Energean

Energean Oil & Gas plc 
Annual Report 2018

Delivering value…

...through growth, 
responsibility and 
discipline.

2018 was a very successful year for Energean. 
In 1Q, we concurrently raised $460 million via 
our IPO on the Premium Segment of the London 
Stock Exchange and $1.275 billion of project 
finance, securing the funding for, and enabling 
a Final Investment Decision (FID) to be taken on, 
our flagship Karish and Tanin gas development 
project. Over the remainder of the year the project 
progressed on time and on budget and we achieved 
the key milestone of first steel cut on the Energean 
Power FPSO hull in November 2018. 

In Greece, we increased revenues by 56% whilst 
reducing unit cost of production by 29% and 
made significant progress on the Epsilon 
development project.

Our long-term strategy is to deliver sustainable 
value to stakeholders by leveraging the Group’s 
experience and expertise in identifying, acquiring, 
developing and operating oil and gas assets in 
the Mediterranean region, and by meeting the 
economic, social and environmental challenges 
of what is a fast-growing energy market.

Strategic report

Corporate governance

Financial statements

Other information

Key highlights

Financial

Revenue
US$ million

57.7

39.7

Adjusted EBITDAX
US$ million

90.3

52.4

16.2

20.7

2016

2017

2018

2016

2017

2018

Cash from operating activities
US$ million

Cost of production per barrel
US$

24.7

62.7

19.1

17.6

29.1

15.2

2016

2017

2018

2016

2017

2018

Gearing ratio
%

24.4

26.2

(7.0)

2016

2017

2018

Operational

Average daily production 

2P reserves 

4,053 bopd

2017: 2,803 bopd

347 MMboe 

2017: 51 MMbbls oil

Other Information
Glossary 
Company information 

GSPAs signed in Israel 

2C resources 

4.6 bcm/yr

2017: 0

58 MMboe 

2017: 250 MMboe

Contents

Strategic Report
Key highlights 
About Energean 
Chairman’s statement 
Chief Executive’s review 
Our business model 
A strong investment proposition 
Market overview 
Our strategy in action
 Optimisingproduction
 Developingreserves
 Addinghydrocarbons
 Maintainingadisciplined

financial framework

Our key performance indicators 
Review of operations 
Financial review 
Corporate social responsibility
 Ourapproach
 Employees
 Health&safety
 Environment
 Community
Risk management 
Principal risks 
Viability statement 

01
02
06
08
16
18
20

24
26
30

32
34
36
40

44
46
48
50
52
56
58
63

65 
66
70
71
74

Corporate Governance
Chairman’s letter 
BoardofDirectors
Executive Committee 
Corporate governance report 
Audit and Risk Committee report 
Nomination and Governance 
Committee report
Health,SafetyandEnvironment 
78
Committee report 
79
Remuneration Committee report 
Directors’Report
95
StatementofDirectors'responsibilities 98

77

Financial Statements
Auditor’s report 
Consolidatedfinancialstatements
Notestothefinancialstatements
Companyfinancialstatements
NotestotheCompanyfinancial 
statements 
Payments to governments 
Transparency disclosure (unaudited) 

100
107
114
161

166
171
172

174 
176

Energean Oil & Gas plc Annual Report 2018 01

About Energean

Strategic report

Corporate governance

Financial statements

Other information

Creating the leading E&P 
player in the Mediterranean

We are an independent E&P company focused on developing sustainable 
resources in the Mediterranean, where we hold 13 licences and operate 
assets with a production track record of more than 38 years.

Key facts

Since inception in 2007 Energean has built up a balanced portfolio of producing and development  
assets, increasing its 2P reserves from 2 MMboe in 2007 to 347 MMboe of 2P reserves and 58 MMboe  
of2Cresourcesattheendof2018.Energeaniscommittedtorealisingthesignificantvalueandgrowth 
potential of its production assets in Greece, the Karish and Tanin development asset offshore Israel,  
and its exploration acreage across Israel, Western Greece and Montenegro.

Where we operate

Energean currently holds 13 licences across the Mediterranean. Our asset base provides 
an attractive, balanced mix of producing, development and exploration assets, creating 
near- and long-term value. We are focused on value-accretive growth opportunities within 
the regionandwillcontinuetopursueorganicandinorganicgrowthoptionsthatbenefit
all ofourstakeholders.

Operational 
strength

Effective  
execution

+45%

Production growth1

-29%

Cost of production1

35%

2P + 2C increase1

13

GSPAs signed, securing  
project economics

8

bcm/yr FPSO under 
construction

1Q 2021

Ontracktodeliverfirst 
gas from Karish

Proven access 
to capital

$13bn

Revenue underpinned by gas 
sales and purchase agreements 
in Israel

39

MMboe reserves in Prinos, 
up from 2 MMboe at acquisition

$1.5bn

Valuation from just  
$1m 10 years ago

FPSO Hull 
delivery

3 Karish Main 
wells

Karish North 
well

Key milestones 
2019

1.  2017 – 2018

02 Energean Oil & Gas plc Annual Report 2018

Greece

Producing

Prinos 100%

Prinos North 100%

South Kavala 100%

In development

Epsilon 100%

Prinos 100%

Prinos North 100%

Katakolo 100%

Exploration

Prinos 100%

South Kavala 100%

Katakolo 100%

Ioannina 40%

Aitoloakarnania 40%

Montenegro

Exploration

Block 26 100%

Block 30 100%

Israel

In development

Karish 70%*

Tanin 70%*

Exploration

Karish 70%*

Tanin 70%*

Blocks 12, 21, 22, 23, 31 (all 70%)

 Oil 

 Gas 

% Ownership

*  Working interest in the Karish and Tanin assets was 50% 

as of 31 December2017andincreasedto70%inMarch2018.

Energean Oil & Gas plc Annual Report 2018 03

About Energean continued

Our history

Strategic report

Corporate governance

Financial statements

Other information

Awards
Oil & gas deal  
of the year

Energy company 
of the year

Deal of the year, Executive of the year,  
Small Cap of the year

2007

2008

2010

2013

2014

2015

2016

2017

2018

2019

Aegean Energy 
S.A. announced 
the purchase 
of 100% of 
Eurotech’s 
shares, majority 
shareholder of 
Kavala Oil S.A.

Aegean 
Energy S.A. 
changed 
its name to 
Energean  
Oil & Gas

Aegean Energy 
initiated a new 
development 
plan for Prinos 
North and 
Epsilonfields

Purchased 
the Energean 
Force

Completed a 
3Dseismic
survey in the 
Prinos Oil 
Field

Multi-year 
offtake 
agreement 
signed between 
BP and Energean 
Oil & Gas for  
the entire  
oil production 
from Prinos

Aegean Energy 
S.A. achieved 
extension of  
the concession 
licence for  
the Prinos Oil 
Field area

Third Point 
investment as 
equity supporter

Acquired 
100% interest 
in Karish and 
Taninfields,
offshore Israel, 
fromDelek
Drillingand
Avner

Secured 
US$75million 
EBRDRBL
facility as well 
as agreed 
US$20million 
financefor
exploration 
assets 

Kerogen Capital 
50% investment 
in Energean 
Israel 

Awarded two 
offshore blocks 
in Montenegro 
with limited 
commitments

Repsol farms 
in toEnergean’s
Ioannina and 
Aitoloakarnania 
Blocks, onshore 
Western Greece

Awardedfive
new exploration 
blocks offshore 
Israel

Signed a total 
of 12 GSPA 
agreements 
for the sale of 
4.2bcm/year 
of gas 

“I’m proud, grateful and happy to be part 
of the fast growth and strong consolidation 
of Energean over the last 10 years.”

Halina Dana
Production Technologist

January:
–  Completed seismic 

acquisition over licences 
23 and31,offshore Israel

February:
–  Completed seismic 

acquisition over Blocks 26 and 
30, offshore Montenegro 

–  Commenced our drilling 

programme offshore Israel

April:
–  First oil delivered from the 

Epsilon Extended Reach Well

–  Gas discovery in Karish North

January:
–  Signed extended and updated 
US$180mRBLSeniorfacility
for the Greek assets

March:
–Deliveredthelargest 

oilandgasIPOinLondonfor
four years, raising US$460m.

–  Signed US$1.275bn of 

project financingtodevelop
theKarishfield.

–  Took Final Investment 

DecisionontheKarishand 
Tanin development

–  Increased shareholding 

in Energean Israel to 70% 
(Kerogen Capital holding 
remaining 30%)

October:
–  Started trading on the Tel 

Aviv Stock Exchange (TASE) 
through a secondary listing

November:
–  Achieved First Steel Cut on the 
EnergeanPowerFPSOHull 

December:
–EnergeanIsraelLimited

(Energean plc 70%) signed 
anMoUwithINGLforthe
transfer of near-shore and 
onshore infrastructure, 
resultingincashinflowof
approximately 369 million 
NIS (US$98 million)

–  13th GSPA signed, increasing 
total gas sales contracted to  
4.6bcm/year

04 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 05

Chairman’s statement

Continued delivery 
and momentum

Key board agenda focus for 2019
 X Health&safety
 X Corporate culture
 X DeliveringonkeyprojectmilestonesforKarishandTanin
 X Maximising value from the Prinos Area
 X Maintaining capital discipline
 X Compliance with the 2018 Corporate Governance Code
 X Progressing our CSR programme

Simon Heale
Chairman

“We will continue to deliver value for 
shareholders by focusing on operational 
excellence, effective project delivery, risk 
mitigation and disciplined capital allocation.”

Strategic report

Corporate governance

Financial statements

Other information

Dear Shareholder,
Iampleasedtopresentourfirstsetoffullyearresultssince
EnergeanenteredthePremiumListingSegmentoftheLondon
Stock Exchange with our IPO in March of this year, and promotion 
to the FTSE 250 following June’s index review. Our $460 million 
equityraiserepresentedthelargestoilandgasIPOinLondonfor
nearly four years and marked an important step forward in the 
Company’s development. In October, we commenced trading 
through our secondary listing on the Tel Aviv Stock Exchange, 
subsequently entering the Tel Aviv 35 index, and further expanding 
the accessibility of our exciting Mediterranean energy story to 
a widerpoolofinvestors.

Securing funding of $1.94 billion in 2018 against an uncertain 
market backdrop was a momentous achievement for Energean, 
ofwhichIamextremelyproud.BecauseofourLondonIPO,
theUS$1.275billionprojectfinancefacility,andthe$0.2billion
Reserve BasedLending(RBL)facility,ourdevelopmentsarefunded.
This meansthatweareconfidentwecandelivertheoperational
progressandmomentumthatisnecessarytomeetour ambitious
value creation goals. 

Alongside these corporate achievements, Energean delivered 
anotheryearofrobustfinancialandoperationalperformance.
Revenue growth of 56% was delivered whilst simultaneously 
reducing unit cost of production by 29%. In addition, strong 
progresswas madeinadvancingourKarishandTaninproject,
wherewehit allofourmilestonesandremainconfidentof
delivering firstgas in1Q2021.

Underpinning our success in 2018 is Energean’s steadfast 
commitment to delivering operational excellence, effective project 
delivery, risk mitigation and disciplined capital allocation, within a 
strong corporate culture and an even stronger health, safety and 
environmental(HSE)focus.

Together, we are determined to make the Company the leading 
independent operator in the Mediterranean, delivering value for 
all of ourshareholdersandstakeholders.

Our Board and Governance
Our Board was chosen to ensure that, as a fast growing public 
company, Energean demonstrates best practice governance 
standards and provides sound stewardship. We are fortunate to 
havedeepsector,financial,HSEandcapitalmarketsexpertiseon
the Board to guide the Company going forward and will continue 
to complyfullywiththeUKCorporateGovernanceCode.

Our People
Energean’s executive management team has a strong track 
record of deliveryandvaluecreation,andissupportedbydeep
and broadexpertiseacrossourtechnical,engineering,geological
andfinancialteams.Werecognisethebenefitsofhavingadiverse
workforce and female representation currently makes up 40% of the 
Executive Committee and 25% of Senior Management. Energean’s 
people are one of its key strengths, and I would like to thank all of 
our colleagues for their hard work and commitment in delivering 
the results and progress that are set out in this report. I very much 
lookforwardto workingwithallofyouaswecontinuetogrow
the business.

We further strengthened our executive management team during 
theperiodwiththeappointmentofImanHillasChiefOperating
Officer.ImanisaPetroleumEngineerwithextensiveexpertiseinthe
technical and commercial aspects of the petroleum business, which 
willbeofsignificantvalueaswecontinuetomoveforward.

Dividend Policy
Strong capital discipline is a key pillar of Energean’s strategy 
and managementframework.Atpresent,weareinagrowthphase
and do not expect to pay a dividend until Karish is producing gas 
andgeneratingcashflows.Inthenearterm,I expectourearnings
to be reinvested in developing the businesses of the Group, 
with a particular focus on the Karish and Tanin development, 
whichI anticipatewilldeliverstrongcapitalreturns.TheBoard
will continue to review how it provides returns to shareholders 
regularly andwilltakeaprudentapproachtoreinvestment 
and/ordistributionoftheprofitsgeneratedbyourbusiness.

Outlook
2019 is set to be an exciting year and I believe we will see 
significant progressacrossourassetportfolio.Ilookforwardto
delivering the four well drilling programme in Israel, which could 
underpinsignificantgrowthinourreservesandresourcesbase.
We continue to see positive demand for Karish and Tanin gas, and 
future gas sales agreements will target both the growing domestic 
and key regional export markets. Our medium term goal is to utilise 
fully our 8 bcm/yr FPSO, which will deliver strong incremental 
economic returns for our shareholders and stakeholders. In Greece, 
werecentlyachievedfirstoilfromtheEpsilonsatellitedevelopment,
and our ongoing drilling programme should see production 
further enhancedaswemovethrough2019.

I look forward to updating shareholders on our exciting work 
programme over the coming months.

Simon Heale
Chairman

06 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 07

Chief Executive’s review 

Delivering sustainable 
growth and value

Replicating the growth and value 
creation achieved in the last decade
Energean was established in 2007 with a clear vision to build the 
leading independent E&P company in the Mediterranean. We saw 
a region which had been overlooked and under-exploited by the 
international oil and gas majors, and one that would inevitably 
need moregasdevelopmenttocaterforgrowingdemandfor
cleaner energy in the surrounding states.

The past decade has been one of considerable growth, learning, 
investment and achievement for Energean. We will leverage this 
experience to continue creating value into our next decade whilst 
retaining our focus on the emerging oil and gas industry in the 
Mediterranean. We believe that this region will soon become 
a globally significantgashub,inwhichweintendtobeakey
independentplayer.Ourambitionsareclear; theEnergeanPower
iscurrentlytheonlyplannedFloating, Production,Storageand
Offloading(‘FPSO’)vesselinthe EasternMediterraneanandis
set to beastrategicallysignificant pieceofinfrastructure.

Since 2007, we have steadily expanded our operating footprint 
from onecountrytofour;fromtwolicencesto13;andfrom
2 MMboetomorethan400MMboeof2Pand2Creservesand
resources. In a very short period, we took the Karish and Tanin gas 
fields,offshoreIsrael,fromacquisitioninDecember2016through
aFieldDevelopmentPlan (FDP)andfinancingtoaFinalInvestment
Decision(FID)inMarch 2018,withthedevelopmentremaining
ontracktodeliverfirstgasin1Q2021.Thisisaremarkable
achievement, of which we are very proud.

Wehavesucceededindeliveringsignificantgrowthandvaluein
our firstyearasalistedbusiness.Ourprioritynowistocontinue
this momentumintothecomingyears,andreplicatethevalue
creation thatwehavedeliveredoverthelastdecade.Wewillpursue
thisgoalwhilstretainingourstrongfocusonHSEandCSR,which
remaincore totheorganisation.

Mathios Rigas
Chief Executive Officer

“In 2018 we delivered a step change in 
our growth and operations. I look forward 
to maintaining this momentum into 2019, 
and I am focused on delivering value for 
our shareholders across our production, 
development and exploration assets.”

Strategic report

Corporate governance

Financial statements

Other information

Successful IPO and project financing
Energean’sPremiumListingontheLondonStockExchange
in March 2018, raising US$460 million, was a landmark 
accomplishment for the Company and represented the largest 
primary raise by an E&P company for more than four years. 
In June 2018,wewereadmittedtotheFTSE250index.

OurinvestmentpropositiontotheLondonmarketattracted
substantial institutional interest despite challenging market 
conditions. The key characteristics underpinning our successful 
proposition were, and continue to be, the quality of our asset portfolio, 
our strategic position in the Mediterranean and our management’s 
trackrecordof valuecreation.Aswecontinuetodeliveronour
stated milestones and enter what is expected to be a very active year, 
presenting multiple catalysts for our share price, we continue to see 
an increasing level of interest in our story from the equity market.

Signing the US$1.275 billion Facility Agreement in the same month 
astheIPOwasakeymilestoneinfinancingthedevelopmentofthe
KarishandTaninprojectandtestamenttotheconfidenceplacedin
us by leading international banks. 

Combined, the debt and equity raised enabled us to take Final 
InvestmentDecisionontheKarishandTanindevelopment,akey
driver of the momentum and growth that will ultimately lead to 
considerable value creation for our shareholders and stakeholders.

The period also saw us list our shares on the Tel Aviv Stock 
Exchange(TASE),themarketinwhichourflagshipKarishand
Taninassetslie,andwhereasignificantnumberofstakeholders
aredomiciled.In undertakingthissecondarylisting,wesucceeded
in expanding the accessibility of our exciting Mediterranean energy 
story to a wider pool of investors and, post period end, have 
entered the Tel Aviv 35 index, which is composed of the largest 
35 companieslisted ontheTASEbymarketcapitalisation.

Continuous increase in reserves and resources

)
e
o
b
M
M

(

450

400

350

300

250

200

150

100

50

0

405

300

237

2

5

7

11

17

24

30

58

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Prinos 2P

Prinos 2C

Katakolo 2P

Karish and Tanin 2C

Karish and Tanin 2P

2P Reserves – MMboe 

49

22

275

1

347

2C Resources – MMboe 

24

58

1

33

 Israel(Gas)

 Israel(Liquids)

 Greece(Gas)

 Greece(Liquids)

 Israel(Gas)

 Israel(Liquids)

 Greece(Liquids)

08 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 09

Chief Executive’s review continued

Our strategy

We have three key elements to our strategy, that we execute within 
our fundamental pillars of disciplined capital allocation, risk mitigation, 
effective project delivery and, ultimately, operational excellence. 
The three areas in which we create value are:

Optimising production:
Our strategy is to optimise production 
from ourexistinglowcostproduction
base, ensuring the most advantageous mix 
of investment and production growth to 
deliver valueandsustainablecashflows.

Developing reserves:
When allocating capital to our development 
programmes we take a highly disciplined 
approach that means we only invest in 
projects that deliver substantial value for our 
shareholders, and which can be delivered 
inalowriskandefficientmanner.Our
development programmes at Karish and 
Tanin, and Epsilon are undertaken within 
this framework and are expected to result 
in strongreturnsforour shareholders.

Adding more hydrocarbons:
We are highly selective in our approach to 
adding hydrocarbons, be it through organic 
orinorganicmeans.Lowcost,balancedrisk
exploration is a core part of our strategy, 
but we will always approach exploration 
with capital allocation and risk mitigation 
inmind.Ourfirstexplorationwell,Karish
North, is well aligned to this approach, and 
in early 2019 we have undertaken low-cost 
seismic acquisition over acreage in Israel 
and Montenegro. 

t i o n

a

c

ciplined capital all o

Dis

 Ris
k 

m

iti

g

a

t
i

o

n

Developing  
reserves

Optimising  
production

E

f

f

e

c

t
i
v

e

p
r
oje

Adding more 
hydrocarbons

ct delivery

e
c
n

e r a tio nal excelle

O p

This strategy is underpinned by our key competitive strengths:

 X We are an experienced offshore 

 X We have the depth and diversity 

operator, operating the majority of 
assetsinour portfolio

 X We are well positioned as an 

independent, Mediterranean-focused 
E&Pcompanytomovequickly inan
increasingly active region

 X We have a track record of value 

creation through timely acquisitions 
andcost-andtime-efficient
development

acrossaseriesof assetsatvarious
stagesof developmenttopositionus
asafull-cycle,sustainable business

 X We have an experienced 

management team, with an 
international oil industry track 
record,whoaresignificantlyinvested
in Energean

 X We have a strong health and safety 

track record

 X We have world class industry partners 
such as TechnipFMC, BP and Repsol, 
andstrongfinancialcapacity

Strategic report

Corporate governance

Financial statements

Other information

Optimising production

Developing reserves

ThePrinosAreaoilfields,offshoreNorthEasternGreece,are
low-cost producing assets in which Energean continues to see 
significantpotential.ThePrinosBasinlicencewasacquiredin
2007. Since then, we have secured a 25-year licence extension and 
have increased reserves through the technical re-appraisal of the 
reservoir,withanew3Dcampaignundertakenin2015aswellas
further drilling activity enabling us to implement our development 
plantosignificantlyincreaseproductionoverthenextthreeyears.

Energean’s long track record in the Prinos Basin, operatorship of the 
majority of our assets, and low operating costs per barrel underpin 
ourabilitytomaximisecashflowfromourreservesandresources.

Prinos development programme
In the Prinos Basin, we have an ongoing investment plan from  
which we expect to increase production over the next few years, 
tapping the 38 MMbbls of discovered 2P oil reserves in the Prinos, 
PrinosNorthandEpsilonoilfields.

Energean delivered 2018 full-year production of 4,053 bopd with 
fourth quarter production averaging 4,573 bopd, representing the 
sixth successive quarter of production growth from the Prinos Area. 
During2019,Energeanexpectstodeliveratleastafurther25%
increase in production. We continue to expect to deliver production 
growth to more than 10,000 bopd by 2021 once the Epsilon satellite 
development has reached plateau production.

InApril2019,wehavedeliveredfirstproductionfromtheEpsilonfield
via an Extended Reach Well, which enabled early production from 
this highly prospective satellite accumulation. The three well platform 
development is progressing well and expected on stream in the next 
year.Atpeak,thefieldisexpectedtodeliverupto5,000bopd.

We will continue drilling in the Prinos Area in 2019, with the exact 
location and target being determined to deliver maximal return on 
investment and value to our shareholders. Owning the production 
infrastructure and drilling rig at Prinos enables us to approach 
drillingfromaflexibleandnimbleposition,enablingustooptimise
the programme based on the most up-to-date drilling results, 
information and analysis.

We regard Prinos as a low-risk development due to our extensive 
knowledge and experience of the Basin and its geology, the secured 
offtake agreement with BP that will fully cover the expected 
increase in production, and the control we enjoy as operator over 
the related infrastructure.

Developing Karish and Tanin
A material de-risked opportunity
OurmostsignificantundevelopedassetsaretheKarishandTaningas
fieldslocatedoffshoreIsrael,whichweacquiredinDecember2016
for $148.5 million ($40 million up front and $108.5 million payable 
overteninstalmentsfollowingFinalInvestmentDecision)plusroyalty
(7.5%/8.25%)and whicharesettotransformourbusinessoverthe
nextfewyears.Thefieldscontainanestimated2.4Tcf(68bcm)of
naturalgasand32.8 MMbblsofcondensateandlightoil2Preserves
and 2C resources.

At the time of acquisition, Karish and Tanin were stranded assets 
with no gas contracts in place. Along with receiving approval of 
ourFDPfromtheIsraeligovernmentinAugust2017,weaimedto
secure gas sale and purchase agreements with leading industrial 
companiesandpowerproducersinIsrael.ByDecember2017,the
Company had secured contracts with 12 leading domestic industrial 
and independent power producers in Israel for the sale of 61 bcm 
of gas (up to 74 bcm including the OR gas supply agreement) 
over a period of 16 years on a weighted average basis. The annual 
production rate is estimated at approximately 4.2 bcm per year 
onanannualcontractquality(ACQ)basis(upto4.9bcmperyear
including the OR gas supply agreement). This was 1.2 bcm above 
theamountrequiredtoproceedwithFIDforKarishandTaninand
reflectstheincreasingenergydemandinIsrael.

Energean continues to see strong demand for its gas and future 
Gas Sales and Purchase Agreements (GSPAs) and will target 
both the growing domestic and key regional export markets. In 
December2018,aheadofitsfourwelldrillingprogramme,Energean
signed a contract to supply I.P.M. Beer Tuvia 5.5 bcm of gas over a 
periodof19 years.Thecontractiscontingentonfindingadditional
gas, which demonstrates both the attractiveness of Karish and 
Taningastothedomesticmarketandconfidenceinourupcoming
drilling programme.

ThedevelopmentoftheKarishfield,whichisexpectedtodeliver
firstgasin1Q2021,willmateriallyincreasethescaleofthe
Group’s operations and support Energean’s strategy to become 
a major player in the Mediterranean gas market. Production 
from the Karish accumulation will be solely used to supply Israel, 
with new discoveries earmarked for both the domestic and key 
regional export markets. These assets are highly strategic for the 
development of the Israeli energy market and will help to meet 
increasing Israeli demand, increase market competition and 
improve security of supply. 

10 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 11

 
Chief Executive’s review continued

Strategic report

Corporate governance

Financial statements

Other information

A material de-risked opportunity continued
We have de-risked the project through a scalable development 
plan. Our new-build FPSO, the Energean Power, will allow 
Energean to develop its assets in the region and will be available 
to be used as a tie back option for future third party oil and 
gas discoveries. The FPSO is currently the only such vessel 
earmarked for operation in the region, and we expect it to be 
a key strategic piece of infrastructure, presenting us with an 
advantagetoquicklycapitalise onsuitablenearbydiscoveries.
Our lump-sumEngineering,Procurement,Construction,
Installation &Commissioning(EPCIC)contractwithTechnipFMC
hassupported ourcapabilitytodelivertheprojectontimeandon
budget and protects our shareholders against the risk of delays 
and costoverruns.

InDecember2018,EnergeanIsraelsignedaMemorandumof
Understanding(MoU)withIsraelNaturalGasLines(INGL)that
willresultinapproximately$98millionofcashinflowforEnergean
Israelbetweennowandfirstgas.Thiscashinflowwasnot
accounted for in our initial project economics and demonstrates 
Energean’s intention to create value for shareholders at every 
opportunity. The MoU covers the onshore section of the Karish 
and Tanin infrastructure and the near shore section of pipeline 
extending to approximately 10km offshore. It is intended that the 
handovertoINGLwillbecomeeffectiveshortlyafterthedelivery
offirstgasfromtheKarishfieldin1Q2021.Followinghandover,
INGLwillberesponsiblefortheoperationandmaintenanceofthis
part of the infrastructure and Energean will not incur any charges 
or tariffs for use of the infrastructure. Energean’s collaboration 
withINGLdemonstratestheIsraeligovernment’ssupportfor
and commitmentto theKarishandTaninproject.

Karish and Tanin project milestones 2019

1Q 2019

 X Four well drilling programme commenced

2Q 2019

 X Keel laying on the FPSO

3Q 2019

 X BeachcrossingatDortobecompleted

4Q 2019

 X SalesgaspipelineinstallationDortoKarish
 X FPSOHullsailawayfromtheCOSCOyard(China)to

Singapore for topsides integration

Monetising Katakolo
In addition to the Prinos Basin, we also own 100% of the Katakolo 
development project in Western Greece, which we received 
government approval to develop in 2017 and which holds 
10.5 MMbblsof2Poilreservesand6.2Bcfof2Cgasresources.
The government has already issued a 25 year exploitation licence 
for Katakolo, although Energean has no commitments in the area. 
WeexpecttoeithertakeFIDorfarmdowntheprojectin2019;ifwe
decidetotakeFID,itislikelythatthefirstpilotwellwillbedrilledin
2020withfirstoilinlate2020/early2021.Drillingwillbeundertaken
using extended reach technology to drill from onshore to the offshore 
reservoir, thus avoiding the construction and use of offshore facilities 
in an area of natural beauty and cultural importance.

Optionality at Katakolo

Adding hydrocarbons

Exploration 
Energean’s focused exploration strategy is to deploy capital only in 
balanced risk, high potential return scenarios, targeting prospects 
and leads that can be quickly, easily, economically and safely 
monetised. We focus on identifying and exploring undeveloped 
areas where we have technical experience of similar geologies 
to minimiseexplorationrisk.Ourexplorationportfolioconsistsof
prospects in Greece, Montenegro and Israel, which we rank based 
on various risk- and return-based metrics. 

Our exploration acreage in Israel 
InDecember2017,EnergeanIsraelwasawardedfivelicences
for Blocks12,21,22,23and31.During2018,NSAIcertifiedgross
prospective resources of 7.5 Tcf (212 bcm) of gas and 101 MMbbls 
ofliquidsacrossthesefiveblocksplustheKarishandTaninleases.

Targeting upside through infrastructure-led exploration

Our seismic programme in Israel and Montenegro 
Postperiod-end,aseismiccampaignofthreeseparate3Dseismic
surveys was scheduled using the PGS Ramform Titan seismic 
vesselinordertomaximiseoperationalandfinancialsynergies.
Energean opted for a turnkey contract to limit the risks that our 
shareholders are exposed to. The seismic campaign started on 
23 December2018inIsrael.Acquisitioncommencedonlicence
31 followedbylicence23,beforethevesselmovedtoMontenegro
toshoot3Dacrosslicences26and30combined.

Israel, Licences 31 and 23:
Energeancommittedtocoverlicences31and23with3Dseismic
(specificallyexcludingthoseareaspreviouslycovered)aspartofthe
firstexplorationlicensinground.

The North-East corner of licence 31 had already been covered by 
theDolphin-20133Dseismicsurvey.Sparse2Dseismic,acquired
by Spectrum in 2008, covered the South-West corner, therefore the 
newlyacquired3Dseismicsurveytargetedtheremaining181km2 
in the South-West corner. The objectives of the seismic survey in 
licence 31 were primarily to delineate the South-West extent of the 
Orpheus prospect and secondly to investigate further prospectively 
South-West of the Orpheus prospect. 

The South-West corner of licence 23 was already covered by the 
Dolphin-20133Dseismicsurvey.Sparse2Dseismic,acquiredby
Spectrum in 2008, targeted the North-East corner. Therefore, the 
newlyacquired3Dseismicsurveycoveredtheremaining255km2 
in the North-East corner. The objectives of the seismic survey 
wereprimarilytodelineatetheHerculesprospectandsecondly
to investigatedeeperprospectivity.TheMesozoicHerculesleadis
the mostlikelyprospectacrossEnergean’sacreagetobecharged
with oil. 

The data quality across both licences in Israel was excellent. The 
processingofthenew3DwillbefinishedbytheendofOctober
2019andwillbemergedwiththelegacyDolphin-20133Dintoa
singlemega3Dseismicvolume.

The Karish lease is the most prospective of the seven blocks 
with 2.5 Tcf and 31.9 MMbbls of gross unrisked prospective 
resources.Energean’sfirstexplorationwellinIsraelisKarishNorth,
which spudded in March 2019. At just 5.4km from the Energean 
PowerFPSO,aKarishNorthdiscoverycouldbequickly and
economically developed.

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Energean Oil & Gas plc Annual Report 2018 13

Chief Executive’s review continued

Strategic report

Corporate governance

Financial statements

Other information

Montenegro
Energeancommittedtocoverlicences26and30with3Dseismic
as part of the exploration licensing bid round. The licences were 
alreadypartiallycoveredbythePGS-20033Dseismicsurvey.
The PGSsurveywasorientedinthedipdirectionorthogonaltothe
coastline.Energeanplannedthenew3Dseismicsurveyinthestrike
direction and parallel to the coastline. The new seismic dataset will 
be processed together with the legacy seismic dataset using a dual 
azimuthprocessingworkflow.Thetotalcoverageofthenew3D
survey is 338km2.

Licences26and30wereacquiredinMarch2017,whenEnergean
signed an exploration concession contract. Preliminary estimates, 
made before the recently acquired seismic data was available, 
placed unrisked prospective resources at 1.8 Tcf (51 bcm) of natural 
gas and 143.9 MMbbls of liquids. We believe Montenegro has 
significantexplorationpotentialforfutureoilandgasdiscoveries
and the entry of ENI into the four blocks neighbouring those held 
byEnergean,withsignificantexplorationcommitments,isan
indication of the area’s potential.

Our seismic programmes in Western Greece 
In Western Greece, Energean and Repsol, the operator, 
commenced aseismicacquisitionprogrammeintheIoannina
Block in November 2018 and expect to complete the acquisition and 
processing of 400km2 of data in 2019. In the Aitoloakarnania Block, 
RepsolandEnergeanexpecttocompletethefirststageofaseismic
acquisition programme during 2019. Energean is substantially 
carried through both seismic programmes by Repsol.

Inorganic opportunities
Energean continues to assess the opportunity to inorganically 
acquire additional hydrocarbons. All opportunities are rigorously 
assessed and Energean will only participate in deals that i) are 
aligned with its strategy and ii) add value for shareholders.

Maintaining a disciplined financial framework 
We have successfully maintained a conservative balance 
sheet throughout the commodity down-cycle, through careful 
management of working capital and low levels of bank debt. We aim 
topreserveourbalancesheetflexibility,alongsidedisciplinedcapital
deployment,backedbystrongcashflowfromourproducingassets.

As our track record demonstrates, Energean continually assesses 
ways to create further sustainable value and act upon value-
accretive opportunities. We have strict investment criteria for new 
projects, typically targeting an unlevered internal rate of return of 
more than 15%. This approach, alongside the Group’s production, 
development and exploration prospects, will underpin Energean’s 
sustainable growth in the future. 

Health, safety and the environment
Weseeourhealth,safetyandenvironmental(HSE)performance
as a key aspect of the overall success of our business. We 
arecommittedtothehigheststandardsofHSEregardingour
employees, contractors, partners and the general public, and the 
mitigation of our environmental impact. 

Our experience of operating in environmentally sensitive areas 
withoutcompromisingthemissomethingweareproud of.
Energean’sHSErecordhasbeenanimportantfactorin our
successful bids for licences, including Karish and Tanin.

Energean is the only oil and gas producer in Greece and, 
together with itspredecessorbusiness,hasa38-year
trackrecord ofoperatingoffshoreandonshoreassetsin
environmentally sensitiveareas.Energean’sexperienceand
conscientious approach towards the management of its assets 
constitute a key differentiator in the sector. 

As we continue to scale up operations, we will remain focused 
onourkeyHSEperformanceindicatorsandthesafetyofour
employees. These are key aspects of how we operate as a 
business and are integral to our culture and our engagement 
with our stakeholders.

Post-period developments
2018 demonstrated our ability to move quickly and deliver 
upon our planned milestones. We are continuing this 
momentum into 2019, which will see a further step-up 
in value-accretiveactivity:

 X Spudded the highly prospective Karish North exploration 

well in March, targeting 1.3 Tcf (36.7 bcm) plus 16.4 MMbbls 
of gross prospective resources, and made a gas discovery.

 X Signed a further gas sales agreement for 0.4 bcm/yr 
withI.P.M.BeerTuviaLtd,contingentontheresultsof
the upcoming four well drilling programme. The signing 
of this contract ahead of results from our 2019 drilling 
programme demonstrates not only the attractiveness of 
theKarishandTaninfieldsbutalsothestrongincremental
demand for our gas.

 X DeliveredfirstproductionfromtheEpsilonsatellite

accumulation.

 X Completed seismic acquisition and initial processing on 
Blocks 23 and 31, offshore Israel and Blocks 26 & 30, 
offshore Montenegro.

 X Became a constituent of the Tel Aviv 90 (TA-90) index in 

January and subsequently the Tel Aviv 35 (TA-35) Index in 
February. The TA-90 and TA-35 consist of the 90 and 35 
largest stocks, respectively, by market capitalisation on the 
Tel Aviv Stock Exchange.

Outlook
Over the last 10 years, Energean has grown from being a company 
with a $1 million valuation to one of $1.5 billion today, and the 
Board believes that it can continue this growth in the coming years 
through leveraging both organic and inorganic opportunities.

Through our full-cycle operations, we are well positioned to continue 
creating value for our shareholders and I believe you will see 2018’s 
momentum continued into 2019 and beyond. 

2019 is set to be an exciting year for Energean, which I expect to 
deliver a number of catalysts for our story. In the Prinos Area we 
planto deliverafurther25%year-on-yearincreaseinproduction
in 2019, whilst completion of the Epsilon platform development 
willprecedeafurthersignificantstep-upinproductioninto
2020.SignificantprogresswillbemadeatourKarishandTanin
development asset, and before year-end you will see drilling of all 
threeproductionwellscompletedandtheEnergeanPowerHull
sailaway from China to Singapore for integration of the topsides. 
It is also a big year for exploration; the Karish North well could 
addsignificantreserves,thusgeneratingadditionalgassales
agreementsandhigh-returnrevenues,andweareconfidentthat
our seismic operations will generate additional prospects for future 
drilling that adhere to our exploration strategy to target resources 
that can be quickly, economically and safely monetised. 

Mathios Rigas
Chief Executive Officer

14 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 15

Our business model 

Creating value in 
the Mediterranean

Our key inputs

How we operate

What we do

Strategic report

Corporate governance

Financial statements

Other information

Energean has gone from strength to strength in 2018, from its Premium Listing on 
the Main Market of the London Stock Exchange at the beginning of the year, to listing 
on the Tel Aviv Stock Exchange later in 2018. The Group was the best performing 
FTSE 250 oil and gas company in 2018 and continues to deliver on its vision of 
becoming the leading independent E&P company in the Mediterranean.

Operational expertise  
and strength

Skilled and dedicated 
workforce

Strong financial 
management and proven 
access to capital

Exemplary HSE  
management

Produce
We seek to maximise value from our 
low-cost production base to generate 
sustainablelong-termcashflows.

Develop
We are implementing active development programmes in Israel 
andGreece.Ourmostsignificantassetsunderdevelopmentare
the2.4Tcf(68bcm)KarishandTaningasfieldslocatedoffshore
Israel, that will materially increase the scale of the Group’s 
operationswithfirstgastargetedfor1Q2021.

Explore and appraise
We have a focused exploration strategy that targets opportunities 
that can be quickly, safely and economically monetised. We 
have a ranked portfolio of prospects in Israel, Greece and 
Montenegro and continually seek value-accretive opportunities 
in the Mediterranean.

Our key differentiators

Near-term value generation

Medium-term value generation

Longer-term value generation

Lowcost
producer withstable
cashflow

Experienced and 
proven offshore 
operator

Strategically 
positioned in
an increasingly 
active region

Track record of 
value creation

Experienced 
management with 
international industry 
track record

World-class 
partnersandstrong 
financialbacking

StrongHSEand
CSR record

Delivering our strategy

1

Optimising production
 Read more on pages 24-25

2

3

Developing reserves
 Read more on pages 26 - 29

Adding more hydrocarbons
 Read more on pages 30 - 31

4

Maintaining a 
disciplined framework
 Read more on pages 32 - 33

Effective corporate 
governance

Our responsible behaviour

Bysuccessfullyemployingourbusinessmodelweaimtocreatevalueforallour stakeholdergroups, 
underpinnedbyeffectiveriskmanagement,soundstewardship andacultureofsafetyandresponsibility.

16 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 17

 
A strong investment proposition

Leveraging our key 
differentiators

Our strong investment proposition 
and key differentiators set us apart in a 
competitive industry. Energean’s growth 
story is one underpinned by long-term 
contracts to supply oil and gas to growing 
markets and is backed by leading financial 
and industry partners.

Production from low cost,  
assetsin Greece

Low-cost  
efficient  
production  
base

Material and  
de-risked 
development 
project

Multiple growth 
opportunities in a 
highly prospective 
region

Transformational development  
of $1.6 billion project in Israel

Exploring the Eastern 
Mediterranean with 
low commitment high 
impact assets in Greece, 
Montenegro and Israel

Low-cost producer with stable 
cash flow

Energean has historically been able to respond to oil price volatility 
throughitslowcostofproductionatitsPrinosoilfield.Thishasbeen
achievedthroughincreasingproduction,asthelargelyfixedelement
of its costs remains the same. In 2018, Energean saw its average 
cost of oil production at US$17.6/bbl, down from US$24.7/bbl in 2017. 
Withhighnetbacksandfavourablefiscalterms,theGroupaimsto
continue this downward trajectory in costs as it increases its Greek 
production base, and believes that costs should dip below $10/bbl 
once production exceeds 10,000 bopd. 

Energean’s continued aim is to maximise value by optimising 
production,reservesandcashflowfromourexistinglow-cost
production base, while pursuing sustainable growth and returns 
through active development and exploration programmes in 
the Mediterranean.

Experienced and proven 
offshore operator

A core competency of Energean is its capability as an operator, 
givingtheGrouptheflexibilitytoprogressprojectsusingthe
significantoperationalandtechnicalknowledgewithinthe
team. Energean is an approved operator in Israel, Greece, Egypt 
and Montenegro.

Energean’s dedicated teams of geologists, geophysicists and 
production and reservoir engineers draw from extensive experience 
fromaroundtheglobeandspecificallywithintheMediterranean.
As wellasgrowingproductionatPrinos,Energean’sexperienced
team has taken the Group’s development project in Israel to the 
next levelofdevelopmentandhasde-riskeditfurtherintheprocess.

Strategically positioned in an 
increasingly active region

Our focus on the Mediterranean region leverages our relationships 
with key stakeholders and regional knowledge and expertise, 
ensuring that we can optimise our strengths of capital discipline, 
risk mitigation, effective project delivery and, ultimately, deliver 
operational excellence. 

Theregionitselfhasseensignificantactivityinrecentyears,having
experienced several world class natural gas discoveries which 
have attracted the global oil and gas industry. Energean’s existing 
position in the region equips it with early mover advantage, and its 
positionasanindependentE&Pwithexistinglocaloffices,means
that it is well positioned to move swiftly on opportunities in the 
regions. We are focused on expanding our position in the region 
both organically and inorganically.

Strategic report

Corporate governance

Financial statements

Other information

Experienced management with 
international industry track record

Energean’s management team and operational and technical staff 
are drawn from international and national oil companies, major and 
smaller independents and engineering contractors. Management 
are also well aligned with shareholders through substantial 
shareholdings in the business. 

During2018,theGrouphasaddedfurthertoitswealthofexperience
withtheappointmentofImanHillasGroupChiefOperatingOfficer
(COO).ImanbringssignificantexperienceintheMENAregion,
havingworkedforDanaGas,BG,ShellandBP.

World-class partners and strong 
financial backing

The Group has always seen collaboration as key to its success. 
Whether this be with industry-leading technical support, or with 
banks and credit institutions, our collaboration with our partners 
has enabled us to become the leading independent E&P company 
in theMediterranean.

Strong HSE and  
CSR record

Energean’s objective is to generate sustainable value through both 
growth and optimisation of existing assets. We are committed to 
conducting our business responsibly, which means safeguarding 
the health and safety of our employees, caring for our environment, 
supporting the local communities in which we operate: not only 
meeting their expectations and needs, but also contributing to the 
sustainable development of those communities. At its operated 
production licences in North Eastern Greece, the Group has a 38-year 
track record of safe operations in environmentally sensitive locations.

Track record of  
value creation

Energean has a strong track record of value creation, having built 
its initial portfolio at low cost, during downturns when others were 
focusedonfixingbalancesheetsandunabletodirectattention
togrowthopportunities.During2018,Energeanincreasedits2P
reservebasebymorethansixtimes,owingprimarilytoFIDonthe
Karish and Tanin project. This was made possible only due to the 
technical,operationalandfinancialcapabilitiesoftheCompany
and the strong relationships that Energean has with its customers, 
lending banks and shareholders.

FIDontheKarishandTanindevelopmentrepresentedasignificant
step in creating value from these assets, which were, at the time 
of purchase, stranded gas discoveries with no gas contracts or 
financinginplace.EnergeanhascontractedTechnipFMCundera
turnkey, lump sum EPCIC contract to provide the full suite of FPSO 
and SURF services during the construction phase and believes that 
this contracting structure is a key contributor to risk mitigation and 
that, by minimising contractor interfaces, project management will 
besimplified.StenaandHalliburtonhavebeenselectedtoprovide
drilling services, and Wood Group will provide operations and 
maintenance services once production has commenced. Energean 
believes that its partnerships with these world-renowned oil and gas 
service providers will minimise operational and development risk 
and help generate maximum value from these assets. Furthermore, 
by the end of 2018, Group has secured US$13 billion of future 
revenuesbysigning13contractsfordomesticgassupply,firmly
underpinning the project economics. Further volumes are expected 
to be contracted in the coming year and Energean has a medium-
termtargetoffillingthesparecapacityintheGroup’s8 bcm/yrFPSO,
which we believe will generate strong incremental economics for 
our shareholders.

In August 2018, an updated independent Competent Persons 
ReportfromNetherlandSewell&Associates(‘NSAI’)forEnergean's
Israeliportfolioincludedthecertificationof2.2Tcf(63bcm)and
31.8 MMbblsofgross2Preserves,0.2Tcf(5bcm)ofgross2C
resources and 7.5 Tcf (212 bcm) and 101 MMbbls of gross prospective 
resources.Thisisthefirstassessmentofprospectiveresourcesinthe
Karish and Tanin leases and the new Blocks (12, 21, 22, 23 and 31) that 
were awarded as part of the 2017 offshore licensing round. 

InGreece,Energeandeliveredfullyear2018productionof4,053 bopd,
which represented 45% growth on the previous year (2017: 2,803 
bopd). Fourth quarter production was 4,573 bopd and represented 
the sixth successive quarter of production growth from the Prinos 
Area.Despitethisproductiongrowth,2018unitcostofproduction
was down 29% on the previous year (2017: $17.6/bbl). The combined 
trajectories of increasing production and decreasing costs are 
fundamental to our strategy of maximising value from the Prinos Area 
licences, and we expect to continue this performance into 2019 as 
investment in, and management of, Prinos and Epsilon continues.

18 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 19

Market overview

Strategic report

Corporate governance

Financial statements

Other information

Maximising opportunities  
in a highly prospective region

The Eastern Mediterranean
2018wasadecisiveyearintheEasternMediterraneaninconfirming
the region’s potential as a gas hub, underpinning Energean’s view 
thatits'earlymover'statusintheregionisastrategicadvantage.

The region represents a large captive market in which governments 
are seeking to transition to cleaner sources of energy and are keen 
to expand sovereign resources. Growing demand from Western 
Europe for alternative sources of gas has raised the prospect of 
strategic pipelines being put in place that will considerably increase 
the economic importance of Eastern Mediterranean assets.

Regional overview and recent activity
Israel
Alongside Energean’s Karish and Tanin project, the development 
ofNoble’sLeviathanisontrackforfirstgasattheendof2019.
Leviathanholdsestimatedrecoverablereservesof605bcm
(21.4 Tcf)ofgasandwillsupplyboththeIsraelidomesticmarket
and the regional export markets of Egypt and Jordan. As part of 
its export strategy, Noble and its partners acquired a stake in the 
East Mediterranean Gas (EMG) pipeline through which they intend 
to export 64 bcm of gas to Egypt over 10 years, both for local 
consumption and for re-export. 

Our opportunity
Energean is well positioned to target and compete for opportunities 
in this region. In addition to our strong track record of value creation 
from assets in the Prinos Basin, we have secured world class industry 
partners(suchasBP,RepsolandTechnipFMC)andstrongfinancial
backing from our lending banks.

The Energean Power is currently the only planned FPSO for the 
Eastern Mediterranean and we believe it could become a strategic 
piece of infrastructure in this emerging hub. We are building our 
FPSO with 8 bcm/yr of capacity and 1 million barrels of liquids 
storagecapacityandareseekingtofillthe3.4bcm/yrofspare
capacity with new discoveries in the medium term.

Our expanding presence in the Eastern Mediterranean will 
strengthen our ability to create new opportunities.

In November 2018, the Israeli Ministry of Energy announced a 
secondoffshorelicensinground.Nineteenblocksinfivezonesare
open for bidding and all are located in the southern part of the Israel 
ExclusiveEconomicZone(EEZ).BidsaredueinJune2019with
allocation decisions expected in July 2019.

Over the last decade, Israeli natural gas demand has been 
among the fastest growing globally. Future demand is forecast 
to increasesubstantially,primarilydrivenbytheelectricitysector
to serve population growth, rising living standards, increased 
waterdesalination,electrificationoftherailwaysystem,andthe
adoption of electric vehicles and compressed natural gas (CNG) for 
transportation. Israel consumed 10.9 bcm of gas in 2018. The Israeli 
MinistryofEnergyanticipatesthatdemandwillincrease to11.0bcm
in 2020 and to 18.3 bcm by 2030, of which almost 95% will be for 
electricity generation and industrial use.

