STRATEGIC REPORT
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2023
Annual Report
Energean plc
www.energean.com
STRATEGIC REPORT
Page 1 of 273
Key Metrics and Report Highlights
2023
2022
% change
Average working interest 2P reserves
and 2C resources (MMboe)
1,337
1,378
(3%)
Average working interest production (Kboe/d)
123
41
200%
Sales revenues ($ million)
1,420
737
93%
Cost of production ($/boe)
11
19
(44%)
Adjusted EBITDAX ($ million)
1
931
422
121%
Operating profit ($ million)
598
232
158%
Profit/(Loss) after tax ($ million)
185
17
988%
Cash flow from operating activities ($ million)
656
272
141%
Net debt/(cash) ($ million)
2,849
2,518
13%
Leverage (Net debt/Adjusted EBITDAX)
1
3x
6x
(50%)
Operational highlights
First major step-up in production achieved
Production for 2023 was up by 200% versus 2022, aided by a full-year of contribution from Karish (Israel)
and the start-up of NEA/NI (Egypt). Day-to-day production at Karish remains unimpacted despite the
ongoing geopolitical situation in Israel. FPSO uptime (excluding planned shutdowns) was 99% in
Q4 2023
2
.
(See pages 40–43 for further details).
Focused on backfilling the Energean power FPSO and meeting growing gas demand the region
Karish North and the second gas export riser were completed in February 2024, which enables the
utilisation of the FPSO’s maximum gas capacity. The field development plan for Phase 1
3
of the Katlan
development (Israel) was approved by the Israeli government in December 2023. The start of the Katlan
(Israel) development will extend the gas production plateau and has potential for exports.
(See pages 40–
43 for further details).
New areas of development underway to grow the current business base
Energean has multiple new avenues of growth on the horizon, which includes amongst others: the
Anchois appraisal drilling in Morocco (where farm-in completion, at the time of writing, is expected
imminently), the unlocking of previously restricted acreage in Italy and the Prinos Carbon Storage (“
CS
”)
project in Greece.
(See pages 40–43 for further details).
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”.
2
Uptime is defined as the number of hours that the Energean Power FPSO was operating; the Q4 2023 figure excludes the
scheduled 6-day shutdown that occurred in December.
3
Phase 1 includes the Athena, Zeus, Hera and Apollo accumulations.
STRATEGIC REPORT
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Corporate and financial highlights
Strong financial performance
The Group saw record revenues ($1,420 million) and adjusted EBITDAX
1
results ($931 million) following
the first full year of production contribution from Karish (Israel) (see page 73 for further details). Energean
paid a total of $94.7 million (€87.0 million) of one-off windfall taxes in Italy in 2023.
Strong balance sheet maintained; ongoing deleveraging
Energean achieved a 50% reduction in its Group leverage (net debt/adjusted EBITDAX) to 3x. Following
Energean Israel’s bond refinancing in July 2023, Energean has no immediate debt maturities.
Delivery of dividend in line with policy
In total, Energean returned $1.20/share to shareholders ($214 million) in 2023, in line with Energean’s
dividend policy (see page 39 for further details).
Emissions intensity reduced
42% year-on-year reduction in emissions intensity to 9.3 kgCO2e/boe and a 86% reduction since our
original baseline year
4
, in line with our stated target (see pages 32 and 38 for further details). FY 2024
emissions intensity are expected between 8.5–9.0 kgCO2e/boe.
4
Original baseline year was 2019. In 2023, this was changed to 2022.
STRATEGIC REPORT
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Non-financial and Sustainability Information Statement
The following table constitutes our Group Non-Financial and Sustainability Information Statement in
compliance with the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations
2022 amendment of and Sections 414C, 414CA and 414CB of the Companies Act 2006.
We consider the information in our Climate-related Financial Disclosures (“
TCFD
”) disclosures on pages
18–33, taken together with our climate-related non-financial disclosures on pages 64–72 of this report
to be compliant with the disclosure requirements of Section 414CB of the Companies Act, as amended
by the UK CFD Regulations.
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
(including climate-
related disclosures)
Environmental Policy
Climate Change Policy
Zero-Routine-Flaring Policy
Task Force on Climate
Related Disclosure
Environmental policies
61–62
Environmental targets
32–33
Environmental data
64–72
Environmental KPIs
38
TCFD disclosure
18–33
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
61–63
HSE KPIs
39
HSE data
60–64
Excellence through
our people
57–60
Human rights
Code of Ethics
CSR approach
46–48
Excellence through our
people
57–60
Social matters
CSR Policy
Code of Ethics
UN’s 17 Sustainable
Development Goals
CSR approach
46–57
Anti-corruption &
anti-bribery
Code of Ethics
UK Bribery Act
Applicable Local Anti-Bribery Laws
Anti-Corruption and Bribery Policy
Whistleblowing Policy
CSR approach
46–48
Corporate governance
105–112
117–124
Governance and
Risk Management
Corporate Governance Code
Principal Risks and Uncertainties
Governance & Risk Management
Risk management
81–96
Corporate governance
105–112
Audit &
Risk Committee
117–124
Business model
Our Business Model
N/A
13–14
Strategy
Our Strategy
N/A
15–16
Non-financial key
performance
indicators
Key Performance Indicators
N/A
38–39
STRATEGIC REPORT
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Contents
Key Metrics and Report Highlights
...........................................................................................................................
1
Non-financial and Sustainability Information Statement
.....................................................................................
3
Contents
........................................................................................................................................................................
4
Strategic Review
About Us
........................................................................................................................................................................
5
Performance in 2023
..................................................................................................................................................
7
Chair’s Statement
........................................................................................................................................................
9
Chief Executive Officer’s Review
.............................................................................................................................
11
Our Business Model
..................................................................................................................................................
13
Our Strategy
................................................................................................................................................................
15
Task Force on Climate-Related Disclosures
........................................................................................................
18
Market Overview
........................................................................................................................................................
34
Our Key Performance Indicators
............................................................................................................................
36
Review of Operations
................................................................................................................................................
40
Corporate Social Responsibility
..............................................................................................................................
46
Financial Review
........................................................................................................................................................
73
Risk Management
.....................................................................................................................................................
81
Viability Statement
....................................................................................................................................................
97
Corporate Governance
Board of Directors
..................................................................................................................................................
100
Corporate Governance Statement
......................................................................................................................
105
Section 172 (1) Companies Act 2006 Statement
.............................................................................................
113
Audit & Risk Committee Report
...........................................................................................................................
117
Environment, Safety & Social Responsibility Committee
................................................................................
125
Nomination & Governance Committee
..............................................................................................................
128
Remuneration Report
.............................................................................................................................................
136
Remuneration Policy
..............................................................................................................................................
140
Annual Report on Remuneration
.........................................................................................................................
151
Group Directors’ Report
.........................................................................................................................................
166
Statement of Directors’ Responsibilities
............................................................................................................
171
Financial Statements
Independent Auditor’s Report to the Members of Energean plc
...................................................................
173
Group Income Statement
......................................................................................................................................
186
Group Statement of Comprehensive Income
...................................................................................................
187
Group Statement of Financial Position
..............................................................................................................
188
Group Statement of Changes in Equity
..............................................................................................................
190
Group Statement of Cash Flows
.........................................................................................................................
192
Notes to
the
Consolidated Financial Statements
............................................................................................
194
Company Statement of Financial Position
........................................................................................................
255
Company Statement of Changes in Equity
........................................................................................................
256
Notes to the Company Financial Statements
...................................................................................................
257
Other Information
2023 Report on Payments to Governments
......................................................................................................
266
Glossary
....................................................................................................................................................................
270
Company Information
............................................................................................................................................
273
STRATEGIC REPORT
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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 eight countries
5
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 1,115 boe of 2P reserves (83% gas).
Energean’s flagship Karish and Karish North projects were brought safely onstream in October 2022 and
February 2024 respectively. Gas from these fields 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.
Energean’s near-term targets are to grow production to over 200 Kboe/d 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 poised for further value-creation via the Katlan (Israel) development, Anchois
appraisal drilling, where farm-in completion, at the time of writing, is expected imminently, (Morocco),
and the Prinos Carbon Storage project (Greece), amongst others. We also remain alert to opportunities
that fit our key business drivers (paying a reliable dividend, deleveraging, growth, and our commitment to
Net Zero) and can move quickly to take advantage when they arise.
The Company has a disciplined capital allocation policy and is focused on shareholder returns. Since its
maiden dividend in Q3 2022, Energean has returned $2.1/share to shareholders (approximately $370
million)
6
, representing seven-quarters of continuous 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.
Energean’s dividend policy has no impact on its targeted deleveraging after first gas to around 1.5x net
debt/EBITDAX or on operational re-investment to continue its organic growth and opportunistic M&A
strategy. Energean is well funded for all of its sanctioned projects, holding $607 million of liquidity as at
31 December 2023, and has minimal exposure to interest rate rises following its 2021 and 2023
refinancings.
ESG, health and safety is of central importance to Energean. It aims to run safe and reliable operations
and is committed to achieving net-zero carbon emissions by 2050 and to reducing its methane
emissions.
Where we operate
Energean holds a balanced portfolio of production, development and exploration assets, with operations
in eight
5
countries across the Mediterranean and UK North Sea. The Group has interests in over 65 leases
and licences, six of which are located offshore Israel.
Please see Note 31 in the Financial Statements for a full breakdown of all Energean licences.
5
Including Morocco, subject to, at the time of writing, farm-in completion occurring.
6
Amount includes the Q4 2023 dividend declared on 22 February and paid on 29 March 2024.
STRATEGIC REPORT
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Figure 1. Map of Energean’s operations
Figure 2. Energean Israel Ltd. (“
EISL
”) leases and licenses
Production
Production, Development & Exploration
Exploration & Appraisal
UK
ITALY
CROATIA
GREECE
ISRAEL
EGYPT
MOROCCO
STRATEGIC REPORT
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Performance in 2023
Energean continued to deliver strong performance against its strategic goals in 2023, producing record
financial results and delivering shareholder returns in line with its policy.
Please see the Key Performance Indicators section on pages 36–39 for more detail.
Operational highlights
Production
123 (83% gas)
Kboe/d
2P Reserves
1,115 (83% gas)
MMboe
2C Resources
222 (49% gas)
MMboe
•
Working interest production of 123 Kboe/d (83% gas), (2022: 41 Kboe/d (75% gas)).
•
Production increased by 200% year-on-year, primarily as a result of the ramp-up of
production from Karish (Israel). Day-to-day production in Israel continues to be unimpacted
by the ongoing geopolitical developments.
•
2P + 2C reserves and resources of 1,337 MMboe (2022: 1,378 MMboe).
•
2P+2C volumes increased year-on-year before produced 2023 volumes (47 mmboe).
•
Material reserves life of around 19 years
7
.
Financial and corporate highlights
Revenues
1,420
$ million
Adjusted EBITDAX
931
$ million
Dividend
$214 million
Distributed in 2023
•
2023 sales revenues of $1,420 million (2022: $737 million).
•
Adjusted EBITDAX of $931 million (2022: $421.6 million).
•
Profit/loss after tax of $185 million (2022: $17 million).
•
Cash flow from operating activities of $656 million (2022: $272 million).
•
$607 million liquidity at 31 December 2023.
•
Returned a total of $1.20/share to shareholders ($214 million) in 2023, representing four quarters
of dividend payments.
•
Issued a $750 million bond that matures in 2033, the primary purpose of which was to repay
Energean Israel's $625 million 2024 bond.
Health, safety and environmental highlights
Serious injuries
Zero
in 2023
Oil spills and environmental damage
Zero
in 2023
Emissions intensity
9.3
kgCO2e/boe
•
Safe and reliable operations, zero serious personnel injuries.
•
Zero oil spills and zero environmental damage.
•
42% year-on-year reduction in emissions intensity to 9.3 kgCO2e/boe on an equity share basis.
•
86% reduction in emissions intensity since our original baseline year
8
.
•
Verified all scope 1, 2 and 3 emissions to ISO 14064-1 based on the operational accounting
approach.
•
Zero-routine flaring policy fully implemented across all operated and JV’s sites.
7
Based upon mid-point of 2024 production guidance of 155–175 kboed.
8
Original baseline year was 2019. In 2023, this was changed to 2022.
STRATEGIC REPORT
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•
Successful purchase of renewable-sourced electricity (“
green electricity
”) across all our operated
sites.
•
Performed three methane emissions detection campaigns at major process installations in Italy,
four in Israel and one in Greece.
•
Continued to implement climate-based scenario analysis and used internal carbon pricing to
assist with investment-decision making.
•
Maintained our score of A- in the Carbon Disclosure Project’s (“
CDP
”’s) Climate Change
disclosure and aligned with all recommended pillars of TCFD disclosure.
•
ESG ratings in top quartile, awarded the “Platinum” index by MAALA for the second consecutive
year, rated at “AAA” and positioned at the top 17% of our sector by MSCI and ranked at the top
18% of our sector by Sustainalytics.
•
Selected as a “Proud Member of the Most Sustainable Companies in Greece” by the QualityNet
Foundation.
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Chair’s Statement
Karen Simon, Independent Chair
Dear Shareholders,
As we will all remember, the international gas market in 2022 was dominated by the effects of the Russia
– Ukraine war. Whilst the removal of 150 bcm+ of export capacity continues to influence market
dynamics, 2023 showed both the ability of the global market to recover from major shocks, primarily
through enhanced global LNG volumes, and more positively, in a post COP 28 environment, to understand
the long-term value of natural gas.
COP 28 in Dubai demonstrated that gas is not only a transition fuel, but will be a major part of the global
energy supply mix up to and post 2050. Gas replaces more pollutive fuels, works flexibly with inherently
intermittent renewable capacity and provides vital energy security.
This can be seen in practice in the Mediterranean, where Energean is now established as the leading gas
and ESG-focused independent exploration and production company. In Israel, Egypt and now Morocco
(where farm-in completion at the time of writing is expected imminently), our projects bring secure and
affordable supply, which displaces coal and fuel oil.
I am very proud of and congratulate the entire team on Energean’s successful operational development
of growing production to over 150 Kboe/d from a multi-asset portfolio.
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, not only because it is 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 to make a Net Zero pledge.
I and the Board are very proud that we have significantly outperformed our peer group across all the
major ESG ratings agencies. Sustainalytics ESG, Bloomberg and MSCI, & CDP have all maintained their
highly positive assessment of our ESG impact. CDP has maintained Energean as at A-, keeping us in the
highest “Leadership” band of our peer group – no other E&P rates above us. The same can be said for
MSCI, who have rated Energean as AAA for the first time – one cannot be rated higher.
I am particularly proud of the efforts of the entire team to create a “no silos” company. Energean is
committed to being a positive diversity, equity and inclusion employer and the entire Group works on a
“one team” policy.
HSE
Over the past year, our unwavering dedication to Health, Safety, and Environment (“
HSE
”) has produced
excellent outcomes. We again attained zero serious injuries, showcasing the effectiveness of our robust
safety management system, work protocols, and committed workforce. Additionally, our environmental
efforts have diminished our ecological impact, reaffirming our commitment to sustainability and
responsible practices. In 2024, we will prioritise enhancing process safety awareness and advancing our
journey towards achieving Net Zero emissions.
Board composition
During 2023, the Board was significantly enhanced by Martin Houston’s appointment. Martin needs no
introduction to anyone involved in the global oil and gas industry; he has 44 years of experience across
the entire oil and gas value chain. Martin was COO and Director of BG Group plc, where he was
instrumental in the creation and development of a globally integrated natural gas, LNG and trading group.
He has since co-founded Tellurian Inc. and is now the Chairman.
STRATEGIC REPORT
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I would like to thank Andrew Bartlett for agreeing to become Energean’s Senior Independent Non-
Executive Director. Andrew has been with Energean since before the IPO, and his long experience in both
energy and capital markets have been invaluable to Energean as we have developed from a small Greek
oil company into the leading independent gas E&P in the Mediterranean.
Operational delivery
2023 was the year Energean truly became the leading gas and ESG focused E&P company in the
Mediterranean. At maximum production, our multi-asset international portfolio produced over
150 Kboe/d.
This increase in production was of course primarily derived from the ramp up from Karish, offshore Israel,
and our regionally unique FPSO, the Energean Power. Energean however is not a single asset company.
2023 was a positive year in Egypt, as we brought the twin licences of NEA/NI online by the end of 2023,
significantly enhancing production into 2024.
We also diversified our geographical footprint, by farming into the Rissana & Lixus licences, offshore
Morocco. The “Anchois” gas discovery has the potential to make a material impact on Moroccan energy
production, displacing coal and rebalancing gas that is currently imported, and is located near to
infrastructure for supply of gas to domestic and international markets.
Our strategic direction and 2024 outlook
Energean’s purpose is to maintain its status as 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 Kboe/d producer and a $1.75 billion per year adjusted EBITDAX
generator. 2023 took us a long way on this journey and 2024 will continue it, with 2024 production
guidance at 155–175 Kboe/d.
Energean’s production, which is approximately 80% gas, drives socioeconomic, industrial and sustainable
development growth in the region through providing secure, reliable and affordable energy. As was
agreed at COP, natural gas is not just a “transition fuel” but will be used beyond 2050 due to its unique
combination that supports a broader just-transition across the globe.
In 2024, we will continue to develop our portfolio, increasing production and reserves. We have already
brought Karish North online, we expect to bring Cassiopea onstream in the summer and we intend to
install the second oil train on the Energean Power FPSO, which enables an increase in the liquids
processing capacity, as soon as feasible. I am particularly excited about the diversification west into
Morocco, where we will drill an appraisal well later this year. Whilst we remain committed to growth and
diversification, we will also be a significant producer with which we will continue to share our success to
our shareholders through our committed dividend policy.
Energean is not just about numbers and operations, it is about people. We will continue to invest in our
people and the communities that host our operations.
I thank you, our shareholders, new and existing, for your continued support.
Karen Simon
Independent Chair
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Chief Executive Officer’s Review
Mathios Rigas, Chief Executive Officer
2023 – a year of growth for Energean, promise for global gas and tragic conflict in the
East Mediterranean
The leading independent gas and ESG-focused E&P in the Mediterranean
2023 was another transformational year for Energean and the year we became the leading independent
gas and ESG-focused E&P in the Mediterranean. We increased production at levels exceeding 150 Kboe/d
from our >1 billion boe Mediterranean-focused asset base and, in line with our strategic commitment to
transition into a natural gas producer, we increased our production to over 80% gas. Whilst we are and
will remain gas focused, we should not ignore the value of hydrocarbon liquids, both to the global
industrial economy, and as a driver of positive Group cashflow. Our next step in the transition strategy is
to continue the focus on growth of our E&P portfolio in parallel with the development of carbon storage
opportunities that will be the catalyst for decarbonisation of heavy industries in our countries of
operation.
Although Karish of course was the major driver of production growth, we are proud of our successes
across the portfolio. We have brought the twin licences of NEA/NI onstream in Egypt, which has already
enhanced production and replaced reserves produced at Abu Qir. We have also had significant progress
on our Prinos carbon storage project, the only project of its type in south-east Europe and the East
Mediterranean. The project was awarded Project of Common Interest status by the European
Commission, and has been allocated €150 million in funding by the EU and Greek Government.
Globally, we see a truly positive environment for natural gas, possibly the best since the IEA’s “golden
age” in 2011. COP 28 in the UAE brought the global energy community together for the first time. It was
clear that gas is not only a “transition fuel” but, short of an unforeseen technological leap, will continue to
play a critical role in providing the energy needs of the world for many decades. Natural gas provides
energy security, reliable supply and is far more sustainable than coal or oil. It is also flexible enough to
work with growing ratios of inherently intermittent and volatile renewable power generation sources. If it
is produced locally or regionally, it is also cost effective and can drive sustainable development. The
medium to long-term future for a regionally focused gas producer is therefore highly positive.
We cannot ignore the conflict in our region. As our operations are 90 kilometres offshore, our day-to-day
production has been unimpacted, and industrially and corporately we are broadly unaffected by the
conflict. At the same time, we are human beings; we all pray for a long-term and lasting peace.
Continued development in 2024 – focusing on longevity
2024 shows significant potential; we are well advanced with our core strategic projects across the
portfolio. In Israel, we brought Karish North online in February 2024 and it is currently using the second
gas export riser, which was installed in 2023. The second oil train will be installed as soon as feasible.
Energean also intends to develop the Katlan/Tanin area in a phased development. Phase 1 includes the
Athena, Zeus, Hera and Apollo accumulations, for which the field development plan was approved by the
Israeli Government in December 2023. Energean expects to take FID upon finalisation of the EPC terms,
which at the time of writing are currently under negotiation.
2024 is a major year for Energean in Italy. The Cassiopea project is expected to come onstream, providing
reliable and secure domestic gas supply for Italian offtakers. We will also continue to investigate new
opportunities, following the unlocking of previously restricted acreage.
Egypt will also see the full benefit of the NEA/NI project onstream as well as a number of infill drilling
opportunities. We recognise the challenges of the socioeconomic situation in Egypt, which has been
materially affected by the reduced traffic volumes through the Suez Canal, however, we remain fully
committed to the country and its potential.
As we have diversified our portfolio in CCS in Greece, we have also extended our footprint across the
Mediterranean, with a potential new gas development in Morocco. Energean was previously East
Mediterranean focused. We believe a broader geographical scope creates enhanced longevity and
returns to our shareholders.
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ESG & CSR at the heart of Energean’s operations
At the core of Energean’s ESG strategy is an idea that was made very clear during COP 28 in the UAE.
Natural gas is the foundation of and catalyst for a more sustainable energy dynamic and will be with us
for many years to come – because domestically produced gas supports all of the pillars of the “energy
trilemma”. Energean seeks to produce affordable and reliable energy, as sustainably as possible, for our
shareholders and societies in which we operate.
Gas is and will continue to be a driver for enhanced sustainable development in the Mediterranean,
displacing more polluting fuels and underwriting energy and economic security. Morocco is an obvious
example of this trend. If our appraisal well is successful, we will be a step closer to significantly reducing
Morocco’s coal usage, which will save on both carbon and air pollution.
We remain committed to reducing emissions from our operations. We were the first E&P 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. Our
Sustainalytics, MSCI, FTSE4Good, CDP and Bloomberg ratings all independently verify not only our
ambition, but our ongoing commitment.
Health and safety remains a top priority
During 2023 we continued our excellent safety record – at a group level, and alongside our contractors,
we achieved an LTIF
9
of 0.47 per million hours. In addition, we continued to support the local communities
in which we operate through donations, internship, sponsorship and funding opportunities.
For gas and CCS to play their post COP28 role, there must be policy support
The simple fact is that gas demand in the greater Mediterranean region outstrips supply. Without an
unforeseen technological leap, natural gas is and will remain a major component of the regional energy
dynamic – even with the growth of renewable energy.
There is however a major risk. The price hikes faced by European gas buyers following the cessation of
Russian supply, or even worse those in southern Asia where deliveries were cancelled, shows what
happens if there is not enough domestic supply.
We argue that for gas to play its vital stability creation and sustainability enabling role envisaged at COP,
there has to be policy incentivisation to encourage enhanced exploration and production.
It goes without saying that the same argument can be made for CCS – at an even earlier stage than gas.
We argue that sovereign states across the length of the Mediterranean should look to Greece for how to
swiftly deign a policy system than encourages the development of carbon storage projects.
Outlook for 2024
2024 will reinforce our position as a regional gas and ESG leader, with major new projects coming
onstream and further development and diversification of our portfolio. Our production will increase, but
our emissions intensity per barrel will continue to decrease as we produce secure, sustainable, affordable
energy.
Our regional leadership and reputation for swift and effective project management – or “getting things
done” means that we are an attractive partner for governments and corporate partners that want to
expedite development through to production.
Energean has always focused on stable, long-term value creation and delivery for all our stakeholders.
With that in mind, we remain alert to opportunities that fit our key business drivers (paying a reliable
dividend, deleveraging, growth, and our commitment to Net Zero) and can move quickly to take
advantage when they arise. Our strong operational and financial performance underpins our stated
dividend policy.
Finally, I wish to end with a “thank you”. I want to thank each and every member of our staff and our
contract partners, all of whom have worked exceptionally hard this year, many of whom have had to
manage challenging situations. Your dedication and drive inspire me every day. Thank you to you all.
Mathios Rigas
Chief Executive Officer
9
Lost Time Injuries Frequency: The number of Lost Time Injuries per million hours worked.
STRATEGIC REPORT
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Our Business Model
Our purpose
Energean’s aim is to lead the energy transition in the Mediterranean through a strategic focus on gas and
achieve its net-zero
10
ambition by 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 emitter
10
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 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
emissions 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, and via asset optimisation activities.
10
Scope 1 and 2 emissions
STRATEGIC REPORT
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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, the consolidation of our Israel position
through the Kerogen acquisition
11
in 2021 and the farm-in into Chariot Ltd.’s offshore Morocco acreage
(which includes the Anchois development) in 2023.
Our strategic pillars
11
Energean’s acquisition of Kerogen’s 30% stake in Energean Israel closed on 25 February 2021.
STRATEGIC REPORT
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Our Strategy
1
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. Energean’s base line year for its targets was previously
2019. However, in light of Energean’s rapid growth through the start-up of Karish and the acquisition of
Edison, Energean has reset its base line year for its targets to 2022. 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 30–33.
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 2023, Energean has continued to publish its scope 3 emissions. This
data can be found on page 70 in the CSR section.
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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 and in 2022 with
the Katlan Area discoveries. By actively pursuing new exploration and appraisal 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 and appraisal portfolio is spread across the Mediterranean and represents a balanced
mix of new frontier areas and lower risk mature basins.
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 dividend policy has no impact on its targeted deleveraging to
around 1.5x net debt/EBITDAX nor on operational re-investment to continue our organic growth and
opportunistic M&A strategy.
In 2023, Energean returned a total of $1.20/share to shareholders (approximately $214 million),
representing four quarters of dividend payments.
2023 dividend payments
Quarter
Cash dividend
Declaration
date
Ex-dividend date
Record date
Payment date
Q4
2022
30 $ cents per
share
9 February
2023
LSE – 9 Mar 23
TASE – 12 Mar 23
LSE – 10 Mar 23
TASE – 10 Mar 23
30 March
2023
Q1
2023
30 $ cents per
share
18 May
2023
LSE – 8 Jun 23
TASE – 11 Jun 23
LSE – 9 Jun 23
TASE – 9 Jun 23
30 June
2023
Q2
2023
30 $ cents per
share
7 September
2023
LSE – 14 Sep 23
TASE – 18 Sep 23
LSE – 15 Sep 23
TASE – 15 Sep 23
29 September
2023
Q3
2023
30 $ cents per
share
16 November
2023
LSE – 7 Dec 23
TASE – 10 Dec 23
LSE – 8 Dec 23
TASE – 8 Dec 23
29 December
2023
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 around 1.5x, and to pay down debt according to a fixed
repayment schedule with refinance options available, as demonstrated through the successful
refinancing of the 2024 Energean Israel bond in July 2023 with a $750 million 10-year bond.
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. 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.
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Business model foundations
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.
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Task Force on Climate-Related Disclosures
Energean is committed to tackling the environmental impacts 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.
The Board’s oversight of climate-related risks and opportunities
Energean recognises climate change as a significant global issue and a top priority for its business. This
commitment is evident in our strategic approach, where we integrate climate change considerations into
all governance processes. Oversight of climate change matters at Energean lies with the Board. To
further emphasise the growing significance of climate-related risks and opportunities, the ESSR
Committee has assumed responsibility for climate change issues on behalf of the Board. Additionally,
the Board is tasked with assessing investments for climate-related risks, among other risks.
The ESSR Committee assesses Energean’s policies and frameworks for recognising and addressing ESG
(Environmental, Social, and Governance) risks. This involves identifying emerging risks, such as those
related to climate change, and recommending mitigation strategies. Additionally, the Committee ensures
Energean’s adherence to pertinent regulatory mandates and/or internationally recognised standards and
guidelines. It closely monitors political and regulatory dialogues and advancements at international, EU-
wide, and national levels concerning various ESG matters, encompassing energy, climate, environment,
industrial trends, and more.
The ESSR Committee met three times in 2023 and reviewed the Board papers on Energean’s carbon
emissions performance and KPIs.
In addition, the Audit & Risk Committee met five times in 2023 and looked 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 tasked with ensuring the
effectiveness and implementation of measures aimed at mitigating and adapting to identified risks.
The Remuneration & Talent Committee met seven times in 2023 and 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 139 and
151–159 in the Corporate Governance section of this Annual Report.
b.
Management’s role in assessing and managing climate-related risks and opportunities
The Board establishes the values and standards of the Company, which encompass the long-term goals
and commercial strategy of the Group. It also ensures that the Company fulfils its obligations to
shareholders and other stakeholders. However, the CEO is primarily responsible for the day-to-day
management and accountability regarding the Company's environmental and climate change policies,
strategies, and targets across short, medium, and long-term plans following consultation with the COO.
The COO holds the responsibility of identifying and evaluating both business and climate-related risks,
and in coordination with the CEO formulating strategies, and endorsing action plans aimed at managing
and mitigating these risks effectively. Additionally, the CEO supervises the Company's overall
environmental performance and establishes expectations and targets for climate performance.
Discussions pertaining to climate change and the transition to sustainable energy with the Board are also
conducted by the CEO. Regular dialogues between the COO, the CEO and the Board cover various climate
change-related matters, including policies and investment decisions influenced significantly by climate
change factors, and the potential impact of carbon credit prices on Energean's forthcoming financial
performance.
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The COO is responsible for managing operational aspects related to climate change, reporting directly to
the CEO and providing regular updates to the Board. Development and implementation of Energean’s
Corporate HSE and Climate Change Policy, as well as designing training programs and drills across the
organisation to enhance safety, environmental, and climate change awareness rests with the HSE
Director. The HSE Director also keeps abreast of technological advancements and opportunities to
support the achievement of defined climate change targets. Ensuring alignment with the Company's net-
zero 2050 objective falls under the purview of the HSE Director. Monitoring Energean's carbon emissions
across all assets and defining emission factors used by the financial team to gauge the financial
implications of climate change on the Company's portfolio are additional responsibilities. Moreover, the
HSE Director collaborates with Energean's financial, economic, and technical departments to assess
climate-related risks and opportunities comprehensively.
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.
The climate-related risks and opportunities for the Group over the short, medium and long-term
Energean has identified climate-related risks and opportunities across short, medium, and long-term
horizons. In the short term, up to 2025, regulatory changes, extreme weather events, and market volatility
pose immediate risks. Medium-term risks, up to 2035, include transition risks associated with moving to
a low-carbon economy, physical risks from climate-related events, and reputation and brand risks. Long-
term risks, up to 2050, encompass stranded assets and supply chain disruptions. However, there are also
opportunities, such as innovation in renewable energy technologies and alternative fuels, sustainable
business practices, and addressing supply chain vulnerabilities. Embracing these opportunities could
enhance resilience, reduce costs, and position the organisation favourably in a changing climate
landscape. Effectively managing these risks and seizing opportunities is crucial for long-term
sustainability and competitiveness while ensuring alignment with stakeholder expectations and
regulatory requirements. Energean engages in comprehensive financial forecasting spanning a five-year
timeframe,
addressing
short-term
concerns
entirely
and
partially
addressing
medium-term
considerations outlined above.
b.
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 plays a crucial role in reviewing investments for climate-related risks, ensuring that these risks
are effectively considered in decision-making processes. Regular discussions between the CEO and the
Board encompass climate change-related issues, particularly investment decisions where climate
considerations are significant drivers and the potential impacts of carbon credit prices on Energean's
financial future.
Energean's business plan incorporates various assumptions, including but not limited to commodity
prices, exchange rates, carbon prices, capital investment schedules, and associated risks and
opportunities affecting revenue and free cash flow. As time horizons lengthen, the level of uncertainty
surrounding these assumptions increases.
The outcomes of our scenario analysis exercise, detailed on pages 27–30, along with rigorous stress-
tests for new investments, guide our corporate strategy and investment decision-making process. This
ensures that climate change-related risks are adequately factored into managing our portfolio. We base
capital allocations and business decisions on criteria as stringent as those posed by the carbon-
constrained scenarios explored.
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.
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Risks and opportunities
Climate change-related risks and opportunities have been meticulously identified, with comprehensive
analysis of future scenarios guiding our integrated strategy approach. Our strategy aligns with efforts to
mitigate global warming and is structured across short, medium, and long-term phases, as outlined in
our Climate Change Policy. The table below provides detailed insights into the risks associated with
climate change, building upon the Principal Risks outlined in the Risk Management section of the report
(pages 81–96). This expanded overview aims to enhance understanding and proactive management of
climate-related challenges and opportunities.
All risks and opportunities have been evaluated and scored based on the corporate risk matrix. For more
information on this, please refer to the Group Risk Management Framework and the Country Risk
Reviews section between pages 81–96 in the Risk Management section.
The process for identifying and assessing climate-related risks is set out under the climate-related Risk
Management section below, on pages 81–96.
Physical risks
Risk
Acute
Chronic
Description
Immediate and severe threats posed by
climate-related events create risk to
Energean’s operations, assets, and
infrastructure. These risks include
extreme weather events such as
storms, floods, and wildfires, which can
result in disruptions to production,
damage to facilities, and potential
safety hazards for personnel.
Additionally, acute physical risks may
arise from sudden geological events like
earthquakes or tsunamis, particularly in
regions prone to such occurrences.
Chronic physical risks for Energean
stem from long-term changes
associated with climate change and
environmental degradation. These risks
include sea level rise, land subsidence,
shoreline erosion, extreme
temperatures, changes in precipitation
patterns, and increased frequency and
severity of storms. These gradual
changes pose threats to Energean's
coastal infrastructure, operations, and
personnel safety.
Financial
impact
Disruptions to production and supply
chains caused by acute physical risks
could result in revenue losses due to
downtime and decreased output. It also
could trigger secondary financial
impacts, such as increased insurance
premiums for property and business
interruption coverage.
Chronic physical risks carry similar
financial risks to acute physical risks,
including:
•
Increased downtime and revenue
loss
•
Higher insurance premiums
Infrastructure located in areas
vulnerable to chronic physical risks may
also face diminished value or greater
impairments over time.
Risk rating
Medium
Medium
Time-horizon
Short, medium and long-term
Long-term
Energean’s
response
(mitigation)
Energean implements a comprehensive
risk management strategy aimed at
mitigating the potential impacts of such
events on its operations, assets, and
financial performance. This response
typically includes several key
components:
1. Risk Assessment and Monitoring:
Energean reviews risk assessments
performed by Climate Change Portals
(e.g. the World Bank Climate Change
Portal, Israel Climate Change
Information Centre etc) to keep
Energean employs a range of responses
to address chronic physical risks and
mitigate their potential impacts on its
operations, assets, and stakeholders:
1. Infrastructure resilience measures:
Energean invests in structural
enhancements and protective
measures to increase the resilience of
its infrastructure against chronic
physical risks such as sea level rise,
shoreline erosion, and land subsidence.
This may include fortifying coastal
infrastructure, raising new platform
STRATEGIC REPORT
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informed on acute physical risks,
considering factors such as the
likelihood of events occurring, their
potential severity, and the vulnerability
of assets and operations. Regular
monitoring of relevant environmental
conditions and early warning systems
also helps to anticipate and prepare for
potential risks.
2. Resilience and Preparedness
Measures: Energean invests in
resilience measures to enhance the
robustness of its infrastructure and
operations against acute physical risks.
This involves structural reinforcements
of offshore platforms, implementation
of emergency response plans, and
training of personnel to ensure
readiness to respond effectively to
emergencies.
3. Insurance and Financial Protection:
Energean maintains appropriate
insurance coverage to mitigate financial
losses resulting from acute physical
risks. This includes property insurance
to cover damages to assets, business
interruption insurance to compensate
for revenue losses during downtime,
and liability insurance to address
potential third-party claims arising from
incidents.
4. Contingency Planning and Business
Continuity: Energean develops and
regularly updates contingency plans
and business continuity strategies to
manage acute physical risks and
minimise disruptions to operations.
These plans outline procedures for
emergency response, resource
allocation, communication, and
coordination with relevant stakeholders.
elevations, and implementing erosion
control measures to reduce vulnerability
to coastal hazards.
2. Monitoring and early warning
systems: Energean implements
monitoring systems and early warning
mechanisms to detect changes in
environmental conditions and anticipate
potential hazards associated with
chronic physical risks. Monitoring of sea
level rise, coastal erosion, and other
indicators enables proactive risk
management and timely response to
emerging threats.
Geographies
impacted
Although all countries face the risk of acute and chronic risks, as per Energean’s
physical risk scenario analysis exercise (see pages 29–30), Energean views Israel
and Egypt, where all production is located offshore and where around 80% of the
Group’s remaining NPV10 lies, as the countries at the most material risk.
Metrics used to
assess risk
Meteorological and oceanographic measurements are the primary data collated to
monitor physical risks.
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Transition risks
Risk
Policy/Legal
Technology
Market
Reputation
Description
a) As prices in the EU and UK Emissions
Trading System (“
ETS
”) increase, due to the
decrease in the number of allowances
available by tightening the cap on
emissions, Energean’s operations in Greece
and the UK are expected to face higher
operational costs as it needs to purchase
more allowances to cover its carbon
emissions.
b) Carbon emissions taxes may be applied
in the future in the Middle East and North
Africa, which would increase the Group’s
operational costs.
c) Changing government policy
requirements may also lead to a reduction
in demand for hydrocarbons
The development of new
technologies and alternative
energy sources may result in
reduced demand for the
company’s products. Increased
energy demand may also
accelerate the development of
renewable energy production and
storage.
Changing customer behaviour
may reduce demand for our oil
and gas products. An excess of
supply over demand may also
lead to lower global commodity
prices.
Negative perceptions of the
hydrocarbon sector may lead to
reputational damage from our
stakeholders, including existing
and potential employees,
investors, local communities in
which Energean operates, the
wider public and governments.
Financial impact
a) Energean may face increased operating
costs associated with purchasing additional
carbon allowances in emissions trading
systems like the EU ETS.
b) Rising carbon costs may influence the
company’s investment decisions,
particularly in long-term projects. Higher
costs associated with carbon emissions
could make certain projects less
economically viable or delay investment
decisions in carbon-intensive ventures.
a) If changing technology and
market trends lead to a decrease
in demand for oil and gas
products, Energean may
experience declining revenues and
profitability. This could result in
lower sales volumes and pricing
pressure, impacting the
company's top-line growth and
margins.
b) Rapid advancements in clean
energy technologies may render
certain Energean’s assets
obsolete or less valuable over
time. This could lead to asset
stranding, where investments in
existing infrastructure become
economically unviable due to
shifts in market dynamics. The
a) As consumers increasingly
favour sustainable energy
sources, there may be a decline
in demand for fossil fuels,
including oil and gas produced
by Energean. This shift in
preference could lead to reduced
revenue and profitability for the
company if it does not adapt its
product offerings or diversify
into renewable energy sources.
b) Excess supply over demand in
the oil and gas market can lead
to lower global commodity
prices. This scenario can
negatively affect Energean's
revenue and profitability, as the
company's financial
Poor reputation may adversely
impact the company by
decreasing the demand for its
goods and services. It may also
reduce the company’s
production capacity, due to
delayed planning approvals and
supply chain interruptions.
A negative reputation may also
block access to finance as
investors move away from E&P
companies and cause litigation
damage from climate action.
STRATEGIC REPORT
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Transition risks
company may incur impairment
charges as it writes down the
value of stranded assets on its
balance sheet.
c) Embracing new technologies
and transitioning towards cleaner
energy sources often requires
significant investments in
research, development, and
infrastructure. Energean may incur
higher operational costs as it
invests in technology upgrades,
emissions abatement equipment,
and renewable energy projects to
remain competitive and compliant
with evolving regulations.
performance is partly tied to the
market prices of oil and gas.
Risk rating
Medium
Medium
Medium
Low
Time horizon
Medium to long-term
Medium to long-term
Long-term
Short, medium and long-term
Energean’s
response
(mitigation)
a) Energean mitigates regulatory risk by
diversifying its operations across multiple
regions with varying carbon pricing
mechanisms and emissions regulations.
This strategy reduces the company's
dependence on any single jurisdiction and
spreads its exposure to carbon costs more
evenly.
b) Investing in low-carbon technologies and
renewable energy sources can help
Energean reduce its carbon emissions and
mitigate the financial impact of increased
carbon costs. This includes deploying
energy-efficient equipment, implementing
carbon capture and storage (“
CCS
”)
technologies (Prinos CCS is in progress),
and expanding its renewable energy and
alternative fuel portfolio (Eco-H2 pilot
project is under evaluation).
Energean allocates resources
towards R&D efforts focused on
advancing CCS and alternative
fuel technologies. This includes
conducting feasibility studies, and
collaborative research
partnerships to enhance the
understanding and scalability of
these technologies.
Energean also has strategic
partnerships and collaborations
with technology providers,
research institutions, and
government agencies to leverage
expertise, share knowledge, and
accelerate the development and
deployment of CCS and alternative
fuels projects.
Energean actively monitors and
manages its exposure to
commodity price fluctuations by
employing hedging strategies
and flexible pricing mechanisms.
Fixed gas contracts with floor
pricing in Israel, provide
protection against fluctuations
in international commodity
prices. In Egypt gas revenues are
protected with cap and collar
and floor pricing.
Energean conducts scenario
analysis based on various IEA
pathways, which outline
potential future trajectories for
the energy transition. By
assessing multiple scenarios,
including different levels of
carbon pricing, renewable
energy penetration, and energy
Energean invests in clean
technologies and innovations to
improve operational efficiency,
reduce carbon emissions, and
enhance environmental
performance. By adopting
advanced technologies such as
carbon capture and storage
(“
CCS
”) and methane emission
reduction techniques, the
company minimises its
environmental footprint and
mitigates reputational risks
associated with climate change.
Energean also actively engages
with stakeholders, including
investors, regulators,
communities, and non-
governmental organisations
(“
NGOs
”), to foster transparency,
build trust, and address
STRATEGIC REPORT
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Transition risks
c) Implementing measures to improve
operational efficiency can help Energean
reduce its carbon footprint and lower its
exposure to carbon costs. This includes
optimising production processes in all sites,
reducing flaring and venting of methane
emissions, and implementing energy
management systems to minimise energy
consumption.
d)
Energean explores opportunities to
offset its carbon emissions through carbon
offset projects or participation in carbon
markets. This involves investing in Natural
Based Solution projects that sequester or
reduce carbon emissions, such as
afforestation, reforestation, and renewable
energy projects, to offset its own emissions
and comply with regulatory requirements.
e)
Energean conducts scenario planning
and risk assessments associated with
increased carbon costs. By identifying
potential risks and developing contingency
plans taking into consideration the defined
internal carbon prices, the company can
mitigate the impact of these risks on its
operations and financial performance.
demand projections, the
company anticipates and
prepares for a range of potential
outcomes. Energean’s portfolio
continues to create value under
all scenarios.
concerns related to climate
change and sustainability. By
communicating its sustainability
initiatives, environmental
performance, and progress
towards carbon reduction goals,
the company enhances its
reputation and strengthens
stakeholder relationships.
Geographies
impacted
Greece and the UK, where Energean
currently participates in the EU Emissions
Trading System (“
ETS
”) and UK ETS
system. Although Italy is within the EU ETS,
Energean's assets are lower than cap and
as a result are not currently forecasted to
pay carbon taxes.
All countries, but primarily in
Europe and the UK.
Greece and Italy are considered
to be the most vulnerable
assets, as per the TCFD scenario
analysis modelling (see pages
27–29).
All countries, but primarily in
Europe and the UK.
Metrics used to
evaluate risks
Emissions intensity (see page 32)
Shadow carbon prices (see page 29)
NPV10 impact of scenario analysis exercise
(see pages 27–29)
ESG ratings (see page 8)
Emissions intensity (see page 32)
Shadow carbon prices (see page
29)
NPV10 impact of scenario
analysis exercise (see pages 27–
29)
Commodity prices (see page 74)
Shadow carbon prices (see page
29)
NPV10 impact of scenario
analysis exercise (see pages
27–29)
Emissions intensity (see page
32)
Energy intensity (see page 65)
Water usage (see page 65)
ESG ratings (see page 8)
STRATEGIC REPORT
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Opportunities
Opportunities
Resource efficiency
Energy source
Products/services
Markets
Resilience
Description
Climate change mitigation efforts
often necessitate more stringent
regulations and standards
regarding resource usage and
emissions. Energean can
leverage this by enhancing the
resource efficiency of its
operations.
The energy transition creates
the opportunity for Energean
to:
•
Reorient its portfolio
towards gas as natural
gas is considered a
transition fuel due to its
lower carbon emissions
compared to coal and
oil
•
Invest in renewable
energy infrastructure
and integrate these
sources into its
operations
•
Invest in alternative
fuels, such as
Energean’s Eco-
Hydrogen pilot project in
Greece or biofuels.
Development and/or
expansion of low emission
goods and services.
Energean is developing a
CS site in Greece to capture
and store carbon dioxide
emissions from its own
operations and other hard
to abate industries.
Energean is also evaluating
similar initiatives in other
areas where the company
operates mature fields.
Energean is evaluating a
pilot blue-hydrogen project
in Greece to produce low
carbon hydrogen from
natural gas together with
CS.
Energean has the
opportunity to capitalise
on the growing demand
for natural gas, particularly
as a cleaner alternative to
coal and oil in power
generation, industrial
processes, and heating.
The Company’s resilience
to commodity price
fluctuations comes hand
in hand with the new
market opportunities.
Financial impact
Optimising production processes
for resource efficiency may result
in:
•
Increased production
resulting in greater revenues
•
Premium pricing
•
Lower production costs
•
The avoidance of regulatory
non-compliance fines
•
Greater access to a wider
source of funding and
capital
•
Greater resilience to the
aforementioned risks
•
Potential premium
pricing due to a greater
demand of low-carbon
products
•
Potential lower
operating costs
•
Lower sensitivity to
carbon pricing costs
•
Greater access to a
wider source of funding
and capital
•
Diversified sources of
revenue via new low-
carbon projects
•
Carbon tax cost
savings
•
Reduced
decommissioning
liabilities
•
Enhanced reputational
opportunities
•
Greater access to a
wider source of
funding and capital
•
Revenue growth
•
Lower emissions
intensity versus oil
and coal projects
leading to lower
potential carbon
taxes
•
Protects the
Company’s revenue
stream from
commodity price
fluctuations
Materiality level
Low
Medium
High
High
Medium
STRATEGIC REPORT
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Opportunities
Time horizon
Short, medium and long-term
Short, medium and long-term
Medium to long-term
Short to medium
Medium-term
Energean’s
response
(strategy to
realise
opportunity)
Energean has established a
specialised team within the
company to manage climate
change process optimisation
projects. This dedicated team is
tasked with conducting in-depth
analyses of process systems,
aiming to identify areas for
improvement that can enhance
energy efficiency and decrease
carbon emissions. Their focus is
on delving deep into various
aspects of the company's
operations, utilising their
expertise to propose and
implement measures that
optimise resource usage,
minimise waste, and ultimately
contribute to Energean's
sustainability objectives.
Energean has actively
engaged all country teams to
integrate renewable energy
production into their
respective sites, aiming to
decrease reliance on grid
energy and showcase
responsible environmental
stewardship. Currently,
projects for installing solar
systems have been identified
in four sites across three
countries: Egypt, Italy, and
Greece.
See ‘products/service’ for an
overview of Energean’s
strategy to realise this
opportunity for investing in
alternative fuels and re-
orienting to natural gas.
Energean conducts
comprehensive feasibility
studies and technology
assessments to evaluate
the viability and technical
feasibility of implementing
CCS and hydrogen projects.
This involves assessing
available technologies,
identifying suitable sites,
and analysing economic
and environmental factors
to inform decision-making.
For the Prinos CS project,
pre-FEED and subsurface
assessment activities
concluded in 2023 and
FEED and ESIA work is
ongoing.
Energean also invests in
research, development, and
pilot projects to
demonstrate the feasibility
and scalability of CCS and
hydrogen technologies.
Energean strategically
invests in the exploration,
development, and
production of natural gas
resources to expand its
presence in target
markets. This may include
acquiring new exploration
licenses, optimising
production operations in
existing assets, and
pursuing opportunities for
resource development
and monetisation.
Over 58% of Energean’s
2023 sales and revenues
was from its Israel and
Egypt gas sales, which
contain long-term gas
contracts underpinned by
floor pricing. Energean will
look to replicate this
strategy in other future
developments.
Geographies
impacted
All countries, but primarily
Greece, Egypt and Italy in the
short to medium-term.
All countries, but primarily
Greece, Egypt and Italy in the
short to medium-term.
All countries, but primarily
Greece in the near-term.
All countries
Israel and Egypt, but this
strategy can be replicated
in other countries.
Metrics used to
evaluate
opportunity
Energy consumption (see page
65)
Waste reduction (see page 65)
Carbon emissions (see pages
68–72)
Carbon emissions (see
pages 68–72)
% of natural gas production
(see page 40)
CCS and hydrogen revenue
streams (metric not
currently disclosed as
Energean currently has no
revenue streams from
these projects)
% of natural gas
production (see page 40)
Sales and other revenue
(see page 37)
STRATEGIC REPORT
Page 27 of 273
c.
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 its 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 80% 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.
Transition risks 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.
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 2023 WEO report, the three
scenarios are:
IEA’s 2023 WEO climate scenarios
Stated Policies Scenario
(“STEPS”)
Announced Pledges
Scenario (“APS”)
Net-Zero Emissions by
2050 Scenario (“NZE”)
Overview
Provides an outlook
based on the latest policy
settings, including energy,
climate and related
industrial policies.
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
2.4°C by 2100
1.7°C by 2100
1.4°C in 2100
2030 oil price
$85/bbl
$74/bbl
$42/bbl
2030 EU gas
price
$6.9/MMBtu
$6.5/MMBtu
$4.3/MMBtu
2030 carbon
price
$120/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 all the Group’s assets with 2P reserves within 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 2022 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.
STRATEGIC REPORT
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Results
Net present value of portfolio
12
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 11% 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 (-5%) due
to the price realised for the liquids stream. Likewise in Egypt, gas revenues are protected with cap and
collar and floor pricing, which results in a -4% decrease in NPV under the NZE scenario.
Our assets in Italy and Greece are more exposed to the effects of lower commodity prices under the
scenarios considered, as the NZE’s outlook for Brent is lower than our base case assumptions. 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.
For the UK and Croatia, the Group’s base case assumptions for long-term gas prices are lower than the
NZE equivalent, which is why there is an increase in the NPV under the NZE scenario.
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 page 210.
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.
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:
12
Relative to Energean’s budget planning Brent oil price of $70/bbl.
STRATEGIC REPORT
Page 29 of 273
Year
($/tCO2)
2024
55–60
2025
65–70
2035
160–165
2050
240–250
This carbon price is based upon an average of the IEA’s NZE scenario in their 2023 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.
Physical risks resilience
As discussed within the Risks section between pages 19–26 in the TCFD section and pages 81–96 in the
Risk Management section of this Annual Report, management recognises that climate change is
expected to lead to the increased frequency and severity of weather-related natural hazards, such as sea-
level rise, storms, flooding and extreme temperatures.
IPCC’s outlook (Sixth Assessment Report (“AR6”) Chapter 11) for the Mediterranean for the direction
of change for weather and climate extreme events under different climate scenarios
Temperature rise
13
1.5°C
2.0°C
4.0°C
Hot temperature
extremes
Very likely
Extremely likely
Virtually certain
Heavy precipitation
Medium
High
High
Methodology and results
Energean has conducted qualitative scenario analysis for Israel and Egypt, which are the two countries
most material to the Group on a NPV10 basis. Around 80% of the Group’s remaining NPV10 is in Israel
and Egypt, where all production is located offshore. Both countries are located within the IPCC’s
‘Mediterranean’ category. Energean has considered the IPCC’s AR6 findings for the change in likelihood
of extreme events for the Mediterranean region, under the IPCC’s three temperature change outlooks.
As per the IPCC’s analysis, hot temperature extremes under the three scenarios are, at a minimum, very
likely. Extreme hot weather events could lead to increasing risks to employee health and safety in the
work-place, decreasing productivity. Israel and Egypt both have historical datasets of high temperatures.
To mitigate this, we ensure that all employees follow appropriate health and safety guidelines, provide
air-conditioned break areas and supply heat-related illnesses awareness training. In view of future higher
temperatures, the company considers flexible work schedules, allowing work during cooler times of the
day. We foresee an increase in cooling water demand (sourced from seawater not freshwater) for
equipment robustness and energy consumption, as higher ambient temperatures reduce heat exchange
13
Versus pre-industrial levels.
STRATEGIC REPORT
Page 30 of 273
efficiency; this is not expected to affect or cause a disruption to production.
Long-term fatigue of material
exposed to higher temperatures is an area that requires further study, but has not been identified as a
immediate risk.
Heavy precipitation ranges from medium to high under the three scenarios. However, due to the offshore
nature of Energean’s operations, the impact of this is not deemed as high versus extreme hot weather.
Near-shore assets take precautionary measures related to extreme precipitation, such as having readily-
cleaned rainwater sewers, drainage channels and equipment that is adequately elevated in order to avoid
disruptions. No additional construction work or infrastructure are foreseen based on findings.
Energean has also identified severe storms as a risk to its Israel and Egypt operations, which may result
in a temporary shut-down in production or the delay of hydrocarbon liquids offloading in Israel. However,
the IPCC does not provide an outlook for extreme storms for the Mediterranean region because
quantifying the effect of climate change on extreme storms is challenging, partly because extreme
storms are rare, short-lived, and local, and individual events are largely influenced by stochastic variability.
Finally, Energean has evaluated the data around the sea-level rise following the IPCC’s scenarios RPC2.6
and RCP8.5. Under the first, the global mean sea level rise is expected to be around 0.43 metres, while
for the second, 0.84 metres by 2100. We have considered factors such as near-shore assets’ elevation,
proximity to coastlines and historical climate data, while in the future soil conditions may be studied. All
assets vulnerable to sea-level rise are considered to be decommissioned by 2100 and currently they are
found to be adequately far distanced from areas that may be affected by sea-level rise, but the necessity
of further modelling tools to assess the potential impact of such extreme events will be evaluated in the
future. The elevation of offshore platforms have been developed in a way that mitigates the risk of swells.
The combination of swells and rising sea level rise is an area identified as requiring further investigation.
Energean will look to enhance its physical risk scenario analysis within next year’s reporting period.
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 81–96 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.
The metrics used by the Group to assess climate-related risks and opportunities in line with its
strategy and risk management process
The key metric we use to track our progress against our energy transition strategy to be Net Zero by 2050
is the emissions intensity of our portfolio across scope 1 and 2 emissions, on an equity-share basis.
Energean’s base line year for its targets was previously 2019. However, in light of Energean’s rapid growth
through the start-up of Karish and the acquisition of Edison, Energean has reset its base line year for its
targets to 2022. This historical and future targets can be found on page 32.
Executive remuneration is partly linked to sustainability metrics, which includes emission reductions,
which is one of the Group’s KPIs.
Please refer to pages 139 and 151–159 in the Corporate Governance
section for further detail.
STRATEGIC REPORT
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Energean’s Net Zero Strategy
Energean's Net Zero Strategy, unveiled in 2020, outlines a series of strategically defined initiatives aimed
at successfully fulfilling the company's commitment to achieving Net Zero. This comprehensive strategy
spans three distinct periods: short-term (up to 2025), medium-term (up to 2035), and long-term (up
to 2050).
In the short-term period, Energean was focused on transitioning production from crude oil to natural gas,
procuring electricity generated from renewable sources across all operational sites, optimising site
performance, and embarking on broader decarbonisation projects. The company also aims to develop a
dynamic roadmap for acquiring or generating carbon removals. In addition, this period was categorised
by focusing on boosting transparency in climate change performance by actively participating in
initiatives such as the CDP and the TCFD.
Building upon these short-term efforts, the medium-term period will see Energean advancing
decarbonisation projects. This includes the operation of a Carbon Capture and Storage (“
CCS
”) site to
sequester emissions and an increased focus on the electrification of certain assets. Furthermore, the
company will also look to start investing in Natural Based Solution projects.
Looking towards the long-term horizon, Energean plans to expand decarbonisation projects to additional
countries where it operates. Natural Based Solution projects will also evolve to align with the overarching
Net Zero target, showcasing the company's sustained commitment to environmental responsibility and
sustainability.
Energean has set a series of milestones that underline the company's 2050 net-zero commitment. The
key aspects of this pathway include:
1.
Become net-zero across our entire operations on an equity share absolute basis by 2050. Our
commitment includes Scope 1 GHG emissions from owned fuel burning sources and Scope 2
from purchased energy.
2.
