STRATEGIC REPORT
let
2020
Annual Report
Energean plc
www.energean.com
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Key Metrics Highlights
Net working interest 2P reserves (MMboe)
Average working interest production (Kboepd)
Sales revenue ($m)
Cost of production ($/boe)
Adjusted EBITDAX ($m)3
Profit after tax ($m)
Cash flow from operating activities ($m)
Net debt / (cash) ($m)4
Report Highlights
STRATEGIC REPORT
Pro
forma
20201,2
982
48.3
336
11.3
108
(416)
137
1,240
2020
2019
762
3.6
28
21.4
(8)
(93)
2
1,240
342
3.3
76
22
36
(84)
36
562
A year of strong delivery; Karish project 87% complete at year-end
The Karish project was approximately 87% complete at year end 2020 (90% at 31 March 2021),
signaling a strong year of operational delivery, despite some COVID-19 related challenges during
the year, and we expect to deliver first gas within 12-months, in 1Q 2022. Since the year-end, we
have also taken Final Investment Decision (“FID”) on Karish North (Israel) and NEA/NI (Egypt),
which will lead to the commercialisation of a combined 280 million barrels of oil equivalent
(“MMboe”) of 2P reserves and delivering project IRRs of >40% and >30%, respectively. Post-
period end, we have further enhanced our Israeli position through the acquisition of Kerogen
Capital’s 30% holding in Energean Israel Limited (“EISL”) 5 , adding 219 MMboe for a total
consideration of less than $2/boe.
Transitioning reserves into cash flows
In 2020, pro forma6 working interest production was 48.3 kboepd, around the mid-point of guidance
of 44.5 - 51.5 kboepd, with the Abu Qir gas-condensate field, offshore Egypt, accounting for over
70% of total output. On the back of strong operational performance, as well as the maturation of
key growth projects, a number of our medium-term targets were enhanced during the period,
including our objective to deliver working interest production of more than 200 kboepd, which we
expect to translate into annualised adjusted EBITDAX of more than $1.4 billion per year. The next
12 months are expected to be our year of transition, in which the delivery of Karish in 1Q 2022 will
accelerate us towards our medium-term goal of paying a meaningful and sustainable dividend.
A carbon neutral future
We have further developed our decarbonisation strategy, in which we target carbon neutrality7
across all operated assets by 2050 and have delivered a 67% year-on-year reduction in carbon
emissions intensity to 22.2 kgCO2/boe, when considering 2020 pro forma8 performance data
1 Pro forma Energean plus the assets acquired from Edison E&P. The transaction closed on 17 December 2020
2 Reserves are pro forma Energean plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”). The
transaction closed on 25 February 2021
3The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include adjusted EBITDAX. More information can be found in the Financial
Review section, under the heading ‘Non-IFRS measures’
4 Net debt/(cash) is shown on an actual basis i.e. not pro forma
5 The transaction closed on 25 February 2021
6 Pro forma production and financial results are presented as if Edison E&P results were consolidated for the entire year; the
locked box date of the transaction was 1 January 2019 and therefore all economic results since that date accrue to Energean
Actual results consolidate from the closing date of the transaction, which occurred on 17 December 2020
7 Scope 1 and 2 emissions
8 Pro forma carbon emissions intensity is presented as if Edison E&P performance was consolidated for the entire year
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STRATEGIC REPORT
versus 2019 Energean standalone data. Moreover, in our 2020 year-end reporting, we have
aligned with the Task Force for Climate Disclosure (“TCFD”) recommendations across all of the
TCFD pillars and run scenario analysis across our assets. We also engaged with the Carbon
Disclosure Project (“CDP”), achieving a B- score in climate change, putting us among the top third
of companies within our sector, and a B score in supplier engagement. Finally, we established a
new climate change entity called Egypt Energy Services (EES) to manage energy efficiency
projects and evaluate the use of low carbon solutions, including carbon capture and storage.
Furthermore, we introduced carbon shadow prices as a key sensitivity tool for decision making.
Internal carbon shadow prices have been set at 25 €/t in 2020 gradually increasing to 200 €/t in
2050.
Non-Financial Information Statement
The information for this statement is included in:
• Strategy on pages 17 to 23;
• The Sustainability Review on pages 43 to 61, which reports on environmental
performance, employees and human rights
• Principal Risks and Uncertainties on pages 72 to 96; and
• Governance and Risk Management on pages 97 to 159.
Additional non-financial information is available on our website www.energean.com
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STRATEGIC REPORT
Contents
Key Metrics Highlights ..................................................................................................................... 2
Report Highlights .............................................................................................................................. 2
Non-Financial Information Statement .............................................................................................. 3
Strategic Review
About Us........................................................................................................................................... 5
Performance in 2020 ........................................................................................................................ 7
Chairman’s Statement ..................................................................................................................... 9
Chief Executive’s Review ............................................................................................................... 12
Our Business Model and Strategy ................................................................................................. 15
Our Strategy ................................................................................................................................... 17
Market Overview ............................................................................................................................ 27
Our Key Performance Indicators ................................................................................................... 29
Review of Operations ..................................................................................................................... 34
Corporate Social Responsibility ..................................................................................................... 42
Financial Review ............................................................................................................................ 61
Risk Management .......................................................................................................................... 71
Viability Statement ......................................................................................................................... 94
Corporate Governance
Board of Directors .......................................................................................................................... 96
Corporate Governance Report .................................................................................................... 104
Audit and Risk Committee Report ............................................................................................... 113
Nomination & Environment, Social & Governance Committee Report ....................................... 119
Remuneration Committee Report ................................................................................................ 125
Group Directors’ Report ............................................................................................................... 153
Statement of Directors’ Responsibilities ...................................................................................... 157
Financial Statements
Independent Auditor’s Report to the Members of Energean Plc ................................................. 159
Group Income Statement ............................................................................................................. 173
Group Statement of Comprehensive Income .............................................................................. 174
Group Statement of Financial Position ........................................................................................ 175
Group Statement of Changes in Equity ....................................................................................... 177
Group Statement of Cash Flows .................................................................................................. 179
Notes to the Consolidated Financial Statements......................................................................... 182
Company Statement of Financial Position ................................................................................... 257
Company Statement of Changes in Equity .................................................................................. 259
Company Accounting Policies ..................................................................................................... 260
Glossary ....................................................................................................................................... 269
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STRATEGIC REPORT
Strategic Review
About Us
Energean at a glance
The leading independent, gas-focused E&P company in the Mediterranean
Established in 2007, Energean is a London Premium Listed FTSE 250 and Tel Aviv 35 Listed E&P
company with operations in nine countries across the Mediterranean and UK North Sea. Since
IPO in 2018, Energean has grown to become the leading independent, gas-producer in the
Mediterranean, with a strong medium-term production and development growth profile. At the core
of this growth is our commitment to develop. We develop and invest in new ideas, concepts and
solutions to produce and develop energy efficiently, at low cost and with a minimal carbon footprint.
Energean completed the acquisition of Edison E&P on 17 December 20209, and in doing so,
reinforced its commitment to the Mediterranean region. The economic reference date of the
transaction is 1 January 2019; however, the figures for Edison E&P are consolidated into the
financial statements as of the completion date of 17 December 2020. Throughout the report, both
operational and financial results are presented on an actual and pro forma (Energean plus Edison
E&P) basis.
Energean's pro forma10 2020 production of 48.3 kboepd came mainly from the Abu Qir gas-
condensate field in Egypt, as well as fields in Southern Europe, acquired as part of the acquisition
of Edison E&P.
Our flagship project is the multi-tcf deepwater Karish, Karish North and Tanin gas development,
offshore Israel, where we will use the newbuild fully-owned Energean Power FPSO, which will be
the only FPSO in the Eastern Mediterranean, to deliver gas into the Israeli domestic market, which
Energean is working towards delivering in 1Q 2022. Post-period end, we further cemented our
position in Israel, when we completed the acquisition of the 30% minority interest in EISL,
increasing Energean’s shareholding in the subsidiary to 100%. To date, Energean Israel has
signed contracts to supply 7.4 Bcm/yr of gas into the Israeli domestic market, all of which have
floor pricing, take-or-pay and/or exclusivity provisions that largely insulate revenues against
downside commodity price risk and underpin our goal of paying a meaningful and sustainable
dividend from 2022.
With a proven track record of consistently growing reserves and resources, we are focused on
maximising production from our large-scale gas-focused portfolio to deliver material free cash flow
and maximise total shareholder return in a sustainable way.
ESG, health and safety are paramount to Energean; we aim to run safe and reliable operations,
whilst targeting carbon-neutrality11 across all our operations by 2050. These aspirations were
significantly advanced with the completion of the Edison E&P acquisition, which is now being
successfully integrated into Energean's business, and we delivered a 67% year-on-year reduction
9 The gross consideration for the transaction, as at the locked box date of 1 January 2019, was $284 million and the final net
consideration (net of cash acquired), as of 17 December 2020, was $203 million
10 Pro forma production and financial results are presented as if Edison E&P results were consolidated for the entire year; the
locked box date of the transaction was 1 January 2019 and therefore all economic results since that date accrue to Energean.
Actual results consolidate from the closing date of the transaction, which occurred on 17 December 2020
11 Scope 1 and 2 emissions
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STRATEGIC REPORT
to carbon emissions intensity to 22.2 kgCO2/boe, when considering 2020 pro forma performance
data versus 2019 Energean standalone data.
Where we operate
Energean holds a balanced portfolio of exploration, development and production assets, with
operations in nine countries across the Mediterranean and UK North Sea. We have interests in
more than 80 leases and licences, 10 of which are located offshore Israel, one of our core countries
of operations.
Figure 1. Map of Energean’s operations
Figure 2. Energean Israel Limited (EISL) leases and licences
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STRATEGIC REPORT
Performance in 2020
From strength to strength
Despite the challenging macro environment, Energean continued to deliver strong performance
against its strategic goals in 2020. In December 2020, we completed the first stage of our transition
to become the leading independent gas-producer in the Mediterranean with the successful
acquisition of Edison E&P. The second stage of this transformation will be completed once Karish,
our flagship gas project offshore Israel, commences production, expected within the next 12-
months, in 1Q 2022, enabling us to deliver material free cash flows and sustainable shareholder
returns.
Operational highlights
• Working interest production 3.6 kboepd (pro forma 48.3 kboepd, 74% gas)
• Pro forma 2P reserves 982 MMboe12, a 187% year-on-year increase13
• Karish development 87% complete at 31 December 2020 (90% at 31 March 2021)14
• FID taken on the >40% IRR Karish North project (Israel) in early 2021
• FID taken on the >30% IRR NEA/NI project (Egypt) in early 2021.
Commercial highlights
• Edison E&P acquisition closed 17 December 2020, expanding our operational footprint to
nine countries, and representing a final net consideration (net of cash acquired) of
approximately $1.0 / 2P boe
• Agreed to acquire Kerogen’s 30% holding in Energean Israel Limited (EISL) for $380-405
million, representing an acquisition price of $1.74 - $1.85/2P boe. The acquisition closed
on 25 February 2021
Increased signed GSPAs in Israel to 7.4 Bcm/yr on plateau (from 5.0 Bcm/yr at year-end
2019).
•
Financial highlights
• Sales revenue of $28 million (pro forma $336 million)
• Operating cash flows of $2 million (pro forma $137 million)
• Adjusted EBITDAX of $(8) million (pro forma $108 million)
• Loss after tax of $(93) million (pro forma $(416) million)
• $429 million pro forma capital expenditure reduction achieved versus January 2020
guidance of $995 million.
Decarbonisation and ESG highlights
• 67% year-on-year reduction carbon emissions intensity to 22.2 kgCO2/boe, when
considering 2020 pro forma performance data versus 2019 Energean standalone data.
• Successful roll out of ‘Green Electricity’ at Prinos in Greece and our premises in Israel
• Achieved a B- score on CDP climate change disclosure and a B score on supplier
•
engagement, and aligned with all recommended pillars of TCFD disclosure
Implemented climate-based scenario analysis and use of internal carbon pricing to assist
with investment-decision making
12 Reserves are pro forma Energean plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”). The
transaction closed on 25 February 2021
13 When considering 2020 pro forma 2P reserves (Energean plus the acquisition of Kerogen’s 30% holding in EISL) versus
Energean 2019 standalone 2P reserves
14 As measured under the TechnipFMC EPCIC
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• ESG ratings in top quartile, awarded ‘Gold’ by Maala15 and ranked 16 out of 114 peer
companies by Sustainalytics.
HSE highlights
• Safe and reliable operations for employees and contractors, with zero serious injuries
recorded
• Zero oil spills and zero environmental damage.
Awards
• Awarded ‘Best ESG Energy Growth Strategy in Europe 2020’ and ‘Transition Economist
Strategy of the Year – Independent’
• Karish project received a Safety and Health Award Recognition for Projects (SHARP) for
safety excellence in Singapore.
Figure 3. Karish project SHARP award at the Admiralty Yard (Singapore)
15 Maala is a non-profit CSR standards-setting organisation in Israel
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STRATEGIC REPORT
Chairman’s Statement
Karen Simon, Independent Chairman
Board Priorities for 2021
Fostering a culture of inclusion and diversity through the successful
integration of Edison E&P and revamp of the organisational structure, as
well as streamlining of learning and knowledge sharing processes.
Continued improvement of employee skills, to maximise value and
successfully delivering our strategy, is also a top priority.
Aligning with the TCFD recommendations across all TCFD pillars and
ensuring that our portfolio is continuously tested against a range of
plausible and robust Paris-aligned climate change scenarios.
Continuing to oversee the reduction of our carbon footprint, whilst
continuingly assessing the impact of our operations on climate change.
This will involve the tracking of key metrics and making appropriate
adjustments to our strategy as we go forward. Low carbon business
opportunities will also be evaluated, including the economic viability of
carbon capture and storage projects. Employee education will play a
leading role by enabling us to stay on top of key trends and capitalise
upon our core strategic strengths, with the ultimate aim to develop the
first carbon capture and storage project in Greece, alongside other
energy related transition initiatives, including blue hydrogen.
Successful delivery of the Karish project in 1Q 2022 and the progression
of further organic growth projects, including Karish North (Israel) and
NEA/NI (Egypt), as well as our next exploration and appraisal campaign
offshore Israel.
Deciding on how best to provide sustainable turns to shareholders whilst
ensuring that the right level of reinvestment in the business is maintained
to progress key organic growth projects.
Cultural integration and people
development
TCFD alignment
Decarbonisation
Operational Delivery
Capital Allocation
Dear Shareholder,
I want to start by addressing the unprecedented and tragic events of the last year. Every day, the
COVID-19 global pandemic seems to reach a new and terrible milestone. More than 100 million
cases have now been reported worldwide, and millions have sadly lost their lives. Every loss of life
is a tragedy and my sincere condolences go out to all who have been impacted by the virus.
It is also a motivation to keep going and do everything we can to stop transmission and save lives.
As Chairman, my number one priority during this difficult time has been to ensure the safety of our
employees, contractors and partners in all the countries in which we operate. At the same time,
maintaining the business’s strategic focus, responding quickly to the low commodity price
environment and lowering the carbon intensity of our operations also continue to be key priorities.
I was highly impressed by the swift and decisive response taken by our CEO and senior
management teams to protect our colleagues. I was also inspired by the positive attitude and
mindset of our people. Your ability to keep calm and carry on, as the British saying goes, was key
to the success of the business in 2020. Thank you all for your hard work, positivity and dedication
during the last year.
Our key successes
On a more positive note, I want to celebrate some of our 2020 successes with you. We closed the
strategic acquisition of Edison E&P in December 2020 and expanded our operational footprint to
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nine countries, becoming one of the largest listed E&P companies on the London Stock Exchange
by market capitalisation. This was a landmark event that transitioned us into the top tier of
European E&Ps by scale and significantly enhanced our gas portfolio. It also added around 250
new colleagues. I want to take this moment to extend a warm welcome to you all and look forward
to working with you in 2021 and beyond. Integration of the two businesses has commenced and is
a top priority for the Board. Through ensuring maximum alignment, the sharing of technical
expertise and the amalgamation of our corporate cultures, I believe that further growth is not only
possible, but new opportunities are there to be unlocked.
Despite challenges associated with COVID-19, solid progress was made on the Karish project,
which was approximately 87% complete at year end 2020. In Israel, we further strengthened our
commercial position through the signature of new GSPAs and have now substantially achieved
our strategic goal of “filling the boat”. In addition, we acquired Kerogen’s 30% stake in EISL for
around $400 million total consideration. This acquisition not only makes financial and strategic
sense for Energean but showcases our commitment to ensuring diversity and security of natural
gas supply into Israel. In doing so, we aim to facilitate the transition from coal fired power plants to
cleaner sources of energy, in line with the goals set by Israel’s Ministry of Energy.
People, culture and development
Energean has always prided itself on its multicultural work environment and its strong values, ‘Our
Ethos’ and the Board has worked hard to strengthen this environment by fostering a culture of
inclusion and diversity. During 2020, we updated our ‘Equal Opportunities Policy’ and provided
Group-wide training on diversity and inclusion best practices. In addition, our Intranet site, the
Energean Transmission Hub Online System (ETHOS), was successfully launched and will help
facilitate knowledge sharing and connect all Energean employees, including our new colleagues
from Edison E&P.
To cultivate an open and honest culture we launched our first Energean Voice Survey, which
achieved a response rate of over 90%. In 2021, we aim to use these results to further improve
Energean’s corporate culture and ensure the smooth integration of Edison E&P. On the subject of
integration, the Board is closely monitoring the implementation of the Group’s detailed strategic
integration plan, including the alignment of the organisational structure and the roll out of key
processes and procedures.
Decarbonisation strategy
The Board fully recognises the immediate challenges facing society and the energy sector from
the impact of climate change. Our decision to align with the recommendations of the TCFD reflects
our recognition of the severity of this threat and the need to support the objectives of the Paris
Agreement to keep the increase in global average temperature to below 2°C above preindustrial
levels, and pursue efforts to limit the temperature increase even further to 1.5°C.The time to act
on climate change is now and for that reason I am fully supportive of Energean’s vision to lead the
Mediterranean region’s energy transition, through a strategic focus on gas as a transition energy
source. I was immensely proud of the commitment made by Energean to be a net zero emitter16
by 2050 and am pleased by the immediate steps taken during 2020 to reduce our environmental
footprint and further incorporate climate-based scenarios into our investment decision-making
process. Some of these steps are described in more detail below.
In October 2020, we agreed with the Public Power Corporation of Greece to source 100% of
electricity for the Prinos area assets from renewable energy sources. This delivered a 100%
reduction in Scope 2 carbon emissions at Prinos and around a 45% reduction of Scope 1 and 2
emissions. Opportunities to convert Prinos into the first Carbon Capture and Storage project in the
Eastern Mediterranean, as well as the development of a small-scale blue hydrogen within the
existing onshore Sigma plant, are also under evaluation. If implemented in the next few years, the
16 Scope 1 and 2 emissions
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projects would broaden and diversify Greece’s existing energy infrastructure whilst providing a
significant first step in the Greek energy transition towards a zero CO2 economy.
These actions, combined with the successful integration of the Edison E&P portfolio, delivered a
67% year-on-year reduction in the carbon intensity of our operations, when considering 2020 pro
forma performance data versus 2019 Energean standalone data, to approximately 22 kgCO2/boe.
In the medium-term we aim to achieve a carbon intensity target of approximately 9.5 kgCO2/boe,
which is approximately half the current global average for the E&P sector.
In 2021, we will roll out three initiatives across all of our operated sites, including switching to
purchasing “green” electricity, introduction of a zero-routine-flaring policy and establishment of
procedures to reduce methane emissions. Looking ahead, we will continue to progress our
feasibility study on carbon capture and underground storage at Prinos, whilst also evaluating the
potential of a small-scale blue hydrogen project. I am proud that we have achieved a B- score in
climate change and a B score in supplier engagement in our first CDP submission, and we aim to
further improve upon this in future years, as we deliver our net-zero strategy.
Board composition
The Board is the steward of corporate governance and strong governance becomes even more
important in challenging times and must underpin the culture of the whole business. As such, I as
Chair, and the Board, are focused on developing in this area, particularly as we approach first gas
from Karish and transition into the leading independent E&P company in the Eastern
Mediterranean, with operations spanning multiple jurisdictions. Responsibility for the governance
of climate change issues within Energean rests with the Board, as demonstrated by our Board-set
target of 70% of our production volumes being gas. To reflect the increasing importance of climate
change-related risks and opportunities, we have reshaped the Board committee structure and
created a dedicated Environment, Safety and Social Responsibility Committee, chaired by Non-
Executive Director Robert Peck. These changes are designed to ensure that environmental issues
and specific corporate governance are dealt with by one committee, ensuring strong strategic focus
and challenge in these areas.
During 2020, I was delighted to welcome Kimberley Wood and Andreas Persianis to the Board.
They bring a wealth of experience in both the financial and natural resource sectors. The
appointments also meant that we achieved greater than 30 percent female representation on our
Board of Directors in 2020. Ohad Marani and David Bonanno stepped down in 2020. I am very
grateful to them both for the expertise they brought to Energean during their time as Non-Executive
Directors and wish them well in their future endeavors.
Looking ahead to 2021
2021 will be a pivotal year in Energean’s journey to become the leading independent E&P company
in the Mediterranean. In March 2021, we enhanced our Israeli position through the acquisition of
Kerogen’s Minority Interest in EISL. Moreover, we are targeting first gas from our flagship Karish
gas development within the next 12-months, in 1Q 2022, and will further progress the development
of Karish North, as well as two additional growth projects in Israel, namely the additional gas export
riser and additional oil train. Successful delivery of these projects will significantly increase our
production throughout the decade, enabling us to deliver material free cash flows and realise our
ambition of paying a meaningful and sustainable dividend to our shareholders from 2022. As a
Board, we aim to decide in 2021 on how to best provide returns to shareholders whilst ensuring
that the right levels of both reinvestment and debt are maintained to ensure a sustainable long-
term outlook for the business.
Stay safe and well.
Karen Simon
Chairman
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STRATEGIC REPORT
Chief Executive’s Review
Mathios Rigas, Chief Executive Officer
A year the world would rather forget but nevertheless another successful year for
Energean
The year 2020 will go down in history as the year of the unexpected and the unknown. Life as we
knew it came to a halt as the world battled the COVID-19 global pandemic, and government
responses to limit the spread of the virus, including restricting people’s movement, significantly
weakened global energy demand, putting huge pressure on our sector. As a business, and on a
personal level, conditions were extremely challenging. We were confined to our homes, in order to
save lives and protect the wellbeing of our colleagues and had to adapt to new ways of working.
Despite a multitude of challenges, I am proud to say that Energean delivered on its promises, kept
its sense of strategic direction and its people stayed positive. I will expand on this and our
achievements in the paragraphs below, but first and foremost I want to sincerely thank our
dedicated team, contractors and partners for their continued hard work and support during this
difficult period. Our successes in 2020 would not have been possible without you. I also want to
take this opportunity to extend a warm welcome to our new colleagues from Edison E&P. It is great
to have you on board and I look forward to seeing what each of you brings to the business in 2021.
Strong delivery despite a challenging year
We entered 2020 in a strong financial position with a healthy balance sheet and funding in place
for our core projects. This allowed us to quickly adapt to the unprecedented combination of the
COVID-19 pandemic and record low commodity prices, and focus on delivering our goals and
growing the business. Consequently, 2020 was a truly transformative year for Energean, and one
that saw the business enter the last phase of its transition into the leading independent E&P player
in the Mediterranean. We completed the acquisition of Edison E&P, expanded our operational
footprint to nine countries and achieved a significant step up in production. We also increased pro
forma 2P reserves by approximately 187% year-on-year17 to almost 1 billion boe, marking our
thirteenth consecutive year of reserves and resources growth.
Despite some COVID-19 related challenges, good progress was also made on our flagship multi-
tcf Karish gas development offshore Israel, which was approximately 87% complete at year end
2020. Energean continues to work towards first gas from Karish in 1Q 2022. Excellent commercial
progress was made in Israel during the year showcased by the signature of 2.4 Bcm/yr of new
GSPAs. This increased signed gas contracts to around 7.4 Bcm/y (on plateau) and means that
approximately 93% of the Energean Power FPSO’s capacity will be utilised. But we have no
intention of stopping there; we have an extremely exciting upcoming exploration programme and
will continue to explore all options for commercialisation in the event of success.
Italian production is very important to our portfolio and, in 2021 to date, is performing significantly
ahead of expectations; and will continue to benefit from our focus on optimisation. Smaller projects
and interventions will compound in their impact and will have an important influence on our bottom
line. In the medium-term term, we expect to roll out our mature assets transition strategy across
several locations, significantly extending the life of our Italian business.
Croatia and Montenegro are exciting areas of growth and I look forward to seeing the potential of
both areas being realised.
17 When considering 2020 pro forma 2P reserves (Energean plus the acquisition of Kerogen’s 30% holding in EISL) versus
Energean 2019 standalone 2P reserves
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Poised for further growth
Delivery of Karish will not be the only driver of near-term growth in Israel. In January 2021, we
reached FID on our 1.1 Tcf (32 Bcm) Karish North project, less than two years after discovery, and
first gas is anticipated in 2H 2023. Initial capital expenditure will be around $150 million and will
coincide with an investment programme to expand liquids output through the addition of a second
oil train and riser on the Energean Power FPSO, which are expected to become operational by
year-end 2022.
Further organic growth is targeted in Israel through the delivery of our next exploration and
appraisal programme. Drilling is expected to commence in early 2022 and will see up to four E&A
wells drilled targeting over one billion boe of prospective resources. The Karish North development
well will be drilled as part of this programme providing cost synergies.We also remained active in
the M&A space in 2020, as demonstrated by our strategic acquisition of Kerogen Capital’s 30%
holding in EISL for $380-405 million. This was not a case of doing deals for the sake of doing deals.
The acquisition is a natural strategic fit that is materially accretive to value, with excellent deal
metrics. It gives us full control of EISL, adds 219 MMboe of 2P reserves and will lower the carbon
intensity of the business. I am pleased to note that we closed the transaction in February 2021 and
thank Kerogen for its support during the development of Karish.
In Egypt, FID was taken on the shallow-water NEA/NI subsea tie-back project. The integrated
NEA/NI project is expected to deliver first gas from one well in 2H 2022 and from the remaining
three wells in 1Q 2023. In line with our disciplined capital allocation policy, in which we focus on
high-return organic growth opportunities, we expect the project to generate an IRR in excess of
30%. This is a crucial project for our Egyptian portfolio, and one that will significantly benefit the
long-term production profile, whilst bringing significant cost and investment efficiencies.
Advancing our net zero strategy
At Energean, ultimate responsibility and accountability for our environmental and climate change
policy, strategy and targets lie with me. I am proud of the achievements we have delivered to date
and am confident that we will continue to deliver upon this strategy. In 2019, we were the first E&P
company in the world to commit to net zero emissions18 by 2050 and we have already started
delivering on that promise. In 2020, we reduced the pro forma carbon intensity of our operations
by almost 70%19 and by 2023 expect our carbon emissions intensity to be around half the current
global average for the oil and gas industry. In addition, we commenced several new initiatives,
including disclosure of climate related data in line with TCFD recommendations, as well as
evaluation of carbon capture and storage and a small-scale blue hydrogen project in Prinos in
Greece. We aim to continue this momentum in 2021 through the continued roll out of our
decarbonisation strategy and optimisation of our new portfolio.
Health, safety and environment
The health and safety of our staff and contractors was a top priority in 2020. We ensured all
necessary measures to keep employees safe from COVID-19 were taken and maintained an
exemplary HSE track record. At the Karish Project we reached the positive milestone of 12 million
man-hours with no LTI20 while Sembcorp Marine’s Admiralty Yard was awarded a Safety and
Health Award Recognition for Projects (“SHARP”) for Safety Excellence for the Karish Project. At
the Group level, and alongside our contractors, we achieved an LTIF21 of 0.6 per million man-
hours. In addition, we not only ensured the safety of our employees, but also extended a helping
hand to local communities by supporting them in their battle against COVID-19.
18 Scope 1 and 2 emissions
19 When considering 2020 pro forma performance data versus 2019 Energean standalone data
20 LTI: Lost Time Injuries
21 LTI Frequency: The number of Lost Time Injuries per million hours worked
Page | 13
STRATEGIC REPORT
The outlook
With COVID-19 vaccines proving their efficacy, and worldwide vaccinations having started in late
2020, there is a path to recovery. 2021 is set to be another very exciting year for Energean. We
aim to continue delivering on our promises, growing the business and decarbonising our
operations, whilst keeping ESG at the heart of our organisation.
Take care.
Mathios Rigas
Chief Executive Officer
Page | 14
STRATEGIC REPORT
Our Business Model and Strategy
Our purpose
Energean’s aim is to lead the energy transition in the eastern Mediterranean through a strategic
focus on gas and achieve its net zero ambition in advance of 2050, whilst delivering meaningful
and sustainable returns to shareholders.
Our business model
Across each part of the hydrocarbon lifecycle we work to create value for our investors, host
countries and people.
Implementing Low
Carbon Solutions
1.
Find & Appraise
2.
Develop
3.
Produce
4.
Acquire
Energean’s business model is to find and monetise hydrocarbons from its portfolio of assets across
the Mediterranean.
Our activities are focused on generating sustainable cashflow from production through selective
development and appraisal of the highest return growth options with a focus on those opportunities
with the lowest carbon intensities. We are focused on organic growth, but will continue to evaluate
inorganic opportunities that complement and supplement our strategic targets and ambitions.
Underpinning our business model is a strategic focus on gas and a commitment to be a net zero
emitter22 by 2050.
Our value life cycle
Find & Appraise
Through targeted exploration and appraisal in the Mediterranean we aim to find hydrocarbons, to
build reserves and resources, to monetise, or to selectively develop for future production. We have
a ranked portfolio of prospects for drilling and remain agile to take advantage of opportunities that
support our organic-focused growth strategy.
Develop
We focus on selective development of material hydrocarbon discoveries we have either found or
acquired. We invest in low-cost, high-return drilling options that lie in close proximity to existing
22 Scope 1 and 2 emissions
Page | 15
STRATEGIC REPORT
infrastructure and aim to deliver cost-effective, timely solutions to convert reserves into cash flows.
In developing these solutions, minimising carbon emissions is at the forefront of our minds, and
we apply an internal carbon pricing system in assessing new projects and investments.
Produce
Production is the cash engine of our business and we are investing in in-field drilling programmes
to maximise production across our producing assets in the Mediterranean, whilst also investing in
opportunities to reduce the carbon footprint of these assets, such as the switch to sourcing
electricity in Prinos from 100% renewable sources through the national grid. In addition,
Energean is committed to the roll-out of sourcing of renewable energy across operated assets
and premises in future, and will continue to pursue such options in 2021.
Acquire
Energean also seeks to grow its portfolio through highly selective and value accretive M&A that
are a natural strategic fit.
Our Strategic Pillars
East
Med
Gas
Tackling
Climate
Change
Organic
Growth
Value-
driven &
Returns-
driven
Page | 16
STRATEGIC REPORT
Our Strategy
1.
East Mediterranean
Energean has a long-standing history of operating in the Mediterranean, having originated in
Greece in 2007 with the purchase of the Prinos assets for approximately $1.5 million. We have
demonstrated our ability to deliver growth and value in the Mediterranean and expect to continue
to maintain our strategic focus and investment in this area. We know the governments and we
know the rocks in this geographical area, and will continue to leverage this understanding and
knowledge to grow the business.
2.
Gas
We are committed to focusing our production mix in a way that promotes the Mediterranean’s
energy transition and creates long-term value for all or our stakeholders. Natural gas emits only
half as much CO2 as coal, yet a large percentage of electricity generated in the region comes from
coal-fired power plants. Replacing these facilities with gas-fired units is one of the fastest, most
efficient and cost-effective ways to reduce global CO2 emissions. Israel, our core market, has
understood this, as the Israeli government’s decision to convert all coal powered stations to gas
by 2025 attests. The Ministry of Energy is also targeting a fuel mix of 70% gas and 30% renewable
energy by 2030.
However, the natural gas of the Mediterranean is not just an energy transition source, it is also an
energy of the future. The region has sufficient large-scale natural gas resources to provide a
sustainable supply to meet rising regional energy demand. Gas is also sustainable and efficient,
and its flexibility as an energy source allows for agile production facilities. This makes gas a good
partner for renewable energies, providing a useful backup source when there is no sunlight or
wind.
3.
Tackling Climate Change
Energean is fully committed to taking action on climate change. In a strong show of leadership and
foresight, Energean was the first E&P company in the world to announce a net zero 2050 target,
using gas as the transition medium to a low carbon future. This commitment will be delivered
through the implementation of our Climate Change Strategy, which provides a blueprint for
minimising our greenhouse gas ("GHG”) emissions and strengthening our low carbon portfolio.
Our Climate Change Strategy commits to ensuring that all our assets will be operated on a carbon
neutral basis in respect of Scope 1 and Scope 2 GHG emissions.
In 2020, as part of our commitment to a low-carbon future, we have aligned with the TCFD
recommendations.
Paris Agreement alignment
It goes without saying, that the energy landscape has changed significantly over the past few
years. 2020 has undoubtedly been a transformational year and major decisions towards a low
carbon future were taken at governmental and business levels. Energean is firmly committed to
playing a leadership role in the energy transition process, supporting the objectives of the Paris
Agreement to keep the increase in global average temperature to below 2°C above preindustrial
levels and pursuing efforts to limit the temperature increase even further to 1.5°C.
Page | 17
STRATEGIC REPORT
In 2020 our portfolio has been tested against a range of plausible and robust Paris-aligned
scenarios, including the scenarios developed by the International Energy Agency (IEA) outlined in
its 2019 World Energy Outlook, to advise our business strategy. Commodity prices derived from
supply and demand fundamentals have been used in this scenario analysis, supplemented with
additional variables that might impact market conditions or demand growth. We use the output of
these scenarios as a key decision-making tool in our investment process.
Our Climate Change Strategy
To achieve this transition, climate change related risks and opportunities have been identified, and
future scenarios that will aid in developing an integrated strategic approach have been analysed.
Our strategy and business plan to limit global warming has been structured, and is currently being
implemented, in three different phases: short, medium, and long-term.
We aim to achieve our net zero goal initially by reducing the company’s absolute scope 1 and 2
emissions through increased efficiency of production installations by optimising performance and
the transition to low or zero carbon electricity use, and by re-focusing our production mix from oil
to gas.
In 2020, sales gas production as a percentage of total production was substantially increased year-
on-year from 0% to 74%, when considering pro forma performance data versus 2019 Energean
standalone data. This increase resulted in a 67% pro forma reduction of our carbon emissions
intensity versus the 2019 Energean standalone baseline, compared to the 50% target disclosed in
our 2019 Sustainability Report. Gas is expected to account for around 80% of Energean’s future
production mix, once the Karish and Karish North fields are brought onstream. This is expected to
lead to a further decrease in the carbon emissions intensity of our operations.
Electricity-wise, we agreed with the Public Power Corporation of Greece to provide to us
Guaranties of Origin for the total amount of electricity consumed at Prinos in 2020. As such, all the
electricity purchased to power the Prinos asset in 2020 was generated from renewable sources
and reduced scope 1 and 2 absolute emissions by 45%.
In addition, we acquired International Renewable Energy Certificates (“I-REC”) for the electricity
that we consumed in Israel. Overall, approximately 98% of electricity purchased by Energean was
generated from renewable sources during 2020.
A Leak Detection and Repair (“LDAR”) program is also expected to be implemented in 2021, in
order to monitor and actively reduce methane emissions from our installations.
The following graph is a representation of the short-term carbon intensity reduction plan of
Energean, which estimates an 85% reduction in Scope 1 and 2 emissions by 2023 versus the
Energean 2019 baseline.
Page | 18
Figure 4. Short-term carbon emissions intensity reduction plan23
STRATEGIC REPORT
80
70
60
50
40
30
20
10
0
Energean
Standalone
66.8
Energean Group (includes Edison E&P)
2019 - 2023
estimated reduction
> 85%
22.2
20.9
- 67%
- 6%
10.3
9.5
2019
2020
2021
2022
2023
- 51%
- 8%
Carbon Intensity Scope 1 & 2 (kgCO2e/boe)
based on 100% Net production of operated sites
Following, these initial actions, remaining emissions will be balanced with an equivalent amount
sequestered or offset, or through buying enough carbon credits to make up the difference. The
company is currently reviewing various options such as Negative Emissions Technologies
(“NETs”) Carbon Capture and Storage (“CCS”) and small-scale blue hydrogen projects, together
with reforestation and afforestation initiatives.
Energean believes that there is considerable opportunity to employ efficient CCS technologies in
the regions in which it operates. Ultimately, Energean aims to become a leader in CCS in the
Eastern Mediterranean and is confident that it will be part of the solution. Besides interest from our
own assets, we believe that there will also be external interest e.g. from power plants, in providing
their emissions to be stored in our depleted reservoirs. Energean is well placed to realise such a
project since it has over 40 years’ experience in managing reservoirs, studying the Mediterranean’s
geology and market developments.
Figure 5. Long-term climate change plan
23 The plan considers 2020 pro forma performance data versus 2019 Energean standalone data. 2021 onwards is based on
Energean Group estimates.
Page | 19
STRATEGIC REPORT
In 2020, we established a new legal entity, “Energean Egypt Energy Services” that is responsible
for evaluating low-carbon technology innovation, including potential new business lines in technical
solutions such as the above-mentioned CCS and small-scale blue hydrogen projects.
Figure 6. Energean Egypt Energy Services
EES an ENERGEAN Company I Registered in Egypt I Develops
Efficient Customer-Facing Gas-Based Utilities
Cradle to Grave Energy Chain
Scope 3 emissions
Energean calculated its scope 3 emissions, including emissions from the use of its products, for
the first time in 2020. Scope 3 emissions coming from the processing and use of sold products
were estimated at around eight times that of scope 1 and scope 2 emissions. Inclusive of all
relevant activity, including the construction of the Energean Power FPSO in Asia, scope 3
emissions were estimated at around 10 times that of scope 1 and 2 emissions. As a next step,
Energean will consider tangible actions to reduce its scope 3 emissions. Among other things,
Energean will consider the environmental awareness of suppliers and contractors, as well as
emissions management, in future recruitment processes.
The Group took decisive steps to adjust its business strategy to not only mitigate climate change-
related risks but also to capture opportunities. Over the past four years, Energean shifted its
portfolio from 100% oil to around 80% gas, recognising that gas plays an important role as a bridge
fuel in the transition to a lower-carbon future. For example, in Israel, gas produced from our
operations will be key in replacing high-carbon coal power plants and thus, will play a significant
role in lowering the country’s absolute emissions.
Recognitions of our Climate Change Strategy
Energean was awarded the ‘Energy Transition Strategy of the Year (Independent)’ at the
Petroleum Economist 2020 Awards ceremony. Up against strong competition from a host of peers
Page | 20
CO2-ZeroBUSINESSEmissions Mitigation Solutions-Unlocking decarbonization as a CO2neutrality solution for key industries located in countries with our presence. -Developing Integrated Carbon Capture and Storage (CCS) value chain integrating available depleted hydrocarbon reservoirs in our portfolio.MID & DOWNSTREAM BUSINESSBringing Efficiency for Our Clients -Targeting progressive upstream to downstream integration through long-term energy performance contracts and partnerships with selected customers-Pioneering the development of small-big size energy efficiency projects ensuring lowest-cost energy supply for the final users at minimum environmental impactExplorationDevelopmentProductionUpstreamBUSINESSINTEGRATED GAS BUSINESS
STRATEGIC REPORT
in the independent E&P space, the prestigious award recognised Energean as an independent oil
and gas company that has committed to an ambitious target and set out a robust plan for how this
will be achieved. Energean was judged against and awarded having satisfied the following criteria:
• Having a companywide strategy to lower emissions in compliance with the Paris
Agreement and for its commitment to net zero carbon emissions24 by 2050
• A strategy to decarbonise production from existing licences or refocus on lower carbon
activities
• Committed capex to the early stages of its transition strategy
• Already achieved some reduction in emissions e.g. the reaching of an agreement with the
Public Power Corporate of Greece that ensures that 100% electricity used in the Prinos
asset originates from renewable energy resources
• Provided transparency and facilitated external auditing
• Carved out a unique role in the energy transition space.
Supporting climate change initiatives
By participating in the CDP for the first time in 2020 Energean promoted disclosure transparency
and further developed its climate change initiatives which were recognised and awarded with a B-
score on climate change and B score on supplier engagement based on our strategy and set
targets.
Energean has strong disclosure with regards to its energy transition intentions and on long-term
carbon neutrality, and has implemented the recommendations of the TCFD within its 2020
reporting structure.
The table below sets out where to find Energean’s TCFD disclosures throughout the Company’s
2020 Annual Report and Accounts.
Page 110
Pages 110-112
Index to disclosures aligned to recommendations of the Task Force on Climate-related
Financial Disclosures
Governance: Disclose the organisation’s governance around climate related risks and
opportunities
a) Describe the board’s oversight of climate-related risks and
opportunities
b) Describe management’s role in assessing and managing climate-
related risks and opportunities
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on
the organisation’s businesses, strategy, and financial planning where such information is material
a) Describe the climate-related risks and opportunities the organisation
has identified over the short, medium and long term
b) Describe the impact of climate-related risks and opportunities
on the organisation’s businesses, strategy, and financial planning
c) Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario
Risk Management: Disclose how the organisation identifies, assesses, and manages climate-
related risks
a) Describe the organisation’s processes for identifying and assessing
climate-related risks
b) Describe the organisation’s processes for managing climate-related
risks
c) Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall risk
management
Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-
related risks and opportunities where such information is material
Pages 89-92
Page 24-26
Page 24-26
Page 74-76
Page 74-76
Page 24-26
24 Scope 1 and 2 emissions
Page | 21
STRATEGIC REPORT
a) Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management
process
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse
gas (GHG) emissions, and the related risks
c) Describe the targets used by the organisation to manage climate-
related risks and opportunities and performance against targets
Page 31-32
Pages 58-60
Pages 17-22
4.
Organic Growth
At the core of this strategic pillar is our commitment to explore, develop and learn. We explore new
ways to find, produce and develop hydrocarbons. We explore new technologies and low carbon
solutions, such as carbon capture and storage, and blue hydrogen. We at Energean believe that
this mindset, combined with our strong subsurface and technical expertise, will enable us to deliver
a growth strategy that is sustainable, successful and will lead to the achievement of our medium-
term financial and operational targets. It was this approach that bore fruit in 2019 with the discovery
of Karish North. By actively pursuing new exploration opportunities in core areas and maximising
output from producing fields, we aim to constantly increase our reserves and resources. 2020 was
the thirteenth consecutive year that we grew our reserve and resource base, and we aim to
continue this track record in the years to come.
Our exploration portfolio is spread across the Mediterranean and represents a balanced mix of
new frontier areas and lower risk mature basins. Planning for our next exploration and appraisal
campaign offshore Israel is underway, with drilling expected to commence in early 2022. Targets
include Block 12, which lies between the Karish and Tanin leases, where a discovery would
significantly de-risk the surrounding acreage. We have two sanctioned projects under way to be
developed, Karish North (Israel) and NEA/NI (Egypt) that will see the commercialisation of
approximately 280 MMboe of 2P reserves, the majority of which are gas.
5.
Value and returns-driven
Disciplined capital allocation that prioritises total shareholder returns is a top priority for Energean.
In 2021, we intend to optimise our capital structure in a way that allows us to remain agile whilst
moving towards a net debt/EBITDAX target of less than two times. At the heart of this aim is our
intention to pay a meaningful and sustainable dividend to shareholders, with 2022 the target year
for our inaugural dividend. Underpinning this capital allocation policy is a commitment to organic
growth projects that meet strict investment criteria and generate returns in excess of 20% in the
case of greenfield projects. An example of this approach is the recent sanctioning of the Karish
North project, which is expected to generate IRRs above 40%. M&A will also play a role in growing
the business; however, we will only do deals that are a strong strategic fit and value accretive. This
is showcased by the approximately $1.85/boe acquisition price that we achieved for Kerogen’s
30% holding EISL.
Page | 22
STRATEGIC REPORT
Business model foundations
Safe &
Reliable
Operations
Partnerships
&
Collaboration
Talented
People
Governance
& Oversight
Technology &
Innovation
These are the building blocks that every E&P business need and are critical foundations for what
we do and how we do it.
Safe, Reliable and Responsible Operations
We value the safety of our workforce above all else and focus on maintaining a safe operating
culture every day. This culture of safety also improves the integrity and reliability of our assets.
Partnerships and Collaboration
We aim to build long-term relationships with our key stakeholders, and partner with leaders of
industry to find innovations that can improve efficiency and deliver low carbon solutions.
Talented People
We work to attract, motivate and retain talented people and provide our employees with the right
skills for the future. Our performance and ability to grow depend on it.
Governance and Oversight
Our board has a diversity of knowledge, expertise, and ways of thinking that help us grow our
business, manage risks and continue to deliver long-term value.
Technology and Innovation
New technologies help us produce energy safely and more efficiently. We selectively invest in
areas with the potential to add greatest value to our business, now and in the future, including
lower carbon solutions.
Page | 23
STRATEGIC REPORT
TCFD Scenario Analysis
As part of our overall approach for managing the risks facing our business and for maximising the
opportunities in our portfolio, Energean conducts comprehensive financial modelling that includes
the risks and opportunities presented by a transition to a lower-carbon economy. We regularly
update our analysis to ensure our business is adaptable to changing market conditions and global
trends. To address the risks and opportunities presented by a potential transition to a lower-carbon
economy, Energean carried out a scenario analysis exercise in late 2020. We applied the
scenarios developed by the IEA, outlined in its 2019 World Energy Outlook, as the basis for our
recent scenario analysis. These scenarios are:
▪ Current Policies Scenario, which assumes no change in policies from today and therefore
projects a warming of over 4°C
▪ Stated Policies Scenario (STEPS), which assumes policies and targets announced by
governments are enacted and estimates an average temperature rise of 2.7°C (some
projections show up to 3.3°C)
▪ Sustainable Development Scenario (SDS), which sees an accelerated transition to a
low-carbon world and projects a 66% chance to limit temperature rise to 1.8°C and a
50% chance to limit it to 1.65°C.
Beyond the impact on commodity prices as a result of reduced demand (in STEPS and SDS), we
considered other key value drivers, namely socio-political risks and fiscal risks in our key markets,
to model the potential impacts on a country level, driven by a shift in global fossil fuel consumption
(e.g. due to changing policies, different consumer behaviour, or technological advances). Our
portfolio continues to create value under all scenarios and our gas-focused business positions us
strongly to adapt to changing demand in a carbon-constrained world.
To further deepen our analysis, and ensure we consider additional downside risks to Energean’s
business in what is increasingly being referred to as a ‘climate emergency’, we went beyond the
demand assumptions inherent in the IEA scenarios and modelled a set of possible industry
responses to the energy transition in the form of supply-side assumptions. These include a view
on industry indiscipline, for example with hydrocarbon prices blighted by oversupply, at least for a
period before the industry is forced to return to a more disciplined position, and a view on the
disruptive impact of the ongoing COVID-19 crisis on investment levels and therefore longer-term
productive capacity.
Our portfolio remains value-generative even under the most severe of these scenarios.
Page | 24
Net Present Value of portfolio25
Israel
Egypt
Italy
Greece
UK
Croatia
Impact on NPV
● 0 to -9%
● -10 to -20%
● -21 to -50%
STRATEGIC REPORT
STEPS
●
●
●
●
●
●
SDS
●
●
●
●
●
●
The impacts to net present value described above are based on the development of our 2P
reserves position ‘as is’, and do not include any unsanctioned steps that we are taking to mitigate
the impacts of climate change. For example, our assets in Greece are amongst the most exposed
to the effects of lower commodity prices that result under the various scenarios considered. We
are already taking steps to mitigate this impact, and are looking at longer term, climate friendly
solutions for the Prinos Basin, which include carbon capture solutions. Energean is a nimble
operator with the ability to deliver solutions that deliver maximum value for our shareholders, and
we view scenario analysis as a key tool in continuing to deliver upon this as we move into a lower-
carbon world.
Inclusion of climate-related risks into decision making
Energean is in the process of moving towards full-incorporation of climate change-related risks into
its investment decision-making. The findings of the recently conducted scenario analysis exercise,
as well as stringent stress-tests for new investments, inform our corporate strategy and investment
decision-making, ensuring that climate change-related risks are adequately considered in
managing our portfolio. This includes planning capital allocations and making business decisions
based on criteria that are as challenging as those posed by the carbon constrained scenarios
examined
Our current portfolio remains resilient under the climate scenarios tested, and we expect to
continue helping meet global energy demand over the coming decades. We will continue to make
capital allocation decisions for our portfolio using rigorous planning assumptions flowing from the
scenario analysis exercise.
Furthermore, Energean uses an internal price on carbon to stress-test new projects, acquisitions
and investments. This stress test serves two purposes. It allows us to measure the impact of an
investment decision on the company’s carbon footprint, and if the project moves us too far away
from our net zero 2050 target, Energean will not consider investing. Furthermore, the internal price
on carbon ensures that we include the possibility of additional carbon taxation schemes being
introduced (within our European markets and beyond), which would result in a reduction of our
income on individual assets. In 2020, our internal carbon price was $25/tCO2, and it will rise to
$40/tCO2 from 2025, $100/tCO2 from 2035 and $200t//tCO2 from 2050.
25 Relative to Energean’s long-term corporate planning Brent oil price of $60/bbl
Page | 25
STRATEGIC REPORT
Year
2020
2025
2035
2050
€/tCO2
25
40
100
200
The internal carbon price helps mitigate future potential climate change impacts by helping us
safeguard the value of future investments under different scenarios where the cost of emitting GHG
increases as a result of more stringent regulated trading schemes. In our sensitivity analysis, we
have seen that climate change constitutes a significant risk (albeit with a low probability) in this
respect. Engineering solutions have been incorporated in the design of future projects and in
operational performance improvements to emissions, in addition to considerations around carbon
capture and offsetting projects in the medium term.
We have already pivoted our portfolio predominantly toward gas as part of an overall strategic
decision to more strongly position the company to meet global energy needs in a carbon-
constrained world.
Page | 26
STRATEGIC REPORT
Market Overview
Brent oil price
Brent crude made significant losses over the course of 2020 largely due to the COVID-19-driven
recession. At the same time, geopolitical events, such as the Russia-Saudi Arabia oil price war,
also contributed to price weakness. Prices fell to a 17-year low on 18 March, when Brent reached
$24.7/bbl, as government responses to limit the spread of COVID-19, including restricting people’s
movement, significantly weakened global oil demand.
Under unprecedented market pressure, the OPEC+ group failed to agree on joint action to curb oil
production to stabilise prices, triggering an oil price war. Crude prices remained depressed
throughout March but, faced with a growing supply-demand imbalance OPEC+ agreed to end its
price war on 9 April with a 9.7 mmb/d supply cut that will taper through to April 2022.
With Brent stable in the $40-45/bbl range throughout June and July, production cuts tapered to 7.7
MMbopd in August and remained at this level until year end 2020. At the December OPEC+
meeting it was agreed that oil production would be raised by 0.5 MMbopd in January 2021, with
future output levels to be decided at monthly ministerial meetings. Brent closed the year priced at
$51.8/bbl.
European gas prices
European gas and global LNG markets faced record low prices in summer 2020, with mild
temperatures, strong wind generation and COVID-19 induced nationwide lockdowns depressing
natural gas consumption. However, the market showed signs of tightening in 2H 2020 due to
unexpected supply challenges in the global LNG market and higher demand in Asia supported by
cold weather patterns across the northern hemisphere.
The latter saw LNG supply originally destined for Europe diverted to Asia. Coupled with further
decline in European domestic production, this significantly tightened European inventories, with
gas storage down by around 15% versus the same period in 2019, and more line with the 5-year
average. As such, European gas prices closed the year in a significantly stronger position versus
1H 2020.
Israel
2020 was another pivotal year for Israel’s upstream oil and gas sector, despite challenges related
to COVID-19. The Chevron-operated (previously Noble Energy) multi-tcf Leviathan field achieved
first gas in December 2019, commencing supplies to the Israeli domestic market, as well as the
key regional export markets of Egypt and Jordan. Gas is exported to Egypt via the 7 Bcm/yr
capacity Eastern Mediterranean Gas (EMG) pipeline in which Chevron (previously Noble Energy)
and its partners have a 39% equity interest.
Robust gas demand outlook
Since 2018, the Ministry of Energy has focused its efforts on transitioning to greener sources of
energy through the increased use of gas and renewables, while phasing out coal. The Israeli
government aims to convert all coal powered stations in the country to gas by 2025 and is targeting
a fuel mix of 70% gas and 30% renewable energy by 2030.
In 2020, demand for gas in Israel was approximately 11-12 Bcm. Despite near-term pressure on
demand, Israel’s long-term gas demand outlook remains robust, with demand forecast to grow to
18.2 Bcm by 2025 and approximately 21 Bcm by 203026.
26 BDO market forecasts as of July 2020 report
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STRATEGIC REPORT
Egypt
Egypt’s gas market has seen substantial change in recent years, moving from supply deficit to
surplus, owing to several recent large domestic discoveries, headlined by Eni’s super-giant Zohr
field. Egypt also started importing gas from Israel in January 2020, realising its ambitions to
become a regional gas hub. However, gas production growth was contained in 2020 in the wake
of the COVID-19 pandemic, which significantly weakened domestic demand and exports.
Italy
Italy is southern Europe's largest oil and gas producer. Oil production exceeded 100,000 bopd in
2020 following start-up of the Total-operated Tempa Rossa field, which has a processing capacity
of 50,000 bopd. Future liquids output is underpinned by this and the Eni-operated Val d'Agri field.
Together the projects will account for approximately 90% of Italian liquids output by the mid-2020s.
Gas production was around 500 MMcfd in 2020 and is expected to increase once the Eni-operated
Cassiopea project (Energean 40%), offshore Sicily, comes onstream in 2024.
Regional pipeline developments
Energean is supportive of all gas infrastructure developments in the Mediterranean. Infrastructure
is key to the Mediterranean achieving the status of a global gas hub, in which we aim to be
the leading independent E&P player.
EastMed Pipeline – A potential export route to Europe
This is a proposed 1,900km pipeline connecting the Eastern Mediterranean’s Levantine Basin
(Israel) with the European gas network, via Greece, Cyprus and Italy. The pipeline has been
classified as a European Project of Common Interest. FID is targeted in 2022, with construction of
the pipeline scheduled for completion by 2025.
In early 2020, Energean and the Public Gas Corporation of Greece (DEPA) agreed to cooperate
to further support construction of the EastMed Pipeline project. The agreement came into force
ahead of EastMed Pipeline accord, which was signed by the leaders of Greece, Cyprus and Israel.
Energean and DEPA also signed a Letter of Intent (LoI) for the potential sale and purchase of 2
bcm/year of gas from Energean’s fields offshore Israel. The agreement represents an important
stepping stone for the project, paving the way for further commercial talks, whilst presenting
Energean with another potential monetisation route for its gas.
TANAP and TAP – Two additional pipelines across Southern Europe
The Trans-Anatolian pipeline (TANAP) is a central part of Europe’s Southern Gas Corridor and
runs from the Turkish border with Georgia to the Greek border at Edirne. It will ultimately deliver
16 Bcm/year of Azerbaijani gas across Turkey, 6 Bcm/year for domestic offtake and 10 Bcm/year
for onward export to southern Europe via the Trans-Adriatic pipeline (TAP). The latter commenced
commercial operations in 4Q 2020, the project having been delivered on schedule, and runs from
Greece to southern Italy.
Cyprus – Egypt pipeline
Cyprus has signed an agreement with Egypt that will eventually allow natural gas found in the
Aphrodite field, estimated at approximately 6 Tcf, to be exported to Egypt, most likely for re-export
as LNG to Europe.
Page | 28
STRATEGIC REPORT
Our Key Performance Indicators
We measure performance over a range of key operational, commercial, financial and non-financial
metrics to ensure the sustainable management of our long-term success. This keeps us focused
on our strategic objectives, whilst allowing us to remain agile and responsive to external events.
Energean completed the acquisition of Edison E&P on 17 December 202027, and in doing so,
reinforced its commitment to the Mediterranean region. The economic reference date of the
transaction was 1 January 2019 and all results subsequent to this date accrue to Energean.
However, for accounting purposes, the figures for Edison E&P are only consolidated into the
financial statements subsequent to the completion date; all results between the economic
reference date and the completion date are reflected through a series of completion adjustments
and are incorporated in the net consideration. Throughout the Key Performance Indicators section,
both operational and financial results are presented on an actual and pro forma (Energean plus
Edison E&P) basis.
Operational
We continued our strong track record of growing reserves, while pro forma production performance
was around the mid-point of guidance of 44.5 - 51.5 kboepd.
1. Working Interest Production
Working Interest Production
Kboepd
Pro
forma
2020
48.3
2020
2019
2018
3.6
3.3
4.1
Objective: Energean is focused on maximising production from its existing asset base and, in the
medium-term, delivering net production of at least 200 kboepd from its gas-weighted portfolio.
2020 progress:
• Average working interest production of 3.6 kboepd (pro forma 48.3 kboepd)
• Karish project approximately 87% complete at 31 December 2020 (90% at 31 March 2021)
• Liquids production at Karish revised upwards and now expected to average 28 kbpd over
a plateau period of approximately five years.
2. 2P Reserves and 2C Resources
2P Reserves
MMboe
2C Resources
MMboe
Pro
forma
202028
982
Pro
forma
202029
158
2020
2019
2018
762
342
347
2020
2019
2018
158
216
58
27 The gross consideration for the transaction, as at the locked box date of 1 January 2019, was $284 million and the final net
consideration (net of cash acquired), as of 17 December 2020, was $203 million
28 Reserves are pro forma Energean plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”). The
transaction closed on 25 February 2021
29 Resources are pro forma Energean plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”). The
transaction closed on 25 February 2021
Page | 29
STRATEGIC REPORT
Objective: Energean aims to grow its reserve and resource base through a combination of
successful exploration and appraisal and selective value accretive acquisitions.
