 64 of 255
STRATEGIC REPORT
Our environmental performance in numbers
For information on the definition of operated versus equity-share, please refer to page 61.
Methodologies used to calculate scope 1 emissions include the standards and protocols of EU ETS,
IPCC, Concawe and EPA. Scope 2 emissions were calculated using the GHG protocol standards.
Environmental records
2022
2021
Pro forma 2020
2020
Production – equity share
Oil (Kboe)
3,720
4,141
4,512
798.4
Raw Gas (Kboe)
11,954
11,489
14,308
595.1
Total oil and raw gas (Kboe)
15,674
15,629
18,820
1,395
Ratio oil/total (%)
23.7
26.5
24.0
57.3
Ratio gas/total (%)
76.3
73.5
76.0
42.7
Production – operated sites
Oil (Kboe)
2,131
2,506
2,189
722.0
Raw Gas (Kboe)
2,222
449.0
336.1
51.8
Total oil and raw gas (Kboe)
4,353
2,955
2,525
773.8
Ratio oil/total (%)
48.9
84.8
86.7
93.3
Ratio gas/total (%)
51.1
15.2
13.3
6.7
GHG emissions – equity share
Total GHG emissions (tCO2e)
254,704
306,930
403,872
84,480
Scope 1 emissions (tCO2e)
249,622
285,362
367,293
52,586
Scope 2 emissions (tCO2e)
5,082
21,568
36,579
31,894
Scope 3 emissions (tCO2e)
N/A
N/A
N/A
N/A
Scope 1 emissions intensity
(kgCO2e/boe)
15.9
18.3
19.5
37.7
Scope 2 emissions intensity
(kgCO2e/boe)
0.1
0.1
0.3
0.2
Total emissions intensity (kgCO2e/boe)
16.0
18.3
19.8
37.9
GHG emissions – operated sites
Total GHG emissions (tCO2e)
75,354
73,042
95,435
73,479
Scope 1 emissions (tCO2e)
71,011
52,259
58,975
41,660
Scope 2 emissions (tCO2e)
4,343
20,783
36,460
31,819
Scope 3 emissions (tCO2e)
42
***
1,889,018
1,488,772
1,488,772
Guarantees of Origin (tCO2e)
(4,168)
(20,725)
(31,542)
(31,542)
I-REC (tCO2e)
(175.0)
(58.0)
(73.0)
(73.0)
Scope 1 emissions intensity
(kgCO2e/boe)
16.3
17.7
37.8
53.8
Scope 2 emissions intensity
(kgCO2e/boe)
0.0
0.0
1.9
0.3
Total emissions intensity (kgCO2e/boe)
16.3
17.7
39.7
54.1
UK Only – equity share
Total GHG emissions (tCO2e)
16,507
23,707
66,905
1,725
Scope 1 emissions (tCO2e)
16,507
23,707
66,905
1,725
Scope 2 emissions (tCO2e)
43
–
–
–
–
Total emissions intensity (kgCO2e/boe)
38.5
83.4
83.4
83.4
42
2022 Scope 3 emissions to be disclosed in the 2023 CDP climate change questionnaire.
43
Electricity is purchased by the building owner and thus taken into scope 3 emissions consideration.
Page 65 of 255
STRATEGIC REPORT
Environmental records
2022
2021
Pro forma 2020
2020
Energy consumption used to calculate
above emissions (kWh)
59,000
77,000
127,000
20,000
Other air emissions – operated sites
NOx (tonnes)
365.1
233.8
156.1
35.4
SO2 (tonnes)
111.4
711.8
900.2
875.1
VOC (tonnes)
14.0
9.0
11.8
11.8
Water usage – operated sites
Fresh water (m3)
47,649
103,784
88,556
88,501
Seawater (m3)
19,418,432
17,413,502
11,173,563
8,589,344
Total water usage (m3)
19,467,393
17,517,286
11,262,119
8,677,846
Recycled water (m3)
19,418,432
16,944,782
10,938,482
8,354,263
Recycled water (%)
99.0
95.2
91.6
92.4
Dispersed oil concentration in
discharged water (mg/L)
0.4
0.4
3.4
3.4
Water quantities disposal – operated sites
Non-hazardous waste (tonnes)
3,420
675.9
1,209
490.7
Non-hazardous waste intensity (kg/
boe)
0.8
0.2
0.5
0.6
Hazardous waste (tonnes)
651.3
341.7
1,457
907.9
Hazardous waste intensity (kg/boe)
0.1
0.1
0.6
1.2
Total waste recycled (%)
95.2
90.5
52.1
90.4
Total waste energy recovery (%)
0.0
0.0
2.0
3.9
Spills – operated sites
Hydrocarbon spills
0.0
0.0
0.0
0.0
Flaring – operated sites
Total hydrocarbons flared (tonnes)
13,775.0
412.8
726.9
536.6
Flaring intensity (kg/boe)
6.4
0.1
0.3
0.7
Energy consumption – operated sites
Total energy consumption (kWh)
33
211,511,613
303,972,222
236,027,778
352,194,444
Electrical energy consumption (TJ)
33
55.1
162.3
209.9
241.1
Electrical energy consumption intensity
(MJ/boe)
33
12.7
54.9
14.7
159.7
Thermal energy consumption (TJ)
706.3
932.0
1,027
639.8
Thermal energy consumption intensity
(MJ/boe)
162.3
315.4
406.6
826.8
Total energy consumption intensity
(MJ/boe)
174.9
383.2
516.2
1,100
Page 66 of 255
STRATEGIC REVIEW
Financial Review
Panos Benos, CFO
Dear Shareholder,
I am pleased to provide an update on the Group’s financial performance in the 12 months to 31 December
2022.
During 2022 Energean delivered production from Karish; commenced payment of dividends to our
shareholders; and we successfully discovered and de-risked new natural gas resources adjacent to our
infrastructure, providing significant potential upside and export optionality.
In total, Energean returned US$0.60/share to shareholders ($106.5 million) in 2022, in line with its target
to pay cumulative dividends of at least $1 billion by end-2025.
Energean achieved record revenues ($737.1 million), adjusted EBITDAX results ($421.6 million) and
operating profit ($232.2 million) on the back of strong commodity prices.
Our focus for 2023 is on continued organic growth. We will continue to ramp up production from Karish
and finalise the development concept for the strategically significant, 68 bcm Olympus Area. Production
will also start from Karish North in Israel and NEA/NI in Egypt (first gas from NEA/NI was achieved in
early March 2023).
Financial results summary
2022
2021
Change
from 2021
Average working interest production (kboepd)
41.2
41.0
0.5%
Revenue ($m)
737.1
497.0
48.3%
Cash cost of production ($m)
284.3
261.6
8.7%
Cost of production ($/boe)
18.9
17.5
8.1%
Administrative & selling expenses ($m)
45.9
43.0
6.7%
Operating profit ($m)
232.2
32.1
623.4%
Adjusted EBITDAX ($m)
421.6
212.1
98.8%
Profit/ (Loss) after tax ($m)
17.3
(96.2)
118.0%
Cash flow from operating activities ($m)
272.2
132.5
105.4%
Capital expenditure ($m)
869.8
407.9
113.2%
Cash capital expenditure ($m)
460.2
452.2
1.8%
Net debt ($m)
2,518.2
2,016.6
24.9%
Net debt/equity (%)
387.3
281.2
37.7%
Revenue, production, and commodity prices
Revenue increased by $240.1 million (2021: $497.0 million) to $737.1 million primarily a result of higher
realised commodity prices. The Group’s realised weighted average pre-hedging oil and gas price for the
year was $81.2/bbl (2021: $57.1/bbl) and $11.2/mcf (2021:5.2 $/mcf), respectively.
Working interest production averaged 41.2 kboepd in 2022 (2021: 41.0 kboepd), with the Abu Qir
gas-condensate field, offshore Egypt, accounting for over 60% of total output.
Adjusted EBITDAX amounted to $421.6 million (2021: $212.1 million). The increase from 2021 was due
to higher revenue partially offset by slightly higher operating costs from the enlarged group. Included
within revenue is the realised loss on the PSV (Italian gas price) hedges of $55.2 million, excluding this
lost revenue would result in an adjusted EBITDA of $476.8 million; which is an increase of $264.7
million
(124.5%) compared to 2021.
Page 67 of 255
STRATEGIC REVIEW
Cash cost of production
Cash production costs for the period were $18.9 /boe (2021: $17.5/boe). The increase in cash unit
production cost was primarily driven by increased royalties paid (2022: $45.8 million, 2021:$24.8 million)
and increased energy costs across the group. The cash production costs excluding royalties are
$238.5 million (2021: $236.8 million) and the related cost per boe is $15.9 (2021: $:15.8)
Depreciation, impairments and write-offs
Depreciation charges before impairment on production and development assets decreased by 14.6% to
$83.3 million (2021: $97.5 million) with the related decrease in the depreciation unit expense to $5.5/boe
(2021: $6.5/boe).
The Group recognised a pre-tax impairment charge of $27.6
million (2021: $0 million) in 2022, a result of
revisions to decommissioning estimates on the Group’s non-producing assets, in Italy and UK. The Group
performed an impairment assessment at 31 December 2022 and did not identify any cash generating
units (“
CGU
”) for which a reasonably possible change in a key assumption would result in impairment or
impairment reversal, except for the Vega oil field in Italy. An 8% decrease in Brent prices would eliminate
the current headroom of the Vega CGU.
Management has considered how the Group’s identified climate risks and climate related goals
may
impact the estimation of the recoverable amount of cash-generating units and as part of the impairment
assessment has run sensitivity scenarios for the IEA’s 2022 WEO climate scenarios (Stated Policies
Scenario (STEPS), Announced Pledges Scenario (APS) and Net-Zero Emissions by 2050 Scenario (NZE)).
The Groups CGUs in Italy (Vega) and Greece are the most sensitive to the impact of the IEA scenarios,
which applied, with no management mitigating actions taken, could result in impairment.
The anticipated extent and nature of the future impact of climate on the Group’s operations and future
investment, and therefore estimation of recoverable value, is not uniform across all cash-generating units.
There is a range of inherent uncertainties in the extent that responses to climate change
may impact the
recoverable value of the Group’s CGUs, with many of these being outside the Group’s control. These include
the impact of future changes in government policies, legislation and regulation, societal responses to
climate change, the future availability of new technologies and changes in supply and demand dynamics.
Exploration and evaluation expenditure and new ventures
During the period the Group expensed $71.4 million (2021: $87.7 million) for exploration and new ventures
evaluation activities. This includes impairment costs of $65.7
million ($82.1 million) for projects that will
not progress to development, primarily Glengorm; Energean will exit the Glengorm licence within 2023.
In addition, new ventures evaluation expenditure amounted to $5.8 million (2021: $5.6 million), mainly
related to pre-licence and time-writing costs.
General and administrative (G&A) expenses
Energean incurred G&A costs of approximately $45.9 million in 2022 (2021: $43.0 million). Cash SG&A
was $36.0 million (2021: $34.8 million).
Cash G&A excludes certain non-cash accounting items from the Group’s reported G&A. Cash G&A is
calculated as follows: Administrative and Selling and distribution expenses, excluding depletion and
amortisation of assets and share-based payment charge that are included in G&A.
2022
($m)
2021
($m)
Administrative expenses
45.9
43.0
Less:
Depreciation
3.9
2.5
Share-based payment charge included in G&A
6.0
5.7
Cash G&A
36.0
34.8
Page 68 of 255
STRATEGIC REVIEW
Net other expenses
Net other expenses of $1.0 million in 2022 (2021: $10.9 million income) includes restructuring costs
($3.2 million), net reversal of expected credit loss provisions of $7.9 million and other non-recurring items.
In 2021 the amount predominantly related to $6.8 million of income due to a decrease in estimates of
decommissioning provisions for certain UK producing assets, representing the amount of the decrease
that was in excess of their book value.
Unrealised loss on derivatives
The Group has recognised unrealised loss on derivative instruments of $5.2 million (2021: $21.5 million)
related to the Cassiopea contingent consideration. A contingent consideration of up to $100.0 million is
payable and determined on the basis of future Italian gas prices recorded at the time of
first gas production
at Cassiopea
, which is expected in 2024.
As at 31 December 2022, the two- year Italian gas (PSV) futures curve indicated higher pricing than
that
at the date of acquisition, with a forward price in excess of €20/Mwh. As a result, the fair value of the
Contingent Consideration as at 31 December 2022 was estimated to be $86.3 million based on a Monte
Carlo simulation (31 December 2021: $78.5 million).
Net financing costs
Financing costs before capitalisation for the period were $236.7 million (2021: $278.4 million). Finance
costs include: $167.4 million of interest expenses incurred on Senior Secured notes (2021: $107.0 million),
$1.5million on debt facilities (2021: $96.7 million), $14.7
million of interest expenses relating to long-term
payables (2021: $4.1 million), $37.4
million unwinding of discount on deferred consideration, contingent
consideration, convertible loan notes and decommissioning provisions (2021: $27.8 million); $15.6 million
commissions for guarantees and other bank charges of (2021: $17.8 million). The 2021 finance costs
included $18.1million for unamortised debt issuance costs under Greek and Egypt RBL, written off due to
repayments prior to their maturity dates.
Net finance costs include foreign exchange losses of $22.2 million (2021: $6.9 million) and finance income
of $9.6 million (2021: $3.0 million), including Interest income from time deposits.
Taxation
Energean recorded tax charges of $89.7 million in 2022 (2021: $5.4 million), split between a current year
tax expense of $200.1 million (2021: $44.6 million), and a deferred tax credit of $110.4 million (2021:
credit $39.2 million) and representing an effective tax rate of 84% (2021: 6%).
The increase in current tax from 2021 is primarily a result of the windfall tax in Italy. During 2022, Italy
introduced: 1) a windfall tax in the form of a law decree which imposed a 25% one-off tax on profit margins
that rose by more than $5.26 million (€5.0 million) between October 2021 and April 2022 compared to the
same period a year earlier. The amount of the windfall tax paid by Energean Italy was $29.3 million and 2)
In November 2022, Italy introduced a new windfall tax that imposed a 50% one-off tax, calculated on 2022
taxable profits that are 10% higher than the average taxable profits between 2018-2021. This amount
has a ceiling equal to 25% of the value of the net assets at end-2021. Based on this, Energean would be
required to pay an additional one-off tax of $92.8 million (€87.0 million) in June 2023.
Operating cash flow
Cash from operations before tax and movements in working capital was $311.3
million (2021:
$131.7 million). After adjusting for tax and working capital movements, cash from operations was
$272.2 million (2021: $132.5 million).
Capital Expenditure
During the year, the Group incurred capital expenditure of $869.8 million (2021: $407.9 million). Capital
expenditure mainly consisted of development expenditure in relation to the Karish Main and Karish
North Fields in Israel ($534.5 million), NEA/NI project in Egypt ($107.9 million), Cassiopea field in Italy
($77.0 million), Scott field in UK ($9.2 million) and exploration expenditures in Athena, Zeus, Hermes and
Hercules in Israel ($123.0 million).
Page 69 of 255
STRATEGIC REVIEW
Net Debt
As at 31 December 2022, net debt of $2,518.2 million (2021: $2,016 million) consisted of $2,500 million
Israeli senior secured notes, $450 million of corporate senior secured notes, $63.5
million draw down of
the Greek loans and $50 million of convertible loan notes, less deferred amortised fees, equity component
of convertible loan ($10.5 million) and cash balances of $502.7 million. Net debt excluding Israel is
$143.8 million (2021: $102.6 million).
In accessing the debt capital markets, Energean is only exposed to floating interest rates for the Greek
loan. Refer to note 26.3 in the financial statements for the interest risk sensitivity.
Credit ratings
Energean maintains corporate credit ratings with Standard and Poor’s (S&P) and Fitch Ratings (Fitch).
On 4 November 2021 Energean plc was assigned its first corporate credit ratings from S&P and Fitch,
following the issuance of the $450 million senior secured notes which mature in 2027.
•
In February 2023 S&P upgraded the ratings from B to B+ for both Energean plc corporate and the
senior secured notes maturing in 2027, with Stable Outlook. This reflects first gas from the Karish
field in Israel and associated track record of production.
•
Fitch assigned a B+ corporate credit rating to Energean plc and B+ rating for the senior secured
notes maturing in 2027. In November 2023 the Outlook was upgraded to Positive to reflect the
improvement in financial performance since 2021, due to stronger price environment and timely
delivery projects including the Karish gas field in Israel.
Risk management
Principal risks
There are no significant changes to the headline principal risks from those disclosed in the 2022 Interim
results. A full description of Energean’s principal risks is disclosed in the strategic review of the 2022
Annual Report & Accounts.
Liquidity risk management and going concern
The Group carefully manages the risk of a shortage of funds by closely monitoring its funding position and
its liquidity risk. The going concern assessment covers the period from the date of approval of the Group
Financial Statements on 22 March 2023 to 30 June 2024 ‘the Assessment Period’. The Assessment
Period has been extended such that it includes the $625 million bond repayment due in March 2024.
As of 31 December 2022 the Group’s available liquidity was approximately $720 million. This available
liquidity figure includes: (i) c. $43 million of undrawn facility under the €100 million loan backed by the
Greek State signed in December 2021 for the development of the Prinos Area in Greece, including the
Epsilon development; and (ii) c. $174 million available under the $275 million Revolving Credit Facility
(‘RCF’) signed by the Group in September 2022 (with the remainder being utilized to issue Letters of Credit
for the Group’s operations). Subsequent to 31 December 2022, the Group signed a $350 million Term
Loan Facility. The Group has a $625 million bond, at the Energean Israel level, maturing in March 2024.
Management expects to refinance this bond during 2023; however, for the purposes of the Going Concern
assessment it has been assumed that the bond is repaid in full and not refinanced.
The going concern assessment is founded on a cashflow forecast prepared by management, which is
based on a number of assumptions, most notably the Group’s latest life of field production forecasts,
budgeted expenditure forecasts, estimated of future commodity prices (based on recent published
forward curves) and available headroom under the Group’s debt facilities. The going concern assessment
contains a ‘Base Case’ and a ‘Reasonable Worst Case’ (“
RWC
”) scenario.
The Base Case scenario assumes Brent at $80/bbl in 2023 and $75/bbl in 2024
and PSV (Italian gas
price) at €50/MWH in 2023 and €45/MWH in 2024. A reasonable ramp-up of production from the Karish
Field is assumed throughout the going concern assessment period, with prices for gas sold assumed at
contractually agreed prices. Under the Base Case, sufficient liquidity is maintained throughout the going
concern period.
Page 70 of 255
STRATEGIC REVIEW
The Group also routinely performs sensitivity tests of its liquidity position to evaluate adverse impacts
that
may result from changes to the macro-economic environment, such as a reduction in commodity
prices. These downsides are considered in the RWC going concern assessment scenario. The Group is
not materially exposed to floating interest rate risk since the majority of its borrowings are fixed-rate. The
Group also looks at the impact of changes or deferral of key projects and downside scenarios to budgeted
production forecasts in the RWC.
The two primary downside sensitivities considered in the RWC are: (i) reduced commodity prices; (ii)
reduced production – these downsides are applied to assess the robustness of the Group’s liquidity
position over the Assessment Period. In a RWC downside case, there are appropriate and timely mitigation
strategies, within the Group’s control, to manage the risk of funding shortfalls and to ensure the Group’s
ability to continue as a going concern. Mitigation strategies, within management’s control, modelled in
the RWC include deferral of capital expenditure on operated assets, deferral or cancellation of exploration
and/or discretionary spend and exercise of rights under contractual arrangements to improve liquidity.
Under the RWC scenario, after considering mitigation strategies, liquidity is maintained throughout the
going concern period.
Reverse stress testing was also performed to determine what commodity price or production shortfall
would need to occur for liquidity headroom to be eliminated. The conditions necessary for liquidity
headroom to be eliminated are judged to have a remote possibility of occurring, given the diversified
nature of the Group’s portfolio and the ‘natural hedge’ provided by virtue of the Group’s fixed-price gas
contracts in Israel and Egypt. In the event a remote downside scenario occurred, prudent mitigating
strategies, consistent with those described above, could also be executed in the necessary timeframe
to preserve liquidity. There is no material impact of climate change within the Assessment Period and
therefore it does not form part of the reverse stress testing performed by management.
In forming its assessment of the Group’s ability to continue as a going concern, including its review of
the forecasted cashflow of the Group over the Forecast Period, the Board has made judgements about:
•
Reasonable sensitivities appropriate for the current status of the business and the wider macro
environment; and
•
the Group’s ability to implement the mitigating actions within the Group’s control, in the event these
actions were required.
After careful consideration, the Directors are satisfied that the Group and Company has sufficient financial
resources to continue in operation for the foreseeable future, for the Assessment Period from the date
of approval of the Group Financial Statements on 22 March 2023 to 30 June 2024. For this reason, they
continue to adopt the going concern basis in preparing the consolidated financial statements.
Non-IFRS measures
The Group uses certain measures of performance that are not specifically defined under IFRS or other
generally accepted accounting principles. These non-IFRS measures include Adjusted EBITDAX, cost of
production, capital expenditure, cash capital expenditure, net debt and gearing ratio and are explained
below.
Page 71 of 255
STRATEGIC REVIEW
Cash cost of production
Cash cost of production is a non-IFRS measure that is used by the Group as a useful indicator of the
Group’s underlying cash costs to produce hydrocarbons. The Group uses the measure to compare
operational performance period to period, to monitor costs and to assess operational efficiency. Cash
cost of production is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory
movements.
($m)
2022
2021
Cost of sales
358.9
345.1
Less:
Depreciation
(79.4)
(94.6)
Change in inventory
4.7
11.1
Cost of production
1
284.3
261.6
Total production for the period (kboe)
15,038.0
14,963.5
Cash cost of production per boe ($/boe)
18.9
17.5
1
Numbers
may not sum due to rounding
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is
calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation and
amortisation, other income and expenses (including the impact of derivative financial instruments and
foreign exchange), net finance costs and exploration costs. The Group presents Adjusted EBITDAX as it
is used in assessing the Group’s growth and operational efficiencies, because it illustrates the underlying
performance of the Group’s business by excluding items not considered by management to reflect the
underlying operations of the Group.
($m)
2022
2021
Adjusted EBITDAX
421.6
212.1
Reconciliation to profit/(loss):
Depreciation and amortisation
(83.4)
(97.5)
Share-based payment
(6.0)
(5.7)
Exploration and evaluation expense
(71.4)
(87.7)
Impairment loss on property, plant and equipment
(27.6)
–
Other expense
(15.2)
(7.0)
Other income
14.1
17.9
Finance expenses
(107.3)
(97.4)
Finance income
9.6
3.0
Unrealised loss on derivatives
(5.2)
(21.5)
Net foreign exchange
(22.2)
(6.9)
Taxation income/(expense)
(89.7)
(5.4)
Profit/ (Loss) for the year
17.3
(96.2)
Page 72 of 255
STRATEGIC REVIEW
Capital expenditure
Capital expenditure is a useful indicator of the Group’s organic expenditure on oil and gas assets and
exploration and appraisal assets incurred during a period. Capital expenditure is defined as additions to
property, plant and equipment and intangible exploration and evaluation assets less decommissioning
asset additions, right-of-use asset additions, capitalised share-based payment charge and capitalised
borrowing costs:
($m)
2022
2021
Additions to property, plant and equipment
877.7
521.4
Additions to intangible exploration and evaluation assets
141.0
54.8
Less:
Capitalised borrowing cost
109.2
181.0
Impairment of property, plant and equipment
27.9
Leased assets additions and modifications
2.0
8.7
Lease payments related to capital activities
(12.7)
(10.9)
Capitalised share-based payment charge
0.2
0.2
Capitalised depreciation
0.6
0.2
Change in decommissioning provision
21.7
(11.0)
Total capital expenditure
870.0
408.0
Movement in working capital
(409.8)
44.3
Cash capital expenditure per the cash flow statement
460.2
452.3
Cash Capital Expenditure
($m)
2022
2021
Payment for purchase of property, plant and equipment
395.8
403.5
Payment for exploration and evaluation,
and other intangible assets
64.4
48.7
Total Cash Capital Expenditure
460.2
452.2
Net debt/(cash) and gearing ratio
Net debt is defined as the Group’s total borrowings less cash and cash equivalents. Management believes
that net debt is a useful indicator of the Group’s indebtedness, financial flexibility and capital structure
because it indicates the level of borrowings after taking account of any cash and cash equivalents that
could be used to reduce borrowings. The Group defines capital as total equity and calculates the gearing
ratio as net debt divided by total equity.
($m)
2022
2021
Current borrowings
45.6
–
Non-current borrowings
2,975.3
2,947.1
Total borrowings
3,020.9
2,947.1
Less: Cash and cash equivalents and bank deposits
(427.9)
(730.8)
Restricted cash
(74.8)
(199.7)
Net Debt
2,518.2
2,016.6
Total equity
650.2
717.1
Gearing Ratio
387.3%
281.2%
Page 73 of 255
STRATEGIC REVIEW
Risk Management
Successful and sustainable implementation of our strategy requires strong corporate governance and
effective risk management. We deliver this through a comprehensive framework of business policies,
systems and procedures that enable us to assess and manage risk effectively.
Managing risks and opportunities is essential to Energean’s long-term success and growth. All investment
opportunities May expose Energean to increased risks, particularly in the current risk environment,
including climate change related risks and opportunities. Energean manages its exposure to such risks in
accordance with the Board’s appetite for risk.
Energean’s risk management framework provides a systematic process for the identification and
management of the key risks and opportunities which May impact the delivery of its strategic objectives.
KPIs are set annually and determining the level of risk Energean is willing to accept in the pursuit of these
objectives is a fundamental component of its risk management framework.
The Board operates a risk management framework for the Company and its subsidiaries (together the
“Group”) in order to identify, assess, control and monitor all current and emerging risks to the business
arising from the achievement of its strategic objectives. The risk management framework establishes
Energean’s internal control and risk management process and includes the following:
Group risk management framework
Outline the
strategy
• Set a sustainable strategy
to achieve Energean's near
and long-term goals
Define
strategic
objectives
• Set clear strategic
objectives supported by
relevant KPIs
Define risk
appetite
• Determine the level of risk
that the Group is willing to
accept in the pursuit of its
strategic objectives and
document this in the Group
Risk Appetite Statement
Identify key
risks
• Identify key risks to the
achievement of strategic
objectives, through discussions at
a Board, Senior Risk Management
Committee, country and functional
level
Apply risk
assessment
process
• Apply the Group risk
assessment process to
ensure the ongoing
management of key risks to
our objectives
Deliver
strategic
objectives
• Delivery of strategic
objectives through
informed risk-based
decision making
Risk management is a continuous process. Due to the constantly changing external and internal
requirements and environment, our risk management and internal control system is being continuously
developed.
2022 activities
In May 2022, the Group engaged Marsh UK to assist on the drafting and implementation of a new
enterprise risk management framework, the deliverables of which include an enterprise risk management
(“
ERM
”) Policy and associated processes.
Page 74 of 255
STRATEGIC REVIEW
During 2022, Marsh delivered to the Board a benchmarking report, providing details on the current state of
the Company’s risk management approach as well as a gap analysis against best practice. By the end of
2022, the risk identification and assessment phase was completed and the following key activities were
performed:
•
Identification of key risks impacting Energean’s business objectives, strategy and operations.
•
Qualitative assessment of the risks by likelihood and the impacts during a full day interactive
workshop held in Milan with the participation of 23 managers across functions, regions and
countries of operations, where an update of all existing controls in place was also performed.
The completeness and validity of the risk information and all outputs produced so far, was included within
our risk management approach and as part of this, are reflected in the strategic organisational risk map
and associated risk register for the year end reporting, containing likelihood and impact assessment
scores and high-level control information.
In 2023 the new ERM framework is expected to be implemented and risk management and internal
control systems are expected to be linked closely, through the implementation of a roadmap
providing guidance on the integration of risk management activities into the controls and compliance
framework, strategic planning and business processes.
Risk oversight and governance
Overall responsibility for risk oversight and the effectiveness of the Company’s risk management and
internal control systems rests with the Board. Principal risks, including emerging risks, as well as progress
against key performance indicators, are reviewed at each quarterly scheduled Board meeting and in-depth
analysis on identified risks are undertaken by the Audit & Risk committee, when deemed appropriate.
The Group’s framework for risk management promotes a bottom-up approach to risk management
with top-down support and challenge. The risks associated with the delivery of the strategy and work
programmes and the associated mitigation measures and action plans are maintained in a series of risk
registers at Group, audit and project level. Reporting of these risks within the organisation is structured
so that risks are escalated through the various business units and functions to Board committees and
to the Board itself. For example, the Environment, Safety & Social Responsibility (“
ESSR
”) Committee
monitors the management of health and safety related risks, as well as risks related to any matter relating
to corporate social responsibility, each in connection with the Group’s operations.
A senior risk management committee, comprised of the executive management team, with the
participation of the ERM officer the Senior Risk Management Committee is responsible and accountable
for overseeing and monitoring risks that fall under their identified remit, while the Audit & Risk committee
is additionally responsible for continuously evaluating the effectiveness of the Group‘s system of internal
control and risk management framework.
Group risk governance structure
Page 75 of 255
STRATEGIC REVIEW
Board of Directors
The Board is responsible for overseeing the risk identification, assessment and mitigation process and
undertakes regular assessments of the risks facing the Group, including current and emerging risks that
could potentially threaten our business integrity, strategy, operating model, future performance, solvency
and/or liquidity.
The overall tone for risk management is driven by the Board, which works closely with the Senior Risk
Management Committee and the Audit & Risk committee (“
ARC
”) to regularly review Energean’s risk
portfolio, monitor any emerging risk and better understand how risks are being managed across the
Company. In this context the Board:
•
Receives high level risk reports and a summary of principal Group risks on a quarterly basis
following ARC meetings;
•
Discusses and provides challenge to end of year reporting on principal risks and decides the
Group’s appetite for the next financial year;
Audit & Risk committee
The Board delegates to the Audit & Risk committee the responsibility for reviewing the effectiveness of
the Group’s systems of internal control and risk management framework. As part of this review, the Audit
& Risk committee on behalf of the Board, ensures that a robust assessment of the principal risks facing
the Company has been undertaken (including those risks that would threaten its business model, future
performance, solvency or liquidity) and provides advice on the management and mitigation of those risks.
The Audit & Risk committee commissions internal and external deep dive investigations into relevant
risks as appropriate.
Financial Control
An integral part of the Energean internal control system is the internal control system for financial
reporting, which is responsible for the financial reports preparation process in compliance with generally
accepted international accounting standards. Energean’s CFO and the Head of Financial Control, in her
capacity as officer in charge of preparing financial reports, are responsible for planning, establishing and
maintaining the internal control system for financial reporting.
Internal Audit Function
The Internal Audit Function has a central role in the Group’s risk management and internal control system,
through objectively and independently evaluating controls, governance and risk management processes.
The Internal Audit is performed by PricewaterhouseCoopers Business Solutions S.A. (“
PwC
”), and the
Group’s Internal Audit Lead, who is responsible for coordinating the relevant assurance and consulting
engagements, aligning the internal audit risk assessment process with the Group risk register outcomes
and proposing a risk based annual audit plan to Audit & Risk Committee.
Senior Risk Management Committee
The Senior Risk Management Committee is responsible for detailed assessment of the risks to the
business.
It considers risks linked to:
•
Strategic objectives
•
Business model.
Consolidation of business risks
To facilitate the assessment of the main risks facing the business, Energean undertakes a bottom-up
review of the key risks faced by the business on a country level through the execution of two subprocesses
(Inherent Risk Assessment and Residual Risk Assessment) to identify the country key risks, meaning the
risks that have the potential to impact a specific operating area, including mitigating actions and any
controls in place.
The country key risks are then verified by the respective Country Risk Committee comprised by the
Country Manager, Asset/Project Execution Manager, Head of Finance, Head of Legal and Head of HSE,
who acting collectively with the ERM Officer, sign off on the country risk register.
From this, the Senior Risk Management Committee reviews all Country Risk Registers and discuss and
present common themes, interconnected risks and key trends. The risks which have been identified
Page 76 of 255
STRATEGIC REVIEW
and rearticulated as principal risks are then consolidated upwards into the Group’s risk register and are
assessed according to their likelihood of occurring, as well as the potential consequences to Energean in
terms of health or safety, reputational, financial, operational or environmental impact.
On a quarterly basis the enterprise principal risks are discussed by the Board on a ‘Risk Heat Map’ to provide
‘top down’ challenge and support. The outcome of this review and the corresponding key messages, are
communicated back down to the business units and functions to facilitate risk awareness and effective
decision making throughout the Group.
Responding to the Changing Risk Environment in 2022
As part of our goal to continuously improve our risk management processes, the following tasks were
completed in 2022:
•
the Group Code of Ethics was reviewed and updated. Italian, Arabic and Hebrew versions were
developed to achieve effective communication between all our people across the countries we
operate. A fully customized training was assigned to all employees across the Group while the
annual attestation was signed by 450 key staff members and contractors confirming compliance
with the Group’s Code of Ethics values, principles and standards.
•
A contingent liabilities, litigation and ongoing disputes dashboard was maintained to assess any
incidents, disputes or emerging risks that might trigger a potential financial liability impacting the
Group. The dashboard was presented at each Audit & Risk Committee meeting and semi-annually
to the Group financial controller and external auditors.
•
To ensure awareness, understanding of and compliance with important governance, regulatory
and security topics, mandatory e-learning was also implemented across the Group translated, as
appropriate, in local languages, which included comprehensive modules on bribery and corruption,
preventing the facilitation of tax evasion, modern slavery, cyber fraud and cyber security.
Climate change related risks and opportunities
Ever since 2019, when Energean recognised climate change as a rapidly emerging risk, climate change
related risks and opportunities are fully integrated with Energean’s multi-disciplinary, Group-wide risk
management process, as per the recommendations of the TCFD.
Climate change related risks and opportunities have been identified, and future scenarios that facilitated
in developing an integrated strategy approach have been analys
ed
44
.
Our strategy and business plan to
limit global warming has been structured, and is currently being implemented, in three different phases;
short, medium and long-term, as per our Climate Change Policy published in 2021.
The risk management framework ensures effective identification, assessment, control and monitoring
of climate change-related risks against their potential financial, legal, physical, market and reputational
impact, and further ensures that key strategic and commercial decisions are assessed by reference to
their financial importance.
Risk appetite
The Board sets Energean’s risk appetite and acceptable risk tolerance levels for each of the six key risk
categories and has reviewed the strategies devised by the Executive Management Team to mitigate
them. In considering Energean’s risk appetite, the Board has reviewed the risk process, the assessment
of risks and the existing controls and mitigating actions that reduce overall risk. During this process, the
Board articulated which risks Energean should not tolerate, which should be managed to an acceptable
level and which should be accepted in order to deliver our business strategy.
44
Please refer to “Our Strategy- Tackling Climate Change-Our Climate Change Strategy”
Page 77 of 255
STRATEGIC REVIEW
Principal risks and uncertainties
Symbols used in the following pages
Trend versus prior year indicates our
perception of pre-mitigation (inherent)
risk
Link to Business Model
Link to Strategy/Strategic
Pillars
▲
The risk increased in 2022
A – Find and appraise
①
– Eastern Mediterranean
▼
The risk decreased in 2022
B – Develop
②
– Gas
―
The risk remained static in 2022
C – Produce
③
– Tackling climate change
N
New Risk
D – Acquire
④
– Organic growth
Z
No longer a risk
E – Implementing low
carbon solutions
⑤
– Value-driven and
return driven
Internally, the Group monitors and mitigates a more substantive list of principal risks, but those listed in
the following pages are the risks considered to be the most important at the time of publishing our 2022
Annual Report that could threaten, or, are linked to, our business strategy and business model.
The following table contains a summary overview of the principal risks to the Group while the following
pages provide for each principal risk an analysis of the potential impacts, the corresponding mitigation
measures, the risk appetite and the strategic objectives or KPIs each of these risks
may impact in 2023.
1. Operational – Delayed delivery of future development projects (NEA/NI, Karish North
(including the second oil train and gas riser), Cassiopea and Epsilon)
Owner
: Technical Director
Link to strategy
:
①
②
④
⑤
Link to business model
: B C
Link to 2022 KPIs
: Production
Risk appetite
Low
–All these development projects are viewed as essential for the relevant
country portfolios, substantially benefitting the long-term production profiles of the
Company, whilst bringing cost and investment efficiencies and strategic benefits.
2022 movement
—
This risk remained static in 2022.
•
NEA/NI first gas, although delayed from its initial first gas date of H2 2022
because of rig availability, was brought onstream in March 2023.
•
The Karish North development well was successfully drilled as part of the
growth drilling campaign in August 2022. The second export riser and the
Karish North flowline were transported from the UK to Israel in March 2023.
The riser will be installed shortly and will connect the production facilities on
the FPSO to the pipeline-to-shore. Key upcoming activities ahead of Karish
North first gas include installation of the Karish North manifold, umbilical and
spool, ahead of opening of the well before year-end 2023.
•
Construction of the second oil train is progressing in line with expectations in
Dubai. The oil train will be installed and commissioned in-situ, and is expected
to be ready to process hydrocarbon liquids by year end 2023.
•
Cassiopea remains on track for first gas in 2024; JV misalignment risks
increase the exposure to potential cost and schedule overruns.
•
First oil from the Epsilon development is expected in 2024.
Impact
A delay to these projects could result in a delay to, or reduction of, future cash
Flows, which would impact the ability of the company to step-up its quarterly
dividend payments to $100 million.
Mitigation
Key development projects are on track.
Energean is actively engaged with its partners, contractors and all other relevant
stakeholders on all development projects to ensure effective working relationships.
For further information, please refer to “
Performance in 2022
” on pages 8-
9.
Ongoing monitoring of KPIs by Executive Management.
2023 Objectives
Continue to monitor project progress ensuring developments progress in line with
expectations.
Page 78 of 255
STRATEGIC REVIEW
2. Strategic
–
Lack of new commercial discoveries and reserves replacement
Principal risk
:
Owner
: Technical Director
Link to strategy
:
②
④
⑤
Link to business model
: A B C D
Link to 2022 KPIs
:
2P Reserves and 2C Resources
Risk appetite
Medium
– Energean aims to replace the reserves it has produced and grow its
reserve and resource base through a combination of successful exploration and
appraisal and selective value accretive acquisitions.
Exposure to exploration and appraisal failure is inherent in accessing the significant
upside potential of exploration projects, and this remains a core value driver for
Energean. The Group invests in data and exploits the strong experience of Energean’s
technical teams to mitigate this risk.
2022 movement
▼
The risk decreased in 2022.
In 2022, 15 MMboe was produced and 210 MMboe was added to 2P reserves, which
equates to a reserve replacement ratio of +1400%
The 2022 growth drilling programme in Israel successfully discovered and de-risked
approximately 73 bcm (480 MMboe) of new gas resources. This includes 68 bcm
(approximately 449 MMboe) of gas resources in the Olympus Area (Block 12 and
Tanin lease), for which the development concept is being finalised.
Impact
Failure to make new significant gas discoveries and replenish the exploration
portfolio will reduce the Group’s ability to grow the business and deliver its strategy.
Mitigation
Energean focuses on high-grading of its exploration and appraisal programme
and maintains a focus on low-risk, high-reward prospects with clear and short-
term routes to commercialisation. Our exploration portfolio is spread across the
Mediterranean and represents a balanced mix of new frontier areas and lower risk
mature basins.
The development concept for the Olympus Area is targeted to be announced in the
coming months, which would further de-risk the remaining 2C resources.
Energean’s 2023 exploration campaign includes the North East Hap’y exploration
well in Egypt and the Izabela-9 exploration well in Croatia
Ongoing monitoring of KPIs by Executive Management Team.
2023 Objectives
Execute exploration campaigns offshore Egypt and Croatia.
By actively pursuing new exploration opportunities in core areas and maximising
output from producing fields, we aim to ensure at least 100% reserves replacement
on an annual basis.
Page 79 of 255
STRATEGIC REVIEW
3. Operational – Production uptime reliability and operating efficiency (including asset integrity)
Owner
: Technical Director
Link to strategy
:
④
⑤
Link to business model
:
C
Link to 2022 KPIs
:
Production
Risk appetite
Low
– The success of Energean’s business depends on best-in-class operations.
2022 movement
N New Risk due to Karish starting production.
Impact
Production uptime and reliability Uptime is a prime driver of upstream “value-add,”
as the value of production lost to downtime far exceeds that of operating expenses.
Production downtime and unreliability, asset concentration risks and the resultant
failure to meet contracted quantities, would reduce Energean’s future net revenues
and cash flows.
Mitigation
•
Karish is onstream and the reservoir deliverability has been confirmed
•
Key development projects, to debottleneck the FPSO capacity from 6.5 bcm/
yr to 8 bcm/yr, are on track for completion by end-2023
•
Internal procedures and best standards
•
Asset integrity management system
•
Maintenance strategy
•
Staff training
•
Contingency planning and recovery strategies in place as part of the BCP risk
management.
2023 Objectives
Deliver strong production uptime and reliability to maintain stable production
performance and cash flows.
Page 80 of 255
STRATEGIC REVIEW
4. Financial Risk: Maintaining liquidity and solvency
Owner
:
Chief Financial Officer
Link to strategy
:
④
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
: Production, Revenues, Adjusted EBITDAX, Cash Flow From Operating Activities,
Loss/Profit after tax
Risk appetite
Low
– Through a disciplined approach to capital allocation, effective execution and
oversight, we accept a very small amount of potential downside financial risk for
targeted upside return.
2022 movement
—
The risk remained static in 2022.
Impact
Funding and liquidity risks could impact the Group’s viability. Erosion of balance
sheet through impairments of financial assets
may further impact the Group’s
financial position
45
.
Mitigation
In 2022, Energean signed a three-year $275 million Revolving Credit Facility (“
RCF
”).
The Group ended the year with $720.0 million of liquidity, including undrawn amounts
of $168 million under the RCF. Post-year end, Energean also signed a $350 million
term loan, which offers additional financial flexibility.
With the start-up of Karish, Energean is on track to meet its near-term targets to
generate revenues of $2.5 billion, EBITDAX of $1.75 billion, and reduce net debt /
EBITDAX < 1.5x. Over 75% of Energean’s near-term production target contains long-
term contracts with floor pricing and take-or-pay provisions.
The Group actively monitors oil price movements and
may hedge part of its
production to protect the downside while maintaining access to upside and to
ensure availability of cashflows for re-investment and debt-service.
Ongoing monitoring of financial KPIs by Executive Management.
2023 Objectives
•
Refinance of the 2024 EISL bond maturity to maintain efficient capital
structure.
•
Evolve the capital allocation strategy from capital investment to sustainable
cash-flow generation.
45
For further information, please refer to Going Concern disclosure on pages 172-173 and Viability Statement disclosure on
pages 92-93
Page 81 of 255
STRATEGIC REVIEW
5. Macro-economic risk (including inflation, interest rates and commodity price fluctuations)
Owner
:
Chief Financial Officer
Link to strategy
:
④
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
: Revenues, Adjusted EBITDAX, Cost of Production, Cash Flow From Operating
Activities, Loss/Profit after tax
Risk appetite
Low
– Through a disciplined approach to capital allocation, effective execution and
oversight, we accept a very small amount of potential downside financial risk for
targeted upside return.
2022 movement
N New Risk
In 2022, global commodity prices were highly volatile, largely as a result
of the conflict in Ukraine. This, combined with rising global demand for products and
materials following the recovery from the global pandemic, has led to rising inflation
around the world. To combat rising inflation, government’s around the world have
increased interest rates.
Impact
Macro-economic headwinds including inflation, interest rates, commodity price
fluctuations, like any other external/political risk, represent an uncertainty factor in
view of achieving the Company’s financial targets.
Mitigation
Protected against commodity price fluctuations:
•
Over 75% of Energean’s near-term production target of 200 kboepd is
protected under long-term gas contracts with floor prices.
•
Energean routinely evaluates hedging contracts for other areas of its portfolio
Interest rates fixed as part of 2021 refinancing:
•
Energean undertook a series of refinancings in 2021, which fixed substantially
all of the Company’s exposure to floating rates; its weighted average cost
of debt in 2022 was 5.25% and substantially unimpacted by the global rise
in interest rates. The only facility within Energean’s capital structure that is
impacted by global interest rate rises is the c. €90.5 million Greek facility;
therefore the impact of the rate rises on overall cost of debt has been minimal.
Inflation:
•
The majority of Energean’s costs are fixed. The development projects in
Israel and Egypt are wrapped under EPCIC and EPIC contracts. There have
been some impacts of inflation on salary costs, but this contributes a small
component of the overall Cost of Operations base.
Ongoing monitoring of financial KPIs is undertaken by Executive Management
Team.
2023 Objectives
Maintaining focus to deliver near-term targets of $2.5 billion revenues and
$1.75 billion EBITDAX
Page 82 of 255
STRATEGIC REVIEW
6. Organisational & HR risk. Failure to attract, retain and develop staff
Owner
: HR Director
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
:
Relevant for all KPIs
Risk appetite
Medium
– Our strategy relies on attracting, motivating and retaining key talented
people and their knowledge and expertise. Our performance and ability to grow
depends on it.
2022 movement
N New Risk
Talent shortages due to an aging workforce, limited new/ young talent entering the
industry and growing competition for talent with the technology industry creates a
risk of attracting and retaining staff.
The pandemic has also changed how people think about work. Priorities have shifted
and workforce expectations have, and continue to change, in terms of flexible and
remote working combined with the challenge of current and future wage inflation.
Impact
The failure to attract, retain and develop staff would have an impact on the business
to operate efficiently and appropriately.
Mitigation
•
Active employee’s incentives plans (LTIP, DBP and MBO awards) as well as
an internal career development process.
•
Effective benchmarking to ensure pay is in line with competitors.
•
Employee incentives and welfare discretionary plans
•
Succession planning paths for key positions of personnel.
•
Clearly defined recruitment drive to increase the headcount for Group level
roles
•
Performance management process, alongside the competency framework,
introduced in February 2022.
Ongoing monitoring of KPIs by Executive Management.
2023 Objectives
Launch of the compensation module in our SAP SuccessFactors and the
implementation of our updated Diversity, Equity and Inclusion Policy.
Energean will continue to foster a culture of inclusion and diversity, as well as
streamlining the learning and knowledge sharing processes.
Page 83 of 255
STRATEGIC REVIEW
7. Deterioration or misalignment of JV relationships
Owner
: Country Managers
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
:
Working Interest Production, 2P reserves and 2C resources, Cost of Production,
Adjusted EBITDAX, Cash Flow from Operating Activities, Loss/Profit After Tax
Risk appetite
Medium
– The Group seeks to operate assets which align with the Group’s core
areas of expertise but recognises that a balanced portfolio will also include non-
operated ventures. The Group accepts that there are risks associated with a non-
operator role and will seek to mitigate these risks by working with partners of high
integrity and experience and maintaining close working relationships with all JV
partners.
2022 movement
▲
– The risk increased in 2022
Non-operated positions are held in the entire UK portfolio and a large component of
the Italian portfolio. JV misalignment risks associated with the Cassiopea project in
Italy increase the exposure to potential cost and schedule overruns.
Impact
•
Cost/schedule overruns.
•
Poor operational performance of assets.
•
Delay in first production from new projects.
•
Negative impact on asset value.
In addition, in case the Company is unable to develop and deliver major projects as
planned, particularly if the Company fails to accomplish budgeted costs and time
schedules, it could incur significant impairment charges associated with reduced
future cash flows of those projects on capitalized costs.
Mitigation
Actively engage with all JV partners early to establish good working relationships.
Actively participate in operational and technical meetings to challenge, apply
influence and/or support partners to establish a cohesive JV view.
Active engagement with supply chain providers to monitor performance and
delivery.
Application of the Group risk management processes and non-operated ventures
procedure.
Ongoing monitoring of KPIs by Executive Management.
2023 Objectives
Continue to proactively engage with JV partners and monitor JOA procedures.
Page 84 of 255
STRATEGIC REVIEW
8. Recoverability of production cost and receivables in Egypt
Owner
: Country Manager Egypt
Link to strategy
:
①
②
⑤
Link to business model
: B C
Link to 2022 KPIs
: Cash Flow From Operating Activities, Profit/Loss After Tax
Risk appetite
Low
–The Group utilises its strong regional ties and the experience of its commercial
teams to mitigate this risk.
2022 movement
—
The risk remained static in 2022. At end-December 2022, net receivables (after
provision for bad and doubtful debts) in Egypt were $116 million, of which $41 million
were classified as overdue.
Impact
Loss of value.
Work programme restricted by reduced financial capability.
Mitigation
Energean has a number of contractual solutions with EGPC to ensure an effective
collection policy, including condensate proceeds, lump-sum payments, Abu Qir
payables offsetting and local currency collection.
Continued engagement with the Egyptian government and Ministry of Petroleum.
Proposals for structuring and planning of overdue repayment, on a regular basis.
2023 Objectives
Improve receivables position as the currency stabilises. Put agreements in place to
accelerate recovery of overdue receivables.
Maintain an active investment programme.