Continuously reduce our carbon emissions intensity from 16 kgCO2e/boe in 2022, to 4–6
kgCO2e/boe in 2035 and net-zero in 2050.
3.
Include our net-zero criteria and relevant costs in new M&As to support Final Investment
Decisions and be incorporated in Field Development Plans. All company’s growth opportunities
will be scrutinised and tested against our Net Zero pathway to assure full adaptiveness.
Opportunities not meeting the criteria will not be eligible for investing.
4.
Reduce absolute carbon emissions through decarbonisation strategies that include technical
solutions such as fuel substitution and energy efficiency management, carbon capture and
storage (“
CCS
”), and portfolio management including divestments.
5.
Commit to methane emissions monitoring and reduction. Drive our JVs’ engagement to this
target.
6.
Continue to implement zero routing flaring and reduce to minimum safety and non-routine
flaring in operated sites and drive similar engagement of our JVs.
7.
Invest in on-site renewable energy production to cover a part of the energy needs. Drive our
JV’s engagement to this target.
8.
Invest in Natural Based Solution (“
NBS
”) projects to generate or purchase from existing
projects carbon removals from the atmosphere in a volume of less than 50% of the total
projected carbon emissions of our new baseline year 2022 equity share production. Our carbon
removals portfolio will be a mixture of NBS technologies, such as forestry, soil, blue carbon,
biochar etc.
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 and the cement sector, 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.
STRATEGIC REPORT
Page 32 of 273
During 2023 subsurface studies matured the project concluding to a maximum safe storage capacity of
60–70MT CO2 with a 3MTPA injectivity potential. Also, subsurface studies were performed and continue
in preparation of the storage permit application. The Prinos CS project has been included within the EU
Commission’s Projects of Common Interest, and €150 million of grants have been committed.
In February 2023, Energean Egypt and Shell Egypt inked a memorandum of understanding (MoU), paving
the way for a collaborative effort towards decarbonisation. This groundbreaking partnership aims to
tackle a key challenge in carbon capture and storage (CCS): the integration of significant carbon emitters
with suitable geological formations. Specifically, the focus lies on decarbonising the LNG terminal in Idku,
operated by Shell, by capturing and storing carbon dioxide in a depleted reservoir within Energean's Abu
Qir offshore concession. Moreover, plans for subsequent phases include extending this facility to
accommodate emissions from other industrial sources such as fertilizers. Notably, the carbon storage
facility's conceptual design has been finalised, while ongoing work on economic and sensitivity models
is underway to delineate the operational framework. Furthermore, significant progress has been made
with the signing of mutual agreements with potential customers, marking a significant step forward in
advancing sustainable solutions.
Recognitions of our Climate Change Strategy
In 2023, Energean continued its active involvement in the Climate Disclosure Project, advocating for
transparency in disclosure and advancing our efforts to combat climate change.
The climate change rating evaluates the thoroughness and comprehensiveness of our disclosures, as
well as our company's understanding of climate change issues, management approaches, and progress
towards addressing climate action. Meanwhile, the supplier engagement rating assesses our
performance in governance, goal setting, scope 3 emissions, and engagement across the value chain.
We are delighted to announce that once again in 2023, we received an improved score of A- for climate
change, maintaining our progress from 2022 and surpassing our ratings of B in 2021 and B- in 2020. This
recognition is based on our strategic approach and established targets. Importantly, this rating positions
us among the top 18% of all oil and gas producers engaged with CDP.
b.
Scope 1, Scope 2, and, Scope 3 greenhouse gas (GHG) emissions, and the related risks
Emissions Intensity
(Equity Share)
14
2023
2022
2021
Target 2035
Target 2050
Scope 1 (kgCO2e/boe)
9.3
15.9
18.3
Reduce scope 1 & 2 by
2035 to 4.0–6.0
kgCO2e/boe
0
Scope 2 (kgCO2e/boe)
– market based
15
0.0
0.1
0.1
0
Scope 1 and 2
(kgCO2e/boe)
9.3
16.0
18.4
0
Scope 3 (MtCO2e) –
Category 10
0.7
0.5
0.5
No target
No target
Scope 3 (MtCO2e) –
Category 11
21.8
7.6
7.6
Scope 3 (MtCO2e) –
Total
22.5
8.0
8.1
14
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. Scope 3 emissions were calculated using the GHG
Protocol’s Scope 3 calculation guidance. Scope 1, 2 and 3 emissions have all been verified to ISO 14064-1 based on the
operational accounting approach. Please refer to the Environmental section on pages 68–72 for a detailed description of what
categories the Group deems irrelevant or insignificant and therefore has not been included in the Group’s Scope 3 emissions
calculation.
15
Market-based method for scope 2 emissions, incorporating energy certificates such as Guarantees of Origin and International
Renewable Energy Certificates (I-RECs).
STRATEGIC REPORT
Page 33 of 273
For further detail on our GHG emissions, please refer to the KPIs section and the full emissions table
in the ‘Our mission: preserving our planet’ section between pages 64–65 and 68–72 in this annual
report.
c.
The targets used by the Group 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. To accomplish our commitment, we target to reduce our absolute emissions by 50%
(from 2022–2050), whilst the remaining 50% or less will be covered by the production or acquirement of
high quality emissions reduction credits through nature-based solution projects.
In 2019, we pledged to reduce the carbon intensity of our business by 85% by 2025 compared to 2019.
As forecasted, we have met this expected target, with our emissions intensity decreasing from 66.8
kgCO2e/boe to 9.3 kgCO2e/boe, achieving an 86% reduction. This has primarily been driven by the switch
from an oil to gas-weighted portfolio and via the start-up of Karish, which has comparatively low
emissions intensity of 4–5 kgCO2e/boe.
Looking ahead, Energean’s 2035 target is to reduce our emissions intensity to 4.0–6.0 kgCO2e/boe.
These targets are continuously monitored by our HSE Director as well as the CEO and the Board.
STRATEGIC REPORT
Page 34 of 273
Market Overview
Brent oil price
In the first half of 2023, oil prices fluctuated following the EU import ban on Russian crude, concerns
about inflation and possible recessions, as well as interest rate rises from several central banks. In the
second half of 2023, oil prices generally rose before falling as a result of geopolitical tensions in the
Middle East and concerns around global oil demand.
Brent averaged $82.2/bbl in 2023, a 17% decrease from 2022 levels. Prices were less volatile than 2022,
with an annual high of $96.7/bbl on 27 September 2023 and an annual low of $71.9/bbl on 5 May 2023.
Our liquids production in Israel, Italy, Egypt and the UK are Brent-linked.
Focus on gas
Over 80% 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 fell in 2023 after witnessing soaring prices in 2022. The average PSV price in 2023
was €42.8/MWh, a 66% decrease from 2022 levels. 2023 PSV prices saw an annual high of €78.0/MWh
on 9 January 2023 and an annual low of €23.7/MWh on 1 June 2023. During the first half of 2023, Italian
PSV prices generally fell as a result of warmer than average winter temperatures and strong wind energy
generation through the spring. In the second half of the year, PSV prices reacted to a jittery European
market regarding concerns about geopolitical tensions in the Middle East.
Israel
Gas
Israel’s third gas field, Karish, commenced production in October 2022, following Leviathan (first gas in
December 2019) and Tamar (2013). Between Q1–Q3 2023, 7.6 Bcm was produced by Tamar and 8.2
Bcm was produced by Leviathan. Of this, Tamar exported 2.0 Bcm and Leviathan exported 6.9 Bcm (4.8
Bcm to Egypt and 2.1 Bcm to Jordan)
16
. Due to the Tamar platform’s proximity to the Gaza strip, the Israeli
government enforced an approximate one month shut-down of production on 7 October over security
concerns. Production was subsequently resumed around the 9 November.
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 2023, demand for gas in Israel was approximately 13 Bcm. Israel’s long-term gas demand outlook
remains robust, with demand forecast to grow to 15 Bcm by 2025, 22 Bcm by 2035 and 26 Bcm by 2045
17
.
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, Katlan and Tanin contain total 2P liquids reserves of 926 Mmboe (as per the year-
end 2023 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 2023, Energean offloaded eight hydrocarbon liquid cargoes, totalling over three million barrels at an
average realised discount of $6/bbl to Brent.
16
Tamar data from Isramco Negev 2 LP’s Q3 2023 report, Leviathan data from NewMed Energy’s Q3 2023 presentation.
17
BDO January 2024 report.
STRATEGIC REPORT
Page 35 of 273
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, Egypt’s production has fallen since 2021 due to decline from its mature gas fields and water
breakthrough at the country’s key producing field, Zohr, with 2023 country production at around 60 bcm
(6 bcf/d). Egypt’s gas demand now outstrips its domestic production and gas demand is forecasted to
continue to rise (63.1 Bcm in 2020 rising to 71.5 Bcm in 2025 and 78.8 Bcm in 2030). 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.
STRATEGIC REPORT
Page 36 of 273
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.
Operational
We continued our strong track record of growing production with a 200% y-o-y increase vs 2022.
1
Working interest production
Working interest production
2023
2022
2021
Kboe/d
123
41
41
Objective
: Energean is focused on maximising production from its existing asset base and delivering net
production of 200 Kboe/d, in line with its near-term targets.
2023 progress:
•
Average working interest production of 123 Kboe/d in 2023.
•
2023 production was greater than 2022 because of the ramp-up of production by Karish and the
start-up of NEA/NI.
2
2P reserves and 2C resources
2P reserves
2023
2022
2021
MMboe
1,115
1,161
965
2C resources
2023
2022
2021
MMboe
222
217
188
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.
2023 progress:
•
2P + 2C reserves and resources of 1,337 MMboe (2022: 1,378 MMboe).
•
2P+2C volumes increased year-on-year before produced 2023 volumes (47 mmboe).
•
Material reserves life of around 19 years
18
.
18
Based upon mid-point of 2024 production guidance of 155–175 kboe/d.
STRATEGIC REPORT
Page 37 of 273
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
Revenues
2023
2022
2021
$ million
1,420
737
497
Objective
: Energean’s near-term target is to generate revenues of $2.5 billion p.a. With approximately
1,115 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:
•
2023 revenues of $1,420 million.
•
2023 revenue was higher than 2022 as a result of a full year of contribution of production
from Israel.
2
Cost of production
19
Cost of production
2023
2022
2021
$/boe
11
19
16
Objective
: The Group’s near-term cost of production (operating costs plus all royalties) target is $9–
11/boe.
2023 progress:
•
The decrease in cash unit production costs was primarily driven by increased production, as
applied to a primarily fixed cost base.
3
Adjusted EBITDAX
20
Adjusted EBITDAX
2023
2022
2021
$ million
931
421
212
Objective
: Energean aims to maximise adjusted EBITDAX to maintain the profitability of the business.
The Group expects to grow adjusted EBITDAX to $1.75 billion p.a. in the near-term through the successful
delivery of sanctioned key growth projects.
2023 progress:
•
2023 adjusted EBITDAX was higher than 2022 predominantly as a result of the higher revenue
achieved due to a full year of contribution of production from Israel.
19
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”.
20
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”.
STRATEGIC REPORT
Page 38 of 273
4
Cash flow from operating activities
Cash flow
f
rom operating activities
2023
2022
2021
$ million
656
272
133
•
The increase was primary driven by higher sales production in 2023 versus 2022.
5
Profit/(Loss) after tax
Profit after tax
2023
2022
2021
$ million
185
17
(96)
•
The increase was primary driven by higher sales production in 2023 versus 2022, partially offset
by the deferred tax charge (see Note 14 in the Financial Statements).
Net-zero emissions
Energean’s aim is to lead the energy transition in the Mediterranean through a strategic focus on gas and
achieve its net-zero ambition by 2050.
1
Emissions intensity reduction
Emissions intensity on an equity
share basis
21
2023
2022
2021
KgCO2e/boe (Scope 1 and 2)
9.3
16.0
18.3
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 emissions intensity of our business by 85% by
2025, versus our 2019 base year
22
.
Energean uses 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, while all our operated
assets’ emissions (covering scope 1, 2 and 3) are verified based on the ISO 14064-1 guidance.
2023 progress:
•
We delivered a 42% year-on-year reduction in the emissions intensity of our operations to 9.3
kgCO2e/boe on equity share basis.
•
The decrease was primarily driven by the contribution of production from Karish in Israel,
which has a lower emissions intensity (4.7 kgCO2e/boe in 2023) versus the wider Group, and
the decreasing rate of commissioning teething issues on the FPSO through the year.
•
Scope 2 emissions intensity was reduced to 0 kgCO2e/boe on an equity share basis due to
the continued use of renewable purchased energy at Energean’s operated sites.
•
We achieved our emissions reduction target to reduce the emissions intensity of our business
by 85% from 2019 (original baseline year) to 2025, by achieving an 86% reduction.
21
Equity share is defined on page 65.
22
Scope 1 and 2 emissions. Original baseline year was 2019. In 2023, this was changed to 2022.
STRATEGIC REPORT
Page 39 of 273
HSE
Energean is fully committed to safety as it conducts its business with integrity, ensuring responsible
behaviour at every step.
1
Lost time injury frequency rate
LTIFR
2023
2022
2021
No. per million hours worked
23
0.47
0.47
0.33
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 0.60.
2023 progress:
•
Safe and reliable operations, zero serious injuries.
•
Zero environmental damage and zero oil spills.
•
Zero health damage and occupational illnesses.
•
Energean’s 2023 LTIFR was flat at 0.47 versus 2022 due to the Group’s continued adherence to
its multi-healthy and safety polices.
Shareholder return
Energean is focused on returning value to shareholders through a reliable, sustainable and progressive
dividend stream
1
Dividends
Dividends
2023
2022
2021
$ million
214
107
N/A
Objective:
Energean is 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. Energean’s policy is
to pay a dividend of at least $50 million per quarter, ramping-up in line with Energean’s near-term
production and revenue targets to at least $100 million per quarter, as the Company’s fully sanctioned
and funded developments come onstream. Post 2025, Energean targets to sustain a reliable dividend
stream.
2023 progress:
•
In 2023, Energean returned a total of $1.20/share to shareholders ($214 million), representing
four quarters of dividend payments. This equates to total returns of $1.80/share (approximately
$320 million) since dividend payments began in Q3 2022.
In 2024, Energean intends to continue to pay quarterly dividends to its shareholders in line with its
previously communicated dividend policy.
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.
23
Refers to employees and contractors.
STRATEGIC REPORT
Page 40 of 273
Review of Operations
Production
Group working interest production averaged 123 Kboe/d in 2023 (2022: 41 Kboe/d). 2023 production
was higher than 2022 because of the ramp-up of production from Karish (Israel) and the start-up of
production from NEA/NI (Egypt).
Working interest hydrocarbon production (Kboe/d)
2023
2022
Israel
87 (89% gas)
5 (92% gas)
Egypt
25 (86% gas)
25 (87% gas)
Rest of portfolio
11 (34% gas)
11 (40% gas)
Total
123 (83% gas)
41 (75% gas)
Israel
Karish
Production commenced at Karish on 26 October 2022. All three wells (Karish Main-01, 02 and 03) had
been opened before year-end 2022.
Sales gas in 2023 totalled 4.4 bcm, up from 0.3 bcm in 2022. Commercial sales under the GSAs began
in April 2023. Slower than anticipated commissioning and ramp-up led to slightly lower than expected
production from Karish in the first half of the year. Optimisation activities on the FPSO and subsea
systems were successfully performed in the second half of the year, resulting in 99% FPSO uptime
(excluding planned shutdowns) in Q4 2023
24
.
Day-to-day production has not been impacted as a result of the security situation in Israel, but it has
impacted the timing of the installation of the second oil train (see below “second oil train and second gas
export riser” for further detail).
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
The Karish North development well was successfully drilled as part of the 2022 growth drilling campaign.
The Karish North manifold was installed in Q2 2023 and the umbilical and spool were installed in Q3 2023
ahead of opening of the well.
Karish North first gas was safely achieved on 22 February 2024. The Energean Power FPSO now has four
production wells in operation, increasing well stock redundancy and flexibility to meet the demand
requirements of Energean's gas buyers.
A second well is expected to be drilled in the late 2020s and, combined with later life workovers to both
wells, is expected to be sufficient to fully develop the 278 MMboe of 2P reserves.
24
Uptime is defined as the number of hours that the Energean Power FPSO was operating; the Q4 2023 figure excludes the
scheduled 6-day shutdown that occurred in December.
STRATEGIC REPORT
Page 41 of 273
Second oil train and second gas export riser
The second gas export riser and second oil train enables the gas production capacity to increase from
6.5 Bcm/yr to 8.0 Bcm/yr and the liquids production capacity to increase from 18 Kboe/d to 32 Kboe/d.
The second gas export riser was installed in March 2023, hooked-up to the FPSO in December 2023 and
was brought online in February 2024.
Construction of the second oil train was completed in Q3 2023. However, because of the security
situation in Israel, it has impacted the timing of the installation of the second oil train, which will be
installed as soon as feasible.
Gas and liquids contracts
Gas – long-term gas sales agreements
Energean has signed 19 long-term gas sale and purchase agreements (“
GSPAs
”) to customers in Israel,
all of which include take-or-pay commitments and floor pricing or an exclusivity provision, providing a
high level of certainty over revenues from the Karish, Karish North and Tanin projects over the next 20
years.
Commercial sales for the majority of Energean’s GSPAs began in April 2023.
In February 2024, Energean signed a new GSPA with Eshkol Energies Generation Ltd., majority owned
Dalia Energy Companies Ltd., for the supply of an initial 0.6 bcm/yr1, rising to 1 bcm/yr from 2032
onwards.
Energean supplies gas to all four IEC power stations that have been privatised: Ramat Hovav, Alon Tavor,
East Hagit and now Eshkol. This new contract is in line with Energean's strategy to bring competition and
security of supply to the Israeli market, and to secure long-term cash flows for its shareholders via its
long-term gas contracts.
The GSPA is for a term of approximately 15 years, for a total contract quantity of up to approximately 12
bcm and represents circa $2 billion in revenues over the life of the contract. The contract contains
provisions regarding floor and ceiling pricing, take or pay and price indexation (not Brent-price linked).
The GSPA has been signed at levels that are in line with the other large, long-term contracts within
Energean's portfolio.
Gas – spot sales agreements
Energean also has 9 spot sales agreements, which enhances the potential to increase offtake volumes
to the extent of the maximum Energean Power FPSO capacity and provides the ability to sell gas at spot
prices above contracted sales prices. The Group continues to explore alternative commercialisation
options, including export at market opportunities.
Liquids
Energean has a sales and purchase agreement with Vitol SA for the marketing of its hydrocarbon liquids
produced in Israel. This agreement was initially for six cargoes, but was extended in 2023.
In 2023, Energean offloaded eight hydrocarbon liquid cargoes, totalling over three million barrels.
Katlan
Energean discovered the Athena and Zeus fields as part of its 2022 drilling campaign. D&M has certified
that these two fields, as well as proximate Hera accumulation, have total 2P reserves of 32 bcm. The
wider Katlan area also contains 37 bcm of de-risked prospective resources.
Energean intends to develop the Katlan/Tanin area in a phased development. Phase 1 includes the
Athena, Zeus, Hera and Apollo accumulations, for which the field development plan was approved by the
Israeli Government in December 2023. Energean expects to take FID expected upon finalisation of EPC
terms, which are currently under negotiation. Phase 1 is split into two parts: a, which includes Athena and
Zeus and b, which includes Hera and Apollo.
STRATEGIC REPORT
Page 42 of 273
Egypt
Abu Qir
The Abu Qir gas-condensate field delivered 22 Kboe/d of working interest production in the 12 months
to 31 December 2023, approximately 87% of which was gas.
An infill well (NAQPII#2) on the Abu Qir field began drilling in December 2023 and was brought online in
January 2024. Energean is evaluating other infill and step-out exploration opportunities around its Abu
Qir hub.
NEA/NI
The NEA/NI project achieved first gas from the first well (NEA#6) in March 2023, followed by the second
(NEA#5) in July 2023 and then the remaining two in December 2023 (PY#1 and NI#1). The latter three
wells are performing in line with expectations at 72 mmscfd (15 Kboe/d). The NEA#6 well ceased
production in November 2023 owing to higher than expected rates of decline. There is no read-across of
this on the other wells.
Exploration
North East Hap'y offshore
The Orion X1 exploration well located on the North East Hap'y Concession, offshore Egypt, started drilling
in October 2023. Energean signed farm-out agreements in 2023 to reduce its working interest in the
licence to 19% (from 30%).
The exploration well reached the target reservoir in March 2024. Preliminary results indicate that well
contains no commercial hydrocarbons. Further appraisal activity is contingent upon the completion of
post-drilling well analysis.
Europe
Production
Working interest production from the Group’s European portfolio averaged 11 Kboe/d (34% gas) in 2023.
Italy – Cassiopea development
The Cassiopea project (180 bcf 2P reserves), in which Energean has a 40% non-operated equity stake,
remains on track for the summer of 2024. Drilling operations began in November 2023 and offshore and
onshore works are progressing well.
The field will deliver plateau working interest production rates of approximately 10 Kboe/d (100% gas)
from the middle of the decade, providing more than 30% of the region's gas consumption.
Greece – Prinos carbon storage project
Energean is committed to meeting its net-zero emissions target by 2050 and leading the Mediterranean
region’s energy transition. The Prinos CS (Greece) project proposal is to provide long-term storage for
carbon dioxide emissions captured from both local and more remote emitters and is in line with
Energean’s efforts to help decarbonise heavy industries in Greece, in line with the Group’s commitment
during COP28. Energean estimates that the Prinos subsurface volumes are sufficient to sequester up to
three million tonnes of CO2 p.a. (as confirmed by Halliburton) for up to around 30 years.
Energean's CS project in Greece has been included by the European Commission as a Project of Common
Interest. Non-binding memorandum of understandings have been signed for c.5 million tonnes p.a. of
storage and €150 million of grants have been committed. Energean is advancing the conversion of its
exploration licence into a storage permit.
STRATEGIC REPORT
Page 43 of 273
Morocco – country entry
In December 2023, Energean agreed to farm-in to Chariot Ltd.’s acreage offshore Morocco, which
includes the 18 bcm (gross)
25
Anchois gas development and significant exploration prospectivity. This
new country entry is well-aligned with Energean's strategy to become the pre-eminent independent
producer in the Mediterranean, with a focus on high quality gas assets. At the time of writing, farm-in
completion is expected imminently.
Energean (“
Operator
”) and Chariot plan to drill an appraisal well on the Anchois field in 2024, with the
following objectives:
•
To undertake a drill stem test on the main gas-containing sands.
•
To target an additional 5 Bcm of recoverable gas with a 61% geological chance of success
through a sidetrack into the O sands in the Anchois Footwall prospect.
•
To target an additional 6 Bcm of recoverable gas with a 49% geological chance of success
through a deepening of the well into previously undrilled sands in the Anchois North Flank
prospect.
Once drilled, the well is expected to be retained as a future producer for the Anchois development.
25
As per Chariot's latest competent persons report covering the Anchois Field that has certified gross 2C contingent resources
of 18 bcm in the discovered gas sands.
STRATEGIC REPORT
Page 44 of 273
Reserves
Energean’s year-end 2023 working interest 2P reserves
26
are 1,115 MMboe, a 4% decrease versus 2022 because of produced 2023 volumes.
At
1 January
2022
Revisions
Discoveries
Acquisitions/
(disposals)
Transfers from/
(to) contingent
Production
At
31 December
2023
Israel
Oil
MMbbls
101
6
-
-
-
(4)
104
Gas
Bcf
4,624
69
-
-
-
(165)
4,527
Total
MMboe
940
19
-
-
-
(34)
926
Greece
Oil
MMbbls
38
(0)
-
-
(3)
(0)
35
Gas
Bcf
5
(1)
-
-
-
-
5
Total
MMboe
39
(0)
-
-
(3)
(0)
36
Egypt
Oil
MMbbls
13
(2)
-
-
(1)
(1)
8
Gas
Bcf
490
(95)
-
-
(4)
(44)
348
Total
MMboe
99
(19)
-
-
(1)
(9)
70
Italy
Oil
MMbbls
36
3
-
-
-
(2)
37
Gas
Bcf
242
4
-
-
-
(7)
239
Total
MMboe
78
4
-
-
-
(3)
78
United
Kingdom
Oil
MMbbls
2
(0)
-
-
2
(0)
2
Gas
Bcf
2
0
-
-
1
(0)
3
Total
MMboe
2
(0)
-
-
2
(0)
3
Croatia
Oil
MMbbls
-
-
-
-
-
-
-
Gas
Bcf
14
0
-
-
-
(0)
14
Total
MMboe
2
0
-
-
-
(0)
2
Total
27
Oil
MMbbls
189
7
-
-
(2)
(8)
186
26
YE22 D&M and NSAI CPR.
27
Numbers may not sum due to rounding.
STRATEGIC REPORT
Page 45 of 273
At
1 January
2022
Revisions
Discoveries
Acquisitions/
(disposals)
Transfers from/
(to) contingent
Production
At
31 December
2023
Gas
Bcf
5,376
(22)
-
-
(2)
(217)
5,135
Total
MMboe
1,161
3
-
-
(2)
(47)
1,115
Present Value of 2P Reserves
28
($ million)
7,326
Adjusted TopCo
29
Group Net Debt YE23 ($ million)
481
28
YE23 NSAI and D&M CPR’s High Case (based on forward curve), NPV10.
29
The Group excluding Israel and Greece.
STRATEGIC REPORT
Page 46 of 273
Corporate Social Responsibility
Our approach
Energean seeks to maintain its position as the leading gas-focused independent E&P company in the
Mediterranean, by leveraging the support of its financial and community stakeholders, guided firmly by
its corporate values and principles.
Our primary objective is to create near-term and long-term value for all our stakeholders and drive
sustainable economic growth in the areas where we operate through a dynamic and innovative approach.
The Company’s overall goal is to create stakeholder value through sustainable development, taking
account of all the economic, social and environmental aspects of our business.
In the above context, Energean is committed to becoming a net-zero emissions company by 2050. The
Company is also a proud active signatory of the United Nations Global Compact, a voluntary Corporate
Responsibility initiative, and is committed to its Principles in the areas of human rights, labour,
environment and anti-corruption.
Moreover, we have always put ourselves at the heart of the communities that host and staff our
operations. It is through this symbiotic relationship that all parties can succeed on their respective and
shared journeys. We are aware that there are some in our communities that need additional support and
Energean is in the position to provide knowledgeable, sustainable and intelligent support that goes
beyond simple charity donations.
Guided by our unique “Ethos” and international best practices, we implement a variety of Corporate Social
Responsibility (“
CSR
”) activities designed to both protect the living environment where we operate and
enhance the lives of the communities that host our operations.
Below, we provide some important insights on the initiatives and measures we have taken:
•
Our services and operations contribute to energy security during a volatile period of geopolitical
tension and uncertainty.
•
Our community involvement in the areas of our operation is ongoing and includes a series of
initiatives aiming to improve the quality of life of local communities.
•
As an E&P committed to achieving Net Zero emissions by 2050, we have developed a
comprehensive Climate Change policy with medium and long-term plans launched for 2035 and
2050 respectively.
•
We publish an annual Sustainability Report in accordance with the Global Reporting Initiative
(GRI) Standards and the guidelines of the Sustainability Accounting Standards Board (“
SASB
”)
for the Oil and Gas E&P industry, which is externally assured by an accredited third party.
•
We participate in the Carbon Disclosure Project (“
CDP
”) in the categories of Climate Change and
Supplier Engagement, achieving strong ratings and exceeding the industry average.
•
We implement initiatives that contribute to the vast majority of the United Nations’ Sustainable
Development Goals (“
UN SDGs
”).
•
We align our disclosures with the reporting recommendations of the Task Force on Climate-
Related Financial Disclosures (“
TCFD
”) and present our approach and relevant results in our
annual Sustainability Reports.
Our people are at the core of Energean’s success. Operating in numerous countries, we acknowledge that
it is essential to bring our people together and unite diverse cultures while promoting diversity and
inclusion. To this end, we have developed initiatives to create an inclusive and attractive workplace for
our employees, launching our inaugural DEI strategy, with multiple in person and electronic education
sessions across the Group. We also started an inaugural “Karish Sailing Cup”, which brought together an
Energean team from all our offices to race against teams from across the Mediterranean. At the same
time, occupational health and safety is a top priority considering the nature of our business and we take
a proactive approach to ensure the health, safety and well-being of our employees.
We acknowledge the specific expectations our stakeholders hold for us. We embrace these expectations
and consistently endeavour to integrate CSR considerations into our business planning procedures.
Energean's CSR program is tailored to cater to the requirements of our stakeholders, foster enduring
relationships, and deliver concrete advantages to the communities where we conduct our operations.
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Community Involvement in the areas of our operation is manifested through several ongoing
initiatives/activities. Our focus is on three pillars, “Community – Education – Environment”, which
indicatively and non-exhaustively include:
•
“Energy in Fermo – Together to fight energy poverty in Italy”
. A multiple stakeholder partnership
focused on the Marche region adjacent to Energean’s Italian production operations, focused on
combating energy poverty by supporting approximately 100 families in the municipality of
Fermo, Italy. This is achieved through: a) providing direct support for the payment of utilities, and
b) launching a bespoke and focused education programme that will enable beneficiaries to
reduce energy consumption, through the direct engagement of local operators (volunteers and
public employees) that already work with local families and people.
•
“On Duty and Socially Responsible”.
Energean provides immediate support to local communities
in emergency situations (i.e. safely transferring a patient from the island of Thasos to Kavala in
extreme weather conditions).
•
Our “Clean Energy Scholarships” initiative.
Energean has granted four scholarships of excellence
and academic achievements to MSc students in the fields of Energy Research at The Technion
(Israel’s Institute of Technology) and Energy & the Maritime Domain at the University of Haifa.
•
Athens Classic Marathon “The Authentic”.
To raise awareness and promote the rights of people
with disabilities for dignity, equality and inclusiveness, each year the Company supports, as
“Grand Sponsors”, and runs alongside the Muscular Dystrophy Association of Greece (“
MDA
Hellas
”). By participating with a company-wide running team of employees from Greece (Athens
and Kavala) and three other countries, we run the 5km & 10km Road Races as well as “The
Authentic” 42km Classic Marathon Race with MDA patients in wheelchairs.
•
“Back to school with Energean”.
The company buys and donates school supplies and equipment
to local communities in Greece and Italy, in collaboration with charity organisations in those
countries.
Our CSR policy
Energean’s CSR policy is built on our core principles and values, which serve as the foundation of our
daily operations. We have incorporated our stakeholders’ expectations and priorities into this 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 entrusted with the responsibility for establishing,
shaping, developing and monitoring our CSR and sustainability goals and objectives. As such, they are
fully committed to our mission of leading the energy transition in the Mediterranean region through our
strategic focus on natural gas.
In our efforts to continuously enhance our sustainability profile, we actively collaborate with
governments, the private sector and society. Through these partnerships, we engage in the exchange of
views and ideas, aiming to further improve our approach and contribute to a more sustainable future
globally.
Corporate Governance is a top priority
Energean upholds the utmost ethical principles in line with globally acknowledged frameworks and best
practices of the industry. Our robust corporate governance system enables us to achieve our CSR goals
and fulfil our obligations towards our stakeholders while earning their trust. Meanwhile, we endeavour to
increase our productivity and maintain a versatile operational framework, enabling us to promptly and
efficiently adapt to changes in the macroeconomic landscape. We build on exemplary best practices and
consistently enforce our governance and internal controls in order to enhance our efficiency and
transparency.
Equality and transparency
Energean has adopted business practices that are characterised by professionalism, fairness and
transparency. Our commitment to adhering to laws and regulations is clearly communicated to all our
employees and stakeholders through our Code of Ethics.
The Code explicitly condemns any form of bribery, corruption and financial crime and this stance is
strongly enforced by Energean’s management and Board. Furthermore, the Code of Ethics serves as the
foundation of our positions on human rights, lobbying and advocacy, prevention of tax evasion, anti-
slavery and compliance with the General Data Protection Regulation.
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We ensure that all our business partners and representatives align with our Code of Ethics and comply
with the ethics and compliance clauses in their contracts. Additionally, prior to entering into any
partnerships, we conduct a thorough risk-based due diligence process to manage risks associated with
ownership structure, anti-bribery and corruption, sanctions, trade restrictions, human rights and labour
conditions.
Bribery and corruption
Acting and operating in an ethical and honest manner is a top priority for us. Energean complies with all
laws and regulations pertaining to bribery and corruption that are applicable in all the countries where we
operate, including the UK Bribery Act 2010.
We have a zero-tolerance policy to any incidents of bribery and corruption as outlined in our Anti-
Corruption and Bribery Policy. We regularly engage with our employees and business partners to ensure
that we maintain a high level of awareness and integrity. Additionally, we have implemented a
comprehensive anti-bribery and anti-corruption compliance program, supervised by our Board of
Directors. This program aims to identify and mitigate potential risks that may lead to unethical behaviour.
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 2023 and the respective SDGs they
serve.
SDGs
Our commitments and actions
•
“Back to School” with Energean.
•
Greece – we donated monetary vouchers for necessary school supplies and
stationery equipment to 3 social institutions, 2 community centres and 1
kindergarten, supporting over 500 students and their families in need –
Kavala, Island of Thassos, Zitsa (Ioannina).
•
Italy – in collaboration with “Caritas” (a charity with a nationwide presence
through local support centres) and other local partners, such as stationery
stores and bookstores in Vasto and Pozzallo, we were able to provide relief
packages for 95 families in need and 110 children, while we also paid for 63
energy bills. The packages included both educational and energy vouchers,
accompanied by engaging books for children, to foster an enhanced
awareness of energy consumption and, consequently, savings –Vasto and
Pozzallo.
•
Egypt – we donated 300 school bags and stationary supplies to
underprivileged students in Maadeyah village (our area of operation) with
the support of “FLDO Foundation” (an NGO that empowers females to
manufacture these school bags from recycled materials). Additionally, we
donated the tuition fees to all primary school students in need of that same
village – Village of Maadeyah.
•
Created a partnership with the Energy Bank Foundation to fight energy poverty
in Italy and promote energy equity. Committed to raising awareness for the
challenges of energy consumption, we have been able to develop a strong local
network to support local communities. The primary objective is to provide direct
utility payments for families and create educational programs on the reduction
of energy consumption. The project “Energy in Fermo – Together to Fight Energy
Poverty” is still ongoing: in 2023 we supported 50 families (151 individuals) and
paid for 100 energy bills – Marche Region/Italy.
•
Supported local families in London through a collaboration with the “Baker Street
Quarter Partnership”, a non-profit company funded and directed by local
businesses for the benefit of the broader community of the Baker Street and
Marylebone area. Employees collected toys and food parcels to support the
IMPS Pre-school, which students come from financially disadvantaged
backgrounds – London/UK.
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•
Donated Energean’s used furniture from the old Haifa office and funds to
families in need, youth clubs and more, through an ongoing collaboration with
the NGO “Lev Hash” (“Feeling Heart”) – Haifa/Israel.
•
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). Energean
colleagues cooked and prepared meals for citizens in need, during both the
Orthodox Easter & the Christmas holiday season – Kavala/Greece.
•
In celebration of Passover, Energean donated 200 valuable food packages to
families in need and holocaust survivors – Israel.
•
In celebration of the Israeli New Year, Energean delivered food packages to
families in need as part of our ongoing partnership with “Lev Hash” (“Feeling
Heart”) – Haifa/Israel.
•
Energean donated supermarket vouchers to individuals and families in need,
ahead of the Orthodox Easter, supporting the Social Market in the Municipality
of Zitsa – Zitsa (Ioannina)/Greece.
•
Donated supermarket vouchers to parish members in need of “Saint Gregory,
the Theologian” (Agios Grigorios Theologos), the Cathedral church of Nea
Karvali, enabling families to buy the necessary goods to celebrate the Orthodox
Easter Sunday table – Nea Karvali (Kavala)/Greece.
•
Several employees in Israel volunteered to pick fruit and sow seeds to support
local farmers during the ongoing conflict – Israel.
•
Continued our excellent HSE performance with almost 2.1 million man-hours
with no Lost Time Injuries regarding all Energean employees.
•
All our operated assets are now certified according to the ISO 45001 Health and
Safety Management System.
•
Donated a Chest Compression System (a cardiopulmonary resuscitation
machine) to the National Centre of Emergency Assistance of Kavala (“
EKAB
”) –
Kavala/Greece.
•
Donated five air conditioning systems to the Health Centre of Zitsa –
Ioannina/Greece.
•
Colleagues in Egypt participated in Abu Qir Petroleum’s (our joint venture) annual
football tournament, a vital method of teamwork, morale building and friendly
competition – Egypt.
•
For “World Blood Donor Day 2023”, our colleagues in Kavala donated blood to
the newly established “Energean Blood Bank”, which is at the disposal of all
Energean employees in Greece and their families – Kavala/Greece.
•
Supported a “Father & Son” football match, in partnership with the Athletic Club
of Kavala, for Father’s Day 2023 – Kavala/Greece.
•
Energean supported an experimental project in a local school focusing on the
implementation of quality courses promoting sport, health and wellbeing –
Abruzzo/Italy.
•
On the occasion of World Heart Day, an annual observance and celebration held
annually
on
29
September,
Energean
provided
free
First
Aid
and
Cardiopulmonary Resuscitation (“
CPR
”) training (“
ΚΑΡΠΑ
in Greek
”), to the
Community of Nea Karvali, as well as local NGOs and citizens of the area – Nea
Karvali (Kavala)/Greece.
•
Offered paid internships to 29 university students around the Group.
•
Hosted a company-wide interactive seminar with HE Dr Ron Adam, Ambassador
of Israel in Kigali, Rwanda for Holocaust Remembrance Day. Educating all
employees on the motivation behind the creation and ongoing observance of
the day.
•
Awarded two full scholarships based on educational performance to Master’s
Degrees graduates in Oil & Gas Technology at The International Hellenic
University – East Macedonia & Thrace, Kavala Campus/Greece.
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•
International Women’s Day 2023 “Embrace Equity”: launched Energean’s
inaugural Diversity, Equity and Inclusion policy. Raising awareness for the day
with an internal campaign led by Karen Simon, Non-Executive Chair, asking
employees “What does equity mean to you?”.
•
On 5 June 2023 (World Environment Day), Energean focused on positive
sustainability actions, and increased environmental awareness:
•
Greece: Donated multiple recycling bins to the Municipality of Paggaio
(Kavala), as well as ten composting bins to the School Committee of the
Municipality of Zitsa (Ioannina) for the schools of the area.
•
Italy: Hosted a country-wide webinar for our employees on environmental
protection and safeguarding operations on-going in the country, with a
strategic group overview.
•
Egypt: Worked with the “Future Light for Development Organisation” (FLDO),
an Egyptian Non-Governmental Foundation, to run awareness sessions for
women in waste sorting and collection, as well as the dangers linked to
plastic use and burning.
•
We embraced recycling by distributing 300 reusable bags made from
recycled fabric to households, offering a planet-friendly substitute to plastic
bags.
•
In Italy, Energean launched an ongoing internal initiative embracing Diversity,
Equity & Inclusion (“
DEI
”) amongst colleagues to build up an internal network of
ambassadors:
•
Started with a workshop titled “Diversity is a fact; Inclusion is an act”,
encouraging employees to share experiences and compare visions.
•
Followed by two workshops:
•
In Milan, colleagues addressed “What does it mean to be blind?”, by
visiting “Dialogue in the Dark”, an exhibition at the “Institute for the Blind”.
•
Colleagues in Pescara, in occasion of the European Diversity Month,
worked on gender diversity with “Donn.è”, a non-profit organisation
based in Abruzzo, committed to raising awareness within schools and
helping women against violence.
•
To close the year 2023, two more DEI workshops were held in Pescara and
Milan to educate employees by addressing the subject of cultural diversity,
on how cultural differences manifest themselves, how to develop a global
mindset and intercultural skills, how to recognise non-inclusive behaviours
and how to implement inclusive behaviour instead.
•
Sponsored the production of a video on the Holocaust experienced by Jews in
the wider Eastern Macedonia & Thrace region, broadcasted during the annual
commemorative ceremony – Kavala/Greece.
•
Supported the Sustainable Future conference, educating the next generation of
scientists. Organised by “Get Involved”, a student NGO that aims at developing
a culture of economic education within universities and other educational
organisations – Athens/Greece.
•
Granted Master’s degrees scholarships to students at the Technion (the Israel
Institute of Technology), to reward excellence and promote academic research
on clean energy – Haifa/Israel.
•
Energean partnered with Giovanni XXIII middle school in Pineto and local sports
organisations in Abruzzo. The initiative offered interdisciplinary teaching, social
skills and psychological well-being through sports in education. We brought
together 35 students from five sports organisations, for more than 30 activities
and three hours of sports per week, in addition to the standard two –
Abruzzo/Italy.
•
Abu Qir Petroleum, Energean’s joint venture, launched their 2023 summer
internship and training program, offering 300 Egyptian students of diverse
academic backgrounds the opportunity to gain experience in the Oil & Gas
sector – Egypt.
•
Awarded scholarships to Master’s degree students at the University of Haifa’s
“Maritime Policy and Strategy Research Center” – Haifa/Israel.
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•
Collaborated with the San Benedetto del Tronto Harbour Master’s Office and
students from the Montani Nautical Institute of Fermo, for an annual marine
safety and environmental protection exercise for the second consecutive year –
Fermo/Italy.
•
Signed two “Memorandums of Agreement” with the International Hellenic
University (“
IHU
”), both with the School of Chemistry and the postgraduate
programme MSc in Oil & Gas Technology – IHU’s Kavala Campus/Greece.
•
Ongoing collaboration with Local Higher Nautical Institute (“
ITIS Montani
”, in
Fermo) in terms of quality education – March Region/Italy.
•
The Energean IT department hosted a company-wide webinar titled “Modern AI:
What is going on and how can we benefit from it?” presented by Professor
Spinellis, a world-renowned expert and communicator on AI.
•
Energean donated 32 high quality monitors to a school in Vasto, ahead of their
reopening after many years of closure. The school will offer various education
courses and three-year professional qualifications – Vasto/Italy.
•
Participated in the 4th edition of the “Ragusa Environment Week”, titled
“Sustainability enlightens the future”, held in front of our Vega platform.
Energean employees presented our Vega platform anti-pollution systems to
approximately 350 students from 15 schools – Ragusa/Italy.
•
In 2023, the overall percentage of women at Energean fell slightly to 23% (2022:
24%; 2021: 16%; 2020: 14%), but the number of women on the Board was
maintained at 33%. We also maintained a healthy mix of employees from
different generations.
•
Twelve women from local communities came together to learn a new skill and
gain a sustainable outlook through an Energean project to make 300 reusable
cloth bags for their wider community – Egypt.
•
Energean became sponsors of the “Panthires” (Panthers), a women’s basketball
team based in Kavala, that promotes good sportsmanship and encourages
young girls to participate in sports. “Panthires” competes in the A2 Women’s
National Division of the Greek Championship – Kavala/Greece.
•
In collaboration with “Donn.è”, a non-profit organisation that helps women and
raises awareness of gender violence prevention within younger generations,
Energean conducted awareness-raising activities for 500 students aged 12 to
18, promoting gender equality and combating stereotypes – Abruzzo/Italy.
•
Energean recycled 99% of water withdrawals at its operated sites in 2023.
•
Energean is focused on providing cleaner and affordable energy. For example:
•
In Israel, gas from the Karish 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 2025, which will remove around 3 million tonnes of CO2.
•
In Egypt, Energean also plays a role in providing secure, reliable, affordable
and cleaner energy through its 87% gas weighted production. In 2023, Egypt
experienced rolling blackouts and increased fuel oil reliance due to declining
indigenous production amidst rising gas demand.
•
The number of employees aged 15–24 was increased in 2023 by 27% (from 11
in 2022 to 14 in 2023).
•
The number of nationalities was maintained year-on-year at 33.
•
Promoted cross-border economic and cultural links and opportunities through
Greek Independence Day events in Italy, Montenegro and Israel.
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•
Energean led a conference in Tel Aviv, in collaboration with energy services giant
Halliburton, bringing together the global energy industry and the Israeli start-ups
community to form an Israeli technology ecosystem – Tel Aviv/Israel.
•
Supported, as Grand Sponsors, 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 2023–24. The team
competes in the A2 Men’s National Division of the Greek Wheelchair Basketball
Championship – Kavala/Greece.
•
Donated T-shirts and basketballs to the Special Olympics basketball teams of
Abruzzo and promoted an educational “meet and greet” for employees based at
the Operational District in Abruzzo with Francesca Elda: a Special Olympics
Basketball Athlete of Roseto degli Abruzzi that Energean supported for the
Special Olympics Mondial Games 2023 in Berlin – San Giovanni Teatino/Italy.
•
Energean employees walked and ran alongside multi-sport athletes in the Milan
Marathon, supporting our partnership with “Special Olympics” – Milan/Italy.
•
Supported the Prefectural Association of People with Disabilities of Kavala, for
the 2nd consecutive year, by financing the operation, service and maintenance
of a special vehicle/van that transports their members daily – Kavala/Greece.
•
Supported, as “Grand Sponsors”, and ran alongside the Muscular Dystrophy
Association of Greece (“
MDA Hellas
”) and patients in wheelchairs, by
participating with a company-wide running team in the 40th Athens Classic
Marathon running events for 2023 (5km & 10km Road Races), in the centre of
Athens, for the 3rd consecutive year (November 2023). This year, Energean had
16 employees-runners participating also in “The Authentic” 42Km Classic
Marathon Race (from Marathon to Athens) and supporting MDA Hellas, coming
from Greece (Athens and Kavala) and 3 more countries. MDA Hellas is a non-
profit organisation that supports people that suffer with neuromuscular
diseases – Athens and Marathon/Greece.
•
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.
•
Donated, in collaboration with Dar Al Orman Association, necessary equipment
(artificial/prosthetic limbs, wheelchairs, and hearing aids), covering the needs of
all
underprivileged
people
with
disabilities
in
Maadeyah
village
–
Maadeyah/Egypt.
•
Supported the Italian Paralympic Swimming Federation (“
F.I.N.P
”) in Termoli
(Molise Region). F.I.N.P promotes swimming by providing its members the
opportunity to discover their aptitudes and talents, fostering self-confidence,
and achieving complete satisfaction in the water and in social life –
Termoli/Italy.
•
Sponsored the “All in One Boat” supporting inter-social co-operation in the
Energean Karish Cup. The boat included people from across a wide range of
different religions, communities, genders and socio-economic backgrounds –
Israel.
•
Energean employees in Athens attended a concert in support of MDA Hellas
featuring popular Greek artists. All proceeds of the concert were dedicated to
improving the quality of life for MDA patients living with ALS – Athens/Greece.
•
Energean Italy held a series of Diversity, Equity & Inclusion (“
DEI
”) workshops for
employees to identify and learn about DEI in general, with issues relating to
gender, disability, and cultural differences. This is a positive step towards the
integration of a more effective and adaptive communication style – Milan,
Pescara/Italy.
•
International Day for People with Disabilities (3 December 2023):
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•
Provided essential equipment that helps the students’ learning and
development process to the Special Elementary School of Kavala/Greece.
•
Contributed necessary equipment to the Home of Autistic Persons “Eleni
Gyra” in Zitsa (Ioannina)/Greece.
•
Renewed our financial support, for the Wheelchair Basketball Season 2023–
24, to the AOK Wheelchair Basketball Team of Kavala/Greece.
•
Remained the main sponsor of OKAK (Kavala's Track and Field Athletic Club),
this time for the 2023–2024 season. OKAK is one of the biggest clubs in Track
and Field in the East Macedonia & Thrace Region of Greece, that promotes
teamwork, 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.
•
Continued our financial aid to support Rahaf Sailing and Surfing Club, supporting
young sailors from low-income communities. Our donation helped the sailing
club’s team with their preparations for the 2024 Paris Olympics, supported over
120 sailors and surfers from Rahaf to participate in multiple competitions, as
well as their community open day – Rahaf (Municipality of Hof Hacarmel)/Israel.
•
Energean donated a modern light tower to the community in collaboration with
the Civil Protection of Porto San Giorgio, after a fire caused destruction of
emergency equipment and materials – Porto San Giorgio/Italy.
•
Sponsored the 7th “Adontes ke Psalontes en ti kardia” festival (“Singing and
Chanting in our hearts”), one of the most important music cultural events in
Northern Greece. Hundreds of students from music schools from Greece and
other European countries, participated in a 4-day music festival all over the city,
playing and singing traditional melodies and Byzantine hymns, honouring
legendary composers and celebrating historical persons – Kavala/Greece.
•
Grand Sponsor of the 7th Dodoni Festival – a remarkable summer open-air
Cultural Festival in the area of Ancient Dodoni – Ioannina/Western Greece.
•
Sponsor of the 23rd “Trofeo Del Mare” (“The Sea Trophy”), the International
Maritime Awards 2023, a cultural event dedicated to the sea that took place in
Scoglitti. The awards highlight the excellent work of individuals, organisations,
and institutions that promote environmental respect and who are committed to
and passionate about the Mediterranean Sea – Sicily/Italy.
•
Sponsors of the 66th Philippi Festival, the second oldest summer festival in
Greece, featuring a wide variety of ancient tragedy and comedy plays, as well as
contemporary theatre – Kavala & Ancient Philippi/Greece.
•
Full sponsorship of the kayak and rowing teams of Maadeyah Sports Club (in
our area of operation), to advance their skills and capabilities – Village of
Maadeyah/Egypt.
•
Became sponsors of the “Panthires” (Panthers), a women’s basketball team
based in Kavala, that promotes good sportsmanship and encourages young
girls to participate in sports. “Panthires” compete in the A2 Women’s National
Division of the Greek Championship – Kavala/Greece.
•
A team of employees from across the Energean Group participated in the Karish
Cup, the first ever Israeli offshore yacht race from the Energean Power FPSO to
Israel’s coast, demonstrating unity and community engagement – Israel.
•
Energean donated wireless communication devices to the Fire Service of
Kavala, enhancing and facilitating the coordination on the fields of action for the
fire fighters – Kavala/Greece.
•
Energean, in collaboration with FLDO (an Egyptian NGO), held a meeting with
representatives of the Fishermen's Association in the village of Al-Maadeyah.
The primary goal was to assess the needs and challenges faced by the local
fishing community, with the aim of enhancing the socio-economic activity in the
area – Al-Maadeyah/Egypt.
•
For “The European Week for Waste Reduction” (“
EWWR
”), Energean donated
three waste bins to the High School of Amygdaleona – Kavala/Greece.
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•
Energean recycled 99% of water withdrawals in its operated sites.
•
Recycled 81% of the waste generated during 2023 in production sites.
•
Maintained the ISO 14001 Environmental Management System certificates in all
our operated sites.
•
Energean supported the National Observatory Sea Protection (“
ONTM
”), a non-
profit organisation that is committed to increasing environmental culture,
especially regarding the Sea – Italy.
•
Energean’s Egyptian Abu Qir Petroleum (“
AQP
”) joint venture (“
JV
”) partners
continued 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 paper
recycling, by continuing the cooperating with “Go Clean”, a recycling solutions
company – Egypt.
•
Supported the “Followgreen” initiative, organised by the Municipality of Kavala,
by acquiring and awarding the prizes to 8 schools in Kavala for their
commitment to recycling. Challenged local schools to participate in the “Let's
Recycle” marathon, that run all throughout Greece for the 2022–23 school year
– Kavala/Greece.
•
Energean is fully committed to taking action on climate change, continuously
pursuing its target to become a net-zero emitter by 2050. We remain dedicated
to our Climate Change strategy, which provides the blueprint to eliminate our
GHG emissions and to enhance our low carbon portfolio.
•
We have outlined a clear roadmap to achieve Net Zero with regards to our Scope
1 and Scope 2 greenhouse gas emissions. Energean’s climate change strategy
has been rolled out and is being implemented in the short, medium and long
term. In 2023, we commenced the development of our long-term offsetting
strategic roadmap.
•
Reduced our carbon emissions intensity by over 86% by 2023 versus our original
baseline year
30
.
•
Verified our GHG emissions to ISO 14064-1 at operated sites level.
•
Accelerated our Carbon Capture Storage (“
CCS
”) project of Prinos.
•
Continued the procurement of “green electricity” in all our operated assets.
•
Maintained our Carbon Disclosure Project (“
CDP
”) score to an A-, regarding the
Climate Change Questionnaire, and maintained an A-, regarding the Supplier
Engagement Rating.
•
Awarded a “Platinum” rating in Israel’s Maala ESG index, for the 2nd consecutive
year, on account of our CSR practices.
•
Energean continues as a member and participant of the Terra Carta and
Sustainable Markets Initiative, an initiative for Climate Action by His Majesty of
England, King Charles.
•
During 2023, we maintained our zero oil spills record, a record that we hold since
the beginning of our operations in 2008.
•
Conducted various biodiversity surveys in order to identify sensitive habitats
close to our operations and to assess our impact:
•
Post drilling survey – Israel.
•
Sediment,
benthic,
water
column,
and
physicochemical
analysis
–
Prinos/Greece.
•
Benthic and water column analysis – Vega field/Italy.
•
Prolonged our collaboration with prestigious academic institutions in Greece to
advance the collective knowledge of the wider biodiversity research field.
•
Energean supported the National Observatory Sea Protection (“
ONTM
”), a non-
profit organisation that is committed to increasing environmental culture,
especially regarding the Sea – Italy.
•
Funded and invested in innovative deep-sea research, examining the presence
of hydrates on the floor of the Mediterranean Sea and their impact on the marine
environment and the climate change, while we also built a process for sharing
30
Original baseline year was 2019. In 2023, this was changed to 2022.
STRATEGIC REPORT
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information from research and surveys, in partnership with The University of
Haifa – Israel.
•
Energean collaborated with the Zooprophylactic Institute of Teramo to monitor
both the quality of the sea water through the biological early warning system
(Mosselmonitor) and the equipment installed under the “Rospo Mare B”
platform.
The
above
were
accomplished
through
the
“Mussel-Watch”
monitoring system, placed below the platform – Italy.
•
Sponsor of the 23rd “Trofeo Del Mare” (“The Sea Trophy”), the International
Maritime Awards 2023, a cultural event dedicated to the sea that took place in
Scoglitti. The awards highlight the excellent work of individuals, organisations,
and institutions that promote environmental respect and 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.
•
On 5 June 2023 (World Environment Day), Energean:
•
Donated multiple recycling bins to the Municipality of Paggaio (Kavala), as well
as ten composting bins to the School Committee of the Municipality of Zitsa
(Ioannina) for the schools of the area – Greece.
•
Embraced recycling by distributing 300 reusable bags made from recycled
fabric to households, offering a planet-friendly substitute to plastic bags –
Egypt.
•
Continued the collaboration with “3Bee” for the adoption of a beehive and a
beekeeper in Vasto, to monitor 300.000 bees that pollinate 300 million flowers.
For Christmas 2023, Energean gave vouchers to employees enabling them to
adopt 26,650 additional bees/hives throughout the country, to 328,650 in total.
“3Bee” is an agri-tech start up with the aim of protecting the bees, in the province
of Vasto, just opposite Energean’s Rospo Mare offshore platform –
Abruzzo/Italy.
In 2023, Energean collaborated with:
•
UN Global Compact.
•
UN Global Working Group participation.
•
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 at the 2023 Maala
ESG Index – Israel.
•
Management body of the Nestos River Delta, Lakes Vistonida-Ismarida and
Thassos Island – Northeastern Greece.
•
The Greek Embassy – Podgorica, Montenegro.
•
Member of Sodalitas, a business leadership for sustainable development. The
organisation promotes the development of CSR initiatives between companies
– Italy.
•
“Panthires” (Panthers), a women’s basketball team based in Kavala, that
promotes good sportsmanship and encourages young girls to participate in
sports – Kavala, Greece.
•
“Caritas Diocesana”, an organisation for charity – Fermo, Vasto, and Pozzallo
(Marche, Abruzzo, and Sicily), Italy.
•
“Go Clean”, a recycling solutions company – Egypt.
•
The Regional Unit of Kavala – Greece.
•
Energy Bank Foundation, a national organisation that provides economic
support to families and individuals suffering from economic and social
vulnerability and provides education on local communities about energy
consumption – Italy.
•
Special Elementary School of Kavala – Greece.
•
National Center of Emergency Assistance of Kavala (“
EKAB
”) – Kavala, Greece.
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•
The University of Haifa’s “Maritime Policy and Strategy Research Center” –
Haifa, Israel.
•
The Egyptian Petroleum Sector – Egypt.
•
“Baker Street Quarter Partnership”, a not-for-profit company funded and directed
by local businesses for the benefit of the broader community of the Baker Street
and Marylebone area – London, England.
•
The Health Center of Zitsa – Ioannina, Greece.
•
“Special Olympics Italia”, an organisation that promotes sport as a means of
inclusion for children and adults with intellectual disabilities – Italy.