2020 progress:
• 187% year-on-year increase30 in pro forma 2P reserves to approximately 982 MMboe, 79%
•
•
gas
Increased working interest in Energean Israel to 100%, adding 219 MMboe of 2P reserves.
The transaction was signed in December 2020 and closed on 25 February 2021
In early 2021, the Group increased its equity interests in the producing Rospo Mare and
Vega fields, offshore Italy, to 100% at zero consideration.
Financial
In 2020, we took major steps towards achieving a number of our medium-term financial targets,
many of which have been enhanced in the period. Looking ahead to 2021 and beyond, Energean
is focused on increasing production from its large-scale, gas-focused portfolio to deliver material
free cash flows and maximise total shareholder return.
1. Revenues
Sales Revenues
$ Million
Pro
forma
2020
335.9
2020
2019
2018
28.0
75.7
90.3
Objective: Energean’s medium-term target is to generate revenues in excess of $2 billion per
annum. With approximately 1 billion boe of 2P reserves to be monetised and a revenue growth
profile underpinned by gas sold under fixed price contracts, Energean believes this target is both
achievable and sustainable.
2020 progress:
• 2020 sales revenues of $28 million (pro forma $336 million)
• New GSPAs signed in Israel taking total gas sales to 7.4 Bcm.yr on plateau, further
enhancing medium-term revenues
• All GSPAs in Israel contain provisions for take-or-pay and / or exclusivity, as well as floor
pricing, ensuring that revenues are secured, predictable and largely insulated from
downside commodity price risk.
2. Cost of Production31
Cost of Production
$/boe
Pro
forma
2020
11.3
2020
2019
2018
21.4
21.5
17.6
Objective: Following completion of the Edison E&P acquisition Energean has started to implement
programmes to further the reduction of operating costs with the aim of creating a sustainable low-
30 When considering 2020 pro forma 2P reserves (Energean plus the acquisition of Kerogen’s 30% holding in EISL) versus
Energean 2019 standalone 2P reserves
31 The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include Cost of Production. More information can be found in the Financial
Review section, under the heading ‘Non-IFRS measures’
Page | 30
STRATEGIC REPORT
cost business. The Group’s medium-term cost of production (operating costs plus all royalties)
target is $9-11/boe.
2020 progress:
• Full, bottom-up internal review initiated that will evaluate:
o Operating cost reductions
o Third party tariff optimisation
o Mothballing; and
o Production efficiencies, such as gas reinjection, to reduce power consumption
• Cost driven performance-management
• Karish, Karish North & Tanin operating costs expected to be $70 - 80 million per year
o Limited variable costs
3. Adjusted EBITDAX32
Adjusted EBITDAX
$ Million
Pro
forma
2020
107.7
2020
2019
2018
(8.3)
35.6
52.4
Objective: Energean aims to maximise EBITDAX to maintain the profitability of the business. The
Group expects to grow EBITDAX to exceed $1.4 billion per annum in the medium-term through
the successful delivery of key growth projects.
2020 progress:
• FID taken on the >40% IRR Karish North project (Israel) in early 2021
• FID taken on the >30% IRR NEA/NI project (Egypt) in early 2021 (Egypt).
4. Cash Flow from Operating Activities
Cash Flow from Operating
Activities
$ Million
5. (Loss)/Profit After Tax
Profit After Tax
$ Million
Net Zero Carbon Emissions
Pro
forma
2020
137.0
Pro
forma
2020
(416.4)
2020
2019
2018
1.5
36.3
62.7
2020
2019
2018
(92.9)
(83.8)
100.8
Energean’s aim is to lead the energy transition in the eastern Mediterranean through a strategic
focus on gas and achieve its net zero ambition in advance of 2050.
1. Carbon Intensity Reduction Programme
Carbon Intensity
2020
2019
2018
Pro
forma
2020
32 The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include adjusted EBITDAX. More information can be found in the Financial
Review section, under the heading ‘Non-IFRS measures’
Page | 31
STRATEGIC REPORT
KgCO2/boe (Scope 1 and 2)
22.2
40.9
66.8
60.6
Objective: In 2019, we were the first E&P company in the world to commit to net zero emissions
by 2050. As part of this commitment, we pledged to reduce the carbon intensity of our business,
by 70% in 2023, versus our 2019 base year33.
Energean used internationally recognised standards and guidance to calculate its GHG emissions.
We followed the recommendations of the Greenhouse Gas Protocol, as well as guidance from
IPIECA, the UK’s Department for Environment, Food and Rural Affairs (DEFRA), the International
Energy Agency (IEA), the UN Intergovernmental Panel on Climate Change (IPCC) and the EU
Emission Trading System. Our scope 1 emissions have been verified by TUV Austria Hellas.
2020 progress:
• We delivered a 67% year-on-year reduction in the carbon intensity of our operations, when
considering 2020 pro forma performance versus Energean 2019 standalone data
• Successfully rolled out the use of ‘Green Electricity’ at Prinos in Greece and our premises
in Israel
• Set a new carbon intensity target of approximately 9.5 kgCO2/boe by 2023, approximately
half the current global average for the upstream oil and gas sector
• Achieved a B- score on climate change and a B score on supplier engagement in our first
CDP submission
• Aligned our year end 2020 reporting procedures with TCFD recommendations
• Reduced energy use intensity at our operating sites by 9.5% and increased energy
efficiency by optimising production equipment and installing LED lighting.
HSE
Energean is fully committed to behaving responsibly and conducting its business with integrity in
everything it does.
1. Lost Time Injury Frequency
LTI Frequency Rate
No. Per Million Hours Worked
Pro
forma
2020
0.63
2020
2019
2018
0.65
0.28
1.10
Objective: Energean is committed to managing its operations in a safe and reliable manner to
prevent major accidents and to provide a high level of protection to its employees and contractors.
2020 performance was slightly poorer versus 2019 due to the inclusion of contractor data related
to the onshore workstream of the Karish project in Israel.
2020 progress:
• Safe operations, zero injuries to Energean employees for a second consecutive year
• Zero environmental damage and zero oil spills
• Zero health damage and occupational illnesses.
Total shareholder return
In 2020, we completed the first phase of our transition to become the leading independent gas-
producer in the Mediterranean with the completion of the acquisition of Edison E&P. The second
33 Scope 1 and 2 emissions
Page | 32
STRATEGIC REPORT
phase of that transformation will be completed once our flagship gas project Karish commences
production, in 1Q 2022, enabling us to deliver material free cash flows and meaningful, sustainable
shareholder returns.
In 2021, the Board aims to decide on how to best provide returns to shareholders whilst ensuring
that the right level of reinvestment is maintained in the business.
The target year for our inaugural dividend is 2022.
Figure 7. Share price performance (rebased) versus peers since IPO
Energean
AkerBP
Lundin
Premier
Tullow
Cairn
Hurricane
Kosmos
DGOC
150.0%
100.0%
50.0%
-
(50.0%)
(100.0%)
Page | 33
STRATEGIC REPORT
Review of Operations
Energean’s focus on developing its gas-weighted resource base in the Eastern Mediterranean is
a key strategic priority. Strong operational and development progress was achieved in 2020 across
the entire portfolio, despite some COVID-19 related challenges.
Key milestones achieved in 2020 and early 2021
Strong
Operational
Performance
Further
Commercial
Success
Robust
Pro Forma
Financial
Performance
Advanced Net
Zero Strategy
ESG and HSE
Highlights
Working interest 2P reserves increased to 762 MMboe (pro forma 982 MMboe34, a
187% year-on-year increase35)
Working interest production 3.6 kboepd (pro forma 48.3 kboepd, 74% gas)
Karish development 87% complete at 31 December 2020 (90% at 31 March 2021)
FID taken on the >40% IRR Karish North project (Israel) in early 2021
FID taken on the >30% IRR NEA/NI project (Egypt) in early 2021
Closed Edison E&P acquisition. Operational footprint expanded to nine countries
Acquired Kerogen’s 30% holding in EISL for $380 - 405 million in early 2021
Increased signed GSPAs in Israel to 7.4 Bcm/yr on plateau36
Sales revenues of $28 million (pro forma $336 million), operating cash flows of $2
million (pro forma $137 million) and adjusted EBITDAX of $(8) million (pro forma
$108 million)
$276 million capex reduction versus January 2020 guidance of $705 million (pro
forma $565 million capex reduction versus January 2020 pro forma guidance of
$995 million)
67% year-on-year reduction carbon emissions intensity to 22.2 kgCO2/boe, when
considering 2020 pro forma performance data versus 2019 Energean standalone
data.
Successful roll out of ‘Green Electricity’ at Prinos in Greece, our premises in Israel
and the EDINA operative site in Croatia
Achieved a B- score on climate change and a B score supplier on engagement on
CDP disclosure and aligned all recommended pillars of TCFD disclosure
Implemented climate-based scenario analysis and internal carbon pricing to assist
with investment-decision making
Safe operations, zero serious injuries
Zero environmental damage and zero oil spills
ESG ratings in top quartile, awarded ‘Gold’ by Maala and ranked 16 out of 114 peer
companies by Sustainalytics
Awarded ‘Best ESG Energy Growth Strategy in Europe 2020’ and ‘Transition
Economist Strategy of the Year – Independent’
Step up in production following the acquisition of Edison E&P
Group pro forma working interest production averaged 48.3 kboepd in 2020 (2020 actuals as
reported: 3.6 kbopd) around the mid-point of guidance of 45.5 – 51.5 kboepd, with pro forma
revenues of $336 million (2020 actuals as reported: $28.0 million). The acquisition of Edison E&P
in December 2020 significantly enhanced the scale of Energean's operations and added a portfolio
of high-quality producing assets. Moreover, additional steps were taken in 2020 towards achieving
a number of the Group’s medium-term targets, many of which were enhanced during the period.
These targets include achieving net production of at least 200 kboepd once Karish and Karish
North are onstream.
Working interest hydrocarbon production (kboepd)
34 Includes an additional 219 MMboe of 2P reserves acquired from Kerogen Capital
35 When considering 2020 pro forma 2P reserves (Energean plus the acquisition of Kerogen’s 30% holding in EISL) versus
Energean 2019 standalone 2P reserves
36 From 5.0 Bcm/yr at year-end 2019
Page | 34
STRATEGIC REPORT
2020 pro forma
35.4
9.1
1.8
1.8
0.2
48.3
2020
1.4
0.3
1.8
0.1
0.0
3.6
Egypt
Italy
Greece
UK North Sea
Croatia
Total
Israel
Karish Project
Under the Group’s EPCIC contract with TechnipFMC, the Karish Project was approximately 87%
complete at 31 December 2020 (90% at 31 March 2021). Energean continues to work towards first
gas from Karish in 1Q 2022. The shipyard in Singapore remains under limitations imposed by
COVID-related restrictions, including limited access to workers and yard productivity. Energean is
working with its contractors to firm up this timetable and will update the market as the situation
evolves.
Energean Power FPSO Progress and Key Milestones
The Energean Power FPSO was approximately 93% complete, at year end 2020. During the period
the majority of the main modules and pipe racks were lifted onto the FPSO hull, marking the first
major milestone of the hull and topside integration campaign. The flare-lift was completed in early
2021, signalling near completion of the lifting programme.
Post-period end Energean commenced its project to install a second oil train and second riser on
the Energean Power FPSO, which will increase the Energean Power FPSO liquids production
capacity to approximately 32 kbopd (from 21 kbopd) and allow maximum gas production of 800
mmscf/d (approximately 8 Bcm/yr, from 6.5 Bcm/yr).
Subsea and Onshore Progress
Subsea works were approximately 76% complete at year end 2020, with the 14-line mooring
system and deepwater subsea production system fully installed. The 90-kilometre gas sales
pipeline scope was also close to completion with the riser installation campaign expected to
commence and complete in 1Q-2021.
During 1Q-2020, successful results were achieved from production measurement performed
during clean-up of all three development wells (KM-01, KM-02 and KM-03), with all three wells
demonstrating the capability to deliver at a combined capacity sufficient to fill the 8 Bcm/yr capacity
of the Energean Power FPSO. High quality liquids, measured at 48 °API, were also identified in
the KM-03 well.
Onshore work was substantially complete at year end (90% inclusive of Energean’s scope of work;
100% under the Technip FMC EPCIC), with mechanical completion and commissioning of the
Production Rate Measurement System at Dor anticipated during 1Q-2021. Installation of the
onshore pipeline commenced in June 2020 and is also expected to complete in 1Q-2021. The
system is expected to be ready for first gas by the end of April 2021. Civil works also progressed
well during 2020 and are expected to complete in 2Q-2021.
Karish North
In January 2021, Energean reached FID at the 1.1 Tcf (32 Bcm) Karish North field, 21-months
after the announcement of the discovery. The field will be commercialised via a low-cost tie-back
to the Energean Power FPSO, which will be situated approximately 5 kilometres away. First gas
is expected in 2H 2023, with production from the first well expected to be up to 300 mmscf/d
Page | 35
STRATEGIC REPORT
(approximately 3 Bcm/yr). Initial capital expenditure in the project is expected to be approximately
$150 million, or $0.6/boe; and Energean estimates that the project will generate IRRs above 40%.
GSPAs
A number of GSPAs were signed with Israeli buyers in 2020, taking total GSPAs to 7.4 Bcm/yr at
plateau, meaning the 8 Bcm/yr capacity of the Energean Power FPSO will be approximately 93%
utilised. All contracts contain provisions for take-or-pay and / or exclusivity, as well as floor pricing,
ensuring that Energean's revenue stream in Israel is secured, predictable and largely insulated
from downside commodity price risk. Energean is exploring options to fill the remaining 0.6 Bcm/yr
spare capacity in its FPSO.
Exploration
Planning for the Group’s next major exploration and appraisal campaign, offshore Israel,
commenced in late 2020. Drilling is expected to commence in early 2022 and could see up to four
exploration and appraisal wells targeting more than 1 billion boe of prospective resources. Targets
include:
Block 12, which is situated between the Karish and Tanin leases, and is estimated to contain gross
prospective recoverable resources of 108 Bcm (3.8 Tcf), with the primary targets having geological
chances of success ranging from 63% to 79%. The first well is expected to target the 20 Bcm
Athena prospect, for which the primary target (11 Bcm / 0.4 Tcf) has a 70% geological chance of
success.
Success at Athena would significantly de-risk the remaining 88 Bcm (3.1 Tcf) of prospective
resources in the block. Any discovery in that block would be prioritised over the development of
Tanin due to i) lower capital expenditure investment (as compared to Tanin); and ii) the absence
of any seller royalties on production from the lease.
Each well is expected to cost approximately $35-50 million and Energean expects to tender for a
rig for the programme in 1H-2021. The first Karish North development well will be drilled as part of
this programme to achieve cost synergies.
Well
Type
Athena-01
KM-04 + Pilot
Hole
Hermes-01
Hercules-0138
Exploration
(Firm)
Appraisal
(Firm)
Exploration
(Optional)
Exploration
(Optional)
KN-04 ST-04
Development
(Firm)
Approximate
Cost $ Million
Prospect Size
(Recoverable)
MMboe37
Possibility of
Success (PoS)
35
45
40
50
50
140
84%
176 + 64
94% + 72%
200
488
N/A
56%
Tbc
100%
Acquisition of Kerogen Capital’s 30% Holding in EISL
In December 2020, Energean announced the proposed acquisition of Kerogen Capital’s 30%
holding in Energean Israel Limited (EISL) for a total consideration of $380-405 million. The
acquisition is a natural strategic fit, that gives the Group 100% ownership of EISL’s share capital
37 Recoverable volume is the sum of the unrisked mean recoverable volumes with a recovery factor (gas) = 0.7 and a recovery
factor (oil) = 0.4. This represent the total recoverable volumes targeted by the well bore
38 Not yet audited. Management estimates presented
Page | 36
STRATEGIC REPORT
and structure, and adds 2P reserves of 219 MMboe (approximately 80% gas) enlarging the
Group’s reserves to around 1 billion boe.
The total consideration of $380-405 million includes an up-front payment of $175 million, payable
on transaction close, as well as a deferred consideration of $125-150 million, the latest allowable
payment of which is 30 days following practical completion of the Karish project. $30 million of
additional deferred consideration is payable by 31 December 2022 and is expected to be funded
by free cash flows. The consideration also includes $50 million of convertible loan notes, which
have a maturity date of 29 December 2023, a strike price of GBP9.50 and a zero-coupon rate.
The acquisition of the minority interest in Energean Israel Limited closed on 25 February 2021.
Egypt39
Production
The Abu Qir gas-condensate field offshore Egypt is the largest producing asset in the Group’s
portfolio. The field delivered 35.4 kboepd of pro forma working interest production in the 12 months
to 31 December 2020, approximately 86% of which was gas, in the middle of market guidance of
34 - 37 kboepd. 2021 production is expected to average 26 - 30 kboepd, lower than 2020 due to
deferral of investments until after completion of the acquisition of Edison E&P.
Development
NEA/NI subsea tieback
In January 2021, Energean sanctioned the NEA/NI project, shallow-water offshore Egypt and
neighbouring the Abu Qir concession. An EPCI contract for the four subsea wells and the
associated tie-back to the Abu Qir platform and associated infrastructure was awarded to
TechnipFMC in February 2021. The integrated NEA/NI project is expected to deliver first gas from
one well in 2H 2022 and from the remaining three wells in 1Q 2023. The project contains an
estimated 37 MMboe of 2P reserves according to D&M and peak production is expected to be
approximately 90 MMscfd plus 1 kbopd of condensates. The North Idku field contains further 2C
resources of 22 MMboe.In line with Energean’s disciplined capital allocation and organic growth
strategy, the project generates an IRR in excess of 30% and a payback period of approximately 3
years, at a long-term Brent price of $60/bbl, versus a Group IRR hurdle rate of more than 20% for
greenfield projects.
Abu Qir infill drilling programme
Following the 4-well programme at NEA/NI, Energean expects to drill at least two sidetracks to
support production in the Abu Qir concession, with the concurrent drilling programmes generating
significant synergies.
Exploration
The Nigma-1 exploration well was spudded on the North East Hap’y Offshore block (Energean,
30%) in late 2019. The well was completed in early 2020 and did not encounter commercial
hydrocarbons. In June 2020, a formal request was submitted to the Egyptian government to enter
the second exploration period. A Zohr-like structure is being evaluated by Energean and Eni (70%,
operator) for a potential exploration well in the early 2020s.
The Ameeq-1 exploration well was spudded on the North Thekah Offshore licence in January 2020
and drilled to a depth of 5,671 metres. The well did not encounter commercial hydrocarbons and
was plugged and abandoned in March 2020. The licence was subsequently relinquished.
Italy40
39 Portfolio acquired as part of the Edison E&P transaction, which closed in December 2020
40 Portfolio acquired as part of the Edison E&P transaction, which closed in December 2020
Page | 37
STRATEGIC REPORT
Energean is the second largest oil and gas operator in Italy after Eni, with interests in more than
50 licences at 31 December 2020.
Production
Pro forma working interest production averaged 9.1 kboepd (52% gas) in 2020, just above the mid-
point of guidance of 8 - 10 kboepd. 2021 production is expected to be between 8 - 9 kboepd.
During early 2021, Energean increased its positions in the Vega and Rospo Mare fields to 100%
(from 60% and 62%, respectively) at nil cost and with an economic reference date of 1 January
2021. ENI retains its share of abandonment expenses associated with both fields.
The Vega and Rospo Mare licences are key targets of the cost reduction programme that has
recently been implemented to capture cost savings across the portfolio, with the goal of improving
profitability and cash flows.
Development
The Cassiopea project, in which Energean has a 40% non-operated equity stake, is ongoing with
first gas expected in 2024. The field will deliver plateau production rates of approximately 150
MMsfcd from the middle of the decade and working interest capital expenditure to first gas is
expected to total approximately EUR265 million. Upside exists within the surrounding area from
potential satellite tie-back options, including the Gemini and Centauro prospects.
During 2021, the main activities in Italy outside of the Cassiopea development are expected to
involve drilling sidetracks in the Callipso field and a workover in the Monte Urano licence. Rospo
Mare sidetracks remain part of the 2023-24 drilling programmes.
Greece
Production
Working interest production in Greece was 1.8 kbopd in the 12 months to 31 December 2020
versus guidance of 1.5 - 2.0 kbopd. 2021 production is expected to be around 1.5 kbopd.
Development
Energean's acreage around the Prinos area remains under review. In March 2021, the European
Commission approved €100 million of support for Energean’s Epsilon project, consisting of a public
guarantee on a commercial loan of around €90.5 million to be contracted by Energean with its
commercial banks and a €9.5 million subordinated loan from the Greek state. Terms are yet to be
agreed. Energean has full control over whether or not it takes advantage of this funding, the
decision being contingent primarily on an FID-decision on the 53 MMboe 2P + 2C Epsilon
development. Under the terms of the approval, the support will be granted no later than 31
December 2021 and has a maximum duration of eight years. The uses of the loans are stipulated
to cover Energean’s investment and working capital requirements in Greece for the next 12
monthsUnder a full-development scenario, Epsilon could deliver peak production in excess of 7
kbopd, with a five-year average of approximately 6.5 kbopd.
In October 2020, the Group reached an agreement with the Public Power Corporation of Greece
to source 100% of electricity for the Prinos area assets from renewable sources to deliver a 100%
reduction in Scope 2 carbon emissions at Prinos and an approximately 45% reduction of Scope 1
& 2 emissions.
Exploration
Ioannina and Aitoloakarnania
Interpretation of 2D seismic acquired on the Ioannina block (Energean 40%) is ongoing. In early
2021, Repsol (60%, operator) decided to withdraw from the licence. Energean is now the 100%
owner and operator of the licence.
Page | 38
STRATEGIC REPORT
The Aitoloakarnania exploration licence in western Greece was relinquished in early 2021.
Block 2
In January 2021, Energean completed the acquisition of Total’s 50% share in Block 2, offshore
western Greece. Combined with the 25% working interest that was acquired through the
acquisition of Edison E&P, the Group now holds a 75% stake in the block. Hellenic Petroleum
holds the remaining 25%.
Carbon Capture and Storage
Energean is committed to meeting its carbon neutral target by 2050 and leading the Mediterranean
region’s energy transition. During 2020 the Group commenced evaluation of carbon capture and
storage in the Prinos asset. Energean estimates that the Prinos subsurface volumes are sufficient
to sequester up to 50 million tonnes of CO2. Use of captured CO2 for enhanced oil recovery is
also under investigation.
Blue Hydrogen
In addition to a CO2 sequestration project, Energean is evaluating an opportunity to develop a
small-scale blue hydrogen (H2) plant within the existing onshore Sigma gas plant. Natural gas
would be converted into H2 and CO2 through an Oxy-combustion process with a Carbon Capture
efficiency of over 99%.
Croatia41
Production
Pro forma working interest production in Croatia averaged 0.2 kboepd during 2020. No material
production is expected in 2021.
Appraisal and Development
In September 2020, Edison E&P spudded the Irena-2 appraisal well which targeted the same gas-
bearing horizon as the Irena-1 well. The well was successfully completed in October 2020 and
subsequently suspended for future production.
First gas from the Irena field is expected in 2024 and working interest production is expected to
peak at 3.5 kboepd (100% gas). Working interest capex to first gas is expected to total
approximately EUR41 million.
Montenegro
Exploration
Energean was granted a one-year extension to the first exploration period to 15 March 2022.
Technical evaluation of Blocks 26 and 30 is ongoing.
UK North Sea42
Production
Pro forma working interest production in the UK North Sea averaged 1.8 kboepd (32% gas) in
2020, towards the top end of full year guidance of 1 - 2 kboepd due to high operating efficiency
and solid uptime performance. During 2020, Perenco shut in the Trent field to await higher gas
prices before production resumes. As Trent is the host facility for production from the Tors fields,
the Tors fields are currently offline.
2021 production is expected to average approximately 0.5 kboepd.
Exploration and Appraisal
41 Portfolio acquired as part of the Edison E&P transaction, which closed in December 2020
42 Portfolio acquired as part of the Edison E&P transaction, which closed in December 2020
Page | 39
The two-well Glengorm appraisal programme, in which Energean has a 25% non-operated
interest, commenced in December 2020. Drilling of the first well is expected to take approximately
180 days. Isabella appraisal is expected to commence in 2022.
STRATEGIC REPORT
Page | 40
Reserves and Resources
Year-end pro forma 2020 Working Interest reserves43 were 982 MMboe, a 187% increase44 on
Energean 2019 standalone 2P reserves.
STRATEGIC REPORT
At 1
January
2020
Revisions
and
Discoveries
Acquisitions/
(Disposals)
Transfers
from / (to)
contingent
Production
At 31
December
202045
Israel
Greece
Egypt
Italy
Croatia
Total
Oil MMbbls
29
Gas
Bcf
1,460
Total MMboe
287
Oil MMbbls
Gas
Bcf
Total MMboe
54
6
55
20
153
55
(0)
-
(0)
Oil MMbbls
Gas
Bcf
Total MMboe
Oil MMbbls
Gas
Bcf
Total MMboe
Gas
Bcf
Total MMboe
Oil MMbbls
Gas
Bcf
Total MMboe
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Oil MMbbls
83
Gas
Bcf
1,466
Total MMboe
342
19
153
105
30
1,042
219
21
817
169
-
-
-
14
567
114
36
249
79
2
2
2
-
13
2
82
1,870
417
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
817
119
-
-
-
(1)
-
-
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
-
(0)
(0)
(1)
(0)
(0)
100
3,472
730
52
6
53
14
567
114
36
249
79
2
2
2
-
13
2
204
4,306
982
United Kingdom Oil MMbbls
43 Reserves are pro forma Energean plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”). The
transaction closed on 25 February 2021
44 When considering 2020 pro forma 2P reserves (Energean plus the acquisition of Kerogen’s 30% holding in EISL) versus
Energean 2019 standalone 2P reserves
45 Pro forma Energean plus the acquisition of Kerogen’s 30% holding in EISL
Page | 41
STRATEGIC REPORT
Corporate Social Responsibility
Our approach
Operating to the highest ethical standards
We are devoted to creating a sustainable future for society through responsible actions, whilst
maintaining the viability of our company, by setting specific guidelines that comply with
international standards of sustainability and best practice approaches. We do this through our work
and our policy, which aims to protect the environment and the rights of all our stakeholders.
We recognise that oil and gas operations have a wide-ranging impact on the environment and
society. To mitigate this impact, we are committed to achieving net zero emissions across all our
operated assets by 205046. In 2020, we have already started acting upon on this commitment and
delivered a year-on-year reduction to carbon emissions intensity, when considering 2020 pro forma
performance versus Energean 2019 standalone data, of almost 70%.
In addition, in our year-end reporting, we have aligned with the TCFD recommendations and also
engaged with CDP, achieving a B- score in climate change and a B score in supplier engagement.
We also established a new climate change and sustainable development department to manage
climate change projects and introduced carbon shadow prices as a key sensitivity tool for decision
making.
Key to Energean’s success is its staff. We ensure that all employees are treated equally and with
respect, and we strive to make our workplace as appealing as possible in order to attract new
talent. In addition, we enforce and implement safe, healthy, and secure practices within the
workplace to ensure that every employee feels safe inside our premises.
Energean also aims to build strong bonds with the local communities in which it operates. As such,
we ensure that all our activities are in line with the interests of our stakeholders, and maintain an
open dialogue with local communities.
Our CSR policy
Our CSR policy is embedded in our company values and is guided by international standards and
best practices. As such, it is fundamental to how our business operates. Our CEO, Board of
Directors and Senior Management are responsible for monitoring Energean’s sustainability
objectives and are highlight supportive of our desire to lead the Mediterranean region’s energy
transition, through a strategic focus on gas.
Our high ethical standards are applied to all aspects of our business model, as well as interactions
with our stakeholders. Our CSR priorities are based on our stakeholders’ needs and expectations,
and we prioritise the areas that need our greatest attention. As such, our CSR policy is focused on
four key areas: our people, health & safety, the environment, and community relations.
Energean is always seeking to improve its sustainable development agenda by collaborating with
governments, the private sector, and society, as well as through receiving feedback from its
stakeholders, in order to ensure alignment with best practice techniques.
Corporate Governance is a top priority
Strong corporate governance is a top priority that acts as a guide towards fulfilling our corporate
social responsibilities, whilst ensuring the trust of our stakeholders. In accordance with this and
best practice, we are always striving to enhance our business productivity whilst maintaining an
agile response capability when it comes to changes in the macro environment. Furthermore, we
46 Scope 1 and 2 emissions
Page | 42
STRATEGIC REPORT
aim to strengthen the supervisory function to management and internal control in order to maintain
and enhance our efficiency and transparency.
Equality and transparency
Our Code of Conduct governs the way we work and conveys a clear message to all staff and
stakeholders on how we commit to compliance with laws and regulations, as well as our ethical
standards. The Code of Conduct is clear on our zero tolerance for bribery, corruption and other
forms of financial crime and this position is strongly reinforced by Energean’s Management and
Board. The Code also covers our position and controls with regards to human rights, lobbying and
advocacy, prevention of the facilitation of tax evasion, anti-slavery and the General Data Protection
Regulation.
We require those who deliver services to us, or who act on our behalf, to abide by the Code and
meet the requirements of specific business ethics and compliance clauses in their contracts. This
ensures that third parties do not cause us to breach our own Code. Prior to awarding contracts,
we conduct risk-based third-party due diligence to assess risks related to ownership structure, anti-
bribery and corruption, sanctions, trade restrictions, human rights and labour conditions.
Bribery and corruption
It is our policy to conduct all our business in an honest and ethical manner, and comply with all
applicable anti-bribery laws, including, but not limited to all applicable local laws where Energean
operates and the U.K. Bribery Act, and to accurately reflects all transactions on Energean’s books
and records.
We take a zero-tolerance approach to bribery and corruption and are committed to acting
professionally, fairly and with integrity in all our business dealings and relationships wherever we
operate.
Our contribution to the 17 United Nations’ Sustainable Development Goals
We recognise that, as an energy company, we have an obligation to contribute to the United
Nations 17 Sustainable Development Goals (SDGs). For this reason, we link our main actions and
initiatives to these goals. The table below shows Energean’s key 2020 CSR activities, alongside
the respective SDGs that they serve.
SDGs
Our commitments and actions
• Donated essential children’s items to “Together for Children” - an
association of NGOs in the field of child welfare - in Athens, Greece.
• Continued the cooperation with “Boroume” (”We Can”) - NGO that fights
food waste – by donation of the surplus lunch food from the Athens
office (Greece)
• Donated food platters to the medical team of Rambam Hospital that
fights COVID-19 - in Haifa, Israel
• Donated food boxes to the local branch of the Red Cross - in Bar,
Montenegro
• Donated food packages to elderly and lonely people, in collaboration
with the local NGO “Lev Hash” - in Haifa, Israel.
• Continued our excellent HSE performance with more than 4 million
man-hours with no Lost Time Injuries (LTI) in the building of the
Energean Power FPSO, and more than 1.3 million man-hours (without
LTI) in all Energean sites
• Donated a Molecular Control Diagnostic Device (PCR) to the General
Hospital of Kavala, allowing for more than 100 COVID-19 tests per day
- in Kavala and Thassos Island, Greece
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STRATEGIC REPORT
• Supported the creation of protection face shields against COVID-19,
invented by the engineers of the University of Thessaly, which were
distributed to entities in several areas of Greece
• Donated COVID-19 Medical Kits to the Israeli National Emergency Pre-
Hospital and Blood Services Organisation (MDA), who treated
thousands of infected individuals in their homes
• Participated in “One Hand”, an initiative by Egypt Oil & Gas, to provide
medical supplies and equipment needed by the Egyptian Ministry of
Health to face COVID-19 challenges
• Organised “Run for our Local Healthcare Heroes” initiative, to raise
money for the front-line people needs of the COVID 19 fight, in all our
areas of operation
• Participated in an initiative by the Ministry of Health, the Ministry of
Social Solidarity and the Food Bank, to secure medical supplies for
hospitals and vulnerable & remote communities (Egypt).
• Offered paid internships to 14 college students in Greece
• On 5 June 2020 (World Environment Day), Energean organised three
environmental webinars:
o For our colleagues and Middle School students & above titled
“How does Climate Change affect our lives” (Greece)
o For Elementary School students titled “Time for Nature” with
units on biodiversity, recycling, waste management and the
environment protection (Montenegro)
o For our colleagues titled “Blue Flags and Coastal
Environments” on the preservation of the marine and coastal
life (Israel)
• Awarded 4 Master’s degrees scholarships to students at the University
of Haifa and the Technion (Israel).
• During 2020 we increased the overall percentage of women at
Energean for a consecutive year from 13% to 15% and Board
representation from 22% to 33% and we have a healthy mix of
employees from three different generations.)
• Welcomed Kimberley Wood to Energean’s Board of Directors as an
Independent Non-Executive Director.
• Energean recycled 89% of water withdrawals in its production sites.
• Energean realises the global demand and focus on providing cleaner
energy, by becoming 70% gas focused.
• Number of Employees: 620 as at 31 December 2020
• Number of Nationalities: 19.
• During the year, Energean completed training webinars to all
employees regarding Equal Opportunities, Diversity, and Inclusion. The
webinars covered general knowledge for all employees and highlighted
how managers can better support, manage, and contribute to their
teams
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STRATEGIC REPORT
• Continued the support of the Association of Paraplegics and Disabled
People in the Prefecture of Ileia (Greece)
• Continued the support to 3 Paralympic swimmers in Israel in their
journey to qualify for the Tokyo 2020 Paralympic Games via monthly
financial aid and social media awareness
• Continued the support to “Etgarim”, an NGO for the rehabilitation of
disabled adults and children through outdoor sports (Israel)
• Supported “Access Israel”, a non-profit organisation that promotes
accessibility and inclusion in order to improve the lives of people with
disabilities and the elderly
• Organised a webinar titled “The Journey to Tokyo Paralympic Games”:
an open conversation with our 3 sponsored Israeli Paralympic
swimmers and our Energean employees asking questions and hearing
their inspiring story
Initiated the “Energean Unathlon of Inclusion” campaign to promote
awareness and support the rights of people with disabilities.
•
• Energean was the grand sponsor of the 4th Dodoni Festival - a summer
Cultural Festival - Ioannina, Western Greece.
• Continued the support to the Hof HaCarmel Regional Council in
promoting community and environmental projects (Israel).
• Neve Yam beach was awarded the “Blue Flag”, the first in the Regional
Council of Hof HaCarmel, in collaboration with
• Energean (Israel)
• Continued the support to “Etgarim” - a Haifa Sailing Club that empowers
activities for youth at risk (Israel).
• Recycled more than 95% of the waste generated during 2020 in
production sites
• Established an energy management system working complementary
with the accredited ISO 14001 environmental management system, in
Energean production sites.
• Energean has pledged to become a net-zero emitter by 2050
• Energean’s strategy to Net-Zero emissions by 2050:
o Short-term plan – next 5 years
o Medium-term plan – by 2035
o Long-term plan – by 2050
• Reported to Carbon Disclosure Project receiving a high score (B- in
climate change and B in supplier engagement)
• Committed to align reporting to the TCFD recommendations
• Energean’s CEO, alongside other business leaders, called on the UK
Prime Minister to deliver a green COVID-19 recovery using the SDGs
as a base
• Purchased 100% renewable electricity for our operations in Kavala,
Greece
• Became the sole sponsor of the “Climate Track” field at the “Start-ups
Go Global” competition, in partnership with EIT Hub Israel.
• Zero oil spills during 2020, while maintaining a completely clear record
•
since the beginning of our operations
Installed the “ODYSSEA” platform, a deep-water marine data
monitoring system, on our “Kappa” natural gas production – Prinos,
South Kavala, Greece.
• Maintenance of Telemetric Stations in surface waters of Nestos River
Delta, Lakes Vistonida-Ismarida and Thassos Island Management Body
- in Northeastern Greece
• Continued supporting the Israeli Nature and Parks Authority in
protecting and conserving Israel’s nature, landscapes and heritage
sites, through educational programs on nature preservation
• Supported Tirat Hacarmel Municipality in a National Emergency
Response Drill (Israel).
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STRATEGIC REPORT
Energean collaborated with:
• United Nations Global Compact
• Maala, a non-profit, CSR standards-setting organisation in Israel, which
has set a dedicated CSR index on the Tel Aviv Stock Exchange.
Maala’s CSR Index is an ESG rating system used as an assessment
tool, benchmarking Israeli companies on their CSR performance.
Energean was rated at Gold Level at the 2020 Maala Index – Israel
• Management body of the Nestos River Delta, Lakes Vistonida-Ismarida
and Thassos Island – Northeastern Greece
• Sembcorp Marine Ltd, TechnipFMC & Sub-Con: Environmental
•
•
•
Campaign “Say no to Plastics” – Israel
“Boroume” (“We Can”), an NGO that fights food waste - Athens, Greece
“Etgarim”, an NGO dedicated to the empowerment and social
integration of people with disabilities through outdoor sports - Haifa,
Israel
“Together for Children”, an association of NGOs in the field of child
welfare - Athens, Greece
Israeli Paralympic Committee.
• Red Cross - Local branch in the City of Bar, Montenegro
•
• Medical Association of Kavala, Greece
• Democritus University of Thrace (DUTH), Department of Environmental
Engineering – Xanthi, Greece
• EIT Hub Israel, under the European Institute of Innovation and
Technology (ΕΙΤ)
• University of Thessaly: the Mechanical Engineering Department and the
Pulmonary Clinic of the University – Volos & Larissa, Greece
• Magen David Adom (MDA), Israel’s National Emergency Pre-Hospital
Medical and Blood Services Organisation
• Association of Paraplegics and Disabled People of the Ileia Prefecture,
Southwestern Greece
• The University of Haifa and the Technion - Israel
“Ozon”, an environmental NGO – Montenegro.
•
Excellence through our people
Our people are critical to our success, and we are committed to fostering an inclusive and high-
performance culture based on trust and collaboration, to have fulfilling roles and careers, and
shape the Energean of the future.
We rely on our people’s commitment, skills and knowledge and it is vital we empower and engage
our diverse workforce to deliver our strategy. The foundation of our success is our ability to recruit,
retain and develop highly talented employees and contracted personnel who lead effectively at
every level of our organisation safe and compliant operations and processes, ultimately delivering
greater value to the business. That is why we continue to invest in these areas. In 2020 we
increased by 14% the training hours in the group compared to 201947.
At the end of 2020, we also launched an upgrading project of our recruitment and e-learning
systems by implementing the latest SAP SuccessFactors suite, which is expected to be completed
in Q3 2021 and will play a key role in the talent acquisition and development. The upgrade will also
simplify the employee experience starting from the recruitment and onboarding processes all the
way to the daily administration, allowing greater autonomy to employees and making the HR-
related activities more efficient overall.
47 This figure excludes training hours from employees who joined Energean from Edison E&P
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STRATEGIC REPORT
Developing our executive team skills is vital for leading their teams successfully, hence in 2020 we
completed the first 360-degree feedback powered by Hogan. This resulted in the development of
a targeted management action plan to address the outcomes of the feedback process.
For another year, we invested in developing the leaders of the future by offering both academic
scholarships as well as external professional training.
Employee engagement
We strive to uphold a positive, open and honest culture to enable our people to fulfil their potential.
Especially during the COVID-19 pandemic with the shift to remote work for a significant number of
our workforce, regular and open communication, and staff engagement have been of utmost
importance. We conducted a group-wide survey to understand how our staff felt with the measures
implemented to tackle COVID-19 within the company with 93% of our staff felt that the steps taken
have been effective. One of the main measures taken was the transition of most employees to
work remotely, which proved successful both in terms of safety and work-life balance without
adverse effects on the performance of our people. Based on these positive indications, we are
planning to implement a more flexible working arrangement for our workforce.
In terms of communication, our CEO and senior management teams host regular town hall
meetings, whilst manager meetings are also held on a weekly basis at the business unit level.
From a wellbeing perspective, group exercise and cooking sessions were arranged during the
COVID-19 pandemic by our CSR team to enable positive interaction between employees and to
encourage a healthy lifestyle.
We cultivate an open feedback culture and we want our people to speak up. In 2020, we revised
and updated our Open Door, Harassment and Bullying policies and Grievance mechanism. We
conduct structured surveys at the Group level and in 2020 we launched our first Energean Voice
Survey, which achieved a plus 90% response rate, which has helped us to focus on key areas and
compare our outcomes with industry peers. In 2021 we plan to create action plans based on those
results and undertake further targeted surveys to build deeper understanding of employees’ views
on the culture of the company after the acquisition of Edison E&P.
We respect the right of all employees to join a legitimate trade union and bargain collectively. We
have collective bargaining agreements in place in our Greek and Italian business units and
continue to have employee representation on the board since 2019.
Our Intranet called ETHOS (Energean Transmission Hub Online System) was successfully
launched in 2020 to further enable communication, document sharing, knowledge exchange and
connect all Energean employees, but also further enabling our people who joined Energean
through the acquisition of Edison E&P to develop stronger relationships with their colleagues
across different locations and time zones.
Diversity and inclusion
Our current and future success depends on a diverse range of talented people. We aim to treat
people fairly, equally, and without prejudice, irrespective of gender, race, nationality, age, disability,
sexual orientation or any other discriminatory attributes. In 2020, we updated our Equal
Opportunities Policy and provided group-wide training on diversity and inclusion best practices.
To further develop our inclusive culture and initiatives, in 2020 we started participating in the D&I
workgroups organised by UN Compact Global Network UK. In 2021 we aim to introduce new
recruitment D&I targets to achieve an even healthier gender, age and nationality mix in all countries
and levels within our organisation.
During 2020 we increased the overall percentage of women at Energean for a consecutive year
from 13% to 15% and Board representation from 22% to 33% and we have a healthy mix of
employees from three different generations.
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STRATEGIC REPORT
We aim to provide an optimal working environment to suit the needs of all employees, including
those with disabilities. The Company welcomes job applications from those with disabilities.
We are proud to have an employee retention rate of 98.2%48 despite the recent turbulent market
conditions.
Headcount by seniority and gender
Gender Balance by Seniority Male
Female
Total
Board
Executive Committee
Senior Management
Middle Management
Rest of staff
6
9
14
44
459
3
1
6
13
72
9
10
20
57
531
Gender balance by seniority
Headcount by age
Category
Up to 30 years old
31 to 50 years old
Over 51 years old
Number
2020
37
392
191
2019
39
259
95
% vs. total No. of
employees
2020
6%
63%
31%
2019
10%
66%
24%
48 Excludes employees who joined Energean at the end of 2020 as part of the Edison E&P acquisition
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STRATEGIC REPORT
Headcount by seniority and age range
Headcount by country
At the end of 2020 our workforce increased significantly, from 393 employees to 620 representing
19 different nationalities, due to the acquisition of Edison E&P which closed in December 2020.
Country
No of
employees49
2020
2019
49 Excludes JV partners
Page | 49
STRATEGIC REPORT
Greece
UK
Montenegro
Cyprus
Israel
Egypt
Italy
Croatia
313
29
2
6
30
60
176
4
334
21
3
6
24
5
-
-
Employees per country
Providing a safe working environment
Protecting the health and safety of all individuals affected by our corporate activities is our top
priority. For another consecutive year we achieved zero serious injuries at our operating sites,
ensuring a safe working environment for all internal stakeholders. 2020 performance was slightly
poorer versus 2019 due to the inclusion of contractors working on the onshore section of the Karish
project in Israel.
Key HSE metrics
LTIF50
Employees
Contractors
Personnel total
TRIR51
Employees
Contractors
Personnel total
Pro forma
2020
0
0.72
0.63
Pro forma
2020
0
1.20
1.05
2020
2019
2018
0
0.73
0.65
0
0.29
0.28
2.81
0
1.1
2020
2019
2018
0
1.46
1.31
0
0.88
0.84
2.81
2.71
2.74
50 LTI Frequency: The number of Lost Time Injuries (fatalities +LTIs) per million hours worked
51 TRIR: The number of Total Recordable Injuries (fatalities + LTIs+ restricted work cases + medical treatment cases)
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STRATEGIC REPORT
FAR52
Employees
Contractors
Personnel total
Pro forma
2020
0
0
0
2020
2019
2018
0
0
0
0
0
0
0
0
0
A robust H&S management system throughout all group assets
The cornerstone of our zero injuries achievement is a well-structured and continuously improving
HSE Management system, providing the necessary framework for ensuring the safety of people,
the protection of the environment and the integrity of the Company’s assets.
Our integrated HSE Management System is aligned with the requirements and principles of
international standards and European safety directives, and provides the required structure for
maintaining the above principles across all Energean assets to reach our health and safety targets.
During 2020, a common HSE management system has been introduced that has been integrated
with the assets acquired from Edison E&P.
All operated assets in Italy are certified to ISO 45001, while the Prinos area assets in Greece are
in the process of certification.
Our integrated HSE Management System is structured across two levels: the group level and the
country level. The group level is based on tried and tested, internationally recognised best
practices and standards, while the country level incorporates all relevant national regulations. It is
structured around a classic ‘Plan-Do-Assess-Adjust’ cycle and comprises three distinct tiers
covering Energean’s activities in all operated areas.
Tier II
Standards,
Procedures,
Guidelines
Level 1
Group Level
Level 2
Country level
Tier I
Policies,
MS
Tier III
Method
Statements,
Records of
compliance
Managing risks and opportunities efficiently
By implementing our HSE management system, we are confident that we can:
•
Identify and efficiently manage all emerging and identified risks, associated with our
operations
52 FAR: The number of fatalities per 100 million hours worked
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STRATEGIC REPORT
• Prevent events escalation that could potentially affect stakeholders and Energean
•
Identify opportunities for improvement.
In 2020, we reached 2 million man-hours free of Lost Time Injuries (LTIs) at all Energean sites and
12 million man-hours free of LTIs at the Energean Power FPSO development and construction
project in Asia.
Corporate Major Accident Prevention Policy (CMAPP)
Energean’s Board of Directors is committed to promoting, enhancing and sustaining a strong
health and safety culture, as well as the implementation of measures for maintaining safety,
environmental protection and control of major accident hazards as core corporate values.
The Board has approved a Corporate Major Accident Prevention policy (CMAPP), that recognises:
• The harmful potential of major accidents in the upstream oil and gas sector and how prompt
•
decisions and actions can prevent them from taking place
Its responsibility to control the risks associated with major accidents and continuously
improving these controls
• The necessity of advanced technology and the implementation of good oilfield practices
•
• The importance of the HSE Management System and its effectiveness.
Its commitment to achieve the highest standards of HSE performance
During 2020 all risks were successfully identified and controlled, with no major accidents recorded.
Leadership and commitment
HSE leadership and accountability starts with the CEO, who ensures that all necessary steps are
taken to achieve the highest possible level of HSE performance across the business. The CEO
proposes to the Board of Directors all actions and activities related to HSE deemed necessary to
fulfil Energean’s commitments. In addition, the CEO defines the strategy and approves action plans
suitable to control and mitigate identified risks and takes advantage of new opportunities. During
2020 more than 100 Senior Management visits and site walk-arounds were performed at our
assets in Greece and Israel.
Crisis Management Plan (CMP)
Energean’s Crisis Management Plan (CMP) has been expanded to include all new assets and
operations, and meets all requirements at the strategic, incident management and response level.
Early identification of a potential crisis and immediate action in the event of a crisis, provides the
necessary management assurance for:
• Protecting human lives
• Protecting the environment
• Protecting tangible and intangible assets
• Ensuring business continuity and sustainable development
• Protecting the Company’s reputation.
During 2020, more than 50 drills and exercises were performed at operated sites, while more than
300 were performed with regards to the construction and development of the Energean Power
FPSO.
Legal compliance
Compliance with all applicable HSE legislation and regulations is a fundamental requirement of
Energean’s HSE Management System. Energean conducts its operations at all workplaces in
accordance with the corresponding local laws and regulations, and European and international
standards. During 2020, more than 90 HSE audits were performed on operated sites, while more
than 800 were performed in relation to the Energean Power FPSO project.
Competence management and training
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STRATEGIC REPORT
Energean maintains an ongoing competence and assurance management scheme and provides
an adequate level of HSE training. All Energean personnel, are suitably trained to meet the
standards set by the Statutory Bodies and the Company’s requirements. This ensures the ongoing
development of a competent workforce which, in the long term, benefits both individuals and
Energean. During 2020, all employees participated in internal HSE training sessions. Moreover,
dedicated teams participated in external certified training according to ongoing needs. More than
2,900 training hours were provided to personnel working in Energean sites, while more than 8,800
training hours were provided to personnel working on the Energean Power FPSO project.
Contractors’ management
Energean evaluates and selects contractors based on their ability to provide services according to
the project, contract requirements, HSE & climate change policies, as well as specific local
requirements. Criteria for pre-qualification, selection, evaluation and re‐evaluation of contractors
are established to assure suitability and efficient monitoring of contractors’ performance.
Occupational health
An annual health programme is provided to all employees to assure that the highest levels of health
and wellbeing are maintained. All employees and contractors hold medical fitness certificates
based on the requirements of their position. During 2020, all employees in operated sites
participated in the annual health program while zero work-related illnesses occurred.
HSE Awards and Records
Energean continued delivering upon its exemplary HSE track record. At Energean, we believe that
protecting the environment and the health & safety of our staff and stakeholders, is a key factor in
the overall success of our business and we are committed to continuously improving in all aspects
of HSE. In November 2020, Sembcorp Marine’s Admiralty Yard was awarded a Safety and Health
Award Recognition for Projects for Safety Excellence for Energean's Karish Project. To date, the
project has completed 5.5 million-man hours with no LTIs in Singapore.
Our COVID-19 response
In early 2020, the COVID-19 pandemic spread globally, presenting enormous challenges to health
systems, and spurring widespread shutdowns and business disruptions. In the face of the current
global health crisis, Energean’s number one priority is to protect the health and wellbeing of its
people and to ensure business continuity.
Energean has taken significant actions to mitigate the impact of COVID-19 on its business,
including:
• Specific control measures, social distancing, and working from home to protect its
employees, in line with local regulatory obligations
• Suitable training to provide the necessary level of knowledge and self-protection.
• Provision of periodic COVID-19 tests
• Development and implementation of Business Continuity Plans at all workplaces,
providing suitable mitigation measures ensuring operational continuity
• Closely monitoring official national guidance.
The below graph refers to the percentage of coronavirus (COVID-19) infections within the
Energean employees in 2020, also taking into consideration Edison’s E&P employees for the
whole 2020. The infected cases constitute 3% of our workforce while all infected employees have
fully recovered and returned to their duties.
Page | 53
STRATEGIC REPORT
Workforce Infection
Infected
Cases
3%
Infected Cases
Total Employees
Our Health and Safety performance in numbers
Occupational safety
Employees man hours worked
Contractors man hours worked
Total man hours worked
Number of Employees Fatalities
Number of Contractors Fatalities
Employees Fatal Accident Rate (FAR)53
Contractors Fatal Accident Rate (FAR)
Total Fatal Accident Rate (FAR)
Employees Lost Time Injuries (LTIs)
Contractors Lost Time Injuries (LTIs)
Total Lost Time Injuries (LTIs)
Employees LTI Frequency (LTIF)54
Contractors LTI Frequency (LTIF)
Total LTI Frequency (LTIF)
Employees Total Recordable Injuries (TRIs)
Contractors Total Recordable Injuries (TRIs)
Employees and Contr. Total Recordable
Injuries (TRIs)
Employees TRI Rate (TRIR)55
Contractors TRI Rate (TRIR)
Employees and Contractors TRI Rate (TRIR)
Process safety
Process safety incidents
Loss of containment incidents
Safety training
Internal training (hours)
Certified training (hours)
Total training (hours)
53 Per 100 million hours worked
54 Per 1 million hours worked
55 Per 1 million hours worked
Pro forma
2020
1,130,183
8,362,784
9,492,967
0
0
0
0
0
0
6
6
0
0.72
0.63
0
10
10
0
1.20
1.05
Pro forma
2020
0
0
Pro forma
2020
3,366
561
3,927
2020
2019
2018
708,080
712,998
650,406
5,382,729 13,594,566 1,108,606
6,117,344 14,302,646 1,821,604
0
0
0
0
0
0
4
4
0
0.73
0.65
0
8
0
0
0
0
0
2
0
2
2.81
0.00
1.10
2
3
0
0
0
0
0
0
4
4
0
0.29
0.28
0
12
8
0
1.46
1.31
12
0
0.88
0.84
5
2.81
2.71
2.74
2020
2019
2018
0
0
1
0
1
1
2020
2019
2018
2,743
183
2,926
2,273
1,631
3,904
3,344
1,164
4,508
Page 54 of 274
STRATEGIC REPORT
Our environment, our highest commitment
At Energean we are committed to protecting the natural environment by identifying the potential impact
of our operations and taking all necessary measures to prevent them. Adopting the highest level of
environmental standards constitutes the core of our strategy.
Our environmental policy meets national and international standards including:
• Monitoring emissions
• Preventing and responding against oil spills and chemical leaks
• Responsible usage of fresh water and seawater
• Conserving biodiversity
• Managing waste at all facilities we operate.
During the planning of new projects, environmental and social impact assessments are carried out
according to high local regulations and international standards. All our assets are certified for their
operations according to the environmental management standard ISO 14001.
Key metrics monitored
Environmental KPIs
intensity
Environmental expenditure $ million56
Energy consumption intensity (MJ/boe)57
Scope 1&2 carbon emissions
(kgCO2e/boe)58
Water use intensity (m3/boe)59
Water volume recycled (%)60
Non- hazardous waste intensity (kg/boe)61
Hazardous waste intensity (kg/boe)62
Waste recycled (%)63
Waste energy recovery (%)64
Pro forma
2020
3.9
186
22.2
0.04
92
0.07
0.13
74
2
2020
2019
2018
0.3
675
40.9
0.25
92
0.37
0.71
92
42.8
1.2
744
66.8
0.87
89
0.72
2.29
96
0
0.8
613
60.6
0.65
90
1.35
1.16
81
9
Air quality
Maintaining high air quality through responsible and sustainable operations is a key priority for
Energean. We continuously monitor all our atmospheric emissions to ensure this. During 2020, the
total amount of nitrous and sulfurous emissions (NOx and SO2) generated by the Prinos area assets
decreased by 13% and 39% respectively, versus 2019 performance. These reductions were due to
the decrease of fuel gas use during operations, as well as the effective desulfurisation process of the
56 Capital expenditures related to environmental protection activities
57 Ratio of energy (thermal & electrical) consumption over gross hydrocarbons production
58 Ratio of direct and indirect (consumed electricity) carbon emissions over gross hydrocarbons production
59 Ratio of total fresh and seawater used for processes over gross hydrocarbons production
60 Proportion of water used in the process that is returned to the same catchment area or the sea, from where is was initially drawn.
61 Ratio of municipal and industrial waste, that according to regulation do not pose a severe threat to human health or the
environment over gross hydrocarbons production
62 Ratio of municipal and industrial waste, that according to regulation pose a severe threat to human health or the environment over
gross hydrocarbons production
63 Proportion of waste that are reprocessed into other products, materials or substances whether for the original use or for other
purposes
64 Proportion of non-recyclable waste materials that are converted into usable heat, electricity or fuel through a variety of processes.
Page 55 of 274
STRATEGIC REPORT
acid gas produced. In future, we anticipate establishing Leak Detection and Repair (LDAR) procedures
to monitor and reduce fugitive emissions across all our operating sites.
Energy efficiency
The Energy Management Team, as a part of the verified ISO 14001 Environmental Management
System, monitors energy demands in the Prinos area assets, proposing performance optimisation
ideas as well as working on energy efficiency projects. This initiative will be adopted across all our
assets during 2021. In 2020, we reduced the injection water volume in the Prinos reservoirs and
optimised our gas-lift operations, resulting in the reduction of seawater usage and consumed
electricity.
Environmental studies
At Energean, we adopt a strong control and mitigation strategy to avoid potential environmental
impacts across all projects and operations. In 2020, a number of environmental surveys were
conducted within the scope of the Karish project:
• A Post Drilling Survey (PDS) that included sampling of sediments and water column for
biological and chemical analysis. The purpose of the PDS was to compare the sampling
analysis results to the baseline data that were collected during 2017. A geophysical survey
was also implemented
• Three Environmental Baseline Surveys were conducted at Blocks 23 and 31, offshore Israel,
to prepare for upcoming drilling activities
• A post pipelay sensitive habitats survey was conducted in the proximity of the gas transfer
pipeline to ensure that no harm was caused due to pipelay
• A visual survey post High Density Polyethylene (HDPE) pipelay and post HDPE removal at
Dor beach was implemented to ensure that no harm was caused to the local environment
• A preliminary survey prior to dredging was conducted at Dor Kurkar ridge.
Biodiversity
We are continuously looking at opportunities to protect and conserve the biodiversity in the areas in
which we operate. During 2020, we renewed our Memorandum of Understanding with the
Management Body of Nestos River Delta, Lakes Vistonida-Ismarida and Thassos, to maintain the
biodiversity monitoring
in northeastern Greece. Additionally, Energean
collaborated with the Democritus University of Thrace to install the Odyssea Platform (an innovative
monitoring marine data system) at the Prinos area assets. The oceanographic data retrieved by the
Odyssea platform, enhances the accuracy of marine simulations and forecasts, providing relevant
information about the open sea and coastal zone areas to local fishermen and other professionals.
telemetric stations,
Page 56 of 274
Figure 8. Odyssea platform
STRATEGIC REPORT
Water resources
Fresh water management is a high priority for Energean. We recognise the importance of freshwater
availability, increased future global demands, high-quality standards requirements as well as
stakeholders’ expectations. Due to this reason, in 2020 we achieved a 21% reduction in fresh-water
usage compared to 2019 and 8% seawater usage for cooling purposes. The recycled water
percentage reached 97%, while injection water into our wells reduced by 76% compared to the
previous year. Our onshore and offshore water discharges are continuously monitored by both
automatic and manual analytical means to meet all relevant regulatory limits.