Page 85 of 255
STRATEGIC REVIEW
9. Significant cyber risk, including a security breach of internal systems or a cyber attack
Owner
: Group Information Technology Manager
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
: Loss/Profit After Tax, Total Shareholder Return
Risk appetite
Low
– Energean is committed to maintaining the security and integrity of its data
and IT systems.
2022 movement
▲
The risk increased in 2022. As Energean grows into a 200 kboepd producer,
the risk of a significant cyber-attack increases and therefore requires constant
monitoring and management.
Impact
•
Potential operational disruption or shut down.
•
Potential exposure to high ransomware demands.
•
Reputational damage / adverse impact on external relationships (customers,
suppliers, government agencies).
•
Loss of shareholder confidence (shareholders, lenders, etc.).
•
High involvement of regulators.
•
Loss of data and theft of confidential information.
•
Regulatory implications and financial penalties.
Mitigation
•
System authorisation and systems training to enable good practise.
•
Security monitoring systems.
•
Security plan and cyber policies and procedures.
•
Insurance to cover potential losses.
•
Firewalls to prevent unauthorised access.
•
Intrusion detection to prevent further breaches or loss of data.
•
Physical access authentication, whitening and net-segregation.
•
Vulnerability Assessment and Penetration Testing as part of the audit
activities.
2023 Objectives
Technological and procedural measures are continuously evolving to manage
changing cyber security threats.
Page 86 of 255
STRATEGIC REVIEW
10. Ethics and Business Conduct. Fraud, Bribery and corruption risk
Principal risk
: Owner: Chief Executive Officer
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
: Cash flow from Operating Activities, Loss/Profit After Tax
Risk appetite
Low
– Energean is committed in maintaining integrity and high ethical standards in
all of the Group’s business dealings. The Group has a zero-tolerance approach to
conduct that
may compromise its reputation or integrity.
2022 movement
▲
The risk increased in 2022. Increased global connectivity, digitalization and the
complexity of fraud schemes increase the likelihood of a potential fraud incident,
although no reportable instances of bribery or corruption have been recorded.
Impact
Reputational damage.
Financial penalties or civil claim.
Criminal prosecution.
Mitigation
Strong governance and anti-corruption policies and procedures. Audit reviews, use
of data analytics and continuous monitoring of bribery and corruption controls
across the Group to assess compliance. Robust financial procedures in place to
mitigate fraud.
Annual training programme in place for all employees, available also in local
languages.
Enhanced due diligence of business partners and customers and compliance
auditing on major contractors.
2023 Objectives
Continue to provide regular training, awareness and communication. Alignment
of the Company’s controls with its JV partners, involving JV governance and
transparency in high-risk areas (Egypt) or activities.
Page 87 of 255
STRATEGIC REVIEW
11. Health Safety and Environment (HSE)
Owner
: HSE Director
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2022 KPIs
: LTIF rate
Risk appetite
Low
– Energean is committed to managing its operations in a safe and reliable
manner to prevent major accidents and to provide a high level of protection to its
employees and contractors. The health and safety of employees is of paramount
importance to Energean.
2022 movement
—
This risk remained static in 2022. The Group’s
pro forma
LTIF
46
for operated
activity in 2022 was 0.47 per million hours worked (up from 0.33 in 2021). Our TRIR
47
for 2022 was 1.18 per million hours worked (up from 0.77 in 2021). There were no
spills to the environment.
Impact
Serious injury or death.
Negative environmental impacts.
Reputational damage.
Regulatory penalties and clean-up costs.
Loss or damage to Company’s assets and potential business interruption.
Loss or damage to third parties and potential claims.
Mitigation
Effectively managing health, safety, security and environmental risk exposure
is a top priority for the Board, Senior Leadership Team and Management Team.
Ongoing monitoring of KPIs by Executive Management is also undertaken.
Development and implementation of the Health Safety Environmental (HSE) & Social
Responsibility (SR) policy that sets out corporate values, standards and expectations
with respect to all HSE & SR matters in relation to company’s employees, partners,
stakeholders, general public, environment and sustainable development.
Implementation and maintenance assurance of an HSE Management System
and an effective H&S framework, covering all Energean’s expectations and as per
international standards.
Implementation and maintenance assurance of suitable and effective Crisis
Management and Emergency Response and Management Plans as per Energean’s
expectations and standards.
Implementation and maintenance assurance of the Corporate Major Accident
Prevention policy (CMAPP), covering Energean’s expectations and standards.
2023 Objectives
Zero serious incidents and LTIF target of less than 0.50 and a TRIR target of less
than 1.10.
Further expand HSE digitialisation in regards to emergency response management
and safety environmental critical elements management.
Continue Group driven HSE audits across all countries and sites to ensure all
systems used are in line with the Group’s guidance.
46
Lost Time Injury Frequency.
47
Total Recordable Incident Rate.
Page 88 of 255
STRATEGIC REVIEW
12. Failure to manage the risk of climate change and to adapt to the energy transition
Owner
: Chief Executive Officer and – HSE Director
Link to strategy
:
②
③
④
⑤
Link to business model: A B C D E
Link to 2022 KPIs
: Revenues, Cost of Production, Adjusted EBITDAX, Cash Flow From Operating
Activities, Loss/Profit after tax, Carbon Intensity reduction, LTIF rate, total shareholder return
Risk appetite
Medium
– The Group is committed to achieving its net-zero emissions
48
target
by 2050 and reducing the near-term carbon intensity of its operations through the
implementation of low carbon solutions and the acquisition of low carbon intensity
hydrocarbons. Energean is focused on taking near-term investment decisions that
ensure its assets remain competitive in an environment where demand for oil and
gas
m
ay be lower than today and will continue to stress test its portfolio against a
range of climate change scenarios, in line with the recommendations of the TCFD.
2022 movement
—
This risk remained static in 2022.
Impact
Reputational damage and loss of investors and providers of capital.
Reduced demand for Company’s products due to technology developments towards
alternative energy sources.
Climate-related policy changes with associated increased costs.
Ability to effect change towards lowering carbon footprint.
Mitigation
On track to reduce near-term carbon emissions intensity to 7-9 kgCO2e/boe and
net-zero by 2050
Prinos CCS – results of pre-FEED study being analysed
In February 2023, a memorandum of understanding (“
MoU
”) with Shell Egypt to
explore a mutually beneficial decarbonisation solution.
Aligned with the TCFD recommendations across all TCFD pillars in our year-end
reporting.
Climate change strategy development for the reduction, sequestration and offsetting
of greenhouse gas emissions. This includes performance optimisation and carbon
capture and offsetting projects.
Carbon shadow prices are taken into consideration in the evaluation of projects and
investments viability.
Active commitment to CSR goals and targets.
Strengthen our low carbon portfolio and reduce our GHG emissions intensity by
shifting production from oil to gas. Best in class ESG ratings:
•
CDP rating increased to A- from B
•
Constituent of FTSE4Good Index Series
•
Maala Index rating increased to platinum from gold.
•
Rated AA by MSCI for second year running
2023 Objectives
Progress FEED activities at the Prinos CCS project in Greece.
Further progress Energean’s path to net-zero.
Further reduce emissions intensity and encourage JV partners to engage in methane
monitoring campaigns.
48
Scope 1 & 2 emissions.
Page 89 of 255
STRATEGIC REVIEW
13. Climate Change – Physical risks
Owner
: HSE Director
Link to strategy
:
③
Link to business model
: A B C D E
Link to 2022 KPIs
:
Relevant for all KPIs
Risk appetite
Medium
– Management recognises that climate change is expected to lead to
rising temperatures and changes to rainfall patterns in all the countries where it
operates. Extreme flooding combined with rising sea level
may cause issues to the
steady state of Energean’s assets. Energean is evaluating measures to reduce the
exposure and vulnerability of both its assets and its people to weather and climate
events.
2022 movement
—
This risk remained static in 2022.
Impact
Unexpected asset costs arising from operational incidents or inadequate water
supply due to changes in precipitation patterns.
Reduced revenue due to extreme weather events and reduced production.
Transportation difficulties and supply chain interruptions.
Increased insurance premiums for insuring assets in high-risk locations.
Negative market reaction.
Loss of investor confidence.
Serious injury or death.
Environmental impacts due to spills.
Reputational damage.
Loss or damage to assets or early retirement and business interruption.
Mitigation
Monitoring the weather conditions near its assets and has built protective barriers
to combat potential flooding.
Energean has also installed an underwater analyser on one of its platforms in
Greece to monitor seawater conditions (wave speed and direction). No extreme
weather events have occurred to date, but the threat remains
Comprehensive insurance policies in place for key assets and infrastructure.
2023 Objectives
Continue monitoring of environmental conditions and reporting at both an asset
and corporate level.
Page 90 of 255
STRATEGIC REVIEW
14. Strategic
–
Regional / Geopolitical conflicts in areas of operation affecting production and
distribution (including fiscal uncertainties)
Owner
: Chief Executive Officer
Link to strategy
:
①
⑤
Link to business model
: A
Link to 2022 KPIs
: Relevant for all KPIs
Risk appetite
Medium
– The sectors in which Energean operates continue to be subject to a
high degree of geopolitical, regulatory and fiscal risk. However, true to Energean’s
entrepreneurial spirit, we accept risks in order to achieve higher business rewards
where they are consistent with our core purpose, strategy and values, and can be
effectively managed.
2022 movement
—
This risk remained static in 2022.
The Israel-Lebanon maritime border dispute was resolved in 2022. The border
treaty is an international treaty, and has been signed by the highest level of political
executive of both sovereign states. For Energean, it specifically and explicitly
recognises that Karish and Karish North are in the sovereign territory of the State
of Israel.
Impact
Loss of value; increasing costs (including taxes); uncertain financial outcomes;
Mitigation
•
Cooperation and relationships with governments to ensure the safety of
Energean’s interests.
•
Security measures to ensure the safety of Energean’s assets and interests.
•
Scenario planning strategy
•
Knowledge of regional and local issues and proactive engagement with
Government and NGOs – Strong CSR strategy
•
Sustained and positive relationships with governments and key stakeholders
through robust investment plans and engagement in local projects.
2023 Objectives
Continued monitoring of geopolitical events and regulatory/fiscal changes.
Undertake risk assessment activities in relation to new projects.
Energean strives to become a leader in CCS in the Eastern Mediterranean and is
confident that we will be part of the solution.
Emerging risks
The main emerging risk areas are on unexpected legislation, including those related to climate change,
and government actions that could impact the Company. Management will closely monitor any relevant
trends around potential new windfall and carbon taxes implementation in countries where this has yet
to occur, but also on regulations governing price determinations in order to properly adjust planning and
budgeting activities.
The Group has identified all these emerging risks and is actively assessing and monitoring them.
Page 91 of 255
STRATEGIC REVIEW
Viability Statement
The Directors have assessed the viability of the Group over a 3 year period until 31 December 2025. The
assessment started from the 31 December 2022 actual financial position and considered the potential
impact of the principal risks documented in the report on its forecasted financial projections. The basis
for the forecasts is the Group Working Capital Model.
The board conducted the review over a 3-year period for the following reasons:
i.
Energean considers its medium-term forecast and guidance on a rolling 3-year basis
ii.
The Group’s key strategic projects, Karish, Karish North, NEA/NI, Cassiopea and Epsilon are
expected to be onstream and fully ramped-up facilitating Energean to reach its medium-term plan
targets of $1.75 billion EBITDAX and over 200
kboepd by 2025.
iii.
This period covers the remaining capital investment phase until respective first production and
ramp-up from each of this phase of strategic projects e.g. Karish North, NEA/NI, Cassiopea and
Epsilon.
iv.
Energean raised $2.5 billion of project bonds in 2021 for its Israel Project, the first tranche of bonds
are due for repayment in 2024 therefore the viability assessment period captures both the coupon
payments and the first principal repayment.
v.
Energean announced its Dividend Policy in March 2022, stating it would aim to pay at least $1 billion
of dividends by the end of 2025 therefore the viability assessment period captures this forecast.
Based on these factors, the board considers that an assessment period up to 31 December 2025
appropriately reflects the underlying potential and viability of the Group and is the period over which
principal risks are reviewed.
In order to make an assessment of the Group’s viability, the Board has carried out a detailed assessment
of the Group’s principal risks, and the potential implications these risks could have on the Group’s liquidity
and its business model over the assessment period. This assessment included (i) monthly cash flow
analysis, (ii) a number of sensitivity scenarios and (iii) a reasonable worst-case scenario including a
combination of various sensitivities, together with associated supporting analysis provided by the Group’s
finance team. Sensitivity analysis focused on commodity price downside, downside production scenarios,
delay to certain strategic projects where we are non-operator and the risk of rising interest rates.
A summary of the key assumptions, aligned to the Group’s principal risks, and the sensitivity scenarios
considered can be found below.
Principal Risks
Base Case Assumptions
Sensitivity Scenarios
1.
Operational Risk: (i) Delay
to key projects (NEA/NI in
Egypt, Karish North including
second oil train and riser,
Cassiopea in Italy and
Epsilon in Greece) including
operational readiness
failures (ii) Production
uptime and operational
efficiency
2.
Deterioration or
misalignment of JV
relationships
3.
Recoverability of receivables
in Egypt
First Gas from NEA/NI occurred
in March 2023, Cassiopeia
assumed 3 month delay vs.
Budget. Epsilon in Q1 2024 (per
budget) and Karish North online
by end of 2023 (per budget).
Production profiles assumed
as per Budget which are
conservatively lower than CPR
2P forecasts
10% reduction in production
across all key projects to
reflect the year of start-up/no
operational history.
5% reduction in production
across all mature assets vs
base case
Additional delay of 3 months
to first gas in Cassiopeia given
non-operated project.
Reduction in EGPC receivables
by 10%
Page 92 of 255
STRATEGIC REVIEW
Principal Risks
Base Case Assumptions
Sensitivity Scenarios
4.
Macro-Economic Risk
including inflation, interest
rates and commodity price
fluctuations
5.
Financial Risk: inability to
maintain balanced cashflow
resulting in increased
liquidity and credit risk
Oil price based on recent
forward curve, at $80/bbl in
2023, $75/bbl in 2024 and
$70/bbl in 2025.
PSV gas price based on recent
forward curve, €50/MWH in
2023, €45/MWH in 2024 and
€30/MWH in 2025
FX rate for costs in € of €1: $1
FX rate for costs in £ of £1: $1.1
in 2023 and $1.2 in 2024 and
2025
FX rate for Shekel of $1: ILS3.5
The USD2.5bn and $450m
bonds have a fixed coupon i.e.
no exposure to interest rate risk
only the €100m Greek State
backed loan is exposed to
movements in EURIBOR and any
loan utilization under the RCF
will be exposed to movements
in SOFR. The RCF is undrawn
at 31 December 2022 apart
from Letters of Credit which are
not linked to interest rates. A
EURIBOR/SOFR rate of 4.5% is
assumed in base case.
Refinance of the first tranche
of bonds due in March 2024,
no refinance of the bonds due
in March 2026
Reduction of 10% in Brent price
and 10% in PSV price across
the whole Viability Assessment
period.
Increase in rates to 5%
Partial drawdown of the RCF
(and rapid repayment thereafter)
to maintain smooth cashflow
balance
6.
Failure to manage the risk of
climate change and to adapt
to the energy transition
Carbon charges (European
carbon emissions tax) included
across the portfolio where
applicable, e.g. in Greece.
Budget expenditure for green
projects and or investments
included in the base case
such as (i) on-site projects for
absolute emissions reduction,
(ii) investment in carbon removal
projects (iii) studies for CCS
projects across the Group.
Free allowances are used up
until 2025 therefore charges
are projected to be incurred
outside of the Viability Period.
The risk of further measure
being introduced and enacted
by governments in our areas
of operations is low. Therefore,
there is no sensitivity included in
the downside scenario.
Under such individual and combined sensitivity scenarios the Group maintains sufficient cash throughout
the viability period. Nevertheless the Board has considered the availability and likelihood of mitigating
factors such as the ability to hedge, headroom under existing debt facilities, additional funding options
including refinancing and further rationalisation of our cost and asset base, including cuts to discretionary
capital expenditure such as exploration or shifting of expenditures under our control.
Based on the results of the analysis the Board of Directors has a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they fall due over the period of
their assessment.
Page 93 of 255
CORPORATE GOVERNANCE
Corporate Governance
Board of Directors
Karen Simon
Non-Executive Chair
Ms. Simon was appointed as an Independent Non-Executive Director in September 2017 and became
Non-Executive Chair in November 2019. Ms. Simon was formally with J.P. Morgan for over 35 years
and retired in December 2019 as Vice Chair in the Investment Bank. During her banking career, Ms.
Simon held a number of executive positions in corporate finance including Global Co-Head of Financial
Sponsor Coverage working with the firm’s private equity clients advising on leveraged buy-outs, M&A and
IPO’s; CO-Head of European Middle East and Africa (EMEA) Debt Capital Markets; and Head of EMEA
Oil & Gas Coverage. Ms. Simon spent 20 years of her career in London where she was a member of J.P.
Morgan’s EMEA Management, Debt Underwriting, and the Reputational Risk Committees. She is a US/
UK dual citizen. Ms. Simon currently sits on the boards of Aker ASA listed on the Oslo stock exchange
and Crescent Energy listed on the New York stock exchange as well as on the Board of Trustees for the
Institute of Shipboard Education, a non-profit which runs the Semester at Sea study abroad program for
university students. Ms. Simon graduated from the University of Colorado with a degree in Economics
and has a Masters of Business Administration degree from Southern Methodist University and a Masters
of International Management degree from the Thunderbird School of Global Management where she also
Co-Chairs the Thunderbird Global Alumni Council.
Independent:
•
Upon appointment as Chair
Committee membership:
•
Nomination & Governance – Chair
•
Remuneration & Talent – Member
Current external appointments:
•
Aker ASA – Independent Non-Executive Director
•
Crescent Energy – Independent Non-Executive Director, Member of the Audit Committee
Matthaios (Mathios) Rigas
Chief Executive Officer
Mr. Rigas (Mathios) is the founding shareholder and has served as the CEO of the Energean Group
since its inception in 2007. He is a Petroleum Engineer with senior investment banking experience.
Under his leadership, Energean has developed into the leading Independent gas focused E&P in the East
Mediterranean. Mathios led the international expansion of Energean, through the acquisitions of Prinos,
Karish and Edison’s E&P business, as well as the Initial Public Offering in London and secondary listing
inTel Aviv. Today, Energean is active in 8 countries, with reserves of over 1.1 bn boe and production
targeting 200,000 boe
/d.
Under Mathios’ leadership, Energean’s ESG strategy has been recognised by numerous awards across
Europe. Mathios was the first E&P CEO to commit to a net-zero strategy in 2019. He was voted CEO of the
year in 2018 in London when Energean was also voted Independent of the Year and the Company’s IPO
received the award for Deal of the Year by World Energy Council.
Prior to setting up Energean Mathios had over 20 years of investment banking and private equity
experience. He worked in London for JP Morgan Chase and subsequently set up Capital Connect, a Greek
private equity fund investing in recycling, IT, healthcare and energy. Mathios holds a degree in Mining and
Metallurgical Engineering from the National Technical University of Athens and an MSc / DIC degree in
Petroleum Engineering from Imperial College.
Page 94 of 255
CORPORATE GOVERNANCE
Independent:
•
N/A
Committee membership:
•
N/A
Current external appointments:
•
None
Panagiotis (Panos) Benos
Chief Financial Officer
Mr. Benos has 21 years international experience in the oil and gas sector, both in banking and industry,
with a long track record of upstream financing in emerging markets. Mr. Benos joined the Energean
Group in 2011 from Standard Chartered Bank, where he was a director in the Oil and Gas team in London
delivering a number of award-winning projects and acquisition finance deals in Africa, Asia and the Middle
East. Before that he worked for ConocoPhillips from 2002 to 2006, where he held positions in European
Treasury, North Sea Economics and International Downstream with a focus on the North Sea, Central
Europe and the Middle East. He commenced his career at Royal Bank of Scotland. He is also a Chartered
Accountant (ICAS) and holds an MSc in Shipping, Trade and Finance from Cass Business School.
Independent:
•
N/A
Committee membership:
•
N/A
Current external appointments:
•
N/A
Andrew Bartlett
Independent Non-Executive Director
Mr. Bartlett was appointed as an Independent Non-Executive Director in August 2017. Mr. Bartlett has
over 30 years’ experience in the upstream oil and gas industry and currently serves as a Non-Executive
Director for Africa Oil Corporation and Prime Oil & Gas B.V. and as Energy Adviser to Helios Investment
Partners LLP (a private equity partnership focused on Africa). Before his current directorships, Mr. Bartlett
served as the chair and Non-Executive Director of Azonto Energy from 2013 to 2015 and Eland Oil & Gas
from 2012 to 2013. He was also previously the Global Head of Oil & Gas M&A and Project Finance for
Standard Chartered Bank between 2004 and 2011. Prior to this, he worked on the Trading and Derivatives
desk of Standard Bank in South Africa. Before joining the investment banking industry, Mr. Bartlett worked
for Shell plc between 1981 and 2001, as a petroleum engineer and development manager, where he
gained extensive experience in the upstream operations of oil and gas fields and latterly as a founding VP
of Shell Capital. He holds an MSc in Petroleum Engineering from Imperial College London.
Independent:
•
Yes
Committee membership:
•
Audit & Risk– Chair
•
Nomination & Governance – Member
Current external appointments:
•
Africa Oil Corporation – Non-Executive Director, Head of Audit Committee
•
Prime Oil and Gas B.V. – Non-Executive Director, Head of Audit Committee
•
Adviser to Helios Investment Partners LLP
Page 95 of 255
CORPORATE GOVERNANCE
Efstathios (Stathis) Topouzoglou
Non-Executive Director
Mr. Topouzoglou was appointed as a Non-Executive Director in May 2017. Mr. Topouzoglou is a founding
shareholder of the Energean Group and co-founder of Prime Marine Corporation (“
Prime
”), serving
as Prime’s chief executive officer and managing director. Prime, a leading worldwide product tanker
company, is a major global provider of seaborne transportation for refined petroleum products, LPG and
ammonia. Mr. Topouzoglou has more than 39 years of experience in founding and growing companies
in the energy transportation sector and holds a B.A. in Business Administration and Economics from the
University of Athens, Greece.
Independent:
•
No
Committee membership:
•
Nomination & Governance – Member
•
Environment, Safety & Social Responsibility – Member
Current external appointments:
•
Chief Executive Officer and Managing Director of Prime Marine Corporation
Amy Lashinsky
Independent Non-Executive Director
Ms. Lashinsky was appointed as an Independent Non-Executive Director in November 2019. Ms.
Lashinsky is the Co-Founder and Chief Executive of Alaco, an international risk management and business
intelligence consultancy. Most active in the emerging and frontier markets, she has over three decades’
experience advising multinationals, financial institutions and investors on matters such as reputational
risk and ESG criteria, delivering intelligence reports to support transactions around the world. She also
works with global law firms and their clients on various contentious matters, from strategic litigation
support to asset tracing and judgement enforcement brought about through arbitration or litigation. Ms.
Lashinsky trained as a securities analyst on Wall Street before joining Kroll in New York in 1985. She
moved to London in 1988 to help establish Kroll’s first overseas office, where she became Managing
Director of its business intelligence unit. In 1995, Ms. Lashinsky set up Asmara Limited, which was sold
to NYSE-listed Armor Holdings in 1998, before co-founding Alaco in 2002. Ms Lashinsky graduated from
the University of Michigan with a B.A. in Political Science. In addition to her duties at Energean, she is a
Trustee of the Rathbones Folio Prize for Literature.
Independent:
•
Yes
Committee membership:
•
Audit & Risk– Member
•
Remuneration & Talent – Member
Current external appointments:
•
Alaco Limited – Chief Executive Officer
Page 96 of 255
CORPORATE GOVERNANCE
Kimberley Wood
Independent Non-Executive Director
Ms. Wood was appointed as an Independent Non-Executive Director of Energean plc in July 2020. She is an
upstream energy lawyer based in London with over 20 years’ experience and is a former partner of Vinson
and Elkins LLP (2011-2015) and Norton Rose Fulbright LLP (2015-2018), where she is currently a senior
consultant. She has extensive experience in the oil & gas sector, as well as in the boardroom. Throughout
her career, she has advised a wide range of companies in the sector, from small independents through
to super-majors. Ms. Wood is included in the Who’s Who Legal: Energy for 2022 and Women in Business
Law for 2022. She holds an LLB from the University of Edinburgh and an LLM in Public International Law
from University College London; and she is admitted as a solicitor in England & Wales.
Ms. Wood is a Director of Gulf Keystone Petroleum Ltd, a company listed on the main market of the London
Stock Exchange, where she chairs the Remuneration & Talent Committee. She is also a Director of Africa
Oil Corp, a company listed on the Toronto Stock Exchange and the NASDAQ Nordic Exchange, chairing
the Corporate Governance and Nomination Committee and finally is a Director of Valeura Energy Inc., a
company listed on the Toronto Stock Exchange, chairing its Governance and Compensation Committee.
Independent:
•
Yes
Committee membership:
•
Remuneration & Talent – Chair
•
Audit & Risk – Member
•
Nomination & Governance – Member
Current external appointments:
•
Gulf Keystone Petroleum Ltd – Independent Non-Executive Director
•
Africa Oil Corp – Independent Non-Executive Director
•
Valeura Energy Inc – Independent Non-Executive Director
Andreas Persianis
Independent Non-Executive Director
Mr. Persianis was appointed as an Independent Non-Executive Director in July 2020. Mr. Persianis is
an experienced Non-Executive Director with over 30 years’ international financial markets experience in
central banking, asset management and Corporate Strategy. He is currently the Managing Director of
Fiduserve Asset Management in Cyprus, a regulated Alternative Investment Fund Management company
that sets up and manages private funds for a diverse range of private and institutional clients. Before
that he was Founder and Managing Director of Centaur Financial Services, a discretionary portfolio
management company with presence in the UK and Cyprus. He has served as a Non-Executive Director
at Central Bank of Cyprus (2014-2019) and on the Bank of Cyprus Board in 2013. He is currently serving
as an Independent Non-Executive Director on the board of Hellenic Bank. He has also worked as a Senior
Manager at Bain & Company (London), one of the world’s largest strategy consulting firm. He holds an
Electrical Engineering undergraduate degree from the University of Cambridge and a Master’s in Business
Administration (MBA, Major in Finance & Investment Banking) from the Wharton Business School.
Independent:
•
Yes
Committee membership:
•
Audit & Risk – Member
•
Environment, Safety & Social Responsibility – Member
Current external appointments:
•
Hellenic Bank PLC– Independent Non-Executive Director
Page 97 of 255
CORPORATE GOVERNANCE
Roy Franklin
Senior Independent Non-Executive Director
Mr. Roy Franklin was appointed Non-Executive Director in October 2021. Mr. Franklin has over 45 years
of experience as a senior executive in the oil and gas industry. He began his career at BP where he
spent 18 years, and served as head of M&A at BP Exploration as his latest position. After leaving BP,
Mr. Franklin acted as managing director of Clyde Petroleum, and then as CEO of Paladin Resources until
its acquisition by Talisman Energy in 2005. Mr. Franklin has extensive experience as a Non-Executive
Director. He sat on the boards of Amec Foster Wheeler plc (2016-2017), Keller Group plc (2007-2016),
Equinor A/S (2015-2019), Premier Oil PLC (2017-2021) and Santos Limited (2006-2017). Mr. Franklin also
acted as a member of the Advisory Board of Kerogen Capital LLC until September 30, 2021. Mr. Franklin
currently acts as Chair of the international energy services group, John Wood Group PLC, as well as a
Non-Executive Director of Kosmos Energy. Mr. Franklin holds a Bachelor of Science in Geology from the
University of Southampton, and in 2004 was awarded an OBE in recognition of his services to the Oil &
Gas industry.
Independent:
•
Yes
Committee membership:
•
Environment, Safety & Social Responsibility – Chair
•
Nomination & Governance – Member
Current external appointments:
•
John Wood Group PLC – Non-Executive Chair
•
Kosmos Energy – Non-Executive Director
Page 98 of 255
CORPORATE GOVERNANCE
Corporate Governance Statement
Good corporate governance is essential to creating trust and engagement between us and our
stakeholders, as well as contributing to the long-term success of our strategy. The Board is committed
to the highest standards of corporate governance in accordance with the 2018 Corporate Governance
Code (the “
Code
”), which the Company is pleased to confirm it has complied with. The Code is available
at
www.frc.org.uk
. In this report, we describe our corporate governance arrangements and explain how
the Group applies the principles of the Code.
•
Board Leadership and Company Purpose is set out on pages
10
1-102
•
Division of responsibilities is set out on pages
10
2-103
•
Composition, Succession and Evaluation is set out on page
10
3
•
Audit, Risk & Internal Control is set out on page
s 10
3-104
•
Remuneration is set out on page104
We also set out our governance structures to consider the impact our business has on climate change
in line with the recommendations of the Task Force on Climate-related Financial Disclosures (“
TFCD
”).
Company Purpose, Vision and Values
The Company’s purpose, vision and values are communicated to employees through regular engagement
such as team and townhall meetings, messages from the CEO, and through our intranet where group
policies and resources can be accessed. Further details on how the Company engages with both its
workforce and with the communities in which it operates are set out on in the s172 Statement on
page
10
6-109.
Purpose
To create long-term value for all our stakeholders and help deliver the energy transition through a focus
on natural gas.
Our Vision
To be the leading sustainable, gas focused and innovative independent E&P company in the Eastern
Mediterranean.
Our Values
Energean seeks to fulfil its vision by adhering to the following values:
•
Responsibility in all our actions and areas where we conduct our business;
•
Excellence in everything we do; deploying best practices to achieve profitable and sustainable
growth;
•
Integrity; respecting our shareholders, employees and business; promoting transparency and
accountability; cultivating a unique corporate sustainability culture;
•
Commitment to a talented workforce; investing in our people’s development;
•
Caring for the environment; reducing our environmental footprint; and
•
Engagement with local communities; meeting their expectations and needs.
Our Principles
Our values are underscored by our Corporate Principles, which are as follows:
•
Being ethical and responsible;
•
Being transparent and accountable;
•
Creating an attractive workplace and being an employer of choice;
•
Mitigating environmental impacts and minimising our footprint; and
•
Supporting local communities.
We believe that putting our values into practice and abiding by our principles will help us create long-term
benefits for shareholders, customers, employees, suppliers, and the communities we serve.
Page 99 of 255
CORPORATE GOVERNANCE
Board and Committee Attendance
Type and number of meetings held during the year:
Director
Board
(8)
Audit & Risk
(5)
Remuneration
& Talent
(6)
Nomination &
Governance
(4)
Environment,
Safety & Social
Responsibility
(3)
Karen Simon
49
8
–
6
4
2
Mathios Rigas
8
–
–
–
–
Panos Benos
8
–
–
–
–
Andrew Bartlett
50
8
5
4
2
–
Robert Peck
51
2
–
0
1
1
Efstathios
Topouzoglou
8
–
–
3
3
Amy Lashinsky
52
7
5
2
–
1
Kimberley Wood
8
5
6
4
–
Andreas Persianis
8
5
–
–
3
Roy Franklin
53
8
–
1
4
3
The Board has a formal schedule of matters that can only be decided by the Board, and this schedule was
reviewed and updated by the Board during 2022.
The key matters considered by the Board in 2022 were:
HSE performance
Approving the Group 2023 budget
Payment of the Company’s inaugural interim
dividends
Group strategy in light of the increased focus on
ESG matters
Strategic decisions on capital expenditure
Karish project having been brought onstream and
first gas achieved
The composition of committees
Board composition
Deep dive into the decommissioning process
from a technical and financial perspective
Review of risk register and a deep dive into risk
management including the introduction of a new
Enterprise Risk Management (“
ERM
”) system
Deep dive into operational insurance covers
Appointment of new Senior Independent
Non-Executive Director
Material contracts
Reviewing and approving the financial statements
for the 2021 year-end and 2022 half year
Financial reporting and controls
Compliance with statutory and regulatory
obligations
Material litigation
Significant transactions
Internal controls and risk management
Delegations of authority
Executive remuneration
Growth drilling programme in Israel
49
Karen Simon joined the ESSR Committee with effect from 20 July 2022. The number of possible ESSR Committee meetings
Karen Simon could have attended was 2.
50
Andrew Bartlett left the Remuneration & Talent Committee and joined the Nomination & Governance Committee with effect
from 20 July 2022. The number of possible Remuneration & Talent Committee meetings Andrew Bartlett could have attended
was 4 and the number of possible Nomination & Governance Committee meetings was 2.
51
Robert Peck retired from the Board at the conclusion of the 2022 AGM held on 26 May 2022. The number of possible Board
meetings Robert Peck could have attended was 2, the number of Remuneration & Talent Committee meetings was 3, the
number of Nomination & Governance Committee meetings was 1 and the number of ESSR Committee meetings was 1.
52
Amy Lashinsky left the ESSR Committee and joined the Remuneration & Talent Committee with effect from 20 July 2022.
The number of possible ESSR Committee meetings Amy Lashinsky could have attended was 1 and the number of possible
Remuneration & Talent Committee meetings was 2.
53
Roy Franklin joined the Remuneration & Talent Committee with effect from 20 July 2022. The number of possible Remuneration
& Talent Committee meetings Roy Franklin could have attended was 2.
Page 100 of 255
CORPORATE GOVERNANCE
Share premium reduction
Reviewing of Greek and Italian assets and capital
allocation
Receiving updates on the Group’s activities in
carbon capture
Monitoring of progress against environmental
commitments
Board approved a Diversity, Equity and Inclusion
policy for the Group.
Benchmarking of Diversity, Equity and Inclusivity
performance.
Board leadership and Company’s purpose
The Board’s primary role is to promote the long-term sustainable success of the Company and to ensure
that value is being generated for shareholders as well as contributing to wider society. This is carried out
through detailed reviews by the Board of the Company’s investment plans, funding plans, and corporate
social responsibility strategy. Details of the Company’s Corporate Social Responsibility commitments and
actions are found on pages
4
5-52. Details of the Company’s engagement with stakeholders is detailed
in the section 172 (1) statement on pages
10
6-109. As required by the Code, the Board is required to
consider and assess the risks the business faces, and is assisted in this process by the Audit & Risk
Committee. The Group’s principal risks and uncertainties, which provide a framework for the Audit & Risk
Committee’s focus, are discussed on pages
7
4-93. The Environmental, Safety & Social Responsibility
(“
ESSR
”) Committee ensures that a key pillar of the Company’s strategy (sustainability and the commitment
to net-zero by 2050) is monitored and assessed in a single forum that then reports on its activities to
the Board. For details on the ESSR Committee’s activities see pages
116-117. The sustainability of the
Company’s business is considered further on pages
1
5-19 of the Strategic Report.
As part of the Company’s contribution to wider society, the Board was again pleased to see the progress
that the Company has made during 2022 in furtherance of its commitment to the UN’s Global Compact
campaign and pledge to net-zero emissions by 2050. 2022 also saw the Company’s Carbon Disclosure
Project (“
CDP
”) rating increased to A- (from B) outperforming the global average for E&Ps of C. Furthermore,
the Remuneration & Talent Committee again included targets to reduce emissions in the short-term and
long-term bonus plans. This now means that the majority of the incentive plans in the Company have
targets relating to reducing emissions. Furthermore this demonstrates the Company’s commitment to
creating value through sustainable development, taking into account the environmental aspects of its
business. Further details of activity in relation to protecting and minimizing impact on the environment
can be found on pages
1
7-19.
Energean has grown from a company that was producing 3,000 barrels of oil equivalent per day (boe/d) in
2019 to a company that produces now, following first gas in Karish, average working interest production
of approximately 41.2
kboepd in 2022 having also significantly increased its reserves during the year.
Karish will be the key driver of the step up to 200,000 boe/d. The Company operates in seven countries
in the East Med and North Sea and has made significant progress in reducing the carbon intensity of its
operations (when measured against the Kilograms of CO2 produced per boe). The Company is also proud
of its health and safety record, further details of which can be found at page
6
0.
In May 2022, Amy Lashinsky was appointed by the Board as the workforce Board representative.
Employees can confidentially email Amy Lashinsky to raise any issues, to the extent appropriate.
In
addition, employees can raise concerns through the confidential whistleblowing procedure via either
the whistle-blowing officer or the Chief Executive Officer, and, when not happy with the way in which their
concern has been handled, they may contact the chair of the Audit & Risk Committee or our external
auditors. The Board receives monthly updates from the Group HR Director on staff-related matters and
has a direct line of communication if required. The Company is committed to investing in its workforce
and employees are able to submit requests for training to enable them to pursue professional training in
their respective areas which is funded by the Company. Employees are also able to benefit from study
leave to give them adequate time to study for these qualifications. The Company has also rolled out
e-learning modules for employees to further develop their knowledge in key corporate matters such as
anti-bribery and corruption. Eligible employees also benefit from pensions contributions at rates that,
under the remuneration policy, are used as the basis to align Executive Directors pension contribution
rates to the wider workforce. Eligible employees are also able to benefit from two share plans the Deferred
Bonus Plan and the Long Term Incentive Plan. Further details on employee related matters are found on
pages
5
2-56. The Board also monitors the Company culture and includes culture related metrics in the
Company’s annual bonus plan. During 2022 these metrics included the benchmarking of Diversity, Equity
and Inclusivity performance against the Centre of Global Inclusion benchmark tool and the approval of
Page 101 of 255
CORPORATE GOVERNANCE
a Diversity, Equity and Inclusion policy. Goals relating to culture are also included in the 2023 bonus
scorecard and the Board and the Remuneration & Talent Committee will continue to monitor and track
progress against these objectives.
Each year the Company welcomes shareholders to its Annual General Meeting (“
AGM
”), which provides a
unique opportunity to ask questions to the Board. The results of the voting on each resolution proposed
to the meeting are published via the Regulatory News Service and through the Tel Aviv Stock Exchange
news service.
The Board and Remuneration & Talent Committee continue to engage with shareholders on issues related
to remuneration most recently by way of a letter to shareholders sent in
March 2023. More information on
this matter is set out on page
12
5.
Division of responsibilities
The Board currently comprises:
•
The Chair (who was independent upon her appointment)
•
Two Executive Directors (Chief Executive Officer and Chief Financial Officer)
•
One Non-Executive Director (Efstathios Topouzoglou)
•
Five Independent Non-Executive Directors.
The independence of Mr. Topouzoglou was tested against the criteria set out in Provision 10 of the
Code. Whilst he is considered to be independent in character and judgement, he is not deemed to be
independent by reference to the criteria set out in the Code, as a result of being a significant shareholder,
owning approximately 9.47% of the shares of the Company (as an individual and through his indirect
holdings in both Oilco Investments Limited and HIL Hydrocarbon Investments Limited).
There is a clear division of responsibilities of the Chair, the Executive Directors and the Non-Executive
Directors. The roles of Chair and Chief Executive Officer are separate, and the responsibilities clearly
defined. It is the Chair’s responsibility to provide leadership of the Board and set the Board agenda as
well as to ensure that the Board is provided with accurate, timely and clear information in relation to the
Group and its business. The Chief Executive Officer is responsible for setting the overall objectives and
strategic direction of the Group as well as having day-to-day executive responsibility for the running of the
Company’s business. The Chief Executive Officer is supported by the Executive Committee which meets
fortnightly and comprises of country managers and functional heads. The Chair and Chief Executive
Officer share responsibility for the representation of the Company to third parties.
As detailed on page
10
0, the Board met eight times throughout the year, which is deemed to be sufficient,
given the size and complexity of the Company’s operations.
The Chair leads the Board and is responsible for its overall effectiveness in directing the Company.
The
Chair is committed to promoting a culture of openness and debate. The Board provides rigorous
challenge to management and such challenge is supported and facilitated by the Chair. The Directors
have strong experience in the sector in which the Company operates (and seeks to operate) and have
a broad range of business, commercial and governmental experience. The Board is supported by the
Company Secretary who is also Secretary to all the Board Committees. This ensures effective information
flow between the Board and its Committees. Each Committee reports to the Board at the next Board
meeting following its own meeting, so that the Board is kept up to date on key matters being dealt with.
The Board benefits from the use of an electronic Board portal system to assist with the timely production
of Board papers and reviewing key Company policies throughout the year. The Board has unfettered
access to senior executives at the Company and is fully supported by the Company Secretarial team.
Every month, whether or not a Board meeting is scheduled, the Board receives a comprehensive report
from management on the business’s performance, which keeps the Non-Executive Directors up-to-date
on all the key issues; and Board members are able to ask management questions on any matter.
Each Board appointment is for an unlimited term, subject to being re-elected as a Director at each AGM.
A
Non-Executive Director or the Company may terminate the appointment at any time upon three months’
written notice. These appointments are subject to the provisions of the Articles of Association, the Code,
the Companies Act and related legislations. The role of the Senior Independent Non-Executive Director,
Roy Franklin, is to provide a sounding board for the Chair and to serve as an intermediary for the other
Directors when necessary. The Senior Independent Non-Executive Director is available to shareholders if
Page 102 of 255
CORPORATE GOVERNANCE
they have concerns which contact through the normal channels of Chair, Chief Executive Officer or Chief
Financial Officer has failed to resolve, or for which such contact is inappropriate.
Composition, succession and evaluation
During the year, the Nomination & Governance Committee oversaw the retirement of Robert Peck,
an Independent Non-Executive Director, from the Board and, following Andrew Bartlett’s decision to
step-down as the Senior Independent Non-Executive Director, the appointment of Roy Franklin as his
replacement. The Nomination & Governance Committee keeps the succession plans for Directors and
senior management continuously under review, including by reference to the present composition of the
Board and each member’s skills and individual performance. More information on this matter is set out
on page
s 1
18-122.
Following Robert Peck’s retirement, the Nomination & Governance Committee reviewed the composition
of the Board committees and recommended the following changes to the Board which were approved
with effect from 20
July 2022:
•
Andrew Bartlett joined the Nomination & Governance Committee and left the Remuneration &
Talent Committee;
•
Amy Lashinsky joined the Remuneration & Talent Committee and left the ESSR Committee;
•
Roy Franklin joined the Remuneration & Talent Committee; and
•
Karen Simon joined the ESSR Committee.
Details of these Board and Committee changes can be found in the Nomination & Governance Committee
report on page
12
0.
In the second half of the year, as required by the Code, the Chair, the Board, its committees and the
individual directors were subject to an internally facilitated annual evaluation of their performance, further
details of which are contained in the Nomination & Governance Committee report on pages
1
18-122. The
results were reviewed by the Committee and discussed with the Board. Both the Nomination & Governance
Committee and the Board were satisfied that each Director continues to contribute effectively.
The Board is satisfied that the Directors have the right combination of skills, experience and knowledge to
assist the Company in achieving its long-term goals.
As the Board was formally constituted just prior to the Company’s listing on the London Stock Exchange
in March 2018, no Independent Non-Executive Director had served more than five years by the end of
2022.
During 2023, the Chair, the Board, its committees and individual directors will be subject to an externally
facilitated review as required by the Code. The results of that externally facilitated review will be reported
on in the 2023 Annual Report & Accounts as well as details on the plans for the Board to continually
monitor performance against those results.
During 2022, upon the Nomination & Governance Committee’s recommendation, the Board approved a
Diversity, Equity and Inclusion policy for the Group recognising that a truly diverse, equitable and inclusive
culture is crucial to attracting, developing and retaining talent. The Board also appointed the Group HR
Director to act as the Group’s DEI Leader.
Audit, risk and internal control
The Board established the Audit & Risk Committee upon admission to the London Stock Exchange, which,
during 2022, comprised Andrew Bartlett, Amy Lashinsky, Andreas Persianis and Kimberley Wood, all of
whom are Independent Non-Executive Directors. The Board is satisfied that Andrew Bartlett has recent
and relevant experience and that the Committee as a whole has competence relevant to the sector in
which the Company operates. The main roles and responsibilities of the Committee are set out in its
terms of reference, which are available to download at
www.energean.com
or available upon request
from the Company Secretary.
As part of its responsibilities, the Committee has formal and transparent policies in place to ensure the
independence and effectiveness of the internal and external audit functions and satisfy itself on the
integrity of the Company’s financial and narrative statements. The Audit & Risk Committee reviews and
monitors the internal control framework and ensures that a robust assessment of the Group’s principal
risks has been undertaken. In 2022 this saw the introduction of a new Enterprise Risk Management
(“
ERM
”) system, as further described on page
7
4. Further information about the Committee’s roles,
Page 103 of 255
CORPORATE GOVERNANCE
responsibilities and activity is detailed on page
s 11
0-115 and further details on the Risk Management
process is found on pages
7
4-93.
This Annual Report includes a number of disclosures that set out the Company’s position and prospects.
The Statement of Directors’ Responsibilities confirms that the Directors believe those disclosures and the
Annual Report and Accounts, taken as a whole to be fair, balanced and understandable and the auditor,
Ernst & Young LLP, has given its opinion that the financial statements give a true and fair view of the
Group’s affairs.
Remuneration
The Board established the Remuneration & Talent Committee as part of the admission process in March
2018. During 2022 the Committee members were Kimberley Wood and Karen Simon with Roy Franklin
and Amy Lashinsky joining the Remuneration & Talent Committee with effect from 20 July 2022. Robert
Peck, having retired from the Board following the conclusion of the 2022 AGM held on 26 May 2022, left
the Committee as did Andrew Bartlett with effect from 20 July 2022. Kimberley Wood, Roy Franklin and
Amy Lashinsky are Independent Non-Executive Directors and Karen was considered independent upon
her appointment as the Company’s Chair. Amy Lashinsky is also the Board’s workforce representative
and ensures that the views of the workforce are taken into consideration in Board decision making.
The Committee has delegated responsibility for determining policy for Executive Director remuneration and
setting the remuneration for the Chair, Executive Directors and senior management. In addition, it reviews
workforce remuneration and related policies and the alignment of incentives and rewards with culture,
taking these into account when setting the policy for Executive Director remuneration. The Company has
in place a long-term incentive plan (“
LTIP
”) for the Executive Directors and senior management, which is
designed to promote the long-term success of the Company by assessing performance over three years
and is linked to absolute and relative share price performance against a peer group of other companies,
as well as emission reductions.
Furthermore, the Company has in place an annual bonus scheme which incentivises management to
progress with key projects as well as measures related to financial liquidity and ESG. It requires Executive
Directors to defer one third of the bonus into shares to be held in trust for two years. This further aligns
the Executive Directors with the long-term interests of the shareholders.
The members of the Remuneration & Talent Committee are required to exercise independent judgement
and discretion when authorising remuneration outcomes, with regard to Company and individual
performance and wider circumstances. No Director is involved in deciding their own outcome; and when
discussing fees for the Chair, Karen Simon recuses herself from these discussions. Further details of the
role and activities of the Remuneration & Talent Committee and the Remuneration Policy are found on
pages
1
31-147 of this report.
Climate change
Board oversight
Energean sees climate change as a major global concern and a top priority for our business. This is
reflected in our strategy, and we apply all our governance processes to climate change-related issues.
Responsibility for the governance of climate change issues within Energean rests with the Board. To
reflect the increasing importance of climate change-related risks and opportunities, the ESSR Committee
has taken over responsibility for climate change matters on behalf of the Board. The Board is also charged
with reviewing investments for climate-related risks (among other risks).
The ESSR Committee evaluates Energean’s policies and systems for identifying and managing
sustainability related risks, which includes identification of emerging risks, such as climate change risks,
and proposes mitigation measures. The Committee further ensures Energean’s compliance with relevant
regulatory requirements and/or applicable international standards and guidelines. The Committee follows
political and regulatory discussions and developments on an international, EU-wide and national level on a
variety of ESG issues, including energy, climate and environment, and industrial trends, etc.
The ESSR Committee convenes three times a year and reviews the Board papers on Energean’s carbon
emissions performance and KPIs where possible when the Committee meets before a Board meeting.
Page 104 of 255
CORPORATE GOVERNANCE
In addition, the Audit & Risk Committee looks at climate change-related issues, to ensure the identification
of multi-disciplinary risks (including climate change-related risks), which may impact more than one part
of the Company. This Committee is responsible for ensuring that measures to mitigate and adapt to the
risks identified are effective and implemented as necessary.
The Remuneration & Talent Committee has responsibility for the annual directors’ bonus targets, long
term incentive plans, and the overall Remuneration Policy. Both the annual directors’ bonus targets and
the long-term incentive plans link executive bonuses to the achievement of emission reduction targets.
Management oversight
The Board sets the Company’s values and standards, including the Group’s long-term objectives and
commercial strategy, and ensures that its obligations to its shareholders and others are understood and
met. Day to day responsibility and accountability for the Company’s environmental and climate change
policy, strategy and targets related to short, medium and long-term plans lies with the CEO.
The CEO is responsible for identifying and assessing business and climate-related risks, defining the
strategy and approving action plans suitable to control and mitigate the identified risks. Furthermore,
the CEO oversees the Company’s overall environmental performance and sets climate performance
expectations and targets. The CEO discusses all relevant actions and activities related to climate change
and the energy transition with the Board. The CEO and the Board regularly discuss climate change-related
issues, such as climate change policies, investment decisions where climate change considerations are a
major driver, and the carbon credit price’s impact on Energean’s future financial performance.