In October 2018, the Ministry of Energy published a policy to reduce 
emissions in energy production with a view to reducing the use of 
polluting fuel products by 2030. According to the policy, the goal 
is a fuel mix of 80% natural gas and 20% or more from renewable 
energy sources in the electricity production sector, by 2030, and 
the gradualclosureofcoal-firedpowerstations.

Meeting growing Israeli gas demand

r
a
e
y
/
m
c
b

30

25

20

15

10

5

0

25.3

24.8

25.8

23.7 24.3

23.0

22.3

21.7

21.0

20.3

19.6

18.9

17.9 18.3

17.4

15.6 15.9

14.1 14.3

12.8

10.9 10.9 11.0 11.0 11.2

8
1
0
2

9
1
0
2

0
2
0
2

1
2
0
2

2
2
0
2

3
2
0
2

4
2
0
2

5
2
0
2

6
2
0
2

7
2
0
2

8
2
0
2

9
2
0
2

0
3
0
2

1
3
0
2

2
3
0
2

3
3
0
2

4
3
0
2

5
3
0
2

6
3
0
2

7
3
0
2

8
3
0
2

9
3
0
2

0
4
0
2

1
4
0
2

2
4
0
2

Electricity

Heavy industry and distribution

Transport

Petrochemical industry

Total local demand

Egypt
Natural gas dynamics in Egypt are undergoing a period of 
substantial change owing to recent large domestic discoveries, 
in particularENI’sZohr.

Early2018sawtheramp-upofthe30TcfZohrfieldto2Bcf/dinthe
thirdquarterfollowingfirstgasinDecember2017,withatargetof
reaching a plateau of 2.7 Bcf/d during 2019. 

TheZohrprojectisplayingafundamentalroleinthegas
independence of Egypt and the Petroleum Ministry expects 
production to reach 8 Bcf/d in 2019 - 2020. Egypt has now 
received itsfinalLNGshipmentinSeptemberandiswidely
expectedtobecomeanLNGexporter.Supportingthislatterview
is the signing of agreements that could see the import of gas from 
neighbouringcountries,includingIsrael,specificallytofeedthe
LNG plantsforre-export.

Towards the end of 2018, ENI commenced drilling the Nour-1 well in 
its Nour concession, which has been widely speculated to contain 
very large prospects. A success at Nour could further boost Egypt’s 
gas renaissance and further spur infrastructure developments in 
the region.

Cyprus
ENI announced the 6 - 8 Tcf Calypso discovery in February 2018, 
expectingappraisaldrillingin2019toconfirmthepotentialof
the play, and adding to the country’s offshore gas resource base, 
which also includes the 4 - 6 Tcf Aphrodite discovery. Exxon 
commenced its two-well drilling programme towards the end of 
the year, announcing the Glafkos-1 discovery in late February. The 
Cypriot government tendered Block 7 to a select group of bidders 
in October, and has entered into negotiations with a Total/ENI joint 
ventureto signafinalcontractforBlock7.

Until Cyprus can produce its own gas, the authorities are planning 
toimportLNGandhavelaunchedthetenderforaFloatingStorage
RegasificationUnit(FSRU).AsecondtendertosupplyLNGis
expected in 2019. The proximity of Cyprus to the Energean Power 
FPSO provides an opportunity for Energean to export gas to Cyprus 
and we have already made a proposal to the Cypriot Government 
in thisregard.

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Energean Oil & Gas plc Annual Report 2018 21

Market overview continued

Strategic report

Corporate governance

Financial statements

Other information

Lebanon
During2018,LebanonsigneditsfirstoffshoreE&Pagreementsand
is preparing for a second licensing round in 2019. Two Exploration 
and Production agreements were signed with a Total-led consortium 
for Blocks 4 and 9, and drilling in Block 4 is expected during 2019. 
LebanonisalsocompletingplanstoimportLNG,havinglaunched
a tenderingprocessforuptothreeFSRUsinMay 2018,althougha
finaldecisionmayneedtowaituntilagovernmentisformed.

Greece
Energean is currently the only company in Greece operating 
producing oil and gas assets. In July 2018, a consortium of 
ExxonMobil,TotalandHellenicPetroleumwasawardedacontract
to explore for hydrocarbons in the ultra-deep water West of Crete 
and South West of Crete blocks, although drilling is not expected 
untilthesecondexplorationphase,mostlikelyinfivetosixyears.
RepsolandHellenicPetroleumwereawardedaninterestinathird
block in the Ionian Sea to the west, which is thought to have similar 
characteristics to those off Crete. 

Afloatinggasstorageandregasificationunitoffshore
Alexandroupolis is expected to begin operations in the coming 
years,creatingafourthimportroutetoGreece.DESFA,Greece’s
natural gas transmission system operator, launched a new tank at 
theLNGterminalonRevithoussaIsland,increasingitstotalstorage
capacity by 73% to 225,000 cubic metres.

Energean is also expecting a tender to be issued for the conversion 
ofitsSouthKavalafieldtothefirstUndergroundGasStorage(UGS)
project in Greece.

Montenegro
The Eastern Adriatic remains underexplored, despite having what 
appear to be all the necessary hydrocarbon-generating components. 
LargeprospectshavebeenidentifiedoffshoreMontenegro.These
are on a par with recent oil discoveries in northern Albania, such as 
theonshoreShpirag-2discovery.Todate,overfivebillionbarrelsof
oilinplacehavebeendiscoveredwithinthisprolificcarbonateplay.
Energean owns two licences to the immediate north of four licences 
owned and operated by ENI (a joint venture with Novatek) which 
completeda3Dseismicsurveyinlate2018,andisexpectedtodrill
two wells during 2019 and 2020.

Future pipeline developments
Energean is supportive of all infrastructure developments in the 
Mediterranean. We believe that infrastructure is paramount to the 
Mediterranean achieving status of a global gas hub, in which we aim 
to be the leading independent E&P player.

East Med Pipeline, an export route to Europe
A 1,700km pipeline connecting the Eastern Mediterranean’s 
LevantineBasin(Israel)withtheEuropeangasnetwork,viaGreece,
Cyprus and Italy, could be completed around 2025. Known as 
theEastMedPipeline,thisdevelopmenthasbeenclassifiedasa
European Project of Common Interest. An MoU has already been 
signed between Israel, Greece, Italy and Cyprus to support the 
expected US$6 - 7 billion pipeline construction.

Two further pipelines that could traverse Greece
There are currently two further major pipeline projects which could 
traverse Greece. The Trans-Anatolian pipeline is planned to run 
from the Turkish border with Georgia, to the Greek border at Edirne. 
Here,thepipelinewillconnecttotheTrans-Adriaticpipeline,whichis
under construction and runs from Greece to Albania in the west. 

Cyprus – Egypt pipeline
Cyprus has signed an agreement with Egypt that will eventually allow 
naturalgasfoundintheAphroditefield(estimatedat4-6Tcf)tobe
exportedtoEgypt,mostlikelyforre-exportasLNGtoEurope.

Oil price outlook
Oil prices continued to steadily recover throughout most of 2018, 
reachingapeakof$86inOctober.However,pricesweakened
thereafter,reachingatransientminimumof$50inDecember.
Energean’sconservativefinancialmanagementanditsfocuson
operating costs ensure it is well placed to withstand the high level 
of variability currently being experienced in the commodity markets 
andgivetheGroupconfidencethatitcanprosperunderarange
of oilprices.

Brent Oil Prices 2018 (US$)

88

80

72

64

56

48

8
1
n
a
J
1

8
1
b
e
F
0
1

8
1
r
a
M
2
2

8
1
y
a
M
1

8
1
n
u
J
0
1

8
1

l

u
J
0
2

8
1
g
u
A
9
2

8
1
t
c
O
8

8
1
v
o
N
7
1

8
1
c
e
D
7
2

Proposed East Med Pipeline 
Existing/Under-construction pipelines

22 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our strategy in action

Strategic report

Corporate governance

Financial statements

Other information

Energean is focused on a clear strategy to deliver value by optimising 
production, efficiently developing and effectively exploring existing and new 
assets in the Mediterranean region. By maximising the potential of our assets 
and building momentum in this increasingly active region, we aim to deliver real 
and sustainable value.

Optimising production 
through disciplined capital 
allocation to increase 
production and reduce 
per unit costs

Maximising our low-cost  
production base
A key strategic priority is to increase Prinos Basin production and 
cashflow.Ourexistingdevelopmentplantargetsthemonetisation
of 2P reserves of 38 MMbbls of oil and 5.2 Bcf of gas, as well 
as 2C resources of 32.5 MMbbls of oil and 8.3 Bcf of gas, as of 
31 December2018.

We estimate average production rates to increase to

5,000 - 5,500

bopd in 2019

Over the next 12 months we will complete the construction of an 
unmanned platform to exploit the Epsilon Field, adjacent to Prinos, 
alongside continued activity in the Prinos Area. We estimate average 
production rates to increase to 5,000 - 5,500 bopd in 2019 as the 
drilling programme is continued, workovers are completed on the 
existing well stock and additional wells are brought into production.

Our focus in Greece  
for the next 12 months

 X Continue drilling in the Prinos Area
 X Increase production to between 5,000 and 5,500 bopd 

(2019 average)

 X Reduce per-barrel operating costs to $14 - 17
 X Deliverfirstproductionfromthethree-wellEpsilon

platform development

24 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 25

Our strategy in action

Strategic report

Corporate governance

Financial statements

Other information

Developing reserves through 
strict risk mitigation and 
capital allocation to deliver 
sustainable cash flows

The development of the 2.4 Tcf Karish 
and Tanin gas project, offshore Israel, 
will ultimately transform the Group’s 
business and position us as a significant 
player within the Mediterranean.

DeliveringcommercialproductionfromKarishandTaninwill
ultimately transform our business. With an estimated 2.4 Tcf 
(68 bcm)ofnaturalgasand31.8MMbblsofliquids2Preserves
plus2C resources,and7.5Tcf(212bcm)ofnaturalgasand
101.8 MMbbls of liquids (prospective resources), our acreage is 
highlystrategicfor thedevelopmentoftheIsraelienergymarket
andwillhelpto meetincreasingIsraelidemand,increasemarket
competitionand improvesecurityofsupply.

The Karish and Tanin development will position Energean as a 
significantplayerwithintheregion.FinalInvestmentDecisionwas
takeninthefirstquarterof2018,thekeymilestoneofFirstSteelCut
on the Energean Power FPSO hull was achieved in November 2018, 
andonthetopsidesinDecember2018.Weareontracktodeliver
firstgasintotheIsraelidomesticmarketinthefirstquarterof2021.

Working in partnership with  
world-class contractors

 X TechnipFMC 

EPCIC contract for FPSO, onshore and subsea workstreams

 X Wood Group 

Operations and maintenance manpower and specialist 
engineering services

 X Stena Drilling 

Contractedforfourfirmandsixoptionalwells

 X Halliburton 

Drillingservices

A transformational project in Israel

World-class asset 

Gas sales

2.4 Tcf

4.6 bcm

2P reserves and 2C resources

per year gas contracts in place

World-class exploration 
potential 

Substantially de-risked 
project

7.5 Tcf

FID

Unrisked prospective resources

Achieved March 2018

Our focus for the next 12 months

 X Continue our active drilling programme
 X CommencekeellayingontheFPSOin 2Q2019
 X CompletetheBeachCrossingatDorin3Q2019
 X EnergeanPowerHulltosailawayfrom theCOSCO
yardin ChinatoSingaporefortopsideintegration
in December 2019

26 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 27

Our strategy in action

Strategic report

Corporate governance

Financial statements

Other information

Developing reserves continued

Key milestones to Karish and Tanin first gas 

2018

2019

2020

2021

March 2018
FIDtakenfollowingfinancingsecured

4Q 2018
Energean Power FPSO First Steel Cut

1Q 2019
–CommencedsalesgaspipelinebeachcrossingatDor

–MobilisedStenaDrillMAXrigandcommencedthefourwell

drilling programme

2Q 2019
–  Commence keel laying on the FPSO

3Q 2019
–CompletebeachcrossingatDor

1Q 2020
–  Karish Main development wells cleaned up and suspended

1Q 2021
–  First gas production

2Q 2020
–  Installation of production manifold and other sub-surface structures

4Q 2020
–SailawayoftheEnergeanPowerfromSingaporeto Israel

Arrival in Israel Jan 2021
3

Hullconstructionatthe
COSCO Yard, China
1

4Q 2019
–  Complete evaluation of shallow and deep potential in Karish  
MainfieldthroughthethreeKarishMaindevelopmentwells

–FPSOHullsailsfromChinatoSingaporeforintegrationof 

the topsides

Subsea Installation Campaign – 1H 2020 on track

Topside construction and integrated at the 
Sembcorp Admiralty Yard, Singapore

2

Sembcorp Marine Admiralty Yard, Singapore 

COSCOYards,Zhoushan,China

28 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 29

Our strategy in action

Strategic report

Corporate governance

Financial statements

Other information

Adding hydrocarbons 
by capitalising on growth 
opportunities in the 
Mediterranean

Energean is well positioned, as an independent operator in 
Energean is well positioned, as an independent 
an increasingly active region, to advance existing and future 
operator in an increasingly active region, to 
developments and exploration prospects
advance existing and future developments and 
exploration prospects

Subsea Installation Campaign - 1H 2020 on track

s
a
G
f
o
f
c
T

12

10

8

6

4

2

0

7.5 Tcf

3.4

Material prospective
resource volumes with a 
high chance of success

2.5

0.4

1.2

2.4

Existing
2P & 2C

Karish
upsides

Tanin
upsides

Block 12

Blocks
21/22/23/31

Lease/Block

Upside potential
Energean has a broad portfolio of organic exploration and development opportunities that it believes 
will result in further value creation for shareholders. Our existing opportunities include:

In Israel
 X 7.5 Tcf (212 bcm) and 101 MMbbls of 
prospectiveresourcesacrossourfive
exploration blocks and Karish and Tanin 
leases offshore Israel. We are building 
the Energean Power FPSO with  
8 bcm/yr of capacity, ensuring that new 
discoveries in the area can be quickly 
and economically monetised.

 X Inearly2019,Energeanacquired3D

seismic over the previously uncovered 
areas of licences 31 and 23, as required 
aspartofthefirstexplorationlicensing
round. The objectives of the seismic 
survey were:

 – In licence 31, primarily to delineate 

the South-West extent of the 
Orpheus prospect (NSAI 2018: 
Orpheus 348 Bcf plus 1.7 MMbbls 
of gross unrisked prospective 
resources) and secondly to 
investigate further prospectively 
South-West of the Orpheus 
prospect. 

 – In licence 23, primarily to delineate 
theHerculesprospect(NSAI2018:
887 Bcf plus 4.4 MMbbls of gross 
prospective resources) and secondly 
to investigate deeper prospectivity. 
TheMesozoicHerculesleadis
the most likely prospect across 
Energean’sacreageto becharged
with oil. 

 X Energean has a further six options 
available on its drilling contract 
with Stena.

In Greece
 X Further Prinos Basin development and 

exploration opportunities.

 X Underground natural gas storage (UGS) 

through exploitation of the almost 
depletedunderwaternaturalgasfield
of SouthKavala.

 X In Western Greece, Energean and 
operator, Repsol, commenced a 
seismic acquisition programme in the 
Ioannina Block in November 2018 and 
expect to complete the acquisition and 
processing of 400km2 of data in 2019. 
In the Aitoloakarnania Block, Repsol 
and Energean expect to complete the 
firststageoftheirseismicacquisition
programme during 2019. Energean 
is substantially carried through both 
seismicprogrammesby Repsol.

In Montenegro
 X Inearly2019,Energeanshot3Dseismic
over its 100% owned licences 26 and 
30, as required as part of the exploration 
licensing bid round. The new seismic 
dataset will be processed, together 
with the legacy seismic dataset, with 
full results available towards the end of 
the year.

 X Licences26and30wereacquiredin
March 2017, when Energean signed 
an exploration concession contract. 
Preliminary estimates, made before 
the recently acquired seismic data was 
available, placed unrisked prospective 
resources at 1.8 Tcf (51 bcm) of natural 
gas and 143.9 MMbbls of liquids. 

Our focus for the next 12 months

 X Complete the drilling of the Karish 

 X Complete interpretation of the 

North well

 X Assess additional resource potential 
in Karish Main through the three 
development wells

 X Assess all opportunities for the 

remaining six options on the Stena 
drilling contract

 X Continue to assess and quantify 

resourceupsideintheEpsilonDeep
HorizonandDolomiticZonethatwas
identifiedaspartofEL-1drilling

 X Finalise plans for Prinos EOR (tertiary) 

development

3DseismicsurveysinIsraeland
Montenegro, with a decision 
onwhetherto'drillordrop'in
Montenegro tobemadein2020

 X Complete2Dseismicacquisitionand
interpretation in Western Greece  
(Repsol operator)

 X Secure operatorship of additional 

development and production projects

30 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 31

 
 
Our strategy in action

Strategic report

Corporate governance

Financial statements

Other information

Maintaining a disciplined 
financial framework

Unit cost of production down

41.0

Our core value drivers of optimising production, 
developing reserves and adding hydrocarbons are 
managed within a steadfast and disciplined financial 
framework. This enables us to ensure that returns to 
shareholders are optimised.

Leveraging financial flexibility
We have successfully built a conservative balance sheet by careful working capital 
management and maintaining low levels of bank debt throughout the commodity down-
cycle and periods of subdued oil prices.

Akeystrategicpriorityistomaintainbalancesheetflexibilitygoingforward,withleverage
minimisedatthecorporate level.

We will seek to maintain strict investment criteria for new projects, typically targeting an 
unleveredinternalrateofreturnofmorethan15%.Weareconfidentthatthisapproach,
alongside our production, development and exploration opportunities, will underpin our 
sustainable growth in the future.

Our focus for the next 12 months

 X DeliveringKarishandEpsilondevelopmentprogrammes

on time and in line with capital expenditure budget
 X Optimise the use of capital by ensuring the highest 

possible returns

 X Maintain liquidity to enable the Company to capture 

exploration or business development opportunities as they 
may arise

 X Grow production to maximise cash from operating activities

19.1

24.7

17.6

e
o
b
/
$
S
U

45

40

35

30

25

20

15

10

0

2015

2016

2017

2018

Revenues up

58

28

40

100

90

80

70

60

50

40

30

20

10

0

m
$
S
U

2015

2016

2017

2018

17.0

14.0

2019
expected
production
costs range

2019
Guidance

90

32 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 33

Our key performance indicators

Strategic report

Corporate governance

Financial statements

Other information

How we measure our success

We measure our 
performance over a range 
of financial, operational 
and non-financial 
metrics to ensure we are 
managing our long-term 
success in a sustainable 
way and in line with our 
strategic objectives.

Financial

Adjusted EBITDAX*
(US$ million)

 52.4

2017: 20.7

Cost of oil production per boe
(US$)

 17.6

2017: 24.7

60

50

40

30

20

10

0

52.4

16.2

20.7

2016

2017

2018

30.0

25.0

20.0

15.0

10.0

5.0

0

24.7

19.1

17.6 

2016

2017

2018

Cash flow from operating activities
(US$ million)

 62.7

2017: 29

70

60

50

40

30

20

10

0

62.7

29

15.2

2016

2017

2018

*EarningsBeforeInterest,Taxes,Depreciation,

AmortizationandExplorationExpenses

Operational

2P reserves
(MMboe )

 347.0

2017: 51.0

2C resources
(MMboe )

 58

2017: 250.0

360.0

300.0

240.0

180.0

120.0

60.0

0

347.0

41.0
2016

51.0

2017

2018

260.0

208.0

156.0

104.0

52.0

0

250.0

195.6

2016

2017

58

2018

Average production per day
(bopd)

Total Shareholder Return (US$)

HSE

Lost time injury frequency rate
(Average number per million hours worked)

 2.8

2017: 3.9

5.0

4.0

3.0

2.0

1.0

0

3.5

3.9

2.8

2016

2017

2018

 4,053

2017: 2,803

4,200

3,500

2,800

2,100

1,400

700

0

4,053

3,490

2,803

2016

2017

2018

665

615

565

515

465

415

365

315

16 Mar18

20 May18

24 Jul 18

27 Sep 18

01 Dec 18

04 Feb 19

Rebased Energean

Rebased Brent

34 Energean Oil & Gas plc Annual Report 2018

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Review of operations

Strategic report

Corporate governance

Financial statements

Other information

Building a balanced portfolio

2018 was a significant year in Energean’s development. Our focus was on 
progressing Karish and Tanin through FID and optimising cash flows in our 
Prinos Licence Area.

Operational achievements in 2018

Corporate

Israel

Greece

 X Deliveredproductionof4,053bopd
from the Prinos Area, resulting in a 
56% year-on-year increase in revenues
 X Grew production from the Prinos Area 

for a sixth consecutive quarter
 X Reduced production costs to  

$18/bbl, a 29% year-on-year reduction, 
and estimated a further reduction to 
between $14 and $17/bbl in 2019
 X Achieved production of more than 
1,000 bopd from the Prinos North 
Extended Reach Well

 X Successfully drilled the Epsilon 

Extended Reach Well which came into 
production post-period end

 X Completeddrillingofthefirstvertical
well into the Epsilon reservoir, which 
indicated reserve upside in the Epsilon 
MainandDeepreservoirs.

 X Increased net 2P reserves to 

 X TookFinalInvestmentDecisionforthe

347 MMboefrom51MMboeatthe
pointofListing

flagshipKarishandTaninproject

 X Signed a lump-sum EPCIC with 

 X Raised $460 million through Premium 

LondonStockExchangeIPO

 X Arranged $1,275 million of project 
financingforKarishandTanin
 X Started trading on the Tel Aviv 

Stock Exchange (TASE) through a 
secondary listing. Post-period end, 
our shares have entered the Tel Aviv 
35 Index, which is composed of the 35 
largest companies listed on the TASE 
by market capitalisation

 X No environmental incidents occurred 
in 2018; all environmental KPIs within 
expected range.

TechnipFMC, mitigating many of the 
risks that shareholders would usually 
be exposed to in a company executing 
a large-scale E&P project

 X Signed Gas Sales and Purchase 

Agreements for 4.6 bcm/yr, securing 
$13 billion of future revenues and 
underpinning the economics of our 
gas project

 X Achievedfirststeelcutonthe

Energean Power hull (November 2018) 
andtopsides(December2018),akey
milestone in demonstrating that the 
projectisontracktodeliverfirstgasin
1Q2021

 X Energean Israel signed an MoU with 

INGLforthetransferandoperatorship
of the onshore section of the Karish 
and Tanin infrastructure and the near-
shore section of pipeline extending to 
approximately 10km offshore, which 
willresultinapproximately$98 million
ofcashinflowbetweennowand
first gas

 X Identified7.5Tcf(212bcm)ofgross

prospective resources over the Karish 
andTaninleasesandthefivenew
blocksawardedinDecember2017,with
a high geological probability of success

 X Committed to the Karish North 

exploration well, which commenced 
March 2019, targeting 1.3 Tcf 
(36.7 bcm)and16.4MMbblsof
gross recoverableprospective
resource (Energean 70%). Karish North 
commenceddrillinginMarch 2019.

Followinghandover,INGLwillberesponsiblefortheoperationand
maintenance of this part of the infrastructure and Energean will not 
incur any charges or tariffs for use of the infrastructure. Energean’s 
collaborationwithINGLdemonstratestheIsraeligovernment’s
support and commitment to the Karish and Tanin project.

AlsoinDecember2018,Energeansignedafurthergassales
agreementwithI.P.M.BeerTuviaLtd.(IPM)tosupplyanestimated
5.5 bcm of gas from its Karish and Tanin FPSO over a period of 
19 years. The contract is subject to necessary approvals and is 
contingent on the results of the 2019 drilling programme.

In addition to the above, we have been gradually extending our team 
in Israel and recruiting local staff to deliver the in-country scope and 
to manage all local interfaces and stakeholders.

Gas as a key transition fuel

With Israeli natural gas demand growing and the IEC 
focused on reducing coal generation post 2017, Energean is 
committed to gas as a key transition fuel.

Energean’s $1.6 billion investment in the gas industry allows 
Israeltoshutdownitsfirstfourcoal-firedpowerplantsin
Haderaandby2021itisestimatedthatmorethan80%of
Energean’s production will come from gas.

Karish and Tanin
In Israel, we made major advances in the development of the Karish 
andTaningasfields,acquiredfromDelekEnergyandAvnerin2016.

Tofast-trackthedevelopmentofKarishtoproducefirstgasin2021,
Energean contracted TechnipFMC to design, procure, construct, 
install and commission all facilities from the wellhead to the entry 
point of the Israeli gas grid. This approach minimises interfaces and 
hence execution risk for the Group and its shareholders.

InparallelwithpreparingtheFDP,approvedbytheIsraeliauthorities
inAugust2017,andaheadofFID,wesecuredgassupplycontracts
for around 4.2 bcm per year for 16 years with Israeli gas buyers. 
Thissecured$12billionofrevenuesandfirmlyunderpinnedthe
project’s economics.

InJanuary2018,EnergeanannouncedithadselectedStenaDrilling
as its preferred drilling contractor, following a competitive tendering 
process.TheStenaDrillMAXwaslaterselectedastherigtobe
deployed. One exploration well and three development wells will be 
drilled at Karish in 2019, and commenced in March with the spud 
ofKarishNorth.DrillingserviceswillbeprovidedbyHalliburtonand
wellengineeringbyLloydsRegister.

InMarch2018,weraised$1.275billionofprojectfinancingand
$460millionofequitythroughourLondonIPO,securingthe
financingfortheKarishdevelopment.

In April 2018, Energean awarded a two-year contract to Wood, 
involving the preparation of systems and procedures to ensure 
safetyandefficiencyinallaspectsofthepre-operationperiod.A
second contract was subsequently awarded in the second half of 
the year to provide operations and maintenance manpower and 
specialistengineeringservicesforaperiodoffiveyears.

InNovember2018,firststeelwascutontheEnergeanPowerFPSO
attheCOSCOYardinChina,andinDecember2018firststeelwas
cut on the topsides at the Sembcorp Admiralty Yard in Singapore. 
Bothoftheseeventssignifiedkeymilestonestowardsthedelivery
offirstgasfromtheprojectin1Q2021.

InDecember2018,EnergeanIsraelsignedaMemorandumof
Understanding(MoU)withIsraelNaturalGasLine(INGL)thatwill
resultinapproximately$98millionofcashinflowforEnergean
Israelbetweennowandfirstgas.Thiscashinflowwasnot
accounted for in our initial project economics and demonstrates 
Energean’s intention to create value for shareholders at every 
opportunity. The MoU covers the onshore section of the Karish and 
Tanin infrastructure and the near-shore section of pipeline extending 
to approximately 10km offshore. It is intended that the handover to 
INGLwillbecomeeffectiveshortlyafterthedeliveryoffirstgasfrom
theKarishfieldin1Q2021.

36 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 37

Review of operations continued

Strategic report

Corporate governance

Financial statements

Other information

Prinos operations
Energean delivered 2018 full year production of 4,053 bopd. Fourth 
quarter production averaged 4,573 bopd, representing the sixth 
successive quarter of production growth from the Prinos Area, 
a greatresultthatdemonstratestheeffectivenessofourongoing
investment programme. Ownership of the infrastructure and facilities 
inthePrinosAreaprovidesarelativelyfixedcostbaseandtherefore
high operational leverage, which allowed us to deliver a 29% reduction 
in unit cost of production in 2018, from $24.7/bbl to $17.6/bbl.

EnergeancommencedoperationsontheEpsilonLamdaPlatform
development during 2018. Epsilon is an 18.4 MMbbl satellite 
development that will be tied back to the Prinos complex, utilising 
sparecapacitytobenefitfromthehighlevelofoperatingleveragein
the system. The development will utilise a minimum manned facility 
with15wellslots,controlledremotelyfromPrinosDelta.GSPwas
selected as turnkey contractor for construction of all facilities 
and drilling of three initial vertical wells using the GSP Jupiter rig. 
A furtherfivewellsareenvisagedtoberequiredtofullyrecoverall
2P reservevolumes.

During2019,Energeanexpectsproductiontoaveragebetween
5,000 and5,500bopd.Therangeinourguidanceisdrivenby
assumptions on performance of the Epsilon Extended Reach Well, 
timing and performance of 2019 wells, workovers, and historic 
performance/decline of the existing well stock. Energean continues 
to target production of more than 10,000 bopd in 2021, at which 
point operatingcostsareexpectedtofalltolessthan$10/bbl.

ThefirstverticalwelloftheEpsilonPlatformdevelopment,EL-1,
encountered the previously discovered Epsilon A reservoir. The well 
found a marginally thicker gross section of 98m with 40 - 45m of 
net pay in the Epsilon A reservoir as compared to the gross and 
netthicknessesof80mand40mencounteredinpastwells.EL-1
alsopenetratedthedeeperEpsilonreservoir,discoveringazone
of approximately 82m thickness and 30 - 35m net pay, which was 
aheadofexpectations.Athirdzone,theDolomiticZone,hasalso
been penetrated, showing some additional hydrocarbon potential 
across the 140m drilled. 

During2018,EnergeancommencedthedrillingofanExtended
Reach Well from the Prinos Alpha platform into the Epsilon satellite 
accumulation,acceleratingfirstoilfromthefieldbynearlyoneyear.

Exploration activities
2018 was a year of early stage exploration activities, primarily 
focusedonseismicplanningacrosstheportfolioandspecific
planning for the Karish North well. We also commissioned an NSAI 
reportonourIsraeliacreageinAugust2018,whichidentified7.5
Tcf (212 bcm) and 101 MMbbls of gross prospective resources 
acrossourKarishandTaninleasesandthefiveexplorationlicences
awarded as part of the 2017 bid round. 

Momentum is picking up in 2019 with the shooting and early stage 
interpretation of seismic across the portfolio and the spudding of 
ourfirstexplorationwell,KarishNorth.

38 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 39

Financial review

Strategic report

Corporate governance

Financial statements

Other information

Strong financial discipline

Sales, general and administrative (SG&A) expenses 
Energean incurred SG&A costs of $12.1 million in 2018.  
This represents an 89% increase on the previous year  
(2017:$6.4million)andisduetotheadditionalstaffingand
administrative costs associated with the rapid growth of the  
Group’s portfolio, the efforts associated with developing the 
projects, and additional requirements associated with being  
aPremiumListedentity.

For the full year 2019 Energean expects SG&A costs to be  
$15million,reflectingtheadditionalcostsassociatedwithafull 
yearofbeinglistedontheLSEandtheTASE,andthecontinued
increaseinthesizeofthebusiness.

Other income
Other income of $7.8 million (2017: $6.4 million expense) includes 
a reversal of a provision for the Greek tax and transfer pricing 
penaltiesrelatingtofiscalyears2006-2011,whichwerethesubject
of an appeal that was ruled in Energean’s favour in July 2018.

Finance costs
Financing costs for the period were $13.5 million (2017: $22.9 million), 
and are composed mainly of $15.1 million of interest expenses on 
theRBLandprojectfinancefacilitiesplus$5.7millionofinterest
expenses on long term payables representing payments to seller on 
Karish and Tanin, offset by capitalised interest of $9.3 million. The 
decrease compared to the previous period is associated with the 
conversion of a shareholder loan to preference shares during 2017.

Derivative financial instruments
The gain on derivative of $96.7 million is a result of the valuation  
ofaderivativefinancialinstrument,measuredatfairvalueatthe
endofeachreportingdate,whichrelatedtoEnergeanIsraelLimited
Class B Shares that the Group had a contingent commitment to 
acquire in the event of an exit (IPO or sale). The methodology used 
to value the shareholding multiplied the estimated probability of  
an exit event (IPO or sale) by the estimated difference between  
the consideration payable and the estimated value of the B shares. 
Thegainrecognisedin2018(FY2017:$25.8million)reflectsthe
increase in probability of an exit event to 100% when Energean 
listedontheLondonStockExchangeon21March2018.Following
executiononthecontingentcommitmentthederivativefinancial
asset was derecognised and transferred to the cost of investment  
inEnergeanIsraelLimited.

Crude oil hedging
Energean has no outstanding crude oil hedges.

Taxation
Energean recorded tax income of $15.5 million in 2018 (2017: 
$14.1 million tax expense) primarily associated with an increased 
recognition of a deferred tax asset. 

Panos Benos
Chief Financial Officer

Revenue, production and commodity prices
Working interest production from Greece averaged 4,053 boepd,  
an increase of 45% for the period (2017: 2,803 boepd). The increase 
in production is due to continued reservoir management of 
asphaltene precipitation and progress through the development 
drilling programme. 

Prinos production is sold at a $6.4/bbl discount to Urals Med blend, 
adjustedforfinalcargoAPI.Revenuesin2018benefitedfromboth
increased volumes and realised prices. 

Cost of production
Cost of oil 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 
assessoperationalefficiency.Costofoilproductioniscalculated 
as cost of sales, adjusted for depreciation and hydrocarbon 
inventory movements. 

The spare processing capacity in the Prinos infrastructure provides 
a high level of operational leverage. This has resulted in a 29.1% 
reduction in per barrel production costs, from $24.7/bbl in 2017 to 
$17.6/bbl in 2018. As production grows, Energean expects operating 
costs to continue to fall, reaching less than $10/bbl if the NSAI 2P 
productionprofileweretobeachieved.Energeanexpects2019
operating costs of $14 - $17/bbl.

Depreciation
Depreciationincreasedby91%to$34.3million(2017:$18.0million)
due to increased production and capital expenditure invested  
in Greece. 

Financial results summary

Av. daily working interest production (kboed)

Sales revenue ($m)

Realised oil price ($/boe)

Cost of oil production ($m)

Cost of production per barrel ($/boe)

Administrative & selling expenses ($m)

AdjustedEBITDAX($m)

Cashflowfromoperatingactivities($m)

Capital expenditure ($m)

Cash capital expenditure ($m)

Net debt (cash) ($m)

Net debt/equity (%)

2018 
$m

4.1

90.3

60.3

26.0

17.6

12.1

52.4

62.7

494.6

293.6

(75.6)

(7.0%)

2017 
$m

2.8

57.8

46.7

25.3

24.7

6.4

20.7

29.1

67.6

54.0

75.6

Change

46.4%

56.4%

29.1%

2.8%

(28.9)%

88.3%

153.6%

115.4%

631.3%

443.6%

(200)%

26.2%

(126.5)%

Adjusted EBITDAX
AdjustedEBITDAXisanon-IFRSmeasureusedbytheGrouptomeasurebusinessperformance.Itiscalculatedasprofitorlossforthe
period, adjusted for discontinued operations, taxation, depreciation and amortisation, other income and expenses (including the impact  
ofderivativefinancialinstrumentsandforeignexchange),netfinancecostsandexplorationcosts.TheGrouppresentsadjustedEBITDAX
asitisusedinassessingtheGroup’sgrowthandoperationalefficiencies,becauseitillustratestheunderlyingperformanceoftheGroup’s
businessbyexcludingitemsnotconsideredbymanagementtoreflecttheunderlyingoperationsoftheGroup.

AdjustedEBITDAX

Reconciliation to profit/(loss):

Depreciationandamortisation

Exploration and evaluation expense

Other income/(expense)

Finance expenses

Finance income

Gain on derivative

Net foreign exchange

Taxation income/(expense)

Profit/(loss)fromdiscontinuedoperations

Income for the year

2018
$m

52.4 

(34.3)

(2.1)

7.8 

(13.5)

1.7 

96.7 

(23.5)

15.5 

–

100.8 

2017
$m

20.7 

(18.0)

(10.0)

(6.4)

(22.9)

0.0 

25.8 

36.2 

(14.1)

(1.4)

9.9

Operating cash flow
Cash from operations before movements in working capital was $53.9 million, representing a 197% increase on the comparable period 
(2017: $18.1 million). After adjusting for working capital movements, cash from operations was $62.7 million, a 115% increase on the 
comparable period (2017: $29.1 million). 

40 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 41

 
 
Financial review continued

Strategic report

Corporate governance

Financial statements

Other information

Capital expenditure
Capital expenditure is a useful indicator of the Group’s organic expenditure on oil and gas assets and exploration and appraisal assets 
incurredduringaperiod.Capitalexpenditureisdefinedasadditionstoproperty,plantandequipmentandintangibleexplorationand
evaluation assets excluding decommissioning asset additions, disposal and capitalised depreciation, less capitalised borrowing cost.

Additions to property, plant and equipment

Additions to intangible exploration and evaluation assets

Less

Capitalised borrowing costs

Total

2018
$m

497.7

6.2

(9.2)

494.6

2017
$m

65.7

3.2

(1.3)

67.6

Capital expenditure was $494.6 million, of which $396.5 million was invested in Israel, $97.2 million in Greece and $1.3 million in other 
areas. 2018 capex does not include the Karish acquisition and development cost of $86.0 million, which was accrued pre consolidation 
at 29March2018.

Cash capital expenditure in 2018 was $293.6 million (FY 2017: $54.0 million).

Energean expects consolidated capital expenditure in 2019 to be $825 - 860 million, the break-down of which is provided in the table below. 

Exploration

Development

Total

Israel 
$ million

30 - 40

640 - 650

670 - 690

Greece 
$ million

5 - 10

140 - 150

145 - 160

Montenegro 
$ million

New business 
$ million

5

–

5

5

–

5

Total 
$ million

45 - 60

780 - 800

825 - 860

Goodwill
Energeanhasrecorded$75.8millionofgoodwill(2017:$nil)inrespectoftheacquisitionofEnergeanIsraelLimited.InaccordancewithIAS
12, Energean is required to recognise a deferred tax liability in relation to the forward liability assumed, the provision for which is calculated 
as the tax rate of Israel (23%) multiplied by the difference between the assigned fair value and the tax bases of assets acquired. The 
offsetting accounting entry to this is goodwill. None of this goodwill will be deductible for tax purposes.

Net cash/debt and gearing ratio
NetdebtisdefinedastheGroup’stotalborrowingslesscashandcashequivalents.Managementbelievesthatnetdebtisausefulindicator
oftheGroup’sindebtedness,financialflexibilityandcapitalstructurebecauseitindicatesthelevelofborrowingsaftertakingaccountofany
cashandcashequivalentsthatcouldbeusedtoreduceborrowings.TheGroupdefinescapitalastotalequityandcalculatesthegearing
ratio as net debt divided by capital.

Net debt reconciliation

EBRDfacility($200m)

Israelprojectfinancefacility($1,275m)

Total borrowings

Cash and cash equivalents

Total net debt/(cash)

Capital

Gearing ratio

2018 
$m

144.3

–

144.3

(219.8)

(75.6)

1,087.8

(7.0%)

2017 
$m

91.3

–

91.3

(15.7)

75.6

289.0

26.1%

InMarch2018,Energeanraised$460.0millionthroughitsPremiumListing.Netofcashtransactioncostsof$20.1millionthiscontributed
$439.9 million of cash. 

EBRD facility agreements
On30January2018,theGroup’sexistingEBRDSeniorFacilityAgreementwasamendedandrestatedpursuanttotheRBLSeniorFacility
Agreement.TheRBLSeniorFacilityAgreementcomprisestwofacilitiesi)afacilityofupto$105millionwithEBRDandtheBlackSea
TradeandDevelopmentBankaslenders;andii)a$75millionfacilitypursuanttowhichtheExport-ImportBankofRomaniaEximbankSA
and Banca Comerciala Intesa Sanpaolo Romania S.A. (with 95% insurance cover from the Romanian ECA) are lenders. Proceeds from the 
RomanianClubFacilitywillfinanceexclusively85%ofthevalueattributabletogoodsandservicesundertheGSPEPCIC.Interestischarged
onthe$105millioncomponentoftheloanatLIBOR+4.9%andonthe$75millionRomanianfacilityatLIBOR+3%.

Karish-Tanin project finance
In1H2018Energeansecured$1,275millionofseniorsecuredprojectfinanceforitsKarish-Taninproject.TheloanisheldattheEnergean
IsraelLimitedlevel(Energean70%).Oncedrawn,interestistobechargedatLIBOR+3.75%overmonths1-12,LIBOR+4.00%overmonths
13-24,LIBOR+4.25%overmonths25-36andLIBOR+4.75%overmonths37-45.ThefacilitymaturesinDecember2021andhasa
bullet repayment on maturity. There is a commitment fee of 30% of the applicable margin. Energean estimates that the weighted average 
applicable interest rate over the life of the facility will be 4.0%.

Liquidity risk management and going concern
TheGroup’sforecastsshowthattheGroupwillbeabletooperatewithinitscurrentdebtfacilitiesandhassufficientfinancialheadroom
for the next 12 months. An important factor for determining that the going concern basis remains appropriate is the Group’s ability to raise 
necessaryfundingasandwhenneeded.In2018,theGroupsuccessfullybecameaPremiumListedcompanyontheLondonStockExchange,
whichraised$460milliongrossproceeds.Furthermore,theGroup’sliquiditypositionwassignificantlyimprovedbytheamendmententered
intoon30January2018oftheGroup’sexistingEBRDSeniorFacilityagreement,whichincreasedthisfacilityfromUS$75milliontoUS$180
million. In addition, the Group entered into a US$1.275 billion Senior Credit Facility agreement, which is being used to fund the Karish and Tanin 
developmentcosts.Subsequenttothebalancesheetdate,theGroupmadeitsfirstdrawdownunderthisfacility.

Brexit
Energean has considered the potential impact of Brexit and believes that its business would not be materially affected by Brexit (either with 
or without a deal).

Events since 31 December 2018
Therehasnotbeenanyeventsince31December2018thathasresultedinamaterialimpactontheyear-endresults.

Non-IFRS measures
TheGroupusescertainmeasuresofperformancethatarenotspecificallydefinedunderIFRSorothergenerallyacceptedaccounting
principles.Thesenon-IFRSmeasuresincludeadjustedEBITDAX,costofoilproduction,capitalexpenditure,cashcapex,netdebtand
gearing ratio and are explained above.

Business combination 
On27March2018,theGroup,followingaFIDinrespectoftheKarishandTaninassets,subscribedforadditionalsharesinEnergeanIsrael
for an aggregate consideration of US$266.7 million, payable in cash, increasing its shareholding in Energean Israel to 70% from 50% as 
Kerogen Capital did not participate in the new share issuance. Upon completion of this subscription, the Group holds 70% of the shares 
in EnergeanIsrael,withKerogenholdingtheremaining30%.Followingtheabove,EnergeanIsraelisconsolidatedin Energean’saccounts.

42 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 43

 
Corporate social responsibility – Our approach

Strategic report

Corporate governance

Financial statements

Other information

Responsibility lies at the heart 
of our business

Energean is committed to adopting 
a responsible, sustainable business 
model in order to create shared long-
term value for all our stakeholders. 
Our aim is therefore to ensure that 
sustainable development and corporate 
responsibility are at the centre of our 
operations and governance.

We intend to go beyond adherence to compliance requirements 
by adopting the highest international business standards and 
by creating an operational framework that allows us to integrate 
sustainability into our business. 

In our business, we aim to make a positive contribution to society 
whilst minimising the cost to the environment. 

We:

 X Build strong and productive relationships with our investors, 
customers, partners and suppliers, based on understanding, 
trust, transparency and accountability

 X Manage risk more effectively by strengthening our procedures 

and processes

 X Engage our employees through a culture of development, 

collaboration,trust andsafety

 X Improve our performance by maintaining the integrity of 

our assets,ourenvironmentandourcommunitieswherever
we operate

 X Earn trust amongst our stakeholders to sustain our reputation 

in thelongterm.

 X Foster a culture of environmental stewardship across our value 
chain, by monitoring and mitigating our environmental footprint 

 X Respect the communities with whom, and the environment 

within which, we work.

Our goal is to integrate sustainability thoroughly into our operations 
and maximise our value creation.

Our objective is to generate sustainable prosperity through  
our business operations.

We are therefore committed to conducting our operations 
responsibly, which means supporting local communities and caring 
fortheenvironment,aswellaslookingafterthehealthand safetyof
our employees.

We have established frequent communication with our 
stakeholders inordertobeabletobetterunderstandtheir
perspectives, taking initiatives to address their concerns and vital 
needs. We have initiated sponsorships to address ad hoc needs 
within local communities, promoting social welfare and protecting 
our social licence to operate.

CSR policy
In addition to the expectations of stakeholders, CSR is a fundamental 
guiding principle of how we run our business. Our CSR policy is 
deeply rooted in our corporate values, and is guided by international 
standards and global initiatives, as well as industry best practice.

Our Chief Executive is accountable for CSR, supported by our CSR 
Team. The Board has ultimate responsibility for reviewing and 
approving the CSR strategy and for monitoring our progress in 
achieving sustainability objectives, through regular performance 
reviews and reporting. In this, it is also supported by the Board 
HSE Committee.

All our business units are accountable for developing and 
implementing the CSR strategy and, where appropriate, progress 
against our targets is independently assessed.

Our approach to CSR
Corporate governance
We are committed to upholding the highest standards of integrity and corporate governance practices in order to maintain 
excellenceinourdailyoperations,andtopromoteconfidenceinourgovernancesystems.

We aim to conduct our business in an open, honest and ethical manner.

Energean will become a signatory to the UN Global Compact in 2019, supporting its corporate governance principles on human 
rights, anti-corruption, environmental protection and better labour practices.

We focus our CSR activities in the following key impact areas:

As our business grows, 
so does our responsibility 
to the local communities 
where weoperate.We
work hard to support our 
local communities and 
workwiththemto makea
real difference.

Read more on  
pages 52 - 55

 4

Community 
relations

Corporate 
Governance

Corporate  
social 
responsibility 
policy

 1

Employees

We are focused on 
attracting, developing 
and retaining the best 
people and creating an 
environment where our 
employeescanfulfil
their truepotential.

  Read more on  
pages 46 - 47

 3

Environment

 2

Health  
& Safety

We are committed to 
conducting our business in an 
environmentally responsible 
way by mitigating risks and 
minimising the impact of our 
operations on the natural 
environment.

Read more on  
pages 50 - 51

The health and safety of our 
workforce remains our top 
priority. We invest in safety 
training and strive to meet the 
most stringent international 
standards.Ourgoalis to
promote a safety culture where 
zeroharmisourultimateaim.

  Read more on  
pages 48 - 49

44 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 45

Strategic report

Corporate governance

Financial statements

Other information

Values
We want to promote a culture of fairness and equality in our working 
environment and amongst our workforce, without discrimination. 
We require all employees and contractors to abide by Energean’s 
Code of Conduct. Energean is committed to protecting and 
advancingHumanRightsasdefinedintheUniversalDeclarationof
HumanRightsandthecoreconventionsoftheInternationalLabour
Organization’sconventionsonlabour.Weupholdandpromote
HumanRightswithinoursphereofinfluence.

Our employees and contractors come from 28 throughout the 
world. We celebrated this inclusivity on 21 March this year, when we 
supported the UN sponsored International Day for the Elimination 
of Racial Discrimination.

Corporate social responsibility – Employees

Excellence through 
our people

Energean understands that its people 
are central to ensuring it achieves its 
objectives as a business. Our values of 
responsibility, excellence, integrity and 
commitment, coupled with caring for 
the environment and engaging with local 
communities, are key to achieving our 
success in a sustainable manner. We also 
understand that inclusivity and diversity 
in our workforce will strengthen our 
capabilities and broaden our horizons.

Inclusivity and diversity
We create a fair and inclusive environment to attract the best people. 
We are proud of our diverse workforce, with its diversity of gender, 
variety of nationalities and broad spectrum of ages. We strive to 
create and develop a working environment where everyone can 
perform to the highest standards. Our guiding principle is that all 
employees have the ability to learn and develop. We therefore seek 
toassisttheminreachingtheirfullpotential,and thusenablethe
business to maximise its chances of success.

During2018,EnergeanestablishedanExecutiveCommittee,which
has 40% female representation. Our senior management team has 
25% female representation.

Asat31December2018,Energeanhad416employees,locatedin
six countries.

Three hundred and seventy of our employees are located in Greece, 
90% of them in Kavala, and contributing to our onshore and offshore 
operations, which makes Energean one of the largest employers in 
thelocalarea.Ourotheremployeesarelocatedinourofficesinthe
UK, Israel, Montenegro, Egypt and Cyprus, as shown below.