•
The International Hellenic University (“
IHU
”) in Thessaloniki – Kavala Campus,
Greece.
•
“Saint Gregory, the Theologian” (Agios Grigorios Theologos), the Cathedral
church of Nea Karvali – Kavala, Greece.
•
“Future Light for Development Organisation” (“
FLDO
”), a Non-Governmental
Foundation, with a focus on women's empowerment, education, and
environmental preservation – Egypt.
•
“Get Involved”, a student NGO that aims at developing a culture of economic
education within universities and other educational organisations – Greece.
•
“Donn.è”, a non-profit organisation, committed to gender education and gender
violence prevention, by raising awareness within schools and helping women
against violence – Abruzzo, Italy.
•
The Municipality of Kavala – Greece.
•
National Observatory Sea Protection (“
ONTM
”) – Italy.
•
The University of Haifa – Israel.
•
Italian Paralympic Swimming Federation (“
F.I.N.P
”) – Termoli, Italy.
•
Civil Protection of Porto San Giorgio – Italy.
•
The Fire Service of Kavala – Greece.
•
The American University of Cairo – Egypt.
•
“Athletic Club of Kavala – Department of Wheelchair Basketball” – Kavala,
Greece.
•
Energean’s Joint Venture, Abu Qir Petroleum (“
AQP
”) – Egypt.
•
The Municipality of Paggaio – Kavala, Greece.
•
“Giovanni XXIII Institute” in Pineto – Abruzzo, Italy.
•
“Lev Hash” (“Feeling Heart”), a local NGO for charities – Haifa, Israel.
•
“Eleni Gyra”, Home of Autistic Persons – Zitsa (Ioannina), Greece.
•
Association “Trofeo Del Mare (“The Sea Trophy”) – Men and stories” – Sicily,
Italy.
•
Rahaf Sailing and Surfing Club, a Club that supports young sailors from low-
income communities – Rahaf, Israel.
•
“Aretusa” Handball Team – Siracusa, Italy.
•
The Nature and Parks Authority – Israel.
•
The Holy Diocese of Philippi, Neapolis and Thassos – Northeastern Greece.
•
Montani Technical Technological Institute in Fermo – Marche, Italy.
•
Democritus University of Thrace (DUTH), Department of Environmental
Engineering – Xanthi, Greece.
•
Dar Al Orman Association, an NGO that performs charity work – Egypt.
•
The Technion (the Israel Institute of Technology) – Haifa, Israel.
•
MDA Hellas (the Muscular Dystrophy Association of Greece), a non-profit
organisation that supports people that suffer with neuromuscular diseases –
Greece.
•
The High School of Amygdaleona – Kavala, Greece.
•
“3Bee”, an agri-tech company committed to halt the loss of biodiversity and
prevent the extinction of threatened species, such as bees – Italy.
•
OKAK (Kavala's Track and Field Athletic Club) – Kavala, Greece.
•
The Prefectural Association of People with Disabilities of Kavala – 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
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circular economy, with the aim of decarbonising industrial processes and
achieving environmental, economic and social sustainability – Italy.
•
The Health Center of Prinos – Island of Thassos, Greece.
•
Montani Technical Institute – Fermo, Italy.
•
The Municipality of Zitsa – Ioannina, Greece.
•
Association CNOS-FAP in Vasto – Abruzzo, Italy.
Excellence through our people
At Energean we aim to offer fulfilling careers and be the employer of choice in all the countries that we
operate by attracting, nurturing, and retaining a range of diverse talent reflective of the communities in
which we live. Driven by our core values, we focus on creating an environment where people feel welcome
and part of a great place to work, inspired to deliver at their best.
In 2023 we actively listened to our people to understand their views on areas that are most important to
them. We conducted a group wide engagement survey to understand the employee’s perception about
the company as well as a culture audit on diversity, equity, and inclusion (“
DEI
”), gaining great insight on
what is working well and where we need to focus our efforts for the future. The findings of the survey and
focus groups helped to shape our first DEI mission, vision, and strategy.
In addition, we launched the Energean global learning platform which gives our employees centralised
access to a range of learning content.
Learning and development
Through increased education and training opportunities, we continue to build our people’s skills. E-Guru,
Energean’s global learning platform, launched within 2023 offering our people a centralised point of
access for training. The platform covers a wide range of learning including the Udemy e-learning business
library and covers topics relevant to our employees such as leadership, safety, sustainability, diversity,
and inclusion, as well as courses related to soft and technical skills. For the second year in a row, we saw
an increase in the overall training hours recorded; up 8.3% in 2023 versus 2022 and with an average of
22 hours of learning per employee during the year.
We also give our colleagues opportunities to develop and contribute, allowing us to strengthen the talent
pipeline which will ensure Energean’s long-term success. This year, 19 colleagues were offered the
opportunity to make an internal move, either via promotions or via a lateral transfer to other roles that
better meet their career aspirations and the company needs.
Employee engagement
It is crucial to listen to our colleagues, understand their views while, showing them that their contribution
is valued and appreciated. In September 2023, The Great Place to Work survey was conducted (with 76%
participation) to measure employee perception of their working environment and the level of trust in the
company. As a result of this survey, the focus for 2024 is on career development opportunities, internal
communication, amongst other areas.
We are proud to be certified as a Great Place to Work in Greece, Israel, and Egypt.
Diversity, Equity and Inclusion (DEI)
We are committed to diversity, equity and inclusion and are proud of our progress so far in raising
awareness of DEI across the business and in celebrating what is important to our people.
2023 has been transformational for Energean in respect to progress towards our DEI initiatives. For the
first time, we developed the Energean DEI mission, vision and strategy following the culture audit
conducted by Inclusive Employers, a UK organisation expert in the workplace inclusion, after analysis of
the engagement survey and focus groups results.
Approximately 150 employees participated in the focus groups around the group. Consideration was
taken to ensure that we heard from a wide range of people from all areas of the organisation, across the
global locations, as well as individuals with varying identities.
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The DEI strategy aims to demonstrate the process by which our DEI goals enable and support the wider
business priorities, in a clear, objective yet ambitious way which aligns with Energean's overall strategy
and values. This strategy is focusing on four pillars:
•
Development of the DEI structure and leadership.
•
Attraction and retention of people.
•
Listening and serving the society.
•
Bridging our DEI practices with learning and development and sustainability drives.
In parallel our recruitment, onboarding and offboarding practices were reviewed and we engaged with
Diversity Jobs Group to attract talent from underrepresented communities.
Additionally, we formalised and launched Energean’s hybrid work policy that offers increased flexibility to
employees for working remotely.
We continue for another year our participation in the UN Compact Global and in 2023 we became
members of the Inclusive Employers network.
Focusing on gender equality, the overall percentage of women at Energean remained relatively stable at
23%. Our gender pay gap for 2023 is -6% at median hourly wage rates, meaning that for every dollar
earned, women earn six cents more.
We are also proud to have increased our overall under 30s population at Energean from 10% to 14%,
ensuring that we provide career opportunities to the younger generation and develop the next generation
of Energean leaders.
In 2023, our employee retention rate has increased compared to 2022 to 90%, while our turnover rate that
measures employee resignations fell to 7.4%.
Headcount by seniority and gender
Gender balance by seniority
Men
Women
Total
31 Dec
2023
31 Dec
2022
31 Dec
2023
31 Dec
2022
31 Dec
2023
31 Dec
2022
Board
6
6
3
3
9
9
Executive Committee
5
7
1
2
6
9
Senior management
19
18
9
8
28
26
Middle management
36
35
10
11
46
46
Rest of staff
388
343
113
103
501
446
Total
454
409
136
127
590
536
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Gender balance by seniority
Headcount by age
Category
Number
% vs. total no. of employees
31 Dec 2023
31 Dec 2022
31 Dec 2023
31 Dec 2022
Up to 30 years old
84
56
14%
10%
31 to 50 years old
351
327
60%
61%
Over 51 years old
155
153
26%
29%
Headcount by seniority and age range
77%
78%
68%
83%
67%
23%
22%
32%
17%
33%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rest of Staff
Middle Management
Senior Management
Executive Committee
Board of Directors
Men
Women
17%
61%
59%
50%
33%
11%
22%
41%
50%
67%
89%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rest of Staff
Middle Management
Senior Management
Executive Committee
Board of Directors
Up to 30 years old
31 to 50 years old
Over 51 years old
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Headcount by country
At the end of 2023 our workforce increased from 536 to 590, representing 33 different nationalities.
Country
No of employees
31
31 December 2023
31 December 2022
Greece
216
185
UK
38
36
Montenegro
0
2
Cyprus
5
5
Israel
102
84
Egypt
41
39
Italy
188
184
Croatia
0
1
Total
590
536
Ensuring a secure workplace
Our foremost commitment is safeguarding the well-being and safety of all individuals impacted by our
corporate endeavours. In 2023, we upheld our outstanding safety record, aligning with the previous year,
by fully leveraging the implementation of our HSE management system across our digital platforms. This
has allowed us to achieve faster response times and implement corrective actions promptly, thereby
expediting the return to normal operations.
In 2023 we achieved a Lost Time Injury Frequency (“
LTIF
”) of 0.46 in all Energean sites and 0.47 in all
sites working for Energean (including contractors’ sites) and a Total Recordable Injury Rate (“
TRIR
”) of
0.92 in all Energean sites and 1.1 in all sites working for Energean (including contractors’ sites). This
mirrors the exemplary performance of the preceding year, showcasing a strong level of consistency.
Key HSE metrics
Lost Time Injuries Frequency (“LTIF”)
32
2023
2022
2021
Employees
0.00
0.00
0.98
Contractors
0.54
0.52
0.25
Personnel total
0.47
0.47
0.33
Total Recordable Injuries Rate (“TRIR”)
33
2023
2022
2021
Employees
0.00
1.29
1.97
Contractors
1.26
1.17
0.62
Personnel total
1.09
1.18
0.77
31
Excludes JV partners and contractors; seconded employees have been calculated in their home country.
32
LTI Frequency: The number of Lost Time Injuries (fatalities +LTIs) per million hours worked.
33
TRIR: The number of Total Recordable Injuries (fatalities + LTIs+ restricted work cases + medical treatment cases).
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Fatal Accidental Rate (“FAR”)
34
2023
2022
2021
Employees
0
0
0
Contractors
0
0
0
Personnel total
0
0
0
Enhancing HSE management systems: the intersection of humanisation and digitalisation
Incorporating our safety and environmental digital platform into Energean's HSE management systems,
which are certified to ISO 45001 and ISO 14001 standards, ensures a holistic approach to risk
management. Accessibility is democratised across all organisational levels, empowering personnel with
real-time data, incident reporting capabilities, and proactive risk mitigation tools. Following the classic
Plan-do-assess-adjust cycle, this humanised approach to digitalisation transforms our HSE management
system from a set of protocols into a dynamic framework that fosters engagement, ownership, and
accountability at every step.
The implementation of our HSE digital platform catalyses a culture of safety and environmental
stewardship, driving top-tier performance results. With seamless integration and user-friendly interfaces,
personnel can make informed decisions promptly, enhancing response times and minimising potential
risks. Furthermore, the platform facilitates comprehensive data analysis, enabling continuous
improvement initiatives and strategic decision-making processes.
By intertwining humanisation with digitalisation through this platform, our HSE management system
transcends traditional boundaries, evolving into a robust, adaptive framework that ensures the well-being
of employees and the sustainability of the environment while optimising organisational performance.
During 2023, more than 5,770 cases were recorded in our digital platform, including more than 3,900
observations, near misses and incidents, more than 360 audits, more than 775 HSE inspections and more
than 200 environmental and 480 H&S performance records.
Key policies of our HSE management system
Health Safety Environmental and Social Responsibility Policy:
Our Health, Safety, and Social
Responsibility Policy encapsulates our commitment to compliance with all relevant laws and standards
while fostering healthy workplaces and advancing our net-zero commitment. We prioritise cultivating a
robust safety culture and implementing rigorous risk management practices, including emergency
preparedness and waste management protocols. Furthermore, we recognise the importance of
maintaining a social license to operate by engaging with stakeholders transparently and aligning our
efforts with the United Nations Sustainable Development Goals (“
UN SDGs
”). Through these integrated
initiatives, we aim to achieve sustainable business practices while positively impacting society and the
environment.
Corporate Major Accident Prevention Policy:
Our Corporate Major Accident Prevention Policy prioritises
the identification and management of major hazards to achieve As Low As Reasonably Practicable
(“
ALARP
”) risk levels. Through rigorous operational control measures and robust management of change
protocols, we mitigate risks effectively. Planning for emergencies is integral, ensuring swift and
coordinated responses. Continuous monitoring of performance, supplemented by regular audits and
reviews, ensures policy effectiveness. We invest in comprehensive organisation and personnel training
to bolster competence and awareness. By adhering to these principles, we strive to prevent major
accidents, safeguarding our people, assets, and the environment. Throughout 2023, there were no major
accidents reported.
Contractors HSE Policy:
Our HSE Policy for contractors mandates strict adherence to company policies,
emphasising their role in managing HSE risks. Compliance with laws and international standards is
imperative, alongside maintaining a robust HSE management system. Contractors must ensure safe
working conditions for their personnel, prioritising environmental preservation and fostering a high safety
culture. Additionally, they are required to provide the necessary staffing levels to meet safety
requirements. By upholding these standards, contractors contribute to a safe and healthy work
environment while aligning with our commitment to HSE excellence.
34
FAR: The number of fatalities per 100 million hours worked.
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Climate change policy:
Our climate change policy is intricately woven into our commitment to align with
the goals of the Paris Agreement, guiding us towards achieving Net Zero emissions. Through continuous
assessment of transitional and physical risks, we prioritise the active reduction of carbon emissions,
focusing particularly on scopes 1 and 2. Moreover, we aim to invest in Natural Based Solution projects,
harnessing nature's processes such as afforestation, reforestation, and soil carbon sequestration to
generate carbon removals. Our adherence to TCFD recommendations and active participation in the CDP
underscores our dedication. Additionally, we maintain internal carbon prices to stress-test resilience and
educate personnel, ensuring alignment with company objectives. These holistic initiatives do not only
aim to reduce emissions but also advance biodiversity conservation and community resilience, reflecting
our unwavering commitment to sustainability and transparency. During 2023 we have reduced our
carbon emission intensity on an equity share accounting approach by 86%, from 68 kgCO2e/boe in 2019
to 9.3 kgCO2e/boe in 2023.
Stop work policy:
Our stop work policy prioritises a safe and secure environment, safeguarding against
risks and potential harm to personnel, property, and the environment. Every individual working with us
holds the responsibility to halt work immediately upon identifying any risks, with no repercussions if
proven unnecessary. Work resumes only after all safety concerns are thoroughly addressed and cleared.
This proactive approach ensures that the well-being of our workforce and the protection of our assets
and surroundings remain paramount, fostering a culture of safety and accountability throughout our
operations. In 2023, a total of 141 stop-work cases were reported across all sites operated by the
company, which constitutes 3.8% of all safety observations.
Main pillars of our HSE management system
The integration of the following topics constitutes a holistic strategy for effectively managing health,
safety, and environmental risks within Energean. By addressing these areas comprehensively, we can
safeguard the well-being of our employees, mitigate environmental impact, and foster sustainable
business practices. Key components include implementing robust safety protocols, promoting
occupational health initiatives, adhering to environmental regulations, minimising carbon footprint,
managing waste responsibly, fostering a culture of safety and environmental stewardship, engaging
stakeholders transparently, and continually improving processes through feedback and innovation. This
multifaceted approach not only enhances workplace safety but also contributes to long-term
sustainability and resilience in the face of evolving challenges.
Risk management:
This involves identifying, assessing, and controlling risks associated with health,
safety, and environmental hazards. It encompasses methods for analysing risks, implementing controls,
and monitoring their effectiveness. More than 29,000 risk assessments and Toolbox talks were
conducted in 2023 in all our operated sites.
Compliance and regulatory requirements:
Ensuring compliance with relevant laws, regulations, and
standards pertaining to health, safety, and environmental protection is crucial. Discussions focus on
staying up-to-date with changing regulations, maintaining records, and conducting audits to ensure
compliance. During 2023, more than more than 140 HSE audits were performed in Energean operated
sites and zero permits and licences violations were recorded.
Safety culture and behaviour-based safety:
Building a strong safety culture within an organisation
involves fostering attitudes, beliefs, and values that prioritise safety. Behaviour-Based Safety (BBS)
focuses on understanding and modifying individual and group behaviours to improve safety outcomes.
In 2023, more than 3,700 safety observations were documented at Energean-operated sites, all
successfully managed.
Leadership and accountability:
At the helm of HSE leadership and accountability stands the CEO,
orchestrating efforts to attain peak HSE performance company-wide. From proposing essential HSE
measures to the Board of Directors, to cultivating transparent communication across management tiers
and staff, the CEO champions a culture of safety and environmental stewardship. This commitment
cascades through all levels of management within the organisation. During 2023, more than 200
leadership visits and managerial walk-arounds were performed in Energean’s operated sites.
Training and competency development:
Providing comprehensive training programs and ensuring
employees have the necessary skills and knowledge to perform their jobs safely is essential. Discussions
involve assessing training needs, developing training materials, and evaluating the effectiveness of
training programs. During 2023, more than 7,250 hours of certified training and more than 900 hours of
internal training were provided to Energean personnel.
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Incident management and investigation:
All incidents occurred in 2023 were managed in our dedicated
digital platform. Developing protocols for responding to incidents, investigating their root causes, and
implementing corrective actions to prevent recurrence is critical. Discussions cover incident reporting
mechanisms, investigation methodologies, and lessons learned. In 2023, a total of 102 actions were
initiated in the system, with 82 having been successfully closed, while the remaining 20 are currently in
progress of being resolved.
Emergency preparedness and response:
Planning for emergencies such as fires, natural disasters, or
chemical spills is essential for protecting personnel, the environment, and assets. Energean's Crisis
Management Plan (“
CMP
”) and Emergency Response Plans (“
ERP
”) encompass all assets and
operations, undergoing formal testing to ensure compliance with strategic, incident management, and
response protocols. During 2023, more than 190 drills and exercises were performed at Energean
operated sites.
Environmental management and sustainability:
Managing environmental impacts, conserving resources,
and promoting sustainability are increasingly important aspects of HSE management. Discussions focus
on reducing carbon footprint, waste minimisation, and implementing renewable energy initiatives. Our
performance in 2023 is explicitly discussed in the climate change and the environmental section.
Health and wellness programmes:
Promoting employee health and well-being contributes to overall
safety and productivity. In 2023, all employees are offered an annual health program to uphold optimal
levels of health and well-being. Additionally, both employees and contractors are required to possess
medical fitness certificates tailored to the demands of their respective roles, ensuring health standards
are consistently met. During 2023, zero work-related illnesses occurred.
Continuous improvement and performance monitoring:
Establishing mechanisms for continuous
improvement involves regularly evaluating HSE performance, identifying areas for improvement, and
implementing corrective actions. Discussions involve setting performance metrics, conducting reviews,
and benchmarking against industry standards. During 2023, we organised a comprehensive HSE
management review meeting in every country where our operations are active.
Contractors’ management:
Contractors are chosen based on their capacity to deliver services in
alignment with project specifications, contractual obligations, HSE and climate change policies, and
localised regulations. Clear criteria for pre-qualification, selection, evaluation, and ongoing assessment
are established to ensure suitability and effective monitoring of contractor performance. During 2023,
more than 60 contractors were evaluated against Energean’s HSE criteria.
Stakeholder engagement and communication:
Engaging with internal and external stakeholders,
including employees, contractors, regulators, and the community, is essential for maintaining
transparency and trust. Discussions focus on communication strategies, stakeholder feedback
mechanisms, and addressing concerns. During 2023, stakeholder engagement meetings were
conducted in conjunction with the environmental licensing processes.
Our Health and Safety performance in numbers
Occupational safety
2023
2022
2021
Employees man hours worked
888,360
772,865
1,015,866
Contractors man hours worked
5,553,675
7,724,105
8,118,433
Total man hours worked
6,442,035
8,496,970
9,134,309
Number of employees fatalities
0
0
0
Number of contractors fatalities
0
0
0
Employees Fatal Accident Rate (“FAR”)
35
0
0
0
Contractors Fatal Accident Rate (“FAR”)
0
0
0
Total Fatal Accident Rate (“FAR”)
0
0
0
Employees Lost Time Injuries (“LTIs”)
0
0
1
Contractors Lost Time Injuries (“LTIs”)
3
4
2
35
Per 100 million hours worked.
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Occupational safety
2023
2022
2021
Total Lost Time Injuries (“LTIs”)
3
4
3
Employees LTI Frequency (“LTIF”)
36
0.00
0.00
0.98
Contractors LTI Frequency (“LTIF”)
0.54
0.52
0.25
Total LTI Frequency (“LTIF”)
0.47
0.47
0.33
Employees Total Recordable Injuries (“TRIs”)
0
1
2
Contractors Total Recordable Injuries (“TRIs”)
7
9
5
Employees and Contr. Total Recordable Injuries (“TRIs”)
7
10
7
Employees TRI Rate (“TRIR”)
37
0.00
1.29
1.97
Contractors TRI Rate (“TRIR”)
1.26
1.17
0.62
Employees and Contractors TRI Rate (“TRIR”)
1.09
1.18
0.77
Process safety
2023
2022
2021
Process safety incidents
0
1
0
Loss of containment incidents
21
38
10
39
0
Safety training
2023
2022
2021
Internal training (hours)
2,394
457
950
Certified training (hours)
5,900
7,295
1,401
Total training (hours)
8,294
7,752
2,351
Our missions: preserving our planet
Recognising our duty to preserve our natural environment, we are compelled to take swift and decisive
action to protect it for the benefit of future generations. Energean stands at the forefront of this
endeavour, exemplifying leadership through a comprehensive sustainability strategy woven into the
fabric of our operations.
From championing conservation initiatives to seamlessly integrating renewable energy, reducing waste,
and managing resources responsibly, our commitment to effecting tangible change knows no bounds.
Our unwavering dedication to safeguarding biodiversity emphasises our solemn pledge to safeguard vital
ecosystems essential for the sustenance of life on our planet. By seamlessly incorporating renewable
energy sources into our energy portfolio, we actively combat the climate crisis, steadfastly working to
reduce harmful carbon emissions.
Furthermore, our concerted efforts to minimise waste, including robust recycling programs and the
reduction of single-use plastics, aim to mitigate the pollution besieging our oceans and landfills.
Education and advocacy serve as linchpins in our mission to preserve our planet. Through continuous
training and advocacy initiatives, we empower our team members to become champions of
environmental conservation and advocates for sustainable practices in all spheres of our operations.
36
Per 1 million hours worked.
37
Per 1 million hours worked.
38
Loss of containment incidents increased in 2023 due to the FPSO start up in Israel with zero effect on people and the
environment. There were no required fines or penalties.
39
Loss of containment incidents increased in 2022 due to the FPSO commissioning phase in Israel with zero effect on people
and the environment. There were no required fines or penalties.
STRATEGIC REPORT
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Together, with unwavering resolve and collective action, we aim to drive positive change on a global scale,
ensuring a healthier and more sustainable future for all.
We uphold environmental excellence that adheres to both national and international benchmarks. Every
aspect of our operations aligns with the highest standards, as evidenced by our assets' environmental
management systems certified to ISO 14001.
Our commitment extends to meticulous monitoring, recording, and assessment of air emissions,
ensuring compliance with stringent regulations. We employ robust measures to prevent and mitigate oil
spills and chemical leaks, safeguarding ecosystems and communities.
Water resource management receives diligent attention, with practices aimed at ensuring sustainability
and responsible usage. Our waste management protocols prioritise sustainability, minimising
environmental impact through efficient disposal and recycling.
Furthermore, we are dedicated to monitoring and preserving ecosystems and biodiversity, recognising
their intrinsic value to our planet's health and resilience. Through proactive measures and continuous
improvement, we strive to uphold environmental stewardship in every facet of our operations.
In addition to our rigorous environmental management practices, we also ensure comprehensive
verification of carbon emissions accounting for Scope 1, 2, and 3, meticulously adhering to the
specifications outlined in ISO 14064-1.
Key metrics monitored
Equity share versus operational accounting approach
We report GHG-related emissions both on an equity share accounting approach and also on the
operational accounting approach. All other environmental data is reported 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 currently hold no operated positions, and
includes 100% of emissions from Accettura, Italy, even though our working interest in the field is 50.33%.
Environmental KPIs
2023
2022
2021
Environmental expenditure $ million
40
1.5
3.3
1.1
Energy consumption intensity (MJ/boe
)41
,
42
– operated share
76.5
174.9
370.3
Scope 1&2 carbon emissions intensity
(kgCO2e/boe)
43
– net equity share
9.3
16.0
18.3
Water use intensity (m3/boe)
44
– operated share
0.003
0.01
0.2
Water volume recycled (%)
45
– operated share
99
99
95
Non- hazardous waste intensity (kg/boe)
46
– operated share
0.01
0.8
0.2
40
Capital expenditures related to environmental protection activities.
41
Ratio of energy (thermal & electrical) consumption over gross hydrocarbons production.
42
2021 figure is 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
43
Ratio of direct and indirect (consumed electricity) carbon emissions over gross hydrocarbons production.
44
Ratio of total fresh and seawater used for processes over gross hydrocarbons production.
45
Proportion of water used in the process that is returned to the same catchment area or the sea, from where it was initially drawn.
46
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.
STRATEGIC REPORT
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Environmental KPIs
2023
2022
2021
Hazardous waste intensity (kg/boe)
47
– operated share
0.01
0.1
0.1
Waste recycled (%)
48
– operated share
81.0
95.2
90.5
Waste energy recovery (%)
49
– operated share
0.0
0.0
0.0
Air quality
Energean places a strong emphasis on prioritising the maintenance of high air quality through
responsible and sustainable operations. We consistently monitor all atmospheric emissions to uphold
this commitment. During 2023, the total amount of nitrous emissions (“
NOx
”) generated across the Group
increased by 18% versus 2022 due to the FPSO full operations in Israel. The amount of sulphurous
emissions increased due to the restart and stabilisation of production in our H2S-reach asset from Prinos,
Greece.
During 2023, we focused on the methane emissions mitigation by conducting a number of LDAR
campaigns in various operated assets to monitor and reduce fugitive emissions (particularly methane).
We carried out campaigns at Prinos, Greece, the FPSO in Israel, S. Giorgio and Maria a Mare, Rospo and
Larino in Italy. The findings are followed by mitigation actions that, depending on the situation, are
scheduled to be fixed. Our next step is to extend fugitive emissions monitoring and mitigation, including
among others incomplete combustion from stationary equipment and flaring systems.
Biodiversity
Maintaining biodiversity is a priority for Energean. We are focused on closely observing pre-, during and
post our operations to quantify and mitigate potential consequences
In 2023, 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.
•
A post-drilling survey that aimed to provide information regarding the environment in the drilled
areas at sea. It provided data related to the marine environment, tracking physical, chemical and
biological parameters in the water column and in the sediment. This study constitutes a basis
for assessing the state of natural and ecological values in the relevant areas, and possible
deviations from accepted country and foreign standards, including changes with respect to the
natural background.
47
Ratio of municipal and industrial waste, that according to regulation pose a severe threat to human health or the environment
over gross hydrocarbons production.
48
Proportion of waste that are reprocessed into other products, materials or substances whether for the original use or for
other purposes.
49
Proportion of non-recyclable waste materials that are converted into usable heat, electricity or fuel through a variety
of processes.
STRATEGIC REPORT
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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 utilising 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 is maintaining the 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.
•
At the Vega platform, benthic and microbenthic fauna samples were taken for analysis, and
water quality analysis was also carried out. The analysis was performed by the University of
Catania’s Department of biological, geological and environmental sciences.
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.
•
An offshore sampling analysis was performed at Prinos in Greece. The results of the independent
laboratory showed near-zero aromatic hydrocarbon and heavy metal concentrations in the water
column, sediment and animal tissue samples, while the benthic communities have not been
affected by our operations in the Gulf of Kavala.
Water resources
Energean places a strong emphasis on the management of freshwater resources. We acknowledge the
significance of ensuring freshwater availability, meeting the rising global demands in the future, adhering
to high-quality standards, and meeting the expectations of stakeholders. In 2023, 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 %
Oil spills prevention
Energean has implemented a robust and thoroughly tested system for preventing oil spills. Our
preventative measures encompass strategies to minimise the likelihood of spills, leaks, and uncontrolled
discharges. These measures include adhering to regulatory discharge limits based on operational
95
99
99
93
94
95
96
97
98
99
100
2021
2022
2023
STRATEGIC REPORT
Page 68 of 273
locations, utilising online sensors to promptly detect and address potential incidents, employing
secondary containment systems, such as barrels, drums and even vessels and implementing
comprehensive plans for the regular inspection and maintenance of equipment posing significant oil spill
risks. The outcome of these efforts is evident in our achievement of yet another consecutive year with
zero oil spills in 2023. We prioritise maintaining a high level of preparedness through annual oil spill
emergency response drills and training sessions. Additionally, our commitment to staying well-prepared
is demonstrated by our membership in Oil Spill Response Ltd., a leading industry consortium renowned
for its expertise in oil spill response services on a global scale.
Waste management
At Energean, we try to enforce the resources and waste hierarchy pyramid, maintaining 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 2023, 81% of total waste was recycled, while 19% was managed through local landfill facilities (95.2%
and 4.8% in 2022 respectively).
Our environmental performance in numbers
For information on the definition of operated versus equity-share, please refer to page 65.
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. Scope 3
emissions were calculated using the GHG Protocol’s Scope 3 calculation guidance. Scope 1, 2 and 3
emissions have all been verified to ISO 14064-1 based on the operational accounting approach.
Environmental records
2023
2022
2021
Production – equity share
Oil (Kboe)
7,379
3,720
4,141
Raw Gas (Kboe)
38,845
11,954
11,489
Total oil and raw gas (Kboe)
46,224
15,674
15,629
Ratio oil/total (%)
16.0
23.7
26.5
Ratio gas/total (%)
84.0
76.3
73.5
Production – operated sites
Oil (Kboe)
5,785
2,131
2,506
91
95
81
9
5
19
0
10
20
30
40
50
60
70
80
90
100
2021
2022
2023
Total waste recycled (%)
Total waste disposal (%)
STRATEGIC REPORT
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Environmental records
2023
2022
2021
Raw Gas (Kboe)
29,439
2,222
449.0
Total oil and raw gas (Kboe)
35,225
4,353
2,955
Ratio oil/total (%)
16.4
48.9
84.8
Ratio gas/total (%)
84.6
51.1
15.2
GHG emissions – equity share
Total GHG emissions (tCO2e)
443,632
254,704
306,930
Scope 1 emissions (tCO2e)
428,252
249,622
285,362
Scope 2 emissions (tCO2e) –
location based
50
15,379
5,082
21,568
Guarantees of Origin (tCO2e)
(14,403)
(4,168)
(20,725)
I-REC (tCO2e)
(151.5)
(175.0)
(58.0)
Scope 2 emissions (tCO2e) –
market based
51
824.5
739.0
785.0
Scope 3 emissions (MtCO2e) –
Category 10
0.7
0.5
0.5
Scope 3 emissions (MtCO2e) –
Category 11
21.8
7.6
7.6
Scope 3 emissions (MtCO2e) –
Total
52
22.5
8.0
8.1
Scope 1 emissions intensity
(kgCO2e/boe)
9.3
15.9
18.3
Scope 2 emissions intensity
(kgCO2e/boe) – market based
0.0
0.1
0.1
Total emissions intensity
(kgCO2e/boe)
9.3
16.0
18.3
GHG emissions – operated sites
Total GHG emissions (tCO2e)
235,134
75,354
73,042
Scope 1 emissions (tCO2e)
220,579
71,011
52,259
Scope 2 emissions (tCO2e) –
location based
53
14,555
4,343
20,783
Guarantees of Origin (tCO2e)
(14,403)
(4,168)
(20,725)
I-REC (tCO2e)
(151.5)
(175.0)
(58.0)
Scope 2 emissions (tCO2e) –
market based
54
0.0
0.0
0.0
50
Location based is defined as the emissions generated from the purchase and consumption of electricity throughout our
premises, shown
before
offsets from renewable-energy certificates.
51
Market-based method for scope 2 emissions, incorporating energy certificates such as Guarantees of Origin (GO) and
International Renewable Energy Certificates (I-RECs).
52
For the Scope 3 emissions on an equity share basis, Energean only considers Category 10 and 11 as material and relevant
53
Location based is defined as the emissions generated from the purchase and consumption of electricity throughout our
premises, shown
before
offsets from renewable-energy certificates.
54
Market-based method for scope 2 emissions, incorporating energy certificates such as Guarantees of Origin (GO) and
International Renewable Energy Certificates (I-RECs).
STRATEGIC REPORT
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Environmental records
2023
2022
2021
Scope 3 emissions (MtCO2e)
55
– Category 1
0.0
0.2
0.1
Scope 3 emissions
(MtCO2e)
55
– Category 2
0.0
0.0
0.1
Scope 3 emissions (MtCO2e)
55
– Category 3
0.0
0.0
0.0
Scope 3 emissions (MtCO2e)
55
– Category 4
0.0
0.0
0.0
Scope 3 emissions (MtCO2e)
55
– Category 5
0.0
0.0
0.0
Scope 3 emissions (MtCO2e)
55
– Category 6
0.0
0.0
0.0
Scope 3 emissions (MtCO2e)
55
– Category 7
0.0
0.0
0.0
Scope 3 emissions (MtCO2e)
55
– Category 8
N/A
N/A
N/A
Scope 3 emissions (ktCO2e)
55
–
Category 9
0.0
0.0
0.0
Scope 3 emissions (MtCO2e)
55
– Category 10
0.5
0.3
0.3
Scope 3 emissions (MtCO2e)
55
– Category 11
16.8
1.9
1.4
Scope 3 emissions (MtCO2e)
55
– Category 12
N/A
N/A
N/A
Scope 3 emissions (MtCO2e)
55
– Category 13
N/A
N/A
N/A
Scope 3 emissions (MtCO2e)
55
– Category 14
N/A
N/A
N/A
Scope 3 emissions (MtCO2e)
55
– Category 15
N/A
N/A
N/A
Scope 3 emissions (MtCO2e)
55
– Total
17.4
2.4
1.9
Scope 1 emissions intensity
(kgCO2e/boe)
6.3
16.3
17.7
Scope 2 emissions intensity
(kgCO2e/boe) – market based
0.0
0.0
0.0
Total emissions intensity
(kgCO2e/boe)
6.3
16.3
17.7
UK Only – equity share
Total GHG emissions (tCO2e)
20,905
16,507
23,707
Scope 1 emissions (tCO2e)
20,905
16,507
23,707
55
For the Scope 3 emissions on an operational share basis, Energean considers Category 11 as the most material and relevant,
but for transparency, has calculated scope 3 emissions for the several other categories. Categories that are not relevant have
been marked as N/A.
STRATEGIC REPORT
Page 71 of 273
Environmental records
2023
2022
2021
Scope 2 emissions (tCO2e)
56
-
-
-
Total emissions intensity
(kgCO2e/boe)
74.9
38.5
83.4
Energy consumption used to
calculate above emissions
(kWh)
74,700
59,000
77,000
Other air emissions – operated sites
NOx (tonnes)
431.4
365.1
233.8
SO2 (tonnes)
1214.5
111.4
711.8
VOC (tonnes)
174.5
14.0
9.0
Water usage – operated sites
Fresh water (m3)
119,089
47,649
103,784
Seawater (m3)
42,588,365
19,418,432
17,413,502
Total water usage (m3)
42,712,921
19,467,393
17,517,286
Recycled water (m3)
42,588,365
19,418,432
16,944,782
Recycled water (%)
99.7
99.0
95.2
Dispersed oil concentration in
discharged water (mg/L)
0.4
0.4
0.4
Water quantities disposal – operated sites
Non-hazardous waste (tonnes)
394
3,420
675.9
Non-hazardous waste intensity
(kg/boe)
0.01
0.8
0.2
Hazardous waste (tonnes)
410
651.3
341.7
Hazardous waste intensity
(kg/boe)
0.01
0.1
0.1
Total waste recycled (%)
81
95.2
90.5
Total waste energy recovery
(%)
0.0
0.0
0.0
Spills – operated sites
Hydrocarbon spills
0.0
0.0
0.0
Flaring – operated sites
Total hydrocarbons flared
(tonnes)
25,804.0
13,775.0
412.8
Flaring intensity (kg/boe)
2.3
6.4
0.1
Energy consumption – operated sites
Total energy consumption
(kWh)
748,723,706
211,511,613
303,972,222
Electrical energy consumption
(TJ)
122.7
55.1
162.3
56
Electricity is purchased by the building owner and thus taken into scope 3 emissions consideration.
STRATEGIC REPORT
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Environmental records
2023
2022
2021
Electrical energy consumption
intensity (MJ/boe)
3.48
12.7
54.9
Thermal energy consumption
(TJ)
2572.6
706.3
932.0
Thermal energy consumption
intensity (MJ/boe)
73.0
162.3
315.4
Total energy consumption
intensity (MJ/boe)
76.5
174.9
383.2
STRATEGIC REPORT
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Financial Review
Panos Benos, CFO
Dear Shareholder,
I'm pleased to share an update on our Group's financial performance over the past year, ending on 31
December 2023.
In 2023, Energean reached a significant milestone by becoming the leading independent gas producer in
the Mediterranean, thanks to the successful ramp-up of production from the Karish gas field in Israel.
This achievement not only increased our production but also aligned with our latest guidance for the year.
Furthermore, we've upheld our commitment to delivering value to our shareholders by continuing our
dividend payments. In 2023 alone, Energean returned $1.20 per share, totalling $214 million, in line with
our target to distribute cumulative dividends of at least $1 billion by the end of 2025.
Despite facing challenges such as lower average commodity prices in the first half of 2023, we achieved
record revenues ($1,420 million), adjusted EBITDAX results ($931 million), and operating profit
($598 million).
Looking ahead to 2024, we see significant potential as we advance our core strategic projects across
Israel, Egypt, Italy, and Greece. Our recent partnership with Chariot Ltd. in offshore Morocco, alongside
our successful gas deliveries in Egypt and progress in the Prinos carbon storage project in Greece, all
contribute to our vision of becoming the foremost independent producer in the Mediterranean. These
initiatives not only support our growth but also underline our commitment to a sustainable energy
transition.
Financial results summary
2023
2022
Change
from 2022
Average working interest production (Kboe/d)
123
41
200%
Revenue ($m)
1,420
737
93%
Cash cost of production ($m)
475
284
67%
Cost of production ($/boe)
11
19
(42%)
Administrative & selling expenses ($m)
43
46
(7%)
Operating profit ($m)
598
232
158%
Adjusted EBITDAX ($m)
931
422
121%
Profit after tax ($m)
185
17
988%
Cash flow from operating activities ($m)
656
272
141%
Capital expenditure ($m)
544
870
(37%)
Cash capital expenditure ($m)
541
460
18%
Net debt ($m)
2,849
2,518
13%
Leverage Ratio (Net debt/Adjusted EBITDAX)
3
6
N/A
STRATEGIC REPORT
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Revenue, production, and commodity prices
Revenue increased by $683 million to $1,420 million (2022: $737 million) primarily as a result of the
successful ramp-up of production from our flagship Karish gas field, located offshore Northern Israel, to
its initial capacity. The Group’s realised weighted average oil and gas price for the year was $72/bbl (2022:
$81/bbl) and $5/mcf (2022: $11/mcf), respectively.
Working interest production averaged 123 Kboe/d in 2023 (2022: 41 Kboe/d), with the Karish gas field
accounting for over 70% of total output.
Adjusted EBITDAX amounted to $931 million (2022: $422 million). The increase from 2022 was due to
higher revenue complimented by slightly lower operating costs.
Cash cost of production
During the period, our cash unit production costs decreased to $11 per barrel of oil equivalent (boe),
compared to $19/boe in 2022. This reduction was primarily due to the increased production for the year
coming from the successful ramp-up of production from the Karish gas field in Israel. In addition, the
Egyptian currency, has fallen sharply against the US dollar, also leading to a reduction of the cost per bbl
in Egypt. Excluding royalties of $186 million (2022: $46 million), our cash production costs amounted to
$289 million in 2023 (2022: $238 million including only 2 months of production in Israel). Consequently,
the related cost per boe excluding royalties decreased to $6.4 in 2023, down from $15.9 in 2022.
Depreciation, impairments and write-offs
Depreciation charges before impairment on production and development assets increased to $306
million (2022: $83 million) with the related increase in the depreciation unit expense to $6.8/boe (2022:
$5.5/boe).
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.
Management has considered how the Group’s identified climate risks and opportunities (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. 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(s).
As part of the impairment assessment the Group has run sensitivity scenarios based on the International
Energey Agency’s (IEA) 2023 World Energy Outlook climate projections including Stated Policies Scenario
(STEPS), Announced Pledges Scenario (APS) and Net-Zero Emissions by 2050 Scenario (NZE).
These
specific scenarios were not directly applied in the assets valuation for financial reporting purposes. This
is because no single scenario fully aligns with the management consensus on the assumptions market
participants may use in appraising the Group’s assets. The assessment revealed that the Group's CGUs
in Italy and Greece, particularly the Vega field, are significantly affected by these scenarios due to their
sensitivity to fluctuations in Brent oil prices. Conversely, the Group's assets in Israel and Egypt are less
influenced by these scenarios, attributed to the localised approach to price definition.
Exploration and evaluation expenditure and new ventures
During the period the Group expensed $34 million (2022: $71 million) for exploration and new ventures
evaluation activities. This includes impairment costs of $29 million (2022: $66 million) for projects that
will not progress to development, primarily Isabella in the UK.
In addition, new ventures evaluation expenditure amounted to $5 million (2022: $5 million), mainly related
to pre-licence assessment costs.
STRATEGIC REPORT
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General and administrative (G&A) expenses
Energean incurred G&A costs of approximately $43 million in 2023 (2022: $46 million). Cash G&A was
$31 million (2022: $36 million).
Cash G&A excludes certain non-cash accounting items from the Group’s reported G&A. Management
uses this alternative performance measure to monitor the Group's performance, as it assists in making
informed decisions about capital allocation. Cash G&A is calculated as follows: administrative and selling
and distribution expenses, excluding depletion and amortisation of assets and share-based payment
charge that are included in G&A.
($m)
2023
2022
Administrative expenses
43
46
Less:
Depreciation
5
4
Share-based payment charge included in G&A
7
6
Cash G&A
31
36
Net other expenses
Net other expenses of $2 million in 2023 (2022: $1 million income) include reversal of provision for legal
claims of $3 million, expected credit loss provisions of $4 million and other non-recurring items.
Unrealised loss on derivatives
The Group has recognised unrealised loss on derivative instruments of $7 million (2022: $5 million)
related to the Cassiopea contingent consideration. A contingent consideration of up to $100 million is
payable and determined based on future Italian gas prices recorded at the time of the commissioning of
the field, which is expected in the summer of 2024.
As at 31 December 2023, 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 2023 was estimated to be $91 million based on a Monte
Carlo simulation (2022: $86 million).
Net financing costs
Financing costs before capitalisation for the period were $268 million (2022: $237 million). Finance costs
include: $193 million of interest expenses incurred on Senior Secured notes (2022: $167 million); $6
million on debt facilities (2022: $2 million); $7 million of interest expenses relating to long-term payables
(2022: $15 million); $51 million unwinding of discount on deferred consideration, contingent
consideration, long-term payables, convertible loan notes and decommissioning provisions (2022: $37
million); and $11 million commissions for guarantees and other bank charges of (2022: $16 million).
Net finance costs include foreign exchange losses of $17 million (2022: $22 million) and finance income
of $19 million (2022: $10 million), including interest income from time deposits.
STRATEGIC REPORT
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Taxation
In 2023, Energean recorded tax charges totalling $159 million, compared to $90 million in 2022. This
comprised a current year tax expense of $59 million (down from $200 million in 2022) and a deferred tax
expense of $100 million (compared to a credit of $110 million in 2022), resulting in an effective tax rate
of 46% (down from 84% in 2022).
The decrease in current tax from 2022 was primarily due to a one-off windfall tax of $119 million charged
in Italy in 2022. Additionally, the current tax expense for Italy and Egypt decreased by $13 million and $10
million respectively compared to the previous year.
Regarding deferred tax movement, both Italy and Israel realised previously recognised deferred tax
assets due to the utilisation of tax losses, amounting to $15 million and $47 million respectively.
Furthermore, Italy reassessed its deferred tax asset recognised on decommissioning provision, resulting
in a reduction of $20 million.
Operating cash flow
Cash from operations before tax and movements in working capital was $874 million (2022: $373
million). After adjusting for tax and working capital movements, cash from operations was $656 million
(2022: $272 million).
Capital expenditure
During the year, the Group incurred capital expenditure of $544 million (2022: $870 million). Capital
expenditure mainly comprise development expenditure in relation to the Karish Main and Karish North
Fields in Israel ($148 million), NEA/NI project in Egypt ($123 million), Cassiopea field in Italy ($161 million),
and exploration expenditures in Katlan, Athena, Zeus, Hermes and Hercules in Israel ($25 million) and in
North East Hap’y and East Bir El Nus in Egypt ($26 million).
Net debt
As at 31 December 2023, net debt of $2,849 million (2022: $2,518 million) consisted of $2,500 million
Israeli senior secured notes, $450 million of corporate senior secured notes and $64 million draw down
of the Greek loans, less deferred amortised fees and cash, bank deposits and restricted cash balances
of $372 million. On 11 July 2023 Energean priced the offering of $750 million aggregate principal amount
of senior secured notes. Net debt excluding Israel was $569 million (2022: $144 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 S&P Global Ratings (“
S&P
”) and Fitch Ratings (“
Fitch
”).
In November 2023:
•
S&P affirmed 'B+' ratings on Energean and its senior secured notes maturing in 2027 however
the Outlook was revised to Negative from Stable. The negative outlook reflects the escalated
geopolitical and security risk in Israel.
The ratings were affirmed at B+ as Energean's assets
remain fully operational, cash flows have not been affected and the conflict is expected to have
limited impact on Energean’s operations in Israel.
•
Fitch upgraded Energean plc's corporate credit rating to 'BB-' from 'B+’ with Stable Outlook.
Energean's senior secured notes maturing in 2027 were also upgraded to 'BB' from ‘B+’. Key
drivers for the upgrade were: production performance, driven by the successful ramp-up of the
Karish field, Energean’s clear path to deleveraging, defined Dividend Policy, low re-contracting
risk and improving cost of production.
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Risk management
Principal risks
As disclosed in Energean’s 2023 Interim Results, Energean has long identified geopolitical risks as one
of the principal risks facing the Group. Considering the events since October 2023, the Group has split
out Israel into a new principal risk relating to the increased regional and domestic geopolitical and
security risks. Day-to-day production has been unimpacted by the geopolitical developments, nor have
any payments from domestic offtakers. Energean has a comprehensive private insurance package in
place for risks of direct (physical) damage to assets as a result of war or terrorism actions and indirect
damage (loss of production) as a result of physical damage due to terrorism actions. There is also a
potential compensation mechanism by the Israeli government under the Property Tax and Compensation
Fund Law. Energean continues to monitor the situation and in the event of further escalation of the
situation in the region, the security of our people and contract personnel alongside the physical integrity
of assets would be our primary focus.
The remainder of the principal risks are unchanged from those disclosed in the 2023 Interim Results. A
full description of Energean's principal risks is disclosed in the strategic review of the 2023 Annual Report.
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 21 March 2024 to 30 June 2025 “the Assessment Period”.
As of 31 December 2023, the Group’s available liquidity was approximately $607 million. This available
liquidity figure includes: (i) c. $115 million available under the $300 million Revolving Credit Facility (“
RCF
”)
signed by the Group in September 2022 and as amended in May 2023 (with the remainder being utilised
to issue Letters of Credit for the Group’s operations) and (ii) c. $120 million under the $120 million
Revolving Credit Facility signed up by the Group in October 2023.
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 2024 and $75/bbl in 2025 and PSV (Italian gas
price) at €30/MWH in 2024 and 2025. 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 and/or management of
operating expenses to improve the liquidity.
Under the RWC scenario, after considering mitigation strategies, liquidity is maintained throughout the
going concern period.
STRATEGIC REPORT
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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 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 21 March 2024 to 30 June 2025. For this reason, they continue to
adopt the going concern basis in preparing the group 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 leverage ratio and are
explained below.
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)
2023
2022
Cost of sales
760
359
Less:
Depreciation
301
79
Change in inventory
(16)
(4)
Cost of production
475
284
Total production for the period (kboe)
44,731
15,038
Cash cost of production per boe ($/boe)
11
19
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is
calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation and
amortisation, other income and expenses (including the impact of derivative financial instruments and
foreign exchange), net finance costs and exploration costs. The Group presents Adjusted EBITDAX as it
is used in assessing the Group’s growth and operational efficiencies, because it illustrates the underlying
performance of the Group’s business by excluding items not considered by management to reflect the
underlying operations of the Group.
STRATEGIC REPORT
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($m)
2023
2022
Adjusted EBITDAX
931
422
Reconciliation to profit/(loss):
Depreciation and amortisation
(306)
(83)
Share-based payment
(7)
(6)
Exploration and evaluation expense
(34)
(71)
Change in decommissioning cost
17
(28)
Other expense
(10)
(4)
Other income
8
3
Finance expenses
(250)
(107)
Finance income
19
10
Unrealised loss on derivatives
(7)
(5)
Net foreign exchange
(17)
(22)
Taxation income/(expense)
(159)
(90)
Profit/(Loss) for the year
185
17
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:
($m)
2023
2022
Additions to property, plant and equipment
533
878
Additions to intangible exploration and evaluation assets
57
141
Less:
Capitalised borrowing cost
18
109
Impairment of property, plant and equipment
-
28
Leased assets additions and modifications
47
2
Lease payments related to capital activities
(16)
(13)
Capitalised depreciation
-
1
Change in decommissioning provision
(3)
22
Total capital expenditure
544
870
Movement in working capital
(3)
(410)
Cash capital expenditure per the cash flow statement
541
460
STRATEGIC REPORT
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Cash capital expenditure
($m)
2023
2022
Payment for purchase of property, plant and equipment
436
396
Payment for exploration and evaluation,
and other intangible assets
105
64
Total cash capital expenditure
541
460
Net debt/(cash) and leverage ratio
Net debt is defined as the Group’s total borrowings less cash and cash equivalents. Management believes
that net debt serves as a valuable indicator of the Group's indebtedness, financial flexibility, and capital
structure because it reflects the level of borrowings after accounting for any cash and cash equivalents
that could be utilised to reduce borrowings.
The management closely monitors the leverage ratio, as it provides a comprehensive picture of the
Group's financial leverage by comparing net debt to EBITDAX. This monitoring is crucial for making
informed decisions regarding dividend distributions, ensuring that such payments are made from a
position of financial strength. It maintains the balance between rewarding shareholders and sustaining
the Group's long-term financial stability.
($m)
2023
2022
Current borrowings
80
46
Non-current borrowings
3,141
2,975
Total borrowings
3,221
3,021
Less:
Cash and cash equivalents and bank deposits
(347)
(428)
Restricted cash
(25)
(75)
Net Debt
2,849
2,518
Adjusted EBITDAX
931
422
Leverage Ratio (Net debt/Adjusted EBITDAX)
3
6
STRATEGIC REPORT
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Risk Management
Successful and sustainable implementation of our strategy requires strong corporate governance and
effective risk management. This is delivered 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 operating
assets and investment opportunities may expose Energean to increased risks, particularly in the current
risk environment, including climate change related risks and opportunities. These risks may have a
financial, operational and reputational impact.
The Board is accountable for effective risk management and internal control systems, including agreeing
the principal and emerging risks facing the Company and its subsidiaries (together the “
Group
”) and
ensuring these are successfully managed. The Board undertakes an annual assessment of the principal
risks that pose a threat to the business model, future performance, solvency and liquidity. The Board also
monitors the Group’s progress against key performance indicators at each quarterly scheduled Board
meeting, and receives in-depth analysis on identified risks undertaken by the Audit and Risk Committee
(“
ARC
”), providing the Board with an opportunity to discuss risk mitigation actions with the senior
leadership team.
Energean has made strides in embedding the Enterprise Risk Management (“
ERM
”) framework across
the Group since its inception in 2022. The ERM framework and its application in the Group’s operating
countries empowers the countries to identify, evaluate and manage the risks they face, on a timely basis,
to ensure each country’s compliance with relevant domestic and international legislation, the Group’s
strategy and policies. Details of the ERM framework are provided in the remainder of this Section.
Group risk management framework
Energean’s ERM framework combines a top-down strategic assessment of risk and risk appetite, which
takes into consideration the external business environment and any changes to the business model,
along with a bottom-up identification and reporting process arising from a review and assessment of the
Country risk registers. Energean has adopted a risk management framework based on the principles of
the “three lines of defence”, supported by various Board-delegated committees and functions. For
example, the Environment, Safety and 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. The key elements of the framework
and roles and responsibilities across the three lines of defence are specified as follows.
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Oversight
Board of
Directors
The Board is ultimately responsible for risk management and internal controls
across the Group and for ensuring that an effective system of risk management
and internal controls is maintained. The Board sets the Group’s risk appetite and
ensures risks are managed within this risk appetite.
•
Approves the Group’s strategy based on an understanding of the risks and
opportunities facing the Group.
•
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.
•
Approves the Group’s risk appetite, policy, and framework.
ARC
As delegated by the Board, the ARC is responsible for continuously evaluating the
effectiveness of the Group‘s system of internal control and risk management
framework.
•
Assesses the Group’s risk management framework.
•
Ensures risks present an accurate reflection of the risk landscape.
•
Reviews and monitors principal risks and the mitigations in place.
•
Approves the Internal Audit plan.
•
Reviews, discusses, and challenges internal audit reports.
Senior
management
risk committee
Responsible for setting risk strategy, identification, and evaluation of significant
risks across the Group.
•
Drives culture of risk management.
•
Develops and implements the Group risk framework that is appropriate to
Energean and its business environment.
•
Ensures that the necessary resources are allocated to managing risk.
•
Aligns risk management with the Group’s objectives, strategy and culture.
•
Responsible and accountable for overseeing and monitoring significant risks
that fall under their identified remit.
First line of defence
Group and
country
functions
Responsible for identifying and managing Country and Functional risks, ensuring
risk management frameworks are operating effectively and capturing upside of
risk, where possible.
•
Identifies and evaluates significant risks applicable to the Country and
Function.
•
Implements suitable internal controls and KPIs.
•
Ensures employees are aware of the risk management policy and fosters a
culture where risks can be identified and escalated for mitigation.
Second line of defence
ERM officer
Leads risk management activities across the Group and responsible for
coordinating risk reporting.
•
Continuously improves risk management policy, strategy and supporting
framework.
•
Chairs
the
Senior
Management
Risk
Committee
and
Country
Risk
Management Committees.
•
Escalates
risks
from
the
Countries/Assets/Projects
to
Senior
Risk
Management Committee, ARC/Board.
•
Updates the Group risk register.
•
Facilitates annual review of categorisation and assessment criteria.
STRATEGIC REPORT
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Country risk
management
committees
•
Ensures identified country risks present an accurate reflection of Energean’s
risk landscape.
•
Ensures risks are consistently categorised, assessed, and managed across the
Group.
•
Identifies and shares best practices for managing risk.
Third line of defence
Internal audit
Responsible for objectively and independently evaluating controls, governance,
and risk management processes. The internal audit is performed by the Group
Internal Audit department engaging as appropriate subject matter experts and on
specific cases PWC Greece.
•
Reviews the risk management and internal control processes.
•
Develops risk based internal audit plans which are approved by the ARC.
•
Provides independent and objective assurance on risk matters to the ARC.
•
Conducts an annual control effectiveness assessment, identify controls and
any further actions proposed to mitigate the risk.
Group risk management activities
Risk management is a continuous process. Due to the constantly changing external and internal
requirements and environment, our risk management and internal control system are being continuously
developed. Notable risk management activities that took place in 2023 include:
Risk workshops
Building on the work carried out in 2022 to implement a new ERM framework, in 2023, Energean engaged
further with Marsh UK to carry out a series of Risk Workshops for a number of Group functions: Legal,
Operation, and Finance.
The Legal Risk Workshop took place in Athens, Greece in September 2023, attended by legal colleagues
across the Group as well as key stakeholders on ESG topics including the HSE Director, Head of Contracts
and Procurement, Head of Insurances & Claims. The Workshop covered Legal risk identification,
qualitative assessment, prioritisation, risk mitigations, and emerging risks. It provided an opportunity for
legal colleagues to reflect on the legal, regulatory and compliance risks facing the Group. Meaningful
discussions were held on how existing and emerging legal, regulatory and compliance risks impact the
Group, what processes and owners are in place to mitigate these risks, and how colleagues can work
better together across different geographies.