The operational management of climate change issues is conducted by the HSE Director, who reports
directly to the CEO and provides updates to the Board on a regular basis. The HSE Director maintains and
oversees the development of Energean’s Corporate HSE and Climate Change Policy, defines appropriate
training programmes and drills for the entire Company to increase safety, environmental and climate
change awareness, and monitors technological developments and opportunities to help achieve defined,
appropriate climate change targets. The HSE Director is tasked with ensuring that the Company stays on
track to meet its net-zero 2050 target. The HSE Director oversees the monitoring of Energean’s carbon
emissions throughout all assets and defines the carbon emission factors that Energean’s financial team
uses to understand the financial impact of climate change on Energean’s portfolio. Furthermore, the HSE
Director assesses the climate risks and opportunities in cooperation with Energean’s financial, economic
and technical departments.
Board expertise
To ensure Energean’s Board remain up to date on the most pertinent climate change developments
and to further enhance their knowledge and skills in relation to climate change issues, Energean invites
leading industry and climate change experts to Board and Committee meetings on a regular basis. The
HSE Director proactively interacts with Board members to provide necessary information and further
insights on specific climate change-related issues affecting the Company.
Board expertise
– Chaired by
CEO, HSE Director also a member.
Meets fortnightly, the HSE Director
on climate change issues.
Environment, Safety & Social
Responsibility (“ESSR”)
chaired by Roy Franklin (Senior
Independent Non -
Director),
Board (
),
CEO and HSE Director.
a year and receives reports from
the HSE Director on climate issues.
The Board meets every 2 months
with ad-
and monthly calls in months where
. The
Board receives regular reports
. Roy
Franklin provides updates on ESSR
.
Page 105 of 255
CORPORATE GOVERNANCE
Section 172 (1) Companies Act 2006 Statement
The Directors confirm that, throughout the year, they have acted in a way they consider, in good faith, would
be most likely to promote the success of the Company, as required by section 172 of the Companies Act
2006.
This section further requires the Directors to have regard to a range of factors when making decisions,
including the likely long-term consequences of any decision, the interests of the Company’s employees,
the need to foster the Company’s business relationships with suppliers and others, the impact of the
Company’s operations on the environment, maintaining a reputation for high standards of business
conduct, and the need to act fairly between members of the Company. The Company’s key stakeholders
are its employees, local communities, governments in the countries in which the Company operates,
customers, and shareholders. The specific engagement with stakeholders on a day-to-day level is
delegated to the executive management team with the Board being kept up to date with the results of
this engagement and future plans. The Executive Directors routinely meet with shareholders to discuss
the strategic direction of the Company and the feedback from these meetings is shared with the other
Directors. Details of the Board’s engagement with the workforce is found on page
10
6 of this report and
details of the Board’s and Company’s engagement with local communities is found on page
s 10
6-108 of
this report.
Throughout the year the Board placed a high importance on stakeholder considerations and considered
these at the centre of its decision-making process.
Long term impact of decisions
Energean has a clear ambition to be the leading Mediterranean focused gas producer and is committed
to sustainability and being a net-zero emitter by 2050. Strategic decisions are taken at the Board with
this ambition at the forefront and as such requiring the Board to consider the long-term impact of any
decisions, especially in relation to reviewing the investment decisions in the Group’s portfolio of assets.
Examples of this decision making in action include the taking the final investment decision on the Israel
growth projects and the proposed development of a carbon capture and storage project at the Prinos
acreage in Greece. For the Israel growth projects the Directors considered the Company’s wider growth
plans and future ability to pay a dividend as well as enabling Israel to use gas as a transition fuel to
move away from coal. For the carbon capture and storage project the Board considered the vital role
that carbon capture and storage could play in the Company’s sustainability plans and vital role the facility
could play in the region.
Engagement with:
Workforce
As required by the UK Corporate Governance Code, Amy Lashinsky, an Independent Non-Executive
Director, was appointed by the Board in 2022 to be the “employee voice” in the boardroom replacing
Robert Peck who retired from the Board on 26 May 2022. Amy Lashinsky met informally with mid-level
managers and staff in Milan at the October Enterprise Risk Management workshop. During 2022, Amy
Lashinsky also joined the Remuneration & Talent Committee where she participates in discussions related
to the Company’s work force.
As part of the 2022 bonus KPIs, the Executive Directors were set objectives relating to conduct and culture.
The Executive Directors were awarded a 100% pay-out on this metric following the successful completion
of the Diversity, Equity and Inclusion (“
DEI
”) benchmarking using the Centre of Global Inclusion benchmark
tool and the approval of a DEI policy.
Local communities
Energean is very active in the communities in which it operates (further information on this can be found
on pages
4
6-52), and the Directors are cognisant of their responsibilities to “give something back” by
means that are appropriate to the particular communities. The Board receives information on such
activities being carried out by the Company in monthly reports and at Board meetings. The activities
are tied to the Company’s commitment to the fulfilment of the 17 UN Sustainable Development Goals.
Examples include:
Page 106 of 255
CORPORATE GOVERNANCE
•
In Greece, we purchased and donated school supplies, classroom equipment, and stationery to 3
social institutions, 2 community centers and 1 kindergarten, supporting over 400 students and their
families in need in Kavala and the Island of Thassos, Greece.
•
In Israel, for the fourth year we continued to support “Etgarim”, an NGO dedicated to the
empowerment and social integration of people with disabilities through outdoor sports and, for
a second year in a row, Energean colleagues ran 5 and 8 kilometers in Etgarim’s “Spring Run”
delivering a message of inclusivity.
•
In Italy, in collaboration with “Caritas” (a Catholic organisation for charity), we donated school
supplies and stationery, helping a Charity Centre and families in need and their children in Chieti
Province, Sicily and Milan, Italy.
•
In Montenegro, Energean teamed up with the Greek Embassy and donated valuable food packages
to the donation campaign of the NGO “Women of Bar”.
•
In Egypt, we partnered with the broader Egyptian Petroleum Sector to provide support and new
houses to the victims of the terrible flood at Khor Awada village.
•
In Egypt, Energean’s Egyptian Abu Qir Petroleum (“
AQP
”) joint venture (JV) partners received their
first certificate for waste segregation and paper recycling in Egypt. AQP became the first Oil & Gas
JV in Egypt to entirely (100%) recycle its paper, cartons and plastic waste from all its offices and
operational sites (onshore and offshore). Energean’s Cairo branch has followed the same approach
of waste segregation and recycling, by cooperating with “Go Clean”, a recycling solutions company.
On 5 June 2022 (World Environment Day), Energean organised the following activities, focused on positive
sustainability actions and increased environmental awareness, aligning with the UN’s 2022 theme of
“Only One Earth”:
•
In Kavala, Greece we donated waste disposal bins to the village of Nea Peramos and organised and
performed a beach clean-up at Richo Beach, in collaboration with the Municipality of Paggaion, in
the villages of Nea Peramos & Nea Iraklitsa;
•
In Montenegro we donated concrete waste disposal bins to the Maljevik and Sutmore sea-side
promenades, in cooperation with the Municipality of Bar;
•
In Egypt we performed a beach clean-up in the village of Al Maadeyah, in cooperation with AQP
and “GoClean”, we distributed LED lamps to underprivileged families in cooperation with AQP,
we distributed recycling bins to schools and the Al Maadeyah beach club, and we hosted an
environmental awareness session titled “Preserve the Environment by Recycling”, encouraging our
employees to form sustainable habits and raise awareness for the next generation;
•
In Haifa, Israel we granted 2 Master’s degrees Clean Energy scholarships to students at the Technion
(the Israel Institute of Technology), to reward excellence and promote academic research on clean
energy.
Page 107 of 255
CORPORATE GOVERNANCE
During 2022, Energean collaborated with:
Globally:
United Nations Global Compact & United National Global Working Group Participation
In Greece:
Management body of the Nestos River Delta, Lakes Vistonida-Ismarida and Thassos Island
The Regional Unit of Kavala
The Holy Diocese of Philippi, Neapolis and Thassos – Northeastern Greece
Democritus University of Thrace (DUTH), Department of Environmental Engineering
Athletic Club of Kavala – Department of Wheelchair Basketball”
The Health Center of Prinos
The Prefectural Association of People with Disabilities of Kavala
OKAK (Kavala’s Track and Field Athletic Club)
MDA Hellas (the Muscular Dystrophy Association of Greece), a non-profit organisation that supports
people that suffer with neuromuscular diseases
In Israel:
Maala, a non-profit, CSR standards-setting organisation in Israel, which has set a dedicated CSR index
on Tel Aviv Stock Exchange. Maala’s CSR Index is an ESG rating system used as an assessment tool,
benchmarking Israeli companies on their CSR performance. Energean was rated at Platinum Level, for
the first time, at the 2022 Maala ESG Index.
“Yeladim – Fair Chance for Children”, an NGO which takes care of children that were removed from
their homes and live in boarding schools
Rahaf Sailing and Surfing Club, a Club that supports young sailors from low-income communities
Etgarim, an NGO dedicated to the empowerment and social integration of people with disabilities
through outdoor sports – Haifa
The Nature and Parks Authority
The University of Haifa and the Technion
In Montenegro:
The Municipality of Bar – City of Bar
The Greek Embassy – Podgorica, Montenegro
In Italy:
“Caritas Diocesana”, a Catholic organisation for charity – Chieti Province
The Italian Naval League
“IdeaVita”, an organisation with the aim of designing and implementing independent life paths to
people with disabilities, affirming and guaranteeing their right to a full and independent life over time
“Aretusa” Handball Team
Order of Journalists of Molise
LILT, the National Association for the Research Against Cancer
Alma Mater Studiorum, University of Studies, Bologna
Assorisorse – Natural Resources and Sustainable Energy, a Confindustria Association made up
of about 100 companies committed to enhancing natural resources and intellectual skills through
technological innovation and the circular economy, with the aim of decarbonising industrial processes
and achieving environmental, economic and social sustainability
In Egypt:
“Go Clean”, a recycling solutions company
The American University of Cairo
Dar Al Orman Association, an NGO that performs charity work
Egyptian Petroleum Sector
Page 108 of 255
CORPORATE GOVERNANCE
Governments
The Company has a transparent dialogue with all host governments in countries where it operates and
seeks to operate. All these discussions are led by the Chief Executive Officer. The Company regularly
engages in industry forums in these countries to further demonstrate its commitment to working closely
with their governments.
Shareholders
Energean is committed to transparency and engaging with its shareholders, including providing all
appropriate information to the investment community. The annual report and accounts are available
from
www.energean.com/investors/reports-presentations
and, where elected or on request, will be
mailed to shareholders and to stakeholders who have an interest in the Company’s performance. The
Company responds to all requests for information from shareholders and maintains a separate Investor
Relations section within the existing
www.energean.com
website, as a focal point for all investor relations
matters. Moreover, there is regular dialogue with institutional shareholders via face-to-face meetings,
investor roadshows, RNS announcements, regular trading updates and conferences, as well as general
presentations that are published on the Company’s website. Furthermore, the Board is advised of any
material comments from institutional investors, to enable it to develop an in-depth understanding of
the views of major shareholders. All shareholders have the opportunity to put forward questions to the
Company’s AGM.
Maintaining a reputation for high standards of business conduct
It is our policy to conduct all our business in an honest and ethical manner, and comply with all applicable
anti-bribery laws, including, but not limited to all applicable local laws where Energean operates and the
U.K. Bribery Act 2010, and to accurately reflect all transactions on Energean’s books and records.
We take a zero-tolerance approach to bribery and corruption and are committed to acting professionally,
fairly and with integrity in all our business dealings and relationships wherever we operate. We actively
monitor and manage risks from bribery or ethical misconduct, and we run an anti-corruption and anti-
bribery compliance program, actively overseen by the Board.
During the year, the Company continued to actively monitor and manage risks from bribery or ethical
misconduct and the due diligence process was extended to include assessments for compliance health
check on all our new customers to ensure that their internal policies meet the high standards that Energean
expects from its partners.
Page 109 of 255
CORPORATE GOVERNANCE
Audit & Risk Committee Report
Andrew Bartlett – Chair of the Audit & Risk Committee
I am pleased to present this Audit & Risk Committee Report for the year ended 31 December 2022, which
sets out the role and work of the Committee during the year and key areas of focus for 2023. 2022 was
a busy year for the Committee as it assisted the Board with its financial reporting obligations for the
annual report, interim report, the introduction of a new Enterprise Risk Management (“
ERM
”) system and
payment of the Company’s maiden interim dividend. I would like to thank my fellow committee members
for their hard work and commitment throughout the year.
Membership of the Committee
The members of the Audit & Risk Committee during the year were myself, Andreas Persianis, Amy
Lashinsky, and Kimberley Wood.
The Board remains satisfied that the Committee has recent and relevant financial experience, and that
the Committee as a whole has sufficient experience of the oil and gas sector to meet the requirements
of the Code.
Furthermore, the Committee’s members are all Independent Non-Executive Directors, and therefore the
composition of the Committee complies with the Code. Committee members’ skills and experience are
documented on pages
9
4-98.
Any member of the Committee, the Company’s external auditor, or the Head of Internal Audit or the
Head of Compliance may request a meeting if he/she considers that one is necessary or expedient. No
meetings of this nature were requested during the financial year. The Committee met with the external
auditor on several occasions without management presence. The Chair of the Board, CFO, external audit
partner and Head of Internal Audit attend meetings by standing invitation; the Company Secretary acts as
Secretary to the Committee.
Attendance at Meetings
The Committee met five times during the year, and attendance at these meetings is set out below:
Director
Number of
meetings
entitled to
attend
Number of
meetings
attended
Andrew Bartlett
5
5
Kimberley Wood
5
5
Amy Lashinsky
5
5
Andreas Persianis
5
5
The Audit & Risk Committee’s role
Following the annual review of the Audit & Risk Committee’s Terms of Reference, updates were made to
ensure alignment with the Code and best practice guidance.
To view the Audit & Risk Committee’s terms of reference, please visit the Company’s website
www.energean.com
.
The role of the Committee is to assist the Board with discharging its responsibilities in relation to:
•
Financial reporting, including monitoring the integrity of the Group’s annual and half year financial
statements and any other formal announcements relating to the Group’s financial performance
and reviewing the Group’s accounting policies and significant financial reporting judgements;
•
Reviewing the Group’s internal financial controls;
•
Reviewing and monitoring the scope of the annual audit and the extent of the non-audit work
undertaken by the external auditors;
•
Advising on the appointment, reappointment and removal of the external auditors and reviewing
and monitoring the external auditor’s independence and objectivity;
•
Reviewing reports from the reserves auditor;
Page 110 of 255
CORPORATE GOVERNANCE
•
Setting the programme for and reviewing the effectiveness and follow-up of internal audit,
whistleblowing and fraud systems in place within the Group. The Audit & Risk Committee
considers annually how the Group’s internal audit requirements shall be satisfied and makes
recommendations to the Board accordingly, as well as on any area it deems needs improvement
or action. The Head of Internal Audit and the Head of Compliance has a standing invitation to all
committee meetings; and
•
Assessing the effectiveness of the Group’s risk management and internal assurance processes.
The Audit & Risk Committee reviews the Group’s capability to identify and manage new types of
risk and keeps under review the Group’s overall risk assessment processes that inform the Board’s
decision making. In order to assist with achieving this, the Committee regularly liaises with the
Company’s compliance function.
The Audit & Risk Committee receives regular regulatory updates to ensure that it remains up to date with
developments in financial reporting.
Key matters considered in relation to the consolidated Financial Statements
The Audit & Risk Committee focused on a number of key judgements and reporting issues in the preparation
of the full year results and the Annual Report. In particular, the Committee considered, discussed and
where appropriate raised challenges in the areas set out below:
•
The Committee received technical reports from management and input from external specialists.
The Committee reviewed reserves and resources reports to verify completeness of information
and consistency of reserves volumes across the accounting processes.
•
The Committee considered the approach taken by the Company on the impairment indicators
and where appropriate, the approach taken to calculate the value-in-use for producing oil and gas
assets. The Committee reviewed and challenged management’s key assumptions for the oil and
gas properties, which included reserves estimates, future oil and gas prices and discount rates. The
Committee supported the view that there were no indicators of impairment at the year end of cash
generating units. The Committee reviewed the financial statement disclosures and was satisfied
they appropriately conveyed the judgements and estimates.
•
The Committee reviewed the impairment of exploration and evaluation assets under IFRS 6 and
heard from management about the rationale for impairment considering the intent to develop or
otherwise extract value from discoveries.
•
The Committee also considered the approach taken by the Company in relation to accounting for
decommissioning provisions. The Committee undertook a deep dive and heard from management
about the decommissioning process from a technical perspective, incorporating the regulatory
framework and impacts of the energy transition, and from a finance perspective, to ensure
decommissioning provisions had been accurately and consistently applied. The Committee
reviewed the accounting treatment considering assumptions related to the estimated costs
and expected timing of decommissioning liabilities. The Committee reviewed disclosures in the
financial statements and were satisfied with the disclosures on decommissioning provisions.
•
The Committee assessed the accounting treatment of the Karish/Tanin development. The
Committee reviewed the capitalisation of development costs and the subsequent accounting
treatment and cessation of capitalisation of certain costs post first gas from Karish Main. The
Committee concluded they were appropriate, and were satisfied that accruals were in place at the
year end to reflect the costs of services provided by contractors.
•
The Committee considered the approach taken by the Company in relation to revenue recognition
including the effectiveness of additional financial software installed in Israel to book revenue over
a number of hydrocarbon products and gas contracts. The Committee reviewed the financial
statements and were satisfied that the requirements of IFRS 15 were satisfied.
•
In September 2022, the Directors announced the payment of the Company’s maiden interim
dividends in line with the previously announced dividend policy. The Committee received reports
from management in order to assess the distributable reserves available to legally declare and pay
dividends in accordance with the dividend policy and the Committee supported the decision to pay
interim dividends.
•
The Committee reviewed the viability statement in the 2022 Annual Report and the going concern
basis of accounting including consideration of evidence of the Group’s capital, liquidity and funding
position. The Committee considered the assessment of principal and emerging risks, assessed
the Group’s prospects in light of its current position and reviewed the disclosures on behalf of the
Page 111 of 255
CORPORATE GOVERNANCE
Board. The Committee supported the viability statement and the management’s going concern
conclusion.
A requirement of the Code is that the Annual Report, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy.
This is the Group’s sixth Annual Report and, in order to support the assessment, the Committee reviewed
the principal and emerging risks, business model, financial review and KPIs to ensure these were
representative of the business and consistent throughout the Report and that areas requiring significant
judgement and explanation have due prominence. The Committee believes that the disclosures set out
in the Annual Report provide the information necessary for shareholders to assess the Group’s position,
performance, business model and strategic outlook.
External auditors
Ernst & Young LLP (“
EY
” or the “
External Auditor
”) were appointed as auditors in 2018 and undertook their
first audit for the year ended 31 December 2017. Energean plc became a Public Interest Entity in 2018
on admission to trading on the London Stock Exchange. The Company must comply with section 494ZA
of the Companies Act 2006 and will be required to put the external audit contract out to tender by 2028.
The current lead audit partner is Paul Wallek with Andrew Smyth, who had been the lead partner since
2018, having rotated out as is required every five years. The fees paid to EY for their services are detailed
in note 7f on page 197 to the financial statements.
The External Auditor attends each meeting of the Audit & Risk Committee and reports on their audit work
and conclusions including the appropriateness of the judgements and estimates made by management
and their compliance with UK-adopted International Accounting Standards. The Audit & Risk Committee
has responsibility for the oversight of the external audit plan. This includes monitoring the independence
and objectivity of EY, the quality of the audit services and their effectiveness, the level of fees paid,
approval of non-audit services provided by EY and re-appointment. The Committee also met with the
external auditors without management present.
The Committee concluded that EY are independent and objective, operate at a high standard and have
recommended to the Board that the External Auditor be re-appointed at this year’s AGM for the financial
year ending 31 December 2023. The Committee regularly reviews the performance of the auditor and the
Chair of the Audit & Risk Committee regularly meets with the Audit Partner to pass on any feedback.
Non-audit services
In order to safeguard the External Auditor’s independence and objectivity, the Group has in place a policy
setting out the circumstances in which the External Auditor may be engaged to provide services other
than those covered by the Group audit. The policy complies with the FRC’s Revised Ethical Standard
for Auditors, published in December 2019. The Policy sets out those types of services that are strictly
prohibited and those that are allowable in principle (permissible services). Any service types are considered
by the Audit & Risk Committee Chair on a case-by-case basis, supported by a risk assessment prepared by
management. This is reported by management to the Audit & Risk Committee who consider the services
provided as part of concluding on the auditors independence.
The types of non-audit services provided by the auditor during 2022 were as follows:
•
Climate change and sustainability assurance services provided by EY Greece;
•
Agreed upon procedures provided by EY Greece for a Greek Government loan;
•
Tax certification services in Greece and Israel;
•
Agreed upon procedures for a Share Premium Reduction in Cyprus; and
•
Interim financial statements review.
In all these cases, safeguards were adopted and reasons given as to why these safeguards were
considered to be effective. The Committee was satisfied that the independence of the External Auditor
was not affected by the performance of any of these services. The non-audit services provided were
required by law and/ or are typically performed by the auditor. Furthermore, in each case there were
business justifications for using the External Auditor for non-audit services. The Chair of the Audit & Risk
Committee agreed with each justification before the service was carried out.
Further details on non-audit services are outlined in note 7f to the financial statements on page
197.
Page 112 of 255
CORPORATE GOVERNANCE
Internal controls and risk management
The Audit & Risk Committee is responsible for the oversight of the Group’s system of internal controls,
including the risk management framework and the work of the internal audit function. Details of the risk
management framework are provided within the risk management section on pages
7
4-77. The Group’s
principal risks and uncertainties, which provide a framework for the Audit & Risk Committee’s focus, are
discussed on pages
78-91. Management has identified the key operational and financial processes that
exist within the business and has developed an internal control framework. This is structured around a
number of Group policies and processes and includes a delegated authority framework. During, the year
the Audit & Risk Committee assessed the key findings raised from internal audits conducted throughout
the year.
During 2H 2022, following the occurrence of a phishing attack that resulted in a redirected payment of an
immaterial amount, the Audit & Risk Committee had oversight of an internal investigation conducted by
the internal audit and compliance functions and supported by forensic analysis experts, in connection with
the phishing incident. Following the review and analysis of the relevant data, Energean has initiated certain
actions to raise awareness of cyber threats and cyber-crimes, and to further enhance the effectiveness of
the internal controls in place for the purpose of preventing similar future incidents.
Internal auditors
The internal audit function’s key objective is to provide independent and objective assurance on risks and
controls to the Board, the Audit & Risk Committee and senior management, and to assist the Board in
meeting its corporate governance responsibilities.
The Head of Internal Audit is responsible for prioritising and co-ordinating internal audit projects, aligning
the internal audit risk assessment process to the Group risk register, facilitating the communication
between the internal audit function, the Audit & Risk Committee, senior management and process owners,
commenting on controls design and operating efficiency, and, when necessary, escalating relevant issues
to appropriate parties within the Group.
Furthermore, the internal audit function undertakes engagements on an “ad hoc” basis, at the request of
senior management and the Audit & Risk Committee.
Since January 2018, PricewaterhouseCoopers Business Solutions S.A. (“
PwC
”) have been appointed as
the Group’s internal advisor and, during 2022, the following was jointly undertaken with the internal audit
function:
•
Execution of internal audit engagements;
•
Periodic follow up audits to assess the implementation of agreed upon management actions;
•
Preparation of the risk based annual Internal Audit Plan;
•
Comment on issues related to internal audit methodology, the quality assessment of the internal
audit function, design of internal engagements and planning aspects.
During the year PwC conducted three (2021: three) internal audits at a cost of $ 115,124 (2021: $71,509).
The Audit & Risk Committee’s members meet regularly with members of the internal audit function and
approve areas that will be assessed by way of an internal audit or a “deep dive” throughout the year.
Deep dives are performed through direct meetings between the Audit & Risk Committee and the process
owner(s), based on a structured agenda, with an aim to discuss
inter alia
key risks, business needs and
critical gaps (if any) of each examined area. This year, topics included operational insurance cover and
abandonment liability management.
The Audit & Risk Committee is responsible for the review and approval of the role and mandate of the
internal audit function, as reflected in the Internal Audit Charter, including the approval of the annual and
ad-hoc internal audit plans, and monitoring the budget and effectiveness of the internal audit function.
Each internal audit report is presented in dedicated meetings with the Audit & Risk Committee and the
status of follow-up action points reviewed against agreed deadlines.
In its annual assessment of the effectiveness of the internal audit function, the Audit & Risk Committee
carried out the following:
•
Met with members of the internal audit function without the presence of management to discuss
the effectiveness of the function;
Page 113 of 255
CORPORATE GOVERNANCE
•
In cooperation with the Head of Internal Audit, examined the sufficiency of internal audit resources
and the involvement of subject matter experts in specific audit engagements;
•
Reviewed and re-assessed the annual Internal Audit Plan;
•
Monitored and assessed the role and effectiveness of the internal audit function in the overall
context of the Group’s risk management policy.
Following the internal audit review of the Company’s internal control systems, the Audit & Risk Committee
considered whether any matter required disclosure as a significant failing or weakness in internal controls
during the year. Other than the incident described under the Internal controls and Risk Management
section, no additional matters were identified.
Reserves committee
During the year the Reserves Committee met to discuss the Group’s reserves auditing process and
support the Audit & Risk Committee in this area. During 2023, the Audit & Risk Committee will receive
reserve reports from each country of operation and meet with their respective reserve auditors to assist
with the year-end reporting process.
Fair, balanced and understandable assessment
The Audit & Risk Committee advised the Board that in its view the 2022 Annual Report including the
financial statements for the year ended 31 December 2022, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess Energean’s position
and performance, business model and strategy. In making this assessment the members of the Audit &
Risk Committee critically assessed drafts of this Annual Report including the financial statements and
discussed with management the process undertaken to make sure these requirements were met.
This included:
•
Confirming that the contents of the annual report were consistent with information shared with the
Board during 2022 to support the assessment of Energean’s position and performance; ensuring
that consistent materiality thresholds are applied for favourable and unfavourable items;
•
Receiving reports from management at Board and Board Committee meetings that the information
contained within the Annual Report was considered to be fair, balanced and understandable; and
•
Considering comments from the external auditor.
Other activities
Whistleblowing policy
The Group has a whistleblowing policy in place and the Committee is responsible for overseeing the
arrangements and the effectiveness of the processes for this. The policy exists to enable employees to
raise any concerns in confidence about wrongdoing or impropriety within the Group. During the year, no
significant concerns or reports were raised to the Committee.
Performance of the Committee
The performance of the committee was reviewed as part of the internal evaluation of the Board’s
effectiveness. In the previous annual report the committee set out its targets for 2022, namely to:
•
Further strengthen the internal audit process by using where appropriate sector specialists in
relevant topics in addition to PwC;
•
Further develop in-house risk management reporting and awareness; and
•
Follow up internal audits on acquired subsidiaries now that integration has been completed with a
focus on cyber security and insurance optimisation.
I am pleased to report that very good progress was made against 2022 priorities including the use of deep
dive sessions on key topics such as abandonment liability management and insurance as detailed above
in the Internal Audit section.
Page 114 of 255
CORPORATE GOVERNANCE
The Audit & Risk Committee worked to expand the reach, capabilities and reporting of internal audits to
focus on controls and fraud prevention in key Edison E&P subsidiaries. Risk management has continued
to be a focus for both the Committee and the Board and in 2022, the Company introduced a new ERM
system accompanied by a detailed workshop on risk management in Milan which Amy Lashinsky attended
on behalf of the Audit & Risk Committee and in her role as workforce representative. During 2022 the Audit
& Risk Committee also oversaw the payment of the Company’s maiden interim dividends in line with the
previously announced dividend policy.
The Audit & Risk Committee will continue to monitor progress in these areas and advise on whether any
further enhancements should be made.
Our priorities for 2023
•
Further expansion and use of the Company’s recently introduced ERM system;
•
To continue to conduct internal audits and deep dives with a specific focus on cyber security, joint
venture audit capabilities and commercial functions; and
•
To conduct post project implementation reviews in Israel following first gas from Karish.
Approval
This report in its entirety has been approved by the Audit & Risk Committee, and signed on its behalf by:
Andrew Bartlett
Audit & Risk Committee Chair
22 March 2023
Page 115 of 255
CORPORATE GOVERNANCE
Environment, Safety & Social Responsibility Committee
Roy Franklin, Chair of Environment, Safety & Social Responsibility (“ESSR”) Committee
It is my pleasure to introduce the ESSR Committee Report for 2022, which sets out its composition, role
and activities during the year.
In this report we will also set out the areas of focus for the ESSR Committee for 2023.
Membership
The members of the ESSR Committee throughout 2022 were myself (as Chair upon appointment on
26 May 2022), Andreas Persianis and Efstathios Topouzoglou. Robert Peck stood down as Chair and
left the Committee following his retirement from the Board on 26 May 2022. Amy Lashinsky left the
Committee on 20 July 2022, Karen Simon joined the Committee on the same date.
The Company Secretary acts as secretary to the Committee.
Meetings
The ESSR Committee met on 3 occasions during 2022 with attendance details set out below:
Director
Number of
meetings
entitled to
attend
Number of
meetings
attended
Roy Franklin
54
3
3
Amy Lashinsky
55
1
1
Robert Peck
56
1
1
Andreas Persianis
3
3
Efstathios Topouzoglou
3
3
Karen Simon
57
2
2
Role of the Committee
The ESSR Committee plays a fundamental role in assisting the Board in reviewing the effectiveness of the
Group’s policies and systems for managing health and safety risks, assessing the policies and systems
within the Group for ensuring compliance with regulatory requirements and reviewing the Company’s
environmental strategy including KPIs. The Committee also reviews the Company’s annual sustainability
report and receives updates on the Company’s performance with key rating agencies. Furthermore, the
Committee receives updates from the Group’s HSE Director on Health, Safety & Environmental matters
and the Company’s Head of CSR for updates on the Company’s performance against its CSR goals. The
Committee also advises the board on safety, the environment including climate change, and Energean’s
overall sustainability performance.
Following the annual review of the ESSR Committee’s Terms of Reference, updates were made to ensure
alignment with the UK Corporate Governance Code and best practice guidance.
To view the ESSR Committee’s terms of reference, please visit the Company’s website
www.energean.com
.
Activities during 2022
ESG Rating
The Committee was notified in December 2022, that the Carbon Disclosure Project upgraded Energean’s
rating to A-, up from B in the previous year, outperforming the global average for Exploration and Production
companies of C.
54
Appointed as Chair on 26 May 2022.
55
Left the Committee on 20 July 2022.
56
Stood down as Chair and left the Committee on 26 May 2022.
57
Joined the Committee on 20 July 2022.
Page 116 of 255
CORPORATE GOVERNANCE
Sustainability reporting
The Committee reviewed the progress being made on the publication of the Company’s annual
sustainability report covering 2021. The Committee received updates from the Head of CSR and reviewed
drafts of the report before publication. The Committee Chair signed off on the publication of the report on
behalf of the Board noting that the report reflected an impressive number of measurable achievements
related to the UN Sustainable Development Goals.
CSR Programme
The Committee received updates from the Head of CSR on the planned activities for 2023, which was
a Committee priority for 2022, and heard about planned initiatives in Israel, Egypt, Italy and Greece that
would benefit the environment, the community and provide opportunities for education in order to create
meaningful impact for those who would benefit.
HSE
The Committee received regular updates from the HSE Director on Group level HSE performance and
received specific reports on HSE performance for Karish during the commissioning and production
start-up phases, and on the progress made in Italy during 2022 as part of the Edison integration.
The Committee also heard about the implementation of new Synergi software which will enable the
Company to better record and monitor safety performance.
Kavala Site Visit
The Committee Chair undertook a site visit to Kavala prior to the Prinos start-up and was able to observe
and report back to the Committee on progress that had been made for safe and responsible operations
both onshore and offshore.
Priorities for 2023
During 2023, the Committee will:
•
Review sustainability reporting for 2022 and the plans for reporting in 2023 to include review of the
Group’s Sustainability Report;
•
Review the scale and balance of the Group’s CSR initiatives in the countries in which it operates;
•
Review the methodology across the Group’s carbon emissions reporting and climate change
targets to ensure consistency;
•
Review the effectiveness of HSE-related systems and procedures for the Energean Power in
operational mode;
•
Deep dive on the effectiveness of HSE systems in the Group’s other operations to include site visits;
and
•
Review the effectiveness of the Group’s emergency response systems from operating unit to
corporate level.
Roy Franklin
ESSR Committee Chair
22 March 2023
Page 117 of 255
CORPORATE GOVERNANCE
Nomination & Governance Committee
Karen Simon, Chair of Nomination & Governance Committee
It is my pleasure to introduce the Nomination & Governance Committee Report for 2022, which sets out
its composition, role and activities during the year.
In this report we will also set out the areas of focus for the Nomination & Governance Committee for 2023.
Membership
The members of the Nomination & Governance Committee throughout 2022 were myself (as Chair),
Kimberley Wood, Efstathios Topouzoglou and Roy Franklin. Robert Peck left the Committee following his
retirement from the Board on 26 May 2022. Andrew Bartlett joined the Committee on 20 July 2022.
The UK Corporate Governance Code (“
Code
”) recommends that a majority of Nomination Committee
members be Independent Non-Executive Directors and that the Chair of the Board (other than where the
Committee is dealing with the appointment of a successor to the chair) or an Independent Non-Executive
Director should chair the Committee. This requirement was satisfied as I was considered to be independent
upon appointment as Chair, and Andrew Bartlett, Roy Franklin and Kimberley Wood are considered to be
Independent Non-Executive Directors.
The Company Secretary acts as secretary to the Committee.
Meetings
The Nomination & Governance Committee met on 4 occasions during 2022 with attendance details set
out below:
Director
Number of
meetings
entitled to
attend
Number of
meetings
attended
Karen Simon
4
4
Andrew Bartlett
58
2
2
Roy Franklin
4
4
Robert Peck
59
1
1
Efstathios Topouzoglou
4
3
Kimberley Wood
4
4
Role of the Committee
The Nomination & Governance Committee plays a fundamental role in assisting the Board in reviewing the
structure, size and composition of the Board, including providing advice to the Board on the retirement and
appointment of additional and/or replacement Directors. It is also responsible for reviewing succession
plans for the Directors, including the Chair and Chief Executive and other senior executives.
Following the annual review of the Nomination & Governance Committee’s Terms of Reference, updates
were made to ensure alignment with the Code and best practice guidance.
To view the Nomination & Governance Committee’s terms of reference, please visit the Company’s
website
www.energean.com
.
Diversity, Equity and Inclusion
The Nomination & Governance Committee’s key area of responsibility is to ensure the composition of the
Board is appropriate for oversight of the strategic direction of the Group and this includes reviewing the
balance of skills and knowledge. The Nomination & Governance Committee recognises the benefits of
diversity in the boardroom and believes that a wide range of experience, backgrounds, perspectives, and
skills generates effective decision-making.
58
Joined the Committee on 20 July 2022.
59
Left the Committee on 26 May 2022.
Page 118 of 255
CORPORATE GOVERNANCE
The gender and diversity disclosures that follow will be mandatory for accounting periods starting on or
after 1 April 2022 however the Company has chosen to apply these new listing rule requirements early.
Gender data for the Board, Executive Management and their direct reports has been collected from the
Company’s HR records. Ethnicity data has been collected directly from Board members and Executive
Management, with respondents self-reporting their ethnicity using the Office of National Statistics
definitions.
As at 31 December 2022, the Board included three women, representing 33.33% of the Board, which
achieves the 33% target set by the Hampton-Alexander review but remains slightly below the proposed
40% target set by the FCA for the end of 2025.
The Company remains as one of the few companies in the FTSE 350 with a female Chair which achieves
the target of having at least one woman in the position of Chair, Senior Independent Non-Executive
Director and/or in the Chief Executive Officer or Chief Financial Officer role by the end of 2025.
Number
of Board
Members
Percentage
of the Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID and
Chair)
Number in
Executive
Management
Percentage
of Executive
Management
Men
6
66.67%
3
7
77.78%
Women
3
33.33%
1
2
22.22%
Executive Management’s make-up at the year-end was 22% women vs 78% men. Their direct reports were
37% women vs 63% men. The combined make-up of Executive Management and their direct reports at
the year-end was 36% women vs 64% men.
The Committee recognises the Parker Review recommendation to have at least one director from an
ethnic minority background on the Board by 2024 and as at 31 December 2022, the Board included one
Director who self-identifies as being non-white. The Company has engaged with the Parker Review Team
at the Department for Business, Energy and Industrial Strategy to report the position with regard to board
diversity.
There have not been any changes to the Board between 31 December 2022 and the date that the Annual
Report was approved that have affected the company’s ability to meet one or more of the targets disclosed
above.
Number
of Board
Members
Percentage
of the Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID and
Chair)
Number in
Executive
Management
Percentage
of Executive
Management
White British
or other White
(including minority
white groups)
8
88.89%
4
8
88.89%
Mixed/ Multiple
Ethnic Groups
0
0%
0
0
0%
Asian/Asian British
0
0%
0
0
0%
Black/African
Caribbean/ Black
British
0
0%
0
0
0%
Other ethnic group,
including Arab
1
11.11%
0
1
11.11%
Not specified/ prefer
not to say
0
0%
0
0
0%
Page 119 of 255
CORPORATE GOVERNANCE
During 2022, upon the Nomination & Governance Committee’s recommendation, the Board approved
a Diversity, Equity and Inclusion policy for the Group (the “
DEI Policy
”). The DEI policy recognises that
a truly diverse, equitable and inclusive culture is crucial to attracting, developing and retaining talent.
The responsibility for the enforcement and monitoring of compliance of the DEI Policy lies with the
Board (acting through the Nomination & Governance Committee) and the Chief Executive Officer carries
overall responsibility to ensure the Company adopts a corporate culture where individual differences are
respected. The Board also appointed the Group HR Director to act as the Group’s DEI Leader.
Time commitment of the Chair
Karen Simon is also a Non-Executive Director of Aker ASA, an Oslo Stock Exchange-listed company
and Crescent Energy, a New York Stock Exchange-listed company. The Board believes that Karen has
adequate time available to devote to the Company. Karen was deemed to be independent on appointment
and was first appointed to the Board as an Independent Non-Executive Director in November 2017. She
has, therefore, only served five years out of a possible nine years.
Board and Committee Composition
Under the Terms of Reference for the Nomination & Governance Committee, the Committee is required
to regularly review the structure, size and composition (including the skills, knowledge and experience)
of the Board (with particular regard to the balance of Executive and Non-Executive Directors, including
independent non-executives) compared to its current position, and to make any resulting recommendations
to the Board with regard to any required changes.
In 2022, Robert Peck informed the Board of his intention to retire at the conclusion of the AGM on 26 May
2022. As a result, two of his Board roles, namely Chair of the Environment, Safety & Social Responsibility
(“
ESSR
”) Committee and the designated Non-Executive Director for workforce engagement, required to
be filled by existing Independent Non-Executive Directors. Following careful consideration, the Committee
concluded that, given their respective backgrounds and skillsets, as well as their existing committee roles
and responsibilities, Roy Franklin be appointed as the Chair of the ESSR Committee and Amy Lashinsky
be appointed as the Board’s Non-Executive Director for workforce engagement.
Following the retirement of Robert Peck, the percentage of Independent Non-Executive Directors
(excluding the Independent Non-Executive Chair) stands at 62.5%.
In July 2022, the Committee further considered committee composition and recommended the following
committee changes which the Board approved with effect from 20 July 2022:
Nomination & Governance Committee
Under Provision 17 of the Code, the Nomination & Governance Committee should have a majority of
Independent Non-Executive Directors. This requirement is met following the appointment of Andrew
Bartlett, an Independent Non-Executive Director, as a member of the Nomination & Governance Committee.
Remuneration & Talent Committee
Under Provision 32 of the Code, the Remuneration & Talent Committee should consist exclusively of, and
not less than three, Independent Non-Executive Directors. This requirement is met as all four members
of the Remuneration & Talent Committee are considered independent. Following Andrew Bartlett’s
appointment to the Nomination & Governance Committee, Roy Franklin, as an Independent Non-Executive
Director, joined the Remuneration & Talent Committee replacing Andrew Bartlett.
With effect from the AGM on 26 May 2022, Amy Lashinsky replaced Robert Peck as the Board’s non-
executive director for workforce engagement and therefore it was considered appropriate that Amy
Lashinsky, as an Independent Non-Executive Director, join the Remuneration & Talent Committee.
ESSR Committee
With Amy Lashinsky having taken on the role as the Board’s Non-Executive Director for workforce
engagement and having been appointed to the Remuneration & Talent Committee, Karen Simon joined
the ESSR Committee replacing Amy Lashinsky.
Page 120 of 255
CORPORATE GOVERNANCE
Appointment of Senior Independent Non-Executive Director
In 2022, following Andrew Bartlett’s decision to step down as Senior Independent Non-Executive Director,
the Nomination & Governance Committee recommended, and the Board approved with effect from
23 March 2022, the appointment of Roy Franklin as the Senior Independent Non-Executive Director, by
virtue of his extensive governance, industry and listed company experience.
Succession Planning
The Nomination & Governance Committee keeps the succession plans for Directors and senior
management continuously under review, including by reference to the present composition of the
Board and each member’s skills and individual performance; the qualities and skills needed from senior
management to deliver the Group’s strategic plan; and contingency planning for senior management in
the event of any sudden or unforeseen circumstances. The succession planning process supports the
development of a diverse and inclusive pipeline.
Induction
The Nomination & Governance Committee ensures that its members are provided with appropriate and
timely training, both in the form of an induction programme for new members and on an ongoing basis
for all members.
Board Evaluation
In 2022, the Nomination & Governance Committee oversaw an internally facilitated evaluation of the
Board’s performance as required by the Code.
The evaluation was conducted by way of a written survey with myself and the Company Secretary
following up directly with each Director.
Evaluation areas included matters that are important to the Company in particular, as well as those items
laid down in the Code and associated guidance, including:
•
the preparation, delivery and management of meetings;
•
the responsibilities, roles and relationships between the Chair, Board and Directors;
•
corporate governance, culture and ethics including Company policies and practices; and
•
performance of the Board and the committees.
The Nomination & Governance Committee reviewed the findings from the 2022 evaluation at its meeting
in November and discussed them with the full Board. In reporting back to the Board, the Chair of the
Nomination & Governance Committee reported that the Committee was satisfied that each Director
continues to contribute effectively, and that an action plan will be developed and monitored during the
year to address areas for improvement. Outcomes from the 2022 evaluation will mean a focus on strategy
following the start-up of Karish, a review of Board skills for the new phase of operations and more Board
interaction with the local workforce and personnel in the Company’s areas of operation.
Furthermore during the year, and as highlighted in last year’s report, we continued to implement the
recommendations from the externally facilitated board review conducted in 2020 and now consider all
actions to have been completed.
In 2023, as required by the Code, the Board will be subject to an externally facilitated evaluation of the
effectiveness of the Board, and the Nomination & Governance Committee will report on its findings and
steps taken to act on any findings.
Committee evaluation
As part of the internally facilitated evaluation as outlined above, Committees were subject to reviews of their
performance and effectiveness. The Committees. Including the Nomination & Governance Committee,
were considered by Directors to be working well and members were deemed to have the appropriate mix
of skills, experience, independence and knowledge of the Company necessary to discharge their duties.
Individual evaluation
In December the Senior Independent Non-Executive Director conducted the annual review of the Chair’s
performance with Non-Executive Directors giving their views. The Senior Independent Non-Executive
Director provided anonymous feedback from this review to the Chair and the review concluded that the
Chair had led the board effectively throughout the year.
Page 121 of 255
CORPORATE GOVERNANCE
Re-election of Directors
In light of the assessment that all Directors continue to perform and provide a valuable contribution to
the Board and its Committees, all Directors will be eligible to submit themselves for re-election at the
2023 AGM. An annual review is conducted to assessing the continuing independence of Non-Executive
Directors, with attention to ensuring that they remain independent in character and judgement, and
continue to present an objective and constructive challenge to the assumptions and viewpoints presented
by the management.
Performance of the Committee
The performance of the Nomination & Governance Committee was assessed as part of the internally
facilitated evaluation as mentioned earlier in this report. In the previous annual report the committee set
out its targets for 2022, namely to:
•
Continue to focus on board composition and to identify candidates with geographic, gender and
ethnic diversity;
•
Look to right size the Board with an expected decrease in the overall number of Directors; and
•
Review Committee Chairs/SID role and make adjustments where appropriate.
I am pleased to report that good progress was made against the 2022 priorities and the Nomination &
Governance Committee continued to strive to create a culture that embraces different perspectives to
drive the business forward through the recommendation, and subsequent approval by the Board, of the
Group DEI Policy. The Nomination & Governance Committee also oversaw changes to the composition of
committees and the appointment of a new Senior Independent Non-Executive Director.
The Nomination & Governance Committee will continue to monitor progress in these areas and advise on
whether any further enhancements should be made.
Our priorities for 2023
•
Focus on strategy for the next chapter post the start-up of Karish;
•
Review board skill sets given new phase of operations with continued focus on diversity; and
•
Increased board exposure to areas of operation and personnel with more in person interactions in
country.
Karen Simon
Nomination & Governance Committee Chair
22 March 2023
Page 122 of 255
CORPORATE GOVERNANCE
Remuneration Report
Energean Plc – Chair letter
Dear Shareholder,
I am pleased, on behalf of the Remuneration & Talent Committee, to present our report on director’s
remuneration for the year. The macroeconomic environment has rightly meant increased scrutiny on
our sector, including around remuneration matters. In this report we have therefore sought to provide
transparent, detailed disclosure on the pay decisions we have taken during in the year.
Background
This has been a year where Energean has achieved significant milestones in its ambition to be the leading
independent gas and ESG-Focused E&P company in the Mediterranean. We have achieved first gas from
the Karish field, delivered
60
our maiden quarterly dividend and continued to progress our net-zero targets
as the first E&P company committed to net-zero by 2050. These successes are reflected in our financials.
For 2022, we have delivered revenues of $737m (representing growth of +48% on prior year) and Adjusted
EBITDAX of $422m (growth of +99% on prior year). This strong performance means we are well on-track
to delivering our annualised near-term targets of $2.5bn revenue and $1.75bn EBITDAX. At the end of the
year, liquidity stood at $720m, ensuring Energean is fully-funded for all sanctioned projects. Meanwhile,
we have declared three quarters of dividends, representing an annualised yield of 9%.
As we look forward, our operational objectives for 2023 mean we will be well-placed to deliver our growth
strategy and production within the guidance range. Production ramp up from the field is aligned with our
expectations, and we are on track to deliver production within the range provided in the January trading
update; furthermore, our debottlenecking projects are on track to increase FPSO production capacity
from 6.5 bcm/yr to 8.0 bcm/yr by the end of 2023. We expect installation of the second gas export riser
and the second oil train in H1 and H2 2023 respectively. First gas from the first well at NEA/NI was
delivered in March 2023, with the remaining three wells expected onstream over the course of 2023. The
cumulative effect of successful delivery of these projects is more than 200 kboepd production in the near-
term (including Karish). In 2023, we are expecting production in the c.131-158 kboepd range, securing
growth in our revenue and EBITDAX outlook for the year.
Our world-class executive team is fundamental in delivering our outperformance. Our CEO, Mathios Rigas,
has continued to lead the company to achieving important and historic milestones, most recently the
first international crude exports from Karish, and first gas at NEA/NI. Under his leadership Energean has
grown from an effective ‘start-up’ into one of the largest independent E&P companies in Europe. Our
CFO has continued to deliver strong fundamentals and a protected balance sheet which has augmented
the company’s reputation in the capital markets. Both of our executive directors have demonstrated
exceptional leadership in unlocking significant shareholder value through targeted acquisitions and
organic growth.
Key remuneration decisions taken in the year
Reflecting the strong performance achieved in the year, the Committee approved an annual bonus
outcome of 70.6% for both directors. The 2022 annual bonus was based on operational goals (45% of
award), commercial goals (15%), financial and risk goals (20%) and sustainability objectives (20%).
While there were significant operational achievements in the year, including delivering Karish first gas,
progressing major projects, building reserves and maintaining the cost of production within appetite,
delays at the start of the year impacted overall production levels. The Committee therefore approved
an outcome of 42% of maximum for the operational part of the bonus. Successful delivery of stretching
commercial goals, including new contracting and portfolio rationalisation objectives, meant the Committee
approved an outcome of 87% of maximum for this element. Financial and risk goals were also successfully
achieved, with the extremely strong liquidity position a particular highlight, and the Committee therefore
approved a maximum outcome on the financial and risk element.
60
Unaudited and subject to change
Page 123 of 255
CORPORATE GOVERNANCE
Sustainability has always been a critical part of Energean’s ethos, and the Committee was pleased to
see significant progress has been made against key ESG objectives in the year. These included reducing
carbon emissions intensity, maintaining our high external sustainability rating and keeping health and
safety indicators within risk tolerance. Reflecting continued strong performance against sustainability
targets, the Committee approved an outcome of 92% for this element.