Employees per country

3

13

19

6

5

 Cyprus

 Montenegro

 Egypt

 Israel

 UK

 Greece

370

Employees by age

3

13

19

6

5

 Under30

 Between31and50

 51orover

370

46 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 47

Corporate social responsibility – Health and safety

Setting and maintaining 
a positive safety culture

Energean is committed to protecting 
the health and safety of all individuals 
affected by its corporate activities, 
including employees, contractors 
and the general public.

WehaveestablishedacomprehensiveandintegratedHealth
andSafetyManagementSystem('H&SMS')alignedwith
the requirements of international standards and European 
safety directives.

We are committed to the implementation, maintenance and 
continualimprovementofourH&SMSandaimtoachieve
accreditation for international safety standards and best practices.

OurH&SMSisbasedontriedandtested,internationallyrecognised
best practices in managing health and safety risks in the E&P 
industry,structuredaroundaclassic‘Plan-Do-Assess-Adjust’cycle.

T
S
U
J
D
A

PLAN

HSE Policies

HSE Standards

HSE Requirements

HSE Plans, Procedures 
and Practices 

ASSESS

By implementing this structure we seek to ensure that we:

 X Understandallhazardsassociatedwithouroperations
 X Undertakeactivitiestomanagethosehazardsandminimise

the risklevels

 X MeasuretheeffectivenessofourHSEperformance
 X Adjust our plans and procedures in response to 

those assessments.

Corporate Major Accident Prevention Policy
The Board has approved a Corporate Major Accident Prevention 
policy (CMAPP), recognising:

 X itsresponsibilitytocomplywiththeOffshoreSafetyDirective

andwiththeSevesoDirective;

 X that the nature of Energean’s offshore oil and gas operations 

may give rise to major accidents;

 X its responsibility to control the risks of major accidents and to 
continuously improve these controls in line with advances in 
technologyandgoodoilfieldpractices;and

 X its commitment — as laid out in the Energean Code of Conduct 
—toachievehighstandardsofHSEperformanceandtomake
available all necessary resources to achieve these goals.

Energean controls risks of major accidents arising from its onshore 
and offshore oil and gas operations so far as is reasonably practicable, 
ensuringthatsuchrisksarewithinthe‘acceptable’or‘tolerable’
classificationunderALARP(AsLowAsReasonablyPracticable).

‘Stop work’ policy
Any person employed or contracted by Energean may invoke the 
‘stopwork’policyiftheyfeelthatanyemployee,aGroupassetor
the local environment is at risk. There shall be no blame put on any 
employeecallingfora‘stopwork’orderingoodfaithevenif, upon
investigation, the stop work order proves to be unnecessary.

Leadership and commitment
HSEleadershipandaccountabilityforH&SstartswiththeCEOwho
takes all necessary steps to ensure that the highest possible level of 
health and safety performance is achieved within the Company. We 
regard health and safety as a line responsibility and an integral part 
of the duties of all personnel. 

D
O

Legal compliance
Compliance with all applicable health and safety legislation and 
regulationsisafundamentalrequirementoftheEnergeanH&S
MS.Allworkcarriedoutatourcompanyofficesandpremises,and
all work activities undertaken at project locations and operational 
sites, is carried out in accordance with applicable local laws and 
European regulations. 

Competence management and training
Energean maintains an ongoing competence and assurance 
managementscheme,andprovidesappropriateHSEtrainingto
all employees.FormalH&Strainingisprovidedtoallemployees
eitherannually,orevery2-3years,dependingonthespecific
training required. 

HSE Assurance in the Supply Chain 
Energean applies a systematic process for the selection and 
managementofsuppliersandcontractors,fromthepre-qualification
stageattheoutsetofthisprocesstothemonitoringandauditofHSE
performance during the provision of supplies, work and/or services.

Strategic report

Corporate governance

Financial statements

Other information

Operational framework and control
We develop, implement, monitor and review procedures and 
instructions for safe operation, enabling our adaptation to changes 
in operations, regulations, industry standards and technology. The 
main components of this framework are:

Total man-hours worked

Employees

Contractors

Personnel total

2016

570,410

281,640

852,050

2017*

778,008

161,280

939,288

2018**

712,988

1,108,606

1,821,594

 X Pre-shiftbriefingsandshifthandovers
 X Toolbox talks
 X SiteHSEinspectionsandaudits
 X Incident reporting and investigation
 X Task risk assessments
 X HSEmeetings
 X Permit to Work system
 X Emergency response
 X Safety inductions.

Occupational health
We take all necessary steps to ensure the health of our employees 
and contractors. An annual health programme is implemented 
for all employees, which includes biochemical analysis, physical 
examinations, and heart and lung screenings. All employees and 
contractorsholdmedicalcertificatesrelevanttotherequirementsof
their position. Private health insurance is provided to all employees, 
except in Israel where public health services are of a high standard.

Key metrics monitored
 X Total man-hours worked
 X NumberofLostTimeInjuries(LTI)
 X LostTimeInjuryFrequency(LTIF)
 X Total Recordable Injury Rate (TRIR)
 X Fatal Accident Rate (FAR)

*   2017 includes employees’ man-hours worked during the plant general 

turn-around activities and for two additional support vessels

**  2018 includes contractors’ man-hours in all construction yards related to 

Energean projects

Total LTI*

Employees

Contractors

Personnel total

* LostTimeInjuries

LTIF*

Employees

Contractors

Personnel total

2016

2017

2018

2

0

2

2016

3.51

0

2.35

3

0

3

2017

3.86

0

3.19

2

0

2

2018

2.81

0

1.10

* LTIFrequency:Thenumberoflosttimeinjuries(fatalities+LTIs)permillion

hours worked

TRIR* 

Employees

Contractors

Personnel total

2016

8.77

3.55

7.04

2017

10.28

0

8.52

2018

2.81

2.71

2.74

* TotalRecordableInjuryRate:Thenumberofrecordableinjuries(fatalities+LTIs

+ restricted work day cases + medical treatment cases) per million 

hours worked

FAR*

Employees

Contractors

Personnel total

2016

2017

2018

0

0

0

0

0

0

0

0

0

*  Fatal Accident Rate: The number of fatalities per 100 million hours worked

48 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 49

Corporate social responsibility – Environment

Creating a sustainable 
environment

The environment is a key concern for 
Energean. We understand the impact 
of our activities upon the environment. 
We are therefore working continually 
to improve our Environmental 
Management System.

We are in the process of achieving ISO 14001 accreditation, 
whichwillhelpustomanagemoreefficientlyourenvironmental
responsibilities. We seek to address our environmental 
responsibilities throughout the value chain. 

Reducing waste and emissions are important to us. We also invest 
inwaystoenhanceourenergyandwaterefficiency.

Environmental protection is a top priority and we are committed 
to ensuring that all necessary measures are taken to minimise the 
possibility of any environmental impact. Additionally, management 
and staff are committed to vigorous supervision and the 
implementation of applicable national and European legislation.

Key metrics monitored
 X Greenhouse gas emissions
 X Specificdirect/indirectemissions
 X Specificenergyconsumption
 X Specificwaterusage
 X Waste quantities

Environmental expenditure

2016

112,158

2017

525,318

2018

825,287

Total cost (€)

Crude oil production

Product (tn)

2016

178,209

2017

143,137

2018

207,003

Specific energy consumption*

Electrical (KWh/
product tn)

Thermal (KWh/
product tn)

Specific emissions*

Direct(kgCO2/
product tn)

Indirect (kg CO2/
product tn)

Specific water usage*

Seawater and 
potable water 
(m3/product tn)

Beach cleaning in Kavala, Greece

2016

338

928

2016

208

297

2017

338

2018

274

1,202

1,044

2017

262

341

2016

2017

7.24**

7.67**

2018

219

234

2018

4.90

2018

941

2018

1,508

**Valuescorrectedfromthefiguresgivenin2017.

Non-hazardous waste disposal

Total waste (tn)

Hazardous waste disposal 

Total waste (tn)

2016

398

2016

170

2017

276

2017

1,191

*   It should be noted that increase of production reduces the above 

specific values.

Strategic report

Corporate governance

Financial statements

Other information

Air quality
To ensure we meet all our environmental objectives, we are 
continuouslymonitoringairquality.InthewiderareaofThassos and
Kavala,12stationsmonitorthetotalsulphationofthe atmosphereon
amonthlybasis,andacentralenvironmentalstationmonitorsH2S, 
SO2andHClevelsandmeteorologicalparameters(windspeedand
direction,ambienttemperature,and relativehumidity).

Marine environment
We have an excellent track record of environmental risk 
management. In 39 years of operation, in the sensitive environment 
of the Gulf of Kavala, no environmental damage has been recorded.

Our environmental policy and management are in line with all 
applicable national laws and European directives.

Our onshore and offshore water discharges are continuously 
monitored to meet the requirements of the Water Framework 
Directive,theMarineStrategyFrameworkDirective,theBarcelona
Convention and the International Convention for the Prevention of 
PollutionfromShips('MARPOL').

Biodiversity protection 
We aim to conserve the biological diversity of terrestrial, marine 
and avian migratory species throughout their range. We manage 
our operations by taking into account the fundamental ecological 
functionsofwetlandsandtheireconomic,cultural,scientificand
recreational value. 

The Bonn Convention, the Ramsar Convention, the Convention 
onBiologicalDiversity,andtheEUBirdsandHabitatsDirectives
are considered throughout the execution of environmental impact 
assessments and environmental monitoring plans.

Anindependentoffshorespecificstudyshowedthatbenthic
communities have not been affected by Energean’s offshore 
operations in the Gulf of Kavala.

Marine contingency plan
We have developed and tested emergency response procedures 
forhandlingspecificincidentssuchasoilspills.Ourwell-structured
management plan, which includes regular, comprehensive training 
forstaffandthenecessaryoilspillfightingequipment,ensures
wehavetheconfidencethatwecanmanageanypotentialoilspill.
The effectiveness of these emergency management procedures 
is demonstrated by the fact that we have never had to put them 
into practice.

Waste management
We are committed to reducing at source the amount of waste 
generated by our activities. Where recycling is not deemed 
practical, opportunitiesforusingwasteasasourceofenergyare
being considered. Energean is investigating new processes to treat 
wastemoreefficiently.Forinstance,weareconsideringhowto
minimise the solid waste produced by our plant, and how to recycle it.  

Water recycling and reuse
We recognise the importance of global water resources to the 
environment,aswellaswater'ssocial,economicandpolitical
implications. We are reducing the impact of our operations 
upon waterresourcesbyrecyclingandreusing:

 X water from production
 X water for cooling
 X waterforfirefighting
 X water for utilities.

Adaptive environmental behaviour 
At Energean, we seek to promote environmental awareness 
amongst our employees, throughout their daily activities, 
both inside and outside of the workplace. We recognise that 
sustainable developmentandsustainablelivingarekeyto
successful environmental conservation. We therefore regularly 
undertake environmental initiatives with the participation of local 
communities, such as cleaning local beaches on page 50.

DolphinsoffshoreKavala,Greece

Our industry, tourism and the environment in  
co-existence
Since 2009, we have invested more than US$400 million in the 
PrinosoilfieldintheGulfofKavala.Ourtrackrecordofzero
environmental incidents during our operations in the Gulf of Kavala 
demonstrates that heavy industry can be compatible with both the 
natural environment and the activities of local communities. Our 
abilitytooperateinenvironmentallysensitiveareasisalsoreflected
bytheawardofmorethan10blueflagsbytheHellenicSocietyfor
the Protection of Nature (representing Greece in the International 
Foundation for Environmental Education) every year since 2008 to 
beaches and marinas in the areas surrounding the Prinos basin.

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Corporate social responsibility – Community

Community relations

Energean aims to make a positive impact when it comes to 
communityissues.Havingunderstoodthepowerofworking
together, we undertake initiatives in order to build trust with the local 
communities where we operate and, hence, secure our social licence 
to operate. We actively pay close attention to the impact we make on 
the well-being of society and we further engage in activities geared 
towards contributing to and improving the quality of life.

Our community investments are part of our larger effort to build 
trust in the societies where we operate and provide solutions 
to chronic societal problems. We consider this effort as a joint 
purpose and we are trying to increase our ability to provide 
sustainable solutions in the long run. We believe that the only way 
toachievethis,isthroughtheestablishmentofamutuallybeneficial
relationship between the organisation and the local communities. 

The energy industry, in its entirety, is engaged in a serious debate 
over impacts on natural resources, as well as impacts on local 
communities and their ecosystems. At Energean, we believe that 
adopting responsible practices and aiming to create shared values 
for all of our stakeholders helps us manage risks and fully take 
advantage of the opportunities presented to us in a constantly 
changing environment. Potential risks mainly include damage to 
our reputation and undermining of our established and long-lasting 
relationships with our local communities, which could lead to the 
lossofour'sociallicence'tooperate.

Our CSR policy is rooted in our Company values, guided by 
international standards and best practices, and has become 
a fundamentalguidingprincipleofhowwedobusiness.Tothis
end, weworktowardscontributingtotheachievementofthe
United NationsSustainableDevelopmentGoals(SDGs)inour
everyday operations. 

OursocialactivitiescontributetotheachievementoftheSustainableDevelopmentGoalsandspecificallyto: 
Goal1‘No Poverty’,Goal2‘Zero Hunger’,Goal3‘Good Health and Well-Being,Goal4‘Quality Education’,  
Goal10‘Reduced Inequalities’,Goal11‘Sustainable Cities and Communities’,andGoal14‘Life Below Water’.

Strategic report

Corporate governance

Financial statements

Other information

We combat poverty

We fight hunger

Energean has adopted a responsible  
attitude to support poor and vulnerable people, 
joining the efforts of NGOs and establishing  
alliances with them towards the common goal 
of fighting poverty. To this end, Energean:

 X SupportedtheNGO‘TogetherforChildren’throughtheCSR
initiatives‘IgivebecauseIcare’and‘SecretSanta’.Inthis
context, Energean urged colleagues to donate children’s items 
and, through a great response, Energean managed to collect 
food, personal hygiene products, cleaning and school supplies, 
clothes and toys in order to support children, adolescents 
and families in need. Energean’s employees were also urged 
to become the Secret Santa to a child in need and feel the 
happiness of giving. In this way, Energean contributed during the 
Christmas period to the happiness and wellbeing of 30 children 
and families already supported by NGO’s food relief programme. 
The Secret Santa activity took place in both Athens and Kavala 
in Greece. 

In Energean, we fight hunger by supporting 
people, particularly the poor and vulnerable, 
who lack access to food and proper nutrition. 
In order to achieve this goal, we establish 
partnerships with NGOs and we contribute 
to their efforts against hunger, while 
directly helping people in need with food 
and gift vouchers:

 X DonationofsurpluslunchfoodfromtheAthensofficeto

‘Boroume’(‘WeCan’)–1,562portions(‘Boroume’isanon-profit
organisationthatfightsfoodwasteby organisingthedistribution
of surplus food for charity throughout Greece). 

 X DonationofsupermarketgiftvouchersforcelebratingEaster,to

families in need. 

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Corporate social responsibility – Community continued

Strategic report

Corporate governance

Financial statements

Other information

We care about good health and wellbeing

We promote cultural and natural heritage

Energean cares about the good health and 
wellbeing of all people, from its employees to 
the citizens of local communities. Providing 
premium health insurance packages to its 
employees, while promoting health initiatives 
in the local communities, Energean seeks to 
provide a helping hand to people in need and 
especially to people with special needs and 
disabilities. In this context, Energean 
responded to local needs through:

 X Energean established a crowd-funding project, the proceeds of 
whichwereallocatedtotheKavalaSchoolof SpecialVocational
EducationandTraining(the'KavalaEEEEK'),atNeaKarvali,
Kavala, Greece. The purpose of the fundraising was the creation 
of a multi-sensory room for students on the autism spectrum, 
aswellasforchildrenwithlearningdifficulties,hyperactivityor
otherneurologicaldevelopmentdisorders.The roomiscalled
theSnoezelenTherapyRoomorMulti-SensoryTreatmentRoom.

We reinforce education

In Energean, we believe that it is our duty to 
support the future generations of Oil & Gas 
experts, who will staff the Greek upstream 
sector. To this purpose, we aim to secure 
a high level of educational skills, which can 
address the employment needs and future 
opportunities in the energy sector. We 
accomplish that by providing scholarships and 
internships to existing and prospective college 
students, sponsoring student’s initiatives, 
forums and conferences, as well as donating 
school equipment. During the reporting period, 
Energean initiated the following actions:

 X Hosted14collegestudentsforinternshipsandsummerwork

during the summer of 2018.

 X Provided numerous guided tours and visits to college professors 
andstudentsonouronshorefacilities(‘SigmaPlant’),atNea
Karvali, Kavala, Greece. 

 X Offered scholarships to two college students of the Eastern 
Macedonia and Thrace Institute of Technology, in order to 
acquiretheirMaster’sDegreeinOil&GasTechnology.

Wheelchair Basket Ball Game, Kavala, Greece (with our Chief Executive on the right)

We stand for equality

Through our slogan ‘We all can, we all care’  
we aim to convey the message that living with 
a disability should not prevent anyone from 
living a full life. At the same time, we urge 
everyone to fight against social exclusion 
of people with disabilities and contribute to 
a world of reduced inequalities. Towards this 
goal, Energean implemented the following 
actions during the reporting period:

 X AncientOlympiaMarathon:Donationtothe‘Associationof
ParaplegicsandDisabledPeopleinthePrefectureofIleia’,
Greece. Additionally, a team of 23 members in total from our 
officesinLondon,AthensandCairo,includingteenagersand
children, participated in various races, including a night-run that 
we run next to the Association’s members who participated in 
their wheelchairs. 

 X Bath University, United Kingdom: Supported a Charity 

Wheelchair Basketball Game, aiming to engage students and 
to raiseawareness.

 X We organised a Wheelchair Basketball Game for a good cause 
inKavala,Greece:‘Energean-KavalaB.C.’,abasketballteam
competing in the 2018 - 2019 A2 Men’s National Basketball 
Championship & Friends, played wheelchair basketball with 
‘KavalaSportsClub–WheelchairBasketballTeam’.Energean’s
CEO, Mr. Mathios Rigas, along with other company executives, 
participated in the game. All proceeds of the event were 
donatedfortheneedsof‘KavalaSportsClub–Wheelchair
Basketball Team’.

 X Supported,asGoldSponsors,the‘1stPetrochemDay’,organised

by Chemecon, a NGO established by Chemical Engineering 
college students.

 X Supported‘Etgarim’(Israel),anNGOfortherehabilitation,

empowerment and social integration of children and adults 
with disabilities,throughoutdoorsports.

 X Donated500setsofschoolequipmenttosixMunicipalitiesin

Epirus, Western Greece.

 X Onthe‘WorldEnvironmentDay’:Initiatedandofferedlecturesto
primary school students on Marine Environment and Recycling, 
in order to educate and raise students’ awareness.

Sustainable development has always been 
Energean’s primary goal for the local 
communities where the Company operates. 
In this context, we work towards the protection 
and safeguard of the cultural and natural local 
heritage. During the reporting period, Energean 
initiated and supported the following actions:

 X Supportofthe2ndDodoniFestival(aCulturalSummerFestival

in Ioannina, Greece).

 X Greatsponsorsof‘Kalpakia2018’(aCulturalFestivalof
HistoricalRemembrancefortheWWIIBattleinKalpaki,
Ioannina, Greece).

 X On-going and continuous support of Kavala’s Fire Brigade. 
 X Grand Sponsors of Ancient Olympia Marathon.
 X GrandsponsorsofKavala’s21kmHalf-MarathonRace‘Saint

Paul Run’.

We protect our ecosystems

In Energean, we seek to prevent and 
significantly reduce marine pollution of all 
kinds. We aim to sustainably manage and 
protect marine coastal ecosystems, not only 
through the prevention of potential pollution, 
but also through remediation of the existing 
pollution beyond Energean’s operational 
boundaries. Our employees are encouraged to 
make a positive impact in local communities, 
and during the reporting period, they took part 
in the following voluntary actions:

 X Voluntary cleaning of Rapsani Beach (employees’ engagement).

 X CleaningoftheseabedofKavala’sMainPort‘ApostolosPavlos’,
with the participation of Energean’s divers and divers volunteers 
(shown below). The action was supported by Energean’s vessels 
‘EnergeanWave’and‘SkalaPrinos’(employees’engagement).

Seabed cleaning, Kavala Port, Greece

Additional Initiatives
In Energean, we believe that our host communities are an 
integral part of our operations and thus they are recognised 
as key stakeholders for our company. In this context, 
Energean held a range of additional societal actions, 
during the reporting period, as stated below:

 X Energean’s Floating Production Storage Off-loading (FPSO) 
Naming Competition 2018, for the naming of the Energean’s 
futurebuiltfloatingvessels.Thewinnerofthecompetitionwill
travel to Singapore for the naming ceremony in 2020;

 X Employees engagement through an Environment Photo Contest, 
with various gifts for participants while the best photos awarded 
and included in the Energean’s annual calendar;

 X Creationandpublishingofthe‘2007-2017:10yearsofgetting

WISER’ book, including words of wisdom by Energean’s employees;
 X GoldsponsorsofKavala’s‘WhiteNight’,incollaborationwiththe
Commercial Association of Kavala and the participation of the 
surrounding local communities, with the aim to enhance and 
mobilise the local market;

 X Initiation of the collection and recycling of plastic bottles, lids and 
bags consumed on Energean’s platforms, delivering dual positive 
impact. On the one hand, the plastic is being recycled while on the 
other hand the monetary value generated through this process 
is donated to the local Special Vocational Education & Training 
School of Nea Karvali in Kavala, Eastern Macedonia, Greece;
 X DecorationanddeliveryofEasterCandlesataNursingHome;

Our Performance
Our main goal is to raise public and employee awareness and to 
inspire the local community on related engagements. For this 
reason, we constantly aim to openly inform the local communities, 
as well as urge and engage our employees over upcoming events. 
At the same time, we welcome feedback on the initiatives and 
activitiesthathavealreadytakenplacebyourCSRDepartment.

The primary way of receiving feedback regarding our approach 
comes from our day to day interaction with the local communities. 
However,inourconstantefforttoimproveandmaximiseour
social contribution, we plan to undertake local communities’ needs 
assessments in the future, through meetings, stakeholder forums 
and surveys, in order to better identify and hence address the 
specificsocietalneeds.

During2018,nosignificantdisputesemergedwithlocal
communities and indigenous people, concerning land use, marine 
areas, cultural heritage, or other reasons. On planned and future 
operations, we aim to further enhance our relationship with the local 
communities in order to keep our social licence to operate intact 
and retain their trust.

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Risk management

Risk management 
framework

Effective risk management is 
fundamental to achieving our strategic 
objectives and protecting shareholder 
value. The Directors have carried out 
a robust assessment of the Group’s 
principal risks and a description of these 
risks, together with details of how they 
impact our strategy and how they are 
managed, is provided on pages 58 - 62.

Overview
The Board has overall responsibility for determining the nature 
andextentofthesignificantrisksitiswillingtotakeinachieving
the strategic objectives of the Group, and for ensuring that 
risks are managed effectively. A key aspect of this is ensuring 
the maintenance of a sound system of internal control and risk 
management. 

The Group operates a risk management framework in order to 
identify, assess, control and monitor the risks to the business and 
allow it to achieve its strategic objectives. 

The risk management framework sets out the inputs into the 
internal controls and risk management process and includes detail 
on the following matters:

 X Risk reporting structure
 X Identification
 X Methodologyandclassification
 X Risk appetite
 X Group Risk Register
 X Reporting and monitoring framework.

The Board has approved a Group Risk Register identifying 
significantrisksofthefollowingkinds:

 X Strategic risk
 X Health,safetyandenvironmentalrisk
 X Humanresourcerisk
 X Technology risk
 X Regulation & compliance risk 
 X Operational and execution risk 
 X Financial and reporting risk.

The Board has put in place a monitoring system to ensure that risk 
management and all aspects of internal control are considered on 
a regular basis, and fully reviewed at least annually. The monitoring 
systemassistsindeterminingthenatureandextentofthesignificant
risks the Board is willing to take in achieving its strategic objectives. 

Strategic report

Corporate governance

Financial statements

Other information

Risk management processes
The Board and the senior management team use a combination 
of differentandcomplementaryskillstoassesstherisksfacing
the business. In determining its risk appetite, the Board considers 
a varietyofinformationwhenreviewingtheGroup’soperations
and approvingkeymattersreservedforitsdecision.This
information includes:

 X updates provided by senior management on key strategic and 

operational matters;

 X discussion and approval by the Board of the Group budget 

(including its working capital);

 X information provided for the purposes of deciding whether to 

approvethosesignificantmatterswhichhavebeenreservedfor
the Board; 

 X Group risk assessments facilitated by the Group’s management 

and monitored by the Internal Audit function; and

 X the reports of the external auditors.

Risk reporting
The Board has delegated to the Audit and Risk Committee the 
responsibility for reviewing the effectiveness of the Group’s systems 
of internalcontrolanditsriskmanagementmethodology.

As part of this review, the Audit and Risk Committee considers the 
principal risks facing the Group and the nature and extent of these 
risks, based on assessments by management and the Group’s 
internal auditors. The Group outsources its Internal Audit function, 
which also provides independent assurance over the effectiveness 
of the systems of risk management and internal control. The detailed 
assessments are then consolidated to provide input into the overall 
Group risk assessment.

The Board

 X Overall responsibility for risks it is willing to take

 X Considers:

 – Management updates
 – Strategic plan and budgets
 – Risk assessments

Audit and Risk Committee 

 X Responsible for review of the effectiveness of the Group’s 

internal controls

 X Considers:

 – Internal audit work plans
 – Management reports (and any other executive reports)
 – External auditor reports
 – Internal audit reports

Internal Audit Reporting and Monitoring

 X Reports directly to the Audit and Risk Committee

Management

 X Responsible for detailed assessment of the risks

 X Considers risks to:

 – Strategy
 – Financial position and prospects

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Principal risks

Strategic report

Corporate governance

Financial statements

Other information

Principal risks and uncertainties

This section describes the material existing and emerging risks which the 
Board believes could significantly impact the ability of the Group to meet 
its strategic objectives.

Strategy:

1 Optimising production

2 Developingreserves:
Karish and Tanin

3 Adding hydrocarbons by capitalising on 

growth opportunities in the Mediterranean

4 Maintaining a disciplined 
financialframework

TheDirectorsoftheCompanyconfirmthattheyhavecarriedoutarobustassessmentoftheprincipalrisksfacingtheCompany,including
those that would threaten its business model, future performance, solvency or liquidity.

Principal Risk 

Strategic Risks

Reserve replacement

The Group’s long term success 
dependsonitsabilitytofind,
develop and acquire additional 
oil and gas reserves that are 
economically recoverable.
Link to strategy: 

1

Geopolitical

The geopolitical situation in 
Israel may adversely affect the 
Group’s business.
Link to strategy: 

2

Potential Impact

Mitigation

The Group’s current reserves are being depleted 
by production, requiring replacement through 
organic or inorganic means. 
An inability to replenish the portfolio at 
acceptable costs may result in declining 
production and revenues. This could have a 
material adverse effect on the Group’s business, 
resultsofoperations,financialconditionand/or
investorconfidence.
The Group’s current reserves are being 
depleted atalowrate.Onceproductionfrom
Karish commences, depletion is expected to 
be significantlyincreasedandhencetheGroup
may have to increase the number of exploration 
wells drilled or discovered reserves acquired 
through M&A activity to maintain the same 
reserves position.

As the Group has assets located in and offshore 
Israel, political, economic and military conditions 
in Israel may directly affect the Group’s business. 
The Group’s development and/or future 
production operations with respect to the Karish-
TaninDevelopment,althoughsubjecttosecurity
measuresrequiredbylawandundertheLease
requirements,couldbespecificallytargeted.

 X Maturation of the Group’s exploration position, including: 
de-risking of the Group’s existing exploration portfolio by 
acquisition and interpretation of additional seismic data; 
high-grading of exploration acreage and prospects; and 
drilling of low risk, material exploration prospects that the 
Group believes can be quickly, economically and safely 
monetised.

 X Pursuit of inorganic opportunities throughout the oil & 
gas lifecycle with a focus on existing production and 
development projects that can be quickly, economically and 
safely progressed into the reserves category.

 X Continuing to maintain a strong technical and commercial 
team with successful track record in exploration and 
marginalfielddevelopment.

 X Active monitoring of the political, economic and social 

situation in Israel.

 X Ensuring that the offshore facilities are appropriately 

equipped and protected.

 X Monitoring and adhering to local laws and regulations.

Principal Risk 

Potential Impact

Mitigation

Health, Safety and Environmental Risks

Health, Safety and the 
Environment

The Group is obliged to comply 
with health and safety and 
environmental regulations and 
cannot guarantee that it will 
be able to comply with these 
regulations.
Link to strategy:

1

2

The Group operates in an industry that is 
inherentlyhazardousandconsequentlysubject
to comprehensive regulation. Although the 
Group considers that it has adequate procedures 
in place to mitigate operational risks and keeps 
these under review, there can be no assurances 
that these will be adequate and failure to 
adequately mitigate risks may result in loss of 
life, injury, or adverse impacts on the health 
of employees, contractors or third parties or 
the environment. Failure, whether inadvertent 
or otherwise, by the Group to comply with 
applicable legal or regulatory requirements 
maygiverisetosignificantliabilitiesandmay
result in loss of life, injury, or adverse impacts on 
the health of employees, contractors and third 
partiesorthe environment.

Project Execution & Production Operations Risks

Project Execution

The Group’s success will 
be partly dependent upon 
completing the Karish-Tanin 
Developmentonbudgetandon
schedule.
Link to strategy: 

1

2

The Karish-Tanin development is approximately 
33% progressed. Whilst the design and execution 
strategy have been developed so as to mitigate 
risk, there remains risk in ensuring that project 
delivery is on budget and on schedule. Any delay 
in project delivery could have an impact under 
the Group’s Gas Sales and Purchase Contracts, 
which could result in delay to, or reduction of, 
cashflowswithpotentialadverseeffectson
theGroup’sresults,financialpositionand/or
investor confidence.

Production

The Group’s success will 
be partly dependent upon 
continuing production from 
Prinos.
Link to strategy:

1

The Group’s current oil and gas production and 
related revenues come entirely from the Prinos 
basin, located offshore in northeast Greece.
The Group is therefore exposed to the effect of 
disruption, delays or interruptions of production 
from wells in this area. 
Furthermore,thePrinosmainfieldismatureand
off plateau.
Significantincidentscouldresultinmaterial
adverseeffectsontheGroup’scashflows,
financialpositionand/orinvestorconfidence.

 X CompliancewiththeGroup’sHealth,SafetyandEnvironment
(‘HSE’)policywhichobserveslocalandnational,legaland
regulatory requirements and generally applies best practices 
where local legislation does not exist or where environmental 
regulation does not presently occur.

 X Ongoing monitoring of the changes in relevant legislation and 

regulation.

 X FurtherdevelopmentandmaintenanceoftheHSE

Management System.

 X Accreditation for Environmental International Standard ISO 

14001 for all existing installations. 

 X Continuous monitoring of air quality in existing plant 

locations.

 X Continuous implementation of an ongoing competence 

assurance and assessment scheme.

 X Continuous implementation of an internal and external annual 

safety training for all onsite personnel and contractors.

 X Continuous implementation of a health monitoring 

programmeandpersonnelfitnessforworkersonsite.

 X Disciplinedlumpsum,turnkeyengineering,procurement,
construction,installationandcommissioning‘EPCIC’
Contract with TechnipFMC for the construction of the FPSO 
and subsurface facilities (which Contract includes liquidated 
damages, including for the event of delay).

 X Monthly reporting on the status, risks, opportunities and 

budget of the Karish-Tanin development.

 X Effective contract management, with a focus on minimising 
variations and close management of contractual milestones, 
contingencies and reimbursable items.

 X Focus on the critical path and regular progress meetings.

 X ContinuousfocusonandinvestmentinHSE.
 X A high quality team of committed in-house reservoir 

engineers and production technologists working on Prinos 
reservoir management, supplemented with outsourced 
consultants/experts.

 X Continuous review of well design and performance, in 

particular with a view to minimise unexpected or additional 
well maintenance.

 X Monthly reporting on the status, risks, opportunities and 

budget of the Prinos development.

 X Ensure production and operating costs from Prinos 

are within guidance on production volume and cost of 
production per barrel. 

 X Management and preventative maintenance of facilities, with 
a focus on ensuring that unplanned work-overs, shutdowns 
and expenditure are minimised.

 X Compliance with asset licence and applicable laws and 

regulations.

 X Continuous and rigorous focus on cost control.

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Principal risks and uncertainties continued

Strategic report

Corporate governance

Financial statements

Other information

Principal Risk 

Potential Impact

Mitigation

Project Execution & Production Operations Risks

Major cyber or information 
security incident

Link to strategy: 

1

2

A cyber-attack could compromise the Group’s 
network and have a disruptive or destructive 
impact resulting in stopped production, 
explosion or loss of life. 
Anylossortheftofconfidentialinformation
could lead to loss of competitive advantage and 
intellectual property and reputational damage.

Financial Risks

Compliance with Financial 
Covenants

The Group has secured loan 
agreements and is subject to 
restrictive debt covenants and 
security arrangements that 
maylimititsabilitytofinance
its future operations and capital 
needs and to pursue business 
opportunities and activities. 
Breachoffinancialcovenants
may lead to default and/or 
liquidity risk.
Link to strategy:

UnderthetermsoftheReserveBasedLending
(‘RBL’)SeniorFacilityAgreementandthe
Subordinated Facility Agreement and the 
Karish-Tanin Project Financing, the Group 
must comply with a number of covenants 
includingfinancialmaintenancecovenantsand
restrictions on, among other matters, dividends 
and other distributions, cash movements, capital 
expenditure, additional future borrowings and 
indebtedness, and disposals and acquisitions. 
The breach of any of these covenants could 
result in part of the loan amounts becoming 
unavailable or to an event of default, in which 
case all amounts owed to the lenders would be 
due and payable immediately.

4

 X Continuous implementation and monitoring of the 

Company’s IT Security Policy, which includes measures to 
protect against cyber-attacks.

 X Vulnerability Assessment and Penetration Testing.
 X Employeeawarenessofconfidentialitythroughinternal
policies (including the Group’s Corporate Culture and 
Business Ethics policy) and awareness training. 

 X Control of disclosures and protection of any disclosed 

confidentialinformationinthirdpartycontracts.

 X All loans are project based, not corporate loans, that have 
beensizedandstructuredonconservativeeconomic,
cost andproductionassumptions(accordingtobank
lending policies).

 X Regularmonitoringoffinancialcovenantsonanactual
and forecast basis as part of the monthly reporting to 
management and the Board. 

 X Adherence to the Facility Compliance Calendar, which 
outlines covenant requirements, due dates and the 
frequency of reporting. 

Principal Risk 

Financial Risks

Treasury and trading

The Group is exposed to 
treasury and trading risks, 
including foreign exchange, 
interest rate and commodity 
price risk.
Link to strategy:
4  

Potential Impact

Mitigation

The Group is exposed to changes in currency 
values as a result of its international operations 
in various foreign currencies. The key sources of 
the risk include loan agreements denominated in 
theUSDollars,salesofcrudeoildenominatedin
U.S. dollars, ongoing operating costs and capital 
expendituresincurredinEUR,USDandtoa
lesser extent GBP and NOK.
The Group is exposed to commodity prices in 
relation to its sales and revenues under its crude 
oil and gas sales contracts, which are subject 
to variable market factors. A decrease in these 
commoditypricescouldsignificantlyimpactthe
Group’scashflowsandresults.
The Group is exposed to changes in interest 
ratesasaresultofitsvariousfinancings(the
RBLSeniorFacilityandtheSubordinatedFacility
and the Karish-Tanin Project Financing). The key 
sourceofriskisthefloatinginterestratecharged
under each of the loan agreements (determined 
byUSDLIBOR).Anincreaseinthefloatingrate
couldadverselyimpacttheGroup’scashflow
and results. 

The Group has a centralised Treasury function which manages 
currency exchange, interest rate and commodity risks, with 
mitigations including:
 X Currency risk

–  Regular updates and revisions of short and long term 

expenditurebudgetsandcashflowprojections,applying
15%sensitivityonEUR:USDmovements



–ShorttermEUR:USDhedgingforfixedinelasticEUR

denominated expenditures.

–  Negotiation of large capital expenditure commitments 

andcontractualobligationsinUSDdenominations.During
2018, the Group exercised the option under the Technip 
EPCICcontracttofixthenonUSDcomponentofthe
paymentplaninUSDfortheperiod2019-2021.

–AllGrouploansareUSDdenominated.
–AllcrudesalesandgascontractsaredenominatedinUSD.



 X Interest Rate Risk
  –  The Group actively monitors its interest rate exposure and 

receives regular market updates from its lending banks.

 –Interestratesunderbankborrowingsarefixedinadvance

for a period of at least 3 months

 –TheGroupmayhedgeaportionofitsfloatingratedebtin
ordertoholdamixofbothfixedandfloatingrateexposure

 X Commodity price risk
  –  The Group actively monitors oil price movements and may 
hedge part of its production to protect the downside while 
maintaining access to upside and to ensure availability of 
cashflowsforre-investmentanddebt-service.
  –  All Karish-Tanin gas contracts are based on pricing 
formulaswhichincludefloorprices;thisensuresa
minimum price for gas sales whatever the market 
conditions or pricing formulas outcome. 

 –TheGroup’sdebtfacilitieshavebeensizedandstructured
on conservative oil and gas price assumptions compared 
to prevailing market prices.

 X Atleastmonthlymonitoringof6-18monthcashflow
projections under a number of reasonable worst case 
assumptions, which include downside sensitivities on oil 
price, cost and production levels.
 X Optimisation of debt capital structure. 
 X Strong long term relationship with major international and 

localfinancialinstitutions.

 X The Karish-Tanin development has secured funding to First 
Gas by a combination of committed equity funding and the 
Karish-Taninprojectfinance.

 X Epsilon development has secured funding to First Oil by 
acombinationofongoingoperatingcashflowfromthe
PrinosfieldandtheRBLFacility.

 X Major turnkey EPCIC contracts for both Karish-Tanin and 

Epsilon development to minimise the risk of cost overruns 
and ensure adequate liquidated damages are payable in 
case of project execution delays.

Lackofnecessaryliquidityandaccessto
funding may materially impact the Group’s plans 
to develop its existing assets, meet production 
targets and execute its strategic growth plan.

Liquidity risk and 
restricted funding

The Group might not have 
adequate liquidity and/or 
access to the necessary 
funding sources to meet its 
minimum opex, capex and 
financingcommitments
aswell asitsgrowthand
expansion plans.
Link to strategy:

4

60 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 61

 
 
Principal risks and uncertainties continued

Principal Risk 

Financial Risks

Counterparty Risk

The Group may be exposed to 
delayed payment, counterparty 
default or suspension or 
termination of sales. 
Link to strategy:

4

Potential Impact

Mitigation

All of the Group’s production of crude oil from 
the Prinos basin is currently sold to a single 
buyer, BP, under a long-term offtake agreement. 
The Group is consequently reliant on BP for 
substantially all of its revenue. 
If the offtake agreement with BP was 
terminated, the Group would need to negotiate 
andenterintoanewofftakecontract.During
any such negotiations, the Group might not 
be able to sell any of its oil from the Prinos 
basin, which would have an adverse effect on 
the Group’s business, results of operations, 
financialconditionand/orprospects.
The Group will be dependent on its purchasers 
under the Gas Sale and Purchase Contracts for 
its Karish-Tanin Project for regular and prompt 
payment once it starts producing in 2021. The 
Group is therefore exposed to a risk of default by 
these purchasers. In the event of such default, 
theGroupmightberequiredtofindalternative
purchasers at less favourable terms.

 X Crude Oil Offtake Agreement
 –InQ12018,thecrudeoilofftakeagreementwithBPwas

extended to 2025 on the same terms.

  –  The Group has built a strong relationship with BP and the 
contractual terms have been applied since 2013 without 
disputes and/or payment defaults and/or lifting delays.

  – Focus on maintaining delivery of production.
  –  BP is an investment grade A- credit rated company 

with minimal risk of being unable to meet its lifting and 
payment obligations under the Prinos offtake agreement.

 X Gas Sale and Purchase Contacts
  –  The Group has secured 4.6bcm/yr for a weighted average 
tenorof16yearsatanaverageof75%‘take-or-pay’
contract terms.

  –  The Group has centred its gas offtake contracts on the 

largest private industrial and IPPs in Israel to ensure 
credit worthiness.

  –  There is a pipeline of opportunities for replacement 

offtakers (power plants, increasing market, reduction of 
coal-generation).

Governance and Compliance Risks

Fraud, bribery and 
corruption

The Group has an obligation to 
comply with fraud, anti-bribery, 
anti-corruption and anti-money 
laundering laws and violations 
of these laws expose the Group 
and / or its employees to 
criminalramifications.
Link to strategy:

1

2

3

4

The Group is exposed to bribery and corruption 
risk through its business operations. 
Any instances of non-compliance with 
applicable laws and regulations, including those 
laws around fraud, anti-bribery, anti-corruption 
and anti-money laundering, could damage the 
reputation of the Group. In addition, these could 
resultinlitigation,regulatoryactionandfines
which could have a material adverse impact on 
ourcashflowsandthefinancialconditionof
the Group

 X Strong oversight and leadership from the Executive 

Management and the Board.

 X Robust framework of controls to monitor all payment 

approvals.

 X Compliance with governance policies, including the Group’s 

Anti-Corruption and Bribery Policy, which sets out the 
Group’s responsibilities, as well as those of its employees, in 
observing and upholding its position on bribery. The policy 
also provides information and guidance to those working 
for the Group on how to recognise and deal with bribery and 
corruption issues.

 X Anti-Bribery training of Group personnel.
 X Compliance with the Group’s Corporate Culture and Business 
Ethics Policy which includes the Group’s policy of conducting 
all its business in an honest and ethical manner and in 
compliance with all applicable laws, including but not limited 
to all applicable local laws where the Group operates and the 
UK'sBriberyAct2010.

Viability statement

The Directors have assessed the 
viability of the Group over the period to 
December 2021, taking account of the 
Group’s current position and the potential 
impact of the principal risks documented 
in this report.

The Board conducted the review for the purposes of the Viability 
Statement over this period for the following reasons:

i. the Group’s Karish Field is expected to be on stream during the 
firstquarterof2021deliveringlong-termcredibleandpredictable
cashflowbasedonsignedgascontractswithtakeorpayprovision
andfloorprices;

ii. the current contractual maturity of the Group’s Project Finance 
FacilityfortheKarishFieldisDecember2021.TheGreekReserve
BasedLendingFacilityisalsoexpectedtoberefinancedwithinthe
three-yearhorizon,assuchthethree-yearperiodislargelyaligned
with Energean’s funding cycle; and

iii. both the Karish and Epsilon Project will be on-stream by 2021 
which means the assessment period contains all material capital 
investmentswhichwillinturnsignificantlyenhancetheGroup’s
abilitytogeneratefreecashflow.

Based on these factors, the Board consider that an assessment 
periodupto31December2021appropriatelyreflectsthe
underlying prospects and viability of the Group, and the period over 
which the principal risks are reviewed.

In order to make an assessment of the Group’s viability, the Board 
has made a detailed assessment of the Group’s principal risks, and 
the potential implications these risks would have on the Group’s 
liquidity and its business model over the assessment period. This 
assessmentincludedmonthlycashflowanalysisandtheBoardalso
considered a number of sensitivity scenarios, including combinations 
thereof, together with associated supporting analysis provided by the 
Group’sfinanceteam.TheKarishProjectdevelopmentexpenditurein
Israel is funded by a dedicated Project Finance Facility and therefore 
we have focused the sensitivity scenarios on the Greek operations 
vis-à-vis production and funding risks.

A summary of the key assumptions, aligned to the Group’s principal 
risks, and sensitivity analysis can be found below. 

Principal Risks

Base Case Assumptions

Sensitivity Scenarios

Production - to achieve target production guidance and 
continue ongoing development

Implementation of the drilling programme in Greece 
during 2019 and 2020, based on the latest NSAI 2P 
productionprofileadjustedforactualproductionYTD

Implementation of the drilling programme in Greece 
during 2019 and 2020, however with ca. 10% less 
production than the latest NSAI report

Finance – to continue our ongoing development 
uninterrupted, pursue more growth opportunities in the 
region as well as be able to withstand any unexpected 
oil price and/or production drops

IncreaseinavailablefundingbycircaUSD50mby
upsizing/refinancingtheGreekRBL

RefinanceofUSD1.275bnProjectFinanceatmaturity
inDecember2021postFirstGaswithalongtermloan
or bond

TheProjectFinanceisavailable,firstdrawdown
occurredinQ12019

Market and Treasury – to withstand macro 
environment,oilprice,FXandInterestRatevolatility

Oil price based on Group planning assumption of $65/
bbl (real) plus discount to Brent

FXrateforcostsinEURof€1:$1.15

IRbasedonfloatingUSDLIBORsetbytheLending
banksateachinterestrateperiodundertheLoans

No funding available for Greece due to lack of bank 
market liquidity/appetite or access to capital resulting 
in adelaytothedrillingcampaigninGreece.

Sensitivity to oil price of $55/bbl (real) plus discount to 
Brent,oilpricedownsidehavingthemostsignificant
impactversusIRorFXratevolatility.

Under such sensitivity scenarios, the Board has considered the availability and likelihood of mitigating factors such as hedging, additional 
funding options and further rationalisation of our cost base, including cuts to discretionary capital expenditure. Based on the results of the 
analysistheBoardofDirectorshasareasonableexpectationthattheCompanywillbeabletocontinueinoperationandmeetitsliabilities
as they fall due over the period of their assessment.

62 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 63

Strategic reportCorporate governanceFinancial statementsOther informationCorporate 
Governance

Chairman’s letter 
Board of Directors  
Executive Committee 
Corporate governance report 
Audit and Risk Committee report 
Nomination and Governance 
Committee report 
Health, Safety and Environment 
Committee report 
Remuneration Committee report 
Remuneration policy 
Annual report on remuneration 
Directors’ report 
Statement of Directors’ responsibilities 
for the Group financial statements 

65
66
70
71
74

77

78
79
80
89
95

98

Strategic report

Corporate governance

Financial statements

Other information

Chairman’s letter

The Board and governance
Our Board was formed in 2017, following incorporation 
of the Company and prior to the IPO in March 2018. In 
preparation for listing, the Board reviewed and expanded 
its policies, where necessary, with the aim of strengthening 
the Group’s governance framework.

The Board plays a vital role in developing and maintaining 
the Group’s culture and values by setting the ‘tone from 
the top’, determining the behaviours of the Group expected 
by the Board and ensuring that ethical standards are 
maintained. In doing so, the Board aims to strike the right 
balance between entrepreneurial leadership and the 
prudent and effective management of risk, both of which 
are essential to maintaining a sustainable business and 
creating value for shareholders.

Diversity
The Board understands the benefits of diversity in 
maintaining and improving the quality of performance 
and all Board appointments are made against objective 
criteria and with due regard to the benefits of diversity, 
in all senses.

The Board established a Board diversity policy in 2018 and 
will implement the policy as and when vacancies arise on 
the Board.

Board evaluation 
During the year the Board undertook an internal evaluation 
facilitated by the Company Secretary.

Engagement with shareholders 
We place emphasis on active engagement with our 
shareholders and aim to maintain open and transparent 
communication. During the year we were pleased to host 
investors at our sites in Israel and Greece and meet with 
our key partners in those regions.

Looking ahead, I expect 2019 to be an important year for 
Energean as the Group continues to grow and focus on 
the development of Karish and Tanin as well as enhancing 
production in Greece. In this context maintaining the high 
standards of governance established to date will be of 
critical importance. 

I look forward to engaging with many shareholders 
throughout the year and welcoming all shareholders 
to our Annual General Meeting on 13 June 2019.

Simon Heale 
Chairman

17 April 2019

Dear Shareholders,
I am pleased to welcome you to our Corporate Governance 
report on behalf of the Board. In this, we outline our governance 
arrangements and explain how we apply the main principles of 
the provisions set out in the UK Corporate Governance Code 
(the ‘Code’) issued by the Financial Reporting Council (FRC). It is 
essential that the governance structure supports the success of 
the Company’s strategy and ensures the creation and preservation 
of shareholder value, as well as benefiting other stakeholders.