Total recycled water %
100
90
80
70
60
50
40
30
20
10
0
90
89
92
2018
2019
2020
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STRATEGIC REPORT
Oil spills prevention
Energean has established a robust and well-tested oil spill prevention management system through
which we achieved a zero oil spills record at our operating sites in 2020. Oil spill emergency response
drills and training are scheduled and take place on an annual basis to maintain a high level of
equipment availability and personnel preparedness. Furthermore, we are associate members of Oil
Spill Response Limited, an industry consortium that is a world leader oil spill response provider.
Waste management
At Energean, we maintain a strong code of ethics regarding discharges and waste, by enforcing waste
recycling and energy recovery activities. In 2020, 92% of total waste was recycled, 4% was used for
energy recovery, while only 4% was disposed at local landfill facilities.
10
9
81
100
80
60
40
20
0
2018
Waste Recycled (%)
4
96
4
4
92
2019
2020
Waste energy recovery (%)
Our environmental performance in numbers
raw gas
Environmental records
Production
Oil (Kboe)
Raw Gas (Kboe)
Total oil and
(Kboe)
Ratio oil/total (%)
Ratio gas/total (%)
GHG emissions
Total GHG emissions
(tCO2e)
Scope 1 emissions
(tCO2e)
Scope 2 emissions
(tCO2e)
Pro forma 2020
2020
2019
2018
4,497.0
13,985.91
18,482.9
24.3%
75.7%
364,839
357,463
37,465
807.0
573.8
1,380.8
58.4%
41.6%
53,729
53,407
31,937
1,209.0
53.8
1,262.8
95.7%
4.3%
1,479.4
69.7
1,549.1
95.5%
4.5%
84,260
93,758
47,692
45,404
36,568
48,354
Page 58 of 274
-
(31,542)
-
0.4
(73)
21.8
29.8
22.2
206.4
909.1
25.2
Scope 3 emissions
(tCO2e)65
Guarantees of Origin
(tCO2e)
I-REC (tCO2e)
Scope 1 emissions
intensity (kgCO2e/boe)
Scope 2 emissions
intensity (kgCO2e/boe)
Total emissions intensity
(kgCO2/boe)
Scope 1 UK emissions
(proportion of total)
(tCO2e)
Scope 2 UK emissions
(proportion of total)
(tCO2e)
Other air emissions
NOx (tonnes)
SO2 (tonnes)
VOC (tonnes)
Water usage
Fresh water (m3)
Seawater (m3)
Total water usage (m3)
Recycled water (m3)
Recycled water (%)
Dispersed oil
concentration in
discharged water (mg/L)
Water quantities disposal
Non-hazardous waste
(tonnes)
Non-hazardous waste
intensity (kg/boe)
Hazardous waste (tonnes) 2,061
Hazardous waste intensity
(kg/boe)
Total waste recycled (%)
Total waste energy
recovery (%)
Spills
Hydrocarbon spills
Flaring (non-routine)
Total hydrocarbons flared
(tonnes)
Flaring intensity (kg/boe)
Energy consumption
Electrical energy
consumption (GWh)
5,201
0.3
0.13
74
1,209
0.07
76.9
9.6
2
0
411,679
11,173,563
11,585,242
11,938,482
92
-
(31,542)
(73)
40.6
0.2
40.9
-
4.8
33.5
874.1
11.8
100,861
8,589,344
8,690,205
8,354,263
92
9.6
491
0.37
931
0.71
92
4
0
708
0.5
58.7
65 To be disclosed in the Q2 2021 CDP climate change questionnaire
STRATEGIC REPORT
872,615
-
37.8
29
66.8
-
4.8
30.6
1,437
16.5
-
-
29.4
31.2
60.6
-
-
29.6
2.3
19.3
112,045
9,234,113
9,346,158
8,363,527
89
82,486
9,182,950
9,265,436
8,333,968
90
6.7
7.9
907
0.72
2,892
2.29
96
0
0
640
0.6
2,095
1.35
1,798
1.16
81
9
0
1,380
0.9
57.9
55.7
Page 59 of 274
276.7
Electrical energy
consumption in the UK
(proportion of total) (GWh) 0.127
Electrical energy
consumption (TJ)
Electrical energy
consumption intensity
(MJ/boe)
Thermal energy
consumption (TJ)
Thermal energy
consumption intensity
(MJ/boe)
Total energy consumption
intensity (MJ/boe)
169.1
186.0
16.9
2,773.6
STRATEGIC REPORT
0.020
211.2
160.7
675.5
514.1
674.8
0.020
208.4
165.0
731.3
579.0
744.0
-
200.5
129.0
749.3
484.0
613.0
Page 60 of 274
STRATEGIC REPORT
Financial Review
Panos Benos, CFO
Dear Shareholder,
I am pleased to provide an update on the Group’s financial performance in the 12-months to 31
December 2020.
2020 marked the start of our transition to become the leading independent gas-producer in the
Mediterranean with the completion of the acquisition of Edison E&P, which closed on 17 December
2020. Financial results have been consolidated from the date of completion, with results between the
economic reference date (1 January 2019) and the completion date being reflected through
adjustments to the final net consideration. Throughout this report, and in our other external materials,
we have provided pro forma information, which presents the results as if they were consolidated from
the effective date of the transaction.
Looking ahead to 2021-22, the second phase of Energean’s transformation will be completed once
Karish, its multi-tcf flagship gas project offshore Israel, commences production enabling it to deliver
material free cash flows and fulfil its medium-term goal of paying a meaningful and sustainable
dividend.
2020 Financial Performance
Revenue, production, and commodity prices
Sales revenue decreased by approximately 63% to $28.0 million (2019: $75.7 million) due to the low
commodity price environment. Edison E&P’s contribution to total revenue between the date of
acquisition and 31 December 2020 was $10.1 million. Pro forma revenues for the year were $335.9
million.
Working interest production averaged 3.6 kboepd in 2020 (2019: 3.3 kboepd), with the Prinos oil field,
offshore Greece, accounting for approximately 50% of total output. Energean's acreage around the
Prinos area remains under strategic review; in March 2021, the European Commission approved €100
million of support for Energean’s Epsilon project, consisting of a public guarantee on a commercial
loan of around €90.5 million to be contracted by Energean with its commercial banks and a €9.5 million
subordinated loan from the Greek state. Terms are yet to be agreed. Energean has full control over
whether or not it takes advantage of this funding, the decision being contingent primarily on an FID-
decision on the 53 MMboe 2P + 2C Epsilon development. Pro forma working interest production
averaged 48.3 kboepd in 2020, of which 74% was gas, with the Abu Qir gas-condensate field, offshore
Egypt, accounting for over 70% of total output.
Depreciation, impairments and write-offs
Depreciation charges before impairment on production and development assets decreased by 38% to
$24.1 million (2019: $39.1 million) due to decreased capital expenditure invested in Greece.
The Group recognised a gross impairment charge of $65.3 million in 2020 (2019: $71.1 million). During
the year, the Group undertook an impairment test for the Prinos CGU (the Prinos and Epsilon fields).
In the period, indicators of impairment were noted for the Prinos CGU, being a reduction in both short-
term (Dated Brent forward curve) and long-term price assumptions and a change in the Group’s Prinos
Page 61 of 274
STRATEGIC REPORT
field production forecast, which have resulted in an impairment of $65.3 million in the carrying value
of the Prinos CGU. Impairment charges for the year also include an additional amount of $4.9 million
related to the disposal of the Energean Force rig unit.
Selling, general and administrative (SG&A) expenses
Energean incurred SG&A costs of approximately $15.3 million in 2020 (2019: $13.7 million). This
represents a 12% increase versus 2019 and is due to the additional staffing and administrative costs
associated with the continued growth of the Group’s portfolio, including the acquisition of Edison E&P,
and the efforts associated with developing the Karish field.
Other expenses
Other expenses of $28.3 million in 2020 (2019: $21.6 million) consisted predominantly of direct costs
incurred related to the acquisition of Edison E&P, as well as losses from disposal of property, plant
and equipment and intra-group merger costs.
Finance costs
Financing costs before capitalisation for the period were $102.7 million (2019: $48.9 million). Included
within this balance is $90.0 million of interest (2019: $34.4 million), which $7.4 million relates to the
interest incurred on the Greek RBL facilities, $81.3 million on the Karish project finance facility (2019:
$27.4 million) and $1.3 million on the Egypt RBL facility (2019: $nil). In addition, there was $6.7 million
(2019: $7.2 million) of interest expenses relating to long-term payables, representing future payments
to the previous Karish & Tanin licence holders. This was offset by capitalised borrowing costs to $97.7
million (2019: $39.9 million). The remainder of the total finance costs expenses relate primarily to
finance and arrangement fees and other finance costs and bank charges. Total finance costs
expensed amount to $5.0 million (2019: $9.0 million).
Commodity price risk
Energean had no hedges during the period and has no outstanding hedges in relation to oil and gas
prices at year-end. Energean will keep its hedging position under review.
Taxation
Energean recorded tax income of $20.7 million in 2020 (2019: $20.5 million tax income) which can
primarily be attributed to the deferred tax impact of the impairment losses associated with the Prinos
assets.
Operating cash flow
Cash from operations before tax and movements in working capital was $(25.5) million (2019: $18.5
million). After adjusting for tax and working capital movements, cash from operations was $1.5 million,
a 95% decrease on the comparable period (2019: $36.3 million). The decrease was primarily driven
by reduced production, and therefore revenue, during the period, alongside the low commodity price
environment in 2020, and also $17.9 million of exceptional transaction costs expensed in relation to
the acquisition of Edison E&P.
Page 62 of 274
Financial results summary
Average working interest production (Kboepd)
Sales revenue ($m)
Cost of production ($m)
Cost of production ($/boe)
Administrative & selling expenses ($m)
Loss ($m)
Adjusted EBITDAX ($m)
Loss after tax ($m)
Cash flow from operating activities ($m)
Capital expenditure ($m)
Cash capital expenditure ($m)
Net debt (cash) ($m)
Net debt/equity (%)
Non-IFRS measures
STRATEGIC REPORT
Pro
forma
2020
48.3
335.9
198.9
11.3
33.1
(422.2)
107.7
(416.4)
137.0
565.4
550.8
1,240.1
103.83
2020
2019
3.6
28.0
28.5
21.4
15.3
(124.5)
(8.3)
(92.9)
1.5
429.0
419.0
1,240.1
103.83
3.3
75.7
25.9
21.5
13.7
(93.9)
35.6
(83.8)
36.3
684.4
954.6
561.6
44.5
The Group uses certain measures of performance that are not specifically defined under IFRS or other
generally accepted accounting principles. These non-IFRS measures include adjusted EBITDAX, cost
of production, capital expenditure, cash capital expenditure, net debt and gearing ratio and are
explained below.
Cost of production
Cost of production is a non-IFRS measure that is used by the Group as a useful indicator of the Group’s
underlying cash costs to produce hydrocarbons. The Group uses the measure to compare operational
performance period to period, to monitor costs and to assess operational efficiency. Cost of production
is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory movements.
Cost of sales
Less:
Depreciation
Change in inventory
Cost of production
Total production for the period (kboe)
Cost of production per boe ($/boe)
Adjusted EBITDAX
Pro forma
2020
$m
364.6
(163.1)
(2.6)
198.9
17,621
11.3
2020
$m
2019
$m
48.4
65.6
(22.1)
2.2
28.5
1,331
21.4
(36.6)
(3.0)
25.9
1,209
21.5
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It
is calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation
and amortisation, other income and expenses (including the impact of derivative financial instruments
and foreign exchange), net finance costs and exploration costs. The Group presents adjusted
EBITDAX as it is used in assessing the Group’s growth and operational efficiencies, because it
Page 63 of 274
illustrates the underlying performance of the Group’s business by excluding items not considered by
management to reflect the underlying operations of the Group.
STRATEGIC REPORT
Adjusted EBITDAX
Reconciliation to profit/(loss):
Depreciation and amortisation
Share-based payment
Exploration and evaluation expense
Impairment loss on property, plant and equipment
Other expense
Other income
Finance expenses
Finance income
Net foreign exchange
Taxation income/(expense)
Loss for the year
Capital expenditure
2020
$m
2019
$m
Pro
forma
2020
$m
107.7
(8.3)
35.6
(166.3)
(3.2)
(164.6)
(182.9)
(35.0)
22.1
(16.9)
1.2
7.8
13.7
(416.4)
(24.1)
(3.2)
(4.4)
(65.3)
(28.3)
9.1
(5.0)
0.4
15.5
20.7
(92.9)
(39.1)
-
(0.8)
(71.1)
(21.6)
3.1
(9.0)
2.5
(3.9)
20.5
(83.8)
Capital expenditure is a useful indicator of the Group’s organic expenditure on oil and gas assets and
exploration and appraisal assets incurred during a period. Capital expenditure is defined as additions
to property, plant and equipment and
less
decommissioning asset additions, right-of-use asset additions, capitalised share-based payment
charge and capitalised borrowing costs:
intangible exploration and evaluation assets
Additions to property, plant and equipment
Additions to intangible exploration and evaluation assets
Less:
Capitalised borrowing costs
Right-of-use asset additions
Lease payments related to capital activities
Capitalised share-based payment charge
Capitalised depreciation
Change in decommissioning provision
Total
Movement in working capital
Cash capital expenditures per the cash flow statement
2020
$m
2019
$m
Pro
forma
2020
$m
659.1
108.1
(97.7)
(17.2)
12.0
(0.1)
(0.6)
(98.2)
565.4
(14.6)
550.8
550.6
11.8
(97.7)
(2.0)
6.6
(0.1)
(0.6)
(39.6)
429.0
(10.0)
419.0
670.6
61.7
(39.9)
-
-
(0.7)
(1.9)
(5.4)
684.4
270.2
954.6
Capital expenditure was $429.0 million, of which $411.9 million was invested in Israel and $14.4 million
in Greece and, for the 14-day period following closing of the Edison E&P transaction, $1.8 million in
Italy and $0.9 million in Egypt. Cash capital expenditure was $419.0 million (FY 2019: $954.5 million).
Page 64 of 274
STRATEGIC REPORT
The decrease versus 2019 is predominantly due to deferral of capital expenditure from the 2020 Karish
programme, as well as limited investment in the Prinos area in Greece.
Pro forma capital expenditure was $565.4 million, of which $411.9 million was invested in Israel, $16.4
million in Greece, $93.1 million in Egypt, $17.3 million in Italy, $18.9 million in the UK North Sea and
$7.1 million in Croatia.
Payment for purchase of property, plant and equipment
Payment for purchase of intangible assets
Acquisition of a subsidiary, net of cash acquired
Total
Net debt/(cash) and gearing ratio
Pro forma
2020
$m
419.4
131.4
203.2
754.0
2020
$m
404.0
15.0
203.2
622.2
2019
$m
897.2
57.4
-
954.6
Net debt is defined as the Group’s total borrowings less cash and cash equivalents. Management
believes that net debt is a useful indicator of the Group’s indebtedness, financial flexibility and capital
structure because it indicates the level of borrowings after taking account of any cash and cash
equivalents that could be used to reduce borrowings. The Group defines capital as total equity and
calculates the gearing ratio as net debt divided by capital.
Current borrowings
Non-current borrowings
Total borrowings
Less: Cash and cash equivalents and bank deposits
Net (Funds)/Debt (1)
Total equity (2)
Gearing Ratio (1)/(2)
2020
$m
2019
$m
1,113.0
330.0
1,443.0
(202.9)
1,240.1
1,194.4
103.8%
38.1
877.9
916.0
(354.4)
561.6
1,260.8
44.5%
Acquisition of Kerogen Capital’s 30% holding in Energean Israel (EISL)
In December 2020, Energean agreed to acquire Kerogen Capital’s 30% shareholding in Energean
Israel Limited (EISL) for a total consideration of between $380 and $405 million. Energean closed the
transaction on 25 February 2021. The acquisition has an economic reference date of 1 January 2021
and the total consideration consists of:
• An up-front payment of $175 million
• Deferred consideration of between $125 million and $150 million, the latest allowable payment
of which will be 30 calendar days following Practical Completion of the Karish project (as
defined under EISL's contract with TechnipFMC). Before Practical Completion, Energean has
the option, at its sole discretion, to pay the deferred cash consideration at any point, in
accordance with the following schedule:
Page 65 of 274
STRATEGIC REPORT
Payment date
On or before 31 March 2021
On or before 30 April 2021
On or before 31 May 2021
On or before 30 June 2021
On or before 31 July 2021
On or before 31 August 2021
On or before 30 September 2021
On or before 31 October 2021
On or before 30 November 2021
On or before 31 December 2021
After 31 December 2021 or at Practical Completion
Amount
payable
$m
125.0
127.5
130.0
132.5
135.0
137.5
140.0
142.5
145.0
147.5
150.0
• A further $30 million of deferred cash consideration, payable on 31 December 2022
• $50 million of convertible loan notes which have a maturity date of 29 December 2023, a strike
price of GBP 9.50 and a zero-coupon rate.
If the deferred cash consideration is paid following Practical Completion of the Karish Project (as
defined under EISL's contract with TechnipFMC), the total consideration will be $405 million. If
Energean elects to pay the deferred cash consideration earlier than 31 December 2021, the total
consideration could be reduced by up to $25 million, to $380 million.
Acquisition rationale
The acquisition is a natural strategic fit that results in Energean owning 100% of EISL’s share capital.
It adds 2P reserves of 29.5 Bcm of gas and 30 MMbbls of liquids, representing 219 MMboe. The
enlarged Energean group has pro forma 2P reserves of approximately 982 MMboe (79% gas) and a
working interest production trajectory to more than 200 kboepd, once Karish and Karish North are
producing at plateau gas rates.
The Company believes that the acquisition is highly value accretive and that the total consideration
represents attractive valuation metrics, including:
• A 43% discount to the estimated Enterprise Value of the Minority Interest, based on the latest
2P CPR valuation estimates
• A price of approximately 1x the forecast Minority Interest annual EBITDAX, which is expected
to be approximately $400 million per year when the gas sales profile is on plateau
• An equity acquisition price of between $1.74 and $1.85 per 2P boe
• A leverage-accretive acquisition that is well within Energean's target to keep its corporate net
debt / EBITDAX ratio below 2.0x.
Moreover, taking a 100% interest in EISL enables Energean to fully control its capital structure,
enhancing its ability to maximise total shareholder returns.
Acquisition financing
On 13 January 2021, Energean signed an 18-month, $700 million term loan facility agreement with
J.P. Morgan and Morgan Stanley, one of the primary uses of which was to fund the $175 million up-
front consideration for the acquisition of the minority interest in EISL. Subsequently, in 1Q 2021,
Energean Israel Finance Limited issued a $2.5 billion bond, part of which will be used to refinance the
Page 66 of 274
STRATEGIC REPORT
term loan facility and the $1.45 billion project finance facility, and a further part of which is expected to
be used to pay the deferred consideration. The bond is split into four equal tranches with maturities in
2024, 2026, 2028 and 2031. This is non-recourse to the Group with the gross proceeds held in a
segregated escrow account until certain release conditions, including the receipt of regulatory
approvals and the registration of certain pledges, are satisfied.
The $30 million additional deferred consideration will be funded by free cash flows from the project.
The convertible loan notes will be satisfied by either new share issuance (if called by Kerogen), or by
repayment of the principal balance.
Acquisition of Edison E&P
Energean completed its acquisition of Edison E&P from Edison S.p.A. on 17 December 2020. The
gross consideration for the transaction, as at the locked box date of 1 January 2019, was $284 million
and the final net consideration (net of cash acquired), as of 17 December 2020, was $203 million.
Amendments to the SPA during 2020
In December 2019, Energean announced that it had agreed to exclude the Algerian asset from the
transaction perimeter. On 19 May 2020, the Group agreed to terminate the agreement for Neptune
Energy to acquire Edison E&P’s UK and Norwegian subsidiaries. As such, Energean entered into
further discussions with Edison to amend its SPA, following which it was agreed that the Norwegian
subsidiary would be formally excluded from the transaction perimeter. Combined with the previously
announced exclusion of the Algerian asset, ultimately $466 million of total reductions to the original
gross consideration of $750 million were agreed.
In addition, under the amended SPA the $100 million Cassiopea contingent payment will now vary
between $0 and $100 million, depending on future Italian gas prices at the point at which first gas
production is delivered from the field, currently anticipated in 2024.
Acquisition financing
On 20 June 2020, Energean signed a $220 million reserve-based lending facility with ING, Natixis and
Deutsche Bank to fund the acquisition of Edison E&P. The facility was subsequently upsized to $280
million and carries a $75 million accordion facility.
The RBL has a tenor of six years from the closing date and is subject to semi-annual redeterminations.
The interest rate is LIBOR plus a margin of 4.75% per annum during the first, second and third years
after closing, and 5.75% thereafter. The RBL carries covenants that are customary for this type of
facility.
In addition to the RBL, Energean entered into a standalone bilateral letter of credit (“LC”) facility with
ING. The facility will be for an amount up to GBP 80 million provided for the purpose of issuing LCs
for United Kingdom decommissioning obligations and obligations under the United Kingdom licences
and does not impact upon the availability of the new RBL.
Liquidity risk management and going concern
The Group carefully manages its risk to a shortage of funds by monitoring its funding position and its
liquidity risk. The going concern assessment covers for the period to 30 April 2022 ‘the Forecast
Period’.
Cash forecasts are regularly produced based on, inter alia, the Group’s latest life of field production
and budgeted expenditure forecasts, management’s best estimate of future commodity prices (based
Page 67 of 274
STRATEGIC REPORT
on recent published forward curves) and the Group’s borrowing facilities. The Base Case
conservatively assumes first gas from Karish in April 2022, Brent at $60/bbl flat and PSV (Italian gas
price) at an average of EUR16/MWH.
In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position for negative
impacts that may result from changes to the macro economic environment such as a fall in commodity
price or increase in interest rate. The Group also looks at the impact of changes or deferral of key
projects and/or portfolio rationalisation. This is done to identify risks to liquidity and covenant
compliance and enable management to formulate appropriate and timely mitigation strategies in order
to manage the risk of funding shortfalls or covenant breaches and to safeguard the Group’s ability to
continue as a going concern.
Post-period end, Energean signed an 18-month, $700 million term loan facility agreement with J.P.
Morgan AG and Morgan Stanley Senior Funding, Inc, the primary uses of which are to accelerate the
Karish North development and to fund the up-front consideration for the acquisition of the minority
interest in Energean Israel. At the same time, Energean also agreed with the existing lenders of its
$1.45 billion project finance facility to extend its maturity by nine months, from December 2021 to
September 2022.
On 24 March 2021, Energean Israel Finance Limited completed the issuance of $2.5 billion aggregate
principal of senior secured notes. The gross proceeds are currently held in a segregated escrow
account until the date upon which certain escrow release conditions are satisfied. Amongst other
things, the escrow release conditions include the receipt of regulatory approvals and the registration
of certain pledges. Upon satisfaction of the escrow release conditions and release of the proceeds of
the issuance, the proceeds are expected to be used i) to repay outstanding indebtedness under
Energean’s and its subsidiaries’ $1.45 billion project finance facility and $700 million term loan; to
replace the existing undrawn amounts available under those facilities; to fund certain reserve
accounts; and for transaction expenses and the Group’s general corporate purposes.
The $2.5 billion principal is be split into four equal tranches with coupon rates as follows:
• $625 million maturing 30 March 2024, at fixed 4.5%
• $625 million maturing 30 March 2026 at fixed 4.875%
• $625 million maturing 30 March 2028 at fixed 5.375%
• $625 million maturing 30 March 2031 at fixed 5.875%
Interest will be paid semi-annually, on 30 March and on 30 September of each year, beginning on
September 30, 2021.
The Group’s revised forecasts show that the Group will be able to operate within its current debt
facilities and has sufficient financial headroom for the 12 months from the date of approval of the 2020
Annual Report and Accounts.
Based on an assessment of the Group’s cash flow forecasts under various scenarios, including the
identification of associated risks and mitigants, the Directors have concluded that they have a
reasonable expectation that the Group will continue in operational existence for a 12-month period
from the date of approval of the 2020 Annual Report and Accounts and have therefore adopted the
going concern basis in preparing the Group and parent company financial statements.
COVID-19 pandemic
Energean continues to monitor the ongoing COVID-19 global pandemic, using the advice of the World
Health Organisation and Public Health England to ensure that best-practice precautions are always
Page 68 of 274
STRATEGIC REPORT
being applied. Clear information and health precautions on how employees should protect themselves
and reduce exposure to, and transmission of, a range of illnesses along with general advice has been
communicated across the organisation. In addition, specific HSE control measures, ensuring adequate
including social distancing and home working, have been implemented to protect the wellbeing of
employees in line with local regulatory obligations.
Events since December 2020
Energean is exposed to macro-economic risks, including pandemic diseases that could have a
material adverse effect on its operations. The Group continues to monitor the COVID-19 pandemic,
which is continuing to cause global economic disruption and impact the oil and gas sector in 2021.
While to date, COVID-19 has had a limited impact on Energean’s activities, it is not possible to predict
whether the outbreak will have a material adverse effect on our future earnings, cash flows and
financial condition.
In January 2021, Energean reached FID on its Karish North (Israel) and NEA/NI (Egypt) projects.
On 13 January 2021, the Group signed with its existing lenders for the US$1.45 billion facility for Karish
development a nine- month extension for the facility maturity date, from December 2021 to September
2022.
On 13 January 2021, the Company signed an 18-month, $700 million term loan facility agreement with
J.P. Morgan and Morgan Stanley.
On 25 February 2021, Energean completed its acquisition of the 30% minority interest in EISL, from
Kerogen Capital. Energean now owns 100% of EISL.
On 24 March 2021, Energean issued $2.5 billion aggregate principal amount of senior secured notes.
The gross proceeds were deposited into an escrow account pending the receipt of regulatory
approvals and registration of certain pledges. Following release, the funds will be used to replace the
$1.45 billion project finance facility and $700 million term loan, fund certain reserve accounts and for
general corporate purposes. The notes will be listed for trading on the TACT Institutional of the Tel
Aviv Stock Exchange (TASE).
Four-year financial summary
Group income statement
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Selling
and
expenses
Exploration and evaluation
expenses
distribution
Pro forma 2020
$m
2020
$m
2019
$m
2018
$m
2017
$m
335.9
(364.6)
(28.7)
(33.0)
(0.1)
28.0
(48.4)
(20.4)
(15.1)
(0.1)
75.7
(65.6)
10.2
(13.3)
(0.3)
90.3
(60.0)
30.3
(11.7)
(0.5)
57.8
(48.6)
9.1
(6.0)
(0.4)
(164.6)
(4.4)
(0.8)
(2.1)
(10.0)
Page 69 of 274
Impairment of property, plant
and equipment
Other expenses
Other income
Operating profit/(loss)
Finance income
Finance costs
Gain on derivative
Net
(loss)/gain
Loss
from
operations before tax
continuing
exchange
foreign
Taxation income/(expense)
Profit
operations
from
continuing
STRATEGIC REPORT
Pro forma 2020
$m
2020
$m
2019
$m
2018
$m
2017
$m
(182.9)
(65.3)
(71.1)
-
-
(35.0)
22.1
(422.2)
1.2
(16.9)
-
7.8
(28.3)
9.1
(124.5)
0.4
(5.0)
-
15.5
(21.6)
3.1
(93.9)
2.5
(9.0)
-
(3.9)
(1.1)
8.9
23.8
1.7
(13.5)
96.7
(23.5)
(8.2)
1.8
(22.8)
0.0
(22.9)
25.8
36.2
(430.1)
(113.6)
(104.3)
85.3
25.4
13.7
(416.4)
20.7
(92.9)
20.5
(83.8)
15.5
100.8
(14.1)
11.3
2020
$m
2019
$m
2018
$m
2017
$m
Non-current assets
3,540.7
2,087.1
1,515.4
Current assets
Total assets
Total assets less current liabilities
594.3
4,135.0
2,659.7
421.1
262.6
2,508.2
1,778.1
2,301.9
1,392.4
Non-current liabilities
(1,465.3)
(1,041.1)
(304.6)
Net assets
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
1,194.4
1,260.8
1,087.8
2.4
915.4
139.9
1.8
(0.1)
2.4
915.4
139.9
5.9
2.1
658.8
139.9
5.9
(19.3)
(15.5)
13.4
(144.7)
10.1
(53.3)
6.6
-
30.0
(138.5)
928.1
1,001.0
827.8
64.7
328.0
143.2
471.2
382.9
(93.9)
289.0
0.9
-
139.9
73.8
(11.4)
Non-controlling interests
266.3
259.7
260.0
Total equity
1,194.4
1,260.8
1,087.8
224.3
289.0
Page 70 of 274
STRATEGIC REPORT
Risk Management
Risk management framework
Energean recognises that strong corporate governance and the effective management and oversight
of risks and opportunities are essential to its long-term success and sustainably implementing its
strategy. As such, the Board strives for continuous improvement in this area. All investment
opportunities expose Energean to increased risks, including climate change, as well as commercial,
technical and geopolitical risks. Energean manages its exposure to such risks in accordance with the
Board’s appetite for risk.
Energean’s risk management framework provides a systematic process for the identification and
management of the key risks and opportunities which may impact the delivery of its strategic
objectives. KPIs are set annually and determining the level of risk Energean is willing to accept in the
pursuit of these objectives is a fundamental component of its risk management framework.
The Board operates a risk management framework for the Company and its in order to identify, assess,
control and monitor all current and emerging risks to the business arising from the achievement of its
strategic objectives. The risk management framework establishes the internal control and risk
management process and includes the following:
Identification
• Risk reporting and oversight structure
•
• Methodology and classification
• Risk appetite
• Group risk register
• Reporting and monitoring framework.
Page 71 of 274
STRATEGIC REPORT
Group’s risk management framework
Outline the
strategy
• Set a sustainable strategy
to achieve Energean's near
and long-term goals
Define
strategic
objectives
• Set clear strategic
objectives supported by
relevant KPIs
Define risk
appetite
• Determine the level of risk that
the Group is willing to accept in
the pursuit of its strategic
objectives
Identify key
risks
• Identify key risks to the
achievement of strategic
objectives, through discussions at a
Board, Risk Managmenet
Committee, Management Team,
regional and functional level
• Apply the Group risk
Apply risk
assessment
process
assessment process to
ensure the ongoing
management of key risks to
our objectives
Deliver
strategic
objectives
• Delivery of strategic
objectives through
informed risk-based
decision making
Risk oversight and governance
Overall responsibility for risk oversight and the effectiveness of the Company’s risk management and
internal control systems rests with the Board. Principal risks, including emerging risks, as well as
progress against key performance indicators, are reviewed at each quarterly scheduled Board meeting
and deep dives on identified risks are undertaken by the Audit and Risk Committee, when deemed
appropriate.
The Group’s framework for risk management promotes a bottom-up approach to risk management
with top-down support and challenge. The risks associated with the delivery of the strategy and work
programmes and the associated mitigation measures and action plans are maintained in a series of
risk registers at Group, audit and project level. Reporting of these risks within the organisation is
structured so that risks are escalated through various internal management, Board committees and to
the Board itself.
Energean’s Management Team is responsible and accountable for overseeing and monitoring risks
that fall under their identified remit, while the Audit and Risk Committee is additionally responsible for
continuously evaluating the effectiveness of the Group‘s system of internal control and risk
management methodology.
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STRATEGIC REPORT
Group’s risk governance framework
Top-down:
Oversight, accountability, monitoring and assurance
The Board
Audit and Risk Committee
Executive Management Team
Chaired by Andy Bartlett, Senior
Independent Non-Executive Director
Chaired by Mathios Rigas, CEO
• Performs a quarterly 'deep-dive' revew of the
Group risk register.
• Responsible for setting the direction for risk
management
• Facilitates continual improvements of the risk
management system
and
• Monitors
effectiveness of the Company's systems of risk
and internal control
• Reviews principal risks and output from the
Risk Management Committee.
reviews
scope
and
the
Board of Directors
The Board is responsible for overseeing the risk identification, assessment and mitigation process and
undertakes regular assessments of the risks facing the Group, including current and emerging risks
that could potentially threaten our business integrity, strategy, operating model, future performance,
solvency and liquidity.
The overall tone for risk management is driven by the Board, which works closely with the Executive
Management team and Audit and Risk Committee to regularly review Energean’s risk portfolio, monitor
any emerging risk and better understand how risks are being managed across the Company. It
considers:
• Executive Management / Committee updates
• Strategic plan and budgets
• Risk assessments.
Audit and Risk Management Committees
The Board delegates to the Audit and Risk Committee the responsibility for reviewing the effectiveness
of the Group’s systems of internal control and risk management methodology. 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
currently outsources its Internal Audit function, which also provides independent assurance over the
Page 73 of 274
STRATEGIC REPORT
effectiveness of the systems of risk management and internal control. The detailed assessments are
consolidated to provide input for the overall Group risk assessment. It considers:
Internal audit work plans
•
• Executive Management / Committee / Senior Management reports; and
• External auditor reports.
Supplementing this is the Internal Audit Reporting and Monitoring function, which is responsible for
reviewing the Risk Management Framework. It reports directly to the Audit and Risk Committee.
Management Team Committee
The Executive Management Committee is responsible for detailed assessment of the risks to the
business.
It considers risks linked to:
• Strategic objectives
• Business model.
Risk management process
Energean’s risk management framework provides a systematic process for the identification,
evaluation and management of the key risks and opportunities which may impact the delivery of its
strategic objectives. This framework utilises a bottom-up approach to risk management with top-down
support and challenge led by the Board. The risk management framework establishes the inputs for
the internal control and risk management process and includes the following:
Identification
• Risk reporting structure
•
• Methodology and classification
• Risk appetite
• Group Risk Register
• Reporting and monitoring framework.
Group risk register
Energean maintains a Group risk register that encompasses all identified risks, the impact of those
risks, the mitigating controls the Company has in place to reduce those risks to an acceptable level
and the actions it must take to further mitigate risks that are not yet deemed to be at an acceptable
level. The Group risk register is reviewed by both the Audit and Risk Committee and the Board and is
updated on a quarterly basis based on the latest developments in the business. The risks are
represented on the basis of the likelihood of occurrence and the impact on matrices that allow their
comparison and classification by relevance.
Each risk in the risk register has a dedicated assigned risk owner who is responsible for reviewing and
reassessing it at least on a quarterly basis to evaluate the strength of existing controls and mitigating
actions and determine whether additional risk reduction actions are required to align the level of risk
with the risk appetite set by the Board. Energean recognises that risk can be mitigated by effective
management but cannot always be fully eliminated; and the Board and Executive Management team
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STRATEGIC REPORT
will decide the level of post-mitigation risk that they are willing to accept when pursuing strategic
business opportunities.
The Board and the Executive Management team use a combination of different and complementary
skills to assess the risks facing the business. In determining its risk appetite, the Board considers a
range of information when reviewing the Group’s operations and in approving key matters reserved
for its decision. This information includes:
• Updates provided by Senior Management on key strategic and operational matters;
• Discussion and approval by the Board of the Group budget (including its working capital);
•
Information provided for the purposes of deciding whether to approve those significant matters
which have been reserved for the Board;
• Group risk assessments facilitated by the Company’s management and monitored by the
Internal Audit function; and
• The reports of the external auditors.
Climate change-related risks are fully integrated with Energean’s multi-disciplinary, company-wide risk
management process, per the recommendations of the TCFD. Through the framework, Energean
adheres to the latest sustainability and sector-related standards and guidelines (such as TCFD, SASB,
and IPIECA ) and is able to identify multi-disciplinary risks and opportunities, including climate change-
related risks that could affect the Company, its strategy and operations. The risk management
framework ensures effective identification, assessment, control and monitoring of risks to the
Company’s business, in addition to capitalising on potential opportunities. Climate change-related
risks are assessed against their potential financial, legal, physical, market and reputational impact,
and key strategic and commercial decisions are assessed on their financial importance.
In focus – climate change risk
During the 2019 risk identification and assessment process, Energean recognised climate change as
a rapidly emerging risk. This was reflected by the Company’s decision to establish a target to achieve
net zero emissions by 205066 and a near-term commitment to reduce the carbon intensity of our
business by over 70%. During 2020, responsibility and accountability for climate change-related risks
was assigned to Karen Simon (Non-Executive Chair) and a new Climate Change and Sustainable
Development department. The latter has identified key risks and opportunities related to climate
change which are outlined in the principal risk section below. These risks and opportunities are
reviewed by the Nomination and ESG Committee.
Risk appetite
The Board sets Energean’s risk appetite and acceptable risk tolerance levels for each of the [eight]
key risk categories and has reviewed the strategies devised by the Executive Management Team to
mitigate them. In considering Energean’s risk appetite, the Board has reviewed the risk process, the
assessment of risks and the existing controls and mitigating actions that reduce overall risk. During
this process, the Board articulated which risks Energean should not tolerate, which should be
managed to an acceptable level and which should be accepted in order to deliver our business
strategy.
66 Scope 1 and 2 emissions
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STRATEGIC REPORT
Principal risks and uncertainties
The following pages provide a summary overview of the principal risks to the Group, the potential
impacts, the mitigation measures, the risk appetite and the strategic objectives the risks may impact.
SYMBOLS USED IN THE FOLLOWING PAGES
Trend versus prior year
indicates our perception
of pre-mitigation risk
▲ Increasing / worsening
▼ Lessening / improving
▬ Static
N New Risk
Link to Business Model
Link to Strategy
A - Find and appraise
B - Develop
C - Produce
D - Acquire
E - Implementing low carbon
solutions
① - Eastern Mediterranean
② - Gas
③ - Tackling climate change
④ - Organic growth
⑤ - Value-driven and return-
driven
Energean’s principal risks are considered, in line with the Group Viability Statement, over a [three-
year period]. In addition to this assessment, Energean actively considers emerging risks and threats
as part of its risk assessment process.
All of these risk factors and events are contingencies which may or may not occur. The Group may
face a number of the risks described below simultaneously and one or more risks described below
may be interdependent.
Categories of principal risks
Strategy
Organisation,
compliance
and
regulatory
Operations
Principal
risk
categories
External
Finance
Climate
Change
Page 76 of 274
STRATEGIC REPORT
Strategic risk
#1 Progress key development projects in Israel
Principal risk: Delay to first gas at Karish
Owner: Chief Executive Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: B C
Link to 2020 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
2020 movement
Impact
Mitigation
Low – Successful delivery of the Karish project is crucial to achieving
the Group’s ambition of becoming the leading independent E&P
company in the Mediterranean and securing the Group’s future
revenue stream and its ability to deliver material free cash flows, the
latter of which underpins the Group’s commitment to deliver material
and sustainable returns to shareholders.
▲ This risk increased primarily due to COVID-19 related challenges
at the Admiralty yard in Singapore, where the Energean Power FPSO
is under construction. Energean continues to work towards first gas
from Karish in 1Q 2022. The shipyard in Singapore remains under
limitations imposed by COVID-related restrictions, including limited
access to workers and yard productivity. Energean is working with its
contractors to firm up this timetable and will update the market as the
situation evolves
Delayed sailaway of the FPSO could result in a delay in delivering
future cash flows, and delay Energean’s ability to pay a meaningful
and sustainable dividend to its shareholders. Delays could also result
in increased capital expenditure and incremental G&A costs, which
could result in a reduction to said cash flows.
A failure to achieve certain milestones, such as targeted sailaway date
and / or first gas delivery could result in reputational damage within
the wider market, including with Energean’s investors, banks, gas
buyers and wider stakeholders.
Under its gas sale agreements (GSPAs), the Group may be subject to
various contractual consequences in case of a delayed start up in
supplying gas in accordance with specific deadlines detailed in the
relevant GSPAs. Such contractual consequences may include early
termination rights that certain buyers potentially have after applicable
long-stop dates, and in the majority of the GSPAs, monetary
contractual payments or early shortfall after the long-stop dates.
Energean has actively engaged with its contractors early to ensure
highly effective working relationships and to discuss incentivising
contractors to accelerate completion of the works.
Energean’s contract with TechnipFMC is a lump-sum, turnkey
EPCIC, which minimises development risk and the potential for
significant cost overruns. Energean’s 2021 budget has been updated
Page 77 of 274
STRATEGIC REPORT
to reflect increased cost of interest and potential liquidated damages
arising from a delay to first gas.
Energean benefits from strong support from Government and
continued engagement with customers in Israel. Energean’s GSPAs
are priced amongst the lowest in Israel, suggesting that buyers (who
have signed GSPAs that contain termination rights) will have limited
incentive to terminate them due to delay in first gas.
Ongoing monitoring of the exercise or threat of liquidated damages,
which might at a certain point be diminished by Force Majeure relief
due to COVID-19. Force Majeure notices have been served on all
gas buyers.
Access to funding: during the year, the Karish project finance facility
was upsized from $1.275 billion to $1.45 billion. Post-period end, the
maturity date was extended to September 2022 providing additional
flexibility on refinancing timing, in the event of ongoing delays. In
addition, the Company undertook a $2.5 billion Bond Issue to
refinance the Karish project finance facility and raised a $700 million
Term Loan.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Deliver first gas at Karish in 1Q 2022.
Continued quantitative assessment of the impact of delay to the
Karish Project to the revenue stream secured by the GSPAs and of
potential mitigating actions.
#2 Market risk in Israel
Principal risk: The potential for Israeli gas market oversupply may result in offtake being at the
take-or-pay level of existing GSPAs and could result in the failure to secure new GSPAs
Owner: Commercial Director
Link to strategy: ① ② ④ ⑤
Link to business model: B C
Link to 2020 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
2020 movement
Impact
Low – Strong commercial terms and contract security are a core
component of Energean’s business model and investment case. The
Group utilises its strong regional ties and the experience of
Energean’s commercial teams to mitigate this risk.
▲ This risk increased in 2020 after the Leviathan field came
onstream in December 2019, significantly increasing the supply of
gas into Israel. COVID-19 also negatively impacted upon regional
gas demand, further contributing to potential regional market
oversupply.
Increased market competition may drive Israeli domestic gas prices
down. Lower pricing may incentivise gas buyers to make
nominations that are restricted to the take-or-pay levels within the
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GSPAs, rather than the full annual contracted quantities. This could
reduce Energean’s future net revenues and cash flows, potentially
impacting upon its ambition to pay a meaningful and sustainable
dividend.
An oversupplied gas market may impact upon Energean’s ability to
commercialise future gas discoveries.
Energean’s GSPAs contain provisions for floor pricing, take-or-pay
and/or exclusivity.
Energean is investigating all options for the commercialisation of
future exploration success, including further domestic supply as well
as supply to key regional gas markets.
Ongoing monitoring of KPIs by Executive Management.
Energean will continue to maintain good relationships with its gas
buyers, whilst also evaluating potential export routes and other
options for monetisation.
Mitigation
2021 Objectives
#3 Progress key development projects
Principal risk: Delayed delivery of future development projects (including NEA / NI in Egypt,
Cassiopea in Italy and Karish North in Israel)
Owner: Chief Executive Officer
Link to strategy: ① ② ④ ⑤
Link to business model: B C
Link to 2020 KPIs: Delivering our strategy and growing our business
Risk appetite
2020 movement
Impact
Mitigation
Low – The three key new development projects are viewed as
essential for the relevant country portfolios, substantially benefitting
the long-term production profiles of the Company, whilst bringing
cost and investment efficiencies and strategic benefits.
▲ This risk increased during 2020 as Energean’s development
portfolio increased with (i) the maturation of the Karish North
development, which was sanctioned in early 2021; and (ii) the
acquisition of Edison E&P resulting in the addition of the Cassiopea
(Italy) and NEA/NI (Egypt) projects to the portfolio.
A delay to any of these projects could result in a delay to, or
reduction of, future cash flows, which could impact upon Energean’s
goal of paying a meaningful and sustainable dividend to its
shareholders.
Energean is actively engaged with its partners, contractors and all
other relevant stakeholders on all development projects to ensure
effective working relationships.
Ongoing monitoring of KPIs by Executive Management.
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2021 Objectives
Developments to progress in line with expectations, targeting first
gas from NEA/NI in 2H 2022, Karish North in 2H 2023 and
Cassiopea in 1H 2024.
Continue to monitor project progress.
STRATEGIC REPORT
#4 Deliver exploration success and reserves addition
Principal risk: Lack of new commercial discoveries and reserves replacement
Owner: Chief Growth Officer
Link to strategy: ① ② ④
Link to business model: A
Link to 2020 KPIs: Delivering our strategy and growing our business
Risk appetite
2020 movement
Impact
Mitigation
Medium - Exposure to exploration and appraisal failure is inherent in
accessing the significant upside potential of exploration projects, and
this remains a core value driver for Energean. The Group invests in
data and exploits the strong experience of Energean’s technical
teams to mitigate this risk.
▬ This risk remained static in 2020 following the decision of the
Group to postpone its exploration plans offshore Israel due to the low
commodity price environment. The Group is preparing for its next
four-well exploration and appraisal campaign offshore Israel in 2022.
Failure to make new significant gas discoveries and replenish the
exploration portfolio will reduce the Group’s ability to grow the
business and deliver its strategy.
Energean focuses on high-grading of its exploration and appraisal
programme and maintains a focus on low-risk, high-reward
prospects with clear and short-term routes to commercialisation.
Planning for the Group’s next major exploration and appraisal
campaign, offshore Israel, are underway. Drilling is expected to
commence in early 2022 for up to four exploration and appraisal
wells.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Maturation of planning for the four-well exploration and appraisal
campaign offshore Israel.
#5 Portfolio Integration
Principal risk: Failure to successfully integrate Edison E&P into Energean’s day-to-day business
activities resulting in limited financial, social and environmental benefits
Owner: Chief Executive Officer
Link to strategy: ① ② ④ ⑤
Link to business model: A B C
Link to 2020 KPIs: Growing our business
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Risk appetite
2020 movement
Impact
Mitigation
2021 Objectives
STRATEGIC REPORT
Low – Edison E&P integration is a top priority for the Board and
Executive Management. Successful integration of Edison E&P with
Energean’s existing business will depend on our ability to combine
the two businesses, including bringing together the cultures and
capabilities of both organisations in an effective manner, which will
require the co-operation of Edison E&P’s existing workforce.
▬ This risk remained static in 2020. The acquisition of Edison E&P
closed successfully in December 2020 and constitutes the largest
acquisition the Group has undertaken to date.
The potential impacts of inadequate portfolio integration are multi-
fold and include:
• Disruption to ongoing operations and development projects
• Diversion of Executive Management’s attention; and
• A lack of ability to realise anticipated financial benefits and
cost synergies.
The challenges and/or costs associated with integration may be
higher than expected and the benefits expected from the acquisition
of Edison E&P may not be fully achieved.
Energean developed a detailed integration and strategic plan with
activities and milestones, for example, providing strategic access to
the Edison E&P SAP system from day one to provide immediate and
full control over the acquired business.
Ongoing monitoring of KPIs by Executive Management.
Continued implementation of the integration roadmap, including
further definition of the one-year ahead plan and mapping of
identified synergies, resulting in finalisation and implementation of
the end-state operating model.
Operational risk
#1 Production performance
Principal risk: Underperformance at core producing assets in Egypt and Italy
Owner: Chief Growth Officer
Link to strategy: ① ② ④ ⑤
Link to business model: C
Link to 2020 KPIs: Growing our business
Risk appetite
2020 movement
Low – Delivering operational excellence in all of Energean’s
activities is a strategic objective and we work closely with all partners
to mitigate the risk and impact of any operational delay or
underperformance. As such, the Company has a low appetite for
risks which may impact on operating cash flow.
▲ This risk increased during 2020 following the acquisition of Edison
E&P, which has seen increased scrutiny on the performance of the
acquired assets. Pro forma Working Interest production averaged
48.3 kboepd, around the mid-point of guidance of 44.5 - 51.5
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STRATEGIC REPORT
kboepd. The risk around operational readiness e.g. the availability of
highly trained technical staff to operate assets and man vessels, also
increased in 2020 largely due to the COVID-19 pandemic.
Impact
Delay to, or reduction of, operating cash flows.
Mitigation
Increased unit operating costs.
Executive Management works closely with technical leads, the HSE
Director and Country Managers to deliver risk mitigation plans and
project solutions.
Positive regular engagement with the Technical team and partners to
share knowledge, offer support and exert influence.
Strong work ethic and culture, with good policies, procedures and
practices in place.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Ongoing management of risks surrounding production.
#2 JV Misalignment
Principal risk(s): Misalignment with JV operators
Owner: Chief Growth Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: C
Link to 2020 KPIs: Growing our business
Risk appetite
2020 movement
Medium – The Group seeks to operate assets which align with the
Group’s core areas of expertise, but recognises that a balanced
portfolio will also include non-operated ventures. The Group accepts
that there are risks associated with a non-operator role and will seek
to mitigate these risks by working with partners of high integrity and
experience and maintaining close working relationships with all JV
partners.
▲ - This is an increased risk in 2020 that follows the acquisition of
Edison E&P. Commodity price volatility continues to have a financial
impact across the sector and the risk remains that the Group's JV
partners may not be able to fund work programme expenditures
and/or reprioritise projects. A large component of the Italian portfolio
and the entire UK portfolio are operated by joint venture partners.
Impact
Cost/schedule overruns.
Poor operational performance of assets.
Poor HSE performance.
Delay in first production from new projects.
Negative impact on asset value.
Ability to effect change towards lowering carbon footprint.
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Mitigation
Actively engage with all JV partners early to establish good working
relationships.
STRATEGIC REPORT
Actively participate in operational and technical meetings to
challenge, apply influence and/or support partners to establish a
cohesive JV view.
Active engagement with supply chain providers to monitor
performance and delivery.
Application of the Group risk management processes and non-
operated ventures procedure.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Continue to engage with JV partners and monitor project progress.
Financial risk
#1 Maintaining liquidity and solvency
Principal risk: Insufficient liquidity and funding capacity
Owner: Chief Financial Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Growing our business
Risk appetite
Low – Energean seeks to maintain liquidity and to develop and
implement a funding strategy that allows a value generative plan to
be executed and ensures minimum headroom from existing sources
of funding is maintained.
2020 movement
▬ This risk remained static in 2020.
Impact
The Company has secured loan agreements and is subject to
restrictive debt covenants and security arrangements that may limit
its ability to finance its future operations and capital needs and to
pursue business opportunities and activities. Breach of financial
covenants may lead to default and/or liquidity risk.
The Company 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.
The full impact of COVID-19 to a lower price environment could
impact the Group’s cash flows and results.
Interest and foreign exchange rate movements could negatively
affect profitability, cash flow and balance sheets (see Note ___ to the
consolidated financial statements).
Funding and liquidity risks could impact viability and ability to
continue as a going concern, including a downturn in business
operations for unexpected factors, e.g. COVID-19.
Erosion of balance sheet through impairments of financial assets
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Mitigation
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may further impact the Group’s financial position.
Regular monitoring of financial covenants on an actual and forecast
basis as part of the monthly reporting to management and the Board.
The Karish project finance facility, Egypt RBL and Greek RBL have
covenants and metrics to monitor the ability to refinance via capital
markets or by conversion of existing commitments to a term loan. The
Company ensures that these covenants are met on a quarterly basis.
During the period, the Karish project finance facility was upsized from
$1.275 billion to $1.45 billion and, post-period end, maturity was
extended to September 2022. Post-period end, a new 18-month,
$700 million term loan was arranged in January 2021, and both
facilities will be refinanced under a $2.5 billion Bond Issue in March
2021.
The Group’s debt facilities have been sized and structured on
conservative oil and gas price assumptions versus the prevailing
market prices.
The Group actively monitors oil price movements and may hedge
part of its production to protect the downside while maintaining
access to upside and to ensure availability of cashflows for re-
investment and debt-service.
All Karish gas contracts are based on pricing formulas which include
floor prices; that ensures a minimum price for gas sales whatever the
market conditions or pricing formulas outcome.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Refinance the Israeli project finance facility and $700 million term
loan.
Continuous stress testing of short-term cash forecasts.
#2 Egypt receivables
Principal risk: Recoverability of revenues and receivables in Egypt
Owner: Chief Financial Officer
Link to strategy: ① ② ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Growing our business
Risk appetite
2020 movement
Low – Edison E&P has receivables due from its operations in Egypt
which have historically been paid irregularly and after significant
delay. Energean management believes that this risk is not specific to
Edison E&P and affects all operators in the country. The Group
utilises its strong regional ties and the experience of its commercial
teams to mitigate this risk.
N – This is a new risk for 2020 that arises due to the acquisition of
producing assets in Egypt through the acquisition of Edison E&P. At
31 December 2020, net receivables (after provision for bad and
doubtful debts) in Egypt were $153.5 million.
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Impact
Loss of value.
STRATEGIC REPORT
Mitigation
Work programme restricted by reduced financial capability.
Inability to fund key development projects, including NEA/NI.
Reduced ability to meet debt covenants and service outstanding
debt.
Energean has a number of contractual solutions with EGPC to
ensure an effective collection policy, including condensate proceeds,
lump-sum payments, Abu Qir payables offsetting and local currency
collection.
Continued engagement with the Egyptian government and Ministry
of Petroleum.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Improve receivables position and agreements in place to accelerate
recovery of overdue receivables.
Maintain an active investment programme.
#3 Decommissioning liability
Principal risk: Higher than expected decommissioning costs and acceleration of abandonment
schedules
Owner: Chief Financial Officer
Link to strategy: ① ② ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Growing our business
Risk appetite
2020 movement
Low – Energean is committed to optimising its decommissioning
activities and spend.
N – This is a new, but material risk for 2020 onwards following the
closing of the acquisition of Edison E&P. Decommissioning
estimates and timing of abandonment schedules are subject to
uncertainty but are expected to be material for the Group, particularly
in the UK and Italy. The estimates for decommissioning obligations
vary depending on the sources provided during the due diligence
undertaken as part of the competitive sale process for Edison E&P
but are estimated to be in excess of $500 million.
Impact
Reduction in cash flow.
Mitigation
Work programme restricted by reduced financial capability.
Negative impact on asset value.
Utilisation of the strong experience of Energean’s technical teams
and commercial partnerships
Proactive interaction with local government and regulation bodies to
jointly design/review decommissioning regulation.
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STRATEGIC REPORT
Scale achievement through grouping of assets in adjacent areas also
promoting increased negotiation leverage in contracting activities.
Potential creation of partnerships for decommissioning activities,
further increasing scale potential and promoting transfer of
decommissioning solutions.
Adoption of new technologies promoting innovative solutions to
further optimise costs and maximise operational excellence.
Continued effort in identifying potential alternative uses for existing
platforms prioritising assets with higher cost base.
Ongoing monitoring of KPIs by Executive Management.
Continue to develop and refine strategy for optimising
decommissioning spend.
2021 Objectives
Organisational, compliance and regulatory risk
#1 Cyber
Principal risk: Major cyber-attack or information security incident
Owner: Information Technology Manager
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D
Link to 2020 KPIs: Growing our business and ‘Best in Class’ on safety
Risk appetite
2020 movement
Impact
Mitigation
Low – Energean is committed to maintaining the security and
integrity of its data and IT systems.
▲ This risk increased in 2020. Energean continues to grow its
operational presence in the Mediterranean and is in the process of
integrating the recently acquired Edison E&P company into its day-
to-day business activities, putting the Group at further risk of cyber-
attacks or IT system failure.
Loss of value.
Reputational damage.
Loss of data and theft of confidential information, and personal data.
Regulatory implications and financial penalties.
Digital transformation of email and collaboration services to the
Cloud.
Constant implementation and monitoring of the Company’s IT
Security Policy.
Control of disclosures and protection of any disclosed confidential
information in third party contracts.
Advanced network security detection and data encryption.
Vulnerability Assessment and Penetration Testing.
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STRATEGIC REPORT
Annual mandatory security and GDPR awareness training. Staff
susceptibility to phishing regularly tested.
Insurance policies in place.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Complete digital transformation and integration project as part of
Edison E&P acquisition.
#2 Ethics, culture and compliance
Principal risk: Major breach of values, business principles and ‘Ethos’
Owner: Compliance Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Growing our business and ‘Best in Class’ on safety
Risk appetite
Low – Energean is committed to maintain integrity and high ethical
standards in all of the Group’s business dealings. The Group has a zero-
tolerance approach to conduct that may compromise its reputation, safety
procedures or integrity.
2020 movement
▬ This risk remained static in 2020. There were no reportable instances of
fraud, bribery or corruption.
Impact
Reputational damage.
Mitigation
2021 Objectives
Financial penalties or civil claim.
Criminal prosecution.
Breach of safety procedures resulting in a HSE incident.
Business Code of Ethics and bribery and corruption policies and procedures.
Audit reviews, use of data analytics and continuous monitoring of policies.
Financial procedures in place to mitigate fraud.
Annual training programme in place for all employees.
Enhanced due diligence of business partners and suppliers and compliance
auditing of contractors.
Enhancement of our whistleblowing process through creation of a confidential
reporting channel.
Ongoing monitoring of KPIs by Executive Management.
Continued focus on enhanced due diligence and monitoring, as well as the
review of higher risk areas.
Implementing compliance programmes and employee awareness
communication and training to all different countries of operations, translated
to local languages where appropriate, to enhance corporate compliance and
governance and ensure the organisational culture is ‘fit for purpose’
everywhere that the Company operates.
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STRATEGIC REPORT
#3 HSE
Principal risk: Lack of adherence to health, safety, environment and security policies
Owner: HSE Director
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C
Link to 2020 KPIs: ‘Best in Class’ on safety
Risk appetite
2020 movement
Low – Energean continuously strives to reduce risks that could lead
to an HSE incident to as low as reasonably practicable
▬ This risk remained static in 2020. The Group’s pro forma LTIF67
for operated activity in 2020 was 0.63 per million hours worked. Our
pro forma TRIR68 for 2020 was 1.05 per million hours worked. There
were no spills to the environment.