The overall annual bonus outcome was therefore 70.6% for both directors. This outcome is lower than
2021, reflecting the significant performance achievements in the year while being cognisant of some
limited operational challenges earlier in the year with the FPSO, and the broader macroeconomic
environment. The Committee believes the outcome is therefore reflective of holistic performance. We
have provided detailed disclosure of performance against targets on page
s 13
6-138.
2020 LTIP Vesting
The 2020 LTIP award was based on relative TSR measured against a peer group of similar E&P
companies (50% of award), stretching absolute TSR targets (30%) and average Scope 1 and 2 emissions
(20% of award). Given our extremely strong market performance, both the relative TSR and absolute
TSR maximum targets were met, and these elements vested in full. There was threshold achievement
of the average Scope 1 and Scope 2 emissions targets. The delays to first gas at Karish, which was
largely the result of COVID-19 postponing delivery of the FPSO, impacted the level of achievement of
the average emissions measure. The Committee determined that no adjustment to the targets should
be made despite this impact on achievement arising from an unforeseen factor outside management’s
control. Strong performance meant an overall formulaic outcome of 85% of maximum was achieved for
the 2020 LTIP.
This award was granted in March 2020, when share prices were impacted by the status of the Karish
project, which at that point had already started experiencing delays materially linked to Covid. At the
time of award, the Committee committed to reviewing the vesting level of the awards to ensure they
are appropriate. As previously disclosed at the time of grant, the Committee made no adjustment to the
award level. In part this was because 30% of the award was based on an absolute TSR measure assessed
from the start of 2020 with a highly challenging base point based on the average share price in Q4 2019
(i.e. before the COVID-19 price impact).
On the question of windfall gains, the Committee considered this in some detail, including analysis from
a variety of perspectives. Our consideration included a sectoral perspective, relative and absolute TSR
performance analysis (excluding any Covid impact), wider operational achievements and overall outturns
(including a review of historic outturns for peer companies) in the context of overall performance. Taking
into account a range of factors we have concluded that we do not consider it appropriate to make any
downwards adjustment and we consider the overall out-turn to be reflective of the executive team’s
performance over the period. We have included substantive disclosure on the factors considered by the
Committee in their determination on pages
14
0-142.
Looking ahead
We are proposing that no salary increases will be awarded to either executive director for 2023. The
Committee believes this is the right decision given the macroeconomic climate and reflects the Committee’s
responsible approach to pay. Targeted salary increases will be made for other members of the Executive
Committee and the broader workforce. During 2022, the Committee oversaw an objective and data-driven
Group wide compensation and benefits benchmark evaluation and, at a local level, adjustments were
made to align compensation and benefits to the wider Energean population and mitigate inflation in each
country of operation.
There will be no change to the annual bonus opportunity or the LTIP opportunity for either executive director
for 2023. The bonus scorecard has been simplified for 2023, and disclosure of targets will be included in
next year’s report when targets are no longer commercially sensitive. The 2023 LTIP will continue to be
based on the same measures as in 2022, however, we have refreshed the LTIP TSR comparator group to
reflect the company’s operations, size and markets. Targets that will apply to the 2023 LTIP grant are set
out on page
13
2.
Page 124 of 255
CORPORATE GOVERNANCE
Shareholder consultation
The Committee took note that there was a notable minority of investors who opted to not support
the advisory vote on the Remuneration Report last year. We understand this vote, at least in part, was
influenced by shareholder views on non-remuneration matters.
In March 2023, we wrote to and sought feedback from our major shareholders on key remuneration
decisions taken during the year, including the Committee’s consideration of potential windfall gains
relating to the 2020 LTIP award. In 2023, we will be reviewing our Remuneration Policy ahead of seeking
renewal of the policy at the 2024 AGM under the normal three-year renewal cycle. As part of this review
process, we will be reviewing the effectiveness of the policy approved by shareholders in 2021, and we
also intend to consult again with major shareholders to ensure their views are taken into account when
formulating our approach to pay. I look forward to meeting with our shareholders and listening to these
views in due course.
In this report, we have sought to provide transparent disclosure on our approach to pay at Energean.
I hope that it provides clarity around the Committee’s decision-making, and that you will support the
advisory vote on this report at the AGM.
Best regards
Kimberley Wood
Remuneration & Talent Committee Chair, Energean Plc
Page 125 of 255
CORPORATE GOVERNANCE
Page 126 of 255
CORPORATE GOVERNANCE
Remuneration Policy
Set out below is a summary of our current Remuneration Policy (“
Remuneration Policy
”) for Executive
Directors, which was approved by shareholders at the 2021 AGM. A full version of the Policy is contained
in our 2020 Annual Report, available on our website at
https://www.energean.com/investors/reports-
presentations/
.
Base salary
Purpose and link to
strategy
To appropriately recognise skills, experience and responsibilities and attract
and retain talent by ensuring salaries are market competitive.
Operation
Generally reviewed annually with any increase normally taking effect from
1 January although the Remuneration & Talent Committee
may award
increases at other times of the year if it considers it appropriate.
The review takes into consideration a number of factors, including (but not
limited to):
1.
The individual Director’s role, experience and performance.
2.
Business performance.
3.
Market data for comparable roles in appropriate comparator
businesses.
4.
Pay and conditions elsewhere in the Group.
Maximum Opportunity
No absolute maximum has been set for Executive Director base salaries.
Any annual increase in salaries is at the discretion of the Remuneration &
Talent Committee taking into account the factors stated in this table and
the following principles:
5.
Salaries would typically be increased at a rate no greater than the
average salary increase for other Group employees.
6.
Larger increases may be considered appropriate in certain
circumstances (including, but not limited to, a change in an individual’s
responsibilities or in the scale of their role or in the size and complexity
of the Group).
7.
Larger increases may also be considered appropriate if a Director has
been initially appointed to the Board at a lower than typical salary.
Performance
Conditions
No performance conditions.
Pension
Purpose and link to
strategy
To provide competitive post-retirement benefits or cash allowance as a
framework to save for retirement. This is to support the recruitment and
retention of talent.
Operation
Typically payable as a cash allowance, however executives can also choose
to participate in a company pension scheme or receive payments into a
personal pension or a combination thereof.
Contributions are set as a percentage of base salary.
Post-retirement benefits do not form part of the base salary for the
purposes of determining incentives.
Maximum Opportunity
Pension contributions will be set in line with the average workforce pension
contribution (in percentage of salary terms).
For 2023, this rate will be 4% of salary. This is the rate that is currently
available to the wider workforce (based on the rate applicable to the
workforce in Greece).
Page 127 of 255
CORPORATE GOVERNANCE
Pension
Performance
Conditions
No performance conditions.
Benefits
Purpose and link to
strategy
To provide market competitive benefits.
Operation
Benefits are currently provided as a single benefits allowance (in lieu of
separate payments for relevant benefits). The Remuneration & Talent
Committee has discretion to replace the benefits allowance by separate
payments for relevant benefits or to provide additional benefits in certain
circumstances (for example relocation or tax equalisation). Executive
Directors are entitled to reimbursement of reasonable expenses (including
any tax thereon). Executive Directors also have the benefit of a qualifying
third-party indemnity from the Company and directors’ and officers’ liability
insurance.
Maximum Opportunity
For the current Executive Directors, the maximum annual value of benefits
will be £48,000 (Mathios Rigas) and £25,000 (Panos Benos). For any future
Executive Director appointed during the lifetime of this Remuneration
Policy, the value of their benefits package would not exceed £48,000. These
totals exclude any expenses treated as taxable benefits by tax authorities
or tax equalisation benefits, should these be provided in exceptional
circumstances, or any one-off costs relating to recruitment, loss of office or
relocation.
Performance
Conditions
No performance conditions.
Annual Bonus
Purpose and link to
strategy
To link reward to key financial and operational targets for the forthcoming
year. Additional alignment with shareholders’ interests through the operation
of bonus deferral.
Operation
The Executive Directors are participants in the annual bonus plan which is
reviewed annually to ensure bonus opportunity, performance measures and
targets are appropriate and supportive of the business plan.
Typically, no more than two-thirds of an Executive Director’s annual bonus is
delivered in cash following the release of audited results and the remaining
amount is deferred into an award over Company shares under the Deferred
Bonus Plan (DBP).
8.
Deferred awards are usually granted in the form of conditional
share awards or nil-cost options (or, exceptionally, as cash-settled
equivalents).
9.
Deferred awards usually vest two years after award although may
vest early on leaving employment or on a change of control (see later
sections).
10.
An additional payment or award may be made in respect of shares
which vest under deferred awards to reflect the value of dividends
(including special dividends) which would have been paid on those
shares during the vesting period (this payment may assume that
dividends had been reinvested in Company shares on a cumulative
basis).
Page 128 of 255
CORPORATE GOVERNANCE
Annual Bonus
Maximum Opportunity
The maximum award that can be made to an Executive Director under the
annual bonus plan is 200% of salary.
For 2023, both executive directors will receive a maximum opportunity of
200% of salary.
Performance
Conditions
The bonus is based on performance against financial, strategic, operational,
ESG or personal measures appropriate to the individual Executive Director
assessed over one year.
The precise measures and weighting of the measures are determined by the
Remuneration & Talent Committee ahead of each award to ensure they are
aligned with strategic priorities.
Where appropriate, a sliding scale of targets will be applied to a measure,
with payout not exceeding 20% for threshold performance increasing to
100% for maximum performance. In relation to operational, milestone
or qualitative targets, the structure of the target may vary based on the
nature of the target set and m
ay be based on the Remuneration & Talent
Committee’s judgement in assessing the performance outturn.
Any bonus payout is ultimately at the discretion of the Remuneration &
Talent Committee. The Committee will consider the use of discretion when
determining the actual overall level of individual bonus payments and it may
adjust the formulaic bonus payout upwards or downwards if it considers it
appropriate to do so.
Long Term Incentive Plan (LTIP)
Purpose and link to
strategy
To link reward to key strategic and business targets for the longer term and
to align executives with shareholders’ interests.
Operation
Awards are usually granted annually under the LTIP to selected senior
executives.
Individual award levels and performance conditions on which vesting will be
dependent are reviewed annually by the Remuneration & Talent Committee.
LTIP awards are usually granted as conditional awards of shares or nil-cost
options (or, exceptionally, as cash-settled equivalents).
Awards granted to Executive Directors normally vest or become exercisable
at the end of a period of at least three years following grant and normally
have a holding period taking the time horizon to no earlier than five years
following grant. Awards may vest early on leaving employment or on a
change of control (see later sections).
An additional payment or award may be made in respect of shares which
vest under LTIP awards to reflect the value of dividends (including special
dividends) which would have been paid on those shares during the vesting
and, if relevant, holding period (this payment may assume that dividends
had been reinvested in Company shares on a cumulative basis).
Maximum Opportunity
The maximum award permitted to be granted to an Executive Director in
respect of any one year under the LTIP is shares with a market value (as
determined by the Remuneration & Talent Committee) of 200% of salary.
Page 129 of 255
CORPORATE GOVERNANCE
Long Term Incentive Plan (LTIP)
Performance
Conditions
All LTIP awards granted to Executive Directors must be subject to a
performance condition.
The precise measures and weighting of the measures are determined by the
Remuneration & Talent Committee ahead of each award to ensure they are
aligned with strategic priorities.
Performance will usually be measured over a performance period of at least
three years.
For achieving a ‘threshold’ level of performance against a performance
measure, no more than 25% of the portion of the LTIP award determined by
that measure will vest. Vesting then increases on a sliding scale to 100% for
achieving a maximum performance target.
Any LTIP vesting is ultimately at the discretion of the Remuneration & Talent
Committee.
Share ownership Guidelines
Purpose
and link to strategy
To create alignment between the long-term interests of Executive Directors
and shareholders.
Operation
Executive Directors are required to build and maintain a holding of 200% of
salary in Company shares.
Until an Executive Director is compliant with this guideline, they are required
to retain at least 50% of vested post-tax shares.
Unless the Remuneration & Talent Committee determines otherwise, this
guideline will continue to apply for two years after an Executive Director
ceases employment with the Group.
Non-Executive Director fees
Purpose
and link to strategy
To appropriately recognise responsibilities, skills and experience by ensuring
fees are market competitive.
Operation
NED fees comprise payment of an annual basic fee and additional fees for
further Board responsibilities including but not limited to:
11. Senior Independent Director
12. Audit & Risk Committee Chair
13. Remuneration & Talent Committee Chair
14. Environment, Safety & Social Responsibility Committee Chair
The Chair of the Board receives an all-inclusive fee. No NED participates
in the Group’s incentive arrangements or pension plan or receives any
other benefits other than where travel to the Company’s registered office
is recognised as a taxable benefit in which case a NED
may receive the
grossed-up costs of travel as a benefit. Non-Executive Directors are entitled
to reimbursement of reasonable expenses (including any tax thereon).
Fees are reviewed annually and are paid in cash or shares. Non-Executive
Directors also have the benefit of a qualifying third-party indemnity from the
Company and directors’ and officers’ liability insurance.
Page 130 of 255
CORPORATE GOVERNANCE
Annual Report on Remuneration
Unaudited information
Implementation of Remuneration Policy in 2023
This section provides an overview of how the Remuneration & Talent Committee is proposing to implement
our Remuneration Policy in 2023 for the Executive Directors.
Base salary
The Remuneration & Talent Committee is proposing no salary increases for the CEO and the CFO for 2023.
This is to reflect the wider macroeconomic context and demonstrates Energean’s responsible approach
to pay. We will be making targeted increases for other members of the Executive Committee and the
broader workforce, being particularly mindful of the need to protect lower earners within the workforce.
Salary
1 January
2023
Salary for
2022
%
increase
Mathios Rigas (CEO)
£750,000
£750,000
No increase
Panos Benos (CFO)
£600,000
£600,000
No increase
Pension
Both Executive Directors are entitled to receive a pension equivalent to 4% of their base salary. This
rate aligns to the rate offered to the wider workforce (based on the contribution available to the Greek
workforce).
Benefits
Mathios Rigas and Panos Benos receive a contractual benefits package worth £48,000 p.a. and £25,000
p.a. respectively.
Annual bonus
The annual bonus plan structure for 2023 will be unchanged from 2022, with a maximum bonus opportunity
of 200% of annual salary for both of the Executive Directors. One-third of any bonus earned will continue
to be deferred into DBP shares. The annual bonus for 2023 will be determined by a bonus scorecard that
is aligned with strategic priorities for the year ahead. For 2023, the Committee has simplified the bonus
scorecard, narrowing the focus to fewer key metrics and objectives.
Area of focus
Weighting
Operational
(Including production, cost of production and growth targets)
40%
Financial, Commercial and Risk (40%)
(Including targets around liquidity, debt and contracting)
40%
Sustainability (20%)
(Including targets around emissions, net-zero transition, health and safety
and diversity and inclusion)
20%
Page 131 of 255
CORPORATE GOVERNANCE
The precise targets for these performance measures in relation to the financial year 2023 are deemed
commercially sensitive. However, retrospective disclosure of the targets and performance against them
will be provided in next year’s Remuneration Report to the extent that they do not remain commercially
sensitive at that time. In the event of unforeseen acquisitions, divestments or investments during the year,
the Remuneration & Talent Committee would consider how performance targets should be adjusted to
ensure that they remain appropriately challenging and would explain any such adjustments in next year’s
Remuneration Report.
The Remuneration & Talent Committee has discretion, where it believes it to be appropriate, to override
any formulaic outcome arising from the bonus plan.
Long-term incentive plan
The Executive Directors will receive an award under the LTIP during 2023 over shares worth 200% of annual
salary at grant. Awards will vest three years after grant and be subject to an additional two-year holding
period. The proposed performance measures for the 2023 award are consistent with the measures for
the 2022 award and are set out below.
Performance measure
Proportion of award
determined by
measure
Threshold
Performance
Maximum
Performance
Relative Total Shareholder
Return over 3 Financial
Years
61
50%
Median ranking
12.5% of award
Upper quartile ranking
50% of award
Absolute Total Shareholder
Return over 3 Financial Years
30%
8% p.a.
7.5% of award
12% p.a.
30% of award
Average Scope 1 and 2 CO
2
emissions (kgCO
2
/ boe) over
3 Financial Years
20%
18 kgCO
2
/ boe
5% of award
6 kgCO
2
/ boe
20% of award
The Committee reflected on the performance measures and targets that would apply for the 2023
LTIP award and considered that the metrics and targets that applied for the 2022 award continue to be
appropriate. However, there has been an update to the TSR peer group to reflect the Company’s current
size, markets and operations with VAR Energi, Ithaca Energy, and the FTSE 250 index replacing Lundin,
Jadestone and Genel. NewMed Energy was formerly known as Delek Drilling.
For the TSR metrics, the Committee recognised that continued strong share price performance over
recent months means there is a strong ‘base effect’ that means strong outperformance will need to be
maintained to generate a payout under the incentive. For the average emissions target, these targets are
regarded as continuing to be stretching in the context of the Company’s ESG and production strategy over
the performance period.
Vesting is calculated on a straight-line basis for performance between the threshold and maximum
performance targets. The Remuneration & Talent Committee has discretion, where it believes it to be
appropriate, to override any formulaic outcome arising from the LTIP. Typically, this will only be exercised
in a negative direction.
61
Total Shareholder Return performance for the 2023 LTIP award will be measured against the following peer group: Aker BP,
NewMed Energy, Isramco Negev 2, Tamar Petroleum, Ratio Energies, Kosmos Energy, Harbour Energy, Capricorn Energy, Tullow
Oil, Diversified Energy Company, Serica Energy, Seplat Energy, Var Energi, Ithaca Energy, the FTSE 250 index and the FTSE 350
Oil, Gas, Coal Index.
Page 132 of 255
CORPORATE GOVERNANCE
Non-Executive Director remuneration
The table below shows the fee structure for Non-Executive Directors for 2023. Fee levels are unchanged
from 2022. Non-Executive Director fees are determined by the full Board except for the fee for the Chair
of the Board, which is determined by the Remuneration & Talent Committee.
2023 fees
Chair of the Board all-inclusive fee
£220,000
Basic Non-Executive Director fee
£55,000
Senior Independent Director additional fee
£10,000
Audit & Risk Committee Chair additional fee
£25,000
Environment, Safety & Social Responsibility Chair additional fee
£15,000
Remuneration & Talent Committee Chair additional fee
£15,000
Audited information
The information provided in this section of the Remuneration Report up until the ‘Unaudited information’
heading on page 144 is subject to audit.
Page 133 of 255
CORPORATE GOVERNANCE
Single total figure of remuneration
The following table sets out the total remuneration for Executive Directors and Non-Executive Directors for 2022 with comparative figures for 2021.
2022 (£ ‘000)
2021 (£ ‘000)
Salary
and
fees
Pension
62
Benefits
Annual
bonus
63
LTIP
64
Total
Fixed
Total
Variable
Total
Salary
and
fees
Pensions
Benefits
Annual
bonus
LTIP
65
Total
Fixed
Total
Variable
Total
66
Executive Directors
Mathios Rigas
750
30
48
1,059
3,974
828
5,033
5,861
675
27
48
1,080
2,969
750
4,049
4,799
Panos Benos
600
24
25
847
2,650
649
3,497
4,146
525
21
25
735
1,881
571
2,616
3,187
Non-executive directors
67
Karen Simon
220
–
–
–
–
220
–
220
150
–
–
–
–
150
–
150
Andrew Bartlett
82
–
–
–
–
82
–
82
68
–
–
–
–
68
–
68
Robert William
Peck
29
–
–
–
–
29
–
29
59
–
–
–
–
59
–
59
Stathis
Topouzoglou
55
–
–
–
–
55
–
55
54
–
–
–
–
54
–
54
Amy Lashinsky
55
–
–
–
–
55
–
55
54
–
–
–
–
54
–
54
Kimberley Wood
70
–
–
–
–
70
–
70
60
–
–
–
–
60
–
60
Andreas
Persianis
55
–
–
–
–
55
–
55
55
–
–
–
–
55
–
55
Roy Franklin
72
–
–
–
–
72
–
72
12
–
–
–
–
12
–
12
62
Pension/ Benefits
– In 2022, Mathios Rigas and Panos Benos received a pension allowance worth 4% of salary (equivalent to the Greek wider workforce) and a separate benefits allowance worth £48,000
and £25,000 respectively.
63
Annual bonus
– bonus payments are paid two-thirds in cash and one-third in deferred shares. Deferred shares vest after two years. Details of the performance measures and targets are set out in the
following section.
64
2020 LTIP
–The 2020 LTIP were subject to performance conditions measured to 31 December 2022. The award is due to vest at 85% of maximum. The amount shown is the indicative vesting value
using the average share price in Q4 2022 (£13.84). The awards will vest in March 2023. Following a two-year holding period they will become exercisable from March 2025. For this award, an estimated
£2,683k and £1,789k is related to share price appreciation between the grant date and vesting date for the CEO and CFO respectively. The award value includes 10,384 and 6,922 dividend equivalents for
the CEO and CFO respectively, valued at the Q4 share price.
65
2019 LTIP
– In the 2021 Annual Remuneration Report, the amount shown for share awards in 2021 included the indicative vesting value of the 2019 LTIP award that was subject to performance
conditions measured to 31 December 2021. The figure shown in the table above represents the subsequent value received on the vesting date of 28 March 2022 using the share price on that date
(£11.50). These awards are subject to a two-year holding period.
66
Total remuneration
paid to Directors in respect of 2022 is £10,645k (2021: £8,498k).
67
Non-executive directors
– Roy Franklin joined the board on 13 October 2021. Robert Peck did not seek re-election to the board at the 2022 AGM, and therefore stepped down on board on 26 May 2022.
There were no other changes to
the board in 2021 or 2022.
Page 134 of 255
CORPORATE GOVERNANCE
Annual bonus
The maximum annual bonus opportunity for the Executive Directors in 2022 was 200% of salary for both
Executive Directors. Two-thirds of any bonus will be paid in cash with the remaining third granted in shares
under the DBP which vest two years post grant. Performance measures and targets applying to the 2022
annual bonus, along with performance achieved, are set out below. Further detail on the respective areas
of performance follows the summary table.
Summary of performance achieved
A summary of the performance achieved for the 2022 bonus is set out below. Additional detail is then
provided for each element of the bonus in the tables below.
Performance Measure
Weighting
% vesting
Operational goals
45%
19.1%
Commercial goals
15%
13.0%
Financial and Risk goals
20%
20.0%
Sustainability goals
20%
18.5%
Total
100%
70.6%
Page 135 of 255
CORPORATE GOVERNANCE
Operational goals (45%)
Operational goals were based on delivery of projects, production, cost of production and reserves targets. Vesting ranges applied to all targets within this element.
Performance
measure
Proportion of
bonus
Threshold
performance
0% vesting
Target
performance
50% vesting
Maximum
performance
100% vesting
Actual
performance
% of maximum
bonus payable
Projects
(20%)
Karish Start-up
date
5%
Target range was 1 August 2022 to 31 October 2022 with
vesting on straight-line basis
26 October 2022
0.3%
Practical
Completion
5%
Target range was 6 to 8 weeks
Not completed
0.0%
End year progress
on major projects
(weighted by
CapEx)
5%
Combined performance/ project progress of NEA-NI,
Epsilon, Argo-Cassiopeia, KN/2nd export riser and Module
10 projects, weighted by capex
64%
3.2%
Israel 2022 drilling
programme costs
5%
$153m
$140m
$133m
$133m
5.0%
Production
(10%)
Israel production
5%
15 kboepd
20 kboepd
25 kboepd
5.3 kboepd
0.0%
Production outside
Israel
5%
35 kboepd
37 kboepd
39 kboepd
35.8 kboepd
1.0%
Cost of
production
(10%)
Group Cost of
Production
10%
$15.4 $/boe
$13.0 $/boe
$11.1 $/boe
$13.2 $/boe
4.6%
Reserves and
resources
(5%)
Group Volumes
5%
29 MMboe
56 MMboe
83 MMboe
111.4 MMboe
5.0%
TOTAL
19.1%
Commercial (15%)
Commercial goals were assessed on a holistic basis based on agreed targets. Targets included those around new gas contracting, portfolio rationalisation and
developing a marketing agreement for Israel crude.
Page 136 of 255
CORPORATE GOVERNANCE
Performance measure
Proportion of bonus
Achievement
Performance assessed against targets on
holistic basis
% of maximum bonus
payable
Commercial
(15%)
New Gas Contracting
5%
–
Successfully maintained contracted
sales for all gas reserves; signed new
agreements on spot interruptible terms to
maximize potential revenue.
–
Significant growth in gas sales in Italy,
Egypt and Croatia which all saw significant
unit and overall revenue improvement.
5.0%
Rationalisation of Portfolio/
Portfolio management
5%
–
NEHO farmout agreed.
–
Refocusing of Italian portfolio retaining
short term cashflow from producing assets
–
Additional confidential portfolio
management
3.0%
Marketing agreement for Israel
crude
5%
–
Agreed new liquid offtake agreement
–
Built a sales and logistics capability out of
new team members and transferred skills
from other countries.
5.0%
TOTAL
13.0%
Financial and Risk (20%)
Financial goals included a vesting range for available liquidity, as well as risk goals that were assessed on a holistic basis by the Committee.
Performance
measure
Proportion of
bonus
Threshold
performance
0% vesting
Target
performance
50% vesting
Maximum
performance
100% vesting
Actual
performance
% of maximum
bonus payable
Financial and
Risk
(20%)
Available Liquidity
12.5%
$200m
$300m
$400m
$720m
12.5%
Risk strategy
7.5%
–
Initiatives included the roll out of S4/HANA across the group, which was live
from Q2 2022, and response to internal audit issues. The Committee recognised
strong progress on this element and approved a vesting outcome of 100%.
7.5%
TOTAL
20.0%
Page 137 of 255
CORPORATE GOVERNANCE
Sustainability (20%)
The sustainability element included targets relating to carbon emissions reduction, our sustainability rating, HSE targets and broader work on developing our new
DEI approach.
Performance
measure
Proportion of
bonus
Threshold
performance
0% vesting
Target
performance
50% vesting
Maximum
performance
100% vesting
Actual
performance
% of maximum
bonus payable
Climate
change
(10%)
Reduce carbon
emissions intensity
2%
-5%
-10%
-15%
-12.6%
1.5%
Sustainalytics
rating
3%
Top 20%
Top 15%
Top 10%
Top 8%
3%
CCS project
progress
2%
–
Successful finalisation of pre-FEED and commencement of FEED
–
Commencement of ESIA
–
Grant of the exploration licence on 1 October 2022
2%
Progress transition
to net-zero
3%
–
All climate change projects progressed, including in Italy on the replacement
of gas-driven compressors and in Egypt, the pilot flare optimization FEED has
been tendered.
–
All operated sites have purchased green electricity resulting in an absolute
carbon emissions reduction of 5%.
2.8%
HSE
(5%)
Recordable
Incidents – LTIF
1.5%
0.65
0.6
0.5
0.45
1.5%
Recordable
Incidents – TRIR
1.5%
1.3
1.2
1
1.14
1%
Overall HSE
performance
2%
–
Significant progress across Israel, Italy, Greece and Egypt in developing
HSEMS and aligning with the Group HSEMS and guidance.
–
HSE management software is fully implemented in Israel and in progress in
Greece and Italy.
1.7%
Culture and
D&I
(5%)
Setting up D&I
benchmarks and
standards
5%
–
DEI Benchmarking completed in Q3 2022 using the Centre of Global Inclusion
benchmark tool.
–
DEI policy finalized and approved.
–
Targets agreed with the Board based on DEI benchmark.
5%
TOTAL
18.5%
Page 138 of 255
CORPORATE GOVERNANCE
The overall outcome for the 2022 annual bonus was therefore:
Total bonus payable
% of maximum
Total bonus payable
£’000 and % of annual
salary
Mathios Rigas
70.6%
£1,059,000
(141% of salary)
Panos Benos
70.6%
£847,200
(141% of salary)
The Remuneration & Talent Committee considered this bonus outcome in light of the Group’s overall
financial and operational performance during 2022 and was satisfied that it was appropriate and that
no discretionary adjustment to the outcome was required. This outcome is lower than 2021, reflecting
the significant performance achievements in the year while being cognisant of some limited operational
challenges earlier in the year with the FPSO, and the broader macroeconomic environment.
LTIP awards vesting during the financial year
The share award granted at the start of the 2020 financial year was subject to performance measured
between 1 January 2020 and 31 December 2022. The value of this award is set out below.
Number of
shares awarded
Value at
award date
68
Number of
shares vesting
69
Estimated
vesting value
Mathios Rigas
325,615
£1,350,000
276,773
£3,830,748
Panos Benos
217,077
£900,000
184,515
£2,553,836
The performance conditions that applied to this award are set out below
Weighting
Threshold
(25% vesting)
Maximum
(100%
vesting)
Performance
achieved
Payout
level
(% of
maximum)
Relative TSR
70
50%
Median
Upper Quartile
Ranked above
the Upper
Quartile
100%
Absolute TSR
30%
8% p.a.
12% p.a.
15.6% p.a.
100%
Average
Scope 1 and 2
CO2emissions
(kgCO2 / boe)
over 3 Financial
years
71
20%
18 kgCO
2
/
boe
6 kgCO
2
/ boe
18 kgCO
2
/
boe
25%
Strong TSR performance, including on a relative and absolute basis, meant the award vested at 85%
of maximum. There was threshold achievement of the average Scope 1 and 2 emissions performance
condition. The delays to first gas at Karish, which was largely the result of COVID-19 postponing delivery
of the FPSO, impacted the level of achievement of the average emissions measure. The Committee
determined that no adjustment to the targets should be made despite this impact on achievement arising
from an unforeseen factor outside management’s control.
68
Value at award date based o
n grant price of £4.15.
69
Straight-line vesting applies for all performance conditions.
70
Comparator group for the 2020 LTIP award comprises Capricorn Energy (formerly Cairn Energy), Enquest, Genel Energy,
Gulf
Keystone Petroleum, Hurricane Energy, Kosmos Energy, Nostrum Oil & Gas, Pharos Energy, Isramco Negev 2 LP,
Harbour Energy,
Ratio Energies, Rockhopper Exploration, Seplat Energy, Tamar Petroleum and Tullow Oil.
71
The carbon emissions targets for this award was incorrectly stated in the 2020 annual report as delivering 0% vesting for threshold
performance instead of the intended 25% vesting. The error has been corrected in this table to reflect the award documentation
and the intentions of the Remuneration & Talent Committee when setting the targets for this award. This also applies to the 2021
and 2022 LTIP award
s.
Page 139 of 255
CORPORATE GOVERNANCE
This award was granted in March 2020, when share prices were impacted by the status of the project
which at that point had already started experiencing delays linked to Covid. At the time of award, the
Committee committed to reviewing the vesting level of the award, being particularly mindful of the need
to mitigate windfall gains. As disclosed at grant, the Committee made no prior adjustment to the award
level. In part this was because 30% of the award was based on an absolute TSR measure assessed
from the start of 2020 with a highly challenging base point based on the average share price in Q4 2019
(i.e. before the COVID-19 price impact).
The 2020 LTIP was granted using a share price of £4.15 and resulted in 325,615 being made under
award to the CEO and 217,077 shares for the CFO. This was a reduction on the 2019 grant price (£7.60),
and a more limited reduction on the 2018 grant price (£5.34). Below we set out the details for prior and
subsequent awards for the CEO for context.
Grant date
Grant price
(5 day average)
Number of
shares made
under award
Face value of
award at grant
FY18 grant
12-Jul-18
£5.34
252,904
£1,350k
FY19 grant
28-Mar-19
£7.61
177,309
£1,350k
FY20 grant
26-Mar-20
£4.15
325,615
£1,350k
FY21 grant
26-Apr-21
£8.06
167,410
£1,350k
The formulaic outcome of the award is 85% of maximum. This is based on maximum achievement of the
relative TSR and stretching absolute TSR targets, as well as threshold achievement of our average Scope
1 and Scope 2 emissions targets.
The Committee recognise that this is an outcome that reflects strong performance of the executive team
over the performance period.
The Committee has considered the matter of windfall gains in some detail and has been presented with
analysis from a variety of perspectives, including:
–
Sector perspective, and sector specific factors
–
Relative and absolute TSR performance (excluding any COVID-19 impact)
–
Underlying operational performance
–
Remuneration out-turns, including peer comparisons
As part of the process we wrote to and sought feedback from our major shareholders. Taking a range of
factors into account, we have concluded that we do not consider it appropriate to make any downwards
adjustment and we consider the overall out-turn to be reflective of the executive team’s overall performance
over the period, as well as the inherent commodity price risk in our sector.
Page 140 of 255
CORPORATE GOVERNANCE
In reaching this decision, the Committee considered the following factors:
Wholesale prices
Energean’s market value is heavily influenced by the commodity markets.
Prevailing commodity prices at the point LTIPs are granted will therefore
always impact the number of shares made under award. This volatility due
to commodity prices means there will be years where a higher number
of shares are awarded due to lower gas prices (e.g. for the 2020 award)
but other years when the number of shares will be elevated. For example,
assuming the gas price remains elevated, the share price will reduce the
grant level for 2023. This variability is inherent in the business model, and it
is recognised will sometimes benefit and sometimes penalise participants
(i.e. participants take ‘the rough with the smooth’).
Adjusting where the share price is lower (e.g. for the 2020 award) and taking
no action when commodity prices are elevated, and where management
is penalised as a consequence (e.g. as could potentially be for the case for
the 2023 award) means there is an element of asymmetry in the general
approach of reductions due to share price falls. This is an important sector
consideration from the perspective of fairness to participants.
Energean’s operational
successes
The company has achieved significant milestones over the performance
period (including first gas from Karish, three quarters worth of dividends
declared, and new gas field discoveries). During 2020, the management
team responded quickly to the operational challenges, and at the end of
2020 we were reporting on our strategic successes. We closed the strategic
acquisition of Edison E&P in December 2020 and expanded our operational
footprint to nine countries, becoming one of the largest listed E&P
companies on the London Stock Exchange. It was a landmark year. This
exceptional performance has been sustained over the three- year period.
This includes the following key achievements:
–
Achieved first gas at Karish, our flagship gas project offshore Israel
–
Fully integrated Edison E&P
–
Closed the acquisition of Kerogen’s 30% holding in Energean Israel
Limited
–
In 2021, issued two new bond programmes, raising $2.5 billion and
$450 million respectively, which fixed interest rates ahead of the rise in
global rates, protecting the balance sheet for our shareholders
–
Implemented a quarterly dividend programme
Performance
conditions on the
award
The award is subject to robust performance conditions. 50% of the award
is based on relative TSR – given the TSR peer group is composed of similar
peer companies, all of which will experience the benefits of commodity
price increases, the award is significantly based on outperformance of
the market (rather than simply momentum in wholesale prices). The TSR
assessment (both relative and absolute TSR) utilises average share prices
in Q4 2019, i.e. there is no element of any COVID-19 share price dip in this
calculation.
Absolute TSR is a
performance condition
Challenging absolute TSR targets (worth 30% of the award) are based on
the share price in Q4 2019 rather than the grant price. This strips out the
impact of COVID-19 on this element of the award.
Page 141 of 255
CORPORATE GOVERNANCE
Performance vs. peers
Energean has outperformed the sectoral-focused FTSE 350 Oil, Gas, Coal
Index (since 1 October 2019). This positive outperformance indicates
that the overall share price recovery is largely driven by intrinsic business
success, rather than simply external factors. Our relative TSR performance
against peer companies is also all the more impressive given our fixed-price
contract model means our peers benefit disproportionately from the
commodity price environment.
Holding period
Vesting awards are subject to a 2-year holding period. As such, there is
significant opportunity for any share price performance not substantiated
by the fundamentals of the Company (e.g. based on ‘tailwinds’ of the
commodity price) to abate by the point the awards are released to
participants.
The Committee considered the overall incentive out-turn in the context of management’s significant
achievements over the period, as well as shareholders’ experience. The Committee also reviewed
historical total compensation outcomes for peer companies as part of the review. Our conclusion was
that the overall incentive outcomes feel to us very supportable in the context of performance, and the
Committee did not feel we should be scaling back.
LTIP awards granted during the financial year
An award was granted under the LTIP to selected senior executives, including the Executive Directors,
in April 2022. This award is subject to the performance conditions described below and will vest in April
2025 with a subsequent two-year holding period for any vested shares to April 2027.
As disclosed last year, the CEO’s salary was uplifted for 2022 but with the uplift conditional on the
achievement of First Gas. Upon achievement of First Gas, his LTIP award was therefore uplifted to reflect
his awarded salary for the year. In the table both the initial grant and the uplift grant are shown.
Type of
award
Date of
grant
Maximum
number
of
shares
72
Face
value
(£)
Face value
(% of
salary)
Threshold
vesting
End of
performance
period
Mathios
Rigas
Conditional
share
award
1 April 2022
116,119
£1,350,000
200%
25% of
award
31 December
2024
Conditional
share
award
9 December
2022
11,533
£150,000
31 December
2024
Panos
Benos
Conditional
share
award
1 April 2022
103,216
£1,200,000
200%
25% of
award
31 December
2024
As disclosed in last year’s report, an administrative error meant that Panos Benos’ 2021 LTIP award was
granted over his prior year salary and therefore a further grant was made in April 2022 over the balancing
number of shares (18,601) to correct this. The performance conditions that apply to this are as set out in
the 2021 Director’s Remuneration Report.
Vesting of the 2022 LTIP awards is subject to satisfaction of the following performance conditions. Vesting
is calculated on a straight-line basis for performance between the threshold and maximum performance
targets. Any LTIP vesting is at the discretion of the Remuneration & Talent Committee. They will consider
the vesting level at the end of the performance period to ensure the final outcome is appropriate and
reasonable.
72
The maximum number of shares that could be awarded has been calculated using the share price of £11.626 (average closing
share price for the five dealing days prior to grant) and excludes any additional shares that may be awarded in relation to
dividends accruing during the vesting and holding periods. The price used for the additional grant to reflect the uplifted CEO
salary following First Gas was £13.00.
Page 142 of 255
CORPORATE GOVERNANCE
The targets that apply to this award were disclosed in the 2021 Director’s Remuneration Report and are
set out again below.
Performance measure
Proportion
of award
determined by
measure
Threshold
performance
Maximum
performance
Relative Total Shareholder
Return over three-year
performance period
73
50%
Median ranking
12.5% of award
Upper quartile ranking
50% of award
Absolute Total Shareholder
Return over three-year
performance period
30%
8% p.a.
7.5% of award
12% p.a.
30% of award
Average Scope 1 and 2 CO
2
emissions (kgCO
2
/ boe) over
3 Financial Years
20%
18 kgCO
2
/boe
5% of award
10
6 kgCO
2
/boe
20% of award
Loss of office payments/ payments to former directors
There have been no payments to former Directors or payments to Directors for loss of office during 2022.
Statement of Directors’ shareholding and share interests
Executive Directors are expected to achieve a holding of shares worth 200% of salary. The Remuneration
& Talent Committee reviews ongoing individual performance against this shareholding requirement
at the end of each financial year. Both Executive Directors currently exceed their minimum guideline.
The number of shares held by Directors as at 31 December 2022 is set out below:
Number of shares as at 31 December
2022
74
Shares owned
outright
Interests
in share
incentive
schemes,
subject to
performance
conditions
Interests
in share
incentive
schemes,
subject to
employment
Percentage
of Issue
Share Capital
(minus LTIP
and DBP
shares)
Share
ownership
guidelines
met?
(3)
Director
LTIP
DBP
Mathios Rigas
14,854,444
643,961
68,926
8.34%
Yes
Panos Benos
3,414,010
467,402
46,397
1.92%
Yes
Karen Simon
232,072
0.13%
n/a
Andrew Bartlett
5,554
0.00%
n/a
Robert William
Peck
75
6,755
0.00%
n/a
Stathis Topouzoglou
16,863,674
9.47%
n/a
Amy Lashinsky
1,507
0.00%
n/a
Kimberley Wood
0
0.00%
n/a
Andreas Persianis
0
0.00%
n/a
Roy Franklin
0
0.00%
n/a
73
Peer group for the 2022 LTIP: Aker BP, Lundin Energy, NewMed Energy, Isramco Negev 2 LP, Tamar Petroleum, Ratio Energies,
Kosmos Energy, Harbour Energy, Capricorn Energy PLC (formerly Cairn Energy), Tullow Oil plc, Diversified Energy Company,
Jadestone Energy, Serica Energy, Seplat Energy, Genel Energy and the FTSE 350 Oil, Gas, Coal inde
x.
74
For the purposes of determining the value of Executive Director shareholdings, the individual’s current annual salary and the share
price as at 31 December 2022 has been used (£13.09 per share)
75
Robert Peck retired from the Board on 26 May 2022
Page 143 of 255
CORPORATE GOVERNANCE
Unaudited information
The information provided in this section of the Remuneration Report is not subject to audit.
Performance graph and CEO remuneration table
The chart below compares the Total Shareholder Return performance of the Company over the period
from Admission to 31 December 2022 to the performance of the FTSE 350 Oil, Gas and Goal Index.
This index has been chosen because it is a recognised equity market index of which the Company is a
member. The base point in the chart for the Company equates to the Offer Price of £4.55 per share.
0
50
100
150
200
250
300
350
400
Mar 18
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
Mar 21
Jun 21
Sep 21
Dec 21
Mar 22
Jun 22
Sep 22
Dec 22
Energean
FTSE 350 Oil, Gas, Coal Index
The table below summarises the CEO single figure for total remuneration, annual bonus pay-outs and
long-term incentive vesting levels as a percentage of maximum opportunity over this period.
2022
2021
76
2020
2019
2018
CEO single figure of remuneration
£’000
£5,861k
£4,799k
£1,608k
£1,134k
£1,581k
Annual bonus pay-out (as a % of
maximum opportunity)
70.6%
80.0%
84.8%
37.9%
82.1%
LTIP vesting out-turn (as a % of
maximum opportunity)
1
85.0%
75.4%
n/a (no
award
vested in
2020)
n/a (no
award
vested in
2019)
n/a (no
award
vested in
2018)
76
The 2021 LTIP value is an average based on two awards that completed in 2021. The 2018 LTIP award that completed in June
2021 vested at 77.9% of maximum. The 2019 LTIP award that completed in December 2021 vested at 72.8% of maximum
Page 144 of 255
CORPORATE GOVERNANCE
Percentage change in remuneration of the Board of Directors
The chart below shows the percentage change in annual salary, benefits and bonus for each Executive and Non-Executive Director compared with the average for all
Company employees between 2020 and 2022.
Annual Percentage Change table
Salary
change
(2021 to
2022)
Benefits
change
(2021 to
2022)
Annual
bonus
change
(2021 to
2022)
Salary
change
(2020 to
2021)
Benefits
change
(2020 to
2021)
Annual
bonus
change
(2020 to
2021)
Salary
change
(2019 to
2020)
Benefits
change
(2019 to
2020)
Annual
bonus
change
(2019 to
2020)
Average for all employees
77
21.54%
32.03%
33.91%
8.88%
16.13%
40.6%
6.2%
-8.70%
12.49%
Executive Directors
Mathios Rigas
11.11%
4.00%
-1.90%
0.0%
-36.0%
25.9%
0%
0%
+124%
Panos Benos
14.29%
6.52%
15.31%
16.7%
-50.0%
28.5%
0%
0%
+124%
Non-Executive Directors
Karen Simon
50.00%
–
–
0%
0%
0%
0%
0%
0%
Andrew Bartlett
20.78%
–
–
0%
0%
0%
0%
0%
0%
Robert William Peck
78
–
–
–
0%
0%
0%
0%
0%
0%
Stathis Topouzoglou
2.33%
–
–
0%
0%
0%
0%
0%
0%
Amy Lashinsky
2.33%
–
–
0%
0%
0%
0%
0%
0%
Kimberley Wood
16.67%
–
–
0%
0%
0%
0%
0%
0%
Andreas Persianis
0.00%
–
–
0%
0%
0%
0%
0%
0%
Roy Franklin
79
–
–
–
0%
0%
0%
–
–
–
77
Average employee pay has been calculated on a full-time equivalent basis based on all employees of Energean
plc.
78
Robert Peck did not receive a full year’s salary for 2022 having retired from the Board at the conclusion of the 2022 AGM held in May 2022. He received £28.7k for 2022 and no comparison has been made
to his 2021 salary.
79
Roy Franklin did not receive a full year’s salary for 2021 having joined the Board in October 2021. He received £12k for 2021 and no comparison has been made to his 2022 salary.
Page 145 of 255
CORPORATE GOVERNANCE
Since Energean plc only has 36 UK employees, it is exempt from the legislative requirement to disclose
a ratio between the remuneration of the CEO and UK employees. However, the Committee continues
to monitor the approach to remuneration that applies to the wider workforce. Further detail on the
Committee’s approach to the wider workforce is set out in the wider workforce section on page 147.
Relative importance of the spend on pay
The chart below illustrates the total expenditure on remuneration in 2021 and 2022 for all of the Company’s
employees compared to dividends payable to shareholders.
2022
$m
2021
$m
Change
Total expenditure on remuneration
85.3
94.6
(9.8)%
Dividends payable to shareholders/ share buybacks
106.5
nil
–
Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration & Talent Committee is chaired by Kimberley Wood. During the year, the Remuneration
& Talent Committee also comprised Karen Simon, Roy Franklin and Amy Lashinsky. Details of their
attendance is set out on page 100.
The Remuneration & Talent Committee met 6 times during 2022. Other attendees present at these meetings
by invitation were the Company Chair, the CEO, the CFO, the Head of HR and the Company Secretary.
No individual was in attendance when their own remuneration was being determined. The Committee is
mindful of the UK Corporate Governance Code and considers that it appropriately addresses the following
principles set out in the Code:
Clarity
This Remuneration Report provides open and transparent disclosure of
our executive remuneration arrangements for our internal and external
stakeholders. In terms of engagement with the wider workforce, Energean
has appointed Amy Lashinsky as the employee representative on the
Board. As part of this role, Amy will ensure that the “employee voice” will be
heard at the Board and will engage with employees to obtain their views on
decisions to be taken by the Board.
Simplicity and
alignment to culture
Variable remuneration arrangements for our executives are straightforward
with individuals eligible for an annual bonus and, at more senior levels, a
single long-term incentive plan. Performance measures used in these plans
are aligned with delivery of Group KPIs, key strategic Group objectives
and long term sustainable value creation. They are also aligned with our
commitment to adopt a responsible, sustainable business model.
Predictability
Our executive remuneration arrangements contain maximum opportunity
levels for each component of remuneration with variable incentive
outcomes varying depending on the level of performance achieved against
specific measures. The charts within our Remuneration Policy provide
estimates of the potential total reward opportunity for the Executive
Directors under our current Remuneration Policy.
Proportionality and risk
Our variable remuneration arrangements are designed to provide a fair and
proportionate link between Group performance and reward. In particular,
partial deferral of the annual bonus into shares, five-year release periods for
LTIP awards and stretching shareholding requirements that apply during
and post-employment provide a clear link to the ongoing performance of
the Group and therefore long-term alignment with stakeholders. We are also
satisfied that the variable pay structures do not encourage inappropriate
risk-taking.
Notwithstanding this, the Remuneration & Talent Committee retains an
overriding discretion that allows it to adjust formulaic annual bonus and / or
LTIP outcomes so as to guard against disproportionate outturns. Malus and
clawback provisions also apply to both the annual bonus and LTIP and can
be triggered in circumstances outlined in the Remuneration Policy.
Page 146 of 255
CORPORATE GOVERNANCE
The Remuneration & Talent Committee is responsible for determining the Company Chair’s fee and all
aspects of Executive Director remuneration as well as the determination of other senior management’s
remuneration. The Remuneration & Talent Committee also oversees the operation of all share plans.
Full terms of reference of the Remuneration & Talent Committee are available on our website at
www.energean.com
.
During the year, the Remuneration & Talent Committee received independent and objective advice from
Deloitte LLP principally on market practice and pay governance for which Deloitte LLP was paid £75,700
fees (charged on a time plus expenses basis). Deloitte LLP is a founding member of the Remuneration
Consultants Group and as such, voluntarily operates under the code of conduct in relation to executive
remuneration consulting in the UK. Deloitte LLP has also provided advice to the Company in relation to
technology consulting, tax, direct and indirect tax compliance services, payroll services, and transaction
support services.
Workforce remuneration and engagement
The Committee considered the remuneration of the wider workforce when developing the new
Remuneration Policy in 2020/21. This review led to an adjustment to pensions. The designated NED
responsible for ensuring the “employee voice” is heard at the Board is Amy Lashinsky who is also a
member of the Remuneration & Talent Committee. The Board regularly receives analysis around the wider
workforce. For example, in their July meeting, they received an HR Update including a pay and benefits
analysis broken down by jurisdiction, and analysis of the gender pay gap and CEO pay ratio. This data
allows the Committee to make decisions around executive pay that is cognisant of the approach being
taken to pay across the Company.