Following the successful IPO in March 2018, the Company 
was pleased to be promoted to the FTSE 250 in May 2018. 

I look forward to working with the Board, management and all 
of our stakeholders as we become a leading independent oil and 
gas exploration and production company in the Mediterranean.

64 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 65

Board of Directors

An experienced Board 
with extensive expertise 
in the energy sector, 
financial management, 
HSE and capital markets.

Simon Heale
Non-Executive Chairman

Matthaios (Mathios) Rigas
Chief Executive Officer 

Panagiotis (Panos) Benos
Chief Financial Officer 

Andrew Bartlett
Senior Independent Director 

Karen Simon
Non-Executive Director 

Independent 
On Appointment

Independent 
Not Applicable

Independent 
Not Applicable

Independent 
Yes

Independent 
Yes

Commencement of Appointment
May 2017, previously the CEO of the Group 
since 2007

Committee Membership
Not Applicable

Key Skills & Experience
Mathios Rigas 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 London.

Mathios has 20 years of investment banking 
and private equity experience and is a 
founding shareholder of the Group.

During the years 2001 to 2007 he set up, 
and was managing partner of, Capital 
Connect Venture Partners, a private 
equity fund in Greece with investments 
in innovative enterprises in IT, healthcare, 
waste management and food industries. 

From 1999 to 2001 Mathios was in charge 
of Piraeus Bank’s shipping division, and 
from 1993 to 1999, he was vice president of 
shipping, energy & project finance at Chase 
Manhattan Bank. He was formerly the 
chairman of the board of Tyres Herco S.A. 
and MAVIN S.A. in Greece.

Current External Appointments
Not Applicable

Commencement of Appointment
July 2017

Committee Membership
 X Nomination & Governance (Chair)
 X Remuneration Committee 

Key Skills & Experience
Simon Heale is a Chartered Accountant 
with a degree in Philosophy, Politics and 
Economics from Oriel College, Oxford. 

Simon has significant business operations 
and management experience gained 
through a diverse range of industries, 
previously serving as chairman of Kaz 
Minerals from May 2013 until December 
2017, as chairman of Marex Spectron from 
January 2016 until December 2018 and 
Gulf Marine Services plc until March 2019.

He also served on the boards of Carlton 
Commodities Capital Corporate Member 
Limited from 2011 to 2016, Coats plc from 
2011 to 2014, Morgan Advanced Materials 
from 2005 to 2014, PZ Cussons from 2008 
to 2013 and Panmure Gordon & Co from 
2010 to 2011. 

Simon has extensive experience in senior 
executive roles, including as chief executive 
of the London Metal Exchange from 2001 
to 2006, as chief operating officer of Jardine 
Fleming Ltd from 1999 to 2001, and as 
deputy managing director at Cathay Pacific 
Airways from 1994 to 1997.

Current External Appointments
 X Deputy Chairman of Brooge Petroleum 

and Gas Investment Company 

Commencement of Appointment
May 2017, previously the CFO of the Group 
since 2011

Committee Membership
Not Applicable

Key Skills & Experience
Panos Benos is a Chartered Accountant 
and holds an MSc in Shipping, Trade and 
Finance from Cass Business School.

Panos has 15 years of international 
experience in the oil and gas sector, both in 
banking and industry, with a long track record 
of upstream financing in emerging markets. 

He was previously a director in the oil and 
gas team in London with Standard Chartered 
Bank, delivering a number of award-winning 
project and acquisition finance deals in 
Africa, Asia and the Middle East. 

Prior to that Panos 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 in shipping finance. 

Current External Appointments
Not Applicable

Commencement of Appointment
August 2017

Commencement of Appointment
September 2017

Committee Membership
 X Audit & Risk (Chair)
 X Nomination & Governance
 X Remuneration

Key Skills & Experience
Andrew Bartlett holds an MSc in Petroleum 
Engineering from Imperial College London.

Andrew has over 30 years’ experience in the 
upstream oil and gas industry. 

Andrew served as the chairman and non-
executive director of Azonto Energy from 
2013 to 2015. 

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, Andrew worked on 
the trading and derivatives desk of Standard 
Bank in South Africa.

Before joining the investment banking 
industry, Andrew worked for Royal Dutch 
Shell between 1981 and 2001, as a petroleum 
engineer and development manager, where 
he gained extensive experience in the 
operation of oil and gas fields.

Current External Appointments
 X Non-Executive Director of Africa Oil 

Corporation 

 X Non-Executive Director of Impact Oil & Gas
 X Adviser to Helios Investment Partners LLP

Committee Membership
 X Health, Safety & Environment

Key Skills & Experience
Karen Simon holds a Masters in 
International Management, an MBA and BA 
in Economics & International Studies.

Karen has been with J.P. Morgan for over 
34 years.

Her career includes senior roles in Oil & Gas, 
Debt Capital Markets and Private Equity 
coverage. 

Karen was the Head of Financial Sponsor 
Coverage for J.P. Morgan in both New York 
and in London from 2007 to 2016, serving 
further as Global co-head including Asia. 

Prior to this, she was co-head of Debt 
Capital Markets for EMEA and spent 
the first 15 years of her career in various 
positions in the Oil & Gas division in 
Houston and London. 

Current External Appointments
 X A Vice Chairman of Investment Banking, 

J.P. Morgan

 X Non-Executive Director of Aker ASA
 X Board Member of the non-profit Dallas 

Women’s Foundation

66 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 67

Corporate governanceCorporate governanceFinancial statementsOther informationStrategic reportBoard of Directors continued

Efstathios (Stathis) Topouzoglou
Non-Executive Director 

Ohad Marani
Non-Executive Director 

Independent 
No

Independent 
Yes

Robert Peck
Non-Executive Director 

Independent 
Yes

Commencement of Appointment
May 2017

Commencement of Appointment
July 2017

Commencement of Appointment
July 2017

Committee Membership
 X Nomination & Governance

Key Skills & Experience
Stathis Topouzoglou holds a BA in Business 
Administration and Economics from the 
University of Athens, Greece. 

He is a founding shareholder of the Group. 
Stathis is also co-founder of Prime Marine 
Corporation (‘Prime’), a leading worldwide 
product tanker company and major global 
provider of seaborne transportation for refined 
petroleum products, LPG and ammonia.

Stathis has more than 35 years of experience 
in founding and growing companies in the 
energy transportation sector.

Current External Appointments
 X Chief Executive Officer and Managing 

Director of PRIME.

Committee Membership
 X Audit & Risk
 X Remuneration (Chair)
 X Health, Safety & Environment

Committee Membership
 X Audit & Risk
 X Remuneration
 X Health, Safety & Environment (Chair)

Key Skills & Experience
Ohad Marani holds an MA in Public 
Administration from Harvard University. 
He also hold an MBA (major in Finance) and 
a BA in Economics, both from the Hebrew 
University of Jerusalem.

Ohad was Chief Executive Officer of the 
Israel Land Development Company Energy 
Ltd from April 2010 to September 2015, 
Chairman of the board of Emmanuelle 
Energy from 2010 to 2015, and Chairman 
of the board of Israel Natural Gas Lines Ltd 
from 2008 to 2010. 

He was the Executive Chairman of the 
board of ORL Ltd from 2004 to 2007. 

Ohad has also served in the Israeli 
government, including Director General of the 
Israeli Finance Ministry from 2001 to 2003, 
Director General of the Budget Department 
of the State of Israel from 2000 to 2001, and 
Minister of Economic Affairs at the Israeli 
Embassy in Washington from 1995 to 2000. 

Current External Appointments
 X Board member of Bank Leumi of Israel Ltd.
 X Member of the Investment Committee of 

Israel’s Infrastructure Fund

Key Skills & Experience
Former Ambassador Robert Peck holds 
a BA in History and Journalism from 
Concordia University in Montréal.

Robert was Canada’s Ambassador to 
Greece and High Commissioner to the 
Republic of Cyprus from 2011 to 2015, Chief 
of Protocol of Canada from 2007 to 2010, 
and Canada’s Ambassador to the People’s 
Democratic Republic of Algeria from 2004 
to 2007. 

He was Senior Advisor in the Human 
Resources Bureau at Global Affairs Canada, 
a department of the Government of Canada, 
from 2015 to 2017.

During a two-year leave of absence from the 
Government of Canada, Robert was Director 
of Corporate Communications and Investor 
Relations at CAE Inc., from 2000 to 2002.

He was also Counsellor to the Canadian 
Embassy in Greece from 1995 to 1998.

Current External Appointments
Not Applicable

David Bonanno
Non-Executive Director 

Independent 
No

Commencement of Appointment
May 2017

Committee Membership
Not applicable

Key Skills & Experience
David Bonanno graduated cum laude from 
Harvard University with a BA in Psychology.

In 2008, David joined Third Point, where he 
is managing director, focusing on special 
situation opportunities in the US and 
Europe and where he acts as the primary 
investment professional responsible for all 
Third Point’s Hellenic Recovery Fund L.P. 
activities in Greece. 

Prior to joining Third Point, David was an 
associate in the private equity and distressed 
investments group at Cerberus Capital 
Management, L.P from 2006 to 2008.

Prior to this, he was an analyst in the 
restructuring and reorganisation advisory 
group at Rothschild Inc. from 2004 to 2006.

Current External Appointments
 X Managing Director, Third Point

Board diversity
The mix in our membership

Board diversity by age (years)

 30 - 44 

45 - 60 

61 - 70

Board diversity by nationality

  British 

Greek 

Israeli  American  Canadian

Board diversity by gender

Male 

Female

68 Energean Oil & Gas plc Annual Report 2018

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Corporate governance continuedCorporate governanceFinancial statementsOther informationStrategic report 
Executive Committee

Corporate governance report

Matthaios (Mathios) Rigas
Chief Executive Officer 

Panagiotis (Panos) Benos
Chief Financial Officer 

Profile – see page 66

Profile– see page 67

Dr. Stephen Moore
Chief Growth Officer 

Iman Hill
Chief Operating Officer

Profile
Dr. Steve Moore is an E&P technical 
professional with 28 years’ experience at Shell, 
Maersk Oil and Mubadala Petroleum. He 
joined Energean in 2014. Previously he was 
Senior Vice President Technical at Mubadala 
Petroleum, where he managed all technical 
functions of the company worldwide, 
including G&G, reservoir, drilling, facilities, 
projects, operations, HSE and technology.

Steve has held increasingly significant roles 
across New Business Development, and 
Technical, Asset and Company Management, 
expanding from company to global level. 
He has worked extensively in the FSU, in the 
Middle East and South East Asia, as well as in 
the UK North Sea.

Steve holds a BSc (Hons) in Chemical 
Engineering and a PhD in Chemical 
Engineering from the University of 
Newcastle upon Tyne, UK.

Profile
Iman Hill joined Energean as Chief 
Operating Officer in November 2018. 
She is a Petroleum Engineer with 30 
years’ experience in the Oil & Gas industry, 
specialising in Production Operations 
and Fast-tracking of Developments to 
Production, across the MENA region, 
Africa, Latin America and the Far East. 

Prior to joining Energean, Iman was the 
Technical Director for Dana Gas PJSC in the 
UAE. She began her career with BP and went 
on to work for Shell, for more than a decade, 
and then BG Group, holding positions such 
as Managing Director of Shell Egypt and 
Chairwoman of Shell Companies in Egypt and 
Senior Vice President for Developments and 
Operations with BG Group.

Iman has also held positions on a number of 
Boards including as a Non-Executive Director 
of Outokumpu, Europe’s largest steel company.

Michelle Churchward
Group General Counsel 
& Company Secretary

Profile
Michelle Churchward joined Energean in 
April 2017 and is responsible for all legal 
and company secretarial matters. Prior 
to joining Energean, Michelle worked on 
exploration and development projects in 
the Falkland Islands, Morocco and Egypt. 
She had previously been Legal Manager at 
Sterling Energy plc, where she was involved 
in oil and gas transactions and activities 
internationally, including in the Kurdistan 
Region of Iraq, West Africa and Madagascar. 
She has also worked for the OMV Group, the 
BG Group and Schlumberger.

Michelle graduated from the University of 
Nottingham with a degree in Law and began 
her career as a solicitor with Titmuss, Sainer 
& Webb (now Decherts). In previous roles she 
was based in London, Aberdeen and Paris.

The Board
The Board met on five occasions during the course of 2018 to 
review trading performance, budgets and funding, to set and 
monitor strategy, to examine acquisition opportunities and 
to report to shareholders. 

The Board has a formal schedule of matters that can only 
be decided by the Board, and this schedule is reviewed 
by the Board each year. The key matters reserved are the 
consideration and approval of:

 X Business plan and budgets 
 X Capital expenditure
 X Group strategy
 X Board membership
 X Performance review
 X Acquisitions and disposals
 X Operation as a 
listed company 
 X Material contracts
 X Financial reporting 

and controls
 X Material tenders
 X Distributions 
and dividends

 X The appointment and 

removal of internal and 
external auditors

 X Changes in 

capital structure 
 X Material litigation
 X Compliance with statutory 
and regulatory obligations

 X Internal controls and 
risk management

 X Significant transactions
 X Executive remuneration
 X Delegations of authority

Statement of compliance
The Board is committed to the highest standards of corporate 
governance. Since Admission on 21 March 2018, the Board 
has complied and will continue to comply with the provisions of 
the UK Corporate Governance Code (‘the Code’). In this report, we 
describe our corporate governance arrangements and explain how 
the Group applies the principles of the Code. The Code is available at 
www.frc.org.uk. The Board has carried out a review of its compliance 
with the relevant provisions of the Code throughout the year and 
confirmed that it continues to comply with all the provisions.

Type and number of meetings held during the year 

Director 

Mathios Rigas 

Simon Heale 

Andrew Bartlett 

Ohad Marani

Robert Peck

Efstathios 
Topouzoglou

Panos Benos 

Karen Simon 

David Bonanno

Board 
5

Audit & Risk
3

Nomination & 
Governance 
1

Remuneration
3 

HSE 
2

5

5

5

5

5

5

5

5

2

–

–

3

3

3

–

–

–

–

–

1

1

–

–

1

–

–

–

–

–

–

2

2

2

–

11

2

2

3

–

–

–

12

1.  Became a member of the Committee in September 2018.
2.  Left the Committee in September 2018.

Directors
New Directors were appointed to the Board in 2017 in anticipation 
of the admission of the Company’s ordinary shares to the 
premium listing segment of the FCA and to trading on the London 
Stock Exchange’s main market of listed securities. Following the 
appointment of the Independent Non-Executive Directors in 2017, the 
Board believes it has an appropriate balance of skills and experience. 
In respect of at least half the Board, its composition meets code 
provision B.1.2, which requires that at least half the Board (including 
the Chairman) comprise Independent Non-Executive Directors. 

The roles of Chairman and Chief Executive Officer are separate and 
the responsibilities of the Chairman and Chief Executive Officer are 
independently defined. It is the Chairman’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 businesses. The Chairman and Chief 
Executive Officer share responsibility for the representation of the 
Company to third parties.

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Non-Executive Directors
The Non-Executive Directors have a broad range of business 
and commercial experience. They provide independent and 
constructive challenge to the Group and monitor the performance 
of the Chief Executive Officer and the Chief Financial Officer against 
the Group’s strategy and key objectives.

Board committees
The Board has established four committees made up principally 
of Independent Non-Executive Directors. All appointments to these 
committees are for an initial period of up to three years and may be 
extended by no more than two additional three year periods. These 
committees are:

Each appointment is for an unlimited term, subject to being  
re-elected as a director at each annual general meeting.  
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 legislation.

The role of the Senior Independent Director, Andrew Bartlett, 
is to provide a sounding board for the Chairman and to serve as an 
intermediary for the other Directors when necessary. The Senior 
Independent Director is available to shareholders if they have 
concerns which contact through the normal channels of Chairman, 
Chief Executive Officer or Chief Financial Officer has failed to 
resolve or for which such contact is inappropriate.

Independence of Directors 
The Board comprises a Non-Executive Chairman, who was 
independent on appointment, two Executive Directors and 
six Non-Executive Directors. The Company considers all of the 
Non-Executive Directors to be independent within the meaning 
of ‘independent’ as defined in the Code, other than David Bonanno 
and Efstathios Topouzoglou.

While each of Mr Bonanno and Mr Topouzoglou are considered 
to be independent in character and judgement, David Bonanno is 
not deemed to be independent by reference to the criteria set out in 
the Code as a result of representing Third Point Hellenic Recovery 
(Lux) S.À.R.L., which holds approximately 26.7% of the shares of 
the Company, while Efstathiou Topouzoglou is not deemed to be 
independent by reference to the criteria set out in the Code as a result 
of owning in aggregate (as an individual and by his indirect holdings 
in both Oilco Investments Limited and HIL Hydrocarbon Investments 
Limited) approximately 11.7% of the shares of the Company.

Time Commitment of Directors
All of the Directors remain committed to their role, and are able 
to devote sufficient time to the Company to discharge their 
responsibilities effectively.

 X Audit and Risk Committee (pages 74 - 76)
 X Nomination and Governance Committee (page 77) 
 X Health, Safety and Environment Committee (page 78) 
 X Remuneration Committee (pages 79 - 94)

The page numbers above denote the location of each committee 
report, which describes the composition and focus of each of 
the committees. The terms of reference of the committees have been 
drawn up in accordance with the provisions of the Code. A copy of 
each committee’s terms of reference is available from the Company 
Secretary and also can be found at www.energean.com.

Board effectiveness 
Evaluation 
During the year, the Board undertook an internal review of its 
effectiveness facilitated by the Company Secretary. This was 
undertaken by way of a questionnaire and one to one meetings 
after which an action plan was drawn up and discussed with 
the Chairman. 

Training and development 
Board members are provided with ongoing training and 
development opportunities. 

Development needs are discussed during annual performance 
reviews with the Chairman. During the year, the Board received 
training on the UN Sustainability Goals and the FRC’s new 
Corporate Governance Code. 

Induction 
On joining the Board all new Directors receive an induction 
programme that is tailored to their individual requirements. 
The induction schedule is facilitated by the Company Secretary 
in consultation with the Chairman and the new Director.

The objective of each induction programme is to provide an overview 
of the Group’s business, strategy, finances, history,  culture and values 
and to ensure that the new Director gains sufficient knowledge of the 
business to allow them to carry out their role effectively.

Leadership structure

Audit and Risk  
Committee

Nomination and  
Governance Committee

Chair 
Andrew Bartlett

Members 
Ohad Marani 
Robert Peck

Chair
Simon Heale

Members 
Andrew Bartlett 
Efstathios Topouzoglou

Remuneration  
Committee

Health, Safety and 
Environment Committee

Chair 
Ohad Marani

Members 
Andrew Bartlett
Robert Peck
Simon Heale 

Chair
Robert Peck

Members 
Ohad Marani
Karen Simon 

Accountability 
This Annual Report includes a number of disclosures which set 
out the Company’s position and prospects. The Statement of 
Directors’ Responsibilities confirms that the Directors believe 
those disclosures 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. 

The Company has established an Audit & Risk Committee to 
consider the nature and extent of the principal risks facing the 
Group. The Committee also considers corporate reporting and 
manages the relationship with external and internal auditors. 
Further details of the Committee’s role and activities are detailed 
on pages 74 to 76 of this report. 

Remuneration
The Board has established a Remuneration Committee to consider 
and approve the Executive Directors’ remuneration arrangements 
and to ensure those arrangements are designed to promote the 
long-term success of the Company and that any performance-
related elements are transparent, stretching and rigorously applied. 
Further details of the role and activities of the Remuneration 
Committee are found on pages 79 to 94 of this report. 

Relationship with shareholders 
Engagement with shareholders 
We are committed to regular dialogue with our shareholders 
and the wider investment community and this process commenced 
with the IPO preparations. Ongoing communications are through 
regulatory announcements, regular meetings, presentations, 
investor conferences and ad hoc events.

Shareholders can access details of the Group’s results and 
other new releases through the London Stock Exchange’s 
Regulatory News Service and the Tel Aviv Stock Exchange news 
service and all news releases are also published on the Investors 
and Media sections of the Group’s website: www.energean.com.

Annual General Meeting 
The 2019 AGM will be held on 13 June 2019. Shareholders will receive 
presentations setting out the key developments in the Group and will 
have an opportunity to ask questions of the Board.

A poll will be used to for all resolutions and the final results will 
be announced via the London Stock Exchange Regulatory News 
Service, the Tel Aviv Stock Exchange news service and the 
Group’s website.

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Committee report

The Audit and Risk Committee reviews the Group’s capability to 
identify and manage new types of risk, and keeps under review the 
Group’s overall risk assessment processes that inform the Board’s 
decision making. 

The Audit and Risk Committee considers annually how the 
Group’s internal audit requirements shall be satisfied and makes 
recommendations to the Board accordingly as well as on any area 
it deems needs improvement or action.

Attendance at meetings 
The Audit and Risk Committee became effective upon Admission 
in March 2018. The Committee met three times during the year, and 
attendance at these meetings is set out below: 

Member 

Number of meetings 

Meetings attended 

Andrew Bartlett

Ohad Marani

Robert Peck

3

3

3

3

3

3

Key matters considered in relation to the consolidated 
financial statements 
The Audit and Risk Committee focused on a number of key 
judgements and reporting issues in the preparation of the full 
year results and the Annual Report. In particular, the Committee 
considered, discussed and where appropriate challenged: 

 X How the Company recognised the additional investment in 

Energean Israel Limited. Following the completion of the IPO, 
the Company had an undertaking to purchase Energean Israel B 
shares. The Committee agreed that the Company had used the 
appropriate accounting treatment for the subsequent valuation 
of the derivative asset and that the consolidation of Energean 
Israel’s results and balance sheet were appropriate.

 X How the Group assesses the recoverability of oil and gas assets, 
including the estimation of oil and gas reserves. The Committee 
considered the approach taken by the Company on the 
impairment indicators and where appropriate, the approach taken 
to calculate the value-in-use for producing oil and gas assets. 
The Committee supported the view that there are no indicators 
of impairment for the Group’s oil and gas assets.

 X Given the importance to the Company, the Committee assessed 
and challenged the accounting treatment of the Karish/Tanin 
development costs. The Committee reviewed the capitalisation 
of development costs and agreed with the Company’s approach 
and that appropriate accruals were in place for the year-end to 
reflect the costs of services provided by contractors. 
 X The viability statement in the 2018 Annual Report and the 

going concern basis of accounting including consideration of 
evidence of the Group’s capital, liquidity and funding position. 
The Committee considered the assessment of principal risks, 
assessed the Group’s prospects in light of its current position 
and reviewed the disclosures on behalf of the Board. The 
Committee supported the viability statement and the Directors’ 
going concern conclusion. 

Andrew Bartlett
Chairman of the Audit & Risk Committee 

I am pleased to present this Audit and 
Risk Committee Report for the year ended 
31 December 2018, which sets out the 
role of the committee during the year 
and key areas of focus for 2019. 

Membership of the committee 
The other members of the Audit and Risk Committee are Ohad 
Marani and Robert Peck. 

The Committee’s members are all Independent Non-Executive 
Directors, and therefore the composition of the Committee complies 
with the Code. Members’ skills and experience are documented on 
pages 66 - 69. The Board is satisfied that the Committee meets the 
requirement to have recent and relevant financial experience and that 
as a whole we have sufficient experience of the oil and gas sector. 
Any member of the Committee, the Company’s external auditor, or its 
internal auditor may however request a meeting if he/she considers 
that one is necessary or expedient. 

The Chairman of the Board, Simon Heale, attends all of the 
meetings of the Committee and the CFO and external audit partner 
attend meetings by invitation. 

Role of the committee 
The Audit and Risk Committee’s role 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, reviewing the Group’s accounting 
policies, reviewing the Group’s internal financial controls, reviewing 
and monitoring the scope of the annual audit and the extent of the 
non-audit work undertaken by external auditors, advising on the 
appointment of external auditors, and reviewing the effectiveness 
of the internal audit, whistleblowing and fraud systems in place 
within the Group. 

In its annual assessment of the effectiveness of Internal Audit, the 
Audit and Risk Committee will:

 X meet with Internal Audit without the presence of management 

to discuss the effectiveness of the function; 

 X review and re-assess the internal audit work plan; and 
 X monitor and assess the role and effectiveness of Internal Audit 

in the overall context of the Group’s risk management. 

During the year PwC undertook 3 internal audits (2017: nil) at a cost 
of $62,600 (2017: nil) 

External auditors 
Ernst & Young LLP (‘EY’ and the ‘External Auditor’) were appointed 
as auditors in 2018 and undertook their first audit for the year 
ended 31 December 2017. Energean Oil & Gas plc became a Public 
Interest Entity in 2018 on admission to trading on the London Stock 
Exchange. The Company has to comply with the EU Audit Directive 
(2014/56/EU) and Audit Regulation (537/2014) and will be required 
to put the external audit contract out to tender by 2028. The 
Committee confirms that it has complied with the provisions of the 
September 2014 Competition and Markets Authority Order in this 
area. The current lead audit partner is Andrew Smyth, who has been 
the lead partner since 2018. The fees paid to EY for their services 
are detailed in note 8 to the financial statements.

The External Auditor attends each meeting of the Audit and Risk 
Committee and reports on their audit work and conclusions 
including the appropriateness of the judgements made by 
management and their compliance with International Financial 
Reporting Standards.

Assessment of Annual Report 
A requirement of the Code is that the Annual Report is fair, balanced 
and understandable and provides the information necessary for 
shareholders to assess the Company’s position and performance, 
business model and strategy. This is the Group’s second Annual 
Report and, in order to support the assessment, the Committee 
reviewed the principal risks, business model, financial review 
and KPIs to ensure these were representative of the business 
and consistent throughout the Report and that areas requiring 
significant judgement and explanation have due prominence.

The Committee believes that the disclosures set out in the Annual 
Report provide the information necessary for shareholders to 
assess the Group’s position, performance, business model and 
strategic outlook.

Internal controls and risk management 
The Audit and 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 56 - 57. The Group’s principal risks 
and uncertainties, which provide a framework for the Committee’s 
focus, are discussed on pages 58 - 62. Management has identified 
the key operational and financial processes which exist within the 
business and has developed an internal control framework. This is 
structured around a number of Group policies and procedures and 
includes a delegated authority framework.

Internal auditors 
The Audit and Risk Committee is responsible for the review and 
approval of the role and mandate of the Internal Audit function, 
including the approval of the annual internal audit plan and 
monitoring the effectiveness of the function. 

PwC LLP was appointed in January 2018 for a term of three 
years as the Group’s outsourced internal audit function (‘Internal 
Audit’) following a tender process. Its key objectives are to provide 
independent and objective assurance on risks and controls, to the 
Board, the Audit and Risk Committee and senior management, 
and to assist the Board in meeting its corporate governance 
responsibilities. The long term Internal Audit plan for 2018, 2019 and 
2020 was approved by the Audit and Risk Committee in April 2018, 
as well as a short term Internal Audit plan for 2018. Going forward, 
the plans will be reviewed annually. The Committee’s Chairman 
has established a positive and effective working relationship with 
Internal Audit.

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Committee report continued

Nomination and Governance 
Committee report

Performance of the Committee 
The performance of the Audit & Risk Committee was assessed by 
way of an internal process in 2018 and will undergo a similar internal 
assessment during 2019.

Our priorities for 2019
During 2019, the Committee will continue to oversee the 
implementation of systems, including SAP. The Committee 
will continue to review the effectiveness of the risk management 
process and controls put in place by management. Furthermore 
the Committee will undertake an internal review of the effectiveness 
of the internal and external auditor. 

Approval 
This report in its entirety has been approved by the Board of Directors, 
following recommendation by the Committee, and signed on its 
behalf by: 

Andrew Bartlett 
Audit and Risk Committee Chairman

17 April 2019

The Audit and Risk Committee has responsibility for the oversight 
of the external audit plan. This includes monitoring the independence 
and objectivity of EY, the quality of the audit services and their 
effectiveness, the level of fees paid, approval of non-audit services 
provided by EY and re-appointment. 

The Committee concluded that EY are objective, and 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 2019.

Non-audit services
In order to safeguard the auditor’s independence and objectivity, 
the Group has in place a policy setting out the circumstances in 
which the auditor may be engaged to provide services other than 
those covered by the Group audit. The policy complies with the 
FRC’s Ethical Standard for Auditors, published in September 2015, 
which implemented the EU’s revised Statutory Audit Directive.

The Policy sets out those types of services that are strictly prohibited 
and those that are allowable in principle (permissible services). 
Any service types that do not fall within either list are considered by 
the Audit and Risk Committee Chairman on a case by case basis, 
supported by a risk assessment prepared by management.

Fees payable to the Auditor for the year ended 31 December 2018 are 
detailed in note 8 to the financial statements. 

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.

Role of the Committee 
The Nomination and Governance Committee assists 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 Chairman and Chief Executive and other senior 
executives. For more information and the Committee’s terms of 
reference please visit the Company’s website www.energean.com. 

Diversity 
The 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 and Governance 
Committee recognises the benefits of diversity in the boardroom 
and believes that a wide range of experience, backgrounds, 
perspectives and skills generates effective decision-making. 

The Board included one woman who represented 11% of the Board. 

Board effectiveness 
As reported earlier on page 72, an evaluation of Board effectiveness 
took place during 2018. The Company Secretary facilitated a formal 
and rigorous annual evaluation of the Board’s performance which 
was done via a survey and one to one meetings. 

Time commitment of the chairman 
During the year Simon Heale was appointed Deputy Chairman 
of BPGIC. He also served as Chairman of Marex Spectrom until 
December 31 2018 and as Chairman of Gulf Marine Services for 
the full year although he stepped down from that position on March 
31 2019. The Board believes that he has adequate time available to 
devote to the company. 

Performance of the Committee 
The performance of the Nomination and Governance Committee 
was assessed by way of an internal process in 2018 and it was 
concluded that the committee continued to be effective.

Our priorities for 2019
In 2019, the Nomination and Governance Committee will focus on 
succession planning to ensure the Group retains senior executives 
with the necessary skills and knowledge to remain effective and the 
Committee will work alongside the Board to prepare and implement 
the board diversity policy.

Simon Heale 
Nomination and Governance Committee Chairman

17 April 2019

Simon Heale
Chairman of Nomination and Governance 
Committee

It is my pleasure to introduce the 
Nomination and Governance Committee 
Report for 2018, which sets out the 
composition and role of the Committee 
and the areas of focus for 2019. 

Membership 
The other members of the Nomination and Governance Committee 
are Andrew Bartlett and Efstathios Topouzoglou. 

The Code recommends that a majority of the members of the 
Nomination and Governance Committee be Independent Non-
Executive Directors and that the Chairman (other than where the 
Committee is dealing with the appointment of a successor to the 
chairmanship) or an Independent Non-Executive Director should 
chair the Committee. As I was considered to be independent upon 
appointment as Chairman and Andrew Bartlett is considered 
to be an Independent Non-Executive Director, we believe that 
the Company complies with the requirements of the Code in 
this respect. The Company Secretary acts as secretary to the 
Committee.

Meetings
The Nomination and Governance Committee became effective 
upon Admission in March 2018.

Simon Heale

Andrew Bartlett

Stathis Topouzoglou

Number of meetings

Meetings attended 

1 

1 

1 

1

1

1

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Committee report

Remuneration  
Committee report

Role of the Committee 
The Health, Safety and Environment Committee evaluates the 
effectiveness of the Group’s policies and systems for identifying and 
managing environmental, health, safety and security risks as well as 
matters relating to equality, diversity, business ethics and corporate 
social responsibility. Additionally, the Committee assesses the 
performance of the Group with regard to the impact of decisions 
and related actions in these areas upon employees, communities 
and other third parties, as well as upon the reputation of the Group. 
The Committee receives regular reports from the HSE manager.

Activities
During the year, the Committee reviewed the effectiveness of 
the Group’s policies and systems for identifying the risk of major 
accidents and for providing conduct assurance on the key, health, 
safety and environmental controls to prevent occurrence of 
accidents. The Committee also reviewed the Group’s plans for an 
enhanced Corporate Social Responsibility (CSR) strategy. 

Performance of the Committee 
The performance of the Health, Safety and Environment Committee 
was assessed by way of an internal process in 2018 and will 
undergo a similar internal assessment during 2019. 

Our priorities for 2019
In 2019 the Committee will continue to review the effectiveness 
of the Group’s Health and Safety policies, the Group’s sustainability 
report and will review the findings from the Internal Audit Report on 
Health and Safety.

Approval 
This report in its entirety has been approved by the Board of 
Directors, following recommendation by the Committee, and signed 
on its behalf by: 

Robert Peck 
Health, Safety and Environment Committee Chairman

Robert Peck
Chairman of Health, Safety and 
Environment Committee 

As Chairman of the Health, Safety 
and Environment Committee, it is my 
responsibility to ensure that the 
Committee is rigorous and effective 
in carrying out its role. 

Membership 
The other members of the Health, Safety and Environment 
Committee are Karen Simon and Ohad Marani. The Company 
Secretary acts as Secretary to the Committee. 

Meetings
The Health, Safety and Environment Committee became effective 
upon Admission in March 2018, during the year two meetings were 
held, the details of the attendance at which are detailed below. 
Any member of the Committee may however request a meeting 
if he/she considers that one is necessary or expedient. 

Director 

Robert Peck

Karen Simon 

Ohad Marani 

Number of meetings 

Meetings attended 

17 April 2019

2

2

2

2

2

2

78 Energean Oil & Gas plc Annual Report 2018

Annual bonus

Adjusted EBITDAX  
(2018 & 2019)
Cost of oil production 
per boe (2018 & 2019)

Average production (2018 
& 2019)
Growth in 2P reserves 
(2018 & 2019)

Karish Tanin related 
measure (2018 & 2019) 
 – see below

Financial KPIs

Operational 
KPIs

Strategic goals

Shareholder-
aligned 
metrics

LTIP

Average production  
(2019 award)

Karish Tanin related measure (2018 & 
2019 awards) – see below

Relative Total Shareholder Return 
(‘TSR’) (2018 & 2019 awards)
Absolute TSR  (2018 & 2019 awards)

The Karish & Tanin development project is of critical importance to 
Energean and accordingly the Remuneration Committee has directly 
aligned executive pay with successful delivery of this strategic project:

 X An element of the 2018 annual bonus was linked to first steel cut 
on the Karish & Tanin project before the end of 2018 – a major 
milestone to meet the target date of first production in 2021.
 X An element of the 2018 and 2019 LTIPs is based on successfully 
meeting the key 2021 deadline for delivery of first gas from the 
Karish & Tanin development project.

Performance in 2018
As outlined in the Chairman’s statement, it has been another year of 
robust financial and operational performance with revenue growth 
of 56% whilst simultaneously reducing unit cost of production by 
29%. Strong progress was also made in advancing our Karish and 
Tanin project. 

As a result of these key targets being met the bonus out-turn for 
2018 was 82.1%, with four of the five metrics paying out in full.

Key remuneration decisions for 2019
Key decisions made by the Remuneration Committee in relation to 
2019 include:

 X Executive Director salaries and annual bonus potential will be 

unchanged in 2019. LTIP awards will be granted over shares at 
the following levels – CEO: 200% of salary (2018: 200%); CFO: 
180% of salary (2018: 200%).

 X In recognition of our evolving strategic priorities, average 

production has been added as a LTIP performance measure 
for the 2019 award.

 X From 2019, an Executive Director’s 200% of salary shareholding 

requirement will, unless the Remuneration Committee determines 
otherwise, continue to apply for a period of two years following 
cessation of employment with the Group. 

I will be available to answer questions on the Remuneration Policy 
and the Annual Report on Remuneration at the AGM on 13 June 2019. 
I hope you will find this report to be clear and helpful in understanding 
our remuneration practices and that you will be supportive of the 
resolutions relating to remuneration at the AGM.

Ohad Marani
Chairman of the Remuneration Committee

17 April 2019

Energean Oil & Gas plc Annual Report 2018 79

Ohad Marani
Chairman of the Remuneration Committee

I am pleased to present the Directors’ 
remuneration report for the year ended 
31 December 2018. The report is split 
into two sections in line with legislative 
reporting regulations:

 X Remuneration Policy – contains details of our Directors’ 
Remuneration Policy, which will be subject to a binding 
shareholder vote at our 2019 Annual General Meeting (AGM) 
and which will have effect from the date on which it is approved. 
Details are set out on pages 80 - 88.

 X The Annual Report on Remuneration – contains details of 

remuneration received by Directors in 2018 and also details of how 
we intend to implement the Remuneration Policy during 2019. The 
Annual Report on Remuneration will be subject to an advisory vote 
at the 2019 AGM. Details are set out on pages 89 - 94.

This report is compliant with Schedule 8 of The Large and 
Medium-sized Companies and Groups (Accounts and Reports) 
(Amendment) Regulations 2013, the UK Listing Authority Listing 
Rules and the Companies Act 2006 and is consistent with the  
UK Corporate Governance Code 2016.

Aligning remuneration with Company strategy 
We measure our performance against a range of key performance 
indicators (‘KPIs’), set out on pages 34 - 35, to ensure we are 
managing our long-term success in a sustainable way and in line 
with our strategic objectives. Our variable pay arrangements reward 
executives against a balanced scorecard containing financial and 
operational KPIs as well as strategic goals and shareholder-aligned 
metrics. The table on this page summarises these variable pay 
arrangements in 2018 and 2019:

Corporate governance continuedCorporate governanceFinancial statementsOther informationStrategic reportRemuneration policy

This part of the report sets out our 
first Directors’ Remuneration Policy 
(the Remuneration Policy) following 
Admission. This Remuneration Policy 
will be subject to a binding shareholder 
vote at the 2019 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. 

Policy table
Our Group-wide remuneration strategy is to provide remuneration 
packages that will:

 X Motivate and retain our industry leading employees;
 X Attract high quality individuals to join the Group;
 X Encourage and support a high performance culture;
 X Reward delivery of the Group’s business plan and our key 

strategic and operational goals; and

 X Align our employees with the interests of shareholders and other 

external stakeholders.

Consistent with this remuneration strategy, the Remuneration 
Committee has agreed a Remuneration Policy for Executive 
Directors whereby:

 X salaries will be set at competitive, but not excessive, levels 

compared to peers and other companies of an equivalent size 
and complexity;

 X performance-related pay, based on stretching targets, will form 

a significant part of remuneration packages;

 X there will be an appropriate balance between rewards for delivery 

of short-term and longer-term performance targets; and

 X development and long-term retention of a significant holding of 

Company shares will be encouraged. 

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.

Executive Directors

Purpose and link to strategy

Operation

Maximum opportunity

Performance conditions1

Fixed pay

Base salary

To appropriately recognise 
skills, experience and 
responsibilities and attract and 
retain talent by ensuring salaries 
are market competitive.

Benefits

To provide market competitive 
benefits (including 
retirement benefits)

Variable pay

Annual bonus2, 3, 4 

To link reward to key financial 
and operational targets for the 
forthcoming year. 

Additional alignment with 
shareholders’ interests through 
the operation of bonus deferral. 

No performance conditions. 

Generally reviewed annually with any increase 
normally taking effect from 1 January 
although the Remuneration 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):

 X The individual Director’s role, experience 

and performance.

 X Business performance.

 X Market data for comparable roles in 
appropriate comparator businesses.

 X Pay and conditions elsewhere in the Group.

No absolute maximum has been set for 
Executive Director base salaries. 

Any annual increase in salaries is at the 
discretion of the Remuneration Committee 
taking into account the factors stated in this 
table and the following principles:

 X Salaries would typically be increased at 
a rate no greater than the average salary 
increase for other Group employees.

 X Larger increases may be considered 
appropriate in certain circumstances 
(including, but not limited to, a change in 
an individual’s responsibilities or in the scale 
of their role or in the size and complexity of 
the Group).

 X Larger increases may also be considered 
appropriate if a Director has been initially 
appointed to the Board at a lower than 
typical salary.

Benefits currently include private medical cover, 
life assurance and a benefits allowance (in lieu of 
other benefits and pension allowance).

For the current Executive Directors, the 
maximum annual value of benefits is £75,000 
(Mathios Rigas) and £50,000 (Panos Benos).

The Remuneration Committee has discretion 
to add to or remove benefits provided to 
Executive Directors.

Executive Directors are entitled to reimburse-
ment of reasonable expenses. Executive 
Directors also have the benefit of a qualifying 
third party indemnity from the Company and 
directors’ and officers’ liability insurance.

For any future Executive Director appointed 
during the lifetime of this Remuneration Policy, 
the value of their benefits package would not 
exceed £75,000.

These totals exclude any expenses treated 
as taxable benefits by tax authorities or any  
one-off costs relating to recruitment, loss of 
office or relocation.

No performance conditions. 

The maximum award that can be made to an 
Executive Director under the annual bonus plan 
is 150% of salary. 

The bonus is based on 
performance against financial, 
strategic or operational 
measures appropriate to the 
individual Executive Director 
assessed over one year.

The precise measures and 
weighting of the measures 
are determined by the 
Remuneration Committee 
ahead of each award to ensure 
they are aligned with strategic 
priorities. 

A sliding scale of targets is 
set for each measure, where 
appropriate, with payout 
usually at zero for threshold 
performance increasing 
to 100% for maximum 
performance.

Any bonus payout is ultimately 
at the discretion of the 
Remuneration Committee.

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.

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).

 X Deferred awards are usually granted in the 

form of conditional share awards or nil-cost 
options (or, exceptionally, as cash-settled 
equivalents).

 X Deferred awards usually vest two years 
after award although may vest early on 
leaving employment or on a change of 
control (see later sections).

 X An additional payment 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).

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Purpose and link to strategy

Operation

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 Committee) of 
200% of salary.

Long-Term 
Incentive Plan (LTIP)3, 4, 5, 6

Awards are usually granted annually under the 
LTIP to selected senior executives.

To link reward to key strategic 
and business targets for 
the longer term and to align 
executives’ with shareholders’ 
interests.

Individual award levels and performance 
conditions on which vesting will be dependent 
are reviewed annually by the Remuneration 
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 are normally released 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 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).

Share Ownership Guidelines 

To create alignment between 
the long-term interests of 
Executive Directors and 
shareholders.

Executive Directors are required to build and maintain a holding of 200% of salary in 
Company shares.

Until an Executive Director is compliant with this guideline, they are required to retain at least 50% 
of vested post-tax shares.

Unless the Remuneration Committee determines otherwise, this guideline will continue to apply 
for two years after an Executive Director ceases employment with the Group.

Performance conditions1

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 Committee 
ahead of each award to ensure 
they are aligned with strategic 
priorities. 

Performance will usually be 
measured over a performance 
period of at least three years. 
For achieving a ‘threshold’ 
level of performance against a 
performance measure, no more 
than 25% of the portion of the 
LTIP award determined by that 
measure will vest. Vesting then 
increases on a sliding scale to 
100% for achieving a maximum 
performance target.

Any LTIP vesting is ultimately 
at the discretion of the 
Remuneration Committee.

Not applicable. 

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 opposite. 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.

7.  The Remuneration 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 (i) before the 2019 AGM (the date the Company’s first 
shareholder-approved Directors’ Remuneration Policy came into effect); or 
(ii) at a time when the relevant individual was not a Director of the Company 
and, in the opinion of the Remuneration Committee, the payment was not 
in consideration for the individual becoming a Director of the Company. For 
these purposes ‘payments’ includes the Remuneration Committee satisfying 
awards 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.
8.  The Remuneration 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.

Notes to table
1.  The Remuneration Committee may amend or substitute any performance 

6. 

condition(s) if one or more events occur which cause it to determine that an 
amended or substituted performance condition would be more appropriate, 
provided that any such amended or substituted performance condition 
would not be materially less difficult to satisfy than the original condition (in 
its opinion). The Remuneration Committee may also adjust the calculation 
of performance targets and vesting outcomes (for instance for material 
acquisitions, disposals or investments and events not foreseen at the time 
the targets were set) to ensure they remain a fair reflection of performance 
over the relevant period. In the event that the Remuneration Committee were 
to make an adjustment of this sort, a full explanation would be provided in the 
next Remuneration Report.

2.  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 
or operational goals relevant to an individual. Specific targets for bonus 
measures are set at the start of each year by the Remuneration Committee 
based on a range of relevant reference points, including, for Group financial 
targets, the Company’s business plan and are designed to be appropriately 
stretching.

3.  The Remuneration 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. Any issuance of new shares is limited to 10% of share capital 
over a rolling ten-year period in relation to all employee share schemes. As 
outlined in the IPO Prospectus, shares issued pursuant to awards granted 
before or in respect of Admission do not count towards this limit.

4.  The cash bonus will be subject to recovery and/or deferred shares will be 
subject to withholding at the Remuneration 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 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.

5.  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 
Committee taking into account relevant external and internal reference 
points and are designed to be appropriately stretching.

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Non-Executive Directors

Purpose and 
link to strategy

Non-Executive Director (NED) fees

To appropriately recognise 
responsibilities, skills and experience 
by ensuring fees are market 
competitive. 

Operation

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 Company’s Articles of Association provide that 
the total aggregate fees paid to the Chairman and 
NEDs will not exceed £2,000,000.

NED fees comprise payment of an annual basic fee and additional fees for 
further Board responsibilities such as:

 X Senior Independent Director

 X Audit & Risk Committee Chairman

 X Remuneration Committee Chairman

 X Health, Safety and Environment Committee Chairman

The Chairman of the Board receives an all-inclusive fee.

No NED participates in the Group’s incentive arrangements or pension 
plan or receives any other benefits other than where travel to the 
Company’s registered office is recognised as a taxable benefit in which 
case a NED may receive the grossed-up costs of travel as a benefit. Non-
Executive Directors are entitled to reimbursement of reasonable expenses. 

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.

Illustrations of application of remuneration policy
The implementation of remuneration policy in 2019 section of the Annual Report on Remuneration details how the Remuneration 
Committee intends to implement the Remuneration Policy during 2019. 

The charts below illustrate, in three assumed performance scenarios, the total value of the remuneration package potentially receivable by 
Mathios Rigas and Panos Benos in relation to 2019. This comprises salary and benefits for 2019 (Mathios Rigas: £675,000 and £75,000; 
Panos Benos £450,000 and £50,000) plus an annual bonus of up to a maximum of 150% of salary and a LTIP award of 200% of salary for 
Mathios Rigas and 180% of salary for Panos Benos. 

The charts are for illustrative purposes only and actual outcomes may differ from those shown.

s
0
0
0
£

3250

3000

2750

2500

2250

2000

1750

1500

1250

1000

750

500

250

0

Chief Executive Officer

£3,113k

Chief Financial Officer

£1,931k

35%

26%

39%

£750k

100%

43%

33%

24%

£1,243k

33%

27%

40%

£500k

100%

£1,985k

41%

34%

25%

Minimum

In line with expectations

Maximum

Minimum

In line with expectations

Maximum

LTIP

Annual  bonus

Fixed pay

Note: LTIP awards have been shown in these charts at grant date face value, with no share price growth or discount rate assumptions. If Energean’s share price was to increase 
by 50% over the vesting period, the value of the LTIP included in the single figure at vesting in the maximum scenario would be £675,000 (CEO) / £405,000 (CFO) higher than 
illustrated in the above charts. Total potential remuneration in this maximum scenario would increase commensurately to £3,788,000 (CEO) / £2,390,000 (CFO).

Assumed performance

Assumptions used

Minimum performance  

 X No pay-out under the annual bonus

 X No vesting under the LTIP

Performance in line with 
expectations 

 X 50% of the maximum pay-out under the annual bonus

 X 50% vesting under the LTIP

Maximum performance  

 X 100% of the maximum pay-out under the annual bonus

 X 100% vesting under the LTIP

Recruitment remuneration policy
Principles
In determining remuneration arrangements for new appointments to the Board (including internal promotions), the Remuneration 
Committee will apply the following principles:

 X The Remuneration Committee will take into consideration all relevant factors, including the experience of the individual, market data 

(for the UK and local 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.

 X 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.

 X Upon appointment, the Remuneration Committee may consider it appropriate to offer additional remuneration arrangements in order 
to secure the appointment. In particular, the Remuneration Committee may consider it appropriate to ‘buy out’ terms or remuneration 
arrangements forfeited on leaving a previous employer (discussed below).

 X The Remuneration Committee may provide costs and support if the recruitment requires relocation of the individual.
 X Instead of including an all-inclusive benefits allowance in a new appointment’s remuneration package, the Remuneration Committee 
may alternatively provide separate pension and benefits allowances although, in this scenario, the total value of these two allowances 
would not exceed the maximum benefits cap outlined in the Policy Table on pages 81 - 82.