Based on the discussions held at the Legal Risk Workshop, Energean will continue to prioritise
compliance with domestic and international laws and regulations. Among other priorities for 2024, local
legal teams will work to enhance communication channels with commercial and project teams to ensure
contractual and litigation risks are identified and appropriately managed.
Due to the conflict in Israel from October 2023, travel restrictions to and from Israel were imposed. As a
result, in-person workshops for the Operation and Finance functions have been postponed. The Group
intends to revisit this in 2024.
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.
In 2023, Energean engaged Marsh Italy to carry out a Fraud Risk Assessment review as a supplementary
risk management and internal audit activity, focusing on the Group’s Procure-to-Pay process in order
protect the Group against any areas that may expose the Group to fraud risks related to this process.
The project identified a number of gaps and therefore included a series of actions to improve the control
environment. The ERM Officer and the Head of Internal Audit will work with relevant process owners in
2024 to implement the recommended actions.
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Country risk reviews
As agreed in the ERM policy, 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. This is achieved
through the execution of two subprocesses (Inherent Risk Assessment and Residual Risk Assessment)
to identify the country key risks; the risks that have the potential to impact a specific operating area,
including mitigating actions and any controls in place.
In 2023, the ERM Officer/Group Compliance Officer facilitated two bi-annual country risk reviews at each
Country Risk Management Committee to discuss any changes to the country risk profile and capture any
new risks. The country key risks were then verified by the respective Country Risk Committee, comprising
the Country Manager, Asset/Project Execution Manager, Head of Finance, Head of Legal and Head of
HSE who, acting collectively with the ERM Officer, signed off on the country risk registers.
From this, the Senior Risk Management Committee reviewed all Country Risk Registers and discussed
and presented common themes, interconnected risks and key trends. The risks that were identified and
rearticulated as principal risks were then consolidated upwards into the Group risk register and were then
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 2023
Although production at Karish and Energean’s day-to-day operations in Israel continue to be largely
unaffected by the ongoing conflict in the region, the security risk on the onshore and offshore production
and infrastructure systems in the area has increased. During this period, Energean’s immediate focus
was on the safety of its workforce, both within the Company and contract personnel. Following the events
on 7 October 2023 and throughout this challenging period, Energean has ensured that all measures are
in place to continue business operations, maintain the mobility of our people and make certain that the
security of information is unaffected. In response, our people’s commitment and engagement
exemplifies the Company’s spirit to be agile, dynamic and quickly address challenges as they arise.
Climate change related risks and opportunities
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 analysed
57
. 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.
57
Please refer to “Our Strategy- Tackling Climate Change- Our Climate Change Strategy”.
STRATEGIC REPORT
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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 2023
A – Find and appraise
①
– Eastern Mediterranean
▼
The risk decreased in 2023
B – Develop
②
– Gas
▬
The risk remained static in 2023
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 2023
Annual Report that could threaten, or, are linked to, our business strategy and business model. For each
principal risk, outlined below is 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 2024.
#1 Strategic risk: Regional and domestic geopolitical and security risks in Israel
Owner
:
CEO
Link to strategy
:
①
②
④
⑤
Link to business model
: B C
Link to 2023 KPIs
: Production, Growth
Risk appetite
Medium
. The areas in which Energean operates continue to be subject to a high
degree of geopolitical risk. However, as Karish is an asset of national strategic
importance for Israel, Energean expects that production will continue as usual,
absent any direct security threats.
Pre-mitigated
2023 movement
N New Risk.
Since 7 October 2023 and as this conflict has continued into 2024,
there is a greater geopolitical and security risk. Essential infrastructure systems
may be targets for missile fire and sabotage operations, and any potential
damage thereto may cause significant damage and disrupt or disable the
production and operations for a period and to an extent that may be significant.
In such cases, it is possible that the war risk insurance coverage may be cancelled
or be negotiated in non-reasonable commercial terms and conditions.
Impact
1. Potential short-term material disruptions or a shut-down in production.
2. Continuity of operations.
3. Other limitations on the Company's project development expansion works,
including the installation of the second oil train.
4. Adverse impact on contractual obligations.
5. Upward trend of exchange rates or inflation.
6. Repercussions for exports and domestic sales resulting in loss of revenue.
7. Loss (increase in prices) of insurance.
8. Difficulties in accessing capital markets, hindering the Company's ability to
refinance debt.
Mitigation
The FPSO is installed 90 km offshore and since the start of the military conflict,
the Karish field has continued to produce in line with guidance with no disruption
to its operations.
STRATEGIC REPORT
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Payments from domestic offtakers have not been interrupted or delayed. Cash
flows have not been affected at this stage.
Energean has insurance packages in place for certain risks as a result of damage
to the assets.
There is also a potential compensation mechanism by the Israeli
government under the Property Tax and Compensation Fund Law. Energean co-
operates with the Government (Ministry of Defence) to ensure the safety of
Energean’s assets.
Energean has security measures to ensure the safety of its personnel, assets, and
interests.
Energean also maintains knowledge of regional and local issues and has
proactive engagement with Government.
2024 objectives
We continue to monitor the risk of any damage to the Company’s assets or any
other limitations on its operations and expansion works, as well as repercussions
for domestic sales. In case of further escalation of the geopolitical situation in the
region, the security of our people and contract personnel alongside the physical
integrity of assets would be our primary focus.
#2 Operational risk: Delayed delivery of further growth projects (considering mainly Karish North in
Israel (including the second oil train and gas riser) and Cassiopea in Italy)
Owner:
Chief Operating Officer
Link to strategy:
①
②
④
⑤
Link to business model:
B C
Link to 2023 KPIs:
Production, Growth
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.
Pre-mitigated
2023 movement
▼
The risk decreased in 2023.
Despite the ongoing geopolitical developments, all
projects have been progressing during the reporting period. Energean’s NEA/NI
project in Egypt was completed, with the final two wells brought onstream on 30
December 2023, as well as Karish North.
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 reach its strategic
objectives.
Mitigation
All projects have been progressing during the reporting period.
•
First gas from Karish North was achieved in February 2024.
•
Construction of the second oil train was completed in Q3 2023. However, the
security situation in Israel has impacted the timing of the installation of the
second oil train, which will be installed as soon as feasible.
•
Cassiopea first gas remains on track for the summer of 2024. The first
production well was completed in January 2024 and offshore and onshore
works are progressing well.
2024 objectives
Progress remaining development projects and achieve the Group’s 2024
production guidance.
STRATEGIC REPORT
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#3 Strategic risk: Lack of new commercial discoveries and reserves replacement
Owner
: Chief Operating Officer
Link to strategy:
②
④
⑤
Link to business model:
A B C D
Link to 2023 KPIs
: Growth
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.
Pre-mitigated
2023 movement
▼
The risk decreased in 2023
; YE23 2P reserves were 1,115 mmboe, stable year-
on-year before produced 2023 volumes (47 mmboe).
Impact
Failure to move 2C resources into 2P and/or 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
The Group has a reserve life of around 19 years
58
on a 2P basis and in 2023 has
taken significant steps to further expand and diversify:
•
In Israel: Katlan Phase 1 FDP approved; FID expected upon finalisation of EPC
terms.
•
Morocco farm-in signed in 2023 and expected, at the time of writing, to
complete imminently. Energean plans to drill the Anchois East appraisal well
in 2024, which objectives are to de-risk the 2C volumes and target additional
upside (11 Bcm).
•
In Italy there are new areas of growth via concessions previously
frozen during the PITESAI review. Energean is subsequently focused on
progressing certain non-operated concessions in the Upper Adriatic and
Sicilian
Channel,
with
the
expectation
to
unlock
additional
reserves.
2024 objectives
To progress existing and identify new organic and inorganic projects to replace
reserves.
#4 Operational risk: Production uptime reliability and operating efficiency (including reliability of the
production systems, i.e. FPSO and subsea))
Owner
: Chief Operating Officer
Link to strategy
:
①
②
-
④
⑤
Link to business model
: C
Link to 2023 KPIs
: Production
Risk appetite
Low
– in delivering both operational excellence and growth.
Pre-mitigated
2023 movement
▼
The risk decreased in 2023
.
Although ramp-up and commissioning was slower than originally expected, the
Company managed to substantially overcome start-up issues by implementing
optimisation activities on the FPSO and subsea systems which have progressed
well. Uptime on the FPSO in Q4 2023 was 99%
59
.
FY 2023 production was in line with revised guidance.
•
FY23 production of 123 Kboe/d, a 200% increase versus FY22.
•
Day-to-day production in Israel continues to be unimpacted by the
ongoing geopolitical developments.
58
Based upon the mid-point of the 155–175 kboed 2024 production guidance.
59
Uptime is defined as the number of hours that the Energean Power FPSO was operating. The Q4 2023 figure excludes the
scheduled 6-day shutdown that occurred in December.
STRATEGIC REPORT
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Impact
Production uptime and reliability uptime are key drivers of upstream “value-add,”
as the value of production lost to downtime exceeds that of operating expenses.
Production downtime and unreliability, and the resultant failure to meet
contracted quantities, would reduce Energean’s future net revenues and cash
flows.
Mitigation
•
Implement a comprehensive maintenance program, including regular
inspections and preventive maintenance tasks.
•
Conduct training programs for operational staff to ensure they have the
necessary skills, knowledge, and competency.
•
Establish robust supply chain for spare parts and equipment.
•
Monitor and analyse performance data to identify potential issues or
deviations.
•
Implement an effective risk-based inspection program for critical integrity
systems.
•
Perform root-cause analysis for all major defects and prepare and implement
a corrective works plan.
•
Maintain effective communication channels with stakeholders, including
buyers, regulators, and contractors.
•
Establish backup systems or redundant components to minimise downtime
in case of failures.
•
Continuously monitor and evaluate the performance of the production
systems to identify areas for improvement.
•
Conduct audit of the procedures and processes in place to ensure
compliance with all regulations.
•
Contingency planning.
2024 objectives
Achieve the Group’s 2024 production guidance.
#5 Financial risk: Maintaining liquidity and solvency
Owner
: Chief Financial Officer
Link to strategy
:
⑤
Link to business model
: A B C D
Link to 2023 KPIs
: Refinancing of 2024 Bond, Net Debt to EBITDA below 3x
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.
Pre-mitigated
2023 movement
▼
The risk decreased in 2023.
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
60
.
Mitigation
In 2023, Energean (i) increased its three-year $275 million Revolving Credit Facility
(“
RCF
”) by $25 million to $300 million (ii) refinanced its 2024 EISL Bond with a
$750 million 10 year Bond and entered into a two-year $120 million unsecured
RCF providing additional financial flexibility.
The refinance of the 2024 EISL Bond was a stated objective for 2023 and enabled
the Group to extend the weighted average maturity of its outstanding debt to over
6 years while maintaining a healthy weighted average cost of debt of c. 6%. The
next material bond maturity is not until 2026.
The Group ended the year with $607 million of liquidity, including undrawn
amounts of $235 million under both RCF facilities, ensuring that the Company is
60
For further information, please refer to Going Concern disclosure on pages 77–78 and Viability Statement disclosure on
pages 97–99).
STRATEGIC REPORT
Page 89 of 273
well-funded for its remaining projects-under-development and reducing the Net
Debt to adjusted EBITDAX leverage ratio to 3x.
The Group actively monitors oil and gas 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.
2024 objectives
Evolve the capital allocation strategy from capital investment to sustainable cash-
flow generation.
#6 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.
Pre-mitigated
2023 movement
▲
The risk increased in 2023.
The assessment was made taking into consideration geopolitical developments,
downgraded Israel’s credit rating due to the impact of its ongoing conflict with
Hamas in Gaza, as well as the ongoing war in Ukraine. The above, 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, governments 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
Largely protected against commodity price fluctuations:
•
Over 75% of Energean’s near-term production target of 200 Kboe/d is
protected under long-term gas contracts with floor prices.
•
Energean routinely evaluates hedging contracts for other areas of its
portfolio, for example PSV for its Italian gas production or Brent for its liquids
production in Israel.
Interest rates fixed as part of 2021 refinancing:
•
Energean undertook a series of refinancings in 2021, which substantially fixed
all the Company’s exposure to floating rates; its average cost of debt in 2023
was 6.13% and substantially unimpacted by the global rise in interest rates.
The only facilities within Energean’s capital structure that are impacted by
global interest rate rises is the c.€90.5 million Greek facility, the three-year
$300 million RCF and the two-year $120 million unsecured RCF. The $300
million RCF is drawn predominantly by way of LCs not linked to floating rates
and the $120 million unsecured RCF is undrawn (and expected to remain
undrawn); 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, Egypt and Italy are wrapped under EPCIC and EPIC contracts and we
will continue to adopt this strategy for new projects, e.g. Katlan. There have
been some impacts of inflation on salary costs, but this contributes a small
component of the overall Cost of Operations base.
STRATEGIC REPORT
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Ongoing monitoring of financial KPIs is undertaken by executive management
team.
2024 objectives
Focused on value and disciplined cost management, 2024 objectives include
close monitoring of all operating costs including contract negotiation where
possible and entering into fixed contracts for any new projects for example the
Katlan development
#7 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 2023 KPIs
: Culture & DEI 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
depend
s
on it.
Pre-mitigated
2023 movement
▬
The risk remained stable in 2023.
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.
Following the pandemic, 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 organisational changes to
strengthen accountability and responsibility.
Ongoing monitoring of KPIs by executive management.
2024
OBJECTIVES
Key development projects to facilitate the path to become a great place to work
in every country we operate include:
•
Carrer Development Framework.
•
Implementation of Diversity Equity & Inclusion Strategy.
•
Culture improvement by engaging in internal communication tactics.
#8 Deterioration or misalignment of JV relationships risk
Owner
: Country Managers
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2023 KPIs
: Commercial
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.
STRATEGIC REPORT
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Pre-mitigated
2023 movement
▲
– The risk
increased
in 2023
Energean holds non-operated positions in one of its key growth projects,
Cassiopea, as well as in several unfrozen concessions in the Sicilian Channel and
Upper Adriatic.
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 capitalised 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.
2024 objectives
Continue to proactively engage with JV partners and monitor JOA procedures.
#9 Recoverability of production cost and receivables in Egypt risk
Owner
: Country Manager Egypt
Link to strategy
:
①
②
⑤
Link to business model
: B C
Link to 2023 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.
Pre-mitigated
2023 movement
▲
The risk increased in 2023.
At end-December 2023, net receivables (after provision for bad and doubtful
debts) in Egypt were $146.5 million, of which $116.3 million were classified as
overdue.
Impact
Loss of value.
Work programme restricted by reduced financial capability.
Mitigation
Energean has a number of solutions in place to manage its 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.
2024 objectives
Improve receivables position as the currency stabilises. Put agreements in place
to accelerate recovery of overdue receivables.
Maintain an active investment programme.
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#10 Significant IT and OT cyber risk, including a security breach of internal systems or a cyber attack
Owner:
Group Information Technology Manager/Isarel Security Manager
Link to strategy:
⑤
Link to business model:
A B C D E
Link to 2023 KPIs:
Production
Risk appetite
Low
– Energean is committed to maintaining the security and integrity of its data
and IT and OT systems.
Pre-mitigated
2023 movement
▲
The risk increased in 2023.
As Energean grows into a >200 Kboe/d 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 and services (including SOC).
•
Security plan and cyber policies and procedures to follow.
•
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.
•
Operational procedures in case of an incident.
•
Software back ups (including by design) (in place for ICSS).
•
Cooperation and relationships with governments re cyber protection.
2024 objectives
Technological and procedural measures are continuously evolving to manage
changing cyber security threats.
#
11 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 2023 KPIs
: Financial , Risk , Commercial
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.
Pre-mitigated
2023 movement
▲
The risk increased in 2023
, in light of the geopolitical developments and new
country entry
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.
To ensure effectiveness of our detective and responsive controls, Group’s
whistleblowing
arrangements
include,
multiple
whistleblowing
channels,
STRATEGIC REPORT
Page 93 of 273
anonymity, safe communication, multi-language, confidentiality and a case
management system that may safeguard support and protection for the reporter.
Enhanced due diligence of business partners and customers and compliance
auditing on major contractors.
In 2023 we have further enhanced our detecting but also preventive controls.
Company has engaged Marsh to conduct a fraud risk assessment in the procure
to pay area, to identify any gaps and mitigate any associated risks. As part of the
Company’s ABC programme, Transparency International UK’s Corporate Anti-
Corruption Benchmark programme was run with valuable recommendations
received. We continuously measure the effectiveness but also improve and
strengthen our controls as we grow, considering mainly the new country
(Morocco) entry.
2024 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.
#12 Health Safety and Environment (HSE) risk
Owner
: HSE Director
Link to strategy
:
⑤
Link to business model
: A B C D E
Link to 2023 KPIs
: LTIF rate
Risk appetite
Low
– The well-being and safety of our employees is a top priority at Energean.
We are committed to ensuring that none of our operational activities pose any risk
of harm or distress to our workforce. While we recognise that certain operational
tasks carry inherent risks, we mitigate these risks through thorough risk
assessments, adherence to operational protocols, and diligent oversight. Our risk
management process is dynamic, and we actively encourage all employees to
report near misses and suggest improvements to our control measures.
Additionally, external parties conduct audits of our operations, and we incorporate
their findings into our ongoing efforts for continuous improvement.
Pre-mitigated
2023 movement
▬
This risk remained static in 2023. The Group’s pro forma LTIF
61
for operated
activity in 2023 was 0.47 per million hours worked (flat on 0.47 in 2022).
Our
TRIR
62
for 2022 was 1.09 per million hours worked
(down from 1.18 in 2022).
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
Effective management of 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, including LTIF <0.60 and
TRIR <1.15 for 2024.
Consistent maintenance and full implementation of the Health Safety
Environmental (“
HSE
”) & Social Responsibility (“
SR
”) policy, delineating corporate
values, standards and expectations concerning all matters related to HSE & SR
for the company’s employees, partners, stakeholders, the public, environment and
sustainable development initiatives.
61
Lost Time Injury Frequency.
62
Total Recordable Incident Rate.
STRATEGIC REPORT
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Thorough implementation and ongoing maintenance of an HSE Management
System, along with an effective H&S framework, aligned with Energean’s
standards and in accordance with international protocols.
Consistent implementation and continuous maintenance of suitable and effective
Crisis Management and Emergency Response Plans, aligned with Energean’s
expectations and standards.
2024 objectives
Zero serious incidents and LTIF target of less than 0.60 and a TRIR target of less
than 1.15 across all Energean operated sites.
Develop the Energean Process Framework and Manual to monitor and enhance
performance and offer Process Safety training to all personnel with pertinent
responsibilities.
Maintain the Occupational Health and Safety ISO 45001 and the Environmental
Management ISO 14001 certifications across all certified assets and obtain
certification for the FPSO in Israel.
#13 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 2023 KPIs
: Progress of Transition plan to Net Zero and Sustainability Rating vs Peer Group
Risk appetite
Medium
– The Group is committed to reaching its net-zero emissions
63
goal by
2050 and reducing the near-term emissions intensity of its operations by adopting
low carbon solutions and acquiring hydrocarbons with low emissions intensities.
Energean is prioritising near-term investment decisions to maintain the
competitiveness of its assets considering a future where demand for oil and gas
may decline. The Group will also continue to evaluate its portfolio against various
climate change scenarios, aligning with the recommendations of the TCFD.
Pre-mitigated
2023 movement
▬
This risk remained static in 2023
Impact
Reputational damage and loss of investors and providers of capital.
Liability exposure due to enhanced disclosures and reporting requirements not
met.
Criminal or civil sanctions for allegedly false or misleading or deceptive
representations.
Increased cost of financial services or inability to raise financing if company
cannot demonstrate clear ESG commitment.
Proxy voting against the Company on a range of topics due to growing investor
interest in ESG issues.
Mitigation
Increased natural gas production to 83% of the Group’s production as part of our
strategy, as we view natural gas as a transitional medium towards a low carbon
future.
Developed a Net Zero pathway including a plan to generate or acquire carbon
removals and defined the required absolute emissions reduction.
Continued purchasing green electricity across all our operated sites.
Prinos Carbon and Storage project progressed and included in the List of Projects
of Common Interest by the European Committee.
In February 2023, Energean and Shell Egypt signed a memorandum of
understanding (“
MoU
”), paving the way for a collaborative effort towards
decarbonisation.
63
Scope 1 & 2 emissions.
STRATEGIC REPORT
Page 95 of 273
Aligned with the TCFD recommendations across all TCFD pillars in our year-end
reporting.
Carbon shadow prices taken into consideration in the evaluation of projects and
investments viability.
Reduced our GHG emissions intensity by 42% versus 2022 by strengthening our
low carbon portfolio and by shifting production from oil to gas.
Verified carbon emissions scopes 1, 2 and 3 according to ISO 14064-1.
Active commitment to ESG goals and targets.
Best in class ESG ratings:
•
CDP rating maintained to A-.
•
Constituent of FTSE4Good Index Series.
•
Maala Index rating maintained to platinum.
•
Rated AAA by MSCI.
2024 objectives
Advance FEED and ESIA activities at the Prinos Carbon Storage project in Greece
and submit the necessary documentation to obtain the storage license.
Continue advancing Energean’s pathway to achieving net-zero emissions.
Reduce 2024 emissions intensity to 8.5–9 kgCO2e/boe3.
#14 Climate Change risk: Physical risks
Owner
: HSE Director
Link to strategy:
③
Link to business model:
A B C D E
Link to 2023 KPIs:
Progress of Transition plan to Net Zero and Sustainability Rating vs Peer Group
Risk appetite
Medium
– Management recognises that
c
limate 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.
Pre-mitigated
2023 movement
▬
The risk remained static in 2023.
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
Energean continues to monitor the weather conditions near its assets and has
built protective barriers to combat potential flooding.
Invest in resilience measures to enhance the robustness of our infrastructure and
operations against physical risks.
Develop and regularly update contingency plans and business continuity
strategies to manage physical risks and minimise disruption to operations.
Comprehensive insurance policies in place for key assets and infrastructure.
STRATEGIC REPORT
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2024 objectives
Continue monitoring of environmental conditions and reporting at both an asset
and corporate level.
Continue to expand on the assessment of physical risks posed to our
infrastructure and operations.
#15 Strategic risk: Geopolitical conflicts outside of Israel 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 2023 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.
Pre-mitigated
2023 movement
▲
The risk increased in 2023.
The movement reflects the risk that the conflict
between Israel and Hamas could spread more widely and affect the regions
where the Company operates other than 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.
2024 objectives
Continued monitoring of geopolitical events and regulatory/fiscal changes.
Undertake risk assessment activities in relation to new projects and areas.
Emerging risks
The main emerging risk areas are related to the ongoing military conflict between the state of Israel with
Hamas, its aftermath, and potential wider consequences for Israel’s fiscal strength and potential
unexpected legislation, including those related to increased tax, 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 these.
STRATEGIC REPORT
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Viability Statement
The Directors have assessed the prospects and viability of the Group in accordance with the Provision
31 of the UK Corporate Governance Code. The long-term viability assessment has been based on a five-
year timeframe, covering the period to 31 December 2028, and is based on the Group Working Capital
Model. By their nature, forecasts inherently become less accurate and more uncertain as the planning
horizon extends.
The Board undertook a review spanning a five-year period for several key reasons:
•
Energean routinely assesses its medium-term forecasts and guidance on a rolling five-year
basis.
•
Energean’s production target of 200 Kboe/d by 2025 is anticipated to be met through the
deployment of the Group's strategic assets—Karish, Karish North, NEA/NI, and Cassiopea.
•
This timeframe encompasses the remaining capital investment phase up to the first production
and ramp-up from this stage of strategic projects, e.g., Cassiopea (Italy), the next phase of
development expenditure for Energean including the first phase of the Katlan development and
the appraisal drilling on the Anchois Field offshore Morocco.
•
Energean’s $450 million Corporate Bond expires in Q4 2027, therefore this repayment is captured
in the viability assessment period.
•
Energean's Dividend Policy, announced in March 2022, outlines the aim to distribute at least
$0.30 per share in quarterly dividends, which is also captured within the assessment period.
Based on these factors, the Board considers that an assessment period up to 31 December 2028
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.
The Company’s prospects have been assessed mainly with reference to the Company’s strategic
planning and associated medium term financial forecast. This incorporates a detailed bottom-up budget
for each country where it operates. The budgeting and planning process is thorough and includes input
from most operating line managers, as well as senior management, and forms the basis for most variable
compensation targets. The Board participates in strategic planning and reviews and approves the Group
five-year budget (“mid-term plan or MTP”). The outputs from this process include full financial forecasts
of revenue, Adjusted EBITDAX, cost of production, operating cash flow, working capital and net debt. The
Directors consider that the planning process and monthly cash flow updates provide a sound
underpinning to management’s expectations of the Group’s prospects.
The Viability assessment encompasses a range of sensitivity scenarios, including a reasonable worst-
case scenario that combines various sensitivities. The latter account for potential downsides in
commodity prices, lower production outcomes, delays in certain strategic projects where we do not
operate, and the risk associated with increasing interest rates. A summary of the key assumptions,
aligned to the Group’s principal risks, and the sensitivity scenarios considered can be found below.
STRATEGIC REPORT
Page 98 of 273
Principal risks
Base case assumptions
Sensitivity scenarios
1. Operational Risk: (i)
Delay to key projects
(including second oil
train and riser,
Cassiopea in Italy)
including operational
readiness failures (ii)
Production uptime
and operational
efficiency (risk #2)
2. Deterioration or
misalignment of JV
relationships (risk #8)
3. Recoverability of
receivables in Egypt
(risk #9)
During the assessment period, the following
assumptions are made regarding the
timeline for various projects coming
onstream:
•
Karish North is presumed to begin
operations in February 2024.
•
We assume Cassiopea online
September 2024 (vs. Operator view of
first half of the year).
•
For the Katlan Area Development, it is
assumed that Athena & Zeus will
commence production in the first half of
2027, with Hera & Apollo following in the
first half of 2029 (outside of the MTP
period).
The sensitivity scenarios
include a variety of changes
to key financial and
operational assumptions:
•
A 5% decrease in
production across all
mature assets compared
to the base case and
additional reduction to
gas production In Israel
to the lower end of
guidance.
•
An additional delay of 3
months for first gas from
Cassiopeia, accounting
for the uncertainties
inherent in non-operated
projects.
•
A 15% reduction in
receivables from EGPC.
•
Minor delays in projects
under our control, such
as the Katlan
development, seismic
activities in Morocco,
and asset integrity
initiatives in Italy and
Egypt.
•
Continuation of stable
dividend distributions at
levels comparable to
those in 2023.
4. Macro-Economic
Risk including
inflation, interest
rates and commodity
price fluctuations
(risk #6)
5. Financial Risk:
inability to maintain
liquidity and solvency
(risk #5)
The financial assumptions for the
assessment period are based on recent
market data and forward curves:
•
Oil price assumptions are set at $80/bbl
in 2024, reducing to $75/bbl in 2025,
and further to $70/bbl in 2026 onwards.
•
The PSV gas price is based on the
recent forward curve, maintaining a
stable price of €30/MWh through 2024
to 2027, and €25/MWh in 2028.
Regarding the company's financial
instruments and exposure to interest rate
risks:
•
The $2.65 billion of bonds at Energean
Israel level and $450 million of Bonds at
Energean plc carry a fixed coupon,
indicating no exposure to interest rate
fluctuations. However, the €100 million
Greek State-backed loan is subject to
variations in EURIBOR rates.
Additionally, any utilisation of the
Revolving Credit Facility (“
RCF
”) will be
The outlined sensitivity
scenarios include
adjustments to financial and
operational parameters to
assess the resilience of the
working capital model under
varying conditions:
•
A 10% decrease in future
oil prices and a 30%
reduction in PSV to test
the impact of adverse
market conditions on
revenue.
•
An increase in interest
rates by +50 basis points
to evaluate the effect of
rising borrowing costs
on financial expenses.
STRATEGIC REPORT
Page 99 of 273
exposed to shifts in the Secured
Overnight Financing Rate (“
SOFR
”).
•
A projected SOFR rate of 5.2% is
assumed for 2024, decreasing to 4.3%
in 2025, and settling at 4% from 2026
onwards.
•
A refinance plan is in place for the
second tranche of bonds due in March
2026. There are no plans to refinance
the other bonds maturing within the
assessment period.
•
A bridge loan of $250 million is
anticipated to be utilised for 6 months in
2027. It is expected to be fully repaid in
the same year.
6. Failure to manage
the risk of climate
change and to adapt
to the energy
transition (risk #13)
•
Carbon charges, such as the European
carbon emissions tax, have been
applied across our portfolio where
relevant, notably in locations like Greece
and UK.
•
Additionally, the budget for our base
case encompasses expenditures for
green projects and investments aimed
at environmental sustainability. This
includes (i) on-site initiatives for direct
emissions reduction, (ii) investments in
projects designed to remove carbon
from the atmosphere, and (iii) funding
for research on Carbon Capture and
Storage (CCS) technologies throughout
the Group.
Free allowances are used up
until 2027. The risk of further
measure being introduced
and enacted by governments
in our areas of operations in
the medium term is low.
Therefore, there is no
sensitivity included in the
downside scenario.
Within these individual and combined sensitivity scenarios, the Group is projected to maintain adequate
cash reserves throughout the viability period. Moreover, the Board has explored the potential and
likelihood of various mitigating strategies. These include the capability to hedge against risks, available
headroom under existing debt facilities, additional funding avenues such as refinancing, and further
optimisation of the cost and asset base. This optimisation could involve reductions in discretionary
capital expenditures, such as exploration, or adjustments to expenditures within our control.
Based on this assessment of prospects and stress-test scenarios, together with its review of principal
risks and the effectiveness of risk management procedures, the Directors confirm that they have a
reasonable expectation that the Company will be able to continue in operation and meet its liabilities as
they fall due over the period to 31 December 2028.
CORPORATE GOVERNANCE
Page 100 of 273
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
in Tel Aviv. Today, Energean is active in eight
64
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.
64
Including Morocco, subject to, at the time of writing, farm-in completion occurring.
CORPORATE GOVERNANCE
Page 101 of 273
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.
Independent:
•
N/A
Committee membership:
•
N/A
Current external appointments:
•
None
Panagiotis (Panos) Benos
Chief Financial Officer
Mr Benos has 23 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
Senior Independent Non-Executive Director
Mr Bartlett was appointed as an Independent Non-Executive Director in August 2017 and was appointed
Senior Independent Non-Executive Director in November 2023. Mr Bartlett has over 40 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. Before his current directorships, Mr Bartlett served as Energy
Adviser to Helios Investment Partners LLP (a private equity partnership focused on Africa), was the chair
and Non-Executive Director of Azonto Energy from 2013 to 2015 and NED of Eland Oil & Gas plc 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
CORPORATE GOVERNANCE
Page 102 of 273
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
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 40 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 Ltd., which was sold to
NYSE-listed Armor Holdings in 1998. In 2002, she co-founded Alaco, which was sold in 2022 to Sigma7,
a portfolio company of the private-equity firm Growth Catalyst Partners. 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 Writers’ Prize, the flagship award of the Literature Prize Foundation.
Independent:
•
Yes
Committee membership:
•
Audit & Risk– Member
•
Environment, Safety & Social Responsibility – Member
•
Remuneration & Talent – Member
CORPORATE GOVERNANCE
Page 103 of 273
Current external appointments:
•
Alaco Ltd. – Chief Executive Officer
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 energy lawyer based in London with over 20 years’ experience and is General Counsel & Company
Secretary at Storegga Ltd., a private developer of carbon capture, storage and hydrogen projects. Ms
Wood is a former partner of Vinson and Elkins LLP (2011–2015) and Norton Rose Fulbright LLP (2015–
2018). She has extensive experience in the energy 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 Who’s Who Legal Energy 2023. 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 Non-Executive 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.
She
is also a Non-Executive Director of Gulf Keystone Petroleum, a company listed on the main market of the
London Stock Exchange, where she is their Senior Independent Director, Deputy Chair and Chair of the
Remuneration Committee
65
.
Independent:
•
Yes
Committee membership:
•
Remuneration & Talent – Chair
•
Nomination & Governance – Member
Current external appointments:
•
General Counsel & Company Secretary of Storegga Ltd.
•
Africa Oil Corp – Independent Non-Executive Director, Chair of the Corporate Governance and
Nomination Committee
•
Gulf Keystone Petroleum Ltd. – Independent Non-Executive Director, Senior Independent
Director, Deputy Chair, and Chair of the Remuneration Committee
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
65
Ms. Wood has announced her resignation from the board of directors of Gulf Keystone Petroleum Ltd., to take effect upon the
earlier of: (i) the appointment of a replacement Senior Independent Director; or (ii) the upcoming Annual General Meeting, which
is scheduled to take place on 21 June 2024
CORPORATE GOVERNANCE
Page 104 of 273
Committee membership:
•
Audit & Risk – Member
•
Remuneration & Talent – Member
Current external appointments:
•
Hellenic Bank plc– Independent Non-Executive Director
Martin Houston
Independent Non-Executive Director
Mr Houston was appointed as an Independent Non-Executive Director in November 2023. Mr Houston
began his career as a petroleum geologist in 1979 and since then has worked worldwide for nearly 45
years, managing all forms of enterprise in the energy industry. He earned a BSc in geology from
Newcastle University and an MSc in petroleum geology from Imperial College, London.
He has established a strong external reputation in the international gas business and is largely credited
with being the key architect of BG Group’s world class LNG business.
He retired from BG in 2014 as Chief
Operating Officer and Executive Director after 32 years.
Mr Houston has been member of many Boards over the past three decades.
He is currently the Chair of
Tellurian Inc, a US based LNG export company he co-founded in 2016. He is a Non-Executive Director of
BUPA Arabia, a healthcare company based in Jeddah, Saudi Arabia and of CC Energy, a private oil and
gas company with producing assets in Oman and the USA.
Mr Houston is a Senior Advisory Partner and Chair of the Energy Group at Moelis and Company, a
boutique investment bank and is on the Advisory Board of Radia Inc, the mega-wind company. He is also
an advisor to Detect Technologies, an AI-based industrial safety company based in Chennai, India and
Energy North, a green ammonia start-up based in Perth, Australia.
Martin is a Merryck mentor and a Fellow of the Geological Society of London. He’s on the Advisory Board
of the Global Energy Policy unit at Columbia University’s School of International and Public Affairs in New
York and the International Advisory Board of Newcastle University.
He is an invited member of the
National Petroleum Council of the United States.
Independent:
•
Yes
Committee membership:
•
Audit & Risk – Member
•
Environment, Safety & Social Responsibility – Chair
•
Nomination & Governance – Member
Current external appointments:
•
Tellurian Inc – Non-Executive Chair
•
BUPA Arabia – Non-Executive Director
•
CC Energy – Non-Executive Director
•
Energy Group at Moelis and Company – Senior Advisory Partner and Chair
CORPORATE GOVERNANCE
Page 105 of 273
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 (“
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 107–108.
•
Division of responsibilities is set out on pages 108–109.
•
Composition, Succession and Evaluation is set out on pages 109–110.
•
Audit, Risk & Internal Control is set out on page 110.
•
Remuneration is set out on pages 110–111.
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 pages
113–116.
Purpose
Energean’s aim is to lead the energy transition in the Mediterranean through a strategic focus on gas and
achieve its net-zero ambition in by 2050, whilst delivering meaningful and sustainable returns to our
shareholders.
Our vision
To be the leading independent gas and ESG focused exploration & production company in the
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.
CORPORATE GOVERNANCE
Page 106 of 273
Board and committee attendance
Type and number of meetings held during the year:
Director
Board (9)
Audit &
Risk (5)
Remuneration
& Talent (7)
Nomination &
Governance (3)
Environment,
Safety & Social
Responsibility (3)
Karen Simon
9
–
7
3
3
Mathios Rigas
9
–
–
–
–
Panos Benos
9
–
–
–
–
Andrew Bartlett
66
7
5
–
3
–
Efstathios
Topouzoglou
9
–
–
3
3
Amy Lashinsky
67
9
5
7
–
–
Kimberley Wood
68
9
5
7
3
–
Andreas Persianis
69
9
5
–
–
3
Martin Houston
70
–
–
1
–
–
Roy Franklin
71
7
–
5
2
2
The Board has a formal schedule of matters that can only be decided by the Board, as updated by the
Board in 2022. In 2023, the Board considered whether any changes to the current schedule of reserved
matters were required and concluded that, following the revisions made in 2022, the current schedule
remained appropriate and relevant.
The key matters considered by the Board in 2023 were:
Strategic focus on stable, long-term value
creation and delivery for stakeholders
Approving the Group 2024 budget
The issuance of $750 million senior secured
notes through Energean Israel Finance Ltd.
The Morocco country entry
First gas from NEA/NI
Conversion of the Kerogen convertible loan notes
Payment of the Company’s interim dividends
Group strategy in light of the increased focus on
ESG matters and proposed new reporting standards
Strategic decisions on capital expenditure
The impact of the security situation in Israel
66
Andrew Bartlett was appointed as the Senior Independent Non-Executive Director on 16 November 2023.
67
Amy Lashinsky was appointed to the Environment, Safety & Social Responsibility Committee with effect from 16 November
2023. The number of possible Environment, Safety & Social Responsibility Committee meetings Amy Lashinsky could have
attended was 0.
68
Kimberley Wood stood down from the Audit & Risk Committee with effect from 16 November 2023. The number of possible
Audit & Risk Committee meetings Kimberley Wood could have attended was 5.
69
Andreas Persianis was appointed as Chair to the Environment, Safety & Social Responsibility Committee with effect from 16
November 2023. The number of possible Environment, Safety & Social Responsibility Committee meetings Andreas Persianis
could have attended was 3. Post year-end, Andreas Persianis stood down from the Environment, Safety & Social Responsibility
Committee and was appointed to the Remuneration & Talent Committee with effect from 1 February 2024.
70
Martin Houston was appointed as an Independent Non-Executive Director of the Company on 16 November 2023 and was
appointed to the Audit & Risk Committee and the Remuneration & Talent Committee with effect from 16 November 2023. The
number of possible Audit & Risk Committee meetings Martin Houston could have attended was 0 and the number of possible
Remuneration & Talent Committee meetings was 1. Post year-end, Martin Houston stood down from the Remuneration &
Talent Committee, was appointed as Chair to the Environment, Safety & Social Responsibility Committee, and was appointed
to the Nomination & Governance Committee with effect from 1 February 2024.
71
Roy Franklin resigned as a Non-Executive Director of the Company on 13 November 2023 and therefore left the Environment,
Safety & Social Responsibility Committee, the Nomination & Governance Committee and the Remuneration & Talent Committee
with effect from 13 November 2023. The number of possible Board meetings Roy Franklin could have attended was 8, the
number of possible Environment, Safety & Social Responsibility Committee meetings was 2, the number of possible Nomination
& Governance Committee meetings was 2, and the number of possible Remuneration & Talent Committee meetings was 5.
CORPORATE GOVERNANCE
Page 107 of 273
Commissioning of the FPSO and increase of
the FPSO to its initial capacity
Board composition and succession planning
HSE performance
The composition of committees and the
appointment of new Senior Independent Non-
Executive Director
Material contracts
Reviewing and approving the financial statements
for the 2022 year-end and 2023 half year
Financial reporting and controls
Compliance with statutory and regulatory
obligations
Material litigation
Significant transactions
Executive remuneration
Growth projects including Karish North and Katlan
Receiving updates and monitoring progress
on the Group’s activities in carbon storage
Monitoring of progress against environmental and
sustainability commitments
The continued integration of the Group
Enterprise Risk Management (“
ERM
”) system
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 46–57. Details of the Company’s engagement with stakeholders is
detailed in the section 172 (1) statement on pages 113–116. 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 81–96. 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 125–127. The
sustainability of the Company’s business is considered further on pages 13–17 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 2023 in furtherance of its commitment to the UN’s Global Compact
campaign and pledge to net-zero emissions by 2050. 2023 saw the MSCI award the Company an AAA
ESG rating putting it in the top 17% of listed Oil & Gas Exploration and Production companies. This
prestigious rating classifies the Company in the “Leader” category, amongst 108 Oil & Gas Exploration
and Production companies. 2023 also saw the Company maintain its Carbon Disclosure Project (“
CDP
”)
rating at A- 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 which 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 minimising impact on the environment
can be found on pages 15–17.
Energean has grown from a company that was producing 3 kboe/d in 2019 to a company that produces
now an average working interest production of approximately 123 Kboe/d in 2023. The Company
operates in eight
72
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 63.
72
Including Morocco, subject to, at the time of writing, farm-in completion occurring.
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Following her appointment in 2022, Amy Lashinsky is the workforce Board representative. Employees
can confidentially email Amy Lashinsky to raise any issues, to the extent appropriate. In addition, the
Group has a whistleblowing policy in place for which the Audit & Risk Committee has overall
responsibility. Further details on the Group whistleblowing policy are contained within the Audit & Risk
Committee report which can be found at page 122.
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 and continued to build our people skills by launching E-Guru, Energean’s global learning
platform, which offers a centralised point of access for training covering a wide range of learning
including the Udemy e-learning business library and topics relevant to our employees such as leadership,
safety, sustainability, diversity, and inclusion, as well as courses related to soft and technical skills. 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 57–60.
The Board also monitors the Company culture and includes culture related metrics in the Company’s
annual bonus plan. During 2023 these metrics included the benchmarking of Diversity, Equity and
Inclusion performance against the Centre of Global Inclusion benchmark tool. Goals relating to culture
are also included in the 2024 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 February 2024. More
information on this matter is set out on page 137.
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 8.926% of the shares of the Company (through his indirect holdings in both Oilco
Investments Ltd. (through Trustena GmbH as trustee to the family trust “The Energy Trust”) and HIL
Hydrocarbon Investments Ltd.).
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 weekly and comprises of business and functional heads, further details of which can be found in
the Nomination & Governance Committee report which can be found at page 128. The Chair and Chief
Executive Officer share responsibility for the representation of the Company to third parties.
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As detailed on page 106, the Board met nine 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,
Andrew Bartlett, 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
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 resignation of Roy Franklin from
the Board and the appointment of Martin Houston, as an Independent Non-Executive Director, to the
Board. Following Roy Franklin’s resignation, the Nomination & Governance Committee also oversaw the
appointment of Andrew Bartlett as the Senior Independent Non-Executive Director.
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
pages 128–135.
Following Roy Franklin’s resignation, 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 16 November 2023:
•
Martin Houston was appointed to the Audit & Risk Committee and the Remuneration & Talent
Committee;
•
Amy Lashinsky was appointed to the Environment, Safety & Social Responsibility Committee;
•
Andreas Persianis was appointed as Chair to the Environment, Safety & Social Responsibility
Committee; and
•
Kimberley Wood stood down from the Audit & Risk Committee.
In January 2024, the Nomination & Governance Committee recommended further Committee changes
to the Board and Martin Houston was appointed to the ESSR Committee as Chair on 1 February 2024
with Andreas Persianis stepping down due to his appointment to the Remuneration & Talent Committee
effective the same date.
Details of these Board and Committee changes can be found in the Nomination & Governance Committee
report on page 131.
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 externally facilitated triennial review of their performance, further
details of which are contained in the Nomination & Governance Committee report on pages 133–135.
The results were reviewed by the Nomination & Governance Committee and discussed with the Board.
CORPORATE GOVERNANCE
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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 six years by the end of
2023.
During 2024, the Chair, the Board, its committees and individual directors will be subject to an internally
facilitated review and progress against the recommendations of the 2023 externally facilitated review will
be reported on in the 2024 Annual Report.
Audit, risk and internal control
The Board established the Audit & Risk Committee upon admission to the London Stock Exchange, which,
during 2023, comprised Andrew Bartlett, Amy Lashinsky, Andreas Persianis and Kimberley Wood, until
she stood down with effect from 16 November 2023. Martin Houston was appointed to the Committee
on 16 November 2023 but was not entitled to attend any meetings in 2023 as no further meetings were
held. All committee members who served during 2023 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 2023 this saw the Enterprise Risk Management (“
ERM
”) framework
embedded further across the Group, as further described on page 81. Further information about the
Committee’s roles, responsibilities and activity is detailed on pages 117–124 and further details on the
Risk Management process is found on pages 81–96.
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 2023 the Committee members were Kimberley Wood, Karen Simon, Amy Lashinsky and
Roy Franklin until his resignation on 13 November 2023. Martin Houston was appointed to the
Remuneration & Talent Committee on 16 November 2023 and was entitled to attend one meeting in
2023.
Kimberley Wood, Amy Lashinsky and Martin Houston 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.
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Furthermore, the Company has in place an annual bonus scheme which incentivises management to
progress with measures related to operations, balance sheet strength, growth and sustainability. 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.
In 2023, in advance of the renewal of the Director’s Remuneration Policy at the 2024 AGM (which is to be
renewed in line with the usual three-year cycle required under UK regulation), the Remuneration & Talent
Committee undertook an in-depth review of the current Remuneration Policy and conducted a
shareholder consultation exercise with respect to the limited changes that were being considered.
Further details of the role and activities of the Remuneration & Talent Committee and the proposed 2024
Directors’ Remuneration Policy, which will be subject to a binding shareholder vote at the 2024 AGM, are
found on pages 136–165 of this report.
Environment and sustainability
Board oversight
Energean sees the environment and sustainability, including climate change, as a top priority for our
business. This is reflected in our strategy, and we apply all our governance processes to environment
and sustainability issues. Responsibility for the governance of environment and sustainability issues
within Energean ultimately rests with the Board. To reflect the increasing importance of climate change-
related risks and opportunities, the Environment, Safety & Social Responsibility Committee (the “ESSR
Committee”) has taken over responsibility for environment and sustainability 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
environmental and sustainability related risks, which includes identification of emerging risks, such as
climate change risks, and proposes mitigation measures. The ESSR 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 environmental and sustainability issues, including
energy, climate and environment, and industrial trends, etc.
The ESSR Committee convenes a minimum of three times a year and, when the Committee meets before
a Board meeting, reviews the Board papers on Energean’s carbon emissions performance and KPIs
where possible.
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.
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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 climate change policy, environmental
and sustainability strategy, and targets related to short, medium and long-term plans ultimately lie with
the CEO.
The COO holds the responsibility of identifying and evaluating both business and climate-related risks,
and in coordination with the CEO formulating strategies, and endorsing action plans aimed at managing
and mitigating these risks effectively. Additionally, the CEO supervises the Company's overall
environmental performance and establishes expectations and targets for climate performance.
Discussions pertaining to climate change and the transition to sustainable energy with the Board are also
conducted by the CEO. Regular dialogues between the COO, the CEO and the Board cover various climate
change-related matters, including policies, investment decisions influenced significantly by climate
change factors, and the potential impact of carbon credit prices on Energean's forthcoming financial
performance.
The COO is responsible for managing operational aspects related to climate change, reporting directly to
the CEO and providing regular updates to the Board. Development and implementation of Energean’s
Corporate HSE and Climate Change Policy, as well as designing training programs and drills across the
organisation to enhance safety, environmental, and climate change awareness rests with the HSE
Director. The HSE Director also keeps abreast of technological advancements and opportunities to
support the achievement of defined climate change targets. Ensuring alignment with the Company's net-
zero 2050 objective falls under the purview of the HSE Director. Monitoring Energean's carbon emissions
across all assets and defining emission factors used by the financial team to gauge the financial
implications of climate change on the Company's portfolio are additional responsibilities. Moreover, the
HSE Director collaborates with Energean's financial, economic, and technical departments to assess
climate-related risks and opportunities comprehensively.
Board expertise
To ensure Energean’s Board remain up to date on the most pertinent environmental and sustainability
developments and to further enhance their knowledge and skills in relation to those issues, Energean
invites leading industry and environment and sustainability experts to Board and Committee meetings
on a regular basis. Both the HSE Director and the Corporate Communications Director proactively interact
with Board members to provide necessary information and further insights on specific climate change-
related issues affecting the Company.
Executive Committee – Chaired by
CEO.
Meets weekly, attended by the
Company’s Corporate
Communications Director, whose
responsibility includes ESG and CSR.
The HSE Director can request to
attend and update the Executive
Committee on climate change
issues.
Environment, Safety & Social
Responsibility (“ESSR”) Committee
chaired by Martin Houston (as of 1
February 2024), attended by Chair of
the Board (also a Committee
member), CEO, HSE Director and the
Company’s Corporate
Communications Director whose
responsibility includes ESG and CSR.
The Committee meets three times a
year and receives reports from the
HSE Director on climate issues.
The Board meets at least every 2
months with ad-hoc meetings as
required and holds monthly calls in
months where no meeting is
scheduled.
The Board receives regular reports
from the HSE Director who attends
Board meetings when requested.
The ESSR Committee Chair provides
updates on ESSR Committee
activities.
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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 are found on page 113 of this report and
details of the Board’s and Company’s engagement with local communities are found on pages 114–115
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 by 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 farm-in to the Rissana and Lixus licenses offshore
Morocco, where farm-in completion is expected shortly. If developed, the Anchois project has the
potential to contribute to the reduction of coal-fired power usage in Morocco. Another example of
decision making is the proposed development of a carbon capture and storage project at the Prinos
acreage in Greece which has now been adopted by the European Commission as a Project of Common
Interest, and has had €150 million of grants committed from the Greek Government to support its
development. 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, has been appointed by the Board to be the “employee voice” in the boardroom and, in her role
as workforce representative, Amy Lashinsky attended the first HSE Corporate Conference which took
place in Athens and was attended by employees from Greece, Italy, Egypt, Israel, Croatia and the UK
representing various technical and business functions. Amy Lashinsky is also a member of the
Remuneration & Talent Committee where she participates in discussions related to the Company’s work
force.
As part of the 2023 bonus KPIs, the Executive Directors were set objectives relating to culture and
Diversity, Equity and Inclusion (“
DEI
”). The Executive Directors were awarded a 96% pay-out on this metric
following the successful completion of the DEI policy revision, the employee focus groups and internal
surveys, and the DEI training.
CORPORATE GOVERNANCE
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Local communities
Energean is very active in the communities in which it operates (further information on this can be found
on pages 48–57), 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, of
which, more details and examples can be found on pages 48–57.
During 2023, 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
“Panthires” (Panthers), a women’s basketball team based in Kavala, that promotes good
sportsmanship and encourages young girls to participate in sports
Special Elementary School of Kavala
National Center of Emergency Assistance of Kavala
The Health Center of Zitsa – Ioannina
The International Hellenic University (“
IHU
”) in Thessaloniki – Kavala Campus
“Saint Gregory, the Theologian” (Agios Grigorios Theologos), the Cathedral church of Nea Karvali,
Kavala
“Get Involved”, a student NGO that aims at developing a culture of economic education within
universities and other educational organisations
The Municipality of Kavala
The Fire Service of Kavala
The Municipality of Paggaio
“Eleni Gyra”, Home of Autistic Persons, Zitsa (Ioannina)
The High School of Amygdaleona, Kavala
The Municipality of Zitsa, Ioannina
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 at
the 2023 Maala ESG Index
CORPORATE GOVERNANCE
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Rahaf Sailing and Surfing Club, a Club that supports young sailors from low-income communities
The Nature and Parks Authority
The University of Haifa’s “Maritime Policy and Strategy Research Center”
“Lev Hash” (“Feeling Heart”), a local NGO for charities, Haifa
The Technion (the Israel Institute of Technology), Haifa
In Montenegro:
The Greek Embassy – Podgorica, Montenegro
In Italy:
“Caritas Diocesana”, an organisation for charity – Fermo, Vasto, and Pozzallo (Marche, Abruzzo, and
Sicily)
“Aretusa” Handball Team
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
Member of Sodalitas, a business leadership for sustainable development
Energy Bank Foundation, a national organisation that provides economic support to families and
individuals suffering from economic and social vulnerability and provides education on local
communities about energy consumption
“Special Olympics Italia”, an organisation that promotes sport as a means of inclusion for children and
adults with intellectual disabilities
“Donn.è”, a non-profit organisation, committed to gender education and gender violence prevention, by
raising awareness within schools and helping women against violence, Abruzzo
National Observatory Sea Protection
Italian Paralympic Swimming Federation, Termoli
Civil Protection of Porto San Giorgio
“Giovanni XXIII Institute” in Pineto, Abruzzo
Association “Trofeo Del Mare (“The Sea Trophy”) – Men and stories”, Sicily
Montani Technical Technological Institute in Fermo, Marche
“3Bee”, an agri-tech company committed to halt the loss of biodiversity and prevent the extinction of
threatened species, such as bees
Association CNOS-FAP in Vasto, Abruzzo
In Egypt:
“Go Clean”, a recycling solutions company
Dar Al Orman Association, an NGO that performs charity work
Egyptian Petroleum Sector
“Future Light for Development Organisation” (“
FLDO
”), a Non-Governmental Foundation, with a focus
on women's empowerment, education, and environmental preservation
The American University of Cairo
In UK:
“Baker Street Quarter Partnership”, a not-for-profit company funded and directed by local businesses
for the benefit of the broader community of the Baker Street and Marylebone area, London
CORPORATE GOVERNANCE
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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 at 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
UK 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 engaged with Transparency International UK (“
TI-UK
”) in order to
benchmark the Company’s anti-corruption programme against the requirements of the 2010 UK Bribery
Act Adequate Procedures Guidance, the US Department of Justice’s Sentencing Guidelines, and the ISO
370001 anti-bribery standards. Using the TI-UK assessment tool, we undertook a gap analysis on the
Company’s anti-corruption programme, identified areas of improvement and actively engaged in deep
dive meetings and collaborations with peers to improve and build more robust programmes. The Board
has endorsed continuous improvement of its anti-corruption programme supplemented by in-depth
guidance and support to enable internal monitoring and improvements.
CORPORATE GOVERNANCE
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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 2023, which
sets out the role and work of the Committee during the year and key areas of focus for 2024. This report
outlines how the Committee has continued to support the Board in fulfilling its oversight responsibilities,
including those in the key areas of financial reporting, external audit, internal audit, effectiveness of the
risk management framework and internal controls, as well as consideration of ethics and compliance
matters. I would like to thank my fellow committee members for their strong commitment and dedication
throughout the year.
During the year, the Committee continued to review the development of the Enterprise Risk Management
framework (“
ERM
”) as detailed in the Internal Controls and Risk Management section below and as
outlined within the Risk Management section on pages 81–96 of the Strategic Review.
Membership of the Committee
The members of the Audit & Risk Committee during the year were myself, Andreas Persianis, Amy
Lashinsky, and Kimberley Wood until she stood down with effect from 16 November 2023. Martin
Houston was appointed to the Committee on 16 November 2023 but did not attend any meetings in 2023.
At year-end on 31 December 2023, the Committee comprised Andrew Bartlett, Amy Lashinsky, Andreas
Persianis and Martin Houston.
The Board remains satisfied that the Committee has recent and relevant financial experience, affirming
that the Committee collectively bring a wide knowledge and sufficient experience of the oil and gas
sector, aligning with the Code’s standards.
Furthermore, all members of the Committee hold positions as Independent Non-Executive Directors,
ensuring compliance with the Code. Detailed profiles outlining the skills and experiences of the
Committee members can be found on pages 100–104.
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, the CFO, the
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
73
5
5
Amy Lashinsky
5
5
Andreas Persianis
5
5
Martin Houston
74
0
0
73
Stood down from the Committee on 16 November 2023.
74
Appointed to the Committee on 16 November 2023.
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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;
•
advising the Board whether, in the Committee’s view, 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; and
•
reviewing and discussing with management the appropriateness of judgements involving the
application of accounting principles and disclosure rules.
Risk management and internal control
, including evaluating the effectiveness of the system of risk
management and internal financial controls.
External audit
, including assessing the performance and effectiveness of the external auditor, review of
their independence and objectivity, advising the Board on the appointment, re-appointment or removal of
the external auditor and reviewing reports from the reserves auditors.
Internal audit
, including approving the Internal Audit Function’s remit and annual internal audit plan to
ensure alignment with the key risks of the business and reviewing the effectiveness and follow-up of
internal audit, whistleblowing and fraud systems within the Group. Annually, the Audit & Risk Committee
evaluates how the Group’s internal audit requirements shall be satisfied and provides recommendations
to the Board accordingly, addressing any areas requiring improvement or action. The Head of Internal
Audit and the Head of Compliance are extended standing invitations to all committee meetings.
Compliance and governance
, including assessing the effectiveness of the Group’s risk management and
internal assurance processes. The Audit & Risk Committee evaluates the Group’s capability to identify
and manage emerging risks and regularly monitors the Group’s overall risk assessment processes that
inform the Board’s decision making. To facilitate this, the Committee maintains regular communication
with the Company’s compliance function.