During 2023, the Committee members will take part in staff events such as town halls meetings and meet
with staff in person and virtually.
Shareholder voting on remuneration resolutions
Votes for
Votes against
Votes withheld
Approval of the Directors’
Remuneration Policy 2021
AGM
103,849,415 (75.3%)
34,092,723 (24.7%)
–
Approval of the Annual
Report on Remuneration
2022 AGM
107,076,639 (80.3%)
26,288,210 (19.7%)
–
External Board appointments
Executive Directors are not normally entitled to accept a Non-Executive Director appointment outside
the Company without the prior approval of the Board. Neither of the current Executive Directors currently
holds any such appointment.
By order of the Board.
Kimberley Wood
Chair of the Remuneration & Talent Committee
22 March 2023
Page 147 of 255
CORPORATE GOVERNANCE
Group Directors’ Report
The Directors are pleased to present their report on the affairs of the Group, together with the financial
statements for the year ended 31 December 2022. The Corporate Governance Statement set out on
pages 99
-
105 forms part of this report.
Details of significant events since the balance sheet date are contained in note 29 to the financial
statements on page
231. Details of financial instruments and financial risks are set out in note 26 to the
financial statements on page
s
220
-
228. An indication of likely future developments in the business of the
Company and its subsidiaries are included in the strategic report.
Details of the Company’s engagement with suppliers and customers and other key stakeholders is
covered in the section 172 (1) statement on pages
106
-09
.
In 2022, the Company introduced a new Enterprise Risk Management system as detailed on page 74.
The Group’s principal risks and uncertainties, are detailed on pages
78-93.
The Company recognises the benefits of diversity in the boardroom and believes that a wide range of
experience, backgrounds, perspectives, and skills generates effective decision-making. In 2022 the Board
approved a Diversity, Equity and Inclusion policy for the Group as detailed on page 53.
Results and dividends
The Group’s financial results for the year ended 31 December 2022 are set out in the consolidated financial
statements.
During 2022, the Directors announced the payment of the Company’s maiden interim dividends, in line
with the previously announced dividend policy. For the three months ended 30 June 2022, the Company
paid an interim dividend of $0.30 per ordinary share on 30 September 2022. For the three months
ended 30 September 2022, the Company paid a further interim dividend of $0.30 per ordinary share
on 30 December 2022. On 9 February 2023, the Company announced that for the three months ended
31 December 2022 the directors had declared an interim dividend of $0.30 per ordinary share to be paid
on 30 March 2023.
Capital structure
Details of the issued share capital are shown in note 19
to the financial statements. As at 31 December
2022, the Company’s issued share capital consisted of 178,040,505 ordinary shares of £0.01 each.
The Company has only one class of share, which carries no right to fixed income. Each share carries the
right to one vote at General Meetings of the Company. No person has any special rights of control over
the Company’s share capital and all issued shares are fully paid. There are no specific restrictions on the
size of a holding nor on the transfer of shares, which are both governed by the general provisions of the
Company’s Articles of Association (the “Articles”) and prevailing legislation. The Directors are not aware of
any agreements between holders of the Company’s shares that
may result in restrictions on the transfer
of securities or on voting rights. Details of employee share plans are outlined in note 3.15 to the financial
statements on page 185.
Directors’ appointments and powers
With regard to the appointment and replacement of Directors, the Company is governed by its Articles of
Association, the UK Corporate Governance Code, the Companies Act and related legislation. The powers
of Directors are described in the Articles and the Schedule of Matters Reserved for the Board, copies of
which are available on request.
Directors’ authority over shares
The authority to issue shares in the Company
m
ay only be granted by the Company’s shareholders and,
once granted, such authority can be exercised by the Directors. At the 2022 AGM, shareholders approved
a resolution for the Company to make purchases of its own shares to a maximum of 10% of its issued
Ordinary shares. This resolution remains in force until the conclusion of the AGM in 2023. As at
22
March
2023, the Directors had not exercised this authority. The Directors are proposing to renew this authority
at the 2023 AGM.
Page 148 of 255
CORPORATE GOVERNANCE
There are a number of agreements entered into by members of the Group that take effect, alter or
terminate upon a change of control of the Company, such as commercial contracts and bank loans and
other financing agreements. The following significant agreements will, in the event of a change of control
of the Company, be affected as follows:
•
Under the 6.5% Senior Secured notes due 2027 ($450 million), upon a change of control (save
for certain exceptions) of the Company, each noteholder has the right to require the Company to
repurchase all or any part of that holder’s notes at a premium plus accrued and unpaid interest.
•
Under the Group’s $2.5 billion Senior Secured Notes, upon a change of control (save for certain
exceptions) of the Sponsor (Energean Israel Limited), or the Issuer (Energean Israel Finance
Limited), each noteholder has the right to require the Sponsor to repurchase all or any part of that
holder’s notes at a premium plus accrued and unpaid interest.
•
Under the 3 year $275million Revolving Credit Facility, which remains undrawn, upon a change
of control, within a short notice period, the Facility Agent is entitled to cancel the available
commitments of each lender and declare all amounts outstanding due and payable.
Furthermore, the Directors are not aware of any agreements between the Company and its Directors or
employees that provide for compensation for loss of office or employment that arises in relation to a
takeover.
Directors’ details
The biographical details and appointments of the Directors are set out on pages 94
–98
. All of the Directors
will offer themselves for re-election at the AGM in May 2023.
The Directors during the year were:
•
Karen Simon (Non-Executive Chair)
•
Mathios Rigas (Chief Executive Officer)
•
Panos Benos (Chief Financial Officer)
•
Roy Franklin (Senior Independent Non-Executive Director)
•
Andrew Bartlett (Independent Non-Executive Director)
•
Robert Peck (Independent Non-Executive Director) – Retired from the Board on 26 May 2022.
•
Efstathios Topouzoglou (Non-Executive Director)
•
Andreas Persianis (Independent Non-Executive Director)
•
Kimberley Wood (Independent Non-Executive Director)
•
Amy Lashinsky (Independent Non-Executive Director)
Articles of Association
The Company’s Articles
may only be changed by special resolution at a General Meeting of shareholders.
The Articles contain provisions regarding the appointment, retirement and removal of Directors. A Director
may be appointed by an ordinary resolution of shareholders in a General Meeting following nomination by
the Board (or member(s) entitled to vote at such a meeting). The Directors may appoint a Director during
any year; however, the individual must stand for re-election by shareholders at the next AGM.
Directors’ indemnities
During the financial year, the Company had in place a qualifying third party indemnity provision (as defined
in section 234 of the Companies Act 2006) for the benefit of each of its Directors and the Company
Secretary, pursuant to which the Company will, to the fullest extent permitted by law and to the extent
provided by the Articles of Association, indemnify them against all costs, charges, losses and liabilities
incurred by them in the execution of their duties. These indemnity provisions were updated during the
course of the year. The Company also has Directors’ and Officers’ liability insurance in place.
Political contributions
No political donations were made during the year (2021: nil).
Significant events since 31 December 2022
Details of significant events since the balance sheet date are contained in note 29 to the financial
statements on page 231.
Page 149 of 255
CORPORATE GOVERNANCE
Substantial shareholdings
The Company has been notified in accordance with Chapter 5 of the Disclosure Guidance and Transparency
Rules (or otherwise) of the following holdings in the Company’s issued share capital:
Shareholder
Number of
Shares
Number of
Voting Rights
% of Issued
Share Capital
Oilco Investments Limited
16,765,024
16,765,024
9.42%
Growthy Holdings Co. Limited
13,948,260
13,948,260
7.83%
Clal Insurance Company Limited
13,570,462
13,570,462
7.62%
The Phoenix Holdings Ltd.
12,528,960
12,528,960
7.04%
BlackRock
7,472,075
7,472,075
4.20%
abrdn
6,648,532
6,648,532
3.73%
Vanguard Group
6,374,736
6,374,736
3.58%
Legal and General Investment
Management
5,761,348
5,761,348
3.24%
Annual General Meeting (AGM)
The Company’s AGM will be held in London in May 2023. Formal notice of the AGM will be issued
separately from this Annual Report and Accounts.
Registrars
The Company’s share registrar in respect of its ordinary shares traded on the London Stock Exchange
is Computershare Investor Services PLC, full details of which can be found in the Company Information
section on page 255.
Greenhouse gas (GHG) emissions reporting
Details of the Group’s emissions are contained in the Corporate Social Responsibility report on
pages
65
–
66
.
Directors’ statement of disclosure of information to auditor
Each of the Directors in office at the date of the approval of this annual report and accounts has confirmed
that, so far as such Director is aware, there is no relevant audit information (as defined in Section 418 of
the Companies Act 2006) of which the Company’s auditor is unaware; and such Director has taken all
the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s auditor is aware of that information. This
confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006.
Going concern
The Group carefully manages the risk of a shortage of funds by closely monitoring its funding position and
its liquidity risk. The going concern assessment covers the period from the date of approval of the Group
Financial Statements on 22 March 2023 to 30 June 2024 (the “Assessment Period”). The Assessment
Period has been extended such that it includes the $625 million bond repayment due in March 2024.
In forming its assessment of the Group’s ability to continue as a going concern, including its review of
the forecasted cashflow of the Group over the Forecast Period, the Board has made judgements about:
•
Reasonable sensitivities appropriate for the current status of the business and the wider macro
environment; and
•
the Group’s ability to implement the mitigating actions within the Group’s control, in the event these
actions were required.
After careful consideration, the Directors are satisfied that the Group and Company has sufficient financial
resources to continue in operation for the foreseeable future, for the Assessment Period from the date
of approval of the Group Financial Statements on 22 March 2023 to 30 June 2024. For this reason, they
continue to adopt the going concern basis in preparing the consolidated financial statements.
Page 150 of 255
CORPORATE GOVERNANCE
Overseas branches and subsidiaries
Details of subsidiaries of the Group are set out in note 30
on pages 232
–
233
to the Financial Statements.
Hedging
Details of hedging are set out in note 26
on pages 220
–228
to the Financial Statements.
Independent auditor
Having reviewed the independence and effectiveness of the auditor, the Audit & Risk Committee has
recommended to the Board that the existing auditor, Ernst & Young LLP (“
EY
”), be reappointed. EY has
expressed its willingness to continue in office as auditor. An ordinary resolution to reappoint EY as auditor
of the Company will be proposed at the forthcoming AGM.
Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R is
disclosed.
Listing Rule requirement
Listing Rule
Reference
Section
Capitalisation of interest
LR 9.8.4R (1)
Note 9/page 199
Publication of unaudited financial information
LR 9.8.4R (2)
Not applicable
Long-term incentive schemes
LR 9.8.4R (4)
Director remuneration
report/ pages 123
–
147
and note 25
, page 220
of the financial
statements
Director emoluments
LR 9.8.4R (5), (6)
No such waivers.
Allotment of equity securities
LR 9.8.4R (7), (8)
No such share
allotments
Listed shares of a subsidiary
LR 9.8.4R (9)
Not applicable
Significant contracts with Directors and
controlling shareholders
LR 9.8.4R (10), (11)
Directors’ report/
pages 148
–
151
Dividend waiver
LR 9.8.4R (12), (13)
Not applicable
Board statement in respect of relationship
agreement with the controlling shareholder
LR 9.8.4R (14)
Not applicable
This Directors’ Report was approved by the Board and signed on its behalf by the Company Secretary on
22 March 2023.
By order of the Board
Eleftheria Kotsana
Company Secretary
22 March 2023
Company number: 10758801, 44 Baker Street, London W1U 7AL
Page 151 of 255
CORPORATE GOVERNANCE
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the annual report, and the Group and the Company financial
statements, in accordance with applicable United Kingdom law and regulations. Company law requires
the Directors to prepare financial statements for each financial year.
Under that law the Directors are required to prepare the Group financial statements in accordance with
UK‑adopted International Accounting Standards (UK‑adopted IAS) and have elected to prepare the
Company financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting
Standard 101 Reduced Disclosure Framework (“
FRS 101
”).
Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss
of the Group and the Company for that period.
In preparing the Group and the Company financial statements the Directors are required to:
•
select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors and then apply them consistently;
•
make judgements and accounting estimates that are reasonable and prudent;
•
present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
•
provide additional disclosures when compliance with the specific requirements in UK‑adopted IAS
(and in respect of the Company financial statements, FRS 101) is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the Group’s and
the Company’s financial position and financial performance;
•
in respect of the Group financial statements, state whether UK‑adopted IAS have been followed,
subject to any material departures disclosed and explained in the financial statements;
•
in respect of the Company financial statements, state whether applicable UK Accounting standards
including FRS 101 have been followed, subject to any material departures disclosed and explained
in the financial statements; and
•
prepare the financial statements on the going concern basis unless it is appropriate to presume
that the Company and/or the Group will not continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable them to ensure that the Company and the
Group financial statements comply with the Companies Act 2006. They are responsible for safeguarding
the assets of the Group and Company and hence for taking reasonable steps to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a strategic report,
directors’ report, directors’ remuneration report and corporate governance statement that complies with
that law and those regulations. The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Page 152 of 255
CORPORATE GOVERNANCE
Directors’ responsibility statement Directors:
The Directors confirm, to the best of their knowledge:
•
that the consolidated financial statements, prepared in accordance with the Companies Act
2006 and UK‑adopted International Accounting Standards, give a true and fair view of the assets,
liabilities, financial position and profit of the parent company and undertakings included in the
consolidation taken as a whole;
•
that the annual report, including the strategic report, includes a fair review of the development and
performance of the business and the position of the company and undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties
that they face; and
•
that they consider the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s
and the Company’s position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 22
March 2023 and is signed on
its behalf by:
Matthaios Rigas
Director
22 March 2023
Panagiotis Benos
Director
22 March 2023
Page 153 of 255
INDEPENDENT AUDITORS REPORT
Independent Auditor’s Report to the Members of
Energean plc
Opinion
In our opinion:
•
Energean plc’s group financial statements and parent company financial statements (the “
financial
statements
”) give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 December 2022 and of the group’s profit for the year then ended;
•
the group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
•
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements of Energean plc (the
parent company
) and its subsidiaries (the
group
) for the year ended 31 December 2022 which comprise:
Group
Parent company
Group statement of financial position as at
31 December 2022
Company statement of financial position as at
31 December 2022
Group income statement for the year then ended
Company statement of changes in equity for the
year then ended
Group statement of comprehensive income for
the year then ended
Related notes 1 to 15 to the financial statements
including a summary of significant accounting
policies
Group statement of changes in equity for the year
then ended
Group statement of cash flows for the year then
ended
Related notes 1 to 31 to the financial statements,
including a summary of significant accounting
policies
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and UK adopted international accounting standards. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is
applicable law and UK Accounting Standards, including FRS 101 Reduced Disclosure Framework (‘United
Kingdom Generally Accepted Accounting Practice’).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
The non‑audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the
parent company and we remain independent of the group and the parent company in conducting the
audit.
Page 154 of 255
INDEPENDENT AUDITORS REPORT
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’
assessment of the group and parent company’s ability to continue to adopt the going concern basis of
accounting included the following procedures:
•
In conjunction with our walkthrough of the group’s financial close process, we confirmed
our understanding of management’s going concern assessment process which included the
preparation of a base case cash flow model covering the period 22 March 2023 to 30 June 2024, a
reasonable worst‑case scenario and two reverse stress test scenarios.
•
We assessed the appropriateness of the duration of the going concern assessment period to
30 June 2024 and considered whether there are any known events or conditions that will occur
beyond the period.
•
We tested the integrity of the models used to calculate the forecast cash flows underlying the going
concern assessment and, where applicable, assessed consistency with information relevant to
other areas of our audit, including recent third‑party reserves and resources reports and deferred
tax asset recoverability assessments.
•
We assessed the reasonableness of the key assumptions included in the base case and reasonable
worst case cash flow models. Our evaluation of the key assumptions within the models included
comparing oil and gas price forecasts to external data, comparing forecast gas prices in Israel to
agreed sales contracts, verifying reserves and production estimates to the reserves report prepared
by management’s external specialist and ensuring consistency of forecast operating costs and
capital expenditure against approved budgets. We also searched for potentially contradictory
evidence that could indicate that management’s assumptions were inappropriate.
•
We challenged the amount and timing of mitigating actions available to respond to the reasonable
worst case, including deferring capital expenditure and reducing operational expenditure, and
assessing whether those actions were feasible and within the Group’s control.
•
We verified the starting cash position and the available financing facilities, including the two‑year
$350m financing facility signed subsequent to the year‑end date, reflected in the models to the
audit work we have performed on those balances, including our understanding of the key terms
and financial covenants associated with the facilities.
•
We verified any material, non‑recurring cash outflows or inflows to and from third parties were
reasonable and supported by relevant contractual terms or legal advice.
•
We evaluated the appropriateness of management’s two reverse stress test scenarios and
assessed the likelihood of such conditions arising during the going concern assessment period to
be remote.
•
We also performed our own further downside stress testing, concluding the likelihood of liquidity
being extinguished during the going concern assessment period under this adverse scenario to be
remote.
•
We reviewed the group’s going concern disclosures included in the financial statements in order
to assess whether the disclosures were appropriate and accurately reflected the outcome of the
Directors’ assessment process.
Our key observations
•
The directors’ assessment forecasts that the group will retain sufficient liquidity throughout the
going concern assessment period in both the base case and an unmitigated reasonable worst‑
case scenario.
•
The group are forecasting compliance with financial covenant ratios across over the going concern
assessment period.
•
The directors’ consider the reverse stress test scenarios to be remote based on forecast commodity
prices and production performance to date, forecasts for the period and the additional liquidity
provided by the recently secured two‑year $350m financing facility available to the group.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group and parent
company’s ability to continue as a going concern for a period through to 30 June 2024.
Page 155 of 255
INDEPENDENT AUDITORS REPORT
In relation to the group and parent company’s reporting on how they have applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in relation to the Directors’
statement in the financial statements about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in
the relevant sections of this report. However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
•
We performed an audit of the complete financial information of four
components and audit procedures on specific balances for a further
six components
•
The components where we performed full or specific audit procedures
accounted for 99% of Total assets, 99% of Revenue, and 99% of group
Loss before tax
Key audit matters
•
Risk of inappropriate estimation of oil and gas reserves
•
Accounting for first production in Israel
Materiality
•
Overall group materiality of $28.2 million which represents 0.5% of
group assets, adjusted to remove the amount of goodwill recognised
at the time of the group’s initial investments in Energean Israel Limited
and Edison E&P
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each company within the group. Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account size, risk profile, the organisation
of the group and effectiveness of group‑wide controls, changes in the business environment, the potential
impact of climate change and other factors such as recent Internal audit results when assessing the level
of work to be performed at each company.
In assessing the risk of material misstatement to the group financial statements, and to ensure we had
adequate quantitative coverage of significant accounts in the financial statements, of the fifteen (2021:
sixteen) reporting components of the group, we selected ten (2021: ten) components covering entities
within Israel, Italy, Egypt, Greece, Cyprus, and the United Kingdom which represent the principal business
units within the group.
Of the ten components selected, we performed an audit of the complete financial information of four
components (“
full scope components
”) which were selected based on their size or risk characteristics.
For the remaining six components (“
specific scope components
”), we performed audit procedures on
specific accounts within that component that we considered had the potential for the greatest impact on
the significant accounts in the financial statements either because of the size of these accounts or their
risk profile.
Page 156 of 255
INDEPENDENT AUDITORS REPORT
The table below illustrates the coverage obtained from the work performed by our audit teams:
Reporting components
Number
% of group
total assets
% of group
revenue
% of group
loss before tax
Full scope
4
86%
91%
74%
Specific scope
1
6
13%
8%
25%
Full and specific scope coverage
10
99%
99%
99%
Remaining components
2
5
1%
1%
1%
Total reporting components
15
100%
100%
100%
1
The audit scope of these components may not have included testing of all significant accounts of the component but will have
contributed to the coverage of significant accounts tested for the group.
2
Of the remaining five (2021: six) components, none are individually greater than; 1% of the group’s total assets (2021: 1%), 1%
of group revenue (2021: 1%) and 1% of group loss before tax (2021: 1%). We performed other procedures to respond to any
potential risks of material misstatement to the consolidated financial statements, including the following:
•
analytical review procedures on an individual component basis;
•
testing of consolidation journals, intercompany eliminations and foreign currency translation calculations;
•
making enquiries of management about unusual transactions in these components; and
•
reviewed minutes of Board meetings held throughout the period.
Changes from the prior year
One component previously designated as full scope has been reclassified as specific scope for 2022 and
one component previously designated as a review scope has been reclassified as specific scope for 2022
(both presented within the specific scope caption above). These changes were as a result of our current
year assessment of the risks of material misstatement in the group’s significant accounts. In addition,
during the year a specific scope entities merged with a full scope entity seeing the overall number of
entities reduce to fifteen in 2022 from sixteen in 2021 (presented within the full scope caption above).
Involvement with component teams
In establishing our overall approach to the group audit, we determined the type of work that needed to be
undertaken at each of the components by us, as the primary audit engagement team, or by component
auditors from other EY global network firms operating under our instruction. Of the four full scope
components, audit procedures were performed on one of these directly by the primary audit team. For
the other three full scope components and for four specific scope components where the work was
performed by component auditors, we determined the appropriate level of involvement to enable us to
determine that sufficient audit evidence had been obtained as a basis for our opinion on the group as a
whole.
The group audit team continued to follow a programme of planned visits that has been designed to ensure
that the Senior Statutory Auditor visits principal business locations of the group on a rotating basis. During
the current year’s audit cycle, visits were undertaken by the primary audit team to the component teams
in Israel (twice), Italy and Egypt. These visits involved discussing the audit approach with component
teams including any issues arising from their work, meeting with local management. attending planning
and closing meetings and reviewing relevant audit working papers on higher risk areas. The primary team
interacted regularly with the component teams where appropriate during various stages of the audit,
reviewed relevant working papers and were responsible for the scope and direction of the audit process.
This, together with the additional procedures performed at group level, gave us appropriate evidence for
our opinion on the group financial statements.
Page 157 of 255
INDEPENDENT AUDITORS REPORT
Climate change
Stakeholders are increasingly interested in how climate change will impact Energean plc. The group
has determined that the most significant future impacts from climate change on their operations will be
from limited access to capital, increasing costs, reputational damage, and the potential for earlier asset
retirement, amongst others. These are explained on pages 20 to 32 in the required Task Force
on Climate‑
related Disclosures and on page 90 in the principal risks and uncertainties. They have also explained their
climate commitments on pages 20 to 32. All of these disclosures form part of the “Other information,”
rather than the audited financial statements. Our procedures on these unaudited disclosures therefore
consisted solely of considering whether they are materially inconsistent with the financial statements or
our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line
with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the group’s
business and any consequential material impact on its financial statements.
The group has explained in note 4.2 of the consolidated financial statements its articulation of how climate
change has been reflected in the financial statements including how this aligns with their commitment
to the aspirations of the Paris Agreement to achieve net‑zero emissions by 2050. Significant judgements
and estimates relating to climate change are also included in note 4.2. These disclosures also explain
where governmental and societal responses to climate change risks are still developing, and where the
degree of certainty of these changes means that they cannot be taken into account when determining
the recoverable amount of the group’s cash‑generating units in accordance with UK adopted international
accounting standards.
Our audit effort in considering the impact of climate change on the financial statements was focused
on evaluating management’s assessment of the impact of climate risk, physical and transition, their
climate commitments, the effects of material climate risks and the significant judgements and estimates
disclosed in note 4.2. We considered whether these have been appropriately reflected in management’s
assessment of impairment indicators, including the estimation of oil and gas reserves, and timing of
planned decommissioning activities in accordance with UK adopted international accounting standards.
As part of this evaluation, we performed our own risk assessment, supported by our climate change
internal specialists, to determine the risks of material misstatement in the financial statements from
climate change which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going
concern and viability and associated disclosures. Where considerations of climate change were relevant
to our assessment of going concern, these are described above.
Based on our work we have considered the impact of climate change on the financial statements to to
impact the key audit matter linked to the risk of inappropriate estimation of oil and gas reserves. Details
of our procedures and findings are included in our explanation of the key audit matter below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion
on these matters.
Page 158 of 255
INDEPENDENT AUDITORS REPORT
Risk of inappropriate estimation of oil and gas reserves
Key audit matter
description
Refer to the Audit & Risk Committee Report (pages
110 to 115); Accounting
policies (pages 174 to 191); and Notes 3.6, 3.8, 3.11, 4.2, and 12 of the
Consolidated Financial Statements
The estimation and measurement of oil and gas reserves is considered to
be a significant risk as it impacts many material elements of the financial
statements including impairment, decommissioning, deferred tax asset
recoverability and depreciation, depletion and amortisation (DD&A).
Reserve estimation is complex, requiring technical input based on
geological and engineering data. Management’s reserves estimates are
provided by external specialists (D&M and NSAI).
Energean’s reserve portfolio as at 31 December 2022 included proven and
probable reserves (2P) reserves of 1,161 Mmboe and contingent resources
(2C) reserves of 217 Mmboe.
Our response to the
risk
We performed the following procedures respect to management’s
estimation of oil and gas reserves:
•
We confirmed our understanding of Energean’s oil and gas reserve
estimation process and the control environment implemented
by management including both the transfer of source data to the
management’s reserves specialists and subsequently the input of
reserves information from the specialist reports into the accounting
system;
•
We obtained and reviewed the most recent third‑party reserves and
resources reports prepared by these specialists and compared these
for consistency between other areas of the audit including Energean’s
reserves models, DD&A, the calculation of the decommissioning
provision, deferred tax asset recoverability and the Directors’ going
concern assessment;
•
We assessed the qualifications of management’s specialists;
•
We held discussions with the specialists to understand their process
and any key judgements applied in reaching their conclusions. We
established whether they had been placed under any undue pressure
by management to achieve certain outcomes; and
•
We considered the impact of climate change and the energy transition
on the calculation of reserves, including the impact on commodity
price assumption forecasts and how this affects the economic limit of
the reserves over the forecast production period.
The audit procedures to address this risk were principally performed our
component teams with oversight by the primary team.
Key observations
communicated to
the Audit & Risk
Committee
We reported to the Audit & Risk Committee that:
•
Based on our procedures we deem the process of estimating reserves
to be appropriate, and no issues were noted when assessing the
competency, objectivity and independence of management’s internal
and external specialists; and
•
We noted no issues with the oil and gas reserves estimates used by
management as part of the financial reporting process, and the related
financial statement impacts of these estimates appear reasonable
and appropriate.
Page 159 of 255
INDEPENDENT AUDITORS REPORT
Accounting for first production in Israel
Key audit matter
description
Refer to Accounting policies (pages 174 to 191); and Notes 3.5, 3.23 and 12
of the Consolidated Financial Statements
Energean achieved first gas was from the Karish Main Field on 26 October
2022. This gave rise to various accounting implications which required
judgements to be made by management, including:
•
Continued capitalisation of borrowing costs;
•
Identification of the cash generating unit (CGU) for the purposes of
impairment testing;
•
Unit of account and method of depreciation; and
•
Presentation of royalties in the income statement.
Our response to the
risk
Our procedures in evaluating these significant judgements made by
management included:
•
Testing the appropriateness of borrowing costs capitalised throughout
the year with a particular focus on those capitalised after the date of
commercial production from Karish Main. We verified that borrowing
costs capitalised after this date were attributed to the continued
development of Karish North, the Field Support Vessel (FSV) and
the 2nd oil train and met the criteria for capitalisation in line with the
requirements of IAS 23
Borrowing Costs;
•
Challenging the conclusion that the Israeli assets represent a single
CGU in accordance with IAS 36 Impairment of Assets, by considering
whether the cash flows associated with the Karish Main, Karish North
and Tanin fields which utilise the common FPSO infrastructure are
separately identifiable;
•
Critically assessing management’s determination of the single unit of
account, which impacts the costs which are eligible to be capitalised
and the rate of depreciation on the Karish asset. This was done through
performing enquiries and inspecting both supporting and contrary
evidence. We performed procedures over the depreciation calculation
by reconciling management’s assumptions to our work performed
over reserves, and testing for clerical accuracy; and
•
Verifying the presentation of royalties payable to the Israeli state as a
gross cost of sale expense (as opposed to a deduction from revenue)
within the Group Income Statement is appropriate and in accordance
with the requirements of IFRS 15 Revenue from Contracts with
Customers.
The audit procedures to address this risk were principally performed by the
Israeli component team with oversight by the primary team.
Key observations
communicated to
the Audit & Risk
Committee
We reported to the Audit & Risk Committee that the accounting judgements
made by management surrounding first production on Karish Main in 2022
are reasonable with regards to the underlying facts and circumstances and
the requirements of the relevant accounting standards.
In the prior year, our auditor’s report included a key audit matter in relation to revenue recognition and the
risk of management override. We have identified this matter as a fraud risk due to the presumed risk of
fraud in revenue recognition, but notwithstanding that we did not consider this to be a key audit matter in
2022 as it did not require significant auditor attention proportionally to our group audit procedures.
Page 160 of 255
INDEPENDENT AUDITORS REPORT
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the financial statements. Materiality provides
a basis for determining the nature and extent of our audit procedures.
We determined materiality for the group to be $28.2 million (2021: $25.6 million), which is 0.5% (2021:
0.5%) of group assets, adjusted to remove the amount of goodwill recognised at the time of the group’s
initial investments in Energean Israel Limited and Edison E&P. This goodwill was driven by the recognition
of a deferred tax liability as part of the business combination accounting which we did not consider to
be reflective of the underlying business activities. We believe that adjusted total assets provides us with
a suitable basis for setting materiality for development stage oil and gas exploration and production
companies, providing a reliable measure to assess the size of the group’s operations. This is consistent
with the measurement basis adopted in our 2021 audit.
We determined materiality for the parent company to be $7.9 million (2021: $8.2 million), which is 0.5%
(2021: 0.5%) of total assets.
During the course of our audit, we reassessed initial materiality and no adjustment to materiality was
made, therefore no additional testing was required due to an amendment in final materiality.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment of the group’s overall control
environment, our judgement was that performance materiality was 50% (2021: 50%) of our planning
materiality, namely $13.6 million (2021: $12.9 million). We have set performance materiality at this
percentage based on our assessment of the likelihood of misstatements and our understanding of the
group gained through our planning procedures.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial
statement accounts is undertaken based on a percentage of total performance materiality. The
performance materiality set for each component is based on the relative scale and risk of the component
to the group as a whole and our assessment of the risk of misstatement at that component. In the current
year, the range of performance materiality allocated to components was $2.7 million to $8.2 million
(2021: $2.6 million to $7.8 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in
excess of $1.4 million (2021: $1.3 million), which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Page 161 of 255
INDEPENDENT AUDITORS REPORT
Other information
The other information comprises the information included in the annual report set out on pages
5 to
153 and 248 to 256 including the Strategic Report and the Directors’ Report, other than the financial
statements and our auditor’s report thereon. The Directors are responsible for the other information
contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit
or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there
is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
The information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
•
The Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic report
or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
Adequate accounting records have not been kept by the parent company, or returns adequate for
Our audit have not been received from branches not visited by us; or
•
The parent company financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
•
Certain disclosures of Directors’ remuneration specified by law are not made; or
•
We have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer‑term viability and that
part of the Corporate Governance Statement relating to the group and company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the Corporate Governance Statement is materially consistent with the financial statements or our
knowledge obtained during the audit:
•
Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 150;
•
Directors’ explanation as to its assessment of the company’s prospects, the period this assessment
covers and why the period is appropriate set out on pages 92 to 93;
•
Director’s statement on whether it has a reasonable expectation that the group will be able to
continue in operation and meets its liabilities set out on pages 92 to 93;
•
Directors’ statement on fair, balanced and understandable set out on page 153;
Page 162 of 255
INDEPENDENT AUDITORS REPORT
•
Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on pages
78 to 91;
•
The section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on page 113; and;
•
The section describing the work of the audit committee set out on pages
110 to 115
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 152 to 153, the
Directors are responsible for the preparation of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors are responsible for assessing the group and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non‑compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud.
The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged
with governance of the company and management.
•
We obtained an understanding of the legal and regulatory frameworks that are applicable to the
group and determined that the most significant are those that relate to the reporting framework (UK
adopted international accounting standards, Companies Act 2006, the UK Corporate Governance
Code and Listing Rules of the UK Listing Authority) and the relevant tax compliance regulations
in the jurisdictions in which the group operates. In addition, we concluded that there are certain
laws and regulations relating to health and safety, employee matters, environmental and bribery
and corruption practices that may impact upon the financial statements. We understood how the
group is complying with those frameworks by making enquiries of management and with those
responsible for legal and compliance procedures. Other procedures performed to address the risk
of management override included evaluating the business rationale for significant unusual and
one‑off transactions, reviewing the minutes of the Board of Directors and Audit & Risk Committee,
and including a level of unpredictability in our testing.
•
We assessed the susceptibility of the group’s financial statements to material misstatement,
including how fraud might occur, focussing on opportunities for management to reflect bias in key
accounting estimates. We also engaged our forensics specialists in assisting our assessment of
the susceptibility of the group’s financial statements to fraud.
•
We determined there to be a risk of fraud associated with management override of the revenue
process, specifically from the posting of manual topside journal entries. Our procedures incorporated
data analytics and manual journal entry testing into our audit approach.
Page 163 of 255
INDEPENDENT AUDITORS REPORT
•
Based on this understanding we designed our audit procedures to identify non‑compliance with
such laws and regulations. Our procedures involved that could give rise to a material misstatement
in the financial statements; this included the provision of specific instructions to component teams.
Our procedures focused on enquires of group management and a review of Board minutes, Audit
& Risk Committee papers, Internal Audit reports and correspondence received from regulatory
bodies.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities
. This description
forms part of our auditor’s report.
Other matters we are required to address
•
Following the recommendation from the Audit & Risk Committee, we were appointed by the
company on 29 April 2022 to audit the financial statements for the year ending 31 December 2022
and subsequent financial periods.
•
The period of total uninterrupted engagement including previous renewals and reappointments is
six years, covering the years ending 31 December 2017 to 31 December 2022 inclusive.
•
The audit opinion is consistent with our report to the Audit & Risk Committee .
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
Paul Wallek (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
22 March 2023
Page 164 of 255
GROUP FINANCIAL STATEMENTS
Page 165 of 255
Group Income Statement
Year ended 31 December 2022
($’000)
Notes
2022
2021
Revenue
6
Cost of sales
7a
(358,930 )
(345,112 )
Gross profit
Administrative expenses
7b
(45,942 )
(42,973 )
Exploration and evaluation expenses
7c
(71,395 )
(87,678 )
Impairment of property, plant and equipment
12/23
(27,628 )
Other expenses
7d
(15,161 )
(7,019 )
Other income
7e
Operating profit
Finance income
9
Finance costs
9
(107,315 )
(97,380 )
Unrealised loss on derivatives
26
(5,203 )
(21,477 )
Net foreign exchange gain/(losses)
9
(22,207 )
(6,922 )
Profit/ (Loss) before tax
(90,742 )
Taxation expense
10
(89,734 )
(5,412 )
Profit/(Loss) for the year
(96,154 )
Attributable to:
Owners of the parent
(96,046 )
Non-controlling interests
(108 )
(96,154 )
Basic and diluted earnings/(loss) per share (cents per share)
Basic
11
$0.10
($0.54 )
Diluted
11
$0.12
($0.54 )
GROUP FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
Year ended 31 December 2022
($’000)
2022
2021
Profit/ (Loss) for the year
(96,154 )
Other comprehensive profit/(loss):
Items that may be reclassified subsequently to profit or loss
Cash Flow hedges
Gain/(loss) arising in the period
(6,182 )
Income tax relating to items that may be reclassified to profit
or loss
(2,799 )
Exchange difference on the translation of foreign operations,
net of tax
(12,781 )
(17,417 )
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit pension plan
(165 )
Income taxes on items that will not be reclassified to profit or
loss
(64 )
(125 )
Other comprehensive profit/(loss) after tax
(17,542 )
Total comprehensive profit/(loss) for the year
(113,696 )
Total comprehensive profit/(loss) attributable to:
Owners of the parent
(113,590 )
Non-controlling interests
(106 )
(113,696 )
Page 166 of 255
GROUP FINANCIAL STATEMENTS
Group Statement of Financial Position
Year ended 31 December 2022
($’000)
Notes
2022
2021
Assets
Non-current assets
Property, plant and equipment
12
Intangible assets
13
Equity-accounted investments
Other receivables
18
Deferred tax asset
14
Restricted cash
16
Current assets
Inventories
17
Trade and other receivables
18
Restricted cash
16
Cash and cash equivalents
15
Total assets
Equity and Liabilities
Equity attributable to owners of the parent
Share capital
19
Share premium
19
Merger reserve
19
Other reserves
Foreign currency translation reserve
(5,827 )
(12,823 )
Share-based payment reserve
Retained earnings
(354,559 )
Total equity
Non-current liabilities
Borrowings
21
Deferred tax liabilities
14
Retirement benefit liability
22
Provisions
23
Other payables
24
Current liabilities
Trade and other payables
24
Current portion of borrowings
21
Derivative financial instruments
Current tax liability
10
Provisions
23
Total liabilities
Total equity and liabilities
Approved by the Board on the 22 March 2023
Matthaios Rigas
Chief Executive Officer
Panos Benos
Chief Financial Officer
Page 167 of 255
GROUP FINANCIAL STATEMENTS
Group Statement of Changes in Equity
Year ended 31 December 2022
($’000)
Share
capital
Share
premium
Hedges
and
Defined
Benefit
Plans
reserve
80
Equity
component
of
convertible
bonds
81
Share
based
payment
reserve
82
Translation
reserve
83
Retained
earnings
Merger
reserves
Total
Non-
controlling
interests
Total
At 1 January 2021
(42 )
(144,734 )
Loss for the period
(96,046 )
(96,046 )
(108 )
Remeasurement of defined benefit
pension plan, net of tax
(125 )
(125 )
(125 )
Hedges net of tax
(4,638 )
(4,638 )
(4,636 )
Exchange difference on the translation
of foreign operations
(12,781 )
(12,781 )
(12,781 )
Total comprehensive income
(4,763 )
(12,781 )
(96,046 )
(113,590 )
(106 )
(113,696 )
Transactions with owners of the
company
Share based payment charges (note
25)
Exercise of Employee Share
Options
(7 )
Acquisition of non-controlling
interests (note 21)
(113,779 )
(103,320 )
(266,193 )
(369,513 )
At 1 January 2022
(2,971 )
(12,823 )
(354,559 )
Profit for the period
Remeasurement of defined
benefit pension plan, net of tax
(96,154 )
80
Reserve is used to recognise remeasurement gain or loss on cash flow hedges and actuarial gain or loss from the defined benefit pension plan. In the Statement of Financial Position this reserve is
combined with the ‘Equity component of convertible bonds’ reserve.
81
Refers to the Equity component of $50million of convertible loan notes, which were issued in February 2021 and have a maturity date of 29 December 2023.
82
Share-based payments reserve is used to recognise the value of equity-settled share-based payments granted to parties including employees and key management personnel, as part of their remuneration.
83
Reserve is used to record unrealised exchange differences arising from the translation of the financial statements of entities within the Group that have a functional currency other than US dollar.
Page 168 of 255
GROUP FINANCIAL STATEMENTS
($’000)
Share
capital
Share
premium
Hedges
and
Defined
Benefit
Plans
reserve
80
Equity
component
of
convertible
bonds
81
Share
based
payment
reserve
82
Translation
reserve
83
Retained
earnings
Merger
reserves
Total
Non-
controlling
interests
Total
Hedges, net of tax
Exchange difference on the
translation of foreign operations
Total comprehensive income
Transactions with owners of the
company
Share based payment charges
(note 25)
Exercise of Employee Share
Options
(6 )
Share premium reduction (note
19)
(500,000 )
Dividends (note 20)
(106,504 )
(106,504 )
(106,504 )
At 31 December 2022
(5,827 )
Group Statement of Changes in Equity (continued)
Year ended 31 December 2022
Page 169 of 255
GROUP FINANCIAL STATEMENTS
Group Statement of Cash Flows
Year ended 31 December 2022
($’000)
Note
2022
2021
Operating activities
Profit/ (Loss) before taxation
(90,742 )
Adjustments to reconcile profit/(loss} before
taxation to net cash provided by operating
activities:
Depreciation, depletion and amortisation
12,13
Impairment loss on property, plant and
equipment
84
12,23
Loss from the sale of property, plant and
equipment
12
Impairment loss on exploration and evaluation
assets
13
Defined benefit (gain)
22
(4,062 )
Movement in provisions
23
(4,465 )
Compensation to gas buyers
6
(22,958 )
Change in decommissioning provision estimates
23
(10,198 )
Finance income
9
(2,950 )
Finance costs
9
Unrealised loss on derivatives
ECL on trade receivables
(1,853 )
Non-cash revenues from Egypt
85
(39,100 )
Impairment loss on inventory
Share-based payment charge
25
Net foreign exchange loss
9
Cash flow from operations before working
capital adjustments
(Increase) in inventories
(16,484 )
(Increase)/Decrease in trade and other
receivables
Increase/(Decrease) in trade and other payables
(34,726 )
Cash flow from operations
Income tax (paid)/ received
Net cash inflow from operating activities
(351 )
(4,742 )
(9,572 )
(57,766 )
(10,278 )
(74,454 )
(39,304 )
84
The impairment of property, plant and equipment is a result of changes in the decommissioning provision.
85
Non-cash revenues from Egypt arise due to taxes being deducted at source from invoices as such revenue and tax charges are
grossed up to reflect this deduction but no cash inflow or outflow results.
Page 170 of 255
GROUP FINANCIAL STATEMENTS
Group Statement of Cash Flows (continued)
Year ended 31 December 2022
($’000)
Note
2022
2021
Investing activities
Payment for purchase of property, plant and
equipment
12
(403,503 )
Payment for exploration and evaluation, and other
intangible assets
13
(48,674 )
Acquisition of a subsidiary, net of cash acquired
Movement in restricted cash
(199,729 )
Proceeds from disposal of property, plant and
equipment
Amounts received from INGL related to the future
transfer of property, plant & equipment
24
Interest received
Net cash outflow for investing activities
(307,941 )
(642,783 )
Financing activities
Drawdown of borrowings
21
Repayment of borrowings
21
(1,807,140 )
Senior secured notes Issuance
21
Acquisition of-non-controlling interests
21
(175,000 )
Transaction costs related to acquisition of non-
controlling interest
(1,677 )
Repayment of obligations under leases
(10,852 )
Debt arrangement fees paid
(48,377 )
Finance cost paid for deferred license payments
(3,494 )
Finance costs paid
(136,695 )
Dividend Paid
Net cash (outflow)/ inflow from financing
activities
(267,479 )
Net (decrease) / increase in cash and cash
equivalents
(303,267 )
Cash and cash equivalents at beginning of the
period
Effect of exchange rate fluctuations on cash held
(21,586 )
Cash and cash equivalents at end of the period
15
(395,753 )
(64,414 )
(30,000 )
(14,023
)
(1,501 )
(178,914 )
(106,504 )
Page 171 of 255
GROUP FINANCIAL STATEMENTS
Group Accounting Policies and Notes
1
Corporate Information
to as “the Group”.
The Group has been established with the objective of exploration, production and commercialisation of
The Group’s core assets and subsidiaries as of 31 December 2022 are presented in note 30.
Significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis, except for the
revaluation of certain financial instruments that are measured at revalued amounts or fair values at the
end of each reporting period, as explained in the accounting policies below.
The consolidated financial information is presented in US Dollars and all values are rounded to the nearest
thousand dollars except where otherwise indicated.
The statement of financial position as at 31 December 2022 presents current tax liabilities separately
from the current portion of trade and other payables. Comparative amounts of $5,279,000 have been
reclassified accordingly.
The consolidated financial statements have been prepared on a going concern basis. The principal
The Group carefully manages the risk of a shortage of funds by closely monitoring its funding position and
its liquidity risk. The going concern assessment covers the period from the date of approval of the Group
Financial Statements on 22 March 2023 to 30 June 2024 ‘the Assessment Period’. The Assessment
Period has been extended such that it includes the $625 million bond repayment due in March 2024.
As of 31 December 2022 the Group’s available liquidity was approximately $720 million. This available
liquidity figure includes: (i) c. $43 million of undrawn facility under the €100 million loan backed by the
Greek State signed in December 2021 for the development of the Prinos Area in Greece, including the
Epsilon development; and (ii) c. $174 million available under the $275 million Revolving Credit Facility
(‘RCF’) signed by the Group in September 2022 (with the remainder being utilized to issue Letters of Credit
for the Group’s operations). Subsequent to 31 December 2022, the Group signed a $350 million Term
Loan Facility. The Group has a $625 million bond, at the Energean Israel level, maturing in March 2024.
Management expects to refinance this bond during 2023; however, for the purposes of the Going Concern
assessment it has been assumed that the bond is repaid in full and not refinanced.
The going concern assessment is founded on a cashflow forecast prepared by management, which is
based on a number of assumptions, most notably the Group’s latest life of field production forecasts,
budgeted expenditure forecasts, estimated of future commodity prices (based on recent published
forward curves) and available headroom under the Group’s debt facilities. The going concern assessment
contains a ‘Base Case’ and a ‘Reasonable Worst Case’ (‘RWC’) scenario.
The Base Case scenario assumes Brent at $80/bbl in 2023 and $75/bbl in 2024
and PSV (Italian gas
price) at €50/MWH in 2023 and €45/MWH in 2024. A reasonable ramp-up of production from the Karish
Field is assumed throughout the going concern assessment period, with prices for gas sold assumed at
contractually agreed prices. Under the Base Case, sufficient liquidity is maintained throughout the going
concern period.
The Group also routinely performs sensitivity tests of its liquidity position to evaluate adverse impacts
that may result from changes to the macro-economic environment, such as a reduction in commodity
prices. These downsides are considered in the RWC going concern assessment scenario. The Group is
not materially exposed to floating interest rate risk since the majority of its borrowings are fixed-rate. The
Group also looks at the impact of changes or deferral of key projects and downside scenarios to budgeted
production forecasts in the RWC.
The two primary downside sensitivities considered in the RWC are: (i) reduced commodity prices; (ii)
reduced production – these downsides are applied to assess the robustness of the Group’s liquidity
position over the Assessment Period. In a RWC downside case, there are appropriate and timely mitigation
strategies, within the Group’s control, to manage the risk of funding shortfalls and to ensure the Group’s
ability to continue as a going concern. Mitigation strategies, within management’s control, modelled in
the RWC include deferral of capital expenditure on operated assets, deferral or cancellation of exploration
and/or discretionary spend and exercise of rights under contractual arrangements to improve liquidity.
Under the RWC scenario, after considering mitigation strategies, liquidity is maintained throughout the
going concern period.
Reverse stress testing was also performed to determine what commodity price or production shortfall
would need to occur for liquidity headroom to be eliminated. The conditions necessary for liquidity
headroom to be eliminated are judged to have a remote possibility of occurring, given the diversified
nature of the Group’s portfolio and the ‘natural hedge’ provided by virtue of the Group’s fixed-price gas
contracts in Israel and Egypt. In the event a remote downside scenario occurred, prudent mitigating
strategies, consistent with those described above, could also be executed in the necessary timeframe
to preserve liquidity. There is no material impact of climate change within the Assessment Period and
therefore it does not form part of the reverse stress testing performed by management.
In forming its assessment of the Group’s ability to continue as a going concern, including its review of
the forecasted cashflow of the Group over the Forecast Period, the Board has made judgements about:
•
Reasonable sensitivities appropriate for the current status of the business and the wider macro
environment; and
•
the Group’s ability to implement the mitigating actions within the Group’s control, in the event these
actions were required.
After careful consideration, the Directors are satisfied that the Group and Company has sufficient financial
resources to continue in operation for the foreseeable future, for the Assessment Period from the date
of approval of the Group Financial Statements on 22 March 2023 to 30 June 2024. For this reason, they
2.2
New and amended accounting standards and interpretations
The following amendments became effective as at 1 January 2022:
•
Annual improvements to IFRS 2018-2020
•
Reference to the Conceptual Framework – Amendments to IFRS 3
•
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
•
Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
None of the above amendments had a significant impact on the consolidated financial statements of the
Group.
New and amended standards and interpretations in issue but not yet effective for the 2022 year
end
New standards and interpretations that are in issue but not yet effective are listed below:
•
IFRS 17 Insurance Contracts – 1 January 2023
•
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative
Information – 1 January 2023
•
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) –
1 January 2023
•
Definition of Accounting Estimates (Amendments to IAS 8) – 1 January 2023
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to
IAS 12) – 1 January 2023
•
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants – 1 January 2024
•
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) – 1 January 2024
The adoption of the above standard and interpretations is not expected to lead to any material changes to
the Group’s accounting policies or have any other material impact on the financial position or performance
of the Group.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries) as detailed in Note 30. Control is achieved when the Group
is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
financial statements from the effective date of acquisition or up to the effective date of disposal, as
appropriate.
Profit or loss and each component of other comprehensive income (OCI) are attributed to owners of the
Group and to the non-controlling interests, even if this results in the non-controlling interests having a
deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those used by other members of the Group. All intragroup
transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the
Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of
the original business combination and the non-controlling interests’ share of changes in equity since the
date of the combination.