Impact
Serious injury or death.
Mitigation
Negative environmental impacts.
Reputational damage.
Regulatory penalties and clean-up costs.
Physical impact of climate change.
Loss or damage to Company’s assets and potential business
interruption.
Loss or damage to third parties and potential claims.
Effectively managing health, safety, security and environmental risk
exposure is the first priority for the Board, Senior Leadership Team
and Management Team
Training for all employees and creation of a strong HSE culture.
Additional HSE training is included as part of all staff and contractor
inductions.
Crisis and emergency response procedures and equipment are
maintained and regularly tested to ensure the Group is able to
respond to an emergency quickly, safely and effectively.
Process in place for assessing an operator’s overall operating and
HSE capabilities, including undertaking audits to determine the level
of oversight required.
Comprehensive insurance policies in place.
Ongoing monitoring of KPIs by Executive Management.
2021 Objectives
Achieve a number of specified indicators in relation to governance,
people and society.
67 Lost Time Injury Frequency
68 Total Recordable Incident Rate
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STRATEGIC REPORT
Climate change risk
#1 Failure to manage the risk of climate change and to adapt to the energy transition
Principal risk: Climate change policy, technological development, changing consumer behaviour
and reputational damage
Owner: Chief Executive Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
2020 movement
Impact
Mitigation
69 Scope 1 & 2 emissions
Low – The Group is committed to achieving its net zero emissions69
target by 2050 and reducing the near-term carbon intensity of its
operations by over 70% through the implementation of low carbon
solutions and the acquisition of low carbon intensity hydrocarbons.
Energean is focused on taking near-term investment decisions that
ensure its assets remain competitive in an environment where
demand for oil and gas may be lower than today and will continue to
stress test its portfolio against a range of climate change scenarios,
in line with the recommendations of the TCFD.
▲ This risk increased in 2020. There was continued and increased
attention to climate change from a range of stakeholders in 2020.
This attention has led, and we expect it to continue to lead, to
acceleration of the energy transition, as well as additional regulations
designed to reduce greenhouse gas (GHG) emissions.
Providers of capital limit exposure to oil and gas projects (short-
term).
Increasing costs e.g. higher compliance costs and increased
insurance premiums (short to medium-term).
Early asset retirement (medium to long-term)
Limited access to R&D opportunities (medium to long-term).
Climate-related policy changes (short to medium-term).
Reputational damage (medium to long-term).
Retaining and attracting talent (short to medium-term).
Ability to effect change towards lowering carbon footprint (medium to
long-term).
Aligned with the TCFD recommendations across all TCFD pillars in
our year-end reporting.
Established a new climate change and sustainable development
department to manage climate change projects.
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Implemented climate-based scenario analysis and internal carbon
pricing to assist with investment-decision making.
Enhanced climate disclosure in our Annual Report and Sustainability
Report. Achieved a B- score on climate change and B score on
supplier engagement in our first CDP.
ESG ratings in top quartile, awarded ‘A’ rating by MSCI, ‘Gold’ by
Maala and ranked 16 out of 114 peer companies by Sustainalytics.
Executive compensation tied to ESG performance targets from 2020.
Fully committed to transparency and adherence to the 17 UN SDGs.
First E&P company globally to commit to net zero emissions by
2050.
Ongoing monitoring of KPIs by Executive Management.
Established a dedicated Environment, Safety and Social
Responsibility committee chaired by Non-Executive Director Robert
Peck to review climate change related risks and projects.
Evaluation of Carbon Capture and Storage (CCS) projects
underway, including the maturation of the conversion of Prinos into
the first CCS project in the East Med.
Small-scale blue hydrogen production facility at the Sigma plant in
Kavala, Greece, also under evaluation.
Evaluation of use of captured CO2 at Prinos for enhanced oil
recovery (EOR), to unlock additional upstream value.
Explore the roll out of ‘Green Electricity’ across all operated assets.
2021 Objectives
#2 Physical risks related to climate change
Principal risk: Disruption to operations and/or development projects due to severe weather (both
acute and chronic)
Owner: Chief Executive Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
2020 movement
Low – Management recognises that Climate change is expected to
lead to rising temperatures and changes to rainfall patterns in all the
countries where it operates. Energean is reviewing its response to
the increased risk that changing weather events presents to both its
assets and its people.
▬ This risk remained static in 2020. Rising sea levels coupled with
extreme flooding could cause disruptions to the operational
performance of Energean’s assets, especially those located in higher
risk areas, in the medium-term. This could also result in damage to
infrastructure and an increase in associated asset integrity and
insurance costs. Longer term atmospheric or sea temperature rises
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Impact
STRATEGIC REPORT
could result in faster degradation of infrastructure and necessitate
operational changes to the running of the Group’s facilities.
Unexpected asset costs arising from operational incidents (medium
to long-term).
Early asset retirement e.g. due to damage or property being situated
in high risk locations (long-term)
Negative market reaction (medium to long-term).
Loss of investor confidence (medium to long-term).
Serious injury or death (medium to long-term).
Environmental impacts due to spills (medium to long-term).
Reputational damage (medium to long-term).
Loss or damage to assets and business interruption (medium to
long-term).
Mitigation
Monitoring of weather conditions and sea conditions.
Use of protective barriers to combat flooding.
Comprehensive insurance policies in place for key assets and
infrastructure.
Established a dedicated Environment, Safety and Social
Responsibility committee chaired by Non-Executive Director Robert
Peck to review climate change related risks and projects.
Continue monitoring of environmental conditions and reporting at
both an asset and corporate level.
Evaluation of climate change projects and data by Energean Egypt
Energy Services (EES).
2021 Objectives
External risk
#1 Geopolitical events
Principal risk: Political and fiscal uncertainties in the Eastern Mediterranean
Owner: Chief Executive Officer
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Delivering our strategy and growing our business
Risk appetite
2020 movement
Medium - Energean faces an uncertain economic and regulatory
environment in some countries of operation. The Company is willing
to invest in countries where political and/or fiscal risks may occur
provided such risks can be adequately managed to minimise the
impact where possible.
▲ This risk increased in 2020. Energean continues to source new
opportunities in the Eastern Mediterranean and this can be in
jurisdictions deemed at higher risk of political or fiscal uncertainty. In
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Impact
Mitigation
2021 Objectives
STRATEGIC REPORT
addition, Energean entered into new countries, through the
acquisition of Edison E&P, with an increased risk profile. The Group
will strive for full compliance with regards to fiscal requirements
across all assets.
Loss of value; increasing costs; uncertain financial outcomes; HSE
incidents; loss of production.
Operate to the highest industry standards with regulators and
monitor compliance with the Group’s licence, Production Sharing
Contracts and taxation requirements.
Maintain positive relationships with governments and key
stakeholders through robust investment plans and engagement in
local projects.
Continuous monitoring of the political and regulatory environments in
which we operate.
Maintain balance sheet strength, continued monitoring of geopolitical
events and regulatory changes.
Undertake risk assessment and internal audit activities in relation to
the Karish project (development project-to-operations transition).
Integration of targets and sustainability projects (i.e. community
investment) within the strategic plan and management incentive
program.
#2 Global pandemic
Principal risk: Operational uncertainties and HSE incidents due to COVID-19 pandemic
Owner: Executive Management and HSE Director
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2020 KPIs: Delivering our strategy, growing our business and ‘Best in Class’ on Safety
Risk appetite
2020 movement
Impact
Low – COVID-19 and its impact on Energean’s development
projects and operations was identified as an emerging risk to its
business in 2019. Energean has been tracking the spread of COVID-
19 and its impact over the past year, recognising it as a principal risk
to the business for the first time in 2020; and is continuing to actively
monitor developments and take precautions to ensure the health and
safety of employees, partners and contractors.
▲ This risk increased in 2020. COVID-19 spread across the globe in
2020 and government responses to limit transmission of the virus
significantly weakened global energy demand, putting huge pressure
on the E&P sector. As a business, and at individual levels, conditions
were extremely challenging.
Project delays; delay in revenue income, termination of GSPAs,
penalties under GSPAs, supply chain interruption; HSE risk / risk to
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employee wellbeing; operational restrictions e.g. ability to mobilise
workforce.
Energean is constantly re-assessing our contingency planning, our
emergency/incident response plan and our business continuity
management plan. Effective communication plans are in place to
respond to the changing demands of the crisis. As part of the HSE
policies, various measures have been introduced to protect the
health and safety of employees and contract personnel. Working
from home, revamping office space and a COVID-19 business
continuity plan is in place for all the company’s offices and plant.
2021 Objectives
Continued modelling of COVID-19 scenarios to identify and evaluate
financial impacts, with an assessment of potential mitigating options.
Continued quantitative assessment of the impact of delay to the
Karish Project to the revenue stream secured by the Israel GSPAs
and of potential mitigating actions.
Conduct risk assessments for each country where operations exist to
identify potential strategic, operational, regulatory and people
related-exposures.
Emerging risks
Energean faces a number of uncertainties that have the potential to be materially significant to its long-
term strategy but cannot be fully defined as a specific risk at present, and therefore cannot be fully
assessed or managed.
These emerging risks typically have a long-time horizon, such as earlier and increased
decommissioning liabilities in the UK and Italy, and elsewhere where the Company operates;
increased calls for cash or L/C guarantees to be put in place; inadequate management of reserves
and production risk resulting in poor returns and impairment. The Group identified the increasing threat
from cyber security attacks, uncertainty around decommissioning legislation and direct impacts from
unanticipated production downtime emerging risks that will be actively assessed and monitored.
In early 2020, the Board and Executive Management decided to elevate the development, operational
and safety risks posed by COVID-19 from an emerging risk to a principal risk to the business. With
this shift in emphasis, all employees were provided with clear information and health precautions on
how to protect themselves and reduce exposure to, and transmission of, the virus.
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STRATEGIC REPORT
Viability Statement
The Directors have assessed the viability of the Group over the period to December 2023, 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)
ii)
iii)
The Group’s Karish Field is expected to be on stream during the first quarter of 2022
delivering long-term credible and predictable cash flow based on signed gas contracts with
take or pay provisions and floor prices
The Group’s funding cycle follows a 3-year horizon: (i) there is a 3 year grace period under
the $280 milion Egypt RBL until 2023, (ii) the Greek RBL will be almost fully amortised by
the end of 2023 with only 7% of the outstanding loan remaining, and (iii) the first tranche
under the USD2.5bn Bond issued in March 2021 by Energean Israel is due for repayment
in March 2024, therefore the viability forecast takes into account the reserving requirement
for such repayment
The majority of the Energean and Edison capital expenditure occurs during the next three
years, including for projects such as the Karish and Karish North gas developments in
Israel, the NEA and NI gas developments in Egypt and the Cassiopea gas development
in Italy. This means the assessment period contains all material capital investments, which
will in turn significantly increase the Group’s free cash flow from H1 2022 (beginning with
Karish in Israel).
Based on these factors, the Board considers that an assessment period up to 31 December 2023
appropriately reflects the 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 assessment included (i) monthly
cash flow analysis, (ii) a number of sensitivity scenarios and (iii) a reasonable worst-case scenario
including a combination of various sensitivities, together with associated supporting analysis provided
by the Group’s finance team. Sensitivity analysis focused on development project delay, oil prices,
EGPC receivables from operations in Egypt and portfolio rationalisation.
A summary of the key assumptions, aligned to the Group’s principal risks, and the sensitivity scenarios
considered can be found below.
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Principal Risks
Strategic Risk: Delay to First
Gas at Karish
Market Risk in Israel: The
potential for Israeli gas
market oversupply may result
in offtake being at the take-or-
pay level of existing GSPAs
and could result in the failure
to secure new GSPAs
Progress key development
projects: Delayed delivery of
future development projects
(including NEA / NI in Egypt,
Karish North in Israel)
Financial Risk: Recoverability
of revenues and receivables
in Egypt
STRATEGIC REPORT
Base Case Assumptions
First Gas from Karish in April
2022 (conservative assumption
as compared to the Group’s
target of first gas end of
2021/Q1 2022)
Minimum ACQ contracted
volumes at floor prices.
Sensitivity Scenarios
Further 3-month delay to first
gas, July 2022
Take or Pay volumes at floor
prices
First gas from Karish
conservatively assumed April
2022, Cassiopea in H1 2024.
Karish first gas delayed to July
2022.
Gradual reduction of receivables
balance from $180m gross as at
YE2020 to $60m by the end of
2023 which reflects
approximately 140 DSO.
Gradual reduction in receivables
in Egypt from $180m YE2020 to
c. $100m by YE2023, this
reflects approximately 240 DSO.
Financial Risk: Insufficient
liquidity and funding capacity
Oil price based on Group
planning assumption of $60/bbl
(real) plus discount to Brent.
Gradual reduction in oil price
from $60/bbl to $50 flat for 2023.
PSV gas price of EUR12/MWH
flat throughout the period
LIBOR rate increased by 1%
PSV gas price based on Group
planning assumption of
EUR15/MWH in 2021, and
EUR17.50/MWH thereafter
FX rate for costs in EUR of €1:
$1.2
Interest Rate based on floating
USD LIBOR set by the Lending
banks at each interest rate
period under the Loans, this
applies to the Greek RBL and
the Egypt RBL. The USD2.5bm
bond has a fixed coupon i.e. no
exposure to LIBOR
Under such individual and combined sensitivity scenarios the Board has considered the availability
and likelihood of mitigating factors such as the impact of hedging, additional funding options, further
rationalisation of our cost and asset base, including cuts to discretionary capital expenditure such as
exploration or indeed shifting of expenditure under our control. Based on the results of the analysis
the Board of Directors has a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period of their assessment.
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CORPORATE GOVERNANCE
Corporate Governance
Board of Directors
Karen Simon
Non-Executive Chairman Karen Simon is newly retired from J.P. Morgan as a Vice Chairman in the
Investment Bank with over 35 years of corporate finance experience with the firm. Most recently, Ms.
Simon headed up Director Advisory Services, a newly established client service at J.P. Morgan
focused on public company directors. From 2004 to 2016, Ms. Simon worked with private equity firms
in J.P. Morgan's Financial Sponsor Coverage group and was promoted to Head the European group
in 2007 and the North American group in 2013. Ms. Simon held a number of other senior positions
previously, including Co-Head of EMEA Debt Capital Markets and Head of EMEA Oil & Gas Coverage.
Ms. Simon spent 20 years of her career working in London and is a dual US/UK citizen. She currently
sits on the boards of Aker ASA in Oslo, an industrial investment company, and the Texas Woman's
Foundation, a non-profit charity focused on the needs of underprivileged girls and women across
Texas. Ms. Simon graduated from the University of Colorado and has Master’s degrees from Southern
Methodist University and from the American Graduate School of International Management.
Independent:
• Upon appointment as Chair.
Committee membership:
• Nomination & Governance – Chair
• Remuneration & Talent – Member.
Current external appointments:
• Aker ASA.
Matthaios (Mathios) Rigas
Chief Executive Officer Mr. Rigas has over 20 years of investment banking and private equity
experience and is a founding shareholder of the Energean Group, serving as CEO of the Energean
Group since 2007. During the years 2001 to 2007 Mr. Rigas 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 Mr. Rigas
was in charge of Piraeus Bank’s Shipping Division. Prior to that, from 1993 to 1999, he was the Vice
President of Shipping, Energy & Project Finance at Chase Manhattan Bank in London where he
arranged financing in excess of US$5 billion, mainly in the oil and gas sector. Mr. 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.
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CORPORATE GOVERNANCE
Independent:
• N/A.
Committee membership:
• Not applicable.
Current external appointments:
• None.
Panagiotis (Panos) Benos
Chief Financial Officer Mr. Benos has 17 years international experience in the oil and gas sector, both
in banking and industry, with a long track record of upstream financing in emerging markets. Mr. Benos
joined the Energean Group in 2011 from Standard Chartered Bank, where he was a director in the Oil
and Gas team in London delivering a number of award-winning projects and acquisition finance deals
in Africa, Asia and the Middle East. Before that he worked for ConocoPhillips from 2002 to 2006, where
he held positions in European Treasury, North Sea Economics and International Downstream with a
focus on the North Sea, Central Europe and the Middle East. He commenced his career at Royal Bank
of Scotland in Shipping Finance. He is also a Chartered Accountant (ICAS) and holds an MSc in
Shipping, Trade and Finance from Cass Business School.
Independent
• N/A.
Committee membership
• Not applicable.
Current external appointments
• None.
Andrew Bartlett
Senior Independent Director Mr. Bartlett has over 32 years’ experience in the upstream oil and gas
industry and currently serves as a Non-Executive director for Africa Oil Corporation, Petrobras Oil &
Gas BV and Impact Oil & Gas and adviser to Helios Investment Partners LLP (a private equity
partnership focused on Africa). Before his current directorships, Mr. Bartlett served as the chairman
and Non-Executive director of Azonto Energy from 2013 to 2015 and Eland Oil & Gas from 2012 to
2013. He was also previously the Global Head of Oil & Gas M&A and Project Finance for Standard
Chartered Bank between 2004 and 2011. Prior to this, he worked on the Trading and Derivatives desk
of Standard Bank in South Africa. Before joining the investment banking industry, Mr. Bartlett worked
for 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. He holds an MSc in
Petroleum Engineering from Imperial College London.
Independent:
• Yes.
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CORPORATE GOVERNANCE
Committee membership:
• Audit & Risk Committee – Chair
• Remuneration & Talent Committee – Member.
Current external appointments:
• Non-Executive Director of Africa Oil Corporation
• Non-Executive Director of Impact Oil & Gas Limited
• Adviser to Helios Investment Partners LLP
• Non-Executive Director of Petrobras Oil and Gas B.V.
Efstathios (Stathis) Topouzoglou
Non-Executive Director Mr. Topouzoglou, is a founding shareholder of the Energean Group and co-
founder of Prime Marine Corporation (“Prime”), serving as Prime’s chief executive officer and
managing director. Prime, a leading worldwide product tanker company, is a major global provider of
seaborne transportation for refined petroleum products, LPG and ammonia. Mr. Topouzoglou has
more than 38 years of experience in founding and growing companies in the energy transportation
sector and holds a B.A. in Business Administration and Economics from the University of Athens,
Greece.
Independent:
• No.
Committee membership:
• Nomination & Governance – Member
• Environment, Safety & Social Responsibility – Member.
Current external appointments:
• Chief Executive Officer and Managing Director of Prime Marine.
Robert Peck
Independent Non-Executive Director Ambassador Mr. Peck worked for 35 years in the Government of
Canada as a career Foreign Service Officer. Ambassador Peck was Canada’s Ambassador to the
People’s Democratic Republic of Algeria from 2004 to 2007 and Ambassador to Greece and High
Commissioner to the Republic of Cyprus from 2011 to 2015. Ambassador Peck was also Counsellor
to the Canadian Embassy in Greece from 1995 to 1998. As Canada’s representative to both Algeria
and Greece, Ambassador Peck worked closely with the Canadian oil and gas and mining sectors.
During a two-year leave of absence from the Government of Canada, Ambassador Peck was Director
of Corporate Communications and Investor Relations at CAE Inc., the global leader in aerospace
simulation technology. Ambassador Peck holds a B.A. in History and Journalism from Concordia
University in Montréal.
Independent:
• Yes.
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CORPORATE GOVERNANCE
Committee membership:
• Nomination & Governance – Member
• Environment, Safety and Social Responsibility Committee – Chair.
Current external appointments:
• Board Member - Michaëlle Jean Foundation.
Amy Lashinsky
Ms. Lashinsky trained as a securities analyst on Wall Street before joining Kroll in New York in 1985.
She moved to London in 1988 to help establish Kroll's first overseas office where she became
Managing Director of its business intelligence unit. In 1995, Ms. Lashinsky set up Asmara Limited,
which was sold to NYSE-listed Armor Holdings in 1998, before founding Alaco in 2002. Ms Lashinsky
graduated from the University of Michigan.
Independent:
• Yes.
Committee membership:
• Environment, Safety and Social Responsibility – Member
• Audit & Risk Committee – Member.
Current external appointments:
• Alaco Limited – Chief Executive Officer
Kimberley Wood
Ms. Wood is an upstream energy lawyer based in London with over 20 years’ experience and is a
former partner of Vinson and Elkins LLP (2011-2015) and Norton Rose Fulbright LLP (2015-2018),
where she is currently a senior consultant. She has extensive experience in the oil & gas sector, as
well as existing independent non-executive director experience. Throughout her career, she has
advised a wide range of companies in the sector, from small independents through to super-majors.
She is included in the Who’s Who Legal: Energy for 2020 and Women in Business Law for 2020. She
holds a Bachelor of Law from the University of Edinburgh and a Master of Law from University College
London; and she is admitted as a solicitor in England & Wales. She is also a Director of Gulf Keystone
Petroleum Ltd, a company listed on the main market of the London Stock Exchange, where she chairs
the Remuneration Committee, and is also a member of its Audit & Risk Committee, Nomination
Committee and Safety & Sustainability Committee. She is also a Director of Africa Oil Corp, a company
listed on the Toronto Stock Exchange and the NASDAQ Nordic Exchange, and a Director of Valeura
Energy Inc., a company listed on the Toronto Stock Exchange and the London Stock Exchange.
Independent:
• Yes.
Committee membership:
• Remuneration & Talent Committee – Chair
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CORPORATE GOVERNANCE
• Audit & Risk – Member
• Nomination & Governance – Member.
Current external appointments:
• Gulf Keystone Petroleum Ltd – Non-Executive Director
• Africa Oil Corp – Non-Executive Director
• Valeura Energy Inc – Non-Executive Director.
Andreas Persianis
Mr. Persianis is an experienced Non-Executive Director with over 30 years’ international financial
markets experience in central banking, asset management and Corporate Strategy. He is currently
the Managing Director of Fiduserve Asset Management in Cyprus, a regulated Alternative Investment
Fund Management company that sets up and manages private funds for a diverse range of private
and institutional clients. Before that he was Founder and Managing Director of Centaur Financial
Services, a discretionary portfolio management company with presence in the UK and Cyprus. He has
served as a Non-Executive Director at Central Bank of Cyprus (2014-2019) and on the Bank of Cyprus
Board in 2013. He was recently elected to the board of Hellenic Bank (pending ECB approval) as an
independent Non-Executive Director. He has also worked as a Senior Manager at Bain & Company
(London), one of the world’s largest strategy consulting firm with Boston, USA Headquarters. He holds
an Electrical Engineering undergraduate degree from the University of Cambridge and a Master’s in
Business Administration (MBA, Major in Finance & Investment Banking) from the Wharton Business
School.
Independent:
• Yes.
Committee membership:
• Audit & Risk Committee – Member
• Environment, Safety and Social Responsibility – Member.
Current external appointments:
• Hellenic Bank (pending ECB approval) – Non-Executive Director.
Section 172 (1) Companies Act 2006 Statement
The Directors confirm that, throughout the year, they have acted in accordance with their
responsibilities to promote the success of the Company, as required by section 172 of the Companies
Act 2006.
This section further requires the Directors to have regard to a range of factors when making decisions,
including the likely long-term consequences of any decision, the interests of the Company’s
employees, the need to foster the Company’s business relationships with suppliers and others, the
impact of the Company’s operations on the environment, maintaining a reputation for high standards
of business conduct, and the need to act fairly between members of the Company. The Company’s
key stakeholders are its employees, local communities, governments in the countries in which the
Company operates, customers, lenders and shareholders.
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CORPORATE GOVERNANCE
Throughout the year the Board placed a high importance on stakeholder considerations and
considered these at the centre of its decision-making process.
The Board also had teach-in sessions with leading figures in the industry in relation to ESG matters,
underpinning the commitment of the Company to be a net-zero emitter by 2050.
Long term impact of decisions
Energean has a clear ambition to be an Eastern Mediterranean focused dividend yield company
committed to sustainability and being a net zero emitter by 2050. Strategic decisions are taken at the
Board with this ambition at the forefront and as such requires the Board to consider the long term
impact of any decisions, especially in relation to reviewing the investment decisions in the Group’s
portfolio of assets.
Engagement with:
Workforce
As required by the 2018 Corporate Governance code, Robert Peck, a Non-Executive Director, was
appointed by the Board in 2019 to be the “employee voice” in the boardroom. During 2020, COVID
restrictions meant that physical visits to staff sites were not possible, however, subject to COVID
restrictions being lifted in 2021, Robert Peck intends to visit company sites to meet with employees
and further understand their views. All members of staff are able to confidentially email Robert to
express any concerns or raise any issues, Robert in turn reports to Nomination & ESG Committee
(now called the Nomination & Governance Committee) when any issues are raised and the Non-
Executive Directors are able to investigate further, if appropriate. Furthermore, Robert attends all
Remuneration & Talent Committee’s meetings, in order to ensure that the “employee voice” is heard
during discussions around bonus awards and targets for future years.
As part of the 2020 bonus KPIs, the Executive Directors were set objectives relating to conduct and
culture. The Executive Directors were awarded a full pay-out on this metric following high levels of
staff retention, the intranet “go live” being completed, 360 assessments being carried out for senior
management and an all-staff engagement survey having been rolled out at the end of the 2020, the
results of which will be built upon during 2021. All of these achievements demonstrate the Board’s
focus on improving the employee experience and the Board looks forward to seeing these
achievements furthered during 2021.
Local communities
Energean is very active in the communities in which it operates (further information on this can be
found on pages 43-46), and the Directors are cognisant of their responsibilities to “give something
back” by means that are appropriate to the particular communities. The Board receives information on
such activities being carried out by the Company in monthly reports and at Board meetings. The
activities are tied to the Company’s commitment to the fulfilment of the 17 UN Sustainable
Development Goals. Examples include:
•
•
In Greece, donated essential children’s items to “Together for Children” - an association of
NGOs in the field of child welfare - in Athens, Greece; donated a Molecular Control Diagnostic
Device (PCR) to the General Hospital of Kavala, allowing for more than 100 COVID-19 tests
per day - in Kavala and Thassos Island, Greece; continued the support of the Association of
Paraplegics and Disabled People in the Prefecture of Ileia (Greece)
In Israel, donated food platters to the medical team of Rambam Hospital that fights COVID-19
- in Haifa, Israel. Donated COVID-19 Medical Kits to the Israeli National Emergency Pre-
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CORPORATE GOVERNANCE
Hospital and Blood Services Organization (MDA), who treated thousands of infected
individuals in their homes; continued supporting the Israeli Nature and Parks Authority in
protecting and conserving Israel’s nature landscapes and heritage sites; continued the support
to 3 Paralympic swimmers in Israel in their journey to qualify to the Tokyo 2020 Paralympic
Games via monthly financial aid and social media awareness; continued the support to
“Etgarim”, an NGO for rehabilitation of disabled adults and children through Outdoor Sports
(Israel)
In Montenegro, donated food boxes to the local branch of the Red Cross - in Bar, Montenegro
In Egypt, participated in “One Hand”, an initiative by Egypt Oil & Gas, to provide medical
supplies and equipment needed by the Egyptian Ministry of Health to face COVID-19
challenges; participated in an initiative by the Ministry of Health, the Ministry of Social Solidarity
and the Food Bank, to secure medical supplies for hospitals and vulnerable & remote
communities (Egypt)
In the UK, Energean’s CEO, joined other leaders in calling on the UK Prime Minister for a
green COVID-19 recovery using the UN’s Sustainable Development Goals
•
•
•
On June 5th (World Environment Day), Energean organized three environmental webinars:
• For our colleagues and Middle School students, titled “How does Climate Change affect our
lives” (Greece)
• For Elementary School students titled “Time for Nature” with units on biodiversity, recycling,
waste management and the environment protection (Montenegro)
• For our colleagues titled “Blue Flags and Coastal Environments” on the preservation of the
marine and coastal life (Israel).
During 2020, Energean collaborated with:
Globally:
United Nations Global Compact
In Greece:
Management body of the Nestos River Delta, Lakes Vistonida-Ismarida and Thassos Island –
Northeastern Greece
“Boroume” (“We Can”), an NGO that fights food waste - Athens, Greece
“Together for Children”, an association of NGOs in the field of child welfare - Athens, Greece
Red Cross - Local branch in the City of Bar, Montenegro
Democritus University of Thrace (DUTH), Department of Environmental Engineering – Xanthi, Greece
University of Thessaly: the Mechanical Engineering Department and the Pulmonary Clinic of the
University – Volos & Larissa, Greece
Association of Paraplegics and Disabled people of the Ileia Prefecture, Southwestern Greece
In Israel:
Maala, a non-profit, CSR standards-setting organisation in Israel. Maala’s CSR Index is an ESG rating
system used as an assessment tool, benchmarking Israeli companies on their CSR performance.
Energean was rated at Gold Level at the 2020 Maala Index
Sembcorp Marine Ltd, TechnipFMC & Sub-Con: Environmental Campaign “Say no to Plastics”
“Etgarim”, an NGO that: a) empowers activities for youth at risk, b) provides rehabilitation of disabled
adults and children through outdoor sports
Israeli Paralympic Committee
Carmel Sailing Community, an NGO that develops the sailing community in Haifa
Magen David Adom (MDA), Israel’s National Emergency Pre-Hospital Medical and Blood Services
Organization
The University of Haifa and the Technion
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CORPORATE GOVERNANCE
“Access Israel”, a non-profit organisation that promotes accessibility and inclusion in order to improve
the lives of people with disabilities and the elderly
“Eco Ocean”, an NGO for the marine and coastal life preservation
EIT Hub Israel, under the European Institute of Innovation and Technology (ΕΙΤ)
In Montenegro:
“Ozon”, an environmental NGO
Red Cross - Local branch in the City of Bar, Montenegro.
Governments
The Company has a transparent dialogue with all host governments in countries where it operates and
seeks to operate. All these discussions are led by the Chief Executive Officer. The Company regularly
engages in industry forums in these countries to further demonstrate its commitment to working closely
with their governments.
Shareholders
Energean is committed to transparency and engaging with its shareholders, including providing all
appropriate information to the investment community. The annual report and accounts are available
from www.energean.com/investors/reports-presentations and, where elected or on request, will be
mailed to shareholders and to stakeholders who have an interest in the Company’s performance. The
Company responds to all requests for information from shareholders and maintains a separate
Investor Relations department within the existing www.energean.com website, as a focal point for all
investor relations matters. Moreover, there is regular dialogue with institutional shareholders via face-
trading updates and
to-face meetings,
conferences, as well as general presentations that are published on the Company’s website.
Furthermore, the Board is advised of any specific remarks from institutional investors, to enable it to
develop an in-depth understanding of the views of major shareholders. All shareholders have the
opportunity to put forward questions to the Company’s AGM.
investor roadshows, RNS announcements, regular
At the 2020 AGM, the Company received less than 80% of votes in favour for the resolution 14, which
sought authority to allot ordinary shares in the Company. The Company undertook to carry out a
detailed review of feedback received on this resolution to ensure that it fully understood the reasons
behind the voting result and allow it to understand shareholders' concerns. In line with the provisions
of the Code, the Company provided an update on its website on the views received from shareholders.
Maintaining a reputation for high standards of business conduct
During the year, the company refreshed its Anti-Bribery and Corruption policies as well as undertaking
due diligence on counterparties to ensure that their internal policies meet the high standards that
Energean expects from its partners. Furthermore, the company ensures that all counterparties comply
with its anti-slavery contract clauses and has carried out audits of counterparties to ensure compliance
with the high standards that Energean expects when working with its counterparties.
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CORPORATE GOVERNANCE
Corporate Governance Report
Statement of Compliance
Good corporate governance is essential to creating trust and engagement between us and our
stakeholders, as well as contributing to the long-term success of our strategy. The Board is committed
to the highest standards of corporate governance in accordance with the 2018 Corporate Governance
Code (the “Code”), which the Company is pleased to confirm it has complied with.
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.
• Board Leadership and Purpose is set out on page 105-106
• Division of responsibilities is set out on page 106-107
• Composition, Succession an Evaluation is set out on page 107-108
• Audit, Risk & Internal Control is set out on page 109
• Remuneration is set out on page 109-110
We also set out our governance structures to deal with climate change in line with the
recommendations of the Task Force on Climate-related Financial Disclosures (“TFCD”).
Attendance
Type and number of meetings held during the year
Board
(9)
Audit &
Risk (11)
Remuneration
(5)
Nomination
& ESG (6)
Director
Karen Simon
Mathios Rigas
Panos Benos
Andrew Bartlett
Robert Peck
Efstathios Topouzoglou
Amy Lashinsky
Kimberley Wood70
Andreas Persianis71
Ohad Marani72
David Bonano73
9
9
9
9
9
9
9
2
2
7
7
10
-
-
11
11
-
11
-
3
-
-
5
-
-
5
-
-
-
2
-
3
-
-
-
-
-
6
6
6
6
-
6
-
The Board met on 9 occasions during 2020 and the key matters considered by the Board are set out
below.
70 Appointed on 26 July 2020
71 Appointed on 26 July 2020
72 Stepped down on 26 July 2020
73 Stepped down on 26 July 2020
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CORPORATE GOVERNANCE
The Board has a formal schedule of matters that can only be decided by the Board, and this schedule
is reviewed by the Board.
The key matters considered by the board in 2020 were:
• HSE performance
• Taking final investment decision (FID) on the
Karish North development
• Taking final investment decision (FID) on
NEA/NI , Egypt
• Approving revised perimeters for the Edison
E&P transaction and its completion
• Acquisition of Kerogen’s 30% stake in Energean
Israel Limited and approval of SPA
• Approving additional gas sales & purchase
agreements (GSPAs)
• Met with key executives from TechnipFMC to
discuss the progress being made on the Karish
EPCIC contract
• Strategic decisions on capital expenditure
• Approving the Group 2021 budget
• Group strategy in light of the increased focus on
ESG matters
• Appointments to the Board
• Board & Board Committee terms of reference
• Review of related party transactions
• Board composition
• Company’s performance in light of COVID-19
including the safety of employees
• Operation as a listed company
• Material contracts
• Reviewing and approving the financial
statements for the 2019 year-end and 2020 half
year
• Financial reporting and controls
• Material tenders
• Material litigation
• Compliance with statutory and regulatory
obligations
• Internal controls and risk management
• Significant transactions
• Executive remuneration
• Review of risk register
• Delegations of authority
• Finalising the Edison transaction
Board leadership and company purpose
The Board’s primary role is to promote the long-term sustainable success of the Company and to
ensure that value is being generated for shareholders and contributing to wider society. Details of the
Company’s Corporate Social Responsibility commitments and actions are found on pages 43-46.
Details of the Companies engagement with stakeholders is detailed in the section 172 (1) statement
on pages 100-103.
As part of the Company’s contribution to the wider society, the Board was pleased to see the progress
that the Company has made during 2020 on its commitment to the UN’s Global Compact campaign
and pledge to net-zero emissions by 2050. Furthermore, the Remuneration Committee included
targets to reduce emissions included in the short-term and long-term bonus plans. This demonstrates
the Company’s commitment to creating value through sustainable development, taking into account
the environmental aspects of its business. Further details of activity in relation to protecting the
environment can be found on pages 51-58.
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CORPORATE GOVERNANCE
Following the acquisition of the Edison portfolio in December 2020, Energean has grown from a
company that produces 4,000 barrels of oil equivalent per day (boepd) in 2019 to over 48,000 boepd
at the end of 2020 and made significant progress in reducing the carbon intensity of its operations.
Energean’s reserves have also significantly increased during the year. The Company is also proud of
its health and safety record, further details of which can be found at page 55.
In June 2019, Robert Peck was appointed by the Board as the workforce Board representative.
Employees can confidentially email Robert to raise any issues, and to the extent appropriate. During
the year matters raised were discussed by the Nomination & ESG Committee and followed up with
management to ensure that any identified issues are appropriately dealt with. In addition, employees
can raise concerns through the confidential whistleblowing procedure, for which the key point of
contact is Andrew Bartlett, Chairman of the Audit & Risk Committee and Senior Independent Director.
The Board receives monthly updates from the Group HR Manager on staff-related matters and has a
direct line of communication if required. The Company is committed to investing in its workforce and
employees are able to submit requests for training to enable them to pursue professional training in
their respective areas which is funded by the company. Employees are also able to benefit from study
leave to give them adequate time to study for these qualifications. The Company has also rolled out
e-learning modules for employees to further develop their knowledge in key corporate matters such
as anti-bribery and corruption. Eligible employees also benefit from pensions contributions which
under the new remuneration policy will be aligned at the same rate as senior management. Eligible
employees are also able to benefit from a number of share plans including the Deferred Bonus Plan
and the Long Term Incentive Plan.
Each year the Company welcomes shareholders to its Annual General Meeting (“AGM”), which
provides a unique opportunity to ask questions to the Board. The results of the voting on each
resolution proposed to the meeting are published via the Regulatory News Service and through the
Tel Aviv Stock Exchange news service. Although the 2020 AGM had to be a closed meeting, due to
the pandemic, the Company took steps to ensure that shareholders were still able to ask such
questions, electronically; and this will be repeated for the 2021 AGM, if necessary.
At the 2020 AGM, the Company received less than 80% votes for the resolution no. 14, which sought
authority to allot ordinary shares in the Company. The Company undertook a detailed review of any
feedback received on this resolution to ensure that it fully understood shareholders' concerns behind
that vote. In line with the provisions of the Code, the Company subsequently provided an update on
its website on the views received from shareholders. The Board was pleased to see that, following the
engagement carried out, shareholders were able to overwhelmingly support the resolution relating to
the disapplication of pre-emption rights in respect of limited new share allotments at the General
Meeting held in February 2021. The Board looks forward to maintaining the active dialogue with
shareholders ahead of the 2021 AGM.
Division of responsibilities
The Board currently comprises:
• The Chairman (who was independent upon her appointment)
• Two Executive Directors (Chief Executive Officer and Chief Finance Officer)
• One Non-executive Director (Efstathios Topouzoglou)
• Five independent Non-executive Directors.
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The independence of Mr Topouzoglou was tested against the criteria set out in Provision 10 of the
Code: whilst he is considered to be independent in character and judgement, he is not deemed to be
independent by reference to the criteria set out in the Code, as a result of being a significant
shareholder, owning approximately 9.8% of the shares of the Company (as an individual and by his
indirect holdings in both Oilco Investments Limited and HIL Hydrocarbon Investments Limited).
There is a clear division of responsibilities of the Chairman, the Executive Directors and the Non-
executive Directors. The roles of Chairman and Chief Executive Officer are separate, and the
responsibilities clearly 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. As
detailed on page 104, the Board met 9 times throughout the year, which is deemed to be sufficient,
given the size and complexity of the Company’s operations and merger and acquisition activity.
The Chairman leads the Board and is responsible for its overall effectiveness in directing the
Company. The Chairman is committed to promoting a culture of openness and debate. The Board
provides rigorous challenge to management and such challenge is supported and facilitated by the
Chairman. The Directors have strong experience in the sector in which the Company operates (and
seeks to operate) and have a broad range of business, commercial and governmental experience.
The Board is supported by the Company Secretary who is also Secretary to all the Board Committees.
This ensures effective information flow between the Board and its Committees. Each Committee
reports to the Board at the next Board meeting following its own meeting, so that the Board is kept up
to date on key matters being dealt with. The Board benefits from the use of an electronic Board portal
system to assist with the timely production of Board papers and reviewing key Company policies
throughout the year. The Board has unfettered access to senior executives at the Company and is
fully supported by the Company Secretarial team.
Every month, whether or not a Board meeting is scheduled, the Board receives a comprehensive
report from management on the businesses performance, which keep the non-executives up-to-date
on all the key issues; and board members are able to ask management questions on any issue.
Each Board 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 legislations. 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.
Composition, succession and evaluation
During the year the Nomination & Environment, Social & Governance (Nomination & ESG) Committee
oversaw the appointment of two new independent non-executive Directors, Andreas Persianis and
Kimberley Wood, with further strengthened the independence of the Board. Details of these
appointments can be found in the Nomination & ESG Committee report on page 124-129.
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These appointments to the Board, led by the Nomination & ESG Committee, refreshed the
membership of the Board Committees, with Kimberley becoming Chair of the Remuneration
Committee and a member of the Nomination and ESG Committee. Kimberley is also the Chair of the
Remuneration Committee of another listed company and, therefore meets the provision in the Code
requiring Remuneration Committee Chairs to have served on a Remuneration Committee for one year.
Andreas was appointed to the Audit & Risk Committee.
In the second half of the year, as required by the Code, the Board underwent an externally facilitated
independent review, further details of which are contained in the Nomination & ESG Committee report
on page 119-124. Following the conclusion of this review, at the end of 2020 the Board, led by the
Nomination & ESG Committee, refreshed the membership and structure of the Committees to ensure
that the Committees continue to operate effectively.
The previous structure was:
Remuneration Committee Nomination & ESG
Audit & Risk
Committee
Andrew Bartlett – Chair Kimberley Wood – Chair
Karen Simon
Andreas Persianis
Amy Lashinsky
Robert Peck
Karen Simon
Andrew Bartlett
Committee
Robert Peck – Chair
Amy Lashinsky
Stathis Topouzoglou
Kimberley Wood
Karen Simon (in attendance)
This revised structure is shown below:
Audit & Risk
Committee
Remuneration & Talent
Nomination &
Governance
Environment, Safety
& Social
Responsibility
Andrew Bartlett –
Chair
Kimberley Wood
Andreas Persianis
Amy Lashinksy
Kimberley Wood – Chair Karen Simon – Chair
Robert Peck – Chair
Karen Simon
Andrew Bartlett
Kimberley Wood
Robert Peck
Amy Lashinsky
Andreas Persianis
Stathis Topouzoglou
Stathis Topouzoglou
The Board is satisfied that the Directors have the right combination of skills, experience and knowledge
to assist the Company in achieving its long-term goals.
As the Board was only formally constituted just prior to the Company’s listing on the London Stock
Exchange in March 2018, no Independent Non-Executive Director had served more than three years
by the end of 2020.
The Nomination & ESG Committee leads the annual evaluation of the Board. During 2020 this was
carried out by an external facilitator conducting a review, the findings of which are contained on page
123-124. The results were reviewed by the Committee and discussed with the Board. Both the
Committee and the Board were satisfied that each Director continues to contribute effectively.
During 2021, the Board will carry out an internal review as required by the Code, building on the
findings of the above-mentioned externally facilitated review. The results of that internal review will
be reported on in the 2021 Annual Report & Accounts.
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Audit, risk and internal control
The Board established the Audit & Risk Committee upon admission to the LSE, which, during 2020,
comprised Andrew Bartlett, Robert Peck (stepped down on 31 December 2020), Amy Lashinsky,
Karen Simon (stepped down on 31 December 2020) and Andreas Persianis (appointed on 26 July
2020), all of whom are Independent Non-Executive Directors. The Board is satisfied that Andrew
Bartlett has recent and relevant experience and that the Committee as a whole has competence
relevant to the sector in which the Company operates. The main roles and responsibilities of the
Committee are set out in its terms of reference, which are available to download at www.energean.com
or available upon request from the Company Secretary.
As part of the responsibilities of the Committee, it has formal and transparent policies to ensure the
independence and effectiveness of the internal and external audit functions and satisfy itself on the
integrity of the Company’s financial and narrative statements. The Audit & Risk Committee considers
the nature and extent of the principal risks facing the Group and the internal control framework. Further
information about the Committee’s activity is detailed on page 114. This Annual Report includes a
number of disclosures that set out the Company’s position and prospects.
The Statement of Directors’ Responsibilities confirms that the Directors believe those disclosures to
be fair, balanced and understandable and the auditor, Ernst & Young LLP, has given its opinion that
the financial statements give a true and fair view of the Group’s affairs.
Remuneration
The Board established the Remuneration Committee as part of admission process in March 2018.
During 2020 the Committee members were Kimberley Wood (Chair – appointed on 26 July 2020),
Karen Simon, Andrew Bartlett, Ohad Marani (stepped down on 26 July 2020).Kimberley and Andrew
are independent Non-Executive Directors and Karen was considered independent on her appointment
as the Company’s Chair. Robert Peck, as the Board’s workforce representative, also attends meetings
of the Remuneration Committee to ensure their views are taken into consideration.
The Committee has delegated responsibility for determining policy for Executive Director remuneration
and setting remuneration for the Chairman, Executive Directors and senior management. The
Company has in place a long-term incentive plan (“LTIP”) for the Executive Directors and senior
management, which is designed to promote the long-term success of the Company by assessing
performance over three years and is linked to absolute and relative share price performance against
a peer group of other related companies, as well as emission reductions.
Furthermore, the Company has in place an annual bonus scheme which incentivises management to
progress with key projects such as first gas at Karish, entering into key gas contracts, as well as
measures related to financial liquidity and ESG. It requires Executive Directors to defer one third of
the bonus into shares to be held in trust for 2 years, these shares are then subject to a further holding
period. This further aligns the Executive Directors with the long-term interests of the shareholders.
The Board will be seeking the approval of its new remuneration policy at the 2021 AGM. After
discussions with key stakeholders, the Remuneration Committee agreed that the policy should be
renewed a year earlier than scheduled in order to reflect the changes to the size of the group and to
ensure that the policy remains relevant and appropriate.
The members of the Remuneration Committee are required to exercise independent judgement and
discretion when authorising remuneration outcomes, with regard to Company and individual
performance and wider circumstances. No Director is involved in deciding their own outcome; and
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when discussing fees for the Chairman, Karen Simon will excuse herself from these discussions.
Further details of the role and activities of the Remuneration Committee and the Remuneration Policy
are found on pages 125-152 of this report.
CORPORATE GOVERNANCE
Climate Change
Board oversight
Energean sees climate change as a major global concern and a top priority for our business. This is
reflected in our strategy, and we apply all our governance processes to climate change-related issues.
Responsibility for the governance of climate change issues within Energean rests with the Board. To
reflect the increasing importance of climate change-related risks and opportunities, Energean formed
a new Board committee in early 2020, the Nomination & Environment, Social & Governance (ESG)
Committee to consider climate change and ESG matters in one forum, in 2021 this committee was
split out and the newly formed Environment, Safety & Social Responsibility Committee will take over
responsibility for climate change and ESS matters. The Board is also charged with reviewing
investments for climate-related risks (among other risks).
The Nomination & ESG Committee (and, going forward, the Environment, Safety & Social
Responsibility Committee) evaluates Energean’s policies and systems for identifying and managing
ESG risks, which includes identification of emerging risks, such as climate change risks, and proposes
mitigation measures. The Committee further ensures Energean’s compliance with relevant regulatory
requirements and/or applicable international standards and guidelines. The Committee follows political
and regulatory discussions and developments on an international, EU-wide and national level on a
variety of ESG issues, including energy, climate and environment, and industrial trends, etc.
The Committee convenes every quarter and reviews the Board papers on Energean’s carbon
emissions performance and KPIs where possible when the Committee meets before a Board meeting.
In addition, the Audit & Risk Committee looks at climate change-related issues, to ensure the
identification of multi-disciplinary risks (including climate change-related risks), which may impact
more than one part of the Company. More specifically, the Audit & Risk Committee is charged with
reviewing investments for climate-related risks (among other risks). the Committee is responsible for
ensuring that measures to mitigate and adapt to the risks identified are effective and implemented as
necessary.
The Remuneration Committee has responsibility for the annual directors’ bonus targets, long term
incentive plans, and the overall Remuneration Policy. Both the annual directors bonus targets and the
long term incentive plans link executive bonuses to the achievement of emission reduction targets.
Management oversight
At Energean, ultimate responsibility and accountability for the Company's environmental and climate
change policy, strategy and targets related to short-, medium- and long-term plans, lie with the CEO.
The CEO is responsible for identifying and assessing business and climate-related risks, defining the
strategy and approving action plans suitable to control and mitigate the identified risks. Furthermore,
the CEO oversees the Company’s overall environmental performance and sets climate performance
expectations and targets. The CEO discusses all relevant actions and activities related to climate
change and the energy transition with the Board. The CEO and the Board regularly discuss climate
change-related issues, such as climate change policies, investment decisions where climate change
considerations are a major driver, and the carbon credit price’s impacts on Energean’s financial future.
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CORPORATE GOVERNANCE
The operational management of climate change issues is conducted by the HSE Director, who reports
directly to the CEO and provides updates to the Board on a regular basis. The HSE Director maintains
and oversees the development of Energean’s Corporate HSE and Climate Change Policy, defines
appropriate training programmes and drills for the entire Company to increase safety, environmental
and climate change awareness, and monitors technological developments and opportunities to help
achieve defined appropriate climate change targets. The HSE Director is tasked with ensuring that the
Company stays on track to meet its net-zero 2050 target. The HSE Director oversees the monitoring
of Energean’s carbon emissions throughout all assets and reserves and defines the carbon emission
factors that Energean’s financial team uses to understand the financial impact of climate change on
Energean’s portfolio. Furthermore, the HSE Director assesses the climate risks and opportunities in
cooperation with Energean’s financial, economic, and technical departments.
Executive Committee –
Chaired by CEO, HSE
Director also a
member.
Meets fortnightly, the
HSE Director has a
standing agenda item
to update the
Committee.
Environment, Safety and
Social Responsibility
(“ESSR”) committee,
chaired by Robert Peck
(iNED), attended by
Chairman of the Board,
CEO, HSE Director.
The Committee meets
quarterly and receives
reports from the HSE
Director on climate issues
and reports to the Board
Board – receives regular
reports from HSE Director
who attends meetings to
present his report. Robert
Peck provides updates on
the ESSR Committee
activities.
Meets every 2 months,
receives reports from the
HSE Director and has
overall responsibility for the
climate change strategy
Board expertise
To ensure Energean’s Board and Management Team remain up to date on the most pertinent climate
change developments and to further enhance their knowledge and skills in relation to climate change
issues, Energean invites leading industry and climate change experts to Board and Committee
meetings on a regular basis. The HSE Manager proactively interacts with Board members and the
Management Team to provide necessary information and further insights on specific climate change-
related issues affecting the company.
Vision and Values
Purpose
To create long-term value for all our stakeholders and help deliver the energy transition through a
focus on gas.
Our Vision
To be the leading sustainable, gas focused and innovative independent E&P company in the
Eastern Mediterranean.
Our Values
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CORPORATE GOVERNANCE
Energean seeks to fulfil its vision by adhering to the following values:
• Responsibility in all our actions and areas where we conduct our business
• Excellence in everything we do; deploying best practices to achieve profitable and sustainable
growth
•
Integrity respecting our shareholders, employees and business; promoting transparency and
accountability; cultivating a unique corporate sustainability culture
• Commitment to a talented workforce; investing in our people’s development
• Caring for the environment; reducing our environmental footprint
• Engagement with local communities; meeting their expectations and needs.
Our Principles
Our values are underscored by our Corporate Principles, which are as follows:
• Being ethical and responsible
• Being transparent and accountable
• Creating an attractive workplace and being an employer of choice
• Mitigating environmental impacts and minimising our footprint
• Supporting local communities.
We believe that putting our values into practice and abiding by our principles will help us create long-
term benefits for shareholders, customers, employees, suppliers, and the communities we serve.
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Audit and Risk Committee Report
Andrew Bartlett - Chairman of the Audit & Risk Committee
I am pleased to present this Audit & Risk Committee Report for the year ended 31 December 2020,
which sets out the role and work of the Committee during the year and key areas of focus for 2021.
2020 was a busy year for the committee as it assisted the Board with its financial reporting obligations
for the annual report, interim report, prospectus, and supplementary prospectus. Coupled with the
challenges of meeting virtually, I would like to thank my fellow committee members for their hard work
and commitment throughout the year.
Membership of the Committee
The members of the Audit & Risk Committee during the year were myself, Andreas Persianis (from 26
July 2020), Amy Lashinsky, Robert Peck and Karen Simon.
As mentioned previously in this annual report, effective from the 1st January 2021 Robert Peck & Karen
Simon stood down from the Committee with Kimberley Wood joining. Karen will continue to attend
meetings in her capacity of Chair of the Board but not as an official member of the Committee. The
Board remains satisfied that the Committee has recent and relevant financial experience and that the
Committee as a whole has sufficient sector experience.
The Committee’s members are all Independent Non-Executive Directors, and therefore the
composition of the Committee complies with the Code. Committee members’ skills and experience
are documented on pages 96-100. The Board is satisfied that the Committee meets the requirement
to have recent and relevant financial experience and sufficient experience of the oil and gas sector.
Any member of the Committee, the Company’s external auditor, or its internal auditor may request a
meeting if he/she considers that one is necessary or expedient. No meetings of this nature were
requested during the financial year. The CFO and external audit partner attend meetings by standing
invitation; the Company Secretary acts as Secretary to the Committee.
Attendance at meetings
The Committee met eleven times during the year, and attendance at these meetings is set out
below:
Number of
meetings
during the
year
No. of meetings attended:
Director
Karen Simon
Andrew Bartlett
Robert Peck
11
11
11
Amy Lashinsky
Andreas Persianis74 5
11
10
11
11
11
5
74 Appointed to the Board on 26th July 2020, 5 meetings took place after this date
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The Audit & Risk Committee’s role
To assist the Board with discharging its responsibilities in relation to:
• Financial reporting, including monitoring the integrity of the Group’s annual and half year
financial statements and 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
• Reviewing reports from the reserves auditor
• Reviewing the effectiveness of the internal audit, whistleblowing and fraud systems in place
within the Group. The Audit & Risk Committee reviews the Group’s capability to identify and
manage new types of risk and keeps under review the Group’s overall risk assessment
processes that inform the Board’s decision making. In order to assist with achieving this, the
Committee regularly liaises with the Company’s compliance function.
The Audit & Risk Committee considers annually how the Group’s internal audit requirements shall be
satisfied and makes recommendations to the Board accordingly, as well as on any area it deems
needs improvement or action. The Group’s internal audit manager has a standing invitation to all
committee meetings.
The Committee receives regular regulatory updates to ensure that it remains up to date with
developments in financial reporting.
Key matters considered in relation to the consolidated financial statements
The Audit & Risk Committee focused on a number of key judgements and reporting issues in the
preparation of the full year results and the Annual Report. In particular, the Committee considered,
discussed and where appropriate raised challenges in the areas set out below:
• Recoverability of oil and gas assets, including estimation of oil and gas reserve volumes. The
Committee considered the approach taken by the Company on the impairment indicators and
where appropriate, the approach taken to calculate the value-in-use for producing oil and gas
assets. The Committee reviewed and challenged management’s key assumptions for the oil
and gas properties, which included reserves estimates, future oil and gas prices and discount
rates. The Committee supported the view that the Greek assets should be impaired by $65
million, but no indicators of impairment were noted in respect of the Israeli assets. The
Committee reviewed the financial statement disclosures and was satisfied they appropriately
conveyed the judgements and estimates related to the impairment recognised in the year.
• Accounting for the acquisition of Edison E&P. The Committee considered the approach taken
by the Company for the accounting treatment of the acquisition of Edison E&P. The Committee
discussed in detail how the Company had approached this given the acquisition date of 17
December 2020 being late in the financial year. The Committee assessed the management
judgements in determining the fair value of the net assets acquired in line with IFRS 3
(Business Combinations). The areas challenged by the Committee included: the reserves and
resources, oil and gas prices and discount rates used to determine the fair value of the oil and
gas assets; the assumptions relating to the decommissioning provisions recognised; and the
methodology used to determine the valuation of the contingent consideration. The Committee
supported the view that management judgements reflected the fair value of the net assets
acquired and that the requirements of IFRS 3 were satisfied.
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CORPORATE GOVERNANCE
• The Committee received reports from management in order to assess the accounting
treatment of the Karish/Tanin development costs incurred in the year, which were significant
to the financial statements. The Committee reviewed the capitalisation of development costs
and concluded they were appropriate, and were satisfied that accruals were in place at the
year end to reflect the costs of services provided by contractors.
• The viability statement in the 2020 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.
A requirement of the Code is that the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
This is the Group’s fourth 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.
External auditors
Ernst & Young LLP (EY or the External Auditor) were appointed as auditors in 2018 and undertook
their first audit for the year ended 31 December 2017. Energean plc became a Public Interest Entity
in 2018 on admission to trading on the London Stock Exchange. The Company 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 8G to the financial statements.
The External Auditor attends each meeting of the 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. The Audit & Risk Committee has
responsibility for the oversight of the external audit plan. This includes monitoring the independence
and objectivity of EY, the quality of the audit services and their effectiveness, the level of fees paid,
approval of non-audit services provided by EY and re-appointment. The Committee also met with the
external auditors without management present.
The Committee concluded that EY are independent and objective, operate at a high standard and
have recommended to the Board that the External Auditor be re-appointed at this year’s AGM for the
financial year ending 31 December 2021. The Committee regularly reviews the performance of the
auditor and the Chairman of the Committee regularly meets with the Audit Partner to pass on any
feedback.
Non-audit services
In order to safeguard the External Auditor’s independence and objectivity, the Group has in place a
policy setting out the circumstances in which the External Auditor may be engaged to provide services
other than those covered by the Group audit. The policy complies with the FRC’s Ethical Standard for
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CORPORATE GOVERNANCE
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 are considered by the Audit & Risk Committee
Chairman on a case-by-case basis, supported by a risk assessment prepared by management. This
is reported biannually to the Committee. The Committee notes the proposed changes in this area and
will comply with any future FRC recommendation on the provision of non-audit services.
The types of services received are as follows:
• Tax certification services in Greece and Israel
• Reporting accountant services in connection with the Prospectus for the Class 1 transaction
related to the acquisition of the Edison E&P business
• Review of the Group’s interim financial statements.
In all these cases, safeguards were adopted and reasons given as to why these safeguards were
considered to be effective. The Committee was satisfied that the independence of the External Auditor
was not affected by the performance of any of these services. The non-audit services provided were
required by law or typically performed by the auditor. Furthermore, in each case there were business
justifications for using the External Auditor for non-audit services. The Chairman of the Committee
agreed with each justification before the service was carried out.