The Audit & Risk Committee stays informed about regulatory developments in financial reporting through
regular updates provided by the Committee’s advisors.
Key matters considered in relation to the consolidated financial statements
The Audit & Risk Committee dedicated attention to several key financial judgements and reporting
matters during the preparation of the full-year results and the Annual Report. Following its review, the
Committee was satisfied with how each of the areas below was addressed. As part of this assessment,
the Committee received reports, requested and received clarifications from management, and sought
assurance and received input from the external auditor.
Specifically, the Committee deliberated on the following areas:
•
The Committee scrutinised technical reports from management and insights from external
specialists, ensuring the completeness of information and consistency of reserves volumes
across accounting processes.
•
The Committee assessed the Company's approach to impairment indicators and the calculation
of value-in-use for producing oil and gas assets. This involved reviewing and challenging
management's key assumptions regarding reserves estimates, future oil and gas prices, and
discount rates. Furthermore, the Committee supported the view that there were no indicators of
impairment at the year-end for cash-generating units, and found the financial statement
disclosures to effectively convey judgments and estimates.
•
Exploration and evaluation assets under IFRS 6 were reviewed, and the rationale for impairment
was discussed with management, considering the intent to develop or extract value from
discoveries.
CORPORATE GOVERNANCE
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•
The Committee examined the Company's approach to accounting for decommissioning
provisions, conducting a thorough assessment encompassing technical and financial
perspectives. This included a review of the decommissioning process, regulatory framework,
energy transition impacts, and related accounting treatment and assumptions. Additionally, the
Committee concurred with the disclosures on decommissioning provisions in the financial
statements.
•
Revenue recognition practices were reviewed to ensure compliance with IFRS 15, with the
Committee affirming satisfaction with the financial statement disclosures.
•
The Committee endorsed the recoverability assessment of trade receivables balances and
concurred with the expected credit loss provision booked in accordance with IFRS 9.
•
Quarterly dividends declared in 2023 were assessed in line with the established dividend policy,
with the Committee supporting the decision based on reports from management regarding
distributable reserves.
•
The Committee scrutinised the viability statement in the 2023 Annual Report and the going
concern basis of accounting, including an assessment of the Group's capital, liquidity, and
funding position. Additionally, the Committee evaluated principal and emerging risks, assessed
the Group's prospects in light of its current position, and reviewed disclosures on behalf of the
Board. Ultimately, the Committee supported the viability statement and management's going
concern conclusion.
•
The Committee also considered the impact of the situation in Israel on all of the above items and
throughout the Annual Report and Accounts
External auditor
Ernst & Young LLP (“
EY
” or the “
External Auditor
”) were appointed as auditor in 2018 and conducted their
initial audit for the year ended 31 December 2017. Energean plc became a Public Interest Entity in 2018
upon admission to trading on the London Stock Exchange. Consequently, 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. The fees paid to EY for their services in
2023 are detailed in note 7g on page 218 to the financial statements.
The External Auditor attends each meeting of the Audit & Risk Committee and presents reports on their
audit procedures and findings, including the assessments of the appropriateness of management’s
judgements and estimates made by management and their compliance with UK-adopted International
Accounting Standards. The Audit & Risk Committee is responsible for overseeing 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 holds sessions with the External Auditor in the absence of management.
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 2024. The Committee regularly reviews the performance of the auditor and the
Chair of the Audit & Risk Committee regularly engages with the Audit Partner to relay 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 2023 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 and levy return certification services in Greece and Israel;
•
Reporting Accountant services related to the 2023 bond offering; and
•
Interim review of consolidated financial statements for six months ended 30 June 2023.
CORPORATE GOVERNANCE
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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 7g to the financial statements on page 218.
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 81–84. The Group’s
principal risks and uncertainties, which provide a framework for the Audit & Risk Committee’s focus, are
discussed on pages 85–96. 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.
Throughout 2023, the Company diligently pursued the implementation of the ERM framework with the
guidance and support of its risk advisor, Marsh. Such framework has been extended to cover all
operations within the group. Additionally, Marsh facilitated several working sessions aimed at assisting
management in adapting to the new framework. This proactive approach was acknowledged by the Audit
& Risk Committee as a significant advancement.
The Group has made strides in embedding the ERM framework across the Group since its inception in
2022. The ERM framework and its application in the Group’s operating countries empowers the countries
to identify, evaluate and manage the risks they face, on a timely basis, to ensure each country’s
compliance with relevant domestic and international legislation, the Group’s strategy and policies. Details
of the ERM framework are provided in the Risk Management Section (pages 81–96).
Energean’s ERM framework combines a top-down strategic assessment of risk and risk appetite, which
takes into consideration the external business environment and any changes to the business model,
along with a bottom-up identification and reporting process arising from a review and assessment of the
Country risk registers. Energean has adopted a risk management framework based on the principles of
the “three lines of defence”, supported by Board-delegated committees and functions. The Audit & Risk
Committee, as delegated by the Board, is primarily responsible for continuously evaluating the
effectiveness of the Group‘s system of internal control and risk management framework. The key
elements of the Audit & Risk Committee’s roles and responsibilities are specified as follows:
•
Assessing the Group’s risk management framework.
•
Ensuring risks present an accurate reflection of risk landscape.
•
Reviewing and monitoring principal risks and mitigations in place.
•
Approving the Internal Audit plan.
•
Reviewing, discussing, and challenging internal audit reports.
Risk workshop
Building on the progress made in 2022 to implement a new ERM framework, in 2023, Energean engaged
further with Marsh UK to carry out a series of Risk Workshops for a number of Group functions: Legal,
Operations, and Finance.
The Legal Risk Workshop took place in Athens, Greece in September 2023, attended by legal colleagues
across the Group. The workshop covered legal risk identification, qualitative assessment, prioritisation,
risk mitigations, and emerging risks. It provided an opportunity for legal colleagues to reflect on the legal,
regulatory and compliance risks facing the Group. Meaningful discussions were held on how existing and
emerging legal, regulatory and compliance risks impact the Group, what processes are in place to
mitigate these risks, and how colleagues can work better together across different geographies.
CORPORATE GOVERNANCE
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Based on the discussions held at the Legal Risk Workshop, Energean will continue to prioritise
compliance with domestic and international laws and regulations. Among other priority areas for 2024,
local legal teams will continue to enhance communication channels with commercial and project teams
to ensure contractual and litigation risks are identified in a timely manner and appropriately managed.
As part of the Group’s regular reporting, the highlights of this workshop have been reported to the Audit
& Risk Committee by the Group Compliance Officer.
The Company includes risk in its training and competency development and during 2023, employees and
Non-Executive Directors were required to complete certified training in bribery prevention, cyber and
information security, and fraud prevention.
Internal auditor
The primary objective of the Internal Audit Function is to provide independent and objective assurance
on risks and controls to the Board, the Audit & Risk Committee and senior management. Additionally, it
assists the Board in meeting its corporate governance responsibilities.
The Internal Audit Function plays a central role in the Group’s risk management and internal control
system by objectively and independently evaluating controls, governance, and risk management
processes.
Under
the
coordination
of
the
Head
of
Internal
Audit,
in
collaboration
with
PricewaterhouseCoopers Business Solutions S.A. (“
PwC
”), the function is responsible for facilitating
relevant assurance and consulting engagements. This includes proposing the involvement of external
providers (subject matter experts) for specific audit activities and presenting a risk-based annual audit
plan to the Audit & Risk Committee for approval.
The Head of Internal Audit is responsible for prioritising and co-ordinating internal audit projects,
facilitating the communication between the Internal Audit Function, the Audit & Risk Committee, senior
management and process owners. Furthermore, the Head of Internal Audit comments on controls design
and operating efficiency, and escalates relevant issues when necessary. The Internal Audit Function also
undertakes engagements on an ad-hoc basis at the request of senior management and the Audit & Risk
Committee. In 2023 there were two such ad-hoc engagements internally conducted, examining certain
aspects of our operations in the Vega field in Italy and the Egyptian Abu Qir Petroleum joint venture fields.
PwC serves as the Group’s internal adviser and, in 2023, the following activities were jointly undertaken
with the Energean Internal Audit Function:
•
Execution of internal audit engagements;
•
Periodic follow-up activities to assess the implementation of agreed – upon management
actions;
•
Preparation of the risk-based annual Internal Audit Plan; and
•
Commentary on issues related to internal audit methodology, quality assessment of the Internal
Audit Function, and design and planning aspects of internal engagements.
In 2023, PwC conducted three (2022: three) internal audits at a cost of $79,863 (2022: $115,124). The
Audit & Risk Committee’s members regularly meet with members of the Internal Audit Function to
approve areas to be assessed through internal audits or deep dives throughout the year.
Deep dives involve direct meetings between the Audit & Risk Committee and the process owner(s) to
discuss key risks, business needs, and critical gaps in examined area. The deep dive sessions conducted
throughout the year on the following topics proved to be an effective means of making progress and
resolving matters efficiently:
•
Israeli commercial function;
•
Karish post-project implementation review;
•
Cost controlling processes for non-operated assets;
•
Israeli insurance covers; and
•
Cybersecurity and IT.
The Audit & Risk Committee is responsible for reviewing and approving the role and mandate of the
Internal Audit Function, as reflected in the Internal Audit Charter. This includes approving 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 is reviewed against agreed deadlines.
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In its annual assessment of the effectiveness of the Internal Audit Function, the Audit & Risk Committee:
•
Met with the Head of the Internal Audit without management present to discuss the function’s
effectiveness;
•
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; and
•
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. No such matters were identified.
Reserves Committee
During the year the Reserves Committee met twice to discuss the Group’s reserves auditing process and
support the Audit & Risk Committee in this domain. No issues were identified, and the reserves
assessment process, with the assistance of the reserves auditors, was deemed effective. In 2024, the
Audit & Risk Committee will receive reserve reports from each country of operation and meet online and
partly in-camera with their respective reserves auditors to assist with the year-end reporting process.
Fair, balanced and understandable assessment
The Audit & Risk Committee has advised the Board that in its view the 2023 Annual Report including the
financial statements for the year ended 31 December 2023, 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
engaged in discussions with management to ensure compliance with these requirements. The
Committee also assessed the principal and emerging risks, the business model, financial review and KPIs
to ensure these were representative and consistent throughout the Report.
Key aspects of the assessment included:
•
Confirming that the contents of the annual report were consistent with information shared with
the Board during 2023 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;
•
Taking into account comments from the external auditor; and
•
Ensuring balanced prominence is given to non-GAAP measures relative to IFRS measures. Non-
GAAP measures are clearly defined, their inclusion justified, and a reconciliation to IFRS
measures provided, starting with the most directly comparable IFRS measure.
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. As part of its oversight role, the Audit &
Risk Committee received in 2023 a report on the main elements of the new Internal Whistleblowing
System (the “Energean IWS”) and its status of implementation across the Group. The Energean IWS was
developed in 2023 in compliance with the EU Directive on Whistleblower Protection and the ISO
Guidelines for Whistleblowing Management Systems and was designed to apply to all Energean legal
entities (and branches) and all Energean personnel and other relevant stakeholders.
Key elements
include
multiple
whistleblowing
channels,
anonymity,
safe
communication,
multi-language,
confidentiality and a case management system that may safeguard support and protection for the
reporter.
CORPORATE GOVERNANCE
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Being cognisant of their responsibilities under Provision 6 of the Code, the Audit & Risk Committee and
other Non-Executive Directors were invited to attend a training session facilitated by Protect, a UK
whistleblowing charity with over 30 years' experience working with organisations and whistleblowers.
The training session, which was developed specifically for Non-Executive Directors, Trustees and
Governors, had an emphasis on the role of the Non-Executive Director and their whistleblowing
responsibilities and obligations.
In 2024, the Company’s annual training programme shall include similar training to be extended to the
Board, alongside other activities to promote a culture where staff feel able to raise concerns.
Regulatory developments
The Committee was briefed on regulatory developments in areas including sustainable finance, non-
financial reporting, accounting and reporting, environmental liabilities and treasury activities.
In January 2024, the Financial Reporting Council (the “
FRC
”) released the updated version of its UK
Corporate Governance Code (referred to as the “
2024 Code
”). This version focuses primarily on a limited
number of changes, with a key emphasis on revisions related to internal controls. The most significant
amendment entails the requirement for the Board to include a declaration in the annual report regarding
the effectiveness of the company's material controls, spanning financial, operational, reporting, and
compliance controls. The 2024 Code is set to be applicable to financial years commencing on or after 1
January 2025, except for Provision 29 (pertaining to the Board's declaration on the effectiveness of
material controls), which will come into effect for financial years beginning on or after 1 January 2026.
To ensure alignment with the 2024 Code, the Committee intends to participate in a series of workshops
conducted by external advisors. These workshops will provide clarity on how the changes affect the
Committee’s work and the extent of its responsibilities. Consequently, a series of working sessions with
the Board and management will be initiated to delineate the actions required for the Company to achieve
compliance with the 2024 Code by the specified effective date(s).
The Committee will carefully review the updates to the Ethical Standard for auditors, published by the
FRC in January 2024, which are set to become effective from 15 December 2024. This review is part of
our ongoing commitment to fulfilling our responsibilities concerning the work conducted by the Group's
auditor.
Performance of the Committee
The performance of the Committee was reviewed as part of the external performance review of the
Board’s performance. The review found that the Committee was working more effectively than in 2020,
the date of the previous external review, and it was noted that the Committee is thorough, meetings are
engaged, and that the Committee provides effective and robust challenge to the CFO and Finance team.
In the previous annual report the Committee set out its targets for 2023, namely to:
•
Further expand and use the Company’s recently introduced ERM framework;
•
Continue to conduct internal audits and deep dives with a specific focus on cyber security, joint
venture audit capabilities and commercial functions; and
•
Conduct post project implementation reviews in Israel following first gas from Karish.
I am delighted to announce significant progress against our 2023 priorities, particularly in the utilisation
of deep dive sessions on key topics such as cybersecurity and IT, as elaborated in the Internal Audit
section. The Company took proactive steps to bolster its IT environment by engaging external resources,
exemplified by the hiring of a cyber risk expert and the introduction of new controls for bank accounts.
These audits have been instrumental in identifying areas for improvement to achieve a security-designed
architecture, with ongoing enhancement slated to continue into 2024.
Throughout 2023, risk management remained a focal point for both the Committee and the Board, with
the implementation of the new ERM framework across the Group and staff training.. The Audit & Risk
Committee worked to expand the reach, capabilities and reporting of internal audits, with a specific
emphasis on cost controls for non-operated assets. This initiative aimed to cover several assets across
multiple geographies, including the core development project in Italy. Given that Cassiopea first gas
remains on track for the summer of 2024, it is imperative to maintain a clear and accurate view of the
development costs.
CORPORATE GOVERNANCE
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To this end, with assistance of the JV audit services firm, the Internal audit team commenced the work
in the fourth quarter of 2023 and will continue these efforts into the first half of 2024.
The year 2023 marked a significant milestone for our business in Israel following the achievement of first
gas in Karish in 2022. Internal audit completed its post-project implementation reviews and identified
lessons learned during the year.
Moving forward, the Audit & Risk Committee remains committed to monitoring progress in these areas
and providing guidance on any further enhancements that may be necessary.
Our priorities for 2024
In preparing its plan for 2024, the Committee has agreed to the following focus areas in addition to the
standing items and will include site visits where appropriate:
•
Heightened attention to emerging risks associated with Middle East operations and their
management;
•
Close monitoring of the insurance situation in Israel;
•
Enhanced focus on cybersecurity measures to safeguard installations;
•
Application of lessons learned from the Karish project; and
•
Review of decommissioning activities and their valuation.
Attendance at AGM
As Chair of the Audit & Risk Committee, I will be in attendance at this year’s AGM due to be held in May
in order to answer any shareholder questions pertaining to the financial statements, the auditor’s report
or any part of this report.
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
20 March 2024
CORPORATE GOVERNANCE
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Environment, Safety & Social Responsibility Committee
Martin Houston, Chair of Environment, Safety & Social Responsibility (“ESSR”) Committee
It is my pleasure to introduce the ESSR Committee Report for 2023, 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 2024.
Membership
The members of the ESSR Committee throughout 2023 were Roy Franklin (as Chair until his resignation
on 13 November 2023), Andreas Persianis (appointed as Chair on 16 November 2023), Efstathios
Topouzoglou, Karen Simon, and Amy Lashinsky (appointed to the Committee on 16 November 2023).
Following Roy Franklin’s resignation from the Board on 13 November 2023, a number of Committee
changes were implemented, with the appointment of Andreas Persianis as Chair, and Amy Lashinsky as
a member, as noted above. As at 31 December 2023, the Committee composition was Andreas Persianis
(as Chair), Efstathios Topouzoglou, Karen Simon and Amy Lashinsky.
In January 2024 the Nomination & Governance Committee recommended further Committee changes
to the Board and I was appointed to the Committee as Chair on 1 February 2024 with Andreas Persianis
stepping down due to his appointment to the Remuneration & Talent Committee.
Neither Amy Lashinsky nor myself were entitled to attend any meetings in 2023.
The Company Secretary acts as secretary to the Committee.
Meetings
The ESSR Committee met on 3 occasions during 2023 with attendance details set out below:
Director
Number of
meetings
entitled to
attend
Number of
meetings
attended
Roy Franklin
75
2
2
Andreas Persianis
76
3
3
Efstathios Topouzoglou
3
3
Karen Simon
3
3
Amy Lashinsky
77
0
0
Martin Houston
78
0
0
75
Resigned his position as Non-Executive Director on 13 November 2023.
76
Appointed as Chair on 16 November 2023 and subsequently stood down from the Committee on 1 February 2024.
77
Appointed to the Committee on 16 November 2023.
78
Appointed to the Committee as Chair on 1 February 2024.
CORPORATE GOVERNANCE
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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 associated 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 Corporate Communications Director, whose
responsibility includes ESG and CSR, for updates on the Company’s performance against its
sustainability and CSR goals. The Committee also advises the Board on safety, the environment including
climate change, and Energean’s overall sustainability performance.
To
view
the
ESSR
Committee’s
terms
of
reference,
please
visit
the
Company’s
website
www.energean.com
.
Activities during 2023
HSE performance
The Committee received regular updates from the HSE Director on Group level HSE performance and is
pleased to report that in 2023, the Group had an outstanding safety record, aligning with the previous
year achieving a Lost Time Injury Frequency (“
LTIF
”) of 0.46 in all Energean sites and 0.47 in all sites
working for Energean (including contractors’ sites) and a Total Recordable Injury Rate (“
TRIR
”) of 0.92 in
all Energean sites and 1.1 in all sites working for Energean (including contractors’ sites). This mirrors the
exemplary performance of the preceding year, showcasing a strong level of consistency. HSE
performance is set out on pages 60–64.
The Committee also received updates on the Synergi software, whose purpose was to enable the
Company to better record and monitor safety performance, and heard that such system had been fully
implemented in all Group sites.
The Committee received deep dive reviews of Italian and Greek HSE performance from the HSE Director
supported by the Heads of HSE in Italy and Greece respectively. The Committee heard that, in Italy,
effective HSE policies and procedures were in place to meet Italian legal requirements which were subject
to regular audits and inspections from independent Italian bodies and that an emergency management
plan was in place with appropriate levels of escalation. For Greece, the Committee heard about the HSE
management system, that Greek sites are certified to ISO 45001 and ISO 14001 standards, and that there
is a good level of engagement led by the management.
ESG rating
The Committee was delighted to hear that MSCI had awarded the Company an AAA ESG rating, putting
it in the top 17% of listed oil & gas exploration companies. This prestigious rating classifies the Company
in the “Leader” category, amongst 108 Oil & Gas Exploration and Production companies.
The company also maintained its Carbon Disclosure Project rating of A- which was awarded in 2022.
Sustainability reporting
The Committee reviewed the progress being made on the publication of the Company’s annual
sustainability
report
covering
2022.
The
Committee
received
updates
from
the
Corporate
Communications Director 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.
The Committee received updates on changes to the reporting landscape including a presentation on the
new European Corporate Sustainability Reporting Directive (“
CSRD
”) which the Committee monitors,
along with other ESG standards such as GRI, SASB, TCFD, the UN Global Compact and the UN
Sustainable Development Goals, with respect to the Company’s reporting requirements.
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CSR programme
The Committee received updates from the Corporate Communications Director on the planned activities
for 2024, which had been subject to review in order for them to be more impactful with the potential for
enhanced measurability and positive impact. The review was a Committee priority for 2023.
The Committee heard about planned initiatives connected to the core CSR pillars of education,
community and environment with activities planned 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.
Priorities for 2024
During 2024, the Committee’s priorities will be:
•
To monitor and review performance and HSE systems to safeguard the health and wellbeing of
our employees and contractors;
•
To review the path to Net Zero strategy;
•
To review sustainability reporting for 2023 and the plan for future reporting including the new
CSRD/CSDDD standards to eventually form the core of the Group’s Sustainability Report; and
•
To monitor and review the role of the Committee with a continuing emphasis on high standards
of governance and compliance.
Martin Houston
ESSR Committee Chair
20 March 2024
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Nomination & Governance Committee
Karen Simon, Chair of Nomination & Governance Committee
It is my pleasure to introduce the Nomination & Governance Committee Report for 2023, 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
2024.
Membership
The members of the Nomination & Governance Committee throughout 2023 were myself (as Chair),
Andrew Bartlett, Kimberley Wood, Efstathios Topouzoglou and Roy Franklin until his resignation on 13
November 2023. In January 2024, the Nomination & Governance Committee recommended further
Committee changes to the Board and Martin Houston was appointed to the Committee on 1 February
2024.
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 is satisfied as I was considered to be independent
upon appointment as Chair, and Andrew Bartlett, Kimberley Wood and Martin Houston are considered to
be Independent Non-Executive Directors.
The Company Secretary acts as secretary to the Committee.
Meetings
The Nomination & Governance Committee met on 3 occasions during 2023 with attendance details set
out below:
Director
Number of
meetings
entitled to
attend
Number of
meetings
attended
Karen Simon
3
3
Andrew Bartlett
3
3
Roy Franklin
79
2
2
Efstathios Topouzoglou
3
3
Kimberley Wood
3
3
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.
To view the Nomination & Governance Committee’s terms of reference, please visit the Company’s
website
www.energean.com
.
79
Resigned his position as Non-Executive Director on 13 November 2023.
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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 generate effective decision-making.
Gender diversity
Gender data for the Board, executive management and their direct reports has been collected from the
Company’s HR records. As at 31 December 2023, the Board included three women, representing one-
third (33.33%) of the Board. This currently remains below the FCA Listing Rules “comply or explain” target
that 40% of the Board should be women. The FTSE Women Leader’s Review recommends that this 40%
target should be achieved by the end of 2025.
Energean aspires to meet this target but recognises that
gender diversity in the broader sector partly factors into our Board gender balance currently falling below
the FCA’s target level.
The Company is one of the few FTSE 350 listed businesses to have a female Chair. Karen Simon was
appointed to the role in 2019. As such, Energean has met the FCA target to have at least one of the Senior
Board positions (Chair, CEO, Senior Independent Director or CFO) held by a woman.
The Executive Committee is composed of 6 additional individuals to the CEO and CFO. The gender
balance of this group (excl. the CEO and CFO) is currently 5 men and 1 woman. The diversity of senior
leadership, which combines the Executive Committee and their direct reports, was 35% women vs 65%
men at the year-end. The FTSE Women Leader’s review targets a 40% diversity level for this combined
Executive Committee and direct reports group by the end of 2025.
The Board is supportive of the FCA proposals, noting the comply or explain principle. Consideration is
given to the diversity of the Board and the appointment of women directors as part of succession
planning.
Board
Executive Committee
Senior Management
ExCo + Direct Reports
Senior Board role
66.6%
33.3%
83%
17%
65%
35%
FTSE Women Leader’s target
40% by end of 2025
FTSE Women Leader’s target
40% by end of 2025
Energean has met
the FCA ‘comply or
explain’ target of
having a woman in
at least one of the
CEO, CFO, SID or
Chair roles.
Karen Simon has
been Chair of
Energean since
2019.
9 roles
6 roles
61 roles
Women
Men
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Disclosure under the FCA Listing Rules
The tabular below provides gender diversity data at Board and Executive Committee levels.
Number of
Board
members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO, SID
and Chair)
Number in
executive
management
80
Percentage of
executive
management
Men
6
66.67%
3
5
83.33%
Women
3
33.33%
1
1
16.67%
Ethnicity diversity
In 2023, Energean undertook a data collection exercise to understand the ethnic diversity of its senior
leadership team. This involved surveying our Board, executive management and their direct reports to
better understand individuals’ ethnic identity. We are pleased to report that we had a 100% response rate
on our survey, with all 70 of our employees at this level providing relevant data. Respondents self-reported
their ethnicity using the Office of National Statistics (“
ONS
”) definitions. The Committee recognised that
the ONS definitions were developed in a UK context, and that they may not fully capture the nuances and
specificities of ethnic identity across the culturally diverse countries in which Energean’s employees are
based, which includes Israel, North Africa and Europe.
This data collected allowed the business to set targets for ethnic diversity for our senior management
population in line with the recommendations of the Parker Review, as well as to report the requisite data
under the FCA Listing Rules.
FCA Listing Rules and Parker Review targets
As at 31 December 2023, Energean has met the FCA Listing Rules target to have at least one director
from a minority ethnic background on the Board. The definition for a minority ethnic background is
defined by reference to categories recommended by the ONS excluding those listed, by the ONS, as
coming from a White ethnic background.
Additionally, the Parker Review recommends that companies should set a minority ethnic percentage
target for the senior management team, to work towards achievement by the end of 2027. Our current
ethnicity diversity at senior management level is 15% (based on the Executive Committee and direct
reports). Energean has set a target of 20% minority ethnic diversity by the end of 2027 for senior
management.
Disclosure under the FCA Listing Rules
During 2023, the Company made changes to its executive management and the number of Executive
Committee members was reduced from 11 (10 at year-end 2022) to 8 (including the CEO and CFO). The
diversity data below in relation to the executive management does not include the CEO and CFO who are
part of the Executive Committee but whose diversity data is included within the Board figure.
80
The diversity data in relation to the executive management does not include the CEO and CFO who are included in the Board
Members’ report.
Board level
Current ethnic diversity across Energean
2027 target
For senior management diversity
Energean has met
the Parker Review
and FCA target of
having one board
director from a
minority ethnic
background.
Energean has set a target
of 20% minority ethnic
diversity by 2027 at senior
management level, up from
the current 15% level.
15%
20%
9
1
1
52
5
8
0%
20%
40%
60%
80%
100%
Non-white
White
Board
Executive Committee
ExCo + direct reports
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Number of
Board
Members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
81
Percentage of
executive
management
White British
or other
White
(including
minority
white
groups)
8
88.89%
4
5
83.33%
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
16.67%
Not
specified/
prefer not to
say
0
0%
0
0
0%
There have not been any changes to the Board between 31 December 2023 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.
During 2022, upon the Nomination & Governance Committee’s recommendation, the Board approved a
Diversity, Equity and Inclusion policy for the Group (the “
DEI Policy
”) which was subsequently revised
during 2023. 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 CEO carries overall responsibility to ensure the Company adopts a corporate culture
where individual differences are respected. The Group HR Director continues 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 six 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
81
The diversity data in relation to the executive management does not include the CEO and CFO who are included in the Board
Members’ report.
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Independent Non-Executives) compared to its current position, and to make any resulting
recommendations to the Board with regard to any required changes.
In 2023, Roy Franklin resigned from the Board with effect from 13 November 2023. As a result, two of his
Board roles, namely the Chair of the Environment, Safety & Social Responsibility (“
ESSR
”) Committee and
the Senior Independent Non-Executive Director role, were 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,
Andreas Persianis be appointed as the Chair of the ESSR Committee and Andrew Bartlett be appointed
as the Board’s Senior Independent Non-Executive Director by virtue of his extensive governance, industry
and listed company experience.
The Nomination & Governance Committee keeps the succession plans for Directors continuously under
review and subsequently recommended the appointment of Martin Houston as an Independent Non-
Executive Director which the Board approved with effect from 16 November 2023. The Nomination &
Governance Committee did not engage an external search firm for the appointment of Martin Houston,
being satisfied that this was not required, due to him having been identified as a suitable candidate for
appointment during previous searches. Martin Houston has 44 years of experience across the entire oil
and gas value chain and was COO and Director of BG Group plc, where he was instrumental in the creation
and development of a globally integrated natural gas, LNG and trading group. He has since co-founded
Tellurian Inc. and is now the Chair.
Following Roy Franklin’s resignation and Martin Houston’s appointment, the Nomination & Governance
Committee further reviewed the composition of the Board committees and recommended the following
changes to the Board which were approved with effect from 16 November 2023:
•
Martin Houston was appointed to the Audit & Risk Committee and the Remuneration & Talent
Committee;
•
Amy Lashinsky was appointed to the ESSR Committee; and
•
Kimberley Wood stood down from the Audit & Risk Committee.
At year-end, the membership of the Company’s Board committees was as follows:
Audit & Risk
Committee
Nomination &
Governance
Committee
Remuneration & Talent
Committee
ESSR Committee
Andrew Bartlett (Chair)
Martin Houston
Amy Lashinsky
Andreas Persianis
Karen Simon (Chair)
Andrew Bartlett
Stathis Topouzoglou
Kimberley Wood
Kimberley Wood
(Chair)
Martin Houston
Amy Lashinsky
Karen Simon
Andreas Persianis
(Chair)
Amy Lashinsky
Karen Simon
Stathis Topouzoglou
In January 2024, the Nomination & Governance Committee recommended further Committee changes
to the Board and Martin Houston was appointed to the ESSR Committee as Chair on 1 February 2024
with Andreas Persianis stepping down due to his appointment to the Remuneration & Talent Committee
effective the same date.
As at the date of approval of this report, the membership of the Company’s Board committees is as
follows:
Audit & Risk
Committee
Nomination &
Governance
Committee
Remuneration & Talent
Committee
ESSR Committee
Andrew Bartlett (Chair)
Martin Houston
Amy Lashinsky
Andreas Persianis
Karen Simon (Chair)
Andrew Bartlett
Martin Houston
Stathis Topouzoglou
Kimberley Wood
Kimberley Wood
(Chair)
Amy Lashinsky
Andreas Persianis
Karen Simon
Martin Houston (Chair)
Amy Lashinsky
Karen Simon
Stathis Topouzoglou
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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 Martin
Houston, an Independent Non-Executive Director, as a member of the Nomination & Governance
Committee with effect from 1 February 2024.
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.
ESSR Committee
Andreas Persianis was appointed as Chair of the ESSR Committee effective 16 November 2023 but
following his appointment to the Remuneration & Talent Committee with effect from 1 February 2024, he
stepped down from the ESSR Committee, and was replaced by Martin Houston as member and Chair of
the Committee effective the same date.
Succession planning
The Nomination & Governance Committee keeps the succession plans for Directors and executive
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 executive
management to deliver the Group’s strategic plan; and contingency planning for executive 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.
External Board performance review
In 2023, the Nomination & Governance Committee, at the request of the Board and as required by the
Code, initiated an external performance review by Independent Board Evaluation (“
IBE
”) with Lisa Thomas
facilitating. This was the second external performance review since the Company’s IPO in 2018.
IBE was chosen to conduct the review following a selection process which adhered to the Corporate
Governance Institute’s “Principles of Good Practice for Listed Companies Using External Evaluators”. IBE
also conducted the previous review in 2020 and following the recommendation of the Nomination &
Governance Committee, it was considered by the Board that re-appointing IBE would better allow
progress to be tracked against previous performance. Other than the previous review, there is no
connection between IBE and the Company, or with the Company Directors, and therefore IBE were
considered to be independent.
IBE have been given the opportunity to comment on the findings contained below.
External Board performance review process
IBE were requested to conduct a comprehensive performance review according to the provisions of the
Code and elements of best practice.
The review commenced in June 2023 when IBE conducted an orientation process by reviewing key
documents and receiving briefings from the CEO, the Company Secretary and myself, as both Chair of
the Board and the Nomination & Governance Committee. Following this orientation, a comprehensive
brief and an agenda for the review was agreed.
In September and October 2023 the observation phase was implemented, IBE were able to observe
meetings of the committees and a meeting of the full Board, before detailed interviews were held with
each Board member, a number of senior management and the Board’s external advisors Ernst and Young
LLP, the Company’s external auditor, and Deloitte LLP, who are advisers to the Remuneration & Talent
and Nomination & Governance Committees.
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Following the observation phase, draft reports were compiled and discussed with myself, the CEO and
Company Secretary, and committee reports were shared with the respective Chairs. The findings of the
review were presented at a meeting of the full Board in November.
External Board performance review results
The findings were that the Board was operating with more maturity since the last review in 2020 and that
key recommendations from the previous review had been successfully implemented. Board members
shared their views on the areas for improvement which are included in the outcomes detailed below.
The Board’s areas of strength were identified as including their cohesion when evaluating opportunities,
a strengthened Board composition since the last review with greater technical and industry knowledge,
and providing effective challenge on financial and accounting matters. Committees were noted to be
functioning better since the last review with improved and more efficient support from the Company
Secretariat.
Recommendations were made with the aim of helping the Board achieve optimal effectiveness. The
Board agreed to implement actions across the following areas:
Outcome/review
Proposed actions
Strategy
– Agree parameters for a strategic
framework encompassing the corporate and
financial strategy, ESG, risk appetite and
people strategy.
Board to convene a dedicated session to define the
parameters for a strategic discussion.
Board composition
– Review Directors’ skills
and Board composition on an ongoing basis
to match strategy.
It is the view of the Nomination & Governance
Committee that the current Board has the appropriate
mix of skills, experience, independence and
knowledge necessary to discharge their duties but
does continually look to complement skill sets given
the geographic footprint and dynamic business
model, therefore, a skills matrix is to be maintained by
the Company Secretariat for use by the Nomination &
Governance Committee when considering Board and
Committee composition and succession planning.
Planning & agendas
– Redesign the Board
planner and agendas to be more thematic
and mapped to include areas such as
strategy, risk, culture and talent/succession
planning.
This recommendation will be implemented in 2024
(to the extent possible) and when planning the 2025
forward agenda. A programme will be initiated to
include increased interaction with employees
including town halls and site visits, and with
shareholders including Israeli shareholders invested
in the Company via TASE.
Risk
– Conduct deep dives into top risks,
and regular reviews of collective risk
appetite, to ensure alignment with strategy.
Programme to be designed with the Compliance
Officer and Head of Internal Audit and added to the
agenda of the Audit & Risk Committee and
considered at future meetings.
Board papers
– Reduce operational and
technical information to allow for a more
strategic focus.
The Board will have a greater focus on strategic items
and allow operational and technical matters to be
reviewed at Committee level.
In addition to the results of the external performance review, the Nomination & Governance Committee
continued to implement recommendations from the 2022 internal evaluation with a focus on continued
improvements in:
•
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.
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In 2024, the Board will be subject to an internally facilitated performance review which will focus on
performance against the recommendations made in the 2023 external review. The Nomination &
Governance Committee will report on its findings in the next Annual Report.
Committee evaluation
The Committees were also subject to reviews of their performance and effectiveness by IBE. The
Committee reviews looked at ways in which Committees could improve their overall effectiveness, their
performance, and areas that they needed to address in 2024. All Committees 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
As part of the external Board performance review, a feedback report on the Chair was presented to the
Senior Independent Non-Executive Director, which concluded that the Chair had led the Board effectively
throughout the year. Additionally, a feedback report on each individual Director was discussed with the
Chair who was satisfied that each Director continues to contribute effectively.
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
2024 AGM. An annual review is conducted to assess 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 management.
Performance of the Committee
The performance of the Nomination & Governance Committee was assessed as part of the externally
facilitated Board performance review as mentioned earlier in this report and the Committee was advised
to take the lead in a number of recommendations made by IBE as part of the external review.
In the previous Annual Report, the Committee also set out its targets for 2023, namely to:
•
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
•
Increase Board exposure to areas of operation and personnel with more in person interactions
in country.
I am pleased to report that good progress was made against the 2023 priorities and the Nomination &
Governance Committee has continued to oversee changes to the composition of the Board, 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 2024
•
To monitor performance against the agreed actions from the 2023 Board performance review;
•
To continue the focus on Board composition, diversity and skill sets;
•
To continue to monitor and review succession planning with a focus on Committee Chairs given
tenure of current Board members; and
•
Review the requirements of regulatory changes, including the 2024 revisions to the Code, and
oversee adjustments to the extent necessary.
Karen Simon
Nomination & Governance Committee Chair
20 March 2024
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Remuneration Report
Energean plc – Chair letter
Dear Shareholder,
As the Chair of the Remuneration & Talent Committee, I am pleased to present our report on Executive
Director’s remuneration for the year. This year, in line with the usual three-year cycle required under UK
regulation, we are submitting a new Remuneration Policy for shareholder approval. This will be subject
to a binding vote at the 2024 AGM. Details on this Policy are set out in the letter below, alongside the
relevant rationale and context that influenced the Committee’s thinking, as well as detail on the
remuneration decisions taken in the year.
Performance context
2023 was a milestone year for Energean, with the company becoming the major independent gas
producer in the Mediterranean following the first full year of production from Karish (Israel). Despite
challenging regional geopolitical developments, the production of the Energean Power FPSO at Karish
was stabilised, operating at 99% uptime during Q4 2023. Given the operational context this is a
remarkable achievement. Energean FY23 production was 123 Kboe/d (83% gas), making good progress
towards the Group’s near-term target of 200 Kboe/d. The Group also has a stated near-term $1.75 billion
adjusted EBITDAX target, with $931 million achieved in FY23, an increase of 121% (FY22: $422 million).
The company achieved revenues of $1,420 million, a 93% increase on prior year (FY22: $737 million). The
company continued to focus on deleveraging the balance sheet, with a 50% reduction in Group leverage
to 3x (FY22: 6x). Our strong operational and financial performance underpins our stated dividend policy,
with the Group returning $214 million to shareholders in 2023. In 2024, it is expected that the company
will pay a quarterly dividend in line with the previously communicated policy.
Energean believes gas is the foundation of and catalyst for a more sustainable energy system and a just
transition. Looking ahead to 2024, we are making significant progress on strategic projects across
multiple jurisdictions, including Italy, Israel, Egypt, Morocco and Greece, which will further diversify and
strengthen the business. At the same time, the company continues to retain its leading focus on
sustainability, with the company’s Scope 1 and 2 emissions intensity of approximately 9.3 kgCO2e/boe
marking a 42% reduction on 2022. In the year, the company made a major step forward at the Prinos
carbon storage project in Greece, which was adopted by the European Commission as a Project of
Common Interest, aligned with our commitment to a broader energy transition strategy.
Outcomes for 2023
Energean’s consistent outperformance relies on our world-class executive team. Energean is led by our
CEO, Mathios Rigas, and our CFO, Panos Benos, who have built the company from an effective “start-up”
into the major independent gas producer in the Mediterranean.
Incentive pay outcomes for the Executive Directors reflect the strong performance of the business. The
Committee approved an annual bonus outcome of 78.4% for both directors. This reflects the robust
financial and operational performance of the company, as well as clear progress on our sustainability
goals. Challenging production targets were set at the start of the year and these were not met at
maximum, although full year production is in line with our latest guidance communicated to the market.
The Committee considered the overall outcome appropriate, reflecting strong performance from our
Executive Directors in delivering on the financial and strategic objectives of the company against a
particularly challenging geopolitical backdrop given the security situation in Israel. The bonus scorecard
outcome cascades through the company, with senior employees who participate in the annual bonus
receiving an outturn aligned with the Executive Directors. The Committee believe this bonus level, which
represents a limited increase on last year, recognises the significant commitment, resilience and effort
evidenced by all colleagues over the last year. Disclosure on achievement against the 2023 bonus
scorecard is set out on pages 155–157.
The 2021 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). Strong TSR performance on an absolute basis meant that this portion of the award will
vest in full. Despite significant growth over the performance period, Energean ranked below the median
CORPORATE GOVERNANCE
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of the relative TSR peer group and, as such, the relative TSR portion of the award lapsed. The Committee
recognise that the mechanics of relative TSR can reward share price volatility, and this three year period
saw some peer companies experiencing a more exaggerated share price recovery from COVID-19. In
contrast, Energean’s price movements are somewhat stabilised by its fixed price contracting model. The
geopolitical context also impacted the share price in the final quarter of the year, which forms the basis
of the TSR growth calculation. Positive progress on the Scope 1 and 2 emissions performance targets
meant that this portion of the award will vest between threshold and maximum. The formulaic outcome
of the award was 41.9% of maximum. Further details can be found on page 157.
2024 Remuneration Policy changes
In line with the usual three-year cycle required under UK regulation, Energean is due to renew its
Remuneration Policy at the 2024 AGM. The Committee undertook an in-depth review of the current
Remuneration Policy to ensure that it continues to be fit-for-purpose, reflective of Energean’s international
footprint and calibrated to incentivise outperformance. The Committee concluded that the Policy
continues to be appropriate and therefore is proposing only limited changes to the existing Policy. In
particular, incentive levels available under the Policy will remain unchanged.
The primary change the Committee proposes for 2024 is to remove the requirement to defer one-third of
the annual bonus award into shares where the shareholding guideline has been met. The CEO and CFO
respectively hold c.8% and c.2% of Energean’s shares. This level of director shareholding is considerably
above the listed market average and significantly higher than Energean’s shareholding guideline (200%
of salary). As such, both directors are strongly aligned with our shareholders. In the context of these high
shareholdings, bonus deferral makes limited incremental impact on shareholder alignment. This change
will simplify the annual bonus structure and better align Energean with international market practice. The
disapplication of deferral would not apply to any Executive Director who has not met the shareholding
guideline. This would include any new Executive Director appointed during the life of the Policy. The
Remuneration Policy will continue to include best practice features as required under the UK Corporate
Governance Code.
As part of the review, we also took the opportunity to consider the terms in the Policy to ensure that the
Policy operates as intended and provides market-aligned provisions. In this context, we are proposing to
remove the cap on the Executive Director’s benefits allowance to better align with market practice in this
area.
However in terms of implementation, there will be no changes to the benefits allowance currently
in operation.
No other material changes are proposed to the Policy. Since Energean listed in 2018, we have had a
strong growth trajectory, a distinctive strategy, and have out-paced almost all of our peers in terms of
delivering returns to our shareholders. Though the Committee believes the proposed Policy continues to
be right for Energean at this point in its strategic cycle, it will keep the pay model under review going
forward and will explore alternative approaches as appropriate. Taking into account our strategy and our
growth trajectory, this might include making a change to the pay framework before the expiry of the
proposed Policy in 2027. The Committee would of course consult with shareholders on any proposed
future changes to the Policy.
Shareholder consultation
As part of the Policy renewal, we engaged with a number of our key shareholders on the proposed limited
changes and were pleased with the positive feedback received. Shareholders commented on, and
welcomed, management’s very significant shareholding in the Company, and understood the logic of the
disapplication of bonus deferral where shareholdings are high. The feedback received during the
consultation round contributed to the Committee’s decision to go forward with the change.
I also consulted with shareholders more broadly, with the Committee recognising that not all
shareholders felt able to support the remuneration resolution at the last AGM. A significant proportion of
the votes against the Remuneration Report originated from our Israeli shareholders, and the Committee
is aware that some of the dissent that impacted the remuneration resolution appears to have arisen due
to differing corporate governance policies across different geographies, including in relation to Board
composition. During Autumn 2023, the Committee sought to engage with our Israeli shareholders to
understand their views on both remuneration and wider governance matters as part of the wider
consultation process.
While some engagement has been undertaken, some communication has been
delayed given the security situation. The Committee will therefore look to complete this consultation
when circumstances allow.
CORPORATE GOVERNANCE
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Implementation of the policy for Executive Directors in 2024
For 2024, no salary increases will be applied for either Executive Director. This means that both directors
will have had no increase to their salary since 2022 despite the high inflationary environment, aligned to
Energean’s responsible approach to executive pay.
There will also be no change to the annual bonus opportunity or the LTIP opportunity for either Executive
Director for 2024. Details of the bonus scorecard targets for 2024 will be included in next year’s report
when targets are no longer commercially sensitive. The 2024 LTIP will continue to be based on the same
measures as applied in 2023.
The average emissions targets have been evolved for 2024 to ensure they
remain stretching.
Non-Executive Director fee increases for 2024
Following a benchmarking exercise and the review of our peers, the Committee has made an upwards
adjustment to the Chair’s fee to £250k for 2024. The Chair’s fee was last increased in 2022, with Energean
undergoing significant evolution in its’ scope, size and complexity in the intervening period, including
Energean becoming the major independent gas producer in the Mediterranean by achieving stable
production from Karish. This uplift will mean the fee is competitively positioned against similarly sized
businesses and will better reflect the Chair’s extensive market and role experience. Energean remains
one of the few FTSE-listed businesses with a female Chair, and the Committee recognises its
responsibility to ensure the Chair’s fee is competitively and fairly positioned.
Changes have also been made to some of the Non-Executive Director fees for 2024. There has been no
increase to the base fee since 2020, and the adjustment to the base fee is to recognise the significant
expansion in Energean’s operational footprint and geographic complexity, as well as the increased time
commitments and strategic input of the Non-Executive Director role at Energean.
Wider workforce
Given the geopolitical context, this has been a year where the Committee has been particularly mindful
of the need to support colleagues across Energean. The Committee welcomed management actions on
pay in response to the security situation. This included a salary uplift to all operations personnel on the
Energean Power FPSO in Israel and additional support to employees and their families that were
immediately affected. In finalising the approach to the Policy and approving pay outcomes for the year,
the Committee has been particularly mindful of the experience of the wider workforce. The Committee
continues to consider reward and conditions across the wider company when making decisions on
executive pay.
Concluding remarks
We believe that the proposed changes to the Director’s Remuneration Policy, while limited, are important
in ensuring that our executive remuneration remains competitive, aligned with market practice, and
reflective of our strategic goals. We are committed to maintaining a transparent and consultative
approach to executive remuneration and will continue to engage with our shareholders on this important
matter. I look forward to your support on both remuneration resolutions at the forthcoming AGM.
Sincerely,
Kimberley Wood
Remuneration & Talent Committee Chair
20 March 2024
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Pension
0
50
100
150
200
250
300
350
400
2018
2019
2020
2021
2022
2023
Energean
FTSE 350 Oil, Gas, Coal Index
Implementation of our Remuneration Policy in 2024 – driving Energean’s future success
Salary
CEO: £750k
CFO: £600k
Remuneration for 2023
–
Rewarding exceptional performance
The 2021 LTIP award
vested at
41.9% of max
.
The weighting and
vesting of each element
is shown above.
The 2023 bonus was
awarded at
78.4% of max.
The weighting and
performance of each
element is shown above.
Pension in line
with wider
workforce
Executive shareholdings
In-post shareholding guideline:
200% of
salary
Applies for two-years following departure
Both directors are
significant shareholders
in Energean
CFO
2%
CEO
8.3%
1 Year
performance
period
1/3 of bonus deferred into shares for 2 years
Deferral disapplied under new Policy where an
executive meets the shareholding guideline
Operational goals –
Including targets and focus relating
to Group production, operating expenses and capital
expenditure.
Balance sheet strength–
including targets around
liquidity and debt
Growth–
Including targets around exploration and
carbon storage
Sustainability –
including targets relating to emissions,
net zero transition, health and safety and D&I
20%
20%
40%
Benefits
4%
Pension remains
in line with wider
workforce
No increase for FY24.
Salaries have not been
increased since 2022
Financial, Commercial
and Risk (40%)
Sustainability (20%)
Operational (40%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Absolute TSR (30%)
Emissions targets
(20%)
Relative TSR (50%)
First year of full production from Karish,
with 99% uptime in Q4 2023
Annual Bonus
LTIP
… reflected in performance-aligned incentive outturns
+ 93% increase in revenue
(2023: $1,420m)
+ 121% increase in EBITDAX
(2023: $931m)
A year of continued strong performance….
See page 151 for further details on pay in the year
Sustained
outperformance of
the market since IPO
Energean is submitting a new Policy for shareholder approval at the 2024 AGM, with only limited changes proposed.
No change to benefits
allowance paid for FY24
CEO:
£48k
CFO:
£25k
2024 award
: 200% of salary
Policy max
: unchanged (200%)
Annual
Bonus
Long
Term
Incentive
2024 award
: 200% of salary
Policy max
: unchanged (200%)
2 year Holding Period
3 Year
performance period
Relative Total Shareholder Return –
measured
against select peers and indices over three years
to reward market outperformance
Absolute Total Shareholder Return –
rewards
growth in underlying share value over three years
Average Scope 1 and 2 CO2 emissions
(kgCO2/boe) –
ensures continued focus on our
Net Zero ambitions
50%
30%
20%
Maximum award size for executive directors unchanged from 2023. Awards will
continue to be usually settled in shares, released after 5 years in total. Awards will be
subject to malus and clawback
Maximum award size for executive directors unchanged from 2023. Disapplication of
deferral subject to approval of new Policy. Bonus targets for FY24 will be disclosed in
next year’s Annual Report.
Total single figure pay
Subject to relevant deferral and holding periods
CEO: £2,747k
(2022: £5,278k)
CFO: £2,167k
(2022: £3,757k)
20%
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Remuneration Policy
This part of the report sets out our Directors’ Remuneration Policy (the “
Remuneration Policy
”). This Policy
will be subject to a binding shareholder vote at the 2024 AGM and will apply to payments made from the
date of approval. The information provided in this section of the Remuneration Report is not subject to
audit.
In determining the new Remuneration Policy, the Remuneration & Talent Committee (the “
Committee
”)
followed a robust process. The Committee discussed the Policy over a series of meetings throughout
2023 and in early 2024. The management team provided input, while ensuring that conflicts of interests
were mitigated. Shareholders were consulted on the changes, with a series of meetings held with key
shareholders throughout Autumn 2023, and follow up consultation in early 2024. External perspective
was provided by our independent advisors. The Committee assessed the Policy against the principles of
clarity, simplicity, risk-management, predictability, proportionality and alignment to culture.
The Committee reviewed the current Policy and considered that it continues to be fit for purpose in
incentivising and rewarding executive outperformance. It is therefore proposing only limited changes,
intended to improve the flexibility of the Policy and to more closely align with international practice in
recognition of the Company’s diverse geographical footprint. The proposed changes to the Policy are:
•
Bonus deferral will be able to be disapplied where an Executive Director has met their
shareholding guideline. For clarity, bonus deferral will normally continue to be a requirement
where they are below the shareholding guideline. Both Executive Directors are significant
shareholders. This better aligns the Policy with international practice where bonus deferral is
atypical.
•
To simplify the benefits allowance by removing the applicable cap. However, for FY24, there will
be no increase in the benefits allowance payable to either the CEO or the CFO. The allowances
payable to the CEO and CFO have not increased since 2021.
Other minor changes have also been made to improve the operation and effectiveness of the Policy.
Policy table
Our Group-wide remuneration strategy is to provide remuneration packages that will:
•
Motivate and retain our industry-leading employees.
•
Attract high quality individuals to join the Group.
•
Encourage and support a high-performance culture.
•
Reward delivery of the Group's business plan and our key strategic and operational goals.
•
Align our employees with the interests of shareholders and other external stakeholders.
•
Consistent with this remuneration strategy, the Remuneration & Talent Committee has agreed a
Remuneration Policy for Executive Directors whereby:
•
Salaries will be set at competitive, but not excessive, levels compared to peers and other
companies of an equivalent size and complexity.
•
Performance-related pay, based on stretching targets, will form a significant part of
remuneration packages.
•
There will be an appropriate balance between rewards for delivery of short-term and longer-
term performance targets.
•
Development and long-term retention of a significant holding of Company shares will be
encouraged.
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The remuneration framework intended to deliver this Policy will be a combination of base salary, benefits,
annual bonus and awards under the Long-Term Incentive Plan (“
LTIP
”). The following table sets out
details of each of these remuneration components.
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):
The individual Director's role, experience and performance.
Business performance, including growth in size and scale of the business.
Market data for comparable roles in appropriate comparator businesses.
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:
Salaries would typically be increased at a rate no greater than the average salary
increase for other Group employees.
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, internationality, and complexity of the Group).
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 2024, this rate will continue to 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).
Performance
conditions
No performance conditions.
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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 (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
No maximum allowance is prescribed under the Policy. The value of the allowance
will be set at a level which the Committee considers to be appropriately positioned
taking into account typical market levels for comparable roles, individual
circumstances and the overall cost. For FY24, the allowance will be £48,000 for the
CEO and £25,000 for the CFO, in line with the allowances payable under the
previous Policy.
The allowance excludes any expenses treated as taxable benefits by tax
authorities or tax equalisation benefits, should these be provided in certain
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 where shareholding is below the guideline.
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.
Where the Executive Director’s share ownership guideline is not met, 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
”).
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 (see later sections).
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).
For bonus awards made in respect of 2024 onwards, where an Executive Director’s
share ownership is met, no deferral will apply and the bonus will be delivered in
cash following the release of the audited results.
Maximum
opportunity
The maximum award that can be made to an Executive Director under the annual
bonus plan is 200% of salary.
For 2024, both Executive Directors will receive a maximum opportunity of 200% of
salary.
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Performance
conditions
The bonus is based on performance against financial, strategic, operational, ESG
or personal measures appropriate to the individual Executive Director, typically
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. The
payment schedule for each metric will normally be scaled based on the stretch of
the underlying target. Normally, up to 20% of the maximum opportunity will be
received for threshold performance. For 2024, threshold performance will equate
to a 0% payout level on most metrics.
In relation to operational, milestone or qualitative targets, the structure of the target
may vary based on the nature of the target set and may be based on the
Remuneration & Talent Committee’s judgement in assessing the performance
outturn.
Any bonus pay-out 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 pay-out 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.
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
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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 or unless an Executive Director is compliant with this guideline, they are
normally 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.
Notes to table
1.
The LTIP and bonus deferral will be operated in accordance with the relevant plan rules including any discretions therein.
2.
The Committee retains the ability to adjust the targets and/or set different measures and alter weightings for any performance
condition(s) if one or more events occur which cause it to determine that an amended, adjusted or substituted performance
condition(s) would be more appropriate so that the conditions achieve their original purpose (e.g. in the event of a material
divestment of a business, capital transactions, changes to accounting standards and other events not foreseen at the time
the targets were set). In the event that the Remuneration & Talent Committee were to make an adjustment of this sort, a full
explanation would be provided in the next Remuneration Report.
3.
Performance measures – annual bonus. The annual bonus measures are reviewed annually and chosen to focus executive
rewards on delivery of key financial targets for the forthcoming year as well as key strategic, operational, ESG or personal
goals relevant to an individual. Specific targets for bonus measures are set at the start of each year by the Remuneration &
Talent Committee and are based on a range of relevant reference points, including, for example, Group financial targets and
the Company's business plan, and are designed to be appropriately stretching. Targets and underpins may be set which
provide the Committee judgement in assessing the extent to which they have been met. Prior to the determination of final
outcomes, the Committee will consider the use of discretion to enhance the rigour and consistency of any payments and to
ensure they align to overall performance and the wider stakeholder experience. While the Committee anticipates that any such
discretion would normally result in a reduction, the Committee reserves the right to make an upwards adjustment if considered
appropriate.
4.
The Remuneration & Talent Committee may: (a) in the event of a variation of the Company's share capital, demerger, special
dividend or dividend in specie or any other corporate event which it reasonably determines justifies such an adjustment, adjust;
and (b) amend the terms of awards granted under the share schemes referred to above in accordance with the rules of the
relevant plans. Share awards may be settled by the issue of new shares or by the transfer of existing shares.
5.
The cash bonus will be subject to recovery and/or deferred shares will be subject to withholding at the Remuneration & Talent
Committee's discretion where within three years of the bonus determination a material misstatement or miscalculation comes
to light which resulted in an overpayment under the annual bonus plan or if evidence comes to light of serious misconduct by
an individual, serious reputational damage to the Group or a material failure of risk management or following a corporate
failure. LTIP awards will be subject to withholding or recovery at the Remuneration & Talent Committee's discretion where
before the fifth anniversary of grant a material misstatement or miscalculation comes to light which resulted in an
overpayment under the LTIP or if evidence comes to light of serious misconduct by an individual, serious reputational damage
to the Group or a material failure of risk management or following a corporate failure.
6.
Performance measures – LTIP. The LTIP performance measures will be chosen to provide alignment with our longer-term
strategy of growing the business in a sustainable manner that will be in the best interests of shareholders and other key
stakeholders in the Company. Targets are considered ahead of each grant of LTIP awards by the Remuneration & Talent
Committee taking into account relevant external and internal reference points and are designed to be appropriately stretching.
7.