 X 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 350% 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 Committee may make a one-off award to buy out compensation arrangements forfeited on 
leaving a previous employer. In doing so, the Remuneration 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.

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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 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 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 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.

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 Committee (or the Board as appropriate) may include any element within 
the Policy Table which the Remuneration Committee considers is appropriate given the particular circumstances, with due regard to the 
best interests of shareholders.  In particular, if the Chairman 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

Notice period

Policy

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 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 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 Committee’s discretion, be settled 
wholly in cash. In determining the level of bonus to be paid, the 
Remuneration 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 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.

Deferred Bonus Plan (DBP) – share awards
 X 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 
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 Committee, in its discretion, elects to 
vest the shares following cessation of employment. 

 X In all other circumstances, unvested DBP shares will lapse upon 

cessation of employment.

 X On a change of control, unvested DBP shares will immediately 

vest in full unless they are exchanged for new awards.

 X 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 Committee may affect the 
current or future value of shares, the Remuneration Committee 
will determine whether unvested DBP shares should vest.

LTIP awards
 X 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 
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 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 Committee in its discretion elects to accelerate 
the release date to cessation of employment or such other 
intermediate date as is deemed appropriate. 

 X In all other circumstances, unvested LTIP shares will lapse upon 

cessation of employment.

 X 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 be 
released on the original release date unless the Remuneration 
Committee in its discretion elects to accelerate the release date 
to cessation of employment or such other intermediate date as 
is deemed appropriate.

 X 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 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.

 X 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 Committee may affect the current 
or future value of shares, the Remuneration Committee will 
determine whether outstanding LTIP awards should be treated 
on the same basis as following a change of control.

The Remuneration 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 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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Annual report on remuneration

Consideration of employment conditions elsewhere 
in the Group
The Remuneration Committee does not currently formally 
consult with employees when determining Executive Director 
pay. However, the Remuneration Committee is kept informed of 
general management decisions made in relation to employee 
remuneration and is 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 Committee is considering changes in 
salaries for the Executive Directors. 

During the year the Remuneration Committee has received updates 
on the UK Corporate Governance Code 2018. Work is under way 
to incorporate, in particular, the new provisions to consider the 
employee voice and ensure there is appropriate engagement with 
employees to explain how executive remuneration aligns with wider 
company pay policy. The Remuneration Committee will also more 
formally review workforce remuneration and related policies as part 
of its process when determining Executive Director remuneration.

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
This Remuneration Policy is consistent with the remuneration 
arrangements that were contained in our IPO Prospectus. The 
Remuneration Committee Chairman is always available to meet 
with any shareholders who wish to discuss any aspect of our 
Remuneration Policy.

Unaudited information
Implementation of remuneration policy in 2019
This section provides an overview of how the Remuneration Committee is proposing to implement our Remuneration Policy in 2019 for the 
Executive Directors.

Base salary
No increase has been made to the Executive Directors’ salaries in 2019.

Mathios Rigas (CEO)
Panos Benos (CFO)

Salary 
1 January 
2019
£675,000 
£450,000

Salary 
1 January 
2018
£675,000
£450,000

% 
increase
Zero
Zero

Benefits
Mathios Rigas and Panos Benos receive contractual benefits packages worth £75,000 p.a. and £50,000 p.a. respectively. 

Annual bonus
The annual bonus plan for 2019 will be broadly consistent with the bonus plan operated in 2018. Key features of the plan for 2019 are: 

 X There will be a maximum bonus opportunity of 150% of annual salary for both of the Executive Directors. 
 X One-third of any bonus earned will be deferred into DBP shares. These shares will vest two years post grant.

The annual bonus for 2019 for Executive Directors will be determined as detailed below:

Performance measure
Adjusted EBITDAX
Cost of oil production per boe
Average production per day
Growth in 2P resources
Individual objectives

As a percentage of maximum
bonus opportunity
CFO
CEO
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%

The targets for these performance measures in relation to the financial year 2019 are deemed commercially sensitive. However, 
retrospective disclosure of the targets and performance against them will be provided in next year’s Remuneration Report to the extent that 
they do not remain commercially sensitive at that time. 

The Remuneration Committee has discretion, where it believes it to be appropriate, to override the formulaic outcome arising from the 
bonus plan.

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LTIP
The Executive Directors will receive an award under the LTIP during 2019. Key terms of this award will be:

 X Mathios Rigas will receive an award over shares worth 200% of annual salary at grant and Panos Benos will receive an award over 

shares worth 180% of annual salary at grant.

 X Awards will vest three years after grant and be subject to an additional two-year holding period.
 X Awards will be subject to performance measures as detailed below:

Performance 
measure
Relative Total Shareholder 
Return over 3 Financial Years
Absolute Total Shareholder 
Return over 3 Financial Years
Average Group production 
over 3 Financial Years

Karish Tarin First Gas date

Proportion of award
determined by measure

55%

20%

10%

15%

Threshold 
Performance
Median ranking
13.75% of award
12.5% p.a.
5% of award
8,000 bpd
2.5% of award
30 June 2021
3.75% of award

Maximum
performance
Upper quartile ranking
55% of award
20% p.a.
20% of award
12,000 bpd
10% of award
31 March 2021
15% of award

Vesting is calculated on a straight-line basis for performance between the threshold and maximum performance targets. 

The Remuneration Committee has discretion, where it believes it to be appropriate, to override the formulaic outcome arising from the LTIP.

Non-Executive Director remuneration
The table below shows the fee structure for Non-Executive Directors for 2019 which is unchanged from after the IPO in 2018. Non-
Executive Director fees are determined by the full Board except for the fee for the Chairman of the Board, which is determined by the 
Remuneration Committee. 

Chairman of the Board all-inclusive fee
Basic Non-Executive Director fee
Senior Independent Director additional fee
Audit Committee Chairman additional fee
Health, Safety and Environment Committee Chairman additional fee
Remuneration Committee Chairman additional fee

No fee is paid to David Bonanno, who is employed and remunerated by Third Point.

2019
fees
£150,000
£50,000
£7,500
£5,000
£5,000
£5,000

Audited information
The information provided in this section of the Remuneration Report, up until the ‘Unaudited information’ heading on page 89, is subject 
to audit.

Single total figure of remuneration
The following table sets out the total remuneration for Executive Directors and Non-Executive Directors for 2018. Comparative figures are 
also provided for 2017 although Energean was an unlisted company throughout that year. As disclosed in last year’s Remuneration Report, 
the Executive Directors’ remuneration framework was restructured for 2018 ahead of Energean’s admittance to the main market of the London 
Stock Exchange in order to be compliant with UK best practice and consistent with the enhanced responsibilities of the Executive Directors.

All figures 
shown in £’000
Executive Directors
Mathios Rigas
Panos Benos
Non-Executive Directors(4)
Simon Heale
Andrew Bartlett 
David Bonanno 
Robert William Peck
Karen Simon
Ohad Marani
Stathis Topouzoglou

2018

Salary 
and 
fees

Benefits(1)

675
450

150
55
–
48
44
48
44

75
50

–
–
–
–
–
–
–

Annual
bonus(2)

831
554

–
–
–
–
–
–
–

Total(3)

1,581
1,054

150
55
–
48
44
48
44

Salary 
and 
fees

603
    464

      54
7
–
9
6
9
13

2017

Benefits

10
4

–
–
–
–
–
–
–

Annual
bonus

805  
481

–
–
–
–
–
–
–

Total(3)

1,418
949

      54
7
–
9
6
9
13

Notes to the table – methodology 
1.  Benefits – Mathios Rigas and Panos Benos receive a contractual benefits package worth £75,000 p.a. and £50,000 p.a. respectively. They do not receive a separate 

pension allowance.

2.  Annual bonus – bonus payments in relation to 2018 performance are paid two-thirds in cash and one-third in deferred shares.  Details of the performance 

measures and targets are set out in the following section.  

3.  Total remuneration paid to Directors in respect of 2018 is £3,026,000 (2017: £2,465,000).
4.  Non-Executive Directors joined the Board during the course of 2017 as follows: David Bonanno – 8 May 2017; Stathis Topouzoglou – 8 May 2017; Simon Heale –  

11 July 2017; Ohad Marani – 11 July 2017; Robert William Peck – 11 July 2017; Andrew Bartlett – 22 August 2017 and Karen Simon – 15 September 2017. 

Annual bonus 
The maximum annual bonus opportunity for the Executive Directors in 2018 was 150% of salary. Two-thirds of any bonus will be paid in 
cash with the remaining third granted in shares under the DBP which vest two years post grant.

Performance measures and targets applying to the 2018 annual bonus are set out below:

Performance 
measure

Adjusted EBITDAX
Cost of oil 
production per boe
Average 
production per day

2P reserves

Strategic  
objective

Mathios Rigas
Panos Benos

Proportion 
of bonus 
determined 
by measure

20%

20%

20%

20%

20%

Threshold 
performance
$40m
Zero payout
$25 per boe
Zero payout
4,000 bpd
Zero payout
5% increase in 2P
Zero payout

Target 
performance
$45m
10% of bonus 
$22.50 per boe
10% of bonus 
4,250 bpd
10% of bonus 
10% increase in 2P
10% of bonus 

Maximum 
performance
$50m
20% of bonus
$20 per boe
20% of bonus
4,500 bpd
20% of bonus
15% increase in 2P
20% of bonus

The target for this element of the bonus was first steel cut on 
the Karish and Tanin floating production storage and offloading 
(‘FPSO’) vessel before the end of 2018. First steel cut on the 
Karish and Tanin project is a major milestone in the delivery of 
the FPSO to the Karish field in order to meet the target date of  
first production in Q1 2021.

Actual 
performance

% of maximum 
bonus payable

$52m

$17 per boe

4,053 bpd
600% increase 
in 2P

20%

20%

2.1%

 20%

First steel was cut on 26 November 2018 
as announced in a press release of the 
following day

Total bonus payable
% of maximum 
82.1%
82.1%

Total bonus payable
£ and % of annual salary
£831,465 (123.2% of salary)
£554,310 (123.2% of salary)

The Remuneration Committee considered this bonus outcome in light of the Group’s overall financial and operational performance during 
2018 and was satisfied that it was appropriate and that no adjustment to the outcome was required.

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LTIP awards during the financial year
An award was granted under the LTIP to selected senior executives, including the Executive Directors, in July 2018. This award is subject 
to the performance conditions described below and will vest in July 2021 with a subsequent two-year holding period for any vested shares 
to July 2023.

Mathios Rigas
Panos Benos

Type of award

Conditional 
share award

Date of grant
12 July 2018
12 July 2018

Maximum 
number 
of shares
252,904
168,602

Face value 

(£)*

£1,350,000
£900,000

Face value 
(% of salary)
200%
200%

Threshold 
vesting

End of 
performance 
period

25% of award

30 June 2021

* The maximum number of shares that could be awarded has been calculated using the share price of £5.338 (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.

Vesting of the awards is subject to satisfaction of the following performance conditions measured over a three-year performance period 
to 30 June 2021. 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 Committee.

Mathios Rigas
Panos Benos

Performance 
measure

Relative Total Shareholder Return**

Absolute Total Shareholder Return

Karish Tarin First Gas date

Type of
award
Conditional 
share award

Date of grant
12 July 2018
12 July 2018

Maximum
number of
shares
252,904
168,602

Face value
(£)*
£1,350,000
£900,000

Face value
(% of salary)
200%
200%

Threshold
vesting

End of
performance
period

25% of award

30 June 2021

Proportion of award
determined by
measure

70%

10%

20%

Threshold 
performance
Median ranking
17.5% of award
12.5% p.a.
2.5% of award
30 June 2021
5% of award

Maximum
performance
Upper quartile ranking
70% of award
20% p.a.
10% of award
31 March 2021
20% of award

*   The maximum number of shares that could be awarded has been calculated using the share price of £5.338 (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.

**  Comparator group comprises Cairn Energy, EnQuest, Genel Energy, Gulf Keystone Petroleum, Hurricane, Isramco, Kosmos Energy, Nostrum Oil & Gas, Ophir Energy, 

Premier Oil, Ratio, Rockhopper Exploration, Seplat Petroleum, SOCO International, Tamar Petroleum, Tullow Oil.

Payments to past Directors
There have been no payments to past Directors or payments to Directors for loss of office during 2018. 

Statement of Directors’ shareholding and share interests
Executive Directors are expected to achieve a holding of shares worth 200% of salary. The Remuneration Committee reviews ongoing 
individual performance against this shareholding requirement at the end of each financial year. Both Executive Directors currently exceed 
their minimum guideline. 

The number of shares currently held by Directors are set out in the table below:

Number of shares at 31 December 2018

Director
Mathios Rigas
Panos Benos
Simon Heale
Andrew Bartlett 
David Bonanno 
Robert William Peck
Karen Simon
Ohad Marani
Stathis Topouzoglou

Percentage of Issue Share
Capital (minus LTIP shares) 

12.75
2.65

Shares owned outright

19,437,816 
4,055,713 
52,478 
2,126 
0
5,665 
89,949 
2,690 
17,819,893  

Interests in share
incentive schemes, subject 
to performance conditions
LTIP(1)
252,904
168,602
–
–
–
–
–
–
–

Share ownership
guidelines met?(2)
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a

Notes to the table
1.  This relates to shares awarded under the LTIP in July 2018. 
2.  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 2018 

has been used (£6.28 per share).

After 31 December 2018, Mathios Rigas acquired 82,488 shares in the Company and Efstathios Topouzoglou acquired 91,650 shares in the 
Company. On 28 March 2019, pursuant to the 2018 annual bonus, Mathios Rigas was granted 36,401 DBP awards and Panos Benos was 
granted 24,267 DBP awards. Also on that date, Mathios Rigas was granted 177,309 LTIP awards and Panos Benos was granted 106,385 
LTIP awards. Full details of these awards will be disclosed in the 2019 Annual Report.

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 2018 to 
the performance of the FTSE All-Share Oil & Gas Producers 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.

Energean’s total shareholder return compared against total shareholder return of the 
FTSE All-Share index since Admission on 21 March 2018 (GBP)

150

140

130

120

110

100

90

80

21 Mar18 31 Mar 18 30 Apr 18 31 May 18 30 Jun 18 31 Jul 18 31 Aug 18 30 Sep 18 31 Oct 18 30 Nov 18 31 Dec 18

Energean Oil & Gas

FTSE All-Share Oil & Gas Producers Index

The table below the chart 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.

CEO(1) single figure of remuneration £000
Annual bonus pay-out (as a % of maximum opportunity)
LTIP vesting out-turn (as a % of maximum opportunity)

Notes to the table

1.  Energean was an unlisted company during 2017 and the annual bonus plan had no cap. 

2018
1,581
82.1% 
n/a (no award vested in 2018)

2017
1,418
n/a(1)
n/a (no award vested in 2017)

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Directors’ report

Percentage change in remuneration of the CEO
The table below illustrates the percentage change in annual salary, benefits and bonus between 2017 and 2018 for the CEO and the average 
for all Company employees.

CEO(1)
Average for all employees

Salary change 
(2017 to 2018)
+12%
+9.9%

Benefits change 
(2017 to 2018)
+650%
+14.6%

Annual bonus change 
(2017 to 2018)
+3.3%
+76.2%

1.  During 2017 Energean was an unlisted company.  As disclosed in last year’s Remuneration Report, the CEO’s remuneration framework was restructured for 2018 
ahead of Energean’s admittance to the main market of the London Stock Exchange in order to be compliant with UK best practice and consistent with the CEO’s 
enhanced responsibilities.

Relative importance of the spend on pay
The table below illustrates the total expenditure on remuneration in 2017 and 2018 for all of the Company’s employees compared to 
dividends payable to shareholders.

Total expenditure on remuneration
Dividends payable to shareholders

2018 
£m
19.9 
nil 

2017
£m
15.5
nil

Change
+28.7%
–

Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration Committee is chaired by Ohad Marani. During the year, the Remuneration Committee also comprised Andrew Bartlett, 
Robert Peck. Simon Heale (from 11 September 2018) and, until 11 September 2018, David Bonanno. Details of their attendance are set out 
page 71.

The Remuneration Committee met three times during 2018, details of attendance at the meetings are set out on page 91. Other attendees 
present at these meetings by invitation were the Company Chairman, the CEO and the CFO. No individual was in attendance when their own 
remuneration was being determined.

The Remuneration Committee is responsible for determining the Company Chairman’s fee and all aspects of Executive Director remuneration. 
In line with the Corporate Governance Code 2018, the Remuneration Committee’s responsibilities will extend to the determination of other 
senior management’s remuneration in 2019.  The Remuneration Committee also oversees the operation of all share plans. Full terms of 
reference of the Remuneration Committee are available on our website at www.energean.com.

During the year, the Remuneration Committee received independent and objective advice from Deloitte LLP principally on market practice and 
incentive design for which Deloitte LLP was paid £17,400 in 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 that industry’s code of conduct in relation to executive 
remuneration consulting in the UK. Deloitte LLP was reporting accountant in the Admission process and, since Admission, has also provided 
advice to the Company in relation to technology consulting, tax advice, direct and indirect tax compliance services, payroll services and financial 
models. The Remuneration Committee has reviewed the nature of this additional advice and is satisfied that it does not compromise the 
independence of the advice that it has received.

Shareholder voting on Remuneration Report resolution

Approval of the Annual Report on Remuneration
2018 AGM

Votes for

Votes against

Votes withheld

106,260,775 (100%)

0 (-)

0

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.

Ohad Marani
Chairman of the Remuneration Committee

17 April 2019

94 Energean Oil & Gas plc Annual Report 2018

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 2018 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 2019. As at 17 April 2019 the Directors had not used this 
authority. The Directors are proposing to renew this authority. 

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 
loan agreements. None of these are considered to be significant 
in terms of their likely impact on the business of the Group as a 
whole. 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 occurs 
because of a takeover bid.

Directors
The biographical details and appointments of the Directors are set 
out on pages 66 - 69. All of the Directors will offer themselves for 
re-election at the AGM on 13 June 2019.

The Directors at the year-end were:

 X Simon Heale (Non-Executive Chairman) 
 X Mathios Rigas (Chief Executive Officer)
 X Panos Benos (Chief Financial Officer) 
 X Andrew Bartlett (Senior Independent Non-Executive Director) 
 X Robert Peck (Independent Non-Executive Director) 
 X Ohad Marani (Independent Non-Executive Director) 
 X Karen Simon (Independent Non-Executive Director) 
 X Efstathios Topouzoglou (Non-Executive Director) 
 X David Bonanno (Non-Executive Director) 

The Directors present their Annual Report 
on the affairs of the Group, together with 
the financial statements and auditor’s 
report, for the year ended 31 December 
2018. The Corporate Governance 
Statement set out on pages 65 - 94 
forms part of this report.

Details of significant events since the balance sheet date are 
contained in note 30 to the financial statements. An indication  
of likely future developments in the business of the Company and 
details of research and development activities are included  
in the strategic report.

Admission to the Main Market of the London Stock 
Exchange & Tel Aviv Stock Exchange
On 21 March 2018, all of the Company’s issued ordinary shares were 
admitted to trading on the main market for listed securities of the 
London Stock Exchange. On 29 October 2018, the Company’s shares 
were admitted to a secondary listing on the Tel Aviv Stock Exchange.

Dividends
No dividends were paid during the year 2018 (2017:nil).

Capital structure
Details of the issued share capital are shown in note 20 to the 
financial statements. As at 31 December 2018, the Company’s 
share capital consisted of 153,152,763 issued ordinary shares of 
£0.01 each. The Company has one class of ordinary shares which 
carry 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 Articles of Association 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 26 to the 
financial statements. 

With regard to the appointment and replacement of Directors, 
the Company is governed by its Articles of Association, the UK 
Corporate Governance Code, the Companies Act and related 
legislation. The Articles themselves may be amended by special 
resolution of the shareholders. The powers of directors are 
described in the Articles of Association and the Schedule of Matters 
Reserved for the Board, copies of which are available on request, 
and the Corporate Governance Statement on page 71.

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Corporate governance continuedCorporate governanceFinancial statementsOther informationStrategic reportDirectors’ report continued

Articles of Association
The Company’s Articles of Association (“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 provided that the individual stands for 
election by shareholders at the next AGM. 

Directors’ indemnities 
Under the Company’s Articles, the Directors of the Company may be indemnified out of the assets of the Company against certain 
liabilities which may be incurred in relation to the affairs of the Company or in relation to the duties, powers and office of each Director. 
Such qualifying third party indemnity provisions for the benefit of the Directors were implemented upon incorporation of the Company 
on 8 May 2017 and remain in force at the date of this report. 

Political contributions
No political donations were made during the year (2017: nil).

Substantial shareholdings
The Company has been notified in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules (or otherwise) of the 
following holdings in the Company’s issued share capital:

Third Point Hellenic Recovery (Lux) S.À.R.L.

Growthy Holdings Co. Limited

Oilco Investments Limited

Clal Insurance 

The Capital Group Companies, Inc.

Number of
shares

40,782,418

18,661,564

17,053,253

15,147,504

10,874,957

% of issued 
share 
capital

26.7%

12.2%

11.2%

9.69%

7.1%

Annual General Meeting (AGM)
The Company’s AGM will be held in London on 13 June 2019. 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 whom can be found in the Company Information section on page 176.

Greenhouse gas emissions (GHG) reporting
Details of the Group’s emissions are contained in the Corporate Social Responsibility report on page 50.

Directors’ statement of disclosure of information to auditor
Each of the Directors in office at the date of the approval of this Directors’ Report 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. 

Independent auditor
Having reviewed the independence and effectiveness of the auditor, the Audit & Risk Committee has recommended to the Board that the 
existing auditor, Ernst & Young LLP (‘EY’), be reappointed. EY has expressed its willingness to continue in office as auditor. An ordinary 
resolution to reappoint EY as auditor of the Company will be proposed at the forthcoming AGM.

Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R is disclosed. 

Listing Rule requirement
Capitalisation of interest 
Publication of unaudited financial information

Long-term incentive schemes 

Director emoluments 
Allotment of equity securities 
Listed shares of a subsidiary
Significant contracts with Directors and controlling shareholders 
Dividend waiver 
Board statement in respect of relationship agreement  
with the controlling shareholder

Listing Rule Reference
LR 9.8.4R (1)
LR 9.8.4R (2)

LR 9.8.4R (4)

LR 9.8.4R (5), (6)
LR 9.8.4R (7), (8)
LR 9.8.4R (9)
LR 9.8.4R (10), (11)
LR 9.8.4R (12), (13)

Section
Note 10/page 136
Not applicable
Directors’ remuneration 
report/ pages 79 - 94
No such waivers.
David Bonanno does not receive 
any fee for acting as a Director.
No such share allotments.
Not applicable
Directors’ report/pages 95 - 96
Not applicable

LR 9.8.4R (14)

Not applicable

The Directors’ Report was approved by the Board and signed on its behalf by the Company Secretary on 17 April 2019.

By order of the Board

Michelle Churchward
Company Secretary

17 April 2019

44 Baker Street 
London
W1U 7AL

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Corporate governance

Financial statements

Other information

Financial 
statements

100
107

Independent auditor’s report to the  
members of Energean Oil & Gas Plc 
Group income statement  
Group Statement of Comprehensive  
Income 
108
Group Statement of Financial Position  109
Group Statement of Changes in Equity  110
112
Group Statement of Cash Flows 
Notes to the Consolidated Financial 
Statements 
Company statement of financial  
position 
Company Statement of Changes  
in Equity 
Company accounting policies 
Notes to the company Financial  
166
Statements 
Payments to governments (unaudited)  171
172
Transparency disclosure (unaudited) 
174
Glossary 
176
Other information 

162
163

161

114

Statement of Directors’ responsibilities 
for the Group financial statements

The Directors of the Company are responsible for preparing the 
Annual Report and the financial statements in accordance with 
applicable law and regulations.

Company law requires the Directors to prepare such financial 
statements for each financial year. Under that law, the Directors are 
required to prepare Group financial statements in accordance with 
International Financial Reporting Standards (IFRSs) as adopted by 
the European Union and Article 4 of the IAS Regulation and have 
also chosen to prepare the parent company financial statements in 
accordance with Financial Reporting Standard (FRS) 101 Reduced 
Disclosure Framework. Under company law, the Directors must not 
approve the financial statements unless they are satisfied that they 
give a true and fair view of the state of affairs of the Company and 
of the profit or loss of the Company for that period. 

In preparing the parent company financial statements, the Directors 
are required to:

 X select suitable accounting policies and then apply them 

consistently;

 X make judgements and accounting estimates that are reasonable 

and prudent;

 X state whether FRS 101 Reduced Disclosure Framework has 

been followed, subject to any material departures disclosed and 
explained in the financial statements; and

 X prepare the financial statements on the going concern basis 

unless it is inappropriate to presume that the parent company 
will continue in business.

In preparing the Group financial statements, International 
Accounting Standard (IAS) 1 requires that the Directors:

 X properly select and apply accounting policies;
 X present information, including accounting policies, in a 
manner that provides relevant, reliable, comparable and 
understandable information; 

 X provide additional disclosures when compliance with the 

specific requirements in IFRSs are insufficient to enable users 
to understand the impact of particular transactions, other events 
and conditions on the entity’s financial position and financial 
performance; and

 X make an assessment of the Group’s ability to continue as 

a going concern.

The Directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the Company’s 
transactions and disclose with reasonable accuracy at any time 
the financial position of the Company and enable them to ensure 
that the financial statements comply with the Companies Act 
2006. They are also responsible for safeguarding the assets 
of the Company and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of 
the corporate and financial information included on the Company’s 
website. Legislation in the United Kingdom governing the 
preparation and dissemination of financial statements may differ 
from legislation in other jurisdictions.

Responsibility statement
We confirm that to the best of our knowledge:

 X the financial statements, prepared in accordance with the 

relevant financial reporting framework, give a true and fair view 
of the assets, liabilities, financial position and profit or loss of the 
Company and the undertakings included in the consolidation 
taken as a whole;

 X 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

 X the Annual Report and financial statements, taken as a whole, 

are fair, balanced and understandable and provide the information 
necessary for shareholders to assess the Company’s position and 
performance, business model and strategy.

This responsibility statement was approved by the board of 
directors on 17 April 2019 and is signed on its behalf.

By order of the Board

Mathios Rigas 
Chief Executive Officer 

Panos Benos
Chief Financial Officer

17 April 2019 

17 April 2019

98 Energean Oil & Gas plc Annual Report 2018

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Independent auditor’s report to  
the members of Energean Oil & Gas plc

Opinion
In our opinion:

 X Energean Oil & Gas 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 2018 and of the group’s 
profit for the year then ended;

 X the group financial statements have been properly prepared in 
accordance with International Financial Reporting Standards 
(‘IFRSs’) as adopted by the European Union; 

 X the parent company financial statements have been properly 
prepared in accordance with United Kingdom Generally 
Accepted Accounting Practice and in accordance with the 
provisions of the Companies Act 2006; and

 X the financial statements have been prepared in accordance with 
the requirements of the Companies Act 2006, and, as regards to 
the group financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Energean Oil & Gas plc 
(Energean) that comprise:

Group
Consolidated statement of 
financial position as at 
31 December 2018
Consolidated statement of profit 
or loss for the year then ended
Consolidated statement of 
comprehensive income for the 
year then ended
Consolidated statement of 
changes in equity for the year 
then ended
Consolidated statement of cash 
flows for the year then ended
Related notes 1 to 30 to the group 
financial statements, including a 
summary of significant 
accounting policies

Parent 
Company statement of financial 
position as at 31 December 2018

Company statement of changes 
in equity for the year then ended 

Company accounting policies and 
the related notes 1 to 14 to the 
company financial statements

The financial reporting framework that has been applied in the 
preparation of the group financial statements is applicable law and 
IFRSs as adopted by the European Union. 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 Financial Reporting 
Standard 101 Reduced Disclosure Framework (United Kingdom 
Generally Accepted Accounting Practice) and in accordance with 
the provisions of the Companies Act 2006.

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 below. We are independent of the group and parent 
company 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.

We believe that the audit evidence we have obtained is sufficient 
and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, 
going concern and viability statement
We have nothing to report in respect of the following information 
in the Annual Report, in relation to which the ISAs (UK) require us 
to report to you whether we have anything material to add or draw 
attention to:

 X the disclosures in the Annual Report set out on pages 58 - 62 

that describe the principal risks and explain how they are being 
managed or mitigated;

 X the directors’ confirmation set out on page 58 in the Annual 

Report that they have carried out a robust assessment of the 
principal risks facing the entity, including those that would threaten 
its business model, future performance, solvency or liquidity;
 X the directors’ statement set out on page 98 in the financial 

statements about whether they considered it appropriate to 
adopt the going concern basis of accounting in preparing them, 
and their identification of any material uncertainties to the 
entity’s ability to continue to do so over a period of at least twelve 
months from the date of approval of the financial statements;
 X whether the directors’ statement in relation to going concern 

required under the Listing Rules in accordance with Listing Rule 
9.8.6R(3) is materially inconsistent with our knowledge obtained 
in the audit; or 

 X the directors’ explanation set out on page 63 in the Annual 

Report as to how they have assessed the prospects of the entity, 
over what period they have done so and why they consider that 
period to be appropriate, and their statement as to whether 
they have a reasonable expectation that the entity will be able 
to continue in operation and meet its liabilities as they fall 
due over the period of their assessment, including any related 
disclosures drawing attention to any necessary qualifications 
or assumptions.

Overview of our audit approach

Key audit matters

Audit scope

Materiality

 X Recognition of the group’s additional 
investment in Energean Israel Limited

 X Recoverability of oil and gas assets, 
including estimation of oil and gas 
reserve volumes used in management’s 
impairment assessment

 X Karish/Tanin development project spend
 X We performed an audit of the complete 

financial information of three components 
and audit procedures on specific balances 
for a further three components

 X The components where we performed 

full or specific audit procedures 
accounted for 98% of profit before tax, 
100% of revenue and 96% of total assets

 X Overall group materiality of $7.5 million 
which represents 0.5% of Total Assets, 
adjusted to remove the amount of 
goodwill connected with group’s additional 
investment in Energean Israel Limited.

Risk

Our response to the risk

Recognition of the group’s additional investment in 
Energean Israel Limited

Net assets attributable to Energean Israel Limited 
(‘Energean Israel’) as at 31 December 2018: $866.6 
million (31 December 2017: $nil)

Derivative asset: $nil (2017: $93.3 million)

Refer to the Audit and Risk Committee Report (page 74); 
Accounting policies (pages 118 - 119); Notes 4.1, 6, 12, 21 
and 28.5 of the consolidated financial statements. 

The commitment to purchase the Energean Israel B 
shares crystallised on 16 March 2018 upon completion 
of Energean’s IPO on the London Stock Exchange. 
This in turn triggered the Subscription Agreement for 
Energean to subscribe for new shares in Energean 
Israel at a cost of $266.7 million, increasing the group’s 
interest in that entity to 70% of the issued equity shares.

Therefore, there is a risk of misstatements in relation 
to the following: 
 X Re-measurement of the derivative up to 

16 March 2018;

 X Applying acquisition accounting principles for 

Energean Israel becoming a controlled subsidiary 
in accordance with IFRS 3 Business Combinations 
(‘IFRS 3’); and

 X The recognition of assets and liabilities acquired 

at fair value, including deferred tax effects, and the 
valuation of goodwill arising from the transaction.

Key audit matters 
Key audit matters are those matters that, in our professional 
judgement, 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. We communicated key audit matters and our planned 
response to each risk to the Audit and Risk Committee in our 
November audit planning report. 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.

We performed the following procedures to address the 
risks identified:
 X Reviewed the approach adopted by management 
for the valuation of the derivative asset at the IPO 
date; 

 X Reviewed supporting evidence to verify that the 

criteria were met to treat Energean Israel Limited 
as a subsidiary from the share subscription date;
 X Inspected supporting documents in relation to the 
key transactions, including the payment of $266.7 
million as a subscription for shares in Energean 
Israel Limited; 

Key observations communicated to the  
Audit and Risk Committee 

We reported to the Audit and Risk Committee that:
 X The fair value of the derivative asset at the IPO 

date was appropriate;

 X The fair values of the assets and liabilities, 

including deferred tax impacts, and of the non-
controlling interest recognised upon Energean 
Israel becoming a controlled subsidiary are 
reasonable;

 X The goodwill recognised in the financial 

statements, which is driven by the deferred tax 
impacts of accounting for the share subscription 
transaction, is appropriate; and 

 X Evaluated management’s attribution of fair 

 X The disclosures required by IFRS 3 have been 

made in the financial statements.

values to the assets, liabilities and non-controlling 
interest of Energean Israel Limited including 
deferred tax implications of the relevant fair value 
adjustments; and

 X Reviewed the disclosures in the financial 

statements to ensure they are in line with IFRS 3. 

The audit procedures to address this risk were 
principally performed by the Group team.

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Auditor’s report continued

Risk

Our response to the risk

Key observations communicated to the  
Audit and Risk Committee 

Recoverability of oil and gas assets, including 
estimation of oil and gas reserve volumes used in 
management’s impairment assessment 

Tangible oil and gas properties: $1,312.3 million (2017: 
$248.9 million) 

Refer to the Audit and Risk Committee Report (page 74); 
Accounting policies (pages 120 - 122); and Notes 4.2 and 
14 of the consolidated financial statements.

This refers to the risk that capitalised costs associated 
to tangible oil and gas assets may be recorded at a 
level that exceeds the future recoverable amounts. 
Within the Energean group, we consider this risk to 
exist for the established assets in Greece and the 
development assets in Israel.

Accounting standards require management to assess 
at each reporting date whether indicators of asset 
impairment exist. Where indicators of impairment 
(or reversal) exist, management must carry out an 
impairment test.

Where indicators of impairment exist, management 
prepares the asset impairment tests under the value-
in-use methodology. The models include a number of 
management estimates and judgements including: 
reserve and resource volume estimates, future oil 
and gas prices, discount rates, production forecasts 
and operating and capital expenditures for each cash 
generating unit (CGU). Changes to one or more of these 
key inputs could lead to a potential impairment, change 
the amount of impairment recognised or result in a 
reversal of a previously recognised impairment. 

Karish/Tanin development project spend

Karish and Tanin development costs capitalised within 
Oil and Gas properties for the year ended 31 December 
2018: $638.0 million (2017: $nil) 

Refer to the Audit and Risk Committee Report (page 74); 
Accounting policies (pages 120 - 121); and Note 14 of 
the consolidated financial statements.

The Karish/Tanin development attained FID in March 
2018 and consequently there has been significant 
project-related expenditure in the last nine months of 
the year. 

We focused on the risks of inappropriate capitalisation 
of costs in accordance with IAS 16 Property, Plant 
and Equipment and the completeness of project cost 
accruals recorded as at 31 December 2018. 

Management did not identify any impairment 
indicators as a result of their impairment assessment. 
Our audit procedures to evaluate management’s 
assessment of impairment indicators for the group’s 
tangible oil and gas assets included:
 X Assessing internal and external factors for the 

existence of impairment indicators;

 X Assessing the completeness of management’s 

We reported to the Audit and Risk Committee that:
 X Management’s estimates of reserves and 

resources, as well as other key assumptions used 
in their impairment indicators assessment, were 
found to be reasonable; and

 X We did not identify any impairment indicators that 
would suggest the carrying value of the group’s 
tangible oil and gas properties is not recoverable.

reserve and resource estimates report, as well as 
the objectivity and competency of the third party 
that was engaged by management to prepare 
the reserves and resources report authors, and 
verifying specific input data used within the 
report;

 X Inspecting management’s reconciliation of the 
third party reserves and resources report with 
Energean’s valuation models and assessing 
economic cut off;

 X Using EY valuation specialists to assist the 

audit team in assessing the reasonableness of 
other key accounting estimates and judgements 
prepared by management as part of their 
impairment indicators assessment, as well as the 
valuation methodology used in the oil and gas 
field cash flow models; and

 X Assessing the reasonableness of future 

production assumptions used by management.

The audit procedures to address this risk were 
principally performed by the Group team and the Greek 
and Israeli component teams.

In order to address the risks identified we performed 
audit procedures focused on capitalisation criteria and 
the completeness of accruals for the key elements 
of costs incurred for the Karish/Tanin development. 
These procedures included: 
 X Understanding the criteria used by management 
to assess whether costs should be capitalised or 
expensed;

 X Verifying that the capitalisation criteria were met 
for costs that we selected on a sample basis as 
part of our audit procedures relating to the project 
costs;

 X Reviewing the agreements entered into with 
the major project contractors to understand 
the nature of services to be provided and the 
associated milestones;

 X Obtaining a listing of project cost accruals at 31 
December 2018, validating a sample of costs 
to supporting documents and comparing to the 
contractual milestones for the development 
project work; and

 X Performing a search for unrecorded liabilities 
through reviewing invoices received after the 
balance sheet date. We compared these to the 
project costs accrued by management and 
assessed whether there were any material 
omissions.

The audit procedures to address this risk were 
principally performed by the Group team and the 
Israeli component team.

We reported to the Audit and Risk Committee that:
 X The capitalisation of development costs for 

the Karish/Tanin project spend met the IAS 16 
capitalisation criteria; and 

 X The accruals recorded at year end are 

materially complete and appropriately reflect 
the cost of services provided by the project 
contractors, including TechnipFMC as the 
project’s major contractor.

Revenue recognition is a significant risk presumed by ISAs (UK). 
It is not included above, as Energean’s revenue streams are 
routine in nature and do not involve significant judgement or use 
of significant estimates. Consistent with the prior year, it is not 
included above as Energean’s revenue streams have not changed in 
2018, are routine in nature and consequently, the auditing of revenue 
recognition did not have a significant effect on our overall audit 
strategy, the allocation of resources in the audit or in directing the 
efforts of the engagement team.

We have also identified a significant risk from misstatements due 
to fraud or error associated with management override in relation to 
the estimation of oil & gas reserves and other key judgements made 
in impairment assessments and decommissioning provisioning. 
However, it is not included above, as it is addressed with the 
procedures associated with the recoverability of oil and gas assets 
in addition to audit procedures conducted in accordance with 
ISAs (UK) to address fraud. 

In the prior year, our auditor’s report included a key audit matter 
in relation to assessment of impairment indicators for exploration 
and evaluation intangible assets. In the current year, we no longer 
consider there is a significant risk attributable to the impairment of 
exploration and evaluation assets due to changes in the size and 
composition of the balance sheet which have resulted in the risk of 
misstatement to no longer be material to the financial statements. 

An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our 
allocation of performance materiality determine our audit scope 
for each entity 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, and changes in the business 
environment when assessing the level of work to be performed at 
each entity.

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 nine reporting components of the group, we selected all 
nine components covering entities within Greece, Cyprus, Egypt, 
Montenegro, Israel and the United Kingdom, which represent the 
principal business units within the group.

Of the nine (2017: ten) components selected, we performed an 
audit of the complete financial information of three (2017: three) 
components (‘full scope components’) which were selected based 
on their size or risk characteristics. For the remaining six (2017: 
seven) components, we performed audit procedures on specific 
accounts within three components (‘specific scope components’) 
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. 

The reporting components where we performed full scope and 
specific scope audit procedures accounted for 98% of the group’s 
profit before tax, 100% of revenue and 96% of total assets. 

For the remaining three components, we performed other 
procedures including the following to respond to any potential risks 
of material misstatement of the consolidated financial statements:

 X Analytical review procedures on a legal entity basis;
 X Tested consolidation journals, intercompany eliminations and 

foreign currency translation recalculations;

 X Made inquiries of management about unusual transactions in 

these components; and

 X Reviewed minutes of Board meetings held throughout the period.

Changes from the prior year 
In comparison to the prior year the following changes occurred in 
the structure of our components:

 X Energean Israel Limited was included as a full scope component 
following the subscription of new shares in the entity which 
increased the group’s equity share by an additional 20% and 
resulted in Energean Israel Limited becoming a consolidated 
subsidiary of the group;

 X The Group merged two previously full scope components, 

Kavala Oil S.A. and Energean Oil & Gas S.A. in November 2018. 
Therefore, our component audit team in Athens reported on the 
consolidated reporting package of Energean Oil & Gas S.A for the 
purposes of the 2018 group audit;

 X The activities in Energean International Limited (Egypt Branch) 
were significantly reduced in 2018, therefore, this component 
was moved out of specific scope, with balances being subject 
to other procedures as described above. 

Involvement with component teams 
In establishing our overall approach to the group audit, we 
determined the type of work that needed to be undertaken at each 
of the components by us, as the group audit engagement team, or 
by component auditors from other EY global network firms operating 
under our instruction. For two full scope components where the work 
was performed by two EY component teams based in Athens and 
Tel Aviv, 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 interacted regularly with the EY component 
teams during each stage of the audit, were responsible for the 
scope and direction of the audit process and reviewed key working 
papers. The group audit team followed a programme of planned 
visits that was designed to ensure that the group audit team 
members visited the full scope component teams during the current 
year’s audit cycle. The Group audit partner visited the Tel Aviv audit 
team and the Group audit manager visited the component team in 
Athens. These visits involved discussing the audit approach with the 
component team and any issues arising from their work, meeting 

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with local management, and reviewing key audit working papers on 
risk areas. The group team interacted regularly with the component 
teams during various stages of the audit, reviewed key 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 
consolidated financial statements. We maintained continuous and 
open dialogue with our EY component teams in addition to holding 
formal meetings to ensure that we were fully aware of their progress 
and results of their procedures.

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 $7.5 million, which 
is 0.5% of total assets as at 31 December 2018, adjusted to 
remove the amount of goodwill connected with group’s additional 
investment in Energean Israel Limited ($75.8m). This goodwill was 
driven by the recognition of a deferred tax liability as part of the 
business combination accounting which we did not consider to 
be reflective of the underlying business activities. We believe that 
adjusted total assets provides us with a suitable basis for setting 
materiality for immature emerging oil and gas exploration and 
production companies, providing a reliable measure to assess the 
size of the group’s operations.

We determined materiality for the parent company to be $4.3 million 
which is 0.5% of total assets.

During the course of our audit, we reassessed initial materiality and 
no changes were made.

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% of our planning materiality, 
namely $3,750,000. We have set performance materiality at 
this percentage based on our assessment of the likelihood of 
misstatements based on our understanding of the group as part of 
our planning procedures.

Audit work at component locations for the purposes 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 $750,000 to $2,800,000.

We determined performance materiality for the parent company to 
be $2,100,000, based on the same judgement made for the Group.

Reporting threshold
An amount below which identified misstatements are considered 
as being clearly trivial.

We agreed with the Audit and Risk Committee that we would report 
to them all uncorrected audit differences in excess of $375,000, 
which is set at 5% of planning materiality, as well as differences 
below that threshold that, in our view, warranted reporting on 
qualitative grounds.

For the parent company, we agreed with the Audit & Risk Committee 
that we would report to them all uncorrected differences in excess 
of $215,000, based on the same judgement made for the Group.

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 - 176, including the Strategic 
Report and Corporate Governance, other than the financial 
statements and our auditor’s report thereon. The directors are 
responsible for the other information. 

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. 

In connection with our audit of the financial statements, 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 audit 
or otherwise appears to be materially misstated. If we identify such 
material inconsistencies or apparent material misstatements, we 
are required to determine whether there is a material misstatement 
in the financial statements or a material misstatement of the other 
information. 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.

In this context, we also have nothing to report in regard to our 
responsibility to specifically address the following items in the other 
information and to report as uncorrected material misstatements of 
the other information where we conclude that those items meet the 
following conditions:

 X Fair, balanced and understandable, set out on page 98 – the 
statement given by the directors that they consider the Annual 
Report and financial statements taken as a whole is fair, 
balanced and understandable and provides the information 
necessary for shareholders to assess the group’s performance, 
business model and strategy, is materially inconsistent with our 
knowledge obtained in the audit; or 

 X Audit and Risk Committee reporting, set out on pages 74 - 76 – 
the section describing the work of the Audit and Risk Committee 
does not appropriately address matters communicated by us to 
the Audit and Risk Committee; or

 X Directors’ statement of compliance with the UK Corporate 
Governance Code, set out on page 71 – the parts of the 
directors’ statement required under the Listing Rules relating to 
the company’s compliance with the UK Corporate Governance 
Code containing provisions specified for review by the auditor in 
accordance with Listing Rule 9.8.10R(2) do not properly disclose 
a departure from a relevant provision of the UK Corporate 
Governance Code.

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:

 X 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 

 X 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:

 X 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

 X 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

 X certain disclosures of directors’ remuneration specified by law 

are not made; or

 X we have not received all the information and explanations we 

require for our audit; or

 X a Corporate Governance Statement has not been prepared by 

the company.

Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement 
set out on page 98, 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. 

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Group income statement
Year ended 31 December 2018

Explanation as to what extent the audit 
was considered capable of detecting 
irregularities, including fraud 
The objectives of our audit, in respect to fraud, are: to identify 
and assess the risks of material misstatement of the financial 
statements due to fraud; to obtain sufficient appropriate audit 
evidence regarding the assessed risks of material misstatement 
due to fraud, through designing and implementing appropriate 
responses; and to respond appropriately to fraud or suspected fraud 
identified during the audit. However, the primary responsibility for 
the prevention and detection of fraud rests with both those charged 
with governance of the entity and management. 

Our approach was as follows: 

 X We obtained an understanding of the legal and regulatory 

frameworks that are applicable to Energean and determined 
that the most significant are those that relate to the reporting 
framework (IFRSs, 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 significant laws and regulations that may have 
an effect on the determination of the amounts and disclosures 
in the financial statements and laws and regulations relating to 
health and safety, employee matters, environmental and bribery 
and corruption practices.

 X We understood how the group is complying with those 

frameworks by making enquiries of management and with those 
responsible for legal and compliance procedures. We designed 
audit procedures to identify non-compliance with such laws 
and regulations identified in the paragraph above, including 
corroborating our enquiries through our review of Board 
minutes, papers provided to the Audit and Risk Committee and 
correspondence received from regulatory bodies, and noted that 
there was no contradictory evidence.

 X We assessed the susceptibility of Energean’s consolidated 

financial statements to material misstatement, including how 
fraud might occur, focussing on opportunities for management 
to reflect bias in key accounting estimates. We have reported our 
findings in our key audit matters section of our report. We also 
incorporated data analytics and manual journal entry testing into 
our audit approach. 

 X Other procedures performed to address the risk of management 
override included evaluating the business rationale for significant 
unusual and one-off transactions, reviewing the minutes of the 
Board of Directors and Audit and Risk Committee, and including 
a level of unpredictability in our testing. 

A further description of our responsibilities for the audit of the 
financial statements is located on the Financial Reporting Council’s 
website at https://www.frc.org.uk/auditorsresponsibilities. This 
description forms part of our auditor’s report.

Other matters we are required to address
 X We were appointed by the company on 16 April 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 two years, covering 
the years ended 31 December 2017 and 31 December 2018.
 X 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. 

 X The audit opinion is consistent with the report of the Audit and 

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. 

Andrew Smyth 
Senior statutory auditor 
for and on behalf of Ernst & Young LLP, Statutory Auditor 
London

17 April 2019

1.  The maintenance and integrity of the Energean Oil & Gas plc web site is the responsibility of the directors; 
the work carried out by the auditors does not involve consideration of these matters and, accordingly, the 
auditors accept no responsibility for any changes that may have occurred to the financial statements since 
they were initially presented on the web site.

2.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements 

may differ from legislation in other jurisdictions.