Transactions with non-controlling interests that do not result in loss of control of a subsidiary, are
accounted for as transactions with the owners (i.e. as equity transactions). The difference between the
fair value of any consideration and the resulting change in the non-controlling interests’ share of the net
3
Summary of significant accounting policies
The principal accounting policies and measurement bases used in the preparation of the consolidated
financial statements are set out below. These policies have been consistently applied to all periods
presented in the consolidated financial statements unless otherwise stated.
Functional and presentation currency and foreign currency translation
Functional and presentation currency
Items included in the consolidated financial statements of the Company and its subsidiaries entities are
measured using the currency of the primary economic environment in which each entity operates (”the
functional currency”).
The functional currency of the Company is US Dollars (US$). The US Dollar is the currency that mainly
influences sales prices, revenue estimates and has a significant effect on its operations. The functional
currencies of the Group’s main subsidiaries are Euro for Energean Italy Spa, Energean International E&P
Spa, Energean Oil & Gas S.A., and US$ for Energean Israel Limited, Energean Egypt Limited, Energean
International Limited and Energean Capital Limited.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
retranslation of monetary assets and liabilities denominated in foreign currencies are recognised in profit
or loss. Such monetary assets and liabilities are translated at year end foreign exchange rates. Non-
monetary items denominated in a foreign currency are translated at the exchange rates prevailing at the
date of the transaction and are not subsequently remeasured.
Translation to presentation currency
For the purpose of presenting consolidated financial statements information, the assets and liabilities of
the Group are expressed in US$. The Company and its subsidiaries’ assets and liabilities are translated
using exchange rates prevailing on the reporting date. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates have fluctuated significantly during that
period, in which case the exchange rates at the dates of the transactions are used. Exchange differences
arising are recognised in other comprehensive income and accumulated in the Group’s translation
reserve. Such translation differences are reclassified to profit or loss in the period in which the foreign
Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value, which is calculated as the
sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for
control of the acquiree. For each business combination the acquirer measures the non-controlling interest
in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are recognised in the consolidated statement of profit or loss as incurred.
Where appropriate, the cost of acquisition includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair
values are adjusted against the cost of acquisition where they qualify as measurement period adjustments.
All other subsequent changes in the fair value of contingent consideration classified are accounted for in
profit or loss. Contingent consideration classified as equity is not remeasured.
The acquiree’s identifiable assets, liabilities and contingent liabilities as at the date of acquisition
are recognised and measured at fair value in accordance with the requirements of
IFRS 3 Business
Combinations
If the initial accounting for a business combination is incomplete by the end of the reporting year in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting
is incomplete. Those provisional amounts are adjusted during the measurement period (see below),
or additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed as at the acquisition date that, if known, would have affected the amounts
recognised as at that date.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in
the acquiree (if any) over the net of the acquisition-date fair value of the identifiable assets acquired and
the liabilities assumed. If, after reassessment, the net of the acquisition-date fair values of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in
the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Investments in Associates and Joint arrangements
A joint arrangement is one in which two or more parties have joint control. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control. A joint arrangement is either a
joint operation or a joint venture.
An associate is an entity over which the Group has significant influence. Significant influence is the power
to participate in the financial and operating policy decisions of the investee but is not control or joint
control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture.
The considerations made in determining significant influence or joint control are similar to those necessary
to determine control over subsidiaries. The Group’s investments in associates and joint ventures are
accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost.
The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net
assets of the associate or joint venture since the acquisition date. Any goodwill relating to the associate
or joint venture is included in the carrying amount of the investment and is not tested for impairment
separately.
Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has
been a change recognised directly in the equity of the associate or joint venture, the Group recognises its
share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses
resulting from transactions between the Group and the associate or joint venture are eliminated to the
extent of the interest in the associate or joint venture.
The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the
face of the statement of profit or loss outside operating profit and represents profit or loss after tax and
non-controlling interests in the subsidiaries of the associate or joint venture.
After application of the equity method, the Group determines whether it is necessary to recognise an
impairment loss on its investment in its associate or joint venture. At each reporting date, the Group
determines whether there is objective evidence that the investment in the associate or joint venture is
impaired. If there is such evidence, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate or joint venture and its carrying value, and then
recognises the loss within ‘Share of profit of an Associate and a Joint Venture’ in the statement of profit
or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group
measures and recognises any retained investment at its fair value. Any difference between the carrying
amount of the associate or joint venture upon loss of significant influence or joint control and the fair
value of the retained investment and proceeds from disposal is recognised in profit or loss.
Joint operations
A joint operation is a type of joint arrangement whereby the parties that have joint control of the
arrangement have the right to the assets and obligations for the liabilities, relating to the arrangement. In
relation to its interests in joint operations, the Group recognises its share of:
•
Assets, including its share of any assets held jointly.
•
Liabilities, including its share of any liabilities incurred jointly.
•
Revenue from the sale of its share of the output arising from the joint operation.
•
Share of the revenue from the sale of the output by the joint operation.
•
Expenses, including its share of any expenses incurred jointly.
The Group is engaged in oil and gas exploration, development and production through unincorporated
joint arrangements particularly in Italy and the UK. These are classified as joint operations in accordance
with IFRS 11
Joint Arrangements
. The Group accounts for its share of the results and assets and liabilities
of these joint operations. In addition, where the Energean acts as operator to the joint operation, the gross
liabilities and receivables (including amounts due to or from non-operated partner) of the joint operation
are included in the Group’s balance sheet. Where another party acts as operator, the Group’s share of the
working capital (inventory, receivables and payables) of those non-operated fields is recognised within
trade and other payables/receivables. A list of the Group’s joint operations and its working interest in each
Exploration and evaluation expenditures
The Group adopts the successful efforts method of accounting for exploration and evaluation costs.
Pre-licence costs are expensed in the period in which they are incurred. All licence acquisition, exploration
and evaluation costs and directly attributable administration costs are initially capitalised as intangible
assets by field or exploration area, as appropriate. All such capitalised costs are subject to technical,
commercial and management review, as well as review for indicators of impairment at least once a year.
This is to confirm the continued intent to develop or otherwise extract value from the discovery. When this
is no longer the case, the costs are written off through the statement of profit or loss. When proved reserves
of oil and gas are identified and development is sanctioned by management, the relevant capitalised
expenditure is first assessed for impairment and (if required) any impairment loss is recognised, then the
remaining balance is transferred to oil and gas properties.
Farm-outs – in the exploration and evaluation phase
The Group does not record any expenditure made by the farmee on its account. It also does not recognise
any gain or loss on its exploration and evaluation farm-out arrangements, but redesignates any costs
previously capitalised in relation to the whole interest as relating to the partial interest retained. Any cash
consideration received directly from the farmee is credited against costs previously capitalised in relation
Oil and gas properties – assets in development
Expenditure is transferred from ’Exploration and evaluation assets’ to ‘Assets in development’ which is a
subcategory of ‘Oil and gas properties’ once the work completed to date supports the future development
of the asset and such development receives appropriate approvals. After transfer of the exploration
and evaluation assets, all subsequent expenditure on the construction, installation or completion of
infrastructure facilities such as platforms, pipelines and the drilling of development wells, including
unsuccessful development or delineation wells, is capitalised within ‘Assets in development’. Proceeds
from any oil and gas produced while bringing an item of property, plant and equipment to the location and
condition necessary for it to be capable of operating in the manner intended by management (such as
samples produced when testing whether the asset is functioning properly) is recognised in profit or loss in
accordance with IFRS 15
Revenue Recognition
. The Group measures the cost of those items applying the
measurement requirements of IAS 2
Inventories
. When a development project moves into the production
stage, all assets included in ‘Assets in development’ are then transferred to ‘Producing assets’ which is
also a sub-category of ‘Oil and gas properties’. The capitalisation of certain construction/development
costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs
which qualify for capitalisation relating to ‘Oil and gas properties’ asset additions, improvements or new
developments.
3.6
Commercial reserves
Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated
quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering
data demonstrate with a specified degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible. Commercial reserves have a 50% statistical
probability that the actual quantity of recoverable reserves will be more than the amount estimated as
proven and probable reserves and a 50% statistical probability that it will be less.
3.7
Depletion and amortisation
All expenditure carried within each field is amortised from the commencement of production on a unit
of production basis, which is the ratio of oil and gas production in the period to the estimated quantities
of commercial reserves at the end of the period plus the production in the period, generally on a field-by-
field basis or by a group of fields which are reliant on common infrastructure. Costs included in the unit
of production calculation comprise the net book value of capitalised costs plus the estimated future field
development costs required to recover the commercial reserves remaining. Changes in the estimates of
commercial reserves or future field development costs are dealt with prospectively.
3.8
Impairments of oil & gas properties
The group assesses assets or groups of assets, called cash-generating units (CGUs), for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset or CGU may
not be recoverable; for example, changes in the group’s assumptions about commodity prices, low
field utilisation, significant downward revisions of estimated reserves or increases in estimated future
development expenditure or decommissioning costs. If any such indication of impairment exists, the
group makes an estimate of the asset’s or CGU’s recoverable amount.
Where there is interdependency between fields due to shared infrastructure, the related cash inflows of
each field are not largely independent and therefore the relevant fields are grouped as a single CGU for
impairment purposes. A CGU’s recoverable amount is the higher of its fair value less costs of disposal
and its value in use. Where the carrying amount of a CGU exceeds its recoverable amount, the CGU is
considered impaired and is written down to its recoverable amount.
Fair value less costs of disposal is the price that would be received to sell the asset in an orderly transaction
between market participants and does not reflect the effects of factors that may be specific to the group
and not applicable to entities in general.
In order to discount the future cash flows the Group calculates CGU-specific discount rates. The discount
rates are based on an assessment of a relevant peer group’s Weighted Average Cost of Capital (WACC).
The Group then adds any exploration risk premium which is implicit within a peer group’s WACC and
subsequently applies additional country risk premium for CGUs. Where conditions giving rise to
impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the
income statement, net of any amortisation that would have been charged since the impairment.
The reversal is limited such that the carrying amount of the asset exceeds neither its recoverable amount,
nor the carrying amount that would have been determined, net of depreciation, had no impairment loss
Other property, plant and equipment
Other property, plant and equipment comprise of plant machinery and installation, furniture and fixtures.
Initial recognition
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable
to bringing the asset into operation and borrowing costs. The purchase price or construction cost is the
aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Depreciation
Depreciation of other property, plant and equipment is calculated on the straight-line method so as to
write-off the cost amount of each asset to its residual value, over its estimated useful life. The useful life
of each class is estimated as follows:
Years
Property leases and leasehold improvements
3 – 10
Motor vehicles and other equipment
2 – 5
Plant and machinery
7 – 15
Furniture, fixtures and equipment
5 – 7
Depreciation of the assets in the course of construction commences when the assets are ready for their
intended use, on the same basis as other assets of the same class.
An item of property, plant and equipment and any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the statement of profit or loss when the asset is
derecognised.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting
date.
Repairs, maintenance, and renovations
Expenditure for routine repairs and maintenance of property, plant and equipment is charged to the profit
or loss in the year in which it is incurred. The cost of major improvements and renovations and other
subsequent expenditure are included in the carrying amount of the asset when the recognition criteria
of IAS 16 ‘Property, Plant and Equipment’ are met. Major improvements and renovations capitalised are
Other intangible assets
Computer software
Costs that are directly associated with identifiable and unique computer software products controlled by
the Group and that it is probable that these products will generate economic benefits exceeding costs
beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost
less any accumulated amortisation and any accumulated impairment losses.
Costs associated with maintenance of computer software programs (such as S4/HANA Cloud Services)
are recognised as an expense when incurred.
Computer software costs are amortised using the straight-line method over their useful live, of between
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its depreciable property, plant and
equipment and intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. Impairment is assessed at the level of cash-generating units (CGUs) which,
in accordance with IAS 36 ‘Impairment of Assets’, are identified as the smallest identifiable group of
assets that generates cash inflows, which are largely independent of the cash inflows from other assets.
This is usually at the individual royalty, stream, oil and gas or working interest level for each property from
which cash inflows are generated.
An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its
recoverable amount, which is the higher of fair value less costs of disposal (FVLCD) and value-in-use
(VIU). The future cash flow expected is derived using estimates of proven and probable reserves and
information regarding the mineral, stream and oil & gas properties, respectively, that could affect the
future recoverability of the Company’s interests. Discount factors are determined individually for each
asset and reflect their respective risk profiles.
Assets are subsequently reassessed for indications that an impairment loss previously recognised may
no longer exist. An impairment charge is reversed if the conditions that gave rise to the recognition of
an impairment loss are subsequently reversed and the asset’s recoverable amount exceeds its carrying
amount. Impairment losses can be reversed only to the extent that the recoverable amount does not
exceed the carrying value that would have been determined had no impairment been recognised previously.
Exploration and evaluation assets are tested for impairment when there is an indication that a particular
exploration and evaluation project may be impaired. Examples of indicators of impairment include a
significant price decline over an extended period, the decision to delay or no longer pursue the exploration
and evaluation project, or an expiration of rights to explore an area. In addition, exploration and evaluation
assets are assessed for impairment upon their reclassification to producing assets (oil and gas interest
in property, plant and equipment). In assessing the impairment of exploration and evaluation assets, the
carrying value of the asset would be compared to the estimated recoverable amount and any impairment
loss is recognised immediately in profit or loss.
Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of
CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying
amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in
3.12
Convertible bonds
Convertible bonds are separated into liability and equity components based on the terms of the contract.
The fair value of the liability component on initial recognition is calculated by discounting the contractual
cash flows using a market interest rate for an equivalent non-convertible instrument. The difference
between the fair value of the liability component and the proceeds received on issue is recorded as equity.
Transaction costs are apportioned between the liability and the equity components of the instrument
based on the amounts initially recognised. The liability component is classified as a financial liability
measured at amortised cost (net of transaction costs) until it is extinguished on conversion or settlement.
The equity component is not remeasured.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at the date of inception. The arrangement is assessed to determine whether fulfilment is
dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the asset
(or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement. With the
exception of leases in joint operations (see below), the Group is not a lessor in any transactions, it is only
a lessee.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term
leases, leases of low-value assets and leases to explore for or use minerals, oil, natural gas and similar
non-regenerative resources. The Group recognises lease liabilities to make lease payments and right-of-
use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use).
The right-of-use asset is measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. Cost comprises the initial amount of the lease
liability and any lease payments made at or before the commencement date, plus any initial direct costs
incurred and an estimate of costs required to remove or restore the underlying asset, less any lease
incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the assets, as follows:
•
Property leases 1 to 10 years
•
Motor vehicles and other equipment 1 to 12 years
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present
value of lease payments to be made over the lease term. The lease payments include fixed payments
(including in substance fixed payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease
payments also include the exercise price of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising
the option to terminate.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to
future payments resulting from a change in an index or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in Interest-bearing loans and borrowings (see Note 21).
iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered to be low value. Lease payments on short-term leases
and leases of low value assets are recognised as expense on a straight-line basis over the lease term.
iv) Other leases outside the scope of IFRS 16
Leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources are outside
the scope of IFRS 16 and are recognised as exploration and evaluation costs or as oil and gas assets, as
appropriate. Please refer to notes 3.4 and 3.5.
Accounting for leases in joint operations
Where the Group enters into lease agreements as operator of a joint operation and is sole signatory to a
lease contract, it recognises its obligations under the lease in full to reflect the legal position of the Group
as the contracting counterparty for such leases. Where the obligations of the non-operator parties under
the joint operating agreement give rise to a sub-lease, the related proportion of the right-of-use asset
is derecognised and a finance lease receivable recorded to reflect the proportion of the lease liability
Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI), or fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of trade
receivables that do not contain a significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not
contain a significant financing component or for which the Group has applied the practical expedient are
measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument
level.
The Group’s business model for managing financial assets refers to how it manages its financial assets
in order to generate cash flows. The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in two categories:
•
Financial assets at amortised cost (debt instruments)
•
Financial assets at fair value through profit or loss
Financial assets at amortised cost
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method
and are subject to impairment under the expected credit loss model. Gains and losses are recognised in
profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost include trade receivables.
Financial assets at fair value through profit or loss
The Group’s financial assets at fair value through profit or loss include financial assets designated
upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be
measured at fair value.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair
value with net changes in fair value recognised in the statement of profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial
position) when the rights to receive cash flows from the asset have expired or are transferred.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group expects to receive, discounted
at an approximation of the original effective interest rate. The expected cash flows will include cash flows
from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default
events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for
which there has been a significant increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of
the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based
on lifetime ECLs at each reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when internal or
external information indicates that the Group is unlikely to receive the outstanding contractual amounts
in full before taking into account any credit enhancements held by the Group. A financial asset is written
off when there is no reasonable expectation of recovering the contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative
financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing
in the near term. This category also includes derivative financial instruments entered into by the Group
that are not designated as hedging instruments in hedge relationships as defined by IFRS 9
Financial
Instruments
. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on financial liabilities recognised at fair value through profit and loss are recognised in
the statement of profit or loss. The Group discloses the unwinding of the discount separately, in finance
costs, from the mark to market gain or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised, modified and through the EIR amortisation
process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in the statement of profit or loss.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities
simultaneously.
Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as interest rate swaps and forward commodity
contracts, to hedge its interest rate risks and commodity price risks, respectively. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into
and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair
value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as:
•
Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or
liability or an unrecognised firm commitment
•
Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable
to a particular risk associated with a recognised asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognised firm commitment
•
Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Group formally designates and documents the hedging
instrument and the hedged item to which it wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge.
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness
requirements:
•
There is ‘an economic relationship’ between the hedged item and the hedging instrument.
•
The effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship.
•
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Group actually hedges and the quantity of the hedging instrument that the
Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow
hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss.
The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging
instrument and the cumulative change in fair value of the hedged item attributable to the hedged risk.
From time to time, the Group may use forward commodity contracts for its exposure to volatility in the
commodity prices. The ineffective portion relating to forward commodity contracts is recognised in
revenue or cost of sales.
The Group designates only the spot element of forward contracts as a hedging instrument. The forward
element is recognised in OCI and accumulated in a separate component of equity.
The amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the
same period or periods during which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain
in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the amount
will be immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation,
once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for
depending on the nature of the underlying transaction.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Ordinary shares
Ordinary shares are classified as equity and measured at their nominal value. Any premiums received on
issue of share capital above its nominal value, are recognised as share premium within equity. Associated
Share-based payment
Equity-settled transactions
Awards to non-employees:
The fair value of the equity settled awards has been determined at the date the goods or services are
received with a corresponding increase in equity (share-based payment reserve).
Awards to employees:
Employees (including senior executives) of the Group receive remuneration in the form of share-based
payments, whereby employees render services as consideration for equity instruments (equity-settled
transactions).
The fair value of the equity settled awards has been determined at the date of grant of the award allowing
for the effect of any market-based performance conditions.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity
(share-based payment reserve), over the period in which the service and, where applicable, the performance
conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting period
has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
The expense or credit in the statement of profit or loss for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant
date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s
best estimate of the number of equity instruments that will ultimately vest. Market performance conditions
are reflected within the grant date fair value. Any other conditions attached to an award, but without an
associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an immediate expensing of an award unless there are
also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/
or service conditions have not been met. Where awards include a market or non-vesting condition, the
transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied,
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the
principal market for the asset or liability or in the absence of a principal market, in the most advantageous
market for the asset or liability.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best
interest. A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
All assets and liabilities, for which fair value is measured or disclosed in the consolidated financial
statements, are categorised within the fair value hierarchy, described as follows, based on the lowest-level
input that is significant to the fair value measurement as a whole:
•
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities
•
Level 2 – Valuation techniques for which the lowest-level input that is significant to the fair value
measurement is directly or indirectly observable
•
Level 3 – Valuation techniques for which the lowest-level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the consolidated financial statements on a recurring basis,
the Group determines whether transfers have occurred between levels in the hierarchy by reassessing
categorisation (based on the lowest-level input that is significant to the fair value measurement as a
Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank, demand deposits and also cash reserves retained
as a bank security pledge in respect of bank guarantees (Note 28), with a maturity of three months or less
that are subject to an insignificant risk of changes in their fair value.
The cash reserves retained as a bank security pledge in respect of bank guarantees are defined as
deposits in escrow and held in designated bank deposits accounts to be released when the Group meet
the specified expenditure milestones.
Restricted cash comprises balances retained in respect of the Group’s Senior Secured Notes and cash
collateral provided under a letter of credit facility for issuing bank guarantees for Group’s activities in
Israel (see Note 16). The nature of the restrictions on these balances mean that they do not qualify for
3.18
Over/underlift
Lifting or offtake arrangements for oil and gas produced in certain of the Group’s jointly owned operations
are such that each participant may not receive and sell its precise share of the overall production in each
period. The resulting imbalance between cumulative entitlement and cumulative production less stock is
underlift or overlift. Underlift and overlift are valued at market value and included within receivables and
payables respectively. Movements during an accounting period are adjusted through cost of sales such
that gross profit is recognised on an entitlements basis.
In respect of redeterminations, any adjustments to the Group’s net entitlement of future production is
accounted for prospectively in the period in which the make-up oil is produced. Where the make-up period
extends beyond the expected life of a field an accrual is recognised for the expected shortfall.
Inventories
Inventories comprise crude oil and by-product (sulphur), consumables and other spare parts. Inventories
are stated at the lower of cost and net realisable value. Cost is determined using the monthly weighted
average cost method. The cost of finished goods and work in progress comprises raw materials, direct
labour, other direct costs and related production overheads. It does not include borrowing costs. Net
realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and estimated costs necessary to make the sale. Spare parts consumed within a year are
carried as inventory and recognised in profit or loss when consumed.
The Group assesses the net realisable value of the inventories at the end of each year and recognises in
the consolidated statement of profit or loss the appropriate valuation adjustment if the inventories are
overstated. When the circumstances that previously caused impairment no longer exist or when there
is clear evidence of an increase in the inventories’ net realisable value due to a change in the economic
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation, and a
reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation at the end of the reporting period, taking
into account the risk and uncertainties surrounding the obligation. The expense relating to a provision is
presented in profit or loss net of any reimbursement. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When
discounting is used, the increase in the provision due to the passage of time is recognised as a finance
cost.
Decommissioning costs
Provision for decommissioning is recognised in full when the related facilities are installed. A corresponding
amount equivalent to the provision is also recognised as part of the cost of the related property, plant and
equipment.
The amount recognised is the estimated cost of decommissioning, discounted to its net present value at a
risk-free discount rate, and is reassessed each year in accordance with local conditions and requirements.
Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt with
prospectively by recording an adjustment to the provision, and a corresponding adjustment to property,
plant and equipment. The unwinding of the discount on the decommissioning provision is included as a
Revenue
Revenue from contracts with customers is recognised when control of the gas/crude oil/by-products
or rendering of services are transferred to the customer at an amount that reflects the consideration to
which the Group expects to be entitled in exchange for those goods or services.
The Group has concluded that it is the principal in its revenue arrangements because it typically controls
the goods or services before transferring them to the customer. In certain jurisdictions in which the Group
operates royalties are levied by the government. The government can request that these royalty payments
be made in cash or in kind. In the current year and in prior years the government has requested cash
payments be made and therefore the Group has not made any royalty payments in kind. As such the
Group obtains control of all the underlying reserves once extracted, sells the production to its customers
and then remits the proceeds to the royalty holder and is therefore considered to be acting as the principal.
Sale of gas, crude oil and by-products
Sales revenue represents the sales value, net of VAT, of actual sales volumes to customers in the year
together with the gain/loss on realisation of cash flow hedges.
The Group’s accounting policy under IFRS 15 is that revenue is recognised when the Group satisfies a
performance obligation by transferring oil or gas to its customer. The title to oil and gas typically transfers
to a customer at the same time as the customer takes physical possession of the oil or gas. Typically, at
this point in time, the performance obligations of the Group are fully satisfied. The revenue is recorded
when the oil or gas has been physically delivered to a vessel or pipeline.
Rendering of services
The Group recognises revenue from technical advisory services, using an input method to measure
progress towards complete satisfaction of the service, because the customer simultaneously receives
and consumes the benefits provided by the Group. The Group recognises revenue from advisory services
on the basis of the labour hours expended relative to the total expected labour hours to complete the
Retirement benefit costs
State managed retirement benefit scheme
Payments made to state managed retirement benefit schemes (e.g. government social insurance fund)
are dealt with as payments to defined contribution plans where the Group’s obligations under the plans
are equivalent to those arising in a defined contribution plan. The Group’s contributions are expensed as
incurred and are included in staff costs. The Group has no legal or constructive obligations to pay further
contributions if the government scheme does not hold sufficient assets to pay all employees benefits
relating to employee service in the current and prior periods.
Defined benefit plan
The Group operates an unfunded defined benefit plan in which a lump sum amount is specified and is
payable at the termination of employees’ services based on such factors as the length of the employees’
service and their salary. The liability recognised for the defined benefit plan is the present value of the
defined benefit obligation at the reporting date.
The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each reporting date. These assumptions used in the actuarial valuations
are developed by management with the assistance of independent actuaries.
Service costs on the defined benefit plan are included in staff costs. Interest expense on the defined
benefit liability is included in finance costs. Gains and losses resulting from other remeasurements of the
defined benefit liability are included in other comprehensive income and are not reclassified to profit or
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
Excluded from the above capitalisation policy are any qualifying assets that are inventories that are
produced in large quantities on a repetitive basis and any Exploration and Evaluation assts which have
not resulted in the classification of commercial reserves.
Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing
Tax
Income tax expense represents the sum of current and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in the consolidated financial statements because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the reporting date.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities
in the consolidated financial statements and the corresponding tax bases used in the computation of
taxable profit, based on tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. No deferred tax is recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Current and deferred tax assets and corresponding liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities and when they relate to income taxes levied
Equity, reserves and dividend payments
Share capital represents the nominal (par) value of shares that have been issued. Share premium includes
any premiums received on issue of share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax benefits.
•
Remeasurement of net defined benefit liability – comprises the actuarial losses from changes in
demographic and financial assumptions and the return on plan assets (see Note 3.22)
•
Translation reserve – comprises foreign currency translation differences arising from the translation
of financial statements of the Group’s foreign entities (see Note 3.1)
•
Merger reserves – On 30 June 2017, the Company became the parent company of the Group
through the acquisition of the full share capital of Energean E&P Holdings Limited. From that
point, in the consolidated financial statements, the share capital became that of Energean plc. The
previously recognised share capital and share premium of Energean E&P Holdings Limited was
eliminated with a corresponding positive merger reserve.
Share-based payment reserve: The share-based payments reserve is used to recognise the value of equity-
settled share-based payments granted to parties including employees and key management personnel,
as part of their remuneration.
Retained earnings includes all current and prior period retained profits.
All transactions with owners of the parent are recorded separately within equity.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends
Critical accounting estimates and judgements
The preparation of these consolidated financial statements in conformity with IFRS requires the use of
accounting estimates and assumptions, and also requires management to exercise its judgement, in the
process of applying the Group’s accounting policies.
Estimates, assumptions and judgement applied are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Although these estimates, assumptions and judgement are based on
management’s best knowledge of current events and actions, actual results may ultimately differ.
4.1
Critical judgements in applying the Group’s accounting policies
The following are management judgements in applying the accounting policies of the Group that have the
most significant effect on the consolidated financial statements:
Carrying value of intangible exploration and evaluation assets (note 13)
Amounts carried under intangible exploration and evaluation assets represent active exploration projects.
Capitalised costs will be written off to the income statement as exploration costs unless commercial
reserves are established or the determination process is not completed and there are no indications
of impairment in accordance with the Group’s accounting policy. The process of determining whether
there is an indicator for impairment or impairment reversal and quantifying the amount requires critical
judgement. The key areas in which management has applied judgement as follows: the Group’s intention
to proceed with a future work programme; the likelihood of license renewal or extension; the assessment
of whether sufficient data exists to indicate that, although a development in the specific area is likely to
proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full
from successful development or by sale; and the success of a well result or geological or geophysical
survey.
Identification of cash generating units
In considering the carrying value of property, plant and equipment the Group has to make a critical
judgement in relation to the identification of the smallest cash generating units to which those assets are
allocated. In all countries except for Italy the cash generating unit is considered to be at the concession
level. In Italy the gas field concessions are connected via a shared pipeline with different points of
entry, which allows production to be changed from one concession to another. In view of this shared
infrastructure that exists in Italy and the ability to move sales between assets as well as the management
of spare parts and the organisational structure of the Italian business the Group has determined that the
related cash inflows are interdependent and therefore identified five cash generating units in Italy being
Italy Gas and then the oil fields (Vega, Sarago Mare, Rospo and Other Oil fields) which is consistent with
how the Group monitors the business.
4.2
Estimation uncertainty
The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are discussed below:
Impairment of property, plant and equipment
The Group assesses at each reporting date whether there is an indication that an asset (or CGU) may be
impaired. The Group assesses impairment at each reporting date by evaluating conditions specific to the
Group that may lead to impairment of assets. Where indicators of impairments or impairment reversals
are present and an impairment or impairment reversal test is required, the calculation of the recoverable
amount requires estimation of future cash flows within complex impairment models. The recoverable
amount (which is the higher of fair value less costs to sell and value in use) of the cash-generating unit
to which the assets belong is then estimated based on the present value of future discounted cash
flows. Key assumptions and estimates used in both the impairment models and in the calculation of the
recoverable amount are: commodity price assumptions, production profiles, the future impact of risks
associated with climate change, discount rates and commercial reserves and the related cost profiles.
Commercial (proven and probable) reserves are estimates of the amount of oil and gas that can be
economically extracted from the Group’s oil and gas assets. The Group’s impairment assessment did
not identify any cash generating units for which a reasonably possible change in a key assumption would
result in impairment or impairment reversal, except for the Vega oil field in Italy. A 8% decrease in Brent
would eliminate the current headroom of the Vega CGU.
Management has considered how the Group’s identified climate risks and climate related goals (as
discussed in the Strategic Report) may impact the estimation of the recoverable amount of cash-generating
units in the impairment assessments. The anticipated extent and nature of the future impact of climate on
the Group’s operations and future investment, and therefore estimation of recoverable value, is not uniform
across all cash-generating units. There is a range of inherent uncertainties in the extent that responses
to climate change may impact the recoverable value of the Group’s cash-generating units, with many
of these being outside the Group’s control. These include the impact of future changes in government
policies, legislation and regulation, societal responses to climate change, the future availability of new
technologies and changes in supply and demand dynamics.
The Group has incorporated carbon pricing when preparing discounted cash flow valuations. Carbon
prices are incorporated based on currently enacted legislation (where relevant). Carbon costs are based
on the forecast carbon price per tonne/CO2e, multiplied by estimated Scope 1 and 2 emissions for the
relevant operation. As part of the impairment assessment the Group has run sensitivity scenarios for the
IEA’s 2022 WEO climate scenarios (Stated Policies Scenario (STEPS), Announced Pledges Scenario (APS)
and Net-Zero Emissions by 2050 Scenario (NZE)). Specific
scenarios are not used as an input to asset
valuations for financial reporting purposes as no single scenario is representative of management’s best
estimate of the likely assumptions that would be used by a market participant when valuing the Group’s
assets. The Groups CGUs in Italy and Greece are most impacted by the scenarios, specifically the Vega
field which as noted above is sensitive to changes in Brent prices.
Further details about the carrying value of property, plant and equipment are shown in Note 12 of the
consolidated financial statements.
Measurement of Contingent consideration (note 26.1)
The acquisition of Edison Exploration & Production S.p.A completed in 2020 included a contingent
consideration of up to $100.0 million for which the fair value has been estimated at $86.3 million at
31 December 2022, based on pricing simulations. The final consideration amount will be determined
on the basis of future gas prices (PSV) recorded at the time of at the time of first gas production at
Cassiopea, which is expected in 2024.
Hydrocarbon reserve and resource estimates
The Group’s oil and gas development and production properties are depreciated on a unit of production
basis at a rate calculated by reference to developed and undeveloped proved and probable commercial
reserves (2P developed and undeveloped) which are estimated to be recoverable with existing and future
developed facilities using current operating methods, determined in accordance with the Petroleum
Resources Management System published by the Society of Petroleum Engineers, the World Petroleum
Congress and the American Association of Petroleum Geologists.
Commercial reserves are determined using estimates of oil and gas in place, recovery factors and future
prices. The level of estimated commercial reserves is also a key determinant in assessing whether
the carrying value of any of the Group’s oil and gas properties has been impaired. As the economic
assumptions used, including the impact of climate change, may change and as additional geological
information is produced during the operation of a field, estimates of recoverable reserves may change.
Such changes may impact the Group’s reported financial position and results which include:
•
Depreciation and amortisation charges in profit or loss may change where such charges are
determined using the units of production method, or where the useful life of the related assets
change
•
Impairment charges in profit or loss
•
Provisions for decommissioning may change where changes to the reserve estimates affect
expectations about when such activities will occur and the associated cost of these activities
•
The recognition and carrying value of deferred tax assets may change due to changes in the
judgements regarding the existence of such assets and in estimates of the likely recovery of such
assets.
The impact upon commercial reserves (if any) and the aggregate depletion charge for the year of a
fluctuation of the forward Brent oil price and PSV price assumption as well as the Group’s carrying amount
of oil and gas properties for the current and prior period are presented in note 12. Management monitors
the impact on the commercial reserves and the depletion charge on a Group level.
Decommissioning liabilities (note 23):
There is uncertainty around the cost of decommissioning as cost estimates can vary in response to
many factors, including from changes to market rates for goods and services, to the relevant legal
requirements, the emergence of new technology or experience at other assets. The expected timing,
work scope, amount of expenditure, discount and inflation rates may also change. Therefore significant
estimates and assumptions are made in determining the provision for decommissioning.
The estimated decommissioning costs are reviewed annually by an internal expert and the results of this
review are then assessed alongside estimates from operators. Provision for environmental clean-up and
remediation costs is based on current legal and contractual requirements, technology and price levels.
The Group considers the impact of climate change on environmental restoration and decommissioning
provisions, specifically the timing of future cash flows, and has concluded that it does not currently
represent a key source of estimation uncertainty. Changes to legislation, including in relation to climate
Segmental reporting
The information reported to the Group’s Chief Executive Officer and Chief Financial Officer (together the
Chief Operating Decision Makers) for the purposes of resource allocation and assessment of segment
performance is focused on four operating segments: Europe, (including Greece, Italy, UK, Croatia), Israel,
Egypt and New Ventures (Montenegro and Malta).
The Group’s reportable segments under IFRS 8 Operating Segments are Europe, Israel and Egypt.
Segments that do not exceed the quantitative thresholds for reporting information about operating
segments have been included in Other.
Segment revenues, results and reconciliation to profit before tax
The following is an analysis of the Group’s revenue, results and reconciliation to profit/(loss) before tax
by reportable segment:
($’000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Year ended 31 December 2022
Revenue from Oil
206,959
–
–
–
206,959
Revenue from Gas
328,506
45,153
156,264
–
529,923
Other
(31,298)
(18,031)
57,131
(7,603)
199
Total revenue
504,167
27,122
213,395
(7,603)
737,081
Adjusted EBITDAX
86
262,655
(4,498)
164,581
(1,125)
421,613
Reconciliation to profit before tax:
Depreciation and amortisation
expenses
(27,199)
(12,112)
(43,266)
(783)
(83,360)
Share-based payment charge
(1,423)
(214)
(89)
(4,318)
(6,044)
Exploration and evaluation
expenses
(61,071)
(1,819)
–
(8,505)
(71,395)
Impairment loss on property,
plant and equipment
(27,628)
–
–
–
(27,628)
Other expense
(5,742)
(1,102)
–
(8,317)
(15,161)
Other income
1,284
54
12,067
728
14,133
Finance income
3,777
6,379
1,705
(2,289)
9,572
Finance costs
(32,395)
(29,811)
(858)
(44,251)
(107,315)
Unrealised loss on derivatives
(5,203)
–
–
–
(5,203)
Net foreign exchange gain/(loss)
4,065
(3,085)
(7,498)
(15,689)
(22,207)
Profit/(loss) before income tax
111,120
(46,208)
126,642
(84,549)
107,005
Taxation income / (expense)
(42,283)
10,951
(57,766)
(636)
(89,734)
Profit/(loss) from continuing
operations
68,837
(35,257)
68,876
(85,185)
17,271
Year ended 31 December 2021
Revenue from oil
165,496
–
–
144
165,640
Revenue from Gas
137,468
–
133,503
(2)
270,969
Other
13,156
–
55,446
(8,226)
60,376
Total revenue
316,120
–
188,949
(8,084)
496,985
Adjusted EBITDAX
6
88,288
(4,969)
130,634
(1,881)
212,072
Reconciliation to profit before tax:
Depreciation and amortisation
expenses
(55,001)
(93)
(41,626)
(731)
(97,451)
Share-based payment charge
(967)
(231)
–
(4,523)
(5,721)
86
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is calculated as profit
or loss for the period, adjusted for discontinued operations, taxation, depreciation and amortisation, share-based payment
charge, impairment of property, plant and equipment, other income and expenses (including the impact of derivative financial
instruments and foreign exchange), net finance costs and exploration and evaluation expenses.
($’000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Exploration and evaluation
expenses
(86,490)
(50)
–
(1,138)
(87,678)
Other expense
(2,150)
(461)
(1,543)
(2,865)
(7,019)
Other income
16,065
19
1,851
(51)
17,884
Finance income
13,450
7,849
985
(19,334)
2,950
Finance costs
(28,318)
(18,526)
(9,059)
(41,477)
(97,380)
Unrealised loss on derivatives
(21,477)
–
–
–
(21,477)
Net foreign exchange gain/(loss)
31,000
520
479
(38,921)
(6,922)
Profit/(Loss) before income tax
(45,600)
(15,942)
81,721
(110,921)
(90,742)
Taxation income / (expense)
29,026
5,017
(39,100)
(355)
(5,412)
Profit/(Loss) from continuing
operations
(16,574)
(10,925)
42,621
(111,276)
(96,154)
The following table presents assets and liabilities information for the Group’s operating segments as at
31 December 2022 and 31 December 2021, respectively:
Year ended 31 December 2022
($’000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Oil & Gas properties
536,874
3,264,364
409,732
(14,440)
4,196,530
Other fixed assets
13,365
4,750
17,325
(65)
35,375
Intangible assets
48,249
219,354
20,639
8,136
296,378
Trade and other receivables
141,509
82,611
131,453
(17,609)
337,964
Deferred tax asset
244,394
–
–
(2,168)
242,226
Other assets
883,576
24,933
96,942
(382,497)
622,954
Total assets
1,867,967
3,596,012
676,091
(408,643)
5,731,427
Trade and other payables
220,706
540,459
50,563
114,506
926,234
Borrowings
61,437
2,471,030
–
488,429
3,020,896
Decommissioning provision
724,458
84,299
–
–
808,757
Current tax payable
109,468
–
–
41
109,509
Other liabilities
124,201
40,882
18,498
32,252
215,833
Total liabilities
1,240,270
3,136,670
69,061
635,228
5,081,229
Other segment information
Capital Expenditure
87
:
Property, plant and equipment
85,840
537,527
105,792
(368)
728,791
Intangible, exploration and
evaluation assets
12,143
124,718
193
3,970
141,024
87
Capital expenditure is defined as additions to property, plant and equipment and intangible exploration and evaluation assets
less decommissioning asset additions, right-of-use asset additions, capitalised share-based payment charge and capitalised
borrowing costs.
Year ended 31 December 2022
($’000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Oil & Gas properties
537,600
2,584,828
342,528
(9,694)
3,455,262
Other fixed assets
16,578
3,917
24,076
(360)
44,211
Intangible assets
74,868
95,941
20,484
36,848
228,141
Trade and other receivables
164,131
22,769
102,605
(979)
288,526
Deferred tax asset
154,798
–
–
–
154,798
Other assets
674,157
379,248
98,720
(81,711)
1,070,414
Total assets
1,622,132
3,086,703
588,413
(55,896)
5,241,352
Trade and other payables
197,865
74,115
25,511
152,216
449,706
Current tax payable
4,932
–
–
347
5,279
Borrowings
–
2,463,524
–
483,602
2,947,126
Decommissioning provision
766,573
35,525
–
802,098
Other liabilities
113,808
180,689
24,663
858
320,018
Total liabilities
1,083,178
2,753,853
50,174
637,024
4,524,229
Other segment information
Capital Expenditure:
Property, plant and equipment
72,782
247,463
52,085
(14,330)
358,000
Intangible, exploration
and evaluation assets
40,523
6,342
215
3,329
50,409
Segment cash flows
Year ended 31 December 2022
($’000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Net cash from / (used in)
operating activities
225,780
(7,850)
66,946
(12,723)
272,153
Cash outflow for investing
activities
(287,490)
(180,040)
(54,229)
213,818
(307,941)
Net cash from financing activities
54,977
(133,953)
(2,528)
(185,975)
(267,479)
Net increase/(decrease) in cash
and cash equivalents
(6,733)
(321,843)
10,189
15,120
(303,267)
Cash and cash equivalents at
beginning of the period
71,312
349,827
19,254
290,446
730,839
Effect of exchange rate
fluctuations on cash held
(6,451)
(3,159)
(2,617)
12,543
316
Cash and cash equivalents at
end of the period
58,128
24,825
26,826
318,109
427,888
Year ended 31 December 2021
($’000)
Net cash from / (used in) operating
activities
43,394
(28,764)
128,659
(10,785)
132,504
Cash outflow from investing
activities
(99,040)
(490,381)
(53,553)
191
(642,783)
Net cash from financing activities
120,446
831,677
(132,414)
240,056
1,059,765
Net increase/(decrease) in cash
and cash equivalents
64,800
312,532
(57,308)
229,462
549,486
Cash and cash equivalents at
beginning of the period
13,609
37,421
76,240
75,669
202,939
Effect of exchange rate fluctuations
on cash held
(7,093)
(125)
322
(14,690)
(21,586)
Cash and cash equivalents at end
of the period
71,316
349,828
19,254
290,441
Revenue
($’000)
2022
2021
Revenue from crude oil sales
206,959
165,924
Revenue from gas sales
529,923
270,969
Revenue from LPG sales
21,747
20,945
Revenue from condensate sales
35,384
34,126
Compensation to gas buyers
(18,031)
–
Gain/(Loss) on forward transactions
(55,189)
(285)
Petroleum product sales
2,697
4,618
Rendering of services
1,001
688
Revenue from contracts with customers
724,491
496,985
Other operating income-lost production insurance proceeds
12,590
–
Total Revenue
737,081
496,985
During August 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Group
agreed to pay compensation to these counterparties due to the fact the gas supply date is taking place
beyond a certain date as defined in the GSPAs (being 30 June 2021). The compensation is accounted as
variable purchase consideration and deducted from revenue as gas is delivered to the offtakers.
Proceeds related to lost production under the business interruption insurance policy of $12.6
million
(2021: $0 million).
100% of the gas produced at Abu Qir (Egypt) is sold to EGPC under a Brent-linked gas price. The gas
price is determined based on Brent prices trading within a certain range, as set out in the agreement, and
contains both a floor price and a cap; limiting volatility and exposure to commodity price fluctuations
Sales for the year ended 31 December (Kboe)
2022
2021
Egypt (net entitlement)
Gas
3,698
6,351
LPG
244
394
Condensate
286
553
Italy
Oil
2,440
2,083
Gas
1,406
1,474
Israel
Gas
1,781
UK
Gas
73
40
Oil
245
271
Croatia
Gas
38
57
Greece
Oil
–
403
Total
10,211
Operating profit/(loss)
($’000)
2022
2021
(a)
Cost of sales
Staff costs (note 8)
52,904
64,564
Energy cost
15,947
11,578
Flux Cost
36,970
11,561
Royalty payable
45,770
24,759
Other operating costs
88
132,688
149,133
Depreciation and amortisation (note 12 and 13)
79,362
94,647
Oil stock movement
(1,707)
(15,501)
Stock (underlift)/overlift movement
(3,004)
4,371
Total cost of sales
358,930
345,112
(b)
Administration expenses
Staff costs (note 8)
17,977
16,839
Other General & Administration expenses
15,960
15,667
Share-based payment charge included in administrative
expenses
6,044
5,714
Depreciation and amortisation (note 12, 13)
3,889
2,480
Auditor fees (note 7f)
2,072
2,273
45,942
42,973
(c)
Exploration and evaluation expenses
Staff costs for Exploration and evaluation activities
(Note 8)
3,012
3,695
88
Other operating costs comprise of insurance costs, gas transportation and treatment fees concession fees and planned
maintenance costs.
($’000)
2022
2021
Exploration costs written off (Note 13)
65,550
82,125
Other exploration and evaluation expenses
2,833
1,858
71,395
87,678
(d)
Other expenses
Transaction costs in relation to Edison E&P
acquisition
89
–
2,052
Intra-group merger costs
3,212
605
Loss from disposal of Property plant & Equipment
1,102
36
Write-down of inventory
1,207
581
Expected credit losses
3,043
–
Provision for litigation and claims
1,198
520
Write down of property, plant and equipment costs
–
779
Other expenses
5,399
2,446
15,161
7,019
(e)
Other income
Reversal of expected credit loss allowance
10,970
1,853
Profit from sale of inventory
1,643
–
Change in estimates of decommissioning provisions
–
7,836
Change in estimate of defined benefit obligation
–
3,463
Reversal of provision for litigation and claims
–
4,494
Other income
1,520
238
14,133
17,884
(f)
Fees to the Company’s auditor for:
The audit of the Company’s annual accounts
770
748
The audit of the Company’s subsidiaries pursuant to
legislation
777
783
Total audit services
1,547
1,531
Audit-related assurance services – half-year review
378
242
Reporting accountant services
–
1,008
Other services
147
75
2,072
2,856
89
Staff costs
The average monthly number of employees (including Executive Directors) employed by the Group
worldwide was:
Number
2022
2021
Administration
187
167
Technical
320
437
507
604
In
addition,
the
Group
consolidates
the
personnel
costs
of
its
Operating
Company,
Abu
Qir
Petroleum
Company (‘AQP’), owned at 100%. The table below details the average number of employees related to
AQP employees:
Number
2022
2021
AQP employee (excluding Energean employees)
626
640
626
640
($’000)
2022
2021
Salaries
90
85,056
94,624
Social security costs
8,706
11,995
Share-based payments (note 25)
6,243
5,933
100,005
112,552
Payroll cost capitalised in oil & gas assets and exploration &
evaluation costs
(16,694)
(20,218)
Payroll cost expensed
83,311
92,334
Included in:
Cost of sales (note 7a)
52,904
64,564
Administration expenses (note 7b)
24,021
22,553
Exploration & evaluation expenses (note 7c)
3,012
3,695
Intra-group merger costs (note 7d)
3,212
605
Other
162
917
83,311
92,334
Details of Directors’ remuneration, Directors’ transactions and Directors’ interests are set out in the part
of the Directors’ Remuneration Report described as having been audited, which forms part of these
Consolidated Financial Statements.
90
Net finance cost
($’000)
Notes
2022
2021
Interest on bank borrowings
21
1,527
96,678
Interest on Senior Secured Notes
21
167,372
106,993
Interest expense on long term payables
24
14,660
4,101
Interest expense on short term liabilities
54
55
Less amounts included in the cost of qualifying
assets
12,13
(123,635)
(174,153)
59,978
33,674
Finance and arrangement fees
11,334
12,420
Commission charges for bank guarantees
2,118
2,404
Unamortised financing costs related to Greek RBL
and Egypt RBL
91
–
18,108
Other finance costs and bank charges
2,136
2,972
Loss on interest rate hedges
–
7,002
Unwinding of discount on right of use asset
2,159
1,316
Unwinding of discount on provision for
decommissioning
21,495
8,722
Unwinding of discount on deferred consideration
7,098
12,854
Unwinding of discount on convertible loan
4,054
3,159
Mark-to-market on contingent consideration
2,667
1,626
Less amounts included in the cost of qualifying
assets
(5,724)
(6,877)
Total finance costs
107,315
97,380
Interest income from time deposits
(9,572)
(2,950)
Total finance income
(9,572)
(2,950)
Foreign exchange losses
22,207
6,922
Net financing costs
119,950
101,352
91
On 18 November 2021 the Group fully repaid the Prinos Project Finance (Greek RBLs) before the maturity date of 31 December
Taxation
(a) Taxation charge
($’000)
2022
2021
Corporation tax – current year
(199,563)
(44,922)
Corporation tax – prior years
(583)
353
Deferred tax (Note 14)
110,412
39,157
Total taxation (expense)
(89,734)
(5,412)
(b) Reconciliation of the total tax charge
The Group calculates its income tax expense by applying a weighted average tax rate calculated based on
the statutory tax rates of each country weighted according to the profit or loss before tax earned by the
Group in each jurisdiction where deferred tax is recognised or material current tax charge arises.
The effective tax rate for the period is 84% (31 December 2021: -6%).