Interactions with the FRC
In September 2019, the Financial Reporting Council’s Audit Quality Review Team (“AQRT”) completed
a review of EY’s audit of the Company’s financial statements for the period ended 31 December 2019.
The Committee were regularly updated on the review and received an update on the final inspection
report, which did not raise any significant findings, and noted the remedial action for the one
recommendation contained in the report. The Committee’s Chair discussed the results with the lead
audit partner.
The Committee agreed with the overall assessment by the AQRT, which was in line with its own
positive conclusion of the external audit carried out for 2019. The Committee receives regular updates
from EY on the FRC’s reports on the key audit issues and the audit profession as a whole.
Internal controls and risk management
The Audit & Risk Committee is responsible for the oversight of the Group’s system of internal controls,
including the risk management framework and the work of the internal audit function. Details of the
risk management framework are provided within the risk management section on pages 71-76. The
Group’s principal risks and uncertainties, which provide a framework for the Committee’s focus, are
discussed on pages 77-93. Management has identified the key operational and financial processes
that exist within the business and has developed an internal control framework. This is structured
around a number of Group policies and includes a delegated authority framework.
Internal auditors
PricewaterhouseCoopers Business Solutions S.A. (“PwC”) were appointed in January 2018 for a term
of three years as the Group’s outsourced internal audit function following a tender process. This term
was extended for an additional year during 2020, after which the Committee will review the Company’s
needs in this area. Its key objectives are to provide independent and objective assurance on risks and
controls to the Board, the Audit & Risk Committee and senior management, and to assist the Board in
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CORPORATE GOVERNANCE
meeting its corporate governance responsibilities. During the year the company appointed an internal
resource to co-ordinate internal audit projects and align the internal audit risk register reporting with
the wider board risk register reporting.
As mentioned in last year’s annual report the Committee has established an internal audit committee
which meets regularly with the internal audit team and guides them on areas that will be assessed by
way of internal audit throughout the year. During the year ,the Committee amended the process with
each independent non-executive sponsoring the respective internal audit and setting the terms of
reference and reporting on its findings at the Audit & Risk Committee and Board.
The Audit & Risk Committee is responsible for the review and approval of the role and mandate of
internal audit function, including the approval of the annual internal audit plan and monitoring the
effectiveness of the function. Each report produced by the internal auditor is reviewed at meetings of
the Committee and the status of follow-up action points reviewed against the agreed deadlines.
In its annual assessment of the effectiveness of the internal audit function, the Audit & Risk Committee
carried out the following:
• Met with the internal audit team without the presence of management to discuss the
effectiveness of the function
• Reviewed and re-assessed the internal audit work plan
• Monitored and assessed the role and effectiveness of the internal audit function in the overall
context of the Group’s risk management policy.
During the year PwC undertook four (2019: four) internal audits at a cost of $ 60,906 (2019: $75,899).
Following Internal Audit’s reviews of the Company’s internal control systems, the Committee
considered whether any matter required disclosure as a significant failing or weakness in internal
controls during the year. No such matters were identified.
Reserves Committee
In 2020 the Committee established a sub-committee to review reports provided by the Group’s external
reserves auditor and changed the committee’s terms of reference to require the newly established
Reserves Committee to review the reports and meet with the external reserves auditors to ensure
that the correct processes were carried out. The sub-committee held in-camera sessions with the
reserves auditors without management present.
Prospectus Review
The company issued one full prospectus and one supplementary prospectus during the year. The
Committee dedicated three meetings to reviewing these documents and carried out a review in a
similar manner to the way that the committee reviews other financial disclosures such as the annual
and interim results. The committee met with the reporting accountants and the auditors and other key
stakeholders involved in the workstreams related to the prospectus. Following careful consideration,
the committee were able to recommend their approvals to the Board.
Fair, balanced and understandable assessment
The Committee advised the Board that in its view the 2020 Annual Report including the financial
statements for the year ended 31 December 2020, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to Energean’s position and
performance, business model and strategy. In making this assessment the members of the Committee
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critically assessed drafts of this Annual Report including the financial statements and discussed with
management the process undertaken to make sure these requirements were met.
This included:
• Confirming that the contents of the annual report was consistent with information shared with
the Board during 2020 to support the assessment of Energean’s position and performance
• Receiving assurance from management
• Considering comments from the external auditor.
Other Activities
In addition to the activities mentioned above, the Committee has carried out an extensive review of
the Company’s insurance coverage to ensure that the Directors were satisfied that the levels of
coverage remained appropriate to the company. Furthermore, the committee reviewed the compliance
program for 2020 and the proposed upgrade to SAP4.
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. The
whistleblowing policy was reviewed by the Committee during the year to ensure that it remained fit for
purpose.
Performance of the Committee
The performance of the Audit & Risk Committee was assessed as part of the external Board evaluation
process details of which can be found on . The 2021 assessment will build on the feedback from the
2020 external evaluation but will be internally facilitated.
Our priorities for 2021
• Ensure seamless Edison integration with Energean processes and controls adopted within our
new subsidiaries
• Further strengthen various finance functions through recruitment for the larger Group and to
meet the requirement for quarterly financial reporting for the bond financing which closed in
March 2021
• Now we are a much bigger company post Edison, reassess our Risk Management reporting
processes through an external review with an aim to be in the top quartile energy companies
in this respect and to adopt an expanded set of risk reporting KPIs.
Approval
This report in its entirety has been approved by the Audit & Risk Committee, and signed on its behalf
by:
Andrew Bartlett
Audit & Risk Committee Chairman
18 April 2021
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Nomination & Environment, Social & Governance
Committee Report
Robert Peck, Chairman of Nomination & Environment, Social & Governance (“NESG”)
Committee (throughout 2020).
It is my pleasure to introduce the NESG Committee Report for 2020, which sets out its composition,
role and activities during the year.
The NESG Committee was effective from 1 January 2020, following the merger of the Nomination &
Governance Committee and the HSE Committee. Following the Board evaluation, the Committee was
split into two Committees effective from 1 January 2021. The two Committees are the Environment,
Safety & Social Responsibility Committee and the Nomination & Governance Committee. In the 2021
Annual Report these Committees will report separately on their activities.
Lastly, we will set out the areas of focus for the new Nomination & Governance Committee and the
Environment, Safety &Social Responsibility Committee for 2021.
Membership
The members of the NESG Committee throughout 2020 were myself (as Chairman), Ohad Marani
(until 26 July 2020), Kimberley Wood (from 26 July 2020), Amy Lashinsky and Efstathios Topouzoglou
with Karen Simon attending for matters related to appointments to the Board.
The UK Corporate Governance Code (“Code”) recommends that a majority of Nomination Committee
members 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. Throughout the year this requirement was met
as I was considered to be independent upon appointment as a Non-Executive Director, and Ohad
Marani (and Amy Lashinsky are considered to be Independent Non-Executive Directors. Following
Ohad stepping down from the Board, Kimberley Wood joined the Committee and was considered to
be independent on appointment.
Following the latest change in committee structure, Karen Simon became chair of the Nomination &
Governance Committee on 1st January 2021, as she was considered to be independent on
appointment; and with Kimberley Wood and myself also being considered as independent, we believe
that the Company complies with the requirements of the Code in this respect for the need to have a
majority of Independent Non-executive Directors on the Nomination Committee.
The Company Secretary acts as secretary to the Committee.
Meetings
The NESG Committee met on 6 occasions during 2020 with attendance details set out below:
Director
Karen Simon
Robert Peck
Number of
possible
meetings
6
6
Number of
meetings
attended
6
6
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Stathis
Topouzoglou
Amy Lashinsky
Kimberley Wood75
Ohad Marani76
6
6
2
4
6
6
2
4
Role of the Committee
The NESG Committee plays a fundamental role in assisting the Board in reviewing the structure, size
and composition of the Board, including providing advice to the Board on the retirement and
appointment of additional and/or replacement Directors. It is also responsible for reviewing succession
plans for the Directors, including the Chairman and Chief Executive and other senior executives.
Furthermore, the Committee receives updates from the Group’s HSE Director on HSE matters and
the Company’s Head of Corporate Social Responsibility for updates on the company’s performance
against its CSR goals.
To view the NESG Committee’s terms of reference, please visit the Company’s website
www.energean.com.
Diversity
The NESG 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 NESG 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. As at 31 December 2020, the Board included three females, representing
33% of the Board, which is in line with the 33% target set by the Hampton-Alexander review; and the
Company remains as one of the few companies in the FTSE 350 with a female Chairman.
Senior management is defined as the Executive Committee; the make-up of that Committee at the
year-end was 10% female v 90% male. Their direct reports are 35% female v 65% male.
Time commitment of the Chairman
Karen Simon is also a Non-Executive Director of Aker ASA, an Oslo Stock Exchange-listed company.
The Board believes that Karen has adequate time available to devote to the Company. Karen was
deemed to be independent on appointment and was first appointed to the Board as an Independent
Non-Executive Director in November 2017. She has, therefore, only served three years out of
a possible nine years.
Appointment of new Independent Non-Executive Directors
The NESG Committee was pleased to recommend to the Board that Kimberley Wood and Andreas
Persianis be appointed as independent Non-Executive Directors, following Ohad Marani and David
Bonanno stepping down from the Board. The appointments increased the percentage of independent
Non-Executive Directors (excluding the independent non-executive Chair) from 50% to 56%.
Kimberley Wood has vast experience with upstream energy companies during her time as an energy
lawyer and partner at Vinson and Elkins LLP and Norton Rose Fulbright LLP. Kimberley was also
included in the Who’s Who Legal: Energy for 2020 and Women in Business Law for 2020. Kimberley
75 Appointed to the Board on 26 July 2020, 2 meetings took place after this date
76 Stepped down from the Board on 26 July 2020, 4 meetings took place before this date
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has significant experience on the boards of other listed upstream energy companies and is a great
addition to the Board Remuneration Committee.
Andreas Persianis is an experienced non-executive director with over 30 years’ international financial
markets experience in central banking, asset management and corporate strategy. He is currently the
Managing Director of Fiduserve Asset Management in Cyprus, a regulated Alternative Investment
Fund Management company that sets up and manages private funds for a diverse range of private
and institutional clients. Andreas brings significant experience in strategic analysis and financial
markets expertise, furthering the Board’s experience in these two crucial areas.
The NESG Committee concluded that Kimberley Wood holding a cross directorship with Andrew
Bartlett did not impair (and was not likely to impair) her independence or Andrew Bartlett’s
independence.
The NESG Committee did not engage an external search firm for the appointment of Kimberley Wood
and Andreas Persianis, being was satisfied that this was unnecessary, as an extensive pool of
candidates had been identified during previous searches. Furthermore, the appointments were in line
with the Board’s policy on diversity.
Succession
The NESG Committee keeps under review the succession plans for senior management. There are
no anticipated changes to the make-up of senior management in the near future.
Induction
Following the appointment of Kimberley Wood and Andreas Persianis, a number of meetings were set
up for them to virtually meet with senior executives, other Board members and with key external
advisors, each of whom was able to give an overview of their area and details of their interactions
with the Board. Key corporate documents were also made available, as well as previous Board
materials. The CoSec function will seek feedback on the induction process to see how this can be
further developed for future Directors joining the Board.
Environment & Social
Throughout the year, the Group HSE Director attended meetings to present to the Committee the
Company’s performance against its HSE goals and progress in reducing carbon emissions. The
Committee also tracked the performance against recommendations made by the internal audit function
on HSE matters. The Company’s Head of Corporate Social Responsibility also attended committee
meetings to update the committee on the Company’s CSR activities and the company’s sustainability
report. During the year, the committee also took over responsibility of monitoring the company’s
corporate compliance program.
Review of the External Board Review from Karen Simon (Chairman of the Board)
As required by the Code, being in its third year as a listed company, the Board underwent an externally
facilitated review. The NESG Committee had overall responsibility for the review. As this matter related
to the effectiveness of the Board, I oversaw the review and met frequently with the board evaluator to
discuss the progress of the review and the findings before they were discussed at the NESG
Committee. Following a competitive tender process, the external review of the board’s effectiveness
was carried out by Lisa Thomas from Independent Board Evaluation (IBE), a consultancy specialising
in this field. Lisa Thomas has no connection with the company or any of its directors.
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This self-assessment of the board was conducted according to the provisions of the Code and general
best practice. A comprehensive briefing was given separately to Lisa by the Chair, the Company
Secretary and the Chief Executive. Lisa observed the Board and the other committee meetings in
September and the NESG Committee in October (all by video conference due to COVID- 19-related
restrictions).
Detailed interviews were conducted with each board member during September 2020 and a number
of senior management and some of the board’s external advisors were also included. Lisa shared her
conclusions with the Chair in early November and reported back to the NESG Committee at its meeting
in December 2020, with all of the Directors present.
A summary of the feedback on the Chair was presented to the Senior Independent Director and, in
addition, the Chair received feedback on individual board members based on the comments made by
each board member during interviews. Reports on each of the board committees were presented to
the Chair and discussed individually with each committee Chair.
As the review was only completed in December 2020, the board will be implementing the
recommendations during 2021 and the Nomination & Governance Committee will report on how the
recommendations have been implemented in its 2021 report.
Outcomes and actions taken
At the conclusion of the review, the following recommendations were made and proposed actions
agreed:
Outcome / Review
Procedural
Strategy review – the Board to consider adding a
formal strategy day to the Board schedule with a
number of external speakers and senior
management present.
Proposed Actions
This has been added to the Board schedule for
2021.
Review of the Board planner – the Board to
ensure sufficient time is allocated to each topic
such as strategy, risk, people, culture,
stakeholders/ESG, investors, diversity, specific
assets, specific countries.
The agenda is agreed with the Chair in advance
of each meeting, the Board has added “deep
dives” into certain areas at each Board meeting;
and the Chair ensures that sufficient time is given
to each item during the meeting.
Review of meeting schedule – the Board to
consider adding of monthly board calls and to
ensure the board has sufficient time in each
meeting to work through the board agenda.
Furthermore, consider adding private sessions for
NEDs at the end of each board meeting.
Structural
Committee structure –The Board to consider
looking to split out the NESG Committee into the
Nomination & Governance Committee and a
separate committee for ESG.
Strategic
The Board to consider a plan for NED
engagement with the business and which areas
Monthly informal board calls have been added to
the Board schedule between formal board
meetings; and a separate session for NEDs has
been added to the end of each board meeting.
In the section below on page 123, we explain how
we have amended the committee structure.
The implementation of this recommendation will
be carried out in the first half 2021.
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could be allocated to particular board members to
become familiar with.
The Board to agree a set of board objectives for
2021.
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The Board objectives for 2021 will be reviewed in
the first part of the year and performance against
them discussed at the end of each board meeting
to ensure the Board is moving forward with its
objectives.
Change of Committee structure
In consultation with the Chairman of the board and following the externally facilitated board evaluation,
effective from 1 January 2021, the NESG Committee recommended to the Board that the NESG
Committee be separated into the Nomination & Governance Committee and the Environment, Safety
& Social Responsibility Committee.
The membership of the Nomination & Governance Committee is as follows:
• Karen Simon (Chairman)
• Kimberley Wood
• Stathis Topouzoglou
• Robert Peck.
That new Committee has absorbed all of the responsibilities relating to Nominations & Governance of
the previous NESG Committee.
The membership of the Environment, Safety & Social Responsibility Committee is as follows:
• Robert Peck (Chairman)
• Amy Lashinsky
• Stathis Topouzoglou
• Andreas Persianis
That new Committee has absorbed all of the responsibilities relating to environment, safety and social
responsibility of the previous NESG Committee.
Following feedback in the Board evaluation process and in consultation with the new Chair of the
board, effective from 1 January 2021, the membership structure for the other Committees has been
slightly altered as set out below.
Remuneration Committee – becomes the Remuneration & Talent Committee. Robert Peck will
attend meetings in his position as workforce representative.
Audit & Risk Committee – Robert Peck leaves the committee and Kimberley Wood joins.
Re-election of Directors
In light of the assessment that all Directors continue to perform and provide a valuable contribution to
the board and its Committees, all Directors will be eligible to submit themselves for re-election at the
2021 AGM.
Performance of the Committee
The performance of the NESG Committee was assessed as part of the externally facilitated review.
Our priorities for 2021
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As mentioned previously, the Committee has been split in two Committees.
The focus for the Environment, Safety & Social Responsibility Committee will be:
• To evaluate the effectiveness of the Company’s policies and systems for identifying and
managing health and safety risks as well as those in connection with corporate social
responsibility initiatives within the Group’s operations
• To monitor and review the Company’s environmental strategy including targets, KPIs and
budgets relating to the climate change strategy
• To monitor how the Company’s environmental strategy is received and regarded by external
stakeholders and to broaden the expertise of the ESS Committee through engagement with
climate change leaders, experts, and organizations, including Chapter Zero.
The focus for the Nomination & Governance Committee will be:
• To monitor performance against the agreed actions from the Board evaluation
• To continue to develop the succession plans for senior management.
Robert Peck
NESG Committee Chairman
18 April 2021
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Remuneration Committee Report
Energean plc – Chair letter
Dear Shareholders,
I am delighted to introduce the Director’s Remuneration Report for the year ended 31 December 2020.
This marks my first report as the Remuneration & Talent Committee Chair. I would like to thank the
previous Chair, Ohad Marani, for his work and dedication over recent years.
This year, against the background of exceptional performance and the strength of Energean’s
management team, we are proposing changes to the remuneration policy and its implementation. This
letter sets out the context to these proposed changes. We engaged with shareholders prior to this
report’s publication, and I would like to thank all shareholders who took part in that consultation
process.
Our performance to date
Since listing in 2018, Energean has seen remarkable growth in its operational capability and market
capitalisation. Management has delivered shareholder returns in excess of 89% since IPO, an
exceptional achievement, especially given the recent challenges posed by the macro environment. In
comparison, the FTSE 350 Oil and Gas and Coal index has seen a decline of 37%% over the same
period.
Since IPO, Energean has grown its footprint to nine countries and its reserves base to almost one-
billion barrels of 2P. Despite COVID-19 related challenges, we have delivered strong progress on our
flagship Karish project, with first gas expected within 12 months. Karish is a key driver of Energean’s
revenue trajectory, expected to reach more than $2 billion per annum in the medium-term, more than
half of which is underpinned by fixed-price contracts that insulate Energean’s revenues from global
commodity price fluctuations.
In March 2021, we secured a $2.5bn bond offering that was almost four-times oversubscribed and
achieved a weighted-average cost of bond debt for Energean Israel of more than 133 bps better than
the Global Average E&P Index. This was an outstanding accomplishment by any measure, removed
a risk that was perceived as significant by the shareholder base, and advances us towards our target
of paying a sustainable and meaningful dividend to our shareholders. We also recently closed our
acquisition of Kerogen’s 30% minority interest in Energean Israel Limited at extremely attractive, and
cash flow accretive, metrics.
We continue to lead the market in environmental stewardship and our ESG ratings are consistently
within the top quartile for our peer group; we have been awarded a gold rating by MAALA and are
ranked 16 out of 114 peer companies by Sustainalytics. We are reducing our environmental footprint
and we were the first E&P company in the world to commit to net zero by 2050. We are implementing
a rolling three-year carbon emissions reduction plan and are on target to reduce our emissions
intensity to half the current global average for our sector by 2023. In the longer-term, we are focused
on emerging technologies, including a prospective carbon capture project in Greece, which would be
the first of its kind in the Mediterranean. Finally, we led the market in linking ESG progress to our
executive pay structure through measures in both the annual bonus and the long-term incentive plan.
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Energean is in a period of significant transition, converting approximately one billion barrels of 2P
reserves into sustainable revenues and cash flows. We expect to continue our growth trajectory, and
as a Committee we are keen that the remuneration policy supports our growth ambitions.
Our world-class executive team is fundamental to our success. Our CEO, Mathios Rigas, has grown
the company from an effective ‘start-up’ into one of the largest independent E&P companies in Europe.
Together, our CEO and CFO have demonstrated exceptional leadership in unlocking significant
shareholder value through targeted acquisitions and organic growth.
It is against this background of exceptional performance and the strength of Energean’s management
team that we are proposing changes to the remuneration policy.
Our proposed changes to the remuneration policy and implementation
Both Executive Directors have large shareholdings in the company. The CEO holds c.11.2% of the
share capital of the company, while the CFO holds c.2.3%. These holdings provide extremely strong
alignment between the executive team and other shareholders, ensuring that strategic decisions and
management actions align with the broader goal of the generation of sustainable and long-term value
for our shareholders.
We are proposing changes to the remuneration policy and its implementation to reflect the increased
scope of the roles of the CEO and CFO and the size and scale of the company they lead. Neither
Executive has seen an increase in remuneration since IPO. The growth and performance of the
company have been exceptional over this period, and the Committee believes this supports an
accelerated timetable for seeking amendments to the remuneration policy.
The Committee recognises that the proposed increases in compensation are proposed against a
broader market trend of significant executive pay restraint, particularly in the context of the global
COVID-19 pandemic. At Energean, while the pandemic presented challenges, we continued to deliver
strongly for shareholders and our wider stakeholders.
Against the background of the exceptional performance, as well as the increased size and scale of the
company, we are proposing two changes to the overall compensation package of executive directors:
(1) Salary adjustments
(2) An increase to the annual performance incentive opportunity
Recognising that the proposed increases are significant, most of the proposed changes will be made
on a staggered basis over 2021 and 2022.
Looking ahead beyond this transitional year, Energean is on a continued strong growth trajectory. The
Committee believes these remuneration changes will support the delivery of our strategy, and that our
exceptional growth and the size and complexity of the business supports the changes.
Shareholder consultation
Initial discussions on changes were held in the first quarter of 2021. The Committee was pleased that
the shareholders we engaged with recognised the strong performance of both the company and
executive directors since IPO. The majority of shareholders we engaged with were minded to support
proposed changes to the Policy and its implementation. The Committee took into account feedback
that changes should be made on a staggered basis. The Committee recognises the importance of
shareholder views on the proposed policy and implementation changes and will therefore continue to
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discuss the proposals with shareholders in advance of the AGM. I would like to thank all shareholders
who took part in the consultation process.
Salary proposals
The Remuneration Committee proposed salary increases for the CEO and the CFO, to reflect their
performance, significant value to the company, and taking into account pay positioning against
comparator companies.
Reflecting the wider societal context, the CEO asked that he not be considered for a salary increase
this year. The Remuneration Committee will therefore consider this matter next year.
A salary adjustment is proposed for the CFO, which will be made on a staggered basis. For 2021, he
will receive an increase from £450k to £525k. Subject to continued strong performance, he may then
receive a further increase to £600k in 2022.
Annual incentive opportunities
Performance based pay is an important part of the Energean approach. The Committee is proposing
an increase in the annual incentive opportunity for executive directors, from 150% of salary to 200%.
Reflecting the CEO’s more senior role it is proposed that this increase would be made for 2021.
However, for the CFO, the increase would be on a staggered basis. The CFO would therefore receive
an award maximum opportunity of 175% for 2021.Subject to continued strong performance, he may
then receive an award maximum opportunity of 200% of salary from 2022.
Workforce pension and reduced benefits
We are also making other changes to better align Energean’s approach to remuneration with best
practice. We are replacing the current benefits allowance with (i) a formal pension aligned to the Greek
workforce rate and (ii) a benefits allowance. These changes mean there will be a slight decrease in
the ‘consolidated benefits’ for the CFO. For 2021, the benefits allowance will be £48k for the CEO and
£25k for the CFO. The Committee will keep these allowances under review and may reduce their
value over the lifetime of the policy.
Other Policy changes
Aside from these changes, the Committee is not proposing any other significant changes to the policy.
We believe the overall structure and the time horizons over which incentives assess performance
remain appropriate for the company and its strategy. Our performance framework will remain
unchanged, with performance-related pay measured against a balance of financial, operational,
strategic and ESS-related metrics.
2020 performance out-turns
Strong performance against strategic, operational and financial goals over the year led the Committee
to approving an annual bonus outcome of 84.75% for both directors. This was to reflect exceptional
performance, as summarised in part above, and detailed in full on page 146. The Committee
considered the outcome in the context of company and stakeholder experience, and believe the
outcomes are appropriate in the context of overall performance.
No LTIPs vested in the year. The first LTIP is due to vest in July 2021, with a further award due to
vest at the end of the year. At the time of vesting, the Committee will consider if the outcomes are
appropriate given business performance and the external context. Details on these outcomes will be
provided in next year’s report.
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Assessment of 2021 performance
The Remuneration Committee has reviewed the scorecard of performance measures for determining
Executive Directors’ variable pay. The revised scorecard that we will use in 2021 (set out on page 143-
144) is intended to complement our strategic ambition of becoming the leading sustainable, gas-
focused, independent E&P company in the Eastern Mediterranean.
The scorecard continues to be more weighted to the delivery of operational and strategic goals which
reflects the company’s objectives for 2021. We have separated out commercial goals focused on, for
example, portfolio optimisation, to align with the company’s commercial objectives for the year. For
financial goals, we have continued with a metric for financial liquidity and have added metrics relating
to average life of the group’s gross debt. This year risk management will also be included in the
scorecard. ESS goals have remained at a 15% weighting with people and culture related metrics
remaining at 5%.
Our approach for the 2021 LTIP will mirror the approach we took for the 2020 LTIP – the award will
be based on relative TSR (50%), absolute TSR (30%) and an ESS measure (20%). For 2021, we are
refreshing the TSR peer group, rebalancing towards more established E&P peers and removing less
relevant peers. The full constituents of this peer group are disclosed on page 144.
Workforce and ESS context
The Committee takes seriously its responsibility to all its stakeholders, including the wider workforce.
Robert Peck is our appointed ‘workforce representative’ on the board (our “designated NED”). The
Committee makes remuneration decisions guided by the additional context of pay and circumstances
across the wider company, and Robert Peck attends many of our Committee meetings as part of
providing this context. His role as Chair of the Environment, Safety & Social Responsibility Committee
also helps ensure that ESS issues are appropriately reflected in Energean’s remuneration structure.
AGM
I will be available to answer questions on the Remuneration Report at the AGM in May 2021. I hope
you find this report to be clear and helpful in understanding our remuneration practices and that you
will support the remuneration resolutions at the forthcoming AGM.
Kimberley Wood
Chair of the Remuneration & Talent Committee
18 April 2021
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ENERGEAN – REMUNERATION POLICY
This part of the report sets out our Directors’ Remuneration Policy (the Remuneration Policy). This
Policy will be subject to a binding shareholder vote at the 2021 AGM and will apply to payments made
from the date of approval. The information provided in this section of the Remuneration Report is not
subject to audit.
In determining the new Remuneration Policy, the Remuneration & Talent Committee (the Committee)
followed a robust process. The Committee discussed the detail of the policy over a series of meetings
throughout 2020 and 2021. The management team provided input, while ensuring that conflicts of
interests were mitigated. External perspective was provided by our independent advisors. The
Committee assessed the policy against the principles of clarity, simplicity, risk-management,
predictability, proportionality and alignment to culture.
The main changes proposed to the Policy are:
• An increase in the Annual Bonus opportunity to 200% of salary (this will be introduced as
follows: the CEO will receive an immediate increase to 200% of salary for 2021. The CFO will
receive 175% of salary for 2021, with a further increase to 200% of salary from 2022, subject
to continued strong performance)
•
Introduction of a formal pension for both executive directors aligned to the wider workforce rate
(in % of salary terms). For 2021, this will be set at 4% of salary to align with rate available to
the Greek workforce.
• Reduction in the benefits allowance available to both directors to £48k for the CEO and £25k
for the CFO.
Other minor changes have also been made to improve the operation and effectiveness of the Policy.
The Committee is proposing the changes against the background of Energean’s exceptional
performance, which has seen the company grow in both size and complexity, as well as the strength
of our management team. More detail on our rationale is provided on pages 131 to 142, and an
overview of shareholder consultation is provided on page 142.
Policy table
Our Group-wide remuneration strategy is to provide remuneration packages that will:
• Motivate and retain our industry-leading employees
• Attract high quality individuals to join the Group
• Encourage and support a high-performance culture
• Reward delivery of the Group's business plan and our key strategic and operational goals
• Align our employees with the interests of shareholders and other external stakeholders.
Consistent with this remuneration strategy, the Remuneration Committee has agreed a Remuneration
Policy for Executive Directors whereby:
• Salaries will be set at competitive, but not excessive, levels compared to peers and other
companies of an equivalent size and complexity
• Performance-related pay, based on stretching targets, will form a significant part of
remuneration packages
• There will be an appropriate balance between rewards for delivery of short-term and longer-
term performance targets
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• 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.
Base Salary
Purpose and link to
strategy
To appropriately recognise skills, experience and responsibilities and attract
and retain talent by ensuring salaries are market competitive.
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):
Operation
• The individual Director's role, experience and performance.
• Business performance.
• Market data
for comparable roles
in appropriate comparator
businesses.
• 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:
• Salaries would typically be increased at a rate no greater than the
average salary increase for other Group employees.
• Larger
increases may be considered appropriate
in certain
circumstances (including, but not limited to, a change in an
individual's responsibilities or in the scale of their role or in the size
and complexity of the Group).
• Larger increases may also be considered appropriate if a Director has
been initially appointed to the Board at a lower than typical salary.
No performance conditions
Maximum Opportunity
Performance
Conditions
Pension
Purpose and link to
strategy
To provide competitive post-retirement benefits or cash allowance as a
framework to save for retirement. This is to support the recruitment and
retention of talent.
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Typically, payable as a cash allowance, however executives can also choose
to participate in a company pension scheme or receive payments into a
personal pension or a combination thereof.
Operation
Contributions are set as a percentage of base salary.
Maximum Opportunity
Post-retirement benefits do not form part of the base salary for the purposes
of determining incentives.
Pension contributions will be set in line with the average workforce pension
contribution (in percentage of salary terms).
For 2021, this rate will be 4% of salary. This is the rate that is currently
available to the wider workforce (based on the rate applicable to the workforce
in Greece).
Performance
Conditions
No performance conditions.
Benefits
Purpose and link to
strategy
Operation
Maximum Opportunity
Performance
Conditions
Annual Bonus
To provide market competitive benefits.
tax equalisation).
Executive Directors are entitled
Benefits are currently provided as a single benefits allowance (in lieu of
separate payments for relevant benefits). The Remuneration Committee has
discretion to replace the benefits allowance by separate payments for relevant
benefits or to provide additional benefits in certain circumstances (for example
relocation or
to
thereon).
reimbursement of reasonable expenses (including any
Executive Directors also have the benefit of a qualifying third-party indemnity
from the Company and directors' and officers' liability insurance.
For the current Executive Directors, the maximum annual value of benefits
will be £48,000 (Mathios Rigas) and £25,000 (Panos Benos). For any future
Executive Director appointed during the lifetime of this Remuneration Policy,
the value of their benefits package would not exceed £48,000. These totals
exclude any expenses treated as taxable benefits by tax authorities or tax
equalisation benefits, should these be provided in exceptional circumstances,
or any one-off costs relating to recruitment, loss of office or relocation.
tax
No performance conditions.
Purpose and link to
strategy
To link reward to key financial and operational targets for the forthcoming
year. Additional alignment with shareholders' interests through the operation
of bonus deferral.
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CORPORATE GOVERNANCE
The Executive Directors are participants in the annual bonus plan which is
reviewed annually to ensure bonus opportunity, performance measures and
targets are appropriate and supportive of the business plan.
Typically, no more than two-thirds of an Executive Director's annual bonus is
delivered in cash following the release of audited results and the remaining
amount is deferred into an award over Company shares under the Deferred
Bonus Plan (DBP).
• Deferred awards are usually granted in the form of conditional share
awards or nil-cost options (or, exceptionally, as cash-settled
equivalents).
• Deferred awards usually vest two years after award although may
vest early on leaving employment or on a change of control (see later
sections).
• An additional payment or award may be made in respect of shares
which vest under deferred awards to reflect the value of dividends
(including special dividends) which would have been paid on those
shares during the vesting period (this payment may assume that
dividends had been reinvested in Company shares on a cumulative
basis).
The maximum award that can be made to an Executive Director under the
annual bonus plan is 200% of salary.
For 2021, the CEO will receive a maximum opportunity of 200% of salary,
while the CFO will receive a maximum opportunity of 175% of salary.
The bonus is based on performance against financial, strategic, operational,
ESS or personal measures appropriate to the individual Executive Director
assessed over one year.
The precise measures and weighting of the measures are determined by the
Remuneration Committee ahead of each award to ensure they are aligned
with strategic priorities.
Where appropriate, a sliding scale of targets will be applied to a measure, with
pay-out not exceeding 20% for threshold performance increasing to 100% for
maximum performance. In 2021, threshold performance will deliver zero pay-
out. In relation to operational, milestone or qualitative targets, the structure of
the target may vary based on the nature of the target set and may be based
on the Remuneration Committee’s judgement in assessing the performance
outturn.
Any bonus pay-out is ultimately at the discretion of the Remuneration
Committee. The Committee will consider the use of discretion when
determining the actual overall level of individual bonus payments and it may
adjust the formulaic bonus pay-out upwards or downwards if it considers it
appropriate to do so.
Operation
Maximum Opportunity
Performance
Conditions
Long Term Incentive Plan (LTIP)
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CORPORATE GOVERNANCE
Purpose and link to
strategy
To link reward to key strategic and business targets for the longer term and to
align executives with shareholders' interests.
Operation
Awards are usually granted annually under the LTIP to selected senior
executives.
Individual award levels and performance conditions on which vesting will be
dependent are reviewed annually by the Remuneration Committee.
LTIP awards are usually granted as conditional awards of shares or nil-cost
options (or, exceptionally, as cash-settled equivalents).
Awards granted to Executive Directors normally vest or become exercisable
at the end of a period of at least three years following grant and normally have
a holding period taking the time horizon to no earlier than five years following
grant. Awards may vest early on leaving employment or on a change of control
(see later sections).
An additional payment or award may be made in respect of shares which vest
under LTIP awards to reflect the value of dividends (including special
dividends) which would have been paid on those shares during the vesting
and, if relevant, holding period (this payment may assume that dividends had
been reinvested in Company shares on a cumulative basis).
Maximum Opportunity The maximum award permitted to be granted to an Executive Director in
respect of any one year under the LTIP is shares with a market value (as
determined by the Remuneration Committee) of 200% of salary.
Performance
Conditions
All LTIP awards granted to Executive Directors must be subject to a
performance condition.
The precise measures and weighting of the measures are determined by the
Remuneration 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.
Share ownership Guidelines
Purpose and link to
strategy
To create alignment between the long-term interests of Executive Directors
and shareholders.
Operation
Executive Directors are required to build and maintain a holding of 200% of
salary in Company shares.
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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.
Notes to table
1. The Committee retains the ability to adjust the targets and/ or set different measures and alter weightings for any performance
condition(s) if one or more events occur which cause it to determine that an amended, adjusted or substituted performance condition(s)
would be more appropriate so that the conditions achieve their original purpose (e.g. in the event of a material divestment of a
business, capital transactions, changes to accounting standards and other events not foreseen at the time the targets were set). In
the event that the Remuneration 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, operational, ESG or personal goals relevant to an
individual. Specific targets for bonus measures are set at the start of each year by the Remuneration 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. Targets and underpins may be set which provide the Committee judgement in assessing the extent to which they have
been met. Prior to the determination of final outcomes, the Committee will consider the use of discretion to enhance the rigour and
consistency of any payments and to ensure they align to overall performance and the wider stakeholder experience. While the
Committee anticipates that any such discretion would normally result in a reduction, the Committee reserves the right to make an
upwards adjustment if considered appropriate.
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.
6. 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 was agreed either: (i) before the 2019 AGM (the date the Company’s first shareholder-
approved Director’s Remuneration Policy came into effect; (ii) during the term of, and was consistent with, any previous policy; or (iii)
at a time when the relevant individual was not a director of the Company and, in the opinion of the Remuneration 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.
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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.
CORPORATE GOVERNANCE
Non-executive director fees
Purpose and link to
strategy
To appropriately recognise responsibilities, skills and experience by ensuring
fees are market competitive.
Operation
NED fees comprise payment of an annual basic fee and additional fees for
further Board responsibilities including but not limited to:
• Senior Independent Director
• Audit & Risk Committee Chairman
• Remuneration & Talent Committee Chairman
• Environment, Safety & Social Responsibility 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 (including any tax
thereon).
Fees are reviewed annually and are paid in cash or shares.
Non-Executive Directors also have the benefit of a qualifying third-party
indemnity from the Company and directors' and officers' liability insurance.
Maximum Opportunity Fees are set at an appropriate level that is market competitive and reflective
of the responsibilities and time commitment associated with specific roles.
No absolute maximum has been set for individual NED fees.
The total aggregate fees paid to the Chairman and NEDs will be in line with
the limit set out in the Company's Articles of Association.
Illustrations of application of remuneration policy
The “Implementation of remuneration policy in 2021” section of the Annual Report on Remuneration
details how the Remuneration Committee intends to implement the Remuneration Policy during 2021.
The charts below illustrate, in four assumed performance scenarios, the total value of the remuneration
package potentially receivable by Mathios Rigas and Panos Benos in relation to 2021. This comprises
salary, pension and benefits for 2021 (Mathios Rigas: £675,000, 4% pension and £48,000; Panos
Benos £525,000, 4% pension and £25,000). Annual bonus opportunities are shown as 200% of salary
for the CEO and 175% of salary for the CFO. Both directors receive an LTIP award of 200% of salary.
The charts are for illustrative purposes only and actual outcomes may differ from those shown.
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CORPORATE GOVERNANCE
CEO:
Fixed
100%
£750k
Target
36%
32%
32%
£2,100k
Maximum
22%
39%
39%
£3,450k
Max + growth
18%
33%
49%
£4,125k
£k
£1,000k
£2,000k
£3,000k
£4,000k
£5,000k
Fixed
Short Term Incentive
Long Term Incentive
CFO:
Fixed
100%
£571k
Target
37%
30%
34%
£1,555k
Maximum
22%
Max + growth
19%
36%
30%
41%
£2,540k
51%
£3,065k
£k
£500k
£1,000k
£1,500k
£2,000k
£2,500k
£3,000k
£3,500k
Fixed
Short Term Incentive
Long Term Incentive
Assumed Performance
Minimum performance
• No pay-out under the annual bonus
• No vesting under the LTIP
Performance in line
with expectations
• 50% of the maximum pay-out under the annual bonus
• 50% vesting under the LTIP
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Maximum performance
Maximum performance
plus share price growth
• 100% of the maximum pay-out under the annual bonus
• 100% vesting under the LTIP
• As above, with 50% increase in the share price attributable to 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:
• 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
• Typically, the new appointment will have (or be transitioned onto) the same package structure
as the other Executive Directors, in line with the Remuneration Policy
• Upon appointment, the Remuneration 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)
• The Remuneration Committee may provide costs and support if the recruitment requires
relocation of the individual
• Where an Executive Director is an internal promotion, the normal policy of the Company is that
any legacy arrangements would be honoured in line with the original terms and conditions.
Similarly, if an Executive Director is appointed following the Company's acquisition of or
merger with another company, legacy terms and conditions would be honoured.
Maximum level of variable remuneration
The maximum level of variable remuneration which may be granted to new Executive Directors in
respect of recruitment shall be limited to the maximum permitted under the Remuneration Policy,
namely 400% of their annual salary. This limit excludes any payments or awards that may be made to
buy out the Director for terms, awards or other compensation forfeited from their previous employer
(discussed below).
Buyouts
To facilitate recruitment, the Remuneration 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
the
incentive awards,
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.
those conditions being met,
the proportion of
likelihood of
the
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CORPORATE GOVERNANCE
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
Termination payment
Expiry date
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.
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.
Executive Directors have rolling six months' notice periods so have no fixed
expiry date.
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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
•
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
In all other circumstances, unvested DBP shares will lapse upon cessation of employment
•
• On a change of control, unvested DBP shares will immediately vest in full unless they are
•
exchanged for new awards
If other corporate events occur such as a demerger, delisting, special dividend, voluntary
winding-up or other event which in the opinion of the Remuneration Committee may affect the
current or future value of shares, the Remuneration Committee will determine whether
unvested DBP shares should vest.
LTIP awards
•
If an individual ceases to hold employment as a result of death, ill-health, injury, disability,
redundancy, transfer of a business out of the Group or any other reason at the Remuneration
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
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CORPORATE GOVERNANCE
accelerate the release date to cessation of employment or such other intermediate date as is
deemed appropriate
•
In all other circumstances, unvested LTIP shares will lapse upon cessation of employment
• LTIP shares that have vested but remain subject to a holding period at the time that an
individual ceases employment will lapse in the event that cessation of employment is as a
result of gross misconduct. Otherwise, these shares will normally be released on the original
release date unless the Remuneration Committee in its discretion elects to accelerate the
release date to cessation of employment or such other intermediate date as is deemed
appropriate
• On a change of control, unless they are exchanged for new awards, unvested LTIP awards
will vest immediately to an extent that takes into account the performance condition assessed
at the change of control and, unless the Remuneration Committee determines otherwise, on
a time pro-rated basis. LTIP shares that have vested but remain subject to a holding period at
the time of the change of control will be released immediately unless they are exchanged for
new awards
If other corporate events occur such as a demerger, delisting, special dividend, voluntary
winding-up or other event which in the opinion of the Remuneration 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.
Consideration of employment conditions elsewhere in the Group
The Board has appointed Robert Peck as the Workforce Representative, the designated NED, who is
responsible for ensuring the “employee voice” is provided at Board-level. The Workforce
Representative attends Remuneration & Talent Committees’ meetings to provide this context. The
Remuneration Committee is kept informed of general management decisions made in relation to
employee remuneration and, in the development of this Policy, has been conscious of the importance
of ensuring that its remuneration decisions for Executive Directors are regarded as fair and reasonable
within the business. Pay and conditions in the Group are one of the specific considerations taken into
account when the Remuneration Committee is considering changes in remuneration for the Executive
Directors.
Differences in policy from broader employee population
A greater proportion of Executive Directors' potential wealth is 'at risk', either through their existing
shareholding or through LTIP awards than for our employees generally and a greater proportion
determined by performance than for our employees generally. However, common principles underlie
the remuneration policy through the Company including for the Executive Directors. In particular, we
place great emphasis throughout the Company on reward being linked to performance and on
encouraging share ownership.
Consideration of shareholders' views
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The Committee engaged with key shareholders in the development and finalisation of this pay
policy. These discussions were productive and informed the final Policy. Initial discussions on
changes were held in the first quarter of 2021, followed by a wider consultation process. The
Committee was pleased that the shareholders we engaged with recognised the strong performance
of both the company and executive directors since IPO, and the majority of these shareholders were
therefore minded to support proposed changes to the Policy and its implementation. The Committee
took into account feedback that changes should be made on a staggered basis. The Committee
recognises the importance of shareholder views on the proposed policy and implementation changes
and will therefore continue to discuss the proposals with shareholders in advance of the AGM.
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ANNUAL REPORT ON REMUNERATION
UNAUDITED INFORMATION
Implementation of remuneration policy in 2021
This section provides an overview of how the Remuneration & Talent Committee is proposing to
implement our Remuneration Policy in 2021 for the Executive Directors. This is subject to the approval
of the Remuneration Policy at the AGM in May.
Base Salary
The Remuneration & Talent Committee proposed salary increases for the CEO and the CFO, to reflect
their performance, significant value to the company, and taking into account pay positioning against
comparator companies. Reflecting the wider societal context, the CEO asked that he not be
considered for a salary increase this year. A salary adjustment is proposed for the CFO, which will be
made on a staggered basis. Further context is provided in the Chair letter.
Mathios Rigas (CEO)
Panos Benos (CFO)
Pension
Salary
1 January
2021
Salary
1 January
2020
£675,000 £675,000
£525,000 £450,000
%
increase
0.0%
16.7%
Both Executive Directors are entitled to receive a pension equivalent to 4% of their base salary. This
rate aligns to the rate offered to the wider workforce (based on the contribution available to the Greek
workforce).
Benefits
Mathios Rigas and Panos Benos receive a contractual benefits package worth £48,000 p.a. and
£25,000 p.a. respectively.
Annual Bonus
The annual bonus plan for 2021 will offer a maximum bonus opportunity of 175% for the CFO and
200% for the CEO of annual salary. One-third of any bonus earned will continue to be deferred into
DBP shares.
As outlined in the Remuneration & Talent Committee Chair’s Statement, the annual bonus for 2021
will be determined by a restructured bonus scorecard that is aligned with strategic priorities for the
year ahead.
Performance Measure
Strategic & Operational goals (including but not limited to Karish FPSO
delivery targets, production targets, cost of production targets and reserves
growth)
Commercial goals (including portfolio optimisation and ratio of contracted
sales to reserves)
50%
10%
As a percentage of
maximum bonus
opportunity
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CORPORATE GOVERNANCE
Financial & Risk goals (including the weighted life of group debt,
available liquidity and the further development of the risk management
strategy and procedures.)
Environmental, Social & Sustainability Goals
People & Culture goals (including but not limited to the Edison integration
process and culture surveys.)
20%
15%
5%
The targets for these performance measures in relation to the financial year 2021 are deemed
commercially sensitive. However, retrospective disclosure of the targets and performance against
them will be provided in next year’s Remuneration Report to the extent that they do not remain
commercially sensitive at that time. In the event of unforeseen acquisitions, divestments or
investments during the year, the Remuneration & Talent Committee would consider how performance
targets should be adjusted to ensure that they remain appropriately challenging and would explain any
such adjustments in next year’s Remuneration Report.
The Remuneration & Talent Committee has discretion, where it believes it to be appropriate, to
override any formulaic outcome arising from the bonus plan.
The Executive Directors will receive an award under the LTIP during 2021 over shares worth 200% of
annual salary at grant. Awards will vest three years after grant and be subject to an additional two-
year holding period. The proposed performance measures for the 2021 award are consistent with the
measures for the 2020 award, although the Committee have adjusted the TSR comparator group to
better reflect Energean’s strategy and markets.
Performance measure
Relative Total Shareholder
Return over 3 Financial
Years
Absolute Total Shareholder
Return over 3 Financial
Years
Average Scope 1 CO2
emissions (kgCO2 / boe)
over 3 Financial Years
Proportion of
award
determined by
measure
50%
30%
20%
Threshold
Performance
Maximum Performance
Median ranking
Upper quartile ranking
12.5% of award
50% of award
8% p.a.
12% p.a.
7.5% of award
30% of award
18
6
0% of award
20% of award
Total Shareholder Return performance will be measured against the following peer group: AkerBP,
Lundin, Delek Drilling , Isramco, Tamar , Ratio, Kosmos, Harbour Energy, Cairn Energy PLC, Tullow
Oil plc, Diversified Oil & Gas plc, Jadestone, Serica, Seplat, Genel and the FTSE 350 Oil and Gas and
Coal index.
Vesting is calculated on a straight-line basis for performance between the threshold and maximum
performance targets. The Remuneration & Talent Committee has discretion, where it believes it to be
appropriate, to override any formulaic outcome arising from the LTIP. Typically. this will only be
exercised in a negative direction.
Non-Executive Director remuneration
Page 144 of 274
The table below shows the fee structure for Non-Executive Directors for 2021. Fees are unchanged
from last year. Non-Executive Director fees are determined by the full Board except for the fee for the
Chair of the Board, which is determined by the Remuneration Committee.
CORPORATE GOVERNANCE
Chair of the Board all-inclusive fee
Basic Non-Executive Director fee
Senior Independent Director additional fee
Audit & Risk Committee Chair additional fee
Environment, Safety & Social Responsibility Committee Chair additional fee
Remuneration & Talent Committee Chair additional fee
2021
fees
£150,000
£55,000
£10,000
£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 148 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 2020 with comparative figures for 2019.
2020
2019
Benefits(1) Annual
bonus(2)
Total
Fixed
Total
Variable
Total (3)
Salary
and
fees
Benefits Annual
bonus
Total
Fixed
Total
Variable
Total (3)
75
50
63
450
675
Salary
and
fees
Executive Directors
Mathios
Rigas
Panos
Benos
Non-executive Directors
Karen Simon 150
Andrew
Bartlett
David
Bonanno
Robert
William Peck
Ohad Marani
Stathis
Topouzoglou
Amy
Lashinsky
Kimberley
Wood
Andreas
Persianis
24
32
26
50
55
50
-
-
-
-
-
-
-
-
-
Notes to the table – methodology
858
750
858
1,608
675
572
500
572
1,072
450
-
-
-
-
-
-
-
-
150
63
-
55
32
50
50
26
24
-
-
-
-
-
-
-
-
-
150
63
-
55
32
50
50
26
24
61
63
-
55
55
50
6
-
-
75
50
-
-
-
-
-
-
-
-
384
750
384
1,134
256
500
256
756
61
63
-
55
55
50
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61
63
-
55
55
50
6
-
-
Page 145 of 274
CORPORATE GOVERNANCE
(1) Benefits – Mathios Rigas and Panos Benos received 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 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 2020 is £3,130,000 (2019: £2,315,000).
(4) Ohad Marani and David Bonano stood down from the Board on 26 July 2020 (Ohad Marani’s fees shown in the table relate to
the period up to this date, David Bonano did not receive any fee previously)
(5) Kimberley Wood and Andreas Persianis joined the Board on 26 July 2020.
Annual Bonus
The maximum annual bonus opportunity for the Executive Directors in 2020 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 2020 annual bonus, along with performance
achieved, are set out below:
Performance
measure
FPSO Project
Progress
Gas Contracts
Adjusted
Reserves
(2P+2C)
Average
production per
day
Financial
Liquidity:
Unrestricted
Cash and
Available but
Undrawn Debt
Facilities ($
million)
Reduction in
Carbon
intensity
Sustainability
Rating vs peer
group
Culture &
Organisation
Proportion
of bonus
determined
by measure
25%
10%
15%
15%
Threshold
performance
Target
performance
Maximum
performance
Actual
performance
85%
Zero payout
0 BCM
Zero payout
0% increase in
2P+2C
Zero payout
89%
12.5% of bonus
5 BCM
5% of bonus
10% increase in
2P+2C
7.5% of bonus
93.50%
25% of bonus
10 BCM
10% of bonus
20% increase in
2P+2C
15% of bonus
88.6%77
25.35 BCM
42.7.% increase
in 2P+2C
% of
maximum
bonus
payable
11.25%
10%
15%
40,000 boepd
Zero payout
45,000 boepd
7.5% of bonus
50,000 boepd
15% of bonus
48,961 boepd
13.5%
20%
150
Zero payout
200
10% of bonus
250
20% of bonus
500
20%
Top 50%
Zero payout
Top 25%
5% of bonus
Top 15%
10% of bonus
10%
5%
Sustainalytics
ranked Energean
16th out of 114,
being at the top
15% of the
companies.
See Footnote78
Total
10%
5%
84.75%
Total bonus
payable
Total bonus payable
£’000 and % of annual salary
77 Project progress is calculated as the FPSO progress as well as the onshore and well development work
78 Culture & Organisation objectives – awarded the full 5% of the bonus for 2020 in recognition of the substantial advance in key
aspects of the Company culture during the year. Particular achievements taken into included: (a) high levels of staff retention
(98.2%), (b) the intranet “go live” being completed, (c) 360 assessments being carried out for senior management and (d) an all staff
engagement survey being rolled out at the end of the year. In light of these significant achievements, the Remuneration Committee
agreed a full pay-out against these culture & organisational objectives.
Page 146 of 274
CORPORATE GOVERNANCE
Mathios Rigas
Panos Benos
% of
maximum
84.75%
84.75%
£858,093 (127.125% of salary)
£572,062 (127.125% of salary)
The Remuneration Committee considered this bonus outcome in light of the Group’s overall financial
and operational performance during 2020 and was satisfied that it was appropriate and that no
discretionary adjustment to the outcome was required.
LTIP AWARDS during the financial year
An award was granted under the LTIP to selected senior executives, including the Executive Directors,
in March 2020. This award is subject to the performance conditions described below and will vest in
March 2023 with a subsequent two-year holding period for any vested shares to March 2025. The
Committee considered the share price at the time of grant, recognising the need to mitigate the risk of
windfall gains. The Committee also noted that 30% of the award was based on an absolute TSR
measure assessed from the start of 2020 with a highly challenging base point based on the average
share price in Q4 2019. On balance, the Committee decided that the award level was reasonable, and
therefore did not make any adjustments to the calculation basis.
Type of
award
Date of
grant
Mathios
Rigas
Panos Benos
Conditional
share
award
26 March
2020
26 March
2020
Maximum
number
of
shares79
Face value
(£)
Face
value
(% of
salary)
325,615
£1,350,000
200%
217,077
£900,000
200%
Threshold
vesting
End of
performance
period
25% of
award
31 December
2022
Vesting of the awards is subject to satisfaction of the following performance conditions. Vesting is
calculated on a straight-line basis for performance between the threshold and maximum performance
targets. Any LTIP vesting is at the discretion of the Remuneration Committee. They will consider the
vesting level at the end of the performance period to ensure the final outcome is appropriate and
reasonable, being particularly mindful of windfall gains.
Performance measure
Relative Total Shareholder Return
over three-year performance
period80
Absolute Total Shareholder Return
over three-year performance
period
Average Scope 1 CO2 emissions
(kgCO2 / boe) over 3 Financial
Years
Proportion of award
determined by
measure
Threshold
Performance
Maximum
performance
50%
30%
20%
Median ranking
12.5% of award
Upper quartile ranking
50% of award
8% p.a.
7.5% of award
12% p.a.
30% of award
18
0% of award
6
20% of award
79 The maximum number of shares that could be awarded has been calculated using the share price of £4.146 (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
80 Comparator group comprises Cairn Energy, Enquest, Genel Energy, Gulf Keystone Petroleum, Hurricane, Kosmos Energy,
Nostrum Oil & Gas, Pharos Energy, Harbour Energy Ratio, Rockhopper Exploration, Seplat Petroleum, Tamar Petroleum and
Tullow Oil
Page 147 of 274
CORPORATE GOVERNANCE
LOSS OF OFFICE PAYMENTS/ PAYMENTSTO FORMER DIRECTORS
There have been no payments to former Directors or payments to Directors for loss of office during
2020.
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 held by Directors as at 31 December 2020 is set out below:
Number of shares as at 31 December 2020
Interests in share
incentive
schemes, subject
to employment
DBP83
67,253
44,835
Percentage of
Issue Share
Capital (minus
LTIP and DBP
shares)
11.19
2.33
Shares owned
outright
19,807,000
4,118,999
186,572
5,554
084
6,755
2,69085
17,433,314
1,507
0
0
Interests in share
incentive
schemes, subject
to performance
conditions
LTIP82
755,828
492,064
–
–
–
–
–
–
-
-
-
Director
Mathios Rigas
Panos Benos
Karen Simon
Andrew Bartlett
David Bonano
Robert William
Peck
Ohad Marani
Efstathios
Topouzoglou
Amy Lashinsky
Kimberley Wood
Andreas
Persianis
Share ownership
guidelines met?81
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Between 31 December 2020 and 16 April 2021, Karen Simon purchased 11,500 shares.
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 2020 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.
81 For the purpose of redetermining the value of Executive Director Shareholders, the individual’s current annual salary and the
share price as at 31 December 2020 has been used (£7.21 per share)
82 This relates to shares awarded under the LTIP in July 2018, March 2019 and March 2020
83 This relates to shares awarded under the DBP in March 2019 and 2020 in relation to the 2018 and 2019 annual bonus
84 Number of shares at date of retirement from Board
85 Number of shares at date of retirement from Board
Page 148 of 274
CORPORATE GOVERNANCE
250
200
150
100
50
0
Mar 2018
Jun 2018
Sep 2018
Dec 2018
Mar 2019
Jun 2019
Sep 2019
Dec 2019
Mar 2020
Jun 2020
Sep 2020
Dec 2020
Energean PLC
FTSE All-Share Oil & Gas Producers Index
The table below summarises the CEO single figure for total remuneration, annual bonus pay-outs and
long-term incentive vesting levels as a percentage of maximum opportunity over this period.
2020
2019
2018
CEO single figure of remuneration £’000
£1,608k
£1,134k
£1,581k
Annual bonus pay-out (as a % of maximum
opportunity)
LTIP vesting out-turn (as a % of maximum
opportunity)
84.8%
37.9%
82.1%
n/a (no award
vested in
2020)
n/a (no award
vested in
2019)
n/a (no award
vested in
2018)
PERCENTAGE CHANGE IN REMUNERATION OF THE BOARD OF DIRECTORS
The chart below shows the percentage change in annual salary, benefits and bonus for each Executive
and Non-Executive Director compared with the average for all Company employees between 2019
and 2020.
Average for all employees86
Salary
change
(2019 to
2020)
6.2%
Benefits
change
(2019 to
2020)
(8.70%)
Annual
bonus
change (2019
to 2020)
12.49%
86 Average employee pay has been calculated on a full-time equivalent basis based on all employees of Energean plc.
Page 149 of 274
Executive Directors
Mathios Rigas
Panos Benos
Non-Executive Directors
Karen Simon
Andrew Bartlett
David Bonano
Robert William Peck
Ohad Marani
Stathis Topouzoglou
Amy Lashinsky
Kimberley Wood
Andreas Persianis
CORPORATE GOVERNANCE
0%
0%
150%
0%
0%
0%
0%
0%
0%
0%
0%
0 %
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
+124%
+124%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Since Energean plc only has 14 UK employees, it is exempt from the legislative requirement to
disclose a ratio between the remuneration of the CEO and UK employees. However, the Committee
continues to monitor the approach to remuneration that applies to the wider workforce. Further detail
on the Committee’s approach to the wider workforce is set out in the wider workforce section on page
151-52.
Relative importance of the spend on pay
The chart below illustrates the total expenditure on remuneration in 2019 and 2020 for all of the
Company’s employees compared to dividends payable to shareholders.
Total expenditure on remuneration
Dividends payable to shareholders
2020
£m
27.3
nil
2019
£m
27.4
nil
Change
-0.4 %
-
Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration & Talent Committee is chaired by Kimberley Wood (appointed on 26 July 2020).
