REG - Energean PLC - Strategic sale of Egypt, Italy & Croatia portfolio

EnergeanAnnouncement

20/06/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240620:nRST1446Ta&default-theme=true

RNS Number : 1446T  Energean PLC  20 June 2024

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN

OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION
OF THE

RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

For immediate release

 

 Energean plc

("Energean" or the "Company")

 

Strategic sale of Egypt, Italy and Croatia portfolio

London, 20 June 2024 - Energean plc (LSE: ENOG, TASE: אנאג) is pleased to
announce that it has entered into a binding agreement for the sale of its
portfolio in Egypt, Italy and Croatia to an entity controlled by Carlyle
International Energy Partners ("Carlyle") for an enterprise value ("EV") of up
to $945 million, of which $820 million is firm (the "Transaction"). Completion
is expected by year-end 2024, subject to customary regulatory and antitrust
approvals.

Compelling transaction metrics:

·      An EV of up to $945 million 1 , representing more than a 3x
return since the portfolio was acquired for $284 million in 2020 2 .

·      A firm EV/2P multiple of $5.4/boe, a >4.5x increase versus c.
$1.2/boe at the time of acquisition 3 .

·      Expected to be immediately accretive to free cash flow.

·      Energean expects sufficient cash proceeds at closing in order to
repay in full the $450 million PLC Corporate Bond and facilitate a special
dividend of up to $200 million.

·    At least $7.5 million per annum G&A savings identified following
the Transaction.

Strategic rationale highlights:

·      This sale enables Energean to rationalise the portfolio and focus
on its gas-weighted, gas-development strategy, underpinned by the Karish Field
in Israel and recent farm-in to the Anchois field in Morocco. This strategy
aims to maximise asset monetisation (through a develop and operate model),
free cash flow generation and returns to shareholders.

·      The Transaction also optimises the portfolio by divesting later
life assets, removing over 60% of the Group's decommissioning liabilities, and
improving free cashflow generation in the short to medium-term.

·      Moving forward, Energean will maintain and seek to grow its
footprint in the Mediterranean and look beyond this to the wider Europe,
Middle East and Africa ("EMEA") region, particularly where there is long-term
policy support for gas and displacement of coal.

·      The Group will also focus on creating a Carbon Storage Hub in
Greece and the wider Mediterranean region via its EnEarth subsidiary.

·      Post-closing, Energean's scope 1 and 2 emissions intensity 4 
will reduce by around 40% to ~5 kgCO2e/boe accelerating its 2035 target by 10
years.

Mathios Rigas, Chief Executive Officer of Energean, commented:

"This deal represents an exciting new chapter for Energean. Today we have
realised a significant return on the investment made when we acquired this
portfolio over four years ago. The transaction delivers on our strategy and
Energean's ability to maximise value for our shareholders. It maintains our
highly disciplined approach to capital allocation, as demonstrated by the
accretive transaction metrics, coupled with an anticipated special dividend.

"Looking ahead, this transaction unlocks management capacity and financial
flexibility to drive future growth. Our focus will now be to create enhanced
value from our Israel assets, and evaluate new opportunities that fit
Energean's key business drivers: paying a reliable dividend, deleveraging,
growth, and our commitment to Net Zero.

"Carlyle is the right custodian of the asset base and will create an excellent
home for our colleagues. We wish them every success and look forward to
watching their progress. I want to thank all of our colleagues based in Egypt,
Italy and Croatia for their hard work and dedication over the years."

Bob Maguire, Co-Head of Carlyle International Energy partners, commented:

"We are delighted to acquire this portfolio of high-quality assets in Italy,
Egypt and Croatia, countries that are actively encouraging new gas
development, which we believe will play a central role in the energy
transition. We look forward to supporting the transformation of these assets
into a scalable E&P platform in the Mediterranean, through the execution
of near-term developments, unlocking organic growth opportunities, M&A,
and accelerating the delivery of existing decarbonisation plans."

Transaction terms and consideration

Carlyle's offer for Energean's Egypt, Italy and Croatian portfolio has a total
enterprise value of up to $945 million plus a $/boe contingent payment linked
to the recent Location B well in Egypt. This is over a 3x increase versus the
original acquisition value of $284 million in 2020 5 , and gives a firm EV/2P
multiple of $5.4/boe (versus c.$1.2/boe) 6 .

The economic effective date of the Transaction is 31 December 2023 ("Effective
Date").

After enterprise value to equity value adjustments as at the Effective Date,
Energean will receive:

·      $504 million upfront cash consideration upon closing of the
Transaction.