The tax (charge) for the period can be reconciled to the loss per the consolidated income statement as
follows:
($’000)
2022
2021
Profit/(Loss) before tax
107,005
(90,742)
Tax calculated at 27.5% weighted average rate (2021:
29.5%)
92
(29,453)
29,721
Impact of different tax rates
93
(9,960)
(5,176)
Utilisation of unrecognised deferred tax/ (Non recognition of
deferred tax)
83,737
2,953
Permanent differences
94
(16,341)
(34,470)
Foreign taxes
(54)
(244)
Windfall
tax
95
(119,425)
–
Tax effect of non-taxable income & allowances
2,217
1,348
Other adjustments
128
103
Prior year tax
(583)
353
Taxation (expense)
(89,734)
(5,412)
92
For the reconciliation of the tax rate, the weighted average rate of the statutory tax rates in Greece (25%), Cyprus (12.5%) Israel
(23%), Italy (24%), United Kingdom (19%/40%/55.07%) and Egypt (40.55%) was used weighted according to the profit or loss
before tax earned by the Group in each jurisdiction, excluding fair value uplifts profits.
93
“Impact of different tax rates” mainly consisted of the Italian regional taxes (IRAP).
94
Permanent differences mainly consisted of non-deductible expenses (-$15.0m), consolidation differences ($2.8m) and foreign
exchange differences (-$4.1m).
95
During 2022, Italy introduced: 1) a windfall tax in the form of a law decree which imposed a 25% one-off tax on profit margins
that rose by more than $5.26 million (€5.0 million) between October 2021 and April 2022 compared to the same period a year
earlier. The amount of the windfall tax paid by Energean Italy was $29.3mil and 2) In November 2022, Italy introduced a new
windfall tax that imposed a 50% one-off tax, calculated on 2022 taxable profits that are 10% higher than the average taxable
profits between 2018-2021. This amount has a ceiling equal to 25% of the value of the net assets at end-2021. Based on this,
Energean would be required to pay an additional one-off tax of $92.8 million ( €87.0 million) in June 2023. In addition, the Energy
(Oil and Gas) Profits Levy (EPL) was announced by the UK Government on 26 May 2022 and legislated for in July 2022. This
was a new, temporary 25% (to be increased to 35% from 1st January 2023) levy on ring fence profits of oil and gas companies.
This was in addition to Ring Fence Corporation Tax which is charged at 30% and the Supplementary Charge which is charged
Earnings/(Loss) per share
Basic earnings per ordinary share amounts are calculated by dividing net income for the year attributable
to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding
during the year. Diluted income per ordinary share amounts are calculated by dividing net income for the
year attributable to ordinary equity holders of the parent by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued if dilutive employee share options were converted into ordinary shares.
($’000)
2022
2021
Total profit/(loss) attributable to equity shareholders
17,271
(96,046)
Effect of dilutive potential ordinary shares
96
4,054
–
21,325
(96,046)
2022
2021
Basic weighted average number of shares
177,931,019
177,278,840
Dilutive potential ordinary shares
6,714,731
–
Diluted weighted average number of shares
184,645,750
177,278,840
Basic earnings/(loss) per share
$0.10/share
$(0.54)/share
Diluted earnings/ (loss) per share
$0.12/share
$(0.54)/share
96
The $4.1million is the unwinding of the discount on the convertible loan notes (as disclosed in note 9) that will no longer be
Property, plant & equipment
Property, Plant & Equipment
at Cost ($’000)
Oil and gas
asset
s
97
Leased
assets
98
Other property,
plant and
equipment
Total
At 1 January 2021
3,430,329
50,841
60,237
3,541,407
Additions
345,180
6,428
1,623
353,231
Lease modification
–
2,261
–
2,261
Disposal of assets
(23)
–
(34)
(57)
Capitalised borrowing cost
178,891
–
–
178,891
Capitalised depreciation
227
–
–
227
Change in decommissioning
provision
(13,174)
–
–
(13,174)
Transfer from Intangible
assets
14,317
–
26
14,343
Foreign exchange impact
(57,960)
(2,285)
(2,806)
(63,051)
At 31 December 2021
3,897,787
57,245
59,046
4,014,078
Additions
742,665
1,195
1,534
745,394
Lease modification
–
831
–
831
Disposal of assets
(900)
–
(900)
Capitalised borrowing cost
109,184
–
–
109,184
Capitalised depreciation
632
–
–
632
Change in decommissioning
provision
21,685
–
–
21,685
Other movements
(241)
37
(74)
(278)
Foreign exchange impact
(31,388)
(596)
(388)
(32,372)
At 31 December 2022
4,739,424
58,712
60,118
4,858,254
Accumulated Depreciation and Impairment
At 1 January 2021
376,643
6,979
50,513
434,135
Charge for the period
Expensed
81,234
12,274
1,998
95,506
Impairments
774
774
Disposal of assets
–
–
21
21
Foreign exchange impact
(16,129)
(151)
449
(15,831)
At 31 December 2021
442,522
19,102
52,981
514,605
Charge for the period
Expensed
71,464
10,091
1,171
82,726
Impairment
27,878
–
–
27,878
Disposal of assets
–
–
–
Foreign exchange impact
1,030
105
6
1,141
At 31 December 2022
542,894
29,298
54,158
626,350
97
Included within the carrying amount of Oil & Gas assets are development costs of the Karish field related to the Sub Sea and On-
shore construction. In line with the agreement with Israel Natural Gas Lines (“
INGL
”), the transfer of title (“
hand over
”) of these
assets to INGL is expected to occur in Q1 2023. For further details refer to note 24.
98
Included in the carrying amount of leased assets at 31 December 2022 are right of use assets related to Oil and gas properties
and Other property, plant and equipment of $21.3 million and $8.1 million respectively. The depreciation charged on these
classes for the year ending 31 December 2022 was $7.9 million and $2.1 million respectively.
Property, Plant & Equipment
at Cost ($’000)
Oil and gas
asset
s
97
Leased
assets
98
Other property,
plant and
equipment
Total
Net carrying amount
At 31 December 2021
3,455,265
38,143
6,065
3,499,473
At 31 December 2022
4,196,530
29,414
5,960
4,231,904
Borrowing costs capitalised for qualifying assets during the year are calculated by applying a weighted
average interest rate of 5.16% for the year ended 31 December 2022 (for the year ended 31 December
2021: 5.49%).
The additions to Oil & Gas properties for the year ended 31 December 2022 are mainly due to development
costs of Karish field related to the EPCIC contract (FPSO, Sub Sea and On-shore construction cost) at the
amount of $534.5 million, development cost for Cassiopea project in Italy at the amount of $56.7 million
and NEA/NI project in Egypt at the amount of $107.9 million.
The impairment recognised above of $27.9 million (2021: $0 million) was a result of a change to the
decommissioning estimate on certain fields in Italy and the UK where the recoverable amount was
lower than the carrying value, subsequent to recognising the change in estimate. The remaining change
in decommissioning provision of $21.7 million was in relation to fields across the group whereby the
recoverable amount exceeded the carrying value.
($’000)
2022
2021
Cost of sales (note 7a)
79,362
94,647
Administration expenses (note 7b)
3,889
2,480
Other operating (income)/expenses
109
97
Capitalised depreciation in oil & gas properties
632
227
Total
83,992
Cash flow statement reconciliations:
Payment for additions to property, plant and equipment
($’000)
2022
2021
Additions to property, plant and equipment
877,726
521,435
Associated cash flows
Payment for additions to property, plant and equipment
(395,753)
(403,503)
Non-cash movements/presented in other cash flow lines
Borrowing cost capitalised
(109,184)
(178,891)
Impairment
(27,878)
Right-of-use asset additions/modifications
(2,027)
(8,689)
Lease payments related to capital activities
12,669
10,852
Capitalised share-based payment charge
(199)
(200)
Capitalised depreciation
(632)
(227)
Change in decommissioning provision
(21,685)
13,174
Movement in working capital
(333,037)
Intangible assets
Exploration
and evaluation
assets
Goodwill
Other
Intangible
assets
Total
($’000)
Intangibles at Cost
At 1 January 2021
158,213
101,146
22,355
281,714
Additions
47,995
–
2,413
50,408
Capitalised borrowing costs
2,202
–
–
2,202
Change in decommissioning
provision
2,141
2,141
Transfers to property, plant and
equipment
(265)
–
(14,078)
(14,343)
Exchange differences
(4,953)
–
(983)
(5,936)
31 December 2021
205,333
101,146
9,707
316,186
Additions
139,911
–
1,113
141,024
Other movements
–
–
280
280
Exchange differences
(6,890)
–
(125)
(7,015)
At 31 December 2022
338,354
101,146
10,975
450,475
Accumulated amortisation and impairments
At 1 January 2021
3,004
–
2,894
5,898
Charge for the period
–
–
1,946
1,946
Impairment
82,125
–
–
82,125
Exchange differences
(1,850)
–
(74)
(1,924)
31 December 2021
83,279
–
4,766
88,045
Charge for the period
39
–
595
634
Impairment
47,240
18,310
–
65,550
Exchange differences
(110)
–
(22)
(132)
31 December 2022
130,448
18,310
5,339
154,097
Net carrying amount
At 31 December 2021
122,054
101,146
4,941
228,141
At 31 December 2022
207,906
82,836
5,636
296,378
Cash flow statement reconciliations:
Payment for additions to intangible assets ($’000)
2022
2021
Additions to intangible assets
141,024
54,750
Associated cash flows
Payment for additions to intangible assets
(64,414)
(48,674)
Non-cash movements/presented in other cash flow lines
Borrowing cost capitalised
–
(2,141)
Change in decommissioning provision
–
(2,202)
Movement in working capital
(76,610)
(1,733)
Goodwill arises principally because of the requirement to recognise deferred tax assets and liabilities for
the difference between the assigned values and the tax bases of assets acquired and liabilities assumed
in a business combination. Total impairment of $65.6
million was recognised in the period for projects
that will not progress to development, primarily Glengorm. Energean will exit the Glengorm licence
within 2023 and as a result the related exploration asset ($33.8 million) and goodwill ($18.3 million)
have been impaired. The remaining goodwill balance is in relation to the Israel CGU ($76.0 million), and
UK ($7
.0 million). We have performed the annual goodwill impairment test and note that no reasonably
Net deferred tax (liability)/asset
Deferred tax
(liabilities)/assets
($’000)
Property,
plant and
equipment
Right of
use asset
IFRS 16
Decom-
missioning
Prepaid
expenses
and other
receivables
Inventory
Tax losses
Deferred
expenses
for tax
Retirement
benefit
liability
Accrued
expenses
and other
short-term
liabilities
Total
At 1 January 2021
(123,543)
(292)
8,877
(4,651)
695
165,841
–
1,050
9,470
57,447
Increase /
(decrease) for the
period through:
Profit or loss (Note
10)
9,848
(718)
50,808
890
(254)
(32,501)
5,020
(932)
6,996
39,157
Other
comprehensive
income
–
–
–
–
–
–
–
–
1,586
1,586
Reclassifications in
the current period
99
(28,442)
33,644
2,025
(233)
(4,903)
6, 010
200
(8,301)
–
Exchange difference
1,584
20
(3,889)
165
(25)
(8,257)
–
(52)
(363)
(10,817)
31 December 2021
(140,553)
(990)
89,440
(1,571)
183
120,180
11,030
266
9,388
87,373
Increase /
(decrease) for the
period through:
Profit or loss (Note
10)
(11,836)
(103)
41,688
1,642
265
83,814
(4,822)
(22)
(214)
110,412
Other
comprehensive
income
(64)
(2,799)
(2,863)
Exchange difference
3,466
15
(4,882)
115
(8)
(6,986)
(15)
(515)
(8,810)
31 December 2022
(148,923)
(1,078)
126,246
186
440
197,008
6,208
165
5,860
186,112
99
These reclassifications primarily relate to the assets and liabilities acquired in the Edison E&P acquisition which completed in December 2020 and reflect updated information on the allocation of the
deferred taxes across the relevant categories.
($’000)
2022
2021
Deferred tax liabilities
(56,114)
(67,425)
Deferred tax assets
242,226
154,798
186,112
87,373
At 31 December 2022 the Group had gross unused tax losses of $1,093.8 million (as of 31 December 2021:
$1,123.8 million) available to offset against future profits and other temporary differences. A deferred tax
asset of $197.0 million (2021: $120.2 million) has been recognised on tax losses of $799.2 million, based
on the forecasted profits. The Group did not recognise deferred tax on tax losses and other differences
of total amount of $546.3 million.
In Greece, Italy and the UK, the net DTA for carried forward losses recognised in excess of the other net
taxable temporary differences was $69.2 million, $33.0 million and $16.7 million (2021: $59.3 million,
$0.19 million and $13.8 million) respectively. An additional DTA of $124.6 million (2021: $81.4 million)
arose primarily in respect of deductible temporary differences related to property, plant and equipment,
decommissioning provisions and accrued expenses, resulting in a total DTA of $242.3 million (2021:
$154.9 million). During the period, Italy recognised a DTA of $33.4 million on tax losses of $139.0million
in accordance with its latest tax losses utilisation forecast.
Greek tax losses (Prinos area) can be carried forward without limitation up until the relevant concession
agreement expires (by 2039), whereas the tax losses in Israel, Italy and the United Kingdom can be
carried forward indefinitely. Based on the Prinos area forecasts (including the Epsilon development), the
deferred tax asset is fully utilised by 2030. In Italy, deferred tax asset of $111.2 million recognised on
decommissioning costs scheduled up to the year the Italian assets expect to enter into a declining phase
assuming available profits from Cassiopea and other long lived assets. In the UK, decommissioning
losses are expected to benefit from tax relief up until 2027 in accordance with the latest taxable profits
forecasts.
On 3 March 2021 it was announced in the UK budget that the UK non-ring fence corporation tax rate
will increase from 19% to 25% with effect from April 2023. The Group does not currently recognise any
deferred tax assets in respect of UK non-ring fence tax losses and therefore this rate change did not
impact the tax disclosures.
Energean UK Limited with activities in the UKCS is subject to the newly introduced UK Energy Profits Levy
(EPL) with effect from the 26 May 2022. For the tax reconciliation of Energean UK the weighted average
tax rate of 55.07% (40% for the RFCT and 15.07% for the weighted average EPL rate) was used. The
Cash and cash equivalents
($’000)
2022
2021
Cash at bank
427,888
729,390
Deposits in escrow
–
1,449
427,888
730,839
Bank demand deposits comprise deposits and other short-term money market deposit accounts that are
readily convertible into known amounts of cash. The effective interest rate on short-term bank deposits
was 1.716% for the year ended 31 December 2022 (year ended 31 December 2021: 0.386%).
Deposits in escrow comprise mainly cash retained as a bank security pledge for the Group’s performance
guarantees in its exploration blocks. These deposits can be used for funding the exploration activities of
Restricted cash
Restricted cash comprises cash retained under the Israel Senior Secured Notes and the Greek State Loan
requirement as follows:
Current
Total short-term restricted cash at 31 December 2022 was $71.8 million. $3 million for bank guarantees
and $68.8 million for the debt payment fund which will be used for the March 2023 coupon payment of
$64.4 million.
Non-Current
$2.8 million: $2.2 million required to be restricted in Interest Service Reserve Account (‘ISRA’) in relation to
Inventories
($’000)
2022
2021
Crude oil
38,048
32,832
Gas
383
–
Raw materials and supplies
54,916
54,371
Total inventories
93,347
87,203
The Group’s raw materials and supplies consumption for the year ended 31 December 2022 was
$6.4 million (year ended 31 December 2021: $6.5 million).
The Group recorded impairment and write-off charges on inventory of $1.2 million for the year ended
Trade and other receivables
($’000)
2022
2021
Trade and other receivables – Current
Financial items:
Trade receivables
215,215
178,804
Receivables from partners under JOA
4,539
5,138
Other receivables
2,344
38,683
Government
subsidies
100
3,025
3,212
Refundable VAT
89,400
42,376
Receivables from related parties (note 27)
–
1
314,523
268,214
Non-financial items:
Deposits and
prepayments
101
15,084
17,139
Deferred insurance expenses
1,983
2,095
Other deferred expenses
102
4,929
Accrued interest income
1,445
1,078
23,441
20,312
337,964
288,526
Trade and other receivables – Non-Current
Financial items:
Other tax recoverable
14,701
16,478
14,701
16,478
Non-financial items:
Deposits and
prepayments
101
11,726
12,337
Other deferred expenses
10
2
–
22,958
Other non-current assets
513
866
12,239
36,161
26,940
52,639
100
Government subsidies relate to grants from Greek Public Body for Employment and Social Inclusion (OAED) to financially
support the Kavala Oil S.A. labour cost from manufacturing under the action plan for promoting sustainable employment in
underdeveloped or deprived districts of Greece, such as the area of Kavala. In September 2020, the Greek Government issued
a law and a subsequent ministerial decision whereby any legal person who has launched legal proceedings in relation to the
aforementioned employment costs, may set off such receivables against tax liabilities provided the judicial proceedings already
commenced are abandoned. Energean investigated the process and potential benefits of this approach decided to apply for the
set off which has been approved and the first offset was in January 2023 of €587k ($626k).
101
Included in deposits and prepayments, are mainly prepayments for goods and services under the GSP Engineering, Procurement,
Construction and Installation Contract (EPCIC) for Epsilon project.
102
In accordance with the GSPAs signed with a group of gas buyers, the Company has agreed to pay compensation to these
counterparties due to the fact the gas supply date is taking place beyond a certain date as defined in the GSPAs (being 30 June
2021). The compensation, amounting to $23 million) has been fully paid in 2021. The compensation presented as a non-current
asset (under the caption deferred expenses) and will be accounted for as variable consideration and deducted from revenue as
gas is delivered to the offtakers.
The table below summarises the maturity profile of the Group receivables:
31 December 2022
($’000)
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12
months
1-2
years
2-5
years
Trade receivables
215,214
218,709
198,665
13,949
6,095
–
Government subsidies
3,025
3,025
–
3,025
–
–
Refundable VAT
89,400
89,400
19,487
50,061
19,852
–
Receivables from partners
under JOA
4,539
4,539
4,539
–
–
–
Other receivables
2,344
2,344
1,027
1,317
–
–
Other tax recoverable
14,701
14,701
–
–
14,701
Total
329,223
332,718
223,718
68,352
40,648
–
31 December 2021
($’000)
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12
months
1-2
years
2-5
years
Trade receivables
178,804
178,804
2,832
175,972
–
–
Government subsidies
3,212
3,212
3,212
–
–
Refundable VAT
42,376
42,376
1,774
40,602
–
–
Receivables from
partners under JOA
5,138
5,138
5,138
–
–
–
Other receivables
38,683
38,683
36,105
2,578
–
–
Other tax recoverable
16,478
16,478
–
–
–
16,478
Total
284,691
284,691
45,849
222,364
–
Share capital
On 30 June 2017, the Company became the parent company of the Group through the acquisition of the
full share capital of Energean E&P Holdings Limited, in exchange for 65,643,120 £0.01 ($0.013) shares in
the Company issued to the previous shareholders. As of this date, the Company’s share capital increased
from £50 thousand ($65k) to £706 thousand ($917k). From that point, in the consolidated financial
statements, the share capital became that of Energean plc. The previously recognised share capital of
$14.9 million and share premium of $125.8 million was eliminated with a corresponding positive merger
reserve recognised of $139.9 million. The below tables outline the share capital of the Company.
The share premium account represents the total net proceeds on issue of the Company’s shares in excess
of their nominal value of £0.01 per share less amounts transferred to any other reserves.
On 14 June 2022, Energean plc by special resolution reduced its share premium account, as confirmed by
an Order of the High Court of Justice.
Issued and authorised
Equity share
capital allotted
and fully paid
Share capital
($’000)
Share premium
($’000)
At 1 January 2021 and at 31 December
2021
177,602,560
2,374
915,388
Issued during the year
– New shares
–
–
–
–
Share based payment
437,945
6
–
Share Premium Reduction
–
–
(500,000)
At 31 December 2022
178,040,505
2,380
20
Dividends
In September 2022, Energean declared its maiden quarterly dividend. In total, Energean returned US$0.60/
share to shareholders in 2022, representing two-quarters of dividend payments. No dividend was proposed
in respect of the year ended 31 December 2021.
US$ cents per share
$’ 000
2022
2021
2022
2021
Dividends announced
and paid in cash
Ordinary shares
September
30
–
53,252
–
December
30
–
53,252
–
60
–
106,504
–
Borrowings
($’000)
2022
2021
Non-current
Bank borrowings – after one year but within five years
4.5% Senior Secured notes due 2024 ($625 million)
620,461
617,060
4.875% Senior Secured notes due 2026 ($625 million)
617,912
615,966
Convertible loan notes ($50 million)
–
41,495
Bank borrowings – more than five years
6.5% Senior Secured notes due 2027 ($450 million)
442,879
442,107
5.375% Senior Secured notes due 2028 ($625 million)
616,767
615,451
5.875% Senior Secured notes due 2031 ($625 million)
615,890
615,047
BSTDB Loan and Greek State Loan Notes
61,437
–
Carrying value of non-current borrowings
2,975,346
2,947,126
Current
Convertible loan notes ($50 million)
45,550
–
Carrying value of current borrowings
45,550
–
Carrying value of total borrowings
3,020,896
2,947,126
The Group has provided security in respect of certain borrowings in the form of share pledges, as well as
fixed and floating charges over certain assets of the Group.
$2,500,000,000 senior secured notes:
On 24 March 2021, the Group completed the issuance of $2.5 billion aggregate principal amount of senior
secured notes.
The Notes have been issued in four series as follows:
•
Notes in an aggregate principal amount of $625 million, maturing on 30 March 2024, with a fixed
annual interest rate of 4.500%.
•
Notes in an aggregate principal amount of $625 million, maturing on 30 March 2026, with a fixed
annual interest rate of 4.875%.
•
Notes in an aggregate principal amount of $625 million, maturing on 30 March 2028, with a fixed
annual interest rate of 5.375%.
•
Notes in an aggregate principal amount of $625 million, maturing on 30 March 2031, with a fixed
annual interest rate of 5.875%.
The Notes are listed for trading on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the “TASE”).
The Company had undertaken to provide the following collateral in favour of the Trustee:
•
First rank Fixed charges over the shares of Energean Israel Limited, Energean Israel Finance
Ltd and Energean Israel Transmission Ltd, the Karish & Tanin Leases, the gas sales purchase
agreements (“
GSPAs
”), several bank accounts, Operating Permits (once issued), Insurance policies,
the Company exploration licenses (Block 12, Block 21, Block 23, Block 31) and the INGL Agreement.
•
Floating charge over all of the present and future assets of Energean Israel Limited and Energean
Israel Finance Ltd.
•
Energean Power FPSO (subject to using commercially reasonable efforts, including obtaining Israel
Petroleum Commissioner approval and any other applicable governmental authority).
Kerogen Convertible Loan
On 25 February 2021, the Group completed the acquisition of the remaining 30% minority interest in
Energean Israel Limited from Kerogen Investments No.38 Limited, Energean now owns 100% of Energean
Israel Limited. This resulted in a reduction of the Group’s reported non-controlling interest balance to $nil
at 31 December 2021.
The total consideration includes
•
An up-front payment of $175 million paid at completion of the transaction
•
Deferred cash consideration amounts totalling $180 million (out of which $30 million paid
in December 2022). The deferred consideration is discounted at the selected unsecured liability
rate of 9.77%.(please refer to note 24)
•
$50 million of convertible loan notes (the “Convertible loan notes”), which have a maturity date of
29 December 2023, a strike price of £9.50, adjusted for dividend payment up to maturity date, and
a zero-coupon rate.
$450,000,000 senior secured notes:
On 18th November 2021, the Group completed the issuance of $450 million of senior secured notes,
maturing on 30 April 2027 and carrying a fixed annual interest rate of 6.5%.
The interest on the notes is paid semi-annually on 30 April and 30 October of each year, beginning on
30 April 2022.
The notes are listed for trading on the Official List of the International Stock Exchange (“
TISE
”).
The issuer is Energean plc and the Guarantors are Energean E&P Holdings, Energean Capital Ltd and
Energean Egypt Ltd
The company undertook to provide the following collateral in favour of the Security Trustee:
•
Share pledge of Energean Capital Ltd, Energean Egypt Ltd, Energean Italy Ltd
•
Fixed charges over the material bank accounts of the Company and the Guarantors (other than
Energean Egypt Services JSC)
•
Floating charge over the assets of Energean plc (other than the shares of Energean E&P Holdings)
Energean Oil and Gas SA (‘EOGSA’) loan for Epsilon/ Prinos Development:
On 27 December 2021 EOGSA entered into a loan agreement with Black Sea Trade and Development
Bank for €90.5 million to fund the development of Epsilon Oil Field. The loan is subject to an interest
rate of EURIBOR plus a margin of 2% on 90% of the loan (guaranteed portion) and 4.9% margin on 10%
of the loan (unguaranteed portion). The loan has a final maturity date 7 years and 11 months after first
disbursement.
On 27 December 2021 EOGSA entered into an agreement with Greek State to issue €9.5 million of notes
maturing in 8 years with fixed rate -0.31% plus margin. The margin commences at 3.0% in year 1 with
annual increases, reaching 6.5% in year 8.
At 31 December 2022, $43 million (€40million) remains undrawn.
Revolving Credit Facility (‘RCF’)
On 8 September 2022, Energean signed a three-year $275 million RCF with a consortium of four banks,
led by ING Bank N.V. The RCF provides additional liquidity for general corporate purposes, if required.
Under its current business plan, Energean expects the RCF to remain undrawn, apart from $101 million
(as at 31 December 2022) of Letters of Credit (“
LCs
”), which replace the LCs that relate to certain assets
in the UK, Italy, Egypt and Greece that were issued under the previous facility with ING on a one-for-one
basis. The interest rate, if drawn by way of loans, is 5% + SOFR.
The Group defines capital as the total equity and net debt of the Group. Capital is managed in order to
provide returns for shareholders and benefits to stakeholders and to safeguard the Group’s ability to
continue as a going concern.
Energean is not subject to any externally imposed capital requirements. To maintain or adjust the capital
structure, the Group may put in place new debt facilities, issue new shares for cash, repay debt, engage
in active portfolio management, adjust the dividend payment to shareholders, or undertake other such
restructuring activities as appropriate.
($’000)
2022
2021
Net Debt
Current borrowings
45,550
–
Non-current borrowings
2,975,346
2,947,126
Total borrowings
3,020,896
2,947,126
Less: Cash and cash equivalents
(427,888)
(730,839)
Restricted cash
(74,776)
(199,729)
Net Debt (1)
2,518,232
2,016,558
Total equity (2)
650,198
717,123
Gearing Ratio (1)/(2):
387.3%
Reconciliation of liabilities arising from financing activities
($’000)
1 January
Cash
inflows
Cash
outflows
Reclass-
ification
Acquisition of
subsidiary
Additions
Lease
modification
Borrowing
costs including
amortisation of
arrangement
fees
Derivatives
de-
designated
as cash
flow hedges
during the
period
Foreign
exchange
impact
Fair value
changes
31 December
2022
3,294,460
63,463
(213,068)
(122)
–
949
(66)
194,984
–
(4,954)
–
3,335,646
Senior Secured Notes
2,905,631
–
(156,694)
–
–
–
–
164,972
–
–
–
2,913,909
Convertible loan notes
41,496
–
–
–
–
–
–
4,054
–
–
–
45,550
Long -term
borrowings
–
63,463
–
–
–
–
–
1,743
–
(3,769)
–
61,437
Lease liabilities
44,425
–
(14,023)
(122)
–
949
(66)
2,294
–
(1,185)
–
32,272
Deferred licence
payments
57,230
–
(12,351)
–
–
–
–
6,953
–
–
–
51,832
Contingent
Consideration
78,450
–
–
–
–
–
–
7,870
–
–
–
86,320
Deferred
consideration of
acquisition of minority
167,228
–
(30,000)
–
–
–
–
7,098
–
–
–
144,326
2021
1,622,354
3,243,000
(2,006,761)
(35,373)
–
187,778
2,261
251,471
4,641
8,691
28,843
3,307,005
Senior Secured Notes
–
2,950,000
(115,717)
(35,640)
–
–
–
106,988
–
–
–
2,905,631
Convertible loan notes
–
–
–
–
–
38,337
–
3,158
–
41,495
Long -term
borrowings
330,092
175,000
(537,873)
(1,713)
–
–
–
35,277
–
(783)
–
–
Current borrowings
1,112,984
118,000
(1,320,989)
2,080
–
–
–
87,460
–
465
–
–
Lease liabilities
47,623
–
(10,852)
–
–
6,304
2,261
1,316
–
(2,227)
44,425
Deferred licence
payments
69,518
–
(14,344)
–
–
–
–
2,056
–
–
–
57,230
Contingent
consideration
55,222
–
23,228
78,450
Deferred
consideration of
acquisition of minority
–
–
–
–
–
143,137
–
12,855
–
11,236
–
167,228
Derivatives not
designated as
hedging instruments
6,915
–
(6,986)
–
–
–
–
2,361
4,641
–
(6,931)
Retirement benefit liability
The Group operates defined benefit pension plans in Greece and Italy.
Under Italian law, Energean Italy Spa is required to operate a Target Retirement Fund “TFR” for its local
employees. This is technically a defined benefit scheme, though has no pension assets, with the liability
measured by independent actuaries.
In accordance with the provisions of Greek labour law, employees are entitled to compensation in case of
dismissal or retirement. The amount of compensation varies depending on salary, years of service and the
manner of termination (dismissal or retirement). Employees who resign are not entitled to compensation.
The compensation payable in case of retirement is equal to 40% of the compensation which would be
payable in case of unjustified dismissal.
These plans are not funded and are defined benefit plans in accordance with IAS 19. The Group charges
the accrued benefits in each period with a corresponding increase in the relative actuarial liability. The
payments made to retirees in every period are charged against this liability. The liabilities of the Group
arising from the obligation to pay termination indemnities are determined through actuarial studies,
conducted by independent actuaries.
22.1
Provision for retirement benefits
($’000)
2022
2021
Defined benefit obligation
1,675
2,767
Provision for retirement benefits recognised
1,675
2,767
Allocated as:
Non-current portion
1,675
2,767
1,675
2,767
22.2
Defined benefit obligation
($’000)
2022
2021
At 1 January
2,766
7,839
Change in estimate
103
–
(3,463)
Current service cost
163
191
Interest cost
52
13
Extra payments or expenses
3,233
775
Actuarial losses – from changes in financial assumptions
(267)
162
Benefits paid
(4,100)
(2,314)
Transfer in/(out)
–
(34)
Exchange differences
(172)
(402)
At 31 December
1,675
2,767
103
During the year there was a change in the defined benefit estimate in Greece, specifically in relation to the periods of service to
which an entity attributes benefit.
22.3
Actuarial assumptions and risks
The most recent actuarial valuation was carried out as of 31 December 2022 and it was based on the
following key assumptions:
2022
2021
Greece
Discount rate
4.10%
2.00%
Expected rate of salary increases
3.54%
3.84%
Average life expectancy over retirement age
19.7 years
19.4 years
Inflation rate
2.20%
2.00%
Italy
Discount rate
0.94%
0.94%
Expected rate of salary increases
n/a
N/A
Average life expectancy over retirement age
20.9 years
20.9
Inflation rate
2.00%
2.00%
Sensitivity analysis
The sensitivity analysis below shows the impact on the defined benefit obligation of changing each
assumption while not changing all other assumptions. This analysis may not be representative of the
actual change in the defined benefit obligation as it is unlikely that the change in the assumptions would
occur in isolation of one another as some of the assumptions may be correlated.
2022
2021
Greece
Percentage Effect on defined benefit obligation
Change + 0.5% in Discount rate
-3%
-3%
Change – 0.5% in Discount rate
3%
3%
Change +0.5% in Expected rate of salary increases
3%
3%
Change -0.5% in Expected rate of salary increases
-3%
-3%
Italy
Percentage Effect on defined benefit obligation
Change + 0.5% in Discount rate
-1%
-1%
Change – 0.5% in Discount rate
1%
1%
2022
2021
Greece
Percentage Effect on current service cost
Change + 0.5% in Discount rate
-4%
-4%
Change – 0.5% in Discount rate
4%
4%
Change +0.5% in Expected rate of salary increases
5%
5%
Change -0.5% in Expected rate of salary increases
-5%
-5%
The amounts presented reflect the impact from the percentage increase / (decrease) in the given
assumption by +/- 0.5% on the defined benefit obligation and current service cost, while holding all other
assumptions constant.
The plan exposes the Group to actuarial risks such as interest rate risk, longevity changes and inflation
risk.
Interest rate risk
The present value of the defined benefit liability is calculated using a discount rate determined by reference
to market yields of high-quality corporate bonds. The estimated term of the bonds is consistent with the
estimated term of the defined benefit obligation and it is denominated in Euro. A decrease in market yield
on high quality corporate bonds will increase the Group’s defined benefit liability.
Longevity of members
Any increase in the life expectancy of the members will increase the defined benefit liability.
Inflation risk
A significant proportion of the defined benefit liability is linked to inflation. An increase in the inflation rate
Provisions
($’000)
Decommissioning
Provision for
litigation and
other claims
Total
At 1 January 2021
865,127
16,408
881,535
New provisions
–
520
520
Change in estimates
(18,808)
(4,494)
(23,302)
Recognised in property, plant and
equipment
(13,174)
(13,174)
Recognised in Intangible assets
2,202
2,202
Recognised in profit& loss
(7,836)
(7,836)
Payments
(2,653)
–
(2,653)
Unwinding of discount
8,722
–
8,722
Currency translation adjustment
(50,290)
(1,140)
(51,430)
At 31 December 2021
802,098
11,294
813,392
Current provisions
12,366
–
12,366
Non-current provisions
789,732
11,294
801,026
At 1 January 2022
New provisions
–
1,619
1,619
Change in estimates
49,313
(551)
48,762
Recognised in property, plant and
equipment
21,685
21,685
Recognised in profit& loss
27,628
27,628
Payments
(8,898)
(344)
(9,242)
Reclassification
–
(1,568)
(1,568)
Unwinding of discount
21,495
–
21,495
Currency translation adjustment
(55,251)
(1,104)
(56,355)
At 31 December 2022
808,757
9,346
818,103
Current provisions
8,376
–
8,376
Non-current provisions
800,381
9,346
809,727
Decommissioning provision
The decommissioning provision represents the present value of decommissioning costs relating to oil and
gas properties, which are expected to be incurred up to 2042 when the producing oil and gas properties
are expected to cease operations. The future costs are based on a combination of estimates from an
external study completed in previous years and internal estimates. These estimates are reviewed annually
to take into account any material changes to the assumptions. However, actual decommissioning costs
will ultimately depend upon future market prices for the necessary decommissioning works required that
will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to
depend on when the fields cease to produce at economically viable rates. This, in turn, will depend upon
future oil and gas prices and the impact of energy transition and the pace at which it progresses which are
inherently uncertain. The decommissioning provision represents the present value of decommissioning
costs relating to assets in Italy, Greece, UK, Israel and Croatia. No provision is recognised for Egypt as
there is no legal or constructive obligation as at 31 December 2022.
Inflation
assumption
Discount
rate
assumption
Cessation
of
production
assumption
Spend in
2022
2022
($’000)
2021
($’000)
Greece
1.6%- 2.2%
4.6%
2034
–
13,036
17,058
Italy
5.2%- 2.0%
3.3%
2023-2042
7,616
519,749
527,801
UK
3.7%
4.1%
2023-2031
1,281
176,063
203,246
Israel
2.3%-2.7%
4.1%
2042
–
84,299
35,525
Croatia
5.2%- 2.0%
3.3%
2032
–
15,610
18,467
Total
8,897
808,757
802,097
Litigation and other claims provisions
Litigation and other claim provision relates to litigation actions currently open in Italy with the Termoli Port
Authority in respect of the fees payable under the marine concession regarding FSO Alba Marina serving
the Rospo Mare field in Italy. Energean Italy Spa has appealed these cases to the Campobasso Court of
Appeal. None of the other cases has yet had a decision on the substantive issue. The Group provided
€5.6 million (c$6.0 million) against an adverse outcome of these court cases.
Energean Italy Spa has currently open litigations with three municipalities in Italy related to the imposition
of real estate municipality taxes (IMU/TASI), interest and related penalties concerning the periods 2016 to
2019. For the years before 2019, Edison SpA bears uncapped liability for any amount assessed according
to the sale and purchase agreement (SPA) signed between the companies while Energean is liable for
any tax liability related to tax year 2019. For all three cases, Energean Italy SpA (together with Edison SpA,
as appropriate) filed appeals presenting strong legal and technical arguments for reducing the assessed
taxes to the lowest possible level as well as cancelling entirely the imposed penalties. The Group strongly
believes based on legal advice received that the outcome of the court decisions will be in its favour with
no material exposure expected in excess of the provision of $2.1 million recognised.
The remaining balance in other provisions a potential claim in Egypt.
It is not currently possible to accurately predict the timing of the settlement of these claims and therefore
Trade and other payables
($’000)
2022
2021
Trade and other payables-Current
104
Financial items:
Trade accounts payable
298,091
109,525
Payables to partners under JOA
105
58,336
43,499
Deferred licence payments due within one year
13,345
–
Deferred consideration for acquisition of minority
144,326
167,228
Other creditors
34,644
12,043
Short term lease liability
9,208
8,253
557,950
340,548
Non-financial items:
Accrued expenses
106
98,650
64,823
Contract
Liability
107
56,230
Other finance costs accrued (note 9)
39,672
36,693
Social insurance and other taxes
4,372
7,643
198,924
109,159
756,874
449,707
Trade and other payables-Non-Current
Financial items:
Trade and other
payables
108
169,360
–
Deferred licence
payments
109
38,488
57,230
Contingent consideration (note 26.1)
86,320
78,450
Long term lease liability
23,063
36,172
317,231
171,852
Non-financial items:
Contract
Liability
107
–
53,537
Social insurance
827
598
827
54,135
318,058
225,987
104
The statement of financial position as at 31 December 2022 presents current tax liabilities separately from the current portion
of trade and other payables. Comparative amounts of $5,279,000 have been reclassified accordingly.
105
Payables related to operated Joint operations primarily in Italy.
106
Included in trade payables and accrued expenses in 2022 and 2021, are mainly Karish field related development expenditures
(mainly FPSO and Sub Sea construction cost), development expenditure for Cassiopea project in Italy and NEA/NI project in
Egypt.
107
In June 2019, Energean signed a Detailed Agreement with Israel Natural Gas Lines (“
INGL
”) for the transfer of title (the “hand
over”) of the nearshore and onshore part of the infrastructure that will deliver gas from the Karish and Tanin FPSO into the
Israeli national gas transmission grid. As consideration, INGL will pay Energean 369 million Israeli New Shekels (ILS), which
translates to approximately $115 million, for the infrastructure being built by Energean in accordance with milestones detailed
in the agreement. The agreement covers the onshore section of the Karish and Tanin infrastructure and the near shore section
of pipeline extending to approximately 10km offshore. The amount included in the contract liability line above represents the
amount received as at 31 December 2022 from INGL. The hand over to INGL is expected to become effective in Q1 2023.
108
The amount represents an amount payable to Technip in respect of costs incurred starting 1 April 2022 until completion, in
terms of the EPCIC contract. The amount is payable in eight equal quarterly deferred payments due after practical completion
date and therefore has been discounted at 5.831%. p.a. (being the yield rate of the senior secured loan notes, maturing in 2024,
at the date of entering into the settlement agreement)
109
In December 2016, Energean Israel acquired the Karish and Tanin offshore gas fields for $40.0 million closing payment with an
obligation to pay additional consideration of $108.5 million plus interest inflated at an annual rate of 4.6% in ten equal annual
payments. As at 31 December 2022 the total discounted deferred consideration was $51.8 million (as at 31 December 2021:
$57.23 million). The Sale and Purchase Agreement (“
SPA
”) includes provisions in the event of Force Majeure that prevents or
delays the implementation of the development plan as approved under one lease for a period of more than ninety (90) days in
any year following the final investment decision (“
FID
”) date. In the event of Force Majeure the applicable annual payment of
the remaining consideration will be postponed by an equivalent period of time, and no interest will be accrued in that period of
time as well. Due to the effects of the COVID-19 pandemic which constitute a Force Majeure event, the deferred payment due
in March 2022 would be postponed by the number of days that such Force Majeure event last. As of 31 December 2021 Force
Majeure event length has not been finalised as the COVID-19 pandemic continues to affect the progress of the project, and as
Employee share schemes
Analysis of share-based payment charge
($’000)
2022
2021
Energean Deferred Share Bonus Plan (DSBP)
1,332
1,215
Energean Long Term Incentive Plan (LTIP)
4,911
4,718
Total share-based payment charge
6,243
5,933
Capitalised to intangible and tangible assets
199
200
Expensed as cost of sales
–
5
Expensed as administration expenses
6,044
5,712
Expensed to exploration and evaluation expenses
–
14
Expensed as other expenses
–
2
Total share-based payment charge
6,243
5,933
Energean Long Term Incentive Plan (LTIP)
Under the Energean plc’s 2018 LTIP rules, senior executives may be granted conditional awards of shares
or nil cost options. Nil cost options are normally exercisable from three to ten years following grant
provided an individual remains in employment. Awards are subject to performance conditions (including
Total Shareholder Return (TSR) normally measured over a period of three years. Vesting of awards or
exercise of nil cost options is generally subject to an individual remaining in employment except in certain
circumstances such as good leaver and change of control. Awards may be subject to a holding period
following vesting. No dividends are paid over the vesting period; however, Energean’s Board may decide
at any time prior to the issue or transfer of the shares in respect of which an award is released that the
participant will receive an amount (in cash and/or additional Shares) equal in value to any dividends that
would have been paid on those shares on such terms and over such period (ending no later than the
Release Date) as the Board may determine. This amount may assume the reinvestment of dividends (on
such basis as the Board may determine) and may exclude or include special dividends.
The weighted average remaining contractual life for LTIP awards outstanding at 31 December 2022 was
1.2 years (31 December 2021: 1.3 years), number of shares outstanding 2,112,973 and weighted average
price at grant date £5.66.
There are further details of the LTIP in the Remuneration Report on pages 123-1
47.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, a portion of any annual bonus of a Senior Executive nominated by the Remuneration &
Talent Committee,
may be deferred into shares.
Deferred awards are usually granted in the form of conditional share awards or nil-cost options
(or, exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award
although may vest early on leaving employment or on a change of control.
The weighted average remaining contractual life for DSBP awards outstanding at 31 December 2022 was
Financial instruments
The Group is exposed to a variety of risks including commodity price risk, interest rate risk, credit risk,
foreign currency risk and liquidity risk. The use of derivative financial instruments is governed by the
Group’s policies approved by the Board of Directors. Compliance with policies and exposure limits are
monitored and reviewed internally on a regular basis. The Group does not enter into or trade financial
instruments, including derivatives, for speculative purposes.
Fair values of financial assets and liabilities
The information set out below provides information about how the Group determines the fair values of
various financial assets and liabilities.
The fair values of the Group’s non-current liabilities measured at amortised cost are considered to
approximate their carrying amounts at the reporting date.
The carrying value less any estimated credit adjustments for financial assets and financial liabilities with
a maturity of less than one year are assumed to approximate their fair values due to their short term-
nature. The fair value of the group’s finance lease obligations is estimated using discounted cash flow
analysis based on the group’s current incremental borrowing rates for similar types and maturities of
borrowing and are consequently categorised in level 2 of the fair value hierarchy.
Contingent consideration
The share purchase agreement (the “SPA”) dated 4 July 2019 between Energean and Edison SpA provides
for a contingent consideration of up to $100.0 million subject to the commissioning of the Cassiopea
development gas project in Italy. The consideration was determined to be contingent on the basis of
future gas prices (PSV) recorded at the time of the at the time of first gas production at the Cassiopea
field, which is expected in 2024. No payment will be due if the arithmetic average of the year one (i.e., the
first year after first gas production) and year two (i.e., the second year after first gas production) Italian
PSV Natural Gas Futures prices is less than €10/Mwh when first gas production is delivered from the
field. $100 million is payable if that average price exceeds €20/Mwh. The fair value of the Contingent
Consideration is estimated by reference to the terms of the SPA and the simulated PSV pricing by
reference to the forecasted PSV pricing, historical volatility and a log normal distribution, discounted at an
estimated cost of debt
The contingent consideration to be payable in 2024 was estimated at acquisition date to amount to
$61.7 million, which discounted at the selected cost of debt resulted in a present value of $55.2 million as
at the acquisition date.
As at 31 December 2022, the two-year future curve of PSV prices increased from the date of acquisition
and indicate an average price in excess of €20/Mwh (the threshold for payment of $100 million), we
estimate the fair value of the Contingent Consideration as at 31 December 2022 to be $86.3 million based
on a Monte Carlo simulation (31 December 2021: $78.5 million).
The fair value of the consideration payable has been recognised at level 3 in the fair value hierarchy.
Contingent consideration reconciliation
Contingent consideration
2022
1 January
78,450
Fair value adjustment
7,870
31 December
86,320
Fair values of derivative financial instruments
The Group undertakes hedging activities as part of the ongoing financial risk management to protect
against commodity price volatility and to ensure the availability of cash flow for re-investment in capital
programmes that are driving business delivery. Commodity hedge contracts entered into in Italy aim to
mitigate the risk of changes to the cost of natural gas and that relating to the sale of natural gas.
The entered into commodity hedges in 2021 however at 31 December 2022 there were no open hedges.
Fair value is the amount for which the asset or liability could be exchanged in an arm’s length transaction
at the relevant date. Where available, fair values are determined using quoted prices in active markets.
To the extent that market prices are not available, fair values are estimated by reference to market-based
transactions, or using standard valuation techniques for the applicable instruments and commodities
involved. Values recorded are as at the balance sheet date, and will not necessarily be realised.
There were no transfers between fair value levels during the year.
The fair value hierarchy of financial assets and financial liabilities that are not measured at fair value (but
fair value disclosure is required) is as follows:
Fair value hierarchy as at 31 December 2022
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Financial assets
Trade and other
receivables (note 18)
–
329,224
–
329,224
Cash and cash
equivalents (note 15)
427,888
–
–
427,888
Restricted Cash
74,776
–
–
74,776
Total
502,664
329,224
–
831,888
Financial liabilities
Financial liabilities held at amortised cost:
Trade and other
payables
–
560,431
–
560,431
Senior Secured Notes
(note 21)
2,716,625
–
–
2,716,625
Borrowings (note 21)
–
106,986
–
106,986
Deferred consideration
for acquisition of
minority (note 24)
–
144,326
–
144,326
Net obligations under
finance leases (note 24)
–
32,271
–
32,271
Deferred licence
payments (note 24)
–
51,833
–
51,833
Financial liabilities at
FVTPL
Contingent
Consideration
–
–
86,320
86,320
Total
2,716,625
895,847
86,320
3,698,792
Fair value hierarchy as at 31 December 2021
($’000)
Level 1
Level 2
Level 3
Total
Financial assets
Trade and other
receivables (note 18)
–
284,692
–
284,692
Cash and cash
equivalents (note 15)
730,839
–
–
730,839
Restricted Cash
199,729
199,729
Total
930,568
284,692
–
1,215,260
Financial liabilities
Financial liabilities held at amortised cost:
Trade and other
payables – current
–
173,319
–
173,319
Senior Secured Notes
(note 20)
2,931,950
–
–
2,931,950
Borrowings (note 20)
–
41,495
–
41,495
Deferred consideration
for acquisition of
minority (note 23)
–
167,228
–
167,228
Net obligations under
finance leases (note 23)
–
44,425
–
44,425
Deferred licence
payments (note 23)
–
57,230
–
57,230
Financial liabilities held at fair value through OCI:
Derivatives
–
12,546
–
12,546
Financial liabilities at
FVTPL:
Contingent
consideration
–
–
78,450
78,450
Total
2,931,950
496,243
78,450
Commodity price risk
The Group considers hedging activities as part of the ongoing financial risk management to protect
against commodity price volatility and to ensure the availability of cash flow for re-investment in capital
programmes that are driving business delivery.
At 31 December 2022 there are no open hedging contracts.
26.3
Interest rate risk
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-
term borrowings are therefore usually at fixed rates.
At 31 December 2022, the Group’s exposure to interest rate risk is only in relation to the Greek borrowings
as all other borrowings are at fixed interest rates (refer to Note 21 details). The exposure to interest rates
for the Group’s money market funds is considered immaterial.
($’000)
2022
2021
Impact on finance costs
Interest rates increase +0.5%
135
–
Interest rates decrease -0.5%
(135)
–
Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount
of future cash inflows from financial assets on hand at the reporting date. The Group has policies in place
to ensure that all of its transactions giving rise to credit risk are made with parties having an appropriate
credit history and monitors on a continuous basis the ageing profile of its receivables.
Also, the Group has policies to limit the amount of credit exposure to any banking institution, considering
among other factors the credit ratings of the banks with which deposits are held. Credit quality information
in relation to those banks is provided below.