Revenue
Cost of sales
Gross profit 

Administrative expenses
Selling and distribution expenses
Exploration and evaluation expenses
Other income/(expense)
Operating profit/(loss)
Finance income
Finance cost
Gain on derivative 
Net foreign exchange (loss)/gain 
Profit from continuing operations before tax

Taxation income/(expense)
Profit from continuing operations

Net results from discontinued operations

Income for the year
Attributable to:
Owners of the parent
Non-controlling interests

Basic and diluted earnings from continuing activities per share (cents per share)
Basic
Diluted 

Basic and diluted total earnings per share (cents per share)
Basic
Diluted 

Notes 
7 
8a

8b
8c
8d
8e

10
10
27 
10

11 

12 

13

13

2018
$’000
90,329 
(60,019)
30,310 

(11,666)
(453)
(2,102)
7,751 
23,840 
1,735
(13,471)
96,709 
(23,521)
85,292 

15,527 
100,819 

2017
$’000
57,752 
(48,648)
9,104 

(5,991)
(445)
(9,966)
(6,398)
(13,696)
14 
(22,940)
25,786 
36,243 
25,407 

(14,061)
11,346 

–

(1,403)

100,819 

9,943 

105,279 
(4,460)
100,819 

$0.80 
$0.79

$0.80 
$0.79

9,952 
(9)
9,943 

$0.16 
$0.16 

$0.14 
$0.14 

106 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 107

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
 
Group statement of comprehensive income
Year ended 31 December 2018

Group statement of financial position
Year ended 31 December 2018

Income for the year

Other comprehensive income/(loss):
Items that may be reclassified subsequently to profit or loss
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
Income taxes on items that will not be reclassified to profit or loss

Other comprehensive loss after tax

Total comprehensive income for the year

Total comprehensive income/(loss) attributable to:
Owners of the parent
Non-controlling interests

2018
$’000
100,819 

2017
$’000
9,943 

(4,288)
(4,288)

(2,252)
(2,252)

(444)
107 
(337)
(4,625)

(258)
74 
(184)
(2,436)

96,194 

7,507 

100,856 
(4,662)
96,194 

7,516 
(9)
7,507 

ASSETS
Non-current assets
Property, plant and equipment 
Intangible assets
Goodwill
Other receivables
Deferred tax asset

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative asset

Total assets

EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 
Share premium
Merger reserves
Other reserves
Foreign currency translation reserves
Share-based payment reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Deferred tax liabilities
Retirement benefit liability
Provisions 
Other payables

Current liabilities
Trade and other payables
Borrowings
Provisions 

Total liabilities
Total equity and liabilities

Approved by the Board on 17 April 2019

Matthaios Rigas 
Chief Executive Officer 

Panos Benos
Chief Financial Officer

Notes

2018
$’000

2017
$’000

14 
15 
6 
19 
16 

18 
19 
17 
27 

20 

20 

21 

22 
16 
23 
24 
25 

25 
22 
24 

1,341,704 
10,555 
75,800 
71,845 
15,532 
1,515,436 

9,912 
32,883 
219,822 
–
262,617
1,778,053 

2,066 
658,805  
139,903 
5,907 
(15,513)
6,617  
29,993 
827,778 
260,045 
1,087,823 

144,270 
76,370
3,659 
7,530 
72,723 
304,552 

385,678 
–
–
385,678 
690,230 
1,778,053 

309,976 
4,000 
–
591 
13,473 
328,040 

9,529 
24,684 
15,692
93,292 
143,197 
471,237 

917 
–
139,903 
73,750 
(11,427)
–
(138,455)
64,688 
224,294 
288,982 

78,831 
3,570
3,288 
5,688 
2,544 
93,921 

66,528 
12,500 
9,306 
88,334 
182,255 
471,237 

108 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 109

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group statement of changes in equity 
Year ended 31 December 2018

At 1 January 2017
Profit for the year
Exchange difference on the 
translation of foreign operations
Remeasurement of defined 
benefit pension plan
Income taxes of other 
comprehensive income
Total comprehensive income
Transactions with owners 
of the company
Issuance of shares
Group restructuring (note 20)
Modification of derivative 
(note 27.2)
Transaction with non controlling 
interests (note 28.5)
Transfer due to disposal of 
subsidiary (note 12)
At 31 December 2017

Share
capital
$’000

Share
premium1
$’000
14,904  125,851 
–

–

–

–

–
–

–

–

–
–

Other
reserve2
$’000
404 
–

–

(258)

74 
(184)

65 
(14,052)

–
(125,851)

–
–

–

–

–
917 

–

–

–
–

67,506 

6,761 

(737)
73,750 

–

–

–
–

–
–

–

–

–
–

Share-
based
payment
reserve3
$’000
 –
–

Translation
Retained
reserve4
earnings
$’000
$’000 
(9,175) (148,407)
9,952 

–

Merger
reserves
$’000
–
–

Non-
controlling
interests
$’000 
303 
(9)

Total
$’000
(16,423)
9,952 

(2,252)

–

–

–

–
(2,252)

–
9,952 

–

–

–
–

(2,252)

(258)

74 
7,516 

Total
$’000
(16,120)
9,943 

(2,252)

(258)

74 
7,507 

65 
–

67,506 

–

–

–
(9)

–
–

–

–
–

–

–

–
–

–

–

–
139,903 

65 
–

67,506 

–

–

–

–
(11,427) (138,455) 139,903 

–

6,761 

224,000 

230,761 

(737)

(737)
64,688  224,294  288,982 

 –

Share
capital
$’000
917 
–

Share
premium1
$’000
–
–

Other
reserve2
$’000
73,750 
–

Share-
based
payment
reserve3
$’000
–
–

Translation
reserve4
$’000 

Merger
Retained
reserves
earnings
$’000
$’000
(11,427) (138,455) 139,903 
–
105,279 

–

–

–
–

–

–

–
–

–

1,009

458,991 

7

–

–

(24,057)

4 

–

–

– 

–

–

129 

223,871 

(337)

–
(337)

–

–

–

–

–

(67,506)

–

–

–

–
–

–

–

3,110

–

3,507 

–

–

–

–

–

(4,086)
(4,086)

–
105,279 

–

–

–

–

–

–

–

–

(4,337)

–

–

–

–

67,506 

–

–

Total
$’000

Non-
controlling
Total
interests
$’000
$’000 
64,688  224,294  288,982 
100,819 
(4,460)
105,279 

(337)

–

(337)

(4,086)
100,856 

(202)
(4,662)

(4,288)
96,194 

(4,337)

(4,337)

460,000 

3,117

(24,057)

3,511 

–

–

–

–

–

–

–

460,000 

3,117

(24,057)

3,511 

–

59,613

59,613

–

–
–

–

–

–

–

–

–

–

–

224,000 

(224,000)

– 

–

–
2,066  658,805 

–
5,907 

–
6,617 

–
(15,513)

–
29,993 

–
139,903 

–

204,800  204,800 
827,778  260,045  1,087,823 

At 1 January 2018
Profit for the period
Remeasurement of defined 
benefit pension plan
Exchange difference on the 
translation of foreign operations
Total comprehensive income
Retrospective application of 
IFRS 9 (note 2.2)
Transactions with owners 
of the company
IPO shares (note 20)
Issuance of shares for share-
based payment transactions
Transaction cost in relation to 
IPO and new share issue 
(note 20)
Employee share schemes 
(note 26)
Derecognition of derivative 
asset (note 27.2)
Share capital increase in 
subsidiary
Shares issued in settlement of 
preference shares in subsidiary  
(note 21)
NCI on acquisition of 
subsidiary (note 6)
At 31 December 2018

1.  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.

2.  Other reserves are used to recognise remeasurement gain or loss on cash flow hedge and actuarial gain or loss from the defined retirement benefit plan. 

Furthermore, other reserve are used to recognise measurement gains from derivative asset, refer to note 8 for further detail of this transaction.

3.  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. 

4.  The foreign currency 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.

5.  Refer to note 20.

110 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 111

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
Group statement of cash flows 
Year ended 31 December 2018

Operating activities
Profit/(loss) from continuing operations before tax
Loss from discontinued operations before tax
Profit/(loss) before taxation
Adjustments to reconcile profit/(loss) before taxation to net cash provided by operating activities:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment loss on property, plant and equipment
Impairment loss on intangible assets
Impairment loss on inventory
Gain from disposal on property, plant and equipment
Gain from disposal of subsidiary
(Decrease)/increase in provisions
Finance income
Finance costs
Fair value gain on derivative
Share-based payment charge
Net foreign exchange (gain)/loss
Cash flow from operations before working capital adjustments
(Increase)/decrease in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash flow from operations 
Tax paid
Receipts in relation to provisions
Net cash inflow from operating activities

Investing activities
Payment for additions to property, plant and equipment
Payment for additions to intangible assets
Disposal of subsidiary, net of cash disposed
Acquisition of a subsidiary, net of cash acquired
Proceeds from disposal of property, plant and equipment
Interest received
Net cash used in investing activities

Financing activities
Proceeds from issue of share capital
Proceeds from new debt
Proceeds from capital increases by non-controlling interests
Transaction costs in relation to IPO and new share issue
Debt arrangement fees paid
Debt arrangement fees for Karish-Tanin facility
Finance costs paid
Net cash inflow from financing activities

Note

14
15
14
15
8e

8e

10
10
27.2
26
10

24

14
15

6

22

For the year ended 
31 December
2018
$’000

2017
$’000

85,292 
–
85,292 

34,087
171
–
–
992 
(6)
–
(6,757)
(1,735)
13,471 
(96,709)
1,570 
23,521 
53,897 
(1,807)
10,741 
(3,562) 
59,269 
(251)
3,666 
62,684 

(290,123)
(3,449)
–
(32,746)
63 
1,591 
(324,664)

460,000 
55,626 
67,613 
(20,057)
(8,237)
(61,496)
(10,919)
482,530 

25,407 
(1,403)
24,004 

17,808
200
1,344 
6,663
–
–
(1,540)
8,748 
(14)
22,940 
(25,786)
–
(36,243)
18,124 
4,985 
(11,168)
17,157 
29,097 
–
–
29,097

(48,744)
(5,259)
(5,610)
–
1,000 
14 
(58,599)

–
33,915 
–
–
(1,475)
–
(4,019)
28,421 

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents:
At beginning of the period
Effect of exchange rate fluctuations on cash held
Total cash and cash equivalents at end of the year 

Supplemental cash flow information:

Non-cash investing and financing activities 
Investment in oil and gas assets against liabilities
Loan capitalisation and issuance of preference shares
Capitalisation of depreciation to oil and gas properties
Capitalised borrowing costs

For the year ended 
31 December
2018
$’000
220,550 

2017
$’000
(1,081) 

15,692 
(16,420)
219,822 

17,586 
(813)
15,692 

For the year ended 
31 December
2018
$’000

2017
$’000

199,262
–
2,574
9,258

15,739
230,761 
2,388 
1,258 

Note

17

Note

14
21
14
14, 15

112 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 113

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements 
Year ended 31 December 2018

1. Corporate Information 
Energean Oil & Gas 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 Company and all 
subsidiaries controlled by the Company are together referred to as ‘the Group’.

The Group has been established with the objective of exploration, production and commercialisation of crude oil and natural gas in Greece, 
Israel, North Africa and the wider Eastern Mediterranean.

The Group’s core assets as of 31 December 2018 comprise:

1. 
2. 
3.
4. 
5. 
6. 
7. 
8.
9. 
10. 
11.
13. 
14. 

Asset
Karish1
Tanin1
Blocks 12, 21, 22, 23, 31
Prinos
Prinos North
South Kavala
Epsilon
Prinos exploration area
Katakolo
Ioannina2
Aitolokarnania2
Block 26
Block 30

Country
Israel
Israel
Israel
Greece
Greece
Greece
Greece
Greece
Greece
Greece
Greece
Montenegro
Montenegro

Group’s
working interest
70%
70%
70%
100%
100%
100%
100%
100%
100%
40%
40%
100%
100%

Partner’s
working interest
30% 
30% 
30% 
N/A
N/A
N/A
N/A
N/A
N/A
60%
60%
N/A
N/A

Field Phase
Development
Development
Exploration
Production 
Production/undeveloped
Production 
Undeveloped
Exploration
Undeveloped
Exploration
Exploration
Exploration
Exploration

1.  Energean Israel holds 100% interest in the Karish and Tanin leases and in the Blocks 12, 21, 22, 23. At 31 December 2018, Energean Israel is a subsidiary in which 

the Group holds a 70% economic interest (Note 6). Kerogen Capital holds the remaining 30% of Energean Israel.
In March 2017 the Group agreed to farm-out a 60% working interest to Repsol (operator) in the Ioannina and Aitolokarnania blocks. 

2. 

The principal operations of the Group are in Greece, Israel and Montenegro. 

On 21 March 2018 the Company completed the admission of its shares to the Premium Segment of the London Stock Exchange.

On 29 March 2018 the Group, following a final investment decision in respect of the Karish and Tanin assets, subscribed for additional 
ordinary shares in Energean Israel for an aggregate consideration of $266.7 million, payable in cash. Since completion of this subscription, 
the Group holds 70% of the shares in Energean Israel, with Kerogen Capital holding the remaining 30% (refer to note 6).

Based on the above, since 29 March 2018 Energean has consolidated Energean Israel Ltd to its consolidated financial statements.

Subsidiaries

Name of subsidiary
Energean E&P Holdings Ltd
Energean MED Limited

Energean Oil & Gas S.A.

Kavala Oil S.A.

Energean International Limited

Energean Israel Limited (Note 6)

Energean Montenegro Limited

Country of incorporation/
registered office
22 Lefkonos Street, 2064 Nicosia, Cyprus
44 Baker Street, London W1U 7AL, UK

Principal activities
Holding Company
Oil and gas exploration, 
development and production
Oil and gas exploration, 
development and production
Provision of oil and gas support 
services
Oil and gas exploration, 
development and production
Oil and gas exploration, 
development and production
Oil and gas exploration, 
development and production

32 Kifissias Ave. 151 25 Marousi Athens, 
Greece
P.O. BOX 8, 64006 Nea Karvali, Kavala,  
Greece
22 Lefkonos Street, 2064 Nicosia
Cyprus
22 Lefkonos Street, 2064 Nicosia 
Cyprus
22 Lefkonos Street, 2064 Nicosia 
Cyprus
560A rue de Neudorf, L-2220, Luxembourg Financing activities

Shareholding
At 31 December
2018
(%)
100
100

Shareholding
At 31 December
2017
(%)
100
–

100

100

99.92

99.92

100

70

100

70
70

100

50

100

–
–

Energean Israel Finance SARL
Energean Israel Transmission LTD 9 Metsada St., Bnei Brak 5120109, Israel

Gas transportation licence holder

2. Significant accounting policies 
2.1 Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial 
instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting 
policies below.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued 
by the International Accounting Standards Board (IASB) and adopted by the European Union (EU).

The consolidated financial information is presented in US Dollar and all values are rounded to the nearest thousand dollars except where 
otherwise indicated.

The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Group presents 
an additional statement of financial position at the beginning of the preceding period when there is a retrospective application of an 
accounting policy, a retrospective restatement, or a reclassification of items in the financial statements. 

The consolidated financial statements have been prepared on a going concern basis. The principal accounting policies adopted by the 
Group are set out below.

2.2 New and amended accounting standards and interpretations
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. 

IFRS 15 Revenue from Contracts with Customers
The Group applies, for the first time, IFRS 15 Revenue from Contracts with Customers. 

The Group has elected to apply the ‘modified retrospective’ approach to transition permitted by IFRS 15 under which comparative financial 
information is not restated. This election has been made as the adjustment on implementation of IFRS 15 is not considered material to 
the Group’s financial statements. It is not considered material as the transition has not impacted gross profit in the comparative periods 
or retained earnings on 1 January 2018.

Disclosure of disaggregated revenue information consistent with the requirement included in IFRS 15 has not had an impact on the 
information presented in note 7. 

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 
accounting for revenue under IFRS 15 does not, therefore, represent a substantive change from the Group’s previous accounting policy 
for recognising revenue from sales to customers.

IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on/or 
after 1 January 2018.

The effect on the Group of adopting IFRS 9 is, as follows: 

Loan modification 
IFRS 9 changed accounting for loan modifications, which the Group may experience from time to time. According to IFRS 9, an entity 
shall recognise any adjustment to the carrying amount of a financial liability arising from a modification or exchange in the statement of 
comprehensive income at the date of the modification or exchange. The classification and measurement of financial liabilities is materially 
consistent with that required by IAS 39 with the exception of the treatment of modification or exchange of financial liabilities which do not 
result in de-recognition. 

According to the new requirements: 
 X The Company recalculated the amortised cost of the intercompany loan between Energean International Limited (Cyprus) and Energean 

Oil & Gas S.A. (Greece) in the amount of $192.8 million as at 1 January 2018 when the terms modified on 31 December 2017. 

As a result, intercompany loan liabilities differed from the liabilities under the loan agreements with the subsequent re-measurement of 
deferred tax.

 X The carrying amount of the intercompany balance is eliminated in the Group’s consolidated financial statements. The effect of the 
deferred tax recalculation was recognised in the statement of comprehensive income at the date of the modification or exchange. 

114 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 115

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the consolidated financial statements 
continued

2.2 New and amended accounting standards and interpretations continued 
The impact of the loan modification on the consolidated statement of financial position at the recognition date was as follows:

Retained earnings 
Deferred tax liabilities

Balance at
31 December
2017
published
$’000
(138,455)
3,570 

Loan
modification
under IFRS 9
$’000
(4,337)
4,337 

Balance at
1 January
2018
$’000
(142,792)
7,907 

The Group has not identified any other modification in its financial liabilities that would result from retrospective application of IFRS 9. 

The classification and measurement of financial assets have changed with the implementation of IFRS 9. However, this has not materially 
changed the measurement of financial assets of the Group. 

The IFRS 9 impairment model requiring the recognition of ‘expected credit losses’, in contrast to the requirement to recognise ‘incurred 
credit losses’ under IAS 39, has not had a material impact on the Group’s financial statements. Trade receivables are settled on a short time 
frame and the Group’s other financial assets are due from counterparties without material credit risk concerns at the time of transition.

IFRS 16 Leases 
The Group will adopt IFRS 16 Leases for the year commencing 1 January 2019, which will impact both the measurement and disclosures 
of leases that are valued above a low value threshold and with terms that are longer than one year.

IFRS 16 “Leases” eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases 
and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease 
accounting The Group has completed an assessment of lease agreements. On adoption of IFRS 16, the Group will recognise lease liabilities 
in relation to leases which are currently classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities will be measured 
at the present value of the remaining lease payments, discounted using the interest rate implicit in the lease (if available), or the Group’s 
subsidiaries incremental borrowing rate as of 1 January 2019. The determination of whether there is an interest rate implicit in the rate, the 
calculation of the Group’s subsidiaries incremental borrowing rate, and whether any adjustments to this rate are required for certain portfolios 
of leases involve some judgement and are subject to change over time. A 1% change in the Group’s incremental borrowing rate would increase/
decrease the value of lease liabilities on transition by around $0.2 million. In accordance with the transition provisions in IFRS 16 the modified 
retrospective approach will be adopted, with the cumulative effect of initially applying the new standard to be recognised on 1 January 2019. 
Comparatives for the 2018 financial year will not be restated. The expected financial impact of transition to IFRS 16 has been summarised 
within this note. In applying IFRS 16 for the first time, the Group will use the following practical expedients permitted by the standard on 
transition: the use of a single discount rate to a portfolio of leases with reasonably similar characteristics and to not separate and account 
for both the lease and the associated non-lease component but to account for both as a single combined lease component. The Group has 
identified lease portfolios for property, oil and gas supply vessels and other support equipment, and other vehicles. 

Lease portfolio
Property leases
Oil and gas supply vessels and other support equipment leases
Other vehicles
Total

Gross value
on transition
$’000
2,302
15,456
140
17,898

Financial impact of the transition
Income statement
Property leases: These leases are currently included as administrative expenses. On transition to IFRS 16 the expense will decrease, offset 
by an increase in finance costs and depreciation of other fixed assets.

Oil and gas production and support equipment leases: These leases are currently either treated as operating costs or capitalised as 
property, plant and equipment. On transition to IFRS 16 operating costs will decrease, offset by an increase in finance costs and depletion 
and amortisation of oil and gas assets. 

Other vehicles: These leases are currently included as administrative expenses. On transition to IFRS 16 these expenses will decrease, 
offset by an increase in finance costs and depreciation of other fixed assets.

2.2 New and amended accounting standards and interpretations continued 
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental 
borrowing rate.

Balance sheet 
The Group expects the impact of the transition to result in higher property, plant and equipment and current and non-current lease liabilities. 

Property, plant and equipment
Current
Non-current
Total

Lease liabilities
Current
Non-current
Total

Value on
transition
$’000
–
17,898
17,898

Value on
transition
$’000
7,788
10,110
17,898

Several other amendments and interpretations apply for the first time in 2018, but did not have any significant impact on the consolidated 
financial statements of the Group. 

2.3 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 1. 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. Specifically, the Group controls an investee 
if and only if the Group has:

 X Power over the investee
 X Exposure, or rights, to variable returns from its involvement with the investee, and
 X The ability to use its power over the investee to affect the amount of the investor’s returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and 
circumstances in assessing whether it has control over an investee, including:

 X The contractual arrangement with the other vote holders of the investee
 X Rights arising from other contractual arrangements
 X The Group’s voting rights and potential voting rights

The results of subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the effective 
date of acquisition or up to the effective date of disposal, as appropriate.

Profit or loss and each component of other comprehensive income (OCI) are attributed to owners of the Group and to the non-controlling 
interests, even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the 
financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All 
intragroup transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-
controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling 
interests’ share of changes in equity since the date of the combination. 

Transactions with non-controlling interests that do not result in loss of control of a subsidiary, are accounted for as transactions with 
the owners (i.e. as equity transactions). The difference between the fair value of any consideration and the resulting change in the non-
controlling interests’ share of the net assets of the subsidiary, is recorded in equity.

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2.3 Basis of consolidation continued

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with 
those used by the Group. 

All intragroup transactions, balances, income and expenses are eliminated on consolidation.

3. Summary of significant accounting policies
The principal accounting policies and measurement bases used in the preparation of the consolidated financial statements are set out below. 
These policies have been consistently applied to all periods presented in the consolidated financial statements unless otherwise stated.

3.1 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 the US Dollar (US$). The US Dollar is the currency that mainly influences sales prices, revenue 
estimates and has a significant effect on Company’s operations. The functional currencies of the Group’s main subsidiaries are the euro for 
Energean E&P Holdings Ltd, Energean Oil & Gas S.A., Kavala Oil SA and Energean Montenegro , and US$ for Energean International Limited 
and Energean Israel Limited. 

Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 
Foreign exchange gains and losses resulting from monetary assets and liabilities denominated in foreign currencies are recognised in the 
profit or loss. Such monetary assets and liabilities are translated at year end foreign exchange rates. Non-monetary items denominated 
in a foreign currency are translated at the exchange rates prevailing at the date of the transaction and are not subsequently remeasured. 

Translation to presentation currency 
For the purpose of presenting consolidated financial statements information, the assets and liabilities of the Group are expressed in US$. 
The Company and its subsidiaries’ assets and liabilities are translated using exchange rates prevailing on the reporting date. Income and 
expense items are translated at the average exchange rates for the period, unless exchange rates have fluctuated significantly during that 
period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising are recognised in other 
comprehensive income and accumulated in the Group’s translation reserve. Such translation differences are reclassified to profit or loss 
in the period in which the foreign operation is disposed of.

3.2 Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business 
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the 
Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for 
control of the acquiree. For each business combination the acquirer measures the non-controlling interest in the acquiree either at fair 
value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are recognised in the consolidated 
statement of profit or loss as incurred. 

Where appropriate, the cost of acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured 
at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify 
as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified are accounted 
for in profit or loss. Contingent consideration classified as equity is not remeasured.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business 
Combinations (revised 2008) are recognised at their fair value at the acquisition date, except that: 

 X deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in 

accordance with IAS 12, ‘Income Taxes’ and IAS 19, ‘Employee Benefits’ respectively;

 X liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements 

of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-
based payment at the acquisition date; and 

 X non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale 

and Discontinued Operations, which are measured at fair value less costs to sell.

3.2 Business combinations and goodwill continued
If the initial accounting for a business combination is incomplete by the end of the reporting year in which the combination occurs, the 
Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during 
the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and 
circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

 The measurement period is the year from the date of acquisition to the date the Group receives complete information about facts and 
circumstances that existed at the acquisition date and is subject to a maximum of one year.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, 
and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the 
identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable 
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the 
acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or 
loss as a bargain purchase gain.

3.3 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. 

Investments in associates and joint ventures 
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 investment in its associate and joint venture are accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment 
is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating 
to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.

The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI 
of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the 
associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised 
gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the 
interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit or loss 
outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, 
adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in 
its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the 
associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between 
the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss within ‘Share of profit of an 
associate and a joint venture’ in the statement of profit or loss.

Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained 
investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence 
or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

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3.3 Joint arrangements continued
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: 

 X Assets, including its share of any assets held jointly
 X Liabilities, including its share of any liabilities incurred jointly
 X Revenue from the sale of its share of the output arising from the joint operation
 X Share of the revenue from the sale of the output by the joint operation
 X Expenses, including its share of any expenses incurred jointly 

3.4 Exploration, evaluation and production assets 
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. These costs are then written off as exploration costs in 
the income statement unless commercial reserves have been established or the determination process has not been completed and there 
are no indications of impairment. Cash consideration received on farm-down of exploration and evaluation assets is credited against the 
carrying value of the asset.

All field development costs are capitalised as property, plant and equipment. Interest payable is capitalised insofar as it relates to specific 
development activities. Property, plant and equipment related to production activities is amortised in accordance with the Group’s depletion 
and amortisation accounting policy. 

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. There should be a 50% statistical 
probability that the actual quantity of recoverable reserves will be more than the amount estimated as proven and probable reserves and 
a 50% statistical probability that it will be less.

3.6 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 group of fields which are reliant on common infrastructure. Costs included in the unit 
of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs required to 
recover the commercial reserves remaining. Changes in the estimates of commercial reserves or future field development costs are dealt 
with prospectively. 

Where there has been a change in economic conditions that indicates a possible impairment in a discovery field, the recoverability of the 
net book value relating to that field is assessed by comparison with the estimated discounted future cash flows based on management’s 
expectations of future oil and gas prices and future costs. 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 pre-tax weighted average cost of capital (WACC). 
The Group then adds any exploration risk premium which is implicit within a peer group’s WACC and subsequently applies additional 
country risk premium for CGUs. Where there is evidence of economic interdependency between fields, such as common infrastructure, the 
fields are grouped as a single CGU for impairment purposes. 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 been recognised for the asset in prior years. 

3.7 Other property, plant and equipment 
Other property, plant and equipment comprises plant machinery and installation, furniture and fixtures. 

Initial recognition
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into 
operation and borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other 
consideration given to acquire the asset. 

Depreciation
Depreciation of other property, plant and equipment is calculated on the straight-line method so as to write-off the cost amount of each 
asset to its residual value, over its estimated useful life. The useful life of each class is estimated as follows:

Buildings
Plant and machinery
Furniture, fixtures and equipment

Years
12
7 - 30
5 - 7

Depreciation of the assets in the course of construction commences when the assets are ready for their intended use, on the same basis 
as other assets of the same class. 

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic 
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the 
net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognised. 

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. 

Repairs, maintenance, and renovations
Expenditure for routine repairs and maintenance of property, plant and equipment is charged to the profit or loss in the year in which it is 
incurred. The cost of major improvements and renovations and other subsequent expenditure are included in the carrying amount of the 
asset when the recognition criteria of IAS 16 ‘Property, Plant and Equipment’ are met. Major improvements and renovations capitalised 
are depreciated over the remaining useful life of the related asset. 

3.8 Other intangible assets 
Computer software 
Costs that are directly associated with identifiable and unique computer software products controlled by the Group and that will probably 
generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is 
carried at cost less any accumulated amortisation and any accumulated impairment losses.

Costs associated with maintenance of computer software programs are recognised as an expense when incurred.

Computer software costs are amortised using the straight-line method over their useful live, of between three and five years, which 
commences when the computer software is available for use. 

3.9 Impairment of non financial assets 
At each reporting date, the Group reviews the carrying amounts of its depreciable property, plant and equipment and intangible assets to 
determine whether there is any indication that those assets have suffered an impairment loss. Impairment is assessed at the level of cash-
generating units (CGUs) which, in accordance with IAS 36 ‘Impairment of Assets’, are identified as the smallest identifiable group of assets 
that generates cash inflows, which are largely independent of the cash inflows from other assets. This is usually at the individual royalty, 
stream, oil and gas or working interest level for each property from which cash inflows are generated.

An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount, which is the higher of fair 
value less costs of disposal (FVLCD) and value-in-use (VIU). The future cash flow expected is derived using estimates of proven and probable 
reserves and information regarding the mineral, stream and oil and gas properties, respectively, that could affect the future recoverability of the 
Company’s interests. Discount factors are determined individually for each asset and reflect the 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.

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3.9 Impairment of non-financial assets continued 
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 recognised immediately in profit or loss. 

Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the carrying value may be impaired. 

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. 
When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating 
to goodwill cannot be reversed in future periods. 

3.10 Leasing 
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the 
lessee. Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Operating leases 
The Group as lessee:
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

Benefits received and receivable as an incentive to enter into an operating lease as well as prepayments and any other premiums paid are 
spread on a straight-line basis over the lease term.

3.11 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 four categories:

 X Financial assets at amortised cost (debt instruments)
 X Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
 X Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition 

(equity instruments)

 X Financial assets at fair value through profit or loss

3.11 Financial instruments – initial recognition and subsequent measurement continued
Financial assets at amortised cost
The Group measures financial assets at amortised cost if both of the following conditions are met:

 X The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash 

flows and

 X The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest 

on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. 
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 
Financial assets at fair value through profit or loss include financial assets held for trading, 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 
are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. 

Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective 
hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured 
at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at 
amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on 
initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. 

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. 

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at fair 
value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the 
right of payment has been established. 

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. 

Impairment of financial assets 
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. 
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the 
Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash 
flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. 

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial 
recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (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 (lifetime ECL). 

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track 
changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. 

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group 
may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the 
outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written 
off when there is no reasonable expectation of recovering the contractual cash flows. 

ii) Financial liabilities 
Initial recognition and measurement 
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, 
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised 
initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. 

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3.11 Financial instruments – initial recognition and subsequent measurement continued
The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments. 

3.11 Financial instruments – initial recognition and subsequent measurement continued
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements: 

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. Separated embedded derivatives are also classified as held for trading unless they are designated 
as effective hedging instruments. 

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. 

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and 
only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss. 

Loans and borrowings 
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured 
at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, modified 
and through the EIR amortisation process. 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the 
EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. 

This category generally applies to interest-bearing loans and borrowings. 

Derecognition 
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial 
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially 
modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. 
The difference in the respective carrying amounts is recognised in the statement of profit or loss. 

iii) Offsetting of financial instruments 
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there 
is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets 
and settle the liabilities simultaneously. 

Derivative financial instruments and hedge accounting 
Initial recognition and subsequent measurement 
The Group uses derivative financial instruments, such as interest rate swaps and forward commodity contracts, to hedge its interest rate 
risks and commodity price risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which 
a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair 
value is positive and as financial liabilities when the fair value is negative. 

For the purpose of hedge accounting, hedges are classified as: 

 X Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm 

commitment 

 X Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a 

recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment 

 X Hedges of a net investment in a foreign operation 

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply 
hedge accounting and the risk management objective and strategy for undertaking the hedge. 

 X There is ‘an economic relationship’ between the hedged item and the hedging instrument. 
 X The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship. 
 X 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. 

The Group uses 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. 

From 1 January 2018, the Group designates only the spot element of forward contracts as a hedging instrument. The forward element 
is recognised in OCI and accumulated in a separate component of equity. 

The amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the same period or periods during which 
the hedged cash flows affect profit or loss. 

If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if 
the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as 
a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI 
must be accounted for depending on the nature of the underlying transaction. 

Equity instruments 
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Ordinary shares
Ordinary shares are classified as equity and measured at their nominal value. Any premiums received on issue of share capital above its 
nominal value are recognised as share premium within equity. Associated issue costs are deducted from share premium.

3.12 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. 

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3.12 Share-based payment continued

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.

3.13 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market 
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or 
transfer the liability takes place either: in the principal market for the asset or liability or, in the absence of a principal market, in the most 
advantageous market for the asset or liability.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or 
liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into 
account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another 
market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair 
value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities, for which fair value is measured or disclosed in the consolidated financial statements, are categorised within the 
fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:

 X Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
 X Level 2 — Valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly or 

indirectly observable

 X 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 whole) at the end of each reporting period.

3.14 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 16), 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 restricted cash and held in designated 
bank deposits accounts to be released when the Group meets the specified expenditure milestones. 

3.15 Inventories 
Inventories comprise crude oil and by-product (Sulphur), consumables and other spare parts. Inventories are stated at the lower of cost and 
net realisable value. Cost is determined using the monthly weighted average cost method. The cost of finished goods and work in progress 
comprises raw materials, direct labour, other direct costs and related production overheads. It does not include borrowing costs. Net 
realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs 
necessary to make the sale. Spare parts consumed within a year are carried as inventory and recognised in profit or loss when consumed.

The Group assesses the net realisable value of the inventories at the end of each year and recognises in the consolidated statement 
of profit or loss the appropriate valuation adjustment if the inventories are overstated. When the circumstances that previously caused 
impairment no longer exist or when there is clear evidence of an increase in the inventories’ net realisable value due to a change in the 
economic circumstances, the amount thereof is reversed.

3.16 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. When a 
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash 
flows (when the effect of the time value of money is material). 

3.16 Provisions continued
Decommissioning provision 
Provision for decommissioning is recognised in full when the related facilities are installed. A corresponding amount equivalent to the 
provision is also recognised as part of the cost of the related property, plant and equipment.

The amount recognised is the estimated cost of decommissioning, discounted to its net present value at a risk-free discount rate, and 
is reassessed each year in accordance with local conditions and requirements. Changes in the estimated timing of decommissioning or 
decommissioning cost estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment 
to property, plant and equipment. The unwinding of the discount on the decommissioning provision is included as a finance cost.

3.17 Revenue 
Revenue from contracts with customers is recognised when control of the goods or 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. 

Sale of crude oil and by products
Sales revenue represents the sales value, net of VAT, of liftings in the year together with the gain/loss on realisation of cash flow hedges. 

Revenue from sale of crude oil and by products is recognised when performance obligations have been met, which is typically when goods 
are delivered and title has passed. 

Rendering of services 
The Group recognises revenue from technical advisory services, using an input method to measure progress towards complete 
satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Group. 

3.18 Retirement benefit costs 
State-managed retirement benefit schemes
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. The 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 loss in subsequent periods.

3.19 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. 

Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. 

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the consolidated financial statements 
continued

3.20 Tax 
Income tax expense represents the sum of current and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated financial 
statements because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that 
are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively 
enacted by the reporting date.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial 
statements and the corresponding tax bases used in the computation of taxable profit, based on tax rates that have been enacted or 
substantively enacted by the reporting date. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred 
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences 
can be utilised. No deferred tax is recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a 
business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 

Current and deferred tax assets and corresponding liabilities are offset when there is a legally enforceable right to set off current tax assets 
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its 
tax assets and liabilities on a net basis.

3.21 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.

Other components of equity include the following:

 X 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 3.18)

 X translation reserve – comprises foreign currency translation differences arising from the translation of financial statements of the 

Group’s foreign entities(see Note 3.1)

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 have been approved in a general 
meeting prior to the balance sheet date.

4. 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 significant management judgements in applying the accounting policies of the Group that have the most significant 
effect on the consolidated financial statements:

Business combination (note 6)
Determination of whether a set of assets acquired and liabilities assumed constitute a business may require the Group to make certain 
judgements. A business is a group of assets that includes inputs, outputs and processes that are capable of being managed together 
to provide a return to the Group and its shareholders. Classification of an acquisition as a business combination or an asset acquisition 
depends on whether the assets acquired constitute a business. Whether an acquisition is classified as a business combination or asset 
acquisition can have a significant impact on the entries made on or after acquisition. 

4.1 Critical judgements in applying the Group’s accounting policies continued
On 29 March 2018, the Group, following a final investment decision in respect of the Karish and Tanin assets, subscribed for additional 
ordinary shares in Energean Israel. Following completion of this subscription, the Group holds 70% of the shares in Energean Israel, with 
Kerogen Capital holding the remaining 30%. The Group considered the acquisition as a business combination because at the date of the 
acquisition the acquired company had a firm approved development plan, licences, employees and processes in place to create future 
outputs. Furthermore at that date the company had already secured Gas Supply Agreements for up to approximately 4.4 to 5.1 bcm per 
annum on an ACQ basis (or an average of approximately 3.3 to 3.8 bcm per annum on a take or pay basis, including the Or Gas Supply 
Agreement), subject to all conditions being satisfied. 

Since 29 March 2018, Energean Israel has been consolidated into the Group. The business combination is subject to the application 
of acquisition accounting as required by IFRS 3 Business Combinations.

The identifiable assets acquired and liabilities assumed of the acquiree are recognised as of the acquisition date and measured at fair 
value as at that date. Any non-controlling interest in the acquiree was also recognised at fair value at the acquisition date.

Carrying value of intangible exploration and evaluation assets (note 15) 
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 calculating the impairment requires critical judgement. The key areas in which management 
has applied judgement and estimation are as follows: the Group’s intention to proceed with a future work programme; the likelihood of 
licence renewal or extension; the assessment of whether sufficient data exists to indicate that, although a development in the specific 
area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful 
development or by sale; and the success of a well result or geological or geophysical survey.

Functional currency
The functional currency for the Company and each of its subsidiaries is the currency of the primary economic environment in which the 
entity operates. Note 3.2 describes the functional currency of each of the entities within the Group. The determination of the functional 
currency of the group’s subsidiary Energean Oil and Gas S.A. involves certain judgements to determine the primary economic environment. 
Energean Oil and Gas S.A.’s revenue and borrowings are denominated in US$, however capital expenditures, payroll cost, energy costs and 
exploration and evaluation costs are all predominantly denominated in Euro, and also the company operates in Greece, consequently the 
Group has determined that the functional currency of the company is the Euro. The Group reconsiders the functional currency of its entities 
if there is a change in events and conditions which determined the primary economic environment.

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, are discussed below:

Fair value measurements and valuation processes
Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset 
or a liability the Group uses market-observable data to the extent that it is possible. Where level 1 inputs are not available, as is the case for 
estimating a fair value for the convertible loan notes (see Note 6) and the option to purchase Energean Israel Class B shares (see Note 27.2) 
the Group has used a combination of level 2 and level 3 inputs to estimate the fair value.

The valuation technique and associated inputs applied in determining the fair value of the option to purchase Energean Israel Class B 
shares are disclosed in Note 27.2.

Carrying value of property, plant and equipment (note 14)
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of 
assets. Where an indicator of impairment exists, 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. For oil 
and gas assets, the expected future cash flow estimation is based on a number of factors, variables and assumptions, the most important 
of which are estimates of reserves, future production profiles, oil prices and costs. In most cases, the present value of future cash flows 
is most sensitive to estimates of future oil price, estimates of reserves, estimates of development costs and discount rates. A change in 
the assumptions could materially change the recoverable amount. In the event that future circumstances vary from these assumptions, 
the recoverable amount of the Group’s development and production assets could change materially and result in impairment losses or the 
reversal of previous impairment losses.

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the consolidated financial statements 
continued

4.2 Estimation uncertainty continued
The fields of Prinos, Prinos North and Epsilon are grouped together in one cash-generating unit (CGU) and reviewed annually for 
impairment. The rationale behind the Group’s view to consider Prinos, Prinos North and Epsilon as one CGU is based on the fact that the 
field area includes all wells on Prinos, Prinos North and Epsilon and the field investment decisions are based on expected field production 
and not on a single well. Moreover all wells are dependent on the same field infrastructure and therefore no well in this area can generate 
cash flows independently.

Further details about the carrying value of property, plant and equipment are shown in Note 14 to the consolidated financial statements.

Hydrocarbon reserve and resource estimates 
The Group’s oil and gas development and production properties are depreciated on a unit of production basis at a rate calculated by 
reference to developed and undeveloped proved and probable commercial reserves (2P developed and undeveloped) which are estimated 
to be recoverable with existing and future developed facilities using current operating methods, determined in accordance with the 
Petroleum Resources Management System published by the Society of Petroleum Engineers, the World Petroleum Congress and the 
American Association of Petroleum Geologists.

Commercial reserves are determined using estimates of oil in place, recovery factors and future oil prices. The level of estimated 
commercial reserves is also a key determinant in assessing whether the carrying value of any of the Group’s oil and gas properties has 
been impaired. As the economic assumptions used may change and as additional geological information is produced during the operation 
of a field, estimates of recoverable reserves may change. Such changes may impact the Group’s reported financial position and results 
and include:

 X Depreciation and amortisation charges in profit or loss may change where such charges are determined using the unit of production 

method, or where the useful life of the related assets change

 X Impairment charges in profit or loss
 X 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

 X 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 and the aggregate depletion charge for the year of a fluctuation of the forward Brent oil price 
assumption as well as the Group’s carrying amount of oil and gas properties for all periods is shown in note 14. Management monitors the 
impact on the commercial reserves and the depletion charge on a Group level. 

Retirement benefit obligation 
The cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves making assumptions 
about discount rates, future salary increases, mortality rates and future pension increases where necessary. The Group sets these 
assumptions with the assistance of independent professional actuaries. Due to the long term nature of these plans, such estimates are 
subject to significant uncertainty. The assumptions used may vary from year to year which would affect future net income and net assets. 
Any differences between these assumptions and the actual outcome also affect future net income and net assets. Further details are 
shown in note 23 of the consolidated financial statements.

Income taxes 
Significant estimates and judgement are required in determining the liability for income taxes. 

The Group has recognised deferred tax assets in respect of tax losses and other temporary differences to the extent that it is probable 
that there will be future taxable profits against which such tax losses can be recovered and other temporary differences can be utilised. 
The Group considers their carrying value at each balance sheet date and assesses whether sufficient taxable profits will be generated in 
future years to recover such recognised deferred tax assets. These estimates are based on forecast performance and where tax losses 
are subject to expiration, the estimates take into account the expected reversal patterns of taxable temporary differences compared to 
the future reversal of deductible temporary differences.

Deferred tax assets recognised from carried forward unused tax losses for the Group amounted to $85.6 million for the year ended 
31 December 2018 (year ended 31 December 2017: $80.6 million) (note 16).

In evaluating whether it is more likely than not that sufficient taxable profits will be generated in future periods in order to assess 
recoverability of losses, the Group considers all available evidence including approved budgets, forecasts and business plans to form 
its assessment. Following an assessment conducted in December 2018, it was determined there would be sufficient taxable income 
generated to recover the deferred tax assets recognised.

5. 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 five operating segments: Greece (including 
the Prinos production asset, Katakolo non-producing assets and Ioannina and Aitolokarnania exploration assets ), Israel, Egypt (which for 
the period ended 31 December 2017 included West Kom Ombo exploration asset), Montenegro (including two non-producing exploration 
assets) and New Ventures. 

The Group’s reportable segments under IFRS 8 Operating Segments are Greece and Israel. 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 before tax by reportable segment:

Year ended 31 December 2018
Revenue1
Adjusted EBITDAX
Reconciliation to profit before tax:
Depreciation and amortisation expenses
Exploration and evaluation expenses
Other income/(expense)
Finance income
Finance costs
Gain on derivative 
Net foreign exchange gain/(loss)
Profit/(loss) before income tax
Taxation income/(expense)
Profit/(loss) from continuing operations
Year ended 31 December 2017
Revenue
Adjusted EBITDAX
Reconciliation to profit before tax:
Depreciation and amortisation expenses
Exploration and evaluation expenses
Other income/(expense)
Finance income
Finance costs
Gain on derivative 
Net foreign exchange gain/(loss) 
Profit before income tax
Taxation income/(expense)
Profit from continuing operations

Other &
intercompany
transactions
$’000

Total
$’000

(128)
(1,069)

90,329 
52,449 

(4)
(2,061)
(84)
200 
7,772 
96,709 
1,701 
103,164 
(514)
102,650 

(34,258)
(2,102)
7,751 
1,735 
(13,471)
96,709 
(23,521)
85,292 
15,527 
100,819 

2,307
(449)

57,752 
20,676 

(62)
(9,626)
1,047
(22,116)
6,874
25,786
45
1,499
(132)
1,367

(18,008)
(9,966)
(6,398)
14 
(22,940)
25,786 
36,243 
25,407 
(14,061)
11,346

Israel
$’000

–
(4,724)

(17)
–
–
841 
(217)
–
(15,096)
(19,213)
4,381 
(14,832)

– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 

Greece
$’000

90,457 
58,242 

(34,237)
(41)
7,835 
694 
(21,026)
–
(10,126)
1,341 
11,660 
13,001 

55,445 
21,125 

(17,946)
(340)
(7,445)
22,130 
(29,814)
–
36,198 
23,908 
(13,929)
9,979

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
Notes to the consolidated financial statements 
continued

5. Segmental reporting continued

Year ended 31 December 2018
Property, plant and equipment 
Intangible assets including goodwill
Other assets
Total assets
Total liabilities
Year ended 31 December 2017
Total assets
Total liabilities

Greece
$’000

Israel
$’000

Other &
intercompany
transactions
$’000

Total
$’000

361,436
6,632
68,426
436,494 
221,355 

372,636 
386,035 

980,026
78,449
275,375
1,333,850 
470,550 

242 
1,274 
6,193 
7,709 
(1,675)

1,341,704
86,355
349,994
1,778,053 
690,230 

–
–

98,6012
(203,780)3

471,237 
182,255

1.  The Group supplies its Prinos crude oil to BP Oil International Ltd, until the later of: a) the expiry of the agreement on 1 November 2025 or b) the delivery of twenty-

five million barrels

2.  Consists mainly of the derivative asset of $93.3 million related to the Energean Israel B shares acquisition option (note 27.2)
3.  Consists mainly of the elimination of an intercompany loan of $210.7 million between Energean International Limited (Cyprus) and Energean Oil & Gas S.A. (Greece) 

Segment cash flows

Year ended 31 December 2018
Net cash from/(used in) operating activities
Net cash used in investing activities
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at end of the period
Year ended 31 December 2017
Net cash from (used in) operating activities
Net cash (used in) investing activities
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at end of the period

Greece
$’000

Israel
$’000

Other &
intercompany
transactions
$’000

71,163
(118,121)
44,515
(2,443)
11,799

27,734
(48,073)
20,916
577 
7,692

(1,236)
(182,900)
393,559
209,423
194,456

(4,652)
(6,744)
13,578 
2,182 
6,791 

(7,243)
(23,643)
44,456
13,570
13,567

6,015 
(3,781)
(6,073)
(3,840)
1,209

Total
$’000

62,684
(324,664)
482,530
220,550
219,822

29,097 
(58,599)
28,421 
(1,081)
15,692

6. Business combination
At 31 December 2017, the Group held a commitment to acquire 50% of the preference shares in Energean Israel Limited. The recognition 
of this commitment, which represented a derivative financial instrument, was based on management’s estimate of the likelihood of the 
triggering events occurring (upon either a successful Initial Public Offering (‘IPO’) or in the event of a sale transaction), the estimated 
valuation of the Israel entity and the $10 million exercise price. The value of the Israel entity was estimated based on the price negotiated 
at a similar time with Kerogen as a transaction between market participants which drove the subscription price of $266.7 million for the 
Energean Israel share issuance. This sum includes the amount payable in respect of Energean’s carry of 20% of Energean Israel for $80 
million, together with its 70% proportionate share of funding in respect of such carry. Since completion of this subscription, the Group holds 
70% of the shares in Energean Israel, with Kerogen holding the remaining 30%.

The Group recognised a derivative financial asset of $93.3 million in the 2017 financial statements. On 21 March 2018, the Group 
successfully completed an IPO on the London Stock Exchange and the probability of the IPO taking place by definition became 100%. 
At that date the Group re-measured the value of the derivative asset, which was valued at $190 million, representing an increase of 
$96.7 million since the year-end, which has been taken to the income statement. Furthermore, the IPO event crystallised the Group’s 
commitment to purchase the Energean Israel preference shares. 

6. Business combination continued 
The acquisition of the 50% of preference shares in Energean Israel, changing the Group’s economic interest in the entity, resulted in 
accounting for Energean Israel as a 50% Joint Venture. The derivative asset was discharged in consideration for the acquisition of the 
50% of the entity’s preference shares. 

On 29 March 2018, the Group, following a final investment decision in respect of the Karish and Tanin assets, subscribed for additional 
shares in Energean Israel for an aggregate consideration of $266.7 million, payable in cash. Prior to this subscription, Kerogen Capital 
Limited (‘Kerogen’) held 50% of the equity voting shares in Energean Israel and did not participate in the new share issuance. Since completion 
of this subscription, the Group holds 70% of the voting shares in Energean Israel, with Kerogen holding the remaining 30%.