·      Working capital/cash adjustments between the Effective Date and
the closing date.

·      $139 million Vendor Loan with a 6-years and 3-months tenor plus
interest at SOFR + 7% in year one, plus 0.5% for each year thereafter.

·      $125 million capped contingent consideration, inflated at the US
CPI index from 1 January 2024 onwards, varying from nil to $125 million (as
inflation adjusted) depending on:

o  Working interest Italian oil and gas production over the period 2025-2028
exceeding annual reference volumes, based off of Proved Developed Reserves and
Proved Reserves respectively as taken from the YE23 Competent Person's Report
("CPR") report 7 ; and

o  Brent and Italian PSV gas prices over the period 2025-2028 exceeding an
annual reference price 8 .

o  The contingent payment due is based on 25% of the incremental commodity
price multiplied by the actual production and payable on an annual basis in
respect of the years 2025-28.

·      An uncapped contingent payment for the recently drilled Location
B well in Egypt.

o  This payment will be calculated based off (i) the 2P reserves (as
determined by an independent auditor at YE24) plus (ii) the actual 2024
production, that are in excess of the below pre-drill estimated volumes:

§ $2.00 per boe for gas in excess of 8,672,924 boe;

§ $5.00 per boe for oil in excess of 0 boe;

§ $4.50 per boe for condensate in excess of 490,055 boe; and

§ $3.75 per boe for LPG in excess of 539,060 boe.

o  The first $15 million of any payable amount shall be payable in cash in Q3
2025 and any balance due shall be payable (at Carlyle's option) either in cash
or as a corresponding increase in the principal amount of the Vendor Loan.

Sale portfolio
 

In 2020, Energean acquired Edison E&P, which included production,
development and exploration assets in Egypt, Italy and Croatia. Energean's
portfolio of assets in these countries has net working interest 2P reserves of
150 mmboe (70% gas) (D&M YE23 CPR) and 2023 net working interest
production of 34 kboe/d (37% gas).

This portfolio generated Adjusted EBITDAX of $264 million in 2023. The gross
assets attributable to the Transaction as at 31 December 2023 were $1.67
billion. Total liabilities attributable to the Transaction as at 31 December
2023 were $1.27 billion, of which $516 million was provision for
decommissioning.

Strategic Rationale

Energean's strategy is to be the leading independent gas-focused E&P in
the Mediterranean and beyond. The Group has taken the decision to sell certain
non-core geographies, where at least $7.5 million per annum of G&A savings
have been identified, in line with its key business drivers to:

·      Be cashflow accretive: the Transaction is expected to be
immediately free cash flow accretive. The Group expects to redefine its
dividend policy post-Transaction close.

·      Focus on gas and gas development: the Transaction enables
management to focus on its core gas-weighted assets, underpinned by Israel and
the recent farm-in to the Anchois field in Morocco, to maximise asset
monetisation, free cash flow generation and returns to shareholders.

·      Achieve our growth objectives: moving forward, Energean will
continue to evaluate existing organic growth opportunities within its
portfolio, as well as inorganic opportunities beyond the Mediterranean in the
wider EMEA region, particularly where there is long-term policy support for
gas and coal phase-out.

·      Deliver upon our Net Zero commitments: the Transaction will
accelerate the Group's decarbonisation efforts whereby post-close the Group's
scope 1 and 2 emissions intensity will reduce by around 40% to ~5 kgCO2e/boe,
accelerating its 2035 target of 4-6 kgCO2e/boe by 10 years. This is in
addition to the Group's focus on creating a Carbon Storage Hub in Greece and
the wider Mediterranean region via its EnEarth subsidiary.

Use of Proceeds and Dividend Policy

Energean expects sufficient cash proceeds at closing to be able to repay in
full the $450 million PLC Corporate Bond and facilitate a special dividend of
up to $200 million.

In light of the Transaction, the Board will undertake a review of the
Company's dividend policy and near-term targets and expects to redefine its
dividend policy upon Transaction closing.

Conditionality and timing to Completion

Completion of the Transaction is conditional upon customary regulatory
approvals in Italy and Egypt together with antitrust approvals in Italy, Egypt
and the Common Market for Eastern and Southern Africa ("COMESA"). The
Transaction also constitutes a Class 1 transaction under the Listing Rules and
is, therefore, as at the date of this announcement, conditional on Energean's
shareholders passing a resolution approving the Transaction. As the Listing
Rules are expected to change in early H2 2024 in a manner that would mean such
shareholder approval would no longer be required, Energean plans to engage
closely with shareholders in relation to the Transaction and will, to the
extent required as per the FCA's listing rules reforms, seek shareholder
approval of the Transaction ahead of completion. The Transaction is subject to
the conditions being satisfied by a longstop date of 20 March 2025 (or such
other date as may be agreed by Energean and Carlyle), with completion
currently expected to occur by year-end 2024.