During the year, the Committee also comprised Andrew Bartlett, Karen Simon and Ohad Marani
(stepped down on 26 July 2020). Details of their attendance is set out on page 104.
Page 150 of 274
CORPORATE GOVERNANCE
The Committee met 5 times during 2020. Other attendees present at these meetings by invitation
were the Company Chair, the CEO, the CFO, the Head of HR and the Company Secretary. No
individual was in attendance when their own remuneration was being determined.
The Committee is mindful of the UK Corporate Governance Code and considers that it appropriately
addresses the following principles set out in the Code:
Clarity
This Remuneration Report provides open and transparent disclosure of our
executive remuneration arrangements for our internal and external stakeholders. In
terms of engagement with the wider workforce, Energean has appointed Robert
Peck as the employee representative on the Board. As part of this role, Robert will
ensure that the “employee voice” will be heard at the Board and will engage with
employees to obtain their views on decisions to be taken by the Board.
Simplicity and
alignment to
culture
Variable remuneration arrangements for our executives are straightforward with
individuals eligible for an annual bonus and, at more senior levels, a single long-
term incentive plan. Performance measures used in these plans are aligned with
delivery of Group KPIs, key strategic Group objectives and long-term sustainable
value creation. They are also aligned with our commitment to adopt a responsible,
sustainable business model.
Predictability
Our executive remuneration arrangements contain maximum opportunity levels for
each component of remuneration with variable incentive outcomes varying
depending on the level of performance achieved against specific measures. The
charts on page 137 within our Remuneration Policy provide estimates of the
potential total reward opportunity for the Executive Directors under our current
Remuneration Policy.
Proportionality
and risk
Our variable remuneration arrangements are designed to provide a fair and
proportionate link between Group performance and reward. In particular, partial
deferral of the annual bonus into shares, five-year release periods for LTIP awards
and stretching shareholding requirements that apply during and post-employment
provide a clear link to the ongoing performance of the Group and therefore long-
term alignment with stakeholders. We are also satisfied that the variable pay
structures do not encourage inappropriate risk-taking.
Notwithstanding this, the Remuneration Committee retains an overriding discretion
that allows it to adjust formulaic annual bonus and / or LTIP outcomes so as to
guard against disproportionate outturns. Malus and clawback provisions also apply
to both the annual bonus and LTIP and can be triggered in circumstances outlined
in the Remuneration Policy.
The Remuneration & Talent Committee is responsible for determining the Company Chair’s fee and
all aspects of Executive Director remuneration as well as the determination of other senior
management’s remuneration. The Remuneration & Talent Committee also oversees the operation of
all share plans. Full terms of reference of the Remuneration Committee are available on our website
at www.energean.com.
During the year, the Committee received independent and objective advice from Deloitte LLP
principally on market practice and incentive design for which Deloitte LLP was paid £31,810 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 the code of conduct in relation to executive
remuneration consulting in the UK. Deloitte LLP has also provided advice to the Company in relation
to technology consulting, tax, direct and indirect tax compliance services, payroll services, financial
models and transaction support services in connection with the acquisition of Edison E&P.
WORKFORCE REMUNERATION AND ENGAGEMENT
Page 151 of 274
CORPORATE GOVERNANCE
The Committee considered the remuneration of the wider workforce when developing the new
Remuneration Policy in 2020/21. This review led to an adjustment to pensions. The designated NED
responsible for ensuring the “employee voice” is heard at the Board is Robert Peck, Robert also
attends meetings of the Committee. During 2021/22, Robert will continue to attend meetings and the
Committee members will take part in staff events such as town halls meetings and meet with staff in
person when COVID-19 restrictions allow for such meetings to take place.
Shareholder voting on Remuneration resolutions
Votes for
Votes against
Votes withheld
Approval of the Directors’ Remuneration Policy
2019 AGM
Approval of the Annual Report on Remuneration
2020 AGM
112,599,416 (95%)
5,950,051 (5%)
134,174,655(95%)
6,796,582(5%)
00
00
External board appointments
Executive Directors are not normally entitled to accept a Non-Executive Director appointment
outside the Company without the prior approval of the Board. Neither of the current Executive
Directors currently holds any such appointment.
By order of the Board.
Kimberley Wood
Chair of the Remuneration & Talent Committee
18 April 2021
Page 152 of 274
CORPORATE GOVERNANCE
Group Directors’ Report
The Directors are pleased to present their Annual Group Report on the affairs of the Group, together
with the financial statements and auditor’s report, for the year ended 31 December 2020. The
Corporate Governance Statement set out on pages 96-152 forms part of this report.
Details of significant events since the balance sheet date are contained in note 29 to the financial
statements on page 252. An indication of likely future developments in the business of the Company
and its subsidiaries are included in the strategic report.
Details of the Company’s engagement with suppliers and customers and other key stakeholders is
covered in the section 172 (1) statement on pages 100-103. The principal risks are detailed on pages
77-93
Results and Dividends
The Group’s financial results for the year ended 31 December 2020 are set out in the consolidated
financial statements.
No dividends have been paid in respect of the year 2020 (2019: nil); and the Directors will not
recommend to shareholders that a dividend be paid at the 2021 AGM.
Capital structure
Details of the issued share capital are shown in note 3.24 to the financial statements. As at 31
December 2020, the Company’s issued share capital consisted of 177,089,406 ordinary shares of
£0.01 each. The Company has only one class of share, which carries no right to fixed income. Each
share carries the right to one vote at General Meetings of the Company. No person has any special
rights of control over the Company’s share capital and all issued shares are fully paid. There are no
specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by
the general provisions of the Company’s Articles of Association (the “Articles”) and prevailing
legislation. The Directors are not aware of any agreements between holders of the Company’s shares
that may result in restrictions on the transfer of securities or on voting rights. Details of employee share
plans are outlined in note 25 to the financial statements on page 240.
Directors’ appointments and powers
With regard to the appointment and replacement of Directors, the Company is governed by its Articles
of Association, the UK Corporate Governance Code, the Companies Act and related legislation. The
powers of directors are described in the Articles and the Schedule of Matters Reserved for the Board,
copies of which are available on request.
Directors’ authority over shares
The authority to issue shares in the Company may only be granted by the Company’s shareholders
and, once granted, such authority can be exercised by the Directors. At the 2020 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 2021.
As at 18 April 2021, the Directors had not exercised this authority. The Directors are proposing to
renew this authority at the 2021 AGM.
Page 153 of 274
CORPORATE GOVERNANCE
There are a number of agreements entered into by members of the Group that take effect, alter or
terminate upon a change of control of the Company, such as commercial contracts and bank loan and
other financing 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 arises in relation to a takeover.
Directors’ Details
The biographical details and appointments of the Directors are set out on pages 96-100. All of the
Directors will offer themselves for re-election at the AGM in May 2021.
The Directors during the year were:
• Karen Simon (Non-Executive Chairman)
• Mathios Rigas (Chief Executive Officer)
• Panos Benos (Chief Financial Officer)
• Andrew Bartlett (Senior Independent Non-Executive Director)
• Robert Peck (Independent Non-Executive Director)
• Efstathios Topouzoglou (Non-Executive Director)
• Andreas Persianis (Independent Non-Executive Director) -– appointed 26 July 2020
• Kimberly Wood (Independent Non-Executive Director) – appointed 26 July 2020
• Amy Lashinsky (Independent Non-Executive Director)
• Ohad Marani (Independent Non-Executive Director – resigned 26 July 2020)
• David Bonano (Non-Executive Director – resigned 26 July 2020).
Articles of Association
The Company’s Articles may only be changed by special resolution at a General Meeting of
shareholders. The Articles contain provisions regarding the appointment, retirement and removal of
Directors. A Director may be appointed by an ordinary resolution of shareholders in a General Meeting
following nomination by the Board (or member(s) entitled to vote at such a meeting). The Directors
may appoint a Director during any year; however, the individual must stand for re-election by
shareholders at the next AGM.
Directors’ indemnities
Under the Articles, the Directors 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. These 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 (2019: 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
Page 154 of 274
Shareholder
Growthy Holdings Co. Limited
Third Point Hellenic Recovery
Fund L.P.
Standard Life Aberdeen plc
affiliated investment management
entities
Oilco Investments Limited
Number of
Shares
Number of Voting
Rights
% of Issued Share
CORPORATE GOVERNANCE
Capital
18,948,260
18,948,260
10.698
16,889,566
16,889,566
15,951,947
16,016,734
15,951,947 (indirect)
16,016,734
Clal Insurance Company Limited
12,053,928
283,577 (direct)
Pelham Capital Limited
7,353,314
13,315,426(indirect)
7353314 (Direct)
9.54
9.01
9.04
7.68
4.16
Annual General Meeting (AGM)
The Company’s AGM will be held in London in May 2021. Formal notice of the AGM will be issued
separately from this Annual Report and Accounts.
Registrars
The Company’s share registrar in respect of its ordinary shares traded on the London Stock Exchange
is Computershare Investor Services PLC, full details of which can be found in the Company
Information section on page 274.
Greenhouse gas (GHG) emissions reporting
Details of the Group’s emissions are contained in the Corporate Social Responsibility report on page
55-60.
Directors’ statement of disclosure of information to auditor
Each of the Directors in office at the date of the approval of this 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.
Going Concern
In assessing the appropriateness of the going concern assumption over the period from 1 January
2021 to 30 April 2022 (the ‘going concern period’), management have stress tested the Company’s
most recent financial projections to incorporate a range of potential future outcomes by considering
Energean’s principal risks, including further potential delays on key projects and adverse changes in
oil and gas prices as compared to those included in the cash flow forecasts. The results of
management’s assessment were reviewed by the Audit and Risk Committee and the Board of
Directors. Further details in respect of the going concern assessment is provided in note 2 to the
consolidated financial statements.
This assessment confirmed that the Company has adequate cash and undrawn credit facilities to
enable it to meet its obligations as they fall due in order to continue its operations throughout the going
Page 155 of 274
CORPORATE GOVERNANCE
concern period. Therefore, the Directors consider it appropriate to continue to adopt the going concern
basis of accounting in preparing the consolidated financial statements.
Post year-end events and future events
Material post year-end events are disclosed in note 29 on page 252 to the Financial Statements.
Future developments of the Group are set out in the Strategic Report on pages 17-40.
Overseas branches and subsidiaries
Details of subsidiaries of the Group are set out in note 30 on pages 252-253 to the Financial
Statements.
Independent auditor
Having reviewed the independence and effectiveness of the auditor, the Audit & Risk Committee has
recommended to the Board that the existing auditor, Ernst & Young LLP (“EY”), be reappointed. EY
has expressed its willingness to continue in office as auditor. An ordinary resolution to reappoint EY
as auditor of the Company will be proposed at the forthcoming AGM.
Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R is
disclosed.
Listing Rule requirement
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)
Section
Note 10/page 217
Not applicable
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)
Directors’ remuneration report/
pages 143-144 and Note 25,
page 240 of the financial
statements
No such waivers.
No such share allotments
Not applicable
Directors’ report/ pages 153-154
LR 9.8.4R (12), (13)
LR 9.8.4R (14)
Not applicable
Not applicable
This Directors’ Report was approved by the Board and signed on its behalf by the Company
Secretary on 18 April 2021.
By order of the Board
Russell Poynter
Company Secretary
18 April 2021
Company number: 10758801, 44 Baker Street, London W1U 7AL
Page 156 of 274
CORPORATE GOVERNANCE
Statement of Directors’ Responsibilities
The directors are responsible for preparing the annual report and the group financial statements in
accordance with applicable United Kingdom law and regulations. Company law requires the directors
to prepare financial statements for each financial year.
Under that law the directors have elected to prepare the group financial statements in accordance with
International Financial Reporting Standards (IFRSs) in conformity with the Companies Act 2006 and
the parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial
Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
Under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules, group
financial statements are required to be prepared in accordance with IFRSs adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. Under company law the directors
must not approve the group financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and the company and of the profit or loss of the group and the
company for that period.
In preparing these financial statements the directors are required to:
• Select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors and then apply them consistently
• Make judgements and accounting estimates that are reasonable and prudent
• Present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information
•
• Provide additional disclosures when compliance with the specific requirements in IFRSs (or
in respect of the parent company financial statements, FRS 101)is insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the group’s
financial position and financial performance
In respect of the group financial statements, state whether IFRSs in conformity with the
Companies Act 2006 and IFRSs adopted pursuant to Regulation(EC) No 1606/2002 as it
applies in the European Union have been followed, subject to any material departures
disclosed and explained in the financial statements
In respect of the parent company financial statements, state whether applicable UK Accounting
standards including FRS 101 have been followed, subject to any material departures disclosed
and explained in the financial statements
•
• Prepare the financial statements on the going concern basis unless it is appropriate to
presume that the company and the group will not continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the company’s and group’s transactions and disclose with reasonable accuracy at any time
the financial position of the company and the group and enable them to ensure that the company and
the group financial statements comply with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent
and detect fraud and other irregularities.
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CORPORATE GOVERNANCE
Under applicable law and regulations, the directors are also responsible for preparing a strategic
report, directors’ report, directors’ remuneration report and corporate governance statement that
complies with that law and those regulations. The directors are responsible for the maintenance and
integrity of the corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement of the directors in respect of the annual financial report:
The directors confirm, to the best of their knowledge:
• That the consolidated financial statements, prepared in accordance with IFRSs in conformity
with the Companies Act 2006 and IFRSs adopted pursuant to Regulation(EC) No 1606/2002
as it applies in the European Union, give a true and fair view of the assets, liabilities, financial
position and profit of the parent company and undertakings included in the consolidation
taken as a whole
• That the annual report, including the strategic report, includes a fair review of the
development and performance of the business and the position of the company and
undertakings included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face
• That they consider the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the
group’s position and performance, business model and strategy.
Mathios Rigas
Director
18 April 2021
Panos Benos
Director
18 April 2021
Page 158 of 274
FINANCIAL STATEMENTS
Financial Statements
Independent Auditor’s Report to the Members of Energean
plc
Opinion
In our opinion:
• Energean plc’s group financial statements and parent company financial statements (the
“financial statements”) give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December 2020 and of the group’s loss for the year then ended;
• The group financial statements have been properly prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union;
• The parent company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice; and
• The financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Energean plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2020 which comprise:
Group
Parent company
Consolidated balance sheet as at 31 December 2020
Balance sheet as at 31 December 2020
Consolidated income statement for the year then ended Statement of changes in equity for the
year then ended
Consolidated statement of comprehensive income for
the year then ended
Statement of cash flows for the year
then ended
Consolidated statement of changes in equity for the
year then ended
Related notes 1 to 16 to the financial
statements including a summary of
significant accounting policies
Consolidated statement of cash flows for the year then
ended
Page 159 of 274
Related notes 1 to 31 to the financial statements,
including a summary of significant accounting policies
FINANCIAL STATEMENTS
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No. 1606/2002 as it applies in 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 FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of
the group 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 going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the
directors’ assessment of the group and parent company’s ability to continue to adopt the going concern
basis of accounting included the following procedures:
•
In conjunction with our walkthrough of the group’s financial close process, we confirmed our
understanding of management’s going concern assessment process which included the
preparation of a base case cash flow model covering the period 1 January 2021 to 30 April
2022, a reasonable worst case scenario and a reverse stress test.
• We obtained management’s going concern assessment, including the cash flow forecast
models for each of the scenarios noted above and the related covenant calculations. We noted
that management has modelled a number of alternative adverse scenarios in order to
incorporate potential unexpected changes to the key assumptions in order to evaluate the
impact on the projected liquidity of the group and its compliance with its loan covenants over
the going concern period.
• We assessed the reasonableness of the key assumptions included in the base case and
reasonable worst case cash flow models which included evaluating how the impacts of Covid-
19 on oil prices and the timing of first gas from the Karish development in Israel had been
reflected in each of these scenarios. Our evaluation of the key assumptions within the models
included comparing oil and gas price forecasts to external data, verifying reserves and
production estimates to Competent Person Reports (CPRs), evaluating the expected receipts
from EGPC, assessing the progress of the Karish development against the plan including
payments for delayed first gas and checking consistency of forecast operating costs and
Page 160 of 274
FINANCIAL STATEMENTS
capital expenditures against approved budgets. We obtained the latest oil and gas (including
PSV) price forecasts and the latest CPR reports to confirm no contra evidence that would
indicate management’s assumptions used were not appropriate.
• We tested the integrity of the models used to calculate the forecast cash flows and the related
covenant calculations and, where relevant assessed consistency with information relevant to
other areas of our audit.
• We verified the starting cash position and the available financing facilities reflected in the
models, including the proceeds from the March 2021 bond issuance held in an escrow
account, to the audit work we have performed including the nature of the facilities, their
repayment terms and the covenants attaching to each facility, where applicable.
• We confirmed the bond proceeds directly with the appointed Escrow Agent together with the
conditions attached to the release of the escrow funds. We assessed the Board’s assertion
that the probability of the escrow release conditions not being satisfied is remote.
• We evaluated the appropriateness of management’s reverse stress test and assessed the
likelihood of such conditions arising that would lead to the group utilising all liquidity or
breaching one or more financial covenants during the going concern period.
• We reviewed the group’s going concern disclosures included in the financial statements in
order to assess whether the disclosures were appropriate and accurately reflected the
outcome of the group’s assessment process.
In line with the Group’s plans to implement new financing for the Karish development as it approaches
first gas, in March 2021 the group raised $2.5 billion in secured borrowings. The proceeds from the
bond issuance will be released from an escrow account upon the receipt of standard regulatory
approvals, registration of certain pledges and execution of relevant legal documentation. Upon
release, we noted that the cash will be utilised to repay the project financing in Israel and the term loan
drawn down to purchase the minority interest in Energean Israel while also providing significant
additional funds for general corporate purposes.
We further observed that the group’s flagship Karish development project is currently on track to deliver
first gas by the first quarter of 2022 and the development costs in the cash flow forecast model were
found to be consistent with those we are aware of from our underlying audit work. We determined that
management’s forecast oil and gas prices used for the purposes of their base case assessment are
within the ranges suggested by available market forecasts.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group and parent
company’s ability to continue as a going concern for the period through to 30 April 2022.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in relation to the directors’
statement in the financial statements about whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report. However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the group’s ability to continue as a going concern.
Overview of our audit approach
Page 161 of 274
FINANCIAL STATEMENTS
Audit scope
Key audit
matters
• We performed an audit of the complete financial information of five
components and audit procedures on specific balances for a further
seven components
• The components where we performed full or specific audit procedures
accounted for 84% of the group’s loss before tax, 98% of revenue and
98% of total assets
• Recoverability of oil and gas assets, including estimation of oil and gas
reserve volumes
• Accounting for the acquisition of Edison E&P
• Karish / Tanin development project spend
Materiality
• Overall group materiality was $20.0 million which represents 0.5% of
Total Assets, adjusted to remove the amount of goodwill relating to the
group’s additional investment in Energean Israel Limited
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each company within the group. Taken together, this enables us to form
an opinion on the consolidated financial statements. We take into account size, risk profile, the
organisation of the group and effectiveness of group-wide controls, changes in the business
environment and other factors such as recent Internal audit results when assessing the level of work
to be performed at each company.
In assessing the risk of material misstatement to the group financial statements, and to ensure we had
adequate quantitative coverage of significant accounts in the financial statements, of the twenty (2019:
eight) reporting components of the Group, we selected twelve (2019: seven) components covering
entities within Israel, Italy, Greece, Egypt, Cyprus, Croatia and the United Kingdom, which represent
the principal business units within the Group.
Of the twelve components selected, we performed an audit of the complete financial information of
five (2019: three) components (“full scope components”) which were selected based on their size or
risk characteristics. For the remaining seven (2019: four) components (“specific scope components”),
we performed audit procedures on specific accounts within each component that we considered had
the potential for the greatest impact on the significant accounts in the financial statements either
because of the size of these accounts or their risk profile. For Energean Montenegro Limited, specified
procedures were defined by the primary team in respect of Intangible assets accounts.
The table below illustrates the coverage obtained from the work performed by our audit teams.
Reporting components
Page 162 of 274
Full scope
Specific scope [1]
Specified procedures
Full, specific and specified procedures
coverage
Remaining components [2]
Total reporting components
FINANCIAL STATEMENTS
Number
% of Group
Revenue
% of Group
Total Assets
% of Group
Loss before
tax [3]
5
7
1
13
7
20
98%
0%
0%
<2%
100%
95%
3%
0.2%
<2%
100%
84%
-
-
16%
100%
[1] The audit scope of these components may not have included testing of all significant accounts of the component but will have
contributed to the coverage of significant accounts tested for the group. The procedures were performed directly by the primary
audit team.
[2] Of the remaining seven (2019: one) components we performed other procedures including the following to respond to any
potential risks of material misstatement of the consolidated financial statements:
•
•
Analytical review procedures on a legal entity basis;
Tested consolidation journals and intercompany eliminations and reperformed foreign currency translations;
• Made inquiries of management about unusual transactions in these components; and
•
Reviewed minutes of Board meetings held throughout the period.
[3] The contribution of specific and specified procedure components to Group Loss before tax is included within ‘remaining
components’ as audit procedures were performed on certain, but not all, significant accounts of the specific and specified
procedures components contributing to Group Loss before tax.
Changes from the prior year
The primary reason for the changes in components scoped in to our audit is the acquisition of the
Edison E&P business, contributing eleven additional components, including two being designated as
full scope components and five as specific scope components.
The remaining change (one specific scope component) was due to a newly established entity within
the existing group.
The scope designation for Energean Montenegro Limited was changed from specific to specified
procedures.
Involvement with component teams
In establishing our overall approach to the group audit, we determined the type of work that needed
to be undertaken at each of the components by us, as the primary audit engagement team, or by
component auditors from other EY global network firms operating under our instruction. Of the five full
scope components, audit procedures were performed on three of these directly by the primary audit
team in London. For two full scope components where the work was performed by 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 primary 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 prepared by the component teams.
The primary audit team followed a programme of planned virtual site visits that was designed to ensure
that the primary audit team members visited the full scope component teams during the current year’s
Page 163 of 274
FINANCIAL STATEMENTS
audit cycle. Due to the travel restrictions as a result of the Covid-19 pandemic, it was not practicable
to travel to Athens and Tel Aviv in the current environment. As a result, we requested those component
auditors to provide us with access to key audit workpapers to perform our workpaper reviews through
the interactive capability of EY Canvas, our global audit workflow tool, or through share-screen
functionality, subject to local law and regulations. In addition, due to the inability to arrange in-person
meetings with such component auditors, we increased the use of alternative methods of
communication with them, including through written instructions, exchange of emails and virtual
meetings. The primary team held virtual closing meetings with local management in order to discuss
the audit issues arising from the local audit process. The findings reported to the primary audit team
were discussed in more detail with component auditors and any further work required by the primary
audit team was then performed by the component auditors.
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. 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.
Recoverability of oil and gas assets, including estimation of oil and gas reserve volumes
Key audit
matter
description
Tangible oil and gas assets: $3,054 million (2019: $1,884 million)
Refer to the Audit and Risk Committee Report (page 114); Accounting policies (pages 186 -
206); and Notes 3.6, 3.8, 3.11, 4.2, and 13 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 (Prinos, Prinos North,
Epsilon) and the development assets in Israel (Karish and Tanin). For the oil and gas assets
acquired through the Edison E&P acquisition, reference is made to the separate key audit
matter below.
Where indicators of impairment exist, management determines the recoverable amount of
the asset or cash generating unit (CGU) by preparing discounted cash flow models to
estimate the value-in use.
We have focused on this area because 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.
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.
Our response
to the risk
We assessed management’s approach to identifying indicators of impairment through the
year. During the first half of 2020 management identified impairment indicators for the
Greece CGU (which constitutes the Prinos, Prinos North and Epsilon fields) and accordingly
performed an impairment test which resulted in the recognition of an impairment charge of
$63 million.
We validated internal or external factors that may lead to impairment triggers and no
impairment indicators were identified for the development assets in Israel.
Page 164 of 274
FINANCIAL STATEMENTS
In relation to the Greece CGU we tested the methodology applied in the value-in-use
calculation relative to the requirements of International Accounting Standard 36: Impairment
of Assets and validated the mathematical accuracy of management’s cash flow forecasts.
We tested the reasonableness of the forecast of future cash flows by considering evidence
available to support assumptions and the reliability of past forecasts.
For the Greece CGU that management tested for impairment, we focused on the following
key assumptions used in the impairment model:
• Future oil price estimates
• Reserves and resources
• Forecast production
• Discount rate used in the life-of-field cash flow model
Our audit work on the impairment test for the Greece CGU comprised the following key
procedures:
• With the assistance of EY’s valuations specialists, we evaluated the price and discount
rate assumptions used by management, which included benchmarking against industry
peers;
• We obtained and reviewed the most recent third party reserves and resources reports
and compared them with management’s impairment analysis for completeness and
consistency;
• We assessed the qualifications of management’s specialist (NSAI) that was used for the
reserves and resources estimates; and
• We performed testing to determine the sensitivity of the impairment model to changes in
key assumptions.
We also performed the following procedures as part of our overall impairment work:
• Evaluated internal or external factors that may lead to further impairment triggers or
suggest reversal of impairment subsequent to the date the impairment of the Greece
CGU was recognised. This included obtaining the updated December 2020 third party
reserves and resources reports prepared by management’s specialist and comparing
these to the reports used in the aforementioned impairment test; and
• Verified that all required disclosures in relation to the impairment assessment and related
estimates are included in the consolidated financial statements.
The audit procedures to address this risk were performed by the primary team and the Greek
and Israeli component teams.
We reported to the Audit and Risk Committee that:
• We consider management’s estimates used in the impairment test performed for the
Greece CGU to be reasonable, with assumptions used being within an acceptable range.
Based on our audit procedures, including relevant sensitivities performed, we concur
with the amount of impairment recognised during the year.
• Management’s disclosures in the financial statements accurately reflect the key
judgements and estimates made in determining the $63 million impairment recognised.
Page 165 of 274
Key
observations
communicated
to the Audit
and Risk
Committee
FINANCIAL STATEMENTS
Accounting for the acquisition of Edison E&P
Key audit
matter
description
Refer to the Audit and Risk Committee Report (page 114); Accounting policies (pages 186 -
206); and Notes 2.3, 3.2, 4.1, 4.2 and 6 of the Consolidated Financial Statements
As more fully described in Note 6 to the consolidated financial statements, on 17 December
2020 Energean completed the acquisition of the Edison’s E&P business for an aggregate
net cash consideration of $203.2million, and contingent consideration estimated at $55.2
million. The acquisition was accounted for under the acquisition method of accounting which
resulted in a fair value of $721.9 million being attributed to tangible and intangible oil and gas
assets and goodwill of $25.3 million. Additionally, liabilities of $1.1 billion were recognised of
which $809 million related to decommissioning provisions in Italy, the UK and Croatia.
The accounting for business acquisitions can be highly complex in nature, with significant
judgement required to determine the fair values of the assets and liabilities acquired. This
transaction falls under the scope of IFRS 3: Business Combinations (IFRS 3) which requires
significant management judgement in determining the fair value of the net assets acquired,
including tangible and intangible oil and gas assets.
Our key audit matter focuses on the valuation of assets acquired and the completeness of
liabilities associated with the Edison E&P acquisition (the purchase price allocation).
Our response
to the risk
Audit procedures on the purchase price allocation (“PPA”) were performed by the primary
audit team and included support provided by EY personnel in Italy and Egypt.
We performed the following procedures in response to the key audit matter identified:
• We performed a risk-based assessment on the accounts included in the opening
balance sheet (as at 17 December 2020) for the acquired business to inform and
direct the scope of our PPA work;
• We engaged our valuation specialists to review the valuation reports prepared by
management’s specialist, including attending calls with the specialists to critically
challenge the valuation methodology, key underlying assumptions and understand
subsequent adjustments made to the model;
• We evaluated the reasonableness of key underlying assumptions and estimates
used in the valuation models such as quantity of the oil and gas reserves, production
volumes, oil and gas prices, discount rates and capital and operating expenditures;
• We assessed the estimates used by management in determining the values
attributed to the decommissioning provisions through comparing them to third party
reports for the operated fields and to operator data for non-operated fields and
evaluated the appropriateness of the discount rates applied;
• We evaluated and tested the integrity and mathematical accuracy of the valuation
models;
• We agreed the resulting goodwill to underlying calculations; and
• Reviewed the disclosures in the financial statements.
To test the fair value of the acquired identifiable oil and gas assets and contingent
consideration, with the assistance of our valuation specialists, our audit procedures included,
amongst others, assessing the competence, capabilities and objectivity of management’s
specialists, evaluating the prospective financial information used in the valuation models,
testing the completeness and accuracy of underlying data and evaluating the group’s use of
valuation methodologies.
Our procedures to evaluate the prospective financial information used in the valuation
models included assessing the key assumptions discussed above through comparison to
Page 166 of 274
FINANCIAL STATEMENTS
current industry, market and economic trends and forecasts (where available) and to
historical results of the Edison E&P business.
We also performed sensitivity analyses to evaluate the impact of changes in key assumptions
to the valuation of the acquired identifiable oil and gas assets.
We assessed the appropriateness of the disclosures in Note 6 to the consolidated financial
statements.
Key
observations
communicated
to the Audit
and Risk
Committee
We reported to the Audit and Risk Committee that:
Based on the procedures performed, we are satisfied that the assumptions, methodologies
and judgements applied to determine the fair values of the assets and liabilities acquired are
reasonable. We are satisfied that the disclosures in Note 6 of the consolidated financial
statements are appropriate and comply with IFRS 3.
Karish / Tanin development project spend
Key audit
matter
description
Karish / Tanin development costs incurred during the year ended 31 December 2020 and
capitalised within Oil and Gas properties: $525 million (2019: $603 million)
Refer to Accounting policies (pages 186 - 206); and Notes 3.5, 3.22 and 13 of the
Consolidated Financial Statements
The Karish / Tanin development attained Final Investment Decision (FID) in March 2018 and
consequently there has been significant project-related expenditure since this date. The
main contractor is TechnipFMC through a lump sum EPCIC contract to deliver the FPSO and
related subsea infrastructure. The Karish North development was approved by the Israeli
Ministry of Energy in August 2020 and therefore its accumulated costs of $42 million were
added to the development asset within the Israeli CGU.
We focused on the risks of inappropriate capitalisation of costs in accordance with IAS
16: Property, Plant and Equipment (IAS 16) and the completeness of project cost accruals
recorded as at 31 December 2020.
Our response
to the risk
We performed audit procedures focused on capitalisation criteria and the completeness of
accruals for the key elements of costs incurred for the Karish / Tanin (including Karish North)
development.
These procedures included:
• Understanding the criteria used by management to assess whether costs should be
capitalised or expensed;
• 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;
• Reviewing the agreements with the major project contractors, including the agreements
with TechnipFMC which accounted for approximately 53% of the development costs
incurred in the year, to understand the nature of services to be provided and the
associated milestones;
• Obtaining a listing of project cost accruals at 31 December 2020, validating a sample of
costs to supporting documents and comparing to the contractual milestones for the
development project work;
• Performing a search for unrecorded liabilities through reviewing invoices received and
cash payments made after the balance sheet date. We compared these to the project
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FINANCIAL STATEMENTS
costs accrued by management and assessed whether there were any material
omissions.
The audit procedures to address this risk were principally performed by the Israeli component
team with oversight by the primary team.
We reported to the Audit and Risk Committee that:
• The capitalisation of development costs for the Karish / Tanin project spend met the IAS
16 capitalisation criteria; and
• The accruals recorded at year end are materially complete and appropriately reflect the
cost of services provided by the project contractors.
Key
observations
communicated
to the Audit
and Risk
Committee
Revenue recognition is a significant risk presumed by ISAs (UK). Consistent with the prior year it is not
included above as, prior to the 17 December 2020 acquisition of the Edison E&P business which did not
result in a material addition to reported revenues for the year, Energean’s revenue streams have not
changed significantly in 2020, are routine in nature and do not involve significant judgement or use of
significant estimates. 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.
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 $20.0 million (2019: $12.2 million), which is 0.5% of total
assets as at 31 December 2020, adjusted to remove the amount of goodwill related to the group’s
additional investment in Energean Israel Limited which occurred in a prior period. This goodwill was
driven by the recognition of a deferred tax liability as part of the business combination accounting
which we did not consider to be reflective of the underlying business activities. We believe that
adjusted total assets provides us with a suitable basis for setting materiality for development stage oil
and gas exploration and production companies, providing a reliable measure to assess the size of the
group’s operations.
We determined materiality for the parent company to be $5.6 million (2019: $5.6 million) which is 0.5%
of total assets.
During the course of our audit, we reassessed initial materiality and no adjustment to materiality was
made, therefore no additional testing was required due to an amendment in final materiality.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce
to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the group’s overall control
environment, our judgement was that performance materiality was 50% of our planning materiality,
Page 168 of 274
FINANCIAL STATEMENTS
namely $10.0 million (2019: $6.1 million). We have set performance materiality at this percentage
based on our assessment of the likelihood of misstatements and our understanding of the group
gained through our planning procedures.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial
statement accounts is undertaken based on a percentage of total performance materiality. The
performance materiality set for each component is based on the relative scale and risk of the
component to the Group as a whole and our assessment of the risk of misstatement at that component.
In the current year, the range of performance materiality allocated to components was $2.0 million to
$3.5 million (2019: $1.2 million to $4.6 million).
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 $1,000,000 (2019: $610,000), 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 and Risk Committee that we would report to them
all uncorrected differences in excess of $280,000 (2019: $280,000), 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 2 to
158, other than the financial statements and our auditor’s report thereon. The directors are responsible
for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of the other information, we are required
to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared
in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
Page 169 of 274
FINANCIAL STATEMENTS
•
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its
environment obtained in the course of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for
•
our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration Report to
be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-
term viability and that part of the Corporate Governance Statement relating to the group and
company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial statements
or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis
of accounting and any material uncertainties identified set out on page 155 to 156 ;
• Directors’ explanation as to its assessment of the company’s prospects, the period this
assessment covers and why the period is appropriate set out on pages 94 to 95;
• Directors’ statement on fair, balanced and understandable set out on page 109;
• Board’s confirmation that it has carried out a robust assessment of the emerging and
principal risks set out on page 76;
• The section of the annual report that describes the review of effectiveness of risk
management and internal control systems set out on pages 71 to 75;
• The section describing the work of the Audit and Risk Committee set out on pages 113 to
118.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 157 to 158, 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
Page 170 of 274
FINANCIAL STATEMENTS
enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable
of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with governance of the company and
management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to
the group and determined that the most significant are those that relate to the reporting
framework (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.
• We understood how Energean plc is complying with those frameworks by making enquiries of
management and with those responsible for legal and compliance procedures. Other
procedures performed to address the risk of management override included evaluating the
business rationale for significant unusual and one-off transactions, reviewing the minutes of
the Board of Directors and Audit and Risk Committee, and including a level of unpredictability
in our testing.
• We assessed the susceptibility of the group’s financial statements to material misstatement,
including how fraud might occur, focussing on opportunities for management to reflect bias in
key accounting estimates. We 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.
Page 171 of 274
FINANCIAL STATEMENTS
• Based on this understanding 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.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required to address
Following the recommendation from the Audit and Risk Committee, we were re-appointed by the
company on 3 September 2020 to audit the financial statements for the year ending 31 December
2020 and subsequent financial periods. The period of total uninterrupted engagement including
previous renewals and reappointments is four years, covering the years ending 31 December 2017
to 31 December 2020 inclusive.
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.
Our audit opinion is consistent with our additional report to the Audit and Risk Committee explaining
the results of our audit.
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
18 April 2021
Notes:
1. The maintenance and integrity of the Energean 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.
Page 172 of 274
Group Income Statement
YEAR ENDED 31 DECEMBER 2020
Revenue
Cost of sales
Gross (loss)/profit
Administrative expenses
Selling and distribution expenses
Exploration and evaluation expenses
Impairment of property, plant and equipment
Other expenses
Other income
Operating loss
Finance income
Finance costs
Net foreign exchange gain/(losses)
Loss before tax
Taxation income
Loss for the year
Attributable to:
Owners of the parent
Non-controlling interests
FINANCIAL STATEMENTS
Notes
7
8a
8b
8c
8d
13
8e
8f
10
10
10
2020
$'000
28,014
(48,416)
(20,402)
(15,136)
(147)
(4,424)
(65,299)
(28,329)
9,186
(124,551)
493
(4,986)
15,445
(113,599)
11
20,741
(92,858)
(91,414)
(1,444)
(92,858)
2019
$'000
75,749
(65,552)
10,197
(13,305)
(345)
(801)
(71,115)
(21,584)
3,095
(93,858)
2,496
(9,002)
(3,933)
(104,297)
20,531
(83,766)
(83,313)
(453)
(83,766)
Basic and diluted loss per share (cents per
share)
Basic
Diluted
12
($0.52)
($0.52)
($0.50)
($0.50)
Page 173 of 274
FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
YEAR ENDED 31 DECEMBER 2020
Loss for the year
Other comprehensive profit/(loss):
Items that may be reclassified
subsequently to profit or loss
Cash Flow Hedge
Income taxes of items that may be
reclassified to profit or loss
Exchange difference on the translation of
foreign operations, net of tax
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
2020
$'000
(92,858)
2019
$'000
(83,766)
(7,483)
1,721
19,222
13,460
(49)
12
(37)
564
(130)
(3,751)
(3,317)
(466)
117
(349)
Other comprehensive profit/(loss) after
tax
13,423
(3,666)
Total comprehensive loss for the year
(79,435)
(87,432)
Total comprehensive (loss attributable
to:
Owners of the parent
Non-controlling interests
(76,262)
(3,173)
(79,435)
(87,109)
(323)
(87,432)
Page 174 of 274
FINANCIAL STATEMENTS
Group Statement of Financial Position
YEAR ENDED 31 DECEMBER 2020
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Equity-accounted investments
Other receivables
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Share premium
Merger reserve
Other reserve
Foreign currency translation reserve
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
Notes
2020
$'000
2019
$'000
ͮ
13
14
18
15
17
18
16
19
19
19
20
21
15
22
23
24
3,107,272
275,816
4
31,568
126,056
3,540,716
73,019
318,339
202,939
594,297
4,135,013
2,367
915,388
139,903
1,792
(42)
13,419
(144,734)
928,093
266,299
1,194,392
330,092
68,609
7,839
881,535
177,193
1,465,268
1,902,271
147,676
-
4,076
33,038
2,087,061
6,797
59,892
354,419
421,108
2,508,169
2,367
915,388
139,903
5,862
(19,264)
10,094
(53,320)
1,001,030
259,722
1,260,752
877,932
73,381
4,265
13,145
72,401
1,041,124
Page 175 of 274
Trade and other payables
Current portion of borrowings
Derivative financial instruments
Provisions
Total liabilities
Total equity and liabilities
FINANCIAL STATEMENTS
24
21
26
23
355,454
1,112,984
6,915
-
1,475,353
2,940,621
4,135,013
168,108
38,052
-
133
206,293
1,247,417
2,508,169
Approved by the Board on 18 April 2021.
Matthaios Rigas
Panos Benos
Chief Executive Officer
Chief Financial Officer
Page 176 of 274
Group Statement of Changes in Equity
YEAR ENDED 31 DECEMBER 2020
At 1 January 2019
Share capital
$'000
2,066
Share
premium1
$'000
658,805
Loss for the period
Remeasurement of defined benefit pension
plan
Hedges net of tax
Exchange difference on the translation of
foreign operations
Total comprehensive income
Transactions with owners of the company
-
-
-
-
-
-
-
-
-
-
Other
reserve2
$'000
5,907
-
(349)
304
-
(45)
Issuance of new shares (note 19)
Transaction cost in relation to new share issue
(note 19)
Employee share schemes (note 25)
297
264,785
-
4
(8,202)
-
-
-
-
Share
based
payment
reserve3
$'000
6,617
Translation
reserve4
$'000
(15,513)
-
-
-
-
-
-
-
3,477
-
-
-
(3,751)
(3,751)
-
-
-
At 1 January 2020
2,367
915,388
5,862
10,094
(19,264)
Loss for the period
Remeasurement of defined benefit pension
plan
Hedges, net of tax
Exchange difference on the translation of
foreign operations
Total comprehensive income
Transactions with owners of the company
Share capital increase in subsidiary
Employee share schemes (note 25)
-
-
-
-
-
-
-
-
-
-
-
-
-
(37)
(4,033)
-
(4,070)
-
-
-
-
-
-
-
3,325
-
-
19,222
19,222
-
-
Retained
earnings
$'000
29,993
(83,313)
-
-
-
(83,313)
-
-
-
(53,320)
(91,414)
-
-
(91,414)
-
-
FINANCIAL STATEMENTS
Merger
reserves5 Total
Non-
controlling
interests
$'000
$'000
$'000
139,903
827,778
260,045
-
-
-
-
-
-
-
-
(83,313)
(453)
(349)
304
(3,751)
(87,109)
265,082
(8,202)
3,481
-
130
-
(323)
-
-
-
139,903
1,001,030
259,722
-
-
-
-
-
-
(91,414)
(1,444)
(37)
(4,033)
19,222
(76,262)
-
3,325
(1,729)
-
(3,173)
9,750
-
At 31 December 2020
2,367
915,388
1,792
13,419
(42)
(144,734)
139,903
928,093
266,299
Page 177 of 274
Total
$'000
1,087,823
(83,766)
(349)
434
(3,751)
(87,432)
265,082
(8,202)
3,481
1,260,752
(92,858)
(37)
(5,762)
19,222
(79,435)
9,750
3,325
1,194,392
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 benefit pension plan.
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 19
FINANCIAL STATEMENTS
Page 178 of 274
FINANCIAL STATEMENTS
Group Statement of Cash Flows
YEAR ENDED 31 DECEMBER 2020
For the year ended 31 December
Note
2020
$'000
2019
$'000
Operating activities
Loss before taxation
Adjustments to reconcile loss before taxation to
net cash provided by operating activities:
Depreciation, depletion and amortisation
13, 14
13
13
14
10
10
8(f)
25
10
Impairment loss on property, plant and equipment
Loss from the sale of property, plant and
equipment
Impairment loss on intangible assets
Increase/(decrease) in provisions
Finance income
Finance costs
Other liabilities derecognised
Share-based payment charge
Net foreign exchange (gain)/loss
Cash flow (used in)/from operations before
working capital adjustments
Increase in inventories
Decrease/(increase) in trade and other
receivables
Increase in trade and other payables
Cash flow from operations
Tax paid
Net cash inflow from operating activities
(113,599)
(104,297)
24,125
65,299
7,568
2,936
(100)
(493)
4,986
(4,094)
3,325
(15,445)
(25,492)
1,944
24,936
136
1,524
(55)
1,469
39,054
71,115
-
-
730
(2,496)
9,002
(1,270)
2,751
3,933
18,522
2,929
(2,423)
18,167
37,195
(910)
36,285
Page 179 of 274
FINANCIAL STATEMENTS
For the year ended 31 December
Note
2020
$'000
2019
$'000
Investing activities
Payment for purchase of property, plant and
equipment
Payment for exploration and evaluation, and other
intangible assets
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
Drawdown of borrowings
Repayment of borrowings
Proceeds from capital increases by non-controlling
interests
Transaction costs in relation to new share issue
Advance payment from future sale of property,
plant and equipment (INGL)
Repayment of obligations under leases
Debt arrangement fees paid
Finance cost paid for deferred license payments
Finance costs paid
13
14
6
19
21
19
24
(403,968)
(897,153)
(15,041)
(57,397)
(203,204)
1,879
542
(619,792)
-
-
2,431
(952,119)
-
265,082
557,000
(38,040)
9,750
-
22,229
(6,645)
(11,563)
(3,993)
(70,463)
848,658
-
-
(8,202)
5,090
(1,024)
(8,557)
(4,492)
(45,142)
Net cash inflow from financing activities
458,275
1,051,413
Net (decrease) / increase in cash and cash
equivalents
Cash and cash equivalents:
At beginning of the period
(160,048)
135,579
354,419
219,822
Page 180 of 274
FINANCIAL STATEMENTS
For the year ended 31 December
2020
$'000
8,568
202,939
2019
$'000
(982)
354,419
Note
16
Effect of exchange rate fluctuations on cash held
At end of the period
Page 181 of 274
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
1. Corporate Information
Energean plc (the 'Company') was incorporated in England & Wales on 8 May 2017 as a public
company with limited liability, under the Companies Act 2006. Its registered office is at 44 Baker Street,
London W1U 7AL, United Kingdom. The 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, UK and the wider Eastern Mediterranean.
On 21st May 2020 the Company following shareholder approval at the Annual General Meeting of the
Company, changed its name from Energean Oil & Gas plc to Energean plc.
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) in conformity with the requirements of the Companies Act 2006 and IFRS
adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union (EU). The
consolidated financial statements have also been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IASB) as applied to
financial periods beginning on or after 1 January 2020.
The consolidated financial information is presented in US Dollars and all values are rounded to the
nearest thousand dollars except where otherwise indicated.
The consolidated financial statements 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.
Going concern
The Group carefully manages its risk to a shortage of funds by monitoring its funding position and its
liquidity risk. The going concern assessment covers for the period to 30 April 2022 ‘the Forecast
Period’.
Cash forecasts are regularly produced based on, inter alia, the Group’s latest life of field production
and budgeted expenditure forecasts, management’s best estimate of future commodity prices (based
on recent published forward curves) and the Group’s borrowing facilities. The Base Case
conservatively assumes first gas from Karish in April 2022, Brent at $60/bbl flat and PSV (Italian gas
price) at an average of EUR16/MWH.
Page 182 of 274
FINANCIAL STATEMENTS
In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position for negative
impacts that may result from changes to the macro economic environment such as a fall in commodity
price or increase in interest rate. The Group also looks at the impact of changes or deferral of key
projects and/or portfolio rationalisation. This is done to identify risks to liquidity and covenant
compliance and enable management to formulate appropriate and timely mitigation strategies in order
to manage the risk of funding shortfalls or covenant breaches and to safeguard the Group’s ability to
continue as a going concern.
Specifically, the Group tested the following sensitivities:
(i)
(ii)
(iii)
(iv)
Reduction in Brent Price over the current Brent forward curve
Increase in LIBOR over the Forecast Period
decrease in projected collection of EGPC receivables over the Forecast Period
A reasonable worst case including a combination of lower Brent prices and reduced
collection of EGPC receivables
The Group also ran a Breakeven analysis to stress test the combination of lower Brent price, lower
PSV (Italian Gas Price) and reduced collection of EGPC receivables.
Should a more extreme downside scenario occur, appropriate mitigating actions that can be executed
in the necessary timeframe could be taken such as a tightening of operating cost and
reductions/postponement of other discretionary exploration and development expenditures. The
Group’s cash and cash equivalents at 31 December 2020 are $203million.
In terms of the Group’s Borrowing Facilities, the following was considered in the context of the Group’s
liquidity and covenant compliance over the Forecast Period.
1. Karish Field Development, Israel:
Consistent with the Group’s plans to implement new financing as the Karish development approaches
first gas, in March 2021 Energean issued a $2.5 billion Bond to (i) refinance its $1.45 billion Project
Finance Facility (ii) cancel and replace the $700m Term Loan which was drawn to fund the acquisition
of Kerogen’s minority interest in Energean Israel, (iii) fund future capital and exploration expenditure
in Israel, including Karish and Karish North and (iv) for general corporate purposes of the Group. The
gross proceeds from the Bond issuance will be released from an escrow account upon the receipt of
standard regulatory approvals, the registration of certain pledges and execution of relevant legal
documentation. While the approval and registration processes are not wholly within the Group’s
control, the Board considers the risk of these not being forthcoming to be remote and has therefore
reflected the receipt of the bond proceeds for the purposes of the going concern assessment.
2. Greek RBL:
In March 2021, the Group agreed a waiver with its lenders under the EBRD reserve-based lending
facility whereby there are no more Borrowing Base Redeterminations and the facility effectively
converts to an amortising term loan with repayments weighted towards the second half of 2022 to
2024. Covenants under the Subordinated Loan Agreement are also waived until December 2022.
3. Egypt RBL:
The next redetermination under the Egypt RBL is due in June 2021. Given the conservative
assumptions on Brent price set in 2020 during a material drop in oil prices due to COVID and the
weaker economic environment we do expect any reduction in debt capacity or availability under the
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Egypt RBL. All forecasted covenants are compliant under both base and reasonable worst case
scenario.
In forming an assessment on the Group’s ability to continue as a going concern and its review of the
forecasted cashflow of the Group over the Forecast Period (from the date of approval of the
consolidated financial statements) the Board has made significant judgements about:
• Reasonable sensitivities appropriate for the current status of the business and the wider macro
environment; and
•
the Group’s ability to implement the mitigating actions if required within the Group’s control,
which would further safeguard the Group’s liquidity and covenant compliance.
After careful consideration, the Directors are satisfied that the Group has sufficient financial resources
to continue in operation for the foreseeable future, for a period of not less than 12 months from the
date of this report. For this reason, they continue to adopt the going concern basis in preparing the
consolidated financial statements.
2.2 New and amended accounting standards and interpretations
Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities
and assets must include, at a minimum, an input and a substantive process that together significantly
contribute to the ability to create output. Furthermore, it clarified that a business can exist without
including all of the inputs and processes needed to create outputs. These amendments had no impact
on the consolidated financial statements of the Group, but may impact future periods should the Group
enter into any further business combinations.
Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide
a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate
benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the
timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument.
These amendments had no impact on the consolidated financial statements of the Group.
Amendments to IAS 1 and IAS 8 Definition of Material
The amendments provide a new definition of material that states, “information is material if omitting,
misstating or obscuring it could reasonably be expected to influence decisions that the primary users
of general purpose financial statements make on the basis of those financial statements, which provide
financial information about a specific reporting entity.” The amendments clarify that materiality will
depend on the nature or magnitude of information, either individually or in combination with other
information, in the context of the financial statements. A misstatement of information is material if it
could reasonably be expected to influence decisions made by the primary users. These amendments
had no impact on the consolidated financial statements of, nor is there expected to be any future
impact to the Group.
Conceptual Framework for Financial Reporting issued on 29 March 2018
The Conceptual Framework is not a standard, and none of the concepts contained therein override
the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist
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the IASB in developing standards, to help preparers develop consistent accounting policies where
there is no applicable standard in place and to assist all parties to understand and interpret the
standards. This will affect those entities which developed their accounting policies based on the
Conceptual Framework. The revised Conceptual Framework includes some new concepts, updated
definitions and recognition criteria for assets and liabilities and clarifies some important concepts.
These amendments had no impact on the consolidated financial statements of the Group.
Amendments to IFRS 16 Covid-19 Related Rent Concessions
On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16
Leases. The amendments provide relief to lessees from applying IFRS 16 guidance on lease
modification accounting for rent concessions arising as a direct consequence of the Covid-19
pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent
concession from a lessor is a lease modification. A lessee that makes this election accounts for any
change in lease payments resulting from the Covid-19 related rent concession the same way it would
account for the change under IFRS 16, if the change were not a lease modification.
The amendment applies to annual reporting periods beginning on or after 1 June 2020. Earlier
application is permitted. This amendment had no impact on the consolidated financial statements of
the Group.
New and amended standards and interpretations in issue but not yet effective for the 2020 year
end
New standards and interpretations that are in issue but not yet effective are listed below:
• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current
or Non-current (1 Jan 2023)
• Amendments to IAS 16 Property, Plant and Equipment – Proceeds before intended use (1 Jan
2022)
• Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets – Cost of fulfilling
a contract
• Annual improvements 2018-2020 (1 Jan 2022)
• Amendments to IFRS 17 Insurance Contracts (1 Jan 2023)
• Reference to the Conceptual Framework (Amendments to IFRS 3)
•
Interest rate benchmark reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFSR IFRS 4
and IFRS 16)”– (1 Jan 2021)
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
• Definition of Accounting Estimates (Amendments to IAS 8) - (1 Jan 2023)
• Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021”
The adoption of the above standard and interpretations is not expected to lead to any changes to the
Group’s accounting policies or have any other material impact on the financial position or performance
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 30. Control is achieved when
the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
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FINANCIAL STATEMENTS
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:
• Power over the investee
• Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect the amount of the investor’s returns
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.
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 US Dollars (US$). The US Dollar is the currency that mainly
influences sales prices, revenue estimates and has a significant effect on its operations. The functional
currencies of the Group's main subsidiaries are Euro for Edison E&P Spa, Edison International E&P
Spa, Energean Oil & Gas S.A., and US$ for Energean Israel Limited, Energean International Limited
and Energean Capital Limited.
• Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
retranslation of monetary assets and liabilities denominated in foreign currencies are recognised in
the profit or loss. Such monetary assets and liabilities are translated at year end foreign exchange
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FINANCIAL STATEMENTS
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 are recognised at their fair value at the acquisition
date, except that:
• 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;
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
•
• 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.
If the initial accounting for a business combination is incomplete by the end of the reporting year in
which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period
(see below), or additional assets or liabilities are recognised, to reflect new information obtained about
facts and circumstances that existed as at the acquisition date that, if known, would have affected the
amounts recognised as at that date.
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The measurement period is the time from the date of acquisition to the date the Group receives
complete information about facts and circumstances that existed as 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 recognized at
cost. The carrying amount of the investment is adjusted to recognize 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 recognized directly in the equity of the associate or joint
venture, the Group recognizes its share of any changes, when applicable, in the statement of changes
in equity. Unrealized 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.
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FINANCIAL STATEMENTS
After application of the equity method, the Group determines whether it is necessary to recognize 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
recognizes 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 recognizes 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 recognized in profit or loss.
• Joint Operations
A joint operation is a type of joint arrangement whereby the parties that have joint control of the
arrangement have the right to the assets and obligations for the liabilities, relating to the arrangement.
In relation to its interests in joint operations, the Group recognises its share of:
• Assets, including its share of any assets held jointly
• Liabilities, including its share of any liabilities incurred jointly
• Revenue from the sale of its share of the output arising from the joint operation
• Share of the revenue from the sale of the output by the joint operation
• Expenses, including its share of any expenses incurred jointly.
3.4 Exploration and evaluation expenditures
The Group adopts the successful efforts method of accounting for exploration and evaluation costs.
Pre-licence costs are expensed in the period in which they are incurred. All licence acquisition,
exploration and evaluation costs and directly attributable administration costs are initially capitalised
as intangible assets by field or exploration area, as appropriate. All such capitalised costs are subject
to technical, commercial and management review, as well as review for indicators of impairment at
least once a year. This is to confirm the continued intent to develop or otherwise extract value from
the discovery. When this is no longer the case, the costs are written off through the statement of profit
or loss. When proved reserves of oil and gas are identified and development is sanctioned by
management, the relevant capitalised expenditure is first assessed for impairment and (if required)
any impairment loss is recognised, then the remaining balance is transferred to oil and gas properties.
Farm-outs — in the exploration and evaluation phase
The Group does not record any expenditure made by the farmee on its account. It also does not
recognise any gain or loss on its exploration and evaluation farm-out arrangements, but redesignates
any costs previously capitalised in relation to the whole interest as relating to the partial interest
retained. Any cash consideration received directly from the farmee is credited against costs previously
capitalised in relation to the whole interest with any excess accounted for by the Group as a gain on
disposal.
3.5 Oil and gas properties – assets in development
Expenditure is transferred from ’Exploration and evaluation assets’ to ‘Assets in development’ which
is a subcategory of ‘Oil and gas properties’ once the work completed to date supports the future
development of the asset and such development receives appropriate approvals. After transfer of the
exploration and evaluation assets, all subsequent expenditure on the construction, installation or
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FINANCIAL STATEMENTS
completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells,
including unsuccessful development or delineation wells, is capitalised within ‘Assets in development’.
Development expenditure is net of proceeds from the sale of oil or gas produced during the
development phase to the extent that it is considered integral to the development of the asset. Any
costs incurred in testing the assets to determine whether they are functioning as intended, are
capitalised, net of any proceeds received from selling any product produced while testing. Where these
proceeds exceed the cost of testing, any excess is recognised in the statement of profit or loss. When
a development project moves into the production stage, all assets included in ‘Assets in development’
are then transferred to ‘Producing assets’ which is also a sub-category of ‘Oil and gas properties’. The
capitalisation of certain construction/development costs ceases, and costs are either regarded as part
of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to ‘Oil and
gas properties’ asset additions, improvements or new developments.
3.6 Commercial reserves
Commercial reserves are proven and probable oil and gas reserves, which are defined as the
estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and
engineering data demonstrate with a specified degree of certainty to be recoverable in future years
from known reservoirs and which are considered commercially producible. There should be a 50 per
cent statistical probability that the actual quantity of recoverable reserves will be more than the amount
estimated as proven and probable reserves and a 50 per cent statistical probability that it will be less.
3.7 Depletion and amortisation
All expenditure carried within each field is amortised from the commencement of production on a unit
of production basis, which is the ratio of oil and gas production in the period to the estimated quantities
of commercial reserves at the end of the period plus the production in the period, generally on a field-
by-field basis or by a group of fields which are reliant on common infrastructure. Costs included in the
unit of production calculation comprise the net book value of capitalised costs plus the estimated future
field development costs required to recover the commercial reserves remaining. Changes in the
estimates of commercial reserves or future field development costs are dealt with prospectively.
3.8 Impairments of oil & gas properties
The group assesses assets or groups of assets, called cash-generating units (CGUs), for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset or CGU
may not be recoverable; for example, changes in the group’s assumptions about commodity prices,
low field utilization, significant downward revisions of estimated reserves or increases in estimated
future development expenditure or decommissioning costs. If any such indication of impairment exists,
the group makes an estimate of the asset’s or CGU’s recoverable amount.