From 29 March 2018, Energean Israel has therefore been consolidated into the Group and represents a business combination for which 
acquisition accounting is required in line with IFRS 3 Business Combinations.

The identifiable assets acquired and liabilities assumed of the acquiree are recognised as of the acquisition date and measured at fair value 
as at that date. Any non-controlling interest in the acquiree is also recognised at fair value at the acquisition date. The fair value of the business 
acquired is represented by the Karish and Tanin oil and gas assets, cash and working capital, offset by certain liabilities including the deferred 
consideration obligation for the oil and gas licences. The fair value allocation, as mentioned above, has been determined by management 
using the agreement with Kerogen in December 2017 as a transaction between market participants which drove the subscription price of 
$266.7 million for the Energean Israel share issue. This resulted in an aggregate fair value of $682.7 million being allocated to the identifiable 
assets and liabilities acquired, prior to the recognition of a deferred tax liability of $79.0 million as further described below. 

The consolidated financial statements include the results of Energean Israel for the period 29 March to 31 December 2018. Since the 
acquisition date Energean Israel’s loss included in the consolidated statement of comprehensive income for the reporting period amounted 
to $14.8 million. If the combination had taken place at the beginning of the year, the Group’s profit from continuing operations for the 
period would have been $99.9 million. Following the August 2018 independent Competent Persons Report (CPR), the Group’s 70% stake in 
Energean Israel represents 298 MMboe  of 2P reserves and 24 MMboe  of 2C resources.

The fair values of the identifiable assets and liabilities of Energean Israel have been estimated as at the date of acquisition and were as follows:

Assets:
Property, plant and equipment
Intangible assets
Trade and other receivables1
Cash and cash equivalents

Liabilities
Trade and other payables
Deferred tax liabilities

Total identifiable net assets at fair value
Goodwill arising on acquisition 
Fair value of non-controlling interest on acquisition 
Fair value of purchase consideration transferred

Fair value
recognised on
acquisition
$’000

579,906
615
309,248
3,104
892,873

(211,194)
(78,012)
(289,206)
603,667
75,800
(204,800)
474,667

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
Notes to the consolidated financial statements 
continued

6. Business combination continued 

8. Operating profit/(loss) before taxation

Acquisition date fair value of consideration transferred
Cash paid for the acquisition of 50% preference shares
Cash paid at acquisition as advance for issue of shares
Cash paid after acquisition date for issue of shares
Cash payable at acquisition date
Derivative asset
Consideration transferred
The cash outflow on acquisition is as follows:
Net cash acquired with the subsidiary
Cash paid
Net consolidated cash outflow

Fair value
recognised on
acquisition
$’000

10,000
25,850
240,817
8,000
190,000
474,667

3,104
(35,850)
(32,746)

1. 

Included in trade and other receivables is an amount of $248.8 million receivable from Energean E&P Holdings due for share capital increases, of which 
$240.8 million was paid in April 2018. 

The balances above which were increased as a result of fair value adjustments being applied upon acquisition are property, plant and 
equipment (oil and gas properties) and deferred tax liabilities. 

Goodwill of $75.8 million has been recognised upon acquisition. An amount of $79.0 million was due to the requirement of IAS 12 to recognise 
deferred tax assets and liabilities for the difference between the assigned fair values and tax bases of assets acquired and liabilities assumed. 
The assessment of fair value of such licences is therefore based on cash flows after tax. Nevertheless, in accordance with IAS 12 Sections 15 
and 19, a provision is made for deferred tax corresponding to the tax rate of Israel (23%) multiplied by the difference between the acquisition 
cost and the tax base. The offsetting entry to this deferred tax is goodwill. Hence, goodwill arises as a direct result of the recognition of this 
deferred tax adjustment (‘technical goodwill’). None of the goodwill recognised will be deductible for income tax purposes.

7. Revenue

Crude oil sales
Petroleum products sales
Rendering of services
Loss on forward transactions
Other
Total revenue

2018
$’000
88,587 
1,659 
1,398 
(1,315)
–
90,329 

2017
$’000
55,113 
1,025 
1,877 
(280)
17 
57,752 

(a) Cost of oil sales
Staff costs (note 9)
Energy cost
Royalty payable
Other operating costs
Depreciation and amortisation (note 14)
Movement in inventories of oil
Total cost of oil sales
Cost of services
Total cost of sales

(b) General and administration expenses
Staff costs (note 9)
Depreciation and amortisation (note 14, 15)
Auditor fees (note 8f)
Other general & administration expenses

(c) Selling and distribution expenses
Staff costs (note 9)
Other selling and distribution expenses

(d) Exploration and evaluation expenses
Staff costs (note 9)
Exploration costs written off (note 14, 15)
Provision for bank guarantee related to exploration licence (note 24)
Other exploration and evaluation expenses

(e) Other operating (income)/expenses 
Provision/(reversal of provision) for tax litigations (note 24)
Reversal of prior period other provision
Other income
Gain from disposal of subsidiary (note 12)
Provision for bad debts
Impairment of inventory
Other expenses

(f) Fees payable to the Company’s auditor: 
Fees payable to the Company’s auditor for:
The audit of the Company’s annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit services
Audit-related assurance services – half-year review
Other services
Total non-audit services
Total

2018
$’000

2017
$’000

12,825
5,859
1,024
6,257
33,904
(1,073)
58,796
1,223
60,019

6,766
354
804
3,742
11,666

166
287
453

773
–
602
727
2,102

(7,248)
(169)
(1,622)
–
46
992
250
(7,751)

243 
267
510 
157
137
294
804

12,598
5,767
176
6,721
17,640
5,003 
47,905
743
48,648

3,048
368
418
2,157
5,991

181
264
445

244
8,007
1,285
430
9,966

6,935
(235)
(14)
(1,540)
401
–
851
6,398

68
185
253
–
165
165
418

134 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 135

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
Notes to the consolidated financial statements 
continued

9. Staff costs
The average monthly number of employees (including Executive Directors) employed by the Group worldwide was:

Administration
Technical

Salaries
Social security costs
Share-based payments (note 26)

Payroll cost capitalised in oil and gas assets and exploration & evaluation costs 
Payroll cost expensed

Included in:
Cost of oil sales (note 8a)
Cost of services
Administration expenses (note 8b)
Exploration & evaluation expenses (note 8d)
Selling and distribution expenses (note 8c)
Other

2018
Number
 70
 335
405

2018
$’000
26,550 
5,470 
3,564
35,584 
(13,972)
21,612

12,825
1,062
6,766
773
166
20
21,612

2017
Number
 58
 328
386

2017
$’000
20,635 
4,418 
–
25,053 
(8,358)
16,695

12,598
600
3,048
244
181
24
16,695

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 financial statements.

10. Net financing cost

Interest on bank borrowings
Interest expense on long-term payables
Less amounts included in the cost of qualifying assets

Finance and arrangement fees
Other finance costs and bank charges
Unwinding of discount
Total finance costs
Interest income from time deposits
Total finance revenue
Foreign exchange losses/(gain)
Net financing costs

 Notes
22
25
14,15

2018
$’000
12,175 
5,676 
(9,258)
8,593 
2,931
1,548 
399 
13,471 
(1,735)
(1,735)
23,521
35,257 

2017
$’000
22,221 
–
(1,258)
20,963 
–
1,774 
203 
22,940 
(14)
(14)
(36,243)
(13,317)

The decrease in interest expenses versus the previous year (31 December 2017: $22.9 million) is associated with conversion of 
a shareholders’ loan to preference shares at the end of 1H 2017 (refer to note 20).

11. Taxation
(a) Taxation charge

Corporation tax – current year
Corporation tax – prior years
Deferred tax (Note 16)
Total taxation income/(expense)

2018
$’000
(939)
4,343 
12,123 
15,527 

2017
$’000
(204)
(4,155)
(9,702)
(14,061)

(b) Reconciliation of the total tax charge
The tax credit/(charge) recognised in the income statement is reconciled to the Group’s Greek entity standard tax rate of 25% 
(31 December 2017: 25%). The differences are reconciled below:

Profit before tax
Tax credit/(charge) at the applicable tax rate of 25% (FY17: 25%)1
Impact of different tax rates
Tax impact of change of tax rates
Reassessment of recognised deferred tax asset in the current period
Permanent differences
Non-recognition of deferred tax on current period losses of branches
Tax effect of non-taxable income2
Derecognition of deferred tax as a result of capitalisation of loan3
Other adjustments
Prior year tax4
Taxation income

2018
$’000
85,292
(21,323)
5,600
598 
(404)
(1,318)
(1,259)
20,749 
8,367 
174 
4,343 
15,527 

2017
$’000
24,004
(6,001)
427
–
(517)
(7,864)
(965)
5,002
–
12 
(4,155)
(14,061)

Effective tax rate

(18%)

59%

1.  For the reconciliation of the effective tax rate, the statutory tax rate of Greek upstream oil and gas activities of 25% has been used since the major part of the 

2. 

deferred tax is coming from the Greek operations of the Group. 
In 2018, the Group recognised a gain of $96.7 million (31 December 2017:$25.8 million) from the revaluation of the derivative asset due to the acquisition of 50% of 
Energean Israel; this gain is non-taxable. 

3.  The Group capitalised an intercompany loan liability of $233.0 million which is eliminated for group reporting purposes. However, because the tax implications differ 

between the relevant jurisdictions the deferred tax credit impact is recorded in the profit and loss.

4.  The Group also reversed a provision of $4.3 million relating to previous years’ income taxes.

136 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 137

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements 
continued

12. Discontinued operations
At 31 December 2016, Energean Israel Limited was presented as a wholly owned subsidiary of Energean E&P Holdings Limited. Based on 
the Kerogen convertible loan and founding shareholder loans, the Group lost control of Energean Israel Limited on 13 June 2017 and it was 
therefore presented as a discontinued operation.

On 21 December 2016, the Group entered into a subscription agreement with Kerogen Capital Limited (Kerogen), a private equity fund manager 
focused on oil and gas, for the investment of $50 million to Energean Israel Limited. The initial capital was funded by a $35 million convertible 
loan in December 2016 and a further $5 million loan in the first quarter of 2017, to be converted to equity, together with a further equity 
investment by Kerogen of $10 million subject to (i) the approval from the Petroleum Commissioner and (ii) the closing of the sale and purchase 
of the subject interest in accordance with the provisions of the Delek sale and purchase agreement. The loan bears no interest and was 
repayable by 19 June 2017 in the case that no conversion occurred. The net proceeds received from the issue of the Kerogen convertible loan 
have been allocated between the financial liability component ($34.2 million as of 31 December 2016) and an equity component ($0.7 million 
as of 31 December 2016). The conversion reserve represents the difference between the fair value of the discounted cash outflows to repay 
the loan from Kerogen, discounted using the market interest rate, and the total proceeds from the convertible loans of $40 million. 

On 13 June 2017 the Kerogen Convertible loan interim facility and founding shareholder loans were discharged in consideration for 
the issue of shares in Energean Israel Limited, whereby Kerogen acquired a 50% equity voting interest and a 50% economic interest and 
the founding shareholders acquired a 50% economic interest in Energean Israel Limited. Energean E&P Holdings Limited retained the 
remaining 50% of the voting rights of Energean Israel. The shareholders’ agreement governing the control and management of Energean 
Israel Limited specified that the Group’s strategy for the development and operation of the Karish and Tanin fields and the implementation 
of such strategy are subject to consulting with and obtaining the consent of Kerogen, resulting in a loss of control. Accordingly, Energean 
Israel Limited was classified in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations as a discontinued 
operation. Energean Israel Limited was deconsolidated as at 13 June 2017.

The results of the discontinued operations, which have been included in the consolidated statement of profit or loss for the year ended 
31 December 2017, were as follows:

Administration expenses
Operating loss 
Finance costs
Finance income
Income from foreign exchange transactions
Profit/(loss) from discontinued operations

For the year
ended
31 December
2017
(1,112)
(1,112)
(304)
11 
2 
(1,403)

A $1.5 million gain on disposal of the subsidiary was recognised in other income in profit or loss, based on the difference between the 
consideration received (nil) and the net liability position of Energean Israel Limited as of 13 June 2017 of $1.5 million. 

Details of the cash flows of the discontinued operations which are included in the consolidated statement of cash flows for the period 
ended 31 December 2017 are as follows:

Operating activities
Investing activities
Financing activities
Net cash from discontinued operation

For the year
ended
31 December
2017
$’000
(985)
(2,715)
4,702 
1,002 

13. 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 amounts 
are calculated by dividing net income for the year attributable to ordinary equity holders of the parent by the weighted average number of 
ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued if employee share 
options were converted into ordinary shares. 

Profit from continuing operations attributable to owners of the parent
Net results from discontinued operations
Total income attributable to equity shareholders
Effect of dilutive potential ordinary shares

Number of shares
Basic weighted average number of shares
Dilutive potential ordinary shares
Diluted weighted average number of shares
Basic earnings from continuing operations per share
Basic earnings from discontinued operations per share
Basic earnings per share
Diluted earnings from continuing operations per share
Diluted earnings from discontinued operations per share
Diluted income per share

14. Property, plant and equipment

Property, plant and equipment at cost
At 1 January 2017
Additions
Capitalised depreciation 
Change in environmental rehabilitation provision
Foreign exchange impact
At 31 December 2017
Additions
Acquisition of subsidiary (Note 6)
Disposals
Capitalised depreciation 
Change in environmental rehabilitation provision
Foreign exchange impact
At 31 December 2018

2018
$’000
105,277 
–
105,277 
–
105,277 

2017
$’000
11,355 
(1,403)
9,952 
–
9,952 

2018
Number

2017
Number

70,643,120 
132,319,399
–
974,418
70,643,120
133,293,817
$0.80/share
$0.16/share
$0.00/share ($0.02)/share
$0.80/share $0.14/share
$0.16/share
$0.79/share
$0.00/share ($0.02)/share
$0.79/share $0.14/share

Oil and gas
assets
$’000
321,059
63,467 
2,388 
2,876 
40,131 
429,921 
493,276 
579,688 
(372)
2,574 
1,758 
(19,391)
1,487,454 

Other
property,
plant and
equipment
$’000
50,376
2,274 
–
–
1,885 
54,535 
4,417 
80 
(57)
–
–
(2,462)
56,513 

Total
$’000
371,435
65,741
2,388
2,876
42,016
484,456 
497,693 
579,768 
(429)
2,574 
1,758 
(21,853)
1,543,967 

138 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 139

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the consolidated financial statements 
continued

14. Property, plant and equipment continued

Property, plant and equipment at cost
Accumulated depreciation
At 1 January 2017
Charge for the period
– Expensed
– Capitalised to oil and gas properties
Impairment
Foreign exchange impact
At 31 December 2017
Charge for the period
– Expensed
– Capitalised to oil and gas properties
Foreign exchange impact
At 31 December 2018
Net carrying amount
At 31 December 2017*
At 31 December 2018

Oil and gas
assets
$’000

Other
property,
plant and
equipment
$’000

Total
$’000

118,339 

22,916 

141,255 

17,020
–
1,344 
12,952 
149,655
–
33,194
–
(7,727)
175,122

788
2,388 
–
(1,267)
24,825

893
2,574 
(1,151)
27,141

17,808 
2,388 
1,344 
11,685
174,480

34,087
2,574
(8,878)
202,263

280,265
1,312,332

29,711
29,372

309,976
1,341,704

* the carrying value of the oil & gas assets as at 31 December 2017 was presented within ‘oil and gas assets’ and ‘property under construction’.

Borrowing costs capitalised for qualifying assets, included in ‘additions’ of oil and gas properties, for the year ended 31 December 2018 
amounted to $8.3 million (year ended 31 December 2017: $1.3 million). The interest rates used was 7.0% (for the year ended 31 December 
2017: 7.0%)

During the year ended 31 December 2014 and in view of its future drilling campaigns, the Group acquired and initiated the upgrade work of 
a drilling rig (Energean Force). The Group has issued a first preferred mortgage (refer to note 22) on the aforementioned Energean Force, 
in favour of the European Bank for Reconstruction and Development (EBRD). 

The carrying value of the Energean Force as at 31 December 2018 is $21.4 million and its depreciation charge has been capitalised within 
the oil and gas properties.

The impairment charge in 2017 relates to impairment of drilling materials in the West Kom Ombo licence and are recorded under 
‘exploration and evaluation expenses’ in the profit or loss.

The currency translation adjustments arose due to the movement against the Group’s presentation currency, USD, of the Group’s Greek 
assets which have the euro as their functional currency.

In 2018 the Group executed an impairment assessment of the Prinos assets. The Group used the value in use in determining the 
recoverable amount of the cash-generating unit. The assessment did not result in an impairment charge. In determining the value in use, 
the Group used a forward curve for one year, average forward curve and forecast median for the subsequent six years reverting to the 
Group’s long-term price assumption for impairment testing which is $70 per barrel inflated at 2% from 2026. The Group applied a 10.4%  
pre-tax discount rate (2017: 11.5%) based on the Group weighted average cost of capital.

Depreciation expense for the year has been recognised as follows:

Cost of sales (note 8a)
Administration expenses (note 8b)
Capitalised depreciation in oil and gas properties
Total

2018
$’000
33,904
183
2,574
36,661

2017
$’000
17,640
168
2,388
20,196

14. Property, plant and equipment continued
Cash flow statement reconciliations:

Payment for additions to property, plant and equipment
Additions to property, plant and equipment
Associated cash flows
Payment for additions to property, plant and equipment
Non-cash movements/presented in other cash flow lines
Borrowing cost capitalised
Movement in working capital

15. Intangible assets

Intangibles at cost
At 1 January 2017
Additions
Write-off of exploration and evaluation costs
Disposal of exploration and evaluation cost
Exchange differences
31 December 2017
Additions
Acquisition of subsidiary (Note 6)
Exchange differences
At 31 December 2018

Accumulated amortisation and impairments
At 1 January 2017
Charge for the period
Exchange differences
31 December 2017
Charge for the period1
Exchange differences
31 December 2018

Net carrying amount
At 31 December 2017
At 31 December 2018

1.  Recognised in administrative expenses.

2018
$’000
497,693

2017
$’000
65,741

(290,123)

(48,744)

(8,307)
(199,262)

(1,258)
(15,739)

Exploration
and
evaluation
assets
$’000

Other
Intangible
assets
$’000

7,963 
2,871 
(6,663)
(1,000)
440 
3,611 
6,177 
616 
(94)
10,310

240 
–
21 
261 
–
–
261 

1,299 
281 
–
–
82 
1,662 
8 
–
(28)
1,641

744 
200 
68 
1,012 
171 
(48)
1,135 

Total
$’000

9,262 
3,152 
(6,663)
(1,000)
522 
5,273
6,185 
616 
(122)
11,951 

984 
200 
89 
1,273 
171 
(48)
1,396 

3,350 
10,049

650 
506

4,000 
10,555

Borrowing costs capitalised for qualifying assets, included in ‘additions’ of exploration and evaluation assets, for the year ended 
31 December 2018 amounted to $0.95 million (year ended 31 December 2017: $nil). The interest rates used was 7.0%.

140 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 141

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
Notes to the consolidated financial statements 
continued

15. Intangible assets continued
Disposal of exploration and evaluation cost
In March 2017, the Group agreed to farm out a 60% working interest and operatorship of the Ioannina licence to Repsol. The Group retains 
a 40% working interest as of 31 December 2018. According to the farm-out agreement:

 X On the completion date, 31 March 2017, Repsol paid to the Group the consideration of $1.0 million for all past costs regarding the licence.
 X Repsol will conduct the exploration of the Ioannina block, providing 90% of the committed investment up to $25 million and 60% 

thereafter in exchange for a 60% interest.

The disposal of exploration and evaluation cost included in the year ended 31 December 2017, relates to 60% of past expenditure in the 
Ioannina lease area. 

Write-off and impairments
The Group recognised $6.7 million for exploration and evaluation expenses written off in the period ended 31 December 2017, relating to 
exploration expenditure for West Kom Ombo in Egypt. West Kom Ombo is an exploration block in Upper Egypt, the licence for which expired 
on 2 October 2017. There are no recoverable costs associated with West Kom Ombo and the asset has been fully written off in 2017.

Cash flow statement reconciliations:

Payment for additions to intangible assets
Additions to intangible assets
Associated cash flows
Payment for additions to intangible assets
Non-cash movements/presented in other cash flow lines
Borrowing cost capitalised
Movement in working capital

16. Net deferred tax (liability)/asset 

Deferred tax (liabilities)/assets
At 1 January 2017
Increase/(decrease) for the period through:
Profit or loss (Note 11)
Other comprehensive income
Exchange difference
31 December 2017
Retrospective application of IFRS 9 
(note 2.2)

Property,
plant and
equipment
$’000
(51,100)

(11,191)
–
(7,726)
(70,017)

Prepaid
expenses
and other
receivables
$’000
10,227 

(14,404)
–
521 
(3,656)

–

–

2018
$’000
6,185

2017
$’000
3,152

(3,449)

(5,259)

951
(3,687)

–
2,107

Retirement
benefit
liability
$’000 
782 

(44)
74 
111 
923 

Accrued
expenses
and other
short term
liabilities
$’000
835 

711 
–
141 
1,687 

Total
$’000
17,689 

(9,702)
74 
1,842 
9,903 

–

–

(4,337)

(4,337)

Inventory
$’000
649 

Tax losses
$’000
56,296 

15,565 
–
8,710 
80,571 

(339)
–
85 
395 

–

16. Net deferred tax (liability)/asset continued 

Deferred tax (liabilities)/assets

At 1 January 2018 (restated)
Acquisition of subsidiary (Note 6) 
Increase/(decrease) for the period through:
Profit or loss (Note 11)
Other comprehensive income
Exchange difference
31 December 2018

Deferred tax liabilities
Deferred tax assets

Property,
plant and
equipment
$’000

(70,017)
(79,117)

(4,524)
–
3,025 
(150,633)

Prepaid
expenses
and other
receivables
$’000

(3,656)
–

1,841 
–
110 
(1,705)

Inventory
$’000

Tax losses
$’000

395 
–

45 
–
236 
676 

80,571 
1,099 

7,677 
–
(3,733)
85,614 

Retirement
benefit
liability
$’000 

923 
–

(63)
–
(40)
820 

Accrued
expenses
and other
short term
liabilities
$’000

(2,650)
6 

7,147 
87 
(200)
4,390 

2018
$’000
(76,370)
15,532 
(60,838)

Total
$’000

5,566 
(78,012)

12,123 
87 
(602)
(60,838)

2017
$’000
(3,570)
13,473 
9,903 

The change in the deferred tax liability is not equal to the origination of temporary difference as in Note 11 mainly because of the acquisition 
of the subsidiary company Energean Israel (business combination), as described in Note 6.

At 31 December 2018 the Group has unused tax losses of $344.5 million (as of 31 December 2017: $322.1 million) available to offset against 
future profits. Out of the total tax losses, $318.7 million come from the Greek operations whereas amount of $25.8 million comes from the 
Israeli operations and specifically the Karish licence which is in the development phase and expected to commence production by 2021. 

With respect to the Greek tax losses carried forward, the majority of them ($317.7 million) come from the Prinos exploitation area which is 
the only producing asset of the Group, whereas an amount of $1.0 million comes from Ioannina, Katakolo and Aitoloakarnania areas which 
are in the exploration phase. 

A deferred tax asset has been recognised as of 31 December 2018 in respect of $85.6 million (as of 31 December 2017: $80.6 million) of 
such tax losses. This represents the losses which are expected to be utilised based on Group’s projection of future taxable profits in the 
jurisdictions in which the losses reside. It is considered probable based on business forecasts that such profits will be available.

17. Cash and cash equivalents 

Cash at bank
Restricted bank deposits

2018
$’000
207,043
12,778
219,822

2017*
$’000
8,144
7,548
15,692

* As at 31 December 2017 an amount $1.9 million of restricted cash was reclassified within ‘Non-current deposits’.

Bank demand deposits comprise deposits and other short-term money market deposit accounts that are readily convertible into known 
amounts of cash. The effective interest rate on short-term bank deposits was 1.33% for the year ended 31 December 2018 (year ended 
31 December 2017: 0.34%). 

Restricted bank deposits comprise mainly cash retained as a bank security pledge for the Group’s performance guarantees in its 
exploration blocks of Israel, Montenegro, Ioannina and Aitolokarnania.

142 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 143

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
Notes to the consolidated financial statements 
continued

18. Inventories 

Crude oil 
Warehouse stocks and materials 
Total inventories

2018
$’000
5,407 
4,505 
9,912

2017
$’000
4,573 
4,956 
9,529

The Group’s raw materials and supplies consumptions for the year ended 31 December 2018 was $1.7 million (year ended 31 December 
2017: $1.7million)

The Group recorded impairment and write-off charges on inventory of $1.0 million for the year ended 31 December 2018 (year ended 
31 December 2017: $nil) related to materials written off (note 8e). 

19. Trade and other receivables

Trade and other receivables – Current
Financial items:
Trade receivables
Receivables from related parties (note 28)

Non-financial items:
Deposits and prepayments
Deferred insurance expenses
Government subsidies2
Refundable VAT
Reimbursement from insurance contracts

Trade and other receivables – Non-current
Non-financial items:
Deferred borrowing fees1
Deferred insurance expenses
Other non current assets

2018
$’000

2017
$’000

1,462 
24 
1,486 

17,422 
6,139 
3,248 
4,187 
401 
31,397 
32,883

65,558 
5,617 
670 
71,845 

9,313 
184 
9,497 

9,090 
–
3,482 
2,195 
420 
15,187 
24,684 

–
–
591 
591 

1.  This item represents arrangement fees and issue costs that the Group has incurred in connection with the Karish-Tanin debt raising, which completed on 

2 March 2018. Arrangement fees and issue costs are deducted from the debt proceeds on initial recognition of the liability and are amortised as finance costs over 
the term of the debt using the effective interest method. 

2.  Government subsidies mainly relate to grants from Greek Public Body for Employment and Social Inclusion (OAED) to financially support 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. 
Kavala Oil S.A. participated in this scheme from July 2010 until subsidies ceased in January 2016. The subsidies balance outstanding at 31 December 2017 is for 
the period 1 July 2010 to 31 December 2015.  
In December 2015, the Group filed a petition against OAED, and the Greek state itself, seeking the payment of US$2.9 million (€2.5 million), which represent the 
outstanding balance up to 31 December 2014. Following several postponements of the hearing initiated by the Greek state, the hearing took place on 14 June 2017 
before the Administrative Court of Piraeus. By decision A6360/2017, the Administrative Court of Piraeus found itself as non-competent court in terms of forum and 
referred the case to the Three-Membered Administrative Court of Kavala. A new hearing date is still expected to be set by the Kavala court.  
The Group is of the view, based on legal advice, that this petition will prevail.

20. Share capital 
The Company’s initial share capital amounted to £50 thousand ($65k), consisting of an issuance of 50,000 ordinary shares of a nominal 
value of £1.00 ($1.3) each on 8 May 2017. On 30 June 2017 the Company effected a 100 for 1 share split resulting in 5,000,000 ordinary 
shares of a nominal value of £0.01 ($0.013) each.

On 30 June 2017, the Company also became the parent company of the Group through the acquisition of the full share capital of Energean 
E&P Holdings Limited, in exchange for 65,643,120 £0.01 ($0.013) shares in the Company issued to the previous shareholders. As of this 
date, the Company’s share capital increased from £50 thousand ($65k) to £706 thousand ($917k). From that point, in the consolidated 
financial statements, the share capital became that of Energean Oil & Gas 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 $139,903 thousand. 
The tables below outline the share capital of the Company. 

On 21 March 2018, the Company issued 72,592,016 new shares in relation to the placement of its initial public offering of ordinary shares 
at £4.55 per share. 

Issued and authorised
At 1 January 2017
Group restructuring
Issuance of shares and share split
At 1 January 2018
Issued during the year
– IPO shares 
– Shares issued in settlement of preference shares in subsidiary (note 21)
– Share based payment
At 31 December 2018

21. Non-controlling interests 

Equity share
capital allotted
and fully paid
Number

65,643,120
5,000,000
70,643,120

72,592,016
9,095,900
821,727
153,152,763

Share
capital
$’000

Share
premium
$’000

14,904
(14,052)
65
917

1,009
129
11
2,066

125,851
(125,851)
–
–

434,934
223,871
–
658,805

Name of subsidiary
Kavala Oil S.A.
Energean International Limited
Energean Israel Ltd
Total

Voting rights

Share of loss

Accumulated balance

Year ended
31 December
2018
%
0.08
–
30.00

Year ended
31 December
2017
%
0.08
–
50.00

Year ended
31 December
2018
$’000
(202)
–
(4,460)
(4,662)

Year ended
31 December
2017
$’000
(9)
–
–
(9)

Year ended
31 December
2018
$’000
92 
–
259,953 
260,045 

Year ended
31 December
2017
$’000
294 
224,000 
–
224,294 

Energean International Limited 
On 30 June 2017, as part of the Reorganisation Agreement, the loan from Third Point to Energean International Limited was discharged 
in consideration for the issuance of 224,000 new preference shares in Energean International Limited. The Group derecognised the 
$230.8 million carrying value of the loan and recognised $224.0 million in equity for the preference shares. The difference of $6.8 million 
was recognised in other reserves as a capital contribution, as Third Point is an ultimate shareholder of the Group. The $224.0 million 
equity recognised for the preference shares represented a non-controlling interest in a subsidiary of the Group. 

On the Company’s admission to the London Stock Exchange and pursuant to the terms of the reorganisation, the Energean International 
preference shares held by Third Point were converted to 9,095,900 common shares in the Company. This conversion solely impacts equity 
and non-controlling interests and had no impact on the Company’s net assets.

144 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 145

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
Notes to the consolidated financial statements 
continued

21. Non-controlling interests continued 
Material partly-owned subsidiaries 
Energean Israel Limited
On 29 March 2018, the Group, following a final investment decision in respect of the Karish and Tanin assets, and after acquiring the 
50% founders shares (refer to note 6), subscribed for additional shares in Energean Israel for an aggregate consideration of $266.7 million, 
payable in cash. Since completion of this subscription, the Group holds 70% of the shares in Energean Israel, with Kerogen Capital holding 
the remaining 30%. The fair value of the non-controlling interest at the date of the acquisition of the additional 20% and control of the 
company, amounted to $204.8 million (refer to note 6).

The summarised financial information of Energean Israel Limited for the year ended 31 December 2018, is provided below. This information 
is based on amounts before inter-company eliminations. 

Summarised statement of financial position as at 31 December 2018: 

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total equity

Summarised statement of profit or loss for 2018: 

Administration expenses
Operating (Loss)/profit
Finance income
Finance costs
Loss for the year before tax

Tax income
Net loss for the period

22. Borrowings 

Net Debt
Current borrowings
Non-current borrowings 
Carrying values of total borrowings 
Less: Cash and cash equivalents and bank deposits
Net (funds)/debt (1)
Total equity (2)
Gearing ratio (1)/(2): 

2018
$’000
204,160 
1,059,259 
(325,724)
(71,195)
866,500

2018
$’000
(4,741)
(4,741)
841 
(15,314)
(19,214)

4,381 
(14,833)

2018
$’000

2017
$’000

–
144,270 
144,270
(219,822)
(75,552)
1,087,823
(6.95%)

12,500
78,831
91,331
(15,692)
75,639
288,982
26.17%

EBRD Senior Facility
In May 2016, the Group signed a Senior Facility Agreement with the EBRD, subsequently amended on 12 July 2016, for a $75 million 
borrowing base facility to fund the Group’s development programme in Prinos, Prinos North and Epsilon fields. The facility was subject 
to an interest rate of 4.9% plus LIBOR01, in addition to fees and commission.

22. Borrowings continued
On 30 January 2018, the Group’s existing EBRD Senior Facility Agreement was amended and restated pursuant to the RBL Senior Facility 
Agreement, giving rise to a modification loss amount of $1.4 million included in Group’s finance cost. The RBL Senior Facility Agreement 
comprises two facilities—a facility of up to $105.0 million with EBRD and the Black Sea Trade and Development Bank as lenders and a 
$75.0 million facility pursuant to which the Export-Import Bank of Romania Eximbank SA and Banca Comerciala Intesa Sanpaolo Romania 
S.A. (with 95% insurance cover from the Romanian ECA) as lenders. Proceeds from the Romanian Club Facility will finance exclusively 85% 
of the value attributable to goods and services under the GSP Engineering, Procurement, Construction and Installation Contract (EPCIC) 
contract. The facility is secured by substantially all of the assets of the subsidiary company Energean Oil & Gas S.A. and a guarantee from 
Energean E&P Holdings and a pledge of its shares in Energean Oil & Gas S.A. The facility will have a seven-year tenor and incurs interest on 
outstanding debt at US Dollar LIBOR01 plus an applicable margin (4.9% for the $105.0 million facility and 3.0% for the $75.0 million facility).

EBRD Subordinated Facility
In July 2016, the Group signed a EBRD Subordinated Facility Agreement, a subordinated loan agreement with the EBRD, subsequently 
amended on 8 March 2017, for a $20 million facility to fund the Group’s exploration activities. The facility is subject to an interest rate of 
4.9% plus LIBOR01, in addition to fees and commission and an EBITDA participation amount of up to 3.5% of EBITDA (if EBITDA is positive) 
depending on the amount of the facility drawn.

On 28 February 2018, the Group’s existing Subordinated Facility Agreement was amended and restated regarding the Maturity Date and 
EBITDA participation amount.

Senior Credit Facility for the Karish-Tanin Development:
On 2 March 2018, the Group entered into a senior secured project finance for its Karish-Tanin project amounting to $1,275 million. The loan 
is held at the Energean Israel Limited level (Energean 70%). Once drawn, interest is to be charged at LIBOR + 3.75% over months 1 to 12, 
LIBOR + 4.00% over months 13 – 24, LIBOR + 4.25% over months 25 – 36 and LIBOR + 4.75% over months 37 – 45. The facility matures in 
December 2021 and has a bullet repayment on maturity. There is a commitment fee of 30% of the applicable margin. As of 31 December 
2018 the Group has paid a total amount of $61.5 million for debt arrangement and commitment fees.

The Group started drawing down the project finance facility in March 2019.

Movement in borrowings

1 January
$’000

Cash
inflows
$’000

Cash
outflows
$’000

Amended
of facility
agreement
$’000

Reclassification
$’000

Borrowing
costs
including
amortisation of
arrangement
fees
$’000

Foreign
exchange
impact
$’000

Shareholder
loan
capitalized
to equity
$’000

31 December
$’000

2018
Long-term borrowings
Current portion of 
long-term borrowings
2017
Long-term borrowings
Current portion of 
long-term borrowings
Borrowings included in 
asset held for sale

78,831 

55,626

(17,610)

12,500 

12,500 

–

–

(12,500)

–

–

15,106 

(183)

–

–

–

–

144,270 

–

255,118 

28,915

(3,721)

21,130 

–

44,262 

5,000

–

–

–

–

–

(12,500)

20,486 

164 

(209,631)

78,831 

12,500 

–

–

738 

–

–

(21,130)

12,500 

(50,000)

–

Capital management 
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. 

On 21 March 2018 the Company completed the admission of its shares to the Premium Segment of the London Stock Exchange and raised 
gross proceeds of $460 million.

146 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 147

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements 
continued

23. Retirement benefit liability 
The Group operates defined benefit pension plans in Greece.

These plans are final salary pension plans. The level of benefits provided depend on members’ length of service and remuneration. 

These plans are not funded and are defined benefit plans in accordance with IAS 19. The Greek subsidiaries charge 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. 

23.1 Provision for retirement benefits

Defined benefit obligation
Provision for retirement benefits recognised
Allocated as:
Non-current portion

23.2 Defined benefit obligation

At 1 January
Current service cost
Interest cost
Extra payments or expenses
Actuarial losses – from changes in financial assumptions
Benefits paid
Exchange differences
At 31 December

2018
$’000
3,659
3,659

3,659
3,659

2018
$’000
3,288 
250 
48 
45 
444 
(249)
(167)
3,659 

2017
$’000
3,288
3,288

3,288
3,288

2017
$’000
2,425
296
43
34
258
(86)
318
3,288

23.3 Actuarial assumptions and risks continued

Percentage effect of change in defined benefit obligation
Change + 0.5% in Discount rate
Change -0.5% in Discount rate
Change +0.5% in Expected rate of salary increases
Change -0.5% in Expected rate of salary increases

Percentage effect of change in current service cost
Change + 0.5% in Discount rate
Change -0.5% in Discount rate
Change +0.5% in Expected rate of salary increases
Change -0.5% in Expected rate of salary increases

2018

2017

-8%
8%
8%
-8%

-9%
9%
9%
-9%

2018

2017

-12%
12%
13%
-13%

-14%
14%
14%
-14%

The amounts presented reflect the percentage increase/(decrease) in the given assumption that is required to impact the defined benefit 
obligation by +/- 0.5%, 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 will increase the Group’s defined 
benefit liability.

23.3 Actuarial assumptions and risks
The most recent actuarial valuation was carried out as of 31 December 2018 and it was based on the following key assumptions:

Discount rate
Expected rate of salary increases
Average life expectancy over retirement age
Inflation rate

2018
$’000
1.70%
3.59%
20.8 years
1.75%

2017
$’000
1.50%
3.59%
24.57 years
1.75%

Sensitivity analysis
The sensitivity analysis below shows the impact on the defined benefit obligation of changing each assumption while not changing any 
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.

24. Provisions 

At 1 January 2017
New provisions and changes in estimates
Transfer from trade and other receivables
Unwinding of discount
Currency translation adjustment
At 31 December 2017
Current provisions
Non-current provisions

Decommissioning
$’000 
2,240 
2,897 
–
229 
322 
5,688 
–
5,688 

Litigation
and other
claims
$’000
–
12,462 
(3,839)
–
683
9,306 
9,306 
–

Total
$’000
2,240
15,359 
(3,839)
229 
1,005 
14,994 
9,306 
5,688 

148 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 149

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
Notes to the consolidated financial statements 
continued

24. Provisions continued 

At 1 January 2018
New provisions and changes in estimates
Refunds
Payments
Unwinding of discount
Currency translation adjustment
At 31 December 2018
Current provisions
Non-current provisions

Decommissioning
$’000 
5,688 
1,758 
–
–
351 
(267)
7,530 
–
7,530 

Litigation
and other
claims
$’000
9,306 
(10,989)
3,666
(1,887)
–
(96)
–
–
–

Total
$’000
14,994 
(9,231)
3,666
(1,887) 
351 
(363)
7,530 
–
7,530

Decommissioning provision
The decommissioning provision represents the present value of decommissioning costs relating to the Prinos asset in Greece.

According to the Prinos concession agreement ratified by Greek Law, the Group is obliged to plug only the wells opened as a result of its 
own drilling activities.

Reviews of estimated future decommissioning and restoration costs and the discount rate applied are carried out annually.

In 2018, there was an increase of $1.1 million (2017: $2.9 million) in the provision resulting from changes in the discount rate. The discount 
rate applied at 31 December 2018 was 4.7% (2017: 6.05%). 

Of the decommissioning and restoration provision at 31 December 2018, an estimated $nil million is expected to be utilised between one 
to five years, $0.5 million within six to 10 years, and the remainder in later periods.

Litigation and other claims
As of 31 December 2017 the Group recorded a provision of $6.9 million for transfer pricing and income tax penalties following tax 
litigation in Greece, for the tax audit of the years 2008 - 2011 which was appealed. Furthermore, the Company recognised a provision for 
its unaudited tax years 2012 – 2016 of a further $4.2 million. This takes into consideration the outcome of the tax audit of the Company’s 
transfer pricing policies finalised for fiscal years 2010 - 2011, which were the subject of the appeal. This amount corresponds to corporate 
income tax amount of $2.3 million plus penalties and interest of $1.9 million.

Following the receipt in June 2018 of the final favourable decision from the appeal process, the provision for transfer pricing and income 
tax penalties has been reversed and recorded in ‘other income’ (note 8e) in the consolidated income statement. During 2015, Energean had 
been required to make a mandatory prepayment of 50% of the total exposure, $3.7 million to the Greek tax authorities. Following the final 
decision, Energean received a refund of aforementioned amount in October 2018.

25. Trade and other payables 

Trade and other payables – Current
Financial items:
Trade accounts payable1 
Accrued expenses1
Other creditors
Deferred licence payments due within one year2
Other finance costs accrued

Non-financial items:
Social insurance and other taxes
Income taxes

Trade and other payables – Non-current
Financial items:
Deferred licence payments2
Non-financial items:
Social insurance

2018
$’000

2017
$’000

323,953 
36,341 
2,372 
15,342 
3,148 
381,156

3,583 
939
4,522 
385,678

47,965 
11,125 
2,281 
–
2,071 
63,442 

2,882
204
3,086
66,528 

71,176

–

1,547
72,723

2,544
2,544

1. 

2. 

Included in trade payables and accrued expenses are mainly Karish field related development expenditures (mainly FPSO and Sub Sea construction cost) which 
accounts for a total amount of $302.8 million, $282.4 million included in trade payables and $20.4 million in accrued expenses.
In December 2016, Energean Israel acquired the Karish and Tanin offshore gas fields for $40.0 million closing payment with an obligation to pay additional 
consideration of $108.5 million plus interest inflated at an annual rate of 4.6% in ten equal annual payments. The additional consideration was triggered on the 
earlier of the date on which a final investment decision of Karish and Tanin made or the date on which the aggregate expenditures in connection with the Israeli 
oil and gas leases exceeded $150.0 million. Therefore as of 31 December 2017, Energean Israel (which at that date was not a subsidiary of the Group) did not 
recognise a liability in respect of the deferred consideration since it was not probable that the contingent consideration would become payable. In March 2018 
Energean Israel made a Final Investment Decision (‘FID’) on the Karish and Tanin offshore Israel leases. Consequently the company proceeded with the payment 
of the first instalment of $10.9 million and the recognition of a liability in respect of the remaining deferred consideration at a discount rate 9.34%. The recognition 
of this liability by Energean Israel took place before the share subscription through which Energean Israel became a subsidiary of the Group (see note 6). As at 
31 December 2018 the total discounted deferred consideration was $86.5 million.

26. Employee share schemes 
Analysis of share-based payment charge

Employee Share Award Plan
Energean 2018 Long Term Incentive Plan
Total share-based payment charge
Capitalised to intangible and tangible assets
Expensed as administration expenses
Expensed to exploration and evaluation expenses
Total share-based payment charge

2018
$’000
3,000
511 
3,511
1,941 
1,520 
50 
3,511 

2017
$’000
–

–
–
–
–
–

150 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 151

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
Notes to the consolidated financial statements 
continued

26. Employee share schemes continued 
Energean 2018 Long Term Incentive Plan
Energean Incentive Plan (LTIP) Under the LTIP, Senior Management can be granted nil exercise price options, normally exercisable from 
three to ten years following grant provided an individual remains in employment. 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 post-grant performance conditions. No 
dividends are paid over the vesting period; however, Energean’s Board may decide at any time prior to the issue or transfer of the shares 
in respect of which an award is released that the participant will receive an amount (in cash and/or additional Shares) equal in value to 
any dividends that would have been paid on those shares on such terms and over such period (ending no later than the Release Date) as 
the Board may determine. This amount may assume the reinvestment of dividends (on such basis as the Board may determine) and may 
exclude or include special dividends

There are further details of the LTIP in the Directors’ Remuneration Report on pages 79 - 94. The weighted average remaining contractual 
life for LTIP awards outstanding at 31 December 2018 was 2.5 years.

Employee Share Award Plan (ESAP)
Most Group employees are eligible to be granted nil exercise price options under the ESAP. 

On 24 May 2018, the Company, following its admission on the London Stock Exchange on 21 March 2018 granted conditional awards to most 
Group employees under the Energean 2018 Long Term Incentive Plan (LTIP) over 659,050 ordinary shares in Energean Oil & Gas plc.

Subject to the rules of the LTIP, half of the shares subject to each employee Award vested on 22 November 2018, and the remainder will 
vest on 22 November 2019.

27. Financial instruments 
Financial risk management objectives 
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.

27.1. Fair values of financial assets and liabilities 
The information set out below provides information about how the Group determines fair values of various financial assets and liabilities.

The fair values of the Group’s financial assets and liabilities measured at amortised cost approximate to their carrying amounts at the 
reporting date. The carrying value less any estimated credit adjustments for financial assets and financial liabilities with a maturity of less 
than one year are assumed to approximate their fair values due to their short term-nature.

The carrying amount of each class of financial assets and liabilities included in the consolidated statement of financial position is as follows:

Financial assets

Cash and cash equivalents and bank deposits
Trade and other receivables

Measured at fair value through profit or loss: 
Derivative asset

Financial liabilities at amortised cost
Borrowings
Trade and other payables

Year ended 31 December

2018
$’000

2017
$’000

Notes 

17
19

219,822
1,486

15,692
9,497

–
221,308 

93,292
118,481

22
25

144,270
452,332 
596,602 

91,331
63,442
154,773

27.2 Fair values of derivative instruments
The Group had one material financial asset measured at fair value at 31 December 2017 which relates to the Energean Israel B shares. 

On 30 June 2017 the Group entered into a Reorganisation Agreement which was subsequently amended by the ‘Supplementary Agreement’ 
dated 31 October 2017, for a full description of this transaction please refer to note 28.5 to the consolidated financial statements. 

The valuation technique used multiplied the estimated likelihood of an Exit (being an IPO or a Sale) by the estimated difference between 
the consideration payable under the commitment and the estimated value of the B shares acquired under the commitment. The key input 
assumptions used in the fair value measurement calculation were the estimated likelihood of an IPO event and value of the B shares. An 
Exit in the form of a Sale was considered to be of negligible likelihood. The other significant inputs were the transaction prices applicable 
in an Exit Event, which were contractually agreed amounts, and the discount rate assumption used in the calculation, which was 11.5%. The 
fair value of the derivative asset was a Level 3 fair value measurement in the fair value measurement hierarchy, because the valuation relied 
significantly on input assumptions that were unobservable.

On remeasurement on 31 December 2017, the value of the B shares was estimated based on the price negotiated at a similar time with 
a third party for another tranche of the B shares in a separate transaction. The likelihood of a future IPO occurring was estimated as of 
31 December 2017 to be 50% having regard to the considerable progress made to prepare for an IPO as of that date, but also to the fact 
that there were a number of significant steps not wholly under the control of the Group that remained to be achieved, and the inherent 
uncertainty in achieving any IPO due to capital market conditions.

Also on 31 October 2017, under the Supplementary Agreement the consideration payable to acquire the B shares in the event of an IPO 
was reduced from $150 million to $10 million. The resulting increase in the value of the derivative asset of $67.5 million (after applying 
the 50% IPO likelihood assumption and other discounting effects) is recorded in the consolidated statement of changes in equity as the 
Supplementary Agreement is a transaction with owners, giving the derivative asset a closing value as of 31 October 2017 of $91.6 million. 
As of 31 December 2017 the derivative asset was further increased to $93.3 million due to unwinding of the discount applied at the 
recognition, resulting in an additional gain of $1.7 million recorded in profit or loss. 

 At the time of the Company’s admission to the Premium Segment of the London Stock Exchange on 21 March 2018, the probability 
of an IPO increased to 100%, increasing the fair value of the derivative to $190 million. The change in fair value of $96.7 million between 
31 December 2017 and 31 March 2018 is included in ‘Gain on derivative’ in the consolidated income statement as it is due to changes 
in measurement assumptions.

On 21 March 2018 following the acquisition of a 50% economic interest in Energean Israel, as described in note 6 the Group derecognised 
the derivative asset at its total fair value of $190 million. Upon derecognition, this derivative was the only instrument in the Level 3 category 
of the fair value hierarchy. There were no transfers in or out of this category in the period, and the only movement in the category relates to 
the increase in fair value of the derivative.

27.3 Commodity price risk
The Group does not have a formal hedging policy with regard to the oil price and is limited in the scope of its hedging activities under the terms 
of its facility agreements with the EBRD. Historically, hedging has been undertaken via zero cost collars for general downside risk and fixed 
price contracts to set a fixed price for a set number of barrels for a known future BP lifting to protect against either (i) a fall in the oil price and/
or (ii) the pricing optionality afforded to BP under the BP Offtake Agreement.

In order to mitigate price risk and take advantage of the April 2018 spike in Brent prices, Energean decided to hedge 30% of anticipated sales 
volumes for the remainder of 2018. On 13 April, Energean entered a hedging trade with Britannic Trading Limited, selling 150,000 bbls for each 
of the anticipated 400,000 bbl liftings in July, September and December at an average price of $69.39/bbl.