If a one-off share award is granted on recruitment to buy out compensation arrangements forfeited on leaving a previous
employer, it may be granted either in the form of a LTIP award or alternatively in the form of an award under a separate
arrangement as permitted by Listing Rule 9.4.2. If such an award were to be granted in the form of a LTIP award, then it would
not be subject to (or form part of the calculation of) the maximum award limit outlined in the Policy Table above. If awarded
as compensation for a forfeited share award which is not subject to performance conditions, it would also not be subject to
the requirement for the LTIP award to be subject to a performance condition. Full requirements that would apply to any buy-
out award granted under the LTIP are set out in the Recruitment Remuneration Policy section of this report.
8.
The Remuneration & Talent Committee reserves the right to make any remuneration payments and/or payments for loss of
office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not
in line with the Policy set out above, where the terms of the payment were agreed either: (i) before the 2019 AGM (the date the
Company’s first shareholder- approved Director’s Remuneration Policy came into effect; (ii) during the term of, and were
consistent with, any previous policy; or (iii) at a time when the relevant individual was not a director of the Company and, in
the opinion of the Remuneration & Talent Committee, the payment was not in consideration for the individual becoming a
director of the Company. For these purposes “payments” includes the Remuneration & Talent Committee satisfying awards
CORPORATE GOVERNANCE
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of variable remuneration and, in relation to an award over shares, the terms of the payment are “agreed” at the time the award
is granted.
9.
The Remuneration & Talent Committee retains the discretion to determine the methodology and basis used in calculating the
pension rate available to the wider workforce, including the jurisdictions deemed as relevant for comparison. The definition of
the wider workforce will be as determined by the Remuneration & Talent Committee. For example, colleagues employed in the
same country as the Director in question.
10.
The Remuneration & Talent Committee may make minor amendments to the Remuneration Policy for regulatory, exchange
control, tax or administrative purposes or to take account of a change in legislation, without obtaining shareholder approval
for that amendment.
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:
Senior Independent Director
Audit & Risk Committee Chair
Remuneration & Talent Committee Chair
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.
Non-Executive Directors may be provided with role-appropriate benefits. Where
travel to the Company's registered office is recognised as a taxable benefit, 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.
Maximum
opportunity
Fees are set at an appropriate level that is market competitive and reflective of the
responsibilities and time commitment associated with specific roles.
No absolute maximum has been set for individual NED fees.
The total aggregate fees paid to the Chair and NEDs will be in line with the limit set
out in the Company's Articles of Association.
Illustrations of application of the Remuneration Policy
The “Implementation of remuneration policy in 2024” section of the Annual Report on Remuneration
details how the Remuneration & Talent Committee intends to implement the Remuneration Policy during
2024.
The charts below illustrate, in four assumed performance scenarios, the total value of the remuneration
package potentially receivable by Mathios Rigas and Panos Benos in relation to 2024. This comprises
salary, pension and benefits for 2024 (Mathios Rigas: £750,000, 4% pension and £48,000; Panos Benos
£600,000, 4% pension and £25,000). Annual bonus opportunities are shown as 200% of salary for both
Directors. Both Directors also receive an LTIP award of 200% of salary.
The charts are for illustrative purposes only and actual outcomes may differ from those shown.
CORPORATE GOVERNANCE
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CEO:
CFO:
Assumed performance
Minimum performance
No pay-out under the annual bonus
No vesting under the LTIP
Performance in line with
expectations
50% of the maximum pay-out under the annual bonus
50% vesting under the LTIP
Maximum performance
100% of the maximum pay-out under the annual bonus
100% vesting under the LTIP
Maximum performance plus share
price growth
As above, with 50% increase in the share price attributable to
the LTIP.
100%
36%
22%
18%
32%
39%
33%
32%
39%
33%
16%
£828k
£2,328k
£3,828k
£4,578k
£0k
£1,000k
£2,000k
£3,000k
£4,000k
£5,000k
£6,000k
Minimum
On-target
Maximum
Maximum + share price
appreciation
Fixed pay
Annual bonus
LTIP
Share price appreciation
100%
35%
21%
18%
32%
39%
33%
32%
39%
33%
16%
£649k
£1,849k
£3,049k
£3,649k
£0k
£1,000k
£2,000k
£3,000k
£4,000k
£5,000k
Minimum
On-target
Maximum
Maximum + share price
appreciation
Fixed pay
Annual bonus
LTIP
Share price appreciation
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Recruitment remuneration policy
Principles
In determining remuneration arrangements for new appointments to the Board (including internal
promotions), the Remuneration & Talent Committee will apply the following principles:
•
The Remuneration & Talent Committee will take into consideration all relevant factors, including
the experience of the individual, market data (for the UK, local or international market as
appropriate) and existing arrangements for other Executive Directors, with a view that any
arrangements should be in the best interests of both the Company and our shareholders, without
paying more than is necessary
•
Typically, the new appointment will have (or be transitioned onto) the same package structure
as the other Executive Directors, in line with the Remuneration Policy
•
Upon appointment, the Remuneration & Talent Committee may consider it appropriate to offer
additional remuneration arrangements in order to secure the appointment. In particular, the
Remuneration & Talent Committee may consider it appropriate to “buy out” terms or
remuneration arrangements forfeited on leaving a previous employer (discussed below)
•
The Remuneration & Talent Committee may provide costs and support if the recruitment
requires relocation of the individual
•
Where an Executive Director is an internal promotion, the normal policy of the Company is that
any legacy arrangements would be honoured in line with the original terms and conditions.
Similarly, if an Executive Director is appointed following the Company’s acquisition of or merger
with another company, legacy terms and conditions would be honoured.
Maximum level of variable remuneration
The maximum level of variable remuneration which may be granted to new Executive Directors in respect
of recruitment shall be limited to the maximum permitted under the Remuneration Policy, namely 400%
of their annual salary. This limit excludes any payments or awards that may be made to buy out the
Director for terms, awards or other compensation forfeited from their previous employer (discussed
below).
Buyouts
To facilitate recruitment, the Remuneration & Talent Committee may make a one-off award to buy out
compensation arrangements forfeited on leaving a previous employer. In doing so, the Remuneration &
Talent Committee will take account of all relevant factors, including any performance conditions attached
to incentive awards, the likelihood of those conditions being met, the proportion of the
vesting/performance period remaining and the form of the award (e.g. cash or shares). The overriding
principle will be that any replacement buyout award should be of comparable commercial value to the
compensation which has been forfeited. However, such buyout awards would only be considered where
there is a strong commercial rationale to do so.
Components and approach
The remuneration package offered to new appointments may include any element within the
Remuneration Policy. In considering which elements to include, and in determining the approach for all
relevant elements, the Remuneration & Talent Committee will take into account a number of different
factors, including (but not limited to) market practice, existing arrangements for other Executive Directors
and internal relativities. If appropriate, different measures and targets may be applied to a new
appointment's annual bonus or LTIP award in their year of joining.
The Remuneration & Talent Committee would seek to structure buyout and variable remuneration awards
on recruitment to be in line with the Company's remuneration framework so far as practical but, if
necessary, the Remuneration & Talent Committee may also grant such awards outside of that framework
as permitted under Listing Rule 9.4.2 subject to the limits on variable remuneration set out above. The
exact terms of any such awards (e.g. the form of the award, time frame, performance conditions, and
leaver provisions) would vary depending upon the specific commercial circumstances.
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Recruitment of Non-Executive Directors
In the event of the appointment of a new Non-Executive Director, remuneration arrangements will
normally be in line with the Remuneration Policy for Non-Executive Directors. However, the Remuneration
& Talent Committee (or the Board as appropriate) may include any element within the Policy Table which
the Remuneration & Talent Committee considers is appropriate given the particular circumstances, with
due regard to the best interests of shareholders. In particular, if the Chair or a Non-Executive Director
takes on an executive function on a short-term basis, they would be able to receive any of the standard
elements of Executive Director pay.
Service contracts
Key terms of the current Executive Directors' service agreements and Non-Executive Directors' letters of
appointment are summarised in the table below. It is envisaged that any future appointments would have
equivalent contractual arrangements unless otherwise stated in this Report.
Provision
Policy
Notice period
Executive Directors – termination of the current Executive Directors' service
agreements would require six months' notice by either the Company or the
Executive Director. The Remuneration & Talent Committee retains discretion to
include a notice period of up to 12 months in an Executive Director's service
agreement.
Non-Executive Directors – at the Company's discretion, Non-Executive Directors
may have a notice period of up to three months.
All current Non-Executive Directors have a three-month notice period.
Termination
payment
Following the serving of notice by either party, the Company may terminate
employment of an Executive Director with immediate effect by paying a sum equal
to salary and benefits in respect of their notice period.
Non-Executive Directors are only entitled to receive any fee accruing in respect of
their period up to termination.
Expiry date
Executive Directors have rolling six months' notice periods so have no fixed expiry
date.
Non-Executive Directors' letters of appointment have no fixed expiry date.
In accordance with the Code, each Director will retire annually and put themselves forward for re- election
at each AGM of the Company.
All Executive Directors' service agreements and Non-Executive Directors' letters of appointment are
available for inspection at the Company's registered office.
Policy on payment of variable remuneration following loss of office
Annual bonus plan
If the Executive Director's employment terminates (or notice is served to terminate their employment)
prior to the payment of an annual bonus, the Director has no contractual entitlement to that bonus. At its
discretion, the Remuneration & Talent Committee may determine that the Executive Director is eligible to
receive a bonus in respect of the financial year in which they cease employment (and/or the financial
year in which notice is served to terminate their employment). This bonus would usually be time
apportioned and may, at the Remuneration & Talent Committee's discretion, be settled wholly in cash. In
determining the level of bonus to be paid, the Remuneration & Talent Committee may, at its discretion,
take into account performance up to the date of cessation or over the financial year as a whole based on
appropriate performance measures as determined by the Remuneration & Talent Committee.
The treatment of outstanding share awards held by an Executive Director upon cessation of employment
is governed by the relevant share plan rules as summarised below.
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Deferred Bonus Plan (“DBP”) – share awards
•
If an individual ceases to hold employment as a result of death, ill-health, injury, disability,
redundancy, transfer of a business out of the Group or any other reason at the Remuneration &
Talent Committee's discretion (except where an individual is dismissed for gross misconduct),
their unvested DBP share awards will be permitted to vest. The vesting date will be accelerated
to cessation of employment following an individual's death. Otherwise, unvested shares will vest
at the normal vesting date unless the Remuneration & Talent Committee, in its discretion, elects
to vest the shares following cessation of employment.
•
In all other circumstances, unvested DBP shares will lapse upon cessation of employment.
•
On a change of control, unvested DBP shares will immediately vest in full unless they are
exchanged for new awards.
•
If other corporate events occur such as a demerger, delisting, special dividend, voluntary winding-
up or other event which in the opinion of the Remuneration & Talent Committee may affect the
current or future value of shares, the Remuneration & Talent Committee will determine whether
unvested DBP shares should vest.
LTIP awards
•
If an individual ceases to hold employment as a result of death, ill-health, injury, disability,
redundancy, transfer of a business out of the Group or any other reason at the Remuneration &
Talent Committee's discretion (except where an individual is dismissed for gross misconduct),
their unvested LTIP awards will be permitted to vest on a time pro-rated basis (unless the
Remuneration & Talent Committee determines otherwise) and subject to performance assessed
over the original performance period (or a shortened performance period where appropriate, for
example following an individual's death). The release date for vested LTIP awards will remain the
original release date unless the Remuneration & Talent Committee in its discretion elects to
accelerate the release date to cessation of employment or such other intermediate date as is
deemed appropriate.
•
In all other circumstances, unvested LTIP shares will lapse upon cessation of employment.
•
LTIP shares that have vested but remain subject to a holding period at the time that an individual
ceases employment will lapse in the event that cessation of employment is as a result of gross
misconduct. Otherwise, these shares will normally be released on the original release date unless
the Remuneration & Talent Committee in its discretion elects to accelerate the release date to
cessation of employment or such other intermediate date as is deemed appropriate.
•
On a change of control, unless they are exchanged for new awards, unvested LTIP awards will
vest immediately to an extent that takes into account the performance condition assessed at the
change of control and, unless the Remuneration & Talent Committee determines otherwise, on
a time pro-rated basis. LTIP shares that have vested but remain subject to a holding period at
the time of the change of control will be released immediately unless they are exchanged for new
awards.
•
If other corporate events occur such as a demerger, delisting, special dividend, voluntary winding-
up or other event which in the opinion of the Remuneration & Talent Committee may affect the
current or future value of shares, the Remuneration & Talent Committee will determine whether
outstanding LTIP awards should be treated on the same basis as following a change of control.
The Remuneration & Talent Committee reserves the right to make any other payments in connection with
a Director's cessation of office or employment where the payments are made in good faith in discharge
of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of a
compromise or settlement of any claim arising in connection with the cessation of a Director's office or
employment. Any such payments may include but are not limited to payments in relation to accrued but
untaken holiday, paying any fees for outplacement assistance and/or the Director's legal and/or
professional advice fees in connection with his or her cessation of office or employment.
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Consideration of employment conditions elsewhere in the Group
The Board has appointed a workforce Board representative, a designated NED, who is responsible for
ensuring the “employee voice” is provided at Board-level. The Workforce Representative attends
Remuneration & Talent Committees’ meetings to provide this context. The Remuneration & Talent
Committee is kept informed of general management decisions made in relation to employee
remuneration and, in the development of this Policy, has been conscious of the importance of ensuring
that its remuneration decisions for Executive Directors are regarded as fair and reasonable within the
business. Pay and conditions in the Group are one of the specific considerations taken into account when
the Remuneration & Talent Committee is considering changes in remuneration for the Executive
Directors.
Differences in policy from broader employee population
A greater proportion of Executive Directors' potential wealth is “at risk”, either through their existing
shareholding or through LTIP awards than for our employees generally and a greater proportion
determined by performance than for our employees generally. However, common principles underlie the
Remuneration Policy through the Company including for the Executive Directors. In particular, we place
great emphasis throughout the Company on reward being linked to performance and on encouraging
share ownership.
Consideration of shareholders' views
The Committee engaged with key shareholders in the development and finalisation of this Remuneration
Policy.
A consultation on the proposed changes was held during Autumn 2023, with follow up
consultation in early 2024.
We consulted on the changes with a number of our shareholders and were
pleased with the positive feedback. The shareholders we engaged with recognised the strong
performance of both the Company and Executive Directors since IPO, as well as the distinctive position
that Energean is in, given that both Executive Directors are significant shareholders. A further round of
consultation was undertaken at the beginning of 2024.
The feedback provided contributed to the
Committee’s decisions for the final policy put to shareholders for approval.
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Annual Report on Remuneration
Unaudited information
Implementation of Remuneration Policy in 2024
This section provides an overview of how the Remuneration & Talent Committee is proposing to
implement our Remuneration Policy in 2024 for the Executive Directors.
Base salary
The Remuneration & Talent Committee is proposing no salary increase for either the CEO or the CFO for
2024. This is to reflect the wider macroeconomic and geopolitical context and demonstrates Energean’s
responsible approach to pay.
No salary increase has been applied since 2022 for either Executive
Director despite the high inflationary environment in our markets in the last two years and the continued
growth of the Group. We will be considering targeted increases for other members of the Executive
Committee and making targeted increases for the broader workforce, being particularly mindful of
inflation and the cost of living in relation to the need to protect lower earners within the workforce.
2024
2023
% 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 allowance worth £48,000 p.a. and £25,000
p.a. respectively. They may also receive reimbursement of business-related expenses should these arise
in the year.
Annual bonus
The annual bonus plan opportunity for 2024 will be unchanged from 2023, with a maximum bonus
opportunity of 200% of annual salary for both of the Executive Directors. The annual bonus for 2024 will
be determined by a bonus scorecard that is aligned with the Company’s strategic priorities for the year
ahead.
The areas of focus for the 2024 annual bonus are set out below:
Area of focus
Weighting
Operational
– including targets and focus relating to Group production, operating
expenses and capital expenditure.
40%
Balance sheet strength
– including targets around liquidity and debt.
20%
Growth
– including targets around exploration and carbon storage.
20%
Sustainability
– including targets around emissions, net-zero transition, health and
safety and diversity and inclusion.
20%
The approach to performance determination and the guiding target ranges for the financial year 2024 are
deemed commercially sensitive. However, retrospective disclosure of the guiding targets and
performance against these will be provided in next year’s Remuneration Report to the extent that they do
not remain commercially sensitive at that time. The scorecard includes both quantitative targets as well
as milestone objectives and evidence/judgement-based assessments in order to reflect the forward
strategy.
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In the event of unforeseen acquisitions, divestments or investments during the year, the Remuneration &
Talent Committee would consider how relevant 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.
For 2024, it is proposed to remove the requirement to defer one-third of the annual bonus award into
shares where an Executive Director has met the shareholding guideline. This change is subject to
approval of the Remuneration Policy at the AGM in 2024. The CEO and CFO respectively hold c.8% and
c.2% of Energean’s shares, which is significantly higher than Energean’s shareholding guideline (200% of
salary). This change will simplify the annual bonus structure and better align Energean with international
market practice (where bonus deferral into shares is uncommon).
Long-term incentive plan
The Executive Directors will receive an award under the LTIP during 2024 of 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 2024 award are consistent with the measures for
the 2023 award and are set out below.
Performance measure
% of award based
on measure
Threshold
Max
Relative Total Shareholder Return
82
Measured over 3 financial years
50%
Median ranking
12.5% of award
Upper quartile ranking
50% of award
Absolute Total Shareholder Return
Measured over 3 financial years
30%
8% p.a.
7.5% of award
12% p.a.
30% of award
Average Scope 1 and 2 CO2
emissions (kgCO2/boe)
Measured over 3 financial years
20%
10 kgCO2/boe
5% of award
5 kgCO2/boe
20% of award
The Committee believes these targets are stretching in the context of the Group’s evolving production
profile and the ongoing geopolitical context impacting the Group.
Vesting will be 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.
Non-Executive Director remuneration
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.
The Committee has approved an uplift in the Chair’s fee to apply from 1 January 2024. The Chair’s fee
was last increased in 2022. In the interim, there has been significant evolution in Energean’s scope, size
and complexity, including Energean becoming the major independent gas producer in the Mediterranean
by achieving stable production from Karish. This uplift will mean the fee is competitively positioned
against similarly sized businesses and will better reflect the Chair’s extensive market and role experience.
Energean remains one of the few FTSE-listed businesses with a female Chair, and the Committee
recognises its responsibility to ensure the Chair’s fee is competitively and fairly positioned.
82
Total Shareholder Return performance for the 2024 LTIP award will be measured against the following peer group:
Africa
Oil, Aker BP, Harbour Energy, Isramco Negev 2, Ithaca Energy, Kosmos Energy, NewMed Energy, Ratio Energies, Seplat Energy,
Serica Energy, Talos Energy, Tamar Petroleum, Tullow Oil, Var Energi, the FTSE 250 index and the FTSE 350 Oil, Gas, Coal Index
.
This group has been updated from the TSR group that was used for the 2023 award.
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Changes have also been made to the Non-Executive Director base fee and some of the Committee fees.
There has been no increase to the base fee since 2020, and no significant increase since Energean listed
in 2018. Following a review against peer companies, and with a particular focus on our international
sector peers, an adjustment to the fee level has been applied to recognise the significant expansion in
Energean’s operational footprint and geographic complexity, as well as the increased time commitments
and strategic input of the Non-Executive Director role. The changes are summarised in the table below.
2024 fees
2023 fees
Chair of the Board all-inclusive fee
£250,000
£220,000
Base Non-Executive Director fee
£80,000
£55,000
Senior Independent Director additional fee
£12,500
£10,000
Audit & Risk Committee Chair additional fee
£25,000
£25,000
Environment, Safety & Social Responsibility Chair additional fee
£15,000
£15,000
Remuneration & Talent Committee Chair additional fee
£17,500
£15,000
Audited information
The information provided in this section of the Remuneration Report up until the “Unaudited information”
heading on page 160 is subject to audit.
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Single total figure of remuneration
The following table sets out the total remuneration for Executive Directors and Non-Executive Directors for 2023, along with the comparative figures for 2022.
2023 (£’000)
2022 (£’000)
Salary and
fees
Pensions
83
Benefits
Annual
bonus
84
LTIP
85
Total Fixed
Total
Variable
Total
86
Salary and
fees
Pensions
Benefits
Annual
bonus
LTIP
87
Total Fixed
Total
Variable
Total
Executive Directors
Mathios Rigas
750
30
48
1,176
743
828
1,919
2,747
750
30
48
1,059
3,391
828
4,450
5,278
Panos Benos
600
24
25
941
578
649
1,518
2,167
600
24
25
847
2,261
649
3,108
3,757
Non-Executive Directors
88
Karen Simon
220
-
-
-
-
220
-
220
220
-
-
-
-
220
-
220
Andrew Bartlett
81
-
-
-
-
81
-
81
82
-
-
-
-
82
-
82
Stathis Topouzoglou
55
-
-
-
-
55
-
55
55
-
-
-
-
55
-
55
Amy Lashinsky
55
-
-
-
-
55
-
55
55
-
-
-
-
55
-
55
Kimberley Wood
70
-
-
-
-
70
-
70
70
-
-
-
-
70
-
70
Andreas Persianis
57
-
-
-
-
57
-
57
55
-
-
-
-
55
-
55
Roy Franklin
70
-
-
-
-
70
-
70
72
-
-
-
-
72
-
72
Martin Houston
7
-
-
-
-
7
-
7
-
-
-
-
-
-
-
-
83
Pension/Benefits
– In 2023, 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.
84
Annual bonus
– bonus payments 2023 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.
85
2021 LTIP
–The 2021 LTIP awards were subject to performance conditions measured to 31 December 2023. The awards vested on 1 February 2024 at 41.9% of maximum. The
amount shown is calculated using the closing share price on the vesting date of 1 February 2024 (£9.37). The vested awards have a two-year holding period and will be released in
2026. For this award, an estimated £91k and £71k is related to share price appreciation between the grant date and vesting date for the CEO and CFO respectively. The award value
includes 9,160 and 7,123 dividend equivalents for the CEO and CFO respectively, valued at the closing share price on 1 February 2024.
86
Total remuneration
paid to directors in respect of 2023 is
£3,503k
(2022:
£3,386k
).
87
2020 LTIP
– In the
2022
Annual Remuneration Report, the amount shown for share awards in 2022 included the indicative vesting value of the 2020 LTIP award that was subject to
performance conditions measured to 31 December 2022. The figure shown in the table above represents the subsequent value received on the vesting date of 24 March 2023 using the
share price on that date £
11.81
. These awards are subject to a two-year holding period.
88
Non-Executive Directors
– Martin Houston joined the Board on 16 November 2023. Roy Franklin stepped down from the Board on 13 November 2023. There were no other changes
to the Board in 2023.
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2023 annual bonus outturn
The maximum annual bonus opportunity for the Executive Directors in 2023 was 200% of salary for both
Executive Directors. Two-thirds of any bonus will be paid in cash with the remaining one-third of the
earned bonus deferred into share under the DBP. These shares will vest two years after the grant date.
Performance measures and targets applying to the 2023 annual bonus, along with performance
achieved, are set out below. Further detail on the respective areas of performance follows the summary
table. As in previous years, where threshold – max target ranges have been set for a measure, threshold
vesting accrues from 0% (this is below the level available under the Policy of 20%, demonstrating
Energean’s commitment in practice to ensuring incentive payouts align with outperformance). Based on
the performance against the pre-set and stretching targets, the Committee approved an outturn of 78.4%
for both Directors.
Performance measure
Weighting
% vesting
Operational goals
40%
20.0%
Financial, commercial and risk goals
40%
40.0%
Sustainability goals
20%
18.4%
Total
100%
78.4%
Operational goals (40%)
Operational goals were based on delivery of projects, production, cost of production and reserves targets.
Distinct targets were set for each element, with vesting ranges applicable to the production and cost of
production targets, and the operational progress in relation to NEA/NI and Katlan assessed by the
Committee.
Performance
measure
Proportion
Threshold
0% vesting
Target 50%
vesting
Performance
measure
Proportion
Threshold
0% vesting
Average
production
20%
131
Kboe/d
140
Kboe/d
158
Kboe/d
123
Kboe/d
0.0%
Group cost of
production
10%
$16/boe
$15/boe
$14/boe
$10.6 boe
10.0%
First gas
NEA/NI
5%
Target was to achieve first gas at NEA/NI in 2023.
Target was met with all wells on production in
December 2023. Committee therefore determined this
element should vest in full.
5.0%
Katlan FID
5%
Target was to achieve Final Investment Decision (FID)
on Katlan. By year end, Field Development Plan (FDP)
had been approved. Committee therefore determined
this element should vest in full.
5.0%
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Financial, commercial and risk (40%)
Key financial, commercial and risk objectives for 2023 were set at the start of the year, with progress
against these assessed by the Committee guided by reference to the pre-set objective. The stretching
targets were all deemed to have been met, with progress described below.
Measure
Proportion
% vesting
Refinancing of
2024 bond
15%
Target was to achieve a re-financing of the 2024 bond
to replace Energean Israel’s March 2024 bond maturity.
The re-financing was completed with a raise of $750
million. The newly issued bond has a maturity date of
2033, which has extended Energean’s weighted average
debt maturity. The Committee determined this element
should vest in full.
15.0%
New gas
contracts
linked to
Katlan
10%
Target was in relation to the signing of new gas
contracts linked to Katlan development (including both
export and Israel). The Committee determined that this
element had been met in full.
10.0%
Net Debt to
EBITDAX at or
below 3x
15%
Overriding target was to keep Net Debt to EBITDAX at or
below 3x. The Committee assessed this target to have
been met at year end based on a review of financial
data and assessment of relevant context. This element
was therefore deemed to have been met in full.
15.0%
Sustainability (20%)
Reflecting Energean’s commitment to sustainability goals, the scorecard included a range of
sustainability objectives, including those focused on reducing carbon intensity and remaining within
critical safety parameters. The Committee assessed each category and determined an appropriate
outcome based on progress and delivery in the year.
Performance
measure
Proportion
Threshold
0% vesting
Target 50%
vesting
Maximum
100%
vesting
Achieved
Threshold
0% vesting
Reduce
carbon
emissions
intensity
(16kg
CO2e/boe
baseline)
4%
-10%
-20%
-30%
-42%
4.0%
Sustainability
rating vs peer
group
(and progress
of Transition
plan to Net
Zero)
3.5%
Top 20%
Top 15%
Top 10%
18th
percentile
2.7%
The Committee considered the completion of the Net
Zero pathway, the purchase of Green Electricity for all
sites balanced with the limited progress of identified
climate projects in Italy and Egypt in approving the final
vesting level.
Recordable
incidents
4%
LTIF:0.60
TRIR: 1.25
LTIF:0.55
TRIR: 1.20
LTIF:0.50
TRIR: 1.10
LTIF:0.47
TRIR: 1.09
4.0%
HSE
performance
against
annual targets
3.5%
The Committee considered rollout of risk management
software and that all countries' Emergency
Management Plans have been aligned with at least one
drill performed in each country. Leadership visits
2.9%
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performed in all sites and countries (84 sites in total).
Internal HSE audits target fully achieved (357 in total).
Culture and
D&I
5%
The Committee considered the successful appointment
of a DEI leader in 2023, and continued actions in
progressing the wider DEI strategy, including review of
Policies and rollout of DEI training. Level 3 reached in
most categories identified in GDEIB model. The
Committee determined that objectives substantively
met in this category.
4.8%
The overall outcome for the 2023 annual bonus was therefore:
Total bonus payable
% of maximum
Total bonus payable
£’000 and % of annual salary
Mathios Rigas (CEO)
78.4%
£1,176k
(157% of salary)
Panos Benos (CFO)
78.4%
£941k
(157% of salary)
The Remuneration & Talent Committee considered this bonus outcome in light of the Group’s overall
financial and operational performance during 2023 and was satisfied that it was appropriate and that no
discretionary adjustment to the outcome was required. The Committee also noted that the annual bonus
outcome cascades down the organisation and believed that the assessed outturn was reflective of the
Company’s strategic delivery in the year, and the broader efforts of Energean colleagues, particularly
given the ongoing geopolitical context and the operational challenges impacting our workforce.
LTIP awards vesting during the financial year
The share award granted at the start of the 2021 financial year was subject to performance conditions
measured between 1 January 2021 and 31 December 2023. The performance conditions that applied to
this award are set out below:
Performance
measure
Proportion
Threshold
25% vesting
Maximum
100%
vesting
Achieved
% of
element
vesting
% of award
vesting
Relative TSR
89
50%
Median
Upper
Quartile
Ranked
below
median
0.0%
0%
Absolute TSR
30%
8% p.a.
12% p.a.
18.1% p.a.
100.0%
30%
Average
Scope 1 and 2
CO2
emissions
(kgCO2/boe)
over 3
Financial
years
20%
18
kgCO2/boe
6
kgCO2/boe
12.5
kgCO2/boe
59.4%
11.9%
Total award vesting
41.9%
89
Total Shareholder Return performance was measured against the following peer group: AkerBP, Lundin, Delek Drilling, Isramco,
Tamar, Ratio, Kosmos, Harbour Energy, Capricorn Energy PLC (formerly Cairn Energy), Tullow Oil plc, Diversified Oil & Gas plc,
Jadestone, Serica, Seplat, Genel and the FTSE 350 Oil and Gas and Coal index.
CORPORATE GOVERNANCE
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Strong TSR performance on an absolute basis meant that this portion of the award will vest in full. Despite
significant growth over the performance period, Energean ranked below the median of the peer group on
a relative TSR basis and, as such, this portion of the award lapsed in full. Partially this reflects market
distortions, with peer group companies impacted more significantly by COVID-19, and therefore
benefitting from a more pronounced market recovery across the performance period. By contrast,
Energean’s fixed price contract model somewhat mitigates the effects of large gas price movements,
and therefore the Company did not experience the exaggerated dip and recovery felt by others in the
sector. The impact of the security situation in Israel also negatively impacted the share price in Q4 2023,
which is the period used for the TSR growth calculation. Positive progress on the Scope 1 and 2
emissions performance targets meant that this portion of the award will vest between threshold and
maximum. The formulaic outcome of the award is 41.9% of maximum.
The Committee considered the holistic performance of the business and decided that the formulaic
outcome was appropriate, albeit recognising the extraneous factors above.
LTIP awards granted during the financial year
An award was granted under the LTIP to selected Senior Executives, including the Executive Directors, in
March 2023. This award is subject to the performance conditions described below and will vest in March
2026 with a subsequent two-year holding period for any vested shares to March 2028.
Type of award
Date of
grant
Maximum
number of
shares
90
Face value
(£)
Face value
(% of salary)
Threshold
vesting
End of
performance
period
Mathios Rigas
Conditional
share award
23 March
2023
136,562
£1,500,000
200%
25% of
award
31
December
2025
Panos Benos
Conditional
share award
23 March
2023
109,249
£1,200,000
200%
25% of
award
31
December
2025
Vesting of the 2023 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. The targets that apply to this award were disclosed in the 2022 Director’s
Remuneration Report and are set out again below.
90
The maximum number of shares that could be awarded has been calculated using the share price of £10.98 (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.
CORPORATE GOVERNANCE
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Performance measure
Proportion of
award determined
by measure
Threshold
performance
25% vesting
Maximum
performance
100% vesting
Relative Total Shareholder
Return
Measured over three-year
performance period
91
50%
Median ranking
12.5% of award
Upper quartile ranking
50% of award
Absolute Total Shareholder
Return
Measured over three-year
performance period
30%
8% p.a.
7.5% of award
12% p.a.
30% of award
Average Scope 1 and 2 CO2
emissions
(kgCO2/boe) over three-year
performance period
20%
18 kgCO2/boe
5% of award
6 kgCO2/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 2023.
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 significantly exceed their minimum
guideline, with the CEO (Mathios Rigas) holding c.8% of the Company’s share capital, and the CFO (Panos
Benos) holding c.2% of the share capital. As such, both directors are significantly aligned with the broader
shareholder base. Detail on the number of shares held by Directors as at 31 December 2023 is set out
below:
Number of shares held as at 31 December 2023
92
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?
Director
LTIP
DBP
Mathios
Rigas
15,141,376
479,445
69,344
8.25%
Yes
Panos Benos
3,588,475
380,586
51,293
1.96%
Yes
Karen Simon
282,072
0.15%
N/A
Andrew
Bartlett
5,554
0.00%
N/A
Stathis
Topouzoglou
16,377,249
8.93%
N/A
Amy
Lashinsky
1,507
0.00%
N/A
91
Peer group for the 2023 LTIP: 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.
92
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 2023 has been used (£10.44 per share).
CORPORATE GOVERNANCE
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Kimberley
Wood
-
0.00%
N/A
Andreas
Persianis
-
0.00%
N/A
Roy Franklin
93
-
0.00%
N/A
Martin
Houston
94
8,500
0.00%
N/A
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 2023 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.
93
Roy Franklin stepped down from the Board on 13 November 2023.
94
Martin Houston joined the Board on 16 November 2023.
0
50
100
150
200
250
300
350
400
Mar 2018
Jul 2018
Nov 2018 Mar 2019
Jul 2019
Nov 2019 Mar 2020
Jul 2020
Nov 2020 Mar 2021
Jul 2021
Nov 2021 Mar 2022
Jul 2022
Nov 2022 Mar 2023
Jul 2023
Nov 2023
Energean
FTSE 350 Oil, Gas, Coal Index
CORPORATE GOVERNANCE
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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.
2023
2022
2021
95
2020
2019
2018
CEO single figure of remuneration
£’000
£2,747k
£5,278k
£4,799k
£1,608k
£1,134k
£1,581k
Annual bonus pay-out
(as a % of maximum opportunity)
78.4%
70.6%
80.0%
84.8%
37.9%
82.1%
LTIP vesting out-turn
(as a % of maximum opportunity)
41.9%
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)
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 2023.
95
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.
CORPORATE GOVERNANCE
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Annual percentage change table
All employee average
Mathios Rigas
Panos Benos
Karen Simon
Andrew Bartlett
Stathis Topouzoglou
Amy Lashinsky
Kimberley Wood
Andreas Persianis
Roy Franklin
Martin Houston
2022–
2023
Salary
change
6.0%
0%
0%
0%
-1.6%
0%
0%
0%
3.6%
N/A
N/A
Benefits
change
0.6%
0%
0%
-
-
-
-
-
-
-
-
Annual
Bonus
change
33.7%
11.0%
11.0%
-
-
-
-
-
-
-
-
2021–
2022
Salary
change
21.5%
11.1%
14.3%
50.0%
20.8%
2.3%
2.3%
16.7%
-
-
-
Benefits
change
32.0%
4.0%
6.5%
-
-
-
-
-
-
-
-
Annual
Bonus
change
33.9%
-1.9%
15.3%
-
-
-
-
-
-
-
-
2020–
2021
Salary
change
8.88%
0.0%
16.7%
0%
0%
0%
0%
0%
0%
0%
0%
Benefits
change
16.13%
-36.0%
-50.0%
0%
0%
0%
0%
0%
0%
0%
0%
Annual
Bonus
change
40.6%
25.9%
28.5%
0%
0%
0%
0%
0%
0%
0%
0%
2019–
2020
Salary
change
6.2%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-
Benefits
change
-8.7%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-
Annual
Bonus
change
12.49%
+124%
+124%
0%
0%
0%
0%
0%
0%
0%
-
Since Energean plc only has 38 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
CORPORATE GOVERNANCE
Page 163 of 273
monitor the approach to remuneration that applies to the wider workforce. This includes reviewing CEO
pay ratio data on an annual basis as part of an annual HR update. Further detail on the Committee’s
approach to the wider workforce is set out in the wider workforce section on page 164.
Relative importance of the spend on pay
The table below illustrates the total expenditure on remuneration in 2022 and 2023 for all of the
Company’s employees compared to dividends payable to shareholders.
($m)
2023
($m)
2022
($m)
Change
Total expenditure on remuneration
82.9
85.1
-2.5%
Dividends payable to shareholders/
share buybacks
213.7
106.5
100.7%
Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration & Talent Committee is chaired by Kimberley Wood, and comprises Karen Simon, Amy
Lashinsky and Andreas Persianis. During the year, the Remuneration & Talent Committee also included
Roy Franklin before he stepped down from the Energean Board, and Martin Houston for a brief period
from appointment.
Details of their attendance is set out on page 106.
The Remuneration & Talent Committee met 7 times during 2023. Other attendees present at these
meetings by invitation were the CEO, the CFO, the Group HR Director and the Company Secretary. No
individual took part in decision-making 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, Amy Lashinsky is the employee
representative on the Board. As part of this role, Amy ensures that the “employee
voice” is heard at the Board and engages 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.
CORPORATE GOVERNANCE
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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 £116,750
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, and payroll services.
Workforce remuneration and engagement
The Remuneration & Talent Committee is committed to ensuring that the wider workforce pay and talent
context factors into the approach to executive remuneration at Energean. 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. In addition, Board members regularly attend Company
events, including town hall meetings and social events, where they meet with the workforce, and hear
views on wider Company matters.
The Board regularly receives analysis around the wider workforce. For example, in their September
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 while being aware of the approach being taken to pay across the wider Company.
Pay at Energean is designed to align outcomes between the wider workforce and the senior leadership
team. The bonus scorecard outcome cascades through the Company, with senior employees who
participate in the annual bonus receiving an outturn aligned with the Executive Directors. There is broad
participation in the Long Term Incentive Plan, with all participants’ awards based on the same
performance measures as the Executive Directors.
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 2023 AGM
104,573,566
(77.2%)
30,948,614
(22.8%)
996
At the Annual General Meeting held on 18 May 2023, all resolutions passed with high levels of support.
However, the Committee was disappointed that a significant minority of shareholders felt unable to
support the Director’s Remuneration Report resolution. In line with requirements under the Corporate
Governance Code, the Committee undertook a significant shareholder consultation exercise to better
understand the factors behind this voting.
The Committee is aware that some of the dissent that impacted the remuneration resolution appears to
have arisen due to differing corporate governance policies across different geographies, including in
relation to Board composition. A significant proportion of the votes against the Remuneration Report
originated from our Israeli shareholders. As part of this consultation exercise, the Committee therefore
sought particularly to engage with our Israeli shareholders to understand their views on both
remuneration and wider governance matters.
The Committee’s discussions with other shareholders who felt unable to support the remuneration
resolution indicated that this largely reflected the level of vesting in relation to the 2020 LTIP and potential
windfall benefit. While the Committee acknowledges these concerns, it believes the decision not to apply
discretion to reduce the vesting of the 2020 LTIP is well-supported by the robust analysis undertaken by
the Committee, which was set out in significant detail in the 2022 Director’s Remuneration Report. The
consultation also included shareholders who re-affirmed their support of this decision.
In discussions,
shareholders generally recognised management’s performance and the way that the Company’s
CORPORATE GOVERNANCE
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performance was reflected in pay decisions.
Some shareholders commented on, and welcomed,
management’s very significant shareholding in the Company.
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
20 March 2024
CORPORATE GOVERNANCE
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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 2023. The Corporate Governance Statement set out on
pages 105–112 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 249. Details of financial instruments and financial risks are set out in note 26 to the
financial statements on pages 241–246. 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 employees, suppliers, customers and other key stakeholders
is covered in the section 172 (1) statement on pages 113–116.
In 2023, the Company introduced a new Enterprise Risk Management system and this was further
strengthened in 2023 as detailed on page 81. The Group’s principal risks and uncertainties, are detailed
on pages 85–96.
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.
We are
committed to diversity, equity and inclusion (“
DEI
”) and have made good progress raising awareness of
DEI across the business including the development of the Energean DEI mission, vision and strategy
following the culture audit conducted by Inclusive Employers, a UK organisation expert in the workplace
inclusion.
The Group’s financial results for the year ended 31 December 2023 are set out in the consolidated
financial statements.
During 2023, the Directors approved the payment of the Company’s interim dividends in line with the
previously announced dividend policy:
Relevant operating period
Payment per ordinary share
Payment date
96
Q4 2022
$0.30
30 March 2023
Q1 2023
$0.30
30 June 2023
Q2 2023
$0.30
29 September 2023
Q3 2023
$0.30
29 December 2023
On 22 February 2024, the Company announced that for the Q4 2023 operating period related to the three
months ended 31 December 2023, the Directors had declared an interim dividend of $0.30 per ordinary
share to be paid on 29 March 2024.
Capital structure
Details of the issued share capital are shown in note 19 to the financial statements. As at 31 December
2023, the Company’s issued share capital consisted of 183,480,959 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 3.13 to the
financial statements on page 205.
Directors’ appointments and powers
With regard to the appointment and replacement of Directors, the Company is governed by the Articles,
the UK Corporate Governance Code, the Companies Act and related legislation. The powers of Directors
96
Payment date is stated as the date upon which payment is initiated by Energean.
CORPORATE GOVERNANCE
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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 may only be granted by the Company’s shareholders and,
once granted, such authority can be exercised by the Directors. At the 2023 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 2024. As at 20 March
2024, the Directors had not exercised this authority. The Directors are proposing to renew this authority
at the 2024 AGM.
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 $2.625 billion Senior Secured Notes, upon a change of control (save for certain
exceptions) of the Sponsor (Energean Israel Ltd.), or the Issuer (Energean Israel Finance Ltd.),
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 $300 million Revolving Credit Facility and the 2 year $120 million unsecured
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 100–104. All of the
Directors will offer themselves for re-election at the AGM in May 2024.
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) – Resigned from the Board of
Directors on 13 November 2023.
•
Andrew Bartlett (Senior Independent Non-Executive Director) – Appointed as Senior Independent
Non-Executive Director with effect from 16 November 2023.
•
Martin Houston (Independent Non-Executive Director) – Appointed to the Board of Directors on
16 November 2023.
•
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.
CORPORATE GOVERNANCE
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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 (2022: nil).
Significant events since 31 December 2023
Details of significant events since the balance sheet date are contained in note 29 to the financial
statements on page 249.
Substantial shareholdings
As at 31 December 2023, the Company had received notifications in accordance with the FCA’s
Disclosure and Transparency Rule 5.1.2 of the following interests of 3% or more in the voting rights of
the Company. The Company has also received one notification subsequent to the end of the reporting
period which is included in the following. The %. of Issued Share Capital was calculated as at the date of
the relevant disclosures:
Shareholder
97
Number of
shares
Number of
voting rights
% of issued
share capital
Date of
notification
Efstathios Topouzoglou
16,377,249
16,377,249
(indirect)
8.926%
7 Feb 2024
Trustena GmbH
16,228,599
16,228,599
(indirect)
9.060%
19 May 2023
Oilco Investments Ltd.
16,016,734
16,016,734
(direct)
9.040%
7 Feb 2020
Growthy Holdings Co. Ltd.
98
13,948,260
13,948,260
(direct)
7.830%
12 Sep 2022
Clal Insurance Company Ltd.
13,599,003
283,577
(direct)
13,315,426
(indirect)
7.680%
19 Mar 2021
Harel Insurance Investments &
Financial Services Ltd.
9,317,983
9,317,983
(indirect)
5.260%
23 Nov 2023
The Phoenix Holdings Ltd.
8,968,710
8,968,710
(indirect)
5.060%
7 Mar 2022
Aggregate of abrdn plc affiliated
investment management entities
with delegated voting rights on behalf
of multiple managed portfolios
99
6,640,126
6,640,126
(indirect)
3.730%
8 Nov 2022
97
A notification received from The Capital Group Companies, Inc. on 26 November 2019 disclosed a position of 8,214,141 shares.
Company analysis based on the Register of Members would indicate this shareholding is no longer greater than 3% despite no
further TR1 having been received.
A notification received from Pelham Capital Ltd. on 10 September 2019 disclosed a position of 7,353,314 shares. Company
analysis based on the Register of Members would indicate this shareholding is no longer greater than 3% despite no further
TR1 having been received.
98
A notification received from Growthy Holdings Co. Ltd. on 12 September 2022 disclosed a position of 7.83%. Company analysis
indicates this holding was 13,948,260 as at 12 September 2022.
99
A notification received from abrdn plc on 8 November 2022 disclosed a position of “Below 5%”. Company analysis based on
the Register of Members dated 30 November 2022 indicates this shareholding was 6,640,126 as at 30 November 2022.
CORPORATE GOVERNANCE
Page 169 of 273
Annual General Meeting (“AGM”)
The Company’s AGM will be held in London in May 2024. 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 273.
Greenhouse gas (“GHG”) emissions reporting
Details of the Group’s emissions are contained in the Corporate Social Responsibility report on pages
69–70.
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 20 March 2024 to 30 June 2025 (the “
Assessment Period
”).
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 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 20 March 2024 to 30 June 2025. For this reason, they continue to
adopt the going concern basis in preparing the group financial statements.
Overseas branches and subsidiaries
Details of subsidiaries of the Group are set out in note 30 on pages 250–251 to the Financial Statements.
Hedging
Details of hedging are set out in note 26 on pages 241–246 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.
CORPORATE GOVERNANCE
Page 170 of 273
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 220
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 136–165 and note 25,
page 240 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 166–
170
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
20 March 2024.
By order of the Board
Eleftheria Kotsana
Company Secretary
20 March 2024
Company number: 10758801, 44 Baker Street, London W1U 7AL
CORPORATE GOVERNANCE
Page 171 of 273
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the annual report, including the Group and the Company
financial statements, in accordance with applicable law and regulations. Company law requires the
Directors to prepare financial statements for each financial year.
Under the UK Companies Act 2006 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
”).
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 Group’s and the Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and the Company and enable them to ensure that the Group and the
Company financial statements comply with the UK 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.
CORPORATE GOVERNANCE
Page 172 of 273
Directors’ responsibility statement:
The Directors confirm, to the best of their knowledge:
•
that the Group financial statements, prepared in accordance with the UK Companies Act 2006
and UK
‑
adopted IAS, give a true and fair view of the assets, liabilities, financial position and profit
of the parent company and the 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 the 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 20 March 2024 and is signed
on its behalf by:
Matthaios Rigas
Director
20 March 2024
Panagiotis Benos
Director
20 March 2024
INDEPENDENT AUDITOR’S REPORT
Page 173 of 273
Financial Statements
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 2023 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 2023 which comprise:
Group
Parent company
Group statement of financial position as at
31 December 2023
Company statement of financial position as at
31 December 2023
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 material accounting policy information
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 material accounting policy information
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 United Kingdom 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.
INDEPENDENT AUDITOR’S REPORT
Page 174 of 273
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.
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 21 March 2024 to 30 June 2025,
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 2025 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 impairment assessments, 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 included assessing the potential impact of the conflict in Israel.
•
We challenged the amount and timing of mitigating actions available to respond to the
reasonable worst case, including accelerating sales from the Karish field, 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 receipt
of the $750 million of senior secured loan notes and the $120 million revolving credit facility
signed during the year, including gaining an understanding of the key terms and financial
covenants associated with the facilities.
•
We reviewed Energean’s commitment to climate change initiatives and ensured that the
corresponding cashflows have been considered in the going concern forecast, which include the
expected capex outflow and receipt of grants.
•
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.
INDEPENDENT AUDITOR’S REPORT
Page 175 of 273
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 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 available and undrawn facilities across the assessment
period.
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 2025.
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 five
components and audit procedures on specific balances for a further four
components.
•
The components where we performed full or specific audit procedures
accounted for 100% of EBITDAX
100
, 99% of Revenue and 96% of Total
assets.
Key audit matters
•
Risk of inappropriate estimation of oil and gas reserves.
•
Recoverability of oil and gas assets.
Materiality
•
Overall Group materiality of $23.2 million which represents 2.5% of
EBITDAX.
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
reporting components of the Group, we selected nine components covering entities within Israel, Italy,
Egypt, Greece, Cyprus and the United Kingdom, which represent the principal business units within
the Group.
Of the nine components selected, we performed an audit of the complete financial information of five
components (“full scope components”) which were selected based on their size or risk characteristics.
For the remaining four 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.
100
Earnings Before Interest, Tax, Depreciation, Amortisation and Exploration expenses.
INDEPENDENT AUDITOR’S REPORT
Page 176 of 273
The reporting components where we performed audit procedures accounted for 100% of the Groups’
EBITDAX, 99% (2022: 99%) of the Group’s Revenue and 96% (2022: 99%) of the Group’s Total assets. For
the current year, the full scope components contributed 100% of the Group’s EBITDAX, 97% (2022: 91%)
of the Group’s Revenue and 65% (2022: 86%) of the Group’s Total assets. The specific scope component
contributed 0% of the Group’s EBITDAX, 2% (2022: 8%) of the Group’s Revenue and 31% (2022: 13%) of
the Group’s Total assets.
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.
Of the remaining six components that together represent 0% of the Group’s EBITDAX, none are
individually greater than 1% of the Group’s EBITDAX. For these components, we performed other
procedures to respond to any potential risks of material misstatement to the Group 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 reviewing minutes of
Board meetings held throughout the period.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
EBITDAX
Revenue
Total assets
100% Full scope components
0% Specific scope components
0% Other procedures
97% Full scope components
2% Specific scope components
1% Other procedures
65% Full scope components
31% Specific scope components
4% Other procedures
INDEPENDENT AUDITOR’S REPORT
Page 177 of 273
Changes from the prior year
One component previously designated as specific scope has been reclassified as full scope for 2023 and
one component previously designated as a specific scope has been reclassified as review scope for
2023. These changes were as a result of our current year assessment of the risks of material
misstatement in the Group’s significant accounts.
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 five full scope
components, audit procedures were performed on one of these directly by the primary audit team and
four by the component teams. Of the four specific scope components, audit procedures were performed
on two of these directly by the primary audit team and two by the component teams. For the in-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 Italy, Egypt and Greece. The primary audit team also met with the Israel component
team in Greece. These visits involved discussing the audit approach with component teams including
any issues arising from their work, meeting with local management, attending 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.
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 its 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 18 to 33 in the required Task Force On Climate
Related Financial Disclosures and on pages 85 to 96 in the principal risks and uncertainties. They have
also explained their climate commitments on pages 18 to 33. 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 how they have reflected the
impact of climate change in their 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 included in note 4. 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 and 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
INDEPENDENT AUDITOR’S REPORT
Page 178 of 273
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, whilst we have not identified the impact of climate change on the financial statements
to be a standalone key audit matter, we have considered the impact on the following key audit matters:
(i) Risk of inappropriate estimation of oil and gas reserves; and (ii) Recoverability of oil and gas assets.
Details of the impact, our procedures and findings are included in our explanation of key audit matters
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.
Risk
Our response to the risk
Key observations
communicated to the Audit
Committee
Risk of inappropriate
estimation of oil and gas
reserves
Refer to the Audit & Risk
Committee Report (pages 117–
124); Accounting policies
(pages 196–209); and Notes 3,
4 and 12 of the Consolidated
Financial Statements.
Energean’s reserves portfolio
as at 31 December 2023
included proven and probable
(2P) reserves of 1,115 Mmboe
(2022: 1,161 Mmboe) and
contingent (2C) resources of
222 Mmboe (2022: 217
Mmboe).
The estimation and
measurement of oil and gas
reserves is considered to be a
significant risk as it impacts a
number of 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 DeGolyer
We performed the following
procedures to address the risk
of inappropriate 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 management’s
reserves specialists and
subsequently the input of
reserves information from
the specialists’ reports into
the accounting system;
•
We obtained and reviewed
the most recent third-party
reserves and resources
reports prepared by the
specialists and compared
these for consistency with
other areas of the audit
including Energean’s
reserves models, the
calculation of DD&A, the
calculation of the
decommissioning
provision, the assessment
of deferred tax asset
recoverability and the
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;
•
We did not identify any
errors or factual
inconsistencies with
reference to Energean’s oil
and gas reserves estimates
that would materially
impact the financial
statements and, as a result,
we consider the reserve
estimates to be reasonable;
and
•
We are satisfied that the
reserves disclosed in the
Annual Report & Accounts
are consistent with those
we have audited.
INDEPENDENT AUDITOR’S REPORT
Page 179 of 273
and MacNaughton (“D&M”) and
Netherland, Sewell &
Associates, Inc (“NSAI”).
directors’ assessment of
going concern;
•
We assessed the
qualifications of
management’s specialists;
We investigated all material
volume
movements
from
management’s
prior
period
estimates and where there was
lack
of
movement
where
changes were expected based
on our understanding of the
Group’s operations and findings
from other areas of our audit;
•
We ensured that
information gained as part
of our other audit
procedures, such as the
performance of the NEA-6
well in Egypt, was included
in the assessment of the
external 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;
•
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
forecasted production
period.
•
In light of Energean’s
pledge to reach net zero
emissions by 2050, we
considered the extent of
reserves recognised that
are due to be produced
beyond 2050 in assessing
the potential impact of a
risk of stranded assets.
The audit procedures to
address this risk were either
performed directly by the
primary team or performed by
INDEPENDENT AUDITOR’S REPORT
Page 180 of 273
our component teams with
oversight from the primary
team.
Recoverability of oil and gas
assets
Refer to the Audit & Risk
Committee Report (pages 117–
124); Accounting policies
(pages 196–209); and Notes 3,
4 and 12 of the Consolidated
Financial Statements.
Energean’s oil and gas assets
balance as at 31 December
2023 amounted to $4,303
million (2022: $4,197 million).
There is a risk that capitalised
costs associated with oil and
gas assets in the development
or production stage may be
carried at a value that exceeds
their future recoverable value.
In accordance with IAS 36
Impairment of Assets, at the
end of each reporting period an
entity should assess whether
there is any indication that an
asset may be impaired or there
might be a reversal of a prior
impairment. This includes any
potential impairment which
could arise as a result of energy
transition away from fossil
based energy sources to
renewable alternatives.
Where indicators of impairment
exist, management determines
the recoverable amount of the
asset or cash generating unit
(‘CGU’) by preparing discounted
cash flow models and
comparing this to the carrying
value of the asset.
In the current period,
management identified
impairment indicators on the
Egypt and Greece CGUs. Full
impairment tests were
performed and $NIL
impairment charges were
recognised (2022: $NIL). The
carrying values of the Egypt
and Greece CGUs at 31
December 2023 were $487
million and $307 million
respectively.
We have identified this as an
area of significant risk, due to
We performed the following
procedures to address the risk
of recoverability of oil and gas
assets:
•
Assessed the
appropriateness and
completeness of
management's impairment
indicator assessment in the
context of IAS 36;
•
Performed a walk-through
to confirm our
understanding of Energean’
s impairment indicator
assessment process, as
well as the controls
implemented by
management;
•
Ensured management
considered any possible
impacts from the conflict in
Israel in their impairment
indicator assessment with
regards to Karish in Israel;
and
•
Ensured the implications of
climate change are
considered by
Management, including any
climate-related
commitments, in their
impairment indicator
assessment.
As at 31 December 2023,
indicators of impairment were
identified by management on
two CGUs in Greece and Egypt,
and full impairment tests were
subsequently performed.
Accordingly, our audit response
included the following
procedures:
•
Confirmed our
understanding of
Energean’s impairment
assessment process, as
well as the controls
implemented by
management;
•
We benchmarked the
Group’s commodity price
assumptions to those of
industry peers, banks and
brokers;
We reported to the Audit & Risk
Committee that:
•
Management’s impairment
indicator assessment is
reasonable and
appropriate, taking into
account all relevant internal
and external factors;
•
The assumptions used in
the cash flow models for
the purpose of performing
the full impairment tests
are reasonable and
supportable. The results of
the impairment tests
yielded headroom of $93
million in Greece and $17
million in Egypt
respectively. Therefore, we
are satisfied that no
Impairment charge should
be recognised at 31
December 2023; and
•
The disclosures included in
the financial statement and
reasonable and
appropriate.
INDEPENDENT AUDITOR’S REPORT
Page 181 of 273
the degree of judgement and
estimation involved. The risk
has increased in the current
year due to the existence of
impairment indicators.
•
We further performed
benchmarking on cost
estimate profiles, the
inflation rate and FX rates
based on comparison with
recent actuals and our
understanding obtained
from other areas of the
audit;
•
We reconciled production
profiles to the work
performed over reserves;
•
We engaged our valuation
specialists to assist us in
determining the
reasonableness of the
discount rate applied by
management to the cash
flow models;
•
We evaluated the
appropriateness of other
assumptions used in the
cash flow models,
including inflation and
assumed foreign exchange
rates, and ensuring
assumptions have been
applied consistently across
other accounting areas;
•
We performed specific
stress tests to determine
the sensitivity of the
impairment assessment to
changes in key
assumptions;
•
We tested the integrity of
the underlying cashflow
model;
•
We sensitised the cash
flow models using oil and
gas prices in line with those
under a “Net Zero
Emissions by 2050
Scenario” published by the
International Energy
Agency to determine
whether any additional
disclosures may be
required;
•
We ensured management
considered any possible
impacts from the conflict in
Israel;
•
We ensured management
considered the implications
of climate change, which
included
benchmarking the
Group’s carbon price
assumptions to those of
INDEPENDENT AUDITOR’S REPORT
Page 182 of 273
industry peers and
considered any climate-
related commitments, in its
impairment assessment;
and
•
We ensured that sufficient
and appropriate
disclosures are included in
the consolidated financial
statements in respect of
any impairment
assessment conducted.