Where there is evidence of economic interdependency between fields, such as common infrastructure,
the fields are grouped as a single CGU for impairment purposes. A CGU’s recoverable amount is the
higher of its fair value less costs of disposal and its value in use. Where the carrying amount of a CGU
exceeds its recoverable amount, the CGU is considered impaired and is written down to its recoverable
amount.
Fair value less costs of disposal is the price that would be received to sell the asset in an orderly
transaction between market participants and does not reflect the effects of factors that may be specific
to the group and not applicable to entities in general.
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FINANCIAL STATEMENTS
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 post 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
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.
3.9 Other property, plant and equipment
Other property, plant and equipment comprise of plant machinery and installation, furniture and
fixtures.
Initial recognition
The initial cost of an asset comprises its purchase price or construction cost, any costs directly
attributable to bringing the asset into operation and borrowing costs. The purchase price or
construction cost is the aggregate amount paid and the fair value of any other consideration given to
acquire the asset.
Depreciation
Depreciation of other property, plant and equipment is calculated on the straight-line method so as to
write-off the cost amount of each asset to its residual value, over its estimated useful life. The useful
life of each class is estimated as follows:
Property leases and leasehold improvements
Motor vehicles and other equipment
Plant and machinery
Furniture, fixtures and equipment
Years
3 - 10
2 - 5
7 - 15
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
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FINANCIAL STATEMENTS
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.
3.10 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.
3.11 Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its depreciable property, plant and
equipment and intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. Impairment is assessed at the level of cash-generating units (CGUs)
which, in accordance with IAS 36 ‘Impairment of Assets’, are identified as the smallest identifiable
group of assets that generates cash inflows, which are largely independent of the cash inflows from
other assets. This is usually at the individual royalty, stream, oil and gas or working interest level for
each property from which cash inflows are generated.
An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its
recoverable amount, which is the higher of fair value less costs of disposal (FVLCD) and value-in-use
(VIU). The future cash flow expected is derived using estimates of proven and probable reserves and
information regarding the mineral, stream and oil & gas properties, respectively, that could affect the
future recoverability of the Company’s interests. Discount factors are determined individually for each
asset and reflect their respective risk profiles.
Assets are subsequently reassessed for indications that an impairment loss previously recognised
may no longer exist. An impairment charge is reversed if the conditions that gave rise to the recognition
of an impairment loss are subsequently reversed and the asset’s recoverable amount exceeds its
carrying amount. Impairment losses can be reversed only to the extent that the recoverable amount
does not exceed the carrying value that would have been determined had no impairment been
recognised previously.
Exploration and evaluation assets are tested for impairment when there is an indication that a
particular exploration and evaluation project may be impaired. Examples of indicators of impairment
include a significant price decline over an extended period, the decision to delay or no longer pursue
the exploration and evaluation project, or an expiration of rights to explore an area. In addition,
exploration and evaluation assets are assessed for impairment upon their reclassification to producing
assets (oil and gas interest in property, plant and equipment). In assessing the impairment of
exploration and evaluation assets, the carrying value of the asset would be compared to the estimated
recoverable amount and any impairment loss is recognised immediately in profit or loss.
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FINANCIAL STATEMENTS
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.
3.12 Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at the date of inception. The arrangement is assessed to determine whether fulfilment
is dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the
asset (or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement.
The Group is not a lessor in any transactions, it is only a lessee.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-
term leases and leases of low-value assets. The Group recognises lease liabilities to make lease
payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred,
and lease payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the
estimated useful lives of the assets, as follows:
• Property leases 1 to 10 years
• Motor vehicles and other equipment 1 to 12 years
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the
asset.
The right-of-use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease
term reflects the Group exercising the option to terminate.
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FINANCIAL STATEMENTS
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at
the lease commencement date if the interest rate implicit in the lease is not readily determinable. After
the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in the lease payments
(e.g., changes to future payments resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in Interest-bearing loans and borrowings (see Note 21).
iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery
and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered to be low value. Lease payments on short-
term leases and leases of low value assets are recognised as expense on a straight-line basis over
the lease term.
3.13 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 amortized cost, fair
value through other comprehensive income (OCI), or fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of
trade receivables that do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in
the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables
that do not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI,
it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the
principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets
in order to generate cash flows. The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in two categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through profit or loss
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Financial assets at amortized cost
Financial assets at amortised cost are subsequently measured using the effective interest (EIR)
method and are subject to impairment under the expected credit loss model. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortized 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
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 or are transferred.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on the difference between the contractual cash
flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral to the
contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from
default events that are possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
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For trade receivables and contract assets, the Group applies a simplified approach in calculating
ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when internal
or external information indicates that the Group is unlikely to receive the outstanding contractual
amounts in full before taking into account any credit enhancements held by the Group. A financial
asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit
or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative
financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing
in the near term. This category also includes derivative financial instruments entered into by the Group
that are not designated as hedging instruments in hedge relationships as defined by IFRS 9.
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.
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Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original liability and the recognition of
a new liability. The difference in the respective carrying amounts is recognised in the statement of
profit or loss.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, or to realise the assets and settle the
liabilities simultaneously.
• Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as interest rate swaps and forward commodity
contracts, to hedge its interest rate risks and commodity price risks, respectively. Such derivative
financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes in the fair value of a recognised
asset or liability or an unrecognised firm commitment
• Cash flow hedges when hedging the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in an unrecognised firm commitment
• Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which it wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge.
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness
requirements:
• There is ‘an economic relationship’ between the hedged item and the hedging instrument
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of
the hedged item that the Group actually hedges and the quantity of the hedging instrument
that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described
below:
Cash flow hedges
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The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash
flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit
or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the
hedging instrument and the cumulative change in fair value of the hedged item attributable to the
hedged risk.
From time to time, the Group may use forward commodity contracts for its exposure to volatility in the
commodity prices. The ineffective portion relating to forward commodity contracts is recognised in
revenue or cost of sales.
The Group designates only the spot element of forward contracts as a hedging instrument. The forward
element is recognised in OCI and accumulated in a separate component of equity.
The amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the
same period or periods during which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must
remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the
amount will be immediately reclassified to profit or loss as a reclassification adjustment. After
discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must
be accounted for depending on the nature of the underlying transaction.
• Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue
costs.
Ordinary shares
Ordinary shares are classified as equity and measured at their nominal value. Any premiums received
on issue of share capital above its nominal value, are recognised as share premium within equity.
Associated issue costs are deducted from share premium.
3.14 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 recognized 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 recognized 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
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FINANCIAL STATEMENTS
ultimately vest. The expense or credit in the statement of profit or loss for a period represents the
movement in cumulative expense recognized 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 recognized 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.
3.15 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either: in the principal market for the asset or liability or in the absence of a principal market, in the
most advantageous market for the asset or liability.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest. A fair value measurement of a non-financial asset takes into account a market
participant's ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities, for which fair value is measured or disclosed in the consolidated financial
statements, are categorised within the fair value hierarchy, described as follows, based on the lowest-
level input that is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the lowest-level input that is significant to the fair
value measurement is directly or indirectly observable
• Level 3 — Valuation techniques for which the lowest-level input that is significant to the fair
value measurement is unobservable.
For assets and liabilities that are recognised in the consolidated financial statements on a recurring
basis, the Group determines whether transfers have occurred between levels in the hierarchy by
reassessing categorisation (based on the lowest-level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
3.16 Cash and cash equivalents
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FINANCIAL STATEMENTS
Cash and cash equivalents comprise of cash at bank, demand deposits and also cash reserves
retained as a bank security pledge in respect of bank guarantees (Note 28), with a maturity of three
months or less that are subject to an insignificant risk of changes in their fair value.
The cash reserves retained as a bank security pledge in respect of bank guarantees are defined as
restricted cash and held in designated bank deposits accounts to be released when the Group meet
the specified expenditure milestones.
3.17 Over/underlift
Lifting or offtake arrangements for oil and gas produced in certain of the Group’s jointly owned
operations are such that each participant may not receive and sell its precise share of the overall
production in each period. The resulting imbalance between cumulative entitlement and cumulative
production less stock is underlift or overlift. Underlift and overlift are valued at market value and
included within receivables and payables respectively. Movements during an accounting period are
adjusted through cost of sales such that gross profit is recognised on an entitlements basis.
In respect of redeterminations, any adjustments to the Group’s net entitlement of future production are
accounted for prospectively in the period in which the make-up oil is produced. Where the make-up
period extends beyond the
expected life of a field an accrual is recognised for the expected shortfall.
3.18 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.
3.19 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation, and
a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is recognised as a separate asset but
only when the reimbursement is virtually certain. The amount recognised as a provision is the best
estimate of the consideration required to settle the present obligation at the end of the reporting period,
taking into account the risk and uncertainties surrounding the obligation. The expense relating to a
provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money
is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting is used, the increase in the provision due to the passage
of time is recognised as a finance cost.
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FINANCIAL STATEMENTS
Decommissioning costs
Provision for decommissioning is recognized in full when the related facilities are installed. A
corresponding amount equivalent to the provision is also recognized as part of the cost of the related
property, plant and equipment.
The amount recognized 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.
3.20 Revenue
Revenue from contracts with customers is recognized 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 gas, crude oil and by-products
Sales revenue represents the sales value, net of VAT, of actual sales volumes to customers in the
year together with the gain/loss on realization of cash flow hedges.
The Group’s accounting policy under IFRS 15 is that revenue is recognised when the Group satisfies
a performance obligation by transferring oil or gas to its customer. The title to oil and gas typically
transfers to a customer at the same time as the customer takes physical possession of the oil or gas.
Typically, at this point in time, the performance obligations of the Group are fully satisfied. The revenue
is recorded when the oil or gas has been physically delivered to a vessel or pipeline.
• Rendering of services
The Group recognizes revenue from technical advisory services, using an input method to measure
progress towards complete satisfaction of the service, because the customer simultaneously receives
and consumes the benefits provided by the Group. The Group recognises revenue from advisory
services on the basis of the labour hours expended relative to the total expected labour hours to
complete the service.
3.21 Retirement benefit costs
• State-managed retirement benefit scheme
Payments made to state-managed retirement benefit schemes (e.g. Government Social Insurance
Fund) are dealt with as payments to defined contribution plans where the Group's obligations under
the plans are equivalent to those arising in a defined contribution plan. The Group's contributions are
expensed as incurred and are included in staff costs. The Group has no legal or constructive
obligations to pay further contributions if the government scheme does not hold sufficient assets to
pay all employees benefits relating to employee service in the current and prior periods.
• Defined benefit plan
The Group operates an unfunded defined benefit plan in which a lump-sum amount is specified and
is payable at the termination of employees’ services based on such factors as the length of the
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FINANCIAL STATEMENTS
employees’ service and their salary. The liability recognised for the defined benefit plan is the present
value of the defined benefit obligation at the reporting date.
The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each reporting date. These assumptions used in the actuarial valuations
are developed by management with the assistance of independent actuaries.
Service costs on the defined benefit plan are included in staff costs. Interest expense on the defined
benefit liability is included in finance costs. Gains and losses resulting from other remeasurements of
the defined benefit liability are included in other comprehensive income and are not reclassified to
profit or loss in subsequent periods.
3.22 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.
3.23 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.
3.24 Equity, reserves and dividend payments
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FINANCIAL STATEMENTS
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:
•
•
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)
translation reserve – comprises foreign currency translation differences arising from the
translation of financial statements of the Group’s foreign entities (see Note 3.1)
• merger reserves - On 30 June 2017, the Company became the parent company of the Group
through the acquisition of the full share capital of Energean E&P Holdings Limited. From that
point, in the consolidated financial statements, the share capital became that of Energean Oil
& Gas plc. The previously recognised share capital and share premium of Energean E&P
Holdings Limited was eliminated with a corresponding positive merger reserve.
• Share-based payment reserve: The share-based payments reserve is used to recognise the
value of equity-settled share-based payments granted to parties including employees and key
management personnel, as part of their remuneration.
Retained earnings includes all current and prior period retained profits.
All transactions with owners of the parent are recorded separately within equity.
Dividend distributions payable to equity shareholders are included in other liabilities when the
dividends 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 management judgements in applying the accounting policies of the Group that have
the most significant effect on the consolidated financial statements:
Determining whether an acquisition constitutes a 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 an integrated set of activities and assets
that is capable of being conducted and managed for the purpose of providing goods or services to
customers, generating investment income (such as dividends or interest) or generating other income
from ordinary activities. A business consists of inputs and processes applied to those inputs that have
the ability to contribute to the creation of outputs. 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.
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FINANCIAL STATEMENTS
On 17 December 2020, the Group completed its acquisition of Edison Exploration & Production S.p.A.
("Edison E&P") from Edison S.p.A. ("Edison"). The gross consideration for the transaction, as at the
locked box date of 1 January 2019, is $284 million and the final net consideration, as of 17 December
2020, is $270 million. Prior to 1 July 2018 Edison E&P did not operate as a consolidated group, instead
the relevant component entities formed part of a broader exploration and production business unit. On
1 July 2018 a new legal sub group of Edison E&P was established. As part of the acquisition
management identified relevant inputs, processes and outputs that met the definition of a business
under IFRS 3.
Following 17 December 2020, Edison E&P Group has been consolidated into the Group. The business
combination is subject to the application of acquisition accounting as required by IFRS 3 Business
Combinations.
Carrying value of intangible exploration and evaluation assets (note 14)
Amounts carried under intangible exploration and evaluation assets represent active exploration
projects. Capitalized 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 license renewal or
extension; the assessment of whether sufficient data exists to indicate that, although a development
in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is
unlikely to be recovered in full from successful development or by sale; and the success of a well result
or geological or geophysical survey.
Identification of cash generating units
In considering the carrying value of property, plant and equipment the Group has to make a critical
judgement in relation to the identification of the smallest cash generating units to which those assets
are allocated. In all countries except for Italy the cash generating unit is considered to be at the
concession level. In Italy the concessions are connected via a shared pipeline with different points of
entry, which allows production to be changed from one concession to another. In view of this shared
infrastructure that exists in Italy and the ability to move sales between assets as well as the
management of spare parts and the organisational structure of the Italian business the Group has
identified cash generating units in Italy to be at the country and commodity level (being Italy gas and
Italy oil).
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:
Carrying value of property, plant and equipment (note 13)
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group
that may lead to impairment of assets. Where indicators of impairments or impairment reversals are
present and an impairment or impairment reversal test is required, the calculation of the recoverable
amount requires estimation of future cash flows within complex impairment models. The recoverable
amount (which is the higher of fair value less costs to sell and value in use) of the cash-generating
unit to which the assets belong is then estimated based on the present value of future discounted cash
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FINANCIAL STATEMENTS
flows. Key assumptions and estimates used in both the impairment models and in the calculation of
the fair value of property, plant and equipment acquired as part of business combination relate to:
commodity prices assumptions, post-tax discount rates and commercial reserves and the related cost
profiles. Proven and probable reserves are estimates of the amount of oil and gas that can be
economically extracted from the Group’s oil and gas assets. The Group estimates its reserves using
standard recognised evaluation techniques. The estimate is reviewed at least twice annually by
management and is regularly reviewed by independent consultants.
Proven and probable reserves are determined using estimates of oil and gas in place, recovery factors
and future commodity prices, the latter having an impact on the total amount of recoverable reserves
and the proportion of the gross reserves which are attributable to host governments under the terms
of the Production Sharing Contracts. Future development costs are estimated taking into account the
level of development required to produce the reserves by reference to operators, where applicable,
and internal engineers.
Further details about the carrying value of property, plant and equipment are shown in Note 13 of the
consolidated financial statements.
Recognising and measuring the identifiable assets acquired and liabilities assumed in Business
combination (note 6)
As mentioned above on 17 December 2020, the Group completed its acquisition of Edison Exploration
& Production S.p.A. 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.
When the fair values of assets and liabilities cannot be measured based on quoted prices in active
markets, they are measured using valuation techniques including the discounted cash flow (DCF)
model. The inputs to these models are taken from observable markets where possible, but where this
is not feasible, a degree of estimation is required in establishing fair values.
Recognition and presentation of contingent consideration
The transaction includes a contingent consideration of up to c. $100.0m for which the fair value has
been estimated at $55.2m, based on pricing simulations. The final consideration amount will be
determined on the basis of future gas prices (PSV) recorded at the time of the commissioning of the
Cassiopea field, which is expected in 2024.
Hydrocarbon reserve and resource estimates
The Group’s oil and gas development and production properties are depreciated on a unit of
production basis at a rate calculated by reference to developed and undeveloped proved and probable
commercial reserves (2P developed and undeveloped) which are estimated to be recoverable with
existing and future developed facilities using current operating methods, determined in accordance
with the Petroleum Resources Management System published by the Society of Petroleum Engineers,
the World Petroleum Congress and the American Association of Petroleum Geologists.
Commercial reserves are determined using estimates of oil 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 which include:
Page 205 of 274
FINANCIAL STATEMENTS
• Depreciation and amortisation charges in profit or loss may change where such charges are
determined using the units of production method, or where the useful life of the related assets
change
Impairment charges in profit or loss
•
• Provisions for decommissioning may change - where changes to the reserve estimates affect
expectations about when such activities will occur and the associated cost of these activities
• The recognition and carrying value of deferred tax assets may change due to changes in the
judgements regarding the existence of such assets and in estimates of the likely recovery of
such assets
The impact upon commercial reserves 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 presented are presented in note 13. Management monitors the impact on the
commercial reserves and the depletion charge on a Group level.
Decommissioning costs (note 23):
There is uncertainty around the cost of decommissioning as cost estimates can vary in response to
many factors, including from changes to market rates for goods and services, to the relevant legal
requirements, the emergence of new technology or experience at other assets. The expected timing,
work scope, amount of expenditure, discount and inflation rates may also change. Therefore significant
estimates and assumptions are made in determining the provision for decommissioning.
The estimated decommissioning costs are reviewed annually by an internal expert and the results of
this review are then assessed alongside estimates from operators. Provision for environmental clean-
up and remediation costs is based on current legal and contractual requirements, technology and price
levels.
Income taxes
Judgements are required in recognition of deferred tax assets relating to the extent to which future
cash flows are included.
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, which requires management to make a
number of estimates. 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.
At 31 December 2020 the Group has gross unused tax losses of $ $783.6 million as of 31 December
2019: $364.4 million) available to offset against future profits (note 15).
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 considered all available evidence
including approved budgets, forecasts and business plans to form its assessment. Following an
assessment conducted at December 2020, it was determined there would be sufficient taxable income
generated to recover the deferred tax assets recognised.
Page 206 of 274
FINANCIAL STATEMENTS
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 four operating segments: Europe, (including Greece, Italy, UK,
Croatia), Israel, Egypt and New Ventures (Montenegro and Malta).
The Group’s reportable segments under IFRS 8 Operating Segments are Europe, Israel and Egypt.
Segments that do not exceed the quantitative thresholds for reporting information about operating
segments have been included in Other. In 2019, before the acquisition of Edison E&P, the Group had
no activities in Egypt and the Europe segment comprised only Greece (including the Prinos and
Epsilon production asset, Katakolo non-producing assets and Ioannina and Aitoloakarnania
exploration assets.
Segment revenues, results and reconciliation to profit before tax
The following is an analysis of the Group’s revenue, results and reconciliation to profit/(loss) before
tax by reportable segment: The consolidated financial statements for the year ended 31 December
2020 include the results of Egypt segment and Italy, UK and Croatia countries for the 14 day period
ended 31 December 2020 (note 6).
Year ended 31 December 2020
Revenue from Oil
Revenue from Gas
Other revenue
Adjusted EBITDAX1
Reconciliation to profit before tax:
Depreciation and amortisation
expenses
Share-based payment charge
Exploration and evaluation
expenses
Impairment loss on property, plant
and equipment
Other expense
Other income
Finance income
Finance costs
Europe
Israel
Egypt
Other &
intercompany
transactions
Total
$'000
$'000
$'000
$'000
$'000
17,987
2,250
7,126
-
-
-
1,580
5,097
92
(4,874)
(3,574)
4,143
0
0
(6,118)
(4,030)
19,567
7,347
1,100
(8,335)
(294)
(1,989)
(443)
(24,125)
(21,399)
(471)
(42)
(2,942)
(502)
(65,299)
-
(1,137)
(2,700)
4,154
224
-
201
(3,619)
(326)
-
-
-
-
689
64
175
(2,712)
(3,225)
(980)
(4,424)
-
(65,299)
(24,492)
(28,329)
4,343
4
9,186
493
(1,216)
(4,986)
Page 207 of 274
FINANCIAL STATEMENTS
Europe
Israel
Egypt
Other &
intercompany
transactions
Total
$'000
$'000
$'000
$'000
$'000
Net foreign exchange gain/(loss)
10,769
1,862
(967)
3,781
15,445
Profit/(loss) before income tax
(84,594)
(5,375)
2,115
(25,745)
(113,599)
Taxation income / (expense)
21,009
495
(1,081)
318
20,741
(63,585)
(4,880)
1,034
(25,427)
(92,858)
Profit/(loss) from continuing
operations
Year ended 31 December 2019
Revenue from oil
Other revenue
Adjusted EBITDAX1
Reconciliation to profit before tax:
Depreciation and amortisation
expenses
75,749
(2,950)
45,129
-
-
(2,846)
(38,777)
(38)
Share-based payment charge
(1,065)
Exploration and evaluation
expenses
Impairment loss on property, plant
and equipment
Other expense
Other income
Finance income
Finance costs
Net foreign exchange gain/(loss)
(16)
(71,115)
(4,418)
2,610
595
(8,265)
(4,504)
(86)
(55)
-
(89)
37
1,293
(1,138)
932
Profit before income tax
(79,826)
(1,990)
Taxation income / (expense)
20,283
375
-
75,749
(2,950)
(3,931)
-
38,352
(239)
(39,054)
(1,600)
(2,751)
(730)
(801)
-
(17,077)
448
608
401
(361)
(71,115)
(21,584)
3,095
2,496
(9,002)
(3,933)
(22,481)
(104,297)
(127)
20,531
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Profit from continuing
operations
(59,543)
(1,615)
(22,608)
(83,766)
1Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is calculated as profit or loss for
the period, adjusted for discontinued operations, taxation, depreciation and amortisation, share-based payment charge, impairment
of property, plant and equipment, other income and expenses (including the impact of derivative financial instruments and foreign
exchange), net finance costs and exploration and evaluation expenses.
Page 208 of 274
FINANCIAL STATEMENTS
The following table presents assets and liabilities information for the Group’s operating segments as
at 31 December 2020 and 31 December 2019, respectively:
Europe
Israel
Egypt
Other &
intercompany
transactions
Total
$'000
$'000
$'000
$'000
$'000
Year ended 31
December 2020
Oil & Gas properties
572,834
2,156,236
326,366
(1,728)
3,053,708
Other fixed assets
Intangible assets
Trade and other
receivables
Deferred tax asset
Other assets
Total assets
Trade and other
payables
Borrowings
Decommissioning
provision
Other current liabilities
Other non-current
liabilities
Total liabilities
Other segment
information
Capital Expenditure:
- Property, plant and
equipment
- Intangible, exploration
and evaluation assets
Year ended 31
December 2019
21,727
139,267
154,469
103,200
251,240
765
89,607
27,588
39,219
1,304
162,222
0
22,856
3,484
7,723
344
(0)
53,564
275,816
318,339
126,056
37,464
247,028
(228,202)
307,530
1,242,737
2,285,376
825,279
(218,379)
4,135,013
187,117
76,146
57,959
34,232
355,454
121,264
1,093,965
826,729
140,629
38,399
6,914
0
-
227,847
1,443,076
865,128
-
54,652
(195,280)
6,915
25,291
193,920
32,284
18,553
270,048
1,301,030
1,409,344
144,895
85,352
2,940,621
14,117
405,279
860
(197)
420,059
1,219
6,625
-
-
-
1,147
8,991
(878)
1,883,651
1,809
18,620
Page 209 of 274
Oil & Gas properties
302,327
1,582,202
Other fixed assets
16,253
558
Europe
Israel
Egypt
FINANCIAL STATEMENTS
Other &
intercompany
transactions
Total
$'000
$'000
$'000
$'000
$'000
Intangible assets
Trade and other
receivables
Deferred tax asset
Other assets
Total assets
Trade and other
payables
Borrowings
Decommissioning
provision
Other current liabilities
Other non-current
liabilities
Total liabilities
Other segment information
Capital Expenditure:
- Property, plant and
equipment
- Intangible, exploration
and evaluation assets
Segment cash flows
16,059
125,501
24,295
33,038
20,196
34,550
-
110,974
412,168
1,853,785
65,408
93,168
159,768
756,217
13,145
133
7,019
-
-
142,177
245,473
991,562
59,481
565,413
8,941
47,085
-
-
-
-
-
-
-
-
-
-
-
-
6,116
147,676
1,047
59,892
-
33,038
234,122
365,292
242,216
2,508,169
9,532
168,108
-
-
-
915,985
13,145
133
850
150,046
10,382
1,247,417
(748)
624,146
4,937
60,963
Year ended 31 December 2020
Net cash from / (used in) operating
activities
Net cash (used in) investing activities
Greece
Israel
Egypt
Other &
intercompany
transactions
Total
$'000
$'000
$'000
$'000
$'000
(5,442)
(2,469) 22,808
(13,428)
1,469
(18,626)
(392,236)
(925)
(208,005)
(619,792)
Page 210 of 274
FINANCIAL STATEMENTS
Greece
Israel
Egypt
Other &
intercompany
transactions
Total
$'000
$'000
$'000
$'000
$'000
Net cash from financing activities
19,164
320,216
(174)
119,069
458,275
Net increase/(decrease) in cash and
cash equivalents
Cash at beginning of the year
Cash acquired from business
Acquisition
Effect of exchange rate fluctuations on
cash held
Cash and cash equivalents at end
of the period
Year ended 31 December 2019
Net cash from / (used in) operating
activities
(4,904)
6,084
(74,489) 21,709
(102,364)
(160,048)
110,488
0
237,847
354,419
7,234
- 55,650
(62,884)
-
5,195
1,422
(1,119)
3,070
8,568
13,609
37,421 76,240
75,669
202,939
47,641
(2,314)
Net cash (used in) investing activities
(71,932)
(875,223)
Net cash from financing activities
18,804
791,254
Net increase/(decrease) in cash and
cash equivalents
At beginning of the year
Effect of exchange rate fluctuations on
cash held
Cash and cash equivalents at end
of the period
(5,487)
11,799
(86,283)
196,706
(228)
65
6,084
110,488
-
-
-
-
-
-
(9,042)
36,285
(4,964)
(952,119)
241,355 1,051,413
227,349
135,579
11,317
219,822
(819)
(982)
237,847
354,419
6. Business combination
Acquisition of Edison E&P
On 17 December 2020, the Group acquired 100 per cent of the issued share capital and obtained
control of Edison Exploration & Production S.p.A (“Edison E&P”). Edison E&P contains a portfolio of
assets including producing assets in Egypt, Italy, the UK North Sea and Croatia with development
assets in Egypt and Italy and balanced-risk exploration opportunities across the portfolio. The
acquisition of Edison E&P qualifies as a business combination as defined in IFRS 3.
The fair values of the identifiable assets and liabilities of Edison E&P have been provisionally
estimated as at the date of acquisition and were as follows:
Page 211 of 274
Assets:
Property, plant and equipment
Identifiable intangible assets
Inventory
Trade and other receivables87
Cash and cash equivalents
Deferred tax assets
Liabilities
Trade and other payables
Retirement benefit liability
Other long term liabilities
Decommissioning liabilities
Total identifiable assets acquired and liabilities assumed
Goodwill arising on acquisition
Fair value of purchase consideration transferred
Satisfied by:
Cash paid
Amount payable
Contingent consideration arrangement
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balances acquired
Net consolidated cash outflow
FINANCIAL STATEMENTS
Fair value recognised
on acquisition
$’000
689,188
133,786
68,977
336,081
62,884
70,832
1,361,748
(199,399)
(3,021)
(51,059)
(808,994)
(1,062,473)
299,275
25,346
324,621
266,088
3,311
55,222
324,621
(266,088)
62,884
(203,204)
87 Trade receivables include mainly balances from EGPC, the Egyptian governmental body that are significantly aged. Consideration
has been given to whether the carrying amount appropriately reflects their recoverable amount and a proper loss allowance
recognised. As such it has been concluded that book value equates to fair values.
Page 212 of 274
FINANCIAL STATEMENTS
The base consideration payable of $398.6 million was agreed as of a locked box date of 1 January
2019 with the impact of economic performance, capital expenditure and working capital movements
from this date to completion of 17 December 2020 adjusted within the final consideration payable of
$269.9 million.
The contingent consideration arrangement will vary depending on future Italian gas prices at the point
in time at which first gas production is delivered from the Cassiopea field in Italy which is expected in
2024. The potential undiscounted amount of all future payments that the Group could be required to
make under the contingent consideration arrangement is between $0 and $100 million. $0 will be
payable if the arithmentic average of the year one and year two Italian PSV futures prices is equal to
or less than €10/Mwh when first gas production is delivered from the field. $100 million is payable if
that average price is equal to or exceeds €20/Mwh. A sliding scale is used to determine consideration
if the average price is between €10/Mwh and €20/Mwh.
The fair value of the contingent consideration arrangement of $55.2 million was estimated by applying
forward gas price curves against the expected date of first gas as at acquisition date. This resulted in
an aggregate fair value of $433.7 million being allocated to the identifiable assets and liabilities
acquired, prior to the recognition of a deferred tax liability of $22.9 million as further described below.
Goodwill of $25.3 million has been recognised upon acquisition. An amount of $22.9 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 each
CGU country (27.9% for Italy and 40% for UK) 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.
Acquisition-related costs (included in other expenses) amount to $17.9 million and have been
recognised in profit and loss.
Edison E&P contributed $10.1 million revenue and $4.6 million to the Group’s loss for the period
between the date of acquisition and 31 December 2020.
If the acquisition of Edison E&P had been completed on the first day of the financial year, Group
revenues for the year would have been $335.9 million and Group loss before tax would have been
$422.2million.
7. Revenue
Crude oil sales
Gas sales
Petroleum products sales
Rendering of services
Total revenue
2020
$'000
2019
$'000
19,567
7,347
326
774
28,014
74,940
-
809
-
75,749
Page 213 of 274
FINANCIAL STATEMENTS
100% of the gas produced at Abu Qir (Egypt) is sold to EGPC under a Brent-linked gas price. At Platt’s
Dated Brent prices of between US$40/bbl and US$72/bbl the gas price is US$3.5/mmBTU, limiting
volatility and exposure to commodity price fluctuations. For Brent prices below US$40/bbl the gas price
decreases until it reaches a gas price floor of US$1.29/mmBTU at a Brent price of US$0/bbl. For Brent
prices above US$72/bbl the gas price increases until it reaches a cap of US$5.88/mmBTU at Brent
prices in excess of US$100/bbl.
8. Operating (loss)/profit before taxation
2020
$'000
2019
$'000
(a)
Cost of oil sales
Staff costs (note 9)
Energy cost
Royalty payable
Other operating costs
Depreciation and amortisation (note 13)
Stock overlift/underlift movement
Total cost of oil sales
(b)
Administration expenses
Staff costs (note 9)
Other General & Administration expenses
Share-based payment charge included in
administrative expenses
Depreciation and amortization (note 13, 14)
Auditor fees (note 8g)
(c)
Selling and distribution expense
Staff costs (note 9)
Other selling and distribution expenses
(d)
Exploration and evaluation expenses
14,562
5,310
430
8,227
22,052
(2,165)
48,416
5,745
4,584
2,776
780
1,251
12,643
7,157
553
5,590
36,645
2,964
65,552
4,812
3,559
2,685
804
1,445
15,136
13,305
29
118
147
52
293
345
Page 214 of 274
Staff costs for Exploration and evaluation activities
(Note 9)
Exploration costs written off
Other exploration and evaluation expenses
(e)
Other expenses
Transaction costs in relation to Edison E&P
acquisition1
Intra-group merger costs
Loss from disposal of Property plant & Equipment
Other indemnities
Write-down of inventory
Expected credit losses
Other expenses
(f)
Other income
Income from accounts payable written off2
Reversal of previous period provision
Write-back bank liabilities3
Proceeds from termination of agreement with
Neptune Energy4
(g)
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
Reporting accountant for proposed Edison E&P
acquisition
Other services
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
1,175
2,936
313
4,424
17,914
2,188
7,568
210
101
-
348
28,329
4,094
92
-
5,000
9,186
710
333
1,043
175
264
73
466
-
335
801
16,461
4,106
-
-
-
451
566
21,584
-
1,825
1,270
-
3,095
256
327
583
167
595
100
Page 215 of 274
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
1,555
1,445
1 Direct costs incurred in 2019 and 2020 relating to the acquisition of Edison’s E&P business
2 Related to derecognition of specific accounts payables balances in the Greek subsidiary following waiver agreements with creditors.
3Related to old bank liability transacted with on European Emission Allowances credits (“EUAs”) that became time barred.
4 Related to termination fees paid by Neptune Energy following the termination of the agreement for Neptune Energy to acquire Edison
E&P’s UK and Norwegian subsidiaries from the Group.
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 25)
Payroll cost capitalized in oil & 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)
Transaction costs in relation to future acquisitions (note 8e)
Selling and distribution expenses (note 8c)
Restructuring costs (note 8e)
Other
2020
Number
2019
Number
99
307
406
2020
$'000
30,095
5,965
3,325
39,385
85
327
412
2019
$'000
27,424
5,664
3,481
36,569
(12,109)
(13,651)
27,276
22,918
14,562
-
8,521
1,175
-
29
756
2,233
27,276
12,643
-
7,497
466
1,034
52
1,081
145
22,918
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.
Page 216 of 274
Notes
21
24
13,14
10. Net finance 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 on provision for
decommissioning
Interest on obligations for leases
Less amounts included in the cost of qualifying
assets
Total finance costs
Interest income from time deposits
Total finance income
Foreign exchange (gain)/losses
Net financing (income)/costs
11. Taxation
(a) Taxation charge
Corporation tax - current year
Corporation tax - prior years
Deferred tax (Note 15)
Total taxation income
(b) Reconciliation of the total tax charge
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
90,008
34,430
6,716
7,178
(93,581)
3,143
4,042
744
247
919
(4,109)
4,986
(493)
(493)
(15,445)
(10,952)
(39,850)
1,758
5,139
1,349
320
436
-
9,002
(2,496)
(2,496)
3,933
10,439
2020
$'000
2019
$'000
(1,171)
404
21,508
20,741
(3)
(127)
20,661
20,531
2020
$'000
2019
$'000
Loss before tax
(113,599)
(104,297)
Page 217 of 274
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
Tax calculated at 24.9% weighted average rate (2019:
25.0%)
28,232
26,074
Impact of different tax rates
Tax impact of change of tax rates
Reassessment of recognised deferred tax asset in the
current period
Permanent differences2
Non recognition of deferred tax on current period losses3
Tax effect of non-taxable income
Foreign taxes
Other adjustments
Prior year tax
Taxation income
Effective tax rate
326
-
822
(5,251)
(3,366)
649
(1,081)
6
404
20,741
(804)
-
725
(3,599)
(1,910)
137
-
35
(127)
20,531
(18%)
(20%)
1 For the reconciliation of the tax rate, the weighted average rate of the statutory tax rates in Greece (25%), Israel (23%) and Italy
(24%) was used weighted according to the profit or loss before tax earned by the Group in each jurisdiction.
2 Permanent differences mainly consisted of non-deductible expenses with the majority relating to transaction costs for the Edison
E&P acquisition.
3 Tax losses generated from entities which are not expected to generate sufficient taxable profits in the near future and for which
deferred tax is not recognised.
12. 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 dilutive employee share options were converted into ordinary shares.
Total loss attributable to equity shareholders
(91,414)
(83,313)
2020
$'000
2019
$'000
Page 218 of 274
Effect of dilutive potential ordinary shares
Number of shares
Basic weighted average number of shares
Dilutive potential ordinary shares
FINANCIAL STATEMENTS
-
(91,414)
-
(83,313)
2020
Number
2019
Number
177,089,406
-
165,061,117
-
Diluted weighted average number of shares
177,089,406
165,061,117
Basic (loss)/earnings per share
$(0.52)/share
$(0.50)/share
Diluted (loss)/earnings per share
$(0.52)/share
$(0.50)/share
13. Property, plant & equipment
Oil and gas
assets
Property, Plant & Equipment at Cost
$'000
At 1 January 2019
Additions
Lease modification
Capitalized borrowing cost
Capitalised depreciation
Change in decommissioning provision
Foreign exchange impact
1,487,454
622,786
-
39,095
1,937
5,437
(9,546)
Other
property,
plant and
equipment
$'000
Leased
assets*
$'000
Total
$'000
9,792
123
(699)
-
-
-
56,513
1,553,759
1,238
624,147
-
-
-
-
(699)
39,095
1,937
5,437
(99)
(1,052)
(10,697)
At 31 December 2019
2,147,163
9,117
56,699
2,212,979
Additions
Acquisition of subsidiary
Lease modification
Disposal of assets
Capitalized borrowing cost
Capitalised depreciation
411,932
646,507
-
(4,795)
94,929
576
1,951
40,549
(1,519)
-
-
-
1,581
2,132
-
(5,328)
-
-
415,464
689,188
(1,519)
(10,123)
94,929
576
Page 219 of 274
Oil and gas
assets
Property, Plant & Equipment at Cost
$'000
Change in decommissioning provision
Transfer from Intangible assets
Foreign exchange impact
39,620
41,822
52,575
FINANCIAL STATEMENTS
Other
property,
plant and
equipment
$'000
Leased
assets*
$'000
-
-
-
-
743
5,153
Total
$'000
39,620
41,822
58,471
At 31 December 2020
3,430,329
50,841
60,237
3,541,407
Accumulated Depreciation
At 1 January 2019
Charge for the period
Expensed
Impairments
Foreign exchange impact
At 31 December 2019
Charge for the period
Expensed
Impairments
Foreign exchange impact
At 31 December 2020
Net carrying amount
At 31 December 2019
At 31 December 2020
175,122
33,206
58,147
(2,963)
-
3,437
-
11
27,141
202,263
4,096
12,968
(457)
40,739
71,115
(3,409)
263,512
3,448
43,748
310,708
18,105
64,727
30,299
3,073
-
458
2,149
572
4,044
23,327
65,299
34,801
376,643
6,979
50,513
434,135
1,883,651
3,053,686
5,669
12,951
1,902,271
43,862
9,724
3,107,272
Borrowing costs included in the cost of qualifying assets during the year are calculated by applying an
interest rate of 8.72 % (for the year ended 31 December 2019: 9.4%).
During the year the Group executed an impairment test for the Prinos CGU (Prinos and Epsilon fields).
In the period, indicators of impairment were noted for the Prinos CGU, being a reduction in both short-
term (Dated Brent forward curve) and long-term price assumptions and a change in the Group’s Prinos
field production forecast, which have resulted in an impairment of $65.3 million in the carrying value
of the Prinos CGU.
The Group applied the following nominal oil price assumptions for impairment assessment in respect
of its production asset of Prinos:
Page 220 of 274
FINANCIAL STATEMENTS
2020
2021
2022
2023
2024
2025
2026
31
December
2020
-
$50/bbl
$55/bbl
$60/bbl
$60/bbl
31
December
2019
forward
curve
($61.7/bbl)
forward curve
forward curve
($58.6/bbl)
($57.2/bbl)
forward
curve
($56.8/bbl)
forward curve
($57.0/bbl)
$60/bbl inflated
at 2% thereafter
$65/bbl
inflated at 2%
thereafter
$65.0/bbl
In 2020 impairment test the Group applied a 12.5% pre-tax discount rate (2019: 11.9%).
The Group used the value in use in determining the recoverable amount of the cash-generating unit
using discounted future cash flows. A reduction in the short and long-term price assumptions by 10%
per barrel, are considered to be reasonably possible changes for the purposes of sensitivity analysis.
Applying such a decrease to oil prices specified above would increase the impairment charge by $77.5
million. A 1 per cent increase in the pre-tax discount rate would increase the impairment by $25.3
million.
Impairment charges for the year also include an amount of $4.9 million relating to the disposal of
Energean Force rig unit.
Depreciation and amortisation for the year has been recognised as follows:
Cost of sales (note 8a)
Administration expenses (note 8b)
Other operating (income)/expenses
Capitalized depreciation in oil & gas properties
Total
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
Right-of-use asset additions/modifications
Lease payments related to capital activities
Capitalised share-based payment charge
Capitalised depreciation
Change in decommissioning provision
Movement in working capital
2020
$'000
22,052
780
1,293
576
24,701
2020
$'000
550,589
2019
$'000
36,645
804
1,605
1,937
40,991
2019
$'000
671,345
(403,968)
(897,153)
(94,929)
(1,951)
6,645
(99)
(576)
(39,620)
(16,091)
(39,095)
-
-
(730)
(1,937)
(5,437)
273,007
Page 221 of 274
FINANCIAL STATEMENTS
0
0
14. Intangible assets
Intangibles at Cost
At 1 January 2019
Additions
Capitalized borrowing costs
Exchange differences
31 December 2019
Additions
Exploration
and evaluation
assets
Goodwill
Other Intangible
assets
$'000
$'000
$'000
Total
$'000
10,310
75,800
1,641
60,639
755
(103)
-
-
-
71,601
75,800
8,379
-
324
-
(24)
1,941
612
87,751
60,963
755
(127)
149,342
8,991
Acquisition of subsidiary
115,438
25,346
18,348
159,132
Capitalized borrowing costs
Transfers to property, plant and
equipment
Exchange differences
At 31 December 2020
Accumulated amortisation and
impairments
At 1 January 2019
Charge for the period
Exchange differences
31 December 2019
Charge for the period
impairment
Exchange differences
31 December 2020
2,761
(41,822)
1,856
-
-
-
158,213
101,146
-
-
1,454
22,355
2,761
(41,822)
3,310
281,714
261
-
-
261
-
2,936
(193)
3,004
-
-
-
-
-
-
-
-
1,135
1,396
252
18
1,405
1,375
-
114
2,894
252
18
1,666
1,375
2,936
(79)
5,898
Page 222 of 274
FINANCIAL STATEMENTS
Exploration
and evaluation
assets
$'000
Goodwill
$'000
Other Intangible
assets
$'000
Total
$'000
Net carrying amount
At 31 December 2019
71,340
75,800
536
147,676
At 31 December 2020
155,209
101,146
19,461
275,816
Borrowing costs capitalised for qualifying assets for the year ended 31 December 2020 amounted to
$2.8 million (31 December 2019: $0.8 million). The interest rates used was 8.72 % (31 December
2019: 9.4%).
Goodwill arises principally because of the requirement to recognise deferred tax assets and liabilities
for the difference between the assigned values and the tax bases of assets acquired and liabilities
assumed in a business combination at amounts that do not reflect fair value (refer to note 6).
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 capitalized
Movement in working capital
15. Net deferred tax (liability)/ asset
2020
$'000
11,753
2019
$'000
61,718
(15,041)
(57,397)
(2,761)
6,049
(755)
(3,566)
Deferred tax
(liabilities)/as
sets
Property,
plant and
equipme
nt
Right
of use
asset
IFRS 16
Decom
-
missio
ning
Prepaid
expense
s and
other
receivabl
es
Invent
ory
Tax
losses
Retire
ment
benefit
liability
Accrued
expense
s and
other
short-ter
m
liabilities
Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
At 1 January
2019
(150,633)
-
(1,705)
676 85,614
820
4,390
-
(60,83
8)
Page 223 of 274
Deferred tax
(liabilities)/as
sets
Property,
plant and
equipme
nt
Right
of use
asset
IFRS 16
Decom
-
missio
ning
FINANCIAL STATEMENTS
Prepaid
expense
s and
other
receivabl
es
Invent
ory
Tax
losses
Retire
ment
benefit
liability
Accrued
expense
s and
other
short-ter
m
liabilities
Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Increase /
(decrease) for
the period
through:
profit or loss
(Note 11)
other
comprehensiv
e income
Exchange
difference
31 December
2019
Acquisition of
subsidiary
(Note 6)
Increase /
(decrease) for
the period
through:
profit or loss
(Note 11)
other
comprehensiv
e income
Exchange
difference
31 December
2020
11,250
(1,074)
-
-
1,385
(4)
(137,998)
(1,078)
-
-
-
-
829
94
6,289
70
3,203 20,661
(130)
-
-
-
116
(14)
35
(37)
(1,491)
23
(63)
(152)
(971)
733 90,412
913
7,646
(40,34
3)
10,080
60,752
70,832
8,381
819
8,877
(3,474)
(98)
7,384
53
(434) 21,508
-
-
(4,006)
(33)
-
-
130
-
-
-
1,603 1,733
(336)
60
7,293
84
655 3,717
(123,543)
(292)
8,877
(4,651)
695
165,84
1
1,050
9,470 57,447
2020
2019
Page 224 of 274
Deferred tax liabilities
Deferred tax assets
FINANCIAL STATEMENTS
$'000
(68,609)
126,056
57,447
$'000
(73,381)
33,038
(40,343)
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).
At 31 December 2020 the Group has gross unused tax losses of $783.6 million (as of 31 December
2019: $364.4 million) available to offset against future profits. Out of the total tax losses, $386.1 million
come from the Greek operations whereas amount of $40.5 million comes from the Israeli operations
and specifically the Karish licence which is in the development phase and expected to commence
production by 2021. Finally, tax losses of $357 million comes from the Edison E&P Group and
especially from its Italian and UK operations. With respect to the Greek tax losses carried forward,
the majority of them ($384.7 million) come from the Prinos exploitation area which is the only producing
asset of the Group, whereas an amount of $1.4 million comes from Ioannina and Katakolo areas which
are in the exploration and development phase respectively. A deferred tax asset has been recognised
as of 31 December 2020 in respect of $165.8 million (as of 31 December 2019: $90.4 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.
Greece
Tax losses can be utilised to offset taxable profits for a period of time that is dictated by the tax
legislation of each licence. The above carried forward unused tax losses arise almost exclusively from
the Prinos Area. Tax losses incurred under the Prinos licence (Law2779/1999) can be utilised without
limitation to offset taxable profits until the termination of Prinos exploitation area.
According to the Ioannina, Katakolo and recently granted Aitoloakarnania lease agreements the losses
incurred in respect of a particular exploitation area prior to the commencement of any exploitable
production shall be carried forward without any restrictions for such period. From the commencement
of any exploitable production and thereafter, the general income tax provisions shall apply in relation
to the carrying forward of losses (currently 5 years).
The Group expects that there will be sufficient taxable profit in the following years and that deferred
tax assets, recognised in the consolidated financial statements of the Group, will be recovered.
Israel
The Group is subject to corporation tax on its taxable profits in Israel at the rate of 23%. The Capital
Gain Tax rates depends on the purchase date and the nature of asset. The general capital tax rate for
a corporation is the standard corporate tax rate.
Tax losses can be utilised for an unlimited period, and tax losses may not be carried back.
Tax losses occurring during the development or construction phases are to be deducted at the
depreciation rate of the asset under development in respect of which they were created.
Page 225 of 274
FINANCIAL STATEMENTS
According to Income Tax (Deductions from Income of Oil Rights Holders) Regulations, 5716-1956, the
exploration and evaluation expenses of oil and gas assets are deductible in the year in which they are
incurred.
The Group expects that there will be sufficient taxable profit in the following years and that deferred
tax assets, recognised in the consolidated financial statements of the Group, will be recovered.
Italy
The Group is subject to corporation tax on its taxable profits in Italy at the rate of 24% (IRES) plus
Italian regional income tax of 3.9% (IRAP). Tax losses can be carried forward for IRES purposes and
used to offset income in the following tax periods without any time limitation. Tax losses can only be
offset with taxable income for an amount not exceeding 80% of the taxable income. Thus, corporations
are required to pay IRES on at least 20% of taxable income. For IRAP purposes, tax losses may not
be carried forward. In Italy, tax losses may not be carried back.
Egypt
All of the producing areas in Egypt in which Energean holds an interest are subject to certain PSC
terms. The terms of the PSCs provide contractors with cost recovery from a portion of the gross
revenue as well as a share of the profit. All Egyptian income taxes are paid out of the state-owned
Egyptian General Petroleum Corporation (“EGPC”) on behalf of the contractor.
However as tax is still considered to have been incurred, the entity owning the concession may be
able to credit the Egyptian tax paid for the purpose of calculating the tax liability in their country of
residence (subject to domestic law / application of relevant double tax treaties).
16. Cash and cash equivalents
Cash at bank
Restricted bank deposits
2020
$'000
197,514
5,425
202,939
2019
$'000
349,857
4,562
354,419
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 1.07% for the year ended 31 December 2020 (year ended 31 December 2019: 1.68%).
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 Aitoloakarnania.
These deposits can be used for funding the exploration activities of the respective blocks.
17. Inventories
Crude oil
Raw materials and supplies
2020
$'000
2019
$'000
16,946
56,073
2,312
4,485
Page 226 of 274
Total inventories
73,019
6,797
FINANCIAL STATEMENTS
The Group’s raw materials and supplies consumption for the year ended 31 December 2020 was $1.3
million (year ended 31 December 2019: $1.8million).
The Group recorded impairment and write-off charges on inventory of $0.1 million for the year ended
31 December 2020 (year ended 31 December 2019: $nil) related to materials written off (note 8e).
18. Trade and other receivables
Trade and other receivables-Current
Financial items:
Trade receivables
Government subsidies1
Receivables from related parties (note 24)
Derivative asset
Non-financial items:
Deposits and prepayments2
Refundable VAT
Deferred insurance expenses
Accrued interest income
Trade and other receivables-Non Current
Financial items:
Government subsidies
Other tax recoverable
Non-financial items:
Deposits and prepayments
Deferred Insurance expenses
Other non-current assets
2020
$'000
2019
$'000
226,118
3,481
22
-
229,621
38,756
49,414
507
41
88,718
318,339
-
16,686
16,686
13,409
-
1,473
14,882
31,568
5,383
-
23
564
5,970
18,155
30,247
5,338
182
53,922
59,892
2,964
-
2,964
-
438
674
1,112
4,076
1 Government subsidies mainly relate to grants from Greek Public Body for Employment and Social Inclusion (OAED) to financially
support the Kavala Oil S.A. labour cost from manufacturing under the action plan for promoting sustainable employment in
underdeveloped or deprived districts of Greece, such as the area of Kavala.
2 Included in deposits and prepayments, are mainly prepayments for goods and services under the GSP Engineering, Procurement,
Construction and Installation Contract (EPCIC) for Epsilon project.
The table below summarizes the maturity profile of the Group receivables:
Page 227 of 274
FINANCIAL STATEMENTS
31 December 2020
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12 months 1-2 years
2-5 years
Trade receivables
Government subsidies
Refundable VAT
Other tax recoverable
Total
$'000
226,118
3,481
49,414
16,686
295,699
$'000
$'000
$'000
$'000
$'000
226,118
3,481
49,414
16,686
295,699
92,194
-
34,618
-
126,812
133,924
3,481
14,796
-
152,201
-
-
-
-
-
-
-
-
16,686
16,686
31 December 2019
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12 months 1-2 years
2-5 years
$'000
$'000
$'000
$'000
$'000
$'000
Trade receivables
Government subsidies
Refundable VAT
Total
5,383
2,964
30,247
38,594
5,383
2,964
30,247
38,594
5,383
-
-
5,383
-
-
30,247
30,247
-
-
-
-
-
2,964
-
2,964
19. Share capital
On 30 June 2017, the Company became the parent company of the Group through the acquisition of
the full share capital of Energean E&P Holdings Limited, in exchange for 65,643,120 £0.01 ($0.013)
shares in the Company issued to the previous shareholders. As of this date, the Company’s share
capital increased from £50 thousand ($65k) to £706 thousand ($917k). From that point, in the
consolidated financial statements, the share capital became that of Energean plc. The previously
recognised share capital of $14.9 million and share premium of $125.8 million was eliminated with a
corresponding positive merger reserve recognised of $139,903 thousand. The below tables outline
the share capital of the Company.
In July 2019 a total of 23,444,445 new ordinary shares were placed with institutional investors at a
price of £9.00 per Placing Share, raising proceeds of approximately $265.1 million (approximately
£211 million) before expenses.
Issued and authorized
At 1 January 2019
Issued during the year
- New shares
- Share based payment
At 31 December 2019
Issued during the year
- New shares
Equity share capital allotted
and fully paid
Share capital
Number
$'000
Share
premium
$'000
153,152,763
2,066
658,805
23,618,583
318,060
177,089,406
297
4
2,367
256,583
-
915,388
-
-
-
Page 228 of 274
FINANCIAL STATEMENTS
Equity share capital allotted
and fully paid
Share capital
Number
-
177,089,406
$'000
-
2,367
Share
premium
$'000
-
915,388
- Share based payment
At 31 December 2020
20. Non-controlling interests
Name of
subsidiary
Voting rights
Share of loss
Accumulated balance
Year ended
31
December
Year ended
31
December
Year ended 31
December
Year ended
31
December
Year ended
31
December
Year ended
31
December
2020
%
2019
%
2020
$'000
2019
$'000
2020
$'000
2019
$'000
Kavala Oil S.A.
Energean Israel Ltd
Total
30.00
30.00
-
30.00
30.00
(3,173)
(3,173)
-
(323)
(323)
-
266,299
266,299
92
259,630
259,722
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, after acquiring the 50% founders’ shares, the Group subscribed for additional shares in
Energean Israel for an aggregate consideration of $266.7 million, payable in cash. At the time of
completion of this subscription, the Group held 70% of the shares in Energean Israel, with Kerogen
Capital holding the remaining 30%. On 25 February 2021 the Group completed the acquisition of
Kerogen Capital’s 30% holding in Energean Israel. See note 28 for further details.
In January 2020 Energean Israel Limited issued and allotted to Energean and Kerogen 32,500 total
shares at nominal value of $1,000. The total number of shares issued to Energean and Kerogen were
22,750 and 9,750 respectively, consistent with each party’s equity interest in Energean Israel at that
date .
The summarised financial information of Energean Israel Limited for the year ended 31 December
2020, is provided below. This information is based on amounts before inter-company eliminations.
Summarized statement of financial position as at 31 December 2020:
Current assets
Non current assets
Current liabilities
Non-current liabilities
Total equity
2020
$'000
38,725
2,178,689
(1,207,374)
(122,759)
887,281
2019
$'000
145,038
1,638,566
(93,169)
(825,011)
865,424
Page 229 of 274
Summarized statement of profit or loss for 2020:
Administration expenses
Exploration and evaluation expenses
Other expenses
Operating loss
Finance income
Finance costs
Loss for the year before tax
Tax income
Net loss for the period
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Cash Flow hedge, net of tax
Tax relating to items that may be reclassified subsequently to profit or
loss
Other comprehensive (loss)/income
Total comprehensive income/(loss) for the period
21. Borrowings
Net Debt
Current borrowings
Non-current borrowings
Total borrowings
Less: Cash and cash equivalents and bank deposits
Net Debt (1)
Total equity (2)
Gearing Ratio (1)/(2):
FINANCIAL STATEMENTS
2020
$'000
(3,909)
(502)
(2,701)
(7,112)
2,063
(326)
(5,375)
495
(4,880)
(7,483)
1,721
(5,762)
(10,642)
2019
$'000
(2,868)
-
(55)
(2,923)
2,262
(1,227)
(1,888)
375
(1,513)
564
(130)
434
(1,079)
2020
$'000
2019
$'000
1,112,984
330,092
1,443,076
(202,939)
1,240,137
1,194,392
103.83%
38,052
877,932
915,984
(354,419)
561,565
1,260,752
44.54%
Page 230 of 274
FINANCIAL STATEMENTS
EBRD Senior Facility:
On 30 January 2018, the Group’s existing EBRD Senior Facility Agreement was amended and
restated pursuant to the RBL Senior Facility Agreement,. 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 has
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). As at 31 December
2020 an amount of $145.2 million has been drawn down from the EBRD Senior Facility. In 2020, the
Group made a prepayment of $38 million, to coincide with the commencement of the loan. Its lenders,
for both the EBRD facility and the Romanian tranche of the loan, simultaneously cancelled outstanding
commitments under the loan. As such, the loan should be considered fully drawn. As at 31 December
2020 the amortised carrying value of the loan was $103.5 million.
EBRD Subordinated Facility:
In July 2016, the Group signed an 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 of the Greek subsidiary Energean Oil &
Gas S.A. an 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 (25 August 2025) and EBITDA participation rate increase by 0.5%
. EBITDA participation amount accrued in 2020 was $nil million (31 December 2019: $2.1 million). As
at 31 December 2020 an amount of $20.0 million has been drawn down from the EBRD Subordinated
Facility (31 December 2019: $20 million).
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.
In March 2020, the Senior Credit Facility was increased to $1.45 billion, providing an additional $175
million of liquidity for the Karish project and future appraisal activity in Israel.
As at 31 December 2020 an amount of $1,150.0 million (31 December 2019: $830.0) was drawn down
from the $1.450,0 million Karish-Tanin project finance facility. In January 2020, the Group agreed with
the existing lenders of its $1.45 billion project finance facility to extend its maturity by nine months,
from December 2021 to September 2022. As such from January 2021 the said loan which is presented
at short term borrowings was classified as long-term borrowings.
Page 231 of 274
FINANCIAL STATEMENTS
In 1Q 2021, the Group issued a $2.5 billion bond, part of which will be used to repay the $1.45 billion
project finance facility.
New Egypt RBL Facility:
On 20 June 2020, the Group signed a reserve based facility with a group of lending banks (the “Egypt
RBL”) in order to fund a portion of the cash consideration to be paid to Edison S.p.A for the Edison
E&P Acquisition, to fund transaction costs and for general corporate purposes.
The Egypt RBL comprises a single senior secured revolving reserve-based credit facility of up to $280
million (the “Facility Limit”), which may be drawn by way of loans or letters of credit. The Facility Limit
may be increased by up to $175 million (for a total Facility Limit of up to $455 million) subject to certain
conditions contained in the accordion provisions in the Egypt RBL.