The following table demonstrates the timing, volumes and the average floor price protected for the Group’s commodity hedges:

Hedged quantity
bbls
150,000
150,000
150,000

Contract Month
Jun/Jul average
Aug/Sept average
Nov/Dec average

Cargo Month
July
September
December

Cargo Size
bbls
408,856
400,000
400,000

Fixed Price
$/bbl
70.73
69.54
67.91

The Group has no material financial assets that are past due. No material financial assets are impaired at the balance sheet date. All financial 
assets and liabilities with the exception of derivatives are measured at amortised cost.

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
Notes to the consolidated financial statements 
continued

27.3 Commodity price risk continued 
The Group’s oil derivatives have been designated as cash flow hedges. The Group’s oil hedges have been assessed to be ‘highly effective’ 
within the range prescribed under IFRS 9 using regression analysis.

The deferred gains and losses in the hedge reserve were subsequently transferred to the income statement during the period in which 
the hedged transaction affected the income statement. All the above oil hedge transactions were realised within the year and therefore 
transferred to sales revenue, resulting in a $1.3 million (31 December 2017: $0.2 million) loss recognised within revenue and $nil hedge 
reserve as at 31 December 2018. 

27.4 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 2018, the Group is exposed to changes in market interest rates through bank borrowings at variable 
interest rates. The exposure to interest rates for the Group’s money market funds is considered immaterial.

The following table illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/- 1%. These changes are considered 
to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market 
interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other 
variables are held constant.

Variable rate instruments
Borrowings

Interest rate sensitivity

31 December 2018
31 December 2017

2018
$’000

2017
$’000

142,986 
142,986

89,986 
89,986 

Profit and equity for the period
-1%
1,170
962

+1%
(1,170)
(1,165) 

27.5 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.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting 
date, without taking account of any collateral obtained, was:

Trade receivables
Other receivables
Cash and cash equivalents and bank deposits
Total

2018
$’000
1,462
24
219,822 
221,308 

2017
$’000
9,313
184
15,691
25,188

27.5 Credit risk continued 
Credit quality of financial assets 
The credit quality of the banks in which the Group keeps its non impaired 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:

Aa3
Caa1
Total

2018
$’000
217,190
2,632
219,822

The Company has assessed the recoverability of all cash balances and believe they are carried within the consolidated statement of 
financial position at amounts not materially different to their fair value.

The credit ratings of the Group’s trade receivables are as follows:

A1
Non-rated
Total

2018
$’000
213
1,249
1,462

2017
$’000
8,587
726
9,313

No current receivables are overdue; therefore none have been impaired and no allowance for expected credit losses has been recognised 
(2017: $nil). 

27.6 Foreign exchange risk 
The Group is exposed to foreign exchange risk as it undertakes operations in various foreign currencies. The key sources of the risk 
are attributed to the fact that the Group has certain subsidiaries with Euro functional currencies in which a number of loan agreements 
denominated in US$ and sales of crude oil are additionally denominated in US$.

The Group’s exposure to foreign currency risk at each reporting date is shown in the table below. The amounts shown are the US$ 
equivalent of the foreign currency amounts.

Dollars (US$) 
United Kingdom Pounds (GBP)
Euro 
NOK
ILS
Total

Liabilities

Assets

2018
$’000
172,247
25,674
40,955
15,001
4,173
258,050

2017
$’000
89,985
–
–
–
–
89,985

2018
$’000
22,852
46,528
43,281
17,774
1,904
132,339

2017
$’000
17,240
403
–
–
–
17,643

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
Notes to the consolidated financial statements 
continued

27.6 Foreign exchange risk continued 
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%. 

USD
Variation
10%

-10%

GBP
Variation
10%

-10%

31 December 2018
Euro
Variation
10%

-10%

ILS
Variation
10%

Profit or loss 
(before tax)
Other comprehensive 
income
Equity 

15,976

(19,527)

3,519

(3,065)

11,201
27,177

(11,202)
(30,729)

–
3,519

–
(3,065)

347

–
347

(336)

(227)

–
(336)

–
(227)

NOK
Variation
10%

277

–
277

-10%

206

–
206

Profit or loss 
(before tax)
Other comprehensive 
income
Equity 

31 December 2017

USD
Variation
10%

-10%

GBP
Variation
10%

9,182

(11,222)

(1,595)
7,587

828
(10,394)

77

–
77

-10%

(252)

–
(252)

-10%

(112)

–
(112)

The above calculations assume that interest rates remain the same as at the reporting date. 

27.7 Liquidity risk 
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially can 
increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and 
other highly liquid current assets and having available an adequate amount of committed credit facilities.

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 cash deposits and credit lines with the banks are available to meet the Group’s liabilities 
as they fall due. On 2 March 2018, the Group entered into a senior secured project finance for its Karish-Tanin project amounting to $1,275 
million. The Group started drawing down the project finance facility in March 2019. 

The table below summarises the maturity profile of the Group financial liabilities based on contractual undiscounted payments:

31 December 2018
Bank loans
Other loans
Trade and other payables
Total

Carrying
amounts
$’000
142,986 
1,284 
458,407 
602,677 

Contractual
cash flows
$’000
237,760 
1,284 
492,004 
731,048 

3 months
or less
$’000
4,629 
–
337,307 
341,935 

3 - 12 months
$’000
6,698 
–
48,429 
55,127 

1 - 2 years
$’000
42,666 
1,284 
15,373 
59,323 

2 - 5 years
$’000
112,087 
–
42,499 
154,586 

More than
5 years
$’000
71,681 
–
48,396 
120,077 

27.7 Liquidity risk continued 

31 December 2017
Bank loans
Other loans
Trade and other payables
Total

Carrying
amounts
$’000
89,986 
1,345 
69,073 
160,404 

Contractual
cash flows
$’000
132,900 
1,345 
69,073 
203,318 

3 months
or less
$’000
2,655 
–
52,689 
55,344 

3 - 12 months
$’000
15,806 
–
14,393 
30,199 

1 - 2 years
$’000
55,105 
1,345 
526 
56,976 

2 - 5 years
$’000
59,333 
–
1,465 
60,798 

More than
5 years
$’000
–
–
–
–

28. Related parties
28.1 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 Oil & Gas 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 in note 28.2 below:

Adobelero Holdings Co Ltd. is a beneficially owned holding company controlled by Panos Benos, the CFO of the Group. Growthy Holdings 
Co Ltd is a beneficially owned holding company controlled by Matthaios Rigas, the CEO of the Group. Oil Co Investments Limited is 
beneficially owned and controlled by Efstathios Topouzoglou, a Non-Executive Director of the Group. The nature of the Group’s transactions 
with the above related parties is mainly financing activities. 

Third Point Hellenic Recovery (Lux) S.A.R.L is a US based institutional investor that has historically supported the Group through debt 
funding and remains one of the Group’s largest shareholders (refer to note 21).

Kerogen Capital is an independent private equity fund manager specialising in the international oil and gas sector, which currently holds the 
30% of Energean Israel ordinary shares not held by the group.

Seven Maritime Company (Seven Marine) is a related party company controlled by one the Company’s shareholder Mr Efstathios 
Topouzoglou. Seven Marine owns the offshore supply ships Valiant Energy and Energean Wave which support the Group’s investment 
program in northern Greece.

Energean Israel Limited was an associate of the Group until 29 March 2018, when the company became a subsidiary to the Group. A Technical 
Services Agreement dated 19 December 2016 was signed between Energean International Limited and Energean Israel Limited for the provision 
of project advisory, technical and commercial consulting services between the two companies.

Abbey Investing: Property lease to other related party includes rental fees of a flat in London. The property is beneficially owned by 
Energean’s executive director’s spouse. The flat is used as a company flat for Energean’s staff and consultants. The lease agreement was 
terminated in August 2018.

Capital Earth: During the year ended 31 December 2018 the Group received consultancy services from Capital Earth Limited, a consulting 
company controlled by the spouse of one of Energean’s executive directors, for the provision of Group Corporate Social Responsibility 
Consultancy and Project Management Services.

156 Energean Oil & Gas plc Annual Report 2018

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the consolidated financial statements 
continued  

28.2 Related party transactions
Purchases of goods and services

Third Point Hellenic Recovery Fund L.P.
Growthy Holdings CO
Oilco Investments Limited
Adobelero Holdings CO
Other related party ‘Seven marine’
Other related party ‘Abbey Investing’
Other related party ‘Capital Earth Ltd’

Revenue and other income

Energean Israel Ltd

28.3 Related party balances
Payables

Energean Israel Ltd
Seven marine
Other related party ‘Capital Earth Ltd’

Nature of transactions 
Finance cost
Finance cost
Finance cost
Finance cost
Vessel leasing and services
Property lease
Consulting services

Nature of transactions 

Technical services

Nature of balance 
Technical services
Vessel leasing and services
Consulting services

2018
$’000
–
–
–
–
6,383
47
131
6,561

2018
$’000

1,398
1,398

2018
$’000
–
4,053 
158 
4,211

2017
$’000
16,070 
43 
43 
4 
6,430
67 
–
22,657 

2017
$’000

1,498 
1,498 

2017
$’000
1,477 
2,562 
–
4,039

28.4 Key management compensation 
Key management personnel are those persons who have the authority and responsibility for planning, directing and controlling the activities 
of the Group. The definition of key management personnel includes directors (both executive and non-executive) and other executives from the 
management team with significant authority and responsibility for planning, directing and controlling the entity’s activities. Key management 
personnel compensation comprises the following:

Executive Directors
Executive Committee
Non-Executive Directors
Total

Salary
and fees
$’000
1,502
817
514
2,833

Benefits
$’000
167
15
–
182

Annual
bonus
$’000
1,849
379
–
2,228

Total
$’000
3,518
1,211
514
5,243

28.5 Reorganisation
On 30 June 2017 the Group entered into a Reorganisation Agreement which was subsequently amended by the ‘Supplementary 
Agreement’ dated 31 October 2017. The Reorganisation Agreement was between the Company and the existing shareholders of Energean 
E&P Holdings (the Existing Shareholders), Energean E&P Holdings, Energean Israel and Energean International. Under the Reorganisation 
Agreement, the Company became the holding company of the Group and the senior secured loan from Third Point and certain other parties 
was discharged in exchange for $224 million preference shares in Energean International Limited.

The preference shares in Energean International Limited had no voting rights. Rights to future capital and distributions comprised the right 
to a return of capital of $224 million upon winding up of Energean Israel Limited and, as clarified in the Supplementary Agreement dated 
31 October 2017, priority over distributions to the Company’s ordinary shareholders up to an amount of $224 million. 

28.5 Reorganisation continued
Under the Reorganisation Agreement dated 30 June 2017 and the subsequent Supplementary Agreement dated 31 October 2017, 
the Group also made the following commitments:

 X Under the Reorganisation Agreement dated 30 June 2017, in the event of an Exit transaction as defined in the Reorganisation 

Agreement, the Group committed to acquire the preference shares in Energean Israel Limited. Consideration would be in the form of 
ordinary shares of the Company to the value of $224 million in the event of a Sale transaction or $240 million in the case of an IPO. Under 
the Reorganisation Agreement, each of Third Point and the Founders may at any time have proposed an Exit Event at which time each of 
the other parties to the Agreement shall: (i) give such co-operation and assistance as such Parties may reasonably request; and (ii) use 
all reasonable endeavours to procure that such Exit Event was achieved in accordance with such proposal, and therefore the contingent 
settlement provision of the preference shares represented a financial liability at 30 June 2017, initially recognised at its fair value and 
subsequently carried at amortised cost. Under the Supplementary Agreement dated 31 October 2017, the process to implement of an Exit 
Event (whether by reference to an IPO or Sale) required the consent of each of Third Point, the Founders and the Company, therefore the 
liability recognised was extinguished on 31 October 2017 with no impact on profit or loss. 

 X Under the Reorganisation Agreement dated 30 June 2017, in the event of an Exit transaction as defined in the Reorganisation 

Agreement, the Group committed to acquire the Founders’ 50% interests in the B shares of Energean Israel Limited which represented 
50% of the beneficial ownership of Energean Israel. Taken together with the Group’s A shares of Energean Israel Limited, this would have 
resulted in Energean Israel becoming a 50% joint venture investee of the Group. Consideration would be in the form of ordinary shares of 
the Company to the value of $50 million in the event of a Sale transaction or $150 million in the case of an IPO. 

 X Under the Reorganisation Agreement, the Group was contractually obliged to pursue an Exit transaction, and therefore the contingent 

share purchase represented a derivative financial instrument at 30 June 2017, carried at fair value through profit and loss (see Note 27.2). 
Pursuant to the terms of the Supplementary Agreement the Company agreed to acquire the Energean Israel Limited Class B Shares 
from its founder shareholders upon the occurrence of:

(i)  a Sale for $10 million in cash (rather than for the issue of New Shares as contemplated by the Reorganisation Agreement); or

(ii) an IPO for $10 million in cash (rather than for the issue of New Shares as contemplated by the Reorganisation Agreement).

The impact of the Supplementary Agreement on the derivative financial instrument was recognised as a credit to equity. In March 2018 the 
Company completed the admission of its shares to the Premium Segment of the London Stock Exchange and the derivative financial asset 
was subsequently derecognised upon the purchase of the Energean Israel B shares.

29. Commitments and contingencies
In acquiring its oil and gas interests, the Group has pledged that various work programmes will be undertaken on each permit/interest. 
The exploration commitments in the following table are an estimate of the net cost to the Group of performing these work programmes:

Capital commitments:
Due within one year
Due later than one year but within two years
Due later than two years but within five years

Operating lease commitments
Within one year
Between one and five years
After five years

Contingent liabilities
Performance guarantees
Greece
Israel
Montenegro 

2018
$’000

16,176
5,840
229
22,245

2,457
2,966
66
5,489

6,623
26,750
3,435
36,808

2017
$’000

7,505
14,458
500
22,463

6,540
659
175
7,374

9,630
20,350
3,598
33,578

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Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
Notes to the consolidated financial statements 
continued  

Company statement of financial position
As at 31 December 2018

29. Commitments and contingencies continued
The non-cancellable operating lease agreements entered by the Group relate mainly to:

 X Lease of supply vessels
 X Oil & gas support equipment leases
 X Property leases; and
 X Vehicles lease.

The total operating lease expenses for the year ended 31 December 2018 amounted to $1.0 million (year ended 31 December 2017: $0.7 million).

Performance guarantees
Energean Israel Limited, on 25 December 2016, submitted to the Israeli Petroleum Commissioner two irrevocable bank guarantees issued by 
HSBC of $10 million each, for each of the Karish and Tanin Leases, to secure compliance with the leases and related liabilities. The guarantees 
replace the respective guarantees in the amount of US$7.5 million each given by the previous leaseholders, Noble, Delek, and Avner.

The Group has issued bank guarantees in favour of the Israeli Petroleum Commissioner in respect of a committed minimum work program 
in five exploration blocks, Block 12, Block 21, Block 22, Block 23 and Block 31, which are located in the economic waters of the State of 
Israel. For the security of any bank claim on the aforementioned guarantees, the Group proceeded to restrict an amount of $2.5 million, 
included within long term restricted bank deposits. 

The Group issued a Letter of Guarantee of $6.0 million to beneficiary Ganoub El Wadi Holding Petroleum (GANOPE), which is the Egyptian 
Oil Commissioning Authority in respect of the capital and financial commitments of its related entity, Energean International Limited, in the 
area of West Kom Ombo. As of 31 December 2017, the $6.0 million guarantee had been reduced to $2.2 million. The Group relinquished the 
area in October 2017 and the respective bank guarantee was further reduced in April 2018 to $1. 9 million. In the year ended 31 December 
2017, the Group recognised a provision of $1.3 million for the remaining amount of the financial commitment (note 24). In August 2018, the 
Group proceeded with the payment of the amount of $1.9 million in respect of the aforementioned bank guarantee.

The Group provided a performance guarantee for the amount of $0.7 million (€0.6 million) issued to the Greek Ministry of Environment 
Energy and Climate Change in respect of contract with the Greek State for exploitation in Prinos. 

The original $8.6 million (€7.9 million) performance bank guarantee related to Ioannina block was reduced to $6.7 million (€5.6 million), and 
will be further reduced from time to time to represent the remaining minimum expenditure obligations. For the security of any bank claim 
on the aforementioned guarantee, Energean Oil & Gas S.A. proceeded to restrict an amount of $2.7 million (€2.2 million), which corresponds 
to its 40% participating interest.

As of 31 December 2018, the Group and its partner Repsol provided a bank guarantee for the total amount of $8.3 million in respect of the Lease 
Agreement of the Aitoloakarnania Area in Greece, to satisfy the Minimum Expenditure Obligations of that agreement for the First Exploration 
phase. The Group proceeded to restrict an amount of $3.3 million (€2.9 million), which corresponds to its 40% participating interest.

A €3.0 million guarantee from Energean Montenegro Limited in favour of the state of Montenegro, is due to expire on 14 October 2020, relating to 
the Group’s concession and mandatory work programme in Montenegro. The guarantee is secured by a €3.0 million cash deposit (see Note 17).

Other contingent liabilities
On 25 January 2018, the Group signed a contract with Stena Drilling, the Contractor’, to conduct drilling of three development wells in Karish 
field in Israel, with optional scope for drilling of two near field exploration wells and up to five additional development wells.

According to this contract in the event of the termination for Group’s convenience, the Contractor shall be entitled to payment as follows:

 X for termination after the date of Final Investment Decision (‘FID’) on the Karish and Tanin offshore Israel leases, the Company shall pay 

Contractor an early termination fee as follows: 

 – Operating Rate, multiplied by sixty (60), or, if the number of unutilised days in the firm drilling campaign (based on a drilling campaign 

of 230 days) is less than sixty, multiplied by such lesser number. 

Legal cases and contingent liabilities 
The Group had no other material contingent liabilities as of 31 December 2018 and 31 December 2017. 

30. Subsequent events 
There has not been any event since 31 December 2018 that has resulted in a material impact on the year-end results.

ASSETS
Non-current assets
Investment in subsidiaries 
Property plant and equipment
Loans and other intercompany receivables

Current assets
Trade and other receivables 
Derivative asset 
Cash and cash equivalents

Total assets

LIABILITIES
Current liabilities
Trade and other payables

Non-Current Liabilities
Other long-term liabilities

Total liabilities

Capital and reserves
Share capital 
Share premium
Other reserves 
Share based payment reserve
Retained earnings
Total equity

During the year the Company made a profit of $98.9 million (31 December 2017: $25.0 million). 

Approved by the Board and authorised for issue on 17 April 2019.

Matthaios Rigas 
Chief Executive Officer  

Panagiotis Benos
Chief Financial Officer

Notes

2018
$’000

2017
$’000

1

3

4
5

6

7

8
8
5
10

848,485 
2
1,443 
849,930 

6,488 
–
6,840 
13,328 
863,258

4,339 
4,339 

47 
47 
4,386

2,066 
658,805  
–
6,617  
191,384 
858,872

852 
–
–
852 

4,848 
93,292 
–
98,140 
98,992 

5,562 
5,562 

–
–
5,562 

917 
–
67,506 
–
25,007 
93,430 

160 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 161

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company statement of changes in equity
As at 31 December 2018

Company accounting policies
As at 31 December 2018

Share
Capital
$’000

Share
Premium
$’000

Share based
payment
reserve
$’000

Other
reserves
$’000

Retained
earnings
$’000

At 8 May 2017
Profit/(loss) for the period 
Capital contributions
Transactions with owners of the company
Modification of derivative (Note 5)
At 31 December 2017

Profit/(loss) for the year 
Transactions with owners of the company
Issuance of shares for share-based payment transactions
Employee share schemes
Transaction cost in relation to IPO and new share issue
Shares issued in settlement of preference shares in 
subsidiary
Group restructuring (Note 5)
At 31 December 2018

–
917

–
917

–

7
4
–

129 
–
2,066

–
–

–
–

–

–
– 
(24,057)

223,871 
–
658,805

–
–

–
–

–

3,110
3,507
–

–
–
6,617

Total
equity
$’000

25,007
917

67,506
93,430

98,871 
–
3,117
3,511 
(24,057)

–
–

67,506
67,506

–

–
–
–

25,007
–

–
25,007

98,871 

–
–
–

–
(67,506)
–

–
67,506 
191,384

224,000 
–
858,872 

(a) General information
Energean Oil & Gas PLC (‘the Company’) was incorporated in England & Wales on 8 May 2017 as a public company with limited 
liability, under the Companies Act 2006. Its registered office is at 44 Baker Street, London W1U 7AL, United Kingdom. The Financial 
Statements are presented in US Dollars and all values are rounded to the nearest US$ thousands ($‘000), except where otherwise stated. 
Energean Oil & Gas Plc is the ultimate Parent of the Energean Oil & Gas Group. 

(b) 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 Financial Statements have therefore been prepared in accordance with 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 disclosure exemptions 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, 40A, 40B, 40C and 40D,111 and 134 to 136 of IAS 1 Presentation 

of Financial Statements; 

e)   the requirements of IAS 7 Statement of Cash Flows; 

f)  the requirements of paragraphs 45(b) and 46-52 of IFRS2 share-based payments

g)   the requirements of paragraph 17 of IAS 24 Related Party Disclosures; 

h)   the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members 

of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; 

Where relevant, equivalent disclosures have been given in the Group accounts.

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.

During the year the Company made a profit of $98.9 million (31 December 2017: $25.2 million). 

(c) Going concern
The Directors have exercised significant judgement in assessing that the preparation of the financial statements on a going concern basis 
is appropriate. In making this assessment, the factors considered, among others, include the current financial position and the profitability 
of the Company as well as the Directors’ expectations in relation to future business prospects, and future profitability and cash flows of 
the Company. Another important factor for determining that the going concern basis remains appropriate is the ability to raise funding as 
and when needed. In 2018 the Company successfully completed an IPO on the London Stock Exchange and raised $460 million gross 
proceeds. 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.  

(d) 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. 

(e) 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.

(f) Financial instruments at fair value through profit or loss
FVTPL includes financial instruments held for trading (HFT) and financial instruments designated upon initial recognition at fair value 
through profit or loss. Financial instruments are classified as HFT if they are acquired for the purpose of selling or repurchasing in the near 
term. Derivatives, including separated embedded derivatives are also classified as HFT. Financial instruments at fair value through profit or 
loss are carried in the statement of financial position at fair value with net changes in fair value presented as gain or loss in the statement 
of profit or loss. The Company’s financial instrument that have been classified as HFT are derivative instruments. 

162 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 163

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
Company accounting policies continued

(g) Trade and other receivables
Receivable represents the Group’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). 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. Where the time value of money is material, 
receivables are carried at amortised cost.

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The calculation 
reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the 
reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-
off if past due for more than one year and are not subject to enforcement activity. 

(h) Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Company prior 
to the end of the financial year that are unpaid and arise when the Company becomes obligated to make future payments in respect of 
the purchase of those goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(i) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market 
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or 
transfer the liability takes place either: in the principal market for the asset or liability or in the absence of a principal market, in the most 
advantageous market for the asset or liability.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or 
liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into 
account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another 
market participant that would use the asset in its highest and best use.

The Company 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 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:

 X Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
 X Level 2 — Valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly or 

indirectly observable

 X 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 financial statements on a recurring basis, the Company 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 whole) at the end of each reporting period.

(j) Share issue expenses
Costs of share issues are written off against share premium arising on the issues of share capital.

(k) 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 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.

(l) 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. 

(m) Critical accounting judgements and key sources of estimation uncertainty
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and 
liabilities, are discussed below:

Fair value measurements and valuation processes
Some of the Company’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an 
asset or a liability the Company uses market-observable data to the extent that it is possible. Where level 1 inputs are not available, as is 
the case for the option to purchase Energean Israel Class B shares the Company has used a combination of level 2 and level 3 inputs to 
estimate the fair value.

Information about the valuation technique and inputs used in determining the fair value of the option to purchase Energean Israel Class B 
shares is disclosed in Note 5.

164 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 165

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the company financial statements

Note 1 Investments in subsidiaries
The following table shows the movement in the investment in subsidiaries during the year

At 31 December 2017
Settlement of preference shares (note 8)
Derivative asset capitalised to investment (note 5)
Cash investments
At 31 December 2018

$’000
852
224,000
190,000
433,633
848,485

On 30 June 2017, the Company reorganised the business and became the parent company of the Group through the acquisition of the full 
share capital of Energean E&P Holdings Limited in exchange for 65,643,120 shares of nominal value £0.01.

During 2018, the Company increased its investments in subsidiary undertakings by $847.6 million.

A complete list of Energean Oil & Gas Plc Group companies at 31 December 2018, and the Group’s percentage of share capital are set 
out in Note 1 of the Group financial statements. The principal activity of all companies relates to oil and gas exploration, development and 
production. All of these subsidiaries have been consolidated in the Group’s financial statements. 

Note 2 Dividends 
No dividends were paid and declared during the period.

Note 3 Loans and other intercompany receivables

Loans to subsidiary
Other receivables
At 31 December 2018

2018
$’000
1,280
163
1,443

2017
$’000
–
–
–

The loan to subsidiary include amount due from subsidiary which incurs a fixed rate of interest at 3% per annum and has maturity date on 
20 October 2021. The amount has been fully eliminated in the Group financial statements.

Note 4 Trade and other receivables 

Financial items
Receivables from shareholders 
Due from subsidiary undertakings

Non-financial items
Deposits and prepayments

Total trade and other receivables

2018
$’000

23
6,267
6,290

198
198
6,488

2017
$’000

65
–
65

4,783
4,783
4,848

Receivables from subsidiary undertakings relates to intragroup recharges for subsidiaries’ employees share-based payments, the employee 
remuneration expense related to subsidiaries is fully recharged to subsidiaries, and management services provided by the Company.  

Note 4 Trade and other receivables continued

The amounts due from subsidiary undertakings consist of receivables related to services provided from the Company to its subsidiaries 
under a ‘Management and administrative Services Agreement’. All these amounts have been eliminated in the Group financial statements.

The receivable amount from shareholders consists of the nominal value of the initial share capital for the incorporation of the company. 
At incorporation, the affiliate company Energean E&P Holdings provided a letter according to which the amount of ₤50k is held available 
in its bank accounts on behalf of the Company until its shareholders are able to pay the amount. At reporting date an amount of $23k was 
still outstanding. 

The amount included under deposits and prepayments account as at 31 December 2017 consists of the costs accrued in 2017 and which 
are related to the Initial Public Offering (IPO) of the Company which at 31 December 2017 was still in progress. All such costs, after the IPO 
successfully completion have been debited against the share capital raised at the reporting date. Such IPO costs are related to the services 
provided to the Company by the reporting accounts, lawyers and other professionals. 

Note 5 Financial Instruments 
Disclosure exemptions adopted
Where equivalent disclosures for the requirements of IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value Measurements have 
been included in the 2017 Annual Report and Accounts of Energean Oil & Gas Plc, the Company has adopted the disclosure exemptions 
available to the Company’s accounts.

Financial risk management objectives
The Company follows the Group’s policies for managing all its financial risks.

Fair values of derivative instruments
The Company had one material financial asset measured at fair value at 31 December 2017 which relates to the Energean Israel B shares. 
As part of the reorganisation the Company committed on 30 June 2017 to acquire the 50% of the class B shares of Energean Israel Limited 
in an Exit Event.

The valuation technique used multiplies the estimated likelihood of an Exit (being an IPO or a Sale) by the estimated difference between the 
consideration payable under the commitment and the estimated value of the B shares to be acquired under the commitment. The key input 
assumptions used in the fair value measurement calculation are the estimated likelihood of an IPO event and value of the B shares. An Exit 
in the form of a Sale is considered to be of negligible likelihood. The other significant inputs were the transaction prices applicable in an Exit 
Event, which were contractually agreed amounts, and the discount rate assumption used in the calculation which was 11.5%. The fair value 
of the derivative asset is a Level 3 fair value measurement in the fair value measurement hierarchy, because the valuation relies significantly 
on input assumptions that are unobservable.

On remeasurement on 31 December 2017, the value of the B shares was estimated based on the price negotiated at a similar time with 
a third party for another tranche of the B shares in a separate transaction. The likelihood of a future IPO occurring was estimated as of 
31 December 2017 to be 50% having regard to the considerable progress made to prepare for an IPO as of that date, but also to the fact 
that there were a number of significant steps not wholly under the control of the Company that remained to be achieved, and the inherent 
uncertainty in achieving any IPO due to capital market conditions.

The change in fair value of $25.8 million between 30 June 2017 and 31 December 2017 is included in ‘Gain on derivative’ in the statement of 
profit or loss as it is due to changes in measurement assumptions.

166 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 167

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
 
Notes to the company financial statements 
continued

Note 5 Financial Instruments continued 

Note 8 Share capital continued

Also on 31 October 2017, under the Supplementary Agreement the consideration payable to acquire the B shares in the event of an IPO 
was reduced from $150m to $10m. The resulting increase in the value of the derivative asset of $67.5 million (after applying the 50% IPO 
likelihood assumption and other discounting effects) is recorded in the statement of changes in equity as the Supplementary Agreement is 
a transaction with owners, giving the derivative asset a closing value as of 31 October 2017 of $91.6 million. As of 31 December 2017 the 
derivative asset was further increased to $93.3 million due to unwinding of the discount applied at the recognition, resulted in additional 
gain of $1.7 million recorded in profit or loss.

At the time of the Company’s admission to the Premium Segment of the London Stock Exchange on 21 March 2018, the probability 
of an IPO increased to 100%, increasing the fair value of the derivative to $190 million. The change in fair value of $96.7 million 
between 31 December 2017 and 21 March 2018 is included in ‘Gain on derivative’ in the income statement as it is due to changes 
in measurement assumptions. 

On 21 March 2018 following the acquisition of a 50% economic interest in Energean Israel, as described in note 27.2 of the consolidated 
financial statements the Company derecognised the derivative asset at total fair value of $190 million. Upon derecognition, this derivative 
was the only instrument in the Level 3 category of the fair value hierarchy. There were no transfers in or out of this category in the period, 
and the only movement in the category relates to the increase in fair value of the derivative.

Note 6 Trade and other payables

Staff costs accrued
Trade payables
Due to subsidiary undertakings
Accrued expenses
Taxes and social securities payable
Other creditors
Total trade and other payables 

2018
$’000
1,573
1,282
756
323
398
7
4,339

2017
$’000
1,849
3
–
3,674
–
36
5,562

Note 7 Other long-term liabilities
Other long-term liabilities consists of a provision for Employers’ National Insurance accounted for on the LTIP Awards at each reporting 
date up to the release date.

Note 8 Share capital 
The Company’s initial share capital amounted to £50 thousand ($65k), consisting of an issuance of 50,000 ordinary shares of a nominal 
value of £1.00 ($1.3) each on 8 May 2017. On 30 June 2017 the Company effected a 100 for 1 share split resulting in 5,000,000 ordinary 
shares of a nominal value of £0.01 ($0.013) each.

On 30 June 2017, the Company also became the parent company of the Group through the acquisition of the full share capital of Energean 
E&P Holdings Limited, in exchange for 65,643,120 £0.01 ($0.013) shares in the Company issued to the previous shareholders. As of this 
date, the Company’s share capital increased from £50 thousand ($65k) to £706 thousand ($917k). 

On 21 March 2018, the Company issued 72,592,016 new shares in relation to the placement of its initial public offering of ordinary shares 
at £4.55 per share.

On the Company’s admission to the London Stock Exchange and pursuant to the terms of the reorganisation agreement, a Company’s 
subsidiary preference shares held by one of the Company’s shareholder were converted to 9,095,900 common shares in the Company (note 1).  

Authorised
At 31 December 2017
Issued during the year
– IPO shares 
– Shares issued in settlement of preference shares in subsidiary
– Share-based payment transactions
– Employee share schemes
At 31 December 2018

Note 9 Staff costs

Wages and salaries
Directors’ remuneration
Social insurance costs and other funds
Share–based payments
Pension contribution & insurance
Total payroll cost 

Equity share
capital allotted
and fully paid
Number

Share
capital
$’000

Share
premium
$’000

70,643,120

917

–

72,592,016
9,095,900
492,202
329,525
153,152,763

1,009
129
7
4
2,066

2018
$’000
402 
3,265 
343 
468 
12 
4,490

434,934
223,871
–
–
658,805

2017
$’000
–
588 
81 
–
–
669

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 Financial Statements.

Note 10 Share-based payment
Employee Share Award Plan (ESAP)
On 24 May 2018, the Company, in respect of the its admission to the London Stock Exchange on 21 March 2018 granted conditional awards 
to most Group employees under the Energean 2018 Long Term Incentive Plan (LTIP) over Company’s 659,050 ordinary shares. 

On 16 November 2018 a number of 329,525 new ordinary shares were issued, in respect of those shares awarded under the Energean 2018 
Long Term Incentive Plan 2018 on 24 May 2018 (‘Admission Awards’) which were due to vest on 22 November 2018.

Energean 2018 Long Term Incentive Plan
Energean Incentive Plan (LTIP) Under the LTIP, Senior Management can be granted nil exercise price options, normally exercisable from 
three to ten years following grant provided an individual remains in employment. The LTIP Awards were granted in the form of conditional 
share awards and are subject performance conditions over a period of up to three years. On 12 July 2018 a total of 644,893 LTIP Awards 
were granted to Senior Management.

Please refer to note 26 of the consolidated financial statements for additional disclosures on the Company’s share based payment plan. 

Income statement summary
Share based payment charges during the year, which have been recognised in the income statement were totalling to $468k. 

168 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 169

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther informationNotes to the company financial statements 
continued

Payments to governments (unaudited)

Note 11 Related party transactions
The Company’s subsidiaries at 31 December 2018 and the Group’s percentage of share capital are set out are in note 1 of the consolidated 
financial statements. The following table provides the Company’s balances which are outstanding with subsidiaries companies at the 
balance sheet date:

Amounts receivable from subsidiary undertakings
Amounts payable to subsidiary undertakings

2018
$’000
7,710
866
8,576

2017
$’000
–
–
–

The amounts outstanding are unsecured and repayable on demand and will be settled in cash.

The following table provides the Company’s transactions only with partially owned subsidiary companies where the Company holds a 
minority interest recorded in the income statement:

Amounts invoiced to subsidiaries under a ‘Management and administrative Services Agreement’. 

2018
$’000
4,327
4,327

2017
$’000
–
–

Note 12 Directors’ Remuneration
Directors’ remuneration has been provided in the remuneration report within the Annual Report. Please refer to page 89 of the Annual Report. 

Note 13 Auditors’ Remuneration
Auditors’ remuneration has been provided in the group financial statements. Please refer to note 8 of the group financial statements for 
details of the remuneration of the company’s auditor on a group basis.

Note 14 Events after reporting period
Please refer to note 30 of the consolidated financial statements. 

Energean pays to several countries numerous taxes, including withholding taxes, PAYE and 
National Insurance on personnel employed, bonuses, licence fees, royalties and other taxes. 

Transparency disclosure
The Reports on Payments to Governments Regulations (UK Regulations) came into force 
on 1 December 2014 and require UK companies in the extractive sector to publicly disclose 
payments made to governments in the countries where they undertake extractive operations. 
The regulations implement Chapter 10 of EU Accounting Directive (2013/34/ EU). The UK 
Regulations came into effect on 1 January 2015. The 2018 disclosure remains in line with 
the EU Directive and UK Regulations and we have provided additional voluntary disclosure 
on withholding taxes, PAYE and other taxes.

The main economic value 
to host governments is from 
payroll and withholding taxes 
on Energean’s activities.

$10.1m 

paid to governments

The payments disclosed are based on where the obligation for the payment arose: payments raised at a project level have been disclosed 
at project level and payments raised at a corporate level have been disclosed on that basis. However, where a payment or a series of related 
payments do not exceed £86,000, they are disclosed at a corporate level, in accordance with the UK Regulations. The voluntary disclosure 
has been prepared on a corporate level.

All of the payments disclosed in accordance with the Directive 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 the Hellenic Hydrocarbon Resources Management SA. 

Royalties – represent cash royalties paid to the Greek Government during the year for the extraction of oil. The terms of the royalties are 
described within the Lease Agreement for Prinos area. The cash payment of royalties occurs within a three months’ period from the end 
of the year in which the royalty payment obligation has arisen.

Bonus payments – represent signature bonuses paid to the Greek and Israeli governments during the year as a result of the award of 
Aitoloakarnania license in Greece and exploration blocks 12, 21, 22, 23 & 31 in Israel as per the terms of the relevant lease agreements. 

Licence fees – represent licence fees, rental fees, entry fees and other consideration for licences and/or concessions paid for access 
to an area during the year (with the exception of signature bonuses which are captured within bonus payments).

Withholding tax (WHT) – represent tax charged mainly on services and royalties. The amount disclosed is equal to the WHT return 
submitted by Energean to governments with the cash payment made in the year the charge is borne. 

PAYE and national insurance – represent payroll and employer taxes paid (such as PAYE and national insurance) by Energean as a direct 
employer. The amount disclosed is equal to the return submitted by Energean to governments with the cash payment made in the year the 
charge is borne.

Training allowances – comprise payments made in respect of training government or national oil company staff. This can be in the form 
of mandatory contractual requirements or discretionary training provided by the company.

VAT – represents net cash VAT received from/paid to governments during the year. The amount disclosed is equal to the VAT refunds/
payments made by Energean to governments on a cash basis. 

Other taxes – comprise payments made in respect of taxes other than the above including annual levies, stamp duties, etc.

170 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 171

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
Transparency disclosure (unaudited)

Licence/Company level
Energean Oil & Gas SA
Greece – Prinos licence
Greece – South Kavala licence
Greece – Ioannina licence
Greece – Katakolo licence
Greece – Aitoloakarnania licence
Energean Oil & Gas SA

Kavala Oil SA

Greek Government Report

Energean Israel Limited
Israel – Karish license
Israel – Tanin license
Israel – Blocks 12, 21, 22, 23 & 31
Israel – Energean Israel Transmission Limited
Israel – Branch of Energean Israel Finance Sarl

Israeli Government Report 

Energean International Limited
Egypt – branch

Egypt Government Report

Energean Montenegro Limited
Montenegro – Block 4218 - 30
Montenegro – Block 4219 - 26

Montenegrin Government Report

Energean E&P Holdings Limited
Energean International Limited
Energean Israel Limited
Energean Montenegro Limited

Cyprus Government Report

Energean Oil & Gas plc
Energean International Limited (UK branch)
Energean Med Limited

UK Government Report

Luxembourg Government Report

–
–
–
–
–
–

–

–
–
–
–
–

–

–

–

–
–

–

–
–
–
–

–

–
–
–

–

–

–
–
–
–
–
–

–

–
–
–
–
–

–

–

–

–
–

–

–
–
–
–

–

–
–
–

–

–

 1.99   
–
–
–
–

 1.99   

 –     

 –     

 –     
 –     

 –     

–
 253.32   
–
–

 253.32   

–
–
–

 –     

 –     

–
–
–
–
–

–
–
–
–
–

–
–
 500.00   
–
–

 70.93   
 72.38   
–
–
–

 –     

 –     

 500.00   

 143.31   

 –     

 –     

 –     
 –     

 –     

 –     
 –     
 –     
 –     

 –     

 –     
 –     
–

 –     

 –     

 –     

 –     

 –     
 –     

 –     

 –     
 –     
 –     
 –     

 –     

 –     
 –     
–

 –     

 –     

 –    

 –     

 –    

 –     

 –     
 –     

 100.96   
 23.13   

 –     

 124.09   

 –     
 –     
 –     
 –     

 –     

 –     
 –     
–

 –     

 –     

 –     
 –     
 –     
 –     

 –     

 –     
 –     
–

 –     

 –     

–
–
–
–
–

 –     

–

 –     

 –     
 –     

 –     

 –     
 –     
 –     
 –     

 –     

 –     
 –     
–

 –     

 –     

 –     

European transparency directive disclosure

Production
entitlements
BBL000

Production
entitlements
$000

Income
taxes
$000

Royalties
(cash only)
$000

Dividends
$000

Bonuses
payments
$000

Licence
fees
$000

Infrastructure
improvement
payments
$000

–
–
–
–
–
–

 228.68   
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
 366.09   
–

 232.78   
–
 19.78   
 1.18   
 256.59   
–

–
–
–
–
–
–

Voluntary disclosure

VAT
$000

Stamp duty
$000

Withholding
tax
$000

PAYE and
national
insurance
$000

Training
allowances
duties
$000

–
–
–
–
–

(4,897.16)   

–
–
–
–
–
 31.13   

–
–
–
–
–
 1,037.58   

–
–
–
–
–
 3,391.78   

–

 0.02   

 49.08   

 8,507.35   

–
–
–
–
–
–

–

Total 
$000

Total
BBL000

Other
$000

–
–
–
–
–
 200.51   

 461.45   
 –     
 19.78   
 1.18   
 622.68   
(236.16)   

(3,782.11)   

 4,774.34   

 –     

 228.68   

 –     

 366.09   

 510.32   

 –     

(4,897.16)   

 31.15   

 1,086.66   

 11,899.13   

 –     

(3,581.60)   

 5,643.28   

–
–
–
–
–

 –     

–

 –     

–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

(511.27)   

 –     

 1,199.23   

 360.92   

–

 –     

–
–

 –     

–
–
–
–

 –     

(211.84)   
(266.17)   

–

(478.01)   

–

–

 –     

–
–

 4.75   

 54.95   

 4.75   

 54.95   

–
–

–
–

 –     

 19.56   

 90.40   

 99.69   

–
–
–
–

 –     

 –     
 –     
–

 –     

–

–
–
–
–

 –     

 –     
 –     
–

 272.23   
 69.42   
 2.55   
 0.89   

 345.08   

 1,116.89   
 1,126.99   
–

 –     

 2,243.88   

–

–

 –     
 –     
 –     
 –     

 –     

 –     
–
–

 –     

–

–
–
–
–
–

 72.92   
 72.38   
 500.00   
–
–

 –     

 1,694.18   

 17.43   

 17.43   

–
–

 –     

 8.26   
 4.53   
 0.40   
 0.41   

 77.12   

 77.12   

 100.96   
 23.13   

 333.73   

 280.49   
 327.27   
 2.95   
 1.30   

 13.61   

 612.01   

 –     
–
–

 –     

–

 905.04   
 860.82   
 –     

 1,765.87   

–

 –     
 –     
 –     
 –     
–
–

 –     

 –     

 –     
 –     
 –     
–
–

 –     

 –     

 –     

 –     
 –     

 –     

 –     
 –     
 –     
 –     

 –     

 –     
 –     
–

 –     

–

 –    

 –     

 –     

 255.30   

 228.68   

 –     

 866.09   

 777.72   

(5,886.44)   

 31.15   

 2,310.20   

 14,994.36   

 99.69   

(3,550.57)   

 10,126.18   

172 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 173

Financial statements continuedStrategic reportCorporate governanceFinancial statementsOther information 
      
 
Other information

Glossary

CO2
H2S
SO2

GBP or £
USD or $
EUR or €
NOK

A
ACQ
AGM
ALARP 

B
bbl
Bcf
bcm
boe
boepd
bopd

C
CAGR
Capex
CEO
CFO
COO
CMAPP
CNG
CPR
CSR

D
DCQ

Carbon dioxide

Hydrogen sulphide

Sulphur dioxide

Pound sterling

US dollar

Euro

Norwegian krone

Annual Contract Quantity

Annual General Meeting

As low as reasonably practicable (A term often 
used in the regulation and management of 
safety-critical and safety-involved systems.)

Barrel

Billion cubic feet

Billion cubic metres

Barrels of oil equivalent

Barrels of oil equivalent per day

Barrels of oil per day

Compound annual growth rate

Capital expenditure

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Corporate Major Accident Prevention Policy

Compressed natural gas

Competent Person’s Report

Corporate Social Responsibility

Daily Contract Quantity

E
E&P
EBITDAX

EBRD

EIA
EOR
EPCIC 

F
FAR

FDP
FEED
FID
FPSO

FRC
FRS 

G
G&A 
GSPA 
GSP

H
H&S
HMRC
HSE

I
IAS
IASB
IFRS
INGL 
IPO
IPP 
IR

Exploration and production

Earnings before interest, tax, depreciation, 
amortisation and exploration expenses 

European Bank for Reconstruction and 
Development

Environmental Impact Assessment

Enhanced Oil Recovery

Engineering, Procurement, Construction, 
Installation and Commissioning

Fatal Accident Rate – number of fatalities per 100 
million hours worked

Field Development Plan

Front-end Engineering and Design

Final Investment Decision

Floating Production Storage and  
Offloading vessel

Financial Reporting Council

Financial Reporting Standard

General and Administrative

Gas Sale and Purchase Agreement

GSP Offshore S.R.L.

Health and Safety

HM Revenue and Customs

Health, Safety and Environment

International Accounting Standard

International Accounting Standards Board

International Financial Reporting Standard

Israel Natural Gas Lines Ltd

Initial Public Offering

Independent Power Producers

Investor Relations

J
JOA 
JV

K
kboepd
km
KPI

L
LIBOR
LSE
LTI
LTIF

M
M3
MARPOL

MM
MMbbls
MMbo
MMboe
MMbtu
MMscf
MMscf/day 
or MMscfd
MMtoe
MoU

N
NGF
NGO
NPV
NSAI

Joint Operating Agreement

Joint Venture 

Thousands of barrels of oil equivalent per day

Kilometres

Key Performance Indicator

O
OECD

Opex
OR

P
PP&E
Psi

Organisation for Economic Co-operation and 
Development

Operating expenses

Or Power Energies

Property, plant and equipment

Pounds per square inch

R
2P reserves
RBL
2C resources Contingent resources

Reserve Based Lending

Proven and probable reserves

S
Sq km  
or km2
STOB

T
Tcf
TRIR
TASE

W
WI

Square kilometres

Stock Tank Oil Barrels

Trillion cubic feet

Total Recordable Injury Rate

Tel Aviv Stock Exchange

Working interest

London Interbank Offered Rate

London Stock Exchange 

Lost Time Injury

Lost Time Injury Frequency

Cubic metre

(Marine pollution) International Convention for 
the Prevention of Pollution from Ships

Million

Million barrels

Million barrels of oil

Million barrels of oil equivalents

Million British Thermal Units

Million standard cubic feet

Million standard cubic feet per day

Million tonnes of oil equivalent

Memorandum of Understanding

Natural Gas Framework

Non-Governmental Organisation

Net Present Value

Netherland, Sewell & Associates, Inc.

174 Energean Oil & Gas plc Annual Report 2018

Energean Oil & Gas plc Annual Report 2018 175

Strategic reportCorporate governanceFinancial statementsOther informationOther information continued

Company information

Registered office
Energean Oil & Gas 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

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
Camarco 
107 Cheapside 
London 
EC2V 6DN

Registrar
Computershare Investor Services plc 
The Pavilions 
Bridgwater Road  
Bristol  
BS13 8AE

Financial calendar
13 June 2019: Annual General Meeting

Forward-looking statements
This Annual Report may include statements that are, or may 
be deemed to be, ‘forward-looking statements’. These forward-
looking statements may be identified by the use of forward-looking 
terminology, including terms such as ‘believes’, ‘estimates’, ‘plans’, 
‘projects’, ‘anticipates’, ‘expects’, ‘intends’, ‘may’, ‘will’ or ‘should’ 
or, in each case, their negative or other variations or comparable 
terminology, or by discussions of strategy, plans, objectives, goals, 
future events or intentions. These forward-looking statements 
include all matters that are not historical facts and involve 
predictions. Forward-looking statements may and often do differ 
materially from actual results.

In addition, even if results or developments are consistent with 
the forward-looking statements contained in this Annual Report, 
those results or developments may not be indicative of results 
or developments in subsequent periods. Any forward-looking 
statements reflect the Group’s current view with respect to future 
events and are subject to risks relating to future events and other 
risks, uncertainties and assumptions relating to the Group’s business, 
results of operations, financial position, liquidity, prospects, growth 
or strategies and the industry in which it operates. Forward-looking 
statements speak only as of the date they are made and cannot be 
relied upon as a guide to future performance.

176 Energean Oil & Gas plc Annual Report 2018

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Registered Office
Energean Oil & Gas plc 
Accurist House 
44 Baker Street 
London 
W1U 7AL 
United Kingdom

Tel: +44 203 655 7200

www.energean.com