In the prior year, our auditor’s report included a key audit matter in relation to “Accounting for first
production in Israel” due to the Karish Main Field achieving first gas in October 2022. The resulting
accounting implications required significant auditor attention proportionally to our Group audit
procedures. Since the asset is now in production, this risk no longer applies, and therefore we did not
consider this to be a significant risk or a key audit matter for the year ended 31 December 2023.
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 $23.2 million (2022: $28.2 million), which is 2.5% (2022:
0.5%) of EBITDAX (“Earnings Before Interest, Tax, Depreciation, Amortisation and Exploration expenses”)
(2022: 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).
We believe that EBITDAX provides us with
a suitable basis for calculating materiality, since this provides an indication of the Group’s ability to
generate cash, which helps investors to evaluate the Group's ability to service its debt and to pay
dividends, thereby assessing their return on investment. Prior to 2023 we determined materiality for the
Group with reference to consolidated total assets, because we determined that the Group's main focus
(and the focus of the users of the financial statements) was on identifying, acquiring and developing oil
and gas assets. However, from 2023 onwards, we have determined that the focus of the Group (and the
users of the financial statements) has shifted from the development of assets towards production,
profitability, cash flow and the payment of dividends.
We determined materiality for the Parent Company to be $11.2 million (2022: $7.9 million), which is 0.75%
(2022: 0.75%) of total assets.
During the course of our audit, we reassessed initial materiality and found no reason to change from our
original assessment at planning.
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% (2022: 50%) of our planning
materiality, namely $11.6 million (2022: $13.6 million).
We have set performance materiality at this
percentage due to quantitative and qualitative assessment of prior year misstatements, our assessment
of the Group’s overall control environment, and consideration of relevant changes in market conditions
during the year.
INDEPENDENT AUDITOR’S REPORT
Page 183 of 273
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 $2.3 million to $8.7
million (2022: $2.7 million to $8.2 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 $1.2 million (2022: $1.4 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.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 172
and 266 to 273, 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.
INDEPENDENT AUDITOR’S REPORT
Page 184 of 273
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 169;
•
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 97 to 99;
•
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 97 to 99;
•
Directors’ statement on fair, balanced and understandable set out on pages 171 to 172;
•
Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on pages 85 to 96;
•
The section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 120; and
•
The section describing the work of the audit committee set out on pages 117–124.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 171 to 172, 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.
INDEPENDENT AUDITOR’S REPORT
Page 185 of 273
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 Energean plc is complying with those frameworks by making enquiries of
management and with those responsible for legal and compliance procedures. We corroborated
our enquiries through inspection of board minutes, papers provided to the Audit & Risk
Committee and correspondence received from regulatory bodies and there was no contradictory
evidence.
•
We assessed the susceptibility of the group’s financial statements to material misstatement,
including how fraud might occur, by considering the degree of incentive, opportunity and
rationalisation that may exist to undertake fraud, and focussed on opportunities for management
to reflect bias in key accounting estimates. We also considered performance targets and their
influence on efforts made by management to manage earnings or influence the perceptions of
analysts. 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.
•
Based on this understanding we designed our audit procedures to identify non-compliance with
such laws and regulations; this included the provision of specific instructions to component
teams. Our procedures involved journal entry testing, with a focus on manual consolidation
journals and journals indicating large or unusual transactions based on our understanding of the
business, enquiries 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
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 21 February 2018 to audit the financial statements for the year ending 31 December
2017 and subsequent financial periods.
•
The period of total uninterrupted engagement including previous renewals and reappointments
is seven years, covering the years ending 31 December 2017 to 31 December 2023 inclusive.
•
The audit opinion is consistent with the additional 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
20 March 2024
CONSOLIDATED FINANCIAL STATEMENTS
Page 186 of 273
Group Income Statement
Year ended 31 December 2023
($'000)
Notes
2023
2022
Revenue
6
Cost of sales
7a
(759,546 )
(358,930 )
Gross profit
Administrative expenses
7b
(43,073 )
(45,942 )
Exploration and evaluation expenses
7c
(34,088 )
(71,395 )
Change in decommissioning provision
23
(27,628 )
Expected credit (loss)/reversal
7d, 26
(4,375 )
Other expenses
7e
(5,274 )
(12,118 )
Other income
7f
Operating profit
Finance income
9
Finance costs
9
(250,395 )
(107,315 )
Unrealised loss on derivatives
26
(6,610 )
(5,203 )
Net foreign exchange losses
9
(16,584 )
(22,207 )
Profit before tax
Taxation expense
10
(159,230 )
(89,734 )
Profit for the year
Basic and diluted earnings per share
(cents per share)
2023
2022
Basic
11
$1.04
$0.10
Diluted
11
$1.05
$0.12
CONSOLIDATED FINANCIAL STATEMENTS
Page 187 of 273
Group Statement of Comprehensive Income
Year ended 31 December 2023
($’000)
2023
2022
Profit for the year
Other comprehensive profit/(loss):
Items that may be reclassified subsequently to profit
or loss
Cash flow hedges
Gain/(loss) arising in the period
Income tax relating to items that may be reclassified to
profit or loss
(2,799 )
Exchange difference on the translation of foreign
operations
Items that will not be reclassified subsequently to profit
or loss
Remeasurement of defined benefit pension plan
(161 )
Income taxes on items that will not be reclassified to profit
or loss
(64 )
(123 )
Other comprehensive profit after tax
Total comprehensive profit for the year
CONSOLIDATED FINANCIAL STATEMENTS
Page 188 of 273
Group Statement of Financial Position
As at 31 December 2023
($’000)
Notes
2023
2022
Assets
Non-current assets
Property, plant and equipment
12
Intangible assets
13
Equity-accounted investments
Other receivables
18
Deferred tax asset
14
Restricted cash
16
Current assets
Inventories
17
Trade and other receivables
18
Restricted cash
16
Cash and cash equivalents
15
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Share capital
19
Share premium
19
Merger reserve
19
Other reserves
Foreign currency translation reserve
(5,827 )
Share-based payment reserve
Retained earnings
Total equity
Non-current liabilities
Borrowings
21
Deferred tax liabilities
14
Retirement benefit liability
22
Provisions
23
Trade and other payables
24
CONSOLIDATED FINANCIAL STATEMENTS
Page 189 of 273
($’000)
Notes
2023
2022
Current liabilities
Trade and other payables
24
Current portion of borrowings
21
Current tax liability
Provisions
23
Total liabilities
Total equity and liabilities
Approved by the Board on the 20 March 2024
Matthaios Rigas
Chief Executive Officer
Panagiotis Benos
Chief Financial Officer
CONSOLIDATED FINANCIAL STATEMENTS
Page 190 of 273
Group Statement of Changes in Equity
Year ended 31 December 2023
($'000)
Share
capital
Share
premium
Hedges
and
defined
benefit
plans
reserve
101
Equity
component
of
convertible
bonds
102
Share
based
payment
reserve
103
Translation
reserve
104
Retained
earnings
Merger
reserves
Total
At 1 January 2022
(2,971 )
(12,823 )
(354,559 )
Profit for the period
Remeasurement of defined benefit pension
plan, net of tax
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 (note 19)
(6 )
Share premium reduction (note 19)
(500,000 )
Dividends (note 20)
(106,504 )
(106,504 )
101
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 2022 in the Statement of Financial Position this
reserve was combined with the “Equity component of convertible bonds” reserve.
102
Refers to the Equity component of $50 million of convertible loan notes, which were issued in February 2021 and converted into equity at maturity in December 2023.
103
Share-based payment reserve is used to recognise the value of equity-settled share-based payments granted to parties including employees and key management personnel, as part of
their remuneration.
104
Translation reserve is used to record unrealised exchange differences arising from the translation of the financial statements of entities within the Group that have a functional currency other than
US dollar.
CONSOLIDATED FINANCIAL STATEMENTS
Page 191 of 273
($'000)
Share
capital
Share
premium
Hedges
and
defined
benefit
plans
reserve
101
Equity
component
of
convertible
bonds
102
Share
based
payment
reserve
103
Translation
reserve
104
Retained
earnings
Merger
reserves
Total
At 1 January 2023
(5,827 )
Profit for the period
Remeasurement of defined benefit pension
plan, net of tax
(123 )
(123 )
Exchange difference on the translation of
foreign operations
Total comprehensive income
(123 )
Transactions with owners of the company
Conversion of the loan note (note 19)
(10,459 )
Exercise of Employee Share Options (note 19)
(12 )
Share based payment charges (note 25)
Dividends (note 20)
(213,698 )
(213,698 )
At 31 December 2023
CONSOLIDATED FINANCIAL STATEMENTS
Page 192 of 273
Year ended 31 December 2023 | |||
($’000) | Notes | 2023 | 2022 |
Operating activities | |||
Profit before taxation | |||
Adjustments to reconcile profit before taxation | |||
to net cash provided by operating activities: | |||
Depreciation, depletion and amortisation | 12,13 | ||
Impairment loss on property, plant and | 12 | ||
equipment | |||
Loss from the sale of property, plant and | 7e | ||
equipment | |||
Impairment loss on exploration and evaluation | 13 | ||
assets | |||
Defined benefit (gain)/loss | ( | ||
Movement in provisions | 23 | ( | ( |
Compensation to gas buyers | 6 | ||
Change in decommissioning provision | 23 | ( | |
estimates | |||
Finance income | 9 | ( | ( |
Finance costs | 9 | ||
Unrealised loss on derivatives | 26 | ||
ECL on trade receivables | 7d | ||
Non-cash revenues from Egypt 105 | ( | ( | |
Impairment loss on inventory | 7e | ||
Share-based payment charge | 25 | ||
Net foreign exchange loss | 9 | ||
Cash flow from operations before working | |||
capital adjustments | |||
Increase in inventories | ( | ( | |
Increase in trade and other receivables | ( | ( | |
Increase/(Decrease) in trade and other | ( | ||
payables | |||
Cash flow from operations | |||
Income tax paid | ( | ( | |
Net cash inflow from operating activities |
105
Non-cash revenues from Egypt arise due to taxes being deducted at source from invoices as such revenue and tax charges are
grossed up to reflect this deduction but no cash inflow or outflow results.
($’000) | Notes | 2023 | 2022 |
Investing activities | |||
Payment for purchase of property, plant and | 12 | ( | ( |
equipment | |||
Payment for exploration and evaluation, and | 13 | ( | ( |
other intangible assets | |||
Movement in restricted cash | 16 | ||
Proceeds from disposal of property, plant and | |||
equipment | |||
Amounts received from INGL related to the | 24 | ||
transfer of property, plant & equipment | |||
Other investing activities | ( | ||
Interest received | |||
Net cash outflow for investing activities | ( | ( | |
Financing activities | |||
Drawdown of borrowings | 21 | ||
Repayment of borrowings | 21 | ( | |
Repayment of deferred consideration liability | 21 | ( | ( |
Debt issue costs | 21 | ( | |
Repayment of obligations under leases | 21 | ( | ( |
Finance cost paid for deferred license | ( | ( | |
payments | |||
Finance costs paid | ( | ( | |
Dividend Paid | ( | ( | |
Net cash outflow from financing activities | ( | ( | |
Net decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at beginning of the | |||
period | |||
Effect of exchange rate fluctuations on cash | |||
held | |||
Cash and cash equivalents at the end of | 15 | ||
the period |
CONSOLIDATED FINANCIAL STATEMENTS
Page 194 of 273
1
Corporate information
Company
to as (“
Group
”).
The Group has been established with the objective of exploration, production and commercialisation of
crude oil, hydrocarbon liquids and natural gas in Greece, Israel, North Africa, United Kingdom (“
UK
”) and
The Group’s core assets and subsidiaries as of 31 December 2023 are presented in notes 30 and 31.
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.
Accounting Standards (“
UK-adopted IAS
The consolidated financial information is presented in US Dollars and all values are rounded to the
nearest thousand dollars except where otherwise indicated.
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 20 March 2024 to 30 June 2025 “the Assessment Period”.
As of 31 December 2023, the Group’s available liquidity was approximately $607 million. This available
liquidity figure includes: (i) c. $115 million available under the $300 million Revolving Credit Facility (“
RCF
”)
signed by the Group in September 2022 and as amended in May 2023 (with the remainder being utilised
to issue Letters of Credit for the Group’s operations) and (ii) c. $120 million under the $120 million
Revolving Credit Facility signed up by the Group in October 2023.
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 2024 and $75/bbl in 2025 and PSV (Italian gas
price) at €30/MWH in 2024 and 2025 assumed throughout the going concern assessment period, with
prices for gas sold assumed at contractually agreed prices for Egypt and Israel. 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
CONSOLIDATED FINANCIAL STATEMENTS
Page 195 of 273
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 and/or management of
operating expenses to improve the 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 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 20 March 2024 to 30 June 2025. For this reason, they continue to
2.2
New and amended accounting standards and interpretations
The following amendments became effective as at 1 January 2023:
•
IFRS 17 “Insurance Contracts”
•
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS “Practice Statement” 2)
•
Definition of Accounting Estimates (Amendments to IAS 8)
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to
IAS 12)
•
International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12)
None of the above amendments had a significant impact on the Group’s consolidated financial
statements. The amendments on International Tax Reform – Pillar Two Model Rules introduce a
mandatory exception in IAS 12 “Income Taxes” to recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes.
New and amended standards and interpretations in issue but not yet effective for the 2023 year-end
•
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
•
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of
Exchangeability – 1 January 2025
•
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures:
Supplier Finance Arrangements – 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.
CONSOLIDATED FINANCIAL STATEMENTS
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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
3
Summary of material 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 ($). 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 S.p.a., Energean Sicilia S.r.l.,
Energean Oil & Gas S.A., $ for Energean Group Services Ltd., Energean Israel Ltd., Energean Egypt Ltd.,
Energean E&P Holdings Ltd. and Energean Capital Ltd., and GBP for Energean UK Ltd. and Energean
Exploration Ltd.
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 $. 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 operation is
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.
CONSOLIDATED FINANCIAL STATEMENTS
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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 joint ventures are
accounted for using the equity method.
Under the equity method, the investment in 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 joint
venture since the acquisition date. Any goodwill relating to the joint venture is included in the carrying
amount of the investment and is not tested for impairment separately.
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
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
CONSOLIDATED FINANCIAL STATEMENTS
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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.
3.5
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.
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
Impairment assessment 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
”).
CONSOLIDATED FINANCIAL STATEMENTS
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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 to make it CGU-specific. 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 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
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
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
CONSOLIDATED FINANCIAL STATEMENTS
Page 200 of 273
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 on 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
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.
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. Other
than in lease arrangements within joint operations (see below), the Group is not a lessor in any
transactions, it is only a lessee.
CONSOLIDATED FINANCIAL STATEMENTS
Page 201 of 273
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 7 years
•
Fibre optic 14 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 assessment.
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
CONSOLIDATED FINANCIAL STATEMENTS
Page 202 of 273
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
CONSOLIDATED FINANCIAL STATEMENTS
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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.
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
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.
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.
CONSOLIDATED FINANCIAL STATEMENTS
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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.
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, and 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, and 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.
CONSOLIDATED FINANCIAL STATEMENTS
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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
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.
CONSOLIDATED FINANCIAL STATEMENTS
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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
3.16
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 entitlement basis.
In respect of redeterminations, any adjustments to the Group’s net entitlement of future production are
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 hydrocarbon liquids, 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 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
CONSOLIDATED FINANCIAL STATEMENTS
Page 207 of 273
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 or in the income statement. The unwinding of the discount on the
Revenue
Revenue from contracts with customers is recognised when control of the gas/hydrocarbon
liquids/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, hydrocarbon liquids, 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
CONSOLIDATED FINANCIAL STATEMENTS
Page 208 of 273
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 assets 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
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.
CONSOLIDATED FINANCIAL STATEMENTS
Page 209 of 273
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 Ltd. 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 Ltd. 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
CONSOLIDATED FINANCIAL STATEMENTS
Page 210 of 273
from successful development or by sale; and the success of a well result or geological or geophysical
survey.
Identification of cash generating units (note 12)
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 we have identified nine cash generating units (“
CGUs
”). The Italy Gas CGUs are as follows:
Cassiopea, Clara E&NW, Calipso, Accetura, Gas Other and the Italy Oil CGUs comprise of: Vega, Sarago
Mare, Rospo and Oil Other. The identification of CGUs across the group 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 (note 12):
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 as certified by the external qualified
professionals.
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.
Management has considered how the Group’s identified climate risks and opportunities (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. 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(s).
As part of the impairment assessment the Group has run sensitivity scenarios based on the International
Energy Agency’s (“
IEA
”) 2023 World Energy Outlook climate projections including Stated Policies Scenario
(“
STEPS
”), Announced Pledges Scenario (“
APS
”) and Net-Zero Emissions by 2050 Scenario (“
NZE
”).
These specific scenarios were not directly applied in the assets valuation for financial reporting purposes.
This is because no single scenario fully aligns with the management consensus on the assumptions
market participants may use in appraising the Group’s assets. The assessment revealed that the Group's
CGUs in Italy and Greece, particularly the Vega field, are significantly affected by these scenarios due to
their sensitivity to fluctuations in Brent oil prices. Conversely, the Group's assets in Israel and Egypt are
less influenced by these scenarios, attributed to the localised approach to price definition.
Further details about the carrying value of property, plant and equipment are shown in note 12 to these
financial statements.
CONSOLIDATED FINANCIAL STATEMENTS
Page 211 of 273
Hydrocarbon reserve and resource estimates (notes 12, 13, 14, 23):
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. Reserves are subject to
regular revision, both upward or downward, based on changes in economic assumptions used, including
the impact of climate change, additional geological information, updates of development plans and
changes in economic factors, including product prices, contract terms, legislation or development plans.
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 the income statement;
•
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;
and
•
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 require estimation. The discount rate applied
to determine the carrying amount of provisions provides a source of estimation uncertainty as referred
to in IAS 1.125.
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.
Discount rate applied is reviewed regularly and adjusted following the changes in market rates.
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
change, are factored into the provisions when the legislation becomes enacted.
Deferred tax assets valuation (note 14):
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be
available, allowing for the utilisation of deductible temporary differences, as well as unused tax losses
and credits that are carried forward. This determination involves evaluating the timing of the reversal of
those assets and estimating the availability of sufficient taxable profits to utilise the assets at the point
of reversal. Such assessments necessitate assumptions about future profitability, introducing a degree
of inherent uncertainty. In assessing the likelihood of generating sufficient taxable profits in future
periods for the recovery of losses, the Group considered approved budgets, forecasts, and business plans
to inform its evaluation.
CONSOLIDATED FINANCIAL STATEMENTS
Page 212 of 273
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 $92.9 million at 31
December 2023, based on pricing simulations. The final consideration amount will be determined on the
basis of future gas prices (“
PSV
”) recorded at the time of at the time of first gas production at Cassiopea,
Segmental reporting
The information reported to the Group’s Chief Executive Officer and Chief Financial Officer (together the
Chief Operating Decision Makers) for the purposes of resource allocation and assessment of segment
performance is focused on four operating segments: Europe (including Greece, Italy, UK, Croatia), Israel,
Egypt and New Ventures.
The Group’s reportable segments under IFRS 8 “Operating Segments” are Europe, Israel and Egypt.
Segments that do not exceed the quantitative thresholds for reporting information about operating
segments have been included in Other.
Segment revenues, results and reconciliation to profit before tax
The following is an analysis of the Group’s revenue, results and reconciliation to profit/(loss) before tax
by reportable segment:
Other & inter- | |||||
segment | |||||
($'000) | Europe | Israel | Egypt | transactions | Total |
Year ended 31 December 2023 | |||||
Revenue from gas sales | 109,949 | 674,481 | 138,237 | - | 922,667 |
Revenue from hydrocarbon liquids | - | 265,355 | 32,487 | - | 297,842 |
sales | |||||
Revenue from crude oil sales | 180,704 | - | - | - | 180,704 |
Revenue from LPG sales | - | - | 14,376 | - | 14,376 |
Other | - | - | - | 4,044 | 4,044 |
Total revenue | 290,653 | 939,836 | 185,100 | 4,044 | 1,419,633 |
Adjusted EBITDAX 106 | 113,498 | 669,894 | 153,790 | (6,684) | 930,498 |
Reconciliation to profit before tax: | |||||
Depreciation and | (36,702) (201,882) | (65,922) | (1,638) | (306,144) | |
amortisation expenses | |||||
Share-based payment charge | (6,610) | (730) | (89) | 89 | (7,340) |
Exploration and | (30,148) | (50) | - | (3,890) | (34,088) |
evaluation expenses | |||||
Change in decommissioning | 16,996 | - | - | - | 16,996 |
expenses | |||||
Expected credit loss | - | - | (4,375) | - | (4,375) |
Other expense | (4,665) | (190) | (412) | (7) | (5,274) |
Other income | 5,155 | 37 | 3,354 | (566) | 7,980 |
106
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 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.
CONSOLIDATED FINANCIAL STATEMENTS
Page 213 of 273
Other & inter- | |||||
segment | |||||
($'000) | Europe | Israel | Egypt | transactions | Total |
Finance income | 10,498 | 11,319 | 1,348 | (3,664) | 19,501 |
Finance costs | (44,264) (169,467) | (972) | (35,692) | (250,395) | |
Unrealised loss on derivatives | (6,610) | - | - | - | (6,610) |
Net foreign exchange gain/(loss) | (8,928) | (9,084) | (3,282) | 4,710 | (16,584) |
Profit/(Loss) before income tax | 8,220 | 299,847 | 83,440 | (47,342) | 344,165 |
Taxation income/(expense) | (42,376) | (68,600) | (48,254) | - | (159,230) |
Profit/(Loss) from operations | (34,156) | 231,247 | 35,186 | (47,342) | 184,935 |
Year ended 31 December 2022 | |||||
Revenue from gas sales | 328,506 | 45,153 | 156,264 | - | 529,923 |
Revenue from crude oil sales | 206,959 | - | - | - | 206,959 |
Other | (31,298) | (18,031) | 57,131 | (7,603) | 199 |
Total revenue | 504,167 | 27,122 | 213,395 | (7,603) | 737,081 |
Adjusted EBITDAX 106 | 262,655 | (4,498) | 164,581 | (1,125) | 421,613 |
Reconciliation to profit before tax: | |||||
Depreciation and | (27,199) | (12,112) | (43,266) | (783) | (83,360) |
amortisation expenses | |||||
Share-based payment charge | (1,423) | (214) | (89) | (4,318) | (6,044) |
Exploration and | (61,071) | (1,819) | - | (8,505) | (71,395) |
evaluation expenses | |||||
Impairment loss on property, plant | (27,628) | - | - | - | (27,628) |
and equipment | |||||
Expected credit loss | (3,043) | - | 10,970 | - | 7,927 |
Other expense | (2,699) | (1,102) | - | (8,317) | (12,118) |
Other income | 1,284 | 54 | 1,097 | 728 | 3,163 |
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 | 68,837 | (35,257) | 68,876 | (85,185) | 17,271 |
operations |
CONSOLIDATED FINANCIAL STATEMENTS
Page 214 of 273
The following table presents assets and liabilities information for the Group’s operating segments as at
31 December 2023 and 31 December 2022, respectively:
Other & inter- | |||||
Year ended 31 December 2023 | segment | ||||
($'000) | Europe | Israel | Egypt | transactions | Total |
Oil & Gas properties | 734,265 | 2,783,914 | 473,628 | 311,295 | 4,303,102 |
Other fixed assets | 35,110 | 13,918 | 19,996 | (801) | 68,223 |
Intangible assets | 20,303 | 243,965 | 46,846 | 14,275 | 325,389 |
Trade and other receivables | 88,729 | 130,135 | 154,095 | (19,702) | 353,257 |
Deferred tax asset | 217,504 | - | - | - | 217,504 |
Other assets | 849,649 | 573,855 | 47,601 | (954,915) | 516,190 |
Total assets | 1,945,560 3,745,787 | 742,166 | (649,848) | 5,783,665 | |
Trade and other payables | 375,390 | 391,379 | 74,893 | 62,864 | 904,526 |
Borrowings | 108,392 | 2,588,491 | - | 524,314 | 3,221,197 |
Decommissioning provision | 738,063 | 92,613 | - | 6,819 | 837,495 |
Current tax payable | 7,597 | - | - | 1,664 | 9,261 |
Deferred tax liability | - | 122,785 | - | - | 122,785 |
Other liabilities | 7,502 | - | 1,601 | (6,817) | 2,286 |
Total liabilities | 1,236,944 3,195,268 | 76,494 | 588,844 | 5,097,550 | |
Other segment information | |||||
Capital Expenditure 107 : | |||||
Property, plant and equipment | 220,461 | 138,490 | 130,099 | (1,630) | 487,420 |
Intangible, exploration and | 4,152 | 24,959 | 26,253 | 1,288 | 56,652 |
evaluation assets |
Other & inter- | |||||
Year ended 31 December 2022 | segment | ||||
($'000) | Europe | Israel | Egypt | transactions | Total |
Oil & Gas properties | 536,874 | 3,264,364 | 409,732 | (14,440) | 4,196,530 |
Other fixed assets | 13,365 | 4,750 | 17,325 | (66) | 35,374 |
Intangible assets | 48,249 | 219,354 | 20,639 | 8,136 | 296,378 |
Trade and other receivables | 141,509 | 82,611 | 131,453 | (17,609) | 337,964 |
Deferred tax asset | 244,394 | - | - | (2,168) | 242,226 |
Other assets | 883,576 | 24,933 | 96,942 | (382,496) | 622,955 |
Total assets | 1,867,967 3,596,012 | 676,091 | (408,643) | 5,731,427 | |
Trade and other payables | 220,706 | 540,459 | 50,563 | 114,506 | 926,234 |
Borrowings | 61,437 | 2,471,030 | - | 488,429 | 3,020,896 |
Decommissioning provision | 724,458 | 84,299 | - | - | 808,757 |
107
Capital expenditure is defined as additions to property, plant and equipment and intangible exploration and evaluation assets
less decommissioning asset additions, right-of-use asset additions, capitalised share-based payment charge and capitalised
borrowing costs.
CONSOLIDATED FINANCIAL STATEMENTS
Page 215 of 273
Other & inter- | |||||
Year ended 31 December 2022 | segment | ||||
($'000) | Europe | Israel | Egypt | transactions | Total |
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 108 | |||||
Property, plant and equipment | 85,840 | 537,527 | 105,792 | (368) | 728,791 |
Intangible, exploration and | 12,143 | 124,718 | 193 | 3,970 | 141,024 |
evaluation assets |
Segment cash flows
Other & inter- | |||||
Year ended 31 December 2023 | segment | ||||
($'000) | Europe | Israel | Egypt | transactions | Total |
Net cash from/(used in) operating | 25,737 | 586,570 | 52,032 | (8,152) | 656,187 |
activities | |||||
Cash outflow for investing activities | (134,681) | (194,833) | (91,238) | 4,294 | (416,458) |
Net cash from financing activities | 65,012 | (129,801) | 26,896 | (289,461) | (327,354) |
Net increase/(decrease) in cash and | (43,932) | 261,936 | (12,310) | (293,319) | (87,625) |
cash equivalents | |||||
Cash and cash equivalents at | 58,340 | 24,825 | 26,825 | 317,898 | 427,888 |
beginning of the period | |||||
Effect of exchange rate fluctuations | 775 | (136) | (3,281) | 9,151 | 6,509 |
on cash held | |||||
Cash and cash equivalents at end of | 15,183 | 286,625 | 11,234 | 33,730 | 346,772 |
the period |
108
Capital expenditure is defined as additions to property, plant and equipment and intangible exploration and evaluation assets
less decommissioning asset additions, right-of-use asset additions, capitalised share-based payment charge and capitalised
borrowing costs.
CONSOLIDATED FINANCIAL STATEMENTS
Page 216 of 273
Other & inter- | |||||
Year ended 31 December 2022 | segment | ||||
($'000) | Europe | Israel | Egypt | transactions | Total |
Net cash from/(used in) operating | 225,780 | (7,850) | 66,946 | (12,723) | 272,153 |
activities | |||||
Cash outflow from investing | (287,490) | (180,040) | (54,229) | 213,818 | (307,941) |
activities | |||||
Net cash from financing activities | 54,977 | (133,953) | (2,528) | (185,975) | (267,479) |
Net increase/(decrease) in cash and | (6,733) | (321,843) | 10,189 | 15,120 | (303,267) |
cash equivalents | |||||
Cash and cash equivalents at | 71,312 | 349,827 | 19,254 | 290,446 | 730,839 |
beginning of the period | |||||
Effect of exchange rate fluctuations | (6,451) | (3,159) | (2,617) | 12,543 | 316 |
on cash held | |||||
Cash and cash equivalents at end of | 58,128 | 24,825 | 26,826 | 318,109 | 427,888 |
the period |
Revenue
($’000) | 2023 | 2022 |
Revenue from crude oil sales | 180,704 | 206,959 |
Revenue from hydrocarbon liquids sales | 297,842 | 35,384 |
Revenue from gas sales | 927,596 | 529,923 |
Revenue from LPG sales | 14,376 | 21,747 |
Compensation to gas buyers | (4,929) | (18,031) |
Gain/(Loss) on forward transactions | - | (55,189) |
Petroleum product sales | 4,044 | 2,697 |
Rendering of services | - | 1,001 |
Revenue from contracts with customers | 1,419,633 | 724,491 |
Other operating income-lost production insurance proceeds | - | 12,590 |
Total Revenue | 1,419,633 | 737,081 |
Since August 2021 in accordance with the GSPAs signed with a group of gas buyers, the Group have paid
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.
In 2022 proceeds were received in relation to lost production under the business interruption insurance
policy of $12.6 million. No such proceeds were received in the current year.
100% of the gas produced at Abu Qir & North Idku and North El Amriya (Egypt) is sold to EGPC and EGAS
respectively under a Brent-linked gas price. The gas price is determined based on Brent prices trading
within a certain range, as set out in the agreement, and contains both a floor price and a cap; limiting
volatility and exposure to commodity price fluctuations.
CONSOLIDATED FINANCIAL STATEMENTS
Page 217 of 273
Sales for the year ended 31 December (Kboe) | 2023 | 2022 |
Egypt (net entitlement) | ||
Gas | 4,533 | 5,059 |
LPG | 287 | 333 |
Condensate | 436 | 390 |
Italy | ||
Oil | 2,190 | 2,440 |
Gas | 1,270 | 1,406 |
Israel | ||
Gas | 28,416 | 1,781 |
Oil | 3,492 | - |
UK | ||
Gas | 23 | 73 |
Oil | 228 | 245 |
Croatia | ||
Gas | 28 | 38 |
Greece | ||
Oil | 367 | - |
Total | 41,270 | 11,765 |
Operating profit/(loss)
($’000) | 2023 | 2022 |
(a) Cost of sales | ||
Staff costs (note 8) | 47,650 | 52,904 |
Energy cost | 22,166 | 15,947 |
Flux cost | 33,998 | 36,970 |
Royalty payable | 185,622 | 45,770 |
Other operating costs 109 | 185,018 | 132,688 |
Depreciation and amortisation (note 12) | 300,876 | 79,362 |
Oil stock movement | (15,554) | (1,707) |
Stock (underlift)/overlift movement | (230) | (3,004) |
Total cost of sales | 759,546 | 358,930 |
(b) Administration expenses | ||
Staff costs (note 8) | 21,416 | 17,977 |
Other general & administration expenses | 6,648 | 16,592 |
109
Other operating costs comprise of insurance costs, gas transportation and treatment fees concession fees and planned
maintenance costs.
CONSOLIDATED FINANCIAL STATEMENTS
Page 218 of 273
($’000) | 2023 | 2022 |
Share-based payment charge included in administrative expenses (note 8) | 7,340 | 6,044 |
Depreciation and amortisation (note 12, 13) | 5,268 | 3,257 |
Audit fees (note 7g) | 2,401 | 2,072 |
43,073 | 45,942 | |
(c) Exploration and evaluation expenses | ||
Staff costs for Exploration and evaluation activities (note 8) | 3,171 | 3,012 |
Exploration costs written off (note 13) | 28,758 | 65,550 |
Other exploration and evaluation expenses | 2,159 | 2,833 |
34,088 | 71,395 | |
(d) Expected credit loss | ||
Expected credit loss expense | 4,375 | 3,043 |
Reversal of expected credit loss allowance | - | (10,970) |
4,375 | (7,927) | |
(e) Other expenses | ||
Intra-group merger costs (note 8) | 80 | 3,212 |
Loss from disposal of property plant & equipment | 190 | 1,102 |
Write-down of inventory (note 17) | - | 1,207 |
Write-down of property, plant and equipment costs (note 12) | 342 | - |
Provision for litigation and claims | - | 1,198 |
Other expenses | 4,662 | 5,399 |
5,274 | 12,118 | |
(f) Other income | ||
Profit from sale of inventory | 339 | 1,643 |
Reversal of provision for legal claims | 2,743 | - |
Other income | 4,898 | 1,520 |
7,980 | 3,163 | |
(g) Fees to the Company’s auditor for: | ||
The audit of the Company’s annual accounts | 970 | 770 |
The audit of the Company’s subsidiaries pursuant to legislation | 838 | 777 |
Total audit services | 1,808 | 1,547 |
Audit-related assurance services – half-year review | 404 | 378 |
Other services (note A) | 189 | 147 |
2,401 | 2,072 |
Note A: In addition to the services outlined in the preceding table, the Company's auditor also rendered
services related to the bond issuance (2023: $0.15 million; 2022: $nil). These services were capitalised
CONSOLIDATED FINANCIAL STATEMENTS
Page 219 of 273
Staff costs
The average monthly number of employees (including Executive Directors) employed by the Group
worldwide was:
Number | 2023 | 2022 |
Administration | 198 | 187 |
Technical | 361 | 320 |
559 | 507 |
In addition, the Group consolidates the personnel costs of its Operating Company, Abu Qir Petroleum
Company (“
AQP
”), owned at 100%. The table below details the average number of employees related to
AQP employees:
Number | 2023 | 2022 |
AQP employee (excluding Energean employees) | 612 | 626 |
612 | 626 |
($’000) | 2023 | 2022 |
Salaries 110 and benefits | 82,948 | 85,056 |
Social security costs | 10,832 | 8,706 |
Share-based payments (note 25) | 7,340 | 6,243 |
101,120 | 100,005 | |
Payroll cost capitalised in oil & gas assets and exploration | (21,463) | (16,694) |
& evaluation costs | ||
Payroll cost expensed | 79,657 | 83,311 |
Included in: | ||
Cost of sales (note 7a) | 47,650 | 52,904 |
Administration expenses (note 7b) | 28,756 | 24,021 |
Exploration and evaluation expenses (note 7c) | 3,171 | 3,012 |
Intra-group merger costs (note 7e) | 80 | 3,212 |
Other | - | 162 |
79,657 | 83,311 |
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 group
110
Including $4.3 million of pension costs incurred (2022: $2.6 million).
CONSOLIDATED FINANCIAL STATEMENTS
Page 220 of 273
Net finance cost
($’000) | Notes | 2023 | 2022 |
Interest on bank borrowings | 21 | 6,104 | 1,527 |
Interest on Senior Secured Notes | 21 | 193,009 | 167,372 |
Interest expense on long term payables | 24 | 7,158 | 14,660 |
Interest expense on short term liabilities | - | 54 | |
Less amounts included in the cost of qualifying | 12,13 | (17,416) | (123,635) |
assets | |||
188,855 | 59,978 | ||
Finance and arrangement fees | 8,985 | 11,334 | |
Commission charges for bank guarantees | 2,274 | 2,118 | |
Other finance costs and bank charges | (229) | 2,136 | |
Unwinding of discount on right of use asset | 2,476 | 2,159 | |
Unwinding of discount on long term trade | 8,753 | - | |
payables | |||
Unwinding of discount on provision for | 31,255 | 21,495 | |
decommissioning | |||
Unwinding of discount on deferred | 5,674 | 7,098 | |
consideration | |||
Unwinding of discount on convertible loan | 4,450 | 4,054 | |
Unwinding of discount on contingent | (1,855) | 2,667 | |
consideration | |||
Less amounts included in the cost of qualifying | (243) | (5,724) | |
assets | |||
Total finance costs | 250,395 | 107,315 | |
Interest income from time deposits | (19,501) | (9,572) | |
Total finance income | (19,501) | (9,572) | |
Foreign exchange losses | 16,584 | 22,207 | |
Net financing costs | 247,478 | 119,950 |
Taxation
(a)
Taxation charge
($’000) | 2023 | 2022 |
Current income tax charge | (57,800) | (199,563) |
Adjustments in respect of current income tax of | (1,598) | (583) |
previous year(s) | ||
Total current tax charge | (59,398) | (200,146) |
Deferred tax relating to origination and reversal of | (99,832) | 110,412 |
temporary differences (note 14) | ||
Income tax expense reported in the Income statement | (159,230) | (89,734) |
CONSOLIDATED FINANCIAL STATEMENTS
Page 221 of 273
(b)
Reconciliation of the total tax charge
The Group calculates its income tax expense by applying a weighted average tax rate calculated based
on the statutory tax rates of each country weighted according to the profit or loss before tax earned by
the Group in each jurisdiction where deferred tax is recognised or material current tax charge arises.
The effective tax rate for the period is 46% (2022: 84%).
The tax (charge) for the period can be reconciled to the accounting profit per the Group Income statement
as follows:
($’000) | 2023 | 2022 |
Profit before tax | 344,165 | 107,005 |
Tax calculated at 18.2% weighted average rate (2022: | (62,752) | (29,453) |
27.5%) 111 | ||
Impact of different tax rates 112 | (15,482) | (9,960) |
Non recognition of deferred tax on current year tax losses | (42,086) | (50,905) |
and other temporary differences | ||
Recognition of previously unrecognised deferred | (27,107) | 134,642 |
tax/derecognition of previously recognised deferred tax 113 | ||
Permanent differences 114 | (12,623) | (16,341) |
Foreign taxes | (29) | (54) |
Windfall tax 115 | - | (119,425) |
Tax effect of non-taxable income & allowances | 2,556 | 2,217 |
Other adjustments | (109) | 128 |
Prior year tax | (1,598) | (583) |
Taxation expense | (159,230) | (89,734) |
There are no income tax consequences attached to the payment of dividends in either 2023 or 2022 by
the Group to its shareholders.
Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the
Group operates. However, this legislation does not currently apply to the Group as its consolidated
revenue has not exceeded the threshold of €750 million in at least two of the four preceding fiscal years
111
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 (23.5%/75%) and Egypt (40.55%) were weighted according to the profit or loss before tax
earned by the Group in each jurisdiction, excluding fair value uplifts profits.
112
“Impact of different tax rates” mainly refer to the Italian regional taxes (IRAP).
113
Change in estimate of decommissioning provision in 2023 resulted in $27.1 million of DTA recognised during the period. In
2022 the Group recognised $134.6 million of DTA mainly due to the change in decommissioning provision and reassessment
of utilisation of tax losses carried forward in Italy.
114
Permanent differences mainly consisted of non-deductible expenses ($13.2 million), goodwill impairment ($0.4 million) and
foreign exchange income ($1.0 million). In 2022, non-deductible tax expenses primarily relate to financial instruments
associated with the acquisition of 30% of Energean Israel from Kerogen Capital, which was finalised during the year.
115
In 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) 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. The
exposure has been provided for accordingly in 2022. Consequently, the Group paid a one-off windfall tax of $94.7 million (€87.0
million) in June -July 2023.
In addition, the Energy (Oil and Gas) Profits Levy (EPL) was announced by the UK Government on 26 May 2022 and legislated
for in July 2022. This was a new, temporary 25% (to be increased to 35% from 1st January 2023) levy on ring fence profits of
oil and gas companies. This was in addition to Ring Fence Corporation Tax which is charged at 30% and the Supplementary
Charge which is charged at 10%. The Group’s exposure to the EPL is de minimis.
CONSOLIDATED FINANCIAL STATEMENTS
Page 222 of 273
prior to the enactment of the legislation. Therefore, the consolidated financial statements do not include
Earnings per share
Basic earnings per ordinary share amounts are calculated by dividing net income for the year attributable
to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding
during the year. Diluted income per ordinary share is calculated by dividing net income for the year
attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that would be issued
if dilutive employee share options were converted into ordinary shares.
($’000) | 2023 | 2022 |
Total profit attributable to equity shareholders | 184,935 | 17,271 |
Effect of dilutive potential ordinary shares 116 | 4,450 | 4,054 |
189,385 | 21,325 |
2023 | 2022 | |
Basic weighted average number of shares | 178,447,141 | 177,931,019 |
Dilutive potential ordinary shares | 2,041,193 | 6,714,731 |
Diluted weighted average number of shares | 180,488,334 | 184,645,750 |
Basic earnings per share | $1.04/share | $0.10/share |
Diluted earnings per share | $1.05/share | $0.12/share |
Property, plant & equipment
Other property, | ||||
Oil and gas | Leased | plant and | ||
($’000) | assets 117 | assets 118 | equipment | Total |
Property, plant & equipment at cost: | ||||
At 1 January 2022 | 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 |
116
In 2023 $4.5 million (2022: $4.1million) is the unwinding of the discount on the convertible loan notes (as disclosed in note 9).
The notes were converted to ordinary shares on 20 December 2023. Refer to note 19 for further detail.
117
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 was completed at the end of March 2023. Following Handover, INGL is responsible for the operation and
maintenance of this part of the infrastructure and the related asset.
118
Included in the carrying amount of leased assets at 31 December 2023 are right of use assets related to Oil and gas properties
and Other property, plant and equipment of $58.0 million and $3.9 million respectively (2022: $21.3 million and $8.1 million).
The depreciation charged on these classes for the year ending 31 December 2023 was $13.4 million and $2.0 million
respectively (2022: $7.9 million and $2.1 million).
CONSOLIDATED FINANCIAL STATEMENTS
Page 223 of 273
Other property, | ||||
Oil and gas | Leased | plant and | ||
($’000) | assets 117 | assets 118 | equipment | Total |
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 |
Additions | 469,023 | 38,278 | 2,203 | 509,504 |
Lease modification | - | 8,706 | - | 8,706 |
Disposal of assets | (111,448) | - | (111,448) | |
Capitalised borrowing cost | 17,658 | - | - | 17,658 |
Change in decommissioning provision | (2,504) | - | - | (2,504) |
Other movements | (313) | - | (307) | (620) |
Foreign exchange impact | 89,811 | 2,582 | 2,090 | 94,483 |
At 31 December 2023 | 5,201,651 | 108,278 | 64,104 | 5,374,033 |
Accumulated depreciation and impairment: | ||||
At 1 January 2022 | 442,522 | 19,102 | 52,981 | 514,605 |
Charge for the period | 71,464 | 10,091 | 1,171 | 82,726 |
Impairments | 27,878 | - | - | 27,878 |
Foreign exchange impact | 1,030 | 105 | 6 | 1,141 |
At 31 December 2022 | 542,894 | 29,298 | 54,158 | 626,350 |
Charge for the period | 287,926 | 15,432 | 1,808 | 305,166 |
Impairment | 342 | - | - | 342 |
Foreign exchange impact | 67,387 | 1,607 | 1,856 | 70,850 |
At 31 December 2023 | 898,549 | 46,337 | 57,822 | 1,002,708 |
Net carrying amount: | ||||
At 31 December 2022 | 4,196,530 | 29,414 | 5,960 | 4,231,904 |
At 31 December 2023 | 4,303,102 | 61,941 | 6,282 | 4,371,325 |
Borrowing costs capitalised for qualifying assets during the year are calculated by applying a weighted
average interest rate of 5.52% for the year ended 31 December 2023 (2022: 5.16%).
The additions to Oil & Gas properties for the year ended 31 December 2023 are mainly due to
development costs for the FPSO, Karish North field and second oil train at the amount of $148 million,
development cost for Cassiopea project in Italy at the amount of $161 million and NEA/NI project in Egypt
at the amount of $123 million.
In 2023 the Group entered in new vessel lease agreements for offshore concessions in Italy.
The impairment of $27.9 million recognised in 2022 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 2022 change in
decommissioning provision of $21.7 million was in relation to fields across the group whereby the
recoverable amount exceeded the carrying value.
CONSOLIDATED FINANCIAL STATEMENTS
Page 224 of 273
follows:
($’000) | 2023 | 2022 |
Cost of sales (note 7a) | 300,876 | 79,362 |
Administration expenses (note 7b) | 4,290 | 2,623 |
Other operating (income)/expenses | - | 109 |
Capitalised depreciation in oil & gas properties | - | 632 |
Total | 305,166 | 82,726 |
Cash flow statement reconciliations:
Payment for additions to property, plant and equipment | ||
($’000) | 2023 | 2022 |
Additions to property, plant and equipment | 533,364 | 877,726 |
Associated cash flows | ||
Payment for additions to property, plant and equipment | (436,043) | (395,753) |
Non-cash movements/presented in other cash flow lines | ||
Borrowing cost capitalised | (17,658) | (109,184) |
Impairment | (342) | (27,878) |
Right-of-use asset additions/modifications | (46,984) | (2,026) |
Lease payments related to capital activities | 16,194 | 12,669 |
Capitalised share-based payment charge | - | (199) |
Capitalised depreciation | - | (632) |
Change in decommissioning provision | 2,504 | (21,685) |
Movement in working capital | (51,035) | (333,038) |
Intangible assets
Other | ||||
Exploration and | Intangible | |||
($’000) | evaluation assets | Goodwill | assets | Total |
Intangible assets at Cost: | ||||
At 1 January 2022 | 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) |
31 December 2022 | 338,354 | 101,146 | 10,975 | 450,475 |
Additions | 56,379 | - | 273 | 56,652 |
Other movements | 313 | - | 307 | 620 |
Exchange differences | 2,670 | - | (12) | 2,658 |
At 31 December 2023 | 397,716 | 101,146 | 11,543 | 510,405 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 225 of 273
Other | ||||
Exploration and | Intangible | |||
($’000) | evaluation assets | Goodwill | assets | Total |
Accumulated amortisation and impairments: | ||||
At 1 January 2022 | 83,279 | - | 4,766 | 88,045 |
Charge for the period | 39 | - | 595 | 634 |
Impairment | 47,240 | 18,310 | - | 65,550 |
Exchange differences | (110) | - | (22) | (132) |
31 December 2022 | 130,448 | 18,310 | 5,339 | 154,097 |
Charge for the period | 46 | - | 932 | 978 |
Impairment | 26,583 | 2,175 | - | 28,758 |
Exchange differences | 1,197 | - | (14) | 1,183 |
31 December 2023 | 158,274 | 20,485 | 6,257 | 185,016 |
Net carrying amount | ||||
At 31 December 2022 | 207,906 | 82,836 | 5,636 | 296,378 |
At 31 December 2023 | 239,442 | 80,661 | 5,286 | 325,389 |
Cash flow statement reconciliations:
Payment for additions to intangible assets ($’000) | 2023 | 2022 |
Additions to intangible assets | 56,652 | 141,024 |
Associated cash flows | ||
Payment for additions to intangible assets | (105,024) | (64,414) |
Non-cash movements/presented in other cash flow lines | ||
Movement in working capital | 48,372 | (76,610) |
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 $28.8 million was recognised in the period for projects
that will not progress to development. The Group exited Isabella licence in December 2023 and as a result
the related exploration asset ($26.6 million) and goodwill ($2.2 million) were impaired.
The remaining goodwill balance is in relation to the Israel CGU ($75.8 million), and UK ($4.8 million). We
have performed the annual goodwill impairment test and note that no reasonably possible change would
CONSOLIDATED FINANCIAL STATEMENTS
Page 226 of 273
Net deferred tax (liability)/asset
Accrued | ||||||||||
Right of | Prepaid | expenses and | ||||||||
Property, | use | expenses | Deferred | Retirement | other | |||||
Deferred tax | plant and | asset | Decom- | and other | Tax | expenses | benefit | short-term | ||
(liabilities)/assets ($’000) | equipment | IFRS 16 | missioning | receivables | Inventory | losses | for tax | liability | liabilities | Total |
At 1 January 2022 | (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 |
Increase/(decrease) for the period through: | ||||||||||
Profit or loss (Note 10) | (13,874) | (2,644) | (26,955) | (2,225) | (440) (57,185) | (630) | 163 | 3,958 | (99,832) | |
Other | ||||||||||
comprehensive income | - | - | - | - | - | - | - | 38 | - | 38 |
Exchange difference | (1,197) | (15) | 4,269 | (12) | 6 | 5,043 | 3 | 304 | 8,401 | |
31 December 2023 | (163,994) | (3,737) | 103,560 | (2,051) | 6 | 144,866 | 5,578 | 369 | 10,122 | 94,719 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 227 of 273
($'000) | 2023 | 2022 |
Deferred tax liabilities | (122,785) | (56,114) |
Deferred tax assets | 217,504 | 242,226 |
94,719 | 186,112 |
At 31 December 2023 the Group had gross unused tax losses of $907.4 million (as of 31 December 2022:
$1,093.8 million) available to offset against future profits and other temporary differences. A deferred tax
asset of $144.9 million (2022: $197.0 million) has been recognised on tax losses of $571.5 million, based
on the forecasted profits. The Group did not recognise deferred tax on tax losses and other differences
of total amount of $655.1 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 $77.8 million, $19.6 million and $10.8 million (2022: $69.2 million,
$33.4 million and $15.1 million) respectively.
An additional DTA of $109.3 million (2022: $124.6 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 $217.5 million (2022:
$242.2 million). During the period, Italy recognised a DTA of $19.6 million on tax losses of $81.6 million
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 2032. In Italy, deferred tax asset of $94.6 million recognised on
decommissioning costs scheduled up to the year the Italian assets expect to enter into a declining phase
assuming that there still be available profits from Cassiopea asset and other long-lived assets. Finally, in
the UK, decommissioning losses is expected to be tax relieved up until 2028 in accordance with the latest
Cash and cash equivalents
($'000) | 2023 | 2022 |
Cash and bank deposits | 346,772 | 427,888 |
346,772 | 427,888 |
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
Restricted cash
Restricted cash comprises cash retained under the Israel Senior Secured Notes and the Greek State Loan
requirement as follows:
Current
The current portion of restricted cash at 31 December 2023 was $22.48 million. It mainly relates to the
March 2024 coupon payment on Senior Secured Notes.
In 2022 it was $71.8 million comprising $3 million for bank guarantees and $68.8 million for debt
repayment fund.
Non-current
The cash restricted for more than 12 months after the reporting date was $3.1 million (2022: $3.0 million)
mainly comprising $2.3 million (2022: $2.3 million) held on the Interest Service Reserve Account (“
ISRA
”)
CONSOLIDATED FINANCIAL STATEMENTS
Page 228 of 273
Inventories
($'000) | 2023 | 2022 |
Crude oil | 55,414 | 35,681 |
Hydrocarbon liquids | 1,685 | 2,367 |
Gas | 553 | 383 |
Raw materials and supplies | 52,474 | 54,916 |
Total inventories | 110,126 | 93,347 |
The Group’s raw materials and supplies consumption for the year ended 31 December 2023 was $10.3
million (2022: $6.4 million).
Trade and other receivables
($'000) | 2023 | 2022 |
Trade and other receivables – current | ||
Financial items: | ||
Trade receivables | 297,305 | 215,215 |
Receivables from partners under JOA | 1,996 | 4,539 |
Other receivables 119 | 9,479 | 2,344 |
Government subsidies 120 | 82 | 3,025 |
Refundable VAT | 19,273 | 89,400 |
Accrued interest income | 1,016 | 1,445 |
329,151 | 315,968 | |
Non-financial items: | ||
Deposits and prepayments 121 | 19,174 | 15,084 |
Other deferred expense | 4,932 | 6,912 |
24,106 | 21,996 | |
353,257 | 337,964 | |
Trade and other receivables – non-current | ||
Financial items: | ||
Other tax recoverable | 15,544 | 14,701 |
15,544 | 14,701 |
119
Other receivables mainly comprise the consideration receivable from INGL as discussed in note 24.
120
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 decreasing the receivable.
121
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.
CONSOLIDATED FINANCIAL STATEMENTS
Page 229 of 273
($'000) | 2023 | 2022 |
Non-financial items: | ||
Deposits and prepayments | 17,612 | 11,726 |
Other non-current assets | 526 | 513 |
18,138 | 12,239 | |
33,682 | 26,940 |
The table below summarises the maturity profile of the Group receivables:
31 December 2023 | Carrying | Contractual | 3 months | 3–12 | ||
($’000) | amounts | cash flows | or less | months | 1–2 years | 2–5 years |
Trade receivables | 297,305 | 305,436 | 237,559 | 56,781 | 11,096 | - |
Government | 82 | 82 | - | 82 | - | - |
subsidies | ||||||
Refundable VAT | 19,273 | 19,273 | 1,196 | 18,077 | - | - |
Receivables from | 1,996 | 1,996 | 1,996 | - | - | - |
partners under JOA | ||||||
Other receivables | 9,479 | 9,479 | 6,994 | 2,485 | - | - |
Other | 15,544 | 15,544 | - | - | 15,544 | |
tax recoverable | ||||||
Total | 343,679 | 351,810 | 247,745 | 77,425 | 26,640 | - |
31 December 2022 | Carrying | Contractual | 3 months | 3–12 | ||
($’000) | amounts | cash flows | or less | months | 1–2 years | 2–5 years |
Trade receivables | 215,215 | 218,709 | 198,665 | 13,949 | 6,095 | - |
Government | 3,025 | 3,025 | - | 3,025 | - | - |
subsidies | ||||||
Refundable VAT | 89,400 | 89,400 | 19,487 | 50,061 | 19,852 | - |
Receivables from | 4,539 | 4,539 | 4,539 | - | - | - |
partners under JOA | ||||||
Other receivables | 2,344 | 2,344 | 1,027 | 1,317 | - | - |
Other tax | 14,701 | 14,701 | - | - | 14,701 | |
recoverable | ||||||
Total | 329,224 | 332,718 | 223,718 | 68,352 | 40,648 | - |
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 Ltd., 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 $139.9 million. The below tables outline the share capital of the Company.
CONSOLIDATED FINANCIAL STATEMENTS
Page 230 of 273
The share premium account represents the total net proceeds on issue of the Company’s shares in
excess of their nominal value of £0.01 per share less amounts transferred to any other reserves.
On 14 June 2022, Energean plc by special resolution reduced its share premium account, as confirmed
by an Order of the High Court of Justice.
Equity share | |||
capital | Share | Share | |
allotted and | capital | premium | |
Issued and authorised | fully paid | ($’000) | ($’000) |
At 1 January 2022 | 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 | 415,388 |
Issued during the year | |||
New shares | 4,422,013 | 57 | 49,943 |
Share based payment | 1,018,441 | 12 | - |
At 31 December 2023 | 183,480,959 | 2,449 | 465,331 |
The issuance of new shares pertains to the settlement of the convertible loan note on 20 December 2023,
Dividends
In line with Energean’s dividend policy, Energean returned $1.2/share to shareholders in 2023,
representing four quarters of dividend payments. $0.60/share was returned to shareholders in 2022,
representing two quarters of dividend payments (maiden dividend was declared in September 2022).
$ cents per share | ($’000) | |||
2023 | 2022 | 2023 | 2022 | |
Dividends announced and paid in cash | ||||
Ordinary shares | ||||
March | 30 | - | 53,252 | - |
June | 30 | - | 53,411 | - |
September | 30 | 30 | 53,518 | 53,252 |
December | 30 | 30 | 53,517 | 53,252 |
Total | 120 | 60 | 213,698 | 106,504 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 231 of 273
Borrowings
($’000) | 2023 | 2022 |
Non-current | ||
Bank borrowings – after one year but within five years | ||
4.5% Senior Secured notes due 2024 ($625 million) | - | 620,461 |
4.875% Senior Secured notes due 2026 ($625 million) | 619,932 | 617,912 |
Bank borrowings – more than five years | ||
6.5% Senior Secured notes due 2027 ($450 million) | 444,313 | 442,879 |
5.375% Senior Secured notes due 2028 ($625 million) | 618,145 | 616,767 |
5.875% Senior Secured notes due 2031 ($625 million) | 616,762 | 615,890 |
8.50% Senior Secured notes due 2033 ($750 million) | 733,653 | - |
BSTDB Loan and Greek State Loan Notes | 108,392 | 61,437 |
Carrying value of non-current borrowings | 3,141,197 | 2,975,346 |
Current | ||
Revolving credit facility | 80,000 | - |
Convertible loan notes ($50 million) | - | 45,550 |
Carrying value of current borrowings | 80,000 | 45,550 |
Carrying value of total borrowings | 3,221,197 | 3,020,896 |
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. (“
TASE
”).