With regard to the risk of potential losses caused by the failure of any of the counterparties the Company
interacts with to honour the commitments they have undertaken, the Group has implemented for some
time procedures and tools to evaluate and select counterparties based on their credit rating, constantly
monitoring its exposure to the various counterparties and implementing appropriate mitigating actions,
primarily aimed at recovering or transferring receivables.
Presented below is a breakdown of trade receivables by past due bracket:
($’000)
31 December
2022
31 December
2021
Trade receivables and receivables from partners under JOA
224,319
215,776
Allowance for impairment
(4,565)
(31,834)
Total
219,754
183,942
Trade
receivables
include
balances
from
EGPC,
the
Egyptian
governmental
body
that
are
significantly
aged.
31 December 2022
31 December 2021
Trade
receivables
Allowance
Trade
receivables
Allowance
($’000)
Not yet due
75,573
(2,377)
44,602
(1,461)
Past due by less than
one month
27,654
(870)
12,187
(399)
Past due by one to
three months
–
–
12,212
(400)
Past due by three to six
months
11,032
(347)
12,959
(425)
Past due by more than
six months
6,095
(192)
41,646
(25,786)
Total
120,354
(3,786)
123,606
(28,471)
Trade Receivables by geography
($’000)
31 December
2022
31 December
2021
Italy
57,000
41,757
United Kingdom
6,491
5,428
Egypt
120,361
123,850
Greece
2,976
2,893
Croatia
–
212
Israel
37,491
21,275
Other Countries
–
2,215
Total
224,319
197,630
Credit quality of bank deposits
The credit quality of the banks in which the Group keeps its deposits is assessed by reference to the credit
rating of these banks. Moody’s credit ratings of the corresponding banks in which the Group keeps its
deposits is as follows:
($’000)
2022
2021
A1
294,505
288,953
A2
96,599
549,494
A3
31,084
10,139
BBB
30,826
64,760
BB
48,403
16,590
B3
1,247
634
502,664
930,570
The Company has assessed the recoverability of all cash balances and considers they are carried within
Foreign exchange risk
The Group is exposed to foreign exchange risk as it undertakes operations in various foreign currencies.
The key sources of the risk are attributed to the fact that the Group has certain subsidiaries with Euro
functional currencies in which a number of loan agreements denominated in US$ and sales of crude oil
are additionally denominated in US$.
The Group’s exposure to foreign currency risk, as a result of financial instruments, at each reporting date
is shown in the table below. The amounts shown are the US$ equivalent of the foreign currency amounts.
Liabilities
Assets
($’000)
2022
2021
2022
2021
Dollars (US$)
759,232
898,804
265,166
480,931
United Kingdom
Pounds (£)
236,115
16,750
107,336
34,971
Euro
588,952
656,602
724,116
11,323
CAD
–
–
–
17
NOK
4,403
109
18
84
ILS
1,501
1,783
22,442
35,905
SGD
276
19,383
238
9,354
EGP
–
–
–
41
Total
572,626
1,590,479
1,593,431
1,119,316
The following table reflects the sensitivity analysis for profit and loss results for the year and equity, taking
into consideration for the periods presented foreign exchange variation by +/- 10%.
31 December 2022
USD
Variation
£
Variation
Euro
Variation
ILS
Variation
NOK
Variation
SGD
Variation
EGP
Variation
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
Profit or loss (before tax)
12,927
(3,634)
(2,415)
1,883
(6,394)
6,986
5
(4)
1,003
(912)
(793)
721
25
25
Other comprehensive income
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Equity
12,927
(3,634)
(2,415)
1,883
(6,394)
6,986
5
(4)
1,003
(912)
(793)
721
25
25
31 December 2021
USD
Variation
£
Variation
Euro
Variation
ILS
Variation
NOK
Variation
SGD
Variation
EGP
Variation
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
Profit or loss (before tax)
(24,122)
29,629
(10,249)
12,275
5,324
(6,755)
–
–
2,094
(1,904)
(439)
399
(4)
5
Other comprehensive income
–
–
–
–
–
–
–
–
–
–
Equity
(24,122)
29,629
(10,249)
12,275
5,324
(6,755)
–
–
2,094
(1,904)
(439)
399
(4)
5
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another
financial asset.
The Group monitors its risk to a shortage of funds by monitoring its debt rating and the maturity dates of existing debt and other payables. As at 31 December 2022,
the Group had available $217 million (2021: $113 million) of undrawn committed borrowing facilities.
The undrawn facilities are in relation to the Greek State-Backed Loan of $43million (€40million) and $174million in relation to the revolving credit facility (Refer to
note 21 for details for further details).
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash
flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
The Group manages its liquidity risk by ongoing monitoring of its cash flows. Group management prepares budgets and regular cash flow forecasts and takes
appropriate actions to ensure available cash deposits and credit lines with the banks are available to meet the Group’s liabilities as they fall due.
The table below summarises the maturity profile of the Group financial liabilities based on contractual undiscounted payments:
31 December 2022
Carrying amounts
Contractual cash flows
3 months
or less
3-12 months
1-2 years
2-5 years
More than
5 years
($’000)
Bank loans
2,975,345
3,869,648
64,453
98,480
910,680
1,291,207
1,504,828
Lease liabilities
32,271
33,207
2,231
6,503
2,967
19,952
1,554
Trade and other
payables
936,120
984,802
311,602
337,634
238,692
96,874
–
Total
3,943,736
4,887,657
378,286
442,617
1,152,339
1,408,033
1,506,382
31 December 2021
Carrying amounts
Contractual cash flows
3 months
or less
3-12 months
1-2 years
2-5 years
More than
5 years
($’000)
Bank loans
2,950,701
3,936,296
64,095
93,004
208,562
1,640,222
1,930,412
Lease liabilities
44,425
21,953
1,919
4,937
6,216
7,130
1,744
Trade and other
payables
467,986
552,689
139,467
208,120
26,704
137,047
11,350
Total
3,463,112
4,510,938
205,481
306,061
241,482
1,784,399
Related parties
27.1
Related party relationships
Balances and transactions between the Company and its subsidiaries, which are related parties, have
been eliminated on consolidation and are not disclosed in this note.
The Directors of Energean Plc are considered to be the only key management personnel as defined by IAS
24. The following information is provided in relation to the related party transaction disclosures provided
in note 27.2 below:
Adobelero Holdings Co Ltd
. is a beneficially owned holding company controlled by Panos Benos, the CFO
of the Group.
Growthy Holdings Co Ltd
is a beneficially owned holding company controlled by Matthaios Rigas, the
CEO of the Group.
Oil Co Investments Limited
is beneficially owned and controlled by Efstathios Topouzoglou, a Non-
Executive Director of the Group.
Seven Maritime Company (Seven Marine)
is a related party company controlled by one the Company’s
shareholders Mr Efstathios Topouzoglou. Seven Marine owns the offshore supply ship Energean Wave
which support the Group’s operation in northern Greece.
Capital Earth:
During the period ended 30 June 2022 the Group received consultancy services from Capital
Earth Limited, a consulting company controlled by the spouse of one of Energean’s executive directors, for
the provision of Group Corporate Social Responsibility Consultancy and Project Management Services.
Prime Marine Energy Inc:
During 2020 Energean Israel, purchased from Prime Marine Energy Inc a
company controlled by a non-executive director and shareholder of Energean plc, a Field Support Vessel
(“
FSV
”). The FSV will provide significant in-country capability to support the Karish project, including FPSO
re-supply, crew changes, holdback operations for tanker offloading, emergency subsea intervention, drilling
support and emergency response. The purchase of this multi-purpose vessel will enhance operational
efficiencies and economics when compared to the leasing of multiple different vessels for the various
activities. The FSV is currently completing construction works at a Greek Shipyard. The agreement with
Prime Marine Energy Inc was terminated on 19 October 2022. In December 2022 the FSV was towed to
Greece for completion of the works under Energean’s supervision.
27.2
Related party transactions
Purchases of goods and services
($’000)
Nature of transactions
2022
2021
Other related party “Seven Marine”
Vessel leasing and services
2,001
2,000
Other related party “Prime Marine Energy Inc”
Construction of field support vessel
8,060
10,273
Other related party “Capital Earth Ltd”
Consulting services
–
35
10,061
12,308
27.3
Related party balances
Payables
($’000)
Nature of balance
2022
2021
Seven Marine
Vessel leasing and services
702
417
702
417
Key management compensation
The Directors of Energean plc are considered to be the only key management personnel as defined by IAS
24 Related Party Disclosures.
31 December 2022 ($’000)
Salary and fees
Benefits
Annual bonus paid in cash
Total
Executive Directors
1,667
157
1,570
3,394
Non-Executive Directors
794
–
–
794
Total
2,461
157
1,570
4,188
31 December 2021 ($’000)
Salary and fees
Benefits
Annual bonus paid in cash
Total
Executive Directors
1,650
100
1,664
3,414
Non-Executive Directors
703
–
–
703
Total
2,353
100
1,664
Commitments and contingencies
In acquiring its oil and gas interests, the Group has pledged that various work programmes will be
undertaken on each permit/interest. The exploration commitments in the following table are an estimate
of the net cost to the Group of performing these work programmes:
($’000)
2022
2021
Capital Commitments
Due within one year
16,607
20,575
Due later than one year but within two years
57,639
51,180
Due later than two years but within five years
1,658
1,497
75,904
73,252
Performance guarantees
110
Greece
4,170
1,176
Israel
97,572
89,683
Egypt
2,000
UK
83,976
99,570
Italy
11,461
21,292
Montenegro
–
566
199,179
212,287
Karish and Tanin Leases ($25 million) – As part of the requirements of the Karish and Tanin Lease deeds,
the Group provided the Ministry of National Infrastructures, Energy and Water with bank guarantees for
each lease. The bank guarantees expire 29 June 2023.
Blocks 12, 21, 22, 23 and 31 ($21 million) – As part of the requirements of the exploration and appraisal
licences which granted to the Group during the Israeli offshore bid in December 2017, the Group provided
the Ministry of National Infrastructures, Energy and Water in January 2018 with bank guarantees for all 5
blocks mentioned above. The bank guarantees are in force until 13 January 2024.
Israeli Natural Gas Lines (“
INGL
”) ($47 million) – As part of the agreement signed with INGL on June 2019
the Group provided INGL bank guarantee in order to secure the milestone payments from INGL. These
bank guarantees are in force until June 2023 ($5 million), November 2023 ($42 million) and January 2024
($3 million)
110
Performance guarantees are in respect of abandonment obligations, committed work programmes and certain financial
obligations.
Israel Other ($5 million) – As part of ongoing operations in Israel, the Group has provided various bank
guarantees to third parties in Israel.
United Kingdom: Following the Edison E&P acquisition, the Group issued letters of credit amounting to
$84
million for United Kingdom decommissioning obligations and other obligations under the United
Kingdom licenses
Italy: The Group issued letters of credit amounting to $11 million for decommissioning obligations and
other obligations under the Italian licenses
Greece and Egypt: The Group issued letters of credit amounting for obligations under the Block 2 and
Block 8 licenses respectively.
Legal cases and contingent liabilities
Subsequent events
On the 9 February 2023 Energean declared its 4Q dividend of US$30 cents per share, to be paid on
30 March 2023.
On the 17 March 2023 Energean signed an unsecured $350 million two year term loan facility, which
Subsidiary undertakings
At 31 December 2022, the Group had investments in the following subsidiaries:
Name of subsidiary
Country of incorporation / registered office
Principal
activities
Shareholding
At
31 December
2022 (%)
Shareholding
At
31 December
2021 (%)
Energean E&P Holdings Ltd
22 Lefkonos Street, 2064 Nicosia, Cyprus
Holding Company
Energean Capital Ltd
22 Lefkonos Street, 2064 Nicosia, Cyprus
Holding Company
Energean Group Services Limited (former
Energean Med Limited)
44 Baker Street, London W1U 7AL, United Kingdom
Oil and gas
exploration,
development and
production
Energean Oil & Gas S.A.
32 Kifissias Ave. 151 25 Marousi Athens, Greece
Oil and gas
exploration,
development and
production
Energean International Limited
22 Lefkonos Street, 2064 Nicosia, Cyprus
Oil and gas
exploration,
development and
production
Energean Israel Limited
22 Lefkonos Street, 2064 Nicosia, Cyprus
Oil and gas
exploration,
development and
production
Energean Montenegro Limited
22 Lefkonos Street, 2064 Nicosia, Cyprus
Oil and gas
exploration,
development and
production
Energean Israel Transmission LTD
Andre Sakharov 9, Haifa, Israel
Gas transportation
license holder
Energean Israel Finance LTD
Andre Sakharov 9, Haifa, Israel
Financing
activities
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name of subsidiary
Country of incorporation / registered office
Principal
activities
Shareholding
At
31 December
2022 (%)
Shareholding
At
31 December
2021 (%)
Energean Egypt Limited
22 Lefkonos Street, 2064 Nicosia, Cyprus
Oil and gas
exploration,
development and
production
Energean Hellas Limited
22 Lefkonos Street, 2064 Nicosia, Cyprus
Oil and gas
exploration,
development and
production
Energean Italy S.p.a.
31 Foro Buonaparte, 20121 Milano, Italy
Oil and gas
exploration,
development and
production
Energean Sicilia Srl
Via Salvatore Quasimodo 2 – 97100 Ragusa (Ragusa)
Oil and gas
exploration,
development and
production
Energean Exploration Limited
44 Baker Street, London W1U 7AL, United Kingdom
Oil and gas
exploration,
development and
production
Energean UK Ltd
44 Baker Street, London W1U 7AL, United Kingdom
Oil and gas
exploration,
development and
production
Energean Egypt Energy Services JSC
Cairo, Egypt
Oil and gas
exploration,
development and
production
100
100
100
100
100
100
100
100
100
100
100
100
100
31
Exploration, development and production interests
Development and Production
Country
Licence /Unit
area
Fields
Fiscal
Regime
Group’s
working
interest
Joint
Operation
Operator
Israel
Karish
Karish, Karish
Main
Concession
100%
No
NA
Tanin
Tanin
Concession
100%
No
NA
Egypt
Abu Qir
Abu Qir, Abu
Qir North, Abu
Qir West, Yazzi
(32.75%)
PSC
100%
No
NA
NEA
Yazzi (67.25%)
PSC
100%
No
NA
Python
PSC
100%
No
NA
NI
Field A (NI-1X),
Field B (NI-3X),
NI-2X, Viper
(NI-4X)
PSC
100%
No
NA
Greece
Prinos
Prinos, Epsilon
Concession
100%
No
NA
South Kavala
Concession
100%
No
NA
Katakolo
Katakolo
(undeveloped)
Concession
100%
No
NA
Italy
C.C6.EO
Vega A (Vega B,
undeveloped)
Concession
100%
111
Yes
Energean
B.C8.LF
Rospo Mare
Concession
100%
112
Yes
Energean
Fiume tenna
Verdicchio
Concession
100%
No
NA
B.C7.LF
Sarago, cozza,
vongola
Concession
95%
Yes
Energean
B.C11.AS
GIANNA
Gianna
(undeveloped)
Concession
49%
Yes
ENI
Garaguso
Accettura
Concession
50%
Yes
Energean
A.c14.AS
Rosanna and
Gaia
Concession
50%
Yes
ENI
A.C15.AX
Valentina,
Raffaella,
Emanuela,
Melania
Concession
10%
Yes
ENI
A.c16.AG
Delia, Demetra,
Sara, Dacia,
Nicoletta
Concession
30%
Yes
ENI
A.C8.ME
Anemone and
Azelea
112
Concession
19%
Yes
ENI
111
Energean has agreed with ENI to acquire the latter’s WI and the request is pending approval from the Italian authorities. However
by means of an agreement between ENI and Energean Italy all the production and cost are retained by Energean from 1.1.2021
and, according to the JOA, the decommissioning costs will be borne by both parties according to their initial WI (Energean 60%,
ENI 40%)
112
Energean has requested from the operator to exit the licence.
Country
Licence /Unit
area
Fields
Fiscal
Regime
Group’s
working
interest
Joint
Operation
Operator
Masseria
Monaco
Appia and
Salacaro
(undeveloped)
Concession
50%
Yes
Energean
G.C1.AG
Cassiopea ,
Gemini, Centauro
Concession
40%
Yes
ENI
B.C14.AS
Calipso and Clara
West
Concession
49%
Yes
ENI
B.C20.AS
Carlo, Clotilde
e Didone
(undeveloped)
Concession
49%
Yes
ENI
Montignano
Cassiano and
Castellaro
Concession
50%
Yes
Energean
B.C13.AS
Clara Est, Clara
Nord, Clara
NW, (Cecilia
undeveloped)
Concession
49%
Yes
ENI
Comiso (EIS)
Comiso
Concession
100%
No
NA
A.c13.AS
Daria, ( Manuela
,Arabella,
Ramona
undeveloped)
Concession
49%
Yes
ENI
B.C10.AS
Emma West and
Giovanna
Concession
49%
Yes
ENI
A.C36.AG
Fauzia
Concession
40%
Yes
ENI
Torrente
menocchia
Grottammare
(undeveloped)
Concession
88%
Yes
Petrorep
Montegranaro
Leoni
Concession
50%
Yes
Gas Plus
Lucera
Lucera
Concession
4.8%
Yes
GPI
Monte Urano
San Lorenzo
Concession
40%
Yes
Energean
A.C21.AG
Naide
Concession
49%
Yes
ENI
Colle di lauro
Portocannone
Concession
62%
Yes
Energean
Porto
civitanova
Porto civitanova
Concession
40%
Yes
GPI
Quarto
Quarto
Concession
33%
Yes
Padana
Energia
A.C17.AG
Regina
Concession
25%
Yes
ENI
S. Andrea
Concession
50%
Yes
Canoel
B.C2.LF
San Giorgio Mare
Concession
95%
Yes
Energean
San Marco
San Marco
Concession
100%
No
NA
B.C1.LF
Santo Stefano
Concession
96%
Yes
Energean
Mafalda
Sinarca
Concession
40%
Yes
Gas Plus
B.C9.AS
Squalo Centrale
Concession
33%
Yes
ENI
Massignano
Talamonti
Concession
50%
Yes
Energean
Masseria
Grottavecchia
Traetta
Concession
14%
Yes
Canoel
S. Anna (EIS)
Tresauro
Concession
25%
Yes
Enimed
Country
Licence /Unit
area
Fields
Fiscal
Regime
Group’s
working
interest
Joint
Operation
Operator
Torrente
Celone
Vigna Nocelli
(Masseria Conca
undeveloped)
Concession
50%
Yes
Rockhopper
Italia
UK
Tors
Garrow, Kilmar
Concession
68%
Yes
Alpha
Petroleum
Markham
Concession
3%
Yes
Spirit
Energy
Scott
Concession
10%
Yes
CNOOC
Telford
Concession
16%
Yes
CNOOC
Wenlock
Concession
80%
Yes
Alpha
Petroleum
Croatia
Izabela
PSC
70%
No
NA
Exploration
Country
Concession
Fields
Fiscal
Regime
Group’s
working
interest
Joint
Operation
Operator
Israel
Blocks 12, 21,
23, 31
Athena, Zeus, Hera,
Hermes and Hercules
Concession
100%
No
NA
Egypt
North East
Hap’y
PSC
3
0%
113
34
Yes
ENI
Greece
Ioannina
Concession
100%
No
N/Al
Block-2
Concession
75%
Yes
Energean
Italy
A.R.78.RC
Concession
10%
Yes
ENI
G.R13.AG
Lince prospect
Concession
40%
Yes
ENI
G.R.14.AG
Panda, Vela prospect
Concession
40%
Yes
ENI
UK
Glengorm
Concession
25%
Yes
CNOOC
Isabella
Concession
10%
Yes
Total
Energies
E&P North
Sea UK
Limited
Montenegro
Block 26, 30
Concession
100%
No
NA
Croatia
Irena
PSC
70%
No
NA
113
From January 2023 Energean share in North East Hap’y
was
Page 236 of 255
COMPANY FINANCIAL STATEMENTS
Company Statement of Financial Position
31 December 2022
Notes
2022
$’000
2021
$’000
ASSETS
Non-current assets
Investment in subsidiaries
3
1,163,565
1,154,387
Property plant and equipment
46
59
Other intangible assets
55
–
Loans and other intercompany receivables
4
334,116
336,150
1,497,782
1,490,596
Current assets
Trade and other receivables
6
74,909
131,677
Cash and cash equivalents
336
18,910
75,245
150,587
Total assets
1,573,027
1,641,183
EQUITY AND LIABILITIES
Shareholders’ Equity
Share capital
9
2,380
2,374
Share premium
9
415,388
915,388
Other reserves
10,459
10,459
Share based payment reserve
25,611
19,374
Retained earnings
615,200
197,491
1,069,038
1,145,086
Non-current liabilities
Other payables
786
551
Borrowings
8
442,879
483,441
443,665
483,992
Current Liabilities
Trade and other Payables
7
14,774
12,105
Borrowings
8
45,550
–
Total Current Liabilities
60,324
12,105
Total Liabilities
503,989
496,097
Total equity and liabilities
1,573,027
1,641,183
During the year the Company made a profit of $24.2 million (31 December 2021: $12.2 million).
Approved by the Board and authorised for issuance on 22 March 2023.
Matthaios Rigas
Chief Executive Officer
Panagiotis Benos
Chief Financial Officer
Page 237 of 255
COMPANY FINANCIAL STATEMENTS
Company Statement of Changes in Equity
For the year ended 31 December 2022
Share
Capital
$’000
Share
Premium
$’000
Share
based
payment
reserve
$’000
Equity
component
of convertible
bonds
$’000
Retained
earnings
$’000
Total
equity
$’000
At 1 January 2021
2,367
915,388
13,419
–
185,318
1,116,492
Profit for the year
–
–
–
–
12,173
12,173
Transactions with
owners of the company
Share based payment
charges
–
–
5,962
–
–
5,962
Exercise of Employee
Share options
7
–
(7)
–
–
–
Convertible bond issue
(note 5)
–
–
–
10,459
–
10,459
At 31 December 2021
2,374
915,388
19,374
10,459
197,491
1,145,086
Profit for the year
–
–
–
–
24,213
24,212
Transactions with
owners of the company
Exercise of Share
Options
6
–
(6)
–
–
–
Share Premium
Reduction (note 9)
–
(500,000)
–
–
500,000
–
Share based payment
charges
–
–
6,243
–
–
6,243
Dividend Paid
–
–
–
–
(106,504)
(106,504)
At 31 December 2022
2,380
415,388
25,611
10,459
615,200
1,069,038
Page 238 of 255
COMPANY FINANCIAL STATEMENTS
Company accounting policies
For the year ended 31 December 2022
1.
General information
Energean plc (‘the Company’) was incorporated in England & Wales on 8 May 2017 as a public company
with limited liability, under the Companies Act 2006. Its registered office is at 44 Baker Street, London W1U
7AL, United Kingdom. The Financial Statements are presented in US dollars and all values are rounded to
the nearest US$ thousands ($‘000), except where otherwise stated. Energean plc is the ultimate Parent
of the Energean Group.
2.
Basis of preparation
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS
100) issued by the Financial Reporting Council. The parent company Financial Statements have therefore
been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 (FRS
101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council. As permitted by FRS
101, the Company has taken advantage of the following disclosure exemptions under FRS 101:
a)
the requirements of IFRS 7 Financial Instruments: Disclosures;
b)
the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
c)
the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative
information in respect of: (i) paragraph 79(a) (iv) of IAS 1 and (ii) paragraph 73(e) of IAS 16 Property
Plant and Equipment;
d)
the requirements of paragraphs 10(d), 16, 38A to 38D, 111 and 134 to 136 of IAS 1 Presentation of
Financial Statements;
e)
the requirements of IAS 7 Statement of Cash Flows;
f)
the requirements of paragraphs 45(b) and 46-52 of IFRS 2 share-based payments
g)
the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
h)
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered
into between two or more members of a group, provided that any subsidiary which is a party to the
transaction is wholly owned by such a member; and
i)
the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
Where relevant, equivalent disclosures have been given in the Group financial statements, included in the
Annual Report.
The Company has applied the exemption from the requirement to publish a separate income statement
for the parent company set out in section 408 of the Companies Act 2006.
2.1
Going concern
The Directors have performed an assessment and concluded that the preparation of the financial
statements on a going concern basis is appropriate. In making this assessment a number of factors
were considered, refer to note 2.1. of the Group financial statements. Accordingly, the Directors have a
reasonable expectation that the Company has adequate resources to continue in operational existence
for the foreseeable future and consider it appropriate to adopt the going concern basis in preparing the
financial statements
Page 239 of 255
COMPANY FINANCIAL STATEMENTS
2.2
Foreign currencies
The US dollar is the functional currency of the Company. Transactions in foreign currencies are translated
at the rates of exchange ruling at the transaction date. Monetary assets and liabilities denominated in
foreign currencies are translated into US dollars at the rates of exchange ruling at the balance sheet date,
with a corresponding charge or credit to the income statement.
2.3
Investments
Fixed asset investments, representing investments in subsidiaries, are stated at cost and reviewed for
impairment if there are indications that the carrying value may not be recoverable.
2.4
Trade and other receivables
Receivables represent the Company’s right to an amount of consideration that is unconditional (i.e. only
the passage of time is required before payment of the consideration is due). The Company is required
to assess the carrying values of each of the amounts due from subsidiary undertakings, considering
the requirements established by IFRS 9 Financial Instruments. The IFRS 9 impairment model requires
the recognition of ‘expected credit losses’. If the subsidiary has sufficient liquid assets to repay the loan
if demanded at the reporting date, the expected credit loss is likely to be immaterial. However, if the
subsidiary could not demonstrate the ability to repay the loan, if demanded at the reporting date, the
Company calculated an expected credit loss.
2.5
Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and services
provided to the Company prior to the end of the financial year that are unpaid and arise when the Company
becomes obligated to make future payments in respect of the purchase of those goods and services.
2.6
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised, modified and through the EIR amortisation process. Amortised cost is calculated by taking
into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included as finance costs in the statement of profit or loss.
2.7
Convertible bonds
Convertible bonds are separated into liability and equity components based on the terms of the contract.
The fair value of the liability component on initial recognition is calculated by discounting the contractual
cash flows using a market interest rate for an equivalent non-convertible instrument. The difference
between the fair value of the liability component and the proceeds received on issue is recorded as equity.
Transaction costs are apportioned between the liability and the equity components of the instrument
based on the amounts initially recognised. The liability component is classified as a financial liability
measured at amortised cost (net of transaction costs) until it is extinguished on conversion or settlement.
The equity component is not remeasured.
2.8
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, demand and time deposits and other short-term highly
liquid investments with a maturity of less than 3 months that are readily convertible to a known amount
of cash and are subject to an insignificant risk of changes in value.
Page 240 of 255
COMPANY FINANCIAL STATEMENTS
2.9
Share issue expenses
Costs of share issues are written off against share premium arising upon the issuance of share capital.
2.10
Capital managemen
t
The Company defines capital as the total equity of the Company. Capital is managed in order to provide
returns for shareholders and benefits to stakeholders and to safeguard the Company’s ability to continue
as a going concern. The Company is not subject to any externally imposed capital requirements. To
maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders,
return capital, issue new shares for cash, repay debt, and put in place new debt facilities.
2.11
Share-based payments
The Company has share-based awards that are equity settled as defined by IFRS 2. The cost of
equity-settled transactions is determined by the fair value at the date when the grant is made using an
appropriate valuation model.That cost is recognised in employee remuneration expense together with a
corresponding increase in equity (share based payment reserve), over the period in which the service and,
where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense
recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the Group’s best estimate of the number of equity instruments
that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the
movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant
date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s
best estimate of the number of equity instruments that will ultimately vest. Market performance conditions
are reflected within the grant date fair value. Any other conditions attached to an award, but without an
associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an immediate expensing of an award unless there are
also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/
or service conditions have not been met. Where awards include a market or non-vesting condition, the
transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant
date fair value of the unmodified award, provided the original vesting terms of the award are met. An
additional expense, measured as at the date of modification, is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the
employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the
fair value of the award is expensed immediately through profit or loss.
2.12
Critical accounting judgements and key sources of estimation uncertainty
There are no critical accounting judgements and key sources of estimation uncertainty in the current year.
Page 241 of 255
COMPANY FINANCIAL STATEMENTS
Notes to the Financial Statements
For the year ended 31 December 2022
3.
Investments in subsidiaries
The following table shows the movement in the investment in subsidiaries during the year
$’000
At 31 December 2021
1,154,387
Additions
9,178
At 31 December 2022
1,163,565
The additions relate to further injections of cash, for the issuance of shares, in existing subsidiaries.
The principal activity of the majority of these companies relates to oil and gas exploration, development
and production.
A complete list of Energean plc Group companies at 31 December 2022, and the Company’s percentage
of share capital are set out in the note 30 of the Group financial statements.
4.
Loans and other intercompany receivables, non-current
2022
$’000
2021
$’000
Loans to subsidiaries
332,050
334,073
Receivables from share-based awards to subsidiary undertakings
2,066
2,077
Total
334,116
336,150
The loans to subsidiaries consist of two loans. The Energean Capital Limited (ECL) ($221.2 million) loan
incurs a fixed rate of interest at 5.5% per annum and matures on 18 May 2027. The Energean Oil & Gas SA
(EOGSA) ($110.9 million) loan incurs a fixed rate of interest at 6.7% and matures on 18 November 2029.
At 31 December 2022 no expected credit loss allowances (2021: $0 million) were held in respect of the
recoverability of amounts due from subsidiary undertakings.
5.
Equity
Dividends
A dividend of 30 US$ cents per ordinary share was declared on the 8 September 2022 and paid on
the 30 September 2022. A further dividend of 30 US$ cents per ordinary share was declared on the
17 November 2022 and paid on the 30 December 2022. No dividend was proposed in respect of the year
ended 31 December 2021.
US$ cents per share
$’000
2022
2021
2022
2021
Dividends announced and paid in
cash
September
30
–
53,252
–
December
30
–
53,252
–
Total
60
–
106,504
–
Page 242 of 255
COMPANY FINANCIAL STATEMENTS
Distributable Reserves
31 December
2022
$’000
31 December
2021
$’000
Total Equity
1,069,038
1,145,086
Non-Distributable
Share Capital
(2,380)
(2,374)
Share Premium (note 9)
(415,388)
(915,388)
Equity component of convertible bonds
1
(10,459)
(10,459)
Unrealised profits included in retained earnings reserve
(232,788)
(186,842)
Unrealised share based payment reserve
2
(13,340)
(10,950)
Total Distributable Reserves
394,683
19,073
1
Equity component of $50 million of convertible loan notes (discussed in note 8), which were issued in February 2021 and have
a maturity date of 29 December 2023.
2
Unrealised portion of the share based payment reserve included in total equity.
6.
Trade and other receivables
2022
$’000
2021
$’000
Financial items
Due from subsidiary undertakings
74,004
129,840
Refundable VAT
374
768
74,378
130,608
Non-financial items
Deposits and prepayments
531
1,069
531
1,069
Total trade and other receivables
74,909
131,677
At 31 December 2022 no expected credit loss allowances (2021: $0 million) were held in respect of the
recoverability of amounts due from subsidiary undertakings.
The amounts due from subsidiary undertakings includes $50 million receivable from Energean E&P
Holdings in relation to dividends received in the current year. Additionally the amount include $12
million
of interest receivable on the intercompnay loans. The remaining amounts due from subsidiaries accrue
no interest and relate to intragroup recharges for subsidiaries’ employees share-based payments and
management services provided by the Company to its subsidiaries under a Master Intercompany Services
Agreement.
Page 243 of 255
Trade and other payables
7
.
2022
$’000
2021
$’000
Staff costs accrued
1,906
2,291
Trade payables
3,219
2,790
Due to subsidiary undertakings
1,515
1,097
Finance costs accrued
6,161
3,575
Accrued expenses
1,718
2,040
Income taxes
36
120
Social insurance and other taxes
170
141
Other creditors
49
51
Total trade and other payables
14,774
12,105
The amounts are unsecured and are usually paid within 30 days of recognition.
8.
Borrowings
On 25 February 2021, $50 million of convertible loan notes (the “
Convertible Loan Notes
”) were issued.
The convertible loan notes have a maturity date of 29 December 2023, a strike price of £9.5, adjusted for
dividend payment up to maturity date, and a zero-coupon rate.
On 18 November 2021, the Company completed the issuance of $450 million aggregate principal amount
of senior secured notes maturing in 2027 at a fixed interest rate of 6.5%.
2022
$’000
2021
$’000
Non-current
Convertible loan notes
–
41,496
6.5% Senior Secured notes
442,879
441,945
Carrying value of non-current borrowings
442,879
483,441
Current
Convertible loan notes
45,550
–
Carrying value of current borrowings
45,550
–
Page 244 of 255
COMPANY FINANCIAL STATEMENTS
9
.
Share capital
Equity share
capital
allotted and
fully paid
Number
Share capital
$’000
Share
premium
$’000
Authorised
At 31 December 2021
177,602,560
2,374
915,388
Share Premium Reduction
–
–
(500,000)
Issued during the period
–
–
–
- New Shares
–
–
–
- Employee share schemes
437,945
6
–
At 31 December 2022
178,040,505
2,380
415,388
As at 31 December 2022, the Company’s issued share capital consisted of 178,040,505 ordinary shares of
£0.01 each. The Company has only one class of share, which carries no right to fixed income. Each share
carries the right to one vote at General Meetings of the Company.
Energean plc by special resolution reduced its share premium account, as confirmed by an Order of the
High Court of Justice on the 14 June 2022.
10.
Staff costs
2022
$’000
2021
$’000
Salaries
114
5,892
5,253
Social insurance costs and other funds
785
1,913
Share-based payments
3,847
3,933
Pension contribution & insurance
305
458
Total Staff Cost
10,829
11,557
114
Including directors remuneration
Page 245 of 255
COMPANY FINANCIAL STATEMENTS
11.
Share-based payment
Energean Long Term Incentive Plan (LTIP)
Under the LTIP, Senior Management can be granted nil exercise price options, normally exercisable Under
the LTIP, Senior Management can be granted nil exercise price options, normally at the end of a period
of at least three years following grant and normally have a holding period taking the time horizon to no
earlier than five years following grant. The size of awards depends on both annual performance measures
and Total Shareholder Return (TSR) over a period of up to three years. There are no other post-grant
performance conditions.
No dividends are paid over the vesting period; however, Energean’s Board may decide at any time prior
to the issue or transfer of the shares in respect of which an award is released that the participant will
receive an amount (in cash and/or additional Shares) equal in value to any dividends that would have
been paid on those shares on such terms and over such period (ending no later than the Release Date) as
the Board may determine. This amount may assume the reinvestment of dividends (on such basis as the
Board may determine) and may exclude or include special dividends.
The average remaining contractual life for LTIP awards outstanding at 31 December 2022 was 1.2 years
(31 December 2021: 1.3 years), number of shares outstanding 2,112,973 and weighted average price at
grant date £5.66
There are further details of the LTIP in the Remuneration & Talent Committee Report section of the Annual
Report and note 25 in the Group financial statements.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, the portion of any annual bonus above 30% of the base salary of a Senior Executive
nominated by the Remuneration & Talent Committee is deferred into shares.
Deferred awards are usually granted in the form of conditional share awards or nil-cost options
(or, exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award
although may vest early on leaving employment or on a change of control.
The average remaining contractual life for DSBP awards outstanding at 31 December 2022 was 0.8 years
(31 December 2021: 0.8 years), number of shares outstanding 236,174 and weighted average price at
grant date £10.05.
There are further details refer to note 25 in the Group financial statements.
Page 246 of 255
COMPANY FINANCIAL STATEMENTS
12.
Related party transactions
The Company’s subsidiaries at 31 December 2022 and the Group’s percentage of share capital are set out
are in note 30 of the Group financial statements. The following table provides the Company’s balances
which are outstanding with subsidiary companies at the balance sheet date:
2022
$’000
2021
$’000
Loans to subsidiaries
332,050
334,073
Receivables from share-based awards to subsidiary undertakings
2,066
2,077
Trade and other receivables
74,004
129,840
Total amounts receivable from subsidiary undertakings
408,120
465,990
Amounts payable to subsidiary undertakings
1,515
1,097
406,605
464,893
The amounts outstanding are unsecured and will be settled in cash.
The following table provides the Company’s transactions with partially owned subsidiary companies
(minority interest exists) recorded in the income statement:
2022
$’000
2021
$’000
Amounts invoiced to partially owned subsidiaries under a Master
Intercompany Services Agreement
–
786
–
786
The amounts invoiced in 2021 relate to the period prior to 25 February 2021, before Energean Israel
became a wholly-owned subsidiary. As at 31 December 2021 and 31 December 2022 there are no partially
owned subsidiaries.
Transaction with other related party
2022
$’000
2021
$’000
Consulting services by Capital Earth Limited
–
35
–
35
Capital Earth Limited is a consulting company controlled by the spouse of one of Energean’s executive
directors. Refer to note 27 in the Group financial statements for further details.
13.
Directors’ Remuneration
Directors’ remuneration has been provided in the remuneration report within the Annual Report. Please
refer to pages 123-147 of the Annual Report.
14.
Auditor’s Remuneration
Auditors’ remuneration has been provided in the Group financial statements. Please refer to note 7 of
the Group financial statements, included in the Annual Report, for details of the remuneration of the
company’s auditor on a group basis.
15.
Subsequent Events
Please refer to note 29 of the Group financial statements.
Page 247 of 255
OTHER INFORMATION
Other Information
2022 Report on Payments to Governments
Basis of preparation
This Report provides a consolidated overview of the payments to governments made by Energean plc and
its subsidiary undertakings (“
Energean
”) for the full year 2022 as required under the Report on Payments
to Governments Regulations 2014 (2014/3209), as amended in December 2015 (2015/1928), (the
“
Regulations
”) and DTR 4.3A of the Financial Conduct Authority’s Disclosure and Transparency Rules.
This Report is available for download from
www.energean.com
.
Activities
Payments made to governments that relate to Energean’s activities involving the exploration, development,
and production of oil and gas reserves (“
Extractive Activities
”) are included in this disclosure. Payments
made to governments that relate to activities other than Extractive Activities are not included in this report
as they are not within the scope of the Regulations.
Government
Under the Regulations, a government is defined as any national, regional or local authority of a country
and includes a department, agency or undertaking that is a subsidiary undertaking controlled by such an
authority. All of the payments included in this disclosure have been made to national governments, either
directly or through a ministry or department of the national government, with the exception of Greek
payments in respect of production royalties and licence fees, which are paid to Hellenic Hydrocarbons
and Energy Resources Management Company (HEREMA).
Project
Payments are reported at project level with the exception that payments that are not attributable to a
specific project are reported at the entity level. A “Project” is defined as operational activities which are
governed by a single contract, licence, lease, concession or similar legal agreement, and form the basis
for payment liabilities with a government. If such agreements are substantially interconnected, those
agreements are to be treated as a single project.
“Substantially interconnected” means forming a set of operationally and geographically integrated
contracts, licences, leases or concessions or related agreements with substantially similar terms that are
signed with a government giving rise to payment liabilities. Such agreements can be governed by a single
contract, joint venture, production sharing agreement, or other overarching legal agreement. Indicators
of integration include, but are not limited to, geographic proximity, the use of shared infrastructure and
common operational management.
Payments
The information is reported under the following payment types.
Production entitlements
Under production-sharing agreements (“
PSAs
”), production is shared between the host government and
the other parties to the PSA. The host government typically receives its share or entitlement in kind rather
than being paid in cash.
Taxes
Taxes are paid by Energean on its income, profits or production and are reported net of refunds.
Consumption taxes, personal income taxes, sales taxes, property and environmental taxes are excluded.
Page 248 of 255
OTHER INFORMATION
Royalties
Royalties are payments for the rights to extract oil and gas resources, typically at a set percentage of
revenue less any allowable deductions.
Dividends
Dividends, in this context, are dividend payments other than those paid to a government as an ordinary
shareholder of an entity, unless paid in lieu of production entitlements or royalties. For the year
ended December 31, 2022, there were no reportable dividend payments to a government.
Bonuses
Bonuses are usually paid upon signature of an agreement or a contract, declaration of a commercial
discovery, commencement of production or achievement of a specified milestone. For the year
ended December 31, 2022, there were no reportable bonuses payments to a government.
Fees
Fees and other sums are paid as consideration for the acquisition of a licence that enables access to
an area for the purposes of performing Extractive Activities. Administrative government fees that are
not specifically related to Extractive Activities, or to access extractive resources, are excluded, as are
payments made in return for services provided by a government.
Infrastructure improvements
Infrastructure improvements payments relate to the construction of infrastructure (road, bridge or rail) that
are not substantially dedicated for the use of extractive activities. Payments that are of a social investment
in nature, for example building of a school or hospital, are also excluded. For the year ended December 31,
2022, there were no reportable payments for infrastructure improvements.
Cash basis
Payments are reported on a cash basis, meaning that they are reported in the period in which they are
paid, as opposed to being reported on an accruals basis (which would mean that they were reported in the
period for which the liabilities arise).
Materiality level
For each payment type, total payments below $106,199 to a government are excluded from this report.
Exchange rate
All payments have been reported in US dollars. Payments made in currencies other than US dollars are
typically translated at the average exchange rate of the year under consideration.
Page 249 of 255
OTHER INFORMATION
Payments overview
The table below shows the relevant payments to governments made by Energean in the year ended
31 December 2022 shown by country and payment type.
Of the seven payment types that the UK regulations require disclosure of, Energean did not make any
payments in respect of production entitlements, dividends, bonuses or infrastructure improvements,
therefore, those categories are not shown in the tables.
Country
Income
taxes
$’million
Royalties
$’million
Fees
$’million
Total
$’million
Egypt
57.77
115
–
0.18
57.95
Greece
0.04
–
0.10
0.14
Israel
0.59
0.89
0.62
2.10
Italy
38.58
16.31
3.85
58.74
United Kingdom
0.10
–
1.08
1.18
TOTAL
97.08
17.20
5.83
120.11
115
Our Egyptian assets are operated under PSAs, which set out the terms of the activities, including the applicable tax laws and
regulations. Under the Abu Qir PSA, Energean is entitled to the net production from the asset, which forms the basis for the
calculation and reporting of its payments to the Egyptian Government. Taxes include in-kind volumes due by Energean to the
Egyptian Tax Authorities under the PSAs, which provide that the tax obligations of the company are settled by the Egyptian
General Petroleum Corporation (EGPC) out of its share of profit oil. The monetary value of those payments is determined using
the same method as per production entitlements. The corporate income taxes paid in 2022, were settled by EGPC on Energean’s
behalf out of production entitlement (payment in kind), in accordance with the terms of our PSAs. The terms of our PSAs provide
that corporate income taxes are paid in the year following that to which they relate. Accordingly, 2022 payment relates to 2021
taxable profits.
Page 250 of 255
OTHER INFORMATION
Payments by project
Payments by Project
Income
taxes
$’million
Royalties
$’million
Fees
$’million
Total
$’million
Egypt – Abu Qir
57.77
–
0.10
57.87
Egypt – North El Amriya / North Idku
–
–
0.08
0.08
EGYPTIAN GOVERNMENT REPORT
57.77
–
0.18
57.95
Greece – Prinos
–
–
0.02
0.02
Greece – Ioannina
–
–
0.08
0.08
Greece – Corporate
0.04
–
–
0.04
GREEK GOVERNMENT REPORT
0.04
–
0.10
0.14
Israel – Karish/Tanin leases
–
0.89
0.13
1.02
Israel – Exploration assets
–
–
0.49
0.49
Israel – Corporate
0.59
–
–
0.59
ISRAELI GOVERNMENT REPORT
0.59
0.89
0.62
2.10
Italy – A.C 14.AS
–
–
0.12
0.12
Italy – A.C 16.AG
–
–
0.39
0.39
Italy – B.C 10.AS
–
1.79
0.18
1.97
Italy – B.C 13.AS
–
1.62
0.38
2.00
Italy – B.C 14.AS
–
4.28
0.16
4.44
Italy – B.C1.LF
–
–
0.10
0.10
Italy – B.C7.LF
–
1.21
0.23
1.44
Italy – B.C8.LF
–
2.80
0.41
3.21
Italy – C.C6.EO
–
2.75
0.27
3.02
Italy – Candela
–
–
0.14
0.14
Italy – Colle Di Lauro
–
0.29
0.05
0.34
Italy – Comiso II
–
0.54
0.01
0.55
Italy – Garaguso
–
0.41
0.08
0.49
Italy – Montignano
–
–
0.11
0.11
Italy – S.Anna (Tresauro)
–
0.62
0.01
0.63
Italy – Other
–
–
1.21
1.21
Italy – Corporate
38.58
–
–
38.58
ITALIAN GOVERNMENT
38.58
16.31
3.85
58.74
UK – Tors & Wenlock assets
–
–
0.72
0.72
UK – Scott & Telford assets
–
–
0.02
0.02
UK – Appraisal assets
–
–
0.30
0.30
UK – Markham
–
–
0.04
0.04
UK – Corporate
0.10
–
–
0.10
UK GOVERNMENT
0.10
–
1.08
1.18
TOTAL
97.08
17.20
5.83
120.11
Page 251 of 255
OTHER INFORMATION
Glossary
CO2 – Carbon dioxide
SO2 – Sulphur dioxide
NOx – Nitrogen oxides
GBP or £ – Pound sterling
USD or $ – US dollar
EUR or €- Euro
A
ACQ – Annual Contract Quantity
AGM – Annual General Meeting
B
bbl – Barrel
Bcf – billion cubic feet
bcm – billion cubic metres
boe – Barrels of oil equivalent
boe/d – Barrels of oil equivalent per day
bopd – Barrels of oil per day
C
Capex – Capital expenditure
CEO – Chief Executive Officer
CFO – Chief Financial Officer
COO – Chief Operating Officer
CMAPP – Corporate Major Accident Prevention Policy
CNG – Compressed natural gas
CPR – Competent Person’s Report
CSR – Corporate Social Responsibility
E
E&P – Exploration and production
EBITDAX – Earnings before interest, tax, depreciation, amortisation and exploration expenses
EBRD – European Bank for Reconstruction and Development
EOR – Enhanced Oil Recovery
EPCIC – Engineering, Procurement, Construction, Installation and Commissioning
F
FAR – Fatal Accident Rate – number of fatalities per 100 million hours worked
FDP – Field Development Plan
FEED – Front-end Engineering and Design
FID – Final Investment Decision
FPSO – Floating Production Storage and Offloading vessel
FRC – Financial Reporting Council
FRS – Financial Reporting Standard
Page 252 of 255
OTHER INFORMATION
G
G&A – General and Administrative
GSPA – Gas Sale and Purchase Agreement
GSP – GSP Offshore S.R.L.
H
H&S – Health and Safety
HMRC – HM Revenue and Customs
HSE – Health, Safety and Environment
I
IAS – International Accounting Standard
IASB – International Accounting Standards Board
IFRS – International Financial Reporting Standard
INGL – Israel Natural Gas Lines Ltd
IPO – Initial Public Offering
IPP – Independent Power Producers
IR – Investor Relations
J
JOA – Joint Operating Agreement
JV – Joint Venture
K
kboepd – Thousands of barrels of oil equivalent per day
KM – Kilometres
KPI – Key Performance Indicator
L
LIBOR – London Interbank Offered Rate
LSE – London Stock Exchange
LTI – Lost Time Injury
LTIF – Lost Time Injury Frequency
M
M3 – Cubic metre
MN – million
MMbbls – million barrels
MMbo – million barrels of oil
MMboe – million barrels of oil equivalents
MMbtu – million British Thermal Units
MMscf – million standard cubic feet
MMscf/day or MMscfd – million standard cubic feet per day
MMtoe – million tonnes of oil equivalent
MoU – Memorandum of Understanding
Page 253 of 255
OTHER INFORMATION
N
NGO – Non-Governmental Organisation
NPV – Net Present Value
NSAI – Netherland, Sewell & Associates, Inc.
O
Opex – Operating expenses
P
PP&E – Property, plant and equipment
R
2P reserves – Proven and probable reserves
RBL – Reserve Based Lending
2C resources – Contingent resources
S
Sq km or km2 – Square kilometres
T
Tcf – Trillion cubic feet
TRIR – Total Recordable Injury Rate
TASE – Tel Aviv Stock Exchange
W
WI – Working interest
Page 254 of 255
OTHER INFORMATION
Company Information
Registered office
Energean plc
Accurist House
44 Baker Street
London
W1U 7AL
United Kingdom
Tel: +44 203 655 7200
Corporate brokers
Morgan Stanley
25 Cabot Square
Canary Wharf
London
E14 4QA
Stifel Nicolaus Europe
150 Cheapside
London
EC2V 6ET
Peel Hunt
7th Floor
100 Liverpool Street
London
EC2M 2AT
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Legal adviser
White & Case LLP
5 Old Broad Street
London
EC2N 1DW
Financial PR adviser
FTI Consulting LLP
200 Aldersgate
Aldersgate
St
London
EC1A 4HD
Registrar
Computershare Investor Services plc
The Pavilions Bridgwater Road
Bristol
BS13 8AE
Financial calendar
May 2023: Annual General Meeting
Page 255 of 255