Staff employed by Energean Italy (which includes Croatia) and Energean Egypt
will continue their employment under Carlyle's ownership, which they have
committed to guarantee for 18-months post-completion, providing continuity for
staff and contributing to ongoing operational reliability and safety.

Advisors

Rothschild & Co is acting as the Company's financial advisor and, to the
extent required, sponsor and White & Case is acting as the Company's legal
counsel.

Conference call

A conference call for analysts and investors will be held today at 10:30 BST /
12:30 Israel Time.

Webcast: https://edge.media-server.com/mmc/p/hjn3mc3v
(https://edge.media-server.com/mmc/p/hjn3mc3v)

 

Conference call registration link:
https://register.vevent.com/register/BI657506a9060d46d68287d141ee2fae7e
(https://register.vevent.com/register/BI657506a9060d46d68287d141ee2fae7e)

 

After completing your conference call registration you will receive dial-in
details on screen and via email. Please note that the dial-in pin number is
unique and cannot be shared.

The presentation slides will be made available on the website shortly at
www.energean.com

Enquiries

 

 For capital markets: ir@energean.com (mailto:ir@energean.com)
 Kyrah McKenzie, Investor Relations Manager                         Tel: +44 (0) 7921 210 862

 For media: pblewer@energean.com (mailto:pblewer@energean.com)
 Paddy Blewer, Corporate Communications Director & Head of CSR      Tel: +44 (0) 7765 250 857

 

 

Inside Information

This announcement contains inside information as stipulated under the Market
Abuse Regulation no 596/2014 (incorporated into UK law by virtue of the
European Union (Withdrawal) Act 2018 as amended by virtue of the Market Abuse
(Amendment) (EU Exit) Regulations 2019). Upon the publication of this
announcement via a regulatory information service, this inside information is
now considered to be in the public domain.

Forward looking statements

This announcement contains statements that are, or are deemed to be,
forward-looking statements. In some instances, forward-looking statements can
be identified by the use of terms such as "projects", "forecasts", "on track",
"anticipates", "expects", "believes", "intends", "may", "will", or "should"
or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are subject to a number of known and
unknown risks and uncertainties that may cause actual results and events to
differ materially from those expressed in or implied by such forward-looking
statements, including, but not limited to: general economic and business
conditions; demand for the Company's products and services; competitive
factors in the industries in which the Company operates; exchange rate
fluctuations; legislative, fiscal and regulatory developments; political
risks; terrorism, acts of war and pandemics; changes in law and legal
interpretations; and the impact of technological change. Forward-looking
statements speak only as of the date of such statements and, except as
required by applicable law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. The information contained in this
announcement is subject to change without notice.

 1  Of which $820 million is firm. In addition to the $945 million, there is a
$/boe contingent payment linked to the recent Location B well in Egypt.

 2  The Edison E&P acquisition also included the UK portfolio, which was
ascribed minimal value.

 3  $5.4/boe multiple is based upon the firm EV of $820 million and 150 mmboe
of YE23 2P reserves (differences due to rounding). Using the EV of $945
million, the EV/2P multiple is $6.3/boe. $1.2/boe multiple is on the EV of
$284 million and 239 mmboe (excludes 4 mmboe of UK volumes) of YE18 2P
reserves.

 4  On an equity share basis.

 5  The Edison E&P acquisition also included the UK portfolio, which was
ascribed minimal value.

 6   $5.4/boe multiple is based upon the firm EV of $820 million and 150
mmboe of YE23 2P reserves (differences due to rounding. Using the EV of $945
million, the EV/2P multiple is $6.3/boe. $1.2/boe multiple is on the EV of
$284 million and 239 mmboe (excludes 4 mmboe of UK volumes) of YE18 2P
reserves.

 7  Gas production (mmscf): 26,918 (2025), 24,551 (2026), 21,574 (2027),
19,063 (2028). Oil production (mmbbl): 1.794 (2025), 1.666 (2026), 1.55
(2027), 1.444 (2028).

 8  Reference price as follows - Brent ($/bbl): 77.33 (2025), 73.56 (2026),
70.00 (2027), 70.00 (2028). PSV gas price (€/MWh): 29.87 (2025), 29.16
(2026), 25.00 (2027), 25.00 (2028).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  DISQKCBKNBKBBAD