The New RBL Facility has a tenor of six years from the closing date and matures on the earlier of (i)
the date on which aggregate remaining reserves for the borrowing base assets are projected to be
less than 25% of the initial approved reserves and (ii) the date falling six years from the closing date.
As at 31 December 2020 an amount of $237.0 million has been drawn down from the Egypt RBL
Facility.
Page 232 of 274
Reconciliation of liabilities arising from financing activities
1 January
Cash
inflows
Cash
outflows
Reclassi-
fication
IFRS 16
adoption
Acquisition of
subsidiary
Additions
Lease
modification
$'000
$'000
$'000
$'000
$'000
$'000
$'000
43,347
57,173
2020
999,551
557,000
(140,621)
(1,130)
Long -term borrowings
Current borrowings (1)
Lease liabilities
Deferred licence payments
Contingent consideration
Asset held to hedge long-
term borrowings
877,931
237,000
(53,033)
(740,579)
38,052
320,000
(61,437)
735,649
6,111
78,139
-
(682)
-
-
-
-
(6,644)
(14,843)
-
(4,664)
3,800
-
-
-
-
-
-
-
-
-
-
2019
230,788
849,546
(61,104)
(2,517)
9,792
Long -term borrowings
Current portion of long-term
borrowings
Lease liabilities
Deferred licence payments
Asset held to hedge long-
term borrowings
142,985
848,658
(44,738)
(38,052)
1,285
-
86,518
-
-
-
-
(1,024)
(15,342)
-
888
38,052
(2,517)
-
-
-
-
9,792
-
-
-
-
43,347
-
-
-
-
-
-
-
-
-
$'000
(1,519)
-
-
(1,519)
-
-
-
(699)
-
-
-
-
1,951
-
55,222
-
123
-
-
123
(699)
-
-
-
-
FINANCIAL STATEMENTS
Borrowing costs
including
amortisation of
arrangement fees
Foreign
exchange
impact
Fair value
changes
$'000
$'000
31 December
$'000
100,522
8,669
80,720
247
6,222
-
4,664
(25,756)
(30,890)
(1,259)
436
6,963
(1,006)
434
104
-
330
-
-
-
(57)
(31)
(26)
-
-
-
7,597
1,622,354
-
-
-
-
-
7,597
(564)
-
-
-
-
330,092
1,112,984
47,623
69,518
55,222
6,915
999,552
877,932
38,052
6,111
78,139
(564)
(682)
(1) As of 31 December 2020 the balance amount $756.2 million classified as long-term borrowings under Karish facility , is currently presented in short term borrowings. On 13
January 2021, the Group signed with its existing lenders for the facility for Karish development a nine-month extension for the facility maturity date, from December 2021 to
September 2022. As such from January 2021 the said loan balance amount $1,094 million which currently presented in short term borrowings will be classified in long-term
borrowings
Page 233 of 274
FINANCIAL STATEMENTS
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.
In March 2021 the Group issued a $2.5 billion Bond to (i) refinance its $1.45 billion Project Finance
Facility (ii) cancel and replace the $700 million Term Loan which was drawn to fund the acquisition of
Kerogen’s minority interest in Energean Israel, (iii) fund future capital and exploration expenditure in
Israel, including Karish and Karish North and (iv) for general corporate purposes of the Group. The
gross processed were deposited into an escrow account pending the receipt of regulatory approvals
and registration of certain pledges.
22. Retirement benefit liability
The Group operates defined benefit pension plans in Greece and Italy.
Under Italian law, Edison E&P is required to operate a Target Retirement Fund “TFR” for its local
employees. This is technically a defined benefit scheme, though has no pension assets, with the
liability measured by independent actuaries.
In accordance with the provisions of Greek labour law, employees are entitled to compensation in
case of dismissal or retirement. The amount of compensation varies depending on salary, years of
service and the manner of termination (dismissal or retirement). Employees who resign are not entitled
to compensation. The compensation payable in case of retirement is equal to 40% of the
compensation which would be payable in case of unjustified dismissal
These plans are not funded and are defined benefit plans in accordance with IAS 19. The Group
charges the accrued benefits in each period with a corresponding increase in the relative actuarial
liability. The payments made to retirees in every period are charged against this liability. The liabilities
of the Group arising from the obligation to pay termination indemnities are determined through
actuarial studies, conducted by independent actuaries.
22.1 Provision for retirement benefits
Defined benefit obligation
Provision for retirement benefits recognised
Allocated as:
Non-current portion
22.2 Defined benefit obligation
2020
$'000
2019
$'000
7,839
7,839
7,839
7,839
4,265
4,265
4,265
4,265
Page 234 of 274
At 1 January
Acquisition of subsidiary
Current service cost
Interest cost
Extra payments or expenses
Actuarial losses - from changes in financial
assumptions
Benefits paid
Exchange differences
At 31 December
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
4,265
3,021
364
39
557
49
(866)
410
7,839
3,659
-
405
61
564
466
(824)
(66)
4,265
22.3 Actuarial assumptions and risks
The most recent actuarial valuation was carried out as of 31 December 2020 and it was based on the
following key assumptions:
Discount rate
Expected rate of salary increases
Average life expectancy over retirement age
Inflation rate
Sensitivity analysis
2020
$'000
1.70%
3.54%
19.4 years
1.84%
2019
$'000
1.70%
3.54%
20.8 years
1.70%
The sensitivity analysis below shows the impact on the defined benefit obligation of changing each
assumption while not changing all other assumptions. This analysis may not be representative of the
actual change in the defined benefit obligation as it is unlikely that the change in the assumptions
would occur in isolation of one another as some of the assumptions may be correlated.
Percentage Effect on defined benefit obligation
Change + 0,5% in Discount rate
Change - 0,5% in Discount rate
Change +0,5% in Expected rate of salary increases
2020
2019
-9%
9%
8%
-8%
8%
8%
Page 235 of 274
FINANCIAL STATEMENTS
Change -0,5% in Expected rate of salary increases
-8%
-8%
Percentage Effect on 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
2020
2019
-12%
12%
12%
-12%
-12%
12%
13%
-13%
The amounts presented reflect the impact from the percentage increase / (decrease) in the given
assumption by +/- 0.5% on the defined benefit obligation and current service cost , while holding all
other assumptions constant.
The plan exposes the Group to actuarial risks such as interest rate risk, longevity changes and inflation
risk.
Interest rate risk
The present value of the defined benefit liability is calculated using a discount rate determined by
reference to market yields of high quality corporate bonds. The estimated term of the bonds is
consistent with the estimated term of the defined benefit obligation and it is denominated in Euro. A
decrease in market yield on high quality corporate bonds will increase the Group’s defined benefit
liability.
Longevity of members
Any increase in the life expectancy of the members will increase the defined benefit liability.
Inflation risk
A significant proportion of the defined benefit liability is linked to inflation. An increase in the inflation
rate will increase the Group’s defined benefit liability.
23. Provisions
Decommissioning
Provision for litigation
and other claims
$'000
$'000
Total
$'000
At 1 January 2019
New provisions and changes in
estimates
Unwinding of discount
Currency translation adjustment
At 31 December 2019
7,530
5,437
320
(142)
13,145
-
133
-
-
133
7,530
5,570
320
(142)
13,278
Page 236 of 274
FINANCIAL STATEMENTS
Decommissioning
Provision for litigation
and other claims
$'000
$'000
Total
$'000
-
13,145
13,145
38,125
1,496
-
808,994
919
2,448
865,127
-
865,127
133
-
133
-
-
(145)
16,375
-
45
133
13,145
13,278
38,125
1,496
(145)
825,369
919
2,493
16,408
881,535
-
-
16,408
881,535
Current provisions
Non-current provisions
At 1 January 2020
New provisions
Change in estimates
Refunds
Acquisition of subsidiary
Unwinding of discount
Currency translation adjustment
At 31 December 2020
Current provisions
Non-current provisions
Decommissioning provision
The decommissioning provision represents the present value of decommissioning costs relating to oil
and gas properties, which are expected to be incurred up to 2040, when the producing oil and gas
properties are expected to cease operations. The future costs are based on a combination of estimates
from an external study completed at the end of 2019 and internal estimates. These estimates are
reviewed regularly to take into account any material changes to the assumptions. However, actual
decommissioning costs will ultimately depend upon future market prices for the necessary
decommissioning works required that will reflect market conditions at the relevant time. Furthermore,
the timing of decommissioning is likely to depend on when the fields cease to produce at economically
viable rates. This, in turn, will depend upon future oil and gas prices, which are inherently uncertain.
The decommissioning provision represents the present value of decommissioning costs relating to
assets in Italy, Greece, UK, Israel and Croatia. No provision is recognized for Egypt as there is no
legal or constructive obligation as at 31 December 2020.
Greece
Italy
UK
Israel
Discount
rate
Cessation
of
production
assumption
assumption
1.26%
1.45%
0.35%
1.44%
2034
2021-2040
2022-2030
2040
Inflation
assumption
1.2% – 1.6
0.6%-1.4%
1.9%
2.2%
2020
$'000
16,082
551,464
239,708
38,399
2019
$'000
13,105
-
-
-
Page 237 of 274
FINANCIAL STATEMENTS
Inflation
assumption
Discount
rate
assumption
na
na
Cessation
of
production
assumption
2021
2020
$'000
19,474
2019
$'000
-
865,127
13,105
Croatia
Total
Litigation and other claims provisions
Litigation and other claim provision related to litigation actions currently open in Italy with the Termoli
Port Authority in respect of the fees payable under the marine concession regarding FSO Alba Marina
serving the Rospo Mare field in Italy. The fees have been paid on the basis of the actual area of the
FSO Alba Marina ship. The Termoli Port Authority subsequently claimed that the concession fees
should have been calculated according to the “virtual area” criterion, which would look at the whole
sea area which might be taken up by the FSO Alba Marina as it pivoted around its anchor buoy. Based
on legal advice received, Energean is confident that Energean Italy Spa has a good chance of being
successful in these litigations. However, The Termoli Port Authority has been successful in a couple
of first instance cases on procedural grounds in the Court of Campobasso, but the judge did not
consider the substantive issue as to whether the virtual area criterion or “actual area” was the correct
method of calculation for the Concession Fee. Accordingly, Energean Italy Spa has appealed these
cases to the Campobasso Court of Appeal. None of the other cases has yet had a decision on the
substantive issue. The Group contain a provision of €4.7 million against an adverse outcome of these
court cases.
Between 20 December 2019 and 5 January 2021 a number of new tax assessments were received
by Edison in respect of the years 2016 to 2019 from the municipalities of Porto Sant’Elpidio, Torino di
Sangro, Cupra Marittima, Scicli and Pineto claiming amounts in respect of IMU, TASI, interest and
sanctions. These will be defended vigorously by Edison S.p.A. and by Energean Italy Spa and there
are a number of lines of defence. Energean Italy’s Spa potential liability is in respect of the 2019 year
only. The assessments from the municipalities of Scicli and Cupra Marittima are illegitimate as they
disregard the previous agreements entered by the two Municipalities, in which the same Municipalities
recognized the lack of the conditions for taxation of the platforms for 2016 onwards. The Group
strongly believes based on legal advice received that the outcome of the court decisions will be in its
favour with no material exposure expected, therefore the Group recognised a provision of $1.9 million
in respect of this claim.
Amount of $1.9 million provision relates to leasing cost charged to ENI on the floating storage located
in the Leoanis plan. The Group following a claim from ENI accounted for this provision since these
overestimated costs were required to be reimbursement.
Other provisions include non-income tax provision and other potential claim in Egypt.
It is not currently possible to accurately predict the timing of the settlement of these claims and
therefore the expected timing of the cash flows.
It is not currently possible to accurately predict the timing of the settlement of these claims and
therefore the expected timing of the cash flows.
24. Trade and other payables
Page 238 of 274
Trade and other payables-Current
Financial items:
Trade accounts payable 1
Payables to partners under JOA 2
Deferred licence payments due within one
year3
Other creditors
Short term lease liability
Non-financial items:
Accrued Expenses 1
Other finance costs accrued
Social insurance and other taxes
Income taxes
Trade and other payables-Non Current
Financial items:
Deferred licence payments 3
Contingent consideration (note 6)
Long term lease liability
Non-financial items:
Long term prepayment 3
Social insurance
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
193,987
64,752
14,344
12,502
10,561
296,146
49,812
2,630
5,695
1,171
59,308
355,454
55,174
55,222
37,062
147,458
29,105
630
29,735
177,193
95,919
-
14,843
5,641
3,541
119,944
42,026
2,306
3,774
58
48,164
168,108
63,296
-
2,570
65,866
5,306
1,229
6,535
72,401
1 Included in trade payables and accrued expenses in FY2020 and Y2019, are mainly Karish field related development expenditures
(mainly FPSO and Sub Sea construction cost) .
2 Payables related to operated Joint operations primarily in Italy
3 In December 2016, Energean Israel acquired the Karish and Tanin offshore gas fields for $40.0 million closing payment with an
obligation to pay additional consideration of $108.5 million plus interest inflated at an annual rate of 4.6% in ten equal annual payments.
As at 31 December 2020 the total discounted deferred consideration was $69.5 million (31 December 2019: $78.1 million).
4 In June 2019, Energean signed a Detailed Agreement with Israel Natural Gas Lines (“INGL”) for the transfer of title (the “hand over”)
of the near shore and onshore part of the infrastructure that will deliver gas from the Karish and Tanin FPSO into the Israeli national
gas transmission grid. As consideration, INGL will pay Energean 369 million Israeli new shekel (ILS), approximately $102 million for
the infrastructure being built by Energean which will be paid in accordance with milestones detailed in the agreement. The agreement
covers the onshore section of the Karish and Tanin infrastructure and the near shore section of pipeline extending to approximately
10km offshore. It is intended that the hand over to INGL will become effective shortly after the delivery of first gas from the Karish field
expected in Q4 2021/Q1 2022 . Following hand over, INGL will be responsible for the operation and maintenance of this part of the
infrastructure.
Trade and other payables are non-interest bearing except for finance leases and deferred licence
payments.
The change in trade payables and in other payables predominantly represents payables of the new
acquired business Edison E&P.
Page 239 of 274
25. Employee share schemes
Analysis of share-based payment charge
Employee Share Award Plan
Energean DSBP Plan
Energean 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
Expensed as other expenses
Total share-based payment charge
FINANCIAL STATEMENTS
2020
$'000
2019
$'000
693
2,632
3,325
99
2,776
442
8
3,325
1,178
314
1,989
3,481
730
2,685
52
14
3,481
Energean Long Term 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.
The weighted average remaining contractual life for LTIP awards outstanding at 31 December 2020
was 1.4 years (31 December 2019: 1.7 years), number of shares outstanding 1,858,005 and weighted
average price at grant date £5.84.
There are further details of the LTIP in the remuneration Report on pages 144 to 147.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, the portion of any annual bonus above 30 per cent of the base salary of a Senior
Executive nominated by the Remuneration Committee was deferred into shares.
Deferred awards are usually granted in the form of conditional share awards or nil-cost options (or,
exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award
although may vest early on leaving employment or on a change of control.
The weighted average remaining contractual life for DSBP awards outstanding at 31 December 2020
was 0.8 years, number of shares outstanding 196,514 and weighted price at grant date £6.27.
Page 240 of 274
FINANCIAL STATEMENTS
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 of the 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 vested on 22 November 2019.
26. Financial instruments
The Group is exposed to a variety of risks including commodity price risk, interest rate risk, credit risk,
foreign currency risk and liquidity risk. The use of derivative financial instruments is governed by the
Group’s policies approved by the Board of Directors. Compliance with policies and exposure limits are
monitored and reviewed internally on a regular basis. The Group does not enter into or trade financial
instruments, including derivatives, for speculative purposes.
26.1. Fair values of financial assets and liabilities
The information set out below provides information about how the Group determines the fair values of
various financial assets and liabilities.
The fair values of the Group's non-current liabilities measured at amortised cost are considered to
approximate their carrying amounts at the reporting date.
The carrying value less any estimated credit adjustments for financial assets and financial liabilities
with a maturity of less than one year are assumed to approximate their fair values due to their short
term-nature. The fair value of the group’s finance lease obligations is estimated using discounted cash
flow analysis based on the group’s current incremental borrowing rates for similar types and maturities
of borrowing and are consequently categorized in level 2 of the fair value hierarchy.
As at 31 December 2020 the Group recognized contingent consideration payable of $55.2 million (31
December 2019: $nil) at fair value through profit and loss. The consideration payable has been
recognized at level 3 in the fair value hierarchy. The fair value of the consideration payable has been
estimated by reference to the sales and purchase agreement and by simulating PSV pricing by
reference to the forecasted PSV pricing, historical volatility and a log normal distribution. The total
cash payable has been discounted at the cost of debt. See note 6 for further details.
The fair value hierarchy of financial assets and financial liabilities that are not measured at fair value
(but fair value disclosure is required) is as follows:
Fair value hierarchy as at 31 December 2020
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets
Trade and other receivables (note 18)
-
246,307
-
246,307
Page 241 of 274
Cash and cash equivalents and bank
deposits (note 16)
Total
Financial liabilities
Financial liabilities held at amortised cost:
Borrowings (note 21)
Net obligations under finance leases
(note 24)
Deferred licence payments (note 24)
Financial liabilities held at FVTPL:
Interest rate derivatives
Contingent consideration (note 6)
Total
202,939
-
202,939
246,307
-
-
-
-
-
-
1,443,076
47,623
69,518
6,915
-
1,567,132
FINANCIAL STATEMENTS
-
-
-
-
-
-
55,222
55,222
202,939
449,246
1,443,076
47,623
69,518
-
6,915
55,222
1,622,354
Fair value hierarchy as at 31 December 2019
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets
Trade and other receivables (note
18)
Cash and cash equivalents and bank
deposits (note 16)
Total
Financial liabilities
Financial liabilities held at amortised cost:
Borrowings (note 21)
Net obligations under finance leases
(note 24)
Deferred licence payments (note 24)
Total
-
8,934
354,419
-
354,419
8,934
-
-
-
915,984
6,111
78,139
1,000,234
26.2 Fair values of derivative financial instruments
-
-
-
-
-
--
-
8,934
354,419
363,353
915,984
6,111
78,139
1,000,234
Page 242 of 274
FINANCIAL STATEMENTS
The Group held financial instruments at fair value at 31 December 2020 related to interest rate
derivatives. All derivatives are recognised at fair value on the balance sheet with valuation changes
recognised immediately in the income statement, unless the derivatives have been designated as a
cash flow hedge. Fair value is the amount for which the asset or liability could be exchanged in an
arm’s length transaction at the relevant date. Where available, fair values are determined using quoted
prices in active markets. To the extent that market prices are not available, fair values are estimated
by reference to market-based transactions, or using standard valuation techniques for the applicable
instruments and commodities involved. Values recorded are as at the balance sheet date, and will not
necessarily be realised.
As at 31 December 2020 the Group’s interest rate derivatives are Level 2 (31 December 2019: Level
2). There were no transfers between fair value levels during the year.
26.3 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.
The Group did not enter into any hedging agreement in relation to oil or gas prices during 2019 or
2020.
26.4 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 2020, 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
2020
$'000
2019
$'000
1,443,076
1,443,076
915,985
915,985
Profit and loss for the period
31 December 2020
5,780
(4,286)
Page 243 of 274
31 December 2019
26.5 Credit risk
FINANCIAL STATEMENTS
+ 50 basis
points
- 50 basis
points
(2,645)
2,405
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the
amount of future cash inflows from financial assets on hand at the reporting date. The Group has
policies in place to ensure that all of its transactions giving rise to credit risk are made with parties
having an appropriate credit history and monitors on a continuous basis the ageing profile of its
receivables.
Also, the Group has policies to limit the amount of credit exposure to any banking institution,
considering among other factors the credit ratings of the banks with which deposits are held. Credit
quality information in relation to those banks is provided below.
With regard to the risk of potential losses caused by the failure of any of the counterparties the
Company interacts with to honour the commitments they have undertaken, the Group has
implemented for some time procedures and tools to evaluate and select counterparties based on their
credit rating, constantly monitor its exposure to the various counterparties and implement appropriate
mitigating actions, primarily aimed at recovering or transferring receivables. For the period ended 31
December 2020 the Group has also considered the impact of COVID-19 in relation to the recoverability
of its trade receivables and expected credit loss allowances recognised at period end.
Presented below is a breakdown of trade receivables by past due bracket:
(in thousands of USD)
Trade receivables
Allowance for impairment
Total
31
December
2020
31
December
2019
257,779
(31,661)
226,118
5,383
-
5,383
Trade receivables include balances from EGPC, the Egyptian governmental body that are significantly
aged.
(in thousands of US$)
Not yet due
Past due by less than one month
Past due by one to three months
31 December 2020
31 December 2019
Trade
receivables
Allowance
Trade
receivabl
es
Allowanc
e
133,144
(2,127)
5,383
16,511
14,269
(424)
(298)
-
-
-
-
-
Page 244 of 274
FINANCIAL STATEMENTS
Past due by three to six months
Past due by more than six months
53,055
(1,850)
40,800
(26,962)
-
-
Total
257,779
(31,661)
5,383
-
-
-
Trade Receivables by geography
(in thousands of USD)
Italy
United Kingdom
Egypt
Greece
Falkland
Croatia
Other Countries
Total
31 December 2020
31 December
2019
62,622
1,931
184,940
5,617
1,865
301
503
-
-
-
5,383
-
-
-
257,779
5,383
Credit quality of bank deposits
The credit quality of the banks in which the Group keeps its deposits is assessed by reference to the
credit rating of these banks. Moody’s credit ratings of the corresponding banks in which the Group
keeps its deposits is as follows:
Aa3
A1
A2
A3
BBB
B1
B2
B3
Baa1
Caa1
Unrated
2020
$'000
51,502
25,974
37,967
-
50,507
9,614
23,443
2,723
26
776
407
2019
$'000
926
8
114,760
235,355
-
-
-
1,553
-
1,790
4
202,939
354,396
Page 245 of 274
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:
FINANCIAL STATEMENTS
A1
Non-rated
Total
2020
$'000
226,139
226,139
2019
$'000
2,636
2,770
5,406
26.6 Foreign exchange risk
The Group is exposed to foreign exchange risk as it undertakes operations in various foreign
currencies. The key sources of the risk are attributed to the fact that the Group has certain subsidiaries
with Euro functional currencies in which a number of loan agreements denominated in US$ and sales
of crude oil are additionally denominated in US$.
The Group’s exposure to foreign currency risk, as a result of financial instruments, at each reporting
date is shown in the table below. The amounts shown are the US$ equivalent of the foreign currency
amounts.
Dollars (US$)
United Kingdom Pounds (GBP)
Euro
CAD
NOK
ILS
SGD
EGP
Total
Liabilities
Assets
2020
$'000
2019
$'000
130,161 176,802
16,099
358,083
2,488
1,072,146
-
15
-
259
9,889
32,593
83
161
41
2020
$'000
19,710
373,462
1,559,366
-
50,723
23,103
91
1
1,593,459 205,361
2,026,456
2019
$'000
4,861
29,035
84,404
-
49,320
702
-
-
168,32
2
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
GBP
Euro
ILS
NOK
SGD
EGP
Variation
Variation
Variation
Variation
Variation
Variation
Variation
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10% 10%
-10%
10%
-
10%
12,542
(15,329)
1,503
(1,746) 14,191
(17,220)
5,570
(5,063) 4,637
(5,659)
25
(23)
(4)
5
Profit or loss
(before tax)
31-Dec-20
Page 246 of 274
FINANCIAL STATEMENTS
Other
comprehensive
income
15,245
(3,706)
Equity
27,787
(19,035)
1,503
(1,746) 14,191
(17,220)
5,570
(5,063) 4,637
(5,659)
25
(23)
(4)
5
USD
Variation
GBP
Variation
31 December 2019
Euro
Variation
ILS
Variation
NOK
Variation
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
16,396
(20,039)
3,427
(4,289)
7,527
(9,215)
(919)
835
4,485
(5,477)
10,129
26,525
(9,642)
-
-
-
-
-
-
-
-
(29,681)
3,427
(4,289)
7,527
(9,215)
(919)
835
4,485
(5,477)
Profit or loss
(before tax)
Other
comprehensive
income
Equity
The above calculations assume that interest rates remain the same as at the reporting date.
26.7 Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with
financial liabilities that are settled by delivering cash or another financial asset.
The Group monitors its risk to a shortage of funds by monitoring its debt rating and the maturity dates
of existing debt and other payables. As at 31 December 2020, the Group had available US$1,040
million (2019: $480.0 million) of undrawn committed borrowing 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 available
cash deposits and credit lines with the banks are available to meet the Group’s liabilities as they fall
due.
The table below summarizes the maturity profile of the Group financial liabilities based on contractual
undiscounted payments:
31 December 2020
Carrying
amounts
Contractual
cash flows
3 months or
less
3-12
months
1-2
years
2-5
years
More than
5 years
Bank loans
Lease liabilities
Trade and other
payables
$'000
$'000
$'000
$'000
$'000
$'000
$'000
1,443,076
1,652,004
13,541
1,226,014
98,718 273,231
47,623
48,199
3,539
7,372
5,978
10,082
40,500
21,228
395,980
412,544
218,910
63,735
26,155
92,394
11,350
Total
1,866,679
2,112,747
235,990
1,297,121 130,851 375,707
73,078
Page 247 of 274
FINANCIAL STATEMENTS
31 December 2019
Carrying
amounts
Contractual
cash flows
3 months or
less
3-12
months
1-2
years
2-5
years
More than
5 years
Bank loans
Lease liabilities
Trade and other
payables
Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
915,985
1,146,599
34,806
64,022 968,320
79,451
6,111
6,626
797
2,761
1,955
1,113
-
-
233,428
260,910
100,917
63,270
21,136
52,390
23,197
1,155,524
1,414,135
136,520
130,053 991,411 132,954
23,197
27. Related parties
27.1 Related party relationships
Balances and transactions between the Company and its subsidiaries, which are related parties, have
been eliminated on consolidation and are not disclosed in this note.
The Directors of Energean Plc are considered to be the only key management personnel as defined
by IAS 24. The following information is provided in relation to the related party transaction disclosures
provided in note 27.2 below:
Adobelero Holdings Co Ltd. is a beneficially owned holding company controlled by Panos Benos,
the CFO of the Group.
Growthy Holdings Co Ltd is a beneficially owned holding company controlled by Matthaios Rigas,
the CEO of the Group.
Oil Co Investments Limited is beneficially owned and controlled by Efstathios Topouzoglou, a Non-
Executive Director of the Group. The nature of the Group’s transactions with the above related parties
is mainly financing activities.
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 shareholders 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.
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 director, for the provision of Group Corporate Social Responsibility Consultancy and Project
Management Services.
27.2 Related party transactions
Purchases of goods and services
Nature of transactions
2020
$'000
2019
$'000
Page 248 of 274
Other related party "Seven marine"
Vessel leasing and
services
Other related party "Prime Marine
Energy Inc"
Construction of field
support vessel
Other related party "Capital Earth
Ltd"
Consulting services
FINANCIAL STATEMENTS
1,473
4,066
19,950
129
21,552
-
129
4,195
Following a competitive tender process, the Group has entered into an agreement to purchase a Field
Support Vessel (“FSV”) from Prime Marine Energy Inc., a company controlled by director and
shareholder at Energean plc, for US$33.3 million. The FSV is being constructed to meet the Group’s
specifications and will provide significant in-country capability to support the Karish project, including
FPSO re-supply, crew changes, holdback operations for tanker offloading, emergency subsea
intervention, drilling support and emergency response. The purchase of this multi-purpose vessel will
enhance operational efficiencies and economics when compared to the leasing of multiple different
vessels for the various activities.
27.3 Related party balances
Payables
Seven marine
Nature of balance
Vessel leasing and
services
2020
$'000
2019
$'000
407
407
6,105
6,105
27.4 Key management compensation
The Directors of Energean plc are considered to be the only key management personnel as defined
by IAS 24 Related Party Disclosures.
31 December 2020
$'000
$'000
$'000
Salary and fees
Benefits
Annual bonus
Total
$'000
Executive Directors
Non-Executive Directors
Total
1,436
574
2,010
160
-
160
1,215
-
1,215
2,811
574
3,385
31 December 2019
$'000
$'000
$'000
Salary and fees
Benefits
Annual bonus
Total
$'000
Executive Directors
Non-Executive Directors
1,436
590
160
-
545
-
2,141
590
Page 249 of 274
FINANCIAL STATEMENTS
Total
2,026
160
545
2,731
28. 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:
2020
$'000
2019
$'000
Capital Commitments*:
Due within one year
Due later than one year but within two years
Due later than two years but within five years
Contingent liabilities
Performance guarantees**
Greece
Israel
UK
Italy
Montenegro
102,255
84,855
200,895
388,005
6,743
62,101
96,655
15,361
614
181,474
5,425
5,729
-
11,154
-
658
38,330
-
-
562
39,550
* Amount of $15.9 million is towards to Government and amount of $372.1 million refers to capital commitments to partners based
on future work programmes
** Performance guarantees are in respect of abandonment obligations, committed work programmes and certain financial
obligations
Issued guarantees:
Karish and Tanin Leases - As part of the requirements of the Karish and Tanin Lease deeds, the
Group provided the Ministry of National Infrastructures, Energy and Water with bank guarantees in the
amount of US$10 million for each lease (total US$20 million). The bank guarantees were in force until
29 December 2019, and were renewed in March 2021 until 31 March 2022.
Blocks 12, 21, 22, 23 and 31 in Israel - As part of the requirements of the exploration and appraisal
licences which granted to the Group during the Israeli offshore BID in December 2017, the Group
provided the Ministry of National Infrastructures, Energy and Water in January 2018 with bank
Page 250 of 274
FINANCIAL STATEMENTS
guarantees in the amount of US$6.5 million for all 5 blocks mentioned above. The bank guarantees
are in force until 13 January 2023.
Blocks 55, 56, 61 and 62, also known as "ZONE D" - As part of the requirements of the exploration
and appraisal licences which granted to the Group during the Israeli 2nd offshore BID in July 2019,
the Group provided the Ministry of National Infrastructures, Energy and Water in January 2018 with
bank guarantees in the amount of US$3.2 million for all 4 blocks mentioned above. The bank
guarantees are in force until 28 September 2022.
Israeli Natural Gas Lines ("INGL") - As part of the agreement signed with INGL on June 2019 the
Group provided INGL bank guarantee at the amount of 18.26 million ILS (approx. US$5.3 million) in
order to secure the first milestone payment from INGL. The bank guarantee is in force until 21
November 2021.
Israel Custom Authority - As part of the ongoing importation related Karish development, the Group
provided the Israeli Custom authority bank guarantees in 2019 at the amount of 10 million ILS (approx.
US$2.9 million). The bank guarantees are in force until 28 February 2021.
United Kingdom: Following Edison E&P acquisition the Group issued letters of credit amount $96.7
million for United Kingdom decommissioning obligations and obligations under the United Kingdom
licenses
Italy: Following Edison E&P acquisition the Group issued letters of credit amount $15.4 million for
decommissioning obligations and obligations under the Italian licenses
Legal cases and contingent liabilities
The Group had no material contingent liabilities as of 31 December 2020.
Liquidated damages
To date, the Energean Group has entered into gas sale and purchase agreements with various gas
buyers (the “GSPAs” or “Gas Supply Agreements”) in Israel.
During 2021, the Company expects to compensate group of gas buyers due to the fact the gas supply
date expected to take place beyond a certain date which is defined in the GSPAs. The subject
compensation is estimated at approximately $23.0 million.
TechnipFMC starts to pay LDs under its EPCIC contract, on a sliding scale, if practical completion
(which is expected to quickly follow first gas) is not achieved by 6 April 2021. In respect of delay to
first gas, the aggregate of the LDs payable under the GSPAs is generally less than the amount of LDs
payable by TechnipFMC.
Significant transaction
On 29 December 2020, the Group had entered into a conditional sale and purchase agreement to
acquire Kerogen Investments No. 38 Limited’s (“Kerogen”) entire interest in Energean Israel Limited
(“Energean Israel”), which constitutes 30% of the total issued share capital of Energean Israel (the
“Minority Interest”) for a total consideration of between US$380 million and US$405. The Total
Consideration includes:
• US$175 million of up-front cash consideration (the “Up-Front Cash Consideration”).
• Between US$125 million and US$150 million of deferred cash consideration (the
“Deferred Cash Consideration”),
Page 251 of 274
FINANCIAL STATEMENTS
• A further US$30 million of deferred cash consideration, payable on 31 December 2022
(the “Additional Deferred Cash Consideration”).
• US$50 million of convertible loan notes, to be issued by the Company to Kerogen,
which have a maturity date of 29 December 2023, a strike price of GBP 9.50 and zero
coupon (the “Convertible Loan Notes”). Issuance of the Convertible Loan Notes
requires no up-front cash outlay by the Company.
.
29. Subsequent events
On 13 January 2021, the Group entered into the Term Loan with J.P. Morgan AG and Morgan Stanley
Senior Funding, Inc. (as lenders). The Term Loan comprises a single senior secured term loan facility
of up to US$700 million, which may be drawn by way of loan for the purposes of, amongst other things,
financing the acquisition of the Minority Interest in Energean Israel.
In January 2021, Energean reached FID on its Karish North (Israel) and NEA/NI (Egypt) projects.
On 13 January 2021, the Group signed with its existing lenders for the US$1.45 billion facility for Karish
development a nine- month extension for the facility maturity date, from December 2021 to September
2022.
On 25 February 2021, Energean completed its acquisition of the 30% minority interest in EISL, from
Kerogen Capital. Energean now owns 100% of EISL.
On 24 March 2021, Energean issued $2.5 billion aggregate principal amount of senior secured notes.
The $2.5 billion principal will be split into four equal tranches:
• $625 million maturing 30 March 2024, at fixed 4.5%
• $625 million maturing 30 March 2026 at fixed 4.875%
• $625 million maturing 30 March 2028 at fixed 5.375%
• $625 million maturing 30 March 2031 at fixed 5.875%
Interest will be paid semi-annually, on 30 March and on 30 September of each year, beginning on
September 30, 2021.
The gross proceed were deposited into an escrow account pending the receipt of regulatory approvals
and registration of certain pledges. Following release, the funds will be used to replace the $1.45 billion
project finance facility and $700 million term loan, fund certain reserve accounts and for general
corporate purposes. The notes will be listed for trading on the TACT Institutional of the Tel Aviv Stock
Exchange (TASE), subject to the approval of the TASE.
30. Subsidiary undertakings
At 31 December 2018, the Group had investments in the following subsidiaries:
Name of subsidiary
Country of incorporation /
registered office
Principal activities
Shareholding
At 31
December
2020
(%)
Shareholding
At 31
December
2019
(%)
Energean E&P Holdings
Ltd
22 Lefkonos Street, 2064 Nicosia,
Cyprus
Holding Company
100
100
Page 252 of 274
FINANCIAL STATEMENTS
Energean Capital Ltd
22 Lefkonos Street, 2064 Nicosia,
Cyprus
Energean MED Limited
44 Baker Street, London W1U
7AL, United Kingdom
Energean Oil & Gas S.A.
32 Kifissias Ave. 151 25 Marousi
Athens, Greece
Energean International
Limited
22 Lefkonos Street, 2064 Nicosia,
Cyprus
Energean Israel Limited
(Note 6)
22 Lefkonos Street, 2064 Nicosia,
Cyprus
Energean Montenegro
Limited
22 Lefkonos Street, 2064 Nicosia,
Cyprus
Energean Israel Finance
SARL
560A rue de Neudorf, L-2220,
Luxembourg
Andre Sakharov 9, Haifa, Israel
Energean Israel
Transmission LTD
Energean Isreal Finance
LTD
Energean Egypt Limited
Energean Hellas Limited
22 Lefkonos Street, 2064 Nicosia,
Cyprus
Energean Italy S.p.a.
31 Foro Buonaparte, 20121
Milano, Italy
Energean International
E&P S.p.a.
31 Foro Buonaparte, 20121
Milano, Italy
Energean Sicilia Srl
Via Salvatore Quasimodo 2 -
97100 Ragusa (Ragusa)
Energean Exploration
Limited
44 Baker Street, London W1U
7AL, United Kingdom
Edison E&P UK Ltd
44 Baker Street, London W1U
7AL, United Kingdom
Edison Egypt Energy
Services JSC
Cairo, Egypt
Holding Company
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Financing activities
Gas transportation
license holder
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Oil and gas exploration,
development and
production
Andre Sakharov 9, Haifa, Israel
Financing activities
22 Lefkonos Street, 2064 Nicosia,
Cyprus
100
100
100
100
70
100
70
70
70
100
100
100
100
100
100
100
100
100
100
100
100
70
100
70
70
-
-
-
-
-
-
-
-
-
Page 253 of 274
FINANCIAL STATEMENTS
31. Exploration, Development and production interests
Country
Fields
Fiscal
Regime
Group’s
working
interest
Israel
Egypt
Greece
Italy
Karish1
Tanin1
Blocks 12, 21, 22, 23, 31
Four licenses Zone D
Concession
Concession
Concession
Concession
Abu Qir
Abu Qir North
Abu Qir West
Yazzi
Python
Field A (NI-1X)
Field B (NI-3X)
NI-2X
North East Hap'y
Viper (NI-4X)
Prinos
Epsilon
Prinos exploration area
South Kavala
Katakolo
Ioannina
West Patraikos
Block-2
Vega A*
Vega B*
Rospo Mare
Verdicchio
Vongola Mare
Gianna
Accettura
Anemone
Appia
Argo-Cassiopea
Azalea
Calipso
Candela Dolce
Candela Povero
Carlo
PSC
PSC
PSC
PSC
PSC
PSC
PSC
PSC
PSC
PSC
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
70%
70%
70%
56%
100%
100%
100%
100%
100%
100%
100%
100%
30%
100%
100%
100%
100%
100%
100%
40%
50%
75%
60%
60%
62%
100%
95%
100%
50%
19%
50%
40%
16%
49%
40%
40%
49%
Field Phase
Development
Development
Exploration
Exploration
Production
Production
Production
Development
Development
Exploration
Exploration
Exploration
Exploration
Exploration
Production
Development
Exploration
Production
Undeveloped
Exploration
Exploration
Exploration
Production
Production
Production
Production
Production
Development
Production
Production
Production
Development
Production
Production
Production
Production
Production
Page 254 of 274
FINANCIAL STATEMENTS
Country
Fields
Cassiano
Castellaro
Cecilia
Clara East
Clara North
Clara Northwest
Clara West
Comiso
Italy (continued)
Cozza
Daria
Didone
Emma West
Fauzia
Giovanna
Leoni
Monte Urano-San Lorenzo
Naide
Portocannone
Quarto
Ramona
Regina
Salacaro
San Giorgio Mare
San Marco
Santa Maria Mare
Santo Stefano
Sarago Mare
Sinarca
Talamonti
Tresauro
UK
Garrow
Kilmar
Scott
Telford
Wenlock
Glengorm
Isabella
Montenegro
Fiscal
Regime
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Concession
Group’s
working
interest
50%
50%
49%
49%
49%
49%
49%
100%
85%
49%
49%
49%
40%
49%
50%
40%
49%
62%
33%
49%
25%
50%
95%
100%
96%
95%
85%
40%
50%
25%
68%
68%
10%
16%
80%
25%
10%
Field Phase
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Production
Exploration
Exploration
Block 26, 30
Concession
100%
Exploration
Croatia
Irena
PSC
70%
Exploration
Page 255 of 274
Country
Fields
Izabela
Malta
FINANCIAL STATEMENTS
Fiscal
Regime
PSC
Group’s
working
interest
Field Phase
70%
Production
Blocks 1, 2 and 3 of Area 3
Concession
100%
Exploration
* In January 2021 Energean has agreed with ENI to acquire the latter's WI (40%) in these fields.
Page 256 of 274
FINANCIAL STATEMENTS
Company statement of financial position
As at 31 December 2020
Notes
2020
$'000
2019
$'000
ASSETS
Non-current assets
Investment in subsidiaries
Property plant and equipment
Loans and other intercompany receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Non-current liabilities
Other payables
Total liabilities
Capital and reserves
Share capital
Share premium
Share based payment reserve
3
5
6
8
9
10
10
12
1,031,991
877,183
71
2,183
2
2,309
1,034,245
879,494
25,745
67,187
92,932
5,178
235,329
240,507
1,127,177
1,120,001
10,532
10,532
153
153
10,685
4,892
4,892
267
267
5,159
2,367
915,388
13,419
2,367
915,388
10,094
Page 257 of 274
Retained earnings
Total equity
Total equity and liabilities
FINANCIAL STATEMENTS
185,318
186,993
1,116,492
1,114,842
1,127,177
1,120,001
During the year the Company made a loss of $1.7 million (31 December 2019: loss of $4.4 million).
Approved by the Board and authorised for isssuance on 18 April 2021.
Matthaios Rigas
Panagiotis Benos
Chief Executive Officer
Chief Financial Officer
Page 258 of 274
FINANCIAL STATEMENTS
Company Statement of Changes in Equity
As at 31 December 2020
Share
Capital
Share
Premium
Share based
payment
reserve
Retained
earnings
Total
equity
$'000
2,066
$'000
$'000
$'000
$'000
658,805
6,617
191,384
858,872
At 1 January 2019
Profit/(loss) for the year
-
-
-
(4,391)
(4,391)
Transactions with owners of
the company
New Shares issued
297
264,785
-
Employee share schemes
Transaction cost in relation to
new share issue
4
-
-
3,477
(8,202)
-
-
-
-
265,082
3,481
(8,202)
At 31 December 2019
2,367
915,388
10,094
186,993 1,114,842
Profit/(loss) for the year
Transactions with owners of
the company
Employee share schemes
-
-
-
-
-
(1,675)
(1,675)
3,325
-
3,325
At 31 December 2020
2,367
915,388
13,419
185,318 1,116,492
Page 259 of 274
FINANCIAL STATEMENTS
Company accounting policies
As at 31 December 2020
1. General information
Energean Plc ‘the Company') was incorporated in England & Wales on 8 May 2017 as a public
company with limited liability, under the Companies Act 2006. Its registered office is at 44 Baker Street,
London W1U 7AL, United Kingdom. The Financial Statements are presented in US dollars and all
values are rounded to the nearest US$ thousands ($‘000), except where otherwise stated. Energean
Plc is the ultimate Parent of the Energean Group. Following the shareholders’ approval at the Annual
General Meeting of the Company held on 21st May 2020, the Company has changed its name from
Energean Oil & Gas plc to Energean plc.
2. Basis of preparation
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100
(FRS 100) issued by the Financial Reporting Council. The parent company Financial Statements have
therefore been prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard
101 (FRS 101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council. As
permitted by FRS 101, the Company has taken advantage of the disclosure exemptions of the
following disclosure exemptions under FRS 101. As permitted by FRS 101, the Company has taken
advantage of the disclosure exemptions under FRS 101:
a) the requirements of IFRS 7 Financial Instruments: Disclosures;
b) the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
c)
the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present
comparative information in respect of: (i) paragraph 79(a) (iv) of IAS 1 and (ii) paragraph
73(e) of IAS 16 Property Plant and Equipment;
d) the requirements of paragraphs 10(d), 16, 38A to 38D, 111 and 134 to 136 of IAS 1
Presentation of Financial Statements;
e) the requirements of IAS 7 Statement of Cash Flows;
f)
the requirements of paragraphs 45(b) and 46-52 of IFRS 2 share-based payments
g) the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
h) the requirements in IAS 24 Related Party Disclosures to disclose related party transactions
entered into between two or more members of a group, provided that any subsidiary which is
a party to the transaction is wholly owned by such a member; and
i)
the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors
Page 260 of 274
FINANCIAL STATEMENTS
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.
2.1 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 a number of factors
were considered, refer to note 2.1. of the consolidated financial statements. Accordingly, the Directors
have a reasonable expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future and consider it appropriate to adopt the going concern basis in
preparing the financial statements
2.2 Foreign currencies
The US dollar is the functional currency of the Company. Transactions in foreign currencies are
translated at the rates of exchange ruling at the transaction date. Monetary assets and liabilities
denominated in foreign currencies are translated into US dollars at the rates of exchange ruling at the
balance sheet date, with a corresponding charge or credit to the income statement.
2.3 Investments
Fixed asset investments, representing investments in subsidiaries, are stated at cost and reviewed for
impairment if there are indications that the carrying value may not be recoverable.
2.4 Financial instruments at fair value through profit or loss (FVTPL)
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 instruments that
have been classified as HFT were derivative instruments.
2.5 Trade and other receivables
Receivables represent 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.
The Company is required to assess the carrying values of each of the amounts due from subsidiary
undertakings, considering the requirements established by IFRS 9 Financial Instruments. The IFRS 9
impairment model requiring the recognition of ‘expected credit losses’, in contrast to the requirement
to recognise ‘incurred credit losses’ under IAS 39. If the subsidiary has sufficient liquid assets to repay
the loan if demanded at the reporting date, the expected credit loss is likely to be immaterial. However,
if the subsidiary could not demonstrate the ability to repay the loan, if demanded at the reporting date,
the Company calculated an expected credit loss.
Page 261 of 274
FINANCIAL STATEMENTS
2.6 Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and
services provided to the Company prior to the end of the financial year that are unpaid and arise when
the Company becomes obligated to make future payments in respect of the purchase of those goods
and services.
2.7 Share issue expenses
Costs of share issues are written off against share premium arising upon the issuance of share capital.
2.8 Capital management
The Company defines capital as the total equity of the Company. Capital is managed in order to
provide returns for shareholders and benefits to stakeholders and to safeguard the Company’s ability
to continue as a going concern. The Company is not subject to any externally imposed capital
requirements. To maintain or adjust the capital structure, the Company may adjust the dividend
payment to shareholders, return capital, issue new shares for cash, repay debt, and put in place new
debt facilities.
2.9 Share-based payments
The Company has share-based awards that are equity settled as defined by IFRS 2.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is
made using an appropriate valuation model.
That cost is recognised in employee remuneration expense together with a corresponding increase in
equity (share based payment reserve), over the period in which the service and, where applicable, the
performance conditions are fulfilled (the vesting period). The cumulative expense recognised for
equity-settled transactions at each reporting date until the vesting date reflects the extent to which the
vesting period has expired and the Group’s best estimate of the number of equity instruments that will
ultimately vest. The expense or credit in the statement of profit or loss for a period represents the
movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the
grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of
the Group’s best estimate of the number of equity instruments that will ultimately vest. Market
performance conditions are reflected within the grant date fair value. Any other conditions attached to
an award, but without an associated service requirement, are considered to be non-vesting conditions.
Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing
of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance
and/or service conditions have not been met. Where awards include a market or non-vesting condition,
the transactions are treated as vested irrespective of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant
date fair value of the unmodified award, provided the original vesting terms of the award are met. An
additional expense, measured as at the date of modification, is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the
Page 262 of 274
FINANCIAL STATEMENTS
employee. Where an award is cancelled by the entity or by the counterparty, any remaining element
of the fair value of the award is expensed immediately through profit or loss.
2.10 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, demand and time deposits and other short-term
highly liquid investments with a maturity of less than 3 months that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
2.11 Critical accounting judgements and key sources of estimation uncertainty
There are no cricical accounting judgements and key sources of estimation uncertainty in the current
year.
3. Investments in subsidiaries
The following table shows the movement in the investment in subsidiaries during the year
At 31 December 2019
Additions
At 31 December 2020
$'000
877,183
154,808
1,031,991
During 2020, the Company increased its investments in subsidiary undertakings by $154.8 million (31
December 2019: $28.7 million). These additions relate to further injections of cash in existing
subsidiaries.
A complete list of Energean Plc Group companies at 31 December 2020, and the Group’s percentage
of share capital are set out in the note 30 of the Group financial statements. The principal activity of
the majority of these companies relates to oil and gas exploration, development and production. All
of these subsidiaries have been consolidated in the Group’s financial statements.
4. Dividends
No dividends were paid or declared during the period. No dividend is proposed in respect of the year
ended 31 December 2020 (2019: $nil).
5. Loans and other intercompany receivables
Loans to subsidiary
Receivables from share-based plan to subsidiary
undertakings
At 31 December
2020
$'000
1,638
545
2,183
2019
$'000
1,452
857
2,309
Page 263 of 274
FINANCIAL STATEMENTS
The loan to subsidiary incurs a fixed rate of interest at 3% per annum and has maturity date on 20
October 2022. At 31 December 2020 no expected credit loss allowances (2019: $nil) were held in
respect of the recoverability of amounts due from subsidiary undertakings.
6. Trade and other receivables
Financial items
Receivables from shareholders
Due from subsidiary undertakings
Non-financial items
Deposits and prepayments
Refundable VAT
Total trade and other receivables
2020
$'000
22
23,417
23,439
1,894
412
2,306
25,745
2019
$'000
25
3,993
4,018
538
622
1,160
5,178
At 31 December 2020 no expected credit loss allowances (2019: $nil) were held in respect of the
recoverability of amounts due from subsidiary undertakings.
The amounts due from subsidiary undertakings include $16.1 million (2019: $nil) that incurs interest
at 4.1% per per annum and has a repayment date on 20 December 2023.
The remaining amounts due from subsidiaries accrue no interest and relates to intragroup recharges
for subsidiaries’ employees share-based payments and management services provided by the
Company to its subsidiaries under a “Master Intercompany Services Agreement”.
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 ₤50 thousand 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 $22 thousand was still outstanding.
7. Financial risk management objectives
The Company follows the Group’s policies for managing all its financial risks.
8. Trade and other payables
Page 264 of 274
Staff costs accrued
Trade payables
Due to subsidiary undertakings
Accrued expenses
Taxes and social securities payable
Other creditors
Total trade and other payables
FINANCIAL STATEMENTS
2020
$'000
1,922
939
385
7,031
250
5
10,532
2019
$'000
791
1,639
210
1,892
346
14
4,892
The amounts are unsecured and are usually paid within 30 days of recognition.
9. Other payables
Other payables relates to Employers’ National Insurance accounted for on the LTIP Awards at each
reporting date up to the vesting date, 26 March 2022 and 31 Decemebr 2022.
10. Share capital
In July 2019 a total of 23,444,445 new ordinary shares were placed to both existing and new
institutional investors at a price of £9.00 per Placing Share, raising proceeds of approximately $265.1
million (approximately £211 million) before expenses. The Placing Shares issued represented
approximately 15.3 per cent of the issued share capital of the Company prior to the Placing.
Authorised
At 31 December 2018
Issued during the year
- New shares
- Employee share schemes
At 31 December 2019
Issued during the year
- New shares
Equity share capital
allotted and fully paid
Share capital
Share
premium
Number
$'000
$'000
153,152,763
2,066
658,805
23,618,583
318,060
297
4
256,583
-
177,089,406
2,367
915,388
-
-
-
Page 265 of 274
- Employee share schemes
-
-
-
At 31 December 2020
177,089,406
2,367
915,388
FINANCIAL STATEMENTS
11. Staff costs
Wages and salaries
Directors' remuneration
Social insurance costs and other funds
Share-based payments
Pension contribution & insurance
Total payroll cost
2020
$'000
2,770
2,032
974
2,362
67
8,205
2019
$'000
1,041
2,723
731
1,661
34
6,190
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.
12. Share-based payment
Energean Long Term 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 other post-grant performance conditions. No dividends are
paid over the vesting period; however, Energean’s Board may decide at any time prior to the issue or
transfer of the shares in respect of which an award is released that the participant will receive an
amount (in cash and/or additional Shares) equal in value to any dividends that would have been paid
on those shares on such terms and over such period (ending no later than the Release Date) as the
Board may determine. This amount may assume the reinvestment of dividends (on such basis as the
Board may determine) and may exclude or include special dividends.
The weighted average remaining contractual life for LTIP awards outstanding at 31 December 2020
was 1.4 years (31 December 2019: 1.7 years), number of shares outstanding 1,858,005 and weighted
average price at grant date £5.84.
There are further details of the LTIP in the Remuneration Committee Report section of the Annual
Report.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, the portion of any annual bonus above 30 per cent of the base salary of a Senior
Executive nominated by the Remuneration Committee is deferred into shares.
Page 266 of 274
FINANCIAL STATEMENTS
Deferred awards are usually granted in the form of conditional share awards or nil-cost options (or,
exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award
although may vest early on leaving employment or on a change of control.
The weighted average remaining contractual life for DSBP awards outstanding at 31 December 2020
was 0.8 years (31 December 2019: 1.24 years), number of shares outstanding 196,514 and weighted
average price at grant date £6.27.
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 of the Group employees under the Energean 2018 Long
Term Incentive Plan (LTIP) over 659,050 ordinary shares and price at grant date £5.00 in Energean
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 vested on 22 November 2019.
Income statement summary
Share based payment charges during the year, which have been recognised in the income statement
amounted to $2.4 million.
13. Related party transactions
The Company’s subsidiaries at 31 December 2020 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 subsidiariy companies at the balance sheet date:
Amounts receivable from subsidiary undertakings
Amounts payable to subsidiary undertakings
2020
$'000
25,600
385
25,985
2019
$'000
3,993
210
4,203
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 (minority interest exists) recorded in the income statement:
Amounts invoiced to subsidiaries under a “Master
Intercompany Services Agreement”
2020
$'000
5,354
5,354
2019
$'000
3,000
3,000
Page 267 of 274
Transaction with other related party
Consulting services by Capital Earth Limited
FINANCIAL STATEMENTS
2020
$'000
129
129
2019
$'000
129
129
14. Directors’ Remuneration
Directors’ remuneration has been provided in the remuneration report within the Annual Report. Please
refer to pages 125 to152 of the Annual Report.
15. Auditor’s 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.
16. Events after reporting period
Please refer to note 29 of the consolidated financial statements.
Page 268 of 274
Other Information
Glossary
O2 - Carbon dioxide
SO2 - Sulphur dioxide
NOx - Nitrogen oxides
GBP or £ - Pound sterling
USD or $ - US dollar
EUR or € - Euro
A
ACQ - Annual Contract Quantity
AGM - Annual General Meeting
B
bbl - Barrel
Bcf - Billion cubic feet
bcm - Billion cubic metres
boe - Barrels of oil equivalent
boepd - Barrels of oil equivalent per day
bopd - Barrels of oil per day
C
Capex - Capital expenditure
CEO - Chief Executive Officer
CFO - Chief Financial Officer
COO - Chief Operating Officer
CMAPP - Corporate Major Accident Prevention Policy
CNG - Compressed natural gas
CPR - Competent Person’s Report
CSR - Corporate Social Responsibility
E
E&P - Exploration and production
OTHER INFORMATION
Page 269 of 274
OTHER INFORMATION
EBITDAX - Earnings before interest, tax, depreciation, amortisation and exploration expenses
EBRD - European Bank for Reconstruction and Development
EOR - Enhanced Oil Recovery
EPCIC - Engineering, Procurement, Construction, Installation and Commissioning
F
FAR - Fatal Accident Rate – number of fatalities per 100 million hours worked
FDP - Field Development Plan
FEED - Front-end Engineering and Design
FID - Final Investment Decision
FPSO - Floating Production Storage and Offloading vessel
FRC - Financial Reporting Council
FRS - Financial Reporting Standard
G
G&A - General and Administrative
GSPA - Gas Sale and Purchase Agreement
GSP - GSP Offshore S.R.L.
H
H&S - Health and Safety
HMRC - HM Revenue and Customs
HSE - Health, Safety and Environment
I
IAS - International Accounting Standard
IASB - International Accounting Standards Board
IFRS - International Financial Reporting Standard
INGL - Israel Natural Gas Lines Ltd
IPO - Initial Public Offering
IPP - Independent Power Producers
IR - Investor Relations
J
JOA - Joint Operating Agreement
JV - Joint Venture
K
Page 270 of 274
kboepd - Thousands of barrels of oil equivalent per day
OTHER INFORMATION
km - Kilometres
KPI - Key Performance Indicator
L
LIBOR - London Interbank Offered Rate
LSE - London Stock Exchange
LTI - Lost Time Injury
LTIF - Lost Time Injury Frequency
M
M3 - Cubic metre
MM - Million
MMbbls - Million barrels
MMbo - Million barrels of oil
MMboe - Million barrels of oil equivalents
MMbtu - Million British Thermal Units
MMscf - Million standard cubic feet
MMscf/day or MMscfd - Million standard cubic feet per day
MMtoe - Million tonnes of oil equivalent
MoU - Memorandum of Understanding
N
NGO - Non-Governmental Organisation
NPV - Net Present Value
NSAI - Netherland, Sewell & Associates, Inc. O
Opex - Operating expenses
P
PP&E - Property, plant and equipment
R
2P reserves - Proven and probable reserves
RBL - Reserve Based Lending
2C resources - Contingent resources
S
Sq km or km2 - Square kilometres
Page 271 of 274
OTHER INFORMATION
T
Tcf - Trillion cubic feet
TRIR - Total Recordable Injury Rate
TASE - Tel Aviv Stock Exchange
W
WI - Working interest
Page 272 of 274
Company Information
OTHER INFORMATION
Registered office
Energean plc
Accurist House
44 Baker Street
London
W1U 7AL
United Kingdom
Tel: +44 203 655 7200
Corporate brokers
Morgan Stanley
25 Cabot Square
Canary Wharf
London
E14 4QA
Stifel Nicolaus Europe
150 Cheapside
London
EC2V 6ET
Peel Hunt
Moor House, 120
London Wall
London
EC2Y 5ET
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Legal adviser
White & Case LLP
5 Old Broad Street
London
EC2N 1DW
Financial PR adviser
FTI Consulting LLP
107 Cheapside
London
EC2V 6DN
Page 273 of 274
OTHER INFORMATION
Registrar
Computershare Investor Services plc
The Pavilions Bridgwater Road
Bristol
BS13 8AE
Financial calendar
May 2021: Annual General Meeting
Page 274 of 274