CONSOLIDATED FINANCIAL STATEMENTS
Page 232 of 273
The Company had undertaken to provide the following collateral in favour of the Trustee:
•
First rank Fixed charges over the shares of Energean Israel Ltd., 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 Ltd. 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).
The March 2024 notes of $625 million were repaid on 30 September 2023.
$750,000,000 senior secured notes:
On the 11 July 2023 Energean priced the offering of $750 million aggregate principal amount of senior
secured notes due 30 September 2033, with a fixed annual interest rate of 8.5%. The interest on the Notes
will be paid semi-annually, on 30 March and 30 September of each year, beginning on 30 March 2024.
The Notes are listed for trading on the TASE-UP of the Tel Aviv Stock Exchange Ltd.
The notes are secured with the shares pledged and the mortgage of Energean Power FPSO and Operating
permit with respect to Karish Main.
The funds were released from escrow in September 2023 and were used to repay Energean Israel's $625
million notes due in March 2024 and pay fees and expenses associated with this refinancing, contribute
towards funding the interest payment reserve account, and contribute towards the payment of the final
deferred consideration to Kerogen in relation to the Group’s previous acquisition in 2021 of the remaining
30% minority interest in Energean Israel.
Kerogen convertible loan:
On 25 February 2021, the Group completed the acquisition of the remaining 30% minority interest in
Energean Israel Ltd. from Kerogen Investments No.38 Ltd., Energean now owns 100% of Energean Israel
Ltd.
The total consideration included:
•
An up-front payment of $175 million paid at completion of the transaction;
•
Deferred cash consideration amounts totalling $180 million settled in two instalments: $30
million was paid in December 2023 with the rest repaid in July 2023; and
•
$50 million of convertible loan notes (the “
Convertible loan notes
”), which have a maturity date
of 29 December 2023, a strike price of £9.505 (equivalent to $13.40) (which was subject to
adjustments for dividend payments up until the maturity date), and were issued at a zero-coupon
rate.
On 20 December 2023, the loan was converted into equity, resulting in the issuance of 4,422,013 ordinary
shares at a conversion price of £8.3843 per share (equivalent to $10.60).
$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.
CONSOLIDATED FINANCIAL STATEMENTS
Page 233 of 273
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); and
•
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 2023 the loan was fully drawn.
Revolving Credit Facility (“RCF”):
On 8 September 2022, Energean signed a three-year $275 million RCF with a consortium of banks, led by
ING Bank N.V. In May 2023, this facility's limit was increased to $300 million. The RCF is designed to
provide additional liquidity for general corporate needs as necessary. The interest rate applied to any
amounts drawn as loans is set at 5% plus the SOFR rate.
Throughout 2023, the Company utilised $80 million from this facility at an average interest rate of 10.3%.
Of this amount, $40 million has been repaid subsequent to the reporting date.
The Group defines capital as the total equity and net debt of the Group. Capital is managed in order to
provide returns for shareholders and benefits to stakeholders and to safeguard the Group’s ability to
continue as a going concern.
Energean is not subject to any externally imposed capital requirements. To maintain or adjust the capital
structure, the Group may put in place new debt facilities, issue new shares for cash, repay debt, engage
in active portfolio management, adjust the dividend payment to shareholders, or undertake other such
restructuring activities as appropriate.
($’000) | 2023 | 2022 |
Current borrowings | 80,000 | 45,550 |
Non-current borrowings | 3,141,197 | 2,975,346 |
Total borrowings | 3,221,197 | 3,020,896 |
Less: | ||
Cash and cash equivalents | (346,772) | (427,888) |
Restricted cash | (25,606) | (74,776) |
Net Debt | 2,848,819 | 2,518,232 |
Total equity | 686,115 | 650,198 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 234 of 273
Reconciliation of liabilities arising from financing activities
Borrowing costs | |||||||||
including | |||||||||
amortisation of | Foreign | ||||||||
Cash | Cash | Reclass- | Lease | arrangement | exchange | 31 | |||
($'000) | 1 January | inflows | outflows | ification | Additions | modification | fees | impact | December |
2023 | 3,335,646 | 905,038 | (1,018,175) | (71,261) | 38,222 | 8,860 | 224,123 | 1,069 | 3,423,522 |
Senior Secured Notes | 2,913,909 | 750,000 | (800,522) | (23,613) | - | - | 193,009 | - | 3,032,783 |
Convertible loan notes | 45,550 | - | - | (50,000) | - | - | 4,450 | - | - |
Current borrowings RCF | - | 110,000 | (30,000) | - | - | - | - | - | 80,000 |
Long-term borrowings | 61,437 | 45,038 | (5,576) | 1,257 | - | - | 6,104 | 154 | 108,414 |
Lease liabilities | 32,272 | - | (18,732) | 1,095 | 38,222 | 8,860 | 2,464 | 915 | 65,096 |
Deferred licence payments | 51,832 | - | (13,345) | - | - | - | 7,667 | - | 46,154 |
Contingent Consideration | 86,320 | - | - | - | - | - | 4,755 | - | 91,075 |
Deferred consideration of | 144,326 | - | (150,000) | - | - | - | 5,674 | - | - |
acquisition of minority | |||||||||
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 | 167,228 | - | (30,000) | - | - | - | 7,098 | - | 144,326 |
acquisition of minority |
CONSOLIDATED FINANCIAL STATEMENTS
Page 235 of 273
Retirement benefit liability
The Group operates defined benefit pension plans in Greece and Italy.
Under Italian law, Energean Italy S.p.a. 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) | 2023 | 2022 |
Defined benefit obligation | 1,595 | 1,675 |
Provision for retirement benefits recognised | 1,595 | 1,675 |
Allocated as: | ||
Non-current portion | 1,595 | 1,675 |
1,595 | 1,675 |
22.2
Defined benefit obligation
($’000) | 2023 | 2022 |
At 1 January | 1,675 | 2,766 |
Current service cost | 88 | 163 |
Interest cost | 59 | 52 |
Extra payments or expenses | 1 | 3,233 |
Actuarial losses – from changes in financial assumptions | 161 | (267) |
Benefits paid | (433) | (4,100) |
Exchange differences | 44 | (172) |
At 31 December | 1,595 | 1,675 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 236 of 273
22.3
Actuarial assumptions and risks
The most recent actuarial valuation was carried out as of 31 December 2023 and it was based on the
following key assumptions:
2023 | 2022 | |
Greece | ||
Discount rate | 3.57% | 4.10% |
Expected rate of salary increases | 3.54% | 3.54% |
Average life expectancy over retirement age | 24.0 years | 19.7 years |
Inflation rate | 2.10% | 2.20% |
Italy | ||
Discount rate | 3.20% | 0.94% |
Expected rate of salary increases | N/A | N/A |
Average life expectancy over retirement age | 17.1 years | 20.9 years |
Inflation rate | 2.00% | 2.00% |
Sensitivity analysis
The sensitivity analysis below shows the impact on the defined benefit obligation of changing each
assumption while not changing all other assumptions. This analysis may not be representative of the
actual change in the defined benefit obligation as it is unlikely that the change in the assumptions would
occur in isolation of one another as some of the assumptions may be correlated.
($’000) | 2023 | 2022 |
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% |
($’000) | 2023 | 2022 |
Greece | ||
Percentage Effect on current service cost | ||
Change + 0.5% in Discount rate | -4% | -4% |
Change – 0.5% in Discount rate | 4% | 4% |
Change +0.5% in Expected rate of salary increases | 4% | 5% |
Change -0.5% in Expected rate of salary increases | -4% | -5% |
CONSOLIDATED FINANCIAL STATEMENTS
Page 237 of 273
The amounts presented reflect the impact from the percentage increase/(decrease) in the given
assumption by +/- 0.5% on the defined benefit obligation and current service cost, while holding all other
assumptions constant.
The plan exposes the Group to actuarial risks such as interest rate risk, longevity changes and inflation
risk.
Interest rate risk
The present value of the defined benefit liability is calculated using a discount rate determined by
reference to market yields of high-quality corporate bonds. The estimated term of the bonds is consistent
with the estimated term of the defined benefit obligation and it is denominated in Euro. A decrease in
market yield on high quality corporate bonds will increase the Group’s defined benefit liability.
Longevity of members
Any increase in the life expectancy of the members will increase the defined benefit liability.
Inflation risk
A significant proportion of the defined benefit liability is linked to inflation. An increase in the inflation rate
Provisions
Provision for | |||
litigation and | |||
($'000) | Decommissioning | other claims | Total |
At 1 January 2022 | 802,098 | 11,294 | 813,392 |
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 | (551) | 27,077 |
Spend | (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 |
At 1 January 2023 | 808,757 | 9,346 | 818,103 |
New provisions | 4,913 | - | 4,913 |
Change in estimates | (24,413) | (2,076) | (26,489) |
Recognised in property, plant and equipment | (7,417) | - | (7,417) |
Recognised in profit& loss | (16,996) | (2,076) | (19,072) |
Spend | (18,697) | - | (18,697) |
Reclassification | (1,023) | - | (1,023) |
Unwinding of discount | 31,255 | - | 31,255 |
Currency translation adjustment | 29,884 | 240 | 30,124 |
At 31 December 2023 | 830,676 | 7,510 | 838,186 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 238 of 273
Provision for | |||
litigation and | |||
($'000) | Decommissioning | other claims | Total |
Current provisions | 51,824 | - | 51,824 |
Non-current provisions | 778,852 | 7,510 | 786,362 |
Decommissioning provision
The decommissioning provision represents the present value of decommissioning costs relating to oil
and gas properties, which are expected to be incurred up to 2044 when the producing oil and gas
properties are expected to cease operations. The future costs are based on a combination of estimates
from an external study completed in previous years and internal estimates. These estimates are reviewed
annually to take into account any material changes to the assumptions. However, actual
decommissioning costs will ultimately depend upon future market prices for the necessary
decommissioning works required that will reflect market conditions at the relevant time. Furthermore,
the timing of decommissioning is likely to depend on when the fields cease to produce at economically
viable rates. This, in turn, will depend upon future oil and gas prices and the impact of energy transition
and the pace at which it progresses which are inherently uncertain. The decommissioning provision
represents the present value of decommissioning costs relating to assets in Italy, Greece, UK, Israel and
Croatia. No provision is recognised for Egypt as there is no legal or constructive obligation as at 31
December 2023.
The principal assumptions used in determining decommissioning obligations for the Group are shown
below:
Discount | Cessation of | |||||
Inflation | rate | production | Spend in | 2023 | 2022 | |
assumption | assumption | assumption | 2023 | ($'000) | ($'000) | |
Greece | 1.8%- 2.7% | 3.08% | 2034 | - | 19,359 | 13,036 |
Italy | 3.0%- 2.0% | 4.17% | 2023–2039 | 8,831 | 497,827 | 519,749 |
UK | 2.34% | 3.31% | 2023–2030 | 9,866 | 202,874 | 176,063 |
Israel | 3.0%- 1.6% | 4.18% | 2044 | - | 92,613 | 84,299 |
Croatia | 3.0%- 2.0% | 4.17% | 2036 | - | 18,003 | 15,610 |
Total | 18,697 | 830,676 | 808,757 |
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 S.p.a. 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 S.p.a. 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 S.p.a. 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 S.p.a.
(together with Edison S.p.a., 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 $2.1
million recognised.
The remaining balance in other provisions pertains to a minor potential claim in Egypt.
It is not currently possible to accurately predict the timing of the settlement of these claims and therefore
CONSOLIDATED FINANCIAL STATEMENTS
Page 239 of 273
Trade and other payables
($’000) | 2023 | 2022 |
Trade and other payables – current | ||
Financial items: | ||
Trade accounts payable | 225,451 | 298,091 |
Payables to partners under JOA 122 | 170,470 | 58,336 |
Deferred licence payments due within one year | 46,154 | 13,345 |
Deferred consideration for acquisition of minority | - | 144,326 |
Other payables 123 | 53,756 | 34,644 |
Contingent consideration (note 26.1) | 91,075 | - |
Short term lease liability | 16,498 | 9,208 |
Deferred income | 548 | |
VAT payable | 20 | |
603,972 | 557,950 | |
Non-financial items: | ||
Accrued expenses 124 | 65,033 | 98,650 |
Contract liability 125 | - | 56,230 |
Other finance costs accrued (note 9) | 63,893 | 39,672 |
Social insurance and other taxes | 4,705 | 4,372 |
133,631 | 198,924 | |
737,603 | 756,874 | |
Trade and other payables – non-current | ||
Financial items: | ||
Trade and other payables 126 | 117,796 | 169,360 |
Deferred licence payments 127 | - | 38,488 |
Contingent consideration (note 26.1) | - | 86,320 |
122
Payables to partners under JOA include payables and working capital estimates provided by the operators. Increase in 2023 is
due to Cassiopea development, in Italy.
123
Other payables mainly comprise royalties accrued in Israel (2023: $32 million, 2022: $6.7 million) and Italy (2023: $18 million,
2022: $27.3 million).
124
Included in trade payables and accrued expenses are mainly development expenditures incurred in Israel (mainly FPSO, Karish
North, Second oil train), development expenditure for Cassiopea project in Italy and NEA/NI project in Egypt.
125
The contract liability relates to the agreement with Israel Natural Gas Lines (“INGL”) for the transfer of title (the “Hand Over”) of
the near shore and onshore segments of the infrastructure that delivers gas from the Energean Power FPSO into the Israeli
national gas transmission grid. The Hand Over became effective in March 2023. Following the Hand Over, INGL is responsible
for the operations and maintenance of this part of the infrastructure and the related asset (refer to Note 7) and contract liability
was derecognised. The final consideration ($7.3 million) became receivable after Handover and was recognised within other
receivables.
126
The amount represents a long-term amount payable in terms of the EPCIC contract. Following the amendment to the terms of
the deferred payment agreement with Technip signed in February 2024 the remaining amount payable under the EPCIC
contract reduced to $210 million. The amount is payable in twelve equal quarterly deferred payments starting in March and
therefore has been discounted at 8.668%. p.a. (being the yield rate of the senior secured loan notes, maturing in 2026, at the
date of agreeing the payment terms).
127
A settlement agreement was signed on 2 November 2023 in relation to remaining deferred consideration for Karish and Tanin
licences whereby it was agreed that the final amount owing would be paid in two instalments in March ($30.0 million) and May
2024 ($17.4 million). As at 31 December 2023 the total discounted deferred consideration was $46.2 million (as at 31 December
2022: $51.8 million).
CONSOLIDATED FINANCIAL STATEMENTS
Page 240 of 273
($’000) | 2023 | 2022 |
Long term lease liability | 48,598 | 23,063 |
166,394 | 317,231 | |
Non-financial items: | ||
Social insurance | 529 | 827 |
529 | 827 | |
166,923 | 318,058 |
Employee share schemes
Analysis of share-based payment charge
($’000) | 2023 | 2022 |
Energean Deferred Share Bonus Plan (“ DSBP ”) | 1,913 | 1,332 |
Energean Long Term Incentive Plan (“ LTIP ”) | 5,427 | 4,911 |
Total share-based payment charge | 7,340 | 6,243 |
Capitalised to intangible and tangible assets | - | 199 |
Expensed as administration expenses (note 8) | 7,340 | 6,044 |
Total share-based payment charge | 7,340 | 6,243 |
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 2023 was
1.2 year, number of shares outstanding 1,763,308 and weighted average price at grant date £10.46 (or
$13.31).
There are further details of the LTIP in the Remuneration Report on pages 136–165.
Deferred Share Bonus Plan (“DSBP”)
Under the DSBP, a portion of any annual bonus of a Senior Executive nominated by the Remuneration
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 2023 was
CONSOLIDATED FINANCIAL STATEMENTS
Page 241 of 273
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 section below outlines the methodology the Group employs to come up with the fair values of various
financial assets and liabilities.
Contingent consideration
The share purchase agreement (“
SPA
”) dated 4 July 2019 between Energean and Edison S.p.a. 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 on 1 October 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 2023, 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 2023 to be $91.1 million based
on a Monte Carlo simulation (2022: $86.3 million).
The fair value of the consideration payable has been recognised at level 3 of the fair value hierarchy.
Contingent consideration | 2023 |
1 January | 86,320 |
Fair value adjustment including | 4,755 |
Discount unwinding | (1,855) |
Unrealised loss on derivates | 6,610 |
31 December | 91,075 |
Fair values of other financial instruments
The following financial instruments are measured at amortised cost and are considered to have fair
values different to their book values:
31 December 2023 | 31 December 2022 | |||
($’000) | Carrying value | Fair value | Carrying value | Fair value |
Senior Secured notes (note 21) | 3,032,783 | 2,775,135 | 2,913,909 | 2,716,625 |
The fair value of the bond is within level 1 of the fair value hierarchy and has been estimated by
discounting future cash flows by the relevant market yield curve at the balance sheet date.
CONSOLIDATED FINANCIAL STATEMENTS
Page 242 of 273
The fair values of other financial instruments not measured at fair value including cash and short-term
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.
No hedging contracts were entered into in 2023 and 2022.
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 2023 the Group’s exposure to interest rate risk is in relation to Greek borrowings and
RCF 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.
($’000) | 2023 | 2022 |
Impact on finance costs | ||
Interest rates increase +0.5% | 401 | 135 |
Interest rates decrease -0.5% | (401) | (135) |
Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount
of future cash inflows from financial assets on hand at the reporting date. The Group has policies in place
to ensure that all of its transactions giving rise to credit risk are made with parties having an appropriate
credit history and monitors on a continuous basis the ageing profile of its receivables.
Also, the Group has policies to limit the amount of credit exposure to any banking institution, considering
among other factors the credit ratings of the banks with which deposits are held. Credit quality
information in relation to those banks is provided below.
With regard to the risk of potential losses caused by the failure of any of the counterparties the Company
interacts with to honour the commitments they have undertaken, the Group has implemented for some
time procedures and tools to evaluate and select counterparties based on their credit rating, constantly
monitoring its exposure to the various counterparties and implementing appropriate mitigating actions,
primarily aimed at recovering or transferring receivables.
Presented below is a breakdown of trade receivables by past due bracket:
31 December | 31 December | |
($’000) | 2023 | 2022 |
Trade receivables and receivables from partners under JOA | 308,078 | 224,319 |
Allowance for impairment | (8,777) | (4,565) |
Total | 299,301 | 219,754 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 243 of 273
Trade receivables include balances from EGPC, the Egyptian governmental body that are significantly
aged.
31 December 2023 | 31 December 2022 | |||
Trade | Trade | |||
($’000) | receivables | Allowance | receivables | Allowance |
Not yet due | 38,309 | (2,022) | 75,573 | (2,377) |
Past due by less than one month | 14,200 | (750) | 27,654 | (870) |
Past due by one to three months | 34,411 | (1,816) | - | - |
Past due by three to six months | 33,684 | (1,778) | 11,032 | (347) |
Past due by more than six months | 34,004 | (1,795) | 6,095 | (192) |
Total | 154,608 | (8,161) | 120,354 | (3,786) |
Trade receivables by geography
31 December | 31 December | |
($’000) | 2023 | 2022 |
Italy | 36,854 | 57,000 |
United Kingdom | 2,260 | 6,491 |
Egypt | 154,638 | 120,361 |
Greece | 189 | 2,976 |
Israel | 114,139 | 37,491 |
Total | 308,080 | 224,319 |
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) | 2023 | 2022 |
Aa2 | 895 | - |
A1 | 30,769 | 294,505 |
A2 | 313,040 | 96,599 |
A3 | 75 | 31,084 |
BBB | 21,098 | 30,826 |
BB | - | 48,403 |
B | 3 | - |
B3 | 6,488 | 1,247 |
372,368 | 502,664 |
The Company has assessed the recoverability of all cash balances and considers they are carried within
CONSOLIDATED FINANCIAL STATEMENTS
Page 244 of 273
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 $ and sales of crude oil are
additionally denominated in $.
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 $ equivalent of the foreign currency amounts.
Liabilities | Assets | |||
($’000) | 2023 | 2022 | 2023 | 2022 |
United Kingdom Pounds (£) | 134,415 | 43,433 | 104,371 | 16,008 |
Euro | 862,698 | 816,719 | 1,175,741 | 653,420 |
CAD | 18 | 17 | - | - |
NOK | 22 | 7,977 | 1 | 22 |
ILS | 7,874 | 9,354 | 30,441 | 19,383 |
SGD | - | 63 | - | 109 |
EGP | 263 | 727 | 4,951 | 16,983 |
Total | 1,005,290 | 878,290 | 1,315,505 | 705,926 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 245 of 273
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% with all other variables held constant.
31 December 2023 | ||||||||||||||
USD | GBP | Euro | ILS | NOK | SGD | EGP | ||||||||
variation | variation | variation | variation | variation | variation | variation | ||||||||
10% | -10% | 10% | -10% | 10% | -10% | 10% | -10% | 10% | -10% | 10% | -10% | 10% | -10% | |
Effect on profit before tax | (3,768) | 2,996 | (30) | (675) | (5,004) | 4,886 | 2,257 | (2,052) | - | - | - | - | 32 | (25) |
Effect on pre-tax equity | (3,768) | 2,996 | (30) | (675) | (5,004) | 4,886 | 2,257 | (2,052) | - | - | - | - | 32 | (25) |
31 December 2022 | |||||||||||||
USD | GBP | Euro | ILS | NOK | SGD | EGP | |||||||
variation | variation | variation | variation | variation | variation | variation | |||||||
10% | -10% | 10% | -10% | 10% | -10% | 10% | -10% 10% | -10% | 10% | -10% | 10% | -10% | |
Effect on profit before tax | 12,927 | (3,634) | (2,415) | 1,883 | (6,394) | 6,986 | 5 | (4) 1,003 | (912) | (793) | 721 | 25 | 25 |
Effect on pre-tax equity | 12,927 | (3,634) | (2,415) | 1,883 | (6,394) | 6,986 | 5 | (4) 1,003 | (912) | (793) | 721 | 25 | 25 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 246 of 273
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 2023, the Group had available $235 million (2022:
$217 million) of undrawn committed borrowing facilities.
The undrawn facilities are in relation to the revolving credit facility and the term loan (refer to note 21 for
further details).
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The table includes both interest and principal
cash flows.
The Group manages its liquidity risk by ongoing monitoring of its cash flows. Group management
prepares budgets and regular cash flow forecasts and takes appropriate actions to ensure available cash
deposits and credit lines with the banks are available to meet the Group’s liabilities as they fall due.
The table below summarises the maturity profile of the Group financial liabilities based on contractual
undiscounted payments:
Carrying | Contractual | 3 months | 3–12 | More than | |||
($'000) | amounts | cash flows | or less | months | 1–2 years | 2–5 years | 5 years |
31 December 2023 | |||||||
Bank | 3,221,197 | 3,939,304 | 96,500 | 88,977 | 952,249 | 898,567 | 1,903,011 |
loans | |||||||
Lease | 65,096 | 74,656 | 4,279 | 14,302 | 27,919 | 12,378 | 15,778 |
liabilities | |||||||
Trade and | 705,270 | 740,980 | 251,215 | 349,765 | 140,000 | - | - |
other | |||||||
payables | |||||||
Total | 3,991,563 | 4,754,940 | 351,994 | 453,044 1,120,168 | 910,945 | 1,918,789 |
Carrying | Contractual | 3 months | 3–12 | More than 5 | |||
($'000) | amounts | cash flows | or less | months | 1–2 years | 2–5 years | years |
31 December 2022 | |||||||
Bank | 2,975,346 | 3,869,648 | 64,453 | 98,480 | 910,680 | 1,291,207 | 1,504,828 |
loans | |||||||
Lease | 32,271 | 33,207 | 2,231 | 6,503 | 2,967 | 19,952 | 1,554 |
liabilities | |||||||
Trade and | 936,120 | 984,802 | 311,602 | 337,634 | 238,692 | 96,874 | - |
other | |||||||
payables | |||||||
Total | 3,943,737 | 4,887,657 | 378,286 | 442,617 1,152,339 | 1,408,033 | 1,506,382 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 247 of 273
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:
Seven Maritime Company (“Seven Marine”)
was 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 operations in northern Greece. From March 2022, Mr
Efstathios Topouzoglou no longer controlled Seven Maritime neither indirectly (through Oilco) nor
directly.
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 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. The FSV arrived in Israel in August 2023.
27.2
Related party transactions
Purchases of goods and services
($’000) | Nature of transactions | 2023 | 2022 |
Other related party “Seven Marine” | Vessel leasing and services | 2,013 | 2,001 |
Other related party “Prime Marine | Construction of field support | - | 8,060 |
Energy Inc” | vessel | ||
2,013 | 10,061 |
27.3
Related party balances
Payables
($’000) | Nature of balance | 2023 | 2022 |
Seven Marine | Vessel leasing and services | - | 702 |
- | 702 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 248 of 273
Key management compensation
The Directors of Energean plc are considered to be the only key management personnel as defined by
IAS 24 Related Party Disclosures.
Annual | ||||
bonus paid | ||||
31 December 2023 ($’000) | Salary and fees | Benefits | in cash | Total |
Executive Directors | 1,561 | 75 | 1,909 | 3,545 |
Non-Executive Directors | 761 | - | - | 761 |
Total | 2,322 | 75 | 1,909 | 4,306 |
Annual | ||||
bonus paid | ||||
31 December 2022 ($’000) | Salary and fees | Benefits | in cash | Total |
Executive Directors | 1,667 | 157 | 1,570 | 3,394 |
Non-Executive Directors | 794 | - | - | 794 |
Total | 2,461 | 157 | 1,570 | 4,188 |
Commitments and contingencies
In acquiring its oil and gas interests, the Group has pledged that various work programmes will be
undertaken on each permit/interest. The exploration and development capital commitments in the
following table are an estimate of the net cost to the Group of performing these work programmes:
($’000) | 2023 | 2022 |
Capital Commitments | ||
Due within one year | 195,903 | 174,071 |
Due later than one year but within two years | 20,963 | 186,596 |
Due later than two years but within five years | 6,230 | 5,961 |
223,096 | 366,628 | |
Performance guarantees 128 | ||
Greece | 4,522 | 4,170 |
Israel | 53,006 | 97,572 |
Egypt | - | 2,000 |
UK | 95,743 | 83,976 |
Italy | 16,140 | 11,461 |
169,411 | 199,179 |
128
Performance guarantees are in respect of abandonment obligations, committed work programmes and certain financial
obligations.
CONSOLIDATED FINANCIAL STATEMENTS
Page 249 of 273
•
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 30 June 2024.
•
Blocks 12, 21, 23 and 31 ($21 million)
– As part of the conditions for obtaining exploration and
appraisal licenses during the Israeli offshore bid in December 2017, the Group provided the
Ministry of National Infrastructures, Energy, and Water with bank guarantees totalling $6 million
in January 2018, covering all blocks mentioned (12, 21, 23, and 31). These guarantees are set to
expire in January 2025. Additionally, the Group has furnished separate guarantees specific to
drilling activities in blocks 12, 23, and 31, amounting to $15 million. The breakdown of these
drilling guarantees includes an expiry date for Block 12 in November 2024, while the guarantees
for Blocks 23 and 31 are due in May 2024.
•
Israeli Natural Gas Lines (“INGL”) ($2.5 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. The guarantee is to expire on 24 July 2024.
•
Israel Other ($4.4 million)
– As part of ongoing operations in Israel, the Group has provided
various bank guarantees to third parties in Israel.
•
United Kingdom ($95.7 million)
– Following the Edison E&P acquisition, the Group issued letters
of credit for United Kingdom decommissioning obligations and other obligations under the
United Kingdom licenses.
•
Italy
– The Group issued letters of credit amounting to $16.1 million for decommissioning
obligations and other obligations under the Italian licenses.
•
Greece
– The Group issued letters of credit amounting for obligations under the Block 2 licenses.
Legal cases and contingent liabilities
Subsequent events
On 21 February 2024 Energean approved its Q4 dividend of $30 cents per share, to be paid on 29
March 2024.
On 22 February 2024 the Karish North first gas and utilisation of the second export riser were safely
achieved.
The Orion X1 exploration well reached the target reservoir in March 2024. Preliminary results indicate that
well contains no commercial hydrocarbons. Further appraisal activity is contingent upon the completion
of post-drilling well analysis. The carrying value of the related capitalised exploration and evaluation
expenses as of 31 December 2023 was $23.3 million. There has been no impairment recognised related
CONSOLIDATED FINANCIAL STATEMENTS
Page 250 of 273
Subsidiary undertakings
At 31 December 2023, the Group had investments in the following subsidiaries:
Shareholding | Shareholding | |||
Country of | At 31 | At 31 | ||
incorporation/registered | Principal | December | December | |
Name of subsidiary | office | activities | 2023 (%) | 2022 (%) |
Energean E&P | 22 Lefkonos Street, 2064 | Holding | 100 | 100 |
Holdings Ltd. | Nicosia, Cyprus | Company | ||
Energean Capital | 22 Lefkonos Street, 2064 | Holding | 100 | 100 |
Ltd. | Nicosia, Cyprus | Company | ||
Energean Group | 44 Baker Street, London | Oil and gas | 100 | 100 |
Services Ltd. | W1U 7AL, United Kingdom | exploration, | ||
development and | ||||
production | ||||
Energean Oil & Gas | 32 Kifissias Avenue, | Oil and gas | 100 | 100 |
S.A. | Marousi Athens, 151 25, | exploration, | ||
Greece | development and | |||
production | ||||
Energean | 22 Lefkonos Street, 2064 | Oil and gas | 100 | 100 |
International Ltd. | Nicosia, Cyprus | exploration, | ||
development and | ||||
production | ||||
Energean Israel Ltd. | 22 Lefkonos Street, 2064 | Oil and gas | 100 | 100 |
Nicosia, Cyprus | exploration, | |||
development and | ||||
production | ||||
Energean | 22 Lefkonos Street, 2064 | Oil and gas | 100 | 100 |
Montenegro Ltd. | Nicosia, Cyprus | exploration, | ||
development and | ||||
production | ||||
Energean Israel | Andre Sakharov 9, Haifa, | Gas | 100 | 100 |
Transmission Ltd. | Israel | transportation | ||
license holder | ||||
Energean Israel | Andre Sakharov 9, Haifa, | Financing | 100 | 100 |
Finance Ltd. | Israel | activities | ||
Energean Egypt Ltd. | 22 Lefkonos Street, 2064 | Oil and gas | 100 | 100 |
Nicosia, Cyprus | exploration, | |||
development and | ||||
production | ||||
Energean Hellas | 22 Lefkonos Street, 2064 | Oil and gas | 100 | 100 |
Ltd. | Nicosia, Cyprus | exploration, | ||
development and | ||||
production | ||||
Energean Italy | 31 Foro Buonaparte, | Oil and gas | 100 | 100 |
S.p.a. | 20121 Milano, Italy | exploration, | ||
development and | ||||
production | ||||
Energean Sicilia | Via Salvatore Quasimodo | Oil and gas | 100 | 100 |
S.r.l. | 2 – 97100 Ragusa | exploration, | ||
(Ragusa) |
CONSOLIDATED FINANCIAL STATEMENTS
Page 251 of 273
Shareholding | Shareholding | |||
Country of | At 31 | At 31 | ||
incorporation/registered | Principal | December | December | |
Name of subsidiary | office | activities | 2023 (%) | 2022 (%) |
development and | ||||
production | ||||
Energean | 44 Baker Street, London | Oil and gas | 100 | 100 |
Exploration Ltd. | W1U 7AL, United Kingdom | exploration, | ||
development and | ||||
production | ||||
Energean UK Ltd. | 44 Baker Street, London | Oil and gas | 100 | 100 |
W1U 7AL, United Kingdom | exploration, | |||
development and | ||||
production | ||||
Energean Egypt | Block #17, City Center, 5th | Oil and gas | 100 | 100 |
Energy Services | Settlement, New Cairo, | exploration, | ||
JSC | 11835, Egypt | development and | ||
production | ||||
Energean | 44 Baker Street, London | Oil and gas | 100 | 100 |
Investments Ltd. | W1U 7AL, United Kingdom | exploration, | ||
development and | ||||
production | ||||
Energean Morocco | 44 Baker Street, London | Oil and gas | 100 | 100 |
Ltd. | W1U 7AL, United Kingdom | exploration, | ||
development and | ||||
production |
Exploration, development and production interests
Development and production
Group’s | ||||||
Licence/unit | Fiscal | working | Joint | |||
Country | area | Fields | regime | interest | operation | Operator |
Israel | ||||||
Karish | Karish North, Karish | Concession | 100% | No | NA | |
Main | ||||||
Tanin | Tanin | Concession | 100% | No | NA | |
Egypt | ||||||
Abu Qir | Abu Qir, Abu Qir | PSC | 100% | No | NA | |
North, Abu Qir West, | ||||||
Yazzi (32.75%) | ||||||
NEA | Yazzi (67.25%), | PSC | 100% | No | NA | |
Python | ||||||
NI | Field A (NI-1X), Field | PSC | 100% | No | NA | |
B (NI-3X), NI-2X, | ||||||
Viper (NI-4X) | ||||||
Greece | ||||||
Prinos | Prinos, Epsilon | Concession | 100% | No | NA |
CONSOLIDATED FINANCIAL STATEMENTS
Page 252 of 273
Group’s | ||||||
Licence/unit | Fiscal | working | Joint | |||
Country | area | Fields | regime | interest | operation | Operator |
South Kavala | Concession | 100% | No | NA | ||
Katakolo | Katakolo | Concession | 100% | No | NA | |
(undeveloped) | ||||||
Italy | ||||||
C.C6.EO | Vega A (Vega B, | Concession | 100% 129 | Yes | Energean | |
undeveloped) | ||||||
B.C8.LF | Rospo Mare | Concession | 100% 130 | Yes | Energean | |
Fiume tenna | Verdicchio | Concession | 100% | No | Energean | |
B.C7.LF | Sarago, cozza, | Concession | 95% | Yes | Energean | |
vongola | ||||||
B.C11.AS | Gianna | Concession | 49% | Yes | ENI | |
GIANNA | (undeveloped) | |||||
Garaguso | Accettura | Concession | 50% | Yes | Energean | |
A.c14.AS | Rosanna and Gaia | Concession | 50% | Yes | ENI | |
A.C15.AX | Valentina, Raffaella, | Concession | 10% | Yes | ENI | |
Emanuela, Melania | ||||||
A.c16.AG | Delia, Demetra, Sara, | Concession | 30% | Yes | ENI | |
Dacia, Nicoletta | ||||||
A.C8.ME | Anemone and | Concession | 19% and | Yes | ENI | |
Azelea 131 | 15.675% | |||||
Masseria | Appia and Salacaro | Concession | 50% | Yes | Energean | |
Monaco | (undeveloped) | |||||
G.C1.AG | Cassiopea , Gemini, | Concession | 40% | Yes | ENI | |
Centauro | ||||||
B.C14.AS | Calipso and Clara | Concession | 49% | Yes | ENI | |
West | ||||||
B.C20.AS | Carlo, Clotilde e | Concession | 49% | Yes | ENI | |
Didone | ||||||
(undeveloped) | ||||||
Montignano | Cassiano and | Concession | 50% | Yes | Energean | |
Castellaro | ||||||
B.C13.AS | Clara Est, Clara | Concession | 49% | Yes | ENI | |
Nord, Clara NW, | ||||||
(Cecilia | ||||||
undeveloped) | ||||||
Comiso (EIS) | Comiso | Concession | 100% | No | NA | |
A.c13.AS | Daria, ( Manuela | Concession | 49% | Yes | ENI | |
,Arabella, Ramona | ||||||
undeveloped) |
129
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 January 2021 and, according to the JOA, the decommissioning costs will be borne by both parties according
to their initial WI (Energean 60%, ENI 40%).
130
Energean has requested from the operator to exit the licence.
131
Energean has requested from the operator to exit the licence.
CONSOLIDATED FINANCIAL STATEMENTS
Page 253 of 273
Group’s | ||||||
Licence/unit | Fiscal | working | Joint | |||
Country | area | Fields | regime | interest | operation | Operator |
B.C10.AS | Emma West and | Concession | 49% | Yes | ENI | |
Giovanna | ||||||
A.C36.AG | Fauzia | Concession | 40% | Yes | ENI | |
Torrente | Grottammare | Concession | 76% | Yes | Petrorep | |
menocchia | (undeveloped) | |||||
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 | 83.32% | Yes | Energean | |
Porto | Porto civitanova | Concession | 40% | Yes | GPI | |
civitanova | ||||||
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 | 100% | Yes | Energean | |
San Marco | San Marco | Concession | 20% | No | ENI | |
B.C1.LF | Santo Stefano | Concession | 95% | 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 | Traetta | Concession | 14% | Yes | Canoel | |
Grottavecchia | ||||||
S. Anna (EIS) | Tresauro | Concession | 25% | Yes | Enimed | |
Torrente | Vigna Nocelli | Concession | 50% | Yes | Rockhopper | |
Celone | (Masseria Conca | Italia | ||||
undeveloped) | ||||||
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 |
CONSOLIDATED FINANCIAL STATEMENTS
Page 254 of 273
Exploration
Group’s | ||||||
working | Joint | |||||
Country | Concession | Fields | Fiscal regime | interest | operation | Operator |
Israel | ||||||
Blocks 12, | Katlan, Hermes and | Concession | 100% | No | N/A | |
21, 23, 31 | Hercules | |||||
Egypt | ||||||
East North | PSC | |||||
Bir El Nus | ||||||
50% | Yes | Energean | ||||
Greece | ||||||
Block-2 | Concession | 75% | Yes | Energean | ||
Prinos | Prinos CO2 Storage | Concession | 100% | No | N/A | |
Italy | ||||||
G.R13.AG | Lince prospect | Concession | 40% | Yes | ENI | |
G.R.14.AG | Panda, Vela prospect | Concession | 40% | Yes | ENI | |
Croatia | ||||||
Irena | PSC | 70% | No | NA |
COMPANY FINANCIAL STATEMENTS
Page 255 of 273
As at 31 December 2023
($’000) | Notes | 2023 | 2022 |
Assets | |||
Non-current assets | |||
Investment in subsidiaries | 3 | 1,289,481 | 1,163,565 |
Property plant and equipment | 34 | 46 | |
Other intangible assets | 47 | 55 | |
Loans and other intercompany receivables | 4 | 173,509 | 334,116 |
1,463,071 | 1,497,782 | ||
Current assets | |||
Trade and other receivables | 6 | 23,414 | 74,909 |
Cash and cash equivalents | 1,202 | 336 | |
24,616 | 75,245 | ||
Total assets | 1,487,687 | 1,573,027 | |
Equity and liabilities | |||
Shareholders’ equity | |||
Share capital | 9 | 2,449 | 2,380 |
Share premium | 9 | 465,331 | 415,388 |
Other reserves | 5 | - | 10,459 |
Share based payment reserve | 32,939 | 25,611 | |
Retained earnings | 447,626 | 615,200 | |
948,345 | 1,069,038 | ||
Non-current liabilities | |||
Other payables | 516 | 786 | |
Borrowings | 8 | 444,313 | 442,879 |
444,829 | 443,665 | ||
Current liabilities | |||
Trade and other payables | 7 | 14,513 | 14,774 |
Borrowings | 8 | 80,000 | 45,550 |
Total current liabilities | 94,513 | 60,324 | |
Total liabilities | 539,342 | 503,989 | |
Total equity and liabilities | 1,487,687 | 1,573,027 |
During the year the Company made a profit of $35.7 million (31 December 2022: $24.2 million).
Approved by the Board and authorised for issuance on 20 March 2024.
Matthaios Rigas
Chief Executive Officer
Panagiotis Benos
Chief Financial Officer
COMPANY FINANCIAL STATEMENTS
Page 256 of 273
Company Statement of Changes in Equity
For the year ended 31 December 2023
Equity | ||||||
Share | component | |||||
based | of | |||||
Share | Share | payment | convertible | Retained | Total | |
($’000) | capital | premium | reserve | bonds | earnings | equity |
At 1 January 2022 | 2,374 | 915,388 | 19,374 | 10,459 | 197,491 | 1,145,086 |
Profit for the year | - | - | - | 24,213 | 24,213 | |
Transactions with owners | ||||||
of the company | ||||||
Exercise of share options | 6 | - | (6) | - | - | - |
Share premium reduction | - | (500,000) | - | - | 500,000 | - |
(note 9) | ||||||
Share based payment | - | - | 6,243 | - | - | 6,243 |
charges | ||||||
Dividend Paid (note 5) | - | - | - | - | (106,504) | (106,504) |
At 31 December 2022 | 2,380 | 415,388 | 25,611 | 10,459 | 615,200 | 1,069,038 |
Profit for the year | - | - | - | 35,665 | 35,665 | |
Transactions with owners | ||||||
of the company | ||||||
Share based payment | - | - | 7,340 | - | - | 7,340 |
charges | ||||||
Exercise of share options | 12 | - | (12) | - | - | - |
Conversion of the loan | 57 | 49,943 | - | (10,459) | 10,459 | 50,000 |
note (note 8) | ||||||
Dividend paid (note 5) | - | - | - | - | (213,698) | (213,698) |
At 31 December 2023 | 2,449 | 465,331 | 32,939 | - | 447,626 | 948,345 |
COMPANY FINANCIAL STATEMENTS
Page 257 of 273
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 $ 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 88C and 88D of IAS 12 “Income Taxes”;
g.
the requirements of paragraphs 45(b) and 46–52 of IFRS 2 “Share-based payments”
h.
the requirements of paragraph 17 of IAS 24 “Related Party Disclosures”;
i.
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
j.
the requirements of paragraphs 30 and 31 of IAS 8 “Accounting Policies, Changes in Accounting
Estimates and Errors”.
The Group has also applied the temporary exception to recognising and disclosing information about
deferred tax assets and liabilities related to Pillar Two income taxes in accordance with Amendments to
IAS 12 International Tax reform: Pillar Two Model Rules, issued by IASB in May 2023.
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.
COMPANY FINANCIAL STATEMENTS
Page 258 of 273
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
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest rate (“
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.
2.6
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.
2.7
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.
2.8
Capital management
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
COMPANY FINANCIAL STATEMENTS
Page 259 of 273
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.
2.9
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.
3.
Investments in subsidiaries
The following table shows the movement in the investment in subsidiaries during the year:
$'000 | |
At 1 January 2023 | 1,163,565 |
Additions | 125,916 |
At 31 December 2023 | 1,289,481 |
The additions are attributed to further cash injections for share issuances in existing subsidiaries.
Additionally, there was the capitalisation of the $125.9 million loan receivable from Energean Oil & Gas
SA (EOGSA), inclusive of $15 million in accrued interest. This resulted in an increase in the Company's
investment in its subsidiary, Energean E&P Holdings Ltd. (EEPHL), through the issuance of 113,920,182
ordinary shares with a nominal value of $1.1052 each. The latter was achieved through a novation
agreement between EOGSA and EEPHL, which was executed during the reporting period.
COMPANY FINANCIAL STATEMENTS
Page 260 of 273
The principal activity of the majority of these companies relates to oil and gas exploration, development
and production.
A complete list of Energean plc Group companies on 31 December 2023, and the Company’s percentage
of share capital are set out in the note 30 of the Group financial statements.
4.
Loans and other intercompany receivables, non-current
($’000) | 2023 | 2022 |
Loans to subsidiaries | 172,294 | 332,050 |
Receivables from share-based awards to subsidiary undertakings | 1,215 | 2,066 |
Total | 173,509 | 334,116 |
On 31 December 2023 the Company has a loan receivable amounting to $172.3 million from Energean
Capital Ltd. (“
ECL
”), a subsidiary. This loan carries a fixed interest rate of 5.5% p.a. and is set to mature
on 18 May 2027.
In addition to the ECL loan, the Company had a loan receivable amounting to $110.9 million from
Energean Oil & Gas SA (“
EOGSA
”) in 2022. This loan was fully capitalised into the investment in the
subsidiary within the reporting period. Refer to note 3 of these financial statements for further detail.
On 31 December 2023 no expected credit loss allowances (2022: $nil) were held in respect of the
recoverability of loans to subsidiaries.
5.
Equity
Dividends
In 2023, the company declared and paid dividends of 30 US cents per ordinary share on these dates:
•
For the Q4 2022 operating period, dividends were declared on 8 February 2023 and paid on 30
March 2023.
•
For the Q1 2023 operating period, dividends were declared on 17 May 2023 and paid on 30 June
2023.
•
For the Q2 2023 operating period, dividends were declared on 5 September 2023 and paid on 29
September 2023.
•
For the Q3 2023 operating period, dividends were declared on 15 November 2023 and paid on
29 December 2023.
In 2022, the company also distributed dividends of 30 US cents per ordinary share twice:
•
A dividend was declared on 8 September 2022 and paid on 30 September 2022.
•
Another dividend was declared on 17 November 2022 and paid on 30 December 2022.
$ cents per share | ($’000) | |||
2023 | 2022 | 2023 | 2022 | |
Dividends announced and paid in cash | ||||
March | 30 | - | 53,252 | - |
June | 30 | - | 53,411 | - |
September | 30 | 30 | 53,518 | 53,252 |
December | 30 | 30 | 53,517 | 53,252 |
Total | 120 | 60 | 213,698 | 106,504 |
COMPANY FINANCIAL STATEMENTS
Page 261 of 273
Distributable reserves
31 | 31 | |
December | December | |
($’000) | 2023 | 2022 |
Total equity | 948,345 | 1,069,038 |
Non-distributable | ||
Share capital | (2,449) | (2,380) |
Share premium (note 9) | (465,331) | (415,388) |
Equity component of convertible bonds 132 | - | (10,459) |
Unrealised profits included in retained earnings reserve | (228,326) | (232,788) |
Unrealised share based payment reserve 133 | (16,431) | (13,340) |
Total distributable reserves | 235,808 | 394,683 |
6.
Trade and other receivables
($’000) | 2023 | 2022 |
Financial items | ||
Due from subsidiary undertakings | 22,519 | 74,004 |
Refundable VAT | 315 | 374 |
22,834 | 74,378 | |
Non-financial items | ||
Deposits and prepayments | 580 | 531 |
Total trade and other receivables | 23,414 | 74,909 |
At 31 December 2023 no expected credit loss allowances (2022: $nil) were held in respect of the
recoverability of amounts due from subsidiary undertakings.
The amounts due from subsidiary undertakings include $1.5 million of interest receivable on the
intercompany loans (2022: $12.1 million). 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.
In 2022, the amounts due from subsidiary undertakings also included $50 million receivable from
Energean E&P Holdings in relation to dividends received in 2022.
132
Equity component of $50 million of convertible loan notes (discussed in note 8), which were issued in February 2021 and were
converted into equity upon maturity on 20 December 2023.
133
Unrealised portion of the share based payment reserve included in total equity.
COMPANY FINANCIAL STATEMENTS
Page 262 of 273
7.
Trade and other payables
($’000) | 2023 | 2022 |
Staff costs accrued | 2,636 | 1,906 |
Trade payables | 2,534 | 3,219 |
Due to subsidiary undertakings | 900 | 1,515 |
Finance costs accrued | 7,215 | 6,161 |
Accrued expenses | 913 | 1,718 |
Income taxes | 52 | 36 |
Social insurance and other taxes | 206 | 170 |
Other creditors | 57 | 49 |
Total trade and other payables | 14,513 | 14,774 |
The amounts are unsecured and are usually paid within 30 days of recognition.
8.
Borrowings
($’000) | 2023 | 2022 |
Non-current | ||
Senior Secured notes | 444,313 | 442,879 |
Carrying value of non-current borrowings | 444,313 | 442,879 |
Current | ||
Convertible loan notes | - | 45,550 |
Revolving credit line facility | 80,000 | - |
Carrying value of current borrowings | 80,000 | 45,550 |
On 25 February 2021, $50 million worth of convertible loan notes (“
Convertible Loan Notes
”) were issued.
These notes had a maturity date set for 29 December 2023, a strike price of £9.505 (which was subject
to adjustments for dividend payments up until the maturity date), and were issued at a zero-coupon rate.
On 20 December 2023, the loan was converted into equity, resulting in the issuance of 4,422,013 ordinary
shares at a conversion price of £8.3843 per share.
On 18 November 2021, the Company completed the issuance of senior secured notes totalling $450
million in aggregate principal amount. These notes, due to mature in 2027, carry a fixed interest rate of
6.5%.
On 8 September 2022, the Company secured a three-year, $275 million multicurrency revolving credit
facility (RCF) with a syndicate of four banks, spearheaded by ING Bank N.V. In May 2023, this facility's
limit was increased to $300 million. The RCF is designed to provide additional liquidity for general
corporate needs as necessary. The interest rate applied to any amounts drawn as loans is set at 5% plus
the SOFR rate.
Throughout 2023, the Company utilised $80 million from this facility at an average interest rate of 10.3%.
Of this amount, $40 million has been repaid subsequent to the reporting date.
COMPANY FINANCIAL STATEMENTS
Page 263 of 273
9.
Share capital
2022 | 2023 | 2022 | |
Authorised | |||
At 1 January 2022 | 177,602,560 | 2,374 | 915,388 |
Share premium reduction | - | - | (500,000) |
Issued during the period | - | - | - |
New shares | - | - | - |
Employee share schemes | 437,945 | 6 | - |
At 31 December 2022 | 178,040,505 | 2,380 | 415,388 |
Share premium reduction | - | - | - |
Issued during the period | - | - | - |
New shares (Note A) | 4,422,013 | 57 | 49,943 |
Employee share schemes | 1,018,441 | 12 | - |
At 31 December 2023 | 183,480,959 | 2,449 | 465,331 |
As at 31 December 2023, the Company’s issued share capital consisted of 183,480,959 ordinary shares
of £0.01 each. The Company has only one class of share, which carries no right to fixed income. Each
share carries the right to one vote at General Meetings of the Company.
In 2022, Energean plc by special resolution reduced its share premium account, as confirmed by an Order
of the High Court of Justice on the 14 June 2022.
10.
Staff costs
($’000) | 2023 | 2022 |
Salaries 134 | 7,129 | 5,892 |
Social insurance costs and other funds | 2,033 | 785 |
Share-based payments | 4,249 | 3,847 |
Pension contribution & insurance | 198 | 305 |
Total staff costs | 13,609 | 10,829 |
11.
Share-based payment
Energean Long Term Incentive Plan (LTIP)
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
134
Including directors’ remuneration.
COMPANY FINANCIAL STATEMENTS
Page 264 of 273
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 2023 was 1.2 years
(31 December 2022: 1.2 years), number of shares outstanding 1,763,308 and weighted average price at
grant date £10.46 (or 13.31).
There are further details of the LTIP in the Remuneration 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 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 2023 was 0.8 years
(31 December 2022: 0.8 years), number of shares outstanding 277,886 and weighted average price at
grant date £11.45 (or $14.69).
There are further details refer to note 25 in the Group financial statements.
12.
Related party transactions
The Company’s subsidiaries at 31 December 2023 and the Group’s percentage of share capital are set
out are in note 30 of the Group financial statements. The following table provides the Company’s
balances which are outstanding with subsidiary companies at the balance sheet date:
($’000) | 2023 | 2022 |
Loans to subsidiaries | 172,294 | 332,050 |
Receivables from share-based awards to subsidiary undertakings | 1,215 | 2,066 |
Trade and other receivables | 22,519 | 74,004 |
Total amounts receivable from subsidiary undertakings | 196,028 | 408,120 |
Amounts payable to subsidiary undertakings | 900 | 1,515 |
Total amounts outstanding | 195,128 | 406,605 |
The amounts outstanding are unsecured and will be settled in cash.
In 2023 the Company also purchased services for $2.7 million from other related parties, ultimately
controlled by the Company.
13.
Directors’ remuneration
Directors’ remuneration has been provided in the remuneration report within the Annual Report. Please
refer to pages 136 to 165 of the Annual Report.
14.
Auditor’s remuneration
Auditor’s 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.
COMPANY FINANCIAL STATEMENTS
Page 265 of 273
15.
Subsequent events
OTHER INFORMATION
Page 266 of 273
Other Information
2023 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 2023 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.
Royalties
Royalties are payments for the rights to extract oil and gas resources, typically at a set percentage of
revenue less any allowable deductions.
OTHER INFORMATION
Page 267 of 273
Dividends
Dividends, in this context, are dividend payments other than those paid to a government as an ordinary
shareholder of an entity on the same terms as to other ordinary shareholders, unless paid in lieu of
production entitlements or royalties. For the year ended December 31, 2023, 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.
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 excluded. For the year ended
December 31, 2023, 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 $106,964 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.
Payments overview
The table below shows the relevant payments to governments made by Energean in the year ended 31
December 2023 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 or infrastructure improvements, therefore,
those categories are not shown in the tables.
OTHER INFORMATION
Page 268 of 273
Country
Income taxes
Royalties
Bonuses
Fees
Total
$m
$m
$m
$m
$m
Egypt
57.76
135
-
1.20
0.24
59.20
Greece
-
-
-
0.62
0.62
Israel
0.40
88.71
-
0.62
89.73
Italy
112.78
136
20.97
-
4.57
138.32
United Kingdom
(0.17)
-
-
0.64
0.47
Total
170.77
109.68
1.20
6.69
288.34
Payments by project
Country
Income
taxes
Royalties
Bonuses
Fees
Total
$m
$m
$m
$m
$m
Egypt-AbuQir
57.76
-
-
0.10
57.86
Egypt-NorthElAmriya/NorthIdku
-
-
0.20
0.05
0.25
Egypt-Exploration
-
-
1.00
0.09
1.09
Egyptian Government report
57.76
-
1.20
0.24
59.20
Greece–Prinos
-
-
-
0.06
0.06
Greece–Exploration
-
-
-
0.53
0.53
Greece–Katakolo
-
-
-
0.03
0.03
Greek Government report
-
-
-
0.62
0.62
Israel-Karish/Taninleases
-
88.71
-
0.13
88.84
Israel-Exploration assets
-
-
-
0.49
0.49
Israel-Corporate
0.40
-
-
-
0.40
Israeli Government report
0.40
88.71
-
0.62
89.73
Italy-A.C14.AS
-
-
-
0.11
0.11
Italy-A.C16.AG
-
-
-
0.44
0.44
Italy-B.C10.AS
-
0.31
-
0.20
0.51
Italy-B.C13.AS
-
4.40
-
0.42
4.82
135
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 2023, 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, 2023 payment
relates to 2022 taxable profits.
136
The amount includes Italian corporate taxes of 19.10 US million and the Italian solidarity contribution (windfall tax) of 93.68 US
million paid during 2023.
OTHER INFORMATION
Page 269 of 273
Country
Income
taxes
Royalties
Bonuses
Fees
Total
Italy-B.C14.AS
-
2.40
-
0.17
2.57
Italy-B.C20.AS
-
-
-
0.11
0.11
Italy-B.C1.LF
-
-
-
0.14
0.14
Italy-B.C7.LF
-
1.29
-
0.28
1.57
Italy-B.C8.LF
-
5.46
-
0.99
6.45
Italy-C.C6.EO
-
3.13
-
0.18
3.31
Italy-ColleDiLauro
-
0.32
-
0.05
0.37
Italy-ComisoII
-
1.21
-
-
1.21
Italy-Garaguso
-
1.10
-
0.10
1.20
Italy-Massignano
-
-
-
0.12
0.12
Italy-Montignano
-
-
-
0.13
0.13
Italy-S.Anna (Tresauro)
-
1.35
-
-
1.35
Italy-Other
-
-
-
1.13
1.13
Italy-Corporate
112.78
-
-
-
112.78
Italian Government
112.78
20.97
-
4.57
138.32
UK-Tors&Wenlockassets
-
-
-
0.48
0.48
UK–Scott&Telfordassets
-
-
-
0.04
0.04
UK-Appraisalassets
-
-
-
0.08
0.08
UK–Markham
-
-
-
0.04
0.04
UK–Corporate
(0.17)
-
-
-
(0.17)
UK Government
(0.17)
-
-
0.64
0.47
Total
170.77
109.68
1.20
6.69
288.34
OTHER INFORMATION
Page 270 of 273
Glossary
CO2 – Carbon dioxide
CO2e – Carbon dioxide equivalent
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
bop/d – 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
EURIBOR – The Euro Interbank Offered Rate
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
OTHER INFORMATION
Page 271 of 273
FPSO – Floating Production Storage and Offloading vessel
FRC – Financial Reporting Council
FRS – Financial Reporting Standard
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
IBOR – Interbank Offered Rate
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
Kboe/d – Thousands of barrels of oil equivalent per day
km – Kilometres
KPI – Key Performance Indicator
L
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 MMscf/d – Million standard cubic feet per day
OTHER INFORMATION
Page 272 of 273
MMtoe – Million tonnes of oil equivalent
MoU – Memorandum of Understanding
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
OTHER INFORMATION
Page 273 of 273
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 2024: Annual General